SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
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Filed by the Registrant þ
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Filed by a Party other than the Registrant o
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
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Champion Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
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Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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CHAMPION INDUSTRIES, INC.
P. O. Box 2968
Huntington, West Virginia 25728
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held March 21, 2016
To The Shareholders:
The annual meeting of shareholders of Champion Industries, Inc. (sometimes referred to as “Champion” or the “Company”) will be held at the Pullman Plaza Hotel, 1001 Third Avenue, Huntington, West Virginia, on Monday, March 21, 2016 at 1:00 p.m. local time for the following purposes:
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To fix the number of directors at five (5) and to elect as directors to hold office until the next annual meeting of shareholders the five (5) nominees named in the accompanying proxy statement.
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To approve, in an advisory (non-binding) vote, Champion’s executive compensation as disclosed in the accompanying proxy statement.
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To transact such other business as may properly come before the meeting or any adjournment thereof.
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Only shareholders of record of the Common Stock of Champion Industries, Inc. at the close of business on January 29, 2016 are entitled to notice of this meeting and to vote at the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on March 21, 2016. The 2015 Proxy Statement and the Annual Report to Shareholders for the year ended October 31, 2015 are also available at https://materials.proxyvote.com/158520. In addition, a Preliminary Schedule 13E-3 has been filed by Champion as of February 12, 2016 and is also available at https://materials.proxyvote.com/158520. You are encouraged to check for any and all amendments to these materials prior to the meeting of stockholders, which also will be made available at https://materials.proxyvote.com/158520.
We hope you will attend the meeting and vote your shares in person. However, since a majority of the outstanding shares must be present in person or by proxy in order to conduct the meeting, we urge you to date, sign and return the enclosed proxy as promptly as possible, whether or not you plan to attend the meeting in person. If you do attend the meeting, you may then withdraw your proxy if you so desire. The proxy may be revoked at any time prior to its exercise, but after commencement of the annual meeting, the proxy may be revoked only in accordance with the order of business adopted for the meeting.
Dated: March 4, 2016 By Order of the Board of Directors
Donna Connelly, SECRETARY
INTRODUCTORY NOTE
Greetings –
The Company typically sends its proxy materials for the Annual Shareholder Meeting in February. This year the Company had two items that it anticipated bringing to shareholders for a vote at the Annual Meeting, but, at the last minute, had to amend the Proxy Statement and remove these items. This caused the delay in getting the Proxy Statement to you. Please accept our apology for this delay. We anticipate having a special meeting of shareholders in the near future to vote on the two referenced items.
In addition, we are excited to announce that effective March 1, 2016 Adam M. Reynolds, age 33, was appointed President and Chief Executive Officer of Champion Industries, Inc. Mr. Adam Reynolds is succeeding his uncle, Marshall T. Reynolds, in this position. Mr. Marshall Reynolds will remain the Company's Chairman of the Board of Directors. Mr. Adam Reynolds brings a diverse and intimate knowledge of the Company's operations to the principal executive position and has been with the Company since 2006 serving in various capacities including assistant to the Company's former President and Chief Operating Officer (2006 - 2013), Division Manager of the Company's Champion Graphic Communications division in Baton Rouge, LA (2013 - 2015), and, more recently, Division Manager of the Company's Chapman Printing division in Parkersburg, WV in concurrence with the Director of Information Technology. Mr. Reynolds also holds a degree in finance from Virginia Tech University.
The Company’s Management felt this was material information that should be disclosed and considered while reading and deciding your vote on the items in this Proxy Statement.
Thank you for your attention.
Sincerely,
Justin T. Evans, CPA
Senior Vice President and Chief Financial Officer
CHAMPION INDUSTRIES, INC.
P. O. Box 2968
Huntington, West Virginia 25728
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
to be held March 21, 2016
INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of Directors (the “Board”) of Champion Industries, Inc. (the “Company”) for use at the annual meeting of shareholders to be held on Monday, March 21, 2016, at 1:00 p.m. local time at the Pullman Plaza Hotel, 1001 Third Avenue, Huntington, West Virginia, and any adjournment thereof (the “Annual Meeting”). The Company anticipates that this Proxy Statement and the form of proxy will be sent or given to shareholders on approximately March 4, 2016.
Only those shareholders of record as of the close of business on January 29, 2016 are entitled to notice of and to vote at the meeting and any adjournment thereof. At such time the Company had, and it presently continues to have, only one (1) class of stock outstanding, consisting of 11,299,528 issued and outstanding shares of Class A common stock, of the par value of One Dollar ($1.00) per share (the “Common Stock”) held by approximately 346 shareholders of record. The Common Stock carries no preemptive rights. No shares of the authorized Class B (nonvoting) common stock authorized by the Company’s Articles of Incorporation have been issued.
INFORMATION ABOUT CHAMPION INDUSTRIES, INC.
The Company.
Champion Industries, Inc. (“Champion” or the “Company”) is a major commercial printer, business forms manufacturer, office products and office furniture supplier, and mailing solutions provider offering warehousing and fulfillment of print and supply goods in regional markets east of the Mississippi River; primarily in West Virginia, Kentucky, Ohio, Indiana, and Louisiana. The Company’s sales offices and/or production facilities are located in Huntington, Charleston, Parkersburg, Clarksburg, and Morgantown, West Virginia; Baton Rouge, Louisiana; and, Evansville, Indiana. The Company utilizes a knowledgeable sales force of approximately 50 people to meet the needs of the Company’s customer base by delivering its products in addition to other business solutions.
Additional information concerning the Company may be found in the Company’s annual report on Form 10-K which is available at www.sec.gov and the Company’s website at www.champion-industries.com. See “FORM 10-K”
GENERAL INFORMATION CONCERNING THE ANNUAL MEETING
Cumulative Voting Is Authorized
The Company’s By-laws provide that at each election for directors every shareholder entitled to vote at such election has as many votes as the number of shares owned, multiplied by the number of directors to be elected, and may either accumulate all votes for one candidate or distribute those votes among as many candidates as the shareholder may choose. For all other purposes, each share is entitled to one vote.
Solicitation Of Proxies And Voting
Solicitation of proxies may be made in person or by mail, telephone, or facsimile by directors, officers and regular employees of the Company or its subsidiaries and by proxy solicitation companies. The Company may also request brokerage houses, banks, and other record holders of the Company’s stock to forward proxy solicitation materials to the beneficial owners of such stock, and will reimburse such persons for their expenses in connection therewith. The Company has engaged Broadridge Corporate Issuer Solutions, Inc. to assist in the solicitation of proxies of brokers and financial institutions and their nominees. The expense of soliciting proxies will be borne by the Company.
Shares represented at the meeting by properly executed proxies in the accompanying form will be voted at the meeting, or any adjournment thereof, and where the shareholder giving the proxy specifies a choice by means of the ballot space provided in the form of proxy, the shares will be voted in accordance with the specifications so made. If no directions are given by the shareholder, the proxy will be voted in accordance with the recommendations of the Board of Directors of the Company, (1) “FOR” the election of the Board of Directors’ five (5) nominees for election as directors of the Company (or, if deemed appropriate by the individuals appointed in the proxies, cumulatively voted for less than all of the Board’s nominees to ensure the election of as many of the Board’s nominees as possible) and (2) “FOR” approval of the advisory (non-binding) proposal on executive compensation. Any proxy given for use at the meeting may be revoked at any time before it is exercised by written notice or subsequently dated proxy received by the Company, or by oral revocation given by the shareholder in person at the meeting or any adjournment thereof. The proxies appointed by the Board of Directors may, in their discretion, vote upon such other matters as may properly come before the annual meeting.
Any proxy given for use at the meeting may be revoked at any time before it is exercised by written notice or subsequently dated proxy received by the Company, or by oral revocation given by the shareholder in person at the meeting or any adjournment thereof. The proxies appointed by the Board of Directors may, in their discretion, vote upon such other matters as may properly come before the annual meeting.
Votes, whether in person or by proxy, will be counted and tabulated by judges of election appointed by the Board of Directors of the Company, in conjunction with an independent, third-party vote tabulation firm. The presence of a majority of the outstanding shares of Common Stock in person or by proxy is necessary to constitute a quorum. Abstentions and broker non-votes will not be counted as votes either “for” or “against” any matters coming before the Annual Meeting, but will be counted toward determining the presence or absence of a quorum. Votes withheld in connection with the election of one or more of the nominees for director will not be counted as votes cast for such individuals. In the election of directors, those
nominees receiving the five (5) highest number of votes shall be elected, even if such votes do not constitute a majority. The proposal on approval of executive compensation will be approved in a non-binding advisory vote if the votes cast in favor exceed the votes cast against approval.
Effect Of Not Casting Your Vote
If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of directors (Item 1 of this proxy statement) and the advisory (non-binding) proposal on executive compensation (Item 2 of this proxy statement).
Recent changes in regulation were made to take away the ability of your bank or broker to vote your uninstructed shares in the election of directors or on executive compensation on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors or the advisory vote on executive compensation, no votes will be cast on your behalf.
If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the annual meeting.
ELECTION OF DIRECTORS
Proposal Number One in the Accompanying Form of Proxy
The proxies granted by the shareholders will be voted at the meeting for the resolution, unless contrary direction is indicated, establishing the number of directors at five (5) and the election of the five (5) nominees listed below. The proxies cannot be voted for a greater number of persons. The nominees elected as directors are to serve until the next annual meeting of shareholders and until their successors are duly elected and have qualified. The By-laws provide, however, that between annual meetings, the Board of Directors, by a majority vote, may increase the number of directors and may appoint such persons as they may select, by a majority vote, to fill any vacancies.
While it is not anticipated that any of the nominees will be unable to serve, if for any reason one or more shall be unable to do so, the proxies will be voted for any nominees selected by management of the Company. The persons listed below have been nominated by the Board of Directors for election as directors. Each of the nominees is currently a director of the Company. The name, age, principal occupation and business experience of each, all positions and offices held by each with the Company or any of its subsidiaries and any period during which he has served as such are set forth below.
| Name, Age, Position and Offices with Company and Year Became Director |
Principal Occupations for Past Five Years |
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Louis J. Akers - 64
Director – 2004
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Director, Huntington West Virginia Sanitary Board since September 11, 2013; President, Metric of West Virginia, August 15, 2012 to Present; Consultant, June 1, 2006 to present; Vice Chairman of Board of Directors, Ferris, Baker Watts, Incorporated from December 2001 to June 1, 2006; Chief Executive Officer, Ferris, Baker Watts, Incorporated, from October 1998 to December 2001.
Mr. Akers' management and financial background provides the Board with expertise in strategic planning and capital and financial management.
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Philip E. Cline - 82
Director – 1992
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Interim President, Alderson-Broaddus College from January 2011 to June 1, 2011; Acting President, Alderson-Broaddus College from November 2010 to January 2011; Consultant, July 1999 to present; President of River City Associates, Inc. and General Manager of Pullman Plaza Hotel (Formerly Radisson Hotel Huntington) from 2001 to May 2010; President, Monumental Concrete Co. August 1996 to July 2005; President, Chief Executive Officer and Director, Broughton Foods Company from January 1997 to June 1999; Interim President and Chief Executive Officer, Broughton Foods Company from November 1996 to December 1996; Consultant from January 1996 to November 1996, Executive Vice President (1995 to 1996), Vice President and Treasurer (1968 to 1995) of J. H. Fletcher& Co. (manufacturer of underground mining equipment); Director of Bank One West Virginia Corporation (formerly Key Centurion Bancshares, Inc.) from 1983 to December 2000.
Mr. Cline's financial and managerial background and experience complements the Board's strategic planning and operations management.
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Marshall T. Reynolds - 79
Director and Chairman of the Board of Directors - 1992
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Chairman of the Board of Directors of Company from 1992 to present; Chief Executive Officer of the Company from 1992 until March 1, 2016 (when he was replaced as CEO by Mr. Adam M. Reynolds who also was named President effective March 1, 2016), President of Company from December 1992 to September 2000; President and general manager of The Harrah and Reynolds Corporation, predecessor of the Company, from 1964 (and sole shareholder from 1972) to present; Chairman of the Board of River City Associates, Inc. (owner of Pullman Plaza Hotel) since 1989; Chairman of the Board of Directors, Broughton Foods Company from November 1996 to June 1999; Director (from 1983 to November 1993) and Chairman of the Board of Directors (from 1983 to November 1993) of Bank One West Virginia Corporation (formerly Key Centurion Bancshares, Inc.).
Mr. Reynolds has served as chief executive officer of the Company and its predecessors since 1964, providing in depth experience in the Company’s printing and office products businesses.
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| Neal W. Scaggs - 79
Director – 1992
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President, Baisden Brothers, Inc. (retail and wholesale hardware) from 1963 to present.
Mr. Scaggs is a retired entrepreneur in the retail auto parts business and serves on various public company boards. He brings business experience and management expertise to the Board.
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| Glenn W. Wilcox, Sr. - 84
Director – 1997
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Chairman of the Board of Directors of Wilcox Travel Agency, Inc. since 1953; Chairman of the Board of Directors (since 1974) and President (from 1974 to 1997) of Blue Ridge Printing Co., Inc; Chairman of the Board of Directors of Tower Associates, Inc. (real-estate development) since 1989.
Mr. Wilcox brings to the Board over twenty (20) years experience in the commercial printing industry.
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Mr. Reynolds is chairman of the board of directors and Mr. Scaggs is a director of Premier Financial Bancorp, Inc., of Huntington, West Virginia, which has a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds is chairman of the board of directors and Mr. Scaggs is a director of Energy Services of America Corporation, of Huntington, West Virginia, which has a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Scaggs was chairman of the board of directors and Mr. Reynolds was a director of First State Financial Corporation, of Sarasota, Florida, which until August 31, 2009 had a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds is a director of First Guaranty Bank, of Hammond, Louisiana, which has a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds was a director of Abigail Adams National Bancorp, Inc., of Washington D.C., which until October 1, 2009 had a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds is a director of Summit State Bank, of Santa Rosa, California, which has a class of securities registered pursuant to the Securities Exchange Act of 1934.
Mr. Wilcox is a director of The Cornerstone Total Return Fund, Inc., Cornerstone Strategic Value Fund, Inc. and Cornerstone Progressive Return Fund (CFP), registered investment companies under the Investment Company Act of 1940.
Mr. Reynolds was chairman of the board of directors and Messrs. Cline, Akers and Scaggs were directors of Portec Rail Products, Inc., of Pittsburgh, Pennsylvania, which until December 29, 2010 had a class of securities registered pursuant to the Securities Exchange Act of 1934.
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
During fiscal year 2015, there were eleven (11) meetings of the Company Board of Directors. All five existing directors who have been nominated to serve as directors to hold office until the next annual meeting of shareholders attended 75% or more of the aggregate of meetings of the Board and their committees held during their respective terms. The Company strongly encourages all members of the Board of Directors to attend the annual meeting of shareholders each year. At the prior year's annual shareholder meeting, all of the existing directors who have been nominated to serve as directors to hold office until the next annual meeting of shareholders were present.
The Board of Directors has determined that Louis J. Akers, Neal W. Scaggs and Glenn W. Wilcox, Sr. are independent directors.
The Board of Directors has adopted a formal policy by which shareholders may communicate with members of the Board of Directors by mail addressed to an individual member of the Board, to the full Board, or to a particular committee of the Board, at the following address: c/o Champion Industries, Inc., P.O. Box 2968, Huntington, West Virginia 25728-2968. This information is also available on the Company's website at www.champion-industries.com.
The Board of Directors has three standing committees: a Compensation Committee, a Nominating Committee and an Audit Committee.
The Compensation Committee reviews and recommends to the Board the compensation and employee benefits of officers of the Company and administers the 2003 Stock Option Plan. The Compensation Committee did not meet during fiscal year 2015, but met in December of 2015. The Compensation Committee consists of Messrs. Akers and Scaggs. A copy of the Compensation Committee charter is available on the Company’s website at www.champion-industries.com. The Compensation Committee assists the Board of Directors in carrying out the Board’s overall responsibility relating to executive compensation. Although its charter grants the committee authority to delegate its responsibility to subcommittees, and to retain compensation consultants, it has not done so.
For fiscal year 2015, the Company’s Chief Executive Officer, Mr. Reynolds, was delegated the task of setting the compensation for the named executive officers. Mr. Reynolds had previously provided to the Compensation Committee his recommendations for his own base salary and performance cash bonus program. The Compensation Committee ultimately determined and approved Mr. Reynolds’ compensation independently based on its collective judgment.
Please review the Compensation Committee’s Compensation Discussion and Analysis as well as the Compensation Committee Report in this Proxy Statement.
The purpose of the Nominating Committee is to assist the Board in identifying qualified individuals to become board members and in determining the composition of the Board and its committees. When considering a potential director candidate, the Nominating Committee looks for personal and professional integrity, demonstrated ability and judgment and business experience. The Nominating Committee will review and consider director nominees recommended by shareholders.
The Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Nominating Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company’s business. When considering a potential director candidate, the Nominating Committee evaluates the entirety of each candidate’s experience and qualifications. The Committee looks for personal and professional integrity, demonstrated ability and judgment and business experience. The Nominating Committee will review and consider director nominees recommended by shareholders.
There are no differences in the manner in which the Nominating Committee evaluates director nominees based on whether the nominee is recommended by a shareholder.
A copy of the Nominating Committee charter is available on the Company's website at www.champion-industries.com. The Nominating Committee currently consists of Messrs. Scaggs and Wilcox. The Nominating Committee did not meet during fiscal year 2015.
The Company's By-laws provide that any shareholder wishing to present a nomination for the office of director must do so in writing delivered to the Company at least fourteen (14) days and not more than fifty (50) days prior to the first anniversary of the preceding year's annual meeting. Each notice must set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) relating to the nomination or nominations; (d) the class and number of shares of the Company which are beneficially owned by such shareholder and the person to be nominated as of the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such nominees as of the date of such shareholder's notice; (e) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (f) the consent of each nominee to serve as a director of the Company if so elected.
The Audit Committee meets with the Company’s financial management and independent auditors and reviews the accounting principles and the scope and control of the Company’s financial reporting practices, and makes reports and recommendations to the Board with respect to audit matters. The Audit Committee also recommends to the Board the appointment of the firm selected to be independent certified public accountants for the Company and monitors the performance of such firm; reviews and approves the scope of the annual audit and evaluates with the independent certified public accountants the Company's annual audit and annual consolidated financial statements; and reviews with management the status of internal accounting controls and internal audit procedures and results. The Audit Committee met three (3) times during fiscal year 2015. The Audit Committee will continue to have at least three members. Messrs. Akers, Scaggs and Wilcox are the current members of the Audit Committee.
The Board determined that Mr. Akers, Mr. Scaggs and Mr. Wilcox are financially literate in the areas that are of concern to the Company, and are able to read and understand fundamental financial statements. The Board has also determined that Mr. Akers, Mr. Scaggs, and Mr. Wilcox each meet independence requirements.
The Securities and Exchange Commission ("SEC") has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an "audit committee financial expert" serving on its audit committee.
Based on its review of the criteria of an audit committee financial expert under the rule adopted by the SEC the Board of Directors does not believe that any member of the Board of Directors' Audit Committee would be described as an audit committee financial expert.
The Company’s Board of Directors has adopted a written charter for the Audit Committee of the Board. A copy of the written Audit Committee charter is available on the Company’s website at www.champion-industries.com. Please review the “Report of the Audit Committee” included in this annual meeting proxy statement.
BOARD LEADERSHIP
Our Board of Directors has no fixed policy with respect of the separation of the offices of Chairman of the Board of Directors and Chief Executive Officer. Our Board of Directors retains the discretion to make this determination on a case-by-case basis from time to time as it deems to be in the best interest of the Company and our shareholders at any given time. We believe our current Board leadership structure is appropriate because it recognizes that in most cases one person should speak for and lead the Company and the Board of Directors in order to promote unified leadership and direction. Mr. Reynolds currently serves and has served since the founding of the Company as chairman of the Board of Directors and until March 1, 2016, as the Company’s Chief Executive Officer. Effective as of March 1, 2016, Adam M. Reynolds was named the Company’s President and Chief Executive Officer. The Board has not designated a lead independent director.
BOARD ROLE IN RISK OVERSIGHT
The Company faces a variety of risks. An effective risk management system will identify the material risks the Company faces in a timely manner, communicate necessary information to senior executives and the Board related to those material risks, implement appropriate and responsive strategies to manage those risks, and integrate the process of risk management into regular decision-making. The Board has designated the Audit Committee to take the lead in overseeing risk management as the Committee regularly reviews the Company’s internal audit reports, independent compliance audit reports, regulatory examination reports and financial information of the Company to the extent applicable. In addition to the Audit Committee, the Board encourages management to promote a corporate culture that incorporates risk management into the Company’s strategies and day-to-day operations.
OWNERSHIP OF SHARES
Principal Shareholders
The Company presently has 11,299,528 shares of common stock issued and outstanding. All this outstanding common stock is Class A shares. No Class B (nonvoting) common stock has been issued.
No person is known to the Company to be the beneficial owner of more than 5% of the Company Common Stock at January 8, 2016 except as follows:
| Title of Class |
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Name and Address of
Beneficial Owner
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Amount and Nature of Beneficial Ownership
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Percent of Class
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Common Stock
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Marshall T. Reynolds
2450 1st Avenue
Huntington, West Virginia 25703
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10,910,396 shares (1)(2)
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67.6% (2)
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(1) Includes 4,238,687 shares through a controlled corporation, The Harrah and Reynolds Corporation (“Harrah and Reynolds”), of which Mr. Reynolds is the sole shareholder and 2,440 shares held by Mr. Reynolds’ wife. Mr. Reynolds possesses full voting and investment power with respect to all shares listed above, except for the 2,440 shares held by his wife, with respect to which he has no voting or investment power. Mr. Reynolds and Harrah and Reynolds have pledged 3,771,500 of these shares (constituting 62.2% of all outstanding shares beneficially owned by Mr. Reynolds) as collateral to secure loans made to Mr. Reynolds or Harrah and Reynolds in the ordinary course of business by several commercial banks. Any disposition of such pledged shares upon a default by Mr. Reynolds or Harrah and Reynolds under such loans could result in a change of control of the Company.
(2) Also includes presently exercisable warrants owned by Mr. Reynolds to purchase shares of common stock equal to 30% of the then issued and outstanding common stock of the Company on a fully diluted, post-exercise basis. The Company currently has 11,299,528 shares of Company common stock currently issued and outstanding. The outstanding common stock consists entirely of Class A (voting) shares. No Class B (nonvoting) common stock has been issued by the Company. Based on such 11,299,258 shares of Company common stock currently issued and outstanding, exercise in full of the warrants would result in issuance of an additional 4,842,654 shares (which initially would be Class B nonvoting shares but those shares could be converted into Class A shares as provided in Article 7 of the Company’s Articles of Incorporation). Such additional post-exercise shares, assuming immediate conversion to Class A shares, would increase the total outstanding Class A (voting) shares in that case to 16,141,912 (that is, 11,299,258 plus 4,842,654). The percent of class reflected above as owned by Mr. Reynolds includes common stock attributable to these warrants. Excluding the effect of the warrants, Mr. Reynolds beneficially owns 53.7% of currently outstanding common stock.
Security Ownership of Officers and Directors
The following table sets forth certain information concerning ownership of Company Common Stock as of the close of business on January 8, 2016 by (i) each of the directors and nominees, (ii) each executive officer named in the Summary Compensation table contained herein, and (iii) all directors and executive officers as a group. Except as otherwise noted, each beneficial owner listed below has sole voting and investment power with respect to the shares listed next to the owner’s name.
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Name of Beneficial Owner
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Shares Beneficially Owned
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Percentage of Class
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Louis J. Akers
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14,000 |
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*
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| Philip E. Cline |
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52,419
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* |
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| Marshall T. Reynolds |
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10,910,396 (1) (2)
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67.6% (2)
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| Neal W. Scaggs |
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62,300 (3) |
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| Glenn W. Wilcox, Sr. |
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125,390 |
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1.1% |
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| Justin T. Evans |
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-0- |
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* |
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| Adam M. Reynolds(5) |
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33,043 |
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All directors and executive officers as a group (7 persons)
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11,197,548
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69.4% (4) |
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* The percentage of shares of Company Common Stock beneficially owned by these persons is less than 1%.
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Includes 4,238,687 shares owned by a controlled corporation and 2,440 shares owned by wife (with respect to which reporting person has no voting or investment power).
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| (2) |
Also includes presently exercisable warrants owned by Mr. Reynolds to purchase shares of common stock equal to 30% of the then issued and outstanding common stock of the Company on a fully diluted, post-exercise basis. Based on the 11,299,528 shares of Company common stock currently issued and outstanding, exercise in full of the warrants would result in issuance of an additional 4,842,654 shares. The percent of class reflected above as owned by Mr. Reynolds includes common stock attributable to these warrants. Excluding the effect of the warrants, Mr. Reynolds beneficially owns 53.7% of currently outstanding common stock.
|
| |
|
| (3) |
Joint voting and investment power shared with wife with respect to 62,300 shares.
|
| |
|
| (4) |
Giving effect to warrants. Excluding effect of warrants, percentage of class owned by all directors and executive officers is 55.9%.
|
| |
|
| (5) |
Effective March 1, 2016 Adam M. Reynolds, age 33, was appointed President and Chief Executive Officer of Champion Industries, Inc. Mr. Adam Reynolds is succeeding his uncle, Marshall T. Reynolds, in this position. Mr. Marshall Reynolds will remain the Company's Chairman of the Board of Directors |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The Company’s Compensation Committee reviews and determines the objectives and policies for executive officer and director compensation, approves compensation for our executive officers and directors and administers our stock plans. The Compensation Committee has delegated to the CEO the responsibility for setting the compensation of the Company’s executive officers. This section discusses our compensation program in fiscal year 2015 for Marshall T. Reynolds, our Chairman of the Board of Directors and Chief Executive Officer (with respect to fiscal year 2015, and as used in this section, the “CEO”) and Justin T. Evans, our Senior Vice President and Chief Financial Officer (collectively, with respect to fiscal year 2015, and as used in this section, the “named executive officers”) and generally for our other executive officers. Please see the Summary Compensation Table below for detailed components of the named executive officers’ fiscal 2015 compensation.
Objectives of our Compensation Program
The objectives of our executive compensation program are to:
· Attract and retain highly talented and productive executives; and
· Provide appropriate incentives.
What Our Compensation Program is Designed to Reward
Our executive compensation program is designed to assure the Company attracts and retains key personnel.
Our CEO has for a number of years asked that he receive no cash bonus, and the Compensation Committee has acquiesced in such request.
Elements of Our Compensation Program: Why We Chose Each, How We Determined the Amounts and Formulas and How Each Relates to Our Objectives
Historically, our executive compensation program has combined the following two main elements: (1) base salary and (2) annual performance cash bonus. Prior to 2006 the Company also provided long-term incentive compensation in the form of stock options. As further described below, all named executive officers received benefits that our other employees receive, and some of our named executive officers also received personal benefits or perquisites in the form of Company supplied automobiles. Our named executive officers do not have any severance arrangements, special change-in-control benefits or pension or retirement benefits other than our 401(k) plan.
The elements of our executive compensation program in fiscal year 2015 are described below:
1. Base Salary. The salaries of our named executive officers are based on a subjective analysis performed by the Company’s CEO. The subjective criteria have historically been based primarily
on anecdotal information obtained by the CEO through his years of experience in the primary markets where such executives are based and his experience within the industry and other industries with companies of similar size, structure or other characteristics. His analysis does
not include typical objective factors frequently used by larger issuers with more complex compensation structures such as company-wide performance, unit or individual performance metrics, compensation consultant reports and analyses or peer group comparisons.
The Compensation Committee reviews and establishes the salary of our CEO, while the CEO reviews and establishes the salaries of our other officers, including the named executive officers. Our CEO has for a number of years asked that he receive a salary of $1 per year, and the Compensation Committee has acquiesced in that request.
Salaries of our named executive officers in fiscal 2015 are shown in the “Salary” column of the Summary Compensation Table, below.
2. Annual Performance Cash Bonus. To reward short-term performance, the Company pays a discretionary annual bonus to the named executive officers as well as other key employees of the Company. The CEO determines the bonus to be paid to each executive officer, based primarily on the CEO’s subjective analysis. This subjective analysis has historically included past compensation levels and aggregate Company compensation as well as the CEO’s market knowledge for a reasonable overall compensation package.
The Compensation Committee determines the CEO bonus. The CEO recommends the bonus for all other officers, including the named executive officers.
3. Long-Term Incentive Compensation – Stock Options. Prior to 2006, our equity incentive program for our executives had consisted exclusively of stock options. Stock options give the executives the right to purchase at a preset price (the market price of our stock when the option is granted) a specific number of shares of our stock at a future date, and the executives can exercise this right during the life of the option (generally five years). Our executives realize value on these options only if our stock price increases (which benefits all shareholders) and only if the executives remain employed with us beyond the date their options are granted and vest.
We have not granted any stock options since fiscal 2006. Any future grants will be based on our overall evaluation of our compensation strategies to achieve desired shareholder value.
Timing of Stock Option Grants.
We did not grant stock options in anticipation of the release of material nonpublic information, and we did not time the release of material nonpublic information based on stock option grant dates. Future grants, if any, will be made consistent with this policy.
4. Personal Benefits. In fiscal year 2015, we provided our named executive officers with limited personal benefits or perquisites, i.e. automobiles for business and personal use, that the Compensation Committee believes are reasonable and in the best interests of the Company and its stockholders.
5. General Benefits. We believe that we must offer a competitive benefits program to attract and retain key executives. We provide benefits to our executives that are generally available to our other employees, including health insurance and the right to participate in the Company’s 401(k) plan.
Roles of the Compensation Committee and CEO in Determining Executive Compensation
The Compensation Committee has delegated to the CEO the responsibility for setting compensation of the Company’s executive officers. Mr. Reynolds provided to the Compensation Committee his recommendations for his own base salary and performance cash bonus program. The Compensation Committee ultimately determined and approved Mr. Reynolds’ compensation independently based on its collective judgment.
CEO Compensation
As discussed previously, Mr. Reynolds requested that his annual salary be set at $1.00 and that he receive no bonus for 2015 and the Compensation Committee acquiesced in his request.
Compensation of Other Named Executive Officers
The compensation of the named executive officers is determined by the Company’s CEO.
Our Board of Directors, our Compensation Committee, and our management value the opinions of our shareholders. At the 2014 annual meeting of shareholders, more than 90% of the votes cast on the say-on-pay proposal were in favor of our named executive officer compensation. The Board of Directors and Compensation Committee reviewed the final vote results and we did not make any changes to our executive compensation program as a result of the vote results.
How Compensation Plans Do Not Encourage Excessive Risk Taking
The compensation plans of the Company consist of two basic components, an annual salary and an annual bonus. The annual bonus is entirely discretionary. It is not based on any formulaic quantification that would encourage the Company’s officers or the officers of its subsidiaries to choose one course of action over another. Rather, the bonuses are subjective in their determination based upon the CEO’s determination of the individual’s performance toward achieving the Company’s performance and improving overall shareholder value. The annual bonus is relatively small in comparison to an employee’s annual salary. The Company believes that the risk of an employee losing his entire salary in the event of termination is sufficient to deter the manipulation of reported earnings or the taking of excessive risks that would threaten the value of the Company.
Given (i) the long term incentive aspect of the base salary component of the Company’s compensation plan and (ii) the absence of any specific incentive formula in the annual bonus component, the Company does not believe its compensation plans encourage senior executive officers or any other employees to take unnecessary and excessive risks, including behavior focused on short term rather than long term results and value creation, or encourage manipulation of reported earnings to enhance employee compensation.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the year ended October 31, 2015 filed with the Securities and Exchange Commission.
Members of the Compensation Committee:
/s/ Louis J. Akers, Chairman
/s/ Neal W. Scaggs
SUMMARY COMPENSATION TABLE(3)
The following table summarizes compensation earned in fiscal years ended October 31, 2015, 2014 and 2013 by the Company’s named executive officers.
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Option Awards ($)
|
All Other Compensation ($)
|
Total ($)
|
| |
|
|
|
|
(1)
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(f)
|
(i)
|
(j)
|
|
Marshall T. Reynolds,
Chief Executive Officer, Chairman of the Board of Directors
|
2015
|
1
1
1
|
-0-
-0-
|
-0-
-0-
-0-
|
-0-
-0-
-0-
|
1
1
1
|
|
Justin T. Evans,
Senior Vice President,
Chief Financial Officer (2)
|
2015
2014
|
100,048
56,950
|
5,000
5,000
|
|
-0-
-0-
|
105,048
61,950
|
| (1) |
The Company provided automobiles to all named executive officers. The Company’s expense for providing the vehicle for each of the other named executive’s personal use, together with any other perquisites, does not exceed $10,000, and therefore is not included in this table.
|
| |
|
| (2) |
On April 28, 2014, Mr. Evans was appointed Senior Vice President and Chief Financial Officer of Champion Industries, Inc., therefore salary compensation reported is for the last 6 months of the year. Mr. Evans' anual base compensation is $100,048.
|
| |
|
| (3) |
Effective March 1, 2016 Adam M. Reynolds, age 33, was appointed President and Chief Executive Officer of Champion Industries, Inc. The Company will disclose the compensation of Mr. Adam Reynolds in the 2016 Proxy Statement when his salary and compensation have been finalized.
|
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about Company Common Stock that may be issued upon the exercise of options under the Company's 2003 Stock Option Plan, as of October 31, 2015.
|
Plan Category
|
|
(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
|
(b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights
|
|
(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
|
|
Equity Compensation Plans Approved by Shareholders
|
|
-0-
|
|
-0-
|
|
475,000
|
|
Total
|
|
-0-
|
|
-0-
|
|
475,000
|
DIRECTOR COMPENSATION
The following table summarizes compensation earned in fiscal year 2015 by the Company’s directors.
|
Name
(a)
|
Fees Earned or Paid in Cash ($)
(b)
|
All Other Compensation ($)
(g)
|
Total ($)
(h)
|
|
Louis J. Akers
|
$22,300
|
|
|
|
Philip E. Cline
|
22,000
|
-0-
|
|
|
Harley F. Mooney, Jr.
|
4,000
|
-0-
|
|
|
A. Michael Perry
|
6,000
|
-0-
|
|
|
Marshall T. Reynolds
|
-0-
|
-0-
|
-0-
|
|
Neal W. Scaggs
|
22,300
|
-0-
|
|
|
Glenn W. Wilcox, Sr.
|
22,300
|
7,810(1)
|
30,110
|
|
(1)
|
The Company reimbursed director Glenn W. Wilcox, Sr. $7,810 for expenses incurred in attendance at monthly board meetings during fiscal year 2015.
|
TRANSACTIONS WITH DIRECTORS, OFFICERS
AND PRINCIPAL SHAREHOLDERS
Intercompany Transactions
The Company has adopted a disinterested director voting policy pursuant to which all material transactions with any director, officer or employee or other person or entity with which such director, officer or employee is affiliated must be on terms no less favorable to the corporation than those that are generally available from unaffiliated third parties and must be approved and ratified by a majority of independent outside directors who do not have an interest in the transactions.
The Company has certain relationships and transactions with Harrah and Reynolds and its affiliated entities. Management believes that all existing agreements and transactions described herein between the Company and Harrah and Reynolds and its affiliates are on terms no less favorable to the Company than those available from unaffiliated third parties.
Realty Leases
Harrah and Reynolds, Marshall T. Reynolds or affiliated entities own the fee interest in certain real estate used by the Company in its business, and lease this real estate to the Company. All realty leases are “triple net,” whereby the Company pays for all utilities, insurance, taxes, repairs and maintenance, and all other costs associated with the properties. The properties leased, and certain of the lease terms, are set forth below.
| |
|
|
Annual
|
Expiration
|
|
Property
|
Lessor
|
Square Feet
|
Rental
|
of Term
|
| |
|
|
|
|
|
2450 1st Avenue
Huntington, West Virginia
|
ADJ Corp. (1)
|
85,000
|
$116,400
|
Monthly
|
| |
|
|
|
|
|
1945 5th Avenue
Huntington, West Virginia (3)
|
Harrah and Reynolds
|
37,025
|
30,000
|
Monthly
|
| |
|
|
|
|
|
615-619 4th Avenue
Huntington, West Virginia
|
ADJ Corp. (1) and
Harrah and Reynolds
|
59,641
|
21,600
|
Monthly
|
| |
|
|
|
|
|
405 Ann Street
Parkersburg, West Virginia
|
Printing Property Corp. (2)
|
36,614
|
57,600
|
Monthly
|
| |
|
|
|
|
| Route 2 Industrial Lane
Huntington, West Virginia
|
ADJ Corp. (1)
|
|
|
Monthly
|
| |
|
|
|
|
| 3000 Washington Street, West
Charleston, West Virginia
|
ADJ Corp (1)
|
37,710 |
150,000 |
Monthly |
|
(1)
|
ADJ Corp. is a West Virginia corporation. Two-thirds of the outstanding capital stock of ADJ Corp. is owned by Marshall T. Reynolds’ two sons. One-third of the outstanding capital stock is owned by the son of former director A. Michael Perry.
|
|
(2)
|
Printing Property Corp. is a West Virginia corporation wholly-owned by Mr. Reynolds.
|
|
(3)
|
Stationer’s Inc. relocated from the 1945 5th Avenue property in April 2015, only occupying this site for six months before moving to Route 2 Industrial Lane. This has raised the annual rental of the Route 2 Industrial Lane from $84,000 to $144,000 or an additional $60,000.
|
Transactions with Directors and Officers
The Company purchased vehicles from an entity controlled by Marshall T. Reynolds’ two sons in the amounts of $361,000, $327,000, and $313,000 for the years ended October 31, 2015, 2014 and 2013.
On December 29, 2009, the Company, Marshall T. Reynolds, Fifth Third Bank, as Administrative Agent for lenders under the Company's Credit Agreement dated September 14, 2007, and the other lenders entered into a Forbearance Agreement. The Forbearance Agreement, among other provisions, required Marshall T. Reynolds to lend to the Company $3,000,000 in exchange for a subordinated unsecured promissory note in like amount, payment of principal and interest on which is prohibited until payment of all liabilities under the Credit Agreement. The subordinated unsecured promissory note, bearing interest at a floating Wall Street Journal prime rate and maturing September 14, 2014, and a debt subordination agreement, both dated December 29, 2009, were executed and delivered, and Mr. Reynolds advanced $3,000,000 to the Company. The $3,000,000 was applied to prepayment of $3,000,000 of the Company's loans. The Forbearance Agreement expired on March 31, 2010 and the Company entered into a Second Amendment and Waiver to Credit Agreement.
On July 18, 2011, the Company and Mr. Reynolds entered into and consummated an Exchange Agreement pursuant to which the $3,000,000 subordinated unsecured promissory note, dated December 29, 2009 and delivered in connection with the Forbearance Agreement, together with $147,875 in accrued interest, was exchanged for 1,311,615 shares of common stock. The ratio of exchange was $2.40 of principal and accrued interest for one share of common stock. The transaction was completed at a discount of approximately 42.5% of the face value of the subordinated unsecured promissory note and related accrued interest. The transaction was approved by a majority of the disinterested directors in a separate board meeting chaired by a disinterested director. The transaction resulted in a net gain on early extinguishment of debt from a related party which is reflected in our consolidated statements of operations. As a result of the Exchange Agreement, Marshall T. Reynolds beneficially owned over 50% of the Company's outstanding common stock as a result of the transaction.
As required by the Second Amendment, the Company, Marshall T. Reynolds and the Administrative Agent entered into a Contribution Agreement and Cash Collateral Security Agreement dated March 31, 2010 (the “Contribution Agreement”) pursuant to which Mr. Reynolds deposited $2,500,000 as cash collateral with the Administrative Agent, which the Administrative Agent may withdraw upon an event of default under the Credit Agreement. This cash collateral was in an account in Mr. Reynolds name with the Administrative Agent and was not reflected on the Company’s financial statements at October 31, 2011 and 2010.
In connection with the Contribution Agreement, the Company has executed and delivered to Mr. Reynolds a Subordinated Promissory Note in an amount up to $2,500,000 (or less, based on draws by the Administrative Agent pursuant to the terms of the Contribution Agreement), payment of principal and interest on which is prohibited prior to January 31, 2011, and thereafter only with the Administrative Agent’s consent. The amount, if any, owed under the Subordinated Promissory Note is contingent upon a draw having been made under the Contribution Agreement. The Subordinated Promissory Note bears interest at the Wall Street Journal prime rate (3.25% at inception and at October 31, 2015 and 2014), original maturity September 14, 2014 and pursuant to Term Note A maturity adjusted to April 2015 and is unsecured. In the event of a draw under the terms of the Contribution Agreement, the cash proceeds shall be deemed to be a subordinated loan made by Mr. Reynolds to the Company. Pursuant to the terms of the Contribution Agreement, the triggers which may require a draw
and subsequent issuance of subordinated debt include a payment violation, a fixed charge coverage ratio violation and a delivery violation by the Company failing to deliver a Compliance Certificate to the Administrative Agent when due under the Credit Agreement. Upon a draw on Mr. Reynolds’ cash collateral account, he is deemed to have made a loan in like amount under the Contribution Agreement and Subordinated Promissory Note, in amounts up to $2.5 million, the proceeds of which will be used by the Administrative Agent to repay outstanding term loans in the inverse order of maturity.
On December 28, 2011, pursuant to the terms of the Limited Forbearance Agreement, a draw of $2.0 million was made on the cash collateral and $2.0 million was funded in the form of the subordinated unsecured promissory note. On September 14, 2012, in accordance with the provisions of the September Forbearance Agreement a draw of $500,000 was made under the provisions of the Contribution Agreement and was funded in the form of a subordinated unsecured promissory note. The draws of $2.0 million and $0.5 million were both used to pay term debt to a syndicate of banks. The promissory note was unfunded from inception through October 31, 2011 and fully funded at October 31, 2012. This note is fully funded at October 31, 2015 and 2014 and is reported on the balance sheet under the line item “Notes payable – related party”.
As approved on June 15, 2015, the Board authorized and approved conversion of a $2,500,000 note payable to a shareholder, accruing interest at the rate of 3.25% per annum, to preferred stock equity that would pay either a 0.00% dividend or 6.00% dividend contingent on the Company’s net income after income taxes being at least $1.0 million, such that if the Company’s net income after income taxes is less than $1.0 million the dividend rate on such preferred stock would be 0.00%, (the “Conversion”). However, because the Company does not have a class of preferred shares currently, the Board on January 18, 2016 approved and recommends adoption of the proposed amendment to Article 7 of the Company’s Articles of Incorporation to create the class of Preferred Series A (this proposed amendment will not be voted upon at the annual meeting, and, instead, will be submitted for a vote at a subsequent special meeting of the shareholders). That proposed amendment is necessary in order to authorize creation of the preferred shares necessary to complete the Conversion. Mr. Reynolds, the Chairman of the Board and formerly the Chief Executive Officer of the Company, is the shareholder affected by the Conversion, and he consequently recused himself from the votes on these matters at the Board’s June 15, 2015 and January 18, 2016 meetings.
The Company is self-insured for certain of the claims made under its employee medical insurance programs. The Company had recorded liabilities totaling $0.5 million and $0.5 million for estimated costs related to outstanding claims as of October 31, 2015 and 2014, respectively. These costs include an estimate for expected settlements on pending claims, administrative fees and an estimate for claims incurred but not reported that we incorporated into a trend and lag analysis utilizing a variety of factors including historical claims trends and various processing statistics provided by the Company’s third party claims administrator. These estimates are based on management’s assessment of outstanding claims, historical analyses and current payment trends. The Company recorded an estimate for the claims incurred but not reported using an estimated lag period based upon historical information. The Company believes the reserves recorded are adequate based upon current facts and circumstances.
The Company issued warrants to purchase Class B Common Stock concurrent with the Restated Credit Agreement. The Warrants entitle the Holders thereof to purchase that number of shares of Company Class B Common Stock equal to thirty percent (30%) of the then issued and outstanding Common Stock of the Company, on a fully diluted, post-exercise basis. Based on the 11,299,528 shares of Company Common Stock currently issued and outstanding,
exercise in full of the Warrants would result in the Company’s issuance of an additional 4,842,654 shares to the Warrant Holders. In the event a greater number of issued and outstanding common shares exist at the time of option exercise, a greater number of options of shares of Class B Common Stock would be issuable. The Previous Secured Lenders assigned the warrants to Marshall T. Reynolds in consideration for his personal guaranty and stock pledge and security agreement to assist in facilitating the consummation of the October 2013 Credit Agreement.
The Company believes that the terms of its related party transactions are no less favorable to the Company than could be obtained with an independent third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that, during fiscal year 2015, all filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company for the years ended October 31, 2015, 2014 and 2013 have been audited by Arnett Carbis Toothman LLP, independent auditors.
The Board of Directors selects the independent accountants for the Company each year. The Board of Directors intends to continue the services of Arnett Carbis Toothman LLP for the fiscal year ending October 31, 2016.
A representative of Arnett Carbis Toothman LLP will be present at the annual meeting of shareholders in order to respond to appropriate questions and to make any other statement deemed appropriate.
Audit Fees
Audit fees and expenses billed to the Company by Arnett Carbis Toothman LLP for the audit of the Company’s financial statements for the fiscal years ending October 31, 2015 and 2014 are as follows. The fees represent contractual fees and are inclusive of expenses billed to date related to the aforementioned audited periods and classified accordingly.
|
Fiscal 2015
|
Fiscal 2014
|
| $148,650 |
$147,270 |
Audit Related Fees
Audit related fees and expenses billed to the Company by Arnett Carbis Toothman LLP for fiscal years 2015 and 2014 for services related to the performance of the audit or review of the Company’s financial statements were not included under the heading “Audit Fees”, are as follows. The fees represent contractual fees and are inclusive of expenses billed to date.
Tax Fees
Tax fees and expenses billed to the Company for fiscal years 2015 and 2014 for services related to tax compliance, tax advice and tax planning, inclusive of expenses are as follows:
All Other Fees
In 2003, the Audit Committee established a policy whereby the independent auditor is required to seek pre-approval by the Committee of all audit and permitted non-audit services by providing a prior description of the services to be performed and specific estimates for each such service.
The Audit Committee approved all of the services performed by Arnett Carbis Toothman LLP during fiscal year 2015.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosure in the financial statements.
The Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee under generally accepted auditing standards. The Committee has discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures and letter received from the independent auditors as required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Committee concerning independence, and has considered the compatibility of non-audit services with the auditors’ independence.
The Committee discussed with the Company’s independent auditors the overall scope and plans for their audit. The Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Committee held three (3) meetings during the fiscal year ended October 31, 2015.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended October 31, 2015 for filing with the Securities and Exchange Commission. The Committee has also recommended the selection of the Company’s independent auditors.
Members of the Compensation Committee:
/s/ Neal W. Scaggs, Audit Committee Chair
/s/ Louis J. Akers, Audit Committee Member
/s/ Glenn W. Wilcox, Sr., Audit Committee Member
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
Proposal Number Two in the Accompanying Form of Proxy
As described above in the “Compensation Discussion and Analysis” section and in the compensation tables of this proxy statement, the Company’s compensation programs are designed to:
|
·
|
Attract and retain qualified individuals of high integrity;
|
|
·
|
Motivate them to achieve the goals set forth in the Company’s business plan;
|
|
·
|
Link executive and stockholder interests through incentive-based compensation; and
|
|
·
|
Enhance the Company’s performance, measured by both short-term and long-term achievements.
|
We believe that our compensation policies and procedures are competitive, are focused on pay for performance principles and are strongly aligned with the long-term interests of our shareholders. We also believe that both the Company and shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) we are submitting a proposal allowing our shareholders to cast an advisory vote on our compensation program at the annual meeting of shareholders. This proposal, commonly known as a “Say-on-Pay” proposal, gives you, as a shareholder of the Company, an opportunity to endorse or not endorse the compensation we pay to our named executive officers through the following resolution:
“RESOLVED, that the shareholders of Champion Industries, Inc. approve the compensation of its executive officers included in the Summary Compensation Table in this Proxy Statement, as described in the Compensation Discussion and Analysis and the tabular disclosure regarding the compensation of the named executive officers (together with the accompanying narrative disclosure) contained in this Proxy Statement.”
Your vote is advisory and will not be binding upon our Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. We believe that both the Company and its shareholders benefit from maintaining a constructive dialogue with its shareholders. This proposal is only one part of our corporate governance program and practices that maintain this dialogue with our shareholders and our commitment to the creation of long-term shareholder value.
The Company’s Board of Directors recommends that shareholders vote “FOR” the resolution to approve the compensation of named executive officers employed by the Company as described in the Compensation Discussion and Analysis and accompanying tables set forth in this proxy statement.
The Company’s executive compensation disclosed in this proxy statement will be approved if votes cast in its favor of the proposal exceed votes cast against it. Abstentions will not be counted as votes cast either for or against the proposal.
At the 2015 annual meeting of shareholders, we provided our shareholders with the opportunity to cast an advisory vote on the compensation of our named executive officers as disclosed in the proxy statement for the 2015 annual meeting, and our shareholders approved the proposal, with more than 90% of the votes cast in favor. At the 2011 annual meeting, we also asked our shareholders to indicate if we should hold an advisory vote on the compensation of our named executive officers every one, two or three years, with our Board of Directors recommending an annual advisory vote. Because our Board of Directors views it as a good corporate governance practice, and because at our 2011 annual meeting more than 93% of the votes cast were in favor of an annual advisory vote, we again are asking our shareholders to approve the compensation of our named executive officers as disclosed in this proxy statement.
OTHER BUSINESS
Proposal Number Three in the Accompanying Form of Proxy
At present, the Board of Directors knows of no other business to be presented by or on behalf of the Company or its Board of Directors at the meeting. If other business is presented at the meeting, the proxies shall be voted in accordance with the recommendation of the Board of Directors.
Shareholders are urged to specify their choices, and date, sign, and return the enclosed proxy in the enclosed envelope, to which no postage need be affixed if mailed in the Continental United States. Prompt response is helpful, and your cooperation will be appreciated.
CODE OF ETHICS
The Board of Directors adopted a Code of Business Conduct and Ethics on December 15, 2003 that applies to all of the Company's officers, directors and employees and a Code of Ethics for the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer which supplements our Code of Business Conduct and Ethics (collectively the “Codes”) which are intended to promote honest and ethical conduct, full and accurate reporting and compliance with laws. We have filed copies of the Codes with the SEC as an exhibit to our October 31, 2003 annual report on Form 10-K.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders for possible inclusion in the Company’s proxy materials for presentation at the next annual meeting of shareholders must be received by the Secretary of the Company no later than October 15, 2016. In addition, the proxy solicited by the Board of Directors for the next annual meeting of shareholders will confer discretionary authority to vote on any shareholder proposal presented at that meeting, unless the Company is provided with the notice of such proposal no later than December 31, 2016. The Company’s By-laws provide that any shareholder wishing to present a nomination for the office of director must do so in writing delivered to the Company at least 14 days and not more than 50 days prior to the first anniversary of the preceding year’s annual meeting, and that written notice must meet certain other requirements. For further details as to timing of nominations and the information required to be contained in any nomination, see the discussion of the Nominating Committee under "Director Meetings, Committees and Attendance" or Article III, Section 10 of the Company’s By-laws, a copy of which may be obtained from the Secretary of the Company upon written request delivered to P. O. Box 2968, Huntington, West Virginia 25728.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING SOLICITED, UPON THE REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 2015, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO JUSTIN T. EVANS, CHIEF FINANCIAL OFFICER, CHAMPION INDUSTRIES, INC., P. O. BOX 2968, HUNTINGTON, WEST VIRGINIA 25728.
Dated: March 4, 2016 By Order of the Board of Directo
Donna Connelly, SECRETARY
CHAMPION INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS, MARCH 21, 2016
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Justin T. Evans and Gregory D. Adkins, and each of them, with full power of substitution, proxies of the undersigned to vote all shares of the Common Stock of Champion Industries, Inc. (the “Company”) which the undersigned is entitled to vote at the Annual Meeting of shareholders of the Company to be held at the Pullman Plaza Hotel, 1001 Third Avenue, Huntington, West Virginia, on March 21, 2016, and at any adjournments thereof, as indicated on the reverse side.
This proxy will be voted as directed, but IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED ON THE REVERSE SIDE AND FOR PROPOSAL 2. If any other business is presented at the Annual Meeting, this Proxy will be voted by those named in this Proxy in accordance with the recommendation of the Board of Directors. At the present time, the Board of Directors knows of no other business to be presented at the Annual Meeting. This Proxy confers discretionary authority on those named in this Proxy to vote with respect to the election of any person as director where the nominee is unable to serve or for good cause will not serve and matters incident to the conduct of the Annual Meeting. This proxy may be revoked prior to its exercise.
Continued and to be signed on the reverse side
The Board of Directors recommends you vote FOR the following:
1. ELECTION OF DIRECTORS
Nominees:
| (1) Louis J. Akers |
(2) Philip E. Cline |
(3) Marshall T. Reynolds |
(4)Neal W. Scaggs |
| (5) Glenn W. Wilcox, Sr. |
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o FOR ALL o WITHHOLD ALL o FOR ALL EXCEPT
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below
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The Board of Directors recommends you vote FOR the following proposals:
2. To approve, in an advisory vote, the compensation of the named executive officers.
¨ FOR ¨ AGAINST ¨ ABSTAIN
Note: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting and any adjournments thereof.
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Please sign exactly as your name(s) appear(s) on this proxy. When shares are held by joint tenants, both should sign. When signing as attorney-in-fact, executor, administrator, trustee, committee, personal representative or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
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Signature if held jointly |
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Dated |
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