CHAMPION INDUSTRIES INC, 10-K405, 1997-01-28

CHAMPION INDUSTRIES INC
10-K405, 1997-01-28
COMMERCIAL PRINTING

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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the Fiscal Year Ended October 31, 1996

OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File No. 0-21084

CHAMPION INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

West Virginia 55-0717455
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2450 First Avenue
P. O. Box 2968
Huntington, West Virginia 25728
- ---------------------------------------- -------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (304) 528-2791

Securities registered pursuant to Section 12(b) of Act: None

Securities registered pursuant to Section 12(g) of Act: Common Stock, $1.00 par
value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
--- ---

Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
--------

The aggregate market value of the voting stock of the registrant held by
non-affiliates as of January 23, 1997 was $54,897,761 of Common Stock, $1.00
par value. The outstanding common stock of the Registrant at the close of
business on January 23, 1997 consisted of 8,104,714 shares of Common Stock,
$1.00 par value.

Total number of pages including cover page - 128.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registration statement on
Form S-1 No. 33-54454, filed on November 10, 1992 are incorporated by reference
into Part IV, Item 14. Portions of the Registrant's definitive proxy statement
dated February 19, 1997 with respect to its Annual Meeting of Shareholders to be
held on March 17, 1997 are incorporated by reference into Part III, Items
[10-13]. Exhibit Index located on pages 17 to 21.

<PAGE>

PART I

ITEM 1 - DESCRIPTION OF BUSINESS

HISTORY

Champion Industries, Inc. ("Champion" or the "Company") is a major
commercial printer and supplier of office products and office furniture in its
regional markets of West Virginia, Kentucky, Ohio, Pennsylvania, Indiana,
Louisiana, Mississippi, Maryland, Tennessee and the Carolinas. The Company's
sales offices and production facilities are located in Huntington, Charleston,
Parkersburg and Clarksburg, West Virginia; Lexington and Owensboro, Kentucky;
Baton Rouge, Louisiana; Cincinnati and Belpre, Ohio; Jackson, Mississippi;
Baltimore, Maryland; Kingsport, Tennessee; Timmonsville, South Carolina;
Evansville, Indiana; and Bridgeville, Pennsylvania. The Company's sales force of
approximately 70 salespeople sells printing services, office products and office
furniture.

The Company was chartered as a West Virginia corporation on July 1, 1992.
Prior to the public offering of the Company's Common Stock, on January 28, 1993
(the "Offering"), 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 division,
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.

The Company and its predecessors have been headquartered in Huntington
since 1922. Full scale printing facilities, including web presses for
manufacturing business forms, and sales and customer service operations are
located in Huntington. The Company's Charleston division was established in 1974
through the acquisition of the printing operations of Rose City Press. Sales and
customer service operations, as well as the Company's largest pre-press
preparation department, are located in Charleston. The Parkersburg division
opened in 1977 and was expanded by the acquisitions of Park Press and McGlothlin
Printing Company. In addition to sales and customer service operations, this
division houses a large full color printing facility and a state-of-the-art
studio, with a laser scanner, electronic color retouching equipment and 4, 5 and
6 color presses.

The Lexington division commenced operations in 1983 upon the acquisition of
the Transylvania Company. This location includes a pre-press department,
computerized composition facilities, a press room and bindery department, as
well as sales and customer service operations.

The Company acquired Stationers, Inc. ("Stationers"), an office products,
office furniture and retail bookstore operation located in Huntington in 1987,
and consolidated its own office products and office furniture operations with
Stationers. On August 30, 1991, Stationers, Inc. sold the assets, primarily
inventory and fixtures, of its retail bookstore operation. In July, 1993,
Stationer's expanded through acquisition and began its operations in Marietta,
Ohio, under the name "Garrison Brewer."

The Bourque Printing division ("Bourque") commenced operations in June,
1993, upon the acquisition of Bourque Printing, Inc. in Baton Rouge, Louisiana.
This location includes a pre-press department, computerized composition
facilities, a press room with up to 4 color presses and a bindery

<PAGE>

department as well as sales and customer service operations. Bourque was
expanded through the acquisition of Strother Forms/Printing in Baton Rouge in
1993 and through the acquisition of the assets of E. S. Upton Printing Company,
Inc. in New Orleans in 1996.

The Dallas Printing division ("Dallas") commenced operations in September,
1993 upon the acquisition of Dallas Printing Company, Inc. in Jackson,
Mississippi. This location includes a pre-press department, computerized
composition facilities, a press room with up to 4 color presses and a bindery
department as well as sales and customer service operations.

On November 2, 1993, a wholly owned subsidiary of the Company chartered to
effect such acquisition purchased selected assets of Tri-Star Printing, Inc., a
Delaware corporation doing business as "Carolina Cut Sheets" in the manufacture
and sale of business forms in Timmonsville, South Carolina. The Company's
subsidiary has changed its name to "Carolina Cut Sheets, Inc." Carolina Cut
Sheets manufactures single part business forms for sale to dealers and through
the Company's other divisions.

On February 25, 1994, Bourque acquired certain assets of Spectrum Press
Inc. ("Spectrum"), a commercial printer located in Baton Rouge, Louisiana.

On June 1, 1994, the Company acquired certain assets of Premier Data
Graphics, a distributor of business forms and data supplies located in
Clarksburg, West Virginia.

On August 30, 1994, Dallas acquired certain assets of Premier Printing
Company, Inc. ("Premier Printing") of Jackson, Mississippi.

On June 1, 1995, in exchange for issuance of 52,383 shares of its common
stock, the Company acquired U.S. Tag & Ticket Company, Inc. ("U.S. Tag"), a
Baltimore, Maryland based manufacturer of tags used in the manufacturing,
shipping, postal, airline and cruise industries.

On November 13, 1995, in exchange for $950,000 cash and the issuance of
66,768 shares of its common stock, the Company acquired Donihe Graphics, Inc.
("Donihe"), a high volume color printer based in Kingsport, Tennessee. The
Company issued the shares without registration under the Securities Act of 1933
based on exemption from registration pursuant to Section 4(2) of said act and
Rule 505 promulgated thereunder, there being four purchasers and all other
provisions of such rule being satisfied.

On February 2, 1996, Bourque purchased various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. ("Upton"), for approximately
$750,000 in cash.

On July 1, 1996, the Company acquired Smith & Butterfield Co., Inc. ("Smith
& Butterfield"), an office products company located in Evansville, Indiana and
Owensboro, Kentucky. The Company issued 66,666 shares of common stock valued at
$1,200,000 in exchange for all of the issued and outstanding shares of common
stock of Smith & Butterfield. The Company issued the shares without
registration under the Securities Act of 1933 based on exemption from
registration pursuant to Section 4(2) of said act and Rule 505 promulgated
thereunder, there being one purchaser and all other provisions of such rule
being satisfied.

On August 21, 1996, the Company purchased the assets of The Merten Company
("Merten") a commercial printer headquartered in Cincinnati, Ohio, for cash and
assumption of liabilities aggregating $2,535,295.

On December 31, 1996, the Company acquired all outstanding capital stock of
Interform Corporation ("Interform"), a business form manufacturer in
Bridgeville, Pennsylvania, for $2,500,000 cash.

<PAGE>

BUSINESS

The Company's printing services range from the simplest to the most complex
jobs, including business cards, books, brochures, posters, tags, 4 to 6 color
process printing and multi-part, continuous and snap-out business forms. The
Company's state-of-the-art equipment enables it to provide computerized
composition, art design, paste-up, stripping, film assembly and color laser
scanner separations. The Company also offers complete bindery and letter press
services. The Company's segmented gross sales of printing services in fiscal
1996 consisted of approximately 43% sheet and tag printing, 24% business forms
printing, 33% process color printing. The printing operations contributed $42.8
million, or 71% of the Company's total revenues for the fiscal year ended
October 31, 1996.

The Company provides a full range of office products, and office furniture
primarily in the budget and middle price ranges. The Company's office products
and office furniture business is operated under the names "Stationers",
"Garrison Brewer" and "Smith & Butterfield." Stationers is the primary contract
office products supplier headquartered in the Company's West Virginia/Ohio
/Kentucky/Indiana market region. Contract catalog sales, in which
customers' catalog orders are purchased directly from the manufacturer, account
for the bulk of sales volume and afford sales personnel flexibility in product
selection and pricing. Contract pricing is offered to medium to large volume
customers. In addition, the Company offers a broad line of general office
products through major wholesalers' national catalogs. Stationers is a member of
Tri-Mega, a major office products purchasing organization. Members benefit from
volume discounts, which permit them to offer competitive prices and improve
margins. The Company's office furniture business focuses on the budget to
mid-range lines, and an upscale contract line is offered as well. The Company
maintains Stationers' headquarters, office furniture showrooms and warehouses in
Huntington, West Virginia; the Garrison Brewer warehouse, sales office and
office design department in Belpre, Ohio; and a sales office and warehouse in
Clarksburg, West Virginia. Smith & Butterfield's headquarters, showroom and
warehouse facility is located in Evansville, Indiana; and it maintains a branch
showroom in Owensboro, Kentucky. Stationers', Garrison Brewers' and Smith &
Butterfield's segmented gross sales in fiscal 1996 consisted of approximately
64% office products, 36% office furniture and design services. Office products
and office furniture operations contributed $17.1 million, or 29% of the
Company's total revenues, for the fiscal year ended October 31, 1996.

ORGANIZATION

Champion is organized into fifteen divisions. The Huntington headquarters
provides centralized financial management and administrative services to all
divisions. The eight commercial printing divisions, located in Huntington,
Charleston and Parkersburg, West Virginia, Lexington, Kentucky, Baton Rouge and
New Orleans, Louisiana, Jackson, Mississippi and Cincinnati, Ohio, each have a
sales force, a customer service operation and a pre-press department that serve
the customers in their respective geographic areas. Although each customer's
interface is solely with its local division's personnel, its printing job may be
produced in another division using the equipment most suited to the quality and
volume requirements of the job. In this way, for example, Champion can
effectively compete for high quality process color jobs in Lexington by selling
in Lexington, printing in Cincinnati and binding in Huntington. The full range
of printing resources is available to customers in the entire market area
without Champion having to duplicate equipment in each area.

U.S. Tag, located in Baltimore, Maryland, manufactures and sells tags used
in the manufacturing, shipping, postal, airline and cruise industries throughout
the United States.

Donihe, located in Kingsport, Tennessee, is a high volume color printer
which sells throughout the United States through its inside sales force.

<PAGE>

Carolina Cut Sheets, Inc., located in Timmonsville, South Carolina,
manufactures single sheet business forms which are sold to other commercial
printers and dealers and through the Company's other divisions.

Interform Corporation, doing business as Interform Solutions and located in
Bridgeville, Pennsylvania, manufactures business forms and related products
which it sells through a network of independent distributors concentrated in
Eastern Pennsylvania, New Jersey and metropolitan New York, and directly through
its Consolidated Graphics Communications division in Pittsburgh, Pennsylvania.

Stationers, Inc., located in Huntington and Clarksburg, West Virginia and
Belpre, Ohio, provides office products and office furniture primarily to
customers in the Company's West Virginia, Ohio and Kentucky market areas.
Products are sold by printing division salespeople and delivered in bulk daily
to each division, or shipped directly to customers. The full range of office
products and office furniture inventory is thus made available to customers.

Smith & Butterfield, located in Evansville, Indiana and Owensboro,
Kentucky, provides office products and office furniture primarily to customers
in the Company's Indiana and Kentucky market areas. Products are sold by Smith &
Butterfield sales personnel and delivered to customers daily.

Each division is managed by a division manager who has profit
responsibility for the sales and production operations of the division. Division
managers report directly to the President of the Company. Their compensation
depends primarily on the volume and profit results of their individual
operations.

SERVICES AND PRODUCTS

PRINTING SERVICES

Champion's primary business is commercial printing. The Company, unlike
most of its regional competitors, offers the full range of printing production
processes, enabling the Company to provide customers a one stop, one vendor
source without the time and service constraints of subcontracting one or more
aspects of production. Major production areas include: (i) printing of business
cards, letterhead, envelopes, and one, two, or three color brochures; (ii)
process color manufacturing of brochures, posters, advertising sheets and
catalogues; (iii) die cutting and foil stamping; (iv) bindery services,
including trimming, collating, folding and stitching the final product; (v)
forms printing, encompassing roll to roll computer forms, checks, invoices,
purchase orders and similar forms in single-part, multi-part, continuous and
snap-out formats; (vi) tag manufacturing; and (vii) high volume process color
web printing of brochures and catalogs.

OFFICE PRODUCTS AND OFFICE FURNITURE

Champion provides the customer with a wide range of product offerings in
two major categories: supplies, such as file folders, paper products, pens
and pencils, computer paper and laser cartridges; and furniture, including
budget and mid-price desks, chairs, file cabinets and computer furniture.
Champion is primarily a contract office products supplier. Most office
furniture is sold from catalogs and supplied from in-house stock, with
special orders and design projects constituting a small portion of sales.

<PAGE>

MANUFACTURING AND DISTRIBUTION

The Company's pre-press facilities are equipped with desktop publishing,
typesetting, laser imagesetting and scanning/retouching, and complete layout,
design, stripping and plate processing. Sheet printing equipment (for printing
onto pre-cut, individual sheets) includes 15" single color duplicators to 28",
36" and 38" two color presses; 6 color Koenig & Bauer, 5 color Heidelberg and
Komori and 4 color Komori presses up to 40"; and Jet and Superjet envelope
presses. Rotary equipment (for printing onto continuous rolls of computer form
paper) includes multi-color web presses ranging from 14" to 22" and eight
station carbon and multi-part collators. High speed color printing is performed
on a Harris 5 color heatset "half-web" press. Binding equipment consists of
hot-foil, embossing and die cutting equipment, perforators, folders,
folder-gluers, scoring machines, collator/stitcher/trimmers for saddle
stitching, automatic and manual perfect binders, numbering machines and mailing
equipment.

Each of the Company's offices is linked with overnight distribution of
products and on-line electronic telecommunications permitting timely transfer of
various production work from facility to facility as required. While the Company
maintains a fleet of delivery vehicles for intracompany and customer deliveries,
it utilizes the most cost effective and expeditious means of delivery, including
common carriers.

Requirements for the Company's press runs are determined shortly before the
runs are made and, therefore, backlog is not a meaningful measure in connection
with the Company's printing business.

Stationers' inventory policy ensures that approximately 60% of the office
products items the Company sells are in stock. Another 30% are ordered on a
daily basis and received overnight. The remaining 10% are items that come
direct from manufacturers and may take one week from placement of order to
delivery to customer. Office furniture sales are made primarily from the
Company's in-house stock. However, special orders from manufacturers may
require up to 90 days for delivery.

CUSTOMERS

Champion serves customers located primarily in smaller cities and towns,
where its marketing strategy is to focus on manufacturers, institutions,
financial services companies and professional firms. Consistent with
customary practice in the commercial printing and office products industries,
the Company ordinarily does not have long term contracts with its customers.
The Company believes that its reputation for quality, service, convenience
and selection allows it to enjoy significant loyalty from its customers.
Although the Company has no written long term contracts with printing or
office products customers, a number of high volume customers issue yearly
purchase orders. These purchase orders, which are typically for office
products, but may include printing services, are for firm prices adjustable
for paper price changes. Depending upon customer satisfaction with price and
service, these purchase orders may be renewed for another year or up to three
years without repeating the full bidding process.

During the fiscal year ended October 31, 1996, no single customer accounted
for more than 1.8% of total revenues. Due to the project-oriented nature of
customers' printing requirements, sales to particular customers may vary
significantly from year to year depending upon the number and size of their
projects.

RAW MATERIALS

Raw materials necessary for the Company's printing business include stock
and special order paper, inks, film and plates, all of which are readily
available from numerous suppliers. The cost of raw materials represented
approximately 31% of the Company's printing sales for the fiscal year ended
October 31, 1996, which is comparable to its experience in prior periods. The
Company has not

<PAGE>

experienced difficulties in obtaining materials in the past and does not
consider itself dependent on any particular supplier for raw materials.

COMPETITION

The markets for the Company's printing services and office products are
highly competitive, based primarily on price, quality, production capability,
capacity for prompt delivery and personal service.

Champion's printing competitors are numerous and range in size from very
large national companies with substantially greater resources than the Company
to many smaller local companies. In recent years, despite consolidation within
the printing industry, there has been a substantial increase in new equipment
and technological advances in such equipment, resulting in excess capacity and
highly competitive pricing. The Company has remained competitive by maintaining
its printing equipment at state-of-the-art levels and emphasizing personal
attention to customers.

Large national and regional mail order discount operations provide
significant competition in the office products and office furniture business.
The economics afforded by membership in a national purchasing association and by
purchasing directly from manufacturers, and the high level of personal services
to customers contribute substantially to the Company's ability to compete in
these product areas.

ENVIRONMENTAL REGULATION

The Company is subject to the environmental laws and regulations of the
United States and the states in which it operates concerning emissions into the
air, discharges into waterways and the generation, handling and disposal of
waste materials. The Company's past expenditures relating to environmental
compliance have not had a material effect on the Company. These laws and
regulations are constantly evolving, and it is impossible to predict accurately
the effect they may have upon the capital expenditures, earnings and competitive
position of the Company in the future. Based upon information currently
available, management believes that expenditures relating to environmental
compliance will not have a material impact on the financial condition of the
Company.

GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS

The Company's operations and the majority of its customers are located in
West Virginia, Ohio, Pennsylvania, Kentucky, Indiana, Tennessee, Maryland,
Louisiana, Mississippi and South Carolina. The Company and its profitability may
be more susceptible to the effects of unfavorable or adverse local or regional
economic factors and conditions than a company with a more geographically
diverse customer base.

SEASONALITY

Historically, the Company has experienced a greater portion of its annual
sales and net income in the second and fourth quarters than in the first and
third quarters. The second quarter generally reflects increased orders for
printing of corporate annual reports and proxy statements. A post-Labor Day
increase in demand for printing services and office products coincides with the
Company's fourth quarter.

EMPLOYEES

On October 31, 1996, the Company had 574 full-time employees.

<PAGE>

EXECUTIVE OFFICERS OF CHAMPION

Position and offices with Champion;
Name Age Principal occupation or employment last five years
- --------------------------------------------------------------------------------
Marshall T. Reynolds 60 President, Chief Executive Officer and Chairman of
the Board of Directors of Company from December
1992 to present; President and general manager of
Harrah and Reynolds, predecessor of the Company
from 1964 (and sole shareholder from 1972) 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.)

Michael D. McKinney 43 Vice President and General Sales Manager of
Company since September 1995; Vice President and
Division Manager - Huntington, of Company from
December 1992 to September 1995; Division Manager
- Huntington, of Harrah and Reynolds from October
1991 to 1992; Division Manager - Lexington, of
Harrah and Reynolds from August 1982 to October
1991.

William M. Campbell 61 Vice President and Division Manager - Parkersburg,
of Company from December 1992 to present; Division
Manager - Parkersburg, of Harrah and Reynolds from
June 1977 to 1992.

Ronald W. Taylor 39 Vice President and Division Manager - Lexington,
of Company from December 1992 to present; Division
Manager - Lexington, of Harrah and Reynolds from
January 1992 to December 1992; Sales
Representative, Lexington Division of Harrah and
Reynolds from 1986 to January 1992.

J. Mac Aldridge 55 Vice President of Company and Division Manager -
Huntington since September 1995; Vice President
and Division Manager - Stationers, of Company
since December 1992; President and General Manager
of Stationers since November 1989; Sales
Representative of Huntington Division of Harrah
and Reynolds from July 1983 to October 1989.

Gary A. Blackshire 44 Vice President and Division Manager - Charleston,
of Company since December 1992; Division Manager -
Charleston, of Harrah and Reynolds from April 1992
to December 1992; Sales Representative of
Charleston Division of Harrah and Reynolds from
1975 until April 1992.

<PAGE>

Position and offices with Champion;
Name Age Principal occupation or employment last five years
- --------------------------------------------------------------------------------
R. Douglas McElwain 49 Vice President and Division Manager - Bourque
Printing, of Company since December 1993; General
Manager of Bourque Printing from June 1993 to
December 1993; Sales Representative of Charleston
Division of Harrah and Reynolds and Company from
1986 until June 1993.

Joseph C. Worth, III 47 Vice President and Chief Financial Officer of
Company since June 1992; Executive Director of
United Huntington Industries, Inc. (venture
capital fund of Huntington, West Virginia) from
1991 until June 1992; President of Guyan Machinery
Company (manufacturer of coal mine and coal
preparation plant equipment) from 1988 until 1991.

Toney K. Adkins 47 Vice President of Company since November, 1995;
President, KYOWVA Corrugated Container Company,
Inc. from 1991 to 1996

Walter R. Sansom 67 Secretary of Company since December 1992;
Production Coordinator of Company since December
1992 and of Harrah and Reynolds from August 1968
to December 1992.

ITEM 2 - PROPERTIES

The Company conducts its operations from 18 different physical locations,
14 of which are leased, and 4 of which are owned in fee simple by Company
subsidiaries. The properties leased, and certain of the lease terms, are set
forth below:

DIVISION OCCUPYING SQUARE ANNUAL EXPIRATION
PROPERTY PROPERTY FEET RENTAL OF TERM
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2450 1st Avenue Champion 85,000 $116,400 2008
Huntington, West Virginia(1) headquarters and
Chapman Printing -
Huntington

1945 5th Avenue Stationers 37,025 60,000 2007
Huntington, West Virginia(1)

615-619 4th Avenue Stationers 59,641 21,600 1998
Huntington, West Virginia(1)

405 Ann Street Chapman Printing - 36,614 57,600 2003
Parkersburg, West Virginia(1) Parkersburg

<PAGE>

<CAPTION>
DIVISION OCCUPYING SQUARE ANNUAL EXPIRATION
PROPERTY PROPERTY FEET RENTAL OF TERM
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1563 Hansford Street Chapman Printing - 21,360 49,920 2003
Charleston, West Virginia(1) Charleston

890 Russell Cave Road Chapman Printing - 20,135 57,600 2000
Lexington, Kentucky(1) Lexington

214 Stone Road Stationers - 15,146 42,000 1999
Belpre, Ohio(1) Garrison Brewer

2800 Lynch Road Evansville, Indiana(1) Smith & Butterfield 42,375 116,640 1999

113-117 East Third St. Smith & Butterfield 8,500 14,400 2002
Owensboro, Kentucky(1)

1901 Mayview Road Interform Corporation 120,000 316,000 1998
Bridgeville, Pennsylvania(1)

736 Carondelet Street Upton Printing 15,000 62,700 1997
New Orleans, Louisiana

1515 Central Parkway The Merten Company 40,000 97,200 2001
Cincinnati, OH(1)

2217 Robb Street U.S. Tag 26,000 52,000 2000
Baltimore, Maryland(1)

Palmetto Industrial Park Carolina Cut Sheets 16,200 35,724 monthly
Timmonsville, S. Carolina

</TABLE>

- -------------------------
(1) Lease is "triple net", whereby Company pays for all utilities, insurance,
taxes, repairs and maintenance, and all other costs associated with
properties.

The Dallas Printing Division owns, and operates from, a single story
masonry structure of approximately 19,600 square feet at 321-323 East Hamilton
Street, Jackson, Mississippi.

The Bourque Printing Division owns, and operates from, a single-story
building of approximately 18,501 square feet at 13112 South Choctaw Drive, Baton
Rouge, Louisiana.

Stationers' Clarksburg operation is conducted from a single story
masonry building of approximately 20,800 square feet owned by the Company at 700
N. Fourth Street, Clarksburg, West Virginia.

Donihe owns, and operates from, a single story steel building of
approximately 38,500 square feet situated on roughly 14.5 acres at 766 Brookside
Drive, Kingsport, Tennessee.

<PAGE>

ITEM 3 - LEGAL PROCEEDINGS

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Champion common stock has traded in the over-the-counter market on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") National Market System since the January 28, 1993 completion of its
public offering of common stock under the symbol "CHMP".

The following table sets forth the high and low closing quotations for
Champion common stock for the period indicated (restated to reflect four 25%
stock dividends, accounted for as 5 for 4 stock splits, paid on January 24,
1994, January 23, 1995, January 22, 1996 and January 27, 1997). The range of
high and low closing bid quotations are based on quotations from NASDAQ, and do
not include retail mark-up, mark-down or commission.

FISCAL 1995 FISCAL 1996
------------------------ --------------------
HIGH LOW HIGH LOW
First quarter $15.23 $12.29 $15.52 $13.12
Second quarter 14.08 12.32 16.60 12.80
Third quarter 16.32 12.80 15.40 13.60
Fourth quarter 15.36 12.80 18.00 13.60

At the close of business on January 27, 1997, there were 537 shareholders
of record of Champion Common Stock.

The following table sets forth the quarterly dividends per share declared
on Champion common stock (restated to reflect four 25% stock dividends,
accounted for as 5 for 4 stock splits, paid on January 24, 1994 , January 23,
1995, January 22, 1996 and January 27, 1997).

FISCAL 1995 FISCAL 1996 FISCAL 1997
-------------------------------------------------------
First quarter $.026 $.032 $.040
Second quarter .032 .040 --
Third quarter .032 .040 --
Fourth quarter .032 .040 --

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The Consolidated Income Statement and Balance Sheet Data of the Company set
forth below at and for the years ended October 31, 1992 through 1996 have been
derived from the audited Consolidated Financial Statements of the Company. The
information set forth below should be read in conjunction with the Consolidated
Financial Statements of the Company (and notes thereto) appearing elsewhere in
this annual report and the information contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
---------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1):
Revenues:
Printing. . . . . . . . . . . . . . . . . $42,770 $30,269 $25,828 $19,621 $18,827
Office products and office furniture. . . 17,115 14,532 13,230 10,691 8,820
---------------------------------------------------------------------
Total revenues . . . . . . . . . . . 59,885 44,801 39,058 30,312 27,647

Cost of sales:
Printing. . . . . . . . . . . . . . . . . 28,694 18,972 15,194 11,307 11,221
Office products and office furniture. . . 11,077 9,670 8,604 6,837 5,605
---------------------------------------------------------------------
Total cost of sales. . . . . . . . . 39,771 28,642 23,798 18,144 16,826

Selling, general and administrative expense . 14,534 11,162 10,919 8,738 8,051
--------------------------------------------------------------------

Income from operations. . . . . . . . . . . . 5,580 4,997 4,341 3,430 2,770
Interest income . . . . . . . . . . . . . 25 11 58 107 18
Interest expense. . . . . . . . . . . . . (444) (185) (91) (123) (454)
Other income. . . . . . . . . . . . . . . 224 113 211 70 10
---------------------------------------------------------------------
Income before income taxes. . . . . . . . . . 5,385 4,936 4,519 3,484 2,344
Income taxes. . . . . . . . . . . . . . . (2,133) (1,995) (1,853) (1,429) (1,009)
---------------------------------------------------------------------
Net income. . . . . . . . . . . . . . . . . . $3,252 $2,941 $2,666 $2,055 $1,335
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings per share (2) (3) (4). . . . . . . . $ .40 $ .37 $ .34 $ .29 $ .27

Cash dividends per share. . . . . . . . . . . $ .152 $ .122 $ .098 $ .041 --

</TABLE>

AT OCTOBER 31,
1995 1995 1994 1993 1992
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1):
Working capital . . . . . . . . . . . . . . . $13,062 $11,044 $9,609 $9,202 $(434)
Total assets. . . . . . . . . . . . . . . . . 38,583 25,020 23,063 18,705 9,030
Short-term debt . . . . . . . . . . . . . . . 1,963 600 383 424 4,215
Long term debt, net of current portion. . . . 5,286 1,557 735 588 211
Net assets. . . . . . . . . . . . . . . . . . -- -- -- -- 1,619
Shareholders' equity. . . . . . . . . . . . . 23,096 18,369 16,380 13,673 --

</TABLE>

- ------------------------
(1) On January 28, 1993, pursuant to an Exchange Agreement, The Harrah and
Reynolds Corporation exchanged certain assets and liabilities of its
printing divisions and all of the capital stock of The Chapman Printing
Company, Inc. and Stationers, Inc. for 2,000,000 shares, constituting
approximately 63% of the Company's Common Stock. The exchange transactions
represented a reorganization of entities under common control. As such,
these assets and liabilities were transferred and accounted for at Harrah
and Reynolds' historical cost in a manner similar to that in a pooling of
interests transaction.

(2) All per share data has been adjusted to reflect four 25% stock dividends,
accounted for as 5 for 4 stock splits paid on January 24, 1994, January 23,
1995, January 22, 1996 and January 27, 1997.

(3) Earnings per share for the years ended October 31, 1996, 1995, 1994 and
1993 have been computed based on the weighted average number of shares
outstanding of 8,078,257, 7,898,941, 7,821,024 and 7,021,260 shares.

(4) Earnings per share for the year ended October 31, 1992 is pro forma,
assuming 4,882,813 shares of Common Stock had been issued and outstanding.

<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated information
derived from the Company's Consolidated Income Statements as a percentage of
total revenues.

PERCENTAGE OF TOTAL REVENUES
YEAR ENDED OCTOBER 31,
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Revenues:
Printing 71.4% 67.6% 66.1%
Office products and office furniture 28.6 32.4 33.9
- ----------------------------------------------------------------------------------------------------
Total revenues 100.0 100.0 100.0
- ----------------------------------------------------------------------------------------------------

Cost of sales:
Printing 47.9 42.3 38.8
Office products and office furniture 18.5 21.6 22.0
- ----------------------------------------------------------------------------------------------------
Total cost of sales 66.4 63.9 60.8
- ----------------------------------------------------------------------------------------------------

Selling, general and administrative expenses 24.3 24.9 28.1
- ----------------------------------------------------------------------------------------------------

Income from operations 9.3 11.2 11.1
- ----------------------------------------------------------------------------------------------------

Other income (expense):
Interest income 0.0 0.0 0.1
Interest expense (0.7) (0.4) (0.2)
Other income 0.4 0.2 0.5
- ----------------------------------------------------------------------------------------------------
Income before income taxes 9.0 11.0 11.5
Income taxes (3.6) (4.4) (4.7)
- ----------------------------------------------------------------------------------------------------

Net income 5.4% 6.6% 6.8%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------

</TABLE>

The following discussion and analysis presents the significant changes in the
financial position and results of operations of the company and should be
read in conjunction with the audited financial statements and notes thereto
included elsewhere herein.

<PAGE>

YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995

Total revenues increased 33.7% in fiscal 1996 to $59.9 million from $44.8 in
fiscal 1995. Printing revenue increased 41.3% in fiscal 1996 to $42.8 million
from $30.3 million in 1995. Office products and office furniture revenue
increased 17.8 % in fiscal 1996 to $17.1 million from $14.5 million in fiscal
1995. This was achieved through new acquisitions which accounted for increased
printing sales of $12.6 million and increased office products and office
furniture sales of $1.7 million. The office products and office furniture
divisions also experienced $900,000 of sales growth due to increased sales
efforts and a one time furniture sale totaling $500,000.

Total cost of sales increased 38.9% in fiscal 1996 to $39.8 million from $28.6
million in fiscal 1995. Printing cost of sales increased 51.2% in fiscal 1996 to
$28.7 million from $19.0 million in fiscal 1995, due primarily to sales volume
and the addition of newly acquired divisions with lower sales margins. Office
products and office furniture cost of sales increased 14.6% in fiscal 1996 to
$11.1 million from $9.7 million in fiscal 1995, primarily due to sales volume.
Selling, general & administrative expenses declined as a percentage of sales in
fiscal 1996 to 24.3% from 24.9% in fiscal 1995 due to cost controls implemented
by management and spreading overhead expenses over increasing revenues.

Income from operations increased 11.7% in fiscal 1996 to $5.6 million from $5.0
million in fiscal 1995. Interest expense on a comparative basis increased
$259,000 as a result of increased debt. Income taxes remained constant at 40%.
For fiscal 1996, net income increased 10.6% to $3.3 million from $2.9 million in
fiscal 1995.

YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994

Total revenues increased 14.7% in fiscal 1995 to $44.8 million from $39.1
million in fiscal 1994. Printing revenue increased 17.2% in fiscal 1995 to $30.3
million from $25.8 million in 1994. This increase was achieved largely through
new acquisitions, which accounted for increased printing sales of $3.5 million.
In addition, sales increases resulted from paper price increases. The printing
divisions experienced a slight increase in sales volume without the impact of
acquisitions. Office products and office furniture revenue increased 9.9% to
$14.5 million in fiscal 1995 from $13.2 million in fiscal 1994 due to a general
increased sales effort.

Total cost of sales increased 20.3% in fiscal 1995 to $28.6 million from $23.8
million in fiscal 1994. Printing cost of sales increased 24.9% in fiscal 1995 to
$19.0 million from $15.2 million in fiscal 1994, due primarily to increased
sales volume and higher paper costs. Office products and office furniture cost
of sales increased 12.4% in fiscal 1995 to $9.6 million from $8.6 million fiscal
1994 due primarily to increased sales volume. Selling, general and
administrative expenses decreased as a percentage of total revenues to 24.9% in
fiscal of 1995 from 28.1% in fiscal 1994, due to cost controls implemented by
management and spreading overhead expenses over increasing revenues.

Income from operations increased 15.1% in fiscal 1995 to $5.0 million from $4.3
million in fiscal 1994. Interest expense on a comparative basis increased by
$94,000, reflecting an increases in debt and the prime rate. The Company's
effective tax rate remained constant at 41%. For fiscal 1995, net income
increased 10.3% to $2.9 million from $2.7 million in fiscal 1994.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operations for the year ended October 31, 1996, 1995 and
1994 were $2.9 million, $213,000, and $2.3 million. The 1996 cash flows from
operations increased due to increased net income, decreased days' sales in
inventory and a $645,000 increase in accrued taxes. 1996 acquisitions of
businesses and capital equipment were funded from working capital, long term
debt and the issuance of common stock. 1995 acquisitions of businesses and
capital equipment were funded from working capital and long term debt. The
primary source of funding in 1994 was cash flows from operations, which were
used to acquire property and equipment of $1.3 million and pay dividends
totaling $760,000. The company used $919,000 of cash to acquire a printing
business. Buildings and vehicles have generally been financed through leases.
Capital equipment has been financed through long term debt and capital leases.

At October 31, 1996 working capital was $13.1 million compared to 11.0
million at October 31, 1995. Working capital was increased by the addition of
positive working capital of acquired businesses. At October 31, 1995, working
capital was $11.0 million compared to $9.6 million at October 31, 1994. Working
capital was increased by the acquisition of positive working capital from U.S.
Tag, the decrease in accrued taxes and increases in accounts receivable and
inventory related to the growth in sales, offset by the reduction in cash.
Management believes that the combination of funds available from operations,
borrowings available under the Company's credit facilities (including leases as
required) and anticipated cash flows from operations will provide sufficient
capital resources for the foreseeable future. In the event the Company seeks to
accelerate internal growth or make acquisitions beyond these sources, additional
financing would be necessary.

INFLATION AND ECONOMIC CONDITIONS

Management believes that the effect of inflation on the Company's
operations is not material. The Company does not have long term contracts;
therefore, to the extent permitted by competition, it has the ability to pass
through to its customers most cost increases resulting from inflation, if any.

<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and other information required by this item are
contained in the financial statements and footnotes thereto listed in the index
on page F-1 of this report, infra.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information relating to the directors of Champion is contained on pages 2
through 3 and page 11 of Champion's definitive Proxy Statement, dated February
19, 1997, with respect to the Annual Meeting of Shareholders to be held on March
17, 1997 which will be filed pursuant to regulation 14(a) of the Securities
Exchange Act of 1934 and which is incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION, 1996

The information called for by this item is contained on pages 4 through 8
of Champion's definitive Proxy Statement, dated February 19, 1997, with respect
to the Annual Meeting of Shareholders to be held on March 17, 1997, which will
be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this Item is contained on pages 3 and 4 of
Champion's definitive Proxy Statement, dated February 19, 1997 with respect to
the Annual Meeting of Shareholders to be held on March 17, 1997, which will be
filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this Item is contained on pages 9 through 11
of Champion's definitive Proxy Statement, dated February 19, 1997 with respect
to the Annual Meeting of Shareholders to be held on March 17, 1997, which will
be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.

<PAGE>

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed for this part of the report are filed as a separate section
following the signature page. Reference is made to the Consolidated
Financial Statements and Schedule - Table of Contents on Page F-1.

1. See Page No. F-1.

2. Schedules, other than those listed on page F-1, are omitted because of the
absence of conditions under which they are required or because the
information required is included in the consolidated financial statements
and notes thereto.

3. EXHIBITS

Number Description Reference
- -------------------------------------------------------------------------------
(1) Underwriting Agreement Underwriting Agreement dated
January 20, 1993 between The Harrah
and Reynolds Corporation, the
Company and Ferris, Baker Watts,
Incorporated, filed as Exhibit 1 to
Form 10-K dated January 27, 1994,
filed on January 29, 1994, is
incorporated herein by reference.

(2) Plan of acquisition, Exchange Agreement dated
reorganization, arrangement, November 5, 1992 between The
liquidation or succession Harrah and Reynolds Corporation and
Company, filed as Exhibit 2.1 to
Registration Statement on Form S-1,
File No. 33-54454, filed on
November 10, 1992, is incorporated
herein by reference.

Agreement of Merger dated May 14,
1996 between Company and Smith &
Butterfield Co., Inc., filed as
Exhibit 2.1 to Form 8-K dated May
15, 1996, filed May 23, 1996 is
incorporated herein by reference.

Asset Purchase Agreement dated
August 12, 1996 between The Merten
Company, its stockholders and
Company subsidiary CM Acquisition
Corp., filed as Exhibit 2.1 to Form
8-K dated August 21, 1996, filed
August 23, 1996, is incorporated
herein by reference.

Interform Corporation Stock
Purchase Agreement dated October
28, 1996, between IRM Services,
Inc. and Company, filed as Exhibit
2.1 to Form 8-K dated November 1,
1996, filed November 5, 1996, is
incorporated herein by reference.

<PAGE>

3. EXHIBITS (continued)

(3) Articles of Incorporation Filed as Exhibits 3.1 and 3.2 to
and bylaws Registration Statement on Form S-1,
File No. 33-54454, filed on
November 10, 1992, are incorporated
herein by reference.

(4) Instruments defining the See Exhibit 3.1 above.
rights of security holders,
including debentures.

(9) Voting trust agreements N/A

(10) Material Contracts Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 2450 1st Avenue,
Huntington, West Virginia, filed as
Exhibit 10.1 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.

Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
615 4th Avenue, Huntington, West
Virginia, filed as Exhibit 10.2 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.

Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 617-619 4th Avenue,
Huntington, West Virginia, filed as
Exhibit 10.3 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.

Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
1945 5th Avenue, Huntington, West
Virginia, filed as Exhibit 10.4 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.

Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 405 Ann Street,
Parkersburg, West Virginia, filed
as Exhibit 10.5 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.

Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 890 Russell Cave
Road, Lexington, Kentucky, filed as
Exhibit 10.6 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.

<PAGE>

3. EXHIBITS (continued)
Realty Lease dated January 28, 1993
between BCM Company, Ltd. and
Company regarding 1563 Hansford
Street, Charleston, West Virginia,
filed as Exhibit 10.7 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.

Master Vehicle Lease dated January
28, 1993 between Champion Leasing
Corp. and Company, filed as Exhibit
10.8 to Form 10-K dated January 27,
1994, filed January 31, 1994, is
incorporated herein by reference.

Line of credit pursuant to Note of
Stationers, Inc. in principal
amount of $500,000, payable to The
Twentieth Street Bank, filed as
Exhibit 10.5 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.

$2,000,000 line of credit pursuant
to Letter Agreement, Loan
Agreement, Commercial Promissory
Note and Guaranty Agreement dated
September 24, 1993 with Bank One,
West Virginia, Huntington, N.A.,
filed as Exhibit 10.11 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.

Lease dated April 11, 1994 between
Terry and Anis Wyatt and Stationers
Inc. regarding 214 Stone Road,
Belpre, Ohio, filed as Exhibit 10.1
to Form 10-K dated January 26,
1995, filed January 27, 1995, is
incorporated herein by reference.

Form of Indemnification Agreement
between Company and all directors
and executive officers, filed as
Exhibit 10.4 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.

Lease Agreement dated June 1, 1995
between Owl Investors Joint Venture
and U.S. Tag & Ticket Company, Inc.
regarding 2217 Robb Street,
Baltimore, Maryland filed as
Exhibit 10.1 to Form 10-K dated
January 26, 1996, filed January 26,
1996, is incorporated herein by
reference.

<PAGE>

3. EXHIBITS (continued)

Commercial Installment Note dated
December 7, 1995 in amount of
$950,000 from Company and Donihe
Graphics, Inc. to National City
Bank, Columbus and attendant
Negative Pledge Agreement from
Donihe Graphics, Inc., filed as
Exhibit 10.2 to Form 10-K dated
January 26, 1996, filed January 26,
1996, is incorporated herein by
reference.

Executive Compensation Plans Employment and Non-Competition
and Arrangements Agreement dated January 28, 1993
between the Company and Marshall T.
Reynolds, filed as Exhibit 10.13 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.

Company's 1993 Stock Option Plan,
effective March 22, 1994, filed as
Exhibit 10.14 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.

(10.1) Commercial Installment Note dated
February 27, 1996 in amount of
$750,000 from Company and Bourque
Printing, Inc. to National City
Bank, Columbus, and attendant
Negative Pledge Agreement from
Bourque Printing, Inc. Page 48

Term/Time Note dated December 30,
1996, in amount of $9,000,000, from
Company to PNC Bank, National
Association, filed as Exhibit 10 to
Form 8-K dated January 14, 1997,
filed January 15, 1997, is
incorporated herein by reference.

(10.2) Lease Agreement dated November 1,
1991 between Randall M. Schulz,
successor trustee of The
Butterfield Family Trust No. 2 and
Smith & Butterfield Co., Inc.
regarding 2800 Lynch Road,
Evansville, Indiana. Page 59

(10.3) Lease Agreement dated June 1, 1972
between Earl H. and Elaine D.
Seibert and Smith & Butterfield
Co., Inc. regarding 113-117 East
Third Street, Owensboro, Kentucky.
Page 71

<PAGE>

3. EXHIBITS (continued)

(10.4) Agreement of Lease dated August 21,
1996 between Marion B. and Harold
A. Merten, Jr. and CM Acquisition
Corp. (now The Merten Company)
regarding 1515 Central Parkway,
Cincinnati, Ohio. Page 85

(10.5) Agreement of Lease dated October 1,
1988 between Ronald H. Scott and
Frank J. Scott t/d/b/a St. Clair
Leasing Co. and Interform
Corporation, regarding 1901 Mayview
Road, Bridgeville, Pennsylvania, as
amended by Amendment No. 1 dated
November 30, 1989, as amended by
Amendment No. 2 dated April 24,
1992, and as amended by Stipulation
and Order of Court (United States
Bankruptcy Court for the Western
District of Pennsylvania in the
matter of Interform Corporation v.
Ronald H. Scott and Frank J. Scott
t/d/b/a St. Clair Leasing Company,
Bankruptcy No. 94-20094-JLC)
entered August 17, 1994. Page 106

(11) Statement re computation of Exhibit 11 Page 126
per share earnings

(12) Statement regarding computation N/A
of ratios

(13) Annual report to security N/A
holders, Form 10-Q or quarterly
report to security holders

(16) Letter re change in certifying
accountant N/A

(18) Letter re change in accounting
principles N/A

(21) Subsidiaries of the Registrant Exhibit 21 Page 127

(22) Published report regarding N/A
matters submitted to vote of
security holders

(23) Consent of Ernst & Young LLP Exhibit 23 Page 128

(24) Power of Attorney N/A

(27) Financial Data Schedule Exhibit 27 EDGAR

(28) Information from reports N/A
furnished to state insurance
regulatory authorities

<PAGE>

(b) Champion filed the following reports on Form 8-K during the last quarter of
the period covered by this report:

(i) Form 8-K dated August 21, 1996, filed August 23, 1996, reporting
acquisition of assets of The Merten Company, of Cincinnati, Ohio.

(ii) Form 8-K dated November 1, 1996, filed November 5, 1996,
reporting execution of an agreement to acquire all outstanding
capital stock of Interform Corporation, of Bridgeville,
Pennsylvania.

(iii) Form 8-K dated January 14, 1997, filed January 15, 1997,
reporting consummation of an agreement to acquire all outstanding
capital stock of Interform Corporation, of Bridgeville,
Pennsylvania.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

CHAMPION INDUSTRIES, INC.

By /s/ Marshall T. Reynolds
-------------------------------------
Marshall T. Reynolds
President and Chief Executive Officer

By /s/ Joseph C. Worth, III
-------------------------------------
Joseph C. Worth, III
Vice President and Chief Financial
Officer

Date: January 28, 1997

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.

SIGNATURE AND TITLE DATE

/s/ Robert H. Beymer January 28, 1997
- -----------------------------------------
Robert H. Beymer, Director

/s/ Philip E. Cline January 28, 1997
- -----------------------------------------
Philip E. Cline, Director

/s/ Harley F. Mooney, Jr. January 28, 1997
- -----------------------------------------
Harley F. Mooney, Jr., Director

/s/ Todd L. Parchman January 28, 1997
- -----------------------------------------
Todd L. Parchman, Director

/s/ A. Michael Perry January 28, 1997
- -----------------------------------------
A. Michael Perry, Director

/s/ Marshall T. Reynolds January 28, 1997
- -----------------------------------------
Marshall T. Reynolds, Director

/s/ Neal W. Scaggs January 28, 1997
- -----------------------------------------
Neal W. Scaggs, Director

23
<PAGE>

CHAMPION INDUSTRIES, INC.

Audited Consolidated Financial Statements

and Schedule

October 31, 1996

CONTENTS

Report of Independent Auditors (Item 8) . . . . . . . . . . . . . . . . . . .F-2

Audited Consolidated Financial Statements and Schedule (Item 8)
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Income Statements . . . . . . . . . . . . . . . . . . . . . .F-5
Consolidated Statements of Shareholders' Equity. . . . . . . . . . . . . .F-6
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . .F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . .F-8
Schedule VIII--Valuation and Qualifying Accounts (Item 14) . . . . . . . F-19

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Champion Industries, Inc.

We have audited the accompanying consolidated balance sheets of Champion
Industries, Inc. and Subsidiaries as of October 31, 1996 and 1995, and the
related consolidated income statements, shareholders' equity, and cash flows for
each of the three years in the period ended October 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based upon our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Champion Industries, Inc. and Subsidiaries at October 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Ernst & Young LLP

Charleston, WV
December 30, 1996

F-2
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

OCTOBER 31,
1996 1995
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,336,764 $ 1,350,806
Accounts receivable, net of allowance of $514,000 and $399,000 11,037,897 7,727,176
Inventories 7,156,466 5,339,592
Other current assets 383,282 162,850
Deferred income tax assets 340,334 272,657
-------------------------------
Total current assets 21,254,743 14,853,081

Property and equipment, at cost:
Land 647,340 347,340
Buildings and improvements 3,125,873 2,290,002
Machinery and equipment 13,802,972 10,029,560
Furniture and fixtures 1,311,368 992,658
Vehicles 1,246,624 467,774
-------------------------------
22,936,105 15,288,924
Less accumulated depreciation (8,917,373) (7,353,794)
-------------------------------
14,018,732 7,935,130
Cash surrender value of officers life insurance 425,507 447,407
Goodwill, net of accumulated amortization 2,565,287 1,689,780
Other assets 318,233 94,678
-------------------------------
3,309,027 2,231,865
-------------------------------
Total assets $38,582,502 $25,020,076
-------------------------------
-------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

OCTOBER 31,
1996 1995
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 1,542,102 $ 692,319
Notes payable 1,300,000 -
Accrued payroll 1,030,523 1,278,825
Taxes accrued and withheld 725,614 369,765
Accrued income taxes 1,295,188 649,406
Accrued expenses 336,314 218,219
Current portion of long-term debt:
Notes payable 1,238,423 392,007
Capital lease obligations 724,615 208,092
------------------------------
Total current liabilities 8,192,779 3,808,633

Long-term debt, net of current portion:
Notes payable 3,750,841 736,198
Capital lease obligations 1,535,176 820,389
Deferred income tax liability 1,677,624 932,633
Deferred gain 330,443 353,703
------------------------------
Total liabilities 15,486,863 6,651,556

Commitments and contingencies - -

Shareholders' equity:
Common stock, $1 par value, 10,000,000
shares authorized; 8,104,907 and 7,917,433
shares issued and outstanding 8,104,907 6,333,946
Additional paid-in capital 7,714,777 6,788,474
Retained earnings 7,275,955 5,246,100
------------------------------
Total shareholders' equity 23,095,639 18,368,520
------------------------------
Total liabilities and shareholders' equity $38,582,502 $25,020,076
------------------------------
------------------------------

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Income Statements

YEAR ENDED OCTOBER 31,
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Printing $42,769,955 $30,269,131 $25,828,373
Office products and office furniture 17,114,644 14,532,229 13,229,386
-----------------------------------------------------
Total revenues 59,884,599 44,801,360 39,057,759

Cost of sales:
Printing 28,693,718 18,971,767 15,193,690
Office products and office furniture 11,076,854 9,670,370 8,604,585
-----------------------------------------------------
Total cost of sales 39,770,572 28,642,137 23,798,275

Selling, general and administrative expenses 14,533,543 11,162,197 10,919,262
-----------------------------------------------------
Income from operations 5,580,484 4,997,026 4,340,222

Other income (expense):
Interest income 25,287 10,705 58,585
Interest expense (443,884) (185,255) (91,068)
Other 223,589 113,505 211,475
-----------------------------------------------------
(195,008) (61,045) 178,992

-----------------------------------------------------
Income before income taxes 5,385,476 4,935,981 4,519,214
Income taxes (2,133,000) (1,995,000) (1,853,000)
-----------------------------------------------------
Net income $ 3,252,476 $ 2,940,981 $ 2,666,214
-----------------------------------------------------
-----------------------------------------------------

Earnings per share $0.40 $0.37 $0.34
-----------------------------------------------------
-----------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity

ADDITIONAL
COMMON STOCK PAID-IN RETAINED
------------------------
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1993 3,974,932 $3,974,932 $8,341,494 $1,356,496 $13,672,922

Net income for 1994 - - - 2,666,214 2,666,214
Dividends ($0.098 per share) - - - (759,531) (759,531)
Stock issued in acquisitions 37,022 37,022 762,978 - 800,000
Stock split (five shares for four) 1,002,988 1,002,988 (1,002,988) - -
-------------------------------------------------------------------------
Balance, October 31, 1994 5,014,942 5,014,942 8,101,484 3,263,179 16,379,605

Net income for 1995 - - - 2,940,981 2,940,981
Dividends ($0.122 per share) - - - (958,060) (958,060)
Stock issued in acquisition 52,383 52,383 (42,808) - 9,575
Cash paid in lieu of fractional shares (168) (168) (3,413) - (3,581)
Stock split (five shares for four) 1,266,789 1,266,789 (1,266,789) - -
-------------------------------------------------------------------------
Balance, October 31, 1995 6,333,946 6,333,946 6,788,474 5,246,100 18,368,520

Net income for 1996 - - - 3,252,476 3,252,476
Dividends ($0.152 per share) - - - (1,222,621) (1,222,621)
Stock issued in acquisitions 150,126 150,126 2,549,874 - 2,700,000
Cash paid in lieu of fractional shares (146) (146) (2,590) - (2,736)
Stock split (five shares for four) 1,620,981 1,620,981 (1,620,981) -
-------------------------------------------------------------------------
Balance, October 31, 1996 8,104,907 $8,104,907 $7,714,777 $7,275,955 $23,095,639
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-6
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

YEAR ENDED OCTOBER 31,
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $3,252,476 $2,940,981 $2,666,214
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation, amortization and accretion 1,661,141 1,124,727 895,765
Deferred gain on sale of assets (23,260) ( 19,128) (148,323)
Deferred income tax benefit 64,125 (13,836) (161,126)
Changes in assets and liabilities:
Accounts receivable (1,385,199) (916,940) (1,092,488)
Inventories (18,185) (1,429,596) (1,267,450)
Other current assets (204,813) (58,161) (14,987)
Accounts payable (815,662) (151,423) (196,361)
Accrued payroll (257,648) 71,751 224,630
Taxes accrued and withheld 199,926 (51,522) 44,063
Accrued income taxes 645,782 (1,317,009) 1,526,554
Accrued expenses (255,164) 32,958 (155,913)
---------------------------------------------------
Net cash provided by operating activities 2,863,519 212,802 2,320,578

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,380,523) (2,304,973) (1,283,554)
Businesses acquired, net of cash received (1,118,792) 18,206 (919,041)
Payments on notes receivable - - 171,700
Increase in other assets (80,098) (35,484) (19,766)
---------------------------------------------------
Net cash used in investing activities (3,579,413) (2,322,251) (2,050,661)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on notes payable 1,300,000 - -
Proceeds from long-term debt 2,822,343 1,455,068 584,195
Principal payments on long-term debt (1,195,134) ( 659,493) (901,349)
Dividends paid (1,222,621) (958,060) (759,531)
Cash paid in lieu of fractional shares (2,736) (3,581) -
---------------------------------------------------
Net cash provided by (used in) financing activities 1,701,852 (166,066) (1,076,685)
---------------------------------------------------
Net increase (decrease) in cash 985,958 (2,275,515) (806,768)
Cash and cash equivalents at beginning of year 1,350,806 3,626,321 4,433,089
---------------------------------------------------
Cash and cash equivalents at end of year $2,336,764 $1,350,806 $3,626,321
---------------------------------------------------
---------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-7
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

October 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Champion conform to generally accepted
accounting principles. The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates. The following is a summary of the more significant accounting and
reporting policies.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements of Champion Industries, Inc.
and Subsidiaries (the "Company") include the accounts of The Chapman Printing
Company, Inc., Bourque Printing, Inc., Dallas Printing Company, Inc.,
Stationers, Inc., Carolina Cut Sheets, Inc., U.S. Tag & Ticket Company, Inc.,
Donihe Graphics, Inc., Smith and Butterfield Co., Inc., and The Merten Company.

Significant intercompany transactions have been eliminated in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments, with an original maturity
of three months or less, to be cash equivalents.

Cash and cash equivalents consist principally of cash on deposit with banks and
repurchase agreements for government securities held in one bank. At October 31,
1996 and 1995, the Company held overnight repurchase agreements for $119,393 and
$102,585 of Federal National Mortgage Association securities with stated
interest rates of 4.06% and 4.00%.

INVENTORIES

Inventories are principally stated at the lower of first-in, first-out cost or
market. Manufactured finished goods and work in process inventories include
material, direct labor and overhead based on standard costs, which approximate
actual costs.

PROPERTY AND EQUIPMENT

Depreciation of property and equipment and amortization of leasehold
improvements and equipment under capital leases are recognized primarily on the
straight-line and declining-balance methods in amounts adequate to amortize
costs over the estimated useful lives of the assets.

F-8
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

The Company leases certain equipment under financing agreements which are
classified as capital leases. These leases are for a term of five years and
contain purchase options at the end of the original lease term. Amortization of
assets recorded under capital lease agreements is included in depreciation
expense.

Major renewals, betterments and replacements are capitalized, while maintenance
and repair costs are charged to operations as incurred. Upon the sale or
disposition of assets, the cost and related accumulated depreciation are removed
from the accounts with the resulting gains or losses reflected in income.
Depreciation expense approximated $1,564,000, $992,000 and $764,000 for the
years ended October 31, 1996, 1995, and 1994.

GOODWILL

The excess cost over fair value of net assets of acquired businesses, goodwill,
is being amortized by the straight-line method over 10 to 30 years. The carrying
value of goodwill is evaluated periodically for impairment. This evaluation
includes the review of operating performance and future undiscounted cash flows
of the underlying businesses. Any impairment loss is recognized in the period
when it is determined that the carrying value of the goodwill may not be
recoverable. Accumulated amortization at October 31, 1996 and 1995, approximated
$824,000 and $727,000. Amortization expense approximated $98,000, $132,000 and
$103,000 for the years ended October 31, 1996, 1995, and 1994.

INCOME TAXES

Provisions for income taxes currently payable and deferred income taxes are
based on the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

2. INVENTORIES

Inventories consisted of the following:

OCTOBER 31,
1996 1995
-----------------------
Printing:
Raw materials $2,276,070 $1,457,025
Work in process 1,473,021 1,021,460
Finished goods 572,228 583,067
Office products and office furniture 2,835,147 2,278,040
-----------------------
$7,156,466 $5,339,592
-----------------------
-----------------------

F-9
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

3. CREDIT ARRANGEMENTS

The Company has an unsecured line of credit with a bank for borrowings to a
maximum of $2,000,000 with interest payable quarterly at the prime rate plus
0.5%. This line of credit, which expires on August 25, 1997, contains certain
restrictive financial covenants. There was $1,100,000 outstanding under this
facility at October 31, 1996 and no borrowings outstanding at October 31, 1995.

The Company also has an unsecured line of credit with a bank for borrowings to a
maximum of $750,000 with interest payable quarterly at the bank's prime rate.
This line of credit expires on August 6, 1997, and is guaranteed by the
President of the Company. There was $200,000 outstanding under this facility at
October 31, 1996 and no borrowings outstanding at October 31, 1995.

4. LONG-TERM DEBT

Long-term debt consisted of the following:

OCTOBER 31,
1996 1995
-----------------------------
<S> <C> <C>
Installment notes payable to banks, due in monthly
installments totaling $15,088 with interest rates
approximating the prime rate and the last note maturing
July 2000, collateralized by equipment, vehicles,
inventory, accounts receivable and, on certain notes,
the personal guarantee of the President of the Company $270,767 $ 380,561

Installment notes payable to banks, due in monthly
installments totaling $47,484 with interest rates
approximating the banks' prime rate and the last note
maturing December 2002, collateralized by equipment,
inventory, and, on certain notes, the personal
guarantee of the President of the Company 1,977,949 747,644

Unsecured installment notes payable to banks, due in
monthly installments totaling $51,333, with interest
rates approximating the banks' prime rate, with the
last note maturing September 2001 2,740,548 -

Capital lease obligations, due in monthly installments
totaling $71,190, including interest at the bank's
prime rate, less .50% to 1%, through September 2000 2,259,791 1,028,481
-----------------------------
7,249,055 2,156,686

Less current portion 1,963,038 600,099
-----------------------------
Long-term debt, net of current portion $5,286,017 $1,556,587
-----------------------------
-----------------------------

</TABLE>

F-10
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Maturities of long-term debt for each of the next five years follows:

NOTES CAPITAL
PAYABLE LEASES TOTAL
----------------------------------------
1997 $1,238,423 $ 724,615 $1,963,038
1998 1,211,992 596,130 1,808,122
1999 927,065 534,199 1,461,264
2000 821,801 293,404 1,115,205
2001 473,383 111,443 584,826
Thereafter 316,600 0 316,600
----------------------------------------
$4,989,264 $2,259,791 $7,249,055
----------------------------------------
----------------------------------------

The prime rate, the base interest rate on the above loans, approximated 8.25%
and 8.75% at October 31, 1996 and 1995. Interest paid during the years ended
October 31, 1996, 1995, and 1994 approximated $382,800, $172,800, and $90,600.
The Company's non-cash activities included equipment purchases of approximately
$410,000, which were financed by a bank.

5. INCOME TAXES

Income taxes consisted of the following:

YEAR ENDED OCTOBER 31,
1996 1995 1994
----------------------------------------
Current expense:
Federal $1,675,000 $1,594,000 $1,613,000
State 394,000 415,000 401,000
Deferred expense (benefit) 64,000 (14,000) (161,000)
----------------------------------------
$2,133,000 $1,995,000 $1,853,000
----------------------------------------
----------------------------------------

F-11
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Deferred tax assets and liabilities are as follows:

OCTOBER 31,
1996 1995
------------------------
Assets:
Allowance for doubtful accounts (current) $ 205,724 $ 159,444
Net operating loss carryforward of acquired companies 198,663 101,295
Other accrued liabilities (current) 134,610 113,213
------------------------
Gross deferred tax assets 538,997 373,952

Liabilities:

Property and equipment 1,876,287 1,033,928
------------------------
Gross deferred liability 1,876,287 1,033,928
------------------------
Net deferred tax liabilities $1,337,290 $ 659,976
------------------------
------------------------

A Reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:

YEAR ENDED OCTOBER 31,
1996 1995 1994
--------------------------------
Statutory federal income tax rate 34% 34% 34%
State taxes, net of federal benefit 5 6 6
Other 1 1 1
-------------------------------
Effective tax rate 40% 41% 41%
-------------------------------
-------------------------------

Income taxes paid during the years ended October 31, 1996, 1995 and 1994
approximated $1,437,000, $3,326,000 and $487,600.

The Company has available a net operating loss carryforward for income tax
purposes from acquired companies of approximately $497,000, of which $401,000
expires in 2010 and $96,000 expires in 2011.

6. RELATED PARTY TRANSACTIONS AND OPERATING LEASE COMMITMENTS

The Company leases operating facilities from entities controlled by its
President, his family and affiliates. The terms of these leases range from five
to fifteen years and are accounted for as operating leases.

The Company also leases vehicles from an entity controlled by its President.
Vehicle leases are for a term of twenty-four months, month-to-month thereafter,
and lease payments average $350 per month.

F-12
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

A summary of significant related party transactions follows:

YEAR ENDED OCTOBER 31,
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Rent expense paid to affiliated entities for:
Vehicles $ 13,130 $ 86,559 $ 305,369
Operating facilities 363,100 363,100 363,100

Purchases of materials and supplies from
affiliated entities 181,113 197,963 143,137
Sales of office products, office furniture and
printing services to affiliated entities 840,482 984,132 1,646,237
</TABLE>

When a new vehicle is required, the Company either purchases a new vehicle or
enters into a new vehicle lease with unrelated entities. These leases are on a
month-to-month basis. Other vehicle rent expense to unrelated entities totaled
$264,875, $368,218 and $220,660 for the years ended October 31, 1996, 1995 and
1994.

In addition, the Company leases property and equipment from unrelated entities
under operating leases. Rent expense amounted to $320,866, $124,685 and $133,116
for the years ended October 31, 1996, 1995, and 1994.

Under the terms and conditions of the above-mentioned leases, the Company pays
all taxes, assessments, maintenance, repairs or replacements, utilities and
insurance.

Future minimum rental commitments for all noncancelable operating leases with
initial terms of one year or more consisted of the following at October 31,
1996:

1996 $756,880
1997 670,780
1998 651,380
1999 440,230
2000 379,320
Thereafter 1,185,300
----------
$4,083,890
----------
----------

Accounts receivable from affiliated entities resulting from sales transactions
totaled $53,690 and $62,112 at October 31, 1996 and 1995.

In order to minimize premium costs, the Company participates in a self-insurance
program for employee health care benefits with affiliates controlled by its
President. The Company is allocated costs based on its proportionate share to
provide such benefits to its employees. The Company's expense related to this
program for the years ended October 31, 1996, 1995 and 1994 was $733,490,
$651,977 and $644,539.

F-13
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

7. EMPLOYEE BENEFIT PLANS

The Company has a Profit Sharing Plan (the "Plan") which covers all eligible
employees and qualifies as a Savings Plan under Section 401(k) of the Internal
Revenue Code. The Company may make discretionary contributions to the Plan. In
addition to the Company's contribution, the participants may make voluntary
contributions up to 2% of their salary not to exceed $300. The Company's expense
under the Plan was approximately $97,000, $66,000 and $30,000 for the years
ended October 31, 1996, 1995 and 1994.

The Champion Industries, Inc. 1993 Stock Option Plan provides for the granting
of both incentive stock options and non-qualified stock options of up to 610,351
shares of common stock. The option price per share for incentive stock options
shall not be lower than the fair market value of the common stock on the date of
the grant. The option price per share for non-qualified stock options shall be
at such price as the Compensation Committee of the Board of Directors may
determine at its sole discretion. At October 31, 1996, options to purchase
170,059 shares have been granted at option prices ranging from $5.63 to $17.90
per share. All options granted to-date are incentive stock options. Options vest
immediately and may be exercised within five years from the date of grant.

8. DEFERRED GAIN

On August 30, 1991, Stationers, Inc. sold assets of its retail bookstore
consisting primarily of inventory and fixtures. The assets sold represented a
separate area of Stationer's retail location and thus the transaction was
considered to be a disposal of a portion of a product line incident to the
evolution of its overall business. Stationers, Inc. unconditionally guaranteed a
bank loan of the purchaser amounting to $600,000. Accordingly, the gain from the
sale of $591,835 was deferred and is being recognized as the purchaser makes
payments on the purchaser's bank loan and the note receivable. The gain
recognized for the years ended October 31, 1996, 1995, and 1994 amounted to
$23,260, $19,128 and $148,323.

9. COMMITMENTS AND CONTINGENCIES

Stationers, Inc. unconditionally guarantees an outstanding bank loan as
described in Note 8. Management periodically assesses the risk of loss related
to this guaranty. Considering the buyer's personal guaranty of the indebtedness,
the bank's collateral position in the inventory, furniture and fixtures and
accounts receivable, the continued profitability of the product line and the
absence of defaults on the bank note, management believes the risk of material
loss is remote.

The Company is subject to the environmental laws and regulations of the United
States and the states in which it operates concerning emissions into the air,
discharges into the waterways and the generation, handling and disposal of waste
materials. The Company's past expenditures relating to environmental compliance
have not had a material effect on the Company. These laws and regulations are
constantly evolving, and it is impossible to predict accurately the effect they
may have upon the capital expenditures, earnings, and competitive position of
the Company in the future. Based upon information currently available,
management believes that expenditures relating to environmental compliance will
not have a material impact on the financial position of the Company.

F-14
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

10. EARNINGS AND DIVIDENDS PER SHARE

Earnings per share were computed based upon the weighted average shares of
common stock outstanding plus the shares that would be outstanding assuming the
exercise of dilutive stock options. The Company had 8,078,257, 7,898,941, and
7,821,024 weighted average shares outstanding during the years ended October 31,
1996, 1995 and 1994.

On December 16, 1996, the Company's Board of Directors authorized a 5-for-4
stock split to be effected in the form of a 25% stock divided to be paid on
January 27, 1997, to shareholders of record on January 6, 1997. This stock
split has been given retroactive effect in the October 31, 1996 balance sheet
and all per share amounts included in these financial statements have been
adjusted accordingly.

11. ACQUISITIONS

On November 13, 1995, the Company acquired all of the outstanding common stock
of Donihe Graphics, Inc. in exchange for cash of $950,000 and 66,768 shares of
its common stock with a value of $1,500,000. The Company obtained a loan from a
bank of $950,000 to finance this acquisition.

On February 2, 1996, the Company acquired various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. for approximately $750,000 in
cash. The Company obtained a loan from a bank of $750,000 to finance this
acquisition.

On July 1, 1996, the Company acquired all of the outstanding common stock of
Smith and Butterfield Co., Inc. in exchange for 66,666 shares of its common
stock with a fair value of $1,200,000.

On August 21, 1996, the Company acquired various assets with a fair value of
approximately $2,500,000 and assumed certain liabilities of approximately
$2,500,000 of The Merten Company. The Company refinanced $2,000,000 of the
assumed liabilities through a loan from a bank.

These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the purchase prices have been allocated to the assets
acquired and liabilities assumed based upon their fair values at the respective
acquisition date. The operating results of these businesses are included in the
Consolidated Income Statements since their respective acquisition dates.

F-15
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

The estimated fair values of these assets and liabilities as of the
acquisition dates are summarized as follows:

Cash $ 576,947
Accounts receivable 1,925,522
Inventory 1,798,689
Other current assets 15,619
Property and equipment 4,859,579
Deferred tax asset 123,592
Goodwill 973,073
Other assets 121,557
Accounts payable (1,665,445)
Other current liabilities (538,528)
Deferred tax liability (736,781)
Long-term debt assumed (3,058,086)
------------
$4,395,738
------------
------------

On June 1, 1995, the Company acquired all of the outstanding common stock of
U.S. Tag & Ticket Company, Inc. ("U.S. Tag") in exchange for 52,383 shares of
its common stock (unregistered) valued at $1,100,000. This transaction has been
accounted for as a pooling of interests; however, prior period financial
information has not been restated due to the immaterial effect on the Company's
financial statements. The operating results of U.S. Tag are included in the
Consolidated Income Statements since the acquisition date.

On December 31, 1996, the Company acquired all of the outstanding common stock
of Interform Corporation in exchange for cash of $2,500,000. This acquisition
will be accounted for under the purchase method. As of September 30, 1996,
Interform had total assets of $14,900,000 and total liabilities of $9,600,000.

The following summarizes the unaudited consolidated pro forma results of
operations for the years ended October 31, 1996 and 1995, assuming the
acquisitions accounted for under the purchase method had been consummated at the
beginning of each year presented.

1996 1995
----------- -----------
Revenues $97,581,254 $89,298,545
Net income 2,154,425 1,890,133
Net income per share .26 .23
Common shares outstanding 8,136,773 8,086,599

F-16
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

12. INDUSTRY SEGMENT INFORMATION

The Company operates principally in two industry segments: the production,
printing and sale, principally to commercial customers, of printed materials
including brochures, pamphlets, reports, tags, continuous and other forms; and
the sale of office products and office furniture.

The Company operates entirely in the United States. Inter-segment sales are not
significant.

Revenues and operating income for the years ended October 31, 1995, 1994, and
1993, and identifiable assets at the end of each of those years, were as
follows:

1996 1995 1994
---------------------------------------------------
Revenues:
<S> <C> <C> <C>
Printing $42,769,955 $ 30,269,131 $25,828,373
Office products and office furniture 17,114,644 14,532,229 13,229,386

Operating income:
Printing 4,281,435 3,794,788 3,349,558
Office products and office furniture 1,299,049 1,202,238 990,664

Depreciation and amortization:
Printing 1,501,970 1,012,925 797,553
Office products and office furniture 159,171 111,802 98,212

Capital expenditures:
Printing 2,624,440 2,218,833 1,013,972
Office products and office furniture 163,158 86,140 269,582

Identifiable assets:
Printing 31,018,430 20,240,878 18,564,881
Office products and office furniture 7,564,072 4,779,198 4,498,498
</TABLE>

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value. The carrying amounts reported in the balance sheet
for short-term revolving credit agreements and long-term debt approximate their
fair value.

F-17
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years
ended October 31, 1996 and 1995.

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-----------------------------------------------------------
REVENUES
1996 14,099,536 14,610,052 13,957,384 17,217,627
1995 10,316,672 10,678,202 11,163,616 12,642,870

COST OF SALES
1996 9,775,536 9,516,370 9,070,837 11,407,829
1995 6,721,732 6,608,022 6,959,790 8,352,593

NET INCOME
1996 636,402 900,681 704,595 1,010,798
1995 553,385 800,029 601,598 985,969

EARNINGS PER SHARE
1996 .08 .11 .09 .12
1995 .07 .10 .08 .13

F-18
<PAGE>

CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES

Schedule VIII

Valuation and Qualifying Accounts

Years Ended October 31, 1996, 1995, and 1994

ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) OF PERIOD
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Allowance for doubtful accounts $ 398,610 $ 177,393 $ (61,702) $ 514,301

1995
Allowance for doubtful accounts 319,103 104,205 (24,698) 398,610

1994
Allowance for doubtful accounts 165,714 188,948 (35,559) 319,103
</TABLE>

(1) Uncollectible accounts written off, net of recoveries.

F-19

<PAGE>

EXHIBIT INDEX

Number Description Reference
- --------------------------------------------------------------------------------

(1) Underwriting Agreement Underwriting Agreement dated
January 20, 1993 between The
Harrah and Reynolds
Corporation, the Company and
Ferris, Baker Watts,
Incorporated, filed as Exhibit
1 to Form 10-K dated January
27, 1994, filed on January 29,
1994, is incorporated herein
by reference.

(2) Plan of acquisition, reorganization, Exchange Agreement dated
arrangement, liquidation or succession November 5, 1992 between The
Harrah and Reynolds
Corporation and Company, filed
as Exhibit 2.1 to Registration
Statement on Form S-1, File
No. 33-54454, filed on
November 10, 1992, is
incorporated herein by
reference.

Agreement of Merger dated May
14, 1996 between Company and
Smith & Butterfield Co., Inc.,
filed as Exhibit 2.1 to Form
8-K dated May 15, 1996, filed
May 23, 1996 is incorporated
herein by reference.

Asset Purchase Agreement dated
August 12, 1996 between The
Merten Company, its
stockholders and Company
subsidiary CM Acquisition
Corp., filed as Exhibit 2.1 to
Form 8-K dated August 21,
1996, filed August 23, 1996,
is incorporated herein by
reference.

Interform Corporation Stock
Purchase Agreement dated
October 28, 1996, between IRM
Services, Inc. and Company,
filed as Exhibit 2.1 to Form
8-K dated November 1, 1996,
filed November 5, 1996, is
incorporated herein by
reference.

(3) Articles of Incorporation and bylaws Filed as Exhibits 3.1 and 3.2
to Registration Statement on
Form S-1, File No. 33-54454,
filed on November 10, 1992,
are incorporated herein by
reference.

(4) Instruments defining the rights of See Exhibit 3.1 above.
security holders, including
debentures.

(9) Voting trust agreements N/A

<PAGE>

3. EXHIBITS (continued)

Realty Lease dated January 28,
1993 between The Harrah and
Reynolds Corporation and
Company regarding 615 4th
Avenue, Huntington, West
Virginia, filed as Exhibit
10.2 to Form 10-K dated
January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Realty Lease dated January 28,
1993 between ADJ Corp. and
Company regarding 617-619 4th
Avenue, Huntington, West
Virginia, filed as Exhibit
10.3 to Form 10-K dated
January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Realty Lease dated January 28,
1993 between The Harrah and
Reynolds Corporation and
Company regarding 1945 5th
Avenue, Huntington, West
Virginia, filed as Exhibit
10.4 to Form 10-K dated
January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Realty Lease dated January 28,
1993 between Printing Property
Corp. and Company regarding
405 Ann Street, Parkersburg,
West Virginia, filed as
Exhibit 10.5 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Realty Lease dated January 28,
1993 between Printing Property
Corp. and Company regarding
890 Russell Cave Road,
Lexington, Kentucky, filed as
Exhibit 10.6 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Realty Lease dated January 28,
1993 between BCM Company, Ltd.
and Company regarding 1563
Hansford Street, Charleston,
West Virginia, filed as
Exhibit 10.7 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Master Vehicle Lease dated
January 28, 1993 between
Champion Leasing Corp. and
Company, filed as Exhibit 10.8
to Form 10-K dated January 27,
1994, filed January 31, 1994,
is incorporated herein by
reference.

<PAGE>

3. EXHIBITS (continued)

Line of credit pursuant to
Note of Stationers, Inc. in
principal amount of $500,000,
payable to The Twentieth
Street Bank, filed as Exhibit
10.5 to Registration Statement
on Form S-1, File No.
33-54454, filed on November
10, 1992, is incorporated
herein by reference.

$2,000,000 line of credit
pursuant to Letter Agreement,
Loan Agreement, Commercial
Promissory Note and Guaranty
Agreement dated September 24,
1993 with Bank One, West
Virginia, Huntington, N.A.,
filed as Exhibit 10.11 to Form
10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by
reference.

Lease dated April 11, 1994
between Terry and Anis Wyatt
and Stationers Inc. regarding
214 Stone Road, Belpre, Ohio,
filed as Exhibit 10.1 to Form
10-K dated January 26, 1995,
filed January 27, 1995, is
incorporated herein by
reference.

Form of Indemnification
Agreement between Company and
all directors and executive
officers, filed as Exhibit
10.4 to Registration Statement
on Form S-1, File No.
33-54454, filed on November
10, 1992, is incorporated
herein by reference.

Lease Agreement dated June 1,
1995 between Owl Investors
Joint Venture and U.S. Tag &
Ticket Company, Inc. regarding
2217 Robb Street, Baltimore,
Maryland filed as Exhibit 10.1
to Form 10-K dated January 26,
1996, filed January 26, 1996,
is incorporated herein by
reference.

Commercial Installment Note
dated December 7, 1995 in
amount of $950,000 from
Company and Donihe Graphics,
Inc. to National City Bank,
Columbus and attendant
Negative Pledge Agreement from
Donihe Graphics, Inc., filed
as Exhibit 10.2 to Form 10-K
dated January 26, 1996, filed
January 26, 1996, is
incorporated herein by
reference.

<PAGE>

3. EXHIBITS (continued)

Executive Compensation Employment and Non-Competition
Plans and Arrangements Agreement dated January 28,
1993 between the Company and
Marshall T. Reynolds, filed as
Exhibit 10.13 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is
incorporated herein by
reference.

Company's 1993 Stock Option
Plan, effective March 22,
1994, filed as Exhibit 10.14
to Form 10-K dated January 27,
1994, filed January 31, 1994,
is incorporated herein by
reference.

(10.1) Commercial Installment Note
dated February 27, 1996 in
amount of $750,000 from
Company and Bourque Printing,
Inc. to National City Bank,
Columbus, and attendant
Negative Pledge Agreement from
Bourque Printing, Inc. Page 48

Term/Time Note dated December
30, 1996, in amount of
$9,000,000, from Company to
PNC Bank, National
Association, filed as Exhibit
10 to Form 8-K dated January
14, 1997, filed January 15,
1997, is incorporated herein
by reference.

(10.2) Lease Agreement dated November
1, 1991 between Randall M.
Schulz, successor trustee of
The Butterfield Family Trust
No. 2 and Smith & Butterfield
Co., Inc. regarding 2800 Lynch
Road, Evansville, Indiana.
Page 59

(10.3) Lease Agreement dated June 1,
1972 between Earl H. and
Elaine D. Seibert and Smith &
Butterfield Co., Inc.
regarding 113-117 East Third
Street, Owensboro, Kentucky.
Page 71

(10.4) Agreement of Lease dated
August 21, 1996 between Marion
B. and Harold A. Merten, Jr.
and CM Acquisition Corp. (now
The Merten Company) regarding
1515 Central Parkway,
Cincinnati, Ohio. Page 85

<PAGE>

3. EXHIBITS (continued)

(10.5) Agreement of Lease dated
October 1, 1988 between Ronald
H. Scott and Frank J. Scott
t/d/b/a St. Clair Leasing Co.
and Interform Corporation,
regarding 1901 Mayview Road,
Bridgeville, Pennsylvania, as
amended by Amendment No. 1
dated November 30, 1989, as
amended by Amendment No. 2
dated April 24, 1992, and as
amended by Stipulation and
Order of Court (United States
Bankruptcy Court for the
Western District of
Pennsylvania in the matter of
Interform Corporation v.
Ronald H. Scott and Frank J.
Scott t/d/b/a St. Clair
Leasing Company, Bankruptcy
No. 94-20094-JLC) entered
August 17, 1994. Page 106

(11) Statement re computation of per Exhibit 11 Page 126
share earnings

(12) Statement regarding computation N/A
of ratios

(13) Annual report to security holders, N/A
Form 10-Q or quarterly report to
security holders

(16) Letter re change in certifying N/A
accountant

(18) Letter re change in accounting N/A
principles

(21) Subsidiaries of the Registrant Exhibit 21 Page 127

(22) Published report regarding matters N/A
submitted to vote of security
holders

(23) Consent of Ernst & Young LLP Exhibit 23 Page 128

(24) Power of Attorney N/A

(27) Financial Data Schedule Exhibit 27
EDGAR

(28) Information from reports furnished
to N/A state insurance regulatory
authorities

<PAGE>

EXHIBIT 10.1

COMMERCIAL INSTALLMENT NOTE (WITH FINANCIAL COVENANTS)

$750,000.00 Executed at Huntington, West Virginia
February 27, 1996

FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
NATIONAL CITY BANK, COLUMBUS ("Bank"), which has its principal place of business
in Columbus, Ohio, at any office of Bank, SEVEN HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS in lawful money of the United States together with interest, in
sixty (60) consecutive monthly installments, commencing the 1st day of April,
1996. Each installment shall consist of principal in the amount of Twelve
Thousand Five Hundred and No/100 Dollars ($12,500.00) plus the unpaid interest
accrued on this note, except that the final installment shall be in such amount
as will pay all of the unpaid principal of and unpaid interest accrued on this
note in full.

Prior to maturity, principal and any overdue interest shall bear interest,
computed daily (on the basis of a 360-day year and actual days elapsed), at
rates determined according to the following interest options, to be elected by
Debtor from time to time for all or parts of the outstanding principal balance
of this note and, except with regard to Option 1, for various periods of time
(each being an interest Period"):

OPTION 1: Computed at a fluctuating rate equal to the Prime Rate as defined
herein, with each change in the Prime Rate automatically and immediately
changing the rate thereafter applicable to this note without notice. All accrued
interest calculated under Option 1 shall be due and payable on the first day of
each month or upon the date another interest option is elected by Debtor.

OPTION 2: Computed at a fixed rate per annum equal to the LIBOR Margin Rate for
Interest Periods of one, two, three, or six months as shall be specified by
Debtor at the time of an election hereunder, or at the end of each previous
Interest Period. Interest accrued under this Option 2 shall be due and payable
on the first day of each month and on the last day of the relevant Interest
Period.

The following procedures shall apply with respect to the election of the
Interest Options hereunder: On the date this note is executed, Option 2 shall
apply. Debtor may thereafter elect Option 1 by giving Bank written or oral
notice at least two (2) Business Days prior to commencement of the applicable
Interest Period and stating that Debtor has elected Option 1. Debtor's notice to
elect Option 1 shall take effect commencing with the third Business Day after
the date of Debtor's notice to Bank and continue in effect until three (3)
Business days after Debtor gives Bank written or oral notice electing Option 2
for a specified Interest Period. At the end of each respective Interest Period
during which Option 2 is in effect; (a) Debtor may elect to continue Option 2 at
the then current LIBOR Margin Rate for the next Interest Period, or convert to
Option 1 by giving Bank written or oral notice not later than two (2) Business
Days prior to the end of the applicable Interest Period, and (b) if no election
to continue under Option 2 at the end of an Interest Period is made by Debtor,
the unpaid principal amount shall automatically convert to Option 1 and
thereafter bear interest at the Prime Rate until three (3) Business days after
Debtor gives Bank written or oral notice electing Option 2 for a specified
Interest Period.

If interest is accruing under Option 1 for all or any portion of the outstanding
principal balance of this note, Debtor may prepay such principal amount, in
whole or in part, at any time without premium or penalty. If interest is
accruing under Option 2, Debtor may prepay such principal amount, in whole or in
part: (a) on the last day of the relevant Interest Period for such amount
without premium or penalty or (b) at any other time upon one (1) Business Day's
prior written notice if, concurrently with the prepayment Debtor pays to Bank a
premium based upon the principal amount prepaid and computed (on

<PAGE>

the basis of a 360-day year and actual days elapsed) at a rate per annum equal
to the excess, if any, of the applicable interest rate over the Reinvestment
Rate, for the period from the date of prepayment to the last day of the relevant
Interest Period.

Concurrently with each prepayment of the principal of this note, Debtor shall
pay the unpaid interest accrued on the principal being prepaid, and each
prepayment shall be applied to the outstanding installments of this note in the
inverse order of their respective due dates.

If Debtor fails to pay an installment in full within ten (10) days after its due
date, Debtor, in each case, will incur and shall pay a late charge equal. to the
greater of twenty dollars ($20.00) or five percent (5%) of the unpaid amount.
The payment of late charge will not cure or constitute a waiver of any Event of
Default under this note.

Except as otherwise provided in writing, payments will be applied first to
installments in the order of their respective due dates and then to late charges
in the order of their respective due dates; provided, however, that if a payment
so applied would pay the principal of this note in full, but leave late charges
outstanding, such payment will instead be applied to late charges prior to being
applied to the principal portion of the final installment. Each payment of an
installment shall be applied first to accrued but unpaid interest and then to
principal.

In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments and installments by giving a written
notice to Debtor of the change. The notice shall be mailed to the address
indicated herein or such other address that Debtor may furnish in writing to an
appropriate officer of Bank and shall be mailed not less than fifteen (15) days
prior to the effective date of such change.

If this note is not paid in full at maturity (whether by lapse of time,
acceleration of maturity or otherwise), the interest rate otherwise in effect
hereunder shall be increased by three percent (3%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
maturity at a rate less than the interest rate actually in effect hereunder.

In consideration of Bank's granting the loan evidenced by this note, Debtor
further agrees with Bank as follows:

1. WARRANTIES. Debtor represents and warrants to Bank as follows:

1.1 ORGANIZATION. Debtor Champion Industries, Inc. is a West Virginia
corporation duly formed and in good standing under west Virginia law
having its chief executive office at the address set forth opposite
its signature below. Debtor Bourque Printing, Inc. is a Louisiana
corporation duly formed and in good standing under Louisiana law
having its chief executive office at the address set forth opposite
its signature below. Debtor Champion Industries, Inc. and Bourque
Printing, Inc. (hereinafter collectively referred to as "Debtor
Corporations") have only the following Subsidiaries, if any: See
Exhibit Al and Exhibit A2 attached hereto and incorporated herein.
Each Debtor Corporation is duly qualified to transact business in each
state or other jurisdiction in which either Debtor corporation owns or
leases any real property or in which Debtors' counsel reasonably
believes such qualification is necessary.
1.2 AUTHORITY. Debtor has requisite power and authority to enter into this
note. No registration with or approval of any governmental agency of
any kind is required on the part of Debtor for the due execution and
delivery or for the enforceability of this note. Each officer
executing and delivering this note on behalf of Debtor has been duly
authorized to do so. Neither the execution and delivery of this note
by Debtor nor its

<PAGE>

performance and observance of the respective provisions hereof will
violate any existing provision in its articles of incorporation,
regulations or by-laws or any applicable law or violate or otherwise
constitute a default under any contract or other obligation now
existing and binding upon it. Upon the execution and delivery hereof,
this note will become a valid and binding obligation of Debtor.

1.3 LITIGATION. No litigation or proceeding is pending against Debtor
before any court or any administrative agency which in the opinion of
Debtors officers might, if successful, have a material, adverse effect
on Debtor.

1.4 TAXES. Debtor has filed all federal, state and local tax returns which
are required to be filed by it and paid all taxes due as shown thereon
(except to the extent, if any, permitted by subsection 2.2). Neither
the Internal Revenue Service nor any other federal, state or local
taxing authority has alleged any material default by Debtor in the
payment of any tax material in amount or threatened to make any
assessment in respect thereof which has not been reflected in the
financial statements referred to in subsection 1.7.

1.5 ASSETS. Debtor has good and marketable title to all assets reflected
in its most current balance sheet except for changes resulting from
transactions in the ordinary course of business. All such assets are
clear of any mortgage, security interest or other lien of any kind
other than any permitted by subsection 4.3.

1.6 COMPLIANCE WITH LAW. Debtor's operations are in full compliance with
all material requirements imposed by law, whether federal or state,
without limitation, the Occupational Safety and Health Act, federal
and state environmental protection laws and zoning ordinances.

1.7 FINANCIAL STATEMENTS. All financial statements and credit
applications delivered by Debtor to Bank accurately reflect Debtor's
financial condition and operations at the times and for the periods
therein stated.

2. AFFIRMATIVE COVENANTS. Debtor agrees that so long as any Bank Debt remains
outstanding, Debtor shall perform and observe each of the following:

2.1 FINANCIAL STATEMENTS. Debtor will furnish each of the following to
Bank

(a) as soon as available and in any event within ninety (90) days
after the end of each Debtor's fiscal years, an annual report of
Debtor for that year. Debtor's annual report shall be audited by
a certified public accountant selected by Debtor and reasonably
acceptable to Bank;

(b) as soon as available and in any event within sixty (60) days
after the end of each of the quarterly periods of each of Debtors
fiscal years,

(1) Debtor's balance sheet as at the end of the period and its income
statement and surplus reconciliation for Debtor's current
fiscal year to date certified by an appropriate officer of
Debtor to be true and complete to the best of his knowledge
and belief, and

(2) that officer's certification that he knows of no Potential Event
of Default that is then existing or if any does, a brief
description thereof and of Debtor's intentions in respect
thereof;

<PAGE>

(c) forthwith upon Bank's written request, such other information in
writing about Debtor's financial condition, properties and
operations as Bank may from time to time reasonably request.

All of Debtor's financial statements shall be prepared in accordance
with GAAP consistently applied except as disclosed therein and in form
and detail satisfactory to Bank.

2.2 TAXES. Debtor will pay in full, prior in each case to the date when
penalties for the nonpayment thereof would attach, all taxes,
assessments and governmental charges and levies for which it may be or
become subject and all lawful claims which, if unpaid, might become a
lien or charge upon its property; provided, that no item need be paid
so long as and to the extent that it is contested in good faith and by
timely and appropriate proceedings effective to stay the enforcement
thereof.

2.3 RECORDKEEPING. Debtor will at all times keep true and complete
financial records in accordance with GAAP and, without limiting the
generality of the foregoing, make appropriate accruals to reserves for
estimated and contingent losses and liabilities. Debtor will permit
sank at all reasonable times to examine Debtor's properties and
records and to make copies of and extracts from such records at Bank's
expense.

2.4 INSURANCE. Debtor will keep itself and all of its insurable properties
insured at all times to such extent, by such insurers and against such
hazards and liabilities as is generally and prudently done by like
businesses, and further in accordance with the provisions of the
Related Writings.

2.5 EXISTENCE. Debtor will at all times maintain its existence, rights and
franchises

2.6 COMPLIANCE WITH LAW. Debtor will comply with all applicable provisions
of the Occupational Safety and Health Act, federal and state
environmental protection laws and every other law (whether statutory,
administrative, judicial or other and whether federal, state or local)
and every lawful governmental order if noncompliance with such law or
order would have a material, adverse effect on Debtor's business or
credit; provided, that any alleged noncompliance shall not be an Event
of Default if and to the extent

(a) appropriate corrective measures are commenced within thirty (30)
days after the noncompliance becomes apparent or is alleged, and
thereafter are diligently pursued to the satisfaction of or being
corrected by procedures satisfactory to the court, agency or
other governmental authority in question, or

(b) the alleged noncompliance is contested in good faith by timely
and appropriate proceedings effective to stay the enforcement
thereof.

2.7 MAINTENANCE. Debtor will maintain all of its fixed assets in good
working order and condition, ordinary wear and tear excepted.

2.8 NOTICES. Debtor will cause its chief financial officer, or in his
absence another officer designated by him, to give Bank prompt written
notice whenever (a) Debtor receives notice from any ERISA regulator
that a default under ERISA exists, (b) Debtor receives notice from any
court, agency or other governmental authority of any alleged
noncompliance with any law or order of the kind referred to in
subsection 2.6, (c) the Internal Revenue Service or any other federal,
state or local taxing authority shall allege any material default by
Debtor in the payment of any tax material in amount or shall

<PAGE>

threaten or make any assessment in respect thereof, (d) any litigation
or proceeding shall be brought against Debtor before any court or
administrative agency which, if successful, might have a material,
adverse effect on Debtor, (e) there shall be filed any application for
a determination of the qualified status of any employee benefit plan;
or (f) he reasonably believes that any Potential Event of Default has
occurred or that any other representation or warranty made in section
1 shall for any reason have ceased in any material respect to be true
and complete.

2.9 BUSINESS PURPOSE. All funds disbursed under this note will be used for
business or commercial purposes.

3. FINANCIAL COVENANTS. Debtor will comply with the following financial
covenants with Bank to be ascertained by Bank on a quarterly basis from
consolidated financial reports of Debtor Champion Industries, Inc., its
subsidiaries and affiliates:

3.1 CURRENT RATIO. The ratio of current assets to current liabilities
shall be maintained at not less than 1.5:1.

3.2 DEBT TO EQUITY RATIO. The ratio of Total Liabilities to Tangible
Shareholder's Equity shall be maintained at not greater than 1:1.

3.3 TANGIBLE NET WORTH. Debtor's Tangible Net Worth shall not fall below
the following amounts for each designated period:

Date of Closing through 10/31/96: $15,000,000.00
11/1/96 through 10/31/97: $16,500,000.00
11/1/97 through 10/31/98: $18,000,000.00
11/1/98 and thereafter: $20,000,000.00

3.4 DEBT SERVICE COVERAGE. The ratio of Debtor's Net Income plus interest
expense plus depreciation plus amortization to interest expense plus
the current portion due of long term debt plus capitalized lease
obligations shall be maintained at not less than 1.50:1.

3.5 PRETAX INTEREST COVERAGE. Debtor will not, during any fiscal year of
Debtor (commencing with the present fiscal year), suffer or permit the
ratio of (a) the aggregate of its net income before taxes for that
year plus interest expense to (b) its interest expense for that year,
to be less than 2.50:1.

4. NEGATIVE COVENANTS. Debtor further covenants with Bank as follows:

4.1 ASSET TRANSFERS. Debtor will not lease as lessor, sell, sellleaseback
or otherwise transfer (whether in one transaction or a series of
transactions) all or any substantial part of its fixed assets (other
than chattels that shall have become obsolete or no longer useful in
its present business).

5. DEFAULT; REMEDIES. The occurrence of any of the following shall constitute
an Event of Default hereunder: (a) Debtor's Bank Debt or any part thereof
shall not be paid in full promptly when due (whether by lapse of time,
acceleration of maturity or otherwise); (b) any Obligor shall die or be
dissolved; (c) any representation or warranty by any Obligor in this note
or any Related Writing shall be false or erroneous in any material respect;
(d) any Obligor shall fail or omit to perform or observe any agreement made
that Obligor in this note or in any Related Writing; (e) a judgment shall
be entered against any Obligor in any court of record; (f) any deposit
account of

<PAGE>

any Obligor is attached or levied upon; (g) any voluntary petition by or
involuntary petition against any Obligor shall be filed pursuant to any
chapter of any bankruptcy code or any Obligor shall make an assignment for
the benefit of creditors, or there shall be any other marshalling of the
assets and liabilities of any Obligor for the benefit of the Obligor's
creditors; or (h) any Obligor's Bank Debt or any part thereof shall not be
paid in full immediately when due (whether due by lapse of time, or
acceleration or otherwise). Upon the occurrence of an Event of Default, the
holder of this note may, in its sole discretion, declare this note to be
due and payable, and the principal of and interest on this note shall
thereupon become immediately payable in full, without any presentment,
demand, or notice of any kind, which Debtor hereby waives. Debtor will pay
to Bank all costs and expenses of collection of this note, including,
without limitation, attorneys' fees.

6. DEFINITIONS. In addition to the words and terms elsewhere defined in this
note, any accounting term used in this note shall have the meaning ascribed
thereto by GAAP, and the following words and terms shall have the following
meanings:

ACCOUNT OFFICER means that officer who at the time in question is
designated by Bank as the officer having primary responsibility for giving
consideration to Debtor's requests for credit or, in that officer's
absence, that officer's immediate superior or any other officer who reports
directly to that superior officer;

BANK DEBT means Debt payable to Bank, whether initially payable to Bank or
acquired by Bank by purchase, pledge or otherwise and whether assigned or
participated to or from Bank in whole or in part;

BUSINESS DAY means a day on which Bank's main office is open to the public
for carrying on substantially all of its banking functions, but shall not
include Saturdays, Sundays or legal holidays;

DEBT means, collectively, all monetary liabilities, and any charges and
expenses incurred in connection therewith, now or hereafter owing by the
Person or Persons in question, including, without limitation, every such
liability whether owing by such Person or one (l) of such Persons alone or
jointly, severally or jointly and severally, whether created by loan,
overdraft, guaranty or other contract or by quasi-contract, tort, statute
or other operation of law;

ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time;

ERISA REGULATOR means any governmental agency having any regulatory
authority over any of Debtor's pension plans, including, without
limitation, the Department of Labor, the Internal Revenue Service and the
pension Benefit Guaranty Corporation;

GAAP refers to generally accepted accounting principles, applied on a basis
consistent with Debtor's accounting procedures in effect on the date
hereof;

LIBOR means the London Interbank Offered Rate for deposits in U.S. Dollars
traded between banks in the London interbank market and as set at or about
11:00 a.m. (London time), two (2) Business Days prior to the beginning of
an Interest Period for periods equal to the relevant Interest Period and
quoted on Telerate, page 3750 (or its successor if such page number
changes) on the date of commencement of the Interest Period elected;

LIBOR MARGIN RATE means the rate per annum equal to the sum of LIBOR plus
1.50%;

<PAGE>

OBLIGOR means any Person who is or shall become obligated or whose property
is or shall serve as collateral for the payment of Debtor's Bank Debt or
any part thereof in any manner, and in addition to Debtor, includes,
without limitation, any maker, endorser, guarantor, subordinating creditor,
assignor, pledger, mortgagor or hypothecator of property;

PERSON means a natural person or entity of any kind, including, without
limitation, any corporation, partnership, trust, governmental body, or any
other form or kind of entity;

POTENTIAL EVENT OF DEFAULT means an event which constitutes, or which with
the lapse of time or the giving of notice or both would constitute an Event
of Default;

PRIME RATE means the fluctuating rate of interest which is publicly
announced from time to time by Bank at its principal place of business as
being its prime rate or base rate thereafter in effect, with each change in
the Prime Rate automatically, immediately and without notice changing the
fluctuating interest rate thereafter applicable hereunder, it being agreed
that the Prime Rate is not necessarily the lowest rate of interest then
available from Bank on fluctuating rate loans;

RECEIVABLE means a claim for money due or to become due to Debtor, whether
classified as an account, instrument, chattel paper, general intangible,
incorporeal hereditament or otherwise, and all proceeds of the foregoing;

REINVESTMENT RATE means a rate of interest equal to the bond equivalent
yield for the most actively traded issues of U.S. Treasury Bills, U.S.
Treasury Notes or U.S. Treasury Bonds for a term similar to the period from
the date of prepayment to the due date of the final installment of this
note and in a principal amount comparable to the principal amount being
prepaid, all as reasonably determined by Bank;

RELATED WRITING means a writing of any form or substance signed by any
Obligor (whether as principal or agent) or by any attorney, accountant or
other representative of any Obligor and received by Bank in respect of
Debtor's Bank Debt or any part thereof, including, without limitation, any
credit application, credit agreement, reimbursement agreement, financial
statement, promissory note, guaranty, indenture, mortgage, security
agreement, authorization, subordination agreement, certificate, opinion or
any similar writing, but shall not include any commitment letter issued by
Bank, without regard to whether Debtor or any other person or acknowledged
receipt thereof.

SUBORDINATED DEBT means any Debt the payment of which has been subordinated
to the payment in full of Bank Debt, whether by its terms or by separate
written instrument, in either case in form and substance satisfactory to
Bank;

SUBSIDIARY means a person, other than a natural person, of which a majority
of the outstanding capital stock (or other form of ownership)or a majority
of the voting power in any election of directors is (or upon the exercise
of any outstanding warrants, options or other rights would be) owned
directly, or indirectly through one or more Subsidiaries, by another
Person, other than a natural person; and

TANGIBLE NET WORTH means net worth less intangible assets, including,
without limitation, patents, trademarks, goodwill and treasury stock.

7. SHARING INFORMATION. Debtor authorizes Bank to share all credit and
financial information relating to Debtor with Bank's parent company, and
with any subsidiary or affiliate company of Bank or of Bank's parent
company.

<PAGE>

8. NOTICES. Except as otherwise provided in this note, a notice to or request
of Debtor shall be deemed to have been given or made hereunder when a
writing to that effect shall have been delivered to an officer of Debtor or
five (5) days after a writing to that effect shall have been deposited in
the United States mail and sent, with postage prepaid, by registered or
certified mail, to Debtor at the address of Debtor's chief executive office
(or to such other address as Debtor may hereafter furnish to Bank in
writing for that purpose), irrespective of whether the writing is actually
received by Debtor. No other method of giving actual notice to or making a
request of Debtor is hereby precluded. Every notice required to be given to
Bank pursuant to this note shall be delivered to an Account Officer.

9. JOINT AND SEVERAL LIABILITY. If Debtor consists of more than one Person,
Debtor shall be jointly and severally liable on this note.

10. SEVERABILITY. If any provision of this note is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable, that
determination shall not affect any other provision of this note, and each
such other provision shall be construed and enforced as if the invalid,
illegal or unenforceable provision were not contained herein.

11. INTERPRETATION. Any holder's delay or omission in the exercise of any
right under this note shall not operate as a waiver of that right or of any
other right under this note. Bank may from time to time in its discretion
grant Debtor waivers and consents in respect of this note or any Related
Writing, but no such waiver or consent shall bind Bank unless specifically
granted by Bank in writing, which writing shall be strictly construed. Each
right, power or privilege specified or referred to in this note or any
Related Writing is in addition to and not in limitation of any other
rights, powers and privileges that Bank may otherwise have or acquire by
operation of law, by other contract or otherwise. The provisions of this
note and the Related Writings shall bind and benefit Debtor and Bank and
their respective successors and assigns, including each subsequent holder,
if any, of this note. If more than one person or entity has signed this
note then the term Debtor means each of them, they are jointly and
severally liable on this note and on the warrant of attorney below and each
shall be the agent of the others for all purposes relating to this note. If
any provision of this note is determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that determination
shall not affect any other provision of this note, and each such other
provision shall be construed and enforced as if the invalid, illegal or
unenforceable provision were not contained herein. The captions to the
various sections and subsections of this note are for convenience of
reference only and shall be disregarded in the interpretation of this note.
This note shall be governed by law of the State of Ohio.

12. ENTIRE AGREEMENT. This note and the Related Writings set forth the entire
agreement between the parties regarding the transactions contemplated
hereby, and supersede all prior agreements, discussions, representations
and understandings, whether written or oral, and any and all
contemporaneous oral agreements, commitments, discussions, representations
and understandings between the parties relating to the subject matter
hereof.

<PAGE>

13. AMENDMENTS. No amendment, modification or supplement to this note or any
Related Writing shall be binding unless executed in writing by all parties
thereto, and this provision shall not be subject to waiver by any party and
shall be strictly enforced.

CHAMPION INDUSTRIES, INC.

P.O. Box 2968 By: /s/ J.C. Worth, III
Huntington, West Virginia 25728 Its: Vice President and C.F.O.

BOURQUE PRINTING, INC.

P.O. Box 2968 By: /s/ R. Douglas McElwain
Huntington, West Virginia 25728 Its: President

<PAGE>

NEGATIVE PLEDGE AGREEMENT

THIS NEGATIVE PLEDGE AGREEMENT is made this 27th day of February, 1996, between
BOURQUE PRINTING, INC. ("Pledgor") and NATIONAL CITY BANK, COLUMBUS ("Bank").

WITNESSETH:

WHEREAS, Pledgor has requested that Bank extend credit to it in the amount of
$750,000.00 as evidenced by a Commercial Installment Note with Financial
Covenants dated February 27, 1996 ("Obligations") and Bank has agreed to such
request upon compliance with certain terms, conditions and provisions; and

WHEREAS, in connection with the Obligations, Bank has requested and Pledgor has
agreed to execute and deliver to Bank this Negative Pledge Agreement (the
"Agreement") wherein Pledgor agrees that, EXCEPT FOR THOSE LIENS AND
encumbrances existing as of the date of this Agreement and fully disclosed in
PLEDGOR'S MOST RECENT FINANCIAL STATEMENTS. it will not sell, pledge,
hypothecate, transfer, mortgage or otherwise encumber any of the assets which it
owns as of February 27, 1996 ("Property").

NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Pledgor agrees as follows:

1. Pledgor hereby covenants and agrees that, until such time as the
Obligations are fully satisfied and paid, unless Bank shall otherwise
consent in writing, Pledgor will not sell, pledge, hypothecate, transfer,
mortgage or otherwise encumber the property and will keep the same free and
clear from any assignment, mortgage, lien or encumbrance.

2. Pledgor further covenants and agrees that, until such time as the
Obligations are fully satisfied and paid, it will maintain adequate
insurance covering the loss of or damage to the Property.

3. Pledgor's breach of the covenants provided in this Agreement shall
constitute an Event of Default under the Obligations giving Bank the right
to declare the amount then remaining unpaid under the obligations to be
forthwith immediately due and payable without presentment, further demand,
protest or notice of dishonor.

4. This Agreement shall be construed in accordance with and governed by the
laws of the State of Ohio.

<PAGE>

5. This Agreement shall be binding upon Pledgor and Bank and their respective
successors and assigns, and shall inure to the benefit of Bank and its
respective successors and assigns.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.

BOURQUE PRINTING, INC.

By: /s/ R. Douglas McElwain
Its: President

NATIONAL CITY BANK, COLUMBUS

By: /s/ David B. Yates
Its: Vice President

<PAGE>

EXHIBIT 10.2

LEASE

* * * *

TRUSTEE OF THE BUTTERFIELD FAMILY TRUST NO. 2
LANDLORD

AND

SMITH & BUTTERFIELD COMPANY, INC.
TENANT

* * * *

THIS INDENTURE OF LEASE, made and entered into as of the 1st day of
November, 1991, by and among Al H. Harding, Jr., TRUSTEE u/a dated July 31,
1976, executed by Ruth Lane Butterfield, as Trustor, and creating "The
Butterfield Family Trust No. 2" (which said trust is hereinafter referred to as
"LANDLORD") and SMITH & BUTTERFIELD CO., INC., an Indiana corporation having its
principal office and place of business at 2800 Lynch Road, Evansville,
Vanderburgh County, Indiana (hereinafter referred to as "TENANT"), WITNESSETH
THAT:

LANDLORD, in consideration of the rents reserved to it and of the covenants
and agreements hereinafter contained and set forth to be kept and performed by
TENANT, does hereby lease, let, rent and demise unto TENANT, and TENANT does
hereby take and hire of and from LANDLORD the real estate improvements situated
in Vanderburgh County, Indiana, more particularly described on the attached
Exhibit A, and common areas including parking, more particularly described on
the attached Exhibit B.

Said premises are hereby demised, together with and including all
improvements situated thereon and all rights appurtenant thereto, but subject,
nevertheless, to easements, rights-of-way and party wall agreements of record.

TO HAVE AND TO HOLD said demised premises unto said TENANT for a term of
eight (8) years, commencing November 1, 1991 and terminating as of the close of
business on the last day of October, 1999 (with an option to extend said term as
hereinafter set forth), all upon and subject to the limitations, terms,
covenants, provisions and conditions hereinafter set forth.

This indenture of lease is made upon and subject to the foregoing and the
following limitations, terms, covenants, provisions and conditions, to-wit:

RENT

For the purpose hereof, the term "lease year" means and refers to the
period of time from August 1 of one year to and including the last day of July
of the next following calendar year. TENANT covenants and agrees to pay to
LANDLORD, without demand, at LANDLORD'S office in the City of Evansville,
Indiana or at such other place as LANDLORD may from time to time designate in
writing, on the days and in the manner herein prescribed for the payment
thereof, rent for the demised premises as follows:

<PAGE>
A. With respect to the first lease year, rental shall be in the amount of
One Hundred Seven Thousand Dollars ($107,000.00), payable in equal
monthly installments in advance; and notwithstanding any of the other
terms and provisions of this Lease, rental hereunder with respect to
the entire term and extension of the term of this Lease shall never be
less than the sum of One Hundred Seven Thousand Dollars ($107,000.00)
per year; and

B. Rental with respect to the second and each subsequent lease year of
the term or extension of the term of this Lease shall be adjusted
(upward or downward) to be at the annual rate and amount determined by
multiplying rental at the rate of One Hundred Seven Thousand Dollars
($107,000.00) per year by one-half of a fraction, the numerator of
which shall be the amount of the 1991 REVISED CONSUMER PRICE INDEX for
Urban Wage Earners and Clerical Workers for all Items and Major Group
Figures of the United States Bureau of Labor Statistics 1982-84 = 100:
January 1991 = 132.8 (hereinafter "Index"), for the month of January
immediately preceding the commencement of the August 1 adjustment date
and the denominator of which shall be 132.8 (being the amount of such
Index for the month of January 1991); provided, however, that rental
shall never be less than rental at the rate and in the amount of One
Hundred Seven Thousand Dollars ($107,000.00) per year.

C. The rental for each lease year shall be payable in equal monthly
installments monthly in advance. All such rental and other amounts
payable by TENANT to LANDLORD hereunder shall be payable and paid
without relief from valuation or appraisement laws in lawful money of
the United States of America, together with reasonable attorney's fees
for collection (in case of default) and together with interest at the
prime rate charged by The Citizens National Bank of Evansville,
Evansville, Indiana, plus Two percent (21) (at the time interest
becomes due and payable).

D. Notwithstanding any rentals due pursuant to A., B., and C. above, the
TENANT will pay an additional monthly rental of $300.00 per month for
the first seven (7) years of this lease, beginning November 1, 1991
and ending October 31, 1998.

In case publication of the Index of the United States Bureau of Labor
Statistics is discontinued, but is replaced by a new index prepared and
published by a department, bureau or agency of the United States Government and
which may be appropriately converted for comparison with the above-mentioned
Index, such rental adjustment shall be made in the manner provided by said
governmental agency for conversion of one index to the other.

II.

USE OF PREMISES

Said premises are leased and let unto TENANT for use by TENANT in
connection with the operation of its business as now or hereafter conducted;
provided, however, that said premises shall not be used for any purposes in
violation of applicable law or Ordinance.

<PAGE>

III.

MAINTENANCE AND REPAIRS

The said premises are accepted by TENANT in their present condition and
state of repair. LANDLORD shall have no obligation to maintain or repair said
premises.

The improvements, including the loading dock, upon said real estate shall
be kept in good order, operating condition and state of repair by TENANT and
shall also be maintained in a clean, sanitary and safe condition in accordance
with all directions, rules and regulations or applicable laws or ordinances, all
at TENANT'S sole cost and expense; and at the expiration of the term or any
extension of the term hereof, TENANT shall surrender the premises in as good
condition and state of repair as exists on the date of the commencement of the
term of this Lease, reasonable wear and tear, loss by fire and other insured
casualty excepted.

TENANT acknowledges the existence of a party wall on part of the southern
boundary of its leased premises and agrees to keeping said common wall in good
repair and to share one-half the expense of any repair or maintenance required
on such wall. TENANT also will take reasonable measures necessary to provide
appropriate security and to prevent access through said party wall.

IV.

ALTERATIONS

TENANT, at its sole cost and expense, may make such interior,
non-structural alterations of the improvement upon said premises as it may
desire. Alterations which would in any manner affect the structure of the
building shall be made only pursuant to the express written consent of LANDLORD.
TENANT shall have no right to cause or permit the imposition of any lien upon
the title to the premises, and TENANT undertakes and agrees to indemnify and
save LANDLORD harmless of and from any and all such liens or claims of liens and
expenses in connection with or by reason of any such lien or claim of lien.

INSURANCE

During the term hereof, TENANT at its sole cost and expense, shall procure
and maintain in full force and effect insurance upon and with respect to the
demised premises as follows:

A. Fire and extended coverage insurance in amounts and written by
insurance companies approved by Landlord; and TENANT acknowledges that
it has been informed that LANDLORD may require such insurance to the
full extent of the replacement value of the improvements on the
demised premises; and

B. Liability insurance in the amount of not less than One Million Dollars
($1,000,000.00) plus excess coverage in the amount of Two Million
Dollars ($2,000,000), both with respect to injuries to or the deaths
of persons arising by reason of any one occurrence and in the amount
of One Hundred Thousand Dollars ($100,000) with respect to claims for
damages to property or with such other limits as shall be approved in
writing by LANDLORD, which insurance shall be maintained in companies
reasonably approved by LANDLORD. The above mentioned excess

<PAGE>

liability insurance may have a deductible feature in an amount not
more than Ten Thousand Dollars ($10,000) with respect to each
occurrence.

Both LANDLORD and TENANT shall be named as insureds in all such policies in
accordance with their respective interests. Copies of such insurance policies
and proof of payment of premiums shall be furnished to LANDLORD, and evidence of
renewal of such insurance from time to time shall be furnished at least thirty
(30) days prior to expiration of then current policies. Each of such policies
shall contain a provision that the same shall not be canceled until at least
fifteen (15) days after notice in writing to LANDLORD.

VI.

TAXES

In addition to other amounts payable by TENANT to LANDLORD in accordance
with other provisions of this Lease, TENANT covenants and agrees to directly pay
or reimburse LANDLORD on account of all ad valorem taxes with respect to the
demised premises payable during the term or any extension of the term of this
Lease. TENANT shall have the right to contest assessments and reassessments of
said real estate, all at TENANT'S sole cost and expense; but no such contest
shall in any manner jeopardize LANDLORD'S title to said real estate.

VII.

OPTION TO EXTEND TERM

TENANT shall have and is hereby given and granted an option to extend the
term of this Lease for a period of five (5) years commencing November 1, 1999,
which option may be exercised by TENANT if TENANT is not in default hereunder by
the giving of written notice of such election to LANDLORD not less than six (6)
months prior to the expiration of this Lease. In case said option is exercised,
the same terms, conditions, covenants and provisions of this Lease applicable to
the original eight (8) year term shall apply to the extended term, including,
without limitation, the rental adjustment provisions of Section I-B of this
Lease, but subject to the rental limitations of Section I-D of this lease. In
addition, the insurance amounts referenced in Section V, B. shall be increased
by twenty-five percent (25%). There shall be no option to further extend the
term of this Lease.

VIII.

DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS

In case the whole or any part of the improvements situated upon the
above-described real estate shall be partially or totally destroyed by fire or
other insured casualty during the term of this lease, the same shall be restored
by LANDLORD without unnecessary delay; provided, however, that all proceeds of
insurance (required to be maintained by TENANT) shall be made available to
LANDLORD for such purpose and provided further that LANDLORD'S obligation
hereunder shall not exceed the amount of such insurance proceeds, and any excess
of cost of repair or restoration over the amount of such proceeds shall be paid
and borne by TENANT. Notwithstanding the foregoing, in case the damage or
destruction occurs during the last year of the initial term of this lease and
TENANT did not exercise its extension option within thirty (30) days following
the date of such damage or destruction or in case such damage or destruction
occurs during the last year of the extended term of this lease, then either
LANDLORD or TENANT may terminate this lease by the giving of written notice to
that effect to the other within thirty (30) days following the date of the
occurrence of such damage or destruction; and in case of such termination all
proceeds of insurance with respect to the improvements upon the demised premises
shall be paid to and shall be the property absolutely of LANDLORD. In case of
termination

<PAGE>

under the provisions of this Article, TENANT shall be relieved of liability
hereunder referable to the period of time subsequent to the date of such damage
or destruction and prorated amounts shall be refunded.

There shall be no abatement of rental on account of or by reason of damage
to or destruction of the demised premises unless this lease is terminated in
accordance with the foregoing provisions of this Article.

IX.

EMINENT DOMAIN

In case the whole of the demised promises shall be taken by any public
authority under the power of eminent domain or conveyed by LANDLORD under the
threat of such taking, the term of this lease shall cease form the date the
possession of said premises is required for the public purpose for which the
same is taken or conveyed. In case a part of the demised premises shall be taken
by any public authority under the power of eminent domain or conveyed by
LANDLORD under the threat of such taking and such taking is not such as to
destroy the usefulness of the demised premises for the operation of TENANT's
business thereon, this lease shall remain in full force and effect and there
shall be no reduction or abatement of rental. If, however, a partial taking does
destroy the usefulness of the demised premises for the purpose of operation of
TENANT's business thereon, TENANT shall have the right, exercisable by the
giving of notice to LANDLORD within ten (10) days after TENANT has been notified
of such taking or conveyance, either to terminate this lease or to continue in
the remainder of the demised premises under and pursuant to the term sand
provisions of this lease. If TENANT elects to continue in possession, there
shall be no reduction in or abatement of rental. If under such circumstances
TENANT elects to terminate this lease and if at the time of the condemnation (or
conveyance in lieu thereof) the premises were subject to a mortgage
indebtedness, TENANT shall pay to the mortgagee the excess, if any, of the
mortgage indebtedness over the amount of the condemnation award or settlement
paid to LANDLORD.

For the purposes hereof the condemnation (or conveyance under threat
thereof) of land along the south side of the demised premises for purposes of
widening of Lynch Road shall not be cause for termination of this lease so long
as TENANT is not deprived of access to the demised premises.

In case of a complete termination of this lease under the circumstances
provided in this Article, the portion of any prepaid payments by LANDLORD TO
TENANT or by TENANT to LANDLORD which is referable to a period of time
subsequent to such termination shall be refunded. LANDLORD agrees that he will
promptly furnish to TENANT copies of any notices served upon LANDLORD by any
public authority notifying LANDLORD of any proposed condemnation of any part of
the demised premises.

UTILITY SERVICES

TENANT undertakes and agrees to pay the Cost of all utility services
desired or required by it in connection with its use and occupancy of the
demised premises, and all such utilities shall be separately metered to and
billed to TENANT. LANDLORD shall have no obligation with respect to or on
account of the furnishing of any utility services to the demised premises.

<PAGE>

XI.

ASSIGNMENT AND SUBLETTING

TENANT is granted and shall have the right to assign this lease or to
sublet any part or all of the demised premises for any lawful purpose, but no
such assignment nor subletting shall release or discharge TENANT of liability
hereunder.

XII.

QUIET ENJOYMENT

If and so long as TENANT shall pay the rent and other payments payable by
it in accordance with the terms and provisions of this lease and shall keep,
perform and observe all of the covenants and provisions hereof to be kept and
performed by TENANT, TENANT shall quietly enjoy the demised premises in
accordance with the terms and provisions of this lease.

XIII.

REMEDIES

Neither this lease nor any interest therein nor any estate hereby created
shall pass to any trustee, receiver or assignee for the benefit of creditors or
be otherwise transferable by operation of law.

The estate and term of TENANT shall cease in the event TENANT is
adjudicated a bankrupt or a receiver of its property is appointed. LANDLORD may
terminate this lease by ten (10) days' written notice to TENANT upon the
happening of any one or more of the following events, which shall be deemed a
default by TENANT and a breach of this lease:

A. The making by TENANT of an assignment for the benefit of creditors;

B. The levying of a writ of execution or attachment for or against the
property of the TENANT, unless the same is vacated, discharged or
satisfied within ten (30) days after written request by LANDLORD; or

C. The doing or permitting by TENANT of any act which creates a
mechanic's lien or a claim therefor against the demised premises, if
such lien or claim is not satisfied or discharged, or indemnified
against to LANDLORD's satisfaction, within ten (10) days after written
notice by LANDLORD.

In case rental payable by TENANT to LANDLORD shall be and remain unpaid for
more than fifteen (15) days after the same is due and payable, or in ease TENANT
shall violate or default in the performance of any of the other covenants,
agreements, stipulations or conditions herein set forth to be kept and performed
by TENANT and such violation or default shall continue for a period of fifteen
(15) days after written notice of such violations or default without TENANT in
good faith having commenced to rectify the same with reasonable diligence,
LANDLORD at his option may declare this lease terminated and canceled and may
re-enter said promises, with or without process of law, using such force as may
be necessary to remove all chattels therefrom; and LANDLORD shall not be liable
by reason of any such re-entry. No such re-entry by LANDLORD shall constitute a
waiver of TENANT'S liability to LANDLORD on account of any breach of this lease
by TENANT.

<PAGE>

In the event any party hereto shall be required to resort to litigation for
the purpose of enforcing against the other party any rights arising hereunder
and shall be successful in such litigation, the judgment in such litigation
shall include an allowance to the successful party for all such party's costs
and expenses including reasonable attorney's fees paid or incurred in connection
with such litigation.

In the event of the termination of this lease for any cause or in the event
of the abandonment, vacation or surrender of the demised premises by TENANT, any
property of TENANT remaining in or upon the demised premises and not removed by
TENANT within fifteen (15) days from and after such termination, abandonment,
vacation or surrender shall be deemed to have been permanently abandoned and may
be used or disposed of by LANDLORD in such manner as it shall deem fit and
proper under the circumstances without liability to TENANT.

In the event any party hereto shall fail, refuse or neglect to do any act
or perform any covenant or agreement in this lease contained and set forth to be
done, kept and performed by such party and such default shall not be cured or
action commenced in good faith within fifteen (15) days following written demand
to the defaulting party to rectify or cure such default, the other party hereto
may do such act or perform such covenant or agreement and shall be entitled to
reimbursement from the defaulting party to the extent of the costs and expenses
incurred together with interest at the prime rate as charged by The Citizens
National Bank of Evansville, plus one percent (1%) (at the time such interest is
payable hereunder) from the date of the payment of any such costs or expenses.
If any such required reimbursement is not made promptly, the party who shall
have incurred such cost or expense may deduct the amount thereof from any
amounts accruing and payable to the defaulting party or may pursue any other
available remedy for the collection of such costs and expenses.

All rights and remedies herein enumerated shall be cumulative and the
enumeration of specific rights and remedies shall not preclude the exercise or
prosecution of any other right or remedy afforded by law, and such rights and
remedies may be exercised and enforced concurrently and whenever and as often as
the occasion therefor arises. The failure of any party to exercise any right or
remedy at a time when such party is entitled so to do shall not preclude such
party from exercising, or constitute a waiver of, such right or remedy with
respect to any continuing or other default or defaults of the other party or
parties hereto.

XIV.

NOTICES

Any notice required or permitted pursuant to the terms and provisions of
this lease shall be deemed fully given or served only if transmitted by
certified mail or registered mail with return receipt requested, addressed to
TENANT at the demised premises and to LANDLORD at 1400 Lincoln Avenue,
Evansville, Indiana 47714. LANDLORD or TENANT may by like written notice, at any
time and from time to time, designate a different address to which notices shall
subsequently be transmitted to him or it, as the case may be.

XV.

MISCELLANEOUS PROVISIONS

A. In case TENANT remains in possession of the demised premises with the
consent of LANDLORD after the expiration of this lease and without the
execution of a new lease, it shall be deemed to be occupying said
premises as a tenant from month-to-month subject to all the
conditions, provisions, terms and obligations of this lease insofar as
the same are applicable to a month-to-month tenancy.

<PAGE>

B. TENANT agrees to indemnify and save LANDLORD harmless against any and
all claims, demands, costs and expenses including reasonable
attorneys' fees arising from or connected with the use and occupancy
of the demised premises by TENANT and from and against any act of
negligence of TENANT, its agents, contractors, servants, employees,
invitees or licensees in or about the demised premises.

C. LANDLORD shall have the right to enter upon the demised premises at
all reasonable times for the purpose of inspecting the same.

D. TENANT acknowledges that it is aware that LANDLORD is composed of the
Trustee of an inter vivos trust and that the undersigned Trustee f
said trust executes this lease solely in his capacity as such Trustee
and that said Trustee shall not have any personal liabilities
hereunder or otherwise as landlord of the demised premises.

E. Parking and use of parking areas will be subject to easement and
rights-of-way of record affecting title to the leased property, and
will be subject to the further understandings referenced in Exhibit B
of the lease.

F. The terms, covenants and conditions hereof shall extend to and be
binding upon the respective successors and assigns of the parties.

G. This lease supersedes and replaces all prior existing leases between
the parties or any of them.

IN WITNESS WHEREOF, LANDLORD has hereunto set his hand and seal and TENANT has
caused the execution hereof by its duly authorized officers, all as of the day
and date first above written.

/s/ Al H. Harding, Jr., trustee u/a
-----------------------------------
dated July 31, 1976, and creating
"The Butterfield Family Trust No.2"

"LANDLORD"

/s/ James D. Butterfield, Pres.
-------------------------------
SMITH & BUTTERFIELD CO., INC.
"TENANT"

<PAGE>

EXHIBIT A

LEGAL DESCRIPTION OF
STRUCTURAL IMPROVEMENTS
LEASED BY SMITH & BUTTERFIELD CO., INC.

DESCRIPTION OF SMITH & BUTTERFIELD OFFICE BUILDING

Part of the Southwest Quarter of the Southeast Quarter of the Northeast Quarter
and part of the Southeast Quarter of the Southwest Quarter of the Northeast
Quarter, all in Section Ten (10), Township Six (6) South, Range Ten (10) West,
more particularly described as follows:

Commencing at the Southwest corner of the Southwest Quarter of the southeast
Quarter of the Northeast Quarter of said Section Ten (10), thence South 89
degrees 13 minutes East along the South line of said quarter quarter section a
distance of 140 feet; thence North 0 degrees 47 minutes East a distance of
410.11 feet; thence North 89 degrees 14 minutes 38 seconds West a distance of
Ten and two tenths (10.2) feet to a point in the center line of the North wall
of the metal building occupied by Qualex and the South wall of the building
occupied by Smith & Butterfield; thence continue North 89 degrees 14 minutes 38
seconds West along the centerline of said wall, for 148.25 feet to the Northwest
corner of the Qualex building; thence continue North 89 degrees 14 minutes 38
seconds West for 67.96 feet; thence North 00 degrees 47 minutes East for 9.0
feet; thence North 89 degrees 14 minutes 38 seconds West for 22.0 feet; then
North 00 degrees 47 minutes East for 110.85 feet; thence South 89 degrees 14
minutes 38 seconds East for 333.89 feet; thence South 00 degrees 47 minutes West
for 119.85 feet; thence North 89 degrees 14 minutes 38 seconds West for 95.68
feet to the place of beginning.

<PAGE>

EXHIBIT B

COMMON AREAS

The Butterfield Family Trust, Al H. Harding, Jr., Trustee, u/a dated June 1,
1970, executed by Sidney Butterfield, as Trustor, and Butterfield Family Trust
No. 2, Al H. Harding, Jr., Trustee, u/a dated July 31, 1976, executed by Ruth
Lane Butterfield, as Trustor, and the Ruth B. Thomas Trust, Al H. Harding, Jr.,
Trustee, u/a dated September 29, 1980, executed by Ruth B. Thomas, as Trustor,
own certain real estate and improvements described as follows:

DESCRIPTION

Part of the Southwest Quarter of the Northeast Quarter and part of the southeast
Quarter of the Northeast Quarter of Section Ten (10), Township Six (6) South,
Range Ten (10) West in Vanderburgh County, Indiana, more particularly described
as follows:

Beginning at the Southeast corner of the Southwest Quarter of the Northeast
Quarter of said section in Lynch Road; from said place of beginning thence North
Eighty-nine (89) degrees twelve (12) minutes West, along the South line of said
quarter quarter section, in Lynch Road, for one hundred twenty-four (124.0)
feet; thence North zero (00) degrees six (06) minutes West for six hundred
fifty-nine and twenty-three hundreds (659.23) feet; thence South eighty-nine
(89) degrees, twenty-one (21) minutes, thirty (30) seconds East for five hundred
forty-two and eighteen hundredths (542.18) feet; thence South zero (00) degrees
twenty-five (25) minutes, forty-two (42) seconds West for six hundred sixty and
fifty three hundredths (660.53) feet to a point in Lynch Road on the South line
of the Southeast quarter of the Northeast quarter of Section Ten (10), Township
Six (6) South Range (10) West thence North eighty-nine (89) degrees thirteen
(13) minutes West along the South line of said quarter quarter section in Lynch
Road for four hundred twelve and eight hundredths (412.08) feet to the place of
beginning and containing a gross area of 8.167 acres and a net area of 7.798
acres exclusive of the thirty (30) feet of right-of-way off the South side
thereof for Lynch Road.

The above described real estate is subject to all easements of record.

Butterfield Family Trust No. 2 owns certain structural improvements described in
Exhibit A of the lease with Smith & Butterfield Co., Inc. effective beginning
November 1, 1991. The Butterfield Family Trust and the Ruth B. Thomas Trust own
certain structural improvements described in Exhibit C currently leased to
Qualex, Inc. effective beginning November 1, 1991.

All of the real estate described in this Exhibit B. except for the structural
improvements described in Exhibit A and Exhibit C of this lease shall constitute
the "Common Area" which area is included in this lease and is available for the
Tenant's use as parking, ingress, egress, loading and other vehicular activity
associated with the Tenant's business purposes, subject to the following:

1. All easements and rights of way of record affecting the title to the
leased premises;

2. Of the two hundred and forty-two (242) parking spaces available,
forty-two (42) will be for the use of Tenant and two-hundred (200)
will be available for the occupants of the improvements leased from
the Butterfield Family Trust and The Ruth B. Thomas Trust. Seven (7)
of the above referenced forty-two (42) spaces will be located on the
southern border, east end of the improvements described in Exhibit A;

<PAGE>

3. All costs for maintenance or replacement of the surface of the
combined parking areas shall be paid for by Tenant at the rate of
seventeen and thirty-five one hundredths percent (17.35%), and the
same percentage will apply to other costs associated with the "Common
Area";

4. Notwithstanding 3. above, Tenant will have exclusive use and
responsibility for maintenance and repair of the loading dock located
on the southern border, west-end, of its leased improvements. The
occupant of the improvements leased from the Butterfield Family Trust
and The Ruth B. Thomas Trust will have like usage and responsibilities
for the loading dock located on the western border of their leased
improvements.

<PAGE>

EXHIBIT C

LEGAL DESCRIPTION OF
STRUCTURAL IMPROVEMENTS
LEASED BY QUALEX, INC.

DESCRIPTION OF QUALEX BUILDING

Commencing at the Southwest corner of the Southwest Quarter of the Southeast
Quarter of the Northeast Quarter of said Section Ten (10); thence South 89
degrees 13 minutes East along the South line of said quarter quarter section a
distance of 140 feet; thence North 0 degrees 47 minutes East, a distance of
S9.41 feet; thence North 89 degrees, 15 minutes 15 seconds West for 10.2 feet to
the Southeast corner of a metal building; thence North 0 degrees 47 minutes
East, along the East wall of a metal building for 350.7 feet to the center of
the North wall of a metal building; thence North 89 degrees 14 minutes 38
seconds West along the centerline of said wall, for 148.25 feet; thence south 00
degrees 47 minutes West along the West wall of a metal building, for 200.0 feet;
thence North 89 degrees 15 minutes 15 seconds West, along said wall for 2.23
feet; thence South 00 degrees 47 minutes West, along the said West wall, for
150.20 feet to the Southwest corner of the building; thence South 89 degrees 15
minutes 15 seconds West, along the South side of the metal building for the
150.5 feet to the place of beginning.

<PAGE>

EXHIBIT 10.3

LEASE AGREEMENT

THIS INDENTURE, dated and effective as of the 1st day of June, 1972,
between EARL H. SEIBERT and ELAINE D. SEIBERT, husband and wife, of Vanderburgh
County, Indiana, hereinafter referred to as Landlord, and SMITH & BUTTERFIELD
CO., INC., a corporation, hereinafter referred to as Tenant,

W-I-T-N-E-S-S-E-T-H

The Landlord, for and in consideration of the net annual rent and the
additional rent and any and all other charges, and the covenants hereinafter
reserved and contained on the part and behalf of the Tenant to be paid, kept and
performed, hereby leases to the Tenant, and the Tenant hereby hires and takes
from the Landlord, premises in the County of Daviess, State of Kentucky, bounded
and described as follows:

Situated on the north side of Third Street between Allen and Daviess
Streets, in Owensboro, Kentucky; Beginning in the north margin of
Third Street at a point 28 feet east of the southeast corner of a lot
owned by The Young Men's Christian Association, of Owensboro,
Kentucky, and running thence east with the north margin of Third
Street 60 feet and 8 inches to the southwest corner of P.M. Civill's
lot; thence northwardly with his west line and on a line parallel with
Allen Street 168 feet to H. W. Miller's south liner thence west with
Miller's south line 22 feet and 2 inches; thence southwardly on a line
and parallel with Allen Street 48 feet; thence westwardly and on a
line parallel with Third Street: and with the south margin of a 12 ft.
alley, 38 feet and 6 inches; thence southwardly on a line parallel
with Allen Street 120 feet to the beginning, and being the same
property conveyed to the Central Trust Company by W. D. Lancaster and
Sue J. Lancaster, his wife, by deed dated December 15, 1933, which is
of record in Deed Book 130, at page 528, in the Daviess County Court
Clerk's office.

Commonly known as 113, 115 and 117 East Third Street, Owensboro,
Kentucky.

The term of this lease is for ten (10) years, to and through May 30, 1982,
or until such term shall sooner cease and expire as hereinafter provided, to
commence on the 1st day of June, 1972, and to end on the 30th day of May, 1982,
both dates inclusive, at a net total rental of Ninety-nine Thousand, Seven
Hundred twenty Dollars ($99,720.00) together with the additional rent
hereinafter mentioned, which the

<PAGE>

Tenant agrees to pay in lawful money of the United States which shall be legal
tender in payment of all debts and dues, public and private, at the time of
payment, in equal monthly installments of Eight Hundred Thirty-one Dollars
($831.00) in advance on the first day of each month during said term, at the
office of the Landlord or such other place as the Landlord may designate,
without any setoff or deduction whatsoever, except that the Tenant shall pay the
first monthly installment on the execution hereof.

The parties hereto, for themselves and their successors and assigns, hereby
covenant as follows:
1. The Tenant shall pay the net annual rent and additional rent, and any
and all other charges, as above and hereinafter provided.

It is expressly agreed that the term "net total rent" means the stated
amount of rent payable during the ten (10) year term in installments as herein
provided; and "additional rental" means all other moneys payable by the Tenant,
such as taxes, duties, assessments and governmental impositions, extraordinary
as well as ordinary, as shall or may during the term be assessed or become a
lien upon the demised premises as defined in Article 4 of this lease, water,
rents, sewer and water meter charges; and "other charges" means insurance
premiums, and any other item or sum which the Tenant is required to pay, under
the covenants of this Lease, as well as any sum paid or expense incurred by the
Landlord hereunder which the Tenant is obligated under this Lease to pay or
incur. All such sums paid and/or expenses incurred, if not paid by the Tenant as
required under the covenants of this Lease, shall be added to the next monthly
installment of rent and payable therewith as additional rent.

It is further agreed that the Tenant shall pay for all utilities used on
the premises by it including but not limited to electricity, gas, water,
telephone, heat and air conditioning.

2. The Tenant may use and occupy the demised premises for the wholesale
and retail sale of office supplies, goods, furniture, business equipment, and
all other allied and associated products, or may use the demised premises for
any other purpose, but shall not use or occupy or permit the demised premises to
be used or occupied in any unlawful manner or for any illegal purpose, and said
demised premises shall be used by Tenant in compliance with all laws, ordinances
and governmental regulations.

<PAGE>

3. All improvements, alterations, additions and fixtures, except movable
and trade fixtures, and heating and/or air conditioning equipment, erected, made
or installed by the Tenant or any sub-tenant upon the demised premises, shall
when and as erected, made, or installed at once be deemed to be attached to the
freehold and become the property of the Landlord and at the expiration or other
termination of the term be surrendered to the Landlord, and the Landlord shall
not be obligated to pay any sum of money whatever to the Tenant for or on
account of the same. Said movable and trade fixtures, and the heating and air
conditioning equipment erected, made or installed by the Tenant or any
sub-tenant, shall remain the property of the Tenant and may be removed by the
Tenant at the expiration or other termination of the term of this lease.

4. The Tenant shall pay as additional rent and discharge punctually as
and when the same shall become due and payable throughout the term of this lease
all ad valorem taxes, duties, assessments, water rates and water rents, and
sewer taxes, whether or not they benefit the fee of the premises, as shall or
may during the term of this lease be levied or assessed against or become a lien
upon the demised premises (other than estate, inheritance, transfer, franchise
and income taxes assessed against the Landlord or taxes imposed and assessed in
lieu thereof), except that as to the calendar year of which the last year of the
term is a part, the Tenant will bear, and pay only that proportion of the taxes
for said calendar year which the period of the term occurring during said
respective calendar year bears to an entire year (based on a calendar year).

If authorities having jurisdiction assess real estate taxes, assessments or
other charges on the demised premises which the Tenant deems excessive, the
Tenant may defer compliance therewith to the extent permitted by the laws of the
State of Kentucky so long as the validity or the amount thereof is contested by
the Tenant in good faith, provided that such deferment will not jeopardize
Landlord's title to the demised premises, or any mortgagee of the freehold of
the demised premises. The Landlord agrees to cooperate with the Tenant at any
such contest, but without expense to the Landlord.

During the term of this lease the Tenant may apply for reductions of real
estate taxes or for corrections of assessed valuations and bring such proceeding
for such purposes as may be permitted by law but only in connection with taxes
payable by the Tenant and in the event the Landlord pays any such

<PAGE>

taxes because of the Tenant's default, the Landlord shall have all of the
foregoing rights and remedies. In the event that as a result of such proceedings
by the Tenant, the Tenant secures a refund of taxes which the Tenant has paid,
such refund shall belong to the Tenant.

If the taxing authorities permit payment of any assessment in annual
installments, payment by the Tenant of such installments as they become due
shall be in compliance with the provisions of this Article 4 and the
installments, if any, applicable to the first and last years of the term of this
lease shall be apportioned between the Landlord and the Tenant in accordance
with the parts of such years during which this lease shall be in force and
effect.

5. The Tenant shall make no major or substantial alterations,
declarations, installations, additions, or improvements in or to the demised
premises without the Landlord's prior written consent which shall not be
unreasonably withheld. All such work, alterations, declarations, installations,
additions or improvements shall be done at the Tenant's expense and at such
times and in such manner as the Tenant may from time to time determine. All
alterations, declarations, installations, additions or improvements upon the
demised premises, made by either party shall, unless the Landlord elects
otherwise (which election shall be made by giving a notice pursuant to the
provisions of Article 28 not less than three (3) days prior to the expiration or
other termination of this lease or any renewal or extension thereof) become the
property of the Landlord, and shall remain upon, and be surrendered with, said
demised premises, as a part thereof, at the end of the term or renewal term, as
the case may be, except that movable and trade fixtures, and heating and air
conditioning equipment installed upon the leased premises by the Tenant shall
remain the property of the Tenant and may be removed by the Tenant at the end of
the term or renewal term.

6. [See letter attached] The Landlord, at its expense, shall keep the
exterior walls and roof of the building located upon the demised premises in
good condition and state of repair, and shall make all structural repairs that
may be required. Subject to the foregoing obligation of Landlord, Tenant, at its
expense, shall keep and maintain the interior of said building in good condition
and state of repair. Tenant shall replace, at its expense any and all broken
glass in and about the demised premises and shall

<PAGE>

insure, and keep insured, all plate glass in the demised premises for and in the
name of the Landlord and Tenant. Tenant shall furnish to Landlord evidence of
the procurement of said insurance.

Tenant shall keep the demised premises in a clean and wholesome condition
and shall suffer no waste or injury, and shall keep the sidewalks and curbs in
good repair and reasonably free from parked motor vehicles, snow, ice, dirt or
rubbish. If Tenant fails to make any repairs required hereunder after due
notice, the same may be made by the Landlord at the expense of the Tenant and
collectible as additional rent and shall be paid by the Tenant within five (5)
days after rendition of a bill or statement therefor. Except as provided in
Article 9 hereof, there shall be no allowance to the Tenant for a diminution of
rental value and no liability on the part of Landlord by reason of
inconveniences, annoyance or injury to business arising from the Landlord, the
Tenant or others making any repairs, alterations, additions or improvements in
or to any portion of the building located on the demised premises, provided that
Landlord will make all reasonable effort not to disturb Tenant's use and
occupancy of the demised premises in making ant repairs, alterations, additions
or improvements required to be made by Landlord pursuant to the terms of this
lease.

7. The Tenant at its own expense shall comply with all laws, orders and
regulations of federal, state, county and municipal authorities, with respect to
its use and occupancy of the demised premises, and Tenant will not do or permit
to be done any act or thing upon amid demised premises which would invalidate
the fire insurance policies covering the building and the demised premises, and
the fixtures and property therein, and sham not do, or permit to be done, any
act or thing upon said premises which shall or might subject the Landlord to any
liability or responsibility for injury to any person or persons or to property
by reason of any business or operation being carried on upon amid premises.
Tenant, at its expense, shall comply with all rules, orders, regulations or
requirements of the Kentucky Board of Fire Underwriters, or its successors.
Landlord represents and warrants that to the best of his knowledge and belief
the building located upon the demised premises now complies with all rules,
orders, regulations or requirements of the Kentucky Board of Fire Underwriters,
and if at any time hereafter it is determined that as of the date of the
commencement of this lease, said building did not

<PAGE>

comply with said rules, orders, regulations or requirements, Landlord, at its
expense, shall make the necessary changes and alterations required for such
compliance.

8. The Tenant agrees to save Landlord harmless of and from any and all
liability to any person for death, injury or damages to person or property
resulting from the use and occupancy of the demised premises, including any
machinery, equipment, or boiler, by Tenant, and to obtain and keep in full force
and effect during the continuation of this lease liability insurance affording
coverage in an amount of not less than One hundred thousand Dollars
($100,000.00) with respect to injuries to or death of any one person, Three
hundred thousand Dollars ($300,000.00) with respect to injuries to or death
resulting from any one accident, and Fifty thousand Dollars {$50,000.00) with
respect to damages to property, which insurance shall name Landlord and Tenant
as insured. Tenant shall keep and maintain on file with Landlord a current
certificate of the insurance company evidencing the procurement and maintenance
of such insurance and that the same will not be canceled until after at least
ten (10) days notice to Landlord.

Tenant further agrees to obtain and keep in full force and effect during
the entire term, or any extension of the term of this lease, fire and extended
coverage insurance with respect to the improvements upon the demised premises,
which insurance (1) shall provide coverage of the type known and referred to as
ninety percent (90%) co-insurance with replacement cost clause or endorsement,
and (2) shall provide for payment of losses to Landlord, in trust for the
benefit of the parties as their interest may appear.

To the extent permitted by the terms and provisions of fire and extended
coverage insurance policies covering the improvements upon the demised premises
and Tenant's fixtures, equipment and other personal property in and upon the
demised premises (and the parties undertake and agree to exert their best
efforts to obtain such permission), Landlord, to the extent of recoverable
insurance proceeds, releases and discharges Tenant of and from any and all
claims on account of damages to the building and improvements upon the demised
premises, and Tenant to the extent of its recoverable insurance proceeds,
releases and discharges Landlord of and from any and all claims on account of
damages to Tenant's acid fixtures, equipment and other personal property in and
upon the demised premises.

<PAGE>

Tenant, at its option, may provide any of the insurance coverage which it
is required by the terms of this lease to provide either by obtaining separate
policies pertaining only to the demised premises or by having such coverage
included in and under blanket or master policies of insurance. In any case,
insurance company certificates evidencing such insurance shall be furnished to
Landlord prior to or promptly following the commencement of each policy term.

9. Except as hereinafter provided with respect to substantial damage to
or destruction of the improvements on the demised premises during the last two
(2) years of the initial term of this lease, or during the last two (2) years of
an extended term of this lease, in the event that the improvements are damaged
or destroyed by fire or other insured casualty, Landlord Shall cause the same to
be repaired or restored, as the case may require, as promptly as is reasonably
possible following the occurrence of such damage or destruction. However, the
obligation of Landlord with respect to the cost of such repair or restoration
shall not exceed the proceeds of insurance payable on account of such damage or
destruction and if Tenant desires that the repair or restoration work be such
that the cost exceeds such insurance proceeds, the excess of the cost over the
amount of such proceeds shall be paid by Tenant.

If during the last two (2) years of the initial term of this lease, the
said improvements are destroyed or damaged to such an extent that it would
reasonably require more than forty-five (45) days to repair the same, then
either Landlord or Tenant may terminate this lease as of the date of the
occurrence of such damage or destruction by the giving of written notice to that
effect to the other party within thirty (30) days following the occurrence of
such damage or destruction; provided, however, that if Tenant shall have
exercised or within said thirty (30) day period of time does exercise its option
to extend the term of this lease, then Landlord shall not have the right to
terminate this lease, and the same shall remain in full force and effect, and
the premises shall be repaired or restored, as the case may require, in
accordance with the foregoing terms and provisions of this Paragraph 9 of this
lease.

If Tenant shall have exercised this option to extend the term of this lease
and if during the last two (2) years of any extended term of this lease the said
improvements are destroyed or damaged to the extent that it would reasonably
require forty-five (45) days or more to repair or restore the same, then either
party may terminate this lease as of the date of such damage or destruction by
the giving of

<PAGE>

written notice to that effect to the other party within thirty (30) days
following the occurrence of such damage or destruction; provided, however, that
if Tenant shall have exercised or within said thirty (30) day period of time
does exercise any remaining option to further extend the term of this lease,
then Landlord shall not have the right to terminate this lease, and the same
shall remain in full force and effect and the premises shall be repaired or
restored, as the case may require, in accordance with the foregoing terms and
provisions of this Paragraph 9 of this lease.

In the event of the undertaking of the repair or restoration of the
building or improvements, Landlord agrees to cooperate with Tenant and to secure
the approval of Tenant as to the contractors and the nature of the work to be
involved in such repair or restoration.

All proceeds of fire and extended coverage insurance referable to and paid
with respect to improvements owned by Landlord and which are not required in
accordance with the foregoing terms and provisions hereof to pay costs of repaid
or restoration of said improvements, shall be and remain the sole property of
Landlord.

Nothing herein contained shall be construed as requiring Landlord to repair
any damage or destruction resulting from an uninsurable casualty, and in the
event of such damage or destruction, and Tenant does not elect to repair the
same, Landlord shall have the option to either repair said damage or destruction
or terminate this lease as of the date of such damage or destruction by the
giving of written notice to that effect to Tenant within thirty {30) days
following the occurrence of such damage or destruction.

During the period required to make such repairs or restoration of the
building or improvements, rent shall be reduced or abated in the proportion that
the untenable portion of the demised premises bears to the entire demised
premises.

10. In the event that the whole or any part of the demised premises shall
be taken by any public authority under the power of eminent domain or conveyed
by Landlord under the threat of such taking, the term of this lease shall cease
with respect to the part of the demised premises so taken or conveyed from the
date the possession of that part shall be required for the public purpose for
which the same is taken or conveyed; and if the portion of the demised premises
so taken or conveyed is such as to

<PAGE>

destroy the usefulness of the demised premises for the purpose or purposes for
which the same are leased hereunder, then Tenant shall have the right,
exercisable by the giving of notice to Landlord within thirty (30) days after
such taking or conveyance, either to terminate this lease or to continue in the
remainder of the demised premises under and pursuant to the terms and provisions
hereof, except that the rent shall be reduced to an amount as shall be mutually
agreed upon between the parties at such time. In the event of any such taking by
eminent domain or under threat thereof, each party shall have the right to
assert and receive the damages separately sustained by such party.

11. This lease is subject and subordinate to all mortgages which may now
or hereafter affect the demised premises and to all renewals, modifications,
consolidations, replacements and extensions thereof. This lease shall be self
operative and no further instrument of subordination shall be required by any
mortgagee. In confirmation of such subordination, the Tenant shall execute
promptly any certificate that the Landlord may request.

12. Landlord covenants and agrees that Tenant, upon making rental and
other payments as provided herein, and upon performing all of the covenants and
conditions herein contained in this agreement, shall and may peacefully and
quietly have, hold and enjoy the demised premises for the original term hereof,
as well as the extended terms provided herein.

13. In the event that Tenant shall become insolvent, and/or make any
assignment for the benefit of its creditors, and/or in the event that a suit is
filed against Tenant seeking the appointment of a receiver or trustee in
bankruptcy, and such suit is not dismissed within thirty (30) days from filing,
or in the event that applying the rentals received therefrom to any and all
expenses incurred in securing possession, repairing, altering or remodeling the
demised premises or any other expenses or commissions in releasing or re-renting
the same, and applying the balance to any and all amounts that may be due from
Tenant under this lease.

No re-entry or the taking of possession by Landlord shall constitute a
waiver of Tenant's liability to Landlord on account of any breach of this lease
by Tenant. Landlord may take possession of said premises and re-let the same,
without such action being deemed an acceptance of a surrender of the

<PAGE>

demised premises, or in any way terminating Tenant's liability hereunder, and
Tenant shall remain liable for payment of the rent herein reserved, less the net
amount realized by Landlord from such re-letting.

In case either party of this lease shall be required to resort to
litigation for the purpose of enforcing against the other party hereto any
rights arising hereunder and shall be successful in such litigation, the
judgment in such litigation shall include an allowance to the successful party
for all such party's costs and expenses including reasonable attorney's fees,
paid or incurred in connection with such litigation.

All rights and remedies herein enumerated shall be cumulative and the
enumeration of specific rights and remedies shall not preclude the exercise or
prosecution of any other right or remedy afforded by law, and such rights and
remedies may be exercised and enforced concurrently and whenever and as often as
the occasion therefor arises. The failure of either party to exercise any right
or remedy at a time when such party is entitled so to do shall not preclude such
party from exercising or constitute a waiver of such right or remedy with
respect to any continuing or other default or defaults of the other party.

15. The Landlord or the Landlord's agent shall have the right to enter
upon the demised premises at all reasonable times to inspect the same, and show
said premises to prospective purchasers, and to make such decorations, repairs,
alterations, improvements or additions as Landlord may deem necessary or
desirable, and the Landlord shall be allowed to take all material into and upon
said premises that may be required therefor without the same constituting an
eviction of the Tenant in whole or in part; provided, however, that Landlord
shall not unreasonably interfere with the business of the Tenant or its
sublessees, and during the period required to make such decorations, repairs,
alterations, improvements or additions, the rent shall be reduced or abated in
the proportion that the unusable portion of the demised premises bears to the
entire demised premises. During the six (6) months period prior to the
expiration of the initial term of this lease or any renewal term, the Landlord
may "exhibit the premises to prospective tenants or purchasers.

16. The Tenant, for itself, its successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this lease, nor sublet
or permit the demised premises or any part thereof to be used by others, without
the prior written consent of the Landlord in each instance; provided, however,

<PAGE>

that the Landlord's consent shall not be required in case of a merger,
consolidation or other similar reorganization of Tenant if the new or continuing
corporation has a net worth upon completion of the transaction which is equal to
or greater than the net worth of Tenant immediately prior to the transaction;
and provided further, however, that the Landlord will not unreasonably withhold
consent to an assignment or sublease of the demised premises if such sublease
provides that the demised premises shall be used only for business of such
character which will in no way be harmful to the demised premises or to the
neighborhood. Objections to a sublease shall be given in writing by the Landlord
to the Tenant within ten (10) days after notice by the Tenant of its intention
to sublease. Failure to object within the time herein provided shall be deemed a
consent to the sublease. If this lease is assigned, or if the demised premises
or any part thereof be sublet or occupied by anybody other than the Tenant,
Landlord may, in the event of default by the Tenant hereunder, collect rent from
the assignee, subtenant or occupant, and apply the net amount collected to the
rent herein reserved, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant or occupant as tenant, or a release of the Tenant from the
further performance by the Tenant of the covenants on the part of the Tenant
herein contained. The consent by the Landlord to an assignment or subletting
shall not in anywise be construed to relieve the Tenant from obtaining the
express consent in writing of the Landlord to any further assignment or
subletting, which consent shall be subject to the provisions hereinabove set
forth.

17. Landlord hereby gives and grants to the Tenant the right to renew this
lease agreement for two (2) consecutive five (5) year periods upon the same
rent, terms and conditions as herein contained, which right of renewal may be
exercised by the Tenant by giving Landlord written notice of its intention to so
renew more than sixty (60) days prior to the expiration of the initial term or
more than sixty (60) days prior to the expiration of any renewal term; provided,
however, that at the time such notice is given the Tenant shall not be in
default under the terms of this agreement. Upon notice of such renewal having
been timely given by the Tenant this lease agreement shall be automatically
extended for the five (5) year period without the necessity of a further
writing.

<PAGE>

18. On the last day of the initial term or renewal of the term of this
lease, Tenant shall peacefully and quietly surrender the demised premises in
good order, condition, and state of repair, fire and other unavoidable casualty,
reasonable wear and tear, excepted; provided, however, that Tenant shall have
the right for a period of thirty (30) days following the expiration of the term
or sooner termination of this lease within which it may remove its furniture,
furnishings, fixtures, trade fixtures, air conditioning and heating equipment,
signs and other removable personal property and equipment. Any of such property
not removed by Tenant within said time or any mutually agreed upon extension of
such time shall remain upon the demised premises and shall be deemed to be the
property of Landlord.

19. In the event Tenant remains in possession of the leased premises at the
expiration of the term or renewal of the term of this lease and without
exercising its right to renewal or the execution of a new lease, it shall be
deemed to be occupying said premises as a tenant from month to month subject to
all the conditions, provisions, terms and obligations of this lease insofar as
the same are applicable to a month to month tenancy.

20. Any notice, bill, statement, or communication required or permitted
pursuant to the terms and provisions of this lease shall be deemed fully given
or served if transmitted by certified or registered mail with return receipt
requested, addressed to Tenant at 2800 Lynch Road, Evansville, Ind., and to
Landlord at 901 Park Plaza Drive, Evansville, Ind. Either party may by like
written notice at any time and from time to time designate a different address
or addresses to which notices shall Subsequently be transmitted to such party.

<PAGE>

21. The covenants, conditions and agreements contained in this lease shall
be binding upon and inure to the benefit of the Landlord and the Tenant and
their respective Successors, and, except as otherwise provided in this lease,
their assigns.

IN WITNESS WHEREOF, the Landlord and the Tenant have respectively signed
and sealed these presents as of the day and year first above written.

/s/ Earl H. Seibert
-------------------
/s/ Elaine D. Seibert
---------------------
"Landlord"

SMITH & BUTTERFIELD CO., INC.

By: /s/ James D. Butterfield, Pres.
-------------------------------

Attest:
/s/ Connie Butterfield
- ----------------------
Assistant Sec. "Tenant"

<PAGE>

February 25, 1992

We, Smith & Butterfield desires to renew the lease with Earl H. and Elaine D.
Seibert on the property at 113-115-117 East Third Street, Owensboro, Kentucky.
This renewal is a continuation of the lease signed 4-19-82 at $1,200.00 per
month rental. This is a net-net lease as previously signed.

The term of the lease is for 10 years, commencing June 1, 1992 and ending
midnight May 31, 2002.

By: James D. Butterfield
Smith & Butterfield

<PAGE>

EXHIBIT 10.4

THIS AGREEMENT OF LEASE is made as of the 21st day of August, 1996, between
MARION B. MERTEN and HAROLD A. MERTEN, JR., hereinafter jointly called "Lessor,"
and CM ACQUISITION CORP., an Ohio corporation, hereinafter called "Lessee."

1. DEMISE OF PREMISES. Lessor hereby demises and leases to Lessee and
Lessee hereby accepts and leases from Lessor, for the term and upon the terms
and conditions hereinafter set forth, the real property described in Exhibit A
attached hereto and incorporated herein by reference (hereinafter called
"Premises" or "Demised Premises"), together with all improvements now existing
thereon.

2. TERM AND RENEWAL. The term of this lease shall be sixty (60) months
commencing on September 1, 1996, and ending at 11:59 p.m. on August 31, 2001,
both dates inclusive, unless sooner terminated as hereinafter provided or unless
renewed as hereinafter provided. Provided that Lessee shall have complied with
all the terms and conditions of this lease, Lessee shall have the option to
renew this lease for two (2) successive additional periods of sixty (60) months
each after the expiration of the original term or the first renewal term, as
applicable, on the same terms and conditions, except for increased rent as
provided in Section 3, as herein provided for the initial term. Such options to
renew shall be exercised by Lessee giving written notice to Lessor of its
exercise of an option at least six (6) months before the end of the original or
renewal term.

3. RENT. Lessee shall pay to Lessor, as rental for the occupation and
use of the Premises for and during the original term hereof, a total rental of
$486,000.00 payable monthly in advance in equal installments of $8,100.00 each,
the first of such installments being payable on the 1st day of September, 1996,
and the remaining installments being due and payable on the 1st day of each
calendar month thereafter during the original term hereof. Lessee shall pay to
Lessor, as rental for the occupation and use of the Premises for and during the
first renewal term, if this lease is renewed, a total rental of $510,300.00
payable monthly in advance in equal installments of $8,505.00 each, and for and
during the second renewal term, if this lease is renewed for such term, a total
rental of $535,815.00 payable

<PAGE>

monthly in advance in equal installments of $8,930.25 each. All rental shall be
payable to Lessor at 7895 Shawnee Run Road, Cincinnati, Ohio 45243, or at such
other place as Lessor may direct in writing.

4. NET RENT. It is the intention of the Lessor and the Lessee that the
rent herein specified shall be net to the Lessor in each month during the term
of this lease; that all costs, expenses, and obligations of every kind relating
to the Demised Premises, except as may be specifically otherwise provided in
this Lease, which may arise or become due during the term of this lease shall be
paid by the Lessee; and that the Lessor shall be indemnified by the Lessee
against such costs, expenses and obligations. Without limiting the generality
of the foregoing provision, the parties agree that:

a. Lessee shall promptly pay all taxes and assessments against or
allocated to the Premises as and when they become due for tax periods after the
signing of this Lease. Lessee will pay all taxes and assessments levied against
the equipment, buildings, or other property which is now located on or which
Lessee may erect, install or have located on the Premises. Taxes for the
current year shall be prorated between Lessor and Lessee as of the date of
commencement of this Lease.

b. In the event the Premises are assessed as a separate tax parcel
and Lessee fails to pay the entire real estate tax bill when due, Lessor may,
but shall not be obligated to, pay the tax bill and the amount so paid together
with interest at the rate of eighteen (18%) percent per annum from the date of
payment shall be deemed additional rent due hereunder and shall be paid by
Lessee not later than the date the next installment of rent shall become due
hereunder.

c. Lessee, at its own cost and expense, covenants and agrees to keep
the Premises, including any improvements and betterments now existing or which
may be made to the Premises, fully insured during the term of this lease against
loss or damage by fire and other casualty; such insurance to be written by an
insurance company or companies authorized to do business in the State of Ohio
for the full insurable replacement value of the Premises, including
improvements. Lessee covenants and agrees that Lessor and Lessee shall be named
as insured parties on such policies as their interests may appear, and that
Lessee shall procure endorsements on the policies required to be maintained by
it under the provisions of this paragraph wherein and whereby the insurance
company will agree that the Lessor will be

<PAGE>

given thirty (30) days' advance written notice of any cancellation or reduction
of insurance under any such policy and that copies of all endorsements issued
after the date of such policy will be forwarded to Lessor.

In the event that Lessee fails to pay for such fire and other casualty
insurance when the premiums are due, Lessor may, but shall not be obligated to,
pay the premium necessary to prevent the lapse of existing policies or obtain
and pay the premium for replacement policies, and the amount so paid together
with interest at the rate of eighteen percent (18%) per annum from the date of
payment shall be deemed additional rent due hereunder and shall be paid by
Lessee not later than the date the next installment of rent shall become due
hereunder.

5. LIEN FOR RENT. Lessee covenants and agrees that Lessor shall have and
is hereby given a lien upon the leasehold estate herein created and upon all of
the property of Lessee of every kind and character which shall come upon the
Demised Premises at any time during the term of this lease or any extension
hereof to secure the payment of all of the rent and other sums whatsoever which
are or shall become due Lessor under the terms of this lease and such lien shall
be paramount to any other liens placed or suffered thereon by Lessee. For the
purpose of enforcing such lien, Lessor shall have and is hereby given the right
to distrain for all of such rent and other sums in the manner and form as
provided by the laws of the State of Ohio. The lien and right given Lessor in
this paragraph shall be cumulative and in addition to all other rights and
remedies which it now has or may hereafter have under this lease and the laws of
the State of Ohio.

6. CONSTRUCTION AND ALTERATIONS BY LESSEE. Lessee may after having first
obtained the written consent of Lessor, which consent shall not be unreasonably
withheld or delayed and at Lessee's full cost and expense alter or construct
improvements upon the Demised Premises, or make alterations or site improvements
such as utility extensions, final grading, paving, curbs, sidewalks,
landscaping, etc., to the Demised Premises, such as may be necessary or
incidental to the purposes and uses for which the Premises are leased. All such
improvements shall become a part of the Demised Premises and shall be the sole
property of Lessor upon the termination of this Lease. Such alterations shall
not impair the roof, exterior brick and block walls, supporting walls or
foundations.

<PAGE>

a. MECHANIC'S AND MATERIAL LIENS. The Lessor shall not be liable for
any labor or materials furnished to the Lessee and the mechanic's or other lien
for such labor and materials shall not attach to or affect the Lessor's interest
in the Demised Premises. The Lessee hereby agrees to pay any mechanic's or
other lien, or to discharge any such lien by bond or deposit or provide an
escrow deposit sufficient for that purpose upon request of the Lessor, and
failing to do so, the Lessor may, without having an obligation to do so, upon
giving fifteen (15) days written notice to the Lessee, pay or discharge the same
and the amount so paid or deposited together with interest at the rate of
eighteen (18%) percent per annum shall be deemed additional rent due hereunder
and payable when the next installment of rent shall become due.

b. The Lessee shall be responsible for obtaining all required
licenses, approvals or permits for any of the construction, alteration or
installation allowed by this lease. Lessee shall be solely responsible for all
work in connection with the alterations and construction and shall be solely
responsible for assuring that all work is completed in a good and workmanlike
manner and in conformity with all federal, state and local laws and regulations,
including, without limitation, the Americans With Disabilities Act, and shall
indemnify and hold Lessor harmless from any loss, cost or expense, including
attorney fees, in, arising out of, or relating to, Lessee's failure to comply
with the provisions of this paragraph 6.

c. Upon full compliance with all terms hereof, and at the termination
hereof, Lessee shall have the right and obligation to remove any and all of its
furniture, furnishings, or equipment then located on the Premises and to dispose
of the same. Lessee agrees that such removal of personal property shall occur
prior to the termination or cancellation of this lease or any extension thereof.

7. PERMISSIBLE USE. The Lessee shall during the continuance of this
lease, conduct upon said Demised Premises a printing and/or office supply and
furniture business and shall neither use nor suffer the same to be used for any
other purpose without the prior written consent of the Lessor, which consent
shall not be unreasonably withheld. Lessee shall conduct and manage the Demised
Premises in proper and orderly manner and will not allow the Demised Premises or
any part thereof to be used for any illegal or immoral purpose and will not
carry on or permit upon said Demised Premises any

<PAGE>

offensive, noisy, or dangerous trade, business, manufacture or occupation of a
nuisance. Lessee shall not alter the drainage of the Premises.

Lessor hereby represents and warrants to the best of their knowledge that
(i) no "Hazardous Substances," as defined hereinafter, have been discharged,
dispersed, released, stored, treated, generated, disposed of or allowed to
escape on the Premises prior to the date of this Lease; (ii) the operations of
the business of The Merten Company (the "Company) on the Demised Premises and
the buildings in which it is conducted conform with all applicable restrictive
covenants, deeds and restrictions and all applicable Federal, state and local
laws, ordinances and regulations (including those relating to zoning and
environmental protection), and such buildings and operations do not encroach
upon, and are not encroached upon by, property of others; and all buildings or
operations of Company and the business that are subject to the Occupational
Safety and Health Act of 1970, as amended, comply with employee working
conditions as prescribed by such Act; (iii) the Demised Premises have no
underground storage tanks, either empty or containing any liquid, including but
without limitation solvents, fuel or waste oil, on any premises used in its
business; (iv) Company has obtained all permits, licenses and other
authorizations and filed all notices which are required to be obtained or filed
by Company for the operation of its business on the Demised Premises under
Federal, state and local laws relating to pollution, protection of the
environment or waste disposal ("Environmental Laws"); (v) the Company is in
compliance in all respects (a) with all terms and conditions of all required
permits, licenses and authorizations; and (b) all other applicable limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
law, regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder; (vi) there are no past or
present events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent continued compliance in all
respects, or which may give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant,

<PAGE>

waste or hazardous or toxic material with respect to the Demised Premises, the
Company or its businesses, properties or plants; and (vii) the properties and
plants of Company do not contain asbestos or PCBs in any form.

The Lessor shall, at their expense, take all necessary remedial action(s)
in response to the presence of any "Hazardous Substances" (as defined
hereinafter) in, on, under or about the Premises which occurred prior to the
date of this lease. The Lessor shall be solely responsible for, and shall
indemnify and hold harmless the Lessee, its directors, officers, employees,
agents, successors and assigns from and against any loss, cost, expense or
liability of any kind directly or indirectly arising out of or attributable to
the use, generation, storage, release, threatened release, discharge, disposal,
or presence of Hazardous Substances in, on, under or about the Premises which
occurred prior to the date of this lease, including, without limitation: (i) all
foreseeable consequential damages; (ii) the costs of any required or necessary
repair, cleanup or detoxification of the Premises, and the preparation and
implementation of any closure, remedial or other required plans; and (iii) all
reasonable costs and expenses incurred by the Lessee in connection with any of
the matters addressed in this paragraph, including but not limited to reasonable
attorney's fees and experts' fees.

Lessee hereby represents and warrants that, except for materials
customarily used in Lessee's normal course of business which shall be used and
disposed of in compliance with all applicable Environmental Laws and
regulations, no "Hazardous Substances", as defined hereinafter, will be
discharged, dispersed, released, stored, treated, generated, disposed of, or
allowed to escape on the Premises during the term of this lease or any renewal
hereof. For purposes of this lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the list of hazardous
substances adopted by the United States Environmental Protection Agency ("EPA")
and the list of toxic pollutants designated by Congress or the EPA or defined by
or in or pursuant to The Comprehensive Environmental Remediation, Compensation
and Liability Act ("CERCLA"), The Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 6901 ET SEQ., 42 U.S.C. Section 9601 ET SEQ., or any
other Federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning any hazardous, toxic or

<PAGE>

dangerous waste, substance or material, as now or at any time hereafter in
effect. The Lessee shall, at its expense, take all necessary remedial action(s)
in response to the presence of any Hazardous Substances in, on, under or about
the Premises attributable to its occupancy hereunder. The Lessee shall be
solely responsible for, and shall indemnify and hold harmless the Lessor, its
directors, officers, employees, agents, successors and assigns from and against
any loss, cost, expense or liability of any kind directly or indirectly arising
out of or attributable to the use, generation, storage, release, threatened
release, discharge, disposal, or presence of Hazardous Substances in, on, under
or about the Premises during the term of this lease or any renewal hereof,
including, without limitation, all reasonable costs and expenses incurred by the
Lessor in connection with any of the matters addressed in this paragraph,
including but not limited to reasonable attorney's fees and experts' fees.

8. CONDITION/MAINTENANCE OF PREMISES. Lessor warrants and represents to
the best of their knowledge that at the commencement of this lease the Premises
shall be in compliance with all material laws, rules and regulations affecting
the Premises or its use and that there is no adverse fact known to Lessor
relating to the physical, mechanical or structural condition of the Premises or
any portion thereof which has not been specifically disclosed to Lessee and not
incurred by other than ordinary wear and tear. The Lessor shall at its own
expense maintain and make all necessary repairs and replacements to the
fundamental structure of the Demised Premises, meaning the roof, exterior brick
and block walls, supporting walls, and foundations, unless the need for same
shall be caused by the negligence of Lessee, its employees, agents or invitees.
Such repairs and replacements, interior and exterior, ordinary as well as
extraordinary, shall be made promptly as and when necessary. All other repairs
to or maintenance of the Demised Premises shall be made by Lessee at its sole
cost and expense, and shall be made promptly as and when necessary. All repairs
and replacements shall be in quality and class at least equal to the original
work. Upon written notice by one party to the other that such maintenance,
repairs or replacements which are the responsibility of the other party are
necessary, and the failure of said other party to effect such maintenance,
repairs or replacements or commence work thereon (which work will be duly
prosecuted) within fifteen (15) days after such written notice is given, the
party giving notice shall have the right to make such repairs or replacements as
are specified in the notice at the expense of

<PAGE>

the other party and obtain reimbursement from said other party for the cost
thereof, including but not limited to the right of the Lessor to collect such
costs as additional rent and the right of the Lessee to set off such costs
against rentals.

9. COMPLIANCE WITH LAWS. The Lessee at its sole expense shall comply
with all material laws, orders, and regulations of federal, state, county, and
municipal authorities, and with any direction of any public officer, pursuant to
law, which shall impose a duty upon the Lessor or the Lessee with respect to the
Demised Premises. The Lessee, at its sole expense, shall obtain all licenses or
permits which may be required for the conduct of its business within the
provisions of this Lease, or for the making of any permitted repairs,
alterations, improvements or additions, and the Lessor, where necessary, will
join with the Lessee in applying for all such permits or licenses.

10. UTILITIES. Lessor warrants that there is electricity, gas, telephone,
water and sewer available at the Premises in quantities sufficient for the
present use of the Premises. Lessor shall not be required to furnish any
utility or similar service to the Premises, including but not limited to, steam,
gas, water, heat or electricity. Except when due to the negligence of Lessor,
Lessor shall not be liable for any failure of any utility service or for injury
to person (including death) or damage to property resulting from steam, gas,
water, heat, electricity, rain or snow which may flow or leak from any part of
the leased property or from any pipes, appliances or plumbing works, from the
street or subsurface or from any other place, or for interference with light or
other easements however caused. Lessee shall pay all charges for utility
service, including but not limited to, steam, gas, water, heat, electricity and
other services used in or about or supplied to the Premises and shall indemnify
Lessor against any liability on such account.

11. INDEMNITY. Lessee during the term of this lease will indemnify Lessor
against and hold Lessor harmless from all claims, demands and/or causes of
action including all costs, expenses and attorneys fees of Lessor incident
thereto for (1) injury to or death of any person or loss of or damage to any
property, including the Premises, (2) failure by Lessee to perform any covenant
required to be performed by Lessee hereunder, (3) failure to comply with any
requirements of any governmental authority, (4) any mechanic's lien or security
agreement filed against the Premises, any equipment

<PAGE>

therein or any materials used in the construction or alteration of any building
or improvement thereon, where such claims, demands, and/or causes of action
arise from or are incidental to the use of the Premises by Lessee, its officers,
agents, servants, employees and/or invitees.

12. INSURANCE. Lessee agrees that it will, at its cost and expense,
obtain and keep in force and effect in the names of both Lessor and Lessee, as
their respective interests may appear, general liability insurance against any
and all claims for personal injury or property damage occurring in, upon or
about the Premises during the term of this lease. Such insurance shall be
maintained for the purpose of protecting Lessor and Lessee pursuant to the
indemnity contained in the foregoing Section 11, but shall not be in
satisfaction of the indemnity obligations stated herein, and shall have limits
of liability of not less than Three Million Dollars ($3,000,000) for injuries to
any number of persons in any one accident or occurrence or for damage to
property in any one accident or occurrence. Lessee agrees that it will, at its
cost and expense, obtain and keep in force and effect in the names of Lessor and
Lessee, as their respective interests may appear, a standard fire and extended
coverage insurance policy or policies protecting the Premises from loss or
damage within the coverage of such insurance policy or policies for its full
insurable replacement value. Lessee will furnish to Lessor appropriate and
acceptable evidence of its compliance with the provisions of this paragraph,
such as certificates of insurance or copies of the policies. Such certificates
or policies shall provide that such insurance will not be cancelled or
materially amended unless thirty (30) days prior written notice of such
cancellation or amendment is given to Lessor. The minimum limits of the
policies of insurance required to be carried by Lessee under this Lease, shall
be subject to increase for the remaining term, if Lessor, in the exercise of its
reasonable judgment shall deem the same necessary for its adequate protection.
Within sixty (60) days after demand therefor by Lessor, Lessee, shall furnish
Lessor with evidence that it has complied with such demand for increased
insurance.

13. EMINENT DOMAIN. If all the Premises or a substantial portion thereof
is taken by condemnation or under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), then either party may at its option terminate this

<PAGE>

lease as of the date the condemning authority takes title or possession,
whichever occurs first, after giving thirty (30) days written notice to the
other party of the exercising of such option.

If any other taking (of the Premises or otherwise) adversely and
substantially affects Lessee's use, access, or rights of ingress or egress of or
to the Premises, then Lessee may elect to terminate this lease as of the date
the condemning authority takes possession. Lessee's election to terminate shall
be made in writing within thirty (30) days after Lessor has given Lessee written
notice of the taking (or in the absence of such notice, within fifteen (15) days
after the condemning authority has taken possession). If Lessee does not
terminate this lease in accordance with this section, this lease shall remain in
full force and effect as to the portion of the Premises remaining, except that
rent shall be reduced in the proportion that the area taken diminishes the value
and use of the Premises to Lessee. In addition, Lessor, at its expense, if the
lease is not terminated, shall promptly repair any damage to the Premises caused
by condemnation and restore the remainder of the Premises to the reasonable
satisfaction of Lessee.

Any award or payment made upon condemnation of all or any part of the
Premises shall be the property of Lessor, whether such award or payment is made
as compensation for the taking of the fee or as severance damages; provided
Lessee shall be entitled to seek an award or payment for loss of or damage to
Lessee's trade fixtures, removable personal property, and additions, alterations
and improvements made to the Premises by Lessee, and for its loss of business or
any other consequential or special damages, such as Lessee's relocation and
moving expenses, provided that such award does not impair Lessor's ability to
recover its claim or the amount thereof.

Lessor shall give notice to Lessee within ten (10) days after receipt of
notification from any condemning authority of its intention to take all or a
portion of the Premises.

Notwithstanding anything, expressed or implied, to the contrary contained
in this Lease, Lessee, at its own expense, may in good faith contest any such
award for loss of or damage to Lessee's trade fixtures, removable personal
property, and additions, alterations and improvements made to the Premises by
Lessee, and for its loss of business or any other consequential or special
damages, such as Lessee's relocation and moving expenses.

<PAGE>

14. FIRE OR OTHER CASUALTY LOSSES. In the event the Premises are damaged
or destroyed or rendered partially untenantable for their then use by fire or
other casualty without the fault of Lessee, Lessor shall repair and/or rebuild
the same as promptly as possible, provided that the proceeds from Lessee's
insurance policies are available to Lessor and sufficient in amount to fully pay
all costs of repair or rebuilding. Lessor's obligation hereunder is merely to
restore the Premises to substantially the same condition as existed immediately
prior to the happening of the casualty and shall not extend to the repair or
replacement of any improvements, additions, fixtures, installations or exterior
signs of the Lessee. If as a result of such partial destruction or damage there
is substantial interference with the operation of Lessee's business in the
Premises, the rent payable under this lease shall be abated in the proportion
that the portion of the Premises destroyed or rendered untenantable bears to the
total Premises. Such abatement shall continue for the period commencing with
such damage or destruction and ending with the completion by the Lessor of the
work of repair and/or reconstruction, if Lessor is obligated to complete such
work. If the damage or casualty was caused by the negligence or fault of the
Lessee, its employees, agents or invitees, there shall be no abatement of rent.

Notwithstanding the foregoing, in the event that fifty percent (50%) or
more of the Premises or fifty percent (50%) or more of the buildings situate on
the Premises are destroyed or rendered untenantable by fire or other casualty,
either party shall have the option to terminate this lease effective as of the
date of such casualty and Lessor may in such event retain the casualty insurance
proceeds. The terminating party shall give the other party notice of
termination within forty-five (45) days after the happening of such casualty.
If neither party elects to terminate this lease, Lessor shall repair and/or
rebuild the Premises as promptly as possible as set forth above, subject to any
delay from causes beyond its reasonable control and the terms of this lease
shall continue in full force and effect, subject to equitable abatement of rent
as set forth above and subject to the insurance proceeds covering the cost of
such repair and/or rebuilding.

15. ASSIGNMENT OR SUBLETTING. Lessee shall not assign, transfer,
mortgage, or pledge this lease and will not sublet the Premises or any part
thereof without first obtaining the Lessor's written approval, which shall not
be unreasonably withheld or delayed. Lessor reserves the right to sell its

<PAGE>

interest in the Premises and to assign or transfer this lease upon the condition
that in such event this lease shall remain in full force and effect, subject to
the performance by Lessee of all the terms, covenants and condition on its part
to be performed, and upon the further condition that such assignee or transferee
(except an assignee or transferee merely for security) agrees to be bound to
perform all terms, covenants and conditions of this lease. Upon any such sale,
assignment or transfer, other than merely as security, Lessee agrees to look
solely to the assignee or transferee with respect to all matters in connection
with this lease and Lessor shall be released from any further obligations
hereunder.

16. EVENTS OF DEFAULT BY LESSEE. In the event that the rent, or any part
thereof, of any additional rental or other payment shall not be paid on any day
when such payment is due and such default shall continue for a period of ten
(10) days after written notice by Lessor to Lessee; or if Lessee should fail in
the performance of, breach or permit the violation of any of the covenants,
conditions, terms, or provisions contained in this lease which on the part of
the Lessee ought to be observed, performed or fulfilled and shall fail to cure
or make good such failure, breach or violation within thirty (30) days after
written notice and demand from Lessor; or if the Demised Premises or any part
thereof shall be abandoned; or if Lessee shall be dispossessed therefrom by or
under the authority of anyone other than Lessor; or if Lessee shall file any
petition or institute any proceeding under an insolvency or bankruptcy act (or
any amendment or addition thereto hereafter made) seeking to effect an
arrangement or its reorganization or composition with its creditors; or if in
any proceedings based on the insolvency of Lessee or relating to bankruptcy
proceedings, a receiver or trustee shall be appointed for Lessee or the Demised
Premises and be not discharged within ninety (90) days; or if the Lessee's
estate created hereby shall be taken in execution or by any process of law; or
if Lessee shall admit in writing its inability to pay its obligations generally
as they become due, then, at the option of Lessor, this lease and everything
herein contained on the part of the Lessor to be kept and performed shall cease,
terminate and be at an end, and Lessor shall be entitled to have again and
repossess the Premises as its former estate and Lessee shall be put out. This
remedy of forfeiture shall be deemed cumulative and in addition to all other
remedies provided by law. In the event Lessor exercises its option to terminate
this lease, repossess the Premises and put Lessee out as herein provided, this
shall not relieve Lessee from its obligations to pay

<PAGE>

rent provided to be paid herein for the remainder of the term of this lease and
Lessee shall remain liable to Lessor for any costs or expenses incurred by
Lessor in reletting the Premises and for the difference between the rent
received upon such reletting and the rent herein specified to be paid by Lessee
for the term hereof.

17. SURRENDER OF PREMISES. Upon expiration of the term of this Lease or
any renewal term, or the sooner termination of this Lease or repossession of the
Premises as herein provided, the Lessee shall peaceably surrender possession of
the Premises in as good order and condition as they now are, reasonable wear and
tear excepted, and shall deliver all keys to the Premises to Lessor.

18. RIGHT OF ACCESS OF THE LESSOR. The Lessee further covenants and
agrees that the Lessor may have access to the Demised Premises at all reasonable
times and upon reasonable notice for the purpose of the examining or exhibiting
the same for sale.

19. NOTICES. All notices permitted or required to be given hereunder
shall be effectual if in writing signed by the party given notice and sent by
certified or registered U.S. mail, postage prepaid, to the other parties at the
following addresses:

Lessor:Mr. and Mrs. Harold A. Merten, Jr.
7895 Shawnee Run Road
Indian Hill, Ohio 45243

Copy to: Thomas H. Clark, Esq.
441 Vine Street, Suite 1136
Cincinnati, Ohio 45202

Lessee:CM Acquisition Corp.
c/o Champion Industries, Inc.
P. O. Box 2968
Huntington, West Virginia 25728

Copy To: Thomas J. Murray, Esq.
611 Third Avenue
P. O. Box 2185
Huntington, West Virginia 25722

20. BROKER. Lessee and Lessor covenant, warrant and represent that there
was no broker instrumental in consummating this lease and that no conversations
or prior negotiations were held with any broker concerning the renting of the
Demised Premises. Lessee and Lessor each agree to hold the

<PAGE>

other harmless against any claim for brokerage commission arising out of any
conversations or negotiations had by Lessee or Lessor with any broker.

21. TITLE AND WARRANTY/SUBORDINATION. Lessor covenants and agrees with
Lessee that Lessor is the lawful owner of the Premises and that they are free
and clear of all other liens, claims and encumbrances whatsoever, except the
permitted encumbrances described below, zoning requirements, covenants,
conditions, easements and restrictions of record and non-delinquent taxes and
assessments, and Lessor will defend the same against all other claims
whatsoever. Lessor further covenants and agrees that Lessee by paying the rents
and observing and keeping the covenants of this lease on its part to be kept,
shall peaceably and quietly hold, occupy and enjoy the Premises during the term
herein created, or any extension.

Upon request by the Lessor, Lessee shall subordinate its rights hereunder
to the lien of any mortgage or deed of trust, or the lien resulting from any
other method of financing or refinancing, now or hereafter in force against the
Premises, and to all advances made or hereafter to be made upon the security
thereof and will attorn to the mortgagee or beneficiary or their assigns in the
event of foreclosure; provided, however, that a condition precedent to Lessee's
attornment and requirement to subordinate hereunder shall be that Lessee, upon
any default in the terms of such financing by Lessor, shall have the right to
pay the rental due hereunder directly to the mortgagee, trustee or beneficiary
of such deed of trust or other persons to whom Lessor may be obligated under
such financing and, so long as Lessee does so pay the rentals as herein provided
and perform all of its obligations pursuant to this lease, this lease and all
Lessee's rights and options hereunder shall remain in full force and effect as
to such mortgagee, trustee or beneficiary or other financing obligee of Lessor.
Lessee shall, upon request of any party-in-interest, execute within ten (10)
days of Lessee's receipt, such instruments or certificates to carry out the
intent of this paragraph. Provided, however, that nothing contained in such
instruments or certificates required by Lessor or other party-in-interest shall
be in derogation of any rights granted to Lessee hereunder, nor expand Lessee's
obligations hereunder.

22. ZONING; PERMITS. Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease and all terms, covenants and conditions hereof are
in all respects subject and subordinate to all

<PAGE>

zoning restrictions affecting the Premises, and the Lessee shall be bound by
such restrictions. The Lessor does not warrant that any licenses or permits
which may be required for Lessee's business to be conducted on the Premises will
be granted, or if granted will be continued in effect or renewed. Any failure
to obtain licenses or permits or any revocation thereof or failure to renew
shall not release Lessee from continuing performance of this Lease.

23. DEFAULT BY LESSOR. In the event the Lessor shall fail for a period of
thirty (30) days after written notice to comply with, keep and perform any of
the agreements herein contained on its part to be complied with, kept or
performed, then at the option of the Lessee this lease may be immediately
terminated, but without prejudice to any right of action or remedy which might
otherwise be used by Lessee to enforce its lawful rights in relation to any
antecedent breach or covenant or agreement herein contained. Waiver of any
default shall not be construed as a waiver of any subsequent default or
condition of the lease to which such default related.

24. MISCELLANEOUS.

a. Wherever the words "Lessor" and "Lessee" appear in this lease,
they shall include the parties and their respective sublessee heirs, devisees,
executors, administrators, successors and assigns, and the provisions of this
agreement are binding upon them. Those words as may be used herein, shall be
construed to include the plural as well as the singular; and the necessary
grammatical changes required to make the provisions apply to either
corporations, partnerships, other entities, or individuals, masculine or
feminine, shall in all cases be assumed as though fully expressed. The neuter
gender has been used herein for convenience only.

b. This lease expresses the entire agreement between the parties
hereto. No amendments, modification, or waiver of any provision hereof shall be
valid unless in writing and signed by all of the parties hereto.

c. This agreement shall be construed in accordance with the laws of
the State of Ohio.

<PAGE>

d. If any provisions or paragraphs or part thereof of this agreement
are held invalid or unenforceable, such invalidity or unenforceability shall not
effect the validity or enforceability of the other portions hereof, all of which
provisions are hereby declared severable.

e. This lease shall not be recorded. However, the parties hereto
mutually agree, upon the written request of either one to the other, to execute
a memorandum of this lease in recordable form as per Exhibit "B" for filing and
recording in the Office of the Recorder of Hamilton County, Ohio.

IN WITNESS WHEREOF, the parties do hereunto set their hands to multiple
copies hereof, each of which shall constitute an original, by their respective
officers thereunto duly authorized all as of the day and year hereinabove set
forth.

Witness as to Lessor: LESSOR:

/s/ /s/ Marion B. Merten
- -------------------- --------------------
MARION B. MERTEN
/s/
- ---

/s/ Harold A. Merten, Jr.
-------------------------
HAROLD A. MERTEN, JR.

Dated: August 21st, 1996

Witness as to Lessee: LESSEE:

/s/ CM ACQUISITION CORP.,
- -------------------- an Ohio corporation

/s/
- ---

Dated: August 21st, 1996 By: /s/ Joseph C. Worth, III
Its President ------------------------

100

<PAGE>

STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )

The foregoing instrument was acknowledged before me, a Notary Public in and
for the State of Ohio, this ____ day of August, 1996, by Harold A. Merten, Jr.
and Marion B. Merten.

-----------------------------------
Notary Public, State of Ohio

STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )

BE IT REMEMBERED that on this _____ day of August, 1996, before me, the
Subscriber, Notary Public in and for said county and state, personally appeared
_______________ and _______________, Secretary, of _______________, the
corporation whose name is subscribed to and which executed the foregoing
instrument, and for themselves and as such officers and for and on behalf of
said instrument by authority of the Board of Directors, and on behalf of said
corporation; and that the signing and execution of said instrument is their free
and voluntary act and deed, their free act and deed as such officers, and the
free and voluntary act and deed of said corporation, for the uses and purposes
in said instrument mentioned.

IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
Notarial Seal on the day and year last aforesaid.

-----------------------------------
Notary Public

This Instrument Was Prepared By:

Thomas J. Murray
Huddleston, Bolen, Beatty, Porter & Copen
Post Office Box 2185
Huntington, West Virginia 25722

101

<PAGE>

AGREEMENT OF LEASE
MERTEN COMPANY
EXHIBIT "A"

Situate in the City of Cincinnati, County of Hamilton, State of Ohio, and being
particularly described as follows:

Beginning at the Northeast corner of Fifteenth and Providence Streets, thence in
the North line of Fifteenth Street, North 80DEG. 11' East 25.09 feet to a point,
thence North 10DEG. 06' West, 90.10 feet to a point in the South line of Gore
Alley, thence in said line South 80DEG. 11' West, 24.94 feet to the Southeast
corner of Gore Alley and Providence Street, thence in the East line of
Providence Street South 10DEG. 00' East, 90.10 feet to the place of beginning.

102

<PAGE>

MERTEN COMPANY LEASE
Exhibit "B"

This Memorandum of Lease is made as of the _____ day of August, 1996, by
and between Marion B. Merten and Harold A. Merten, Jr., _______________
("Lessor") and CM Acquisition Corp., an Ohio corporation having its principal
place of business at 1515 Central Parkway, Cincinnati, OH 45214 ("Lessee").

WITNESSETH:

Lessor has leased to Lessee and Lessee has leased from Lessor that certain
parcel of real property as described on EXHIBIT A attached hereto and made a
part hereof, all upon and subject to such covenants, terms, conditions and
agreements set forth in a certain Lease between Lessor and Lessee dated
_______________, 1996 ("Lease"), which Lease is incorporated herein by
reference.

The term of the Lease shall be for an original term to begin on September
1, 1996, and shall extend for a period of five (5) years, expiring on August 31,
2001 ("Initial Term"), unless sooner terminated or extended as provided for in
the Lease. Pursuant to the Lease, Landlord has granted Tenant the right and
option to extend the Initial Term for two additional terms of five (5) years
each to begin upon the expiration of the Initial Term, the first to begin on
September 1, 2001, and the second to begin on September 1, 2006.

IN WITNESS WHEREOF, this Memorandum of Lease has been executed as of the
day, month and year first above written.

Signed and delivered
in the presence of:

- ------------------------------ ------------------------------
Witness Lessor

LESSEE: CM Acquisition Corp. an Ohio
corporation

By:
- ------------------------------ ---------------------------
Witness

Its:
- ------------------------------ --------------------------
President

103

<PAGE>

STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )

The foregoing instrument was acknowledged before me, a Notary Public in and
for the State of Ohio, this ____ day of August, 1996, by Harold A. Merten, Jr.
and Marion B. Merten.

-----------------------------------
Notary Public, State of Ohio

STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )

BE IT REMEMBERED that on this _____ day of August, 1996, before me, the
Subscriber, Notary Public in and for said county and state, personally appeared
_______________ and _______________, Secretary, of CM Acquisition Corp., the
corporation whose name is subscribed to and which executed the foregoing
instrument, and for themselves and as such officers and for and on behalf of
said instrument by authority of the Board of Directors, and on behalf of said
corporation; and that the signing and execution of said instrument is their free
and voluntary act and deed, their free act and deed as such officers, and the
free and voluntary act and deed of said corporation, for the uses and purposes
in said instrument mentioned.

IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
Notarial Seal on the day and year last aforesaid.

-----------------------------------
Notary Public

This Instrument Was Prepared By:

Thomas J. Murray
Huddleston, Bolen, Beatty, Porter & Copen
Post Office Box 2185
Huntington, West Virginia 25722

104

<PAGE>

MEMORANDUM OF LEASE
MERTEN COMPANY
EXHIBIT "A"

Situate in the City of Cincinnati, County of Hamilton, State of Ohio, and being
particularly described as follows:

105

<PAGE>

EXHIBIT 10.5

AGREEMENT OF LEASE

THIS AGREEMENT OF LEASE, dated the first day of October, 1988, by and
between RONALD H. SCOTT and FRANK J. SCOTT t/d/b/a St. Clair Leasing Co., a
Pennsylvania partnership, and INTERFORM CORPORATION, Lessee.

WITNESSETH:

That in consideration of the rents hereinafter agreed to be paid by Lessee
or Lessor, and in consideration of the covenants of the respective parties
hereto be performed at the time and in the manner hereinafter provided, Lessor
does hereby lease and demise unto Lessee, and Lessee does hereby hire and take
from Lessor, all that certain lot, piece or parcel of land situated, lying and
being in the Township of South Fayette, Allegheny County, Pennsylvania, as set
forth on the drawing marked Exhibit "A" hereby attached and made a part hereof
with three one (1) story metal buildings containing approximately 112,000 square
feet.

TO HAVE AND TO HOLD the above described premises, together with the
tenements, hereditaments, appurtenances, improvements, buildings and assessments
thereunto belonging or in any wise appertaining, subject to the terms and
conditions herein stated, for a term of one hundred twenty (120) months
commencing on the first day of October 1, 1988 terminating on the last day of
September, 1998.

AND IN CONSIDERATION OF THE LETTING AND HIRING OF SAID PREMISES, AS
HEREINABOVE PROVIDED, THE PARTIES HERETO HEREBY COVENANT AND AGREE AS FOLLOWS:

1. Lessee does hereby agree to pay to Lessor as rent for the said leased
premises the sum of TWO HUNDRED EIGHTY THOUSAND DOLLARS ($280,000.00) during
each and every year, payable, in equal monthly installments of TWENTY-THREE
THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS and 33/100 ($23,333.33) in advance,
without further demand, on the 1st day of every month during the term.

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<PAGE>

2. Lessee agrees that during the term aforesaid, at Lessee's own proper
cost and charges, it will bear, pay and discharge when due and payable, all
charges for electricity, gas, heat, telephone, water, sewerage, or for setting
and repairing meters, or other utility services used on the said leased premises
or any part thereof, which shall during the demised term be levied, assessed or
imposed or become due and payable.

Lessee agrees that at Lessee's own proper costs and charges, it will pay
and discharge when due and payable all Real Estate Taxes on the premises and all
municipal assessments and payments which shall during the term be levied,
assessed, or imposed upon the leased premises, or any structure erected thereon.

3. Lessee covenants and agrees to maintain, at its sole cost and expense,
at all times during the term of this Lease, public liability insurance for the
leased premises under which Lessor shall be named as an additional insured,
properly protecting and indemnifying Lessor in an amount not less than
$1,000,000 for injury to any one person (including death), not less than
$5,000,000 for personal injuries in any one accident, and not less than
$500,000.00 for property damage.

During the term of this Lease, Lessee will keep the entire leased premises
insured against the loss or damage by fire, with extended coverage, and against
loss from such other hazards as may be required by Lessor, and in no event will
property insurance be in an amount less than the full replacement cost of all
buildings or other improvements now or hereafter erected on the leased premises.
The Lessee shall take out and maintain such boiler insurance as may be
reasonably required by the Lessor. All such policies of insurance and additional
fire insurance carried on the Premises by the Buyer shall name Seller as an
additional insured.

Lessee shall furnish Lessor with a certificate or certificates of insurance
covering said insurance so maintained by Lessee, stipulating that such insurance
shall not be cancelled without notice in advance to Lessor.

4. If the demised premises or any portion thereof shall be damaged by
fire or any other casualty, such premises or portion thereof shall, as soon as
possible, be repaired and/or rebuilt in good workmanlike manner, so that the
restored premises are substantially similar to the construction at the

107

<PAGE>

time of the fire or other casualty, by and at the expense of Lessor. Until the
repairs and/or rebuilding shall have been completed, these rent shall be
proportionately abated according to the part of the demised premises which shall
be rendered untenantable by reason of fire. However, if the demised premises
shall be substantially or completely destroyed by fire or any other casualty,
then either party may, within thirty (30) days after the occurrence of the
damage, cancel and terminate this lease by giving notice to the other party and,
if such notice shall be given, the term of this Lease shall expire on the tenth
day after such notice shall be given, with the same effect as if that day were
the date herein specified for the expiration of the term, and Lessee shall
vacate the premises and surrender the same Lessor. If a dispute arises as to the
amount of rent due under this clause, the dispute shall be submitted to
arbitration. Lessor shall designate an arbitrator and Lessee shall designate an
arbitrator, and these two arbitrators shall select a third arbitrator. In the
event that they shall fail to agree to a third arbitrator within ten days after
their designation, he shall be designated by the American Arbitration
Association. The decision of a majority of this Board of Arbitration shall be
final and binding on all parties. Lessor shall not be liable for any damage,
compensation or claim by reason of inconvenience or annoyance arising from the
necessity of repairing any portion of the building, the interruption in the use
of the premises, or the termination of this Lease by reason of the destruction
of the premises.

5. Except as provided in Article 4, Lessee agrees that it will during the
term of this Lease keep and maintain all buildings and improvements erected upon
the demised premises, both outside and inside, in good order and repair, at
lessee's sole cost and expense, making all repairs and replacements, except
structural repairs, which are necessary to so maintain said buildings and
improvements, so that at all times the said buildings and improvements shall be
in good order, condition, and repair, reasonable wear and tear excepted. Lessee
will provide for snow removal from the parking area, loading dock area and
roadways.

6. Lessee agrees that it will, during the term of this Lease, or any
extension or renewal thereof, at its own expense, observe and comply with all
valid laws, orders, regulations, rules,

108

<PAGE>

ordinances and requirements of the Federal, State, County and other municipal
governments, or any subdivision thereof, having jurisdiction over the demised
premises and of the Board of Fire Underwriters or any other body exercising
similar functions. Lessee agrees to pay all costs, expenses, claims, fines,
penalties and other losses that may arise out of or be imposed because of the
failure of lessee to comply therewith.

Lessee may in good faith contest in its own name, or when necessary, in
Lessor's name, but at Lessee's expense (and Lessor agrees in the latter case to
sign any necessary or appropriate papers) the validity of any law, order,
regulation, rules, ordinance or other requirement, or the applicability thereof
to the premises, and may postpone compliance therewith until after the end of
such contest.

7. In the event that Lessee shall be in default in the performance of any
of the terms, covenants or provisions herein contained, Lessor may immediately
or at any times thereafter perform the same for the account of Lessee and any
amount paid or expense or liability incurred by Lessor in the performance of
the same shall be deemed to be additional rent payable by Lessee for the
demised premises and the same may, at the option of Lessor be added to any
fixed rent than due or thereafter falling due hereunder.

8. (a) Lessee may at any time or times during the term hereof, at its
own cost and expense, make any alterations, rebuilding, replacement, changes,
additions and improvements to the demised premises and to the building thereon
provided that.

(i) the same shall performed in a workmanlike manner and shall
not weaken or impair the structural strength nor lessen the value of the
building as it is at the commencement of the term hereof;

(ii) before the commencement of any such work, Lessee shall
certify to Lessor in writing, the nature of the alteration to be made, as well
as the cost thereof as estimated by Lessee;

(iii) before the commencement of and such work, said plans and
specifications shall be filled with or approved by all municipal or other
governmental departments or authorities having jurisdiction thereof, and all
work shall be done subject to and in accordance with the requirements of law and
local regulations;

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<PAGE>

(iv) the same shall be made according to plans and
specifications therefore which shall have first been approved in writing by
Lessor; and

(v) Lessee shall pay the increased premium, if any changed by
the insurance companies carrying insurance policies on said building to cover
the additional risk during the course of such work.

(b) All such alterations, rebuilding, replacements, changes, additions and
improvements made by Lessee shall be and become part of the realty, and upon the
expiration, forfeiture or termination of this Lease or any extension or renewal
thereof, for any reason whatsoever shall become the sole and absolute property
of Lessor, unless Lessor and Lessee otherwise agree in writing at the time that
such alteration, rebuilding, replacement, change, addition or improvement is
made.

(c) Lessee shall not remove, damage or destroy the building, improvements,
equipment or appurtenances and/or any part of any of them in or upon the demised
premises at the commencement of the term hereof or which may hereafter by put in
or upon the demised premises without the consent of Lessor.

9. Lessee may, with the prior approval of the Lessor first had and
obtained, assign this leases or sublet all or any part of the premises for a
term or terms which will expire not later than the date of expiration or other
termination of this Lease, and subject to the covenants and conditions contained
in this Lease the following further conditions:

(a) Neither the assignment or sublease nor acceptance or rent by Lessor
from any assignee or sublessee) shall relieve, release or in any manner affect
the liability of Lessee;

(b) Any assignee or sublessee shall assume and agree to perform all of the
terms, conditions and agreements of this Lease on the part of Lessee to be
performed, and shall be and become jointly thereof, and severally liable with
Lessee for the performance thereof, including the payment of rent;

(c) A duplicate original of the sublease and/or the instrument of
assignment and assumption, duly executed and acknowledged by Lessee and the
assignee or sublease, shall be delivered to Lessor promptly after the making of
the assignment of sublease;

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<PAGE>

(d) Any assignment or sublease under this Article shall be to a
financially responsible corporation, firm or partnership as determined by
Lessor; and

(e) Any assignment of, or attempt to assign, this Lease contrary to the
provisions herein, shall give Lessor, at its option, the right to declare the
terms of this Lease at an end, and it shall be entitled to all rights and
remedies of repossession under the laws of Pennsylvania, free from any rights or
claims of these Lessee.

10. This Agreement of Lease and all its terms, covenants, and conditions
are, and each of them is, subject and subordinate to any and all mortgages and
to mortgage bonds and judgments, entered thereon, now or hereafter placed upon
the demised premises and/or upon the land, and/or buildings erected thereon to
the same effect as if any such mortgage and/or accompanying bond and judgment
thereon had been before the execution of said Lease. It being the intent of
this paragraph that any such mortgage, whether a first or second mortgage,
placed upon the aforesaid demised premises, and/or upon the land, and/or
buildings erected thereon, shall be valid lien upon both and legal and equitable
title to the aforesaid premises, and/or buildings, as if the said Lease were not
in existence.

11. If, during the term of this Lease, Lessee shall neglect or refuse to
pay any installment of rent due for the period of five (5) days after notice of
such default sent to Lessee by registered mail, or should an execution issue
against Lessee and a levy be made against the personal property to Lessee and
the same be not bonded, stayed, satisfied, or remedied within (10) days of the
said execution and levy, or before the said property is sold, whichever is
sooner, either at public or private sale, pursuant to said execution, or should
Lessee file in any court pursuant to any statute either of the United States or
any state, a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Lessee's
property, or should such a petition be so filed against Lessee and not be
dismissed within a period of ninety (90) days after the date of filing thereof,
or should Lessee make an assignment for the benefit of creditors, or a bill in
equity or other proceeding for the appointment of a receiver for Lessee is
granted, or if proceeding for reorganization or for composition with creditors
under any state or federal law be instituted by or against lessee, and if
instituted against Lessee shall be connected to by it or remain undismissed
for a period of

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ninety (90) days after the date of filing thereof, then, and in each case, at
the option of Lessor, exercisable by notice to Lessee, the rent for the
unexpired balance of the term shall at once become due and collectible, by
distress or otherwise, and all personal property owned by Lessee removed from
said premises shall, for six months after such removal, be liable to distress
and may be distrained and sold or Lessor may in each of said cases, without
notice or demand, enter into and upon the demised premises or any part thereof
in the name of whole, and repossess the same as of their former estate, and
expel Lessee and those claiming under them and remove their effects, forcibly,
if necessary, without being taken or deemed to be guilty of any manner of
trespass, and thereupon this demise shall absolutely determine without prejudice
to any remedies which may otherwise be used by Lessor for arrears of rent or
breach of Lessee's covenants herein contained.

It is understood and agreed, however, that if Lessee shall be required to
pay the entire rent for any unexpired balance of this term, or any renewal
thereof, and if Lessor shall dispossess Lessee and take possession of the
demised premises, as set for in Article 12 of this Lease, that, in such event,
if Lessor shall relent the demised premises, or any part of the same, for the
unexpired balance of said term for which it has already received rental payment
in full from Lessee, the rentals received by Lessor from such releting (less any
costs expended in securing said rentals) shall be turned over to Lessee.

12. If Lessee shall fail to pay rent due hereunder for a period of five
(5) days after notice of default sent to Lessee by registered mail, besides the
distress, or it Lessee fails to cure within thirty (30) days after written
notice shall have been given to Lessee by Lessor, except as otherwise set forth
in Article 11 hereof then Lessee shall, at the option of Lessor exercisable by
notice of Lessee, be non-tenant, subject to dispossession by Lessor without
further notice or process of law, with release of errors and damages, and Lessor
may re-enter the premises and dispossess Lessee without thereby becoming a
trespasser.

13. Lessee hereby accepts notice to quit, remove from and surrender up
possession of the demised premises to Lessor, its successors or assigns, at the
end of the said term, whenever it may be determined, whether by forfeiture or
otherwise, without any further notice to that effect, all further notices being
hereby waived. This waiver of notice to quit is to apply either at the end of
the original

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term of the Lease, or any renewal thereof, or at the end of any subsequent year
or month in case Lessee holds over, and at the time the term is ended by
forfeiture.

14. At the end of the said term, whether the same shall be determined by
forfeiture or expiration of the term, as in the Lease provided, it is agreed
that an amicable action of ejectment may be entered in the Court of Common Pleas
of Allegheny County (after fifteen (15) days prior written notice given Lessee)
in which Lessor, its successors or assigns, shall be plaintiff, and Lessee, its
successors or assigns and all who come into possession during the term of
continuance of this Lease, or under Lessee, shall be defendants, and that
judgment may be entered thereupon in favor of the plaintiff, without leave of
court, for the demised premises, to have the same force and effect as if a
summons in ejectment had been regularly issued, legally served and returned, and
that a writ of possession with clause of fi, fe for all costs, may be issued
forthwith, waiving all errors and defects whatsoever in entering said judgment,
also waiving right of appeal, writ of error, or stay upon any writs of habere
facias possession which may issue upon these same. Lessee hereby empowers any
attorney to appear for it in said amicable action in ejectment for the demised
premises in any court having jurisdiction, and confess judgment therein against
it, with costs, in favor of Lessor and against Lessee and any other parties
claiming under Lessee.

15. If rent and/or any charges hereby reserved as rent shall remain unpaid
on any day when the same ought to be paid after the notice provided in Article
13, Lessee hereby empowers any Prothonotary or attorney of any Court of Record
to appear for Lessee in any and all actions which may be brought for rent and/or
the charges, payments, costs, and expenses reserved as rent, or agreed to be
paid by Lessee, and to sign for Lessee an agreement for entering in any
competent court an amicable action or actions for the recovery of rent or other
charges or expenses, and in said suits or in said amicable action or actions to
confess judgment against Lessee for all or any part of the rent specified in
this Lease and then unpaid, including, at Lessor's option, the rent for the
entire unexpired balance of the term of this Lease, and/or other charges,
payments, costs and expenses reserved as rent or agreed to be paid by Lessee,
and for interest and costs together with an attorney's commission of 5%. Such
authority shall not be exhausted by one exercise thereof, but judgment may be
confessed as aforesaid from time to time as often as any of said rent and/or
other charges reserved as rent shall fall due or be in arrears, and such

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<PAGE>

powers may be exercised as well after the expiration of the original term and/or
during any extension or renewal of this Lease.

16. Lessor agrees that any and all equipment and fixtures which may be
placed or installed in the demised premises by Lessee and which shall be
designed for, or used in, the conduct of Lessee's business in the demised
premises, shall at all times be and remain the property of Lessee. Lessee hereby
undertakes and agrees to remove all such equipment and fixtures prior to the
expiration or other termination of this Lease or any renewal thereof, and, at
its sole expense, to repair any and all damage to the premises which shall have
been occasioned either by the installation or the removal thereof. Any and all
such equipment and fixtures which shall remain in the premises more than thirty
(30) days after the termination of this Lease, shall be deemed abandoned by
lessee and shall become the sole property of Lessor.

17. In case there shall at any time be filed against the premises any
mechanic's or materialman's lien (with the exception of any lien filed for work
done or for materials supplied at the request of Lessor) (in which case Lessor
shall promptly cause such lien to be discharged), Lessee will, within ten (10)
days after it shall have received notice thereof, cause said lien to be
discharged either by paying the amount claimed or by bonding or otherwise.

18. At the expiration or other termination of the term hereof, Lessee
shall vacate and surrender to Lessor full and actual possession of the demised
premises in a good state of repair, damage by the elements, and ordinary wear
and tear excepted.

19. Lessor hereby covenants that Lessee, upon payment of the rent as
herein reserved and performing all the covenants and agreements herein contained
on the part of Lessee, shall and may peaceably and quietly have, hold and enjoy
the premises hereby demised.

20. The receipt of any rent by Lessor, whether the same be that originally
reserved or that which may be payable under any of the covenants, or agreements
herein contained, or any portion thereof, shall not be deemed to operate as a
waiver of the rights of Lessor to enforce the payment of rent previously due or
which may thereafter become due, to forfeit any of the remedies reserved by
Lessor hereunder, and the failure of Lessor to enforce any covenants or
conditions concerning which Lessee

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<PAGE>

shall be guilty of a breach or be in default shall not be deemed to avoid the
right of Lessor to enforce the same or any other condition or covenants on the
occasion of any subsequent breach or default.

21. Subject to the security regulations of any government authority,
Lessee agrees that it will permit Lessor to have free access to the demised
premises, on reasonable notice to Lessee for the purpose of inspecting the same
or making repairs that Lessee may neglect or refuse to make in accordance with
the provisions of this Lease, and also for the purpose of showing the demised
premises to persons considering or concerned with the placement of a mortgage
thereon.

22. In any care where, pursuant to the terms of this Lease, Lessor's
approval is required by Lessor, such approval shall not be unreasonably
withheld.

23. It is agreed by and between the parties that the premises leased shall
be used to manufacture, market and sell business forms.

24. All notices required or desired to be given hereunder shall be in
writing and shall for the purpose of this Lease be deemed to have been duly
given.

(a) To Lessor if a copy thereof by registered mail, postage prepaid,
addressed to Lessor at 1450 Redfern Drive, Pittsburgh, PA 15241 or to such other
address as Lessor may from time to time designate in writing to Lessee.

(b) To Lessee if a copy thereof be mailed by registered mail, postage
prepaid, addressed to Box A, Mayview and Scott Roads, Bridgeville, PA 15017,
Attn: President.

All notices served by prepaid registered mail as aforesaid shall be
effective on the date they are so mailed.

25. The covenants, agreements and conditions contained in this Lease shall
run with the land and the premises hereby leased and shall be binding upon and
insure to the benefit of the parties hereto and their respective successors and
assigns.

26. This lease contains the entire agreement of the parties hereto with
respect to the letting and hiring of the demised premises and such Lease may not
be amended, modified, released, surrendered or discharged, in whole or in part,
except by an instrument in writing signed by both of the parties hereto.

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<PAGE>

27. Lessee may renew this Lease for an additional term of five (5) years
at an annual rental of TWO HUNDRED NINETY-FOUR THOUSAND DOLLARS ($294,000.00)
payable in equal monthly installments of TWENTY-FOUR THOUSAND FIVE HUNDRED
DOLLARS (24,500.00) and subject to all the terms, covenants and conditions
hereof provided that Lessee, in writing, notifies Lessor of its intention to
renew not later than one hundred eighty (180) days prior to the termination date
of the initial ten year term, and further provided that Lessee is not in default
of any of the terms, covenants and conditions of this Lease.

116

<PAGE>

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound by
this agreement, and Lessor has executed this Agreement by his Agent, thereunto
duly authorized, and Lessee has executed this Agreement on the day and year
above written.

Witness: ST. CLAIR LEASING CO.

/s/ Clifford Bright By: /s/ Ronald H. Scott
- ------------------------- -------------------
Ronald H. Scott

By: /s/ Frank J. Scott
------------------
Frank J. Scott

Attest: INTERFORM CORPORATION

/s/ Clifford Bright By: /s/ Ronald H. Scott, President
- ------------------------- ------------------------------
Title

117

<PAGE>

AMENDMENT NO. 1 DATED THIS 30th DAY OF NOVEMBER, 1989, TO AGREEMENT OF LEASE
DATED THE FIRST DAY OF OCTOBER, 1988 BY AND BETWEEN RONALD H. SCOTT AND FRANK J.
SCOTT, t/d/b/a ST. CLAIR LEASING COMPANY, a Pennsylvania partnership ("LESSOR")
AND INTERFORM CORPORATION, a Pennsylvania corporation ("LESSEE")

WHEREAS, Lessor and Lessee are parties to an Agreement of Lease dated the
first day of October, 1988 (the "Lease"), by the terms of which Lessee does
lease from Lessor certain real estate located in the Township of South Fayette,
Allegheny County, Pennsylvania, with three one-story metal buildings containing
approximately 112,000 square feet erected thereon; and

WHEREAS, Lessor has caused to be constructed on the premises an additional
one-story metal building containing 8,400 square feet which Lessee desires to
lease from Lessor; and

WHEREAS, Lessor and Lessee have agreed to increase the rent payable by
$3,000.00 per month on account of the lease of the additional building.

WHEREFORE, in consideration of the letting and hiring of this additional
building, Lessor and Lessee hereby covenant and agree as follows:

1. The Agreement of Lease dated the first day of October, 1988, be and it
hereby is amended to include effective December 1, 1989, the lease by Lessor to
Lessee of an additional metal building consisting of 8,400 square feet, together
with 18 parking spaces adjacent thereto, all as shown on the drawing attached
hereto as Exhibit A-1.

2. In addition to the rent provided for in the Lease, Lessee does hereby
agree to pay to Lessor as rent, the additional sum of $36,000 during each and
every year, payable in equal monthly installments of $3,000 in advance without
further demand on the first day of every month during the term beginning with
the month of December, 1989.

3. All of the rights, duties and obligations of Lessor and Lessee set
forth in the Lease with respect to the buildings described therein shall be
applicable to the building which is the subject of this Amendment.

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<PAGE>

4. All other terms and conditions of the Lease Agreement not inconsistent
herewith shall remain in full force and effect.

IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have signed or caused to be signed this First Amendment this 30th day of
November, 1989.

Witness: ST. CLAIR LEASING COMPANY

By: /s/ Ronald H. Scott
- ------------------------- -------------------

Ronald H. Scott

By: /s/ Frank J. Scott
- ------------------------- ------------------
Frank J. Scott

Attest: INTERFORM CORPORATION

By: /s/ Ronald H. Scott
- ------------------------ -------------------
Secretary President

119

<PAGE>

AMENDMENT NO. 2 TO AGREEMENT OF LEASE

THIS AMENDMENT, made this ____ day of ___________________, 1992, by and
between RONALD H. SCOTT and FRANK J. SCOTT, t/d/b/a St. Clair Leasing Co., a
Pennsylvania partnership ("Lessor") and INTERFORM CORPORATION, a Pennsylvania
corporation ("Lessee").
WITNESSETH:
WHEREAS, Lessor and Lessee entered into an Agreement of Lease dated October
1, 1988 covering certain real estate located in the Township of South Fayette,
Allegheny County, Pennsylvania with three one-story buildings containing
approximately 112,000 square feet erected thereon ("Leased Premises"); and

WHEREAS, Lessor caused to be constructed on the Leased Premises an
additional one-story building containing 8,400 square feet; and

WHEREAS, by Amendment No. 1 to Agreement of Lease dated November 30, 1989
(Amendment No. 1") (the Agreement of Lease, as amended by Amendment No. 1 is
hereinafter referred to as the "Lease") the additional building was incorporated
into and made subject to the terms of the Lease and became a part of the Leased
Premises; and

WHEREAS, the parties desire to amend further the Lease, to provide
additional terms.

NOW, THEREFORE, in consideration of the mutual promises herein made, Lessor
and Lessee hereby covenant and agree as follows:

1. Paragraph 5 of the Lease is hereby deleted and shall henceforth read
in its entirety as follows: .

"5. Except as provided in Article 4, Lessee agrees that it will,
during the term of the Lease, keep and maintain all buildings and
improvements erected on the Leased Premises, both outside and inside,
in good order and repair, at Lessee's sole cost and expense, making
all repairs and replacements, so that at all times the said buildings
and improvements shall be in good order, condition and repair,
reasonable wear and tear excepted. Notwithstanding the foregoing, the
following repairs and replacements shall be the responsibility of
Lessor unless such repairs or replacements are required with respect
to damage caused by the negligence or willful wrongful acts of Lessee
or Lessee's invitees or licensees: (i) structural support systems for
the roof (but not the roof itself), (ii) exterior walls, (iii)
framework steel members and (iv) foundations. Lessee will provide for
snow removal from the parking area, loading dock areas and roadways."

2. Paragraph 8 of the Lease is hereby amended by adding at the end
thereof the following:

"(d) The rights and obligations of this paragraph 8 are subject to the
respective rights and obligations of Lessor and Lessee set forth in
Paragraph 5 hereof."

3. Paragraph 10 of the Lease is hereby deleted and shall henceforth read
in its entirety as follows:

"10. Lessor covenants that the Leased Premises are not subject to any
liens, claims or other encumbrances except as listed on Exhibit A,
attached hereto and incorporated herein (the "Permitted
Encumbrances"). Lessor further covenants that Lessor is not in default
in connection with any of the Permitted Encumbrances. It is agreed
that the Lessee shall have the right, at its sole expense, to record
the Lease, Amendment No. 1

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<PAGE>

and this Amendment No. 2 so that any lien, claim or encumbrance placed upon
the Leased Premises after the date of such recordation shall be subject to
the Lease, as amended. Lessor covenants and agrees that Lessee, on payment
of the rent, additional rents and charges provided for in this Lease and
the fulfillment of the obligations under the covenants, agreements and
conditions of this Lease, shall lawfully and quietly hold, occupy and enjoy
the Leased Premises during the term of this Lease or any renewals thereof
without any interference from anyone claiming through or under Lessor."

4. A new paragraph 28 is added to the Lease to read in its entirety as
follows:

"If at any time during the Term of this Lease (including any Renewal Term),
Lessor receives a bona fide offer from any person or entity to purchase the
Leased Premises, which Lessor intends to accept, or if Lessor makes a bona
fide offer to any other person or entity for the sale of the Leased
Premises, which is accepted by such bona fide purchaser (which acceptance
will be subject only to Lessee's right of first refusal contained herein),
Lessor will send to Lessee a written statement of all of the material terms
and conditions of the proposed sale, together with a reasonable
identification of the proposed purchaser. Lessee will have the right at
its option, within fourteen (14) days after the receipt of the written
statement, to accept the terms of the proposed sale, for the purchase price
specified in such bona fide offer, and under the terms and conditions
specified in such bona fide offer. If Lessee does not elect to exercise its
right of first refusal within that fourteen (14) day period, Lessor will be
entitled to enter into the contract to sell the Leased Premises to the
proposed purchaser at any time within one hundred eighty (180) days after
the expiration of that fourteen (14) day period, provided that the sale is
on terms and conditions and for a price which are essentially the same as
(and are not more favorable to the purchaser than) the terms, conditions
and price set forth in the written statement sent to Lessee and that the
sale is completed within one hundred eighty (180) days after the expiration
of that fourteen (14) day period.

121

<PAGE>

5. Except as modified herein, the Lease remains unchanged and in full
force and effect.

IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this Amendment No. 2 to Agreement of Lease to be signed this
24th day of April, 1992.

Witness: ST. CLAIR LEASING COMPANY

By: /s/ Ronald H. Scott
- ------------------------- -------------------
Ronald H. Scott

By: /s/ Frank J. Scott
- ------------------------- ------------------
Frank J. Scott

Attest: INTERFORM CORPORATION

By: /s/ G. Duncan Fraser
- ------------------------- --------------------
Secretary President

(Corporate Seal)

122

<PAGE>

EXCERPT FROM
STIPULATION AND ORDER OF COURT (UNITED
STATES BANKRUPTCY COURT FOR THE WESTERN
DISTRICT OF PENNSYLVANIA IN THE MATTER OF
INTERFORM CORPORATION V. RONALD H. SCOTT
AND FRANK J. SCOTT T/D/B/A ST. CLAIR
LEASING COMPANY, BANKRUPTCY NO. 94-20094-JLC)
ENTERED AUGUST 17, 1994

2. St. Clair hereby grants Interform the right to terminate the Lease at
any time effective after February 15, 1995 under the following terms and
conditions:

a. In the event Interform elects to terminate the lease, it may do so
at anytime upon five months written notice to St. Clair designating a
termination date at least five months from the date of the notice (the
"Termination Date"), provided the Termination Date shall be no earlier than
February 15, 1995. Upon termination, rent, taxes and insurance will be prorated
for the portion of the year, month and day to the Termination Date.

b. On or before August 31, 1994 Interform shall pay the sum of Two
Hundred Fifty Thousand ($250,000.00) Dollars to St. Clair.

c. On or before August 31, 1994, Interform will deliver to St. Clair
a letter of credit from a bank which provides that in the event Interform elects
to terminate its lease with St. Clair, St. Clair may draw on the letter of
credit for payment of the additional sum of $250,000.00. Such letter of credit
shall be in form and from a bank reasonably satisfactory to St. Clair. The
total sum to be paid to St. Clair being the $250,000.00 being paid on or before
August 31, 1994 and $250,000.00 prior to final vacation of the premises by
Interform in the event Interform terminates the Lease prior to its expiration
date of September 30, 1998. The letter of credit shall be an irrevocable
standby letter of credit in St. Clair's favor and shall provide that St. Clair
may draw the full amount of $250,000.00 by means of a sight draft upon the bank
accompanied by the following certification by Ronald H. Scott or Frank J. Scott
stating that:

"The Undersigned has received from Interform a notice of termination
of its Lease with St. Clair which notice was given pursuant to the
Stipulation approved by Order of the Bankruptcy Court dated August __,
1994, that the Termination Date provided for in said

123

<PAGE>

notice has arrived and Interform has failed to make payment of the
termination charge of $250,000.00."

If the letter of credit has an expiry date of earlier than September
30, 1998, it shall also authorize St. Clair to draw thereon upon a certification
by Ronald H. Scott or Frank J. Scott as follows:

"It is now within ten days of the expiry date of this letter of credit
and the Lease is still in effect and Interform has failed to provide a
replacement letter of credit, we hereby request payment under the letter of
credit".

d. Interform's maintenance obligation under the Lease shall hereafter
be limited to maintenance of the interior of the structure, electrical and
plumbing and parking lot in their present conditions, reasonable wear and tear
excepted and leave the roof in a water tight condition. Interform shall have no
obligation to replace the roof or any air conditioning or ventilating systems
but shall continue to maintain said systems in their present operating condition
and shall do so until Interform vacates the premises.

e. In the event Interform terminates the lease and vacates the
premises, Interform will restore the premises to the condition it was in
immediately prior to the vacation of the premises. If St. Clair so directs,
Interform will reerect any interior or exterior partitions which may have been
removed to enable Interform to remove machinery. Such direction to be given by
St. Clair at the time of the removal of said equipment.

f. At the termination of the lease the premises will be returned to
St. Clair in broom clean condition.

g. In the event Interform exercises its option to renew the Lease,
it shall not have the right to terminate pursuant to the terms of this
Stipulation during such renewal period.

3. Notwithstanding anything to the contrary contained herein, Interform
shall continue to pay rent and other charges at the contract rate and all other
terms and conditions of the Lease shall remain in full force and effect except
as specifically amended hereby.

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<PAGE>

4. The United States Bankruptcy Court for the Western District of
Pennsylvania shall retain jurisdiction of this or any disputes arising hereunder
until the Lease is terminated or expires and the premises are vacated by
Interform.

125

<PAGE>

EXHIBIT 11

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,

1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Primary:
Average shares outstanding 8,045,743 7,869,614 7,806,313
Net effect of dilutive stock options - based on
treasury stock method using average market price 32,514 29,327 14,711
----------------------------------------
Totals 8,078,257 7,898,941 7,821,024
----------------------------------------
----------------------------------------

Net income $3,252,476 $2,940,981 $2,666,214
----------------------------------------
----------------------------------------

Per share amount $0.40 $0.37 $0.34
----------------------------------------
----------------------------------------

Fully diluted:
Average shares outstanding 8,045,743 7,869,614 7,806,313
Net effect of dilutive stock options - based on
treasury stock method using period end market
price, if greater than the average market price 51,246 30,635 38,294
----------------------------------------

Totals 8,069,989 7,900,249 7,844,607
----------------------------------------
----------------------------------------

Net income $3,252,476 $2,940,981 $2,666,214
----------------------------------------
----------------------------------------

Per share amount $0.40 $0.37 $0.34
----------------------------------------
----------------------------------------
</TABLE>

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The Registrant, Champion Industries, Inc., a West Virginia corporation,
does business under the trade name "Chapman Printing Company". Its wholly owned
subsidiaries are:

1. The Chapman Printing Company, Inc., a West Virginia corporation.

2. Stationers, Inc., a West Virginia corporation (doing business in Ohio as
"Garrison Brewer").

3. Bourque Printing, Inc., a Louisiana corporation.

4. Dallas Printing Company, Inc., a Mississippi corporation.

5. Carolina Cut Sheets, Inc., a West Virginia corporation.

6. U.S. Tag & Ticket Company, Inc., a Maryland corporation.

7. Donihe Graphics, Inc., a Tennessee corporation.

8. Smith & Butterfield Co., Inc., an Indiana corporation.

9. The Merten Company, an Ohio corporation.

10. Interform Corporation, a Pennsylvania corporation.

<PAGE>

EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT

We consent to the inclusion in this Annual Report (Form 10-K) of Champion
Industries, Inc. of our report dated December 30, 1996, with respect to the
consolidated financial statements of Champion Industries, Inc. and Subsidiaries
for the year ended October 31, 1996.

We also consent to the incorporation by reference in the Registration Statement
pertaining to the 1993 Stock Option Plan (Form S-8, No. 33-76790) of Champion
Industries, Inc. of our report dated December 30, 1996, with respect to the
consolidated financial statements of Champion Industries, Inc. and Subsidiaries
included in the Annual Report (Form 10-K) for the year ended October 31, 1996.

/s/ Ernst & Young LLP

Charleston, WV
January 27, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF CHAMPION INDUSTRIES, INC. AS OF AND FOR THE
PERIODS ENDED OCTOBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 2,336,764
<SECURITIES> 0
<RECEIVABLES> 11,551,897
<ALLOWANCES> 514,000
<INVENTORY> 7,156,466
<CURRENT-ASSETS> 21,254,743
<PP&E> 22,936,105
<DEPRECIATION> 8,917,373
<TOTAL-ASSETS> 38,582,502
<CURRENT-LIABILITIES> 8,192,779
<BONDS> 0
0
0
<COMMON> 8,104,907
<OTHER-SE> 14,990,925
<TOTAL-LIABILITY-AND-EQUITY> 38,582,502
<SALES> 59,884,599
<TOTAL-REVENUES> 59,884,599
<CGS> 39,770,572
<TOTAL-COSTS> 39,770,572
<OTHER-EXPENSES> 14,169,667
<LOSS-PROVISION> 115,000
<INTEREST-EXPENSE> 443,884
<INCOME-PRETAX> 5,385,476
<INCOME-TAX> 2,133,000
<INCOME-CONTINUING> 3,252,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,252,476
<EPS-PRIMARY> .40
<EPS-DILUTED> .40

</TABLE>