SC 13E1/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13E-3

RULE 13E-3 TRANSACTION STATEMENT

(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)

Champion Industries, Inc.

(Name of Issuer)

Champion Industries, Inc.

(Name of Person(s) Filing Statement)

CLASS A COMMON STOCK, $1.00 PAR VALUE

(Title of Class of Securities)

158520106

(Respective CUSIP Numbers of Classes of Securities)

Justin T. Evans

Senior Vice President and Chief Financial Officer

2450 First Avenue

P.O. Box 2968

Huntington, West Virginia 25728

(304) 528-2700

 (Name, Address and Telephone Number of Person Authorized to Receive

Notices and Communications on Behalf of Person(s) Filing Statement)

COPIES TO:

Roger D. Hunter

Bowles Rice LLP

600 Quarrier Street

Charleston, WV 25301

(304) 347-1101

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS: APPROVED OR DISAPPROVED OF THE TRANSACTION; PASSED UPON THE MERITS OR FAIRNESS OF THE TRANSACTION; OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This statement is filed in connection with (check the appropriate box):

x	a	The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14(C) or Rule 13e-3(c) under the Securities Exchange Act of 1934.
o	b.	The filing of a registration statement under the Securities Act of 1933.
o	c.	A tender offer.
o	d.	None of the above.

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Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies x.

Check the following box if the filing is a final amendment reporting the results of the transaction:o.

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee
$26,070	$5.21

* The filing fee was determined based on the product of: (a) the estimated 86,900 shares of common stock proposed to be acquired from stockholders in the transaction to which this Schedule 13E-3 relates; and (b) the consideration of thirty cents ($0.30) per share of common stock (the “aggregate value”). The amount required to be paid with the filing of this Schedule 13E-3 equals 0.0002 times the aggregate value.

o Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	$ 0.00
Form or Registration No.:	Schedule 14A — Preliminary Proxy Statement
Filing Party:	Champion Industries, Inc.
Date Filed:	February 12, 2016

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INTRODUCTION

This Rule 13e-3 Transaction Statement on Schedule 13E-3 (“Schedule 13E-3”) is being filed by Champion Industries, Inc., a West Virginia corporation (the “Company”), and is joined by the persons designated below in the following paragraph, pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and Rule 13e-3 promulgated thereunder, concurrently with the filing of a preliminary proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934, which is referred to herein as the Proxy Statement. The information contain in the Proxy Statement, including all annexes thereto, is hereby expressly incorporated herein by reference. As of the date of this Schedule 13E-3, the Proxy Statement is in preliminary form and is subject to completion or amendment.

The following persons, who are directors and/or executive officers and 10% or more shareholders of the Company (as indicated below), have joined and adopted this Schedule 13E-3 as additional filing persons:

Marshall T. Reynolds Chairman of the Board of Directors, Chief Executive Officer and controlling shareholder (Mr. Reynolds beneficially owns or controls approximately 53.7% of the Company’s outstanding Class A Common Stock, as disclosed in Proxy Statement, including shares owned by Harrah and Reynolds Corporation in which Mr. Reynolds is the sole shareholder.)

Harrah and Reynolds Corporation 10% or more shareholder (this corporation owns approximately 37.5% of the outstanding Class A Common Stock of the Company as disclosed in the Proxy Statement. Mr. Reynolds owns all the stock of, and controls, Harrah and Reynolds Corporation.)

Glenn W. Wilcox, Sr. Director (Mr. Wilcox beneficially owns or controls approximately 1.1% of the Company’s outstanding Class A Common Stock, as disclosed in the Proxy Statement.)

Phillip E. Cline Director (Mr. Cline beneficially owns or controls approximately 0.0057% of the Company’s outstanding Class A Common Stock, as disclosed in the Proxy Statement.)

Neal W. Scaggs Director (Mr. Skaggs beneficially owns or controls approximately 0.006% of the Company’s outstanding Class A Common Stock, as disclosed in the Proxy Statement.)

Louis J. Akers Director (Mr. Akers beneficially owns or controls approximately 0.001% of the Company’s outstanding Class A Common Stock, as disclosed in the Proxy Statement.)

Justin T. Evans Senior Vice President and Chief Financial Officer

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Item 1. Summary Term Sheet.

The information set forth in the Proxy Statement under “Summary of Material Terms of Reverse Stock Split and Related Transactions” is incorporated herein by reference.

Item 2. Subject Company Information.

(a) Name and Address. The name of the subject company is Champion Industries, Inc. The address of the principal executive offices of the Company is 2450 First Avenue P.O. Box 2968 Huntington, West Virginia 25728. The telephone number of the Company is (304) 528-2700.

(b) Securities. The subject securities are the Class A Common Stock of the Company (CUSIP No. 158520106).  The information set forth in the Proxy Statement under incorporated herein by reference.

(c) Trading, Market and Prices. The information set forth in the Proxy Statement under “Information About Champion Industries, Inc. - Market Information and Dividends” is incorporated herein by reference.

(d) Dividends. The information set forth in the Proxy Statement “Information About Champion Industries, Inc. - Market Information and Dividends” is incorporated herein by reference.

(e) Prior Public Offerings. The Company has not made an underwritten public offering of the Common Stock for cash during the three years preceding the date of the filing of this Schedule 13E-3.  The information set forth in the Proxy Statement under “Information About Champion Industries, Inc. - No Prior Public Offerings” is incorporated herein by reference.

(f) Prior Stock Purchases. The Company has not purchased any Common Stock during the two years preceding the date of the filing of this Schedule 13E-3, nor have its directors and executive officers.  The information set forth in the Proxy Statement under “Information About Champion Industries, Inc. - No Stock Purchases” is incorporated herein by reference.

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Item 3. Identity and Background of Filing Person.

(a)  Name and Address.  The Company is the principal filing person and also the subject company.  The Company’s business address and business telephone number are set forth in Item 2(a) above.  The information set forth in the Proxy Statement under “Information About Champion Industries, Inc. - the Company” is incorporated herein by reference.

The executive officers and directors of the Company, along with its 10% or more shareholders, are joining and adopting this Schedule 13E-3.  They are identified in the INTRODUCTION above and may be contacted care of Justin T. Evans, Senior Vice President and Chief Financial Officer, Champion Industries, Inc. at the Company’s business address and business telephone number set forth in Item 2(a) above.

(b) Business and Background of Entities Other than the Company. Harrah and Reynolds Corporation is a West Virginia corporation that holds various business and investment interests.  Its sole shareholder is Marshall T. Reynolds.

Neither Harrah and Reynolds Corporation nor Mr. Reynolds was convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors).

Neither Harrah and Reynolds Corporation nor Mr. Reynolds was a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

(c) Business and Background of Natural Persons. The executive officers and directors of the Company, along with its 10% or more shareholders, are joining and adopting this Schedule 13E-3.  They are identified in the INTRODUCTION above and may be contacted care of Justin T. Evans, Senior Vice President and Chief Financial Officer, Champion Industries, Inc. at the Company’s business address and business telephone number set forth in Item 2(a) above.

None of the Company’s executive officers and directors and 10% or more shareholders was convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors).  None of these persons was convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors).

Item 4. Terms of the Transaction.

(a) Material Terms. The information set forth in the Proxy Statement under “Summary of Material Terms of Reverse Stock Split and Related transactions,”  Special Factors”, and set forth in Annex 1 to the Proxy Statement (copy of West Virginia Code Chapter 31D, Article 13, which is the statute governing statutory appraisal rights) and Annex 2 to the Proxy Statement (copies of proposed shareholder resolutions and proposed amendments to the Company’s Article of Incorporation to effectuate the proposed reverse stock split), is incorporated herein by reference.

(b) Purchases. Only fractional shares incident to the reverse stock split will be purchased from directors, officers, and affiliates, as applicable. In any circumstance this would amount to 199 pre-split shares or less in each case and is thus deemed not to be material to a reasonably prudent judgment on the proposed reverse stock split..

(c) Different Terms. Not applicable.

(d) Appraisal Rights. The information set forth in the Proxy Statement under “Special Factors - Statutory Appraisal Rights” is incorporated herein by reference.

(e) Provisions for Unaffiliated Security Holders. No provision has been made to grant unaffiliated security holders access to the Company’s corporate files or to obtain counsel or appraisal services at the Company’s expense.

(f) Eligibility for Listing or Trading. Not applicable.

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Item 5. Past Contacts, Transaction, Negotiations and Agreements.

(a) Transactions. The information set forth in the Proxy Statement under “Transactions with Directors, Officers, and Principal Shareholders”, is incorporated herein by reference.

(b) Significant Corporate Events. The information set forth in the Proxy Statement under “Proposed Amendments to Articles of Incorporation to Authorize 2,500 Preferred Series A Shares ($1,000 Par Value Each), and Related Transactions”, and “Transactions with Directors, Officers, and Principal Shareholders”, is incorporated herein by reference.

(c) Negotiations or Contacts. The information set forth in the Proxy Statement under “Proposed Amendments to Articles of Incorporation to Authorize 2,500 Preferred Series A Shares ($1,000 Par Value Each), and Related Transactions”, and “Transactions with Directors, Officers, and Principal Shareholders”, is incorporated herein by reference.

(e) Agreements Involving the Subject Company’s Securities. The information set forth in the Proxy Statement under “Proposed Amendments to Articles of Incorporation to Authorize 2,500 Preferred Series A Shares ($1,000 Par Value Each), and Related Transactions”, and “Transactions with Directors, Officers, and Principal Shareholders”, is incorporated herein by reference.

Item 6. Purposes of the Transaction and Plans or Proposals.

(b) Use of Securities Acquired.  In lieu of issuing any fractional shares after the proposed reverse stock split, the Company plans to purchase all resulting fractional share interests for cash consideration of 30 cents per pre-split share, and cancel and retire such purchased shares.

 The information set forth in the Proxy Statement under “Special Factors - Certain Effects of the Proposed Reverse -- Rights, Preferences and Limitations”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions” is incorporated herein by reference.

(c) Plans.

(1)	None.
(2)	None.

(3)	None
(4)	None.
(5)	None.
(6)	None.

(7) The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Certain Effects of the Proposed Reverse”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions, is incorporated herein by reference.

(8) The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Certain Effects of the Proposed Reverse”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions, is incorporated herein by reference.

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Item 7. Purposes, Alternatives, Reasons and Effects.

(a) Purposes. The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions,” is incorporated herein by reference.

(b) Alternatives. The information set forth in the Proxy Statement under “Special Factors - Alternatives Considered”, “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions,” is incorporated herein by reference.

(c) Reasons. The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, ““Special Factors - Alternatives Considered”, “Special Factors - Deliberations of the Board and Special Committee”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions,” is incorporated herein by reference.

(d) Effects. The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Certain Effects of the Proposed Reverse Stock Split (including without limitation the information set forth therein under the subheadings “Rights, Preferences and Limitations”, “Financial Impact”,  “Termination of Registration with SEC”, “Benefits”, “Detriments”, and “Federal Income Tax Treatment)”,  “Special Factors - Statutory Appraisal Rights”, “Special Factors - Fairness of the Proposed Reverse Stock Split”, “Special Factors - Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and set forth in Annex 1 to the Proxy Statement (copy of West Virginia Code Chapter 31D, Article 13, which is the statute governing statutory appraisal rights) and Annex 2 to the Proxy Statement (copies of proposed shareholder resolutions and proposed amendments to the Company’s Article of Incorporation to effectuate the proposed reverse stock split),  is incorporated herein by reference.

Item 8. Fairness of the Transaction.

(a) Fairness. The information set forth in the Proxy Statement under “Special Factors - Fairness of the Proposed Reverse Stock Split”, “Special Factors - Alternatives Considered”, “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Certain Effects of the Proposed Reverse Stock Split (including without limitation the information set forth therein under the subheadings “Rights, Preferences and Limitations”, “Financial Impact”,  “Termination of Registration with SEC”, “Benefits”, “Detriments”, and “Federal Income Tax Treatment)”,  “Special Factors - Statutory Appraisal Rights”, “Special Factors - Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, is incorporated herein by reference.

(b) Factors considered in determining fairness. The information set forth in the Proxy Statement under “Special Factors - Fairness of the Proposed Reverse Stock Split”, “Special Factors - Alternatives Considered”, “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Certain Effects of the Proposed Reverse Stock Split (including without limitation the information set forth therein under the subheadings “Rights, Preferences and Limitations”, “Financial Impact”,  “Termination of Registration with SEC”, “Benefits”, “Detriments”, and “Federal Income Tax Treatment)”,  “Special Factors - Statutory Appraisal Rights”, “Special Factors - Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, is incorporated herein by reference.

(c) Approval of Security Holders. The proposed reverse stock split is not structured so that approval of at least a majority of unaffiliated security holders is required.

The information set forth in the Proxy Statement under “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)” and “Special Factors - Deliberations of the Board and Special Committee”, is incorporated herein by reference.

(d) Unaffiliated representative. No unaffiliated representative has been retained to act solely on behalf of unaffiliated shareholders for purposes of negotiating the terms of the proposed reverse stock split.

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The information set forth in the Proxy Statement under “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Third Party Valuation Report” and “Summary of Material Terms of Reverse Stock Split and Related Transactions” is incorporated herein by reference.

(e) Approval of Directors. The proposed reverse stock split was approved by all the of the Board of Directors of the Company.

Also, the Board formed a Special Committee of independent, disinterested and non-employee directors (namely, Louis J. Akers and Glenn W. Wilcox, Sr.) to evaluate a potential transaction and make recommendations to the full Board.  The Special Committee evaluated whether to undertake a potential transaction and, among other things, considered alternatives, advantages and disadvantages of the proposed reverse stock split, the fairness of the proposed reverse stock split including the proposed cash-out price to be paid in lieu of issuing fractional shares after the split, and related factors, and ultimately recommended the proposed reverse stock split.  As part of the Special Committee’s work, it obtained a third party valuation from Chaffe and Associates, Inc. and took the results of that valuation into account in making its ultimate recommendations.

The Board unanimously adopted such recommendations and supporting rationale of the Special Committee and adopted approving resolutions which, among other things, submitted the proposed reverse stock split to a vote of shareholders.

The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Alternatives Considered”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)”, “Special Factors - Third Party Valuation Report”, and “Special Factors - Deliberations of the Board and Special Committee”, “Recommendation of the Board of Directors”, “Special Factors - Recommendation of the Board of Directors” and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and set forth in Annex 2 to the Proxy Statement to the Proxy Statement,  is incorporated herein by reference.

(f) Other offers. Not Applicable.

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Item 9. Reports, Opinions, Appraisals and Certain Negotiations.

(a) Report, Opinion or Appraisals. The information set forth in the Proxy Statement under “Special Factors - Third Party Valuation Report”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)”, “Special Factors - Purpose and Reasons for the Reverse Stock Split”,  “Special Factors - Statutory Appraisal Rights”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and set forth in Annex 2 to the Proxy Statement to the Proxy Statement,   is incorporated herein by reference.

(b) Preparer and Summary of the Report. The information set forth in the Proxy Statement under “Special Factors - Third Party Valuation Report”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Deliberations of the Board and Special Committee”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and in Annex 2 to the Proxy Statement to the Proxy Statement,  is incorporated herein by reference.

(c) Availability of Documents. The January 7, 2016 final draft valuation report of Chaffe and Associates, Inc., which was considered by the Special Committee and the Board  in making their respective determinations of fairness, is being made available to shareholders in Exhibit 99.7 to this Schedule 13E-3.

A copy of the Schedule 13E-3 including all exhibits (including, without limitation, Exhibit 99.7) is being made available to shareholders by the Company at https://materials.proxyvote.com/15820.

In addition, a copy of the  January 7, 2016 final draft valuation report of Chaffe and Associates, Inc. is also available for inspection and copying at the principal executive offices of the Company at 2450 First Avenue (P.O. Box 2968), Huntington, West Virginia 25728 during the Company’s regular business hours by any interested Company shareholder of representative who has been so designated in writing upon written request to the Company and at the expense of the requesting shareholder.

The information set forth in the Proxy Statement in the first two paragraphs under “Special Factors” and under “Special Factors - Third Party Valuation Report” is incorporated herein by reference.

Item 10. Source and Amounts of Funds or Other Consideration.

(a) Source of funds. The information set forth in the Proxy Statement under “Special Factors - Certain Effects of the Proposed Reverse Stock Split -- Financial Impact”,  “Special Factors - Deliberations of the Board and Special Committee” and “Summary of Material Terms of Reverse Stock Split and Related Transactions,” is incorporated herein by reference.

(b) Conditions. Not applicable.

(c) Expenses. The information set forth in the Proxy Statement under “Special Factors - Certain Effects of the Proposed Reverse Stock Split -- Financial Impact”,  “Summary of Material Terms of Reverse Stock Split and Related Transactions,” “Special Factors - Purpose and Reasons for the Reverse Stock Split”, and “Special Factors - Deliberations of the Board and Special Committee”, is incorporated herein by reference.

(d) Borrowed Funds. Not applicable.

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Item 11. Interest in Securities of the Subject Company.

(a) Securities Ownership. The information set forth in the Proxy Statement under “Security Ownership of Officers and Directors” is incorporated herein by reference. As applicable, the address for any person required to provide such information pursuant to this Item 11 is c/o Champion Industries, Inc., 2450 First Avenue P.O. Box 2968 Huntington, West Virginia 25728 (Attention:  Justin T. Evans, Senior Vice President and Chief Financial Officer).

(b) Securities Transactions. None of the Company’s directors and executive officers and 10% or more shareholders has engaged in any transactions in the Company’s Class A Common Stock in the last 60 days.  The information set forth in the Proxy Statement under “Information About Champion Industries, Inc. - No Stock Purchases”  is incorporated herein by reference.

Item 12. The Solicitation or Recommendation.

(d) Intent to Tender or Vote in a Going-Private Transaction.  The directors and executive officers of the Company, and its 10% or more shareholders, have filed a Schedule 13D/A (amending an earlier Schedule 13D  by the same filing persons) indicating that they support and, to the extent that they are shareholders, intend to vote for the proposed reverse stock split.  Copies of the Schedule 13D and the Schedule 13D/A (amending the original Schedule 13D) are incorporated by reference.

As noted above,  the Board formed a Special Committee of independent, disinterested and non-employee directors (namely, Louis J. Akers and Glenn W. Wilcox, Sr.) to evaluate a potential transaction and make recommendations to the full Board.  The Special Committee evaluated whether to undertake a potential transaction and, among other things, considered alternatives, advantages and disadvantages of the proposed reverse stock split, the fairness of the proposed reverse stock split including the proposed cash-out price to be paid in lieu of issuing fractional shares after the split, and related factors, and ultimately recommended the proposed reverse stock split.  As part of the Special Committee’s work, it obtained a third party valuation from Chaffe and Associates, Inc. and took the results of that valuation into account in making its ultimate recommendations.

The Board unanimously adopted such recommendations and supporting rationale of the Special Committee and adopted approving resolutions which, among other things, submitted the proposed reverse stock split to a vote of shareholders.

The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Alternatives Considered”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)”, “Special Factors - Third Party Valuation Report”, and “Recommendation of the Board of Directors”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and set forth in Annex 2 to the Proxy Statement,  is incorporated herein by reference.

(e) Recommendations of Others.  The directors and executive officers of the Company, and its 10% or more shareholders, have filed a Schedule 13D/A (amending an earlier Schedule 13D  by the same filing persons) indicating that they support and, to the extent that they are shareholders, intend to vote for the proposed reverse stock split.  Copies of the Schedule 13D and the Schedule 13D/A (amending the original Schedule 13D) are incorporated by reference.

As noted above,  the Board formed a Special Committee of independent, disinterested and non-employee directors (namely, Louis J. Akers and Glenn W. Wilcox, Sr.) to evaluate a potential transaction and make recommendations to the full Board.  The Special Committee evaluated whether to undertake a potential transaction and, among other things, considered alternatives, advantages and disadvantages of the proposed reverse stock split, the fairness of the proposed reverse stock split including the proposed cash-out price to be paid in lieu of issuing fractional shares after the split, and related factors, and ultimately recommended the proposed reverse stock split.  As part of the Special Committee’s work, it obtained a third party valuation from Chaffe and Associates, Inc. and took the results of that valuation into account in making its ultimate recommendations.

The Board unanimously adopted such recommendations and supporting rationale of the Special Committee and adopted approving resolutions which, among other things, submitted the proposed reverse stock split to a vote of shareholders.

The information set forth in the Proxy Statement under “Special Factors - Purpose and Reasons for the Reverse Stock Split”, “Special Factors - Alternatives Considered”, “Special Factors - Deliberations of the Board and Special Committee”, “Special Factors - Fairness of the Proposed Reverse Stock Split (including without limitation the subsections “Substantive Fairness” and “Procedural Fairness”)”, “Special Factors - Third Party Valuation Report”, and “Recommendation of the Board of Directors”, and “Summary of Material Terms of Reverse Stock Split and Related Transactions”, and set forth in Annex 2 to the Proxy Statement,  is incorporated herein by reference.

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Item 13. Financial Information.

(a) Financial Information.  The audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended October 31, 2015 are incorporated herein by reference.

The information in the Proxy Statement under “Information About Champion Industries, Inc. - Summary Financial Information”, “Form 10-K” , is incorporated herein by reference.

(b) Pro Forma Information. Pursuant to Regulation S-K subsection 229.1010 (b), the impact of the reverse stock split is not deemed to be material to a reasonably prudent judgment on the proposed reverse stock split. Given this, pro forma information is not disclosed.

Item 14. Persons/Assets, Retained, Employed, Compensated or Used.

(a) Solicitations or Recommendations. The information set forth in the Proxy Statement under “General Information Concerning the Annual Meeting - Solicitation of Proxies and Voting”, is incorporated herein by reference.

(b) Employees and Corporate Assets.  The Company’s Senior Vice President and Chief Financial Officer (Justin T. Evans) is listed as point of contact for the Company if shareholders wish to obtain additional information, and as part of his normal duties he has been involved in the preparation and filing of the Proxy Statement and related filings including this Schedule 13E-3.  The Company traditionally has used its own printing facilities to print annual reports and proxy statements and plans to do so with respect to the subject Proxy Statement (definitive) and annual reports.

Item 15. Additional Information.

(b) Other Material Information. The information contained in the Proxy Statement, including all annexes attached thereto, is incorporated herein by reference.

Item 16. Exhibits.

The Proxy Statement and all annexes attached thereto are being incorporated into this Schedule 13E-3 by reference.  See Item 15 above.

Exhibits 99.1 through 99.13, referenced below, are part of this Schedule 13E-3.

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Item 16 Exhibit No.	Schedule 13E-3 Exhibit No.	Description
(a)(3)	NA	Disclosure document.   [The Proxy Statement and all annexes, while not an exhibit hereto, has been incorporated into this Schedule 13E-3 by reference, and includes the form of Proxy Card.  See Item 15 above.]
(a)(5)	NA	Other disclosure documents.  [The Form 8-K and Form 8-K//A filed by the Company relating to the proposed reverse stock split, while not exhibits hereto, are incorporated herein by reference.]
(b)	NA	Loan agreement.   Not applicable (“N/A”)
(c)		Valuation report and related materials considered by the Special Committee and the full Board in reaching their conclusions as to fairness, plus related Board resolutions and attachments thereto.
		The following exhibits are included with this Schedule 13E-3:
	99.1	Initial Memorandum and Board Minutes
	99.2	Special Committee Meeting #1 Material, Minutes and Board Minutes
	99.3	Board Minutes Disclosing Board Update November 2015
	99.4	Board Minutes Disclosing Board Update December 2015
	99.5	Chaffe and Associates Draft Valuation #1
	99.6	Special Committee Meeting #2 Material and Minutes
	99.7	Chaffe and Associates Draft Valuation #2
	99.8	Special Committee Meeting #3 and #4 Material and Minutes
	99.9	Board Resolution Approving the Transaction
	99.10	Exhibit A to the Board Resolution
	99.11	Exhibit B to the Board Resolution Part 1 (Proposed Reverse Split Article Amendment Only)
	99.12	Exhibit B to the Board Resolution Part 2 (Both Reverse Split and Preferred Proposed Article Amendments)
	99.13	Fiscal 2016 Consolidated Projections

(d)	NA	[The form of Specimen Warrant Certificate, previously filed as Exhibit 4.1 to the Company’s Form 10-K dated January 21, 2013 ( filed on January 29, 2013), is incorporated herein by reference.]
(f)	NA	[Annex 1 to the Proxy Statement (copy of WV Code Chapter 31D, Article 13 governing statutory dissenters’ and appraisal rights) and the information set forth under “Special Factors - Statutory Appraisal Rights”, while not exhibit to this Schedule 13E-3, are incorporated by reference.  See Item 15 above.]
(g)	NA	Any written instruction, form or other material furnished to persons making an oral solicitation or recommendation on behalf of filing person(s).  Not applicable.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

/s/ Marshall T. Reynolds

Marshall T. Reynolds

	The Harrah and Reynolds Corporation
By:	/s/ Marshall T. Reynolds
	Marshall T. Reynolds

/s/ Glenn W. Wilcox, Sr.

Glenn W. Wilcox, Sr.

/s/ Philip E. Cline

Philip E. Cline

/s/ Neal W. Scaggs

Neal W. Scaggs

/s/ Louis J. Akers

Louis J. Akers

/s/ Justin T. Evans

Justin T. Evans

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EXHIBIT INDEX

Exhibit
Number	Description
99.1	Initial Memorandum and Board Minutes
99.2	Special Committee Meeting #1 Material, Minutes and Board Minutes
99.3	Board Minutes Disclosing Board Update November 2015
99.4	Board Minutes Disclosing Board Update December 2015
99.5	Chaffe and Associates Draft Valuation #1
99.6	Special Committee Meeting #2 Material and Minutes
99.7	Chaffe and Associates Draft Valuation #2
99.8	Special Committee Meeting #3 and #4 Material and Minutes
99.9	Board Resolution Approving the Transaction
99.10	Exhibit A to the Board Resolution
99.11	Exhibit B to the Board Resolution Part 1 (Proposed Reverse Split Article Amendment Only)
99.12	Exhibit B to the Board Resolution Part 2 (Both Reverse Split and Preferred Proposed Article Amendments)
99.13	Fiscal 2016 Consolidated Projections

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EX-99.1

Exhibit 99.1

The following is the initial memorandum to the Board of Directors from the Company’s legal counsel disclosing the mechanics of a potential “going dark” transaction.

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To:	Justin T. Evans, Chief Financial Officer, Champion Industries, Inc. (the “Company”)
From:	Bowles Rice LLP (Roger D. Hunter)
Date:	September 18, 2015
Subject:	Possible Reverse Stock Split with Cash Purchase of All Resulting Fractional Shares (Under 1.0 Shares), Reducing Shareholders of Record to Below 300, Followed by SEC Deregistration to End/Suspend SEC Reporting Requirements (sometimes referred to as “Going Dark”)

CONFIDENTIAL/PRIVILEGED

EXECUTIVE SUMMARY

As you requested, this Memorandum briefly summarizes key steps and considerations that would be involved in a possible “going dark” transaction involving a reverse stock split.

1.           “Going dark”, using a reverse stock split, and the key advantages of doing so.

“Going dark” refers to an SEC reporting company (A) taking steps to reduce its shareholders of record below the applicable threshold to allow SEC deregistration (below 300 for the Company), (B) then filing SEC Form 15 seeking to deregister with the SEC,  and (C) effective 90 days after filing the Form 15, ending/suspending  its SEC reporting, compliance and filing requirements under the Securities Exchange Act of 1934 (“Exchange Act”).1  Reporting requirements remain terminated/suspended as long as record shareholders remain below 300.

While there are various ways to reduce record shareholders to less than 300, this Memorandum focuses on a possible reverse stock split coupled with the cash purchase of all resulting fractional shares (less than 1 whole resulting share). Preliminarily, you have calculated that a 100 to 1 reverse split should result in roughly 275 record shareholders based on recent record shareholder listings.  The reverse stock split would require an amendment to the Articles of Incorporation, which  must be approved at a shareholders meeting (either at a special meeting or at the March 2016 annual meeting of shareholders).  It also would require the preparation and filing with the SEC of proxy materials and related Rule 13e-3 disclosures.

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A number of smaller SEC reporting companies have opted to go dark since enactment of the Sarbanes-Oxley Act (“SOX”) .  The most frequently cited advantages of going dark include:

·   Achieving significant annual operating cost savings from eliminating SEC reporting (you have indicated you are working on an estimate of cost savings)

·   Freeing up significant management time and focus, which can be redirected to the business and long-term objectives (you’ve indicated you also are working on an estimate of management time savings)

·   SOX compliance is no longer needed

·   D&O insurance costs may be decreased

·   Personal liability of officers/directors will be decreased, including for the CEO and CFO who now must make SOX certifications

·   Less public scrutiny and disclosure, making it easier to keep confidential sensitive business, financial and other information that competitors now can see and are free to use to their own advantage and/or to the detriment of the company

·   A company’s shares may continue to be quoted on the OTC Pink Sheets without subjecting it to any Exchange Act reporting requirements

·   Corporate governance requirements can be simplified

·   A company likely will have greater freedom to explore, confidentially, major corporate and strategic transactions, such as mergers and acquisitions or dispositions, and to execute such transactions more smoothly, efficiently and cost-effectively

Additional advantages flow from using the reverse stock split (with cash purchase of resulting fractional shares) as the means to reduce the number of record shareholders.  For example, smaller shareholders who end up with fractional shares to be purchased for cash after the reverse split, are given an opportunity to obtain cash for their shares without paying brokerage commissions/trading costs.

Also, smaller shareholders who want to avoid being cashed out can do so by buying additional shares so they end up with at least 1 whole share after the reverse split. Similarly, shareholders who otherwise will end up with just a little over 1 whole share after the reverse split, but would prefer to cash out as many shares as they can after the reverse split, can do that by selling enough shares to leave them less than 1 whole share after the reverse split which would be purchased for cash.

There also are some disadvantages to going dark and to using a reverse stock split to do so.   Those SEC reporting companies that have opted to go dark have determined that in their situations the advantages outweigh the disadvantages.

As part of the process of exploring whether or not it might make sense for the Company to go dark and use a reverse stock split, the disadvantages will need to be evaluated and considered.  This would be a key part of what an independent Special Committee, recommended below, would evaluate in depth.

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2.           Use of an Independent Special Committee to Evaluate the Potential Transaction and Its Fairness, both as to the Process and the Cash Purchase Price for the Fractional Shares (Using an Outside Valuation Expert).

The Company’s officers and directors have fiduciary duties that they must fulfill as they consider possibly going dark.  In this regard, we recommend that the Board establish a Special Committee of independent directors to evaluate the possible transaction and its fairness,  including both the fairness of the process and of the cash price to be paid for fractional shares.  As to the cash price, we also recommend that the Board authorize the Special Committee to retain an outside valuation expert to obtain a valuation which then would be used to set the fractional share purchase price.

Using a Special Committee in this way will assist the entire Board in fulfilling its fiduciary duties to shareholders.  The Special Committee process also will give the Board the best chance, in the event of a legal challenge, to be judged under the “business judgment rule” (as opposed to higher standards such as the “entire fairness” standard).   Under the business judgment rule, directors’ good faith business judgment will not be second-guessed in a subsequent legal action if they proceeded with diligence and in good faith in making the decision.  Under the more stringent “entire fairness” standard, the directors have the burden of proof to show the court that the entire transaction was fair, both in terms of process and in terms of substance (including price).

Using a Special Committee also will help show that, if the transaction goes forward, the Board proceeded in good faith and with care, that the overall going dark transaction was in the overall best interests of the Company, and that both the process and price were fair to shareholders.  West Virginia does not have extensive case law precedent in this particular area.  However, Delaware courts have dealt with many different types of going dark and going private transactions. Consequently, Delaware has a fairly rich and robust body of case law in Delaware, to which courts in other states often look for guidance.  Here, our recommendation to use an independent Special Committee is based on leading Delaware case law to which West Virginia courts may well look in the event of a legal challenge.

A central task of the Special Committee is to undertake a thorough review of the advantages and disadvantages of going dark using the reverse stock split approach.  The most frequently cited advantages were noted earlier.  The most frequently cited disadvantages (and some potential mitigating factors that might apply here) include the following:

·   Going dark may reduce liquidity of shares.  (This could be somewhat offset to the extent trading in shares can continue to occur on the OTC Pink Sheets.)

·   If record shareholders go above 300, then SEC reporting would restart (unless this is monitored and action is taken again to keep  record holders below 300).

·   It could diminish the perceived prestige of being a public reporting company.

·   It would be difficult to use shares as currency for mergers and acquisitions or in incentive compensation for employees after going dark.  (This is somewhat offset to the extent the Company in more recent years has not been pursuing acquisitions or using stock or stock options in compensating employees.)

·   Deregistration could inhibit the Company’s access to the capital markets. For example, after deregistering it could not conduct a public offering without significant effort and expense (since short form registration statements such as Form S-3 and shelf takedown transactions would no longer be available).

·   Extensive SEC disclosures are required for the reverse stock split (e.g., proxy statement and Rule 13e-3 disclosures), and that involves time and expense.

·   Dissenting shareholders who don’t want to be cashed out, will have statutory appraisal/dissenter rights.  See Section 5 below.

·   There will be less information available to shareholders and less transparency after deregistration.  (This can be offset somewhat by providing information to shareholders periodically, and by the Company having greater flexibility in the format and timing of its shareholder communications.)

·   Even after deregistration, the company will remain subject to anti-fraud provisions of state and federal securities laws.

·   There also is some risk of potential litigation (although the immediate risk is likely less than in a “going private” transaction initiated by an officer or principal shareholder).  Disgruntled shareholders could complain about reduced liquidity and/or stock price after deregistration, if those occur, and could allege breach of fiduciary duty.  They might also make allegations of insider trading on the basis of material non-public information, once public reports and filings with the SEC are no longer being made.  Similar allegations might be made against the company itself if it makes repurchases of shares once public reports and filings are no longer being made by the company.

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           It is anticipated that the Special Committee would need at least a month and maybe longer to complete its work, if it determines that the advantages of going dark after a reverse stock split outweigh the disadvantages and recommends to the Board that the Company should go dark in this way. The Special Committee’s work would include retaining an outside valuation expert and receiving, considering and acting upon that expert’s valuation report.

3.           Key steps and estimated time line involved in possibly going dark using a reverse stock split.

The following table lists the key steps and estimated time line for this type of potential going dark transaction.

The table and time line assume that if the Board wishes to move ahead with exploring this possible course of action, the Board at its September 21, 2015 meeting will authorize that, will appoint an independent Special Committee and authorize it to do the work suggested above.

If Board authorization is deferred until a later time, or the form of the possible transaction is modified, the schedule would have to be adjusted accordingly.  A month-long SEC review period is assumed.  If the SEC review takes a longer time, then that also would require modifying the estimated time line.

Finally, the table does not list separately all the related due diligence and drafting work that would be required for each key step on the time line.  It is assumed that drafting and due diligence will proceed apace with the key steps.

If authorized by the Board to proceed, Bowles Rice (“BR” in the table below) will take the lead in drafting and will assist in the due diligence effort, and will work closely with you, the Special Committee and Board, and others as appropriate, with the goal of having all this work proceed smoothly and efficiently.

DATE (Est.)	STEP OR ACTION	RESPONSIBLE PARTY (AND NOTES)
Sept. 21, 2015	Board reviews with counsel and with the CFO the possibility of going dark using the reverse stock split approach	Board, CFO, BR
Sept. 21, 2015	Board approves moving forward with exploring possible going dark transaction, and creates and empowers Special Committee to proceed	Board
Week of Sept. 21, 2015	Complete review of advantages and disadvantages of possibly going dark using a reverse stock split; confirm desire to move forward with exploring possible transaction (or not); if decision is to continue exploring possible going dark transaction with reverse stock split, retain Outside Valuation Expert	Special Committee (May use unanimous written action in lieu of meeting) (CFO, BR to assist)

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Week of Sept. 21, 2015	Review anti-dilution and restrictive covenants in plans and agreements, and review Section 13D issues; follow up as needed. Refine cost estimates and provide the Special Committee with other information and support as needed.	CFO, BR (E.g., see restrictive covenant in the amended credit agreement relating to payments to shareholders) CFO, BR
By Oct. 23, 2015	Obtain Preliminary (Draft) Valuation Report	Valuation Expert Special Committee (estimated 4-week turnaround to get the draft Report)
Week of Oct. 26, 2015	Review and discuss (1) Preliminary (Draft) Valuation Report, (2) Proposed Reverse Split Ratio, and (3) Draft of Proposed Amendment to Articles of Incorporation (leaving blanks for the Reverse Split Ratio)	Special Committee (Valuation Expert, CFO, BR to assist)
By Nov. 6, 2015	Obtain Final Valuation Report and analyze estimated costs of purchasing fractional shares in a possible reverse stock split	Valuation Expert Special Committee (Valuation Expert, CFO, BR to assist)
Week of Nov. 9, 2015	Special Committee meets and reviews Final Valuation Report and makes a final recommendation to the Board regarding the possible going dark transaction.  If it recommends proceeding, recommendations should include Reverse Split Ratio, cash purchase price, related Amendments to Articles, target shareholder meeting date, etc.	Special Committee (Valuation Expert, CFO, BR to assist)
Week of Nov. 9, 2015	Board meets and receives/acts on recommendations of Special Committee. If recommendation is to proceed, and the Board approves that, the Board would need to adopt Resolutions (1) authorizing the  reverse stock split, setting the Reverse Split Ratio and cash purchase price for fractional shares (less than 1 share), (2) approving the related amendments to the Articles of Incorporation, (3) setting target dates for  the shareholders meeting date, record date, effective date, etc., and (4) authorizing filing of Preliminary Proxy Materials (and Schedule 13E-3/Rule 13e-3 Disclosures)	Board (Special Committee, CFO, BR, Valuation Expert to assist Board in its deliberations)
Week of Nov. 16, 2015	File Preliminary Proxy Materials (and file Schedule 13E-3/Rule 13e-3 Disclosures) and related filings with the SEC	CFO, BR, Special Committee, Outside Auditors, others as appropriate (Note:  SEC review and comments are anticipated)

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Nov. 16, 2015 to Dec. 16, 2015	SEC review; respond to SEC comments, obtain final SEC approval(s)	CFO, BR, Special Committee, Outside Auditors, others as appropriate (Note: SEC review and comments are anticipated, and this estimated time line assumes a 1-month review period)
By Dec. 21, 2015 (subject to timing of SEC review)	File final proxy materials, etc., and mail/deliver proxy materials	CFO, BR, Special Committee, Outside Auditors, others as appropriate
Week of Jan. 25, 2016	Special Meeting of Shareholders Special Meeting of Board (afterward) to authorize any additional actions needed	All (this is a target date)
Week of Jan. 25, 2016	After shareholders meeting/approval: ·file Form 8-K; issue Press Release ·obtain new CUSIP number ·file FINRA notification under Rule 10b-17 ·follow up as needed on Trading Symbol ·make final arrangements with Transfer Agent (including transmittal letter and funding arrangements for purchasing fractional shares) ·address any dissenters’ appraisal rights and follow up as needed (see section 5 below)	CFO, BR (with assistance from others as needed)
Week of Jan. 25, 2016	File Articles of Amendment to Articles of Incorporation, authorizing reverse stock split	BR
Week of Feb. 1, 2015)	Effective Date of Reverse Stock Split Confirm number of record shareholders is below 300 File SEC Form 15 to deregister	CFO CFO, BR
If any shareholders exercise statutory dissenter/appraisal rights	Continue addressing dissenting shareholders’ appraisal rights, if necessary	Board, CFO, BR

 

1 Sometimes, the phrase “going private” is used to mean SEC deregistration..  However, securities lawyers often use the term “going private” more narrowly, to mean a transaction (e.g., a tender offer, or cash-out merger, etc.) that results in SEC deregistration after nearly all the shareholders are eliminated (i.e., their shares are bought or cashed out), followed by SEC deregistration.  In contrast, merely “going dark” does not usually eliminate most of the shareholders but rather enough to get below the number of record shareholders to allow SEC deregistration.

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4.           Estimated legal and valuation expert fees; other fees and costs to consider.

You also asked us to provide estimates of the major costs involved in a going dark transaction using a reverse stock split with cash purchase of all resulting fractional shares (i.e., less than 1 share).

We reached out to Dixon Hughes Goodman LLP to get an estimate of fees to serve as outside valuation expert and provide a valuation report to the Special Committee. The estimated fees and costs were approximately $45,000 to $55,000.  The estimated time to complete the work was 4 to 6 weeks.

As you and I discussed, you were going to reach out to Arnett, Carbis and Toothman LLP (“AC&T”), the Company’s outside auditors, to see if AC&T would be allowed to do an expert valuation for the Special Committee under applicable independence standards for independent audit firms which audit public companies that are subject to SEC reporting and filing.  If AC&T can do the work, it might be able to do it faster and at a lower cost because of its familiarity with the Company, its historical financial performance and financial statements, and other pertinent historical information.

We also estimated our legal fees at approximately $45,000 assuming a one-month SEC review period and barring any unusual or unanticipated circumstances.  This estimate excludes any litigation work that may arise and any work on dissenters’ rights (should there be shareholders who choose to object to the reverse stock split and to having their resulting fractional shares purchased for the cash purchase price that is proposed).

As we have discussed, estimates also will need to be obtained for other services, fees and costs.  These include the following:

·   AC&T’s work on the proxy statement and related materials to be filed with the SEC

·   Printing costs for the proxy materials and other SEC filings (e.g., Schedule 13E-3)

·   Paying Agent firm (e.g., the Company’s existing Transfer Agent) to send transmittal letters and pay out the cash purchase price to shareholders with fractional shares (less than 1 share) after the reverse split

·   Any other charges of the Transfer Agent in connection with the possible transaction

·   Fees and costs to obtain a new CUSIP number and any other FINRA fees and costs in connection with the possible transaction

·   SEC filing fees (which should be relatively small)

If the Board chooses to explore a possible going dark transaction and establishes an independent Special Committee to review the potential transaction, an estimate of all the fees and costs will need to be provided to the Special Committee.

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5.           Appraisal rights for dissenting shareholders.

WV Code § 31D-13-1302(a)(4) provides that a shareholder is entitled to appraisal rights in the event of any “amendment of the Articles of Incorporation” that “reduces the number of shares . . . owned by the shareholder to a fraction of the share” if the corporation “has the obligation or right to repurchase the fractional share so created.”

Therefore, a reverse stock split would trigger statutory appraisal rights for  any properly dissenting shareholder who would end up with a fractional share (less than 1 whole share) to be cashed out in the transaction, provided that shareholder follows all the applicable statutory procedures for asserting appraisal rights.

The appraisal statute is set forth in WV Code § 31D-13-1301 through § 31D-13-1331 (the “WV Appraisal Rights Statute”).    We would note the following key points concerning the WV Appraisal Rights Statute:

·   A copy of the WV Appraisal Rights Statute and a detailed explanation of it will need to be included in the proxy materials with the notice of the shareholders meeting.

·   There are several different required notices that a dissenting shareholder must file, and each has its own deadline.  If the dissenting shareholder fails to provide any of the notices in a timely manner, then statutory appraisal rights are lost.

·   A notice of intent to demand payment of “fair value” is the first required notice a dissenting shareholder must provide.

·   It must be submitted to the Corporation before the shareholders meeting where the amendment to the Articles will be voted upon by shareholders.  If it isn’t, appraisal rights are lost.

·   Any such dissenting shareholder must not vote in favor of the amendment.  Any vote in favor of the amendment would eliminate appraisal rights.

·   In the 10 days after the effective date of the reverse stock split, the Company then would have to provide a written appraisal notice and form to properly dissenting shareholders who have properly objected to being cashed out.

o   The written appraisal notice and form must specify a deadline for receiving back the completed form (with certain signed certifications and surrendered share certificates) from such dissenting shareholders.

o   That deadline cannot be less than 40 nor more than 60 days after the date the written appraisal notice and form are sent.

o   In the written appraisal notice and form, the Company must provide various information including the Company’s estimate of “fair value.”

·   To perfect appraisal rights, the dissenting shareholder must sign and return the appraisal notice/form, certify ownership on the relevant date, and surrender and deposit the share certificates, in a timely manner.. Failure to do all of these things by the deadline set by the Company will cause a loss of the appraisal rights.

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·   At this point, the Company has to go ahead and pay its estimated “fair value” and send the dissenting shareholders copies of its most recent annual financial statements and interim statements, the check, and notice that the dissenting shareholder may demand more than the amount the Company is paying.

·   In response, the dissenting shareholder must then provide the Company with the shareholder’s own estimate of “fair value” and demand payment of the additional amount to bring the total paid up to the shareholder’s “fair value” estimate..

·   The Company can choose to pay the extra amount demanded in the dissenting shareholder’s estimate.  If it does so, that is the end of the matter with respect to that dissenting shareholder.

·   If the Company chooses not to pay the dissenting shareholder the additional amount(s) so as to bring total payment up to the shareholder’s own estimate of “fair value,” then a court proceeding would ensue to determine “fair value”.

·   “Fair value”, under the WV Appraisal Rights Statute, does not include any discount for minority shares or for thinly traded volume.

·   The court can appoint one or more appraisers.

·   Court costs including appraisers’ fees will be assessed to the Company.

·   The court also can assess the costs and fees of the dissenter(s) to the Company if it finds the Company did not fulfill its obligations under the WV Appraisal Rights Statute.

·   Finally, the court can assess either side with attorneys’ fees and costs incurred by the other side, if the court finds one side acted “arbitrarily, vexatiously or not in good faith”.

6.           SEC disclosure and reporting requirements in a going dark transaction using a reverse stock split; and termination of SEC reporting 90 days after SEC Form 15 (deregistration form) is filed.

A proxy statement would have to be prepared and filed with the SEC under Schedule 14A, and then provided to shareholders, in connection with seeking shareholder approval of the amendments to the Articles of Incorporation required for the reverse stock split.

Additionally, the various disclosures required by SEC Rule 13e-3 must be made, including the filing of a Schedule 13E-3 with the SEC.   Senior management and principal shareholders would be deemed “affiliates”, and they must file Schedule 13E-3 filings, which may be done simultaneously with the Company.

Many of the disclosures required by Schedule 13E-3 will be covered in the proxy materials. Those proxy disclosures may be incorporated by reference into Schedule 13E-3 which should be filed at the same time as the proxy materials.

Rule 13e-3 is aimed at tender offers but also covers going dark and going private transactions in which the end result will be SEC deregistration.  The Rule is designed to make sure  shareholders receive detailed disclosures concerning these sorts of transactions, including information concerning the purposes and fairness of the transaction and price.   For example, Schedule 13E-3 requires, among other things, disclosures as to:

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·   Alternatives considered and why they were rejected.

·   Reasons for the structure and for undertaking the transaction.

·   Effects of the transaction on the company, its affiliates, and its unaffiliated stockholders.  These disclosures should include a detailed discussion of the benefits and detriments (advantages and disadvantages) of the transaction.

·   Whether the person filing the Schedule 13E-3 believes the transaction is fair to unaffiliated stockholders.

·   The material factors leading the filer to believe the transaction is fair.

·   Whether a majority of the non-employee directors approved the transaction, whether an independent Special Committee was used, and whether the transaction requires approval of a majority of the unaffiliated shareholders.

·   Whether any directors dissented or abstained from voting on the transaction, and if  so, why.

·   Whether a Special Committee was used.

·   Valuation or appraisal report summary, including the basis for and methods used to reach the valuation conclusion.  The SEC will want disclosure of any power point presentations by the outside valuation expert, any board books, etc., relating to the valuation.

Schedule 13D filings of existing filers will need to be reviewed and updated at the point at which an intent is formed to enter into an actual going dark transaction.  The timing in turn will depend on the process that is used, and we would need to review the specific circumstances and details in order to advise on specific timing.  For example, if a Special Committee is appointed, and the Board withholds approval of any possible transaction until the work and recommendation of the Special Committee is completed, then the Schedule 13D updates may not be required until the meeting at which the Board first receives and approves (if it does receive and approve) a recommendation of the Special Committee to do a going dark transaction.   At that point, in this example, it would appear that an actual intent to enter into a going dark transaction would exist and the Schedule 13D update thus would be triggered.

The SEC usually will review going dark and going private transactions covered by proxy materials and Schedule 13E-3 filings.  Such reviews typically take at least 4 weeks but some  take longer.  The estimated time line above assumes a 1-month review process.

Form 8-K filings also will be required at key points.  At a minimum, an 8-K will be when and if the Board approves any proposed amendment to the Articles of Incorporation for the reverse stock split, and after it has become effective.

  To deregister, the Company will have to file Form 15.  However, the filing of the Form 15 to end/suspend SEC reporting and filing requirements is not effective immediately.  Instead, it is effective 90 days after it is filed.

After the 90-day period has run, the termination (i.e., suspension) of the various SEC reporting requirements under the Exchange Act, to which the Company and its directors, officers and principal shareholders are subject, would be effective.  The termination/suspension of those reporting obligations would continue as long as the number of the Company’s record shareholders stays below 300.

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The terminated/suspended reporting requirements would include, for example, the obligations of the Company and its directors, officers and principal shareholders:

(a) to file Forms 10-K, 10-Q and 8-K;

(b) to comply with detailed governance and proxy rules in the drafting of proxy statements, and

(c) to report share ownership for directors, officers and principal shareholders on SEC Forms 3, 4, and 5, and to make disclosures relating to shareholdings and intentions of 5% or greater stockholders (such as filing and/or updating Schedules 13D and 13E-3 as discussed above).

7.           Additional information.

Please feel free to contact me if you or the Board have any questions concerning any of these matters.

Roger D. Hunter

Bowles Rice LLP

600 Quarrier Street

Charleston, WV  25801

(304) 347-1101 (office direct line)

(304) 993-6044 (mobile)

rhunter@bowlesrice.com

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The following is an exceprt of the board minutes from the initial Board of Directors meeting discussing the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Board of Directors Meeting

Pullman Plaza Hotel, Huntington – 9:00AM

September 21, 2015

III.   New Business

Mr. Reynolds shared with the board that Roger Hunter, a corporate attorney with Bowles Rice law firm, had been invited to join the meeting to discuss a possible “going dark” transaction. Before inviting Mr. Hunter to join the meeting, Mr. Reynolds had Mr. Evans share with the Board a succinct description of the transaction. Mr. Evan disclosed that if the Company could get under 300 shareholders of record, it could suspend its public filings and technically be a private company (“going dark”). Mr. Evans disclosed the current number of shareholders and shareholders of record and explained how the Company might be able to get under the 300 shareholder of record threshold. Mr. Evans explained that the benefit of this would be to save money, time, and reallocate resources to focus on operations.

Mr. Hunter was then invited to join the meeting and went into further detail of the possible transaction. Mr. Hunter distributed a memo that detailed the possible advantages and disadvantages of the transactions as well as the steps that would need to be taken to achieve such a transaction.

After Mr. Hunter was excused from the meeting, upon motion by Mr. Wilcox and second by Akers, and unanimously carried, the motion to pursue a “going dark” transaction was approved. A special independent committee of the board is to be formed by Mr. Akers and Mr. Wilcox to explore this transaction.

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EX-99.2

Exhibit 99.2

The following is the material presented to the Special Committee at its inaugural meeting discussing and quantifying the potential “going dark” transaction.

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Special Committee of the Board of Directors Meeting

Champion Industries Headquarters, Huntington, WV – 10:00 A.M.

October 5, 2015

AGENDA

I.           Call To Order.......................................................................................................................................................................................L. Akers / G. Wilcox

II.           Organizational Matters (Elect Chairman and Secretary)................................................................................................................L. Akers / G. Wilcox

III.           Discussion of Advantages and Disadvantages

of “Going Dark” transaction.............................................................................................................................................................J. Evans

IV.           Discussion of Alternatives..............................................................................................................................................................J. Evans

V.           Liquidity Discussion.........................................................................................................................................................................J. Evans / R. Hunter

VI.           Discussion of Valuation..................................................................................................................................................................J. Evans

VII.           Ratio Analysis.................................................................................................................................................................................J. Evans

VIII.           Discussion of Statutory Appraisal Rights...................................................................................................................................R. Hunter

IX.           Cost Savings Analysis.....................................................................................................................................................................J. Evans

X.           Cost of “Going Dark” Transaction..................................................................................................................................................J. Evans

XI.           Timeline for Completion...............................................................................................................................................................J. Evans / R. Hunter

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Agenda Item #3

Review of “Going Dark” Transaction and the Advantages and Disadvantages

“Going dark” refers to an SEC reporting company (A) taking steps to reduce its shareholders of record below the applicable threshold to allow SEC deregistration (below 300 for the Company), (B) then filing SEC Form 15 seeking to deregister with the SEC, and (C) effective 90 days after filing the Form 15, ending / suspending its SEC reporting, compliance and filing requirements under the Securities Exchange Act of 1934 (“Exchange Act”).   Reporting requirements remain terminated / suspended as long as record shareholders remain below 300.

Currently the Company has approximately 355 shareholders of record but approximately 1,390 beneficial shareholders. The difference between the shareholders of record and beneficial shareholders are those shares that are held in brokerages also called “street name”. Shares held in street name count as one shareholder of record. At this time approximately 1,036 shareholders have their shares in street name.

After extensive research and effort by the Company’s Management, it was determined a reverse stock split may be the most efficient and effective way to get under the 300 shareholders of record threshold. This would be accomplished by setting a ratio of at minimum of 100 old shares for 1 new share and paying cash in lieu of any issuance of fractional shares. At a ratio of 1:100, the Company would cash out 80 shareholders of record. This would bring the shareholders of record from 355 currently, to 275 post reverse split. At a ratio of 1:200 The Company would cash out 131 shareholders of record. This would bring the shareholders of record from 355 currently, to 224 post reverse split. Both of these scenarios assume there is no action taken by shareholders, intentionally or as a result of brokerages releasing to the beneficial owner, post reverse split. (See ratio analysis discussion for further details.)

The main advantages for Champion to go dark are as follows:

1.   Freeing Management and staff time to focus on long-term business objectives as well as internal financial reporting and analytics.

2.   Reduce or eliminate costs associated with SEC reporting including audit fees, legal fees, Edgarizer and XBRL compliance, Sarbanes Oxley compliance, as well as other ancillary reporting and compliance costs.

(See Cost Savings Analysis section for details)

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The main disadvantages for Champion to go dark are as follows:

1.   The liquidity of the Company’s stock may be reduced.

2.   If shareholders of record go above 300, assuming no action by the company, this would trigger the Company to comply with SEC reporting requirements.

3.   Shares may be less attractive for use as currency in acquisitions.

4.   Dissenting shareholders have appraisal rights. (See Discussion of Statutory Appraisal Rights)

5.   Potential risk of litigation

Agenda Item #4

Discussion of Alternatives

The alternatives to going dark are to do nothing and keep the status quo, or the Company or its largest shareholders could make a tender offer in a “going private” transaction.

 If the Company keeps the status quo, it would continue to bear the cost of reporting and compliance of a public company. In addition, the Company’s Management would continue to devote time and resources that could be focused on more productive matters. Given the size of Champion, in terms of market capitalization ($2.8MM), asset size ($24MM), and revenue generation ($63MM), in addition to the industry and economic challenges faced by the Company over the last several years, keeping the status quo could significantly reduce the pace of recovery and growth moving forward. For consideration, the cost and time savings should be reviewed in the Cost Savings Analysis section.

The latter alternative, going fully private, would have a significant cash requirement (a minimum of $1.5MM assuming repurchase of 5MM shares at $.25 per share and $250M for legal and professional). The likely cash need would be much higher. At this time the Company does not have the cash resources to undertake such a transaction and its largest shareholders have not expressed the interest to personally undertake such a transaction. In addition, litigation risk is believed to be much higher given the stock performance over the last several years and the Company’s intent to return to profitability moving forward. A long and drawn out legal case would be counterproductive and costly.

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Agenda Item #5

Liquidity Discussion

Liquidity of the Company’s stock was listed as a disadvantage of the going dark transaction. While this is typically the case for companies that are listed on a national exchange, Champion Industries, Inc. has been trading over the counter since being delisted from the NASDAQ exchange several years ago. The Company’s stock has continued to trade on the OTC Pink market and would be able to remain on that exchange post going dark. The average trading volume over the prior year has been about 11,000 shares per day at an average price of $.27 per share. The Company currently has about 11.3MM shares outstanding. The stock is currently thinly traded and the average daily value of $3,000 changing hands would suggest that liquidity is already quite low.

Below is a summary of the Company’s stock trading over the prior 52 weeks:

Although liquidity is currently low, it would be expected that the decreased visibility of the Company would have an impact and could reduce liquidity further or virtually eliminate altogether.

The Company intends to continue to distribute quarterly updates and an audited Annual Report to shareholders that would be available to the public via the Company’s website and the OTC Markets website. This would maintain some level of visibility and could help trading, and thus liquidity.  The Company could also do press releases for significant events in interim periods.

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Agenda Item #6

Discussion of Valuation

To determine the price that will be paid for any fractional shares resulting from the reverse split, the Company would engage a professional firm to evaluate its common shares. At present, the Company could use the following firms:

·   Dixon Hughes, LLP

·   Chaffe and Associates

·   A referral of a professional firm from the Company’s external auditors Arnett, Carbis, Toothman, LLP (“ACT”)

Dixon Hughes was referred by Bowles Rice, our legal counsel for this transaction. They have given a $45M - $55M price range for the valuation and a 4 -6 week turnaround for completion.

Chaffe and Associates has been engaged by the Company in the past, so there is some familiarity with the Company’s operations; which should cut down on the turnaround time. A preliminary estimate for the valuation is $20M.

The referral from ACT could be a benefit in that ACT has an intimate knowledge of our business and could lend guidance to the firm it has a working relationship with. This would presumably cut down on time of completion of the valuation. We have no knowledge of these firms at this time to base an estimate of cost.

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Agenda Item # 7

Ratio Analysis

Management has reviewed its shareholder list and has determined the optimal ratio for the reverse split is either 1:100 or 1:200. With the 1:100 ratio, there would be 80 shareholders of record cashed out and the total holders of record would be 275 post reverse split which would give the Company a 25 shareholder buffer. With the 1:200 ratio, There would be 131 shareholders of record cashed out and the total holders of record would be 224 post reverse split giving the Company a 76 shareholder of record buffer.

There are several items to consider, they are as follows:

1.   Margin of safety

2.   Cost of cash out

3.   Potential that brokers will release shares to owners

4.   Risk of litigation

Margin of safety:

The obvious choice is the 1:200 ratio as it reduces the shareholders of record by another 51, but there are other factors to consider here. Over the past year the shareholder of record list has not fluctuated, this means that the trading that has taken place is amongst beneficial owners that have shares in street name. Given this, we can surmise that either the 100 or 200 ratio would accomplish the objective.

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Cost of cash out:

Below is a summary table of the cost to cash out any fractional shares based on a range of valuations:

Here the 1:100 ratio is cheaper to execute but both options are plausible within the range of valuations given.

Potential that brokers will release shares to owners:

A broker “kick-out” occurs when a street name or nominee holder determines it no longer wants to serve in that position and distributes the shares to the beneficial owners, thus increasing the number of record holders.

This is a possibility with either ratio. Even with a larger number of record holders cashed out with the 1:200 ratio, this creates many more shareholders with a small number of shares. I would assume that the shareholders currently in street name have more holdings than just Champion and thus brokers would continue to hold post reverse split. This is supported by that fact that currently 192 shareholders in street name have 50 shares of the Company’s stock or less; 95 have 10 shares or less.

Risk of Litigation:

There will be a risk of litigation with this transaction whether the Company would pursue the 1:100 or 1:200 reverse split, but the likelihood this litigation would come from shareholders that will be cashed out should be minimal. This is because only shareholders that own 99 shares, or less, in the case of 1:100 ratio and 199 shares, or less, in the case of the 1:200 ratio, would be cashed out. Even if a conservative $1 estimate is used for the cash out price, this would be $199 or less in value per individual cashed out. In summary, the monetary value itself would likely be a deterrent of litigation from these shareholders.

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The more likely risk of litigation would come from those shareholders that disagree with the transaction and would be concerned with less exposure and liquidity. However, the stock has traded thinly and at low prices for some time now. Assuming the Company found this transaction to be beneficial, a thorough proxy and communication with shareholders could help reduce the risk of this type of litigation.

Agenda Item # 8

Discussion of Statutory Appraisal Rights

WV Code § 31D-13-1302(a)(4) provides that a shareholder is entitled to appraisal rights in the event of any “amendment of the Articles of Incorporation” that “reduces the number of shares . . . owned by the shareholder to a fraction of the share” if the corporation “has the obligation or right to repurchase the fractional share so created.”

Therefore, a reverse stock split would trigger statutory appraisal rights for  any properly dissenting shareholder who would end up with a fractional share (less than 1 whole share) to be cashed out in the transaction, provided that shareholder follows all the applicable statutory procedures for asserting appraisal rights.

The appraisal statute is set forth in WV Code § 31D-13-1301 through § 31D-13-1331 (the “WV Appraisal Rights Statute”).    We would note the following key points concerning the WV Appraisal Rights Statute:

·   A copy of the WV Appraisal Rights Statute and a detailed explanation of it will need to be included in the proxy materials with the notice of the shareholders meeting.

·   There are several different required notices that a dissenting shareholder must file, and each has its own deadline.  If the dissenting shareholder fails to provide any of the notices in a timely manner, then statutory appraisal rights are lost.

·   A notice of intent to demand payment of “fair value” is the first required notice a dissenting shareholder must provide.

·   It must be submitted to the Corporation before the shareholders meeting where the amendment to the Articles will be voted upon by shareholders.  If it isn’t, appraisal rights are lost.

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·   Ay such dissenting shareholder must not vote in favor of the amendment.  Any vote in favor of the amendment would eliminate appraisal rights.

·   In the 10 days after the effective date of the reverse stock split, the Company then would have to provide a written appraisal notice and form to each properly dissenting shareholders who have properly objected to being cashed out.

o   The written appraisal notice and form must specify a deadline for receiving back the completed form (with certain signed certifications and surrendered share certificates) from such dissenting shareholders.

o   That deadline cannot be less than 40 nor more than 60 days after the date the written appraisal notice and form are sent.

o   In the written appraisal notice and form, the Company must provide various information including the Company’s estimate of “fair value.”

·   To perfect appraisal rights, the dissenting shareholder must sign and return the appraisal notice/form, certify ownership on the relevant date, and surrender and deposit the share certificates, in a timely manner.. Failure to do all of these things by the deadline set by the Company will cause a loss of the appraisal rights.

·   At this point, the Company has to go ahead and pay its estimated “fair value” and send the dissenting shareholders copies of its most recent annual financial statements and interim statements, the check, and notice that the dissenting shareholder may demand more than the amount the Company is paying.

·   In response, the dissenting shareholder must then provide the Company with the shareholder’s own estimate of “fair value” and demand payment of the additional amount to bring the total paid up to the shareholder’s “fair value” estimate..

·   The Company can choose to pay the extra amount demanded in the dissenting shareholder’s estimate.  If it does so, that is the end of the matter with respect to that dissenting shareholder.

·   If the Company chooses not to pay the dissenting shareholder the additional amount(s) so as to bring total payment up to the shareholder’s own estimate of “fair value,” then a court proceeding would ensue to determine “fair value”.

o   “Fair value” under the does not include any discount for minority shares or for thinly traded volume.

o   The court can appoint one or more appraisers.

o   Court costs including appraisers’ fees will be assessed to the Company.

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Agenda Item #9

Cost Savings Analysis

Below is a summary of the estimated savings annually:

The opportunity cost is derived from the dollar savings of time of the CFO, Controller and Staff associated with the reporting and compliance function of the Company. This cost savings is much more subjective but it can be reasonably assumed that the time spent doing more productive activities would at a minimum pay for itself. In reality, this number is much higher. The time and uninterrupted focus that can be diverted to operations and business fundamentals is what is needed for the Company to see a quicker recovery as well as future success and growth.

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Agenda Item #10

Cost of “Going Dark” Transaction

The estimated cost of Going Dark for the Company is as follows:

The cost of the transaction is dependent on the ratio of shares for the reverse split as well as the valuation. $150,000 or less is likely a conservative estimate for an all in cost of the transaction.

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Agenda Item #11

Timeline for Completion

DATE (Est.)	STEP OR ACTION	RESPONSIBLE PARTY (AND NOTES)
Sept. 21, 2015	Board reviews with counsel and with the CFO the possibility of going dark using the reverse stock split approach	Board, CFO, BR
Sept. 21, 2015	Board approves moving forward with exploring possible going dark transaction, and creates and empowers Special Committee to proceed	Board
October 5, 2015	Complete review of advantages and disadvantages of possibly going dark using a reverse stock split; confirm desire to move forward with exploring possible transaction (or not); if decision is to continue exploring possible going dark transaction with reverse stock split, retain Outside Valuation Expert	Special Committee (May use unanimous written action in lieu of meeting) (CFO, BR to assist)
Week of October 5, 2015	Review anti-dilution and restrictive covenants in plans and agreements, and review Section 13D issues; follow up as needed. Refine cost estimates and provide the Special Committee with other information and support as needed.	CFO, BR (E.g., see restrictive covenant in the amended credit agreement relating to payments to shareholders) CFO, BR
By Oct. 23, 2015	Obtain Preliminary (Draft) Valuation Report	Valuation Expert Special Committee (estimated 4-week turnaround to get the draft Report)

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Week of Oct. 26, 2015	Review and discuss (1) Preliminary (Draft) Valuation Report, (2) Proposed Reverse Split Ratio, and (3) Draft of Proposed Amendment to Articles of Incorporation (leaving blanks for the Reverse Split Ratio)	Special Committee (Valuation Expert, CFO, BR to assist)
By Nov. 6, 2015	Obtain Final Valuation Report and analyze estimated costs of purchasing fractional shares in a possible reverse stock split	Valuation Expert Special Committee (Valuation Expert, CFO, BR to assist)
Week of Nov. 9, 2015	Special Committee meets and reviews Final Valuation Report and makes a final recommendation to the Board regarding the possible going dark transaction.  If it recommends proceeding, recommendations should include Reverse Split Ratio, cash purchase price, related Amendments to Articles, target shareholder meeting date, etc.	Special Committee (Valuation Expert, CFO, BR to assist)
Week of Nov. 9, 2015	Board meets and receives/acts on recommendations of Special Committee. If recommendation is to proceed, and the Board approves that, the Board would need to adopt Resolutions (1) authorizing the  reverse stock split, setting the Reverse Split Ratio and cash purchase price for fractional shares (less than 1 share), (2) approving the related amendments to the Articles of Incorporation, (3) setting target dates for  the shareholders meeting date, record date, effective date, etc., and (4) authorizing filing of Preliminary Proxy Materials (and Schedule 13E-3/Rule 13e-3 Disclosures)	Board (Special Committee, CFO, BR, Valuation Expert to assist Board in its deliberations)
Week of Nov. 16, 2015	File Preliminary Proxy Materials (and file Schedule 13E-3/Rule 13e-3 Disclosures) and related filings with the SEC	CFO, BR, Special Committee, Outside Auditors, others as appropriate (Note:  SEC review and comments are anticipated)

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Week of Nov. 16, 2015	File Preliminary Proxy Materials (and file Schedule 13E-3/Rule 13e-3 Disclosures) and related filings with the SEC	CFO, BR, Special Committee, Outside Auditors, others as appropriate (Note:  SEC review and comments are anticipated)
Nov. 16, 2015 to Dec. 16, 2015	SEC review; respond to SEC comments, obtain final SEC approval(s)	CFO, BR, Special Committee, Outside Auditors, others as appropriate (Note: SEC review and comments are anticipated, and this estimated time line assumes a 1-month review period)
By Dec. 21, 2015 (subject to timing of SEC review)	File final proxy materials, etc., and mail/deliver proxy materials	CFO, BR, Special Committee, Outside Auditors, others as appropriate
Week of Jan. 25, 2016	Special Meeting of Shareholders Special Meeting of Board (afterward) to authorize any additional actions needed	All (this is a target date)
Week of Jan. 25, 2016	After shareholders meeting/approval: ·file Form 8-K; issue Press Release ·obtain new CUSIP number ·file FINRA notification under Rule 10b-17 ·follow up as needed on Trading Symbol ·make final arrangements with Transfer Agent (including transmittal letter and funding arrangements for purchasing fractional shares) ·address any dissenters’ appraisal rights and follow up as needed (see section 5 below)	CFO, BR (with assistance from others as needed)
Week of Jan. 25, 2016	File Articles of Amendment to Articles of Incorporation, authorizing reverse stock split	BR

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Week of Feb. 1, 2015)	Effective Date of Reverse Stock Split Confirm number of record shareholders is below 300 File SEC Form 15 to deregister	CFO CFO, BR
If any shareholders exercise statutory dissenter/appraisal rights	Continue addressing dissenting shareholders’ appraisal rights, if necessary	Board, CFO, BR

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The following are the minutes of the inaugural Special Committee Meeting discussing the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Special Committee of the Board of Directors Meeting

Champion Industries, Inc. Headquarters, Huntington, WV – 10:00AM

October 5, 2015

Special Committee Members: Lou Akers, Glenn Wilcox

Special Committee Subject Matter: Exploration of Potential “Going Dark” transaction

In Attendance by Phone: Lou Akers, Glenn Wilcox

Non-Directors Present by Invitation:  Justin T. Evans, Chief Financial Officer, Roger Hunter, Legal Counsel – Bowles Rice LLP

I.   Call to Order

Mr. Wilcox and Mr. Akers called the meeting to order.

II.   Organization Matters

After a discussion amongst participants, the consensus was Mr. Akers should be the Chairman of the Special Committee and Mr. Wilcox the Secretary given their respective backgrounds as it related to the subject matter. Mr. Evans was charged with taking minutes. Upon motion by Mr. Akers and second by Mr. Wilcox a motion to that effect was passed.

III.   Discussion of Advantages and Disadvantages of Potential “Going Dark” Transaction Using a Potential Reverse Stock Split

At the request of the Committee, to open the meeting Mr. Evans started with a brief overview of going dark using a reverse stock split and how the Company would execute a potential transaction of this sort. To go dark (no longer a public company subject to SEC reporting and other public company compliance), the Company would need to get under 300 shareholders of record. Currently the Company has approximately 355. To get fewer than 300 shareholders of record, a reverse stock split could be executed in a ratio of 1:100 or 1:200. The 1:100 likely would get the Company to about 275 shareholders of record while the 1:200 likely would bring the shareholders of record to about 224.

Mr. Evans, in conjunction with legal counsel, had prepared an agenda that was consistent with the Board’s charge to the Special Committee, along with a memo discussing important items to consider related to possibly going dark.  In addition, he had provided the Committee members with a copy of a September 18, 2015 memorandum from Mr. Hunter to Mr. Evans discussing a potential going dark transaction using a reverse stock split.  Within Mr. Evans’ memo there were estimates and figures as well as specific discussion related to Champion to facilitate and support the Committee’s discussion and deliberations as to the main agenda topics. Mr. Evans distributed all this material prior to the meeting to allow for a thorough review in preparation of the meeting. As such, at Mr. Wilcox’s suggestion, the Committee requested that Mr. Evans discuss each section of his memo as the Committee worked through each of the agenda items, and asked that Mr. Hunter add any additional comments for each topic, as the Committee proceeded.  The comments of Mr. Evans and Mr. Hunter, and questions of Committee members, were then discussed amongst the attendees as the meeting proceeded through each agenda topic.

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The first agenda topic of discussion was the advantages and disadvantages of potentially going dark. Mr. Evans cited the main advantages related to Champion were freeing management and staff time to focus on long-term business objectives as well as internal financial reporting and analytics, and eliminate costs associated with SEC reporting. The estimated costs savings was $220M annually. Mr. Evans’ opinion was that the savings would be higher given a conservative estimate of opportunity costs. The committee discussed the Company’s financial position including market capitalization, sales, and total assets as well as trends and results over the past several years.  Mr. Wilcox asked Mr. Hunter to add his professional opinion on any other potential advantages of the transaction for the committee to consider. Mr. Hunter concurred in the advantages noted by Mr. Evans and added that other potential advantages would include a potential savings on D&O insurance, streamlining of corporate governance, greater confidentiality of strategic and competitively sensitive information, no brokerage fees for those fractional shares converted to cash after the reverse split.

Mr. Hunter also noted another advantage of using the reverse stock split to get below 300 shareholders of record.  That is, it would allow shareholders whose holdings were a little over or a little under the threshold for being cashed out to have a choice whether to be cashed out or not.  That is, shareholders could either buy or sell shares before the record date for the reverse split, in order to get above or below the threshold, and thereby be cashed out or not as they might prefer.

After thorough discussion of these items, the committee agreed that more focus on business and the annual costs savings were the main advantages of the potential transaction but all had merit.

Mr. Evans cited the disadvantages as potential reduced liquidity of the Company’s stock, tripping the 300 shareholder of record threshold triggering SEC reporting and compliance post reverse split, shares being less attractive in acquisitions, appraisal rights of dissenting shareholders, and potential risk of litigation. Mr. Hunter agreed with these disadvantages and added a decrease in prestige, expense of reregistering to raise capital, time and expense preparing and filing the various documents, filings and information necessary to complete the potential transaction, reduced information to shareholders and others about the company, and continued application of the antifraud provisions.  Mr. Hunter also noted some potential mitigating factors.  Those factors included, as Mr. Evans mentioned in his memo, the ability after going dark to still post annual audits and quarterly statements with OTC markets online (along with communications with them as to material events and/or transactions) and to make such information available to shareholders as well.  Regarding the antifraud provisions, the company could provide by policy that there should be only certain trading windows available for insiders.  Mr. Hunter also added some brief comments on potential litigation risk and appraisal rights, and mitigating factors to consider, and indicated he would have more to say on those subjects as the meeting proceeded.

The committee discussed each disadvantage, but the main items of liquidity, number of shareholders of record, and risk of litigation were discussed at length. The Committee’s opinion was that the liquidity was already very low and had been for some time as the Company trades on the OTC Markets. Mr. Evans provided the Committee with trading information for the previous year that included trading volume, trading price, and various averages of both. The trading information supported the Committee’s opinion that the liquidity of the Company’s stock was already very low. Mr. Evans disclosed to the committee that his research indicated the majority of the trading appeared to be between beneficial shareholders holding stock in street name and thus the shareholders of record would not be impacted much after the reverse split. The committee discussed the potential that brokers could cease holding the shares in street name (which counts as one shareholder of record) and release to shareholders if the share volume was too low. Mr. Evans disclosed that there were currently 192 shareholders holding shares in street name that had 50 shares or less and 95 shareholders in street name that had 10 shares or less. Given this, the Committee thought if a broker “kick out” were to occur, it would have already happened.  The Committee believed that if a potential transaction were undertaken, such “kick-outs” were possible but not likely, and that the street name holdings and possible “kick-outs” would need to be (and could be) monitored closely.  The Committee discussed the risk of litigation and the consensus was that it was unlikely that litigation would come from shareholders that were cashed out given the monetary value, but more likely (if it came at all) from dissenting shareholders that would remain post reverse split. The Committee thought that thorough communication with shareholders (assuming the potential transaction was found to be beneficial and is undertaken at all) disclosing the merits of the potential transaction could dissuade litigation.

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IV.   Discussion of Alternatives

The Committee discussed keeping the status quo and a full “going private” transaction as alternatives to going dark. The Committee believed that keeping the status quo, given the financial position of Champion as well as the state of the industries in which it operates, could significantly reduce the pace of recovery and growth moving forward. Mr. Akers and Mr. Wilcox (assuming certain estimates) thought that the benefit of being technically private (focused Management effort and diverted resources to more productive activities) outweighed the benefit of being public.

Going fully private would require the Company or its largest shareholders to make a cash tender offer for the Company (or undertake some other transaction such as a cash-out merger that would have the same effect). Mr. Akers, Mr. Wilcox and Mr. Evans stated this was not an option for the Company from a cash perspective and that its largest shareholders had not expressed interest in making a tender offer personally.

V.   Liquidity Discussion

The Committee continued its earlier discussion of liquidity, obtaining further comment from both Mr. Evans and Mr. Hunter, and this discussion was consistent with the prior discussion. See Item III.

VI.   Discussion of Valuation

The Committee discussed the importance of getting a valuation, and potential firms to give a valuation, of the Company’s stock to consider in paying cash in lieu of fractional shares. After discussion of pros and cons of each candidate, the Committee thought that given the estimated cost ($20M) and the Company’s prior engagements with Chaffe and Associates, that they were the best candidate. Mr. Evans disclosed that he would have more in depth conversation and firm cost estimate (as well as timing of a final valuation report) within the week.

VII.   Ratio Analysis

The consensus was a 1:100 or 1:200 would be the optimal ratio for the reverse stock split. Both would be effective getting under the 300 shareholder of record threshold, but the Committee did not have concrete valuation information, which the Committee believes is essential to any final recommendations it might make to the Board of Directors as to (a) whether to undertake the potential transaction and, (b) if so, which reverse split ratio to use and what the cost entailed in that ratio actually would be (once the valuation was known).  Mr. Evans did give a range of valuation and related costs, and within those ranges, the Committee thought, preliminarily, that both reverse split ratios were plausible.

VIII.   Discussion of Statutory Appraisal Rights

Mr. Hunter discussed with the Committee the appraisal rights of shareholders to be cashed out. Mr. Hunter detailed the procedures that the dissenting shareholder would need to go through to execute. Using a range of values for the Company’s shares, the Committee determined the monetary value for shareholders to be cashed out and the lengthy process to exercise appraisal rights significantly reduced the potential for this action from dissenting shareholders.

Additionally, Mr. Hunter noted that the statute requires the dissenting shareholder to state the number or value per share they are demanding and believe is fair.  The statute likewise gives the company the right simply to agree to and pay a dissenting shareholder’s stated number (or value), and thereby ending the matter and avoiding the time and expense of an actual court proceeding to determine the fair value per share.  Preliminarily, using the range of estimates in Mr. Evans’ memo, Mr. Hunter thought that doing that to avoid the litigation costs would seem to be a viable and cost-effective option if there were any dissenting shareholders.

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IX.   Cost Savings Analysis

Mr. Akers had Mr. Evans discuss in detail the annual cost savings that would result from potentially going dark. Mr. Evans discussed specific hard costs as well as time and opportunity cost estimates for a total annual savings estimate of $220M. Mr. Evans also disclosed the opportunity cost was a subjective matter and thought the actual savings would be much higher.

X.   Cost of Potential “Going Dark” Transaction

Mr. Akers had Mr. Evans discuss in detail the costs of the potential transaction. Mr. Evans gave a range of estimates based on valuations from $.25 to $1.00 per share pre-split. The range was as little as $105M and as much as $182M depending on the valuation and the ratio. Based on the range, Mr. Evans’ estimate of an all in cost of the potential transaction was $150M. This assumes no litigation cost post reverse split.

XI.   Timeline for Completion of a Potential Transaction

The Committee discussed in detail a timeline for completion of a potential going dark transaction involving a reverse stock split. The Committee determined the valuation turnaround time would largely determine the timing of full execution.  The estimated range was from December, 2015 at the earliest and February, 2016 at the latest.  Mr. Hunter added that the SEC review and comment period also could affect the time line, and that the estimated time line assumed a 30-day SEC review/comment period.  Mr. Akers indicated that everyone recognized the SEC could take longer as well.

The Committee consensus was that if the later date were the case, the Company’s best option probably would be to vote on the matter at the annual meeting of shareholders. If in December or January, a special meeting of the shareholders may be considered. The Committee thought this was an ultimate decision of the Board of Directors, if the Board ultimately decided to undertake the potential transaction after receiving the valuation report and the Committee’s subsequent final recommendations, assuming the ultimate decision was to proceed with the potential transaction.

XII.   Adjournment

Mr. Akers and Mr. Wilcox wanted the minutes of the Special Committee meeting to be distributed to the Board of Directors for the next meeting of the Board of Directors on October 19, 2015. Given the information considered to date, Mr. Wilcox made a motion to preliminarily recommend to the Board of Directors that the Company and the Committee proceed with continuing to explore the potential transaction, pending the valuation to be determined, and to this end retain a valuation firm (the recommendation of the Committee being to use Chaffe, as noted above). Upon a second by Mr. Akers, the motion was passed.

The Committee indicated that, if the Board approves continued exploration of the potential transaction, the Committee hoped to be in a position to obtain the valuation report and final cost and time line estimates within approximately 30 days, and therefore hoped to be in a position to make final recommendations to the Board by the Board’s November meeting on (a) whether to undertake the potential transaction, and, (b) if so, which reverse stock split ratio to use and the resulting updated costs of the potential transactions.

The Committee also noted again that, if the ultimate decision then is to proceed with the potential transaction, the Board (as noted earlier) also would have to make the final decision as to timing and whether to pursue a special shareholders’ meeting or wait and address the matter at the annual meeting of shareholders.

There being no further business Mr. Wilcox made a motion to adjourn, upon a second by Mr. Akers the meeting was adjourned.

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The following is an excerpt of the minutes presented to the Company’s Board of Directors, after the inaugural Special Committee meeting, disclosing the research and discussion of the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Board of Directors Meeting

Pullman Plaza Hotel, Huntington – 9:00AM

October 19, 2015

VII.  New Business

Mr. Reynolds had Mr. Evans begin the meeting with a discussion of the potential “going dark” transaction. Mr. Evans had distributed minutes of the special committee of the Board of Directors meeting held on October 5, 2015. The minutes detailed the discussion of the meeting. The material presented to the special committee by Mr. Evans and legal counsel to facilitate the discussion was also presented to the board. The recommendation from the committee was to continue to explore the transaction. Mr. Cline made a motion to defer any decision to continue exploration to the Board meeting on November 16, 2015; this would allow the board members ample time to review and digest the information presented. After a second by Mr. Akers the motion passed.

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EX-99.3

Exhibit 99.3

The following is an excerpt of the minutes presented to the Company’s Board of Directors updating the Board on the progress of the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Board of Directors Meeting

Pullman Plaza Hotel, Huntington – 9:00AM

November 16, 2015

III.   Discussion of Going Dark Transaction

Mr. Evans discussed the progress of the exploration of the potential “going dark” transaction with the board. Mr. Evans disclosed the valuation firm had agreed to the price previously presented to the board and a 4-6 week turnaround. Given this information, the board approved continued exploration of the potential transaction after a motion by Mr. Wilcox and second by Mr. Cline.

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EX-99.4

Exhibit 99.4

The following is an excerpt of the minutes presented to the Company’s Board of Directors updating the Board on the progress of the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Board of Directors Meeting

Pullman Plaza Hotel, Huntington – 9:00AM

December 21, 2015

III.   Discussion of Going Dark Transaction

Mr. Evans discussed the progress of the exploration of the potential “going dark” transaction with the board. Mr. Evans disclosed the valuation firm had made their on-site visit the prior week and that this was the last step in the valuation process.  A full valuation report should be available the first week of 2016.

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EX-99.5

Exhibit 99.5

The following is the draft valuation of the Company's common stock as it was presented to the Special Committee at its January 4, 2016 meeting.

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EX-99.6

Exhibit 99.6

The following is the material presented to the Special Committee at its second meeting discussing and quantifying the potential “going dark” transaction.

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Special Committee of the Board of Directors Meeting

Champion Industries Headquarters, Huntington, WV – 10:30 A.M.

January 4, 2016

AGENDA

I.           Call to Order...............................................................................................................................................................................................L. Akers

II.           Discussion of Draft Valuation.................................................................................................................................................................J. Evans/ R. Hunter

III.           Updated Liquidity Discussion................................................................................................................................................................J. Evans

IV.           Updated Cost of “Going Dark” Transaction Discussion.....................................................................................................................J. Evans

V.           Updated Ratio Analysis Discussion.......................................................................................................................................................J. Evans

VI.           Discussion of SEC Perspectives and Prior Comments on

Similar Transactions..............................................................................................................................................................................J. Evans/ R. Hunter

VII.           Updated Timeline for Completion Discussion.................................................................................................................................J. Evans / R. Hunter

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Agenda Item #2

Discussion of Draft Valuation

Attached as Exhibit A (Exhibit 99.5 to this Schedule 13E-3 filing) is a draft of the valuation of the Company’s stock; the Committee should review the highlights of each section to determine reasonableness and completeness of the valuation.

Agenda Item #3

Updated Liquidity Discussion

Below is an updated summary of the Company’s stock trading over the prior 52 weeks:

For reference, below is the trading information reported to the Special Committee at the initial meeting in October.

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The information above would suggest that liquidity of the Company’s stock is decreasing while still public; which would suggest that the proposed “Going Dark” transaction would not be necessarily to blame if liquidity decreased post “Going Dark”.

Agenda Item #4

Updated Cost of “Going Dark” Transaction Discussion

The updated estimated cost of Going Dark for the Company is as follows:

An all in cost of $150,000 or less is a conservative estimate. This assumes no post transaction litigation/compliance costs.

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Agenda Item # 5

Ratio Analysis

Management has reviewed its shareholder list and has determined the optimal ratio for the reverse split is either 1:100 or 1:200. With the 1:100 ratio, there would be 80 shareholders of record cashed out and the total holders of record would be 275 post reverse split which would give the Company a 25 shareholder buffer. With the 1:200 ratio, There would be 131 shareholders of record cashed out and the total holders of record would be 224 post reverse split giving the Company a 76 shareholder of record buffer.

Now that we have firmer estimate on the valuation, it would appear that the 1:200 ratio would be optimal. This is due to the increased buffer below 300 shareholders of record at a marginally higher cost ($12,000 more at $0.25 per share) ($25,000 more at $0.50 per share).

Agenda Item #6

Discussion of SEC Perspectives and Prior Comments on Similar Transactions

In anticipation of an SEC review of the potential transaction, counsel has advised we discussed the various comments the SEC has issued to Registrants in the past that have undertaken similar transactions.

Agenda Item #7

Timeline for Completion

Week of January 4, 2016………………………………...return comments on draft valuation and receive final valuation

Week of January 11, 2016………………………………...have third special committee meeting and devise final recommendation to the Board of Directors

Week of January 18, 2016……………………………………..the Board of Directors receive the recommendation of the Special Committee and vote to proceed or not; approve a resolution  to (1) must authorize reverse split, ratio, and purchase price for fractional shares (2) Approve

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Amendments of Articles (3) set target dates for meeting, record date, effective date, etc. and (4) authorize preliminary Proxy materials and Schedule 13E-3. Rule 13-E-3 Disclosures.

Week of January 25, 2016………………………………….File Proxy Materials and 13E-3 Schedule and Disclosures with SEC

January 25, 2016 to February 25, 2016…………………………….SEC Review Period / Send Proxy Materials to Shareholders

March 21, 2016…................................................…………………. Annual Shareholder Meeting and Board of Directors Meeting directly following to approve any further action necessary

Week of March 21, 2016…………………………………………...File Form 8-K, obtain new cusip, file FINRA notice, trading symbol follow-up, Make final arrangements with transfer agent, transmittal letter/funding, address dissenter appraisal rights, File Articles of Amendment to Articles of Incorporation, authorizing reverse split

April 1, 2016………………………………………………………..Effective date of Reverse Stock Split.

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The following are the minutes of the second Special Committee Meeting discussing the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Special Committee of the Board of Directors Meeting

Champion Industries, Inc. Headquarters, Huntington, WV – 10:45AM

January 4, 2016

Special Committee Members: Lou Akers, Glenn Wilcox

Special Committee Subject Matter: Continued Exploration of Potential “Going Dark” Transaction, and Review and Discussion of Draft Executive Summary and Supporting Exhibits and Worksheets (“Draft Valuation/Summary”) Prepared by Chaffe & Associates, Inc. (“Chaffe”) and Constituting Chaffe’s Draft Valuation Report.

In Attendance in Person:  Lou Akers (Chairman of the Committee)

In Attendance by Phone: Glenn Wilcox

Non-Directors Present by Invitation:  Justin T. Evans, Chief Financial Officer (in Attendance), Roger Hunter, Legal Counsel – Bowles Rice LLP (by Phone)

I.   Call to Order and Review of Agenda

Mr. Akers called the meeting to order and confirmed that everyone had received and had the chance to review the Agenda and materials prepared by Mr. Evans at the request of the Committee.  Mr. Evans had provided these materials to Committee members and Mr. Hunter for their review prior to the meeting.

A copy of these materials is attached to and made a part of these minutes.  The materials consisted of:

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·   the Agenda (page 1),

·   four pages of additional information for discussion of Agenda items II through VII (pages 2 - 5), and,

·   an Exhibit A which contained a cover page (page 6) and the 19-page Draft Valuation/ Summary. (Mr. Evans also had forwarded a copy of this draft to the Committee and Mr. Hunter on December 31, 2015, the same date Chaffe released it to him for distribution to the Committee and legal counsel.)

The Committee by unanimous consent proceeded to address each of the remaining Agenda items.

II.   Discussion of Draft Valuation/Summary

Mr. Akers and Mr. Wilcox observed at the outset of the discussion that their initial impression after reviewing the Draft Valuation/Summary was that it appeared to be thorough and well done and had covered and condensed a lot of information that supported Chaffe’s conclusions of fair market value as of December 26, 2015.  At the request of the Committee, Mr. Evans began discussing the Draft Valuation/Summary section by section (19 pages including the supporting worksheets/exhibits).

First, Mr. Evans discussed Chaffe's executive summary and particularly Chaffe’s conclusion that fair market value of the Company's common stock as of December 26, 2015, was in a range from 17 cents per share to 20 cents per share.  He explained that the worksheets and exhibits in the Draft Valuation/Summary were included in the draft because they provide supporting detail as to how Chaffe reached its conclusion by determining enterprise value of the Company through several different valuation approaches.  Mr. Evans explained that he had provided Chaffe with the Company's historical audited financial statements as well as internal projections for the fiscal year 2016.  In turn, Chaffe summarized that financial information and data in worksheets and exhibits and then used it to perform different valuation analyses, after compiling and analyzing publicly available financial data (and calculating relevant ratios and multiples) concerning the public companies that Chaffe determined to be most comparable to the Company in terms of lines of business (that is, printing and/or office supplies and furniture).  Chaffe also analyzed recent transactions involving comparable publicly traded companies, and calculated additional relevant ratios and multiples.  Chaffe then took all the data from comparable companies and transactions and applied the average or median multiples and ratios to the Company’s applicable information, to produce various valuation analyses.  Chaffe also analyzed and estimated liquidation value. Chaffe then weighted the results of different analysis to reach its conclusions.

Mr. Evans expressed his view that overall Chaffe's approach and the supporting worksheets appeared to be well-done, while he noted that there were some areas where Mr. Evans felt some numbers needed to be updated or double- checked and perhaps clarified.

Mr. Akers asked what numbers in the worksheets might change.  Mr. Evans indicated that Chaffe had used trailing 12-month numbers through July 31, 2015 and those probably would be updated for the final.  Unaudited numbers for the fiscal year just ended on October 31, 2015 may be available for use by the final report. However, Mr. Evans did not believe that this update would have a material impact on the valuation conclusions of Chaffe.

Mr. Evans next reviewed the worksheets (exhibits) containing both historical and FYE 2016 projected income statement and balance sheet information for the Company.  He noted the projected 2016 operating income and the fact that that such projected income and deferred tax benefits were taken into account by Chaffe in the worksheet/exhibit summarizing income statement information.  He also noted that interest expense in the last column in that worksheet/exhibit needed to be moved up to a different line (interest expense line), but doing that would not change the operating income amount.

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Mr. Akers observed that Chaffe did a very good job and was very comprehensive in its valuation analysis including the supporting details found in the various supporting exhibits/worksheets.

Mr. Evans next reviewed the worksheet/exhibit that summarized the Company's balance sheet information included projections for FYE 2016.  He noted that Chaffe took into account the conversion, to preferred stock, of existing debt owed to a shareholder, which conversion had been approved and authorized previously by the Board of Directors.  Such approval and conversion also had been reported by the Company in previous SEC filings.

Mr. Akers asked if the preferred stock would be entitled to a dividend rate after the debt-to-preferred conversion.  Mr. Evans explained that this had been disclosed in the Company's previous SEC filings, and that the dividend rate was zero unless the Company earned a $1 Million net profit in the year in question.  Mr. Akers observed that this was a good deal for the Company.

Mr. Evans then gave an overview of the public companies that Chaffe had identified as a peer group.  He noted that it was a thorough group and included the most comparable public companies, even though Champion Industries offers both printing and office supplies and furniture, whereas most if not all the peer group companies do not engage in both lines of business. The major publicly traded printing competitors were there (for example, Donnelly) as were the main public office supply/furniture businesses.

Mr. Evans then provided an overview of how Chaffe had compiled the financial data for the peer companies and calculated various median and average financial ratios and multiples commonly used in determining enterprise values of businesses.  Chaffe also looked at transactions involving comparable or peer businesses in the last several years and compiled relevant valuation ratios and multiples reflected in those transactions.  This data included standard deviations and other pertinent statistical or valuation data.  Then, Chaffe took and applied all these multiples and ratios (to the extent applicable) and applied them to the Company's summary financial information in order to produce different valuations. For example, Chaffe looked at multiples of EBITDA and other valuation metrics.  In some cases, standard ratios and multiples were not applicable, such as the Price/Earnings multiple or ratio, because the Company has not had recent earnings to which such a multiple could be applied.  Chaffe then weighted the different applicable valuations based on its judgment and relevant industry (valuation) standards, in order to produce its final conclusions.

Mr. Evans indicated to the Committee one area in which follow-up discussion with Chaffe and possible clarification and updating were needed, was the interest rates Chaffe had used in the Draft Valuation/Summary’s worksheet/exhibit that set forth the calculations of Weighted Average Cost of (Debt) Capital ("WACC").  Mr. Evans explained that because some Company debt was variable and that the prime rate had increased following the Federal Reserve Board Open Market Committee's action to raise interest rates in December.    However, he did not think that this update and change would have a material impact on the valuation conclusions.

Mr. Akers again complemented the work of Chaffe and noted that he felt the valuation conclusions Chaffe reached in the Draft Valuation/Summary looked right.  Mr. Wilcox concurred.

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The Committee then asked Mr. Hunter if he had any additional comments or questions after reviewing the Draft Valuation/Summary.    Mr. Wilcox asked Mr. Hunter if he felt Chaffe had covered the things the SEC would expect to be addressed in this sort of process and evaluation of this sort of potential transaction and particularly determining a fair cash-out price to apply to purchase fractional shares following a reverse stock split.

Mr. Hunter said he thought the Draft Valuation/Summary did address the applicable valuation approaches that would be customary and be expected, insofar as relevant data allowed.  For example, because the Company had a net loss for the last several years, applying a peer group median Price/Earnings (“P/E”) multiple to earnings was not a feasible approach here. Similarly,  to the extent the SEC's relevant disclosure guidelines indicate a company's board of directors should consider any firm third party offers for the company or its common shares, in assessing price fairness in this sort of transaction, that was not pertinent here where Mr. Hunter understood there had not been any such third party offers.  The Committee and Mr. Evans indicated there had not been any such third party offers to their knowledge.  To the extent those same guidelines indicated a board also should consider share trading price history, that history was covered in the meeting materials in the liquidity update provided by Mr. Evans in those materials and should be reviewed by the Committee as it proceeded with its agenda.  Mr. Hunter also observed that the Draft Valuation/Summary addresses liquidation value, which was another factor the SEC guidelines indicated should be considered in addressing the issue of valuation and fairness of any cash-out price that might be selected to pay for fractional shares following any potential reverse stock split.

 Mr. Hunter agreed with Mr. Evans that the interest rates in the WACC calculation worksheet needed to be updated, that a higher WACC rate in general and in theory would decrease a valuation somewhat, and that here, however, any such decrease probably would not be material.  Nonetheless, this should be updated and confirmed with Chaffe.

Mr. Hunter summarized that, based on what he had seen in some sample SEC comment letters to a few public companies that had undertaken similar transactions, the Draft Valuation/Summary had touched on all the key valuation metrics and factors (where applicable) and that the Committee had been looking closely at share trading and price history which was another valuation factor that should be considered here. In fact, he noted that price history Information and liquidity would be addresses further in the next part of the agenda for today's Committee meeting.

Finally, Mr. Hunter recommended that Chaffe be asked to elaborate on the weighting it had applied to the different valuation approaches it used.

Mr. Evans indicated that Chaffe had addressed liquidation value but the other valuation metrics constituted the major portion of the Draft Valuation/Summary.  He directed the Committee’s attention to the pertinent worksheet/exhibit analyzing liquidation value.  Mr. Evans noted that a lot of the Company’s machinery and equipment is older and is fully depreciated, and that the Company does not have appraisals of those fixed assets (which in turn would be very expensive and time-consuming to obtain).  He indicated that in the absence of actual appraisals, a lot of factors and assumptions would have to be made to try to speculate as to whether a greater value could be realized than Chaffe estimated and, if so, how much higher value might realistically be achieved.  Mr. Akers noted that the Company's assets were largely tied up as collateral for a significant amount of secured debt.  That too would have to be taken into account and would be a complicating factor in any attempt to do a hypothetical orderly liquidation.  After discussion, the Committee felt that it was not in a position to come to a materially different conclusion on liquidation value without undue speculation.

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The Committee asked Mr. Hunter to inquire of his colleagues at Bowles Rice who would have knowledge of liquidations (both orderly liquidations outside of bankruptcy and within the context of a bankruptcy) to see what their experience has been.  That is, the Committee would like to know how close to book value companies in their experience were able to come in liquidations, particularly in industries that are experiencing slow or no growth.  Mr. Hunter indicated he would ask a senior bankruptcy/creditor rights partner in the law firm and report to Mr. Evans what that experience had been.

III.   Updated Liquidity Discussion

The Committee next discussed the updated liquidity, stock price and trading information Mr. Evans had included with the meeting materials. At the request of the Committee, Mr. Evans summarized the updated information.  He concluded that liquidity had been decreasing and was relatively low at the present time, i.e., before and apart from any potential going dark transaction.  The Committee discussed all this information including price history.

Mr. Hunter noted that the Committee, in reviewing this information including price history data, was addressing one of the price fairness factors that the SEC guidelines indicated a board of directors should consider in this context.

The Committee discussed price history further and noted the average price in the updated information had been 25 cents per share.  The Committee noted that 25 cents per share presently would represent a premium to the most recent trading price per share.

The Committee then asked Mr. Hunter if any public companies doing similar transactions had set a cash-out price for fractional shares after such split that reflected a premium per share (that is, a premium to the trading price per share on a pre-split basis or to the valuation price determined by a third party valuation study). 

Mr. Hunter advised that he had seen several SEC filings of public companies involving going dark after a reverse stock split, that had included such a premium in setting the price per pre-split share at which any fractional shares would be cashed out after their respective reverse stock splits.

IV.   Discussion of Updated Cost of “Going Dark”

The Committee next discussed the updated costs of a potential "going dark" transaction, reviewing the updated cost information Mr. Evans had provided in the meeting materials.  Mr. Akers indicated that the Committee had hoped to stay under $150,000 estimated cost, if a potential transaction were ultimately approved, and that so far this seemed achievable based on the Draft Valuation/Summary and updated cost information.

As the cost discussion continued, the discussion moved to the issue of what reverse split ratio to use if a potential transaction is ultimately approved and undertaken.  Mr. Akers asked Mr. Evans to provide an overview of the updated information on possible reverse split ratios.

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V.   Discussion of Updated Ratio Analysis

The Committee next discussed the subject of what split ratio would make the most sense if the Company were to undertake a going dark transaction following a reverse stock split.  The Committee, after some initial discussion, asked Mr. Evans his thoughts on this subject.

Mr. Evans indicated that he felt that, overall, a 200:1 ratio made the most sense in light of the updated information and the Draft Valuation/Summary.  The approximate extra or marginal transaction cost if a 200:1 ratio were used instead of 100:1, was not anticipated to be very large in relative terms.  This would be the case even if a cash-out price were to be set at a premium to the valuation range per share that Chaffee had determined to be the fair value per share of the Company’s common stock as of December 26, 2015.  Mr. Akers indicated that this seemed to be the case even if a premium cash-out price of 25 cents per pre-split share were used.  Mr. Evans confirmed that he thought that was correct.  Mr. Evans also noted that using the 200:1 ratio would provide a significant extra cushion for the Company to stay below 300  record shareholders as compared to using the 100:1 ratio.

The Committee discussed the updated information and agreed that the 200:1 reverse split ratio seemed to be the best ratio, in light of the Draft Valuation/Summary and other updated information pertinent to the ratio issue.  During the discussion, Mr. Evans also noted that using the average trading price per share of 25 cents/share, the 200:1 reverse split would imply mathematically a post-split trading price of $50/share.  

The Committee discussed this aspect of a 200:1 reverse stock split.  Mr. Akers noted that General Motors had done a reverse stock split and that the resulting higher price for a single share had not been a bad thing for G.M. shareholders and appeared to have been a net good thing for them and the company alike. He also observed that he understood that Company common shares would become margin-eligible if they traded at $50/share whereas now they are not. The Committee concluded that this would be an additional benefit of the potential transaction. 

The Committee again considered the issue of cash-out price for a potential transaction and whether that price should reflect a premium to the current trading price and to the Chaffe valuation range.   Mr. Hunter noted that a premium had been proposed in a number of SEC filings in which public companies were proposing to go dark after a reverse stock split, and that ultimately the price fairness issue, including consideration of trading price history, was one that the Committee and ultimately the Board would have to address and determine. The Committee asked Mr. Evans if he felt a premium would be permissible here. Mr. Evans said he felt it would be.

The Committee discussion also addressed the potential for "kickout" by brokerage firms who currently hold their clients' Company shares in street name ("kickout" is a term used to refer to when a firm no longer holds a company's stock in street name and requires its clients to henceforth hold such stock in certificated form).  The Committee consensus was that, if the potential transaction is ultimately approved and undertaken, it seemed unlikely as a practical matter that there would be much if any "kickout" but management should monitor the risk closely. 

The Committee also asked Mr. Evans his thoughts on the "kickout" issue.  Mr. Evans noted that most trading in Company common stock had been in street name shares.  He felt that this suggested “kickouts” most likely would not be a material problem, but that, if the transaction were to be approved and pursued, management would monitor the situation closely for any significant "kickout". 

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VI.   Discussion of SEC Perspectives and Prior Comments on SEC Filings in Similar Transactions

The Committee asked Mr. Hunter if there were additional points he wanted to share concerning the SEC's perspective and sample comments from other going dark transactions that involved reverse stock splits.  Mr. Hunter indicated that he had highlighted the key points earlier during the Committee’s discussion of the Draft Valuation/Summary.

Mr. Hunter also noted that the Draft Valuation/Summary addressed most of the applicable key valuation approaches and valuation aspects of fairness that should be analyzed by the Committee.  The additional factors, he noted, had been discussed by the Committee today including the consideration given to price trading history were important and appropriate.   As noted earlier, some valuation factors or approaches were not applicable, such as the P/E multiple approach (because the Company had not had positive earnings in recent years).

VII.   Discussions of Updated Timeline for Completion of a Potential Going Dark Transaction

Mr. Akers then asked Mr. Evans and Mr. Hunter to address the updated timeline and begin the discussion of timing issues if the Committee ultimately recommends to the Board that it approve the potential transaction.  Mr. Evans indicated that this week he would discuss with Chaffe representatives some of the questions and comments noted on   the Draft Valuation/Summary during the Committee meeting today.  Then the Committee would resume deliberations (ideally next Monday the 11th of January).  If the Committee then was ready to do so, it could make a recommendation on the 11th as to whether and how to proceed with the going dark transaction involving a reverse stock split. That timeline would allow the full Board to receive the Committee's report and recommendation at the Board's next regular monthly meeting on January 18, 2016. 

If the Board then voted to proceed with the potential transaction, several SEC filings would need to be prepared and made as noted in the meeting materials including Schedule 14C proxy materials and Schedule 13E-3 disclosures.  Mr. Hunter elaborated that probably a press release and Form 8-K would need to be done together, and that affiliates would need to update and amend 13D disclosures.  Mr. Evans noted that those should be included. 

Mr. Evans indicated that the goal would be to file these materials within the applicable time periods set by the SEC and as soon as possible.  A related goal would be to try to present the reverse split-related amendments to the Articles of Incorporation at the annual meeting of shareholders.  This would be the most efficient way to proceed. 

Mr. Hunter noted that SEC comments and review could affect the ultimate time line, and the Committee noted that the time line might have to be changed if the transaction is pursued depending on SEC review and comment. 

The Committee discussed the various timing considerations.  

The Committee's consensus was that this general time line as refined in the timing discussion was appropriate and should be pursued. 

VIII.                      Next Meeting; Adjournment.

There being no further business to come before the Committee, Mr. Wilcox moved that the meeting be adjourned and that the Committee meet again next Monday January 11, 2016 at 10:30 a.m. Eastern time.  Mr. Akers seconded the motion which was unanimously approved.

The meeting adjourned at approximately 11:50 a.m. Eastern time. 

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EX-99.7

Exhibit 99.7

The following is the updated draft valuation of the Company's common stock as it was presented to the Special Committee at its January 11, 2016 meeting. Although it was a draft, Chaffe had indicated the numbers were final and the final report would contain the same numbers and results (although the final report would contain more narrative discussing the numbers and the calculations). Based on that, the Special Committee and Board of Directors determined the material information was present with which to make a decision as it relates to the reverse stock split and going dark transaction.

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EX-99.8

Exhibit 99.8

The following is the material presented to the Special Committee at its third and fourth meetings discussing and quantifying the potential “going dark” transaction.

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Special Committee of the Board of Directors Meeting

Champion Industries Headquarters, Huntington, WV – 10:30 A.M.

January 11, 2016

AGENDA

I.           Call to Order...............................................................................................................................................................................................L. Akers

II.           Review and Approval of Prior Meeting Minutes....................................................................................................................................L. Akers

III.           Discussion of Updated Draft Valuation................................................................................................................................................J. Evans/ R. Hunter

IV.           Updated Shareholder Listing / Cash Out Listing..................................................................................................................................J. Evans

V.           Final Ratio Analysis Discussion............................................................................................................................................................J. Evans

VI.           Other Discussion Matters....................................................................................................................................................................All Members

VII.           Timeline for Completion Discussion...............................................................................................................................................J. Evans/ R. Hunter

VIII.           Recommendation to the Board of Directors..................................................................................................................................L. Akers/ G. Wilcox

IX.           Adjournment........................................................................................................................................................................................L. Akers

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Agenda Item #2

Review and Approval of Prior Meeting Minutes

See Exhibit A attached hereto (included in Exhibit 99.6 of this Schedule 13E-3 filing).

Agenda Item #3

Discussion of Updated Draft Valuation

Attached as Exhibit B (included in Exhibit 99.7 of this Schedule 13E-3 filing) is an updated draft of the valuation of the Company’s stock; there were a few updates made from the initial version but the outcome did not change significantly. We will not have a final valuation report until the end of January, but the numbers will not change. Chaffe will only add narrative to the valuation and submit to the Company in a more formal fashion. I believe the substantive material and information is present to proceed with a recommendation to the Board of Directors.

Agenda Item #4

Updated Shareholder Listing / Shareholder of Record Cash Out Listing

Attached as Exhibit C (withheld from this Schedule 13E-3 filing as it contains names of the Company's shareholders) is the summary page of an updated shareholder listing dated January 4, 2016. The listing shows that the Company’s shareholders of record have decreased since the initial discussions took place in October, 2015. At that time the Company had approximately 355 shareholders of record and as of January 4, 2016, the Company had 346 shareholders of record.

Agenda Item # 5

Final Ratio Analysis Discussion

Given the Company now has 346 shareholders of record, and assuming the 1:200 ratio, 131 shareholders of record would still be cashed out. Bring the post-split total record holders to 215. Exhibit C (withheld from this Schedule 13E-3 filing as it contains names of the Company's shareholders) gives a detailed list of shareholders and number of shares to be cashed out.

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Agenda Item #6

Other Discussion Matters

Attached as Exhibit D (included in Exhibit 99.6 of this Schedule 13E-3 filing) , is the information from the prior Special Committee meeting that includes a liquidity and cost of transaction discussion. This agenda item is to review and discuss any pertinent information prior to making a recommendation to the Board of Directors.

Agenda Item #7

Timeline for Completion

Week of January 11, 2016………………………………...have third special committee meeting and devise final recommendation to the Board of Directors

Week of January 18, 2016……………………………………..the Board of Directors receive the recommendation of the Special Committee and vote to proceed or not; approve a resolution  to (1) must authorize reverse split, ratio, and purchase price for fractional shares (2) Approve Amendments of Articles (3) set target dates for meeting, record date, effective date, etc. and (4) authorize preliminary Proxy materials and Schedule 13E-3. Rule 13-E-3 Disclosures.

Week of January 25, 2016………………………………….File Proxy Materials and 13E-3 Schedule and Disclosures with SEC and Also file a SEC Form 8-K to disclose the Company’s intentions for this transaction.

January 25, 2016 to February 25, 2016…………………………….SEC Review Period / Send Proxy Materials to Shareholders

March 21, 2016…................................................…………………. Annual Shareholder Meeting and Board of Directors Meeting directly following to approve any further action necessary

Week of March 21, 2016…………………………………………...File Form 8-K, obtain new cusip, file FINRA notice, trading symbol follow-up, Make final arrangements with transfer agent, transmittal letter/funding, address dissenter appraisal rights, File Articles of Amendment to Articles of Incorporation, authorizing reverse split

April 1, 2016………………………………………………………..Effective date of Reverse Stock Split.

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Agenda Item # 8

Recommendation to the Board of Directors

The following should be considered in making the recommendation to the Board of Directors:

1.   Pre-split price per share paid for fractional shares

2.   Reverse split ratio

3.   Current shareholders of record

4.   Total beneficial shareholders (including those in street name)

5.   Anticipated post reverse split shareholders of record

6.   Factors considered by the Special Committee (including cost savings and liquidity discussion)

7.   Assumed post-split trading price

8.   Timeline and action items for completion

9.   Other pertinent factors for the Boards consideration

Agenda Item # 9

Adjournment

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The following are the minutes of the third Special Committee Meeting discussing the potential “going dark” transaction.

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CHAMPION INDUSTRIES, INC.

Special Committee of the Board of Directors Meeting

Champion Industries, Inc. Headquarters, Huntington, WV – 10:30AM

January 11, 2016

Special Committee Members: Lou Akers, Glenn Wilcox

Special Committee Subject Matter: Continued Exploration of Potential “Going Dark” Transaction, and Review and Discussion of Revised Draft Executive Summary and Supporting Exhibits and Worksheets (“Revised Draft Valuation/Summary”) Prepared by Chaffe & Associates, Inc. (“Chaffe”) and Constituting Chaffe’s Draft Valuation Report.

In Attendance in Person:  Lou Akers (Chairman of the Committee)

In Attendance by Phone: Glenn Wilcox

Non-Directors Present by Invitation:  Justin T. Evans, Chief Financial Officer (in Attendance), Roger Hunter, Legal Counsel – Bowles Rice LLP (by Phone)

I.   Call to Order and Review of Agenda

Mr. Akers called the meeting to order and confirmed that everyone had received and had the chance to review the Agenda and had received the materials prepared for this meeting and circulated beforehand (to Committee members and Mr. Hunter) by Mr. Evans at the request of the Committee.

A copy of these materials is attached to and made a part of these minutes.  The materials (44 pages total) consisted of:

·   the Agenda (page 1),

·   three (3) pages of additional information for discussion of Agenda items II through VIII (pages 2 - 4),

·   an Exhibit A (included in Exhibit 99.6 of this Schedule 13E-3 filing) which contained a cover page (page 5) and the draft Minutes of the January 4, 2016 meeting of the Committee (pages 6 - 14);

·   an Exhibit B (included in Exhibit 99.7 of this Schedule 13E-3 filing) which contained a cover page (page 15) followed by the 19-page Revised Draft Valuation/ Summary (pages 16 - 33) reflecting changes made by Chaffe & Associates, Inc. (“Chaffe”) after Mr. Evans passed along the questions and requests for clarification that had been discussed at the Committee’s January 4, 2016 meeting;

·   an Exhibit C (withheld from this Schedule 13E-3 filing as it contains names of the Company's shareholders) which contained a cover page (page 34) followed by a 4-page excerpt of a 1/4/16 computerized analysis of existing shareholders of record, (pages 35 - 38), which indicates there are 131 shareholders of record with less than 200 shares of Class A Common Stock; and

·   an Exhibit D (included in Exhibit 99.6 of this Schedule 13E-3 filing) which contained a cover page (page 39) followed by the Agenda for the 1/4/16 meeting (page 40) and five pages of meeting materials prepared and circulated by Mr. Evans for the 1/4/16 Committee meeting and providing additional information concerning 1/4/16 Agenda items II through VII (pages 41 - 44).

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The Committee by unanimous consent proceeded to address each of the remaining Agenda items.

II.   Review and Approval of Minutes of Prior Meeting

Mr. Akers confirmed that all Committee members had had a chance to review the minutes as submitted with the above meeting materials.  Brief discussion ensued.

Upon motion of Mr. Wilcox, duly seconded by Mr. Akers, the Minutes were approved unanimously.  A copy of the Minutes as approved is included as Exhibit A (included in Exhibit 99.6 of this Schedule 13E-3 filing) in the meeting materials attached hereto and made a part of these Minutes.

III.   Discussion of Revised Draft Valuation/Summary

The Committee asked Mr. Evans to highlight the revisions and clarifications made by Chaffe and reflected in the Revised Draft Valuation/Summary attached as Exhibit B to these Minutes.  Mr. Evans noted those (e.g., updating the interest rates used in the WACC calculation) and indicated that they did not have a material effect on the valuation overall but that, due to rounding, the range of fair market value per share as determined by Chaffe was now 17 cents to 21 cents (Chaffe now had to round up to 21 cents whereas it had  had to round down to 20 cents in the initial draft reviewed on 1/4/16).

The Committee discussed the Revised Draft Valuation/Summary.  Mr. Akers and Mr. Wilcox said that after reviewing the Revised Draft Valuation/Summary, their impression continued to be that the work and report appeared to be thorough and well done with substantial data and information supporting Chaffe’s conclusions of fair market value as of December 26, 2015.

The Committee asked Mr. Evans when the final report of Chaffe would be available.  Mr. Evans indicated that the final report would not have new calculations or numbers, and that the range (17 cents to 21 cents) would not change nor would the supporting worksheets/exhibits.  Rather, the final report would add more narrative discussion to go along with each of the key supporting worksheets/exhibits.  The conclusions and numbers would not change.

Upon motion of Mr. Wilcox, duly seconded by Mr. Akers, the Revised Draft Valuation Report was accepted and approved unanimously for submission to the full Board of Directors.  A copy of the Revised Draft Valuation Report as approved is included as Exhibit B (included in Exhibit 99.7 of this Schedule 13E-3 filing) in the meeting materials attached hereto and made a part of these Minutes.

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IV.   Updated Shareholder-of-Record Listing/ Cash Out Listing

The Committee next discussed the listing of shareholders of record. A copy of the shareholder listing is included as Exhibit C (withheld from this Schedule 13E-3 filing as it contains names of the Company's shareholders) in the meeting materials attached hereto and made a part of these Minutes.

At the request of the Committee, Mr. Evans elaborated on the updated listing and what it showed.

First, Mr. Evans noted that as of the 1/4/16 report, there were 346shareholders of record holding Class A Common Stock (the Company’s publicly registered common stock in question, which is sometimes simply referred to in some of the documents as the “common stock”).  This represented a decrease of 9 since the shareholder listing report reviewed by the Committee at its first meeting in October 2015.

Second, the 1/4/16 report had shown that 131 shareholders of record held less than 200 shares.  Thus, using the 1:200 reverse split ratio (which is sometimes also referred to as a “200 to 1” or “200:1” reverse stock split), 131 shareholders of record would end up with less than one (1) whole share after the reverse split.  Therefore, 131 shareholders of record would have fractional shares that would have to be purchased and cashed out.

Third, this would mean that after the 1:200 reverse stock split ratio, it was anticipated that the shareholders of record would decrease to 215.  This would be below the 300 shareholders-of-record threshold, and would provide a buffer (or margin of safety) of 85 shareholders-of-record.

The Committee discussed this updated shareholder listing information and proceeded to discussion of the reverse stock split ratio.

V.   Final Ratio Analysis Discussion

The Committee next discussed the 1:200 reverse stock split ratio, as approved unanimously by the Committee at its 1/4/16 meeting, in light of the updated shareholder listing information.  The Committee noted that the 1:200 ratio is expected to result in a buffer of 85 shareholders of record, which would be a significantly larger buffer than would result from using a 1:100 ratio (which would result in 266 record shareholders, or a buffer of only 34).

The Committee then discussed with Mr. Evans the differences in costs by  using a 1:200 ratio instead of the 1:100 reverse split ratio.  Mr. Evans confirmed that, although the 1:200 ratio provides a much larger buffer below the 300 threshold, the extra cost (vs. 1:100 ratio) is not very large.

The Committee re-affirmed that a 1:200 reverse stock split ratio (where someone holding 200 pre-split shares of Class A Common Stock before the reverse split would end up with 1 share after the reverse stock split) was the optimal ratio if the reverse stock split is ultimately approved and pursued.

The Committee discussed the updated costs of a potential "going dark" transaction, reviewing the updated cost information Mr. Evans had provided in the meeting materials.  Mr. Akers indicated that the Committee had hoped to stay under $150,000 estimated cost, if a potential transaction were ultimately approved, and that so far this seemed achievable based on the Draft Valuation/Summary and updated cost information.

As the cost discussion continued, the discussion moved to the issue of what reverse split ratio to use if a potential transaction is ultimately approved and undertaken.  Mr. Akers asked Mr. Evans to provide an overview of the updated information on possible reverse split ratios.

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VI.   Discussion of Other Related Matters Including Price for Fractional Shares

The Committee next discussed price for cashing out fractional shares and the other matters identified in the meeting materials attached hereto as factors to consider in making a recommendation to the Board of Directors.  The Committee noted that today and at its last meeting, it had discussed and considered already (a) the reverse split ratio, (b) current shareholders of record, (c) issues surrounding shares held in street name (and the “kickout” risks that could arise and would need to be monitored), (d) anticipated number of post-split shareholders of record, (e) liquidity of Class A Common Stock (which is very low already), (f) cost savings (anticipated to be at least approximately $220,000 per year of cost of SEC reporting and related costs of being a public company), (g) post-liquidity trading price (which, by being above $50/share could have some advantages to shareholders after any potential reverse split transaction), and (h) the general time line (with the current thinking that the necessary amendment to the Articles of Incorporation should be presented for a vote at the 2016 annual meeting of shareholders scheduled for March 21, 2016.

The Committee also noted that finalizing an estimate of the transaction costs of a reverse stock split followed by SEC deregistration (sometimes referred to as “going dark”), would require finalizing a recommendation as to the price per share that should be paid for pre-split shares belonging to shareholders with less than 200 shares.

The Committee then had an extended discussion of price.  In addition to the Revised Draft Valuation Report, the Committee focused on trading and price history over the last year.  The Committee noted that the volume weighted average price (“VWAP”) of Class A Common Stock in late December 2015 had been 24 cents.

The Committee, after extensive discussion, indicated that, while it felt a premium should be paid over both the VWAP (24 cents/share for pre-reverse split shares) and the top of the valuation range (i.e., 21 cents/share for pre-split shares) set forth in the Revised Draft, the Committee needed additional time to consider all the relevant factors in order to reach a price recommendation for pre-split shares of Class A Common Stock.

At the conclusion of its deliberations, the Committee also expressed its tentative view that such premium price recommendation should be in the range of 25 cents/share to 30 cents/share.

The Committee asked Mr. Evans to obtain updated trading and price history information and share that with the Committee at its next meeting, which the Committee wanted to have soon.

VII.   Discussion of Timeline

The Committee discussed the general time line.  The Committee wanted to conclude its work in the next few business days.

That way, if the Committee was able to reach a final recommendation for the Board, that recommendation could be presented to the full Board in time for the Board’s consideration and possible action at its monthly meeting to be held on Monday, January 18, 2016. 

The Committee asked Mr. Hunter to advise if that timing would allow the necessary amendments to the Articles of Incorporation to be presented for a vote of shareholders at the 2016 annual meeting set for March 21, 2016.  Mr. Hunter indicated that it probably would suffice, but he noted again that there would be several SEC filings that would need to be prepared and made as noted in the January 4, 2016 meeting of the Committee.  Those filings would include Schedule 14C proxy materials and Schedule 13E-3 disclosures by the Company.  A Form 8-K would need to be filed as well.  Affiliates would need to file amended Schedule 13D’s and join the Schedule 13E-3 (assuming they concur in the Committee’s recommendations and assuming the Board approves those recommendations and proceeds with the potential transactions).  Mr. Hunter noted that the time line was subject to, and could be affected by, possible SEC comments on the Company’s filings related to the reverse stock split and subsequent deregistration.

The Committee's consensus was that this general time line, as it has been refined in the timing discussion was appropriate and should be pursued.   The Committee discussed dates and times for its next meeting, and the consensus was that Wednesday January 13, 2016 at 10:30 a.m. would work for the Committee members.  Mr. Evans and Mr. Hunter indicated that date and time would work for them as well.

VIII.                      Next Meeting; Adjournment.

There being no further business to come before the Committee, Mr. Wilcox moved that the meeting be adjourned and that the Committee meet again on Wednesday January 13, 2016 at 10:30 a.m. Eastern time.  Mr. Akers seconded the motion which was unanimously approved.

The meeting adjourned at approximately 11:25 a.m. Eastern time. 

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The following are the minutes of the fourth Special Committee Meeting discussing the potential “going dark” transaction.

11

CHAMPION INDUSTRIES, INC.

Special Committee of the Board of Directors Meeting

Champion Industries, Inc. Headquarters, Huntington, WV

Initially convened at 10:30AM (and reconvened at 2:00 PM)

January 13, 2016

Special Committee Members: Lou Akers, Glenn Wilcox

Special Committee Subject Matter: Continued Exploration of Potential “Going Dark” Transaction, and Recommendations to Full Board and Supporting Rationale.

In Attendance in Person (at the reconvened meeting):  Lou Akers (Chairman of the Committee)

In Attendance by Phone: Glenn Wilcox

Non-Directors Present by Invitation:  Justin T. Evans, Chief Financial Officer (in Attendance), Roger Hunter, Legal Counsel – Bowles Rice LLP (by Phone)

I.   Call to Order; Reconvening of the Meeting; and Review of Agenda

Mr. Wilcox called the meeting to order initially.  Mr. Hunter indicated that he had spoken with one of Bowles Rice’s partners whose legal work for over 30 years has focused on bankruptcy and creditors’ rights (Ms. Julie Chincheck).  Specifically, he had asked her how the percentage discounts to net book value used in Chaffe’s liquidation analysis compared to what she has seen in liquidations over her 30-plus-year career involving companies in industries with slow, no or negative growth.  Mr. Hunter indicated that Ms. Chincheck had reported that in the course of her career it was common for a significantly greater discount to net book value to be realized by companies regardless of whether those companies were doing an orderly liquidation outside of bankruptcy or a liquidation in bankruptcy.  She felt that Chaffe’s discount percentages were not too low and that a higher discount percentage could be supported based on her experience.

When it was learned that something had come up and the Chairman was unable to attend until the afternoon, the meeting was recessed to 2:00 PM.

When the meeting reconvened at 2:00 PM, the Committee and Mr. Evans and Mr. Hunter were present either in person or by phone as noted above.

The Chairman briefly reviewed the matters covered up to that point by the Committee in its prior sessions to date.  The Chairman then noted that it appeared that, subject to reaching agreement on price, the Committee was nearly ready to make recommendations to the full Board.

The Chairman asked Mr. Evans and Mr. Hunter to advise what work remained to be done by the Committee in addition to reaching a recommendation as to the price for pre-split shares at which fractional shares would be cashed out after the possible reverse stock split if it were approved by the Board.

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Mr. Evans and Mr. Hunter discussed the points that needed to be covered in the form of a formal motion and recommendation, with supporting rationale, that needed to address each of the following elements:

·   Recommendation that the proposed reverse stock split, followed by SEC deregistration, be approved by the full Board

·   Recommended reverse stock split ratio for Class A Common Stock,

·   Recommended price to be paid for fractional shares after the reverse stock split,

·   The current number of shareholders of record and how that was anticipated to change after the reverse stock split,

·   Recommendation that the full Board approve, and submit to shareholder vote, an amendment to the Articles of Incorporation of the Company to allow the reverse stock split to be carried out,

·   The estimated cost savings per year if the Company were no longer subject to SEC reporting,

·   The estimated transaction costs of the proposed reverse stock split followed by SEC deregistration (assuming no post-transaction litigation and an SEC comment period that did not extend beyond 30 days),

·   Recommendation that the Board should approve and authorize all necessary SEC filings and other acts, filings and documentation to carry out and implement the proposed transactions,

·   Recommendation of the time line for presenting the amendment to the Articles to the shareholders, carrying out the reverse stock split, and deregistering with the SEC, and

·   Summary of the rationale for these recommendations.

The Chairman noted that the Committee was nearly ready to make recommendations on all these points and provide those recommendations and the Committee’s reasoning to the full Board.  However, he noted that before it could make its recommendations, the Committee needed to take up the issue of price as its first order of business today, because that was the main item remaining open and the price recommendation also would affect the estimated cash-out costs and overall transaction costs.

The Chairman noted that the Committee wanted to keep below $150,000 as a target if any going dark transaction was ultimately approved and pursued.  The discussion turned to the issue of price and the related subjects of cash-out costs and overall transaction costs.

II.   Continued Discussion of Price and Costs; Motion Making Recommendations to the Full Board of Directors (with Supporting Rationale)

Mr. Akers confirmed that all Committee members had had a chance to review the updated trading information report circulated by Mr. Evans (i.e., a one-page OTC Market Report as of 1/8/16).

Mr. Evans indicated that the updated report showed a volume weighted average price (VWAP) of just under 24 cents ($0.23941 per share), which rounded to 24 cents.  This was the same VWAP (24 cents) as had been shown on the late December report on trading/price history had shown.

The Committee discussed the information on the new OTC Market Report, including the VWAP, as well as the Chaffe valuation as set forth in the Revised Draft Valuation Report (received and discussed at the January 11, 2016 meeting of the Committee).  The Committee felt that a premium was appropriate, and that the premium should be a premium both to VWAP (24 cents) and to the high end of the Chaffe valuation range (21 cents).

Mr. Akers and Mr. Wilcox both noted that, at the end of its meeting on January 11, 2016, the Committee was reviewing a premium price in the range of 25 cents to 30 cents per share.

Mr. Akers noted that the Committee had asked Mr. Evans to calculate the difference in cash-out price (using a 1:200 reverse stock split ratio) between a price of 25 cents and a price of 30 cents.  Mr. Evans provided the Committee with that information.  He advised that the difference was approximately $4,400 between 25 cents and 30 cents, and approximately $8,800 between 20 cents per share and 30 cents.  This was a difference of approximately $880 for each increase of 1 cent.  At 30 cents per share, cash-out cost would be estimated at $26,400.

The Committee noted that, even if 30 cents per share were recommended and used (with a cash-out price of $26,400), the estimated overall transaction costs would still be well below the target of $150,000.  Mr. Evans confirmed that.

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Assuming no post-transaction litigation or extra compliance costs (and assuming an SEC comment period that did not exceed 30 days), and using 30 cents per share as the cash-out price for fractional shares, the estimated total transaction costs are approximately $111,500.

The Committee also noted that if the Company were to use 30 cents per share as the price for cashing out fractional shares, the estimated overall transaction costs likewise would be well below (approximately 49.32% lower than) the estimated $220,000 per year in costs savings if the Company no longer were an SEC reporting company.

Giving weight to (a) the trading and price history, including the VWAP of 24 cents, (b) the Chaffe valuation in the Revised Draft Valuation/Summary, and (c) the Committee’s judgment that a premium should be paid, and further taking into account (d) the cash-out cost (and overall transaction cost) information and estimates provided by Mr. Evans, the Committee reached a consensus on a recommended price of 30 cents per pre-split share of Class A Common Stock.

The Committee then discussed further each of the elements that needed to be included in the Committee’s recommendation to the full Board of Directors.  At the request of the Committee, Mr. Hunter reviewed one last time each of the elements that should be included in the recommendation.  The Committee noted it had reached consensus now on each element including price.

Mr. Hunter then noted that a summary of the Committee’s rationale for its recommendations should be provided along with those recommendations.  The Committee noted that its reasoning was reflected in the minutes of its prior meetings and from the Committee’s discussions today and in its last meeting on Monday January 11, 2016.

After further discussion of the required elements, and after summarizing the Committee’s views on what to recommend (including price) and the supporting rationale, Mr. Wilcox moved and Mr. Akers seconded a motion that the Committee adopt the specific recommendations (including without limitation the 1:200 reverse stock split ratio and the 30 cents per pre-split share cash-out price for fractional shares after the split) and the supporting rationale that are set forth in the 3-page summary (entitled “CHAMPION INDUSTRIES, INC. SPECIAL COMMITTEE RECOMMENDATIONS AND SUPPORTING RATIONALE”) attached to and made a part of these Minutes (included in Exhibit 99.10 of this Schedule 13E-3 filing) (the “Summary of Recommendations and Supporting Rationale”).  The motion passed unanimously.

The Committee asked Mr. Evans to provide a copy of the Summary of Recommendations and Supporting Rationale to the full Board of Directors along with copies of minutes and meeting materials reviewed by the Committee.  The Committee instructed that these materials should include the Revised Draft Valuation Report accepted and approved for submission to the full Board at the Committee’s meeting on January 4, 2016.

The Committee requested that Mr. Hunter plan to attend the portion of the Board of Directors meeting on Monday January 18, 2016 at which the Committee’s recommendations and reasoning would be considered and discussed by the full Board.  Mr. Hunter indicated that he would plan on attending.

VIII.                      Adjournment.

There being no further business to come before the Committee, Mr. Wilcox moved that the meeting be adjourned.  Mr. Akers seconded the motion, which was unanimously approved.

The meeting adjourned at approximately 2:17 p.m. Eastern time.

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EX-99.9

EXHIBIT 99.9

CHAMPION INDUSTRIES, INC.

RESOLUTIONS OF THE BOARD OF DIRECTORS AUTHORIZING

1:200 REVERSE STOCK SPLIT FOR THE COMPANY’S

CLASS A COMMON STOCK AND SUBSEQUENT SEC DEREGISTRATION

OF THE COMPANY AND SUCH COMMON STOCK

WHEREAS, the Board of Directors (the "Board") of Champion Industries, Inc. (the "Company") at its regular monthly meeting on September 21, 2015, established a Special Committee of the Board composed of independent directors (the “Special Committee”) for the purpose of exploring a possible reverse stock split followed by SEC deregistration of the Company and its Class A Common Stock (sometimes referred to as the “potential transactions”);

WHEREAS, the Board asked the Special Committee (A) to recommend whether or not such possible transactions would be in the best interests of the Company and, (B) if the Committee ultimately recommended undertaking the potential transactions, to make recommendations thereon to the full Board including reverse stock split ratio and the price per pre-split share at which fractional shares resulting from the reverse stock split should be cashed out;

WHEREAS, following the Special Committee’s initial meeting on October 4, 2015, and at the recommendation and request of the Special Committee, the Board authorized the Special Committee to retain an independent investment banking firm to do an independent valuation of the Company’s Class A Common Stock;

WHEREAS, Chaffe & Associates, Inc. (“Chaffe”) was selected to perform an independent valuation of the fair market value of the Company’s Class A Common Stock to assist the Special Committee in exploring a possible transactions;

WHEREAS, from October 4, 2015 through January 13, 2016, the Special Committee has met four times and has evaluated the potential transactions, including, (A) review of the alternatives to the potential transactions, (B) evaluation of the potential advantages and disadvantages thereof (including potential impact on the Company’s efforts to restore the Company to profitability and then grow profitability), (C) evaluation of potential reverse stock split ratios; (D) review of the estimated transaction costs of the potential transactions, (D) analysis of the potential savings of the possible transactions, (E) review of Chaffe’s valuation findings as set forth in its draft valuation report summary, (F) review of the recent (last 52-week) trading and price  history of the Company’s Class A Common Stock,  (G) evaluation of price fairness for cashing out fractional shares (less than 1.0 whole share) resulting from any reverse stock split; and (H) review and consideration of other pertinent factors bearing on its work;

WHEREAS, the Special Committee unanimously has made recommendations to the full Board concerning the potential transactions as more fully set forth in the 3-page SUMMARY OF RECOMMENDATIONS TO FULL BOARD AND SUPPORTING RATIONALE (the “Special Committee Recommendations”), a copy of which is attached to and made a part of these resolutions as Exhibit A (Exhibit 99.10 of this Schedule 13E-3 filing) hereto;

WHEREAS, as more fully set forth in the Special Committee Recommendations, the Special Committee has determined and recommended that it is in the best interests of the Company to effect a 1:200 (one for two hundred) reverse stock split of the Company’s Class A Common Stock, par value $1.00 per share,  (the "Common Stock"), whereby each two hundred (200) shares of Class A Common Stock would automatically be reclassified and changed into one (1) share of Class A Common Stock on the effective date and time, and each resulting fractional share of less than one (1) whole share shall be cashed out at a recommended price of 30 cents per pre-split share (or $60.00 per post-split share) (the "Reverse Stock Split");

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WHEREAS, as more fully set forth in the Special Committee Recommendations, the Special Committee also has determined and recommended that it is in the best interests of the Company to make such filings with the U.S. Securities and Exchange Commission (“SEC”) as may be necessary to deregister the Company and its Class A Common Stock, so that SEC reporting would no longer be required;

WHEREAS, as more fully set forth in the Special Committee Recommendations, the Special Committee has determined that approximately $220,000 per year in SEC reporting costs would be saved if the Company deregistered following the Reverse Stock Split, whereas the estimated costs of undertaking the Reverse Stock Split and subsequent deregistration is estimated to be approximately $111,400; and

WHEREAS, based on the Special Committee Recommendations, and the Board’s own consideration and review, the Board has determined that it is in the best interests of the Company to approve and authorize the Reverse Stock Split (including the cashing out of resulting fractional shares), to amend the Articles of Incorporation of the Company to allow and effectuate the Reverse Stock Split, and to deregister the Company and its Class A Common Stock following the Reverse Stock Split;

NOW THEREFORE BE IT RESOLVED:

RESOLVED, that the Board declares it advisable and in the best interests of the Company to amend the Articles of Incorporation of the Company (sometimes hereinafter referred to as the “Articles”) to allow and effectuate the Reverse Stock Split and to amend the Articles of Incorporation of the Company accordingly, including such amendments as are necessary to adjust the rights granted under the Articles with respect to (nonvoting) Class B Common Stock accordingly, including, without limitation, (A) the rights of certain Class A Common Stock holders who are subject to the ownership restrictions of the Bank Holding Company Act of 1956, as amended, to redeem and convert  Class A into Class B shares, and (B) the rights of Class B shareholders who are not subject to the ownership restrictions of the Bank Holding Company Act of 1956, as amended, can redeem and convert Class B back into Class A shares, all without any additional consideration;

RESOLVED, that the Proposed Articles of Amendment of the Articles of Incorporation of the Company in the form attached as Exhibit B (Exhibit 99.11 and 99.12 of this Schedule 13E-3 filing)hereto (the "Proposed Amendment") is hereby adopted and approved, subject to the approval of such Proposed Amendment by the stockholders of the Company holding Class A Common Stock;

RESOLVED, that, upon approval by the stockholders of the Company, the President, Chief Executive Officer, Chief Financial Officer, Vice President, Treasurer, Secretary and any other officer of the Company (each such person, an "Authorized Officer") be, and each of them hereby is, authorized to execute, deliver and file the Proposed Amendment with the Secretary of State of West Virginia and to pay any fees related to such filing;

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RESOLVED, that, at any time prior to the effectiveness of the filing of the Prosed Amendment with the Secretary of State, the Board reserves the right to abandon the amendment to the Certificate of Incorporation of the Company and not to file the Proposed Amendment, even if approved by the stockholders, if the Board, in its discretion, determines that such amendments are no longer in the best interests of the Company or its stockholders;]

RESOLVED, that the Board hereby recommends that the stockholders approve and adopt the Proposed Amendment;

RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized and empowered to prepare, execute and file, or cause to be prepared, executed and filed, all reports, schedules, statements, documents and information required to be filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder in connection with the Proposed Amendment, including, without limitation, reports relating to certain current events on Form 8-K and a preliminary and definitive proxy statement (the "Proxy") to obtain stockholder approval of the Proposed Amendment and any amendments thereto, as well as Schedule 13E-3 filings;

RESOLVED, that the Proposed Amendment be placed before the shareholders of the Company for a vote thereon at the Company’s 2016 annual stockholders meeting to be held on March 21, 2016, and that, alternatively, if for any reason the Proposed Amendment cannot be brought before the shareholders at said annual meeting, that the Proposed Amendment be placed before the shareholders at a special meeting of shareholders (the "Special Meeting") at such date, time and place as the Authorized Officers of the Company deem to be appropriate following consultation with legal counsel and following clearance of the related Proxy with the SEC and the expiration of any waiting period applicable to the Company’s Schedule 13E-3 filed with the SEC;

RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized and empowered to stipulate a record date for the stockholders entitled to notice of and to vote at the annual meeting of stockholders (or, if applicable, at any necessary Special Meeting, as the case may be), and that such record date be in accordance with the West Virginia business corporations statute and the Articles of Incorporation and By-laws of the Company;

RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized and empowered to prepare and mail a proper notice of the annual meeting (or, if applicable, proper notice of any necessary Special Meeting, as the case may be), and related proxy materials to all stockholders of record on the record date;

RESOLVED, that, subject to stockholder approval of the Proposed Amendment, the number of shares of the Company's issued and outstanding Class A Common Stock shall be decreased through the declaration of the Reverse Stock Split including the cashing out of resulting fractional shares of less than 1.0 whole shares;

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RESOLVED, that, subject to stockholder approval of the Proposed Amendment, each stockholder of record as of close of business on the effective date of the Reverse Stock Split, which shall be April 1, 2016 or on such date thereafter as is determined by the Board (by subsequent Resolution) to be the first practicable effective date, (the “Effective Date”), shall be entitled to one (1) share of Class A Common Stock for every two hundred (200) shares of Class A Common Stock held by such stockholder [without surrender of any certificates for its shares];

RESOLVED, that no fractional shares shall be issued in connection with the Reverse Stock Split and stockholders who, after the Reverse Stock Split, have a fractional share of less than one (1.0) whole share of Class A Common Stock shall receive cash (without interest or deduction) in lieu of such fractional share interests in an amount equal to 30 cents per pre-Reverse Stock Split share (which is equivalent to $60.00 per post-Reverse Stock Split share);

RESOLVED, that the aggregate par value of the pre-Reverse Stock Split shares remain, and shall be designated as, capital of the Company;

RESOLVED, that, to the extent that any Warrant or Warrants now outstanding for the purchase of Class B Common Stock do not, by its or their terms, automatically adjust the number of shares which may be purchased following a reverse stock split,  the Authorized Officers be, and each of them hereby is, authorized and empowered, in the name and on behalf of the Company, to take, or cause to be taken, all action required to adjust the number of shares covered by such Warrant appropriately to reflect the Reverse Stock Split, including, without limitation, the preparation, execution and filing of any necessary amendment or other instruments or document to achieve such adjustment;

RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized and empowered to take all such further action and to execute, deliver and file all such further agreements, certificates, instruments and documents, in the name and on behalf of the Company, and if requested or required, under its corporate seal duly attested by the Secretary or Assistant Secretary; to pay or cause to be paid all expenses; to take all such other actions as they or any one of them shall deem necessary, desirable, advisable or appropriate to consummate, effectuate, carry out or further the transactions contemplated by and the intent and purposes of the foregoing resolutions;

RESOLVED, that in connection with the transactions contemplated in the preceding resolutions, the Secretary or the Assistant Secretary of the Company be, and hereby is, authorized in the name and on behalf of the Company, to certify any more formal or detailed resolutions as such officer may deem necessary, desirable, advisable or appropriate to consummate, effectuate, carry out or further the transactions contemplated by and the intent and purposes of the foregoing resolutions; and that thereupon, such resolutions shall be deemed adopted as and for the resolutions of the Board as if set forth at length herein;

RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized and empowered to prepare, execute and file, or cause to be prepared, executed and filed, such other reports, schedules, statements, documents and information, and to take or omit to take such other actions, as they may determine to be necessary, appropriate or convenient in connection with carrying out the intent of these resolutions and of the transactions authorized and/or contemplated by these resolutions, with the execution of any such reports, schedules, statements, documents and information, and the taking or omission to take any such actions, to be conclusive evidence of such determination; and,

RESOLVED, that the omission from these resolutions of any agreement or other arrangement contemplated by any of the agreements or instruments described in the foregoing resolutions or any action to be taken in accordance with any requirements of any of the agreements or instruments described in the foregoing resolutions shall in no manner derogate from the authority of the Authorized Officers to take all actions necessary, desirable, advisable or appropriate to consummate, effectuate, carry out or further the transactions contemplated by and the intent and purposes of the foregoing resolutions.

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EX-99.10

Exhibit 99.10

EXHIBIT A

TO BOARD OF DIRECTORS RESOLUTION ADOPTED

BY BOARD OF DIRECTORS OF CHAMPION INDUSTRIES, INC.

ON JANUARY 18, 2015 AUTHORIZING 1:200 REVERSE

STOCK SPLIT AND RELATED TRANSACTIONS

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CHAMPION INDUSTRIES, INC.

SPECIAL COMMITTEE RECOMMENDATIONS AND SUPPORTING RATIONALE

SUMMARY OF RECOMMENDATIONS TO FULL BOARD OF DIRECTORS

 1:200 Reverse Stock Split for Company Class A Common Stock.

§ 1:200 (1 for 200) reverse stock split in which 131 shareholders of record would be cashed out at 30 cents/share, and all other fractional shares after the split would be cashed out at that price as well($26,400 total cash-out cost), reducing record shareholders to 215 post-split, with estimated total transaction costs of $111,400 (for reverse split and SEC deregistration), and estimated annual savings of $220,000/year in SEC reporting costs following deregistration

§ Goal is to get below 300 shareholders of record (should reduce to approx. 215 after reverse split)

§ As of 1/4/16, there were 346 shareholders of record

§ After the reverse split, the Company would not issue any fractional shares and in lieu thereof  any post-split fractional shares (consisting of less than 1 whole share ) would be cashed out. An estimated 131 record shareholders would be cashed out (at a toal cost of $26,400), leaving 215 post-split

§ Amendment to the Articles of Incorporation as needed to allow/effectuate the reverse split

§ Cash-out price of 30 cents per pre-split share (this equals $60.00 per post-split whole share)

§ Effective date of April 1, 2016 or as soon thereafter as possible

§ Board should approve reverse stock split and proposed amendment to Articles

§ Submit the amendment to shareholders at annual meeting (3/21/16) or as soon thereafter as possible

§ Board should reserve right not to effectuate the reverse split up through effective date

§ Board should authorize all SEC filings (including, e.g., disclosures required by Schedules 14C and 13E-3, filing of an 8-K) and all other actions/documents necessary to implement the transactions

Subsequent Deregistration of the Company and Its Common Stock with the SEC

§ Board should approve deregistration as soon as practicable after the reverse split (provided the Company has less than 300 record shareholders as a result of the reverse split):

§ deregister the Company and its common stock with the SEC

§ prepare and file all necessary SEC filings including Form 15 and new 8-K

§ Board should authorize all other actions/documents/filings to implement deregistration

§ SEC deregistration after a reverse stock split that reduces record shareholders below the 300 threshold is sometimes called “going dark”

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PROCESS AND SUPPORTING RATIONALE

Committee Included Independent Directors; Obtained an Independent Valuation Report; and Held Four Meetings In Its Four-Month Review Process That Led to These Recommendations

Alternatives Were Considered But Were Rejected As Less Advantageous or Simply Not Feasible

§ Doing nothing and keeping the status quo could significantly reduce the pace of recovery (i.e., restoring profitability) and slow growth (i.e., growing profitability), given the financial position of the Companyand the state of the industries in which it operates.

§ Going fully private would require the Company or its largest shareholders to make a broad cash tender offer or cash-out merger.  This was not an option for the Company from a cash perspective, and the Company’s largest shareholders had not expressed interest in making a tender offer personally.

Pros/Cons Were Analyzed, and Significant Net Benefits Support Doing the Proposed Transactions

§ Main Advantage #1:  Eliminate and save estimated $220,000 per year in costs of SEC reporting

§ Main Advantage #2:  Free management and staff time to focus on long-term business objectives as well as internal financial reporting and analytics to support those objectives.

§ Additional Advantages:

·   Greater confidentiality of strategic and competitively sensitive information

·   Streamlining of corporate governance

·   No brokerage fees on purchase of fractional shares after the reverse split

·   Shareholders with less than 200 pre-split shares could buy additional shares to get to 200 by the record date and thereby avoid cash-out if they prefer

·   Similarly, shareholders with slightly more than 200 pre-split shares could sell some shares to get under the 200 share level if they prefer

·   The post-reverse-split trading price would appear to be greater than $5/share, which may have advantages (e.g., the Committee understands that shares trading at less than $5/share are not eligible for margin)

·   Stock still could be traded in the over-the-counter market in the Pink Sheets

·   Estimated transaction costs are estimated not to exceed $150,000, possibly lower,   significantly less than the 1st full year’s estimated costs savings ($220,000)

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Advantages outweigh the potential disadvantages, which were considered and include:

·   Reduced liquidity of the Company’s Class A Common Stock (mitigated by the fact that liquidity is already very low)

·   Risk that record shareholders could increase above 300 again, requiring reregistration. This includes the risk of “kickouts” by brokerage firms (i.e., ending book entry holdings, thereby forcing customers to get stock certificates and thus increasing the number of record shareholders).  The Committee felt “kickouts” were unlikely now but could be monitored closely and addressed if the 300 threshold is approached or seems likely to be exceeded.

·   Common stock would be less attractive for use in acquisitions (mitigated by the fact that the Company hasn’t been doing acquisitions in recent years).

·   Dissenting shareholders with only fractional shares after the reverse split would have statutory dissenters rights (mitigated somewhat by the independent valuation, the process, and the recommendation of a premium cash-out price)

·   Time and expense of the proposed transactions (mitigated by estimated transaction costs being significantly lower than anticipated 1st year savings)

·   Potential decrease in perceived prestige from no longer being public

·   Potential expense of reregistering if that became necessary to raise capital

·   Reduced information to shareholders and others about the Company (can be mitigated somewhat  by providing quarterly/annual financial reports)

·   Continued application of anti-fraud provisions (which can be mitigated to some extent, e.g., by imposing trading windows for insiders and providing shareholders with updates for material events)

·   Risk of litigation (mitigated in the Committee’s view by several factors here, including the process used to review the potential transactions, the identified benefits to the Company of going dark, the Committee’s premium price recommendation for purchasing fractional shares after the reverse split, and the degree of shareholder choice noted above in the advantages of the proposed transactions)

The Proposed Price for Purchase of Fractional Shares Is Fair in the Committee’s Judgment

§ It is a premium price, both as to the independent valuation of Chaffe & Associates, Inc. and to the weighted average trading price over the prior 12-month period (as of 1/8/16)

§ The fairness evaluation by the Committee included consideration of the (A) multiple valuation approaches used by Chaffe which took into account pertinent multiples for peer public companies and for transactions involving public companies in the same or similar industries and included analysis of net book value as well as estimated liquidation value, as well as (B) trading history and price data for the Company’s shares, including volume-weighted average price per share of 24 cents/share for the prior 52-week period (as of 1/8/16)

§ The Committee concluded that the cash-out price for fractional shares should include a premium and gave significant weight to the trading history and volume-weighted average price, and cash-out and overall transaction costs,  in trying to arrive at a premium price that would be fair

The Proposed Ratio Provides a “Cushion” Below 300 Record Shareholders at a Reasonable Cost

§ 1:200 ratio only cost approx. $15,600 more in cash-out price than a 1:100

§ However, it reduces record shareholder count to 215 (85-share buffer) vs. 266 (buffer of 34)

4

EX-99.11

Exhibit 99.11

EXHIBIT B

TO BOARD OF DIRECTORS RESOLUTION ADOPTED

BY BOARD OF DIRECTORS OF CHAMPION INDUSTRIES, INC.

ON JANUARY 18, 2015 AUTHORIZING 1:200 REVERSE

STOCK SPLIT AND RELATED TRANSACTIONS

[PART ONE - SHOWING FORM OF ARTICLES OF AMENDMENT

FOR 1:200 REVERSE STOCK SPLIT ONLY]

1

FORM OF

ARTICLES OF AMENDMENT

OF THE

ARTICLES OF INCORPORATION

OF CHAMPION INDUSTRIES, INC.

Pursuant to the provisions of Section 31D-10-1003 of the West Virginia Business Corporation Act, the undersigned corporation adopts the following ARTICLES OF AMENDMENT to its Articles of Incorporation:

1.  The name of the corporation is Champion Industries, Inc.

2.  The following Amendment of the Articles of Incorporation, which amends Article 7 in its entirety, was duly adopted and approved by the shareholders of the corporation entitled to vote thereon (that is, the Class A Common Stock of the corporation, which is the only class of voting common stock under the corporation’s Articles of Incorporation), at [the annual] [ OR] [a special] meeting held on [March 21, 2016,] [OR] [date of special meeting, if applicable], in the manner prescribed by the West Virginia Business Corporation Act:

a.  Article 7 of the Articles of Incorporation is hereby amended to read as follows:

7(a).           The aggregate number of shares which the corporation shall have authority to issue is 125,000 shares, to be divided into 100,000 Class A common shares of the par value of $1.00 each, and 25,000 shares of Class B common shares of the par value of $1.00 each.  This number of shares of each class reflects the 1:200 reverse stock split approved by the holders of Class A common shares, effective as of 5:00 P.M. Eastern time on the date the Articles of Amendment were filed with the West Virginia Secretary of State to amend this Article 7 to reflect such reverse stock split.  In connection with such reverse stock split, the corporation shall not issue any fractional shares.  In lieu of any fractional share interest resulting from such split, the corporation shall pay a price per pre-split share as shall have been determined by the board of directors of the corporation prior to the filing of articles of amendment to the corporation’s articles of incorporation to effectuate such 1:200 reverse stock split.  The relative rights, privileges and limitations of the Class A common shares and the Class B common shares shall be in all respects identical, share for share, except that the voting power for the election of directors and for all other voting purposes shall be vested exclusively in the holders of the Class A common shares and, except as otherwise required by law, the holders of Class B common shares shall not have any voting power or be entitled to receive any notice of meetings of shareholders.  The number of shares of either class of shares that are covered by Warrants issued and outstanding prior to such amendment of this Article 7 to reflect said reverse stock split, shall be adjusted to reflect the post-split number of shares covered by such Warrant so as to reflect such reverse stock split and to carry out the original economic substance and intent of the Warrants.

7(b) Notwithstanding the foregoing, any Class A common shares held (whether by conversion, direct or indirect purchase, or otherwise) by any shareholder whose ownership of Class A common shares is subject to the ownership limitations of the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder, may be tendered to the corporation with a request that they be redeemed and converted, on a share for share basis, for certificate(s) representing Class B common shares and such shares shall be redeemed and converted upon the corporation’s issuance of certificates for Class B common shares.

7(c)  Any share of Class B common shares that is transferred to a holder who is not subject to the ownership limitations of the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder, shall automatically, upon tender to the corporation, be redeemed and converted by the corporation into a share of Class A common shares.

7(d)  Any conversion of Class A or Class B common shares pursuant to 7(b) or 7(c) hereof shall be made for no additional consideration.

2

Dated:  [March 21, 2016]                                                                           CHAMPION INDUSTRIES, INC.

By: /s/Marshall T. Rynolds

Marshall T. Reynolds

Chairman of the Board of Directors

This instrument prepared by:

ROGER D. HUNTER, ESQ.

BOWLES RICE LLP

600 QUARRIER STREET

CHARLESTON, WV 25301

304.347.1101

3 

EX-99.12

Exhibit 99.12

EXHIBIT B

TO BOARD OF DIRECTORS RESOLUTION ADOPTED

BY BOARD OF DIRECTORS OF CHAMPION INDUSTRIES, INC.

ON JANUARY 18, 2015 AUTHORIZING 1:200 REVERSE

STOCK SPLIT AND RELATED TRANSACTIONS

[PART TWO - SHOWING FORM OF ARTICLES OF AMENDMENT

FOR BOTH 1:200 REVERSE STOCK SPLIT AMENDMENT

AND THE PREFERRED SHARES AMENDMENT]

1 

FORM OF

ARTICLES OF AMENDMENT

OF THE

ARTICLES OF INCORPORATION

OF CHAMPION INDUSTRIES, INC.

[ASSUMING SHAREHOLDERS APPROVE BOTH 1:200 REVERSE STOCK SPLIT AMENDMENT AND THE PREFERRED SHARES AMENDMENT]

Pursuant to the provisions of Section 31D-10-1003 of the West Virginia Business Corporation Act, the undersigned corporation adopts the following ARTICLES OF AMENDMENT to its Articles of Incorporation:

1.  The name of the corporation is Champion Industries, Inc.

2.  The following Amendment of the Articles of Incorporation, which amends Article 7 in its entirety, was duly adopted and approved by the shareholders of the corporation entitled to vote thereon (that is, the Class A Common Stock of the corporation, which is the only class of voting common stock under the corporation’s Articles of Incorporation), at [the annual] [ OR] [a special] meeting held on [March 21, 2016,] [OR] [date of special meeting, if applicable], in the manner prescribed by the West Virginia Business Corporation Act:

a.  Article 7 of the Articles of Incorporation is hereby amended to read as follows:

7(a).           The aggregate number of shares which the corporation shall have authority to issue is 127,500 shares, to be divided into 2,500 Preferred Series A shares of the par value of $1,000.00 each; 100,000 Class A common shares of the par value of $1.00 each; and 25,000 shares of Class B common shares of the par value of $1.00 each.  This number of shares of each class of common shares reflects the 1:200 reverse stock split approved by the holders of Class A common shares, effective as of 5:00 P.M. Eastern time on the date the Articles of Amendment were filed with the West Virginia Secretary of State to amend this Article 7 to reflect such reverse stock split.  In connection with such reverse stock split, the corporation shall not issue any fractional shares.  In lieu of any fractional share interest resulting from such split, the corporation shall pay a price per pre-split share as shall have been determined by the board of directors of the corporation prior to the filing of articles of amendment to the corporation’s articles of incorporation to effectuate such 1:200 reverse stock split.  The Preferred Series A shares shall have the rights, privileges and limitations as are set forth in subsection 7(e) below.  The relative rights, privileges and limitations of the Class A common shares and the Class B common shares shall be in all respects identical, share for share, except that the voting power for the election of directors and for all other voting purposes shall be vested exclusively in the holders of the Class A common shares and, except as otherwise required by law, the holders of Class B common shares shall not have any voting power or be entitled to receive any notice of meetings of shareholders.  The number of shares of either class of shares that are covered by Warrants issued and outstanding prior to such amendment of this Article 7 to reflect said reverse stock split, shall be adjusted to reflect the post-split number of shares covered by such Warrant so as to reflect such reverse stock split and to carry out the original economic substance and intent of the Warrants.

7(b) Notwithstanding the foregoing, any Class A common shares held (whether by conversion, direct or indirect purchase, or otherwise) by any shareholder whose ownership of Class A common shares is subject to the ownership limitations of the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder, may be tendered to the corporation with a request that they be redeemed and converted, on a share for share basis, for certificate(s) representing Class B common shares and such shares shall be redeemed and converted upon the corporation’s issuance of certificates for Class B common shares.

7(c)  Any share of Class B common shares that is transferred to a holder who is not subject to the ownership limitations of the Bank Holding Company Act of 1956, as amended, and the regulations promulgated thereunder, shall automatically, upon tender to the corporation, be redeemed and converted by the corporation into a share of Class A common shares.

7(d)  Any conversion of Class A or Class B common shares pursuant to 7(b) or 7(c) hereof shall be made for no additional consideration.

7(e)  Preferred Series A shares shall be non-voting shares.  The voting power for the election of directors and for all other voting purposes shall be vested exclusively in the holders of the Class A common shares and, except as otherwise required by law, the holders of Preferred Series A shares shall not have any voting power or be entitled to receive any notice of meetings of shareholders.  The Preferred Series A shares are being issued in consideration of the conversion by a stockholder of $2,500,000.00 principal amount of debt owed to such shareholder by the corporation, and shall be issued on the conversion date upon surrender and cancellation of such debt by such stockholder (the “Conversion Date”).  Preferred Series A shares shall be entitled to a preference in the event of liquidation as to proceeds thereof, over the common shares.  Preferred Series A shares shall be entitled to a contingent dividend (as described in this subsection 7(e), below) and a preference as to dividends, and no dividends shall be paid by the corporation to any holders of any class of common shares unless and until such dividends as are required by this subsection 7(e) have been declared and paid to the holders of Preferred Series A shares.  Preferred Series A shares shall be entitled to receive a dividend, at the rate of six percent (6.00%) per annum on the par value thereof, to be paid in the first quarter of the next ensuing fiscal year, following any fiscal year in which the net income of the corporation after taxes is at least $1,000,000.00 or greater; provided, however, that no dividend shall be paid on Preferred Series A shares, and such shares shall have a zero percent (0.00%) dividend rate, unless the corporation earned at least $1,000,000.00 in net income after taxes in the prior fiscal year.   On each anniversary of the Conversion Date (each, an “Anniversary Date”), the  corporation shall have the option and right to redeem, in whole or in part, Preferred Series A shares at the redemption price of $1,000 per share (par), at the option of the corporation.  Preferred Series A shares not have a conversion right to convert Preferred Series A shares to any class of common shares.

2

Dated:  [March 21, 2016]                                                                           CHAMPION INDUSTRIES, INC.

By: /s/Marshall T. Reynolds

Marshall T. Reynolds

Chairman of the Board of Directors

This instrument prepared by:

ROGER D. HUNTER, ESQ.

BOWLES RICE LLP

600 QUARRIER STREET

CHARLESTON, WV 25301

304.347.1101

3

EX-99.13

Exhibit 99.13

The following is the consolidated estimated (projected) results of operations of the Company’s 2016 fiscal year as presented to Chaffe and Associates for the valuation of the Company’s common stock. The information disclosed below is in a summarized and consolidated format that is similar to the format in which the Company reports financial information to the public and its shareholders.

This exhibit includes “forward-looking” information statements, as defined in the Private Securities Litigation Reform Act of 1995, including projected performance and income. Actual results may differ from those provided in the forward-looking statements. The projections are subject to various conditions and may not occur. Even if these events do occur, the ultimate results may differ substantially.

1 

Champion Industries, Inc. and Subsidiaries

Projected Consolidated Statements of Operations

Projections for the Year Ended October 31, 2016 (1)
Revenues	$	65,066,631
Cost of sales		49,354,537
Gross profit		15,712,094
Selling, general and administrative expenses		14,723,000
Income from operations		989,094
Other income (expenses)		(566,000	)
Income before income taxes		423,094
Income tax benefit (2)		857,691
Net income	$	1,280,785

(1) These projections were based on historical performance and trends for each of the Company's operating divisions with adjustments made for known and unknown events that the Company expects to occur in 2016. The Company or its management give no assurance that these results will materialize.

(2) At the time completed, this was the estimated net result of reversing the valuation allowance the Company carries against its net deferred tax assets. This assumption is based on a profitable fiscal 2016 that would indicate the ability to generate sufficient future income to utilize such tax assets. Actual results and tax valuation allowance reversals could differ significantly.

2