SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant[X]
Filed by a party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Champion Industries, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
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CHAMPION INDUSTRIES, INC.
P. O. Box 2968
Huntington, West Virginia 25728
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held March 17, 1997
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To The Shareholders:
The annual meeting of shareholders of Champion Industries, Inc. will be
held at the Radisson Hotel Huntington, 1001 Third Avenue, Huntington, West
Virginia, on Monday, March 17, 1997, at 12:00 noon for the following purposes:
1. To fix the number of directors at seven (7) and to elect directors
to hold office until the next annual meeting of shareholders.
2. To consider and approve an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common
Stock to 20,000,000 shares.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record of the Common Stock of Champion Industries,
Inc. at the close of business on February 12, 1997, are entitled to notice of
this meeting and to vote at the meeting.
We hope you will attend the meeting and vote your shares in person.
However, since a majority of the outstanding shares must be present in person
or by proxy in order to conduct the meeting, we urge you to date, sign and
return the enclosed proxy as promptly as possible, whether or not you plan to
attend the meeting in person. If you do attend the meeting, you may then
withdraw your proxy if you so desire. The proxy may be revoked at any time
prior to its exercise, but after commencement of the annual meeting, the
proxy may be revoked only in accordance with the order of business adopted
for the meeting.
Dated: February 19, 1997 By Order of the Board of Directors
WALTER R. SANSOM, SECRETARY
CHAMPION INDUSTRIES, INC.
P. O. Box 2968
Huntington, West Virginia 25728
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
to be held March 17, 1997
INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Champion Industries, Inc. (the "Company") for use at the annual
meeting of shareholders to be held on Monday, March 17, 1997, at 12:00 Noon at
the Radisson Hotel Huntington, 1001 Third Avenue, Huntington, West Virginia, and
any adjournment thereof (the "Annual Meeting"). The Company anticipates that
this Proxy Statement and the form of proxy will be sent or given to shareholders
on approximately February 19, 1997.
Only those shareholders of record as of the close of business on February
12, 1997, are entitled to notice of and to vote at the meeting and any
adjournment thereof. At such time, the Company had and continues to have only
one (1) class of stock outstanding, consisting of 8,104,714 issued and
outstanding shares of common stock, of the par value of One Dollar ($1.00) per
share (the "Common Stock") held by 542 shareholders. The Common Stock carries no
preemptive rights.
The Company's By-laws provide that at each election for directors every
shareholder entitled to vote at such election has as many votes as the number of
shares owned, multiplied by the number of directors to be elected, and may
either accumulate all votes for one candidate or distribute those votes among as
many candidates as the shareholder may choose. For all other purposes, each
share is entitled to one vote.
SOLICITATION OF PROXIES AND VOTING
Solicitation of proxies may be made in person or by mail, telephone, or
telegraph by directors, officers and regular employees of the Company or its
subsidiaries and by proxy solicitation companies. The Company may also request
brokerage houses, banks, and other record holders of the Company's stock to
forward proxy solicitation materials to the beneficial owners of such stock, and
will reimburse such persons for their expenses in connection therewith. The
Company has engaged Corporate Investor Communications, Inc. to assist in the
solicitation of proxies of brokers and financial institutions and their
nominees, for a fee of $2,750, plus reimbursement of reasonable out-of-pocket
expenses. The expense of soliciting proxies will be borne by the Company.
Shares represented at the meeting by properly executed proxies in the
accompanying form will be voted at the meeting, or any adjournment thereof, and
where the shareholder giving the proxy specifies a choice by means of the ballot
space provided in the form of proxy, the shares will be voted in accordance with
the specifications so made. If no directions are given by the shareholder, the
proxy will be voted in accordance with the recommendations of the Board of
Directors of the Company. Any proxy given for use at the meeting may be revoked
at any time before it is exercised by written notice or subsequently dated proxy
received by the Company, or by oral revocation given by the shareholder in
person at the meeting or any adjournment thereof.
Votes, whether in person or by proxy, will be counted and tabulated by
judges of election appointed by the Board of Directors of the Company, in
conjunction with an independent, third-party vote tabulation firm. The
presence of a majority of the outstanding shares of Common Stock in person or
by proxy is necessary to constitute a quorum. Abstentions and broker
non-votes will not be counted as votes either "for" or "against" any matters
coming before the Annual Meeting, but will be counted toward determining the
presence or absence of a quorum. Votes withheld in connection with the
election of one or more of the nominees for director will not be counted as
votes cast for such individuals. In the election of directors, those
receiving the greatest number of votes shall be elected, even if such votes
do not constitute a majority. Under West Virginia law and the Company's
Articles of Incorporation and By-laws, abstentions and broker non-votes have
the effect of a "no" vote with respect to Proposal No. 2 herein, since
state law requires the amendment to Articles of Incorporation to be
authorized and approved by the affirmative vote of holders of a majority of
the outstanding Common Stock of Company rather than a majority of votes
actually voting on the proposal.
1
ELECTION OF DIRECTORS
Proposal No. 1 in the Accompanying Form of Proxy
The proxies granted by the shareholders will be voted at the meeting for
the resolution, unless contrary direction is indicated, establishing the number
of directors at seven (7) and the election of the seven (7) nominees listed
below. The proxies cannot be voted for a greater number of persons. The nominees
elected as directors are to serve until the next annual meeting of shareholders
and until their successors are duly elected and have qualified. The By-laws
provide, however, that between annual meetings, the Board of Directors, by a
majority vote, may increase the number of directors and may appoint such persons
as they may select, by a majority vote, to fill any vacancies.
While it is not anticipated that any of the nominees will be unable to
serve, if for any reason one or more shall be unable to do so, the proxies will
be voted for any nominees selected by management of the Company. The persons
listed below have been nominated by the Board of Directors for election as
directors. Each of the nominees is currently a director of the Company. The
name, age, principal occupation and business experience of each, all positions
and offices held by each with the Company or any of its subsidiaries and any
period during which he has served as such are set forth below.
Name, Age, Position and
Offices with Company and
Year Became Director Principal Occupations for Past Five Years
- ------------------------- -------------------------------------------------
Robert H. Beymer - 69 President of First Sentry Bank, Huntington, West
Director - 1992 Virginia from 1996 to present; General Partner,
Eastern Heights Shopping Center, Ltd., from 1976
to present; Consultant to One Valley Bank of
Huntington (Huntington, West Virginia) from 1986
to 1993; President of First Guaranty Bank (Hammond,
Louisiana) from December 1992 to June 1994;
Director of Stationers, Inc. (a Company subsidiary)
from 1990 to present.
Philip E. Cline - 63 Interim President and Chief Executive Officer,
Director - 1992 Broughton Foods Company since November, 1996;
Consultant from January, 1996 to November, 1996;
Executive Vice President (1995 to 1996), Vice
President and Treasurer (1968 to 1995) of J. H.
Fletcher & Co. (manufacturer of underground mining
equipment); Director of Banc One West Virginia
Corporation (formerly Key Centurion Bancshares,
Inc.) from 1983 to present.
Harley F. Mooney, Jr. - 68 Brig. Gen. U.S. Army (Ret.), Managing Partner,
Director - 1992 Mooney-Osborne & Associates (management consulting)
from 1985 to present; Director of Stationers, Inc.
(a Company subsidiary) from 1989 to present;
consultant to Stationers, Inc. from 1988 to 1990;
consultant to The Harrah and Reynolds Corporation
since 1988.
Todd L. Parchman - 42 Partner, Parchman, Vaughan & Company (investment
Director - 1993 bankers) since May, 1996; Senior Vice President
(from 1990 to May, 1996) and Director (from 1994
until May, 1996), Ferris, Baker Watts,
Incorporated.
A. Michael Perry - 60 President (from 1983 to December 1993), Chief
Director - 1992 Executive Officer (from 1983 to present) and
Chairman of Board from November 1993 to present
of Banc One West Virginia Corporation (formerly
Key Centurion Bancshares, Inc.).
Neal W. Scaggs - 60 President, Baisden Brothers, Inc. (retail and
Director - 1992 wholesale hardware) from 1963 to present; Director
of Banc One West Virginia Corporation (formerly Key
Centurion Bancshares, Inc.) from 1984 to present.
2
Name, Age, Position and
Offices with Company and
Year Became Director Principal Occupations for Past Five Years
- ------------------------- -------------------------------------------------
Marshall T. Reynolds - 60 President, Chief Executive Officer and Chairman of
President and Chief the Board of Directors of Company from 1992 to
Executive Officer, present; President and general manager of The
Director and Chairman Harrah and Reynolds Corporation, predecessor of the
of the Board of Company from 1964 (and sole shareholder from 1972)
Directors - 1992 to 1993; Director (from 1983 to November 1993) and
Chairman of the Board of Directors (from 1983 to
November 1993) of Banc One West Virginia
Corporation (formerly Key Centurion Bancshares,
Inc.).
Mr. Reynolds is chairman of the board of directors of Premier Financial
Bancorp, Inc., of Georgetown, Kentucky, which has a class of securities
registered pursuant to the Securities Exchange Act of 1934. Mr. Reynolds is a
director of Abigail Adams National Bancorp, Inc., of Washington, DC, which has a
class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds and Mr. Beymer are directors of First Guaranty Bank of
Hammond, Louisiana, which has a class of securities registered pursuant to the
Securities Exchange Act of 1934.
Mr. Parchman is a director of Morgan Group, Inc., which has a class of
securities registered pursuant to the Securities Exchange Act of 1934. Ferris,
Baker Watts, Incorporated, of which Mr. Parchman was an officer and director
until May, 1996, served as representative of the several underwriters involved
in the January 1993 public offering of Company Common Stock. Pursuant to
agreement among Mr. Reynolds, the Company and Ferris, Baker Watts, Incorporated,
Mr. Parchman was appointed to the Company's Board of Directors at the closing of
such offering.
DIRECTOR MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors has two standing committees, a Compensation
Committee and an Audit Committee.
The Compensation Committee reviews and recommends to the Board the
compensation and employee benefits of officers of the Company and administers
the 1993 Stock Option Plan. The Compensation Committee did not meet during
fiscal 1996, and currently consists of Messrs. Beymer, Mooney and Perry.
The Audit Committee meets with the Company's management, independent
auditors and internal accountants, reviews the accounting principles and the
scope and control of the Company's financial reporting practices, and makes
reports and recommendations to the Board with respect to audit matters. The
Audit Committee met 2 times during fiscal 1996, and currently consists of
Messrs. Cline, Parchman and Scaggs.
The Board does not have a nominating committee, as nominations are made by
the Board as a whole.
During fiscal 1996, there were 11 meetings of the Company Board of
Directors. All directors attended 75% or more of the aggregate of meetings of
the Board and their committees held during their respective terms.
OWNERSHIP OF SHARES
Principal Shareholder
No person is known to the Company to be the beneficial owner of more than
5% of the Company Common Stock at January 31, 1996 except as follows:
3
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
- -------- ------------------- -------------------- ----------
Common Stock Marshall T. Reynolds 4,775,877 shares(1) 59%
2450 1st Avenue
Huntington, West
Virginia 25728
(1) 4,773,437 shares through a controlled corporation, The Harrah and
Reynolds Corporation, of which Mr. Reynolds is the sole shareholder;
2,440 shares are held by Mr. Reynolds' wife. 1,561,797 shares are
pledged as collateral to secure loans made to Mr. Reynolds in the
ordinary course of business by several commercial banks. Any
disposition of such pledged shares upon a default by Mr. Reynolds
under such loans could result in a change of control of the Company.
The Company has no reason to believe that any such default will occur.
Security Ownership of Officers and Directors
The following table sets forth certain information concerning ownership of
Company Common Stock as of January 31, 1997 by (i) each of the directors and
nominees, (ii) each executive officer named in the Summary Compensation table
contained herein, and (iii) all directors and executive officers as a group.
Except as otherwise noted, each beneficial owner listed below has sole voting
and investment power with respect to the shares listed next to the owner's name.
Name of Beneficial Owner Shares Beneficially Owned Percentage of Class
- ------------------------- -------------------------- -------------------
Robert H. Beymer 5,244 (1) *
Philip E. Cline 13,093 *
Harley F. Mooney, Jr. 13,190 *
Todd L. Parchman 1,267 *
A. Michael Perry 12,206 *
Marshall T. Reynolds 4,775,877 (2) 59%
Neal W. Scaggs 48,827 (3) *
J. Mac Aldridge 38,827 (4)(8) *
Gary A. Blackshire 27,313 (5)(8) *
William M. Campbell 28,866 (6)(8) *
R. Douglas McElwain 24,379 (7)(8) *
All directors and 5,093,326 61%
executive officers as a
group(16 persons) (9)
* The percentage of shares of Company Common Stock beneficially owned
by each person listed above (other than Marshall T. Reynolds, who
beneficially owns 59%) is less than 1%.
(1) Includes 2,316 shares owned by wife; reporting person has no voting
or investment power with respect to those 2,316 shares.
(2) Includes 4,773,437 shares owned by a controlled corporation;
2,440 shares owned by wife; reporting person has no voting
or investment power with respect to these 2,440 shares.
(3) Shares joint voting and investment power with wife.
(4) Joint voting and investment power shared with wife with
respect to 24,413 shares.
(5) Includes 303 shares held by wife as custodian for minor
child, with respect to which reporting person has no voting
or investment power; joint voting and investment power
shared with wife with respect to 12,596 shares.
(6) Joint voting and investment power shared with wife with
respect to 18,065 shares.
(7) Joint voting and investment power shared with wife with
respect to 12,456 shares.
(8) Includes presently exercisable options to purchase 14,414
shares of Common Stock pursuant to 1993 Stock Option Plan.
4
(9) Includes presently exercisable options to purchase an
aggregate of 113,730 shares of Common Stock pursuant to 1993
Stock Option Plan. These shares are not included for
purposes of computing the percentage of Common Stock held by
all directors and executive officers as a group.
COMPENSATION OF DIRECTORS AND OFFICERS
Compensation of Directors
Company directors who are not employees of the Company are paid a
director's fee of $500 per Company Board meeting attended and $100 per committee
meeting attended. In addition, Company directors Robert H. Beymer and Harley F.
Mooney, Jr. were each paid directors' fees of $500 per Stationers, Inc. Board
meeting attended, for total Stationers, Inc. directors' fees of $6,000 each in
fiscal 1996. The Company reimbursed director Todd L. Parchman for his travel
expenses incurred in attendance at monthly Board meetings, aggregating $4,605 in
fiscal year ended October 31, 1996.
Compensation of Executive Officers
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending October 31, 1994,
1995 and 1996, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the five most highly compensated executive officers of the Company in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Awards
- -----------------------------------------------------------------------------
(a) (b) (c) (d) (g) (i)
All Other
Name and Principal Position Year Salary Bonus Options(1) Compensation(2)
($) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------
Marshall T. Reynolds, 1996 150,000 -0- -0- 134
President and Chief 1995 150,000 -0- -0- 134
Executive Officer, Chairman 1994 150,000 -0- -0- 134
of the Board of Directors
R. Douglas McElwain, 1996 50,467 80,000 2,500 150
Vice President, Division Manager 1995 50,016 99,402 3,125 150
1994 50,550 70,000 -0- 150
William M. Campbell, 1996 50,016 72,805 2,500 150
Vice President, Division Manager 1995 50,016 72,805 3,125 150
1994 50,016 80,489 -0- 150
J. Mac Aldridge, 1996 50,016 102,909 2,500 150
Vice President, Division Manager 1995 50,016 101,440 3,125 150
1994 50,016 102,629 -0- 150
Gary A. Blackshire 1996 50,016 108,006 2,500 150
Vice President, Division Manager 1995 50,016 92,540 3,125 150
1994 50,016 80,681 -0- 150
(1) All options are granted at the market price of Company common stock on
the date of the grant. Pursuant to the anti-dilution provisions of the
Company's 1993 Stock Option Plan, all share amounts and exercise
prices have been adjusted, as appropriate, for stock dividends and
stock splits paid on Company common stock through October 31, 1996.
5
(2) This item consists of matching contributions by the Company to its
401(k) Plan on behalf of each of the named executives to match pre-tax
elective deferral contributions (included under Salary) made by each
to such plan. Participation in the 401(k) Plan is open to any employee
of the Company on the first day of the thirteenth month following
employment. Participants may contribute 2% of their annual
compensation, up to a maximum of $300 per year.
Employment Agreement
Mr. Reynolds entered into an employment agreement with the Company dated
January 28, 1993 pursuant to which he agreed to serve as President and Chief
Executive Officer for a period of three years, commencing January 28, 1993, and
ending January 31, 1996, for an annual salary of $150,000, plus such annual
bonus as may be determined at the sole discretion of the Compensation Committee
of the Company's Board of Directors. The employment agreement further provides
that for a period of two years following termination of Mr. Reynolds'
employment, he will not engage in any business competitive with the Company in
West Virginia, Ohio or Kentucky. Although the employment agreement has expired,
Mr. Reynolds continues to serve in those capacities for the same compensation.
OPTION GRANTS IN LAST FISCAL YEAR - 1996
Number of Potential realizable value
securities % of total at assumed annual rates of
underlying options stock price appreciation
options granted granted to Exercise for option term (2)
------------------- employees price Expiration ------------------------------
Name Type(1) # in fiscal year ($/share) date 0%($) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------
Marshall T. Reynolds ISO -0-
President and Chief NQSO -0-
Executive Officer, -----
Chairman of the TOTAL -0- N/A N/A N/A N/A N/A N/A
Board of Directors
R. Douglas McElwain ISO 2,500
Vice President, NQSO -0-
Division Manager -----
TOTAL 2,500 7.1% $18.80 12/18/2000 -0- 12,975 28,700
William M. Campbell ISO 2,500
Vice President, NQSO -0-
Division Manager -----
TOTAL 2,500 7.1% $18.80 12/18/2000 -0- 12,975 28,700
J. MacAldridge ISO 2,500
Vice President, NQSO -0-
Division Manager -----
TOTAL 2,500 7.1% $18.80 12/18/2000 -0- 12,975 28,700
Gary A. Blackshire ISO 2,500
Vice President, NQSO -0-
Division Manager -----
TOTAL 2,500 7.1% $18.80 12/18/2000 -0- 12,975 28,700
(1) Incentive Stock Option (ISO) or Non-qualified Stock Option (NQSO). These
options were granted on December 18, 1995, and vested immediately. Options
have a term of five years and are exercisable at any time during such five
years as to any or all options, conditioned upon optionee's employment by
Company at time of exercise (or exercise within 90 days following
termination of employment due to death or disability). As a result of the
Company's 25% stock dividend, treated as a 5 for 4 stock split, paid on
January 22, 1996, the number of shares subject to option and exercise price
were adjusted from 2,000 shares and $23.50 to 2,500 shares and $18.80,
respectively.
(2) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent assumed annual rates of appreciation, at
0%, 5% and 10%, for the 5 year option term, based on Securities and
Exchange Commission rules, and do not represent the Company's estimate or
projection of the price of the Company's Common Stock in the future.
Additionally, these values do not take into account certain provisions of
the options providing for termination of the options following termination
of employment. Actual gains, if any, on stock option exercises depend upon
the actual future performance of the Company's Common Stock. Accordingly,
the potential realizable values set forth in this table may not be achieved.
6
The following table shows the number of shares covered by both
exercisable and non-exercisable stock options as of October 31, 1996. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the fiscal year-end price of Company Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End (#) FY-End ($)(2)
Shares
Acquired on Value Realized ($) Exercisable/ Exercisable/
Name Exercise (#) (1) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------
Marshall T. Reynolds
President and Chief
Executive Officer,
Chairman of the
Board of Directors -0- -0- -0- -0-
R. Douglas McElwain
Vice President,
Division Manager -0- -0- 9,531/0 $88,699/0
William M. Campbell
Vice President,
Division Manager -0- -0- 9,531/0 $88,699/0
J. Mac Aldridge
Vice President,
Division Manager -0- -0- 9,531/0 $88,699/0
Gary A. Blackshire
Vice President,
Division Manager -0- -0- 9,531/0 $88,699/0
(1) Aggregate market value of the shares covered by the option less
the aggregate price paid by the executive.
(2) Market value of shares covered by in-the-money options on October
31, 1996 (based on $22.50 per share, the closing price of Company
Common Stock on the NASDAQ Stock Market on October 31, 1996),
less option exercise prices. Options are in-the-money if the
market value of the shares covered thereby is greater than the
option exercise price. All options are granted at the market
price of Company common stock on the date of the grant. Pursuant
to the anti-dilution provisions of the Company's 1993 Stock
Option Plan, all share amounts and exercise prices have been
adjusted, as appropriate, for stock dividends and stock splits
paid on Company common stock through October 31, 1996.
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Mr. Reynolds' $150,000 salary for fiscal year 1996 was equal to the base
salary established in his former employment agreement with the Company. This
salary was based upon Mr. Reynolds' extensive experience in the commercial
printing industry and the desirability of maintaining the availability of his
services for the Company. It is not tied to any objective standards of
Company's stock performance or earnings in fiscal year 1996. The Compensation
Committee believes the base salary is appropriate in light of, among other
factors, the Company's revenue growth of approximately 34%, net income growth
of approximately 11%, and return on equity of approximately 14% for the year as
well as Mr. Reynolds' efforts in successfully leading the Company and in
directing its acquisition program in 1996. Mr. Reynolds' employment agreement
provided that he will receive such annual bonus as may be determined by the
Compensation Committee. He requested that the Compensation Committee not
consider or grant any such bonus for fiscal year 1996, and no bonus was granted.
With respect to the salaries and other compensation of the Company's
executive officers (other than Mr. Reynolds), the Compensation Committee
believes that Mr. Reynolds, as Chief Executive Officer, is in the best position
to establish such compensation and acts upon his recommendations. The Company s
compensation package for executive officers consists of base salary plus the
opportunity to earn a cash bonus and discretionary stock options. The base
salaries are set at levels Mr. Reynolds believes sufficient to attract and
retain qualified executives. Cash bonuses are based upon net profit of each of
the Company's divisions for which each executive officer is responsible, as well
as Mr. Reynolds' assessment of the executive's individual performance and level
of responsibility. Stock options are intended to attract and retain executive
management by affording them an opportunity to receive additional compensation
based upon performance of the Company's Common Stock, and are based upon Mr.
Reynolds' assessment of each executive officer's overall performance.
Members of the Compensation Committee:
Robert H. Beymer
Harley F. Mooney, Jr.
A. Michael Perry
8
STOCK PERFORMANCE GRAPH
The following line graph compares, from January 29, 1993, the first full
trading day on which the Company's Common Stock was publicly traded, through
October 31, 1996, the cumulative total return among the Company, the Russell
2000 Index and a peer group index, based on an investment of $100 on January 29,
1993, in the Company's Common Stock and each index, and assuming reinvestment of
all dividends, if any, paid on such securities. The 9 companies in the peer
group index are: American Business Products, Inc., Banta Corporation, Cadmus
Communications Corp., Graphic Industries, Inc., New England Business Service,
Outlook Graphics Corp., Paris Business Forms, Inc., Standard Register Company
and United Stationers, Inc. Duplex Products, Inc., has been removed from the
peer group because it was acquired by Reynolds and Reynolds in 1996.
Comparison of Cumulative Total Return
Champion Industries, Inc., Russell 2000 Index and Peer Group Index
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPH
CHAMPION INDUSTRIES, INC. RUSSELL 2000 PEER GROUP
1/29/93 100 100 100
10/29/93 151 114 95
10/31/94 318 112 102
10/31/95 407 130 152
10/31/96 488 147 135
TRANSACTIONS WITH DIRECTORS, OFFICERS,
AND PRINCIPAL SHAREHOLDERS
Organization of the Company
Prior to the public offering of the Company's Common Stock (the
Offering ), effective January 28, 1993, the Company's business was operated by
The Harrah and Reynolds Corporation ("Harrah and Reynolds") doing business as
Chapman Printing Company, together with its wholly-owned subsidiaries, The
Chapman Printing Company, Inc. and Stationers, Inc. Incident to the Offering,
Harrah and Reynolds and the Company entered into an Exchange Agreement, pursuant
to which, upon the closing date of the Offering: (i) Harrah and Reynolds
contributed to the Company substantially all of the operating assets of its
printing divisions, including all inventory and equipment (but excluding any
real estate and vehicles) and all issued and outstanding capital stock of its
subsidiaries, The Chapman Printing Company, Inc. and Stationers, Inc.; (ii) the
Company assumed certain of the liabilities relating to the operations of the
printing divisions of Harrah and Reynolds and its subsidiaries, The Chapman
Printing Company, Inc. and Stationers, Inc., excluding debts associated with
real estate, certain accounts payable to affiliates and certain other
liabilities; and (iii) Harrah and Reynolds was issued 2,000,000 shares of Common
Stock of the Company.
Harrah and Reynolds and the Company entered into agreements governing
certain aspects of the ongoing relationships between them, including: (i) seven
realty leases pursuant to which the Company leases or subleases real property
from Harrah and Reynolds, Marshall T. Reynolds, Company officers or directors or
their related interests; and (ii) a master vehicle lease pursuant to which the
Company leases vehicles used by Company personnel from Champion Leasing Corp., a
wholly-owned subsidiary of Harrah and Reynolds.
Marshall T. Reynolds, Chairman and Chief Executive Officer of the Company,
owns all of the capital stock of Harrah and Reynolds. Harrah and Reynolds owns
approximately 59% of the outstanding Common Stock of the Company. As long as
Harrah and Reynolds owns more than 50% of the Company's voting shares, it will
continue to have the power acting alone to approve any action requiring a vote
of the majority of the voting shares of the Company and to elect a majority of
the Company's directors.
9
Intercompany Transactions
The Company has certain relationships and transactions with Harrah and
Reynolds and its affiliated entities. Management believes that all existing
agreements and transactions described herein between the Company and Harrah and
Reynolds and its affiliates are on terms no less favorable to the Company than
those available from unaffiliated parties. Management's belief is premised upon
(i) its review of real estate appraisals obtained from unrelated third parties
and of market rentals of properties comparable to those leased by the Company;
and (ii) its review of the terms of vehicle leases offered by unrelated third
parties with respect to vehicles comparable to those leased by the Company. The
transactions described below have been approved in accordance with the Company's
disinterested director voting policy.
Realty Leases
Harrah and Reynolds, Marshall T. Reynolds or affiliated entities and
Company officers own the fee interest in certain real estate used by the Company
in its business, and lease this real estate to the Company. All realty leases
are "triple net," whereby the Company pays for all utilities, insurance, taxes,
repairs and maintenance, and all other costs associated with the properties. The
properties leased, and certain of the lease terms, are set forth below.
Annual Expiration
Property Lessor Square Feet Rental of Term
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2450 1st Avenue ADJ Corp. (1) 85,000 $116,400 2008
Huntington, West Virginia
1945 5th Avenue Harrah and Reynolds 37,025 60,000 2007
Huntington, West Virginia
615-619 4th Avenue ADJ Corp. (1) and 59,641 21,600 1998
Huntington, West Virginia Harrah and Reynolds
405 Ann Street Printing Property Corp. 36,614 57,600 2003
Parkersburg, West Virginia (2)
1563 Hansford Street BCM Company, Ltd. (3) 21,360 49,920 2003
Charleston, West Virginia
890 Russell Cave Road Printing Property Corp. 20,135 57,600 2000
Lexington, Kentucky (2)
(1) ADJ Corp. is a West Virginia corporation. Two-thirds of the
outstanding capital stock of ADJ Corp. is owned by Marshall T.
Reynolds' two sons, one of whom resides with Mr. Reynolds.
One-third of the outstanding capital stock is owned by the son of
director A. Michael Perry.
(2) Printing Property Corp. is a West Virginia corporation wholly-owned by
Mr. Reynolds.
(3) BCM Company, Ltd. is a general partnership owned by Michael D.
McKinney, William M. Campbell (both executive officers of the
Company) and David Brumfield, former Charleston Division Manager
of Harrah and Reynolds.
Vehicle Lease
Champion Leasing Corp., a wholly-owned subsidiary of Harrah and Reynolds,
leases to the Company and its subsidiaries, pursuant to a master vehicle lease,
14 motor vehicles, which include automobiles and delivery vehicles for use by
the Company's employees. Each vehicle is leased for a term of 24 months from the
date it was first placed in service, and thereafter on a month-to-month basis,
with monthly rental commitments averaging $70 per month. All operating expenses,
including taxes, insurance and fuel are paid by the Company. The leases are
accounted for as operating leases.
10
Additional Related Party Transactions
Marshall T. Reynolds is the Chairman of the Board of Directors and a
significant shareholder of River City Associates, Inc., a West Virginia
corporation which owns and operates the Radisson Hotel Huntington, in
Huntington, West Virginia. Harley F. Mooney, Jr. and A. Michael Perry, directors
of the Company, serve as directors of River City Associates, Inc. River City
Associates, Inc. in the ordinary course of business purchases stationery, office
products, office furniture, forms and various other printed products from the
Company. Such purchases aggregated $240,236, and constituted 0.4% of total
revenues, in the Company's fiscal year ended October 31, 1996.
Director Todd L. Parchman was, until May 1996, an executive officer and
director of Ferris, Baker Watts, Incorporated ("FBW"), which represented the
several underwriters involved in the January 1993 public offering of Company
Common Stock. FBW and Company are parties to a letter agreement dated January 4,
1994, providing for Company's payment of a fee to FBW in the event FBW
introduces Company to a commercial printing or office supply business which
Company acquires, and further providing that if Company and any such entity
identified by FBW commence negotiations relating to an acquisition by Company,
Company shall engage FBW as its exclusive financial advisor in connection
therewith. Pursuant to this agreement, Company paid FBW a fee for services
rendered in the Company's acquisition of U.S. Tag & Ticket Company, Inc., of
Baltimore, Maryland, effected June 1, 1995. The amount of the fee did not exceed
five percent of FBW's consolidated gross revenues for its previous full fiscal
year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1996
all filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with, except that one (1) report,
covering one (1) transaction, was filed late by R. Douglas McElwain.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Company for the year ending
October 31, 1996 have been audited by Ernst & Young LLP, independent certified
public accountants. A representative of Ernst & Young LLP will be present at the
annual meeting of shareholders in order to respond to appropriate questions and
to make any other statement he deems appropriate.
The Board of Directors selects the independent public accountants for the
Company each year. The Board of Directors intends to continue the services of
Ernst & Young LLP for the fiscal year ending October 31, 1997.
PROPOSED AMENDMENT OF THE COMPANY'S
ARTICLES OF INCORPORATION
Increase in Authorized Common Stock
Proposal #2 in the Accompanying Form of Proxy
The Company is presently authorized to issue 10,000,000 shares of Common
Stock. The Board of Directors of the Company has recommended that the
shareholders approve an amendment to Article 7 of the Company's Articles of
Incorporation which would increase the number of shares of authorized Common
Stock to 20,000,000. The full text of the resolution to adopt the proposed
amendment is appended to this Proxy Statement as Exhibit A.
11
On January 31, 1997 the Company had 8,104,714 shares of Common Stock issued
and outstanding. In addition to these shares, the Company has reserved 610,351
shares of Common Stock for issuance pursuant to its 1993 Stock Option Plan.
There remain approximately 1,284,935 shares of Common Stock authorized but
unissued and unreserved.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is desirable so that sufficient shares of
Common Stock will be available for issuance from time to time, without further
action or authorization by the shareholders, for corporate needs such as
acquisitions of other entities through the issuance of shares of Common Stock,
equity financing, retirement of outstanding indebtedness, stock splits and stock
dividends, employee benefit plans, dividend reinvestment plans, or other
corporate purposes deemed to be in the best interests of the Company and its
shareholders. Because of the limited number of remaining authorized but unissued
or unreserved shares, the Company's ability to use its securities for these
purposes is limited under the present Article 7.
Since the holders of Common Stock have no preemptive rights, the increased
number of shares of Common Stock may be issued without further shareholder
approval. The Company presently has no plans, agreements, contracts,
arrangements or understandings with respect to issuing any additional shares of
Common Stock in excess of those currently authorized.
The authorization of additional shares of Common Stock will have no
immediate effect upon the rights of existing security holders. However, because
no preemptive rights attach to ownership of the Company's Common Stock, the
additional Common Stock, when issued, may affect the proportionate interests of
each shareholder of the Company.
The additional shares of authorized Common Stock, as well as the presently
available shares of Common Stock, could be used, without the need for action by
shareholders, in a manner which would discourage or make more difficult an
attempt to acquire control of the Company. For example, the shares could be
privately placed with purchasers who might support the Board of Directors in
opposing a hostile takeover bid. The proposed amendment is not in response to
any effort of which the Company is aware to obtain control of the Company by
accumulating shares of the Company's Common Stock or otherwise, and the Board of
Directors does not have any current plans to use shares of Common Stock for
anti-takeover purposes.
Adoption of this amendment to the articles of incorporation requires the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the annual meeting.
The Board of Directors recommends a vote "FOR" this proposal.
OTHER BUSINESS
Proposal #3 in the Accompanying Form of Proxy
At present, the Board of Directors knows of no other business to be
presented by or on behalf of the Company or its Board of Directors at the
meeting. If other business is presented at the meeting, the proxies shall be
voted in accordance with the recommendation of the Board of Directors.
Shareholders are urged to specify their choices, and date, sign, and return
the enclosed proxy in the enclosed envelope, to which no postage need be affixed
if mailed in the Continental United States. Prompt response is helpful, and your
cooperation will be appreciated.
12
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders for possible inclusion in the Company's proxy
materials for presentation at the next annual meeting of shareholders must be
received by the Secretary of the Company no later than October 22, 1997. In
addition, the Company's By-laws provide that any shareholder wishing to present
a nomination for the office of director must do so in writing delivered to the
Company at least 14 days and not more than 50 days prior to the first
anniversary of the preceding year's annual meeting, and that written notice must
meet certain other requirements. For further details as to timing of nominations
and the information required to be contained in any nomination, see Article III,
Section 10 of the Company's By-laws, a copy of which may be obtained from the
Secretary of the Company upon written request delivered to P. O. Box 2968,
Huntington, West Virginia 25728.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
WALTER R. SANSOM, SECRETARY, CHAMPION INDUSTRIES, INC., P. O. BOX 2968,
HUNTINGTON, WEST VIRGINIA 25728
Dated: February 19, 1997 By Order of the Board of Directors
WALTER R. SANSOM, SECRETARY
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
RESOLVED, that the Articles of Incorporation of this Company be amended by
deleting in its entirety Article 7 thereof and substituting in lieu thereof the
following:
7. The aggregate number of shares which the corporation shall have
authority to issue is twenty million (20,000,000) common shares of the par
value of $1.00 each.
13
CHAMPION INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS, MARCH 17, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Preston Henshaw and Robert L. Shell, Jr., and
each of them, with full power of substitution, proxies of the undersigned to
vote all shares of the Common Stock of Champion Industries, Inc. (the "Company")
which the undersigned is entitled to vote at the annual meeting of shareholders
of the Company to be held at the Radisson Hotel Huntington, 1001 Third Avenue,
Huntington, West Virginia, on March 17, 1997, and at any adjournment thereof, as
indicated below.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND IN FAVOR OF PROPOSAL
NO. 2. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THOSE NAMED IN THIS PROXY TO
VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE
IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO
THE CONDUCT OF THE ANNUAL MEETING.
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY IN THE RETURN ENVELOPE.
Please sign exactly as your name(s) appear(s) on this proxy. When shares are
held by joint tenants, both should sign. When signing as attorney-in-fact,
executor, administrator, trustee, committee, personal representative or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
HAS YOUR ADDRESS CHANGED?
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[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS.
FOR WITHHOLD FOR ALL EXCEPT
Robert H. Beymer A. Michael Perry [ ] [ ] [ ]
Philip E. Cline Marshall T. Reynolds
Harley F. Mooney, Jr. Neal W. Scaggs
Todd L. Parchman
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"FOR ALL EXCEPT" box and strike a line through that nominee's name. Your shares
will be voted for the remaining nominees.
2. To approve the amendment to the Company's FOR AGAINST ABSTAIN
Articles of Incorporation to increase the [ ] [ ] [ ]
number of authorized shares of Company Common
Stock to 20,000,000 shares.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournments
thereof.
Mark box at right if an address change has been [ ]
noted on the reverse side of card.
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Please be sure to sign and date this Proxy. Date
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Stockholder sign here Co-owner sign here