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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended October 31, 1998
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
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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 15, 1999, was $44,786,508 of Common Stock, $1.00
par value. The outstanding common stock of the Registrant at the close of
business on January 15, 1999 consisted of 9,713,913 shares of Common Stock,
$1.00 par value.
Total number of pages including cover page - 240.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registration statement on
Form S-2/A No. 333-47585, filed on March 16, 1998, are incorporated by reference
into Part IV, Item 14. Portions of the Registrant's definitive proxy statement
dated February 16, 1999 with respect to its Annual Meeting of Shareholders to be
held on March 15, 1999 are incorporated by reference into Part III, Items 10-13.
Exhibit Index located on pages 58 to 63.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report or in documents
incorporated herein by reference, including without limitation statements
including the word "believes," "anticipates," "intends," "expects" or words
of similar import, constitute "forward-looking statements" within the meaning
of section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements of the Company expressed or
implied by such forward-looking statements. Such factors include, among
others, general economic and business conditions, changes in business
strategy or development plans, and other factors referenced in this Annual
Report, including without limitations under the captions "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
and "Business." Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
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PART I
ITEM 1 - BUSINESS
HISTORY
Champion Industries, Inc. ("Champion" or the "Company") is a major
commercial printer, business forms manufacturer and office products and office
furniture supplier in regional markets east of the Mississippi River. The
Company's sales offices and production facilities are located in Huntington,
Charleston, Parkersburg, Clarksburg, and Morgantown, West Virginia; Lexington
and Owensboro, Kentucky; Baton Rouge and New Orleans, Louisiana; Cincinnati and
Belpre, Ohio; Jackson, Mississippi; Baltimore, Maryland; Kingsport and
Knoxville, Tennessee; Timmonsville, South Carolina; Evansville, Indiana;
Bridgeville and Altoona, Pennsylvania; and Asheville, North Carolina. The
Company's sales force of approximately 140 salespeople sells printing services,
business forms management 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
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
scanners, electronic color retouching equipment and 4, 5 and 6 color presses.
The Lexington division commenced operations in 1983 upon the
acquisition of the
3
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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 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 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
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of its Common stock, the Company acquired Donihe Graphics, Inc. ("Donihe"), a
high-volume color printer based in Kingsport, Tennessee.
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. Smith & Butterfield is operated as a division
of Stationers, Inc. 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.
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 which was financed by a bank.
On May 21, 1997, the Company acquired all outstanding common shares of
Blue Ridge Printing Co., Inc. of Asheville, North Carolina and Knoxville,
Tennessee ("Blue Ridge"), in exchange for 277,775 shares of the Company's common
stock. The transaction has been accounted for as a pooling of interests.
On February 2, 1998, the Company acquired all outstanding common shares
of Rose City Press ("Rose City"), of Charleston, West Virginia, in exchange for
75,722 shares of the Company's valued at $1,250,000.
On May 18, 1998, the Company acquired all outstanding common shares of
Capitol Business Equipment, Inc. ("Capitol"), doing business as Capitol Business
Interiors, of Charleston, West Virginia, in exchange for 72,202 shares of the
Company's common stock valued at $1,000,000.
On May 29, 1998, the Company acquired all outstanding common shares of
Thompson's of Morgantown, Inc. and Thompson's of Barbour County, Inc.
(collectively, "Thompson's"), of Morgantown, West Virginia, in exchange for
45,473 shares of the Company's valued at $600,000.
Rose City, Capitol and Thompson's are operated as divisions of
Stationers.
BUSINESS
Champion is a major commercial printer, business forms manufacturer and
office products
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and office furniture supplier in regional markets east of the Mississippi River.
The Company's sales force sells a full range of printing services, business
forms, office products and office furniture. Management views these sales
activities as complementary since frequent customer sales calls required for one
of its products or services provide opportunities to cross-sell other products
and services. The Company believes it benefits from significant customer loyalty
and customer referrals because it provides personal service, quality products,
convenience and selection with one-stop shopping.
The Company's printing services range from the simplest to the most
complex jobs, including business cards, books, tags, brochures, posters, 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 scanner
separations. The Company also offers complete bindery and letterpress services.
The Company's segmented gross sales of printing services in fiscal year 1998
consisted of approximately 39% sheet and tag printing, 29% business forms
printing, and 32% process color printing. The printing operations contributed
$95 million, or 77% of the Company's total revenues for the fiscal year ended
October 31, 1998.
The Company provides a full range of office products and office
furniture primarily in the budget and middle price ranges, and also offers
office design services. The Company publishes a catalog of high volume,
frequently ordered items purchased directly from manufacturers. These catalog
sales account for the bulk of sales volume and afford sales personnel
flexibility in product selection and pricing. Medium to large volume customers
are offered levels of pricing discounts. In addition, the Company offers a broad
line of general office products through major wholesalers' national catalogs.
The Company recently introduced an on-line ordering system through software
available on a CD-ROM designed and published by the Company. The office products
and office furniture catalog will soon reside on the Company's web page at
WWW.CHAMPION-INDUSTRIES.COM and full ordering capabilities will be available
within the next six months. The Company is a member of 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 middle price range lines, although
upscale lines are offered as well. Office products, office furniture and office
design operations contributed $28 million, or 23% of the Company's total
revenues, for the fiscal year ended October 31, 1998.
ORGANIZATION
Champion is organized into twenty-one divisions, fifteen of which are
wholly-owned subsidiaries. The Huntington headquarters provides centralized
financial management and administrative services to all divisions. 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.
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COMMERCIAL PRINTING
Ten commercial printing divisions are located in Huntington, Charleston
and Parkersburg, West Virginia; Lexington, Kentucky; Baton Rouge and New
Orleans, Louisiana; Jackson, Mississippi; Cincinnati, Ohio; Kingsport,
Tennessee; and Asheville, North Carolina. Each has 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.
BUSINESS FORMS
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 own distributor, the Consolidated Graphics Communications
division in Pittsburgh, Pennsylvania.
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.
The Huntington, West Virginia division of Chapman Printing Company
manufactures single sheet and multi-part, snap-out and continuous business forms
for sale through many of the Company's commercial printing divisions.
TAGS
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 through dealers and the Company's other divisions.
OFFICE PRODUCTS, OFFICE FURNITURE AND OFFICE DESIGN
Stationers, located in Huntington, Clarksburg (doing business as
"Champion-Clarksburg"), Charleston (through its Rose City division), Morgantown
(through its Thompson's division), West Virginia and Belpre, Ohio (doing
business as "Garrison Brewer"), provides office products and office furniture
primarily to customers in the Company's West Virginia, Ohio and Kentucky
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market areas. Products are sold by printing division salespeople and delivered
in bulk daily to each division, or shipped directly 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.
Stationers, through its Capitol division, offers office design services
throughout West Virginia and eastern Kentucky.
PRODUCTS AND SERVICES
PRINTING SERVICES
Champion's primary business is commercial printing and business forms
manufacturing. 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.
The capabilities of the Company's various printing divisions are stated
below.
<TABLE>
<CAPTION>
High
Sales & Volume
Customer Sheet Full Full
Division Service Pre-Press Printing Color Color
- ---------------- ---------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
Huntington * * *
Charleston * *
Parkersburg * * * *
Lexington * * *
Bourque Printing, Inc. * * * *
Dallas Printing Company, Inc. * * *
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
Carolina Cut Sheets, Inc. * *
U.S. Tag & Ticket Company, Inc. * * *
Donihe Graphics, Inc. * * *
Upton Printing * * * *
The Merten Company * * * *
Interform Corporation * * *
Blue Ridge Printing Co., Inc. * * * *
</TABLE>
OFFICE PRODUCTS, OFFICE FURNITURE AND OFFICE DESIGN
Champion provides its customers 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 middle price range desks, chairs, file cabinets and computer
furniture. Office supplies are sold primarily by Company salespeople through the
Company's own catalogs. Office furniture is primarily sold from catalogs and
supplied from in-house stock. Special orders constitute a small portion of
sales. The Capitol division of Stationers provides interior design services to
commercial customers. The design services include space planning, purchasing and
installation of office furniture, and management of design projects.
MANUFACTURING AND DISTRIBUTION
The Company's pre-press facilities have desktop publishing,
typesetting, laser imagesetting and scanning/retouching equipment, and complete
layout, design, stripping and plate processing operations. Sheet printing
equipment (for printing onto pre-cut, individual sheets) includes single color
duplicators, single to six color presses and envelope presses. Rotary equipment
(for printing onto continuous rolls of paper) includes multi-color business form
web presses, carbon and multi-part collators, and a high speed 5-color 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
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made and, therefore, backlog is not a meaningful measure in connection with the
Company's printing business.
The Company's inventory goal is to have approximately 60% of the office
products items the Company sells 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
The Company believes that its reputation for quality, service,
convenience and selection allows it to enjoy significant loyalty from its
customers. Champion's 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, although 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, 1998, no single customer
accounted for more than 1% of the Company's 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.
SUPPLIERS
The Company has not experienced difficulties in obtaining materials in
the past and does not consider itself dependent on any particular supplier for
supplies. The Company has negotiated Company-wide paper purchasing agreements
directly with paper manufacturers and is a member of a major office products
buying group, which management believes provide the Company with a competitive
advantage.
COMPETITION
The markets for the Company's printing services and office products are
highly competitive, with success 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
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companies. In recent years, despite consolidation within the printing industry,
there has been a substantial increase in technological advances in new
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 the
office supply and office furniture market segments.
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 and are included in
normal operating expenses. 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.
GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS
The Company's operations and the majority of its customers are located
east of the Mississippi River. 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, 1998, the Company had 907 full-time employees.
The Company's subsidiary, Interform Corporation, is party to a
collective bargaining
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agreement with the United Steelworkers of America, AFL-CIO-CLC on behalf of its
Local Union 8263 covering all production and maintenance employees (totaling 93
employees at October 31, 1998) at its Bridgeville, Pennsylvania facility. The
Company believes relations with the union and covered employees are good.
EXECUTIVE OFFICERS OF CHAMPION
<TABLE>
<CAPTION>
Position and offices with Champion;
Name Age Principal occupation or employment
- ----- ---- last five years
-----------------------------------
<S> <C> <C>
Marshall T. Reynolds 62 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
Corp. (formerly Key Centurion
Bancshares, Inc.).
Michael D. McKinney 45 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 63 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 41 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 57 Vice President and Division
Manager - Stationers of
</TABLE>
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<TABLE>
<S> <C> <C>
Company since December 1992; Vice
President of Company and Division
Manager - Huntington from
September 1995 to October 1997;
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 46 Vice President of Company since
December 1992; Division Manager -
Merten since September 1998;
Division Manager - Charleston
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.
R. Douglas McElwain 51 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.
L. David Brumfield 61 Vice President and Division
Manager - Dallas Printing since
May, 1997; President and General
Manager, Radisson Hotel,
Huntington, from 1992 to 1997.
Joseph C. Worth, III 49 Vice President-Mergers and
Acquisitions of Company since
April 1998; Vice President and
Chief Financial Officer of Company
from June 1992 to March 1998.
Toney K. Adkins 49 Vice President-Administration of
Company since November, 1995;
President, KYOWVA Corrugated
Container Company, Inc. from 1991
to 1996.
David B. McClure 40 Vice President and Chief Financial
Officer of Company since April,
1998; Senior Manager, Ernst &
Young LLP, from October 1987 to
March 1998.
Walter R. Sansom 69 Secretary of Company since
December 1992; Production
Coordinator of Company since
December 1992 and of Harrah and
Reynolds from August 1968 to
December 1992.
</TABLE>
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ITEM 2 - PROPERTIES
The Company conducts its operations from twenty-four (24) different
physical locations, seventeen (17) of which are leased, and seven (7) of which
are owned in fee simple by Company subsidiaries. The properties leased, and
certain of the lease terms, as of October 31, 1998, are set forth below:
<TABLE>
<CAPTION>
Division Occupying Square Annual Expiration
Property Property Feet Rental Of Term
-------- -------------------- ------- -------- -----------
<S> <C> <C> <C> <C>
2450 1st Avenue Champion Headquarters 85,000 $116,400 2008
Huntington, West Virginia (1) 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 2003
Huntington, West Virginia (1)
405 Ann Street Chapman Printing - 36,614 57,600 2003
Parkersburg, West Virginia (1) Parkersburg
1563 Hansford Street Chapman Printing - Charleston 21,360 49,920 2003
Charleston, West Virginia (1)
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 Smith & Butterfield 42,375 116,640 1999
Evansville, Indiana (1)
113-117 East Third St. Smith & Butterfield 8,500 14,400 2002
Owensboro, Kentucky (1)
1901 Mayview Road Interform Corporation 120,000 316,000 2003
Bridgeville, Pennsylvania (1)
736 Carondelet Street Upton Printing 15,000 62,700 2000
New Orleans, Louisiana
5600 Jefferson Highway Upton Printing 11,250 47,250 2000
Harahan, Louisiana
1515 Central Parkway The Merten Company 40,000 97,200 2001
Cincinnati, Ohio (1)
2217 Robb Street U.S. Tag 26,000 52,000 2000
Baltimore, Maryland (1)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Palmetto Industrial Park Carolina Cut Sheets 16,200 35,724 monthly
Timmonsville, S. Carolina
711 Indiana Avenue Stationers- 22,000 96,000 2003
Charleston, West Virginia (1) Capitol
Kirk and Chestnut Streets Stationers- 9,000 19,356 2003
Morgantown, West Virginia Thompson's
</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.
Blue Ridge owns, and operates from, (i) a two-story masonry building of
approximately 9,066 square feet and a contiguous 1,692 square foot former
residential structure at 544 and 560 Haywood Road, Asheville, North Carolina,
and (ii) a two-story steel building of approximately 12,500 square feet on
approximately 3 acres at 1485 Amherst Road, Knoxville, Tennessee.
Stationers' Rose City division owns and operates from (i) 2 masonry
buildings (2 story and 5 story) of approximately 20,900 square feet in the
aggregate, at 811-813 Virginia Street, East, and (ii) an adjacent 6 story brick
warehouse of approximately 42,500 square feet, in Charleston, West Virginia.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
15
<PAGE>
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 Offering under the symbol "CHMP."
The following table sets forth the high and low closing prices for
Champion common stock for the period indicated. The range of high and low
closing prices are based on data from NASDAQ, and do not include retail mark-up,
mark-down or commission.
<TABLE>
<CAPTION>
Fiscal Year 1998 Fiscal Year 1997
High Low High Low
------------------ ------------------
<S> <C> <C> <C> <C>
First Quarter $19.50 $16.00 $19.40 $16.75
Second quarter 17.00 13.00 19.75 16.75
Third quarter 14.56 10.50 19.50 16.00
Fourth quarter 12.50 9.25 19.38 17.75
</TABLE>
At the close of business on January 15, 1999, there were 564
shareholders of record of Champion common stock.
The following table sets forth the quarterly dividends per share
declared on Champion common stock.
<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year
1999 1998 1997
----------- ------------- ------------
<S> <C> <C> <C>
First quarter $.050 $.050 $.040
Second quarter -- .050 .050
Third quarter -- .050 .050
Fourth quarter -- .050 .050
</TABLE>
16
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the five
years in the period ended October 31, 1998, have been derived from the Audited
Consolidated Financial Statements of the Company. The information set forth
below should be read in conjunction with the Audited Consolidated Financial
Statements, related notes, and the information contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere herein.
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ------ ----- ------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Printing $ 95,003 $ 87,979 $ 49,242 $ 35,371 $ 30,001
Office products and office furniture 28,058 20,406 17,115 14,532 13,229
----------- ------------ ----------- ---------- -----------
Total revenues 123,061 108,385 66,357 49,903 43,230
Cost of sales:
Printing 66,699 59,850 33,015 22,251 17,755
Office products and office furniture 18,616 13,289 11,077 9,670 8,605
----------- ------------ ----------- ---------- -----------
Total cost of sales 85,315 73,139 44,092 31,921 26,360
----------- ------------ ----------- ---------- -----------
Gross profit 37,746 35,246 22,265 17,982 16,870
Selling, general and
administrative expense 29,872 28,079 16,197 12,788 12,486
----------- ------------ ----------- ---------- -----------
Income from operations 7,874 7,167 6,068 5,194 4,384
Interest income 245 20 25 11 67
Interest expense (1,507) (1,586) (693) (252) (132)
Other income 241 737 224 113 212
----------- ------------ ----------- ---------- -----------
Income before income taxes 6,853 6,338 5,624 5,066 4,531
Income taxes (2,702) (2,571) (2,252) (2,060) (1,859)
----------- ------------ ----------- ---------- -----------
Net income $ 4,151 $ 3,767 $ 3,372 $ 3,006 $ 2,672
----------- ------------ ----------- ---------- -----------
----------- ------------ ----------- ---------- -----------
Earnings per share:
Basic $ 0.45 $ 0.45 $ 0.41 $ 0.37 $ 0.33
Diluted 0.45 0.45 0.40 0.37 0.33
Dividends per share 0.20 0.19 0.152 0.122 0.098
Weighted average common shares
outstanding:
Basic 9,142,000 8,383,000 8,324,000 8,147,000 8,084,000
Diluted 9,172,000 8,441,000 8,356,000 8,177,000 8,099,000
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
At October 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ----- ----
(In Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 9,773 $ 912 $ 2,461 $ 1,390 $ 3,734
Working capital 35,108 18,935 13,579 11,148 10,040
Total assets 74,505 60,346 44,063 28,643 25,690
Long-term debt 13,993 15,156 7,561 2,405 1,124
Shareholders' equity 45,310 26,850 24,641 19,794 17,739
</TABLE>
19
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a commercial printer, business forms manufacturer and
office products and office furniture supplier in regional markets east of the
Mississippi River. The Company has grown through strategic acquisitions and
internal growth. Through such growth, the Company has realized regional
economies of scale, operational efficiencies, and exposure of its core products
to new markets. The Company has acquired twelve printing companies and six
office products and office furniture companies since the Offering.
The Company's largest acquisition since the Offering was the purchase
of Interform on December 31, 1996. The addition of Interform sales to the
business forms segment has increased the printing component of the Company's
revenue mix. Through sales to independent distributors, and through its own
distributor, Consolidated Graphic Communications, Interform provides the
Company's manufacturing divisions access to the large northeastern markets of
Pennsylvania, New Jersey and New York.
The Company's net revenues consist primarily of sales of commercial
printing, business forms, tags, other printed products, office supplies, office
furniture, data products and office design services. The Company recognizes
revenues when products are shipped or services are rendered to the customer. The
Company's revenues are subject to seasonal fluctuations caused by variations in
demand for its products.
The Company's cost of sales primarily consists of raw materials,
including paper, ink, pre-press supplies and purchased office supplies,
furniture and data products, and manufacturing costs including direct labor,
indirect labor and overhead. Significant factors affecting the Company's cost of
sales include the costs of paper in both printing and office supplies, the costs
of labor and other raw materials.
The Company's operating costs consist of selling, general and
administrative expenses. These costs include salaries, commissions and wages for
sales, customer service, accounting, administrative and executive personnel,
rent, utilities, and equipment maintenance.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information
derived from the Company's Consolidated Income Statements, including certain
information presented as a percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
(IN THOUSANDS)
---------------------------------------------------------------
1998 1997 1996
------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Printing $ 95,003 77.2% $ 87,979 81.2% $ 49,242 74.2%
Office products and office furniture 28,058 22.8 20,406 18.8 17,115 25.8
-------- ------- -------- ------- -------- -----
Total revenues 123,061 100.0 108,385 100.0 66,357 100.0
Cost of sales:
Printing 66,699 54.2 59,850 55.2 33,015 49.8
Office products and office furniture 18,616 15.1 13,289 12.3 11,077 16.7
-------- ------- -------- ------- -------- ------
Total cost of sales 85,315 69.3 73,139 67.5 44,092 66.5
-------- ------- -------- ------- -------- ------
Gross Profit 37,746 30.7 35,246 32.5 22,265 33.5
Selling, general and administrative expenses 29,872 24.3 28,079 25.9 16,197 24.4
-------- ------- -------- ------- -------- ------
Income from operations 7,874 6.4 7,167 6.6 6,068 9.1
Other income (expense):
Interest income 245 0.2 20 0.0 25 0.0
Interest expense (1,507) (1.2) (1,586) (1.4) (693) (1.0)
Other income 241 0.2 737 0.7 224 0.4
-------- ------- -------- ------- -------- ------
Income before income taxes 6,853 5.6 6,338 5.9 5,624 8.5
Income taxes (2,702) (2.2) (2,571) (2.4) (2,252) (3.4)
-------- ------- -------- ------- ------- ------
Net income $ 4,151 3.4% $ 3,767 3.5% $ 3,372 5.1%
-------- ------- -------- ------- ------- ------
-------- ------- -------- ------- ------- ------
</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 consolidated financial statements and notes
thereto included elsewhere herein.
21
<PAGE>
YEAR ENDED OCTOBER 31, 1998 COMPARED TO YEAR ENDED OCTOBER 31, 1997
REVENUES
Consolidated net revenues were $123.1 million for the year ended
October 31, 1998, compared to $108.4 million in the prior fiscal year. This
change represents a growth in revenues of $14.7 million or 13.5%. Printing
revenues increased $7.0 million or 8.0% during the same period from $88.0
million in 1997 to $95.0 million in 1998. Approximately $5.3 million of this
growth was due to the inclusion of Interform Corporation for the full fiscal
year of 1998, whereas fiscal year 1997 included only ten months of Interform's
operations. Internal growth accounted for the remaining $1.7 million increase in
printing revenues. Office products and office furniture revenues increased $7.7
million or 37.5% from $20.4 million in fiscal year 1997 to $28.1 million in
fiscal year 1998. The increase in office products and office furniture revenue
was achieved through the 1998 acquisitions disclosed in Note 9 to the
Consolidated Financial Statements (the "1998 acquisitions") and internal growth.
The 1998 acquisitions contributed approximately $6.0 million in this growth with
internal growth accounting for the remaining $1.7 million.
COST OF SALES
Total cost of sales for the year ended October 31, 1998, totaled $85.3
million compared to $73.1 million in the previous year. This change represents
an increase of $12.2 million or 16.7% in cost of sales. Printing cost of sales
increased 11.4% in fiscal year 1998 to $66.7 million from $59.9 million in
fiscal year 1997, due primarily to sales volume and the impact of the Interform
acquisition as discussed above. Office products and office furniture cost of
sales increased 40.1% in fiscal year 1998 to $18.6 million from $13.3 million in
fiscal year 1997, primarily due to the 1998 acquisitions.
OPERATING EXPENSES AND INCOME
Selling, general and administrative (S,G&A) expenses decreased as a
percentage of revenues in fiscal year 1998 to 24.3% from 25.9% in fiscal year
1997, due primarily to management's effort to control overall expenses. As the
Company expands through strategic acquisitions, this ratio is expected to
improve on a long-term basis. With the growth in revenue and the reduction in
S,G&A expenses as a percentage of revenues, income from operations increased
9.9% in fiscal year 1998 to $7.9 million from $7.2 million in fiscal year 1997.
OTHER INCOME/EXPENSE
Interest expense decreased $79,000 from $1.586 million in fiscal year
1997 to $1.507 million in fiscal year 1998 primarily as a result of the lower
interest rate environment during the second half of 1998 and the reduction of
notes payable and long-term debt. Interest income increased $225,000 from
$20,000 in fiscal year 1997 to $245,000 in fiscal year 1998 as a result of
investing the residual net proceeds from an April 1998 stock offering in a money
market
22
<PAGE>
account. Other income decreased $496,000 from $737,000 in fiscal year 1997 to
$241,000 in fiscal year 1998 primarily due to a $330,000 one-time recognition of
deferred gain from the previous sale of Stationers' bookstore operations
included in fiscal year 1997.
INCOME TAXES
Income taxes as a percentage of income before income taxes decreased
slightly from 40.6% in fiscal year 1997 to 39.4% as a result of tax
attributes associated with acquired businesses.
NET INCOME
Net income for the year ended October 31, 1998, increased 10.2% to
$4.15 million from the net income reported in the prior year of $3.77 million.
Basic and diluted earnings per share remained the same for fiscal years 1998 and
1997 at $0.45 per share as a result of the additional shares issued in the April
1998 stock offering discussed below.
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996
REVENUES
Total revenues increased 63.3% in fiscal year 1997 to $108.4 million
from $66.4 in fiscal year 1996. Printing revenue increased 78.7% in fiscal year
1997 to $88.0 million from $49.2 million in 1996. Office products and office
furniture revenue increased 19.2 % in fiscal year 1997 to $20.4 million from
$17.1 million in fiscal year 1996. This was achieved through new acquisitions
which accounted for increased printing sales of $35.5 million and increased
office products and office furniture sales of $3.6 million. The office products
and office furniture change in sales was also impacted by a one-time furniture
sale totaling $500,000 in 1996.
COST OF SALES
Total cost of sales increased 65.9% in fiscal year 1997 to $73.1
million from $44.1 million in fiscal year 1996. Printing cost of sales increased
81.3% in fiscal year 1997 to $59.9 million from $33.0 million in fiscal year
1996, due primarily to sales volume and the impact of newly acquired divisions
with lower sales margins. Office products and office furniture cost of sales
increased 20.0% in fiscal year 1997 to $13.3 million from $11.1 million in
fiscal year 1996, primarily due to increased sales volume.
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses increased as a percentage
of sales in fiscal year 1997 to 25.9% from 24.4% in fiscal year 1996 due to
increased costs associated with acquisitions. For the reasons stated above,
income from operations increased 18.1% in fiscal year
23
<PAGE>
1997 to $7.2 million from $6.1 million in fiscal year 1996.
OTHER INCOME/EXPENSE
Interest expense increased $893,000 from $693,000 in fiscal year 1996
to $1.6 million in fiscal year 1997 as a result of the debt assumed in the
Interform acquisition. Other income increased from $224,000 in fiscal year 1996
to $737,000 in fiscal year 1997 due to a $330,000 one-time recognition of
deferred gain from the previous sale of Stationers' bookstore operations.
INCOME TAXES
Income taxes in fiscal year 1997 increased slightly to 40.6% from 40.0%
in fiscal year 1996 due to the Company's expansion into states with higher tax
rates.
NET INCOME
For the reasons stated above, net income for fiscal year 1997 increased
11.7% to $3.8 million, or diluted earnings per share of $0.45, from $3.4
million, or diluted earnings per share of $0.40 in fiscal year 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1998, the Company had $9.8 million of cash and cash
equivalents, an increase of $8.9 million from the prior year. Working capital as
of October 31, 1998, was $35.1 million, an increase of $16.2 million from
October 31, 1997. The increase in cash and cash equivalents and working capital
consists primarily of the residual net proceeds of the stock offering and the
1998 acquisitions. In April 1998, the Company completed an offering of 1,091,993
common shares. The net proceeds (net of underwriting discounts, commissions and
offering expenses) to the Company from the April 1998 offering approximated
$14.1 million. Approximately $5.9 million of the net proceeds has been used to
reduce long-term debt through October 31, 1998. The remaining proceeds from the
April 1998 stock offering are invested in a money market account with a national
financial institution. It is management's intention to maintain these funds in a
highly liquid money market account to be used for further debt reduction,
working capital and general purposes, including the continuation of the
Company's acquisition program.
Management is in the process of implementing a corporate-wide cash
management program that management anticipates will provide it with better
access to daily cash flow. This program is expected to be in place by the second
quarter of fiscal year 1999. Once the program is implemented, management
believes it will be in a position to better utilize available cash and cash
equivalents and cash flows from operations to further reduce long-term debt.
24
<PAGE>
The Company has historically used cash generated from operating
activities and debt to finance capital expenditures and the cash portion of the
purchase price of acquisitions. Management plans to continue making significant
investments in equipment and expects total capital expenditures to approximate
$3 million in 1999. Included in these capital expenditures for 1999 is the
initial cost to convert the Company's printing operations to a centralized
information system (see below for further discussion regarding the Company's
information systems infrastructure). However, to fund the Company's continued
expansion of operations internally and through acquisitions and to upgrade its
information systems, additional financing may be necessary. The Company has
available lines of credit totaling $12 million (see Note 3 to the Consolidated
Financial Statements for additional information). For the foreseeable future,
management believes it can fund operations, meet debt service requirements, and
make the planned capital expenditures based on the available cash and cash
equivalents, cash flow from operations, and lines of credit.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities for the years ended October 31,
1998, 1997 and 1996 were $4.2 million, $2.0 million, and $3.3 million. These
cash flows increased in fiscal year 1998 compared to fiscal year 1997 primarily
due to increased net income, depreciation and amortization, and the improvement
in the management of accounts receivable and inventories.
The reduction in deferred revenue in the year ended October 31, 1998,
was from an acquired company that had previously required advance payments on
certain large transactions. Cash flows from operating activities for the fiscal
year 1997 compared to 1996 decreased primarily as a result of the investment in
inventories to support increased sales.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows used in investing activities were ($1.5) million, ($2.0)
million, and ($3.8) million for the years ended October 31, 1998, 1997, and
1996. Cash flows used in investing activities decreased in 1998 compared to 1997
as a result of the increase in proceeds from sales of assets and the cash
received from acquired businesses. This decrease was partially offset by the
additional investment in property and equipment of $1.0 million. Cash flows used
in investing activities in 1997 compared to 1996 also decreased because of the
change in cash related to make acquired businesses.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows provided by (used in) financing activities for the years
ended October 31, 1998, 1997, and 1996 were $6.1 million, ($1.5 million), and
$1.5 million. The increase in net cash provided by financing activities in 1998
compared to 1997 came from the proceeds from the stock offering, net of issuance
expenses, partially offset by the repayment of notes payable and long-term debt.
The decrease in net cash flows from financing activities in 1997 compared to
1996
25
<PAGE>
related to the reduction in new long-term borrowings and the increase in debt
service from the debt assumed in the Interform acquisition. Equipment and
vehicles have generally been financed through bank financing. Dividends paid in
fiscal years 1998, 1997 and 1996 were $1.8 million, $1.6 million and $1.2
million.
INFLATION AND ECONOMIC CONDITIONS
Management believes that the effect of inflation on the Company's
operations has not been material and will continue to be immaterial for the
foreseeable future. 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.
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.
INFORMATION SYSTEMS AND YEAR 2000 ASSESSMENT UPDATE
Management has in place a Company-wide program to assess the need to
modify or replace portions or all of its information systems to maintain its
competitiveness and enable the proper processing of transactions relating to the
Year 2000 and beyond. Management has made the decision to purchase and implement
a new information system for the printing divisions. This new system is an
enterprise-wide system encompassing sales, purchasing, production, and financial
reporting. Implementation is expected to begin in March or April 1999 and take
approximately two years. There are four printing systems currently in use that
are not Year 2000 compliant. These systems will be converted first and are
expected to be operational by September 30, 1999. In the event that these
non-compliant systems are not converted by December 31, 1999, the systems can be
converted to the Company's core printing software, that is Year 2000 compliant,
within a short timeframe of one to two months. It is anticipated that the new
system will cost approximately $800,000 ($500,000 related to software and
training and $300,000 of hardware costs). Approximately $600,000 of these
estimated costs will be capitalized and amortized against income over a period
of five years. It is the opinion of management that the cost of converting the
printing divisions to a new information system and the annual amortization
thereof will not materially impact results of operations or financial condition.
There are a number of risks in implementing a new system, including the
complexity of the conversion process and the new systems themselves, the
converting of business data from the old system to the new system, and the need
for comprehensive employee training on the new information systems. There can be
no assurance that this process will not have a material adverse effect on the
Company's business and operating results.
26
<PAGE>
Based on its assessment of the information currently available,
management has determined that the office products and office furniture division
information system is Year 2000 compliant. Once the new information system is
implemented in all of the printing divisions, a program will be initiated to
assess the benefits of having both divisions under one financial reporting
system.
In addition, management is in the process of finalizing its assessment
of non-critical systems. Based on the information currently available, most of
these systems are Year 2000 compliant. The systems that are not compliant will
be replaced. The new systems are expected to be operational by July 31, 1999.
The related costs to replace these systems are not expected to be material to
the operating results or financial position of the Company.
The Company is also in the process of obtaining assurances from its
significant suppliers, large customers, financial institutions, and others that
those parties are Year 2000 compliant or have appropriate plans to remediate
Year 2000 issues. The Company has received correspondence from some third
parties and it appears they are taking reasonable steps to remedy Year 2000
issues. The Company continues to assess the extent to which its operations are
vulnerable should those organizations fail to properly remediate their computer
systems. While management believes its efforts are adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other companies on
which the Company's systems and operations rely will be converted on a timely
basis and will not have an adverse effect on the Company's business, operating
results or financial position.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement No.
130 (SFAS No. 130), "Reporting Comprehensive Income" and Statement No. 131 (SFAS
No. 131), "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131 establishes standards for the way public companies report
information about operating segments in annual financial statements and interim
financial reports issued to shareholders. Management does not anticipate that
the adoption of these standards will have a significant effect on the Company's
financial statements and notes thereto.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures about market risk, see
Note 10 to the Notes to Consolidated Financial Statements and the information
presented herein under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
27
<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.
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 the Company is contained on
pages 2 through 4 and page 13 of the Company's definitive Proxy Statement, dated
February 16, 1999, with respect to the Annual Meeting of Shareholders to be held
on March 15, 1999 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
The information called for by this item is contained on pages 6 through
10 of the Company's definitive Proxy Statement, dated February 16, 1999, with
respect to the Annual Meeting of Shareholders to be held on March 15, 1999,
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 4 and 5
of the Company's definitive Proxy Statement, dated February 16, 1999, with
respect to the Annual Meeting of Shareholders to be held on March 15, 1999,
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 page 12 of the
Company's definitive Proxy Statement, dated February 16, 1999, with respect to
the Annual Meeting of Shareholders to be held on March 15, 1999, which will be
filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.
28
<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 Audited
Consolidated Financial Statements and Schedule II Table of Contents on
Page F-1.
(1) See Page No. F-1.
(2) Schedules, other than Schedule II listed on page F-1, are
omitted because of the absence of conditions under which they
are required.
3. EXHIBITS
<TABLE>
<CAPTION>
Number Description Reference
<S> <C> <C> <C>
(3) 3.1 Articles of Incorporation Filed as Exhibit 3.1 to Form 10-Q dated June 16,
1997, filed on June 16, 1997, incorporated herein
by reference.
3.2 Bylaws Filed as Exhibit 3.2 to Registration Statement on
Form S-1, File No. 33-54454, filed on November 10,
1992, incorporated herein by reference.
(4) Instruments defining the rights of security See Exhibit 3.1 above.
holders, including debentures.
(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
</TABLE>
29
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
30
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
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.
$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.
</TABLE>
31
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
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, filed as
Exhibit 10.2 to Form 10-K dated January 28,
1997, filed January 28, 1997, is
incorporated herein by reference.
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, filed as
Exhibit 10.3 to Form 10-K dated January 28,
1997, filed January 28, 1997, is
incorporated herein by reference.
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, filed as Exhibit 10.4 to
Form 10-K dated January 28, 1997, filed
January 28, 1997, is incorporated herein by
reference.
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
</TABLE>
32
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
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, filed as Exhibit
10.5 to Form 10-K dated January 28, 1997,
filed January 28, 1997, is incorporated
herein by reference.
$12,500,000 Term Loan Credit Agreement by
and among Champion Industries, Inc. and the
Banks Party Thereto and PNC Bank, National
Association, as Agent, dated as of March 31,
1997, as amended by Amendment No. 1 to
Credit Agreement dated August 1, 1997, filed
as Exhibit 10.1 to Form 10-K dated January
29, 1998, filed January 29, 1998, is
incorporated herein by reference.
Commercial Gross Lease between M. Field
Gomila et al and Bourque Printing dba Upton
Printing dated October 29, 1997, regarding
740 and 746 Carondolet Street, New Orleans,
Louisiana, filed as Exhibit 10.3 to Form
10-K dated January 29, 1998, filed January
29, 1998, is incorporated herein by
reference.
Executive Compensation Plans and Company's 1993 Stock Option Plan, effective March 22,
Arrangements 1994, filed as Exhibit 10.14 to Form 10-K dated
January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Deferred Compensation Agreement dated July
1, 1993 between Blue Ridge Printing Co.,
Inc. and Glenn
</TABLE>
33
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
W. Wilcox, Sr., filed as Exhibit 10.4 to Form 10-K
dated January 29, 1998, filed January 29, 1998, is
incorporated herein by reference.
Split Dollar Life Insurance Agreement dated
July 1, 1993 between Blue Ridge Printing
Co., Inc. and Glenn W. Wilcox, Sr., filed as
Exhibit 10.5 to Form 10-K dated January 29,
1998, filed January 29, 1998, is
incorporated herein by reference.
(10.1) $5,600,000 Term Loan Credit Agreement by and
among the Company and its subsidiaries and
PNC Bank, National Association, dated as of
March 13, 1998, together with promissory
note and representative security agreement
attendant thereto. Page 64
(10.2) Agreement of Lease between The Tilson Group
and Capitol Business Equipment, Inc. dated
May 18, 1998, regarding 711 Indiana Avenue,
Charleston, West Virginia. Page 155
(10.3) Agreement of Lease between Mildred Thompson
and Thompson's of Morgantown, Inc. dated May
28, 1998, regarding Kirk and Chestnut
Streets, Morgantown, West Virginia. Page 184
(10.4) Lease Agreement between The Equitable Life
Assurance Society of the United States and
Champion Industries, Inc., d/b/a Upton
Printing, dated October 27, 1997,
</TABLE>
34
<PAGE>
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
regarding 5600 Jefferson Highway, Harahan,
Louisiana. Page 199
(21) Subsidiaries of the Registrant Exhibit 21 Page 218
(23) Consent of Ernst & Young LLP Exhibit 23 Page 219
(27) Financial Data Schedule Exhibit 27 Page 220
(b) Champion filed the following reports on Form 8-K during the last
quarter of the period covered by this report:
None.
</TABLE>
35
<PAGE>
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/ DAVID B. MCCLURE
------------------------------------------
David B. McClure
Vice President and Chief Financial Officer
Date: January 25, 1999
36
<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 25, 1999
- ----------------------------------------
Robert H. Beymer, Director
/S/ PHILIP E. CLINE January 25, 1999
- ----------------------------------------
Philip E. Cline, Director
/S/ HARLEY F. MOONEY, JR. January 25, 1999
- ----------------------------------------
Harley F. Mooney, Jr., Director
/S/ TODD L. PARCHMAN January 25, 1999
- ----------------------------------------
Todd L. Parchman, Director
/S/ A. MICHAEL PERRY January 25, 1999
- ----------------------------------------
A. Michael Perry, Director
/S/ MARSHALL T. REYNOLDS January 25, 1999
- ----------------------------------------
Marshall T. Reynolds, Director
/S/ NEAL W. SCAGGS January 25, 1999
- ----------------------------------------
Neal W. Scaggs, Director
/S/ GLENN W. WILCOX, SR. January 25, 1999
- ----------------------------------------
Glenn W. Wilcox, Sr., Director
37
<PAGE>
CHAMPION INDUSTRIES, INC.
Audited Consolidated Financial Statements and Schedule
October 31, 1998
CONTENTS
<TABLE>
<S> <C>
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 II--Valuation and Qualifying Accounts (Item 14a)....................F-20
</TABLE>
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, 1998 and 1997, and the
related consolidated income statements, statements of shareholders' equity, and
cash flows for each of the three years in the period ended October 31, 1998. 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1998, 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, West Virginia
December 18, 1998
F-2
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31,
1998 1997
----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,773,193 $ 912,290
Accounts receivable, net of allowance of $1,329,000 and $1,140,000 21,234,593 19,075,180
Inventories 12,760,204 11,576,651
Property held for sale -- 300,000
Other current assets 478,306 283,642
Deferred income tax assets 935,004 981,619
----------------------------
Total current assets 45,181,300 33,129,382
Property and equipment, at cost:
Land 984,889 784,889
Buildings and improvements 5,564,062 4,144,472
Machinery and equipment 29,195,512 22,852,103
Equipment under capital leases 2,137,400 5,720,594
Furniture and fixtures 1,943,399 1,684,275
Vehicles 2,438,462 1,914,362
----------------------------
42,263,724 37,100,695
Less accumulated depreciation (17,335,378) (13,825,053)
----------------------------
24,928,346 23,275,642
Cash surrender value of officers' life insurance 935,169 921,213
Goodwill, net of accumulated amortization 3,026,106 2,558,356
Other assets 434,407 461,120
----------------------------
4,395,682 3,940,689
----------------------------
Total assets $ 74,505,328 $ 60,345,713
----------------------------
----------------------------
</TABLE>
F-3
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
OCTOBER 31,
1998 1997
-------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,175,743 $ 3,657,365
Notes payable -- 2,425,000
Accrued payroll and commissions 1,541,586 2,052,130
Taxes accrued and withheld 597,886 571,477
Accrued income taxes 175,202 450,027
Accrued expenses 716,582 793,848
Current portion of long-term debt:
Notes payable 3,477,473 2,842,844
Capital lease obligations 388,954 1,401,519
-------------------------
Total current liabilities 10,073,426 14,194,210
Long-term debt, net of current portion:
Notes payable 12,966,038 11,328,588
Capital lease obligations 1,026,517 3,827,368
Deferred income tax liabilities 4,341,150 3,589,889
Other liabilities 788,462 555,886
-------------------------
Total liabilities 29,195,593 33,495,941
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value, 20,000,000 shares authorized;
9,713,913 and 8,384,930 shares issued and outstanding 9,713,913 8,384,930
Additional paid-in capital 22,242,047 7,450,328
Retained earnings 13,353,775 11,014,514
-------------------------
Total shareholders' equity 45,309,735 26,849,772
-------------------------
Total liabilities and shareholders' equity $74,505,328 $60,345,713
-------------------------
-------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Printing $ 95,002,726 $ 87,978,709 $49,242,232
Office products and office furniture 28,058,762 20,405,929 17,114,644
----------------------------------------------
Total revenues 123,061,488 108,384,638 66,356,876
Cost of sales:
Printing 66,699,561 59,849,596 33,014,938
Office products and office furniture 18,615,734 13,289,403 11,076,854
----------------------------------------------
Total cost of sales 85,315,295 73,138,999 44,091,792
Gross Profit 37,746,193 35,245,639 22,265,084
Selling, general and administrative expenses 29,871,573 28,079,009 16,197,359
----------------------------------------------
Income from operations 7,874,620 7,166,630 6,067,725
Other income (expense):
Interest income 244,753 20,116 25,287
Interest expense (1,507,387) (1,586,418) (692,914)
Other 241,392 737,097 223,589
----------------------------------------------
(1,021,242) (829,205) (444,038)
----------------------------------------------
Income before income taxes 6,853,378 6,337,425 5,623,687
Income taxes (2,702,274) (2,570,644) (2,251,319)
----------------------------------------------
Net income $ 4,151,104 $ 3,766,781 $ 3,372,368
----------------------------------------------
----------------------------------------------
Earnings per share:
Basic $ 0.45 $ 0.45 $ 0.41
Diluted 0.45 0.45 0.40
Dividends paid per share 0.20 0.19 0.152
Weighted average shares outstanding:
Basic 9,142,000 8,383,000 8,324,000
Diluted 9,172,000 8,441,000 8,356,000
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1995 6,611,721 $6,611,721 $ 6,516,199 $ 6,665,789 $19,793,709
Net income for 1996 -- -- -- 3,372,368 3,372,368
Dividends ($0.152 per share) -- -- -- (1,222,621) (1,222,621)
Stock issued in acquisition 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 8,382,682 8,382,682 7,442,502 8,815,536 24,640,720
Net income for 1997 -- -- -- 3,766,781 3,766,781
Dividends ($0.19 per share) -- -- -- (1,567,803) (1,567,803)
Stock options exercised 2,441 2,441 11,310 -- 13,751
Cash paid in lieu of fractional shares (193) (193) (3,484) -- (3,677)
---------------------------------------------------------------------------
Balance, October 31, 1997 8,384,930 8,384,930 7,450,328 11,014,514 26,849,772
Net income for 1998 -- -- -- 4,151,104 4,151,104
Dividends ($0.20 per share) -- -- -- (1,811,843) (1,811,843)
Stock issued in acquisitions 193,397 193,397 1,564,894 -- 1,758,291
Stock options exercised 43,593 43,593 184,274 -- 227,867
Stock offering, net of issuance expenses 1,091,993 1,091,993 13,042,551 -- 14,134,544
---------------------------------------------------------------------------
Balance, October 31, 1998 9,713,913 $9,713,913 $22,242,047 $13,353,775 $45,309,735
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,151,104 $ 3,766,781 $ 3,372,368
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 3,620,925 3,179,515 2,002,480
Gain on sales of assets (52,914) (371,041) (23,260)
Deferred income taxes 616,334 334,409 236,860
Deferred compensation 56,894 82,285 92,933
Changes in assets and liabilities:
Accounts receivable (372,128) (1,690,650) (1,579,298)
Inventories (489,321) (1,758,510) (88,812)
Other current assets (164,028) 152,345 (232,237)
Accounts payable (1,038,947) 236,195 (902,376)
Accrued payroll (628,118) 616,772 (222,450)
Taxes accrued and withheld (58,872) (235,161) 255,134
Accrued income taxes (264,549) (946,031) 650,031
Deferred revenue (1,059,975) -- --
Accrued expenses (108,610) (1,383,537) (255,416)
---------------------------------------------
Net cash provided by operating activities 4,207,795 1,983,372 3,305,957
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,195,260) (2,163,775) (2,538,459)
Proceeds from sales of assets 513,282 163,103 34,745
Businesses acquired, net of cash received 1,159,356 254,676 (1,118,792)
Increase in other assets 33,798 (297,364) (137,655)
---------------------------------------------
Net cash used in investing activities (1,488,824) (2,043,360) (3,760,161)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings on notes payable (2,758,757) 1,575,000 1,300,000
Proceeds from long-term debt 1,815,465 1,306,919 3,122,343
Principal payments on long-term debt (5,465,344) (2,812,791) (1,672,249)
Dividends paid (1,811,843) (1,567,803) (1,222,621)
Proceeds from stock offering, net of issuance expenses 14,134,544 -- --
Proceeds for exercise of stock options 227,867 13,751 --
Cash paid in lieu of fractional shares -- (3,677) (2,736)
---------------------------------------------
Net cash provided by (used in) financing activities 6,141,932 (1,488,601) 1,524,737
---------------------------------------------
Net increase (decrease) in cash 8,860,903 (1,548,589) 1,070,533
Cash and cash equivalents at beginning of year 912,290 2,460,879 1,390,346
---------------------------------------------
Cash and cash equivalents at end of year $ 9,773,193 $ 912,290 $ 2,460,879
---------------------------------------------
---------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 1998
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., The Merten Company,
Interform Corporation, Blue Ridge Printing Co., Inc., CHMP Leasing, Inc., Rose
City Press, Capitol Business Equipment, Inc. and Thompson's of Morgantown, Inc.
Significant intercompany transactions have been eliminated in consolidation.
CASH EQUIVALENTS
Cash and cash equivalents consist principally of cash on deposit with banks,
repurchase agreements for government securities, and a money market account, all
highly liquid investments, with an original maturity of three months or less. At
October 31, 1998 and 1997, the Company held overnight repurchase agreements for
$1,686,000 and $51,000 of Federal National Mortgage Association securities with
stated interest rates of 4.07% and 4.0%. In addition, at October 31, 1998, the
Company had invested $5,238,000 in a money market account with a national
financial institution that earned 4.94% during October 1998.
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 as follows:
<TABLE>
<S> <C>
Buildings and improvements 5 - 40 years
Machinery and equipment 5 - 10 years
Furniture and fixtures 5 - 10 years
Vehicles 3 - 5 years
</TABLE>
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 $3,432,000, $3,021,000 and $1,905,000 for the
years ended October 31, 1998, 1997, and 1996.
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 estimated 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, 1998 and 1997,
approximated $1,093,000 and $956,000. Amortization expense approximated
$137,000, $132,000 and $98,000 for the years ended October 31, 1998, 1997, and
1996.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the years
ended October 31, 1998, 1997, and 1996 approximated $650,000, $646,000, and
$378,000.
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.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average shares of common stock outstanding for the period and excludes any
dilutive effects of stock options. Diluted earnings per share is computed by
dividing net income by the weighted average shares of common stock outstanding
for the period plus the shares that would be outstanding assuming the exercise
of dilutive stock options. The effect of dilutive stock options increased
weighted average shares outstanding by 30,000, 58,000 and 32,000 for the years
ended October 31, 1998, 1997, and 1996.
F-9
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
1998 1997
--------------------------
<S> <C> <C>
Printing:
Raw materials $ 3,117,249 $ 2,843,081
Work in process 2,112,007 2,655,231
Finished goods 3,621,439 2,923,560
Office products and office furniture 3,909,509 3,154,779
--------------------------
$12,760,204 $11,576,651
--------------------------
--------------------------
</TABLE>
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
1998 1997
--------------------------
<S> <C> <C>
Unsecured term notes payable to a bank, due in monthly principal
installments of $217,000 plus interest at the prime rate with the last
note maturing April 2004 $13,593,658 $11,600,431
Installment notes payable to banks, due in monthly installments totaling
$90,000 with interest rates approximating the bank's prime rate and the
last note maturing October 2002, collateralized by equipment, vehicles,
inventory, and accounts receivable 2,141,994 2,122,215
Unsecured installment notes payable to banks, due in monthly installments
totaling $1,700, with interest rates approximating the bank's prime
rate, with the last note maturing June 1999 13,133 448,786
Mortgage note payable to a bank, due in monthly installments of $11,000,
including interest at the prime rate with the note maturing November 2005,
collateralized by real estate 694,726 --
Capital lease obligations, due in monthly installments totaling $43,000,
including interest at the bank's prime rate through July 2002 1,415,471 5,228,887
--------------------------
17,858,982 19,400,319
Less current portion 3,866,427 4,244,363
--------------------------
Long-term debt, net of current portion $13,992,555 $15,155,956
--------------------------
--------------------------
</TABLE>
The unsecured term note agreements contain restrictive financial covenants
requiring the Company to maintain certain financial ratios.
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:
<TABLE>
<CAPTION>
NOTES CAPITAL
PAYABLE LEASES TOTAL
---------------------------------------
<S> <C> <C> <C>
1999 $ 3,477,473 $ 388,954 $ 3,866,427
2000 3,293,099 316,598 3,609,697
2001 3,060,308 341,661 3,401,969
2002 2,980,725 368,258 3,348,983
2003 2,487,604 -- 2,487,604
Thereafter 1,144,302 -- 1,144,302
---------------------------------------
$16,443,511 $1,415,471 $17,858,982
---------------------------------------
---------------------------------------
</TABLE>
The Company has unsecured revolving lines of credit with banks for borrowings to
a maximum of $12,000,000 with interest payable monthly at interest rates
approximating the prime rate. These lines of credit, $2,000,000 of which expires
in May 1999, and $10,000,000 in January 2002, contain certain restrictive
financial covenants. There were no borrowings outstanding under these facilities
at October 31, 1998 and $2,000,000 outstanding at October 31, 1997.
The prime rate, the base interest rate on the above loans, approximated 8.0% and
8.5% at October 31, 1998 and 1997. Interest paid during the years ended October
31, 1998, 1997, and 1996 approximated $1,588,000, $1,511,000 and $632,000.
The Company's non-cash activities for 1998 and 1997 included equipment purchases
of approximately $579,000 and $1,733,000, which were financed by a bank.
4. EMPLOYEE BENEFIT PLANS
The Company had a Profit Sharing Plan that covered all eligible employees and
qualified as a Savings Plan under Section 401(k) of the Internal Revenue Code.
Effective January 1, 1998, the Profit Sharing Plan was merged into The Champion
Industries, Inc. 401(k) Plan (the "Plan"). The Plan covers all eligible
employees who satisfy the age and service requirements. Each participant may
elect to contribute up to 15% of annual compensation, and the Company is
obligated to contribute 100% of the participant's contribution not to exceed 2%
of the participant's annual compensation. The Company may make discretionary
contributions to the Plan. In The Company's expense under these Plans was
approximately $311,000, $158,000 and $97,000 for the years ended October 31,
1998, 1997 and 1996.
The Company's 1993 Stock Option Plan provides for the granting of both incentive
and non-qualified stock options to management personnel for up to 762,939 shares
of the Company's common stock. The option price per share for incentive stock
options shall not be lower than the fair market value of the common stock at the
date of 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. All options to date
F-11
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
are incentive stock options. Exercise prices for options outstanding as of
October 31, 1998, ranged from $13.12 to $18.50. Options vest immediately and may
be exercised within five years from the date of grant. The weighted average
remaining contractual life of those options is 2.6 years. A summary of the
Company's stock option activity and related information for the years ended
October 31 follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
1998 PRICE 1997 PRICE 1996 PRICE
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 179,532 $12.52 146,973 $ 11.12 100,098 $ 9.28
Granted 42,000 18.50 35,000 17.90 46,875 15.04
Exercised (43,593) 6.30 (2,441) 5.63 -- --
Forfeited (19,515) 11.88 -- -- --
--------- --------- ---------
Outstanding-end of year 158,424 15.89 179,532 12.52 146,973 11.12
--------- --------- ---------
--------- --------- ---------
Weighted average fair value of
options granted during the year $ 4.51 $ 4.63 $ 3.62
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: risk-free interest rates of
6.00%, 6.04% and 5.63%; dividend yields of 1.08%, 1.10% and 1.37%; volatility
factors of the expected market price of the Company's common stock of 21.2%,
23.6% and 23.0%; and a weighted-average expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. Accordingly, the
following pro forma disclosures are not likely to be representative of the
effects on reported net income for future years.
F-12
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The following pro forma information has been determined as if the Company had
accounted for its employee stock options under the fair value method. For
purposes of pro forma disclosures, the estimated fair value of the options is
expensed in the year granted since the options vest immediately. The Company's
pro forma information for the years ended October 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Pro forma net income $3,962,000 $3,605,000 $3,203,000
-------------------------------------
-------------------------------------
Pro forma basic and diluted earnings per share $0.43 $0.43 $0.38
-------------------------------------
-------------------------------------
</TABLE>
The Company has deferred compensation agreements with two employees of Blue
Ridge Printing Co., Inc. providing for payments totaling approximately
$1,000,000 over a ten year period after retirement. The Company had accrued
approximately $609,000 and $556,000 at October 31, 1998 and 1997, relating to
these agreements. The amount expensed for these agreements for the years ended
October 31, 1998, 1997, and 1996 approximated $53,000, $82,000, and $93,000. To
assist in funding the deferred compensation agreements, the Company has invested
in life insurance policies which had cash surrender values of $400,000 at
October 31, 1998 and 1997.
5. INCOME TAXES
Income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Current expense:
Federal $1,662,406 $1,783,878 $1,620,319
State 423,534 452,357 394,000
Deferred expense 616,334 334,409 237,000
---------------------------------------
$2,702,274 $2,570,644 $2,251,319
---------------------------------------
---------------------------------------
</TABLE>
F-13
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
1998 1997
------------------------
<S> <C> <C>
Assets:
Allowance for doubtful accounts $ 531,611 $ 455,940
Deferred compensation 243,412 222,354
Net operating loss carryforward of acquired companies 253,461 307,035
Accrued vacation 207,693 217,980
Other accrued liabilities 117,995 238,244
------------------------
Gross deferred tax assets 1,354,172 1,441,553
Liabilities:
Property and equipment 4,631,527 4,049,824
Other assets 128,791 --
------------------------
Gross deferred liability 4,760,318 4,049,824
------------------------
Net deferred tax liabilities $3,406,146 $2,608,271
------------------------
------------------------
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996
------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34% 34% 34%
State taxes, net of federal benefit 4 5 5
Other 1 2 1
------------------
Effective tax rate 39% 41% 40%
------------------
------------------
</TABLE>
Income taxes paid during the years ended October 31, 1998, 1997 and 1996
approximated $2,393,000, $3,024,000 and $1,437,000.
The Company has available, for income tax purposes, net operating loss
carryforwards from acquired companies of approximately $1,653,000 of which
$57,000 expires in 2010, $697,000 in 2011, and $899,000 in 2012.
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, which are
accounted for as operating leases, range from five to fifteen years.
F-14
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
A summary of significant related party transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996
------------------------------
<S> <C> <C> <C>
Rent expense paid to affiliated entities for
operating facilities $363,000 $363,000 $363,000
Sales of office products, office furniture and
printing services to affiliated entities 447,000 462,000 840,000
</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
$231,000, $262,000 and $265,000 for the years ended October 31, 1998, 1997 and
1996.
In addition, the Company leases property and equipment from unrelated entities
under operating leases. Rent expense amounted to $779,000, $489,000 and $321,000
for the years ended October 31, 1998, 1997, and 1996.
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,
1998:
<TABLE>
<S> <C>
1999 $ 894,000
2000 710,000
2001 509,000
2002 408,000
2003 271,000
Thereafter 690,000
-----------
$3,482,000
-----------
-----------
</TABLE>
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, 1998, 1997 and 1996 was approximately
$2,049,000, $1,960,000 and $733,000.
7. 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 Stationers' 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.
F-15
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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 recognized as the purchaser made payments on the purchaser's bank
loan and the note receivable. In 1997, Stationers was released from this
guarantee, and the remaining gain was recognized. The gain recognized for the
years ended October 31, 1997 and 1996, amounted to $330,000 and $23,000.
8. COMMITMENTS AND CONTINGENCIES
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 and are included in normal
operating expenses. 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.
9. ACQUISITIONS
On May 29, 1998, the Company acquired all of the outstanding common stock of
Thompson's of Morgantown, Inc. and Thompson's of Barbour County, Inc.
(collectively referred to as "Thompson"), both companies doing business as
Thompson's Office Furniture and Supplies of Morgantown and Philippi, West
Virginia, in exchange for 45,473 shares of its common stock with a market value
at the time of acquisition of $600,000.
On May 18, 1998, the Company acquired all of the outstanding common shares of
Capitol Business Equipment, Inc. (Capitol), doing business as Capitol Business
Interiors of Charleston, West Virginia, in exchange for 72,202 shares of its
common stock with a market value at the time of acquisition of $1,000,000.
The Capitol and Thompson transactions were accounted for under the pooling of
interests method. However, prior period financial statements were not restated
due to the immaterial effect on Champion's consolidated financial statements.
Accordingly, Capitol's and Thompson's operations are included in these
consolidated financial statements since their acquisition date.
On February 2, 1998, the Company acquired all of the outstanding common stock of
Rose City Press (Rose City) of Charleston, West Virginia, an office products
company, in exchange for 75,722 shares of its common stock with a market value
at the time of acquisition of $1,250,000. The transaction was accounted for
under the purchase method and Rose City's operations are included in these
consolidated financial statements since the acquisition date.
Pro forma financial information related to these acquisitions has not been
presented because such information would not be materially different from
amounts reported herein.
F-16
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
On December 31, 1996, the Company acquired all of the outstanding common stock
of Interform Corporation (Interform) in exchange for cash of $2,500,000,
obtained through bank financing. This acquisition was accounted for under the
purchase method. At December 31, 1996, Interform held for sale one of its former
facilities which was recorded at its estimated fair value. This facility was
sold in December 1997 for its estimated fair market value.
The Interform acquisition has been accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based upon their fair values at the acquisition
date. The operating results of Interform are included in the Consolidated Income
Statements since its acquisition date.
The following summarizes the unaudited consolidated pro forma results of
operations for the year ended October 31, 1997, assuming the acquisition of
Interform, accounted for under the purchase method had been consummated at the
beginning of the year.
<TABLE>
<S> <C>
Revenues $113,710,000
Net income $3,661,000
Diluted earnings per share $0.43
Diluted weighted average shares outstanding 8,441,000
</TABLE>
10. 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 including interior design
services. The Company employs approximately 1,000 people, approximately 100 of
whom are covered by a collective bargaining agreement which expires on May 31,
2001. The Company believes its relations with employees is satisfactory.
The Company operates entirely in the United States. Inter-segment sales are not
significant and no sales to one customer represented 10% of total revenues.
F-17
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Revenues and operating income for the years ended October 31, 1998, 1997, and
1996, and identifiable assets at the end of each of those years, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Revenues:
Printing $95,002,726 $87,978,709 $49,242,232
Office products and office furniture 28,058,762 20,405,929 17,114,644
Operating income:
Printing 5,947,416 6,065,034 4,768,676
Office products and office furniture 1,927,204 1,101,596 1,299,049
Depreciation and amortization:
Printing 3,306,724 2,955,739 1,843,309
Office products and office furniture 314,201 223,776 159,171
Capital expenditures:
Printing 3,048,842 1,812,896 2,375,301
Office products and office furniture 146,418 350,879 163,158
Identifiable assets:
Printing 61,904,800 52,577,247 36,498,504
Office products and office furniture 12,600,528 7,768,466 7,564,072
</TABLE>
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION (Statement 131). Statement 131 establishes
standards for the way public companies report information about operating
segments in annual financial statements and interim financial reports. Statement
131 is effective for the Company for the year ending October 31, 1999.
Management does not anticipate that the adoption of this standard will have a
significant effect on the segments reported herein.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value. The fair value of revolving credit agreements and
long-term debt was estimated using discounted cash flows and it approximates
their carrying value.
F-18
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended October 31, 1998 and 1997.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
1998 29,634,000 31,181,000 30,765,000 31,481,000
1997 21,116,000 29,260,000 27,454,000 30,555,000
GROSS PROFIT
1998 8,366,000 9,755,000 9,168,000 10,457,000
1997 6,005,000 10,009,000 8,936,000 10,296,000
NET INCOME
1998 797,000 1,021,000 1,021,000 1,312,000
1997 869,000 971,000 781,000 1,146,000
EARNINGS PER SHARE
Basic
1998 .10 .12 .11 .14
1997 .10 .12 .09 .14
Diluted
1998 .09 .12 .11 .14
1997 .10 .12 .09 .14
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic
1998 8,386,000 8,819,000 9,647,000 9,708,000
1997 8,382,000 8,382,000 8,384,000 8,385,000
Diluted
1998 8,437,000 8,856,000 9,674,000 9,711,000
1997 8,439,000 8,442,000 8,437,000 8,445,000
</TABLE>
F-19
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years Ended October 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT BALANCES OF CHARGED TO BALANCE
BEGINNING ACQUIRED COSTS AND AT END
DESCRIPTION OF PERIOD COMPANIES EXPENSES DEDUCTIONS(1) OF PERIOD
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Allowance for doubtful accounts $1,139,985 $ 59,515 $274,191 (144,664) $1,329,027
1997
Allowance for doubtful accounts 548,284 314,313 373,165 (95,777) 1,139,985
1996
Allowance for doubtful accounts 422,377 -- 191,094 (65,187) 548,284
</TABLE>
- ----------
(1) Uncollectible accounts written off, net of recoveries.
F-20
<PAGE>
3. EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description Reference
<S> <C> <C> <C>
(3) 3.1 Articles of Incorporation Filed as Exhibit 3.1 to Form 10-Q dated June 16,
1997, filed on June 16, 1997, incorporated herein
by reference.
3.2 Bylaws Filed as Exhibit 3.2 to Registration Statement on
Form S-1, File No. 33-54454, filed on November 10,
1992, incorporated herein by reference.
(4) Instruments defining the rights of security See Exhibit 3.1 above.
holders, including debentures.
(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
</TABLE>
58
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
$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,
</TABLE>
59
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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, filed as Exhibit 10.2 to Form
10-K dated January 28, 1997, filed January 28,
1997, is incorporated herein by reference.
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, filed as Exhibit 10.3 to Form
10-K dated January 28, 1997, filed January 28,
1997, is incorporated herein by reference.
Agreement of Lease dated August 21, 1996 between
Marion B. and Harold A. Merten, Jr. and CM
</TABLE>
60
<PAGE>
<TABLE>
<S> <C> <C> <C>
Acquisition Corp. (now The Merten Company)
regarding 1515 Central Parkway, Cincinnati, Ohio,
filed as Exhibit 10.4 to Form 10-K dated January
28, 1997, filed January 28, 1997, is incorporated
herein by reference.
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, filed as Exhibit 10.5 to Form 10-K
dated January 28, 1997, filed January 28, 1997, is
incorporated herein by reference.
$12,500,000 Term Loan Credit Agreement by and among
Champion Industries, Inc. and the Banks Party
Thereto and PNC Bank, National Association, as
Agent, dated as of March 31, 1997, as amended by
Amendment No. 1 to Credit Agreement dated August 1,
1997, filed as Exhibit 10.1 to Form 10-K dated
January 29, 1998, filed January 29, 1998, is
incorporated herein by reference.
Commercial Gross Lease between M. Field Gomila et
al and Bourque
</TABLE>
61
<PAGE>
<TABLE>
<S> <C> <C> <C>
Printing dba Upton Printing dated October 29, 1997,
regarding 740 and 746 Carondolet Street, New
Orleans, Louisiana, filed as Exhibit 10.3 to Form
10-K dated January 29, 1998, filed January 29,
1998, is incorporated herein by reference.
Executive Compensation Plans and Company's 1993 Stock Option Plan, effective March
Arrangements 22, 1994, filed as Exhibit 10.14 to Form 10-K dated
January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Deferred Compensation Agreement dated July 1, 1993
between Blue Ridge Printing Co., Inc. and Glenn W.
Wilcox, Sr., filed as Exhibit 10.4 to Form 10-K
dated January 29, 1998, filed January 29, 1998, is
incorporated herein by reference.
Split Dollar Life Insurance Agreement dated July 1,
1993 between Blue Ridge Printing Co., Inc. and
Glenn W. Wilcox, Sr., filed as Exhibit 10.5 to Form
10-K dated January 29, 1998, filed January 29,
1998, is incorporated herein by reference.
(10.1) $5,600,000 Term Loan Credit Agreement by and among
the Company and its subsidiaries and PNC Bank,
National Association, dated as of March 13, 1998,
together with promissory note and representative
security agreement attendant thereto.
Page 64
(10.2) Agreement of Lease between The Tilson Group and
Capitol Business Equipment, Inc. dated May 18,
1998, regarding 711 Indiana Avenue, Charleston,
West Virginia.
</TABLE>
62
<PAGE>
<TABLE>
<S> <C> <C> <C>
Page 155
(10.3) Agreement of Lease between Mildred Thompson and
Thompson's of Morgantown, Inc. dated May 28, 1998,
regarding Kirk and Chestnut Streets, Morgantown,
West Virginia.
Page 184
(10.4) Lease Agreement between The Equitable Life
Assurance Society of the United States and Champion
Industries, Inc., d/b/a Upton Printing, dated
October 27, 1997, regarding 5600 Jefferson Highway,
Harahan, Louisiana.
Page 199
(21) Subsidiaries of the Registrant Exhibit 21 Page 218
(23) Consent of Ernst & Young LLP Exhibit 23 Page 219
(27) Financial Data Schedule Exhibit 27 Page 220
</TABLE>
63
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
$5,600,000 TERM LOAN
CREDIT AGREEMENT
by and among
CHAMPION INDUSTRIES, INC.
INTERFORM CORPORATION
U.S. TAG & TICKET COMPANY, INC.
BOURQUE PRINTING, INC.
SMITH & BUTTERFIELD CO., INC.
DALLAS PRINTING COMPANY, INC.
THE CHAPMAN PRINTING COMPANY, INC.
STATIONERS, INC.
DONIHE GRAPHICS, INC.
CAROLINA CUT SHEETS, INC.
CHMP LEASING, INC.
BLUE RIDGE PRINTING CO., INC.
ROSE CITY PRESS
THE MERTEN COMPANY
and
PNC BANK, NATIONAL ASSOCIATION
Dated as of March 13, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. CERTAIN DEFINITIONS............................................................................................1
1.1 Certain Definitions..................................................................................1
1.2 Construction........................................................................................12
1.2.1 Number; Inclusion........................................................................13
1.2.2 Determination............................................................................13
1.2.3 Bank's Discretion and Consent............................................................13
1.2.4 Documents Taken as a Whole...............................................................13
1.2.5 Headings.................................................................................13
1.2.6 Implied References to this Agreement.....................................................13
1.2.7 Persons..................................................................................13
1.2.8 Modifications to Documents...............................................................13
1.3 Accounting Principles...............................................................................14
2. TERM LOAN.....................................................................................................14
2.1 The Commitments.....................................................................................14
2.2 Commitment Fees.....................................................................................15
2.3 Term Notes..........................................................................................15
2.4 Use of Proceeds.....................................................................................15
3. INTEREST RATES................................................................................................15
3.1 Interest Rate Options...............................................................................15
3.2 Interest Periods....................................................................................16
3.2.1 Initial Period...........................................................................16
3.2.2 Subsequent Periods.......................................................................16
3.2.3 Rate Quotations..........................................................................16
3.2.4 Ending Date and Business Day.............................................................16
3.2.5 Termination Before Expiration Date.......................................................16
3.3 Interest After Default..............................................................................17
3.4 Euro-Rate Unascertainable...........................................................................17
3.4.1 Unascertainable..........................................................................17
3.4.2 Illegality; Increased Costs; Deposits Not Available......................................17
3.4.3 Bank's Rights............................................................................18
4. PAYMENTS......................................................................................................18
4.1 Payments............................................................................................18
4.2 Interest Payment Dates..............................................................................18
4.3 Principal...........................................................................................19
4.4 Prepayments.........................................................................................19
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4.4.1 Right to Prepay..........................................................................19
4.4.2 Change of Lending Office.................................................................19
4.5 Additional Compensation in Certain Circumstances....................................................20
4.5.1 Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc.........................................................20
4.5.2 Indemnity and Compensation...............................................................21
5. REPRESENTATIONS AND WARRANTIES................................................................................21
5.1 Representations and Warranties......................................................................21
5.1.1 Organization and Qualification...........................................................21
5.1.2 Capitalization and Ownership.............................................................21
5.1.3 Subsidiaries.............................................................................22
5.1.4 Power and Authority......................................................................22
5.1.5 Validity and Binding Effect..............................................................22
5.1.6 No Conflict..............................................................................23
5.1.7 Litigation...............................................................................23
5.1.8 Title to Properties......................................................................23
5.1.9 Financial Statements.....................................................................23
5.1.10 Use of Proceeds; Margin Stock...........................................................24
5.1.11 Full Disclosure.........................................................................24
5.1.12 Taxes...................................................................................24
5.1.13 Consents and Approvals..................................................................25
5.1.14 No Event of Default; Compliance with Instruments........................................25
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc..........................................25
5.1.16 Security Interests......................................................................25
5.1.17 Insurance...............................................................................26
5.1.18 Compliance with Laws....................................................................26
5.1.19 Material Contracts; Burdensome Restrictions.............................................26
5.1.20 Investment Companies; Regulated Entities................................................26
5.1.21 Plans and Benefit Arrangements..........................................................27
5.1.22 Employment Matters......................................................................28
5.1.23 Environmental Matters...................................................................28
5.1.24 Senior Debt Status......................................................................29
5.2 Updates to Schedules................................................................................29
6. CONDITIONS OF LENDING.........................................................................................30
6.1 First Loan. On the Closing Date:...................................................................30
6.2 Each Additional Loan................................................................................32
7. COVENANTS.....................................................................................................32
7.1 Affirmative Covenants...............................................................................32
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7.1.1 Preservation of Existence, Etc...........................................................33
7.1.2 Payment of Liabilities, Including Taxes, Etc.............................................33
7.1.3 Maintenance of Insurance.................................................................33
7.1.4 Maintenance of Properties and Leases.....................................................33
7.1.5 Maintenance of Patents, Trademarks, Etc..................................................33
7.1.6 Visitation Rights........................................................................34
7.1.7 Keeping of Records and Books of Account..................................................34
7.1.8 Plans and Benefit Arrangements...........................................................34
7.1.9 Compliance with Laws.....................................................................34
7.1.10 Use of Proceeds.........................................................................34
7.2 Negative Covenants..................................................................................35
7.2.1 Indebtedness.............................................................................35
7.2.2 Liens....................................................................................36
7.2.3 Guaranties...............................................................................36
7.2.4 Loans and Investments....................................................................36
7.2.5 Liquidations, Mergers, Consolidations and Acquisitions...................................37
7.2.6 Dispositions of Assets or Subsidiaries...................................................38
7.2.7 Affiliate Transactions...................................................................38
7.2.8 Continuation of or Change in Business....................................................38
7.2.9 Plans and Benefit Arrangements...........................................................38
7.2.10 Fiscal Year.............................................................................39
7.2.11 Changes in Organizational Documents.....................................................39
7.2.12 Capital Expenditures and Leases.........................................................40
7.2.13 Minimum Fixed Charge Coverage Ratio.....................................................40
7.2.14 Maximum Leverage Ratio..................................................................40
7.2.15 Minimum Tangible Net Worth..............................................................40
7.3 Reporting Requirements..............................................................................41
7.3.1 Quarterly Financial Statements...........................................................41
7.3.2 Annual Financial Statements..............................................................41
7.3.3 Certificate of the Borrowers.............................................................41
7.3.4 Notice of Default........................................................................42
7.3.5 Notice of Litigation.....................................................................42
7.3.6 Certain Events...........................................................................42
7.3.7 Budgets, Forecasts, Other Reports and Information........................................42
7.3.8 Notices Regarding Plans and Benefit Arrangements.........................................43
8. DEFAULT.......................................................................................................44
8.1 Events of Default...................................................................................45
8.1.1 Payments Under Loan Documents............................................................45
8.1.2 Breach of Warranty.......................................................................45
8.1.3 Breach of Negative Covenants or Visitation Rights........................................45
8.1.4 Breach of Other Covenants................................................................45
8.1.5 Defaults in Other Agreements or Indebtedness.............................................45
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8.1.6 Final Judgments or Orders................................................................46
8.1.7 Loan Document Unenforceable..............................................................46
8.1.8 Uninsured Losses; Proceedings Against Assets.............................................46
8.1.9 Notice of Lien or Assessment.............................................................46
8.1.10 Insolvency..............................................................................46
8.1.11 Events Relating to Plans and Benefit Arrangements.......................................47
8.1.12 Cessation of Business...................................................................47
8.1.13 Change of Control.......................................................................47
8.1.14 Involuntary Proceedings.................................................................48
8.1.15 Voluntary Proceedings...................................................................48
8.2 Consequences of Event of Default....................................................................48
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings........48
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.....................................48
8.2.3 Set-off..................................................................................49
8.2.4 Suits, Actions, Proceedings..............................................................49
8.2.5 Application of Proceeds..................................................................49
9. MISCELLANEOUS.................................................................................................50
9.1 Modifications, Amendments or Waivers................................................................50
9.2 No Implied Waivers; Cumulative Remedies; Writing Required...........................................50
9.3 Reimbursement and Indemnification of Bank by the Borrowers; Taxes...................................50
9.4 Holidays............................................................................................51
9.5 Notices.............................................................................................51
9.6 Severability........................................................................................52
9.7 Governing Law.......................................................................................53
9.8 Prior Understanding.................................................................................53
9.9 Duration; Survival..................................................................................53
9.10 Successors and Assigns.............................................................................53
9.11 Confidentiality....................................................................................53
9.12 Counterparts.......................................................................................54
9.13 Bank's Consent.....................................................................................54
9.14 Exceptions.........................................................................................54
9.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL.............................................................54
</TABLE>
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULE
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES, PARTNERSHIPS AND LLC INTERESTS
SCHEDULE 5.1.21 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.23 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(T) - TERM NOTE
EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of March 13, 1998, and is
made by and among CHAMPION INDUSTRIES, INC., a West Virginia corporation
("Champion"), INTERFORM CORPORATION, a Pennsylvania corporation, U.S. TAG &
TICKET COMPANY, INC., a Maryland corporation, BOURQUE PRINTING, INC., a
Louisiana corporation, SMITH & BUTTERFIELD CO., INC., an Indiana corporation,
DALLAS PRINTING COMPANY, INC., a Mississippi corporation, THE CHAPMAN PRINTING
COMPANY, INC., a West Virginia corporation, STATIONERS, INC., a West Virginia
corporation, DONIHE GRAPHICS, INC., a Tennessee corporation, CAROLINA CUT
SHEETS, INC., a West Virginia corporation, CHMP LEASING, INC., a West Virginia
corporation, BLUE RIDGE PRINTING CO., INC., a North Carolina corporation, ROSE
CITY PRESS, a West Virginia corporation and THE MERTEN COMPANY, an Ohio
corporation (each a "Borrower" and collectively and jointly and severally, the
"Borrowers"), and PNC BANK, NATIONAL ASSOCIATION ("Bank").
WITNESSETH:
WHEREAS, the Borrowers have requested the Bank to provide term
loans to the Borrowers in an aggregate principal amount of up to Five Million
Six Hundred Thousand Dollars ($5,600,000) for the purpose of refinancing
existing equipment leases and financing equipment purchases; and
WHEREAS, the Bank is willing to provide such credit upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS.
In addition to words and terms defined elsewhere
in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context hereof clearly
requires otherwise:
AFFILIATE as to any Person shall mean any other
Person (i) which directly or indirectly controls, is controlled by, or
is under common control with such Person, (ii) which beneficially owns
or holds 5% or more of any class of the voting or other equity
interests of such Person, or (iii) 5% or more of any class of voting
interests or other equity interests of which is beneficially owned or
held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by
contract or otherwise, including the power to
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elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
AGREEMENT shall mean this Credit Agreement, as
the same may be supplemented or amended from time to time, including
all schedules and exhibits.
ANNUAL STATEMENTS shall have the meaning
assigned to that term in Section 5.1.9(i).
AUTHORIZED OFFICER shall mean those individuals,
designated by written notice to the Bank from the Borrowers, authorized
to execute notices, reports and other documents on behalf of the
Borrowers required hereunder. The Borrowers may amend such list of
individuals from time to time by giving written notice of such
amendment to the Bank.
BANK shall mean PNC Bank, National Association
and its respective successors and assigns as permitted hereunder.
BASE RATE shall mean the greater of (i) the
interest rate per annum announced from time to time by PNC Bank at its
Principal Office as its then prime rate, which rate may not be the
lowest rate then being charged commercial borrowers by the Bank, or
(ii) the Federal Funds Effective Rate plus 0.5% per annum.
BENEFIT ARRANGEMENT shall mean at any time an
"employee benefit plan," within the meaning of Section 3(3) of ERISA,
which is neither a Plan nor a Multiemployer Plan and which is
maintained, sponsored or otherwise contributed to by any member of the
ERISA Group.
BORROWERS shall have the meaning given in
the recitals to this Agreement.
BUSINESS DAY shall mean any day other than a
Saturday or Sunday or a legal holiday on which commercial banks are
authorized or required to be closed for business in Pittsburgh,
Pennsylvania and on which dealings in dollar deposits are carried on in
the London interbank market.
CLOSING DATE shall mean the Business Day on
which the Term Loans shall be made, which shall be March 13, 1998, or
such other time and place as the parties agree.
CONSIDERATION shall mean with respect to any
Permitted Acquisition, the aggregate of (i) the net present value paid by any
Borrower, directly or indirectly, to the seller in connection therewith, (ii)
the Indebtedness incurred or assumed by any Borrower, whether in favor of the
seller or otherwise and whether fixed or contingent, (iii) any Guaranty given or
incurred by any Borrower in connection therewith, (iv) 50% of the value of stock
transferred, and (v) the net present value of any other consideration given or
obligation incurred by any Borrower in connection therewith.
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CONSOLIDATED CASH FLOW FROM OPERATIONS for any
period of determination shall mean the sum of net income, depreciation,
amortization, other non-cash charges to net income, interest expense and cash
income tax expense minus non-cash credits to net income, all measured on a
rolling four quarters basis of the Borrowers for such period determined and
consolidated in accordance with GAAP.
CONSOLIDATED TANGIBLE NET WORTH shall mean as of
any date of determination total stockholders' equity less intangible assets of
the Borrowers as of such date determined and consolidated in accordance with
GAAP.
DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $
shall mean lawful money of the United States of America.
ENVIRONMENTAL COMPLAINT shall mean any written
complaint setting forth a cause of action for personal or property damage or
natural resource damage or equitable relief, order, notice of violation,
citation, request for information issued pursuant to any Environmental Laws by
an Official Body, subpoena or other written notice of any type relating to,
arising out of, or issued pursuant to, any of the Environmental Laws or any
Environmental Conditions, as the case may be.
ENVIRONMENTAL CONDITIONS shall mean any
conditions of the environment, including the workplace, the ocean, natural
resources (including flora or fauna), soil, surface water, groundwater, any
actual or potential drinking water supply sources, substrata or the ambient air,
relating to or arising out of, or caused by, the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, emptying, discharging, injecting, escaping, leaching, disposal,
dumping, threatened release or other management or mismanagement of Regulated
Substances resulting from the use of, or operations on, any Property.
ENVIRONMENTAL LAWS shall mean all federal, state,
local and foreign Laws and regulations, including permits, licenses,
authorizations, bonds, orders, judgments, and consent decrees issued, or entered
into, pursuant thereto, relating to pollution or protection of human health or
the environment or employee safety in the workplace.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended or supplemented from time to
time, and any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.
ERISA GROUP shall mean, at any time, the
Borrowers and all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control and all other
entities which, together with any Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code.
EURO-RATE shall mean with respect to the Term
Loans, the interest rate per annum for any Interest Period determined by the
Bank by dividing (the resulting quotient rounded upward to the nearest 1/100th
of 1% per annum) (i) the rate of interest determined by the Bank in accordance
with its usual procedures (which determination shall be conclusive and binding
upon the
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Borrowers, absent manifest error on the part of the Bank) to be equal
to the offered rates for deposits in Dollars for the applicable Euro-Rate
Interest Period which appears on Page 3750 of the TELERATE rate reporting system
or other similar system as of approximately 11:00 a.m. Greenwich Mean Time, two
(2) Business Days prior to the first day of such Euro-Rate Interest Period for
an amount comparable to such Loan and having a borrowing date and a maturity
comparable to such Interest Period by (ii) a number equal to 1.00 minus the
Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the
following formula:
Euro Rate = OFFERED RATE ON TELERATE PAGE 3750
1.00 - Euro-Rate Reserve Percentage
If more than one offered rate appears on Page 3750 of the TELERATE reporting
system or similar system, the rate will be the arithmetic mean of such offered
rates. The Euro-Rate shall be adjusted with respect to the balance of the Term
Loans outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Bank shall give prompt notice to the
Borrowers of the Euro-Rate as determined or adjusted in accordance herewith,
which determination shall be conclusive absent manifest error.
EURO-RATE RESERVE PERCENTAGE shall mean the
maximum percentage (expressed as a decimal rounded upward to the nearest 1/100
of 1%) as determined by the Bank which is in effect during any relevant period,
as prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities") of a member bank
in such System.
EVENT OF DEFAULT shall mean any of the events
described in Section 8.1 and referred to therein as an "Event of Default."
FEDERAL FUNDS EFFECTIVE RATE for any day shall
mean the rate per annum (based on a year of 360 days and actual days elapsed and
rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank
of New York (or any successor) on such day as being the weighted average of the
rates on overnight federal funds transactions arranged by federal funds brokers
on the previous trading day, as computed and announced by such Federal Reserve
Bank (or any successor) in substantially the same manner as such Federal Reserve
Bank computes and announces the weighted average it refers to as the "Federal
Funds Effective Rate" as of the date of this Agreement; PROVIDED, if such
Federal Reserve Bank (or its successor) does not announce such rate on any day,
the "Federal Funds Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was announced.
FINANCIAL PROJECTIONS shall have the meaning
assigned to that term in Section 5.1.9(ii).
FIXED CHARGE COVERAGE RATIO shall mean the ratio
of Consolidated Cash Flow from Operations to Fixed Charges.
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FIXED CHARGES shall mean for any period of
determination the sum of interest expense, cash income taxes, scheduled
principal installments on indebtedness (as adjusted for prepayments), the
unfunded portion of capital expenditures and payments under capitalized leases
of the Borrowers for such period determined and consolidated in accordance with
GAAP.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, subject to the provisions of
Section 1.3, and applied on a consistent basis both as to classification of
items and amounts.
GUARANTY of any Person shall mean any obligation
of such Person guaranteeing or in effect guaranteeing any liability or
obligation of any other Person in any manner, whether directly or indirectly,
including any performance bond or other suretyship arrangement and any other
form of assurance against loss, except endorsement of negotiable or other
instruments for deposit or collection in the ordinary course of business and
indemnities.
INDEBTEDNESS shall mean, as to any Person at any
time, any and all indebtedness, obligations or liabilities (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several) of such Person for or in respect of: (i)
borrowed money, (ii) amounts raised under or liabilities in respect of any note
purchase or acceptance credit facility, (iii) reimbursement obligations
(contingent or otherwise) under any letter of credit, currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, (iv) any other transaction (including forward sale or
purchase agreements, capitalized leases and conditional sales agreements) having
the commercial effect of a borrowing of money entered into by such Person to
finance its operations or capital requirements (but not including trade payables
and accrued expenses incurred in the ordinary course of business which are not
represented by a promissory note or other evidence of indebtedness and which are
not more than thirty (30) days past due), or (v) any Guaranty of Indebtedness
for borrowed money.
INELIGIBLE SECURITY shall mean any security
which may not be underwritten or dealt in by member banks of the Federal Reserve
System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24,
Seventh), as amended.
INSOLVENCY PROCEEDING shall mean, with respect
to any Person, (a) case, action or proceeding with respect to such Person (i)
before any court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Borrower or otherwise
relating to liquidation, dissolution, winding-up or relief of such Person, or
(b) any general assignment for the benefit of creditors, composition, marshaling
of assets for creditors, or other, similar arrangement in respect of such
Person's creditors generally or any substantial portion of its creditors,
undertaken under any Law.
INTEREST PERIOD shall have the meaning assigned
to such term in Section 3.2.
INTERNAL REVENUE CODE shall mean the Internal
Revenue Code of 1986, as the same may be amended or supplemented from time to
time, and any successor statute of similar
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import, and the rules and regulations thereunder, as from time to time in
effect.
LABOR CONTRACTS shall mean all employment
agreements, employment contracts, collective bargaining agreements and other
agreements among any Borrower and its employees.
LAW shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree or award of any Official Body.
LIEN shall mean any mortgage, deed of trust,
pledge, lien, security interest, charge or other encumbrance or security
arrangement of any nature whatsoever, whether voluntarily or involuntarily
given, including any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing).
LLC INTERESTS shall have the meaning given to
such term in Section 5.1.3.
LOAN DOCUMENTS shall mean this Agreement, the
Term Notes, and any other instruments, certificates or documents delivered or
contemplated to be delivered hereunder or thereunder or in connection herewith
or therewith, as the same may be supplemented or amended from time to time in
accordance herewith or therewith, and LOAN DOCUMENT shall mean any of the Loan
Documents.
MATERIAL ADVERSE CHANGE shall mean any set of
circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
this Agreement or any other Loan Document, (b) is or could reasonably be
expected to be material and adverse to the business, properties, assets,
financial condition, results of operations of the Borrowers taken as a whole,
(c) impairs materially or could reasonably be expected to impair materially the
ability of the Borrowers taken as a whole to duly and punctually pay or perform
their Indebtedness, or (d) impairs materially or could reasonably be expected to
impair materially the ability of the Bank, to the extent permitted, to enforce
their legal remedies pursuant to this Agreement or any other Loan Document.
MATURITY DATE shall mean March 1, 2003 with
respect to the Tranche A Loan and December 1, 2003 with respect to the Tranche B
Loan.
MONTH, with respect to an Interest Period, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. If any Interest Period
begins on a day of a calendar month for which there is no numerically
corresponding day in the month in which such Interest Period is to end, the
final month of such Interest Period shall be deemed to end on the last Business
Day of such final month.
MULTIBANK CREDIT AGREEMENT shall mean the Credit
Agreement by and among Champion Industries, Inc., the banks party thereto and
the Bank as Agent, dated as of March 31, 1997 as the same may be amended from
time to time.
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MULTIEMPLOYER PLAN shall mean any employee
benefit plan which is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA and to which any Borrower or any member of the ERISA Group
is then making or accruing an obligation to make contributions or, within the
preceding five Plan years, has made or had an obligation to make such
contributions.
MULTIPLE EMPLOYER PLAN shall mean a Plan which
has two or more contributing sponsors (including any Borrower or any member of
the ERISA Group) at least two of whom are not under common control, as such a
plan is described in Sections 4063 and 4064 of ERISA.
NOTICES shall have the meaning assigned to that
term in Section 9.5.
OBLIGATION shall mean any obligation or liability
of the Borrowers to the Bank, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing, or due or
to become due, under or in connection with this Agreement, the Term Notes, or
any other Loan Document.
OFFICIAL BODY shall mean any national, federal,
state, local or other government or political subdivision or any agency,
authority, bureau, central bank, commission, department or instrumentality of
either, or any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.
PARTNERSHIP INTERESTS shall have the meaning
given to such term in Section 5.1.3.
PBGC shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA or any
successor.
PERMITTED ACQUISITION shall have the meaning
assigned to such term in Section 7.2.5.
PERMITTED INVESTMENTS shall mean:
(i) direct obligations of the United
States of America or any agency or instrumentality thereof or obligations backed
by the full faith and credit of the United States of America maturing in twelve
(12) months or less from the date of acquisition;
(ii) commercial paper maturing in 180 days
or less rated not lower than A-1, by Standard & Poor's or P-1 by Moody's
Investors Service, Inc. on the date of acquisition;
(iii) demand deposits, time deposits or
certificates of deposit maturing within one year in commercial banks whose
obligations are rated A-1, A or the equivalent or better by Standard & Poor's on
the date of acquisition; and
(iv) Investments shown on SCHEDULE 1.1(P).
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PERMITTED LIENS shall mean:
(i) Liens, security interests and
mortgages in favor of the Bank;
(ii) Liens, security interests and mortgages
in favor of the Bank pursuant to the Multibank Credit Agreement;
(iii) Liens for taxes, assessments, or
similar charges, incurred in the ordinary course of business and which are not
yet due and payable;
(iv) Pledges or deposits made in the
ordinary course of business to secure payment of workmen's compensation, or to
participate in any fund in connection with workmen's compensation, unemployment
insurance, old-age pensions or other social security programs;
(v) Liens of mechanics, materialmen,
warehousemen, carriers, or other like Liens, securing obligations incurred in
the ordinary course of business that are not yet due and payable and Liens of
landlords securing obligations to pay lease payments that are not yet due and
payable or in default;
(vi) Good-faith pledges or deposits made in
the ordinary course of business to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or leases, not in
excess of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other similar bonds
required in the ordinary course of business;
(vii) Encumbrances consisting of zoning
restrictions, easements or other restrictions on the use of real property, none
of which materially impairs the use of such property or the value thereof, and
none of which is violated in any material respect by existing or proposed
structures or land use;
(viii) Liens on property leased by the
Borrowers under capital and operating leases permitted in Section 7.2.12
securing obligations of the Borrowers to the lessor under such leases;
(ix) Any Lien existing on the date of this
Agreement and described on SCHEDULE 1.1(P), as the debt underlying such Lien may
be refinanced or replaced (but the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien) and a
replacement Lien placed thereon;
(x) Purchase Money Security Interests,
PROVIDED that the aggregate amount of Purchase Money Indebtedness secured by
such Purchase Money Security Interests shall not exceed the limitations on
Purchase Money Indebtedness set forth in Section 7.2.1(iv);
(xi) The following, (A) if the validity or
amount thereof is being contested in good faith by appropriate and lawful
proceedings diligently conducted so long as levy
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and execution thereon have been stayed and continue to be stayed or (B) if a
final judgment is entered and such judgment is discharged within thirty (30)
days of entry, and in either case they do not, in the aggregate, materially
impair the ability of such Borrower to perform its Obligations hereunder or
under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges
due and payable and subject to interest or penalty, PROVIDED
that the Borrowers maintain such reserves or other appropriate
provisions as shall be required by GAAP and pays all such
taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects
of title to, real or personal property, including any
attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual
Liens.
(4) Liens resulting from final judgments or orders
described in Section 8.1.6; and
PERSON shall mean any individual, corporation,
partnership, limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
PLAN shall mean at any time an employee pension
benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan)
which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code and either (i) is
maintained by any member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five years been
maintained by any entity which was at such time a member of the ERISA Group for
employees of any entity which was at such time a member of the ERISA Group.
POTENTIAL DEFAULT shall mean any event or
condition which with notice, passage of time or a determination by the Bank
would constitute an Event of Default.
PRINCIPAL OFFICE shall mean the main banking
office of the Bank in Pittsburgh, Pennsylvania.
PROHIBITED TRANSACTION shall mean any prohibited
transaction as defined in Section 4975 of the Internal Revenue Code or Section
406 of ERISA for which neither an individual nor a class exemption has been
issued by the United States Department of Labor.
PROPERTY shall mean all real property, both
owned and leased, of the Borrowers.
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PURCHASE MONEY INDEBTEDNESS shall mean any loan
or deferred payment obligation of the Borrowers secured by a Purchase Money
Security Interest.
PURCHASE MONEY SECURITY INTEREST shall mean
Liens upon tangible property securing loans to the Borrowers or deferred
payments by the Borrowers for the purchase of such tangible property.
RATIO shall mean the ratio of the Borrower's
Total Senior Indebtedness to Earnings Before Interest, Taxes, Depreciation, and
Amortization ("EBITDA"). For purposes of the Ratio, Total Senior Indebtedness
shall be measured as of the end of each fiscal quarter and EBITDA shall be
measured as of the end of each fiscal quarter for the previous four fiscal
quarters.
REGULATED SUBSTANCES shall mean any substance,
including any solid, liquid, semisolid, gaseous, thermal, thoriated or
radioactive material, refuse, garbage, wastes, chemicals, petroleum products,
by-products, coproducts, impurities, dust, scrap, heavy metals, defined as a
"hazardous substance," "pollutant," "pollution," "contaminant," "hazardous or
toxic substance," "extremely hazardous substance," "toxic chemical," "toxic
waste," "hazardous waste," "industrial waste," "residual waste," "solid waste,"
"municipal waste," "mixed waste," "infectious waste," "chemotherapeutic waste,"
"medical waste," or "regulated substance" or any related materials, substances
or wastes as now or hereafter defined pursuant to any Environmental Laws,
ordinances, rules, regulations or other directives of any Official Body, the
generation, manufacture, extraction, processing, distribution, treatment,
storage, disposal, transport, recycling, reclamation, use, reuse, spilling,
leaking, dumping, injection, pumping, leaching, emptying, discharge, escape,
release or other management or mismanagement of which is regulated by the
Environmental Laws.
REGULATION U shall mean Regulation U, T, G or X
as promulgated by the Board of Governors of the Federal Reserve System, as
amended from time to time.
REPORTABLE EVENT shall mean a reportable event
described in Section 4043 of ERISA and regulations thereunder with respect to a
Plan or Multiemployer Plan.
SECTION 20 SUBSIDIARY shall mean the Subsidiary
of the bank holding company controlling any Bank, which Subsidiary has been
granted authority by the Federal Reserve Board to underwrite and deal in certain
Ineligible Securities.
SECURITY AGREEMENTS shall mean the Security
Agreements in substantially the form of EXHIBIT 1.1(S) executed and delivered by
each of the Borrowers to the Bank.
SHARES shall have the meaning assigned to that
term in Section 5.1.2.
STANDARD & POOR'S shall mean Standard & Poor's
Ratings Services.
SUBSIDIARY of any Person at any time shall mean
(i) any corporation or trust of which more than 50% (by number of shares or
number of votes) of the outstanding capital stock or shares of beneficial
interest normally entitled to vote for the election of one or more directors or
trustees (regardless of any contingency which does or may suspend or dilute the
voting rights) is at
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such time owned directly or indirectly by such Person or one or more of such
Person's Subsidiaries, (ii) any partnership of which such Person is a general
partner or of which more than 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, (iii) any limited liability company of which such Person is a
member or of which more than 50% of the limited liability company interests is
at the time directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries or (iv) any corporation, trust, partnership, limited
liability company or other entity which is controlled or capable of being
controlled by such Person or one or more of such Person's Subsidiaries.
SUBSIDIARY SHARES shall have the meaning
assigned to that term in Section 5.1.3.
TRANCHE B LOAN COMMITMENT EXPIRATION DATE shall
mean March 12, 1999.
TERM LOANS shall have the meaning assigned to
that term in Section 2.1.
TERM NOTES shall mean collectively and Term Note
shall mean separately all of the Term Notes of the Borrowers in the form of
Exhibit 1.1(T) evidencing the Tranche A Loan and the Tranche B Loan together
with all amendments, extensions, renewals, replacements refinancings or refunds
thereof in whole or in part.
TOTAL SENIOR INDEBTEDNESS shall mean as to the
Borrowers, taken as a whole, the sum of all borrowed money and all reimbursement
obligations under any letters of credit.
TRANCHE A LOAN shall have the meaning assigned
to that term in Section 2.1.
TRANCHE B LOAN shall have the meaning assigned
to that term in Section 2.1.
TRANCHE B LOAN COMMITMENT shall mean $3,000,000.
1.2 CONSTRUCTION.
Unless the context of this Agreement otherwise clearly
requires, the following rules of construction shall apply to this Agreement and
each of the other Loan Documents:
1.2.1 NUMBER; INCLUSION.
references to the plural include the singular, the
plural, the part and the whole; "or" has the inclusive meaning represented by
the phrase "and/or," and "including" has the meaning represented by the phrase
"including without limitation";
1.2.2 DETERMINATION.
references to "determination" of or by the Bank shall be
deemed to include good-faith estimates by the Bank (in the case of quantitative
determinations) and good-faith beliefs by the Bank (in the case of qualitative
determinations) and such determination shall be conclusive absent manifest
error;
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1.2.3 BANK'S DISCRETION AND CONSENT.
whenever the Bank is granted the right herein to
act in its sole discretion or to grant or withhold consent such right shall be
exercised reasonably and in good faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
the words "hereof," "herein," "hereunder,"
"hereto" and similar terms in this Agreement or any other Loan Document refer to
this Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.5 HEADINGS.
the section and other headings contained in this
Agreement or such other Loan Document and the Table of Contents (if any),
preceding this Agreement or such other Loan Document are for reference purposes
only and shall not control or affect the construction of this Agreement or such
other Loan Document or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
article, section, subsection, clause, schedule
and exhibit references are to this Agreement or other Loan Document, as the case
may be, unless otherwise specified;
1.2.7 PERSONS.
reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement or such other Loan Document, as the case may be,
and reference to a Person in a particular capacity excludes such Person in any
other capacity; and
1.2.8 MODIFICATIONS TO DOCUMENTS.
reference to any agreement (including this
Agreement and any other Loan Document together with the schedules and exhibits
hereto or thereto), document or instrument means such agreement, document or
instrument as amended, modified, replaced, substituted for, superseded or
restated.
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1.3 ACCOUNTING PRINCIPLES.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP; PROVIDED, HOWEVER, that all accounting
terms used in Section 7.2 (and all defined terms used in the definition of any
accounting term used in Section 7.2 shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof applied on a
basis consistent with those used in preparing the Annual Statements referred to
in Section 5.1.9(i). In the event of any change after the date hereof in GAAP,
and if such change would result in the inability to determine compliance with
the financial covenants set forth in Section 7.2 based upon the Borrowers'
regularly prepared financial statements by reason of the preceding sentence,
then the parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in a
manner that would not affect the substance thereof, but would allow compliance
therewith to be determined in accordance with the Borrowers' financial
statements at that time.
2. TERM LOAN
2.1 THE COMMITMENTS.
(a) $2,6000,000 TERM LOAN. Subject to the terms
and conditions hereof and relying upon the representations and warranties herein
set forth, the Bank agrees to make a term loan to the Borrowers on the Closing
Date in a principal amount equal to Two Million Six Hundred Thousand Dollars and
No/100 ($2,600,000.00) ("Tranche A Loan").
(b) EQUIPMENT LINE/TERM CREDIT FACILITY.
Subject to the terms and conditions hereof and relying upon the representations
and warranties herein set forth, the Bank agrees to make additional term loans
to the Borrowers in the maximum aggregate principal amount of Three Million
Dollars and No/100 ($3,000,000.00) ("Tranche B Loan") which can be drawn on
until the Tranche B Commitment Expiration Date to finance equipment acquisitions
by the Borrowers. The Borrowers shall request advances for Tranche B Loans by
submitting invoices to the Bank for equipment acquisitions. If the Bank finds
the invoice in order, and if the face amount of the invoice, together with all
Tranche B Loans then outstanding, would not exceed the Tranche B Loan
Commitment, the Bank will advance the face amount of the invoice to the
Borrowers.
The term loans described in subparagraphs (a) and (b) above
shall be known collectively as the "Term Loans," each a "Term Loan." The
Commitments are not revolving credit commitments, and the Borrowers shall not
have the right to borrow, repay and reborrow under this Section 2.1.
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2.2 COMMITMENT FEES.
Accruing from the date hereof until the Tranche B Commitment
Expiration Date, the Borrowers agree to pay to the Bank as consideration for the
Bank's Equipment Line/Term Credit Facility Commitment hereunder, a commitment
fee equal to one-fourth percent (1/4%) per annum (computed on the basis of a
year of 360 days and actual days elapsed) on the average daily unborrowed amount
of the Tranche B Loan Commitment as the same may be constituted from time to
time. All Commitment Fees shall be payable in arrears on the last Business Day
of the January, April, July, and October immediately following the date hereof
and on the Tranche B Commitment Expiration Date or upon acceleration of the Term
Notes, if sooner.
2.3 TERM NOTES.
The Obligation of the Borrowers to repay the unpaid principal
amount of the Term Loans made to it by the Bank, together with interest thereon,
shall be evidenced by a Tranche A Term Note and a Tranche B Term Note, each
dated the date of this Agreement.
2.4 USE OF PROCEEDS.
The proceeds of the Tranche A Loan shall be used by the
Borrowers to refinance their existing equipment leases. The proceeds of the
Tranche B Loans shall be used to finance the Borrowers' equipment acquisitions.
3. INTEREST RATES
3.1 INTEREST RATE OPTIONS.
The Borrowers shall pay interest in respect of the
outstanding unpaid principal amount of Term Loans as selected by it from the
Base Rate Option or Euro-Rate Option set forth below. If at any time the
designated rate applicable to the Term Loans made by the Bank exceeds the Bank's
highest lawful rate, the rate of interest on such Term Loan shall be limited to
the Bank's highest lawful rate. The Borrowers shall have the right to select
from the following Interest Rate Options applicable to the Term Loans:
(a) BASE RATE OPTION: A fluctuating rate per
annum (computed on the basis of a year of 360 days and actual days elapsed)
equal to the Base Rate plus one-half percent (1/2%), such interest rate to
change automatically from time to time effective as of the effective date of
each change in the Base Rate; or
(b) EURO-RATE OPTION: The Euro-Rate applicable
to the Term Loan shall be a rate per annum (computed on the basis of a year of
360 days and actual days elapsed) determined by reference to the Ratio as
follows:
<TABLE>
<CAPTION>
RATIO EURO-RATE +
----- -----------
<S> <C>
>= 2.00 X 175 basis points
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>= 1.50 X < 2.00 X 150 basis points
< 1.50 X 125 basis points
</TABLE>
(c) ASSUMED DESIGNATION. If with respect to any
Loan the Borrowers do not designate an interest rate option, the Base Rate shall
apply.
3.2 INTEREST PERIODS.
3.2.1 INITIAL PERIOD.
From time to time, the Borrowers may specify one or
more interest periods during which the Euro-Rate shall apply to the Term Loans.
Such initial interest period, and all subsequent interest periods elected by the
Borrowers (each being an "Interest Period") shall be one, two, three or six
Months in duration.
3.2.2 SUBSEQUENT PERIODS.
At least three (3) Business Days prior to the
expiration of the Interest Period then in effect, the Borrowers shall submit a
written request (the "Euro-Rate Request") to the Bank specifying the term of the
next Interest Period to which the Euro-Rate shall apply.
3.2.3 RATE QUOTATIONS.
The Borrowers may call the Bank on or before the date
on which a Euro-Rate Request is to be delivered to receive an indication of the
rates then in effect, but it is acknowledged that such projection shall not be
binding on the Bank nor affect the rate of interest which thereafter is actually
in effect when the election is made.
3.2.4 ENDING DATE AND BUSINESS DAY.
Any Interest Period which would otherwise end on a
date which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day.
3.2.5 TERMINATION BEFORE EXPIRATION DATE.
The Borrowers shall not select, convert to or renew
an Interest Period for any portion of the Term Loans that would end after the
applicable Maturity Date.
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3.3 INTEREST AFTER DEFAULT.
To the extent permitted by Law, upon the occurrence of an
Event of Default and until such time such Event of Default shall have been cured
or waived, the rate of interest applicable to the entire outstanding balance of
the Term Loans shall be increased to a rate of interest equal to the Base Rate
plus 2.0% per annum (the "Default Rate"). The Borrowers acknowledge that the
increase in rates referred to in this Section 3.3 reflects, among other things,
the fact that such Term Loans or other amounts have become a substantially
greater risk given their default status and that the Bank is entitled to
additional compensation for such risk; and all such interest shall be payable by
Borrowers upon demand by the Bank.
3.4 EURO-RATE UNASCERTAINABLE.
3.4.1 UNASCERTAINABLE.
If on any date on which a Euro-Rate would otherwise
be determined, the Bank shall have determined that:
(i) adequate and reasonable means do not
exist for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the secondary market for negotiable
certificates of deposit maintained by dealers of recognized standing relating to
the London interbank eurodollar market relating to the Euro-Rate, the Bank shall
have the rights specified in Section 3.4.3.
3.4.2 ILLEGALITY; INCREASED COSTS; DEPOSITS NOT
AVAILABLE.
If at any time the Bank shall have determined that:
(i) the making, maintenance or funding
of any Loan to which a Euro-Rate would otherwise apply has been made
impracticable or unlawful by compliance by the Bank in good faith with any Law
or any interpretation or application thereof by any Official Body or with any
request or directive of any such Official Body (whether or not having the force
of Law), or
(ii) such Euro-Rate would not adequately
and fairly reflect the cost to the Bank of the establishment or maintenance of
any such Term Loan, or
(iii)after making all reasonable efforts,
deposits of the relevant amount in Dollars for the relevant Interest Period for
a Loan to which a Euro-Rate would otherwise apply, are not available to the Bank
at the effective cost of funding a proposed Loan in the London interbank market,
then the Bank shall have the rights specified in Section 3.4.3.
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3.4.3 BANK'S RIGHTS.
In the case of any event specified in Section 3.4.1
or Section 3.4.2 above, the Bank shall promptly so notify the Borrowers thereof,
and in the case of an event specified in Section 3.4.2 above, the Bank shall
promptly endorse a certificate to such notice as to the specific circumstances
of such notice, and the Bank shall promptly send copies of such notice and
certificate to the Borrowers. If the Bank notifies the Borrowers of a
determination under Section 3.4.1 or Section 3.4.2, the Borrowers shall, subject
to the Borrowers' indemnification Obligations under Section 4.5.2, on the date
specified in such notice either convert the outstanding balance of the
applicable Term Loan to the Base Rate or prepay the applicable Term Loan in
accordance with Section 4.4. Absent due notice from the Borrowers of conversion
or prepayment, the then outstanding balance of the Term Loan shall automatically
be converted to the Base Rate upon such specified date.
4. PAYMENTS
4.1 PAYMENTS.
All payments and prepayments to be made in respect of
principal, interest, or other fees or amounts due from the Borrowers hereunder
shall be payable prior to 1:00 p.m., Pittsburgh time, on the date when due
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrowers, and without set-off, counterclaim or
other deduction of any nature, and an action therefor shall immediately accrue.
Such payments shall be made to the Bank at the Principal Office in U.S. Dollars
and in immediately available funds. The Bank's statement of account, ledger or
other relevant record shall, in the absence of manifest error, be conclusive as
the statement of the amount of principal of and interest on the Loans and other
amounts owing under this Agreement and shall be deemed an "account stated."
4.2 INTEREST PAYMENT DATES.
Interest on the outstanding balance of the Term Loans shall be
due and payable in arrears on the tenth Business Day of each month beginning
April 14, 1998 and on the applicable Maturity Date or upon acceleration of the
Term Notes. Interest on the principal amount of the Term Loans or other monetary
Obligation shall be due and payable on demand after such principal amount or
other monetary Obligation becomes due and payable (whether on the stated
maturity date, upon acceleration or otherwise).
4.3 PRINCIPAL
The Tranche A Term Loan shall be repaid in 59 equal
consecutive monthly installments of $43,333.33 each, beginning April 1, 1998.
All remaining principal and interest will be due and owing on March 1, 2003. The
Tranche B Term Loan shall be repaid in 60 equal consecutive monthly
installments, based on the outstanding balance on the Tranche B Commitment
Expiration Date, beginning January 1, 1999 and ending December 1, 2003.
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4.4 PREPAYMENTS.
4.4.1 RIGHT TO PREPAY.
The Borrowers shall have the right at its option from
time to time to prepay the Term Loans in whole or part without premium or
penalty (except as provided in Section 4.5) unless the Borrowers have selected a
Euro-Rate Option and the Euro Rate contract is terminated early, in which case
the Borrowers shall be liable for a penalty in the amount of the Bank's cost to
terminate such contract.
Whenever the Borrowers desire to prepay any part of
the Term Loan, they shall provide a prepayment notice to the Bank at least one
(1) Business Day prior to the date of prepayment of the Term Loans setting forth
the following information:
(x) the date, which shall be a Business Day, on
which the proposed prepayment is to be made;
(y) the total principal amount of such
prepayment, which shall not be less than $100,000 and
(z) the Commitment under which the Term Loan was
made.
All prepayment notices shall be irrevocable. All
Term Loan prepayments permitted pursuant to this Section 4.5.1 shall be applied
first to the unpaid installments of principal of the Tranche B Loan in the
inverse order of scheduled maturities and second to the unpaid installments of
principal of the Tranche A Loan in inverse order of maturities. Any prepayment
hereunder shall be subject to the Borrowers' Obligation to indemnify and
compensate the Bank under Section 4.5.2.
4.4.2 CHANGE OF LENDING OFFICE
The Bank agrees that upon the occurrence of any event
giving rise to increased costs or other special payments under Section 3.4.2
(Illegality, etc.) or 4.5.1 (Increased Costs, etc.) with respect to the Bank, it
will if requested by the Borrowers use reasonable efforts (subject to overall
policy considerations of the Bank) to designate another lending office for any
Loans affected by such event, PROVIDED that such designation is made on such
terms that the Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing in this Section
4.5.2 shall affect or postpone any of the Obligations of the Borrowers or the
rights of the Bank provided in this Agreement.
4.5 ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES.
4.5.1 INCREASED COSTS OR REDUCED RETURN RESULTING
FROM TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC.
If any Law, guideline or interpretation or
application thereof by any Official
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Body charged with the interpretation or administration thereof enacted or made
after the date of this Agreement or compliance with any request or directive
(whether or not having the force of Law) of any central bank or other Official
Body made after the date of this Agreement:
(i) subjects the Bank to any tax or
changes the basis of taxation with respect to this Agreement, the Term Notes,
the Term Loans or payments by the Borrowers of principal, interest or other
amounts due from the Borrowers hereunder or under the Term Notes (except for
taxes on the overall net income or gross receipts of the Bank),
(ii) imposes, modifies or deems
applicable any reserve, special deposit or
similar requirement against credits or commitments to extend credit extended by,
or assets (funded or contingent) of, deposits with or for the account of, or
other acquisitions of funds by, the Bank, or
(iii)imposes, modifies or deems
applicable any capital adequacy or similar requirement (A) against assets
(funded or contingent) of, or other credits or commitments to extend credit
extended by, the Bank, or (B) otherwise applicable to the obligations of the
Bank under this Agreement, and the result of any of the foregoing is to increase
the cost to, reduce the income receivable by, or impose any expense (including
loss of margin) upon the Bank with respect to this Agreement, the Term Notes or
the making, maintenance or funding of any part of the Term Loans (or, in the
case of any capital adequacy or similar requirement, to have the effect of
reducing the rate of return on the Bank's capital, taking into consideration the
Bank's customary policies with respect to capital adequacy) by an amount which
the Bank in its sole discretion deems to be material, the Bank shall from time
to time notify the Borrowers of the amount determined in good faith (using any
averaging and attribution methods employed in good faith including allocation to
the Borrowers of pro rated amounts ) by the Bank to be necessary to compensate
the Bank for such increase in cost, reduction of income, additional expense or
reduced rate of return. The Bank will use reasonable efforts to avoid such
increase in costs, reduction of income, additional expense or reduced rate of
return . Notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrowers to the Bank
thirty (30) Business Days after such notice is given.
4.5.2 INDEMNITY AND COMPENSATION.
In addition to the compensation required by Section
4.5.1, the Borrowers shall indemnify and compensate each Bank against all
liabilities, losses or expenses (including loss of margin, any loss or expense
incurred in liquidating or employing deposits from third parties and any loss or
expense incurred in connection with funds acquired by the Bank to fund or
maintain any portion of the Term Loans subject to the Euro-Rate) which the Bank
sustains or incurs as a consequence of any default by the Borrowers in the
performance or observance of any covenant or condition contained in this
Agreement or any other Loan Document, including any failure of the Borrowers to
pay when due (by acceleration or otherwise) any principal, interest or any other
amount due hereunder.
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If the Bank sustains or incurs any such loss or
expense, it shall from time to time notify the Borrowers of the amount
determined in good faith by the Bank (which determination may include such
assumptions, allocations of costs and expenses and averaging or attribution
methods as the Bank shall deem reasonable) to be necessary to indemnify and
compensate the Bank for such loss or expense. Such notice shall set forth in
reasonable detail the basis for such determination and shall be binding absent
manifest error. Such amount shall be due and payable by the Borrowers to the
Bank ten (10) Business Days after such notice is given.
5. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES.
The Borrowers jointly and severally represent and warrant to
the Bank on the date of this Agreement as follows:
5.1.1 ORGANIZATION AND QUALIFICATION.
Each of the Borrowers is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each of the Borrowers has the lawful power to
own or lease its properties and to engage in the business it presently conducts
or proposes to conduct. Each of the Borrowers is duly licensed or qualified and
in good standing in all other jurisdictions where the property owned or leased
by it or the nature of the business transacted by it or both makes such
licensing or qualification necessary.
5.1.2 CAPITALIZATION AND OWNERSHIP.
The authorized capital stock of Champion consists of
20,000,000 shares of Common Stock, $1 par value, of which 8,464,167 shares
(referred to herein as the "Shares") are issued and outstanding. All of the
Shares have been validly issued and are fully paid and nonassessable. There are
no options, warrants or other rights outstanding to purchase any such shares
except as indicated on SCHEDULE 5.1.2.
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5.1.3 SUBSIDIARIES.
SCHEDULE 5.1.3 states the name of each of the
Borrowers (other than Champion Industries, Inc.), its jurisdiction of
incorporation, its authorized capital stock, the issued and outstanding shares
(referred to herein as the "Subsidiary Shares") and the owners thereof if it is
a corporation, its outstanding partnership interests (the "Partnership
Interests") if it is a partnership and its outstanding limited liability company
interests, interests assigned to managers thereof and the voting rights
associated therewith (the "LLC Interests") if it is a limited liability company.
Each of the Borrowers has good and marketable title to all of the Subsidiary
Shares, Partnership Interests and LLC Interests it purports to own, free and
clear in each case of any Lien. All Subsidiary Shares, Partnership Interests and
LLC Interests have been validly issued, and all Subsidiary Shares are fully paid
and nonassessable. All capital contributions and other consideration required to
be made or paid in connection with the issuance of the Partnership Interests and
LLC Interests have been made or paid, as the case may be. There are no options,
warrants or other rights outstanding to purchase any such Subsidiary Shares,
Partnership Interests or LLC Interests except as indicated on SCHEDULE 5.1.3.
5.1.4 POWER AND AUTHORITY.
Each of the Borrowers has full power to enter into,
execute, deliver and carry out this Agreement and the other Loan Documents to
which it is a party, to incur the Indebtedness contemplated by the Loan
Documents and to perform its Obligations under the Loan Documents to which it is
a party, and all such actions have been duly authorized by all necessary
proceedings on its part.
5.1.5 VALIDITY AND BINDING EFFECT.
This Agreement has been duly and validly executed and
delivered by each of the Borrowers, and each other Loan Document which any
Borrower is required to execute and deliver on or after the date hereof will
have been duly executed and delivered by such Borrower on the required date of
delivery of such Loan Document. This Agreement and each other Loan Document
constitutes, or will constitute, legal, valid and binding obligations of each
Borrower which is or will be a party thereto on and after its date of delivery
thereof, enforceable against such Borrower in accordance with its terms, except
to the extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or general equitable
principles.
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5.1.6 NO CONFLICT.
Neither the execution and delivery of this Agreement
or the other Loan Documents by the Borrowers nor the consummation of the
transactions herein or therein contemplated or compliance with the terms and
provisions hereof or thereof by any of them will conflict with, constitute a
default under or result in any breach of (i) the terms and conditions of the
certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents of the Borrowers or (ii) any Law or
any material agreement or instrument or order, writ, judgment, injunction or
decree to which any Borrower is a party or by which any Borrower is bound or to
which it is subject, or result in the creation or enforcement of any Lien,
charge or encumbrance whatsoever upon any property (now or hereafter acquired)
of any Borrower.
5.1.7 LITIGATION.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Borrowers, threatened against
any Borrower at law or equity before any Official Body which individually or in
the aggregate may result in any Material Adverse Change. None of the Borrowers
is in material violation of any order, writ, injunction or any decree of any
Official Body which may result in any Material Adverse Change.
5.1.8 TITLE TO PROPERTIES.
Each of the Borrowers has good and marketable title
to or valid leasehold interest in all properties, assets and other rights which
it purports to own or lease or which are reflected as owned or leased on its
books and records, free and clear of all Liens and encumbrances except Permitted
Liens, and subject to the terms and conditions of the applicable leases. All
leases of property are in full force and effect without the necessity for any
consent which has not previously been obtained upon consummation of the
transactions contemplated hereby.
5.1.9 FINANCIAL STATEMENTS.
(I) ANNUAL STATEMENTS. Champion has
delivered to the Bank copies of its audited consolidated year-end financial
statements for and as of the end of the three fiscal years ended October 31,
1997 (the "Annual Statements"). The Annual Statements were compiled from the
books and records maintained by the Borrowers' management, are correct and
complete and fairly represent the consolidated financial condition of the
Borrowers as of their dates and the results of operations for the fiscal periods
then ended and have been prepared in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments.
(II) FINANCIAL PROJECTIONS. Champion has
delivered to the Bank financial projections of the Borrowers for the period
through _______ ___, 199__ derived from various assumptions of the Borrowers'
management (the "Financial Projections"). The Financial Projections represent a
reasonable range of possible results in light of the history of the business,
present and foreseeable conditions and the intentions of the Borrowers'
management. The Financial Projections accurately reflect the liabilities of the
Borrowers upon consummation of the transactions
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contemplated hereby as of the Closing Date.
(III)ACCURACY OF FINANCIAL STATEMENTS.
None of the Borrowers has any material liabilities, contingent or otherwise, or
forward or long-term commitments that are not disclosed in the Annual Statements
or in the notes thereto and which under GAAP were required to be disclosed
therein, and except as disclosed therein there are no unrealized or anticipated
losses from any commitments of any Borrower which are reasonably likely to cause
a Material Adverse Change. Since October 31, 1997, no Material Adverse Change
has occurred.
5.1.10 USE OF PROCEEDS; MARGIN STOCK.
The Borrowers intend to use the proceeds of the Loans
in accordance with Section 2.4 hereof. None of the Borrowers engages or intends
to engage principally, or as one of its important activities, in the business of
extending credit for the purpose, immediately, incidentally or ultimately, of
purchasing or carrying margin stock (within the meaning of Regulation U). No
part of the proceeds of the Term Loans has been or will be used, immediately,
incidentally or ultimately, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock or
to refund Indebtedness originally incurred for such purpose, or for any purpose
which entails a violation of or which is inconsistent with the provisions of the
regulations of the Board of Governors of the Federal Reserve System. None of the
Borrowers holds or intends to hold margin stock in such amounts that more than
25% of the reasonable value of the assets of such Borrower are or will be
represented by margin stock.
5.1.11 FULL DISCLOSURE.
Neither this Agreement nor any other Loan Document,
nor any certificate, statement, agreement or other documents furnished to the
Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading.
5.1.12 TAXES.
All federal, state, local and other tax returns
required to have been filed with respect to the Borrowers have been filed, and
payment or adequate provision has been made for the payment of all taxes, fees,
assessments and other governmental charges which have or may become due pursuant
to said returns or to assessments received, except to the extent that such
taxes, fees, assessments and other charges are not material and are being
contested in good faith by appropriate proceedings diligently conducted and for
which such reserves or other appropriate provisions, if any, as shall be
required by GAAP shall have been made. There are no agreements or waivers
extending the statutory period of limitations applicable to any federal income
tax return of any Borrower for any period.
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5.1.13 CONSENTS AND APPROVALS.
No consent, approval, exemption, order or
authorization of, or a registration or filing with, any Official Body or any
other Person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Loan
Documents by the Borrowers.
5.1.14 NO EVENT OF DEFAULT; COMPLIANCE WITH
INSTRUMENTS.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the borrowings or other
extensions of credit to be made on the Closing Date under or pursuant to the
Loan Documents which constitutes an Event of Default or Potential Default. None
of the Borrowers is in material violation of (i) any term of its certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents or (ii) any material agreement or instrument to
which it is a party or by which it or any of its properties may be subject or
bound.
5.1.15 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES,
ETC.
Each of the Borrowers owns or possesses all the
material patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises, permits and rights necessary to own and operate its
properties and to carry on its business as presently conducted and planned to be
conducted by such Borrower, without known possible, alleged or actual conflict
with the rights of others.
5.1.16 SECURITY INTERESTS.
The Liens and security interests granted to the Bank
pursuant to the Security Agreement in the Collateral constitute and will
continue to constitute Prior Security Interests under the Uniform Commercial
Code as in effect in each applicable jurisdiction (the "Uniform Commercial
Code") or other applicable Law entitled to all the rights, benefits and
priorities provided by the Uniform Commercial Code or such Law. Upon the filing
of financing statements relating to said security interests in each office and
in each jurisdiction where required in order to perfect the security interests
described above, all such action as is necessary or advisable to establish such
rights of the Bank will have been taken, and there will be upon execution and
delivery of the Security Agreement, such filings, and no necessity for any
further action in order to preserve, protect and continue such rights, except
(i) the filing of continuation statements with respect to such financing
statements within six months prior to each five-year anniversary of the filing
of such financing statements, and (ii) filing additional financing statements
if, as provided in the Security Agreement, additional locations or names are
used. All filing fees and other expenses in connection with each such action
have been or will be paid by the Borrowers.
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5.1.17 INSURANCE.
The Borrowers maintain policies and bonds provide adequate coverage
from reputable and financially sound insurers in amounts sufficient to insure
the assets and risks of each Borrower in accordance with prudent business
practice in the industries of the Borrowers. No notice has been given or claim
made and no grounds exist to cancel or avoid any such policy or bonds or to
reduce the coverage provided hereby.
5.1.18 COMPLIANCE WITH LAWS.
The Borrowers are in compliance in all material respects with all
applicable Laws (other than Environmental Laws which are specifically addressed
in Section 5.1.24) in all jurisdictions in which the Borrowers are presently or
will be doing business.
5.1.19 MATERIAL CONTRACTS; BURDENSOME RESTRICTIONS.
All material agreements relating to the business operations of each
Borrower, including all employee benefit plans and Labor Contracts are valid,
binding and enforceable upon such Borrower and each of the other parties thereto
in accordance with their respective terms, and there is no default thereunder,
to such Borrower's knowledge, with respect to parties other than such Borrower.
None of the Borrowers is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which is
reasonably likely to result in a Material Adverse Change.
5.1.20 INVESTMENT COMPANIES; REGULATED ENTITIES.
None of the Borrowers is an "investment company" registered or required
to be registered under the Investment Company Act of 1940 or under the "control"
of an "investment company" as such terms are defined in the Investment Company
Act of 1940 and shall not become such an "investment company" or under such
"control. "None of the Borrowers is subject to any other Federal or state
statute or regulation limiting its ability to incur Indebtedness for borrowed
money.
5.1.21 PLANS AND BENEFIT ARRANGEMENTS.
Except as set forth on SCHEDULE 5.1.21:
(i) The Borrowers and each other member of the ERISA Group are in
compliance in all material respects with any applicable provisions of ERISA with
respect to all Benefit Arrangements, Plans and Multiemployer Plans. There has
been no Prohibited Transaction with respect to any Benefit Arrangement or any
Plan or, to the best knowledge of the Borrowers, with respect to any
Multiemployer Plan or Multiple Employer Plan, which is material. The Borrowers
and all other members of the ERISA Group have made when due any and all payments
required to be made under any agreement relating to a Multiemployer Plan or a
Multiple Employer Plan or any Law pertaining thereto. With respect to each Plan
and Multiemployer Plan, the Borrowers and each other member of the ERISA Group
(i) have fulfilled in all material respects their
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obligations under the minimum funding standards of ERISA, (ii) have not incurred
any liability to the PBGC, and (iii) have not had asserted against them any
penalty for failure to fulfill the minimum funding requirements of ERISA.
(ii)To the best of the Borrowers' knowledge, each Multiemployer
Plan and Multiple Employer Plan is able to pay benefits thereunder when due.
(iii) None of the Borrowers nor or any other member of the ERISA
Group has instituted or intends to institute proceedings to terminate any Plan.
(iv)No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi)None of the Borrowers nor any other member of the ERISA Group
has incurred or reasonably expects to incur any material withdrawal liability
under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither any
Borrower nor any other member of the ERISA Group has been notified by any
Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan or
Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of the Borrowers, no Multiemployer Plan or
Multiple Employer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is insured, the
Borrowers and all other members of the ERISA Group have paid when due all
premiums required to be paid for all periods through the Closing Date. To the
extent that any Benefit Arrangement is funded other than with insurance, the
Borrowers and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer Plans
have been administered in accordance with their terms and applicable Law.
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5.1.22 EMPLOYMENT MATTERS.
Each of the Borrowers is in compliance with the Labor Contracts and all
applicable federal, state and local labor and employment Laws including those
related to equal employment opportunity and affirmative action, labor relations,
minimum wage, overtime, child labor, medical insurance continuation, worker
adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where the failure to comply would constitute a
Material Adverse Change. There are no outstanding grievances, arbitration awards
or appeals therefrom arising out of the Labor Contracts or current or threatened
strikes, picketing, handbilling or other work stoppages or slowdowns at
facilities of any Borrower which in any case would constitute a Material Adverse
Change. The Borrowers have delivered to the Bank true and correct copies of each
of the Labor Contracts (if any).
5.1.23 ENVIRONMENTAL MATTERS.
Except as disclosed on SCHEDULE 5.1.23:
(i) None of the Borrowers has received any material
Environmental Complaint from any Official Body or private Person alleging
that such Borrower or any prior or subsequent owner of any of the Property is
a potentially responsible party under the Comprehensive Environmental
Response, Cleanup and Liability Act, 42 U.S.C. Section 9601, ET SEQ., and no
Borrower has reason to believe that such an Environmental Complaint might be
received. There are no pending or, to the Borrowers' knowledge, threatened
Environmental Complaints relating to any Borrower or, to the Borrowers'
knowledge, any prior or subsequent owner of any of the Property pertaining
to, or arising out of, any material Environmental Conditions.
(ii)There are no circumstances at, on or under any of the Property
that constitute a breach of or non-compliance with any of the Environmental
Laws, and there are no past or present Environmental Conditions at, on or under
any of the Property or, to the Borrowers' knowledge, at, on or under adjacent
property, that prevent compliance with the Environmental Laws at any of the
Property.
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in substantial compliance
with Environmental Laws. There are no processes, facilities, operations,
equipment or other activities at, on or under any of the Property, or, to the
Borrowers' knowledge, at, on or under adjacent property, that currently result
in the release or threatened release of Regulated Substances onto any of the
Property, except to the extent that such releases or threatened releases are not
a substantial breach of or otherwise not a violation of the Environmental Laws.
(iv)There are no aboveground storage tanks, underground storage
tanks or underground piping associated with such tanks, used for the management
of Regulated Substances at, on or under any of the Property that (a) do not
have, to the extent required by Environmental Laws, a full operational secondary
containment system in place, and (b) are not
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otherwise in compliance with all Environmental Laws. There are no abandoned
underground storage tanks or underground piping associated with such tanks,
previously used for the management of Regulated Substances at, on or under any
of the Property that have not either been closed in place in accordance with
Environmental Laws or removed in compliance with all applicable Environmental
Laws and no contamination associated with the use of such tanks exists on any of
the Property that is not in compliance with Environmental Laws.
(v) Each Borrower has all material permits, licenses,
authorizations, plans and approvals necessary under the Environmental Laws for
the conduct of the business of such Borrower as presently conducted. Each
Borrower has submitted all material notices, reports and other filings required
by the Environmental Laws to be submitted to an Official Body which pertain to
past and current operations on any of the Property.
(vi)All past and present on-site generation, storage, processing,
treatment, recycling, reclamation, disposal or other use or management of
Regulated Substances at, on, or under any of the Property and all off-site
transportation, storage, processing, treatment, recycling, reclamation, disposal
or other use or management of Regulated Substances have been done materially in
accordance with the Environmental Laws.
5.1.24 SENIOR DEBT STATUS.
(i) The Obligations of the Borrowers under this Agreement, the
Term Notes and each of the other Loan Documents to which it is a party do rank
and will rank at least PARI PASSU in priority of payment with all other
Indebtedness of the Borrowers except Indebtedness of the Borrowers to the extent
secured by Permitted Liens. There is no Lien upon or with respect to any of the
properties or income of any Borrower which secures indebtedness or other
obligations of any Person except for Permitted Liens.
5.2 UPDATES TO SCHEDULES.
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Borrowers shall promptly provide the Bank in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
same; PROVIDED, however, that no Schedule shall be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule be deemed to have been cured thereby, unless and until the
Bank, in its reasonable discretion, shall have accepted in writing such
revisions or updates to such Schedule.
6. CONDITIONS OF LENDING
The obligation of the Bank to make the Term Loans hereunder is subject
to the performance by each of the Borrowers of its Obligations to be performed
hereunder at or prior to the making of such Term Loan and to the satisfaction of
the following further conditions:
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6.1 FIRST LOAN. On the Closing Date:
(a) OFFICER'S CERTIFICATE.
The representations and warranties of the Borrowers contained
in Section 5 and in each of the other Loan Documents shall be true and accurate
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein and except changes in
representations and warranties that, in the determination of the Bank, are not
reasonably likely to result in a Material Adverse Change), and the Borrowers
shall have performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have occurred and be
continuing or shall exist; and Champion, on behalf of all of the Borrowers,
shall have delivered to the Bank a certificate, dated the Closing Date to each
such effect and signed by two of the following officers: the Chief Executive
Officer, President, Chief Financial Officer, Secretary or Assistant Secretary of
the Champion.
(b) SECRETARY'S CERTIFICATE.
There shall be delivered to the Bank a certificate dated the
Closing Date and signed by the Secretary or an Assistant Secretary of Champion,
certifying as appropriate as to:
(i) all action taken by the Borrowers in connection with this
Agreement and the other Loan Documents;
(ii)the names of the officer or officers authorized to sign
this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of the Borrowers for purposes of this Agreement and the true signatures
of such officers, on which the Bank may conclusively rely; and
(iii) copies of its organizational documents, including its
certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing (or subsistence) of each Borrower in each state where
organized or qualified to do business and a bring-down certificate by facsimile
dated the Closing Date.
(c) OPINION OF COUNSEL.
There shall be delivered to the Bank a written opinion of
Huddleston, Bolen, Beatty, Porter & Copen, counsel for the Borrowers, dated the
Closing Date and in form and substance satisfactory to the Bank and its counsel
as to such other matters incident to the transactions contemplated herein as the
Bank may reasonably request.
(d) LEGAL DETAILS.
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All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to the Bank and counsel for the Bank, and
the Bank shall have received all such other counterpart originals or certified
or other copies of such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Bank and said counsel,
as the Bank or said counsel may reasonably request.
(e) PAYMENT OF FEES.
The Borrowers shall have paid or caused to be paid to the
Bank, counsel fees, and all other fees, costs and expenses accrued through the
Closing Date for which the Bank is entitled to be reimbursed.
(f) OFFICER'S CERTIFICATE REGARDING MACS.
Since October 31, 1997, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of any Borrower, and there shall have been delivered to the Bank
a certificate of Champion dated the Closing Date and signed on behalf of all
Borrowers by any two of the Chief Executive Officer, President, Chief Financial
Officer, Secretary or Assistant Secretary of Champion to each such effect.
(g) NO VIOLATION OF LAWS.
The making of the Term Loan shall not contravene any Law
applicable to the Borrowers or to the Bank.
(h) NO ACTIONS OR PROCEEDINGS.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in the
Bank's reasonable judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
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6.2 EACH ADDITIONAL LOAN.
At the time of making any Loans other than Loans made on the
Closing Date hereunder and after giving effect to the proposed borrowings: the
representations and warranties of the Borrowers contained in Section 5 shall be
true on and as of the date of such additional Loan with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which relate solely to an earlier date or
time, which representations and warranties shall be true and correct on and as
of the specific dates or times referred to therein and except changes in
representations and warranties that, in the determination of the Bank, are not
reasonably likely to result in a Material Adverse Change), and the Borrowers
shall be in compliance with all covenants and conditions hereof and; no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; the Borrowers shall have delivered to the Bank a duly executed and
completed Loan request; and Champion, on behalf of all the Borrowers, shall have
delivered to the Bank a certificate, dated the date of the Loan request to each
such effect and signed by two of the following officers: the Chief Executive
Officer, President, Chief Financial Officer, Secretary or Assistant Secretary of
Champion.
7. COVENANTS
7.1 AFFIRMATIVE COVENANTS.
The Borrowers covenant and agree that until payment in full of the Term
Loans, and interest thereon, and satisfaction of all of the Borrowers' other
Obligations under the Loan Documents, the Borrowers shall comply at all times
with the following affirmative covenants:
7.1.1 PRESERVATION OF EXISTENCE, ETC.
Each of the Borrowers shall maintain its legal existence as a
corporation, limited partnership or limited liability company and its license or
qualification and good standing in each jurisdiction in which its ownership or
lease of property or the nature of its business makes such license or
qualification necessary, except as otherwise expressly permitted in Section
7.2.5.
7.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.
Each of the Borrowers shall duly pay and discharge all liabilities
to which it is subject or which are asserted against it, promptly as and when
the same shall become due and payable, including all taxes, assessments and
governmental charges upon it or any of its properties, assets, income or
profits, prior to the date on which penalties attach thereto, except to the
extent that such liabilities, including taxes, assessments or charges, are being
contested in good faith and by appropriate and lawful proceedings diligently
conducted and for which such reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made, but only to the extent that
failure to discharge any such liabilities would not result in any additional
liability which would adversely affect to a material extent the financial
condition of any Borrower.
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7.1.3 MAINTENANCE OF INSURANCE.
Each of the Borrowers shall insure its properties and assets
against loss or damage by fire and such other insurable hazards as such assets
are commonly insured (including fire, extended coverage, property damage,
workers' compensation, public liability and business interruption insurance) and
against other risks (including errors and omissions) in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as reasonably
determined by the Bank.
7.1.4 MAINTENANCE OF PROPERTIES AND LEASES.
Each of the Borrowers shall maintain in good repair, working order
and condition (ordinary wear and tear excepted) in accordance with the general
practice of other businesses of similar character and size, all of those
properties useful or necessary to its business, and from time to time, the
Borrowers will make or cause to be made all appropriate repairs, renewals or
replacements thereof.
7.1.5 MAINTENANCE OF PATENTS, TRADEMARKS, ETC.
Each of the Borrowers shall maintain in full force and effect all
patents, trademarks, service marks, trade names, copyrights, licenses,
franchises, permits and other authorizations necessary for the ownership and
operation of its properties and business if the failure so to maintain the same
would constitute a Material Adverse Change.
7.1.6 VISITATION RIGHTS.
Each of the Borrowers shall permit any of the officers or
authorized employees or representatives of the Bank to visit and inspect any of
its properties and to examine and make excerpts from its books and records and
discuss its business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as the Bank may reasonably request,
PROVIDED that the Bank shall provide the Borrowers with reasonable notice prior
to any visit or inspection.
7.1.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.
Each of the Borrowers shall maintain and keep proper books of
record and account which enable the Borrowers to issue financial statements in
accordance with GAAP and as otherwise required by applicable Laws of any
Official Body having jurisdiction over the Borrowers, and in which full, true
and correct entries shall be made in all material respects of all its dealings
and business and financial affairs.
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7.1.8 PLANS AND BENEFIT ARRANGEMENTS.
Each of the Borrowers shall, and shall cause each member of the
ERISA Group to, comply with ERISA, the Internal Revenue Code and other
applicable Laws applicable to Plans and Benefit Arrangements except where any
such failure would not result in a Material Adverse Change. Without limiting the
generality of the foregoing, the Borrowers shall cause all of its Plans and all
Plans maintained by any member of the ERISA Group to be funded in accordance
with the minimum funding requirements of ERISA and shall make, and cause each
member of the ERISA Group to make, in a timely manner, all contributions due to
Plans, Benefit Arrangements and Multiemployer Plans except where such failure
would not result in a Material Adverse Change.
7.1.9 COMPLIANCE WITH LAWS.
Each of the Borrowers shall comply with all applicable Laws,
including all Environmental Laws, in all respects, PROVIDED that it shall not be
deemed to be a violation of this Section 7.1.9 if any failure to comply with any
Law would not result in fines, penalties, remediation costs, other similar
liabilities or injunctive relief any of which would constitute a Material
Adverse Change.
7.1.10 USE OF PROCEEDS.
7.1.10.1 GENERAL
The Borrowers will use the proceeds of the Term Loans only to
refinance existing equipment leases and to finance future equipment purchases.
7.1.10.2 MARGIN STOCK.
The Borrowers shall not use the proceeds of the Term Loans to
purchase or carry margin stock as more fully provided in Section 5.1.10.
7.1.10.3 SECTION 20 SUBSIDIARIES.
The Borrowers will not, directly or indirectly, use any portion of
the proceeds of the Term Loans (i) knowingly to purchase any Ineligible
Securities from a Section 20 Subsidiary during any period in which such Section
20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting or placement period Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make
payments of principal or interest on Ineligible Securities underwritten or
privately placed by as Section 20 Subsidiary and issued by or for the benefit of
any Borrower or any Affiliate of any Borrower.
7.2 NEGATIVE COVENANTS.
The Borrowers covenant and agree that until payment in full of the Term
Loans, and interest thereon and satisfaction of all of the Borrowers' other
Obligations hereunder, the Borrowers shall comply with the following negative
covenants:
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7.2.1 INDEBTEDNESS.
None of the Borrowers shall, at any time create, incur, assume or
suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii)Existing Indebtedness as set forth on SCHEDULE 7.2.1.
(including any extensions, renewals or refinancings thereof), PROVIDED there is
no increase in the amount thereof or other significant change in the terms
thereof unless otherwise specified on SCHEDULE 7.2.1;
(iii) Capitalized and operating leases as and to the extent
permitted under Section 7.2.13;
(iv)Purchase Money Indebtedness not exceeding (a) in any
fiscal year fifteen percent (15%) of Champion's total shareholders' equity (as
defined by GAAP) for the prior fiscal year, and (b) the aggregate amount of the
Purchase Money Indebtedness outstanding at any time not exceeding thirty percent
(30%) of Champion's total shareholders' equity at the conclusion of the prior
fiscal year, both such limitations to be adjusted annually; PROVIDED, that
neither of the limitations on Purchase Money Indebtedness provided in this
Section 7.2.1(iv) for Borrower's 1998 fiscal year shall apply to Purchase Money
Indebtedness incurred by the Borrowers during such fiscal year 1998 with respect
to the refinancing of equipment with the proceeds of the Tranche A Loan as
contemplated by this Agreement;
(v) Champion's existing $2,000,000 unsecured revolving credit
facility with Banc One, West Virginia;
(vi)Champion's existing $800,000 unsecured revolving credit
facility with First Sentry Bank, Huntington, West Virginia, which is personally
guaranteed by Marshall T. Reynolds; and
(vii) Indebtedness under the Multibank Credit Agreement.
7.2.2 LIENS.
None of the Borrowers shall, at any time create, incur, assume or
suffer to exist any Lien on any of its property or assets, tangible or
intangible, now owned or hereafter acquired, or agree or become liable to do so,
except Permitted Liens.
7.2.3 GUARANTIES.
None of the Borrowers shall, at any time, directly or indirectly,
become or be liable in respect of any Guaranty, or assume, guarantee, become
surety for, endorse or otherwise agree, become or remain directly or
contingently liable upon or with respect to any obligation or liability of any
other Person.
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7.2.4 LOANS AND INVESTMENTS.
None of the Borrowers shall, at any time, make or suffer to remain
outstanding any loan or advance to, or purchase, acquire or own any stock,
bonds, notes or securities of, or any partnership interest (whether general or
limited) or limited liability company interest in, or any other investment or
interest in, or make any capital contribution to, any other Person, or agree,
become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in the
ordinary course of business;
(ii)advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
(iii) Permitted Investments;
(iv)loans, advances and investments in Affiliates of any
Borrower.
7.2.5 LIQUIDATIONS, MERGERS, CONSOLIDATIONS AND ACQUISITIONS..
None of the Borrowers shall dissolve, liquidate or wind-up its
affairs, or become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all of the assets or capital
stock of any other Person, PROVIDED that
(i) any Affiliate of any Borrower may consolidate or merge
into another Affiliate of such Borrower which is wholly-owned by such Borrower,
and
(ii)Champion may acquire, whether by purchase or by merger,
(A) all of the ownership interests and voting rights of another Person or (B)
substantially all of assets of another Person or of a business or division of
another Person (each an "Permitted Acquisition"), PROVIDED that each of the
following requirements is met:
(1) the board of directors or other equivalent governing body of
such Person shall have approved such Permitted Acquisition and the Loan Parties
shall have delivered to the Bank written evidence of such approval prior to such
Permitted Acquisition;
(2) the business acquired, or the business conducted by the Person
whose ownership interests are being acquired, as applicable, shall be
substantially the same as one or more line or lines of business conducted by
Champion and shall comply with Section 7.2.8;
(3) immediately prior to and after giving effect to such Permitted
Acquisition, (A) no payment default exists, (B) no violation of Section 7.2
exists, (C) the Bank has not sent a notice of a violation of Section 7.1 which
has not been cured and (D) no Event of Default exits; and
(4) Champion shall demonstrate on a pro forma basis that they
shall be in compliance with all the covenants contained in this Agreement after
giving effect to such Permitted
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Acquisition by delivering at least five (5) Business Days prior to such
Permitted Acquisition a certificate evidencing such compliance.
Subject to the above limitations, Permitted Acquisitions may include any merger
or acquisition, whether accounted for under GAAP as a purchase or a pooling of
interests and regardless of whether the value of the Consideration paid or
received is comprised of cash, common stock, preferred stock, assets or
partnership interests, estimated value of earn-outs or other means.
7.2.6 DISPOSITIONS OF ASSETS OR SUBSIDIARIES.
None of the Borrowers shall sell, convey, assign, sell and
leaseback, abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or intangible
(including sale, assignment, discount or other disposition of accounts, contract
rights, chattel paper, equipment or general intangibles with or without recourse
or of capital stock, shares of beneficial interest, partnership interests or
limited liability company interests of a Subsidiary of any Borrower), except:
(i) transactions involving the sale of inventory in the
ordinary course of business;
(ii)any sale, transfer or lease of assets in the ordinary
course of business which are no longer necessary or required in the conduct of
the Borrower's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by any Subsidiary
of any Borrower to such Borrower; or
(iv)any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets acquired or leased
within the parameters of Section 7.2.12.
7.2.7 AFFILIATE TRANSACTIONS.
None of the Borrowers shall enter into or carry out any
transaction (including purchasing property or services from or selling property
or services to any Affiliate of any Borrower or other Person) unless such
transaction is not otherwise prohibited by this Agreement, is entered into in
the ordinary course of business upon fair and reasonable arm's-length terms and
conditions which are fully disclosed to the Bank and is in accordance with all
applicable Law.
7.2.8 CONTINUATION OF OR CHANGE IN BUSINESS.
None of the Borrowers shall engage in any business other than
commercial printing, and certain leasing businesses in support thereof, and the
supplying of office products and office furniture, substantially as conducted
and operated by such Borrower during the present fiscal year, and such Borrower
shall not permit any material change in such business.
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7.2.9 PLANS AND BENEFIT ARRANGEMENTS.
None of the Borrowers shall:
(i) fail to satisfy the minimum funding requirements of ERISA
and the Internal Revenue Code with respect to any Plan where such failure is
likely to result in a Material Adverse Change;
(ii)request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which would constitute a Material
Adverse Change;
(iv)permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that any Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto, where such failure is likely to result in a Material
Adverse Change;
(vi)withdraw (completely or partially) from any Multiemployer
Plan or withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from
any Multiple Employer Plan, where any such withdrawal is likely to result in a
Material Adverse Change;
(vii) terminate, or institute proceedings to terminate, any
Plan, where such termination is likely to result in a Material Adverse Change;
(viii) make any amendment to any Plan with respect to which
security is required under Section 307 of ERISA; or
(ix)fail to give any and all notices and make all disclosures
and governmental filings required under ERISA or the Internal Revenue Code,
where such failure is likely to result in a Material Adverse Change.
7.2.10 FISCAL YEAR.
None of the Borrowers shall change its fiscal year from the
twelve-month period beginning November 1 and ending October 31.
7.2.11 CHANGES IN ORGANIZATIONAL DOCUMENTS.
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None of the Borrowers shall amend in any respect its certificate
of incorporation (including any provisions or resolutions relating to capital
stock), by-laws, certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or other
organizational documents in the event such change would be adverse to the Bank
as determined by the Bank in its sole discretion, without obtaining the prior
written consent of the Bank. Each of the Borrowers shall provide true and
correct copies of all amendments to organizational documents to the Bank at the
time annual financial statements are delivered.
7.2.12 CAPITAL EXPENDITURES AND LEASES.
None of the Borrowers shall make any capital expenditures, as
defined by GAAP, including the purchase or lease of any assets which if
purchased would constitute fixed assets or which if leased would constitute a
capitalized lease, other than capital expenditures in the aggregate not to
exceed fifteen percent (15%) per annum of Champion's total shareholders' equity
(as defined by GAAP) for the previous fiscal year ended, and all such capital
expenditures and leases shall be made under usual and customary terms and in the
ordinary course of business. By way of example, for the fiscal year November 1,
1997 through October 31, 1998, 15% of the prior year's total shareholders'
equity is $3,464,000.
7.2.13 MINIMUM FIXED CHARGE COVERAGE RATIO.
The Borrowers shall not permit the ratio of Consolidated Cash Flow
from Operations divided by Fixed Charges, calculated as of the end of each
fiscal quarter for the previous four fiscal quarters then ended, to be less than
1.10 to 1.0.
7.2.14 MAXIMUM LEVERAGE RATIO.
The Borrowers shall not at any time permit the ratio of Total
Senior Indebtedness divided by EBITDA to be greater than:
2.75 to 1.0 as of October 31, 1997
2.50 to 1.0 as of October 31, 1998
2.50 to 1.0 as of October 31, 1999
2.25 to 1.0 as of October 31, 2000 and
2.0 to 1.0 as of October 31 of each year thereafter.
7.2.15 MINIMUM TANGIBLE NET WORTH.
The Borrowers shall not at any time permit Consolidated Tangible Net
Worth to be less than the sum of (i) 90% of Tangible Net Worth on the Closing
Date, (ii) an amount equal to 50% of the Consolidated Net Income and (iii) 100%
of the proceeds of all stock issued by the Borrowers.
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7.3 REPORTING REQUIREMENTS.
The Borrowers covenant and agree that until payment in full of the
Term Loan and interest thereon and satisfaction of all of the Borrowers' other
Obligations hereunder and under the other Loan Documents the Borrowers will
furnish or cause to be furnished to the Bank:
7.3.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of the Borrowers, consisting of a consolidated
balance sheet as of the end of such fiscal quarter and related consolidated
statements of income, retained earnings and cash flows for the fiscal quarter
then ended and the fiscal year through that date, all in reasonable detail and
certified (subject to normal year-end audit adjustments) by the Chief Executive
Officer, President or Chief Financial Officer of Champion as having been
prepared in accordance with GAAP, consistently applied, and setting forth in
comparative form the respective financial statements for the corresponding date
and period in the previous fiscal year.
7.3.2 ANNUAL FINANCIAL STATEMENTS.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrowers, financial statements of the
Borrowers consisting of a consolidated balance sheet as of the end of such
fiscal year, and related consolidated statements of income, retained earnings
and cash flows for the fiscal year then ended, all in reasonable detail and
setting forth in comparative form the financial statements as of the end of and
for the preceding fiscal year, and certified by independent certified public
accountants of nationally recognized standing. The certificate or report of
accountants shall be free of qualifications (other than any consistency
qualification that may result from a change in the method used to prepare the
financial statements as to which such accountants concur).
7.3.3 CERTIFICATE OF THE BORROWERS
Concurrently with the financial statements of the Borrowers.
furnished to the Bank pursuant to Sections 7.3.1 and 7.3.2, a certificate of the
Borrowers signed by the Chief Executive Officer, President or Chief Financial
Officer of Champion, on behalf of all the Borrowers, in the form of EXHIBIT
7.3.3, to the effect that, except as described pursuant to Section 7.3.4, (i)
the representations and warranties of the Borrowers contained in Section 5 and
in the other Loan Documents are true on and as of the date of such certificate
with the same effect as though such representations and warranties had been made
on and as of such date (except representations and warranties which expressly
relate solely to an earlier date or time) and the Borrowers have performed and
complied with all covenants and conditions hereof, (ii) no Event of Default or
Potential Default exists and is continuing on the date of such certificate and
(iii) containing calculations in sufficient detail to demonstrate compliance as
of the date of such financial statements with all financial covenants contained
in Section 7.2.
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7.3.4 NOTICE OF DEFAULT.
Promptly after any executive officer of any Borrower has learned
of the occurrence of an Event of Default or Potential Default, a certificate
signed on behalf of the Loan parties by an executive officer of such Borrower
setting forth the details of such Event of Default or Potential Default and the
action which such Borrower proposes to take with respect thereto.
7.3.5 NOTICE OF LITIGATION.
Promptly after the commencement thereof, notice of all actions,
suits, proceedings or investigations before or by any Official Body or any other
Person against any Borrower which involve a claim or series of claims in excess
of $500,000 or which if adversely determined would constitute a Material Adverse
Change.
7.3.6 CERTAIN EVENTS.
Written notice to the Bank:
(i) at least ten (10) calendar days after closing, with
respect to any proposed sale or transfer of assets pursuant to Section
7.2.6(iv), and
(ii)within the restrictions set forth in Section 7.2.12, any
amendments to the organizational documents of any Borrower.
7.3.7 BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION.
Promptly upon their becoming available to the Borrowers:
(i) the annual budget and any forecasts of the Borrowers, to
be supplied not later than thirty (30) days prior to commencement of the fiscal
year to which any of the foregoing may be applicable,
(ii)any reports including reports on the internal control
structure the Borrowers based upon any audit of the Borrowers,
(iii) any reports, notices or proxy statements generally
distributed by Champion to its stockholders on a date no later than the date
supplied to such stockholders,
(iv)regular or periodic reports, including Forms 10-K, 10-Q
and 8-K, registration statements and prospectuses, filed by Champion with the
Securities and Exchange Commission,
(v) upon the Bank's reasonable request, a copy of any order
in any proceeding to which any Borrower is a party issued by any Official Body,
and
(vi)such other reports and information as any of the Bank may
from time to time reasonably request. The Borrowers shall also notify the Bank
promptly of the enactment or adoption of any Law which may result in a Material
Adverse Change.
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7.3.8 NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS.
7.3.8.1CERTAIN EVENTS.
Promptly upon becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to any Borrower or any
other member of the ERISA Group (regardless of whether the obligation to report
said Reportable Event to the PBGC has been waived),
(ii)any Prohibited Transaction which could subject any
Borrower or any other member of the ERISA Group to a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, any Benefit Arrangement or
any trust created thereunder where such civil penalty or tax is likely to result
in a Material Adverse Change,
(iii) any assertion of material withdrawal liability with
respect to any Multiemployer Plan,
(iv)any partial or complete withdrawal from a Multiemployer
Plan by any Borrower or any other member of the ERISA Group under Title IV of
ERISA (or assertion thereof), where such withdrawal is likely to result in
material withdrawal liability,
(v) any cessation of operations (by any Borrower or any other
member of the ERISA Group) at a facility in the circumstances described in
Section 4062(e) of ERISA,
(vi)withdrawal by any Borrower or any other member of the
ERISA Group from a Multiple Employer Plan,
(vii) a failure by any Borrower or any other member of the
ERISA Group to make a payment to a Plan required to avoid imposition of a Lien
under Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA, or
(ix)any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to materially
increase or materially reduce the unfounded benefit liability or obligation to
make periodic contributions.
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7.3.8.2 NOTICES OF INVOLUNTARY TERMINATION AND ANNUAL REPORTS.
Promptly after receipt thereof, copies of (a) all notices
received by any Borrower or any other member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by any Borrower or any
member of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b) at the request of the Bank each annual report (IRS Form 5500
series) and all accompanying schedules, the most recent actuarial reports, the
most recent financial information concerning the financial status of each Plan
administered or maintained by any Borrower or any other member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of any Borrower or any other member of the ERISA Group in which any of
their personnel participate or from which such personnel may derive a benefit,
and each Schedule B (Actuarial Information) to the annual report filed by any
Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
7.3.8.3 NOTICE OF VOLUNTARY TERMINATION.
Promptly upon the filing thereof, copies of any Form 5310, or
any successor or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan.
The Borrowers shall be deemed to have satisfied certain of the reporting
requirements (the "Required Reports") set forth in this Section 7.3 to the
extent that the information contained in any such Required Report is included
among filings made to the Securities and Exchange Commission via the Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR"); PROVIDED, HOWEVER, that
the Borrowers shall provide directly to the Bank any and all Required Reports as
the Bank may request from time to time, regardless of whether such Required
Reports have been included in the Borrowers' EDGAR filings.
8. DEFAULT
8.1 EVENTS OF DEFAULT.
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
8.1.1 PAYMENTS UNDER LOAN DOCUMENTS.
The Borrowers shall fail to pay any principal of the Term Loans
(including scheduled installments, mandatory prepayments or the payment due at
maturity), or shall fail to pay any interest on the Term Loans after such
principal or interest becomes due in accordance with the terms hereof or
thereof, or the Borrowers fail to pay any other amount owing hereunder or under
the other Loan Documents after the date provided in an invoice or other notice
of payment due;
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8.1.2 BREACH OF WARRANTY.
Any representation or warranty made at any time by any Borrower
herein or in any other Loan Document, or in any certificate, other instrument or
statement furnished pursuant to the provisions hereof or thereof, shall prove to
have been false or misleading in any material respect as of the time it was made
or furnished;
8.1.3 BREACH OF NEGATIVE COVENANTS OR VISITATION RIGHTS.
A default shall occur in the observance or performance of any
covenant contained in Section 7.1.6 or Section 7.2;
8.1.4 BREACH OF OTHER COVENANTS.
Any of the Loan Parties shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of thirty
(30) Business Days after the Chief Executive Officer, President, Chief Financial
Officer or Corporate Secretary of any Borrower becomes aware of the occurrence
thereof (such grace period to be applicable only in the event such default can
be remedied by corrective action of such Borrower as determined by the Bank in
its sole discretion);
8.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.
A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which any Borrower may be obligated as a
borrower or guarantor in excess of $750,000 in the aggregate, and such breach,
default or event of default consists of the failure to pay (beyond any period of
grace permitted with respect thereto, whether waived or not) any indebtedness
when due (whether at stated maturity, by acceleration or otherwise) or if such
breach or default permits (because of nonpayment) or causes the acceleration of
any indebtedness (whether or not such right shall have been waived) or the
termination of any commitment to lend;
8.1.6 FINAL JUDGMENTS OR ORDERS.
Any final judgments or orders for the payment of money in excess
of $50,000 in the aggregate shall be entered against any Borrower by a court
having jurisdiction in the premises, which judgment is not discharged, vacated,
bonded or stayed pending appeal within a period of thirty (30) days from the
date of entry;
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8.1.7 LOAN DOCUMENT UNENFORCEABLE.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS.
Any assets of any Borrower are attached, seized, levied upon or
subjected to a writ or distress warrant; or such come within the possession of
any receiver, trustee, custodian or assignee for the benefit of creditors and
the same is not cured within thirty (30) days thereafter;
8.1.9 NOTICE OF LIEN OR ASSESSMENT.
A notice of Lien or assessment, other than a Permitted Lien, is
filed of record with respect to all or any part of the assets of any Borrower by
the United States, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency, including the PBGC,
or any taxes or debts owing at any time or times hereafter to any one of these
becomes payable and the same is not paid within thirty (30) days after the same
becomes payable;
8.1.10 INSOLVENCY.
Any Borrower ceases to be solvent or admits in writing its
inability to pay its debts as they mature;
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8.1.11 EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS.
Any of the following occurs: (i) any Reportable Event, which the
Bank determines in good faith constitutes grounds for the termination of any
Plan by the PBGC or the appointment of a trustee to administer or liquidate any
Plan, shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Bank determines in good faith
that the amount of any Borrower's liability is likely to exceed 10% of its
Consolidated Net Worth; (v) any Borrower or any member of the ERISA Group shall
fail to make any contributions when due to a Plan or a Multiemployer Plan; (vi)
any Borrower or any other member of the ERISA Group shall make any amendment to
a Plan with respect to which security is required under Section 307 of ERISA;
(vii) any Borrower or any other member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) any Borrower or any
other member of the ERISA Group shall withdraw (or shall be deemed under Section
4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any
applicable Law is adopted, changed or interpreted by any Official Body with
respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), the Bank determines in good faith that any such
occurrence would be reasonably likely to materially and adversely affect the
total enterprise represented by any Borrower and the other members of the ERISA
Group;
8.1.12 CESSATION OF BUSINESS.
Any Borrower ceases to conduct its business as contemplated,
except as expressly permitted under Section 7.2.5 or 7.2.6, or any Borrower is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business and such injunction, restraint or other
preventive order is not dismissed within thirty (30) days after the entry
thereof;
8.1.13 CHANGE OF CONTROL.
(i) Any person or group of persons (within the meaning of Sections
13(a) or 14(a) of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership of (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) 33% or more of the
voting capital stock of any Borrower; or (ii) Marshall T. Reynolds shall cease
to have beneficial ownership of at least 40% of the voting capital stock of
Champion.
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8.1.14 INVOLUNTARY PROCEEDINGS.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Borrower in an involuntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Borrower for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of thirty (30) consecutive days or such court shall enter a decree
or order granting any of the relief sought in such proceeding; or
8.1.15 VOLUNTARY PROCEEDINGS.
Any Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or other similar official) of itself or for any substantial part of its
property or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
action in furtherance of any of the foregoing.
8.2 CONSEQUENCES OF EVENT OF DEFAULT.
8.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Sections 8.1.1 through
8.1.13 shall occur and be continuing, the Bank shall be under no further
obligation to make Loans hereunder and the Bank shall by written notice to the
Borrowers declare the unpaid principal amount of the Term Notes then outstanding
and all interest accrued thereon, any unpaid fees and all other Indebtedness of
the Borrowers to the Bank hereunder and thereunder to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable
to the Bank without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, and
8.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Section 8.1.14 or 8.1.15
shall occur, the Bank shall be under no further obligations to make Loans
hereunder and the unpaid principal amount of the Term Notes then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrowers to the Bank hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; and
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<PAGE>
8.2.3 SET-OFF.
If an Event of Default shall occur and be continuing, the Bank or
any participant of such Bank, and any branch, Subsidiary or Affiliate of such
Bank or participant anywhere in the world shall have the right, in addition to
all other rights and remedies available to it, without notice to such Loan
Party, to set-off against and apply to the then unpaid balance of all the Loans
and all other Obligations of the Borrowers hereunder or under any other Loan
Document any debt owing to, and any other funds held in any manner for the
account of, the Borrowers by the Bank or participant or by such branch,
Subsidiary or Affiliate, including all funds in all deposit accounts (whether
time or demand, general or special, provisionally credited or finally credited,
or otherwise) now or hereafter maintained by the Borrowers for their own
respective account (but not including funds held in custodian or trust accounts)
with the Bank or participant or such branch, Subsidiary or Affiliate. Such right
shall exist whether or not the Bank shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of such Loan Party is or are matured or unmatured and
regardless of the existence or adequacy of any Guaranty or any other security,
right or remedy available to the Bank; and
8.2.4 SUITS, ACTIONS, PROCEEDINGS.
If an Event of Default shall occur and be continuing, and if the
Bank has elected to accelerate the maturity of Loans pursuant to any of the
foregoing provisions of this Section 8.2, the Bank, if owed any amount with
respect to the Term Notes, may proceed to protect and enforce its rights by suit
in equity, action at law and/or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement or
the Term Notes, including as permitted by applicable Law the obtaining of the EX
PARTE appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Bank; and
8.2.5 APPLICATION OF PROCEEDS.
From and after the date on which the Bank has taken any action
pursuant to this Section 8.2 and until all Obligations of the Borrowers have
been paid in full, any and all proceeds received by the Bank from the exercise
of any other remedy by the Bank, shall be applied as follows:
(i) first, to reimburse the Bank for out-of-pocket costs,
expenses and disbursements, including reasonable attorneys' and paralegals' fees
and legal expenses, incurred by the Bank in connection with realizing on the
Collateral or collection of any Obligations of any Borrower under any of the
Loan Documents;
(ii)second, to the repayment of all Indebtedness then due and
unpaid of the Borrowers to the Bank incurred under this Agreement or any of the
other Loan Documents, whether of principal, interest, fees, expenses or
otherwise, in such manner as the Bank may determine in its discretion; and
(iii) the balance, if any, as required by Law.
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9. MISCELLANEOUS
9.1 MODIFICATIONS, AMENDMENTS OR WAIVERS.
If an amendment is made to a section of the Multibank Credit Facility that has
an exact counterpart in this Agreement, the counterpart section in this
Agreement will be deemed to have been amended in the same way. In addition, the
Bank and the Borrowers, may from time to time enter into written agreements
amending or changing any provision of this Agreement or any other Loan Document
or the rights of the Bank or any Borrower hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
Obligations of the Borrowers hereunder or thereunder. Any such agreement, waiver
or consent made with such written consent shall be effective to bind the Bank
and the Borrowers.
9.2 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED.
No course of dealing and no delay or failure of the Bank or the
Borrowers in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or operate as a waiver thereof, nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power, remedy or privilege preclude any further exercise thereof or of any other
right, power, remedy or privilege. The rights and remedies of the Bank under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which it would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of the Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
9.3 REIMBURSEMENT AND INDEMNIFICATION OF BANK BY THE BORROWERS; TAXES.
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The Borrowers agree within thirty (30) calendar days after demand to
pay or reimburse to the Bank and to save such Bank harmless against (i)
liability for the payment of all reasonable out-of-pocket costs, expenses and
disbursements (including fees and expenses of counsel for the Bank except with
respect to (a) and (b) below), incurred by the Bank (a) in connection with the
interpretation of this Agreement, and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to the provisions hereof, (c) in connection with the enforcement of
this Agreement or any other Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim arising under
this Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, or
(ii) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Bank, in
its capacity as such, in any way relating to or arising out of this Agreement or
any other Loan Documents or any action taken or omitted by the Bank hereunder or
thereunder, PROVIDED that the Borrowers shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (A) if the same results from the Bank's
gross negligence or willful misconduct, or (B) if the Borrowers were not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense (except that the Borrowers shall remain liable to the
extent such failure to give notice does not result in a loss to the Borrowers),
or (C) if the same results from a compromise or settlement agreement entered
into without the consent of the Borrowers, which shall not be unreasonably
withheld. The Borrowers agree unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar impositions now or
hereafter determined by the Bank to be payable in connection with this Agreement
or any other Loan Document, and the Borrowers agree unconditionally to save the
Bank harmless from and against any and all present or future claims, liabilities
or losses with respect to or resulting from any omission to pay or delay in
paying any such taxes, fees or impositions.
9.4 HOLIDAYS.
Whenever payment to be made or taken hereunder shall be due on a day
which is not a Business Day such payment shall be due on the next Business Day
and such extension of time shall be included in computing interest and fee,
except that the Term Loans shall be due on the Business Day preceding the
applicable Maturity Date if the applicable Maturity Date is not a Business Day.
Whenever any payment or action to be made or taken hereunder (other than payment
of the Loans) shall be stated to be due on a day which is not a Business Day,
such payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2 with respect to Interest Periods), and such
extension of time shall not be included in computing interest or fees, if any,
in connection with such payment or action.
9.5 NOTICES.
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All notices, requests, demands, directions and other communications (as
used in this Section 9.5, collectively referred to as "notices") given to or
made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
below or in accordance with any subsequent unrevoked written direction from any
party to the others:
If to the Borrowers:
Champion Industries, Inc.
2450-90 First Avenue
Huntington, West Virginia 25728
Attention: Joseph C. Worth III, Chief Financial Officer
Telephone: (310) 823-1700
Telecopy: (310) 823-7318
If to the Bank:
PNC Bank, National Association
One PNC Plaza
249 5th Avenue
Pittsburgh, PA 15222-2707
Attention: Mark J. Stasenko
Telephone: (412) 762-4690
Telecopy: (412) 762-7353
All notices shall, except as otherwise expressly herein provided, be
effective (a) in the case of telex or facsimile, when received, (b) in the case
of hand-delivered notice, when hand-delivered, (c) in the case of telephone,
when telephoned, PROVIDED, however, that in order to be effective, telephonic
notices must be confirmed in writing no later than the next day by letter,
facsimile or telex, (d) if given by mail, four (4) days after such communication
is deposited in the mail with first-class postage prepaid, return receipt
requested, and (e) if given by any other means (including by air courier), when
delivered; PROVIDED, that any notices of a Potential Default or an Event of
Default shall be sent by facsimile or overnight delivery service.
9.6 SEVERABILITY.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
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<PAGE>
9.7 GOVERNING LAW.
This Agreement shall be deemed to be a contract under the Laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to its conflict of laws principles.
9.8 PRIOR UNDERSTANDING.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
9.9 DURATION; SURVIVAL.
All representations and warranties of the Borrowers contained herein or
made in connection herewith shall survive the making of the Term Loans and shall
not be waived by the execution and delivery of this Agreement, any investigation
by the Bank, the making of the Term Loans, or payment in full of the Term Loans.
All covenants and agreements of the Borrowers contained in Sections 7.1, 7.2 and
7.3 herein shall continue in full force and effect from and after the date
hereof until payment in full of the Term Loans. All covenants and agreements of
the Borrowers contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Term Notes, Section 4 and Section 9.3, shall survive
payment in full of the Term Loans.
9.10 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
the Bank, the Borrowers and their respective successors and assigns, except that
the Borrowers may not assign or transfer any of their rights and Obligations
hereunder or any interest herein.
9.11 CONFIDENTIALITY.
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The Bank each agrees to keep confidential all information obtained from
any Borrower which is nonpublic and confidential or proprietary in nature
(including any information such Borrower specifically designates as
confidential), except as provided below, and to use such information only in
connection with its respective capacity under this Agreement and for the
purposes contemplated hereby. The Bank shall be permitted to disclose such
information (i) to outside legal counsel, accountants and other professional
advisors who need to know such information in connection with the administration
and enforcement of this Agreement, subject to agreement of such Persons to
maintain the confidentiality, (ii) to assignees and participants as contemplated
by Section 9.10 PROVIDED that they shall execute an agreement in favor of the
Borrowers covering the matters set forth in this Section 9.11, (iii) to the
extent requested by any bank regulatory authority or, with notice to the
Borrowers, as otherwise required by applicable Law or by any subpoena or similar
legal process, or in connection with any investigation or proceeding arising out
of the transactions contemplated by this Agreement, (iv) if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not bound by confidentiality restrictions, or (v) if the
Borrowers shall have consented to such disclosure.
9.12 COUNTERPARTS.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
9.13 BANK'S CONSENT.
Except as otherwise provided in the Loan Documents, whenever the Bank's
consent is required to be obtained under this Agreement or any of the other Loan
Documents as a condition to any action, inaction, condition or event, the Bank
shall be authorized to give or withhold such consent in its reasonable
discretion.
9.14 EXCEPTIONS.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
9.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
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EACH OF THE BORROWERS HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWERS AT THE ADDRESS PROVIDED FOR IN SECTION 9.5 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH OF THE BORROWERS
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST
IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. THE BORROWERS AND THE BANK HEREBY WAIVE TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL
EXTENT PERMITTED BY LAW.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
<TABLE>
<CAPTION>
ATTEST: CHAMPION INDUSTRIES, INC.,
a West Virginia corporation
<S> <C>
/s/ Thomas J. Murray By: /S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
Title: VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
ATTEST:
INTERFORM CORPORATION
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
- ------------------------------------- -----------------------------------------
Title: VICE PRESIDENT CHAMPION Title: VICE PRESIDENT
INDUSTRIES, INC.
ATTEST:
U.S. TAG & TICKET COMPANY, INC.
- -----------------------------------
</TABLE>
122
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title:VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
THE CHAPMAN PRINTING COMPANY, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title:VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
STATIONERS, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
DONIHE GRAPHICS, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
THE MERTEN COMPANY
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
BOURQUE PRINTING, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
SMITH & BUTTERFIELD CO., INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ATTEST:
DALLAS PRINTING COMPANY, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
CAROLINA CUT SHEETS, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
CHMP LEASING, INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
BLUE RIDGE PRINTING CO., INC.
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
</TABLE>
125
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
ATTEST:
ROSE CITY PRESS
- ------------------------------------
/S/ TONEY K. ADKINS By:/S/ JOSEPH C. WORTH, III
- ------------------------------------ -----------------------------------------
(SEAL)
Print Name: TONEY K. ADKINS Print Name: JOSEPH C. WORTH, III
Title: VICE PRESIDENT CHAMPION INDUSTRIES, INC. Title: VICE PRESIDENT
PNC BANK, NATIONAL ASSOCIATION
BY:
--------------------------------------
TITLE:
-----------------------------------
</TABLE>
126
<PAGE>
TERM NOTE
---------
$3,000,000 Pittsburgh, Pennsylvania
March 13, 1998
FOR VALUE RECEIVED, the undersigned, CHAMPION INDUSTRIES, INC., a
West Virginia corporation ("Champion"), INTERFORM CORPORATION, a
Pennsylvania corporation, U.S. TAG & TICKET COMPANY, INC., a Maryland
corporation, BOURQUE PRINTING, INC., a Louisiana corporation, SMITH &
BUTTERFIELD CO., INC., an Indiana corporation, DALLAS PRINTING COMPANY, INC.,
a Mississippi corporation, THE CHAPMAN PRINTING COMPANY, INC., a West
Virginia corporation, STATIONERS, INC., a West Virginia corporation, DONIHE
GRAPHICS, INC., a Tennessee corporation, CAROLINA CUT SHEETS, INC., a West
Virginia corporation, CHMP LEASING, INC., a West Virginia corporation, BLUE
RIDGE PRINTING CO., INC., a North Carolina corporation, ROSE CITY PRESS, a
West Virginia corporation and THE MERTEN COMPANY, an Ohio corporation (each a
"Borrower" and collectively and jointly and severally, the "Borrowers")
hereby unconditionally promise to pay to the order of PNC Bank, National
Association ("BANK"), at the office of the Bank at 249 Fifth Avenue,
Pittsburgh PA 15222, or at such other place as the holder of this Term Note
may from time to time designate in writing, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Three Million Dollars ($3,000,000.00).
1. PAYMENTS. This Term Note is payable in periodic installments on the
dates and in the amounts set forth in the hereinafter defined Credit Agreement.
This Term Note is one of the Term Notes referred to in, was executed and
delivered pursuant to, and evidences obligations of Borrower under, that certain
Credit Agreement dated as of the date hereof by and among Borrowers and the Bank
(as the same may be amended, restated, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"), to which reference is hereby made for a
statement of the terms and conditions under which the loan evidenced hereby is
made and is to be repaid and for a statement of Bank's remedies upon the
occurrence of an Event of Default (as defined therein). The Credit Agreement is
incorporated herein by reference in its entirety. Capitalized terms used but not
otherwise defined herein are used in this Term Note as defined in the Credit
Agreement.
2. INTEREST. Borrowers further promise to pay interest on the
outstanding unpaid principal amount hereof from the date hereof until payment in
full hereof at the rate from time to time applicable to the Term Loan as
determined in accordance with the Credit Agreement; PROVIDED, HOWEVER, that upon
the occurrence and during the continuance of an Event of Default, as provided in
the Credit Agreement, Borrowers shall pay to Bank, if Bank so elects, interest
on the outstanding principal balance of this Term Note at the rate of interest
applicable upon the occurrence and during the continuance of an Event of Default
as determined in accordance with the Credit Agreement.
Interest charges shall be computed on the daily principal
balance of the Term Loan on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed in the period during which it accrues. In
computing interest on this Term Note, the date of funding of the Term Loan shall
be included and the date of actual payment in full of the Term Loan shall be
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<PAGE>
excluded; PROVIDED, HOWEVER, that if the Term Loan is repaid on the same day
on which it is made, one day's interest shall be paid on the Term Loan.
Interest on this Term Note shall be payable at the rates, at the times and
from the dates specified in the Credit Agreement, on the date of any
prepayment hereof, at maturity, whether due by acceleration or otherwise, and
as otherwise provided in the Credit Agreement. From and after the date when
the principal balance hereof becomes due and payable, whether by acceleration
or otherwise, interest hereon shall be payable on demand.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrowers shall, for the purpose of computing interest
earned by Bank, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Bank received interest hereunder in excess of the highest rate applicable
hereto, such excess shall be applied in accordance with the terms of the Credit
Agreement.
3. DEFAULT; WAIVER OF NOTICE. Bank shall have the continuing exclusive
right to apply after the occurrence and during the continuance of an Event of
Default and to reapply any and all payments hereunder against the Obligations in
such manner, consistent with the terms of the Credit Agreement, as Bank deems
advisable. Borrower hereby waives demand, presentment and protest and notice of
demand, presentment, protest and nonpayment.
4. POWER TO CONFESS JUDGMENT: EACH OF THE BORROWERS HEREBY AUTHORIZES
AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE AFTER TO APPEAR FOR ONE OR MORE OF THE
BORROWERS AFTER AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT HAS OCCURRED AND,
WITH OR WITHOUT DECLARATION FILED, CONFESS JUDGMENT AGAINST ONE OR MORE OF THE
BORROWERS IN FAVOR OF THE BANK FOR THE UNPAID BALANCE OF THE OBLIGATIONS, AND
INCLUDING, WITHOUT LIMITATION, ALL ACCRUED AND UNPAID INTEREST, CHARGES,
EXPENSES OR OTHER IMPOSITIONS, WHETHER BY ACCELERATION OR OTHERWISE WITH COSTS
OF SUIT AND A REASONABLE ATTORNEY'S COMMISSION AS CERTIFIED BY THE BANK WITH
RELEASE OF ALL ERRORS, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM
EXECUTION TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE BORROWERS.
NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO
EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT
TO BE VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT
MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE BANK SHALL ELECT, UNTIL SUCH
TIME AS
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<PAGE>
THE BANK SHALL HAVE RECEIVED PAYMENT IN FULL OF THE LOAN, INTEREST AND COSTS.
BY SIGNING THIS TERM NOTE, EACH OF THE BORROWERS HEREBY ACKNOWLEDGES
THAT IT HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE
CONFESSION OF JUDGMENT PROVISION AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT
CONSTITUTES A WAIVER OF RIGHTS IT OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A
HEARING BEFORE A JUDGMENT IS ENTERED AGAINST IT AND WHICH MAY RESULT IN A COURT
JUDGMENT AGAINST THE BORROWERS, OR ANY OF THEM, WITHOUT PRIOR NOTICE OR HEARING
AND THAT THE OBLIGATIONS MAY BE COLLECTED FROM SUCH BORROWER REGARDLESS OF ANY
CLAIM ANY BORROWER MAY HAVE AGAINST THE BANK.
5. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING: EACH OF THE
BORROWERS HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY
COURT OF RECORD OR THE SHERIFF WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR
ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA
RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE
ON ANY JUDGMENT ENTERED AGAINST ONE OR MORE OF THE BORROWERS PURSUANT TO THE
CONFESSION OF JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY
NATURE WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM
EXECUTION, TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE BORROWERS.
NO SINGLE EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENT WITHOUT A
HEARING SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE
SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE OR VOID, BUT THE POWER SHALL
CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE
BANK SHALL ELECT UNTIL SUCH TIME AS THE BANK SHALL HAVE RECEIVED PAYMENT IN FULL
OF THE OBLIGATIONS INCLUDING INTEREST AND COSTS.
BY SIGNING THIS INSTRUMENT EACH OF THE BORROWERS HEREBY ACKNOWLEDGES
THAT IT HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE POWER
TO EXECUTE ON A JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO
EXECUTE ON A JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS IT
OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A
JUDGMENT, AND THAT THE LOAN MAY
129
<PAGE>
BE COLLECTED FROM THE BORROWER REGARDLESS OF ANY CLAIM THAT ANY BORROWER MAY
HAVE AGAINST THE BANK.
6. EXPENSES. In addition to, and not in limitation of, the foregoing
and the provisions of the Credit Agreement, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all reasonable
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Term Note in endeavoring to collect any amounts payable
hereunder which are not paid when due, whether by acceleration or otherwise.
7. APPLICABLE LAW. This term note shall be deemed to have been
delivered and made at Pittsburgh, Pennsylvania and shall be interpreted and the
rights and liabilities of the parties hereto determined in accordance with the
internal laws (as opposed to conflicts of law provisions) and judicial decisions
of the Commonwealth of Pennsylvania.
8. MISCELLANEOUS. Whenever possible each provision of this Term Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Term Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Term Note. Whenever in this Term
Note reference is made to Bank or Borrowers, such reference shall be deemed to
include, as applicable, a reference to their respective permitted successors and
assigns and, in the case of Banks, any financial institutions to which it has
sold or assigned all or any part of its commitment to make the Term Loan as
permitted under the Credit Agreement. The provisions of this Term Note shall be
binding upon and shall inure to the benefit of Bank and its permitted successors
and assigns. Borrowers' successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Borrowers.
CHAMPION INDUSTRIES, INC.,a West Virginia
corporation
By: /S/ JOSEPH C. WORTH, III
------------------------------------------
Title: VICE PRESIDENT AND CHIEF FINANCIAL
---------------------------------------
OFFICER
-------
INTERFORM CORPORATION
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<PAGE>
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
U.S. TAG & TICKET COMPANY, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
THE CHAPMAN PRINTING COMPANY, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
STATIONERS, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
DONIHE GRAPHICS, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
131
<PAGE>
THE MERTEN COMPANY
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
132
<PAGE>
BOURQUE PRINTING, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
SMITH & BUTTERFIELD CO., INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
DALLAS PRINTING COMPANY, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
CAROLINA CUT SHEETS, INC.
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
CHMP LEASING, INC.
133
<PAGE>
By:/S/ JOSEPH C. WORTH, III
------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
BLUE RIDGE PRINTING CO., INC.
By:/S/ JOSEPH C. WORTH, III
-------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
ROSE CITY PRESS
By:/S/ JOSEPH C. WORTH, III
-------------------------------------------
(SEAL)
Print Name: JOSEPH C. WORTH, III
----------------------------------------
Title: VICE PRESIDENT
---------------------------------------
134
<PAGE>
TERM NOTE
---------
$2,222,038.37 Pittsburgh, Pennsylvania
March 30, 1998
FOR VALUE RECEIVED, the undersigned, CHAMPION INDUSTRIES, INC., a West
Virginia corporation ("Champion"), INTERFORM CORPORATION, a Pennsylvania
corporation, U.S. TAG & TICKET COMPANY, INC., a Maryland corporation, BOURQUE
PRINTING, INC., a Louisiana corporation, SMITH & BUTTERFIELD CO., INC., an
Indiana corporation, DALLAS PRINTING COMPANY, INC., a Mississippi corporation,
THE CHAPMAN PRINTING COMPANY, INC., a West Virginia corporation, STATIONERS,
INC., a West Virginia corporation, DONIHE GRAPHICS, INC., a Tennessee
corporation, CAROLINA CUT SHEETS, INC., a West Virginia corporation, CHMP
LEASING, INC., a West Virginia corporation, BLUE RIDGE PRINTING CO., INC., a
North Carolina corporation, ROSE CITY PRESS, a West Virginia corporation and THE
MERTEN COMPANY, an Ohio corporation (each a "Borrower" and collectively and
jointly and severally, the "Borrowers") hereby unconditionally promise to pay to
the order of PNC Bank, National Association ("BANK"), at the office of the Bank
at 249 Fifth Avenue, Pittsburgh PA 15222, or at such other place as the holder
of this Term Note may from time to time designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of Two Million Two Hundred Twenty Two Thousand Thirty Eight Dollars and
Thirty Seven/100 ($2,222,038.37).
1. PAYMENTS. This Term Note is payable in periodic installments on the
dates and in the amounts set forth in the hereinafter defined Credit Agreement.
This Term Note is one of the Term Notes referred to in, was executed and
delivered pursuant to, and evidences obligations of Borrower with respect to the
"Tranche A Loan" described in, that certain Credit Agreement dated as of the
date hereof by and among Borrowers and the Bank (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "CREDIT
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which the loan evidenced hereby is made and is to be repaid and
for a statement of Bank's remedies upon the occurrence of an Event of Default
(as defined therein). The Credit Agreement is incorporated herein by reference
in its entirety. Capitalized terms used but not otherwise defined herein are
used in this Term Note as defined in the Credit Agreement.
2. INTEREST. Borrowers further promise to pay interest on the
outstanding unpaid principal amount hereof from the date hereof until payment in
full hereof at the rate from time to time applicable to the Term Loan as
determined in accordance with the Credit Agreement; PROVIDED, HOWEVER, that upon
the occurrence and during the continuance of an Event of Default, as provided in
the Credit Agreement, Borrowers shall pay to Bank, if Bank so elects, interest
on the outstanding principal balance of this Term Note at the rate of interest
applicable upon the
135
<PAGE>
occurrence and during the continuance of an Event of Default as determined in
accordance with the Credit Agreement.
Interest charges shall be computed on the daily principal
balance of the Term Loan on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed in the period during which it accrues. In
computing interest on this Term Note, the date of funding of the Term Loan shall
be included and the date of actual payment in full of the Term Loan shall be
excluded; PROVIDED, HOWEVER, that if the Term Loan is repaid on the same day on
which it is made, one day's interest shall be paid on the Term Loan. Interest on
this Term Note shall be payable at the rates, at the times and from the dates
specified in the Credit Agreement, on the date of any prepayment hereof, at
maturity, whether due by acceleration or otherwise, and as otherwise provided in
the Credit Agreement. From and after the date when the principal balance hereof
becomes due and payable, whether by acceleration or otherwise, interest hereon
shall be payable on demand.
If a payment hereunder becomes due and payable hereunder other
than on a Business Day, the due date thereof shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the applicable rate specified in the Credit Agreement. Credit for
any payments made by Borrowers shall, for the purpose of computing interest
earned by Bank, be given in accordance with the Credit Agreement. In no
contingency or event whatsoever shall interest charged hereunder, however such
interest may be characterized or computed, exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that Bank received interest hereunder in excess of the highest rate applicable
hereto, such excess shall be applied in accordance with the terms of the Credit
Agreement.
3. DEFAULT; WAIVER OF NOTICE. Bank shall have the continuing exclusive
right to apply after the occurrence and during the continuance of an Event of
Default and to reapply any and all payments hereunder against the Obligations in
such manner, consistent with the terms of the Credit Agreement, as Bank deems
advisable. Borrower hereby waives demand, presentment and protest and notice of
demand, presentment, protest and nonpayment.
4. POWER TO CONFESS JUDGMENT: EACH OF THE BORROWERS HEREBY AUTHORIZES
AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE AFTER TO APPEAR FOR ONE OR MORE OF THE
BORROWERS AFTER AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT HAS OCCURRED AND,
WITH OR WITHOUT DECLARATION FILED, CONFESS JUDGMENT AGAINST ONE OR MORE OF THE
BORROWERS IN FAVOR OF THE BANK FOR THE UNPAID BALANCE OF THE OBLIGATIONS, AND
INCLUDING, WITHOUT LIMITATION, ALL ACCRUED AND UNPAID INTEREST, CHARGES,
EXPENSES OR OTHER IMPOSITIONS, WHETHER BY ACCELERATION OR OTHERWISE WITH COSTS
OF SUIT AND A REASONABLE ATTORNEY'S COMMISSION AS CERTIFIED BY THE BANK WITH
RELEASE OF ALL
136
<PAGE>
ERRORS, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION TO
THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE BORROWERS. NO SINGLE
EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST
THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE
VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY
BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE BANK SHALL ELECT, UNTIL SUCH TIME
AS THE BANK SHALL HAVE RECEIVED PAYMENT IN FULL OF THE LOAN, INTEREST AND COSTS.
BY SIGNING THIS TERM NOTE, EACH OF THE BORROWERS HEREBY ACKNOWLEDGES
THAT IT HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE
CONFESSION OF JUDGMENT PROVISION AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT
CONSTITUTES A WAIVER OF RIGHTS IT OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A
HEARING BEFORE A JUDGMENT IS ENTERED AGAINST IT AND WHICH MAY RESULT IN A COURT
JUDGMENT AGAINST THE BORROWERS, OR ANY OF THEM, WITHOUT PRIOR NOTICE OR HEARING
AND THAT THE OBLIGATIONS MAY BE COLLECTED FROM SUCH BORROWER REGARDLESS OF ANY
CLAIM ANY BORROWER MAY HAVE AGAINST THE BANK.
5. POWER TO EXECUTE ON A JUDGMENT WITHOUT HEARING: EACH OF THE
BORROWERS HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY
COURT OF RECORD OR THE SHERIFF WITHIN THE COMMONWEALTH OF PENNSYLVANIA OR
ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA
RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE
ON ANY JUDGMENT ENTERED AGAINST ONE OR MORE OF THE BORROWERS PURSUANT TO THE
CONFESSION OF JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY
NATURE WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM
EXECUTION, TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED BY THE BORROWERS.
NO SINGLE EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENT WITHOUT A
HEARING SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE
SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE OR VOID, BUT THE POWER SHALL
CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE
BANK SHALL ELECT UNTIL SUCH TIME AS THE BANK SHALL HAVE RECEIVED PAYMENT IN FULL
OF THE OBLIGATIONS INCLUDING INTEREST AND COSTS.
137
<PAGE>
BY SIGNING THIS INSTRUMENT EACH OF THE BORROWERS HEREBY ACKNOWLEDGES
THAT IT HAS READ, HAS HAD THE OPPORTUNITY TO HAVE IT REVIEWED BY LEGAL COUNSEL,
UNDERSTANDS AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING THE POWER
TO EXECUTE ON A JUDGMENT WITHOUT A HEARING, AND UNDERSTANDS THAT THE POWER TO
EXECUTE ON A JUDGMENT WITHOUT A HEARING CONSTITUTES A WAIVER OF RIGHTS IT
OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE EXECUTION ON A
JUDGMENT, AND THAT THE LOAN MAY BE COLLECTED FROM THE BORROWER REGARDLESS OF ANY
CLAIM THAT ANY BORROWER MAY HAVE AGAINST THE BANK.
6. EXPENSES. In addition to, and not in limitation of, the foregoing
and the provisions of the Credit Agreement, the undersigned further agrees,
subject only to any limitation imposed by applicable law, to pay all reasonable
expenses, including reasonable attorneys' fees and legal expenses, incurred by
the holder of this Term Note in endeavoring to collect any amounts payable
hereunder which are not paid when due, whether by acceleration or otherwise.
7. APPLICABLE LAW. This term note shall be deemed to have been
delivered and made at Pittsburgh, Pennsylvania and shall be interpreted and the
rights and liabilities of the parties hereto determined in accordance with the
internal laws (as opposed to conflicts of law provisions) and judicial decisions
of the Commonwealth of Pennsylvania.
8. MISCELLANEOUS. Whenever possible each provision of this Term Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Term Note shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Term Note. Whenever in this Term
Note reference is made to Bank or Borrowers, such reference shall be deemed to
include, as applicable, a reference to their respective permitted successors and
assigns and, in the case of Banks, any financial institutions to which it has
sold or assigned all or any part of its commitment to make the Term Loan as
permitted under the Credit Agreement. The provisions of this Term Note shall be
binding upon and shall inure to the benefit of Bank and its permitted successors
and assigns. Borrowers' successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for Borrowers.
138
<PAGE>
CHAMPION INDUSTRIES, INC., a West
Virginia corporation
By: Title:
INTERFORM CORPORATION
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
U.S. TAG & TICKET COMPANY, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
THE CHAPMAN PRINTING COMPANY, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
STATIONERS, INC.
By:
----------------------------
(SEAL)
139
<PAGE>
Print Name:
--------------------
Title:
-------------------------
DONIHE GRAPHICS, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
THE MERTEN COMPANY
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
140
<PAGE>
BOURQUE PRINTING, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
SMITH & BUTTERFIELD CO., INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
DALLAS PRINTING COMPANY, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
CAROLINA CUT SHEETS, INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
CHMP LEASING, INC.
141
<PAGE>
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
BLUE RIDGE PRINTING CO., INC.
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
ROSE CITY PRESS
By:
----------------------------
(SEAL)
Print Name:
--------------------
Title:
-------------------------
142
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is entered into as of this
13th day of March, 1998 by and between THE MERTEN COMPANY, an Ohio corporation
(the "BORROWER"), with an address at 1515 Central Parkway, Cincinnati, Ohio
45214, and PNC BANK, NATIONAL ASSOCIATION (the "BANK"), with an address at One
PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2709.
WHEREAS, the Borrower, the Bank, Champion Industries, Inc., a West
Virginia Corporation, Interform Corporation, a Pennsylvania corporation, U.S.
Tag & Ticket company, Inc., a Maryland corporation, Bourque Printing, Inc., a
Louisiana corporation, Smith & Butterfield Co., Inc., an Indiana corporation,
Dallas Printing Company, Inc., a Mississippi corporation, The Chapman Printing
Company, Inc., a West Virginia corporation, Stationers, Inc., a West Virginia
corporation, Donihe Graphics, Inc., a Tennessee corporation, Carolina Cut
Sheets, Inc., a West Virginia corporation, CHMP Leasing, Inc., a West Virginia
corporation, Blue Ridge Printing Co., Inc., a North Carolina corporation and
Rose City Press, a West Virginia corporation (collectively, the "CO-BORROWERS")
have entered into that certain Credit Agreement, dated as of March 13, 1998 (as
the same may be amended, restated or otherwise modified from time to time, the
"CREDIT AGREEMENT"), pursuant to which the Bank has agreed to extend to the
Borrower and the Co-Borrowers, upon the terms and subject to the conditions set
forth therein, term loans for the purpose of refinancing existing equipment
leases and financing equipment purchases. (All terms capitalized but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Credit Agreement unless the context otherwise requires).
WHEREAS, the Borrower has agreed to enter into this Agreement for the
purpose of granting to the Bank a first priority perfected lien on all property
of the Borrower purchased or otherwise refinanced with proceeds of the term
loans provided under the Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
1. DEFINITIONS.
(a) "Collateral" means the Borrower's entire right, title and
interest in and to all equipment of the Borrower, wherever located, as described
in attached EXHIBIT "A" attached hereto, and also in (i) all other property
later acquired or refinanced by the Borrower, wherever located, with proceeds of
the term loans provided under the Credit Agreement, (ii) all accessions to,
substitutions for and all replacements, products and proceeds of the foregoing,
including proceeds of insurance policies insuring the Collateral, all property
received wholly or partly in trade or exchange for such Collateral, and all
rents, revenues, issues, profits and proceeds arising from the sale, lease,
license, encumbrance, collection or any other temporary or permanent
143
<PAGE>
disposition of such items or any interest therein whether or not they constitute
"proceeds" as defined in the Uniform Commercial Code; and (iv) all books,
records, documents and ledger receipts of the Borrower pertaining to any of the
foregoing including, but not limited to, customer lists, credit files, computer
records and programs, storage media and computer software used or required in
connection with generating, processing and storing such books and records or
otherwise used or acquired in connection with documenting information pertaining
to the Collateral.
(b) "Secured Obligations" means, without limitation, (i) all
indebtedness, obligations and liabilities, whether of principal, interest, fees,
expenses or otherwise, of the Borrower to the Bank, whether now existing or
hereafter incurred under the Credit Agreement, the Notes, or any other Loan
Document, whether or not contemplated by the Borrower or the Bank at the date
hereof and whether direct, indirect, matured or contingent, joint or several, or
otherwise, together with any and all extensions, renewals, refinancings or
refundings thereof in whole or in part, and (ii) all costs and expenses,
including, but not limited to, attorneys' fees and legal expenses incurred by
the Bank in the collection of any of the indebtedness referred to in clause (i),
and (iii) any advances made by the Bank for the insurance, maintenance,
preservation, protection or enforcement of, or realization upon, any property or
assets now or hereafter made subject to a mortgage, pledge, lien or security
interest granted pursuant to this Agreement or pursuant to any agreement,
instrument or note relating to any of the Secured Obligations, including, but
not limited to, advances for taxes, insurance, repairs and the like.
(c) "Liens" includes security interests, pledges, bailments,
leases, mortgages, conditional sales and title retention agreements, charges,
claims, encumbrances and liens.
(d) "Prior Security Interest" means an enforceable, perfected
security interest under the Uniform Commercial Code which is prior to all Liens,
except Liens for taxes not yet due and payable to the extent given priority by
statute and Permitted Liens.
(e) Terms and phrases defined in the Uniform Commercial Code
are used herein as therein defined except where the context otherwise requires.
2. GRANT OF SECURITY INTEREST. As security for the due and punctual
payment and performance of the Secured Obligations, the Borrower, as debtor,
hereby assigns and grants to the Bank, as secured party, a continuing lien on
and security interest in the Collateral. The security interest in the Collateral
granted hereunder also secures future advances that constitute Secured
Obligations. The Bank shall also have the right to apply toward and set off
against the unpaid balance of the Secured Obligations any or all amounts owing
to the Borrower by the Bank, including without limitation any items or funds in
any deposit account now or hereafter maintained by the Borrower with the Bank,
and any and all other property of the Borrower now or hereafter in the
possession of the Bank in whatever capacity, and for such purpose the Bank shall
have, and there is hereby granted to and created in favor of the Bank a first
Lien on all such deposit accounts and property. The Bank is hereby authorized to
charge any account of the Borrower with the Bank for any or all amounts of
Secured Obligations which are due.
144
<PAGE>
3. CHANGE IN NAME OR LOCATIONS. The Borrower hereby agrees that if the
Borrower desires to change the location of any of the Collateral from the
locations listed on EXHIBIT "B" hereto and made part hereof, or if the Borrower
desires to change its name or form of organization, or establish a name in which
it may do business or in which it may invoice account debtors or maintain
records concerning the Collateral that is not listed on EXHIBIT "B" hereto, it
shall first, with respect to such new location or name: (i) give the Bank at
least 10 days' prior written notice of its intention to do so and provide the
Bank with such information in connection therewith as the Bank may reasonably
request including, without limitation, lien search results; and (ii) if
financing statements are on file, take such action, satisfactory to the Bank, as
may be necessary to maintain at all times the perfection and priority of the
security interest in the Collateral granted to the Bank hereunder.
The Borrower's chief executive office is also shown on EXHIBIT "B" hereto.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Borrower represents,
warrants and covenants to the Bank as follows:
(a) The Borrower has good and marketable title to the
Collateral, free and clear of all Liens except for Permitted Liens.
(b) The Borrower will not hereafter, without the prior written
consent of the Bank, (i) sell, pledge, encumber, assign or otherwise dispose of
any of the Collateral or grant (other than by operation of law) any right of
setoff, lien or security interest to exist thereon except to the Bank, (ii)
materially alter its ordinary course of business, including its sales terms,
conditions and practices, or (iii) extend, postpone or compromise (except in the
ordinary course of business) the time or amount of payment on any account or
accounts or other amounts owing to it which, individually or in the aggregate,
are material.
(c) The Borrower will from time to time and at all reasonable
times following the protocols established in Section 7.1.6 of the Credit
Agreement allow the Bank, by or through any of its officers, agents, attorneys,
or accountants, to examine or inspect the Collateral.
(d) The Borrower will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest
therein.
(e) The Borrower, if the Bank deems necessary or advisable,
(i) execute, deliver, file and record such security agreements, financing
statements, instruments and documents and take such other action to attach,
perfect, continue, preserve and protect the Bank's Prior Security Interest in
the Collateral and proceeds thereof and pay all filing fees and taxes related
thereto, and the Borrower hereby irrevocably appoints the Bank, its officers,
employees and agents, or any of them, as attorneys in fact for the Borrower and
in the Borrower's name, place and stead, (ii) maintain and protect the
Collateral and defend and preserve the Borrower's title thereto and the Bank's
Prior Security Interest therein free from all other Liens, and (iii) keep
accurate and complete books and records concerning the Collateral.
145
<PAGE>
(f) The Borrower will promptly furnish to the Bank such
information and documents relating to the Collateral and to the Borrower's
financial condition, business, assets or liabilities, at such times and in such
form and detail as the Bank may reasonably request.
(g) The Borrower will maintain the equipment in good
condition, repair and working order, ordinary wear and tear alone excepted, and
will maintain and operate the equipment and every portion thereof in full
compliance with all applicable laws, ordinances, regulations, decrees and
orders, the violation of which would have a material adverse effect on the value
of the Collateral. The Borrower will promptly notify the Bank of any event
causing a material loss or decline in value of the Collateral whether or not
covered by insurance and the amount of such loss or depreciation;
(h) The Borrower will promptly notify the Bank of (i) any
materially adverse change in the Borrower's financial condition or business
affairs, and (ii) any default, or any event or condition which with the passage
of time would result in a default under any other Loan Document.
(i) Risk of loss of, damage to or destruction of the
Collateral and all proceeds thereof is on the Borrower. The Borrower will
maintain insurance at all times with respect to all Collateral as required by
the Credit Agreement. In the event of failure to provide insurance as herein
provided, the Bank may, at its option, obtain such insurance and the Borrower
shall pay to the Bank, on demand, the cost thereof. Proceeds of insurance may be
applied as provided in the Credit Agreement by the Bank to reduce the Secured
Obligations or to repair or replace Collateral, all in the Bank's sole
discretion.
(j) The security interests granted to the Bank pursuant to
this Agreement constitute and will continue to constitute Prior Security
Interests under the Uniform Commercial Code as in effect in each applicable
jurisdiction or other applicable Law, entitled to all the rights, benefits and
priorities provided by the Uniform Commercial Code or such Law. Upon the filing
of financing statements relating to said security interests in each office and
in each jurisdiction where required in order to perfect the security interests
granted pursuant to this Agreement, all such action as is necessary or advisable
to establish such rights of the Bank will have been taken, and upon execution
and delivery of this Agreement and such filings, there will be no necessity for
any further action in order to preserve, protect and continue such rights,
except (i) the filing of continuation statements with respect to such financing
statements within six months prior to each five-year anniversary of the filing
of such financing statements, (ii) perfection of interests in titled vehicles
and (iii) filing additional financing statements if, as provided in this
Agreement, additional locations or names are used. All filing fees and other
expenses in connection with each such action have been or will be paid by the
Borrower.
(k) The Borrower shall take all necessary action, at its own
cost and expense, to observe and perform its agreements and covenants, and keep
its representations and warranties true, correct, and complete under this
Agreement.
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(l) The Borrower's agreements, covenants, representations and
warranties under this Agreement are continuing ones, shall at all times remain
true, correct and complete and shall at all times be observed and performed and
shall relate to each item of Collateral upon its coming into existence and at
all times thereafter.
5. EVENTS OF DEFAULT. The Borrower shall, at the option of the Bank, be
in default under this Agreement upon the happening of any of the following
events or conditions (each, an "Event of Default"):
(a) any Event of Default as defined in the Credit Agreement or
any other Loan Document; or
(b) the failure of the Bank to have a Prior Security Interest
in the Collateral; or
(c) any indication or evidence received by the Bank that the
Borrower may have directly or indirectly been engaged in any type of activity
which, in the Bank's discretion, might result in the forfeiture of any property
of the Borrower to any governmental entity, federal, state or local.
6. REMEDIES. Upon the occurrence of any such Event of Default and at
any time thereafter, the Bank shall have the right, without presentment, demand,
protest or notice of any kind, to declare all or any part of the Secured
Obligations secured thereby immediately due and payable and shall have, in
addition to any remedies provided herein or by any applicable law or in equity,
all the remedies of a secured party under the Uniform Commercial Code.
Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Bank will give the Borrower reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or any other
intended disposition thereof is to be made. The requirements of commercially
reasonable notice shall be met if such notice is sent to the Borrower at least
ten (10) days before the time of the intended sale or disposition. At any such
sale or other disposition, the Bank may, to the extent permissible under
applicable laws, purchase the whole or any part of the Collateral, free from any
right of redemption on the part of the Borrower, which right is hereby waived
and released. Expenses of retaking, holding, preparing for sale, selling or the
like shall include the Bank's attorneys' fees and legal expenses, incurred or
expended by the Bank to enforce any payment due it under this Agreement either
as against the Borrower, or in the prosecution or defense of any action, or
concerning any matter growing out of or in connection with the subject matter of
this Agreement and the Collateral secured hereunder.
Without limiting the generality of any of the rights and
remedies conferred upon the Bank under this paragraph, the Bank may, to the full
extent permitted by the applicable laws (i) enter upon the premises of the
Borrower (and, to the extent necessary in the judgment of the Bank, exclude
therefrom the Borrower) and take immediate possession of the Collateral, either
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personally or by means of a receiver appointed by a court of competent
jurisdiction, using all necessary force to do so, (ii) at the Bank's option,
use, operate, manage, and control the Collateral in any lawful manner, (iii)
collect and receive all rents, income, revenue, earnings, and issues and profits
therefrom, and (iv) maintain, repair, renovate, alter, or remove the Collateral
as the Bank may determine in its exclusive discretion.
Each of the rights, privileges and remedies provided to the
Bank hereunder or otherwise by law with respect to the Collateral shall be
exercised only for the benefit of the Bank and any Collateral or proceeds
thereof held or realized upon at any time by the Bank shall inure to the benefit
of the Bank for the benefit of the Banks (i) first, to reimburse the Bank for
expenses and fees incurred in connection with the Credit Agreement, this
Agreement, and all other Loan Documents, including, without limitation,
attorneys' fees and legal expenses, and (ii) second, to liquidate the Secured
Obligations. Any surplus shall be paid to the Borrower, its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction shall determine. The Borrower shall remain
liable to the Bank for and shall pay to the Bank any deficiency which may remain
after such sale or collection.
All of the rights and remedies of the Bank under this
Agreement shall be cumulative and not exclusive of other rights and remedies
which it otherwise would have, whether under the Credit Agreement, the Notes,
the other Loan Documents, the Uniform Commercial Code, applicable law or
otherwise.
7. POWER OF ATTORNEY. The Borrower does hereby make, constitute and
appoint any officer or agent of the Bank as the Borrower's true and lawful
attorney-in-fact (without requiring any of them to act as such) with all
necessary power to (i) at any time after the occurrence and during the
continuance of an Event of Default, receive, open and dispose of all mail
addressed to the Borrower and notify postal authorities to change the address
for delivery thereof to such address as the Bank may designate, (ii) at any time
after the occurrence and during the continuance of an Event of Default, endorse
the name of the Borrower or any of the Borrower's officers or agents upon any
notes, checks, drafts, money orders, or other instruments of payment or
Collateral that may come into the possession of the Bank in full or part payment
of any amounts owing to the Bank, (iii) to do any and all things necessary to be
done in and about the premises as fully and with the same effect as the Borrower
might or could do, including the right to sign, for the Borrower, UCC-1
financing statements and UCC-3 Statements of Change, provided that the Bank
shall provide the Borrower with notice of any such action, and (iv) at any time
after an occurrence of and during the continuance of an Event of Default, to sue
for, compromise, settle and release all claims and disputes with respect to the
Collateral. The Borrower hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof, except for gross negligence or willful
misconduct of the Bank. This power of attorney is coupled with an interest and
is irrevocable.
8. PAYMENT OF EXPENSES. At its option, and after notice to the Borrower
if no potential default or Event of Default exists, the Bank may discharge
taxes, liens, security interests or such other encumbrances as may attach to the
Collateral, may pay for required insurance on the Collateral and may pay for the
maintenance, appraisal or reappraisal, and preservation of the
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Collateral, as determined by the Bank to be necessary. The Borrower will
reimburse the Bank on demand for any payment so made or any expense incurred by
the Bank pursuant to the foregoing authorization, and the Collateral also will
secure any advances or payments so made or expenses so incurred by the Bank.
9. NOTICES. All notices, and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made in accordance with Section 10.6 of the Credit Agreement. Any
party hereto may change the address to which notice to it, or copies thereof,
shall be addressed, by giving notice thereof to the other parties hereto in
conformity with the foregoing.
10. PRESERVATION OF RIGHTS. No delay or omission on the part of the
Bank to exercise any right or power arising hereunder will impair any such right
or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Bank impair any
right or power arising hereunder. The Bank's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Bank may
have under other agreements, at law or in equity.
11. ILLEGALITY. If any term, provision, or restriction of this
Agreement is held to be invalid, void or unenforceable in any way in any
jurisdiction, the remainder of the terms, provisions, covenants and restrictions
of this Agreement shall remain in full force and effect in such jurisdiction and
shall in no way be affected, impaired or invalidated, and such invalidity or
impairment shall not affect the validity and enforceability of such provision,
covenant, or restriction in any other jurisdiction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable.
12. CHANGES IN WRITING. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by the Borrower
therefrom, will in any event be effective unless the same is in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. Any modification,
amendment or waiver binding the Borrower must be consented to by the Borrower.
13. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
14. COUNTERPARTS. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
15. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the Borrower and the Bank and their respective heirs,
executors, administrators,
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successors and assigns; PROVIDED, HOWEVER, that the Borrower may not assign this
Agreement in whole or in part without the prior written consent of the Bank, and
the Bank at any time may assign this Agreement in whole or in part.
16. INTERPRETATION. In this Agreement, unless the Bank and the Borrower
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or," the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated. Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
17. INDEMNITY. The Borrower agrees to indemnify each of the Bank and
its directors, officers and employees and each legal entity, if any, who
controls the Bank (the "INDEMNIFIED PARTIES") and to hold each Indemnified Party
harmless from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, all fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result of the execution of or performance under this
Agreement; PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not
apply to claims, damages, losses, liabilities and expenses attributable to an
Indemnified Party's gross negligence or willful misconduct. The indemnity
agreement contained in this Section shall survive the termination of this
Agreement. The Borrower may participate at its expense in the defense of any
such claim.
18. GOVERNING LAW; VENUE. The Uniform Commercial Code shall govern the
attachment, perfection and the effect of attachment and perfection of the Bank's
security interest in the Collateral, and the rights, duties and obligations of
the Bank and the Borrower with respect thereto. Except as provided by the
immediately preceding sentence, this Agreement shall be deemed to be a contract
under the laws of the Commonwealth of Pennsylvania and the execution and
delivery thereof and the terms and provisions shall be governed by and construed
in accordance with the laws of said Commonwealth. The Borrower irrevocably
consents to the nonexclusive jurisdiction of the Court of Common Pleas of
Allegheny County and the United States District Court for the Western District
of Pennsylvania, and waives personal service of any and all process upon it and
consents that all such service of process be made by certified or registered
mail directed to it at the address provided for in Section 10.6 of the Credit
Agreement and service so made shall be deemed to be completed upon actual
receipt thereof. The Borrower waives any objection to jurisdiction and venue of
any action instituted against it as provided herein and agrees not to assert any
defense based on lack of jurisdiction or venue.
19. SELF-HELP REMEDIES. THE BORROWER KNOWINGLY CONSENTS TO THE BANK'S
EXERCISE OF ITS RIGHTS AS A SECURED LENDER UNDER THE LOAN DOCUMENTS AND
APPLICABLE LAW.
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20. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE BORROWER AND THE BANK ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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WITNESS the due execution of this Security Agreement as a document
under seal, as of the date first written above.
ATTEST: THE MERTEN COMPANY,
an Ohio corporation
By:
- ------------------------- --------------------------------
Name: Name:
-------------------- --------------------------
Title:
-------------------- -------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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EXHIBIT "A"
TO SECURITY AGREEMENT
LIST OF EQUIPMENT
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EXHIBIT "B"
TO SECURITY AGREEMENT
Address of Borrower's chief executive office, including the county:
1515 Central Parkway
Cincinnati, Ohio 45214
Hamilton County
Address for books and records, if different:
Addresses of other Collateral locations, including counties and name and address
of landlord or owner if location is not owned by the Borrower:
- ---------------------
- ---------------------
- ---------------------
Other names or trade names now or formerly used by the Borrower:
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EXHIBIT 10.2
THIS AGREEMENT OF LEASE is made as of the 18th day of May, 1998,
between THE TILSON GROUP, a West Virginia general partnership, hereinafter
called "Lessor," and CAPITOL BUSINESS EQUIPMENT, INC., a West Virginia
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 and all easements appurtenant thereto or necessary for Lessee's intended
use of the Premises.
2. TERM AND RENEWAL. The term of this lease shall be sixty (60)
months commencing on June 1, 1998, and ending at 11:59 p.m. on May 31, 2003,
both dates inclusive, unless sooner terminated as hereinafter provided or unless
renewed as hereinafter provided.
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
Four Hundred Eighty Thousand Dollars ($480,000.00) payable monthly in advance in
equal installments of Eight Thousand Dollars ($8,000.00) each, the first of such
installments being payable on the 1st day of June, 1998, and the remaining
installments being due and payable on the 1st day of each calendar month
thereafter during the original term hereof. All rental shall be payable to
Lessor at 825 Edgewood Drive, Charleston, West Virginia, 25302, Attention:
Brenda Tilson, or at such other place as Lessor may direct in writing.
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4. TAXES AND INSURANCE. 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 on a calendar year basis between Lessor and
Lessee as of the date of commencement of this Lease. Taxes for the final year of
the lease term shall also be prorated on a calendar year basis.
b. In the event 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
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other casualty; such insurance to be written by an insurance company or
companies authorized to do business in the State of West Virginia 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 given fifteen (15) 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. 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, 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. Except as
provided in subparagraph c with respect to the removal of personalty and
fixtures, all such improvements
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shall, at the option of Lessor, become a part of the Demised Premises and shall
be the sole property of Lessor upon the termination of this Lease.
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.
c. All trade fixtures, signs, equipment, furniture, furnishings
or other personal property of whatever kind and nature kept or installed on the
Premises by Lessee
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shall not become the property of Lessor or a part of the realty no matter how
affixed to the Premises and may be removed by Lessee at any time and from time
to time during the entire term of this lease and any extension thereof. If
Lessee is in compliance with all terms hereof at the termination of this lease,
Lessee shall have the right and obligation to remove any and all of its
furniture, furnishings, trade fixtures, equipment or other personal property
then located on the Premises and to dispose of the same. Lessee shall repair any
damage to the Premises caused by such removal. Lessee agrees that such removal
of personal property and fixtures shall occur within ten (10) days after the
termination or cancellation of this lease or any extension thereof. Lessee shall
notify Lessor in writing thirty (30) days prior to termination of this lease by
its terms or within five (5) days after cancellation of this lease by Lessor or
Lessee of its election to remove said property or said property may, at Lessor's
option, be and become the property of Lessor. If Lessor shall elect not to
retain the property it may be removed by Lessor at Lessee's expense.
Upon request of Lessee or its assignees or any subtenant permitted
hereunder, Lessor shall execute and deliver such landlord consent or lien waiver
forms submitted by any vendors, lessors, chattel mortgagors or owners of, or
lenders who may be granted security interests by Lessee in, any trade fixtures,
signs, equipment, furniture, furnishings or other personal property of any kind
and description kept or installed on the Premises setting forth that Lessor
subordinates in favor of the vendor, lessor, chattel mortgagor, owner or
security interest holder any superior lien, claim interest or other right
therein. Lessor shall further acknowledge that property covered by the consent
or waiver forms is personal property and is not to become a part of the realty
no matter how affixed thereto, and that such property may
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be removed from the Premises by the vendor, lessor, chattel mortgagee, owner or
security interest holder at any time upon default in the terms of such lease,
chattel mortgage, security agreement or other similar document, free and clear
of any claim or lien of Lessor provided that all damage resulting from such
removal is promptly repaired.
6. PERMISSIBLE USE. The Lessee shall during the continuance of this
lease, conduct upon said Demised Premises an interior design, 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 or delayed. 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 offensive, noisy, or dangerous trade, business, manufacture or
occupation of a nuisance.
Lessor hereby represents and warrants that 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. 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 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
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of toxic pollutants designated by Congress or the EPA or defined by or in or
pursuant to 42 U.S.C. Section 9601 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 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 Lessor shall, at its expense, take all necessary remedial
action(s) in response to the presence of Hazardous Substances in, on, under
or about the Premises attributable to occurrences prior to the commencement
of the term of this lease.
7. CONDITION/MAINTENANCE OF PREMISES. Lessor warrants and represents
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,
environmental, mechanical or structural condition of the Premises or any portion
thereof which has not been specifically disclosed to Lessee. The Lessee shall at
its own expense maintain and make all necessary repairs and replacements to the
pipes, heating and air conditioning systems, plumbing systems, glass, fixtures,
and all other appliances and appurtenances belonging to the Demised Premises,
and the fundamental structure of the Demised Premises, meaning the roof,
exterior brick and block walls, supporting walls, and foundations, and the
sidewalks, parking lots, curbs and driveways adjoining or appurtenant to the
Demised Premises. Such repairs and replacements, interior and exterior, ordinary
as well as extraordinary, and structural as well as non-structural, shall be
made promptly as and when necessary. All repairs to or maintenance of the
Demised Premises shall
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be made by Lessee at its sole cost and expense. 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 and diligently complete work thereon 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 the other party and obtain reimbursement from said other party for the cost
thereof plus interest thereon at the rate of eighteen percent (18%) per annum.
Lessor shall be entitled to collect such costs as additional rent and Lessee
shall be entitled to set off such costs against rentals.
8. 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 Lessee with respect to Lessee's
operations on 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
alterations, improvements or additions, and the Lessor, where necessary, will
join with the Lessee in applying for all such permits or licenses.
9. UTILITIES. 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. 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
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flow or leak from any part of the Premises 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. 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.
10. 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 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.
11. 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 10, but shall not be in
satisfaction of the indemnity obligations stated herein, and shall have limits
of liability of not less than Two
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Million Dollars ($2,000,000) 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 canceled or materially amended unless fifteen (15) days
prior written notice of such cancellation or amendment is given to Lessor.
12. EMINENT DOMAIN. If all the Premises or such portion thereof as
would make it impossible for Lessee to continue its then existing business on
the Premises 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"), Lessee may, in its sole discretion, (i) exercise its
option to purchase the Premises and be entitled to the award or payment
resulting from the condemnation or (ii) terminate this lease as of the date the
condemning authority takes title or possession, whichever occurs first.
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 (i) exercise its option to purchase the
Premises and be entitled to receive the full amount of the award or payment
resulting from the condemnation, (ii) elect to terminate this lease as of the
date the condemning authority takes possession, or (iii) elect to repair the
Premises and permit
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the lease to continue. Lessee's election to terminate this lease or to exercise
its option to purchase the Premises shall be made in writing within forty-five
(45) days after Lessor has given Lessee written notice of the taking (or in the
absence of such notice, within thirty (30) 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 and the purchase price for the option to purchase shall by reduced by the
difference between the amount of the award payable to Lessor on account of the
condemnation and the portion of the award used by Lessee in the repair of the
Premises. In the event that the Lessee does not elect to terminate the lease or
exercise its option to purchase, Lessee shall promptly repair any damage to the
Premises caused by condemnation and restore the remainder of the Premises to
Lessee's reasonable satisfaction. Lessor shall place all proceeds of the
condemnation award paid to it in escrow and make such proceeds available to
Lessee for purposes of such repairs. Lessor shall be entitled to retain any of
the award payable to it which is not used by Lessee in making repairs or
restorations to the Premises.
In the event Lessee exercises its option to purchase the Premises
following the occurrence of a condemnation, any award or payment made upon
condemnation of all or any part of the Premises shall be the property of Lessee.
In the event that Lessee elects to terminate this lease, any award or payment
made upon condemnation of the Premises shall be the property of the Lessor,
whether such award or payment is made as compensation for the taking of the fee
or as severance damages; provided Lessee shall in any event be entitled to
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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 the leasehold herein
created 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.
Lessor shall give notice to Lessee within five (5) 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 the leasehold herein created
or any other consequential or special damages, such as Lessee's relocation and
moving expenses.
13. 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, Lessee may, in its discretion, (i) exercise its option
to purchase the Premises within thirty (30) days of the occurrence of the
casualty and be entitled to retain all insurance proceeds payable on account of
such casualty, or (ii) repair and/or rebuild the Premises as promptly as
possible, provided that the proceeds from Lessee's insurance policies are
available to Lessee and sufficient in amount to fully pay all costs of repair or
rebuilding. Lessee'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
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improvements, additions, fixtures, installations or exterior signs of the
Lessee. If such fire or other casualty was not the fault of the Lessee and 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 Lessee elects to complete such work. If the damage or
casualty was caused by the fault of the Lessee, 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,
Lessee shall have the option to (i) exercise its option to purchase the Premises
hereunder, (ii) terminate this lease effective as of the date of such casualty,
(iii) repair the Premises as provided in the immediately preceding paragraph. In
the event Lessee exercises its option to purchase the Premises Lessee shall be
entitled to retain all insurance proceeds. In the event that Lessee elects to
terminate this lease, Lessor may in such event retain the casualty insurance
proceeds with respect to the Premises. Lessee shall either exercise its option
to purchase, give the Lessor notice of termination, or commence repair or
rebuilding of the Premises within forty-five (45) days after the happening of
such casualty. If Lessee does not elect to terminate this lease, Lessee shall
repair and/or rebuild the Premises as promptly as possible as set forth above,
subject to any delay from causes beyond
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its reasonable control and the terms of this lease shall continue in full force
and effect, and subject to equitable abatement of rent as set forth above.
14. 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
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 conditions 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 or any subletting or
assignment to a parent or affiliate of Lessee), Lessor agrees to look solely to
the assignee or transferee with respect to all matters in connection with this
lease and Lessee shall be released from any further obligations hereunder.
Notwithstanding the foregoing provisions of this Article, Lessee shall
have the right, without the necessity of obtaining Lessor's written consent, to:
(i) Sublet all or part of the Demised Premises to any
parent or affiliate of Lessee; or
(ii) Assign this lease to any parent or affiliate of Lessee.
For purposes of this paragraph, the term "parent" shall mean any
company or entity which now or hereafter owns or controls, directly or
indirectly, fifty (50%) percent or more of the stock or other ownership interest
in Lessee. For the purposes of this paragraph, the term
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"affiliate" shall mean any company in which Lessee or Lessee's parent now or
hereafter owns or controls, directly or indirectly, fifty (50%) percent or more
of the stock or other ownership interest having the right to vote for, or
appoint, directors or managers thereof. For the purpose of this definition, the
stock or other ownership interest so owned or controlled shall be deemed to
include all stock or ownership interests owned or controlled directly or
indirectly by any other company of which Lessee or Lessee's parent owns or
controls, directly or indirectly, fifty (50%) or more of the stock or ownership
interest having the right to vote for directors or managers thereof.
15. OPTION TO PURCHASE. The Lessee shall have the exclusive right to
purchase the Demised Premises at any time prior to the expiration of the term of
this Lease, on the terms and conditions hereinafter set forth:
a. EXERCISE OF OPTION. This right shall be exercised by the
Lessee giving Lessor written notice of its intent to exercise this option.
b. DURATION OF OPTION. In the event of a casualty or
condemnation, the option to purchase may be exercised within forty-five (45)
days of the occurrence of the casualty or condemnation. If not exercised by
reason of condemnation or casualty, the option given herein may be exercised by
the Lessee at any time prior to expiration of the term of the Lease. If not
timely exercised, the option expires.
c. CONDITION TO EXERCISE OF OPTION. The option provided herein
can only be exercised by the Lessee at a time when this Lease is still in force
and effect and the Lessee is not in default under any of the terms hereof.
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d. EXERCISE OF OPTION CREATES CONTRACT. If the Lessee exercises
the said option in the manner set forth above, the same shall constitute a
contract for the purchase of the Demised Premises between the parties contingent
upon Lessee not being in default under the terms of the Lease at the time of
Closing.
e. CLOSING. In the event Lessee elects to exercise its option to
purchase the Premises, Closing shall occur within thirty (30) days following
exercise of the option by Lessee, or such other date as the parties hereto may
agree. The Closing shall take place at such a place as the parties may agree or
at such other place in the City of Charleston, West Virginia, as may be
designated by the Lessor.
f. PURCHASE PRICE. The purchase price for the Demised Premises
shall be the sum of Eight Hundred Sixty Thousand Dollars ($860,000.00), subject
to reduction as provided in paragraph 12 in the event of exercise of this option
to purchase following a condemnation.
g. PAYMENT OF PURCHASE PRICE. The total purchase price shall be
payable in cash or certified funds at Closing.
h. DELIVERY OF DEED. It is agreed by and between the parties
hereto that at the Closing of this transaction, Lessor shall convey good and
marketable indefeasible fee simple title to the Demised Premises to Lessee by
good and sufficient general warranty deed (the "Deed"), free and clear of all
liens, defects, encumbrances and clouds on the title except the following
permitted exceptions (the "Permitted Exceptions"):
(i) zoning ordinances, if any; and
(ii) real estate taxes not yet due and payable.
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(iii) liens of taxes, covenants and restrictions of record
and liens and encumbrances created by or at the instance of Lessee.
i. TITLE EXAMINATION. Lessee shall, upon giving Lessor notice
exercising its option to purchase, obtain at Lessee's expense, a title
examination covering the Demised Premises. Within ten (10) days after receipt of
the title report, Lessee shall serve upon Lessor notice specifying those
exceptions to title, if any, to which Lessee objects, except for those matters
previously identified as Permitted Exceptions or arising as a result of the
actions or inaction of Lessee (the "Title Defects"). Upon receipt by the Lessor
of Lessee's notice of Title Defects, Lessor shall immediately and diligently
pursue the removal of the Title Defects. Lessor shall have thirty (30) days from
receipt of Lessee's notice of Title Defects to cure same to the reasonable
satisfaction of Lessee. If the Title Defects are not cured within such time
period, Lessee may (a) terminate this Lease or (b) waive the unsatisfied Title
Defects and close the transaction.
j. It is understood and agreed by and between the parties hereto
that, subject to Lessee's obligations under this lease, responsibility for the
risk of loss respecting the subject property shall remain with the Lessor until
the closing of the transaction contemplated by the exercise of the option.
k. It is understood and agreed by and between the parties hereto
that this option and any contract created by the exercise hereto shall be
governed by the laws of the State of West Virginia.
l. If the option to purchase is exercised by the Lessee, the
Lessor's obligation to close shall survive the expiration of this Lease as
extended or renewed in the
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event the Closing has not occurred prior to the expiration of the
extended or renewed lease term. In such event, the Lessee shall be permitted to
continue to occupy the Demised Premises by paying to the Lessor the monthly
rental required herein pro rated from the date of the expiration of the extended
or renewed lease term until the date of the Closing of the purchase, which such
rentals shall be applied to the Purchase Price of the Demised Premises at
Closing but shall be retained by Lessor in the event Closing does not occur
without the fault of breach by Lessor.
m. At the closing, Lessor shall deliver to Lessee the following:
(i) a duly executed and acknowledged Deed conveying good and indefeasible title
in fee simple to the Demised Premises, free and clear of any and all liens,
encumbrances and restrictions of record, except for the Permitted Exceptions;
(ii) a certificate stating that all representations and warranties made by
Lessor herein are true and correct on the closing date; (iii) a Vendor's
Affidavit stating that no federal income tax is required to be withheld under
the Foreign Investment and Real Property Tax Act; and (iv) all other documents
reasonably requested by Lessee to close this transaction.
n. CLOSING COSTS. Lessor shall pay the cost of any real estate
conveyance fee or transfer tax charged, the cost of preparation of the Deed and
Vendor's Affidavit; and any other expenses stipulated to be paid by Lessor under
the provisions herein. Lessee agrees to pay the cost of recording fees, the cost
of the title examination and any other expenses stipulated to be paid by Lessee
under the provisions herein.
16. EVENTS OF DEFAULT.
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a. BY LESSEE. In the event that the rent, or any part thereof,
or 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 for thirty (30) days; 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 be instituted and not discharged within
ninety (90) days; or if 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
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Lessee out as herein provided, this shall not relieve Lessee from its
obligations to pay 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.
b. BY LESSOR. In the event that Lessor shall fail to complete
the sale of the Premises following Lessee's exercise of its option to purchase,
Lessee may seek specific performance of the contract arising from the exercise
of its option to purchase, such remedy being deemed cumulative and in addition
to all other remedies provided by law.
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. Lessor agrees to conduct any inspections in such a manner as
will not interfere with Lessee's use of the Premises.
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:
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Lessor: 825 Edgewood Drive
Charleston, West Virginia 25302
Attention: Brenda Tilson
Lessee: 711 Indiana Avenue
Charleston, West Virginia 25302
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 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, that such Premises are
free and clear of any and all liens, claims and encumbrances whatsoever, except
the permitted encumbrances described below, zoning requirements, covenants,
conditions, easements and restrictions of record which have been disclosed to
Lessee and non-delinquent taxes and assessments, and that 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 Lessee's 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
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or their assigns in the event of foreclosure; provided, however, that conditions
precedent to Lessee's attornment and requirement to subordinate hereunder shall
be (i) that Lessee, upon notice from such mortgagee or beneficiary of 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
and (ii) that such mortgagee, beneficiary, their successors and assigns agree to
perform the obligations of Lessor under this lease. 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 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
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revocation thereof or failure to renew shall not release Lessee from continuing
performance of this Lease.
23. 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. Waiver of any
default or breach in any one instance by Lessor or Lessee shall not be construed
as a waiver of any subsequent default or breach or condition of the lease to
which such default or breach related.
c. This agreement shall be construed in accordance with the laws
of the State of West Virginia.
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.
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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 for filing and recording in the
Office of the Clerk of the County Commission of the county in which the Demised
Premises are located.
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.
LESSOR:
THE TILSON GROUP
By /S/ JAMES TILSON
------------------------------------
Its GENERAL PARTNER
-----------------------------------
Dated: May 18, 1998
LESSEE:
CAPITOL BUSINESS EQUIPMENT, INC.
A WEST VIRGINIA CORPORATION
Dated: May 18, 1998 By /S/ JAMES TILSON
------------------------------------
Its VICE PRESIDENT
-----------------------------------
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STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, TO-WIT:
The foregoing instrument was acknowledged before me this 18th day of
May, 1998, by James Tilson, General Partner The Tilson Group, a West Virginia
general partnership, on behalf of the partnership.
My commission expires: JULY 3, 2006 .
------------------------------------------
/S/ MONIKA J. HUSSELL
------------------------------------
Notary Public
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, TO-WIT:
The foregoing instrument was acknowledged before me this 18th day of
May, 1998, by James Tilson, Vice President, of Capitol Business Equipment, Inc.,
a West Virginia corporation, on behalf of said corporation.
My commission expires: JULY 3, 2006 .
------------------------------------------
/S/ MONIKA J. HUSSELL
------------------------------------
Notary Public
This Instrument Was Prepared By:
Thomas J. Murray
Huddleston, Bolen, Beatty, Porter & Copen
Post Office Box 2185
Huntington, West Virginia 25722
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EXHIBIT A TO LEASE
PARCEL NO. 1 - 38' X 120' - PARKING LOT (LT 14 AND PT LT 15)
All of that certain lot or parcel of land situate in the City of
Charleston, Kanawha County, West Virginia, together with the buildings and
improvements thereon and appurtenances thereunto belonging, more particularly
bounded and described as follows, to-wit:
BEGINNING at an iron pin in the north line of Indiana Avenue
located 12.50 feet in a southwesterly direction from the
common front corner to Lots Nos. 15 and 16 of Block 1 of Elk
Extension known as Bigley and Walker Addition, and running
thence with the north line of said Indiana Avenue S. 88
degree 30' W. 37.50 feet to a point where a large Elm tree
now stands and located at the common front corner to Lots
Nos. 13 and 14 of said Block 1; thence running with the
division line between Lots 13 and 14 N. 1 degree 30' W.
120.00 feet to a point in the south line of an alley located
at the common rear corner to said Lots Nos. 13 and 14; thence
running with the south line of said alley N. 88 degree 30' E.
37.50 feet to a point located in the north boundary line of
Lot No. 15; thence running with a line thru Lot No. 15
parallel to and 12.50 feet from the division line between
Lots Nos. 14 and 15 S. 1 degree 30' E. 120.00 feet to the
place of beginning, and being all of Lot No. 14 and part of
Lot No. 15 of Block 1 of Bigley and Walker Addition.
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Being all of that certain lot conveyed to the Tilson Group by Robert C.
Means, et al. by deed dated December 18, 1990 and recorded in the Office of the
Kanawha County Clerk in Deed Book 2262, at Page 260.
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Parcel No. 2 - 37.5' x 120' Fronting
INDIANA AVENUE (LT 6 & PT LT 7)
All that certain lot or parcel of land situate in the City of
Charleston, Kanawha County, West Virginia, bounded and described as follows:
Being all of Lot No. Six (6) and one-half of Lot No. Seven
(7) of Block One of the Bigley Walker Addition to the City of
Charleston, fronting thirty-seven and one-half feet on
Indiana Avenue, and extending between parallel lines a
distance of one hundred twenty feet to an alley.
Being all of that certain lot conveyed to the Tilson Group by Pressure
Products, Inc. as Parcel No. 5 in that certain deed dated June 14, 1990 and
recorded in the Office of the Kanawha County Clerk in Deed Book 2250, at Page
178.
Parcel No. 3 - 95' x 120' Fronting
INDIANA AVENUE (LT 5 AND PT LTS 2, 3, AND 4)
All that certain lot or parcel of land situate in the City of
Charleston, Kanawha County, West Virginia, bounded and described as follows:
BEGINNING at a stake 85 feet from the corner of West
Washington Street (formerly Charleston Street) and Indiana
Avenue; thence leaving Indiana Avenue N. 1 degree 30' W.
118.33 feet to a point in a 10 foot alley; thence running
with said alley N. 87 degrees 29' E. 95.02 feet; thence
leaving said alley and running toward Indiana Avenue S. 1
degree 30' E. 120 feet to a point in the right of way of said
Indiana Avenue; thence with the right of way said Indiana
Avenue S. 88 degrees 30' W. 95 feet to the place of
beginning, and being all of Lots E and F and 15 feet off the
rear of Lots B, C and D, as shown on that certain partition
map recorded in the office of the Clerk of the County Court
of Kanawha County, West Virginia, in Deed Book 91, at Page
348, and also being part of Lots Two (2), Three (3) and Four
(4) and all of Lot Five (5), Block 1, Bigley and Walker "Elk
Park" Addition, as shown on the map of said addition,
recorded in said Clerk's office, and further shown upon that
certain map prepared by J. Lewis Hark, dated February 27,
1971, attached hereto and being made a part hereof.
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Being all of that certain lot conveyed to the Tilson Group by Pressure
Products, Inc. as Parcel No. 4 in that certain deed dated June 14, 1990 and
recorded in the Office of the Kanawha County Clerk in Deed Book 2250, at Page
178.
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EXHIBIT 10.3
THIS AGREEMENT is made and entered into this 28th day of May, 1998, by
and between MILDRED THOMPSON, single, party of the first part (hereinafter
called "Lessor"); and THOMPSON'S OF MORGANTOWN, INC., a West Virginia
corporation, party of the second part (hereinafter called "Lessee") .
LEASE
1. PREMISES. Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor the lower or first floor or level and approximately one-half of the
middle or second floor or level, presently occupied by Lessee, of that certain
building situate, lying and being in the Third Ward of the City of Morgantown,
Monongalia County, West Virginia, which building is located on the northeast
corner of Kirk and Chestnut Streets.
2. CONDITION OF PROPERTY. Lessor warrants and represents that at the
commencement of this lease the leased premises shall be in compliance with all
laws, rules and regulations affecting the leased premises or its use, including
those relating to the environmental or physical condition of the leased
premises, and that there is no adverse fact known to Lessor relating to the
physical, environmental, mechanical or structural condition of the Premises or
any portion thereof which has not been specifically disclosed to Lessee.
3. TERM/EXTENDED TERM. The initial term of this Agreement shall be
for a period of five (5) years, commencing on June 1, 1998 (the "Commencement
Date"), and terminating without further notice on May 31, 2003, both dates
inclusive. In the event that Lessee takes possession of the leased premises
prior to the Commencement Date, Lessee shall possess such property for a term of
days under the same terms and conditions, and at the same prorata rent as
is payable hereunder.
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Provided Lessee is not then in default under the terms of this lease,
and that no condition then exists which, with the passage of time or the giving
of notice, or both, would constitute a default hereunder, Lessee shall have the
option, in its sole discretion, to renew the initial term of this Lease for one
additional period of five (5) years commencing June 1, 2003 and ending May 31,
2008, both dates inclusive (the "renewal term"), under the following terms and
conditions:
(a) Lessee shall furnish to Lessor written notice of the election
to exercise its option to renew the initial term of this Lease not less than
sixty (60) days prior to May 31, 2003.
(b) All terms and conditions of this Lease, other than rental,
which shall be as hereinafter provided, and the renewal option, shall continue
without change and be applicable during the renewal term hereof.
4. POSSESSION/TITLE. Except for and excluding a lien on the premises
securing a loan by Huntington National Bank, Lessor covenants and agrees with
Lessee that Lessor is the lawful owner of the leased premises, that such
premises are free and clear of any and all liens, claims and encumbrances
whatsoever, except zoning requirements, covenants, conditions, easements and
restrictions of record which have been disclosed to Lessee, and non-delinquent
taxes and assessments, and that 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 Lessee's part to
be kept, shall peaceably and quietly hold, occupy and enjoy the Premises during
the initial term herein created and any renewal term.
5. RENT.
(a) BASE RENT. Lessee agrees to pay a yearly base rental of
Nineteen Thousand Three Hundred Fifty-Six and 00/100 ($19,356.00) for each year
of the initial five year lease term,
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payable in monthly installments of One Thousand Six Hundred Thirteen and 00/100
Dollars ($1,613.00) per month on the 1st day June, 1998 and continuing on the
1st day of each calendar month thereafter. In the event that the Lessee takes
possession of the leased premises prior to the Commencement Date, Lessee shall
pay a prorata portion of such monthly rental upon taking possession, such
portion to cover the period from the possession date through May 31, 1998. All
monthly rental payments shall be paid in advance on the first day of each month
and shall be made to the Lessor as follows: Mrs. F. R. Thompson, P. O. Box 845,
Morgantown, WV 26507.
(b) RENEWAL TERM BASE RENT. The yearly base rental for the
renewal term, if exercised, shall be the sum of Twenty Thousand Three Hundred
Twenty-Eight and 00/100 Dollars ($20,328.00) for each year of the renewal term,
payable in monthly installments of One Thousand Six Hundred Ninety Four and
00/100 Dollars ($1,694.00) per month commencing June 1, 2003, and continuing on
the 1st day of each calendar month thereafter.
(c) INCREASE IN TAXES, ETC. Any increase (from amounts payable as
of the Commencement Date) in real estate taxes, insurance premiums (other than
extraordinary increases caused by the nature of the use of other occupants of
the leased premises) or fire service fees affecting the real estate where the
leased premises are located shall be paid by the Lessee as additional rent on a
prorata basis. Such increases, if any, will be added to the next monthly
installment after Lessee has received notice of any such increase.
6. USE OF PREMISES. Lessee shall use the leased premises for an
office furniture supply business only. Lessee shall not use or knowingly permit
any part of the leased property to be used for any unlawful purposes without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld or delayed. Except as expressly elsewhere in this lease
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provided, Lessee agrees to perform, fully obey and comply with all the
ordinances, rules, regulations and laws of all public authorities. Lessee shall
erect no sign, nor shall any advertisement or notice be inscribed, painted or
affixed on any part of the outside or inside of said building unless such color,
size and style, and the location of the same, be first approved by the Lessor in
writing; such approval shall not be unreasonably withheld or delayed.
7. TAXES. Lessor, subject to her right to partial reimbursement of
increases in taxes and fees as provided in paragraph 5(c) hereof, shall timely
pay all ad valorem real property taxes, fire service fees and other assessments
against the leased premises prior to such taxes and fees becoming delinquent.
8. REPAIRS. Lessor shall, at its own expense, maintain in good
operating condition and in compliance with all the ordinances, rules,
regulations and laws of all public authorities, and make all necessary repairs
and replacements to, the pipes, heating and air conditioning systems, plumbing
systems, glass, and all other appliances and appurtenances belonging to the
leased premises, and to the fundamental structure of the leased premises,
meaning the roof, exterior brick and block walls, supporting walls, and
foundations, and the sidewalks, parking lots, curbs and driveways adjoining or
appurtenant to the leased premises. Such repairs and replacements, interior and
exterior, ordinary as well as extraordinary, and structural as well as
non-structural, shall be made promptly as and when necessary. All other
non-structural repairs and maintenance shall be made by Lessee at its sole cost
and expense. 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
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or commence and diligently complete work thereon 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 the other party and obtain reimbursement from said other party for the cost
thereof plus interest thereon at the rate of ten percent (10%) per annum. Lessor
shall be entitled to collect such costs as additional rent and Lessee shall be
entitled to set off such costs against rentals.
Lessee may make any improvements to the leased premises provided that
such improvements comply with federal, state and municipal statutes and
ordinances, and further provided that Lessee obtain Lessor's prior approval for
such improvements and repairs. Lessee shall be responsible for obtaining any
necessary building permits. Lessee agrees that all damage or injury done to the
premises by Lessee or by any person who may be in or upon the premises, except
Lessor, Lessor's agents, servants and employees, shall be repaired by Lessee, or
its employees, at Lessee's expense. Lessee shall indemnify Lessor against any
mechanic's lien or other lien arising out of the making of any alterations,
additions, repairs, or improvements by Lessee. At the end of the Lease term, any
improvements located on the leased premises shall become the property of the
Lessor.
All trade fixtures, signs, equipment, furniture or other personal
property of whatever kind and nature kept or installed on the leased premises by
Lessee shall not become the property of Lessor or a part of the realty no matter
how affixed to the leased premises and may be removed by Lessee at any time and
from time to time during the entire term of this lease. Upon request of Lessee
or its assignees or any subtenant permitted hereunder, Lessor shall execute and
deliver any landlord consent or lien waiver forms submitted by any vendors,
lessors, chattel mortgagors
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or owners of, or holders of security interests granted by Lessee against, any
trade fixtures, signs, equipment, furniture or other personal property of any
kind and description kept or installed on the leased premises setting forth that
Lessor waives, in favor of the vendor, lessor, chattel mortgagor, secured
interest holder or owner, any superior lien, claim interest or other right
therein. Lessor shall further acknowledge that property covered by the consent
or waiver forms is personal property and is not to become a part of the realty
no matter how affixed thereto, and that such property may be removed from the
leased premises by the vendor, lessor, chattel mortgagee, security interest
holder or owner at any time upon default in the terms of such chattel mortgage,
security agreement, lease or other similar document, free and clear of any claim
or lien of Lessor provided that all damage resulting from such removal is
promptly repaired.
Lessor has disclosed to Lessee the presence of an underground storage
tank on the leased premises. Lessor and Lessee confirm that Lessee has not used
and does not intend to use the storage tank and that such tank is expressly
excluded from the premises being leased to Lessee. Lessor shall remain solely
responsible for compliance with all laws, rules and regulations of all
governmental authorities with respect to said underground storage tank.
9. UTILITIES. Lessee, in conjunction and cooperation with the tenant
of the property adjacent to the leased premises, shall share and pay all charges
incurred for utilities serving the building of which the demised premises are a
part, including, but not limited to, gas, heat, electricity and telephone or
other communication systems, and shall indemnify Lessor against any liability or
damage on such account.
10. INSURANCE/DESTRUCTION OF PREMISES.
(a) Lessor shall maintain throughout the initial term and renewal
term, if exercised,
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at Lessor's cost and expense, a policy or policies of insurance against loss or
damage to the leased premises by reason of fire or other casualty in the amount
of the full insurable value thereof. Such policy shall be written by a company
reasonably acceptable to Lessee, shall be maintained in the names of both Lessor
and Lessee, as their respective interests may appear, shall contain a provision
waiving subrogation rights against the Lessee from all claims, losses and
liabilities arising from or caused by any hazard covered by such insurance, and
shall provide that the same may not be canceled except upon 30 days prior
written notice to Lessee. Lessor shall furnish to Lessee the original policy or
a certificate with respect thereto in connection with such policy. Lessee shall
maintain fire or other casualty insurance or provide self insurance against
damage to its personal property maintained at the leased premises.
(b) In the event the leased premises are damaged or destroyed or
rendered partially untenantable for their then use by fire or other casualty,
Lessor shall repair and/or rebuild the same as promptly as possible, provided
that the proceeds from Lessor's insurance policies are available to Lessor to
pay the costs of repair or rebuilding. Lessor's obligation hereunder is merely
to restore the leased 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 leased premises, the rent payable under this lease shall be abated in the
proportion that the leased premises destroyed or rendered untenantable bears to
the total leased 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
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is obligated to complete such work.
Notwithstanding the foregoing, in the event that fifty percent (50%) or
more of the leased premises is destroyed or rendered untenantable by fire or
other casualty, or if said building be damaged or destroyed by any cause so that
Lessor shall decide to demolish or completely rebuild the building, Lessor shall
have the option to terminate this lease effective as of the date of such
casualty by giving to the Lessee within thirty (30) days after the happening of
such casualty written notice of such termination. During such thirty (30) day
period Lessee shall have the option to terminate this lease by written notice to
Lessor in the event that the damage cannot reasonably be repaired within ninety
days of the occurrence of the fire or other casualty. If neither Lessor or
Lessee elect to terminate this lease, Lessor shall repair and/or rebuild the
leased 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.
11. INDEMNITY AND INSURANCE. Except for claims or demands arising from
(i) the failure of Lessor to perform its maintenance and repair obligations
under this lease, or (ii) the actions of Lessor, its agents, employees and
invitees on the leased premises in the performance of such obligations, Lessee
agrees to indemnify Lessor against and to hold Lessor harmless from any and all
claims or demands for loss of or damage of property or for injury or death to
any person from any cause whatsoever while upon or about said leased premises
during the term of this lease. Lessee agrees to take out and maintain with a
reputable insurance company, at its sole cost and expense, public liability
insurance in the amount of not less than $1,000,000.00 in respect to bodily
injury or death, and not less than $100,000.00 in respect to property damage
growing out
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of the use of or occurring on or about the premises. Lessor shall be named as
co-insured on all such policies, and shall be entitled to a certificate of the
insurer showing said coverage to be in effect.
12. CONDEMNATION. If the whole of the leased premises, or such portion
thereof as will make the leased premises unsuitable for the purposes herein
leased, is condemned for any public use or purpose by any legally constituted
authority, then in either of such events this lease shall cease from the time
when possession is taken by such public authority and rental shall be accounted
for between Lessor and Lessee as of the date of the surrender of possession.
Such termination shall be without prejudice to the rights of either Lessor or
Lessee to recover compensation from the condemning authority for any loss or
damage caused by such condemnation. Neither Lessor nor Lessee shall have any
rights in or to any award made to the other by the condemning authority.
If any other taking (of the leased premises or otherwise) adversely and
substantially affects Lessee's use, access, or rights of ingress or egress of or
to the leased 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 leased premises
remaining, except that rent shall be reduced in the proportion that the area
taken diminishes the value and use of the leased premises to Lessee. In
addition, Lessor, at its expense, shall promptly repair any damage to the leased
premises caused by condemnation and restore the
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remainder of the leased premises to the reasonable satisfaction of Lessee.
13. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease or
any interest therein, let or sublet the said premises or any part thereof or any
right or privilege appurtenant thereto, or permit the occupancy or use of any
part thereof by another person without the express written consent of Lessor
first had and obtained, which consent shall not be unreasonably withheld or
delayed.
Notwithstanding the foregoing provisions of this paragraph, Lessee
shall have the right, without the necessity of obtaining Lessor's written
consent, to:
(i) Sublet all or part of the leased premises to any parent
or affiliate of Lessee; or
(ii) Assign this lease to any parent or affiliate of Lessee.
For purposes of this paragraph, the term "parent" shall mean any
company or entity which now or hereafter owns or controls, directly or
indirectly, fifty (50%) percent or more of the stock or other ownership interest
in Lessee. For the purposes of this paragraph, the term "affiliate" shall mean
any company of which Lessee or Lessee's parent now or hereafter owns or
controls, directly or indirectly, fifty (50%) percent or more of the stock or
other ownership interest having the right to vote for, or appoint, directors or
managers thereof. For the purpose of this definition, the stock or other
ownership interest so owned or controlled shall be deemed to include all stock
or ownership interests owned or controlled directly or indirectly by any other
company of which Lessee or Tenant's parent owns controls, directly or
indirectly, fifty (50%) or more of the stock or ownership interest having the
right to vote for directors or managers thereof.
14. MAINTENANCE. The Lessee shall keep said leased premises clean and
in safe
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condition for invitees or licensees in said premises, and will be responsible
for keeping the area in a tidy condition and for keeping the sidewalks adjacent
to said premises clean and free of garbage, ice and snow. Lessee will save the
Lessor harmless from any claim for loss or damage occasioned by the condition of
the premises or the sidewalks abutting the same.
15. NOTICES. All notices given to Lessee shall be in writing,
deposited in the United States mail, certified or registered, with postage
prepaid, and addressed to Lessee at ____________________________________, West
Virginia _____. Notices by Lessee to Lessor shall be in writing, deposited in
the United States mail, certified or registered, with postage prepaid, and
addressed to Lessor at P. O. Box 845, Morgantown, West Virginia 26507. Notices
shall be deemed delivered when deposited in the United States mail, as above
provided. Changes of address by either party must be given to the other in the
same manner as above specified.
16. DEFAULT. This lease is made upon the express condition that if
Lessee fails to pay the rental reserved hereunder or any part thereof after the
same shall become due, and should such failure continue for a period of ten (10)
days, or if Lessee fails or neglects to perform, meet or observe any of Lessee's
other obligations hereunder and such failure or neglect shall continue for a
period of thirty (30) days, then Lessor at any time thereafter, by ten (10) days
written notice to Lessee, may lawfully declare the termination hereof and
re-enter said premises, and by due process of law, expel, remove and put out
Lessee or any person or persons occupying said premises and may remove all
personal property therefrom without prejudice to any remedies which might
otherwise be used for the collection of arrears of rent or for the preceding
breach of covenant or condition.
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Notwithstanding any other provisions of this lease, where the curing of
an alleged default requires more than payment of money, and the work of curing
said default cannot reasonably be accomplished within the time otherwise
permitted herein, and where Lessee has commenced upon the said work of curing
said default and is diligently pursuing same, then Lessee shall be entitled to
reasonable time extensions to permit the completion of said work of curing said
default, as a condition precedent to any re-entry by Lessor or termination of
the lease by Lessor, and any defect that is cured shall not thereafter be
grounds for re-entry or for termination.
In the event that Lessor shall fail to perform any of its obligations
hereunder following fifteen (15) days written notice, Lessee may (i) by written
notice to Lessor terminate this lease as of a date specified in the notice and
receive a refund of any pre-paid rent or taxes, and without prejudice to any
right of action or remedy which might otherwise be used by Lessee to enforce its
rights with respect to an antecedent breach; or (ii) perform or pay Lessor's
obligations and be entitled to offset all such amounts, plus interest at the
rate of ten percent (10%) per annum. These remedies shall be deemed cumulative
and in addition to all other remedies provided by law. Notwithstanding any other
provisions of this lease, where the curing of an alleged default by Lessor
requires more than payment of money, and the work of curing said default cannot
reasonably be accomplished within the time otherwise permitted herein, and where
Lessor has commenced upon the said work of curing said default and is diligently
pursuing same, then Lessor shall be entitled to reasonable time extensions to
permit the completion of said work of curing said default, as a condition
precedent to any termination of the lease by Lessee, and any defect that is
cured shall not thereafter be grounds for termination.
17. NON-WAIVER OF DEFAULT. The subsequent acceptance of rent hereunder
by Lessor
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shall not be deemed a waiver of any preceding breach of any obligation hereunder
by Lessee other than the failure to pay the particular rental so accepted, and
the waiver of any breach of any covenant or condition by Lessor shall not
constitute a waiver of any other breach regardless of knowledge thereof.
18. ENTRY AND INSPECTION. Upon reasonable notice given to Lessee by
Lessor, Lessee shall permit Lessor and its agents to enter the demised premises
at reasonable times for any of the following purposes: to inspect the same and
to assure maintenance of the building in which the said premises are located,
and to make such repairs to the demised premises as Lessor may elect or be
required to make.
19. RELATIONSHIP OF PARTIES. It is understood and agreed that the
relationship of the parties hereto is strictly that of landlord and tenant and
that this lease shall not be construed as a joint venture or partnership. The
parties hereto are not and shall not be deemed to be agents or representatives
of each other.
20. TERMINATION. Upon the termination of this lease, the Lessee shall
surrender said premises in as good condition as they now are, reasonable wear
and use excepted, and remove therefrom all personal effects, including trade
fixtures, furniture, belonging to the Lessee. Any and all improvements, repairs
and remodeling done to the leased premises shall become the sole property of the
Lessor.
21. MISCELLANEOUS.
(a) The paragraph captions in this Agreement are for convenience
only and shall not in any wise limit or be deemed to construe or interpret the
terms and provisions hereof.
(b) Time is of the essence of this agreement and of
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all provisions hereof.
(c) This Agreement shall be construed and enforced in accordance
with the laws of the State of West Virginia.
(d) Any amendment to this Agreement must be in writing and signed
by all parties hereto.
22. SUCCESSORS. All the terms, covenants, and conditions hereunder
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of the parties hereto.
23. MEMORANDUM OF LEASE. This lease shall not be recorded. The parties
shall, if Lessee requires, execute and deliver a memorandum of this lease in
proper form for the purpose of recording. However, the memorandum shall not in
any circumstances be deemed to modify or change any provision of this lease. The
lease provisions shall in all instances prevail.
24. ENTIRE AGREEMENT. Lessor and Lessee agree that this Agreement
contains the final and entire agreement between the parties hereto, and they
shall not be bound by any terms, conditions, statements, or representations,
oral or written, not herein contained.
WITNESS the following signatures and seals:
Lessor:
/S/ MILDRED T. BRIGHT, ATTORNEY
-------------------------------
IN FACT
MILDRED THOMPSON
Lessee:
THOMPSON'S OF MORGANTOWN, INC.,
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a West Virginia corporation
By: /S/ GEORGE T. BRIGHT
---------------------
Its President
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EXHIBIT 10.4
LEASE AGREEMENT
1) PARTIES. THIS LEASE, dated the 27TH day of OCTOBER, 1997, by and between THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, (hereinafter "Lessor"),
and CHAMPION INDUSTRIES. INC. D/B/A UPTON PRINTING, (hereinafter "Lessee"),
WITNESSETH:
In consideration of the rental stated herein and their mutual covenants, Lessor
leases to Lessee and Lessee leases from Lessor, on the terms and conditions
herein, the Premises, situated in Jefferson Parish, Louisiana, and described
more particularly as follows:
APPROXIMATELY 11,250 SQ.FT. OF OFFICE/WAREHOUSE, 5600 JEFFERSON HIGHWAY,
BUILDING W-2, SUITES 278-282, HARAHAN, LA 70123 (SEE ATTACHED EXHIBIT"A")
2) TERM. The term of this Lease is THREE (3) year(s), commencing NOVEMBER 1,
1997 and expiring OCTOBER 31, 2000; provided, however, that if Lessee takes
occupancy sooner than the commencement date, the commencement date shall be the
date of occupancy, the Lease shall commence upon Lessee's acceptance and the
term will run from the first of the following month for the number of years set
out above.
3) RENTAL. Lessee agrees to pay to Lessor, without deduction, set off, prior
notice, or demand, rental during said term payable on the first day of each
month in advance monthly installments of THREE THOUSAND NINE HUNDRED
THIRTY-SEVEN AND 50/100------($3,937.50) dollars. One monthly installment of
rent shall be due and payable on the date of execution of this Lease by Lessee
for the first month's rent and a like monthly installment shall be due and
payable on or before the first day of each calendar month succeeding the
"commencement date" during the demised term; provided, that if the "commencement
date" should be a date other than the first day of a calendar month, the monthly
rental set forth above shall be prorated to the end of that calendar month, and
all succeeding installments of rent shall be payable on or before the first day
of each succeeding calendar month during the demised term.
On the date of execution of this Lease by Lessee, there shall be due and
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payable by Lessee a security deposit in an amount equal to one monthly rental
installment to be held for the performance by Lessee of Lessee's covenants and
obligations under this Lease, it being expressly understood that the deposit
shall not be considered an advance payment of rental or a measure of Lessor's
damage in case of default by Lessee. Upon the occurrence of any event of default
by Lessee or breach by Lessee of Lessee's covenants under this Lease, Lessor
may, from time to time, without prejudice to any other remedy, use the security
deposit to the extent necessary to make good any arrears of rent and/or any
damage, injury, expense or liability caused to Lessor by the event of default or
breach of covenant, any remaining balance of the security deposit to be returned
by Lessor to Lessee upon termination of this Lease.
All rental due under this Lease is payable to the order of THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES, but delivered to Lessor or Lessor's
Agent at the address designated for notice in Article 26.
4) LATE CHARGES. Lessee's failure to pay rent promptly may cause Lessor to incur
unanticipated costs. The exact amount of such costs is impractical or extremely
difficult to ascertain. Such costs may include, but are not limited to
processing and accounting charges and late charges which may be imposed on
Lessor by any ground lease, any rent payment within ten (10) days after it
becomes due, Lessee shall pay Lessor a late charge equal to ten percent (10%) of
the overdue amount. The parties agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of such
payment.
5) IMPROVEMENTS TO BE MADE; DELIVERY OF PREMISES. If Lessor is to make any
improvements prior to Lessee's occupancy, a separate Schedule A shall be
attached and initialed by each party setting out the agreed improvements; in
such event Lessor shall proceed diligently to make such improvements and the
Premises shall be deemed acceptable when such improvements are made. If no
Schedule A is attached, Lessee shall be deemed to have accepted the Premises in
their existing condition. Lessee shall in no event be liable for any latent
defects. Should Lessor's delay be reasonably preventable, Lessee's remedy shall
be to terminate this Lease should Lessor still fail after notice to complete the
work with dispatch. Any improvements desired by Lessee not included in Schedule
A shall be at Lessee's cost and a delay arising from their completion will not
delay the commencement of the Lease.
6) TAXES. In addition to the rental provided for hereinabove, Lessee shall pay
each month one-twelfth of his prorata portion (based upon the ratio which the
total number of square feet covered by this Lease bears to the total number of
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square feet in the center) of the real estate taxes and assessments general and
special, levied or imposed, with respect to said multiple occupancy buildings
which for the purposes hereof shall be deemed to include related parking
facilities and all the improvements to said buildings, as estimated by Lessor.
In January of each year, Lessor shall furnish Lessee with a statement setting
forth the amount of tax levied against the land, buildings and improvements, the
Lessee's share of said tax, and the amount paid by the Lessee to pay for said
tax during the prior year. Said statement shall include a copy of the tax bills
for the year and a check or bill for any over or under payment for said taxes.
In addition to all other payments required to be paid by Lessee to Lessor,
Lessee shall pay in the same manner as set forth in the preceding paragraph all
rents, sales and use taxes, if any, levied or imposed with respect to the leased
Premises or this Lease and all such levies of ad valorem or other property taxes
or taxes assessed with respect to property ownership, as amended or modified,
which are not presently in effect and with which it would be chargeable as a
consequence of the ownership of the demised Premises if in fact it were the
owner thereof in fee simple at the time of such assessment of levy.
7) KIND OF BUSINESS. Lessee shall occupy the Premises throughout the full term
of the Lease, and the principal business to be conducted is STORAGE & WHOLESALE
DISTRIBUTION OF PRINTED FORMS AND RELATED OFFICE USE . Lessee agrees to comply
with (and to indemnify Lessor from any violations of) all laws or ordinances,
including the Occupational Safety and Health Act of 1970, relative to Lessee's
use of the Premises.
8) COMPLIANCE WITH LAWS & REGULATIONS. Lessee shall at its own cost and expense
obtain any and all licenses and permits necessary of any such use. Lessee shall
comply with all governmental laws, ordinances and regulations applicable to
Lessee's use of the Premises, and shall promptly comply with all governmental
orders and directives for the corrections, preventions and abatement of
nuisances in, upon, or connected with Premises, all at Lessee's sole expense.
Without Lessor's prior written consent, Lessee shall not receive, store or
otherwise handle any product, material or merchandise which is explosive or
highly inflammable, or considered to be Hazardous Material (see Article 9f
below). Lessee will not permit the Premises to be used for any purpose or in any
manner which would render the insurance thereon void or the insurance risk more
hazardous. Lessee shall also be responsible for making any modifications and
repairs to the facility at Lessee's expense which are imposed or required by any
governmental authority as a result of Lessee's use and/or occupancy of the
Premises. Said repairs and/or modifications shall be approved
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by the Lessor.
9) ENVIRONMENTAL.
(a) LESSOR'S REPRESENTATION. As of the date of this Lease, Lessor represents to
Lessee, to the best of Lessor's knowledge based solely on the Environmental
Reports dated July, 1991; March, 1992; and, January, 1994 that the Lessor has
not disposed, stored or used Hazardous Materials (as hereinafter defined) in the
Building, other than those that are in compliance with law.
(b) LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
i) Lessee represents, warrants and covenants that (1) the Premises will
not be used for any dangerous, noxious or offensive trade or business
and that it will not cause or maintain a nuisance there, (2) it will
not bring, generate, treat, store, use or dispose of Hazardous
Materials at the Premises, (3) it shall at all times comply with all
Environmental Laws (as hereinafter defined) and shall cause the
Premises to comply, and (4) Lessee will keep the Premises free of any
lien imposed pursuant to any Environmental Laws.
ii) Premises for purposes of this Article shall mean the Building and
the Property including parking areas.
iii) REPORTING REQUIREMENT. Lessee warrants that it will promptly
deliver to the Lessor, (1) copies of any documents received from the
United States Environmental Protection Agency and/or any state, parish
or municipal environmental or health agency concerning Lessee's
operations upon the Premises, (2) copies of any documents submitted by
the Lessee to the United States Environmental Protection Agency and/or
any state, parish or municipal environmental or health agency
concerning its operations on the Premises, including but not limited to
copies of permits, licenses, annual filings, registration forms and,
(3) upon the request of Lessor, Lessee shall provide Lessor with
evidence of compliance of Environmental Laws.
iv) TERMINATION, CANCELLATION, SURRENDER. At the expiration or earlier
termination of this Lease, Lessee shall surrender the Premises to
Lessor
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free of any and all Hazardous Materials and in compliance with all
Environmental Laws. Lessor may require, at Lessee's sole expense at the
end of the term, a clean-site certification, environmental audit or
site assessment.
v) Subject to the provisions of this Article and to the prior written
consent by Lessor which may be given or withheld in Lessor's sole
discretion, Lessee shall be entitled to use and store only those
Hazardous Materials that are necessary for Lessee's business, provided
that such usage and storage is in full compliance with all applicable
Environmental Laws.
vi) Lessee shall not be entitled to install any tanks under, on or
about the Premises for the storage of hazardous Materials without the
express written consent of Lessor, which may be given or withheld in
Lessor's sole discretion.
(c) LESSOR'S RIGHT OF ACCESS AND INSPECTION.
i) Lessor shall have the right but not the obligation, at all times
during the term of this Lease to (1) inspect the Premises, (2) conduct
tests and investigations and take samples to determine whether Lessee
is in compliance with the provisions of this Article, and (3) request
lists of all hazardous Materials used, stored or located on the
Premises. If such tests, inspections and/or samples are conducted by
Lessor as a result of Lessee's violations of the provisions of Article
9 of this Lease, the Lessee shall bear the cost of said tests,
inspections and/or samples.
ii) Lessee will cooperate with Lessor and allow Lessor and Lessor's
representatives access to any and all parts of the Premises and to the
records of Lessee with respect to the Premises for inspection purposes
at any time. In connection therewith, Lessee hereby agrees that Lessor
or Lessor's representatives may perform any testing upon or of the
Premises that Lessor deems reasonably necessary for the evaluation of
environmental risks, costs, or procedures, including soils or other
sampling or coring.
(d) VIOLATIONS - ENVIRONMENTAL DEFAULTS.
i) Lessee shall give to Lessor immediate verbal and follow-up written
notice of any presence, disposal, escape, migration leakage, spillage,
discharge, emission release, threatened release, handling or
transportation of Hazardous Materials in, on, at, under, from, in the
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vicinity of, affecting or related to the Premises or any part thereof.
Lessee covenants to promptly investigate, clean up and otherwise
remediate any spill, release or discharge of Hazardous Materials on,
at, from or adjacent to the Premises at Lessee's sole cost and expense;
such investigation, clean up and remediation to be performed in
accordance with all Environmental Laws. Lessee shall return the
Premises to the condition existing prior to the introduction of any
such Hazardous Materials.
ii) In the event of (1) a violation of any Environmental Law, (2) a
release, spill or discharge of a Hazardous Substance on or from the
Premises, or (3) the discovery of any environmental condition requiring
response which violation, release, or condition is attributable to the
acts or omissions of Lessee, its agents, employees, representatives,
invitees, licensees, sublessees, customers, or contractors, or (4) an
emergency environmental condition (together "Environmental Defaults"),
Lessor shall have the right, but not the obligation, to immediately
enter the Premises, to supervise and approve any actions taken by
Lessee to address the violation, release, or environmental condition,
or if the Lessor deems it necessary, then Lessor may perform, at
Lessee's expense, any lawful actions necessary to address the
violation, release, or environmental condition.
iii) Lessor has the right but not the obligations to cure any
Environmental Defaults, has the right to suspend some or all of the
operations of the Lessee until it has determined to its sole
satisfaction that appropriate measures have been taken, and has the
right to terminate the Lease upon the occurrence of any Environmental
Defaults.
(e) ADDITIONAL RENT. Any expenses which the Lessor incurs, which are to be at
Lessee's expense pursuant to this Article, will be considered Additional Rent
under this Lease and shall be paid by Lessee on demand by Lessor.
(f) DEFINITIONS.
i) "HAZARDOUS MATERIALS" shall mean, (1) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976 ("RCRA"),
as amended from time to time; (2) "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. ss.9601, ET. SEQ.) ("CERCLA"), as amended from
time to time; (3) hazardous waste, hazardous materials, toxic
substances or hazardous substances as defined in Governmental
Requirements (defined below) now existing or hereafter enacted; (4)
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asbestos containing materials; (5) polychlorinated biphenyls; (6)
radioactive materials; (7) chemicals known to cause cancer or
reproductive toxicity; (8) spilled or leaked petroleum products,
distillates or fractions; (9) any substance the presence of which on
the Property is prohibited by any Governmental Requirements; and (10)
any substance for which any Governmental Requirements requires a permit
or special handling in its use, collection, storage, treatment, or
disposal.
ii) "ENVIRONMENTAL LAWS" means any and all federal, state and local
laws, statutes, rules, regulations, permits, licenses and all other
legal requirements regulating or imposing liability or standards of
conduct concerning, any hazardous, toxic, or dangerous waste, substance
or material or the protection of human health or the environment,
including, but not limited to, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of Hazardous Materials. Environmental Laws
include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss.9601, ET.
SEQ.)("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C.
1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C.
ss.6901 ET SEQ.) ("RCRA"), the Federal Water Pollution Control Act, (33
U.S.C. ss.1251, ET SEQ.), the Clean Air Act, (42 U.S.C. ss.7401, ET
Seq.), the Toxic Substances Control Act, (15 U.S.C. ss.2601 ET SEQ.),
the Safe Drinking Water Act, (42 U.S.C. ss.300 ET SEQ.), the
Environmental Protection Agency's regulations relating to underground
storage tanks (40 C.F.R. Parts 280 and 281), any so-called "Superfund"
or "Superlien" law, and the Louisiana Environmental Quality Act, La.
R.S. 30:2001, ET SEQ., as such laws have been amended or supplemented.
(g) SURVIVAL. The provisions of this Article shall survive the expiration or
earlier termination of this Lease.
10) ALTERATIONS. All alterations, replacements and improvements made upon the
Premises during the Lease, including lighting, electrical wiring, office
partitions, all heating and air conditioning, shall be done only with the prior
express written consent of Lessor and shall become the property of Lessor upon
expiration of the Lease. However, those certain trade fixtures, machinery and
equipment installed by Lessee solely for use in his business shall remain the
property of Lessee; such trade fixtures, machinery and equipment installed by
Lessee shall be removed at the expiration of the Lease, provided the Lease not
then be in default and provided the Premises be returned to the same
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conditions as when let, ordinary wear and tear, act of God or other casualty
excepted. No consent of Lessor for Lessee to make improvements or repairs to the
Premises shall be deemed to permit Lessor's interest to become subject to labor
or material liens.
11) DELIVERY AT END OF LEASE. At expiration of this Lease, Lessee shall
redeliver to Lessor the Premises in good order and condition, clear of all goods
and broom cleaned and shall make good all damages to the Premises, usual wear
and tear damage by the elements excepted, and shall remain liable for holdover
rent until the Premises with keys shall be returned to such order to Lessor. No
demand notice of such delivery shall be necessary.
12) LIEN FOR PAYMENT OF RENTAL. Lessee hereby agrees that Lessor shall have the
rights provided for protection of interests under Louisiana law, and in addition
shall have a possessory lien on all goods located upon the Premises for payment
of all rental and other sums due by Lessee to Lessor by reason of this Lease.
13) ASSIGNMENT AND SUB-LETTING. The Lease may not be assigned, and the Premises
may not be sublet, partially or fully, without prior written consent of Lessor.
Even in the event of permitted assignment or subletting, Lessee acknowledges
that it shall remain fully responsible for compliance with all terms of the
Lease. Any sublessee occupying any part of this space shall, by the act of
subletting formally or informally, assume all obligations of Lessee, whether or
not Lessor knew of or approved or disapproved of such subletting.
14) INSOLVENCY, ETC. AS DEFAULT. In the event of Lessee's bankruptcy,
receivership, insolvency, attachment by law of its contents, or assignment for
the benefit of creditors, or Lessee's failure to maintain a going business in
the Premises; Lessor may immediately upon written notice to Lessee declare a
default in the Lease.
15) DEFAULT BY LESSEE. Should Lessee fail to pay any of the rentals provided for
herein, or should Lessee fail to comply with any of the other obligations of
this Lease, within ten (10) days from the mailing, by Lessor of notice demanding
same, Lessor shall have the right, at Lessor's option (a) to cancel this Lease,
in which event there shall be due to Lessor as liquidated damages, a sum equal
to the amount of the guaranteed rent for one year, or alternatively at Lessor's
option to be reimbursed all actual cost incurred in reentering, renovating and
reletting said Premises; (b) to accelerate all rentals due for the unexpired
remaining term of this Lease and declare same immediately due and payable; or
(c) to sue for the rents in intervals or as
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the same accrues. The foregoing provisions are without prejudice to any remedy
which might otherwise be used under the laws of Louisiana for arrears of rent or
breaches of contract, or to any lien to which Lessor may be entitled.
If Lessee has taken steps to cure any default not curable in ten (10) days, such
additional reasonable time as is necessary to cure such default shall be granted
Lessee.
Should Lessor terminate this Lease as provided in this article, Lessor may
reenter said Leased Premises and remove all persons, or personal property,
without legal process, and all claims for damages by reason of such reentry are
expressly waived.
Lessor's failure to strictly and promptly enforce these conditions shall not
operate as a waiver of Lessor's right, Lessor hereby expressly reserving the
right to always enforce prompt payment of rent, or to cancel this Lease
regardless of any indulgences or extensions previously granted.
In the event Lessee defaults in the performance of any of the terms, covenants,
agreements or conditions contained in this Lease and Lessor places the
enforcement of this Lease, or any part thereof, or the collection of any rent
due or to become due hereunder, or recovery of the possession of the Leased
Premises in the hands of an attorney, or files suit upon the same, Lessee agrees
to pay reasonable attorney's fees incurred by Lessor.
16) RIGHT TO SHOW SIGN. Lessor shall be permitted to keep or exhibit inside the
show window, or on the exterior of the Premises a "for lease" sign for 90 days
prior to expiration of the Lease and shall have the right to enter the space at
reasonable hours for the purpose of showing the same.
17) RIGHT OF ENTRY. Lessor may enter the Premises at reasonable times to inspect
same, to make repairs and alterations, or to run pipe or electric wire, as
Lessor may deem necessary and appropriate, provided Lessor will not unduly
inconvenience Lessee's business.
18) SIGNS. Unless otherwise agreed in this Lease, Lessee shall not be permitted
to place any signs on the Premises without Lessor's prior written approval. Upon
termination of this Lease, Lessee shall remove any sign, advertisement or notice
painted on or affixed to the leased Premises and restore the place it occupied
to the condition in which it existed as of the date of this Lease. Upon Lessee's
failure to do so, Lessor may do so at Lessee's expense.
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19) CONDITION AND UPKEEP OF PREMISES. Lessee will at Lessee's sole expense keep
and maintain in good repair the entire leased Premises including without
limitation interior walls, floors, ceilings, ducts, utilities, air conditioning,
heating, lighting, sprinkler and plumbing, termite and pest extermination, and
also including the loading dock, stairs and any parking area exclusively used by
Lessee. Lessor shall be responsible only to maintain the roof, foundations, and
outside walls (not including doors and floors or stairs). Where contractors' or
manufacturers' warranties are applicable and the Lessee advises the Lessor in
writing of the need for such repair, the Lessor, at its option, will enforce
such warranties for Lessee's benefit or assign such warranties to Lessee for
Lessee to enforce.
However, Lessor shall not be obliged to make any repair unless it shall be
notified in writing by Lessee of the need of such repair and shall have had a
reasonable period of time to make such repair and shall not be liable to make
any repair occasioned by Lessee's acts within the Premises. Lessor shall not be
liable for any damage or loss in consequence of leaks, stoppage of water, sewer
or drains or any other defects about the building and Premises, unless it shall
have failed to repair the defect within a reasonable time following written
demand of Lessee to do so.
It is specifically acknowledged that safety and replacement of the plate glass
are Lessee's responsibility, as well as keeping pipes from freezing in the
winter.
20) COMMON AREA MAINTENANCE. Lessee shall be responsible for maintaining the
common areas used in conjunction with the leased Premises in a clean condition.
Should Lessor, in its sole business judgment, decide to contract for the
services of maintaining the common areas, Lessee shall pay as additional rent
Lessee's prorata share of the cost of such services. Said additional rent shall
be paid in monthly installments of one-twelfth of the estimated annual cost
attributed to Lessee. In January of each year, Lessor shall furnish Lessee a
statement setting forth Lessee's actual prorata portion of said costs. Said
statement shall include a check or bill for any over or under payment for said
maintenance items and shall include, but not be limited to, all parking areas,
access roads and facilities in or at the Premises including driveways, loading
docks and areas, sidewalks, ramps, landscaped and planting areas, lighting
facilities, signs and all other areas and improvements for the general use, in
common, of Lessees, their officers, agents, employees and customers. Lessor
shall have the right from time to time to establish, modify and enforce
reasonable rules and regulations with respect to all such facilities and areas;
to change truck routes provided the leased Premises are adequately
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served by the new route; to restrict parking by Lessees, their officers, agents
and employees to designated areas; and to do and perform such other acts as
Lessor shall, in the use of its business judgment, determine to be advisable
with a view to the improvement of the convenience and use thereof by Lessees,
their officers, agents, employees and customers.
21) FIRE AND CASUALTY CLAUSE. In case the said Premises shall be so damaged by
fire or other cause as to be rendered untenantable and necessary repairs cannot
be made within 180 days, this Lease shall terminate as of the time the Premises
were rendered untenantable. However, if the damage is such that repairs can be
completed within 180 days, Lessor agrees to make such repairs promptly, and to
allow Lessee an abatement in rent for such time as the Premises remains
untenantable. If the loss occurs in the last 18 months of the original term or
extension thereof, either party may terminate this Lease effective the date of
the casualty by giving the other party written notice of such election within 30
days of the loss. In the event of partial loss, the rent shall be abated by that
proportion of the Leased Premises rendered unfit for use.
22) INSURANCE AND INDEMNITY. (a) Liability and Property Damage: Lessee shall at
all times during the full term of this Lease and during the full term of any
holdovers or other rental agreements, carry and maintain at its own cost and
expense, Broad Form Commercial General Liability Insurance against claims for
personal injury or injuries, including death and property damage occurring in,
on or about the leased Premises, such insurance to afford protection to the
limit of not less than $1,000,000.00 Dollars in respect to each person, and to
the limit of not less than $1,000,000.00 in respect to any one occurrence
causing bodily injury or death, and to the limit of, not less than $500,000.00
in respect to property damage. Lessee shall furnish Lessor with a duplicate
certificate or certificates of such insurance policy or policies and such
insurance policy shall name Lessor as an additional insured thereunder. All such
insurance shall be procured from a responsible insurance company or companies
reasonably satisfactory to Lessor and authorized to do business in the state
where the leased Premises are located and may be obtained by Lessee by
endorsement on its blanket insurance policies, provided that the insurance
company or companies are satisfactory to Lessor. All such policies shall provide
that the same may not be canceled or altered except upon ten (10) days prior
written notice to Lessor. Lessor makes no representation that the limits of
liability specified to be carried by Lessee under the terms of this Lease are
adequate to protect Lessee against Lessee's undertaking under this Section, and
in the event Lessee believes that any such insurance coverage called for under
this Lease is insufficient, Lessee shall provide, at its own expense, such
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additional insurance as Lessee deems adequate.
(b) Fire and Extended Coverage: The Lessor shall, at all times during the full
term of this Lease, keep all improvements in and on the demised Premises insured
to the full replacement value thereof against loss by fire and extended coverage
and maintain such insurance at all times as specified herein.
Lessee shall pay each month as additional rent one-twelfth of Lessee's prorata
share of Lessor's insurance premium attributable to the full insurable value of
the improvements covered by this Lease.
Lessee is not to suffer anything to be or remain on or about the Premises nor
carry on nor permit upon the Premises any trade or occupation or suffer to be
done anything which may render an increased or extra premium payable for the
insurance of the Premises against fire and the hazards insured under extended
coverage, unless consented to in writing by the Lessor and if so consented to,
the Lessee shall pay such increased or extra premium within ten days after the
Lessee shall have been advised of the amount thereof.
(c) Placement of Insurance: All of the aforementioned policies of insurance
shall be written and maintained with responsible insurance companies duly
authorized and licensed to do business in and to issue policies in the State of
Louisiana. The policies providing for the protection required in subparagraph
(a) hereof may remain in the possession of Lessee, provided, however, that
Lessee furnish satisfactory evidence to Lessor or the Lessor's mortgagee that
such policy or policies fulfill the requirements of this subparagraph. Lessee
agrees to pay all premiums in full as they become due.
(d) Voiding Insurance: Lessee will not permit the herein demised Premises to be
used for any purpose which would render the insurance thereon void.
(e) INDEMNITY: Lessee shall indemnify defend (with counsel approved by Lessor)
and hold Lessor and Lessor's affiliates, shareholders, directors, officers,
employees and agents harmless from and against any and all claims, judgements,
damages (including consequential damages), penalties, fines, liabilities,
losses, suits, administrative proceedings, costs and expense of any kind or
nature, known or unknown, contingent or otherwise, which arise out of or in
anyway related to the Premises caused by or resulting from the acts or omissions
of Lessee, its agents, employees, representatives, invitees, licensees,
sublessees, customers or contractors during or after the term of this Lease
(including, but not limited to attorneys', consultants, laboratory and expert
fees and including without limitation, diminution in the value of the Building
or Property, damages for the loss or restriction on use of rentable or usable
space or of any amenity of the Building or
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Project and damages arising from any adverse impact on marketing of space in the
Building), including but not limited to those arising from or related to the
use, presence transportation, storage, disposal, spill, release or discharge of
Hazardous Materials on or about the Premises.
23) LESSOR'S LIABILITY. Should Lessor incur any liability arising under the
terms of this Lease Agreement, subject liability shall be limited only to the
interest of Lessor in the building and the land and the proceeds of any
insurance carried by Lessor and collectible with respect to any such damages and
Lessor shall not be personally liable for any deficiency. In the event the
building is damaged or destroyed, any liability of Lessor for any damages
suffered by Lessee shall be limited to the interest of Lessor in the building,
the land, and the proceeds of insurance from such damage or destruction to the
extent proceeds of such insurance are not used to rebuild or repair the
building, and Lessor shall not be personally liable for any deficiency.
24) UTILITIES. All utility charges on and attached to the Premises shall be paid
by Lessee, including cost of heat, water, electric current, gas garbage pickup,
sewer and special fees. Lessee shall maintain an active electrical connection
through the duration of this Lease with the electric utility company. In the
event the Premises constitute a portion of a multiple occupancy building and a
utility is not separately metered, Lessee will pay a proportionate share of the
cost for that utility, such share calculated on the basis of the space occupied
by Lessee as compared to the entire leased space contained in the building.
25) ATTORNEY'S FEES AND INTEREST. In the event it becomes necessary for Lessor
to employ an attorney to enforce collection of the rents agreed to be paid, or
to enforce compliance with any of the covenants and agreements herein contained,
Lessee shall be liable for reasonable attorney's fees, costs and expenses
incurred by Lessor.
26) NOTICE. Any notice provided for herein will be deemed given when deposited
by certified mail, or actually delivered in person to the parties or their
designated agents at the following addresses or at such other addresses as they
may from time to time direct.
LESSOR: EQUITABLE LIFE ASSURANCE SOCIETY OF THE U.S., C/O ROBERT D.
BRIDGEWATER, 5612 JEFFERSON HWY., N.O., LA 70123.
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LESSEE: CHAMPION INDUSTRIES, INC., C/O TONY D. ADKINS, V.P. & CONTROLLER, 2450
FIRST AVENUE, HUNTINGTON, WV 25703
27) CONDEMNATION. If the leased Premises be subjected to any eminent domain
proceedings, the Lease shall terminate if all of the leased Premises are taken
or if the portion taken is so extensive that the residue is wholly inadequate
for Lessee's purpose. If the taking is partial, then Lessee's rentals shall be
reduced in the proportion which space taken bears to the space originally
leased. In such condemnation proceedings Lessee may claim compensation for
moving expenses and for the taking of any removable installations which by the
terms of this Lease Lessee would be permitted to remove at the expiration of
this Lease, if such award is separately allowed by the condemning authority, but
Lessee shall be entitled to no additional award, it being agreed that all
damages allocable to full fee simple ownership of the entire leased Premises
shall in any event be payable to Lessor.
28) QUIET POSSESSION. Lessor agrees to warrant and defend Lessee in its quiet
and peaceful possession of the Premises so long as the Lease is not in default.
29) REPAIRS AND CLEANLINESS. Lessee shall immediately repair any damages caused
by Lessee that threaten or weaken the structure or detract from the appearance
of the Premises. Lessee shall also maintain a high degree of neatness and
cleanliness in the building and on adjacent grounds, including loading docks,
stairs, parking lots and rail sidings, if any, alongside and in the vicinity of
the building occupied by Lessee. If Lessee does not correct the damages and/or
clean the Premises within five (5) days of written notification by Lessor,
Lessor may proceed with repairs and/or cleanup at Lessee's expense.
30) TRASH. Lessee shall not store merchandise or vehicles or leave trash outside
the leased Premises. All trash shall be kept in metal containers with metal tops
which must be painted, and their design and location on the Premises must be
approved by Lessor. Should Lessee be in default in the requirements of this
provision, Lessor may, after notice to Lessee, remedy such default at Lessee's
expense, and such expense shall be treated as additional rental due under this
Lease by Lessee.
31) LEASE HOLDOVER. Should Lessee remain on the Premises after expiration of
this Lease Agreement, Lessor has the option to interpret such actions as
creating a month-to-month lease at a rental one hundred per cent (100%) higher
than that payable for the last month of the Lease term, or to
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consider the holding over a trespass. Only a new signed lease or extension
agreement shall deprive Lessor of the choice of action.
32) ENTIRETY OF UNDERSTANDING IN WRITTEN LEASE. It is agreed that the entire
understanding between the parties is set out in the Lease and any riders which
are hereto annexed, that this Lease supersedes and voids all prior proposals,
letters and agreements, oral or written, and that no modification or alteration
of the Lease shall be effective unless evidenced by an instrument in writing
signed by both parties. The law of Louisiana where the Lease Premises are
situated shall apply.
33) WAIVER. Failure of Lessor to declare any default immediately upon occurrence
thereof or delay in taking any action in connection therewith shall not waive
such default, but Lessor shall have the right to declare any such default at any
time; no waiver of any default shall alter Lessee's obligations under the Lease
with respect to any other existing or subsequent default.
34) BINDING ON HEIRS, ETC. It is further agreed by the parties to this Lease
that all of the covenants and agreements enumerated herein shall be binding upon
both parties' legal representatives, heirs and assigns throughout the life of
this instrument.
35) AMERICANS WITH DISABILITIES ACT ("ADA"). Lessee hereby represents that it is
not a public accommodation, as defined in the ADA.
The Lessor shall take whatever steps are necessary to cause the common areas of
the building as hereinafter defined, to meet the requirements of the Title III
of ADA.
The Lessee at its sole cost and expense shall be solely responsible for taking
any and all measures which are required to comply with the requirements of Title
I and/or Title III of the ADA within Lessee's leased Premises. Any Alterations
to the Premises made by Lessee for the purpose of complying with the ADA or
which otherwise require compliance with the ADA shall be done in accordance with
this Lease; provided, that Lessor's consent to such Alterations shall not
constitute either Lessor's assumption, in whole or in part, of Lessee's
responsibility for compliance with the ADA, or representation or confirmation by
Lessor that such Alterations comply with the provisions of the ADA.
Lessee shall indemnify the Lessor for all claims, damages, judgments, penalties,
fines, administrative proceedings, costs, expenses and liability arising from
Lessee's failure to comply with any of the requirements of Title I and/or Title
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III of the ADA within Lessee's leased Premises.
Lessor shall indemnify the Lessee for all claims, damages, judgments, penalties,
fines, administrative proceedings, costs, expenses and liability arising from
Lessor's failure to comply with Title III of the ADA within the common areas.
Common areas shall mean all portions of the development not covered by the
buildings, including all service roads, sidewalks, driveways, entry's and
parking areas not primarily used by Lessee.
36) CARPET PROTECTORS. Lessor requires the use of carpet protectors at all desk
areas in order to maintain the carpet in good condition and prevent abnormal
wear.
37) SUBROGATION. Neither the Lessor nor the Lessee shall be liable to the other
for the loss arising out of damage to or destruction of the leased Premises, or
the building or improvements of which the leased Premises are a part thereof,
when such loss is caused by any of the perils which are or could be included
within or are insured against by a standard form of fire insurance with extended
coverage, including sprinkler leakage insurance, if any. All such claims for any
and all loss, however caused, hereby are waived. Said absence of liability shall
exist whether or not the damage or destruction is caused by the negligence of
either Lessor or Lessee or by any of their respective agents, servants or
employees. It is the intention and agreement of the Lessor and the Lessee that
each party shall look to his respective insurance carriers for reimbursement of
any such loss, and further, that the insurance carriers involved shall not be
entitled to subrogation under any circumstances against any party to this Lease.
Neither the Lessor nor the Lessee shall have any interest or claim in the
other's insurance policy or policies, or the proceeds thereof, unless
specifically covered therein as a joint assured.
Each party to this Lease agrees immediately to give to each insurance company,
written notice of the terms of the mutual waivers contained herein, and to have
the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverage by reason of the mutual waivers contained
in this Section.
38) SUBORDINATE TO MORTGAGE. At the option of Lessor's mortgagee, the Lessee
agrees to subordinate this Lease to any mortgage, deed of trust or encumbrance
which the Lessor may have placed, or may hereafter place, on the Premises.
Lessee agrees to execute, on demand, any instrument which may be deemed
necessary or desirable to render such mortgage, deed of trust or
214
<PAGE>
encumbrance, whenever made, superior and prior to this Lease.
39) RELOCATION. Lessor reserves the right, at its option, to require Lessee to
move its Leased Premises, and relocate to other space in this property. If
Lessor exercises this option, it shall give Lessee three (3) months prior
written notice; and, Lessor shall provide Lessee with such other space as is
equal to or larger than the Leased Premises, and of the same approximate
quality. Lessor shall pay all actual expenses of such relocation, including
providing Lessee with comparable tenant finish improvements. In such event of
relocation, this Lease shall otherwise continue in full force and effect,
without interruption, as to all of its terms and conditions.
40) LEASING COMMISSION. Lessor and Lessee each warrant and represent that it had
no dealings, with respect to the Demised Premises or this Lease, with any broker
or real estate dealer except for Robert D. Bridgewater, as agent for Lessor. It
is understood and agreed that Lessor shall be responsible for the payment of any
and all brokers and/or dealers commissions and fees in connection with this
transaction including those commissions and fees which may be earned by Robert
D. Bridgewater. The Commission Agreement, is attached hereto and forms a part
hereof.
41) It is understood and agreed that this Lease Agreement shall not be binding
until and unless all parties have signed it.
IN WITNESS WHEREOF, the parties have set their hands to duplicate original
copies as to the day and year above written.
LESSOR:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
WITNESSES:
/S/ STEPHEN S. WILLIAMS
------------------------
By: Stephen S. Williams
Investment Officer
LESSEE:
CHAMPION INDUSTRIES, INC. D/B/A
UPTON PRINTING
215
<PAGE>
/S/ TONEY K. ADKINS
------------------------
By: Toney K. Adkins, Vice President &
Controller for Champion Industries, Inc.
216
<PAGE>
SCHEDULE "A"
Space is leased "as-is" with the exception of the following improvements to be
provided by Lessor:
1) Provide separate electric meter;
2) Close in all openings in existing fire wall between tenants; and,
open wall inside office to expose existing glassfront panel.
3) Demolish portion of office to provide access to one dock-high
loading door; raise existing lighting to warehouse roof rafters
and provide circuit wiring from panel.
4) Place all air-conditioning & heating units, plumbing and
electrical fixtures, and doors in good working condition;
Lessor will provide the following improvements at Lessee expense. Lessee to give
Lessor a check in the amount of $1,950.00, with the signing of this Lease, to
cover the cost of these items.
5) ELECTRICAL. Install (5) duplex recepticles in office and warehouse
area (locations by Lessee); Remove (2) 220 volt circuits and
wiring from office walls.
6) FINISH. Install (1) six foot, double-door in office wall (location
by Lessee).
217
<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.
11. CHMP Leasing, Inc., a West Virginia corporation.
12. Blue Ridge Printing Co., Inc., a North Carolina corporation.
13. Rose City Press, a West Virginia corporation
14. Capitol Business Equipment, Inc., a West Virginia corporation
15. Thompson's of Morgantown, Inc., a West Virginia corporation
218
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Annual Report (Form 10-K) of Champion
Industries, Inc. of our report dated December 18, 1998, with respect to the
consolidated financial statements of Champion Industries, Inc. and Subsidiaries
for the year ended October 31, 1998.
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 18, 1998, 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, 1998.
/s/ Ernst & Young LLP
Charleston, West Virginia
January 25, 1999
219
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