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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pursuant to Exchange Act Rule 0-11. Set forth the amount on
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
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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 16, 1998
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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 16, 1998, at 12:00 noon for the following purposes:
1. To fix the number of directors at eight (8) and to elect directors
to hold office until the next annual meeting of shareholders.
2. 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 10, 1998, 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 17, 1998 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 16, 1998
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 16, 1998, 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 17, 1998.
Only those shareholders of record as of the close of business on February
10, 1998, 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 8,388,445 issued and
outstanding shares of common stock, of the par value of One Dollar ($1.00) per
share (the "Common Stock") held by 534 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 $3,000, 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
1
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.
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 eight (8) and the election of the eight (8) 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 - 70 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 - 64 President and Chief Executive Officer, Broughton
Director - 1992 Foods Company since January, 1997; Interim
President and Chief Executive Officer, Broughton
Foods Company from November, 1996 to December,
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. - 69 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; Director of Ohio
River Bank, Ironton, Ohio from 1995 to present.
2
Name, Age, Position and
Offices with Company and
Year Became Director Principal Occupations for Past Five Years
- -------------------------- -------------------------------------------------
Todd L. Parchman - 43 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 - 61 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.).
Marshall T. Reynolds - 61 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
of the Board of the Company from 1964 (and sole shareholder from
Directors - 1992 1972) to present; Chairman of the Board of
Directors, Broughton Foods Company since November
1996; 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.).
Neal W. Scaggs - 61 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.
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 is chairman of the board of directors, Mr. Cline is president,
chief executive officer and a director and Mr. Scaggs is a director of
Broughton Foods Company, of Marietta, Ohio, 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.
3
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 1997, 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 1997, 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 1997, there were 10 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 15, 1998 except as follows:
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) 57%
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. 1,700,000 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.
4
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth certain information concerning ownership of
Company Common Stock as of January 15, 1998 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 7,593 *
Harley F. Mooney, Jr. 13,190 *
Todd L. Parchman 1,267 *
A. Michael Perry 12,206 *
Marshall T. Reynolds 4,775,877 (2) 57%
Neal W. Scaggs 48,827 (3) *
Glenn W. Wilcox, Sr. 125,000 *
J. Mac Aldridge 40,827 (4)(8) *
Gary A. Blackshire 29,313 (5)(8) *
David G. Pilcher 2,000 (6) *
R. Douglas McElwain 28,870 (7)(8) *
All directors and 5,270,630 61%
executive officers as a
group(19 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 57%) 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) Includes presently exercisable options to purchase 2,000
shares of Common Stock pursuant to 1993 Stock Option Plan.
(7) Joint voting and investment power shared with wife with
respect to 12,456 shares.
(8) Includes presently exercisable options to purchase 16,414
shares of Common Stock pursuant to 1993 Stock Option Plan.
(9) Includes presently exercisable options to purchase an aggregate
of 134,730 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.
5
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 directors Todd L. Parchman and Glenn W.
Wilcox, Sr. for their travel expenses incurred in attendance at monthly Board
meetings, aggregating $4,977 and $162, respectively, in fiscal year ended
October 31, 1997.
The Company's Blue Ridge Printing Co., Inc. subsidiary ("Blue Ridge") is
party to a Deferred Compensation Agreement dated July 1, 1993, and a Split-
Dollar Life Insurance Agreement dated July 1, 1992 with Company director
Glenn W. Wilcox, Sr., who has the principal shareholder and chairman of the
board of directors of Blue Ridge prior to the Company's acquisition of Blue
Ridge in May of 1997. Pursuant to the Deferred Compensation Agreement, if
Mr. Wilcox is employed by Blue Ridge upon attaining age 69, Blue Ridge has
agreed to pay him (or his designated beneficiary in the event of his death
after retirement prior to receiving all benefits) an annual retirement benefit
of $50,000 for ten years. If Mr. Wilcox ceases to be employed prior to age 65
as a result of disability, he or his designated beneficiary will receive a
reduced amount. Blue Ridge may prepay its obligations in whole or in part at
a discounted rate.
In the event Mr. Wilcox dies while employed by Blue Ridge prior to
commencement of payments under the Deferred Compensation Agreement, no
benefits will be payable thereunder, but death benefits will be paid under
the Split-Dollar Life Insurance Agreement. Pursuant to that Agreement, Blue
Ridge pays annual premiums on a policy of life insurance owned by Mr. Wilcox.
At Mr. Wilcox's death, or termination of the Agreement, as therein provided,
Blue Ridge is entitled to receive from the proceeds of such policy the
aggregate premiums paid by it less that portion of the annual premium taxable
to Mr. Wilcox, with Mr. Wilcox or his beneficiaries being entitled to the
balance of proceeds.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending October 31, 1994,
1995 and 1996, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the five most highly compensated executive officers of the Company in all
capacities in which they served:
6
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Awards
- ------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (i)
All Other
Name and Principal Position Year Salary Bonus Options(1) Compensation(2)
($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------
Marshall T. Reynolds, 1997 150,000 -0- -0- 78
President and Chief 1996 150,000 -0- -0- 134
Executive Officer, Chairman 1995 150,000 -0- -0- 134
of the Board of Directors
Gary A. Blackshire 1997 50,016 131,608 2,500 150
Vice President, Division Manager 1996 50,016 108,006 3,125 150
1995 50,016 92,540 3,906 150
David G. Pilcher,(3) 1997 160,000 -0- -0- -0-
Vice President, Division Manager
J. Mac Aldridge, 1997 50,016 104,913 2,500 150
Vice President, Division Manager 1996 50,016 102,909 3,125 150
1995 50,016 101,440 3,906 150
R. Douglas McElwain, 1997 50,016 94,581 2,500 150
Vice President, Division Manager 1996 50,467 80,000 3,125 150
1995 50,016 99,402 3,906 150
(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, 1997.
(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 $300 per year.
(3) Mr. Pilcher's employment with the Company commenced on December 31,
1996.
7
OPTION GRANTS IN LAST FISCAL YEAR - 1997
Number of Potential realizable value
securities % of total at assumed annual rates of
underlying options stock price appreciation
options granted granted to Exercise for option term (2)
------------------- employees price Expiration ------------------------------
Name Type(1) # in fiscal year ($/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
Gary A. Blackshire ISO 2,500
Vice President, NQSO -0-
Division Manager ----- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,375 27,325
David G. Pilcher ISO -0-
Vice President, NQSO -0-
Division Manager ----- -----
TOTAL -0- N/A N/A N/A N/A N/A N/A
J. MacAldridge ISO 2,500
Vice President, NQSO -0-
Division Manager ----- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,375 27,325
R. Douglas McElwain ISO 2,500
Vice President, NQSO -0-
Division Manager ----- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,375 27,325
(1) Incentive Stock Option (ISO) or Non-qualified Stock Option (NQSO). These
options were granted on December 16, 1996, 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 27, 1997, the number of shares subject to option and exercise price
were adjusted from 2,000 shares and $22.38 to 2,500 shares and $17.90,
respectively.
(2) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent assumed annual rates of appreciation, at
0%, 5% and 10%, for the 5 year option term, based on Securities and
Exchange Commission rules, and do not represent the Company's estimate or
projection of the price of the Company's Common Stock in the future.
Additionally, these values do not take into account certain provisions of
the options providing for termination of the options following termination
of employment. Actual gains, if any, on stock option exercises depend upon
the actual future performance of the Company's Common Stock. Accordingly,
the potential realizable values set forth in this table may not be achieved.
8
The following table shows the number of shares covered by both
exercisable and non-exercisable stock options as of October 31, 1997. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the fiscal year-end price of Company Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End (#) FY-End ($)(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-
Gary A. Blackshire
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
David G. Pilcher
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
J. Mac Aldridge
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
(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, 1997 (based on $18.63 per share, the closing price of Company
Common Stock on the NASDAQ Stock Market on October 31, 1997),
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, 1997.
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Mr. Reynolds' $150,000 salary for fiscal year 1997 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 1997. The Compensation
Committee believes the base salary is appropriate in light of, among other
factors, the Company's revenue growth of approximately 63%, net income growth
of approximately 12%, 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 1997. 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 1997, 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
10
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, 1997, 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., Standard Register Company and United Stationers, Inc.
Duplex Products, Inc. and Paris Business Forms, Inc. have been removed from the
peer group because they were acquired by Reynolds and Reynolds in 1996 and 1997.
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
10/31/96 404 147 182
10/31/97 416 187 185
11
TRANSACTIONS WITH DIRECTORS, OFFICERS,
AND PRINCIPAL SHAREHOLDERS
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
- ------------------------------------------------------------------------------------------------------
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 2003
Huntington, West Virginia Harrah and Reynolds
405 Ann Street Printing Property Corp. (2) 36,614 57,600 2003
Parkersburg, West Virginia
1563 Hansford Street BCM Company, Ltd. (3) 21,360 49,920 2003
Charleston, West Virginia
890 Russell Cave Road Printing Property Corp.(2) 20,135 57,600 2000
Lexington, Kentucky
(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 and L. David Brumfield, executive officers
of the Company.
12
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,
11 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 from $10 to $760 per month. All
operating expenses, including taxes, insurance and fuel are paid by the Company.
The leases are accounted for as operating leases.
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 1997
all filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Company for the year ending
October 31, 1997 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, 1998.
OTHER BUSINESS
Proposal #2 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.
13
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 20, 1998. 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, 1997, 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 17, 1998 By Order of the Board of Directors
WALTER R. SANSOM, SECRETARY
14
CHAMPION INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS, MARCH 17, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Kirby J. Taylor 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 16, 1998, and at any adjournments 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. 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 VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
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?
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
CHAMPION INDUSTRIES, INC.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
Shareholder sign here Co-owner sign here
DETACH CARD
1. Election of Directors.
FOR WITHHELD 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
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s). Your shares will be voted for the remaining nominee(s).
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment(s)
thereof.
Mark box at right if an address change has been noted on the reverse [ ]
side of card.
DETACH CARD