Document:

Exhibit 10.5

EMPLOYMENT AGREEMENT

          This Employment Agreement (the “Agreement”) is made, entered into by and between SORL Auto Parts, Inc., a Delaware corporation (the “Company”), and Zong Yun Zhou (the “Executive”), effective as of May 1, 2006 (the “Effective Date”).

1.       RECITALS.

          WHEREAS, Executive is currently employed by the Company as its Chief Financial Officer;

          WHEREAS, the Company desires to insure the continued employment of the Executive; and

          WHEREAS, the Executive is willing to commit to a long-term agreement to serve the Company;

          NOW, THEREFORE, the Company and the Executive desire to set forth in this Agreement the terms and conditions of the Executive’s employment with the Company.

2.       EMPLOYMENT.

          The Company hereby employs the Executive as Chief Financial Officer of the Company and the Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth, for a period of five years from the Effective Date.   Following the expiration of the term of this Agreement, this Agreement shall continue thereafter for additional one year periods, unless the Company provides Executive with written notice of the Company’s intention not to renew by no later than six months prior to the expiration of the initial term, or any subsequent one-year term, of this Agreement.  Executive’s term of employment is hereinafter referred to as the “Term.”

3.        DUTIES.

           A.          The Company hereby employs the Executive to perform the duties and responsibilities of Chief Financial Officer of the Company and to perform such other duties in addition to or in replacement of Executive’s duties as Chief Financial Officer as the Chief Executive Officer may from time to time reasonably designate.  Throughout the Term, Executive shall faithfully and diligently perform Executive’s duties in conformity with the directions of the Chief Executive Officer and serve the Company to the best of Executive’s ability.  Executive shall have the duties and responsibilities commonly incident to the position of a Chief Financial Officer or such other position as the Chief Executive Officer assigns to Executive.  Additionally, Executive shall act as Chief Financial Officer or in such other accounting
function for Ruili Group Ruian Auto Parts Co. Ltd., the Company’s principal operating subsidiary.

          B.          The Executive shall initially report to the Chief Executive Officer.

4.       COMPENSATION.

          A.          Salary and Bonus.  The compensation of Executive including bonuses shall be determined from time to time by the Compensation Committee of the Company’s Board of Directors taking into account the performance of the Executive and the results of operations of the Company.

          B.          Reimbursements.  During the Term upon presentation to the Company of written records thereof, the Company shall reimburse the Executive for all reasonable out-of-pocket expenses incurred by her in connection with the Company’s business, including without limitation reasonable travel and entertainment expenses.

          C.          Cellular Telephone.  During the Term, Executive shall be entitled to the use of a cellular telephone and the monthly access charge and any business-related charges shall be paid by the Company.

          D.          Vehicle.  During the Term, Executive shall be entitled to the use of a company vehicle including gas and insurance paid to Executive in the form of a monthly allowance.

          E.          Computers and Internet.  During the Term, Executive shall be entitled to the use of business appropriate computer equipment required by Executive to perform duties including monthly access charges for the Internet, and any business-related charges shall be paid by the Company.  

          F.          Home Office.  Because the Company is a public Company in the United States and its stock is listed on the NASDAQ Stock Market, the parties acknowledge that Executive shall be working from home late evenings and early mornings from time to time based on time zone differences. Accordingly, Executive shall be entitled to reimbursement for setting up a home office with appropriate telephone, communications, office and computer equipment for such purpose.

          G.          Employee Benefit Plans.  The Executive shall be entitled to participate in all other employee benefit on terms commensurate with the benefits awarded management personnel of comparable status with the Company, including medical insurance.

5.       TERMINATION.

          A.          Death or Disability.  The Executive’s employment and this Agreement shall terminate automatically upon the Executive’s death.  If the Company determines in good faith that Disability of the Executive has occurred (pursuant to the definition of Disability set forth below), it may give to the Executive written notice of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the day of receipt of such notice by the Executive.  For purposes of this Agreement, “Disability” shall mean the absence of the Executive from her duties with the Company on the basis provided in this Agreement for a period of 180 consecutive days due to mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Executive or her legal representative.

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          B.          Cause.  The Company may terminate this Agreement and the Executive’s employment for Cause.  For purposes of this Agreement, “Cause” shall mean that the Executive has been convicted of:  (1) an act of fraud upon or toward the Company; or (2) a felony.

6.       SEVERANCE COMPENSATION

          A.          Death or Disability.  If the Executive’s employment is terminated by reason of the Executive’s death or Disability, this Agreement shall terminate without further obligations to the Company or to the Executive or her legal representatives under this Agreement, other than, in the case of death, for payment of the Executive’s then salary by the Company for the remaining portion of the Term of to the extent not theretofore paid, which shall be paid to the Executive or her estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the date of termination, and in the case of Disability all earned and accrued but unpaid salary through the date of Disability. 

          B.          Cause.  If the Executive’s employment is terminated by the Company for Cause, this Agreement shall terminate without further obligation to the Company or to the Executive other than for the timely payment by the Company of earned and accrued salary of the Executive through the date of termination.

          C.          Termination Without Cause.  If the Executive is terminated for any reason other than for death, Disability or Cause, this Agreement shall terminate without further obligations to the Company or to the Executive under this Agreement, other than for payment of all salary by the Company owed for the remaining portion of the Term, which shall be paid in a lump sum within 30 days of the termination date.

7.       CONFIDENTIAL INFORMATION.

          A.          Confidential Information.  The Executive shall hold and keep confidential for the benefit of the Company all secret or confidential information, files, documents other media in which confidential information is contained, knowledge or data (collectively the “Confidential Information”) relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during her employment by the Company or any of its affiliated companies. Confidential Information does not include information that is already public knowledge at the time of disclosure (other than by acts by the Executive or his representatives in violation of this Agreement) or that is provided to the Executive by a third party without an obligation with the Company to maintain the confidentiality of
such information.  After termination of the Executive’s employment with the Company, she shall not, without the prior written consent of the Company, or as may otherwise be required by law or legal process, communicate or divulge any Confidential Information to anyone other than the Company and those designated by it.

          The Executive shall acknowledge that all confidential documents are and shall remain the sole and exclusive property of the Company regardless of who originally acquired the confidential documents.  The Executive agrees to return to the Company promptly upon the expiration or termination of her employment or at any other time when requested by the Company, any and all property of the Company, including, but not limited to, all confidential documents and copies thereof in his possession or control.

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8.       CONFLICTING AGREEMENTS.

          The Executive hereby represents and warrants that the execution of this Agreement and the performance of her obligations hereunder is not in breach of or in conflict with any other agreement to which she is a party or is bound, and that she is not now subject to any covenants against competition or similar covenants which would affect the performance of his obligations hereunder.

9.       OWNERSHIP OF INVENTIONS.

          All ideas, inventions, trademarks, proprietary information, know-how, processes and other developments or improvements developed by the Executive, alone or with others, during the term of her employment, that are within the scope of the Company’s business operations or that relate to the Company’s work or projects, are the exclusive property of the Company.

          In that regard, the Executive agrees to disclose promptly to the Company any and all inventions, discoveries, trademarks, proprietary information, know-how, processes or improvements, patentable or otherwise, that she may make from the beginning of her employment until the termination thereof, that relate to the business of Company, whether such is made solely or jointly with others.  The Executive further agrees that, during the term of this Agreement, she will provide the Company with a reasonable level of assistance, at the Company’s sole option and expense, to obtain patents in the United States of America, the People’s Republic of China or elsewhere on any such ideas, inventions, trademarks and other developments, and agrees to execute all documents necessary to obtain such patents in the name of the Company.

          The Executive’s obligations and covenants herein contained in this Section 9 shall continue in effect after the termination of her employment with respect to all and any inventions, discoveries and improvements made, or conceived by her during the term of the Executive’s employment, and said obligation shall be binding upon the Executive’s assigns, heirs, executors, administrators or other legal representatives.

10.     SUCCESSORS.

          A.          This Agreement is personal to the Executive and shall not, without the prior written consent of the Company, be assignable by the Executive.

          B.          This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes.  As used herein, “successor” and “assignee” shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise.

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11.     SPECIFIC PERFORMANCE.

          The Executive is obligated, under Section 7 hereof, to protect the Confidential Information of the Company.  Any loss resulting from a breach of the Executive’s obligations to protect the Confidential Information could not be reasonably or adequately compensated in damages in an action at law.  Therefore, in addition to other remedies provided by law or this Agreement, the Company shall have the right to obtain injunctive relief, in the appropriate court, at any time, against the dissemination by the Executive of the Confidential Information, or the use of such information by the Executive in violation of Section 7 hereof.

12.     WAIVER.

          No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement.  No waiver shall be binding unless in writing and signed by the party waiving the breach.

13.     MODIFICATION.

          This Agreement may not be amended or modified other than by a written agreement executed by the Executive and the Board.  Commencement or continuation of any custom, practice or usage by the Company shall not constitute a modification hereof or otherwise give rise to enforceable rights or create obligations of the Company.

14.     SAVINGS CLAUSE.

          If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

15.     GOVERNING LAW.

          This Agreement shall be deemed to have been executed and delivered within the State of Delaware, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the internal laws of the State of Delaware.

16.     CONSTRUCTION.

          Each party has cooperated in the drafting and preparation of this Agreement.  Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

17.     ASSIGNABILITY.

          Neither this Agreement nor any right or obligation hereunder is assignable in whole or in party, whether by operation of law or otherwise, by any party without the express written consent of the other parties and any such attempted assignment shall be void and unenforceable.

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18.     COMMUNICATIONS.

          All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or if mailed by registered or certified mail, postage prepaid, addressed to the Executive at the address set forth on the signature page hereof, or addressed to the Company.  Any party may change the address at which notice shall be given by written notice given in the above manner.

19.     EXECUTION.

          This Agreement is being executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

20.     LEGAL COUNSEL.

          The Executive and the Company recognize that this is a legally binding contract and acknowledge and agree that they have each had the opportunity to consult with legal counsel of their choice.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

	
  
SORL AUTO   PARTS, INC.
  	
  
 
  	
  
EXECUTIVE:
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  By:
  	
   
  	
   
  	
   
  
	
   
  	
  

  	
   
  	
  

  
	
  Name:
  	
   
  	
   
  	
  Zong Yun   Zhou
  
	
  Title:
  	
   
  	
   
  	
   
  

- 6 -Exhibit 10.1

    PROMISSORY
      NOTE

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              6010040275500005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular loan or item. Any item above containing
      "'***" has been omitted due to text length limitations.

    

     

    Borrower: CHAMPION
      INDUSTRIES, INC. (TIN: 55-0717455)

    P.O.
      BOX 2968

    HUNTINGTON.
      WV 25728-2968

    Lender:

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    Principal
      Amount: $1,200,000.00 Initial
      Rate: 8.250% Date
      of Note: July 28, 2006

     

    PROMISE
      TO PAY. CHAMPION INDUSTRIES INC ("Borrower") promises to pay to COMMUNITY TRUST
      BANK, INC. ("Lender"), or order, In lawful money of the United States of
      America, the principal amount of One Million Two Hundred Thousand & 00/100
      Dollars ($1,200,000.00), together with interest on the unpaid principal balance
      from July 28, 2006 until paid in full.

     

    PAYMENT.
      Subject to any payment changes resulting form changes in the index, Borrower
      will pay this loan in 60 payments of $24,549.14 each payment. Borrower’s first
      payment is due August 28, 2006, and all subsequent payments are due on the
      same
      day of each month after that. Borrower’s final payment will be due on July 28,
      2011, and will be for all principal and all accrued interest not yet paid.
      Payments include principal and interest. Unless otherwise agreed or required
      by
      applicable law, payments will be applied first to any accrued unpaid interest;
      then to principal; then to any unpaid collection costs; then to any late
      charges. The annual interest rate for the Note is computed on a 365/360 basis;
      that is, by applying the ratio of annual interest rate over a year of 360 days,
      multiplied by the outstanding principal balance, multiplied by the actual number
      of days the principal balance is outstanding. Borrower will pay Lender at
      Lender's address shown above or at such other place as Lender may designate
      in
      writing.

     

    VARIABLE
      INTEREST RATE. The
      interest rate on this Note is subject to change from time to time based on
      changes in an independent index which is the Highest Prime Rate most recently
      published in “The Wall Street Journal’s money rates column” as the base rate on
      corporate loans at large U.S. money center commercial banks. (the “Index”). The
      index is not necessarily the lowest rate charged by Lender on its loans. If
      the
      index becomes unavailable during the term of this loan, Lender may designate
      a
      substitute index after notifying Borrower. Lender will tell Borrower the current
      index rate upon Borrower’s request. The interest rate change will not occur more
      often than each day, [Any change in the Prime Rate shall be effective as of
      the
      day on which the change is announced to become effective]. Borrower understands
      that Lender may make loans based on other rates as well. The
      Index currently is 8.250% per annum.
      The
      interest rate to be applied to the unpaid principal balance of this Note will
      be
      at a rate equal to the index, resulting in an initial rate of 8.250% per annum.
      NOTICE: Under no circumstances will interest rate on this Note be more than
      the
      maximum rate allowed by applicable law. Whenever increases occur in the interest
      rate, Lender, at its option, may do one or more of the following: (A) increase
      Borrower’s payment to ensure Borrower’s loan will pay off by its original final
      maturity date, (B) increase Borrower’s payments to cover accruing interest, (C)
      increase the number of Borrower’s payments, and (D) continue Borrower’s payments
      at the same amount and increase Borrower’s final payment.  

     

    PREPAYMENT.
      Borrower
      may pay without penalty all or portion of the amount owed earlier than it is
      due. Early payments will not, unless agreed to by Lender in writing, relieve
      Borrower of Borrower’s obligation to continue to make payments of accrued unpaid
      interest. Rather, early payments will reduce the principal balance due and
      may
      result in Borrower’s making fewer payments. Borrower agrees not to send Lender
      payments marked “paid in full”, “without recourse”, or similar language. If
      Borrower sends such a payment, Lender may accept it without losing any of
      Lender’s rights under this Note, and Borrower will remain obligated to pay any
      further amount owed to Lender. All written communications concerning disputed
      amounts, including any check or other payment instrument that indicates that
      the
      payment constitutes “payment if full” of the amount owed or that is tendered
      with other conditions or limitations or as full satisfaction of a disputed
      amount must be mailed or delivered to: Community Trust Bank, Inc., P.O. Box
      2947
      Pikeville, KY 41502-2947.

     

    LATE
      CHARGE.
      If a
      payment is 10 days or more lately, Borrower will be charged 5.000%
      of the regularly scheduled payment. 

     

    INTEREST
      AFTER DEFAULT. Upon
      default, including failure to pay upon final maturity, the interest rate on
      this
      Note shall be increased by adding a 2,000 percentage point margin “Default Rate
      Margin”). The Default Rate Margin shall also apply to each succeeding interest
      rate change that would have applied had there been no default. However, in
      no
      event will the interest rate exceed the maximum interest rate limitations
      permitted under applicable law.

    

    DEFAULT.
      Each of
      the following shall constitute an event of default (“Event of Default”) under
      this Note.

    

    Payment
      Default-
      Borrower fails to make any payment when due under this Note.

     

    Other
      Defaults-
      Borrower fails to comply with or to perform any other term, obligation, covenant
      or condition contained in this Note or in any of the related documents or to
      comply with or perform any term, obligation, covenant, or condition contained
      in
      any other agreement between Lender and Borrower. 

    

    Default
      in favor of third parties- Borrower
      or any Grantor defaults under any loan, extension of credit, security agreement,
      purchase or sales agreement, or any other agreement, in favor of any other
      creditor or person that may materially effect any of Borrower’s property or
      Borrower’s ability to repay this Note or perform Borrower’s obligations under
      this Note or any of the related documents. 

    

    False
      Statements-
      Any
      warranty, representation or statement made or furnished to Lender by Borrower
      or
      on Borrower’s behalf under this Note or the related documents is false or
      misleading in any material respect, either now or at the time made or furnished
      or becomes false or misleading at any time thereafter.

    

    Insolvency-
      The
      dissolution or termination of Borrower’s existence as a going business, the
      insolvency or Borrower, the appointment of a receiver for any part of Borrower’s
      property, any assignment for the benefit of creditors, any type of creditor
      workout, or the commencement of any proceeding under any bankruptcy or
      Insolvency laws by or against Borrower. 

    

    Creditor
      or Forfeiture Proceedings. Commencement
      of foreclosure of forfeiture proceedings, whether by judicial proceeding,
      self-help, repossession or any other method, by any creditor of Borrower or
      by
      any governmental agency against any collateral securing the loan. This includes
      a garnishment of any of Borrower’s accounts, including deposit accounts, with
      Lender. However, the Event of Default shall not apply if there is a good faith
      dispute by Borrower as to the validity or reasonableness of the claim which
      is
      the basis of the creditor or forfeiture proceeding and if Borrower gives Lender
      written notice of the creditor or forfeiture proceeding and deposits with Lender
      monies or a surety bond for the creditor or forfeiture proceeding, in an amount
      determined by Lender, in its sole discretion, as being an adequate reserve
      or
      bond for the dispute.

    

    Events
      Affecting Guarantor- Any
      of
      the preceding events occurs with respect to any guarantor, endorser, surely,
      or
      accommodation party of any of the indebtedness or any guarantor, endorser,
      surety, or accommodation part dies or becomes incompetent, or revokes or
      disputes the validity of, or liability under, any guaranty of the indebtedness
      evidenced by this Note. In the event of a death, Lender, at this option, may,
      but shall not be required to , permit the guarantor’s estate to assume
      unconditionally the obligations arising under the guaranty in a manner
      satisfactory to Lender, and, in doing so, cure any Event of
      Default.

    

    

    Change
      in Ownership- Any
      change in ownership of twenty-five percent (25%) or more of the common stock
      of
      Borrower. 

    

    Adverse
      Change- A
      material adverse change occurs in Borrower’s financial condition, or Lender
      believes the prospect of payment or performance of this Note is impaired.

    

    Insecurity-
      Lender
      in
      good faith believes itself insecure. 

    

    Cure
      Provisions - If
      any
      default, other than a default in payment is curable and if Borrower has not
      been
      given a notice of a breach of the same provision of this Note within the
      preceding twelve (12) months, it may be cured if Borrower, after receiving
      written notice from Lender demanding cure of such default: (1) cures the default
      within ten (10) days; or (2) if the cure requires more than ten (10) days,
      immediately initiates steps which Lender deems in Lender’s sole discretion to be
      sufficient to cure the default and thereafter continues and completes all
      reasonable and necessary steps sufficient to produce compliance as soon as
      reasonable practical. 

    

     

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    

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      2

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    PROMISSORY
      NOTE (Continued)

    Loan
      No: 6010040275500005

    

    

    LENDER’S
      RIGHTS.
      Upon
      default, Lender may declare the entire unpaid principal balance on this Note
      and
      all accrued unpaid interest immediately due, and then Borrower will pay that
      amount. 

    

    ATTORNEYS’
      FEES; EXPENSES.
      Lender
      may hire or pay someone else to help collect this Note if Borrower does not
      pay.
      Borrower will pay Lender that amount. This includes, subject to any limits
      under
      applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or
      not there is a lawsuit, including attorneys’ fees, expense for bankruptcy
      proceedings (including efforts to modify or vacate any automatic stay or
      injunction), and appeals. If not prohibited by law, Borrower also will pay
      any
      court costs, in addition to all other sums provided by law.

    

    JURY
      WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
      action, proceeding, or counterclaim brought by either Lender or Borrower against
      the other. 

    

    GOVERNING
      LAW. This Note will be governed by Federal law applicable to the Lender and,
      to
      the extent not preempted by federal law, the laws of the Commonwealth of
      Kentucky without regard to its conflicts of law provisions. This Note has been
      accepted by the Lender in the Commonwealth of Kentucky. 

    

    CHOICE
      OF VENUE.
      If there
      is a lawsuit, Borrower agrees upon Lender’s request to submit to the
      jurisdiction of the courts of Pike County, Commonwealth of Kentucky. 

     

    DISHONORED
      ITEM FEE.
      Borrower
      will pay a fee to Lender of $20.00 if Borrower makes a payment on Borrower’s
      loan and the check or preauthorized charge with which Borrower pays is later
      dishonored.

     

    RIGHT
      OF SETOFF.
      To the
      extent permitted by applicable law, Lender reserves the right of setoff in
      all
      Borrower’s accounts with Lender (whether checking, savings, or some other
      account). This includes all accounts Borrower holds jointly with someone else
      and all accounts Borrower may open in the future. However, this does not include
      any IRA or Keogh accounts, or any trust accounts for which setoff would be
      prohibited by law. Borrower authorizes Lender, to the extent permitted by
      applicable law, to charge or setoff all sums owing on the indebtedness against
      any and all such accounts. 

     

    COLLATERAL.
      Borrower
      acknowledges this Note is secured by (1) HEIDELBERG COLOR PRINTING PRESS SM
      74-6-P + L S/N627630 WITH THE FOLLOWING ATTACHMENTS: (1) DOM.ACC.HEAD FOR
      M7012V000/SUVAM7012V00, (1) S/W LICENSE PRE.INTERF. 74 VERSION S/N 1253014566A
      AND (1) PRINECT PREPRESS INTERFACE OHNE LAUFWERK.

     

    INTEREST
      INCREASE. THIS
      NOTE’S INTEREST RATE WILL BE INCREASED BY 2% PER ANNUM IF ANY PAYMENT IS NOT
      RECEIVED WITHIN 30 DAYS OF ITS DUE DATE. 

     

    

    SUCCESSOR
      INTERESTS.
      The
      terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs,
      personal representatives, successors and assigns, and shall inure to the benefit
      of Lender and its successors and assigns. 

    

    GENERAL
      PROVISIONS.
      If any
      part of this Note cannot be enforced, this fact will not affect the rest of
      the
      Note. Lender may delay or forgo enforcing any of its rights or remedies under
      this Note without losing them. Borrower and any other person who signs,
      guarantees or endorses this Note, to the extent allowed by law, waive
      presentiment, demand for payment, and notice of dishonor. Upon any change in
      terms of this Note, and unless otherwise expressly stated in writing, no party
      who signs this Note, whether as maker, guarantor, accommodation maker or
      endorser, shall be released form liability. All such parties agree that Lender
      may renew or extend (repeatedly and for any length of time) this loan or release
      any party or guarantor or collateral; or impair, fail to realize upon or perfect
      Lender’s security interest in the collateral; and take any other action deemed
      necessary by Lender without the consent of or notice to anyone. All such parties
      also agree that Lender may modify this loan without the consent of or notice
      to
      anyone other than the party with whom the modification is made. The obligations
      under this Note are joint and several. 

    

    WEST
      VIRGINIA INSURANCE NOTICE. Unless
      Borrower provides Lender with evidence of the Insurance coverage required by
      Borrower’s agreement with Lender, Lender may purchase insurance at Borrower’s
      expense to protect Lender’s interest in the collateral. This insurance may, but
      need not, protect Borrower’s interests. The coverage that Lender purchases may
      not pay any claim that Borrower makes or any claim that is made against Borrower
      in connection with the collateral. Borrower may later cancel any insurance
      purchased by Lender, but only after providing Lender with evidence that Borrower
      has obtained insurance as required by their agreement. If Lender purchases
      insurance for the collateral, Borrower will be responsible for the cost of
      the
      that insurance, including interest and any other charges Lender may impose
      in
      connection with the placement of the insurance, until the effective date of
      the
      cancellation or expiration of the insurance. The costs of the insurance may
      be
      added to Borrower’s total outstanding balance or obligation. The costs of the
      insurance may be more than the cost of insurance Borrower may be able to obtain
      on Borrower’s own. 

     

    

     

    PRIOR
      TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
      NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS, BORROWER AGREES TO TERMS
      OF THIS NOTE. 

     

    

     

    BORROWER
      ACKNOWLEDTGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
      NOTE.

     

    

     

    BORROWER:

     

    

     

    CHAMPION
      INDUSTRIES, INC.

     

    

     

    

     

    By:
      _________________________________________
      

     

     
      TONEY K. ADKINS, PRESIDENT OF CHAMPION

     

    INDUSTRIES,
      INC. 

     

    

     

    LENDER:

     

    

     

    COMMUNITY
      TRUST BANK, INC. 

     

    

     

    

     

    X__________________________________________

     

     AUTHORIZED
      SIGNER

     

     

     

    

     

    

    

    

    COMMERCIAL
      SECURITY AGREEMENT

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              6010040275500005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular loan or item. Any item above containing
      "'***" has been omitted due to text length limitations.

    

     

    Borrower: CHAMPION
      INDUSTRIES, INC. (TIN: 55-0717455)

    P.O.
      BOX 2968

    HUNTINGTON.
      WV 25728-2968

    Lender:

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    THIS
      COMMERCIAL SECURITY AGREEMENT dated July 28, 2006, is made and executed between
      CHAMPION INDUSTRIES INC ("Grantor") and COMMUNITY TRUST BANK, INC.
      ("Lender").

     

    GRANT
      OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
      a
      security interest in the Collateral to secure the Indebtedness and agrees that
      Lender shall have the rights stated in this Agreement with respect to the
      Collateral, in addition to all other rights which Lender may have by
      law.

     

    COLLATERAL
      DESCRIPTION.
      The word
      "Collateral" as used in this Agreement means the following described property,
      whether now owned or hereafter acquired, whether now existing or hereafter
      arising, and wherever located, in which Grantor is giving to Lender a security
      interest for the payment of the Indebtedness and performance of all other
      obligations under the Note and this Agreement:

    

    Purchase
      Money Security Interest in (1) HEIDELBERG COLOR PRINGTING PRESS SM 74-6-P +
      L
      S/N 627630 WITH THE FOLLOWING ATTACHMENTS (1) DOM.ACC.HEAD FOR
      M8023V000/SUVAM7012V00, (1) S/W LICENSE PRE.INTERF. 74 VERSION S/N 12530 14566A
      AND (1) PRINECT PREPRESS INTERFACE OHNE LAUFWERK.

     

    In
      addition, the word "Collateral" also includes all the following, whether now
      owned or hereafter acquired, whether now existing or hereafter arising, and
      wherever located:

     

    (A)
      All
      accessions, attachments, accessories, tools, parts, supplies, replacements
      of
      and additions to any of the collateral described herein, whether added now
      or
      later.

    (B)
      All
      products and produce of any of the property described in this Collateral
      section.

     

    (C)
      All
      accounts, general intangibles, instruments, rents, monies, payments, and all
      other rights, arising out of a sale, lease, consignment or other disposition
      of
      any of the property described in this Collateral section.

     

    (D)
      All
      proceeds (including insurance proceeds) from the sale, destruction, loss, or
      other disposition of any of the property described in this Collateral section,
      and sums due from a third party who has damaged or destroyed the Collateral
      or
      from that party's insurer, whether due to judgment, settlement or other
      process.

     

    (E)
      All
      records and data relating to any of the property described in this Collateral
      section, whether in the form of a writing, photograph, microfilm, microfiche,
      or
      electronic media, together with all of Grantor's right, title, and interest
      in
      and to all computer software required to utilize, create, maintain, and process
      any such records or data on electronic media.

     

    

    RIGHT
      OF SETOFF.
      To the
      extent permitted by applicable law. Lender reserves a right of setoff in all
      Grantor's accounts with Lender (whether checking. savings. or some other
      account). This includes all accounts Grantor holds jointly with someone else
      and
      all accounts Grantor may open in the future. However, this does not include
      any
      IRA or Keogh accounts, or any trust accounts for which setoff would be
      prohibited by law. Grantor authorizes Lender, to the extent permitted by
      applicable law, to charge or setoff all sums owing on the Indebtedness against
      any and all such accounts.

     

    GRANTOR'S
      REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
      COLLATERAL.
      With
      respect to the Collateral, Grantor represents and promises to Lender
      that:

     

    Perfection
      of Security Interest.
      Grantor
      agrees to take whatever actions are requested by Lender to perfect and continue
      Lender's security interest in the Collateral. Upon request of Lender, Grantor
      will deliver to Lender any and all of the documents evidencing or constituting
      the Collateral, and Grantor will note Lender's interest upon any and all chattel
      paper and instruments if not delivered to Lender for possession by
      Lender.

     

    Notices
      to Lender.
      Grantor
      will promptly notify Lender in writing at Lender's address shown above (or
      such
      other addresses as Lender may designate from time to time) prior to any (1)
      change in Grantor's name; (2) change in Grantor's assumed business name(s);
      (3)
      change in the management of the Corporation Grantor; (4) change in the
      authorized signer(s); (5) change in Grantor's principal office address; (6)
      change in Grantor's state of organization; (7) conversion of Grantor to a new
      or
      different type of business entity; or (8) change in any other aspect of Grantor
      that directly or indirectly relates to any agreements between Grantor and
      Lender. No change in Grantor's name or state of organization will take effect
      until after Lender has received notice.

     

    No
      Violation.
      The
      execution and delivery of this Agreement will not violate any law or agreement
      governing Grantor or to which Grantor is a party, and its certificate or
      articles of incorporation and bylaws do not prohibit any term or condition
      of
      this Agreement.

     

    Enforceability
      of Collateral.
      To the
      extent the Collateral consists of accounts, chattel paper, or general
      intangibles, as defined by the Uniform Commercial Code, the Collateral is
      enforceable in accordance with its terms, is genuine, and fully complies with
      all applicable laws and regulations concerning form, content and manner of
      preparation and execution, and all persons appearing to be obligated on the
      Collateral have authority and capacity to contract and are in fact obligated
      as
      they appear to be on the Collateral. There shall be no setoffs or counterclaims
      against any of the Collateral, and no agreement shall have been made under
      which
      any deductions or discounts may be claimed concerning the Collateral except
      those disclosed to Lender in writing.

     

    Location
      of the Collateral.
      Except
      in the ordinary course of Grantor's business, Grantor agrees to keep the
      Collateral at Grantor's address shown above or at such other locations as are
      acceptable to Lender. Upon Lender's request, Grantor will deliver to Lender
      in
      form satisfactory to Lender a schedule of real properties and Collateral
      locations relating to Grantor's operations, including without limitation the
      following: (1) all real property Grantor owns or is purchasing; (2) all real
      property Grantor is renting or leasing; (3) all storage facilities Grantor
      owns,
      rents, leases, or uses; and (4) all other properties where Collateral is or
      may
      be located.

     

    Removal
      of the Collateral. Except
      in
      the ordinary course of Grantor's business, Grantor shall not remove the
      Collateral from its existing location without Lender's prior written consent.
      To
      the extent that the Collateral consists of vehicles, or other titled property,
      Grantor shall not pledge any action which would require application for the
      certificates of title for the vehicles outside the State of West Virginia,
      without Lender’s prior written consent. Grantor shall, whenever requested,
      advise Lender of the exact location of the Collateral.

     

    Transactions
      Involving Collateral.
      Except
      for inventory sold or accounts collected in the ordinary course of Grantor's
      business, or as otherwise provided for in this Agreement, Grantor shall not
      sell, offer to sell, or otherwise transfer or dispose of the Collateral. Grantor
      shall not pledge, mortgage, encumber or otherwise permit the Collateral to
      be
      subject to any lien, security interest, encumbrance, or charge, other than
      the
      security interest provided for in this Agreement, without the prior written
      consent of Lender. This includes security interests even if junior in right
      to
      the security interests granted under this Agreement. Unless waived by Lender,
      all proceeds from any disposition of the Collateral (for whatever reason) shall
      be held in trust for Lender and shall not be commingled with any other funds;
      provided however, this requirement shall not constitute consent by Lender to
      any
      sale or other disposition. Upon receipt, Grantor shall immediately deliver
      any
      such proceeds to Lender.

     

    Title.
      Grantor
      represents and warrants to Lender that Grantor holds good and marketable title
      to the Collateral, free and clear of all liens and encumbrances except for
      the
      lien of this Agreement. No financing statement covering any of the Collateral
      is
      on file in any public office other than those which reflect the security
      interest created by this Agreement or to which Lender has specifically
      consented. Grantor shall defend Lender's rights in the Collateral against the
      claims and demands of all other persons.

     

    Repairs
      and Maintenance.
      Grantor
      agrees to keep and maintain, and to cause others to keep and maintain, the
      Collateral in good order, repair and condition at all times while this Agreement
      remains in effect. Grantor further agrees to pay when due all claims for work
      done on, or services rendered or material furnished in connection with the
      Collateral so that no lien or encumbrance may ever attach to or be filed against
      the Collateral.

    

    Inspection
      of Collateral.
      Lender
      and Lender's designated representatives and agents shall have the right at
      all
      reasonable times to examine

    and
      inspect the Collateral wherever located.

    

    Taxes,
      Assessments and Liens.
      Grantor
      will pay when due all taxes, assessments and liens upon the Collateral, its
      use
      or operation, upon this Agreement, upon any promissory note or notes evidencing
      the Indebtedness, or upon any of the other Related Documents.
      Grantor

    may
      withhold any such payment or may elect to contest any lien if Grantor is in
      good
      faith conducting an appropriate proceeding to contest

    the
      obligation to pay and so long as Lender's interest in the Collateral is not
      jeopardized in Lender's sole opinion. If the Collateral is

    

    

    

    

    

    

    

    

    

    

    

    

     

    

     

    

     

    

    

    

    Loan
      No: 6010040275500005

    COMMERCIAL
      SECURITY AGREEMENT (Continued)

    Page
      2

    subjected
      to a lien which is not discharged within fifteen (15) days, Grantor shall
      deposit with Lender cash, a sufficient corporate surety bond or other security
      satisfactory to Lender in an amount adequate to provide for the discharge of
      the
      lien plus any interest, costs, attorneys' fees or other charges that could
      accrue as a result of foreclosure or sale of the Collateral. In any contest
      Grantor shall defend itself and Lender and shall satisfy any final adverse
      judgment before enforcement against the Collateral. Grantor shall name Lender
      as
      an additional obligee under any surety bond furnished in the contest
      proceedings. Grantor further agrees to furnish Lender with evidence that such
      taxes, assessments, and governmental and other charges have been paid in full
      and in a timely manner. Grantor may withhold any such payment or may elect
      to
      contest any lien if Grantor is in good faith conducting an appropriate
      proceeding to contest the obligation to pay and so long as Lender's interest
      in
      the Collateral is not jeopardized.

     

    Compliance
      with Governmental Requirements.
      Grantor
      shall comply promptly with all laws, ordinances, rules and regulations of all
      governmental authorities, now or hereafter in effect, applicable to the
      ownership, production, disposition, or use of the Collateral, including all
      laws
      or regulations relating to the undue erosion of highly-erodible land or relating
      to the conversion of wetlands for the production of an agricultural product
      or
      commodity. Grantor may contest in good faith any such law, ordinance or
      regulation and withhold compliance during any proceeding, including appropriate
      appeals, so long as Lender's interest in the Collateral, in Lender's opinion,
      is
      not jeopardized.

     

    Hazardous
      Substances.
      Grantor
      represents and warrants that the Collateral never has been, and never will
      be so
      long as this Agreement remains a lien on the Collateral, used in violation
      of
      any Environmental Laws or for the generation, manufacture, storage,
      transportation, treatment, disposal, release or threatened release of any
      Hazardous Substance. The representations and warranties contained herein are
      based on Grantor's due diligence in investigating the Collateral for Hazardous
      Substances. Grantor hereby (1) releases and waives any future claims against
      Lender for indemnity or contribution in the event Grantor becomes liable for
      cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify
      and hold harmless Lender against any and all claims and losses resulting from
      a
      breach of this provision of this Agreement. This obligation to indemnify shall
      survive the payment of the Indebtedness and the satisfaction of this
      Agreement.

     

    Maintenance
      of Casualty Insurance.
      Grantor
      shall procure and maintain all risks insurance, including without limitation
      fire, theft and liability coverage together with such other insurance as Lender
      may require with respect to the Collateral, in form, amounts, coverages and
      basis reasonably acceptable to Lender and issued by a company or companies
      reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver
      to Lender from time to time the policies or certificates of insurance in form
      satisfactory to Lender, including stipulations that coverages will not be
      cancelled or diminished without at least thirty (30) days' prior written notice
      to Lender and not including any disclaimer of the insurer's liability for
      failure to give such a notice. Each insurance policy also shall include an
      endorsement providing that coverage in favor of Lender will not be impaired
      in
      any way by any act, omission or default of Grantor or any other person. In
      connection with all policies covering assets in which Lender holds or is offered
      a security interest, Grantor will provide Lender with such loss payable or
      other
      endorsements as Lender may require. If Grantor at any time fails to obtain
      or
      maintain any insurance as required under this Agreement, Lender may (but shall
      not be obligated to) obtain such insurance as Lender deems appropriate,
      including if Lender so chooses "single interest insurance," which will cover
      only Lender's interest in the Collateral.

     

    Application
      of Insurance Proceeds.
      Grantor
      shall promptly notify Lender of any loss or damage to the Collateral, whether
      or
      not such casualty or loss is covered by insurance. Lender may make proof of
      loss
      if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
      of any insurance on the Collateral, including accrued proceeds thereon, shall
      be
      held by Lender as part of the Collateral. If Lender consents to repair or
      replacement of the damaged or destroyed Collateral, Lender shall, upon
      satisfactory proof of expenditure, payor reimburse Grantor from the proceeds
      for
      the reasonable cost of repair or restoration. If Lender does not consent to
      repair or replacement of the Collateral, Lender shall retain a sufficient amount
      of the proceeds to pay all of the Indebtedness, and shall pay the balance to
      Grantor. Any proceeds which have not been disbursed within six (6) months after
      their receipt and which Grantor has not committed to the repair or restoration
      of the Collateral shall be used to prepay the Indebtedness.

     

    Insurance
      Reserves.
      Lender
      may require Grantor to maintain with Lender reserves for payment of insurance
      premiums, which reserves shall be created by monthly payments from Grantor
      of a
      sum estimated by Lender to be sufficient to produce, at least fifteen (15)
      days
      before the premium due date, amounts at least equal to the insurance premiums
      to
      be paid. If fifteen (15) days before payment is due, the reserve funds are
      insufficient, Grantor shall upon demand pay any deficiency to Lender. The
      reserve funds shall be held by Lender as a general deposit and shall constitute
      a non-interest-bearing account which Lender may satisfy by payment of the
      insurance premiums required to be paid by Grantor as they become due. Lender
      does not hold the reserve funds in trust for Grantor, and Lender is not the
      agent of Grantor for payment of the insurance premiums required to be paid
      by
      Grantor. The responsibility for the payment of premiums shall remain Grantor's
      sole responsibility.

     

    Insurance
      Reports.
      Grantor,
      upon request of Lender, shall furnish to Lender reports on each existing policy
      of insurance showing such information as Lender may reasonably request including
      the following: (1) the name of the insurer; (2) the risks insured; (3) the
      amount of the policy; (4) the property insured; (5) the then current value
      on
      the basis of which insurance has been obtained and the manner of determining
      that value; and (6) the expiration date of the policy. In addition, Grantor
      shall upon request by Lender (however not more often than annually) have an
      independent appraiser satisfactory to Lender determine, as applicable, the
      cash
      value or replacement cost of the Collateral.

     

    Financing
      Statements.
      Grantor
      authorizes Lender to file a UCC financing statement, or alternatively, a copy
      of
      this Agreement to perfect Lender's security interest. At Lender's request,
      Grantor additionally agrees to sign all other documents that are necessary
      to
      perfect, protect, and continue Lender's security interest in the Property.
      Grantor will pay all filing fees, title transfer fees, and other fees and costs
      involved unless prohibited by law or unless Lender is required by law to pay
      such fees and costs. Grantor irrevocably appoints Lender to execute documents
      necessary to transfer title if there is a default. Lender may file a copy of
      this Agreement as a financing statement. If Grantor changes Grantor's name
      or
      address, or the name or address of any person granting a security interest
      under
      this Agreement changes, Grantor will promptly notify the Lender of such
      change.

     

    GRANTOR'S
      RIGHT TO POSSESSION. Until
      default, Grantor may have possession of the tangible personal property and
      beneficial use of all the Collateral and may use it in any lawful manner not
      inconsistent with this Agreement or the Related Documents, provided that
      Grantor's right to possession and beneficial use shall not apply to any
      Collateral where possession of the Collateral by Lender is required by law
      to
      perfect Lender's security interest in such Collateral. If Lender at any time
      has
      possession of any Collateral, whether before or after an Event of Default,
      Lender shall be deemed to have exercised reasonable care in the custody and
      preservation of the Collateral if Lender takes such action for that purpose
      as
      Grantor shall request or as Lender, in Lender's sole discretion, shall deem
      appropriate under the circumstances, but failure to honor any request by Grantor
      shall not of itself be deemed to be a failure to exercise reasonable care.
      Lender shall not be required to take any steps necessary to preserve any rights
      in the Collateral against prior parties, nor to protect, preserve or maintain
      any security interest given to secure the Indebtedness.

     

    LENDER'S
      EXPENDITURES.
      If any
      action or proceeding is commenced that would materially affect Lender's interest
      in the Collateral or if Grantor fails to comply with any provision of this
      Agreement or any Related Documents, including but not limited to Grantor's
      failure to discharge or pay when due any amounts Grantor is required to
      discharge or pay under this Agreement or any Related Documents, Lender on
      Grantor's behalf may (but shall not be obligated to) take any action that Lender
      deems appropriate, including but not limited to discharging or paying all taxes,
      liens, security interests, encumbrances and other claims, at any time levied
      or
      placed on the Collateral and paying all costs for insuring, maintaining and
      preserving the Collateral. All such expenditures incurred or paid by Lender
      for
      such purposes will then bear interest at the rate charged under the Note from
      the date incurred or paid by Lender to the date of repayment by Grantor. All
      such expenses will become a part of the Indebtedness and, at Lender's option,
      will (A) be payable on demand; (B) be added to the balance of the Note and
      be
      apportioned among and be payable with any installment payments to become due
      during either (1) the term of any applicable insurance policy; or (2) the
      remaining term of the Note; or (C) be treated as a balloon payment which will
      be
      due and payable at the Note's maturity. The Agreement also will secure payment
      of these amounts. Such right shall be in addition to all other rights and
      remedies to which Lender may be entitled upon Default.

    DEFAULT.
      Each
      of
      the following shall constitute an Event of Default under this
      Agreement:

    Payment
      Default. Grantor
      fails to make any payment when due under the Indebtedness.

     

    Other
      Defaults.
      Grantor
      fails to comply with or to perform any other term, obligation, covenant or
      condition contained in this Agreement or in any of the Related Documents or
      to
      comply with or to perform any term, obligation, covenant or condition contained
      in any other agreement between Lender and Grantor.

     

    Default
      in Favor of Third Parties.
      Should
      Borrower or any Grantor default under any loan, extension of credit, security
      agreement, purchase or sales agreement, or any other agreement, in favor of
      any
      other creditor or person that may materially affect any of Grantor's property
      or
      Grantor's or any Grantor's ability to repay the Indebtedness or perform their
      respective obligations under this Agreement or any of the Related
      Documents.

     

    False
      Statements.
      Any
      warranty, representation or statement made or furnished to Lender by Grantor
      or
      on Grantor's behalf under this Agreement or the Related Documents is false
      or
      misleading in any material respect, either now or at the time made or furnished
      or becomes false or misleading at any time thereafter.

    

    Defective
      Collateralization.
      This
      Agreement or any of the Related Documents ceases to be in full force and effect
      (including failure of any collateral document to create a valid and perfected
      security interest or lien) at any time and for any reason.

     

    Insolvency.
      The
      dissolution or termination of Grantor's existence as a going business, the
      insolvency of Grantor, the appointment of a receiver for any part of Grantor's
      property, any assignment for the benefit of creditors, any type of creditor
      workout, or the commencement of any proceeding under any bankruptcy or
      insolvency laws by or against Grantor.

     

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    

    

    Loan
      No: 6010040275500005

    COMMERCIAL
      SECURITY AGREEMENT (Continued)

    Page
      3

     

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

     

    

     

    

     

    Creditor
      or Forfeiture Proceedings.
      Commencement of foreclosure or forfeiture proceedings, whether by judicial
      proceeding, self-help, repossession or any other method, by any creditor of
      Grantor or by any governmental agency against any collateral securings the
      basis
      of the creditor or forfeiture proceeding and if Grantor gives Lender written
      notice of the creditor or forfeiture proceeding and the Indebtedness. This
      includes a garnishment of any of Grantor's accounts, including deposit accounts,
      with Lender. However, this Event of Default shall not apply if there is a good
      faith dispute by Grantor as to the validity or reasonableness of the claim
      which
      is the basis of the creditor or forfeiture proceeding and if Grantor gives
      Lender written notice of the creditor or forfeiture proceeding and deposits
      with
      Lender monies or a surety bond for the creditor or forfeiture proceeding, in
      an
      amount determined by Lender, in its sole discretion, as being an adequate
      reserve or bond for the dispute.

     

    Events
      Affecting Guarantor.
      Any of
      the preceding events occurs with respect to any guarantor, endorser, surety,
      or
      accommodation party of any of the Indebtedness or guarantor, endorser, surety,
      or accommodation party dies or becomes incompetent or revokes or disputes the
      validity of, or liability under, any Guaranty of the Indebtedness.

     

    Adverse
      Change.
      A
      material adverse change occurs in Grantor's financial condition, or Lender
      believes the prospect of payment or performance of the Indebtedness is
      impaired.

    Insecurity.
      Lender
      in good faith believes itself insecure.

     

    Cure
      Provisions.
      If any
      default, other than a default in payment is curable and if Grantor has not
      been
      given a notice of a breach of the same provision of this Agreement within the
      preceding twelve (12) months, it may be cured if Grantor, after receiving
      written notice from Lender demanding cure of such default: (1) cures the default
      within ten (10) days; or (2) if the cure requires more than ten (10) days,
      immediately initiates steps which Lender deems in Lender's sole discretion
      to be
      sufficient to cure the default and thereafter continues and completes all
      reasonable and necessary steps sufficient to produce compliance as soon as
      reasonably practical.

     

    RIGHTS
      AND REMEDIES ON DEFAULT.
      If an
      Event of Default occurs under this Agreement, at any time thereafter, Lender
      shall have all the rights of a secured party under the West Virginia Uniform
      Commercial Code. In addition and without limitation, Lender may exercise anyone
      or more of the following rights and remedies:

     

    Accelerate
      Indebtedness.
      Lender
      may declare the entire Indebtedness, including any prepayment penalty which
      Grantor would be required to pay, immediately due and payable, without notice
      of
      any kind to Grantor.

     

    Assemble
      Collateral.
      Lender
      may require Grantor to deliver to Lender all or any portion of the Collateral
      and any and all certificates of title and other documents relating to the
      Collateral. Lender may require Grantor to assemble the Collateral and make
      it
      available to Lender at a place to be designated by Lender. Lender also shall
      have full power to enter upon the property of Grantor to take possession of
      and
      remove the Collateral. If the Collateral contains other goods not covered by
      this Agreement at the time of repossession, Grantor agrees Lender may take
      such
      other goods, provided that Lender makes reasonable efforts to return them to
      Grantor after repossession.

     

    Sell
      the Collateral.
      Lender
      shall have full power to sell, lease, transfer, or otherwise deal with the
      Collateral or proceeds thereof in Lender's own name or that of Grantor. Lender
      may sell the Collateral at public auction or private sale. Unless the Collateral
      threatens to decline speedily in value or is of a type customarily sold on
      a
      recognized market, Lender will give Grantor, and other persons as required
      by
      law, reasonable notice of the time and place of any public sale, or the time
      after which any private sale or any other disposition of the Collateral is
      to be
      made. However, no notice need be provided to any person who, after Event of
      Default occurs, enters into and authenticates an agreement waiving that person's
      right to notification of sale. The requirements of reasonable notice shall
      be
      met if such notice is given at least ten (10) days before the time of the sale
      or disposition. All expenses relating to the disposition of the Collateral,
      including without limitation the expenses of retaking, holding, insuring,
      preparing for sale and selling the Collateral, shall become a part of the
      Indebtedness secured by this Agreement and shall be payable on demand, with
      interest at the Note rate from date of expenditure until repaid.

     

    Appoint
      Receiver.
      Lender
      shall have the right to have a receiver appointed to take possession of all
      or
      any part of the Collateral, with the power to protect and preserve the
      Collateral, to operate the Collateral preceding foreclosure or sale, and to
      collect the Rents from the Collateral and apply the proceeds, over and above
      the
      cost of the receivership, against the Indebtedness. The receiver may serve
      without bond if permitted by law. Lender's right to the appointment of a
      receiver shall exist whether or not the apparent value of the Collateral exceeds
      the Indebtedness by a substantial amount. Employment by Lender shall not
      disqualify a person from serving as a receiver.

     

    Collect
      Revenues, Apply Accounts.
      Lender,
      either itself or through a receiver, may collect the payments, rents, income,
      and revenues from the Collateral. Lender may at any time in Lender's discretion
      transfer any Collateral into Lender's own name or that of Lender's nominee
      and
      receive the payments, rents, income, and revenues therefrom and hold the same
      as
      security for the Indebtedness or apply it to payment of the Indebtedness in
      such
      order of preference as Lender may determine. Insofar as the Collateral consists
      of accounts, general intangibles, insurance policies, instruments, chattel
      paper, choses in action, or similar property, Lender may demand, collect,
      receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
      the
      Collateral as Lender may determine, whether or not Indebtedness or Collateral
      is
      then due. For these purposes, Lender may, on behalf of and in the name of
      Grantor, receive, open and dispose of mail addressed to Grantor; change any
      address to which mail and payments are to be sent; and endorse notes, checks,
      drafts, money orders, documents of title, instruments and items pertaining
      to
      payment, shipment, or storage of any Collateral. To facilitate collection,
      Lender may notify account debtors and obligors on any Collateral to make
      payments directly to Lender.

     

    Obtain
      Deficiency.
      If
      Lender chooses to sell any or all of the Collateral, Lender may obtain a
      judgment against Grantor for any deficiency remaining on the Indebtedness due
      to
      Lender after application of all amounts received from the exercise of the rights
      provided in this Agreement. Grantor shall be liable for a deficiency even if
      the
      transaction described in this subsection is a sale of accounts or chattel
      paper.

     

    Other
      Rights and Remedies.
      Lender
      shall have all the rights and remedies of a secured creditor under the
      provisions of the Uniform Commercial Code, as may be amended from time to time.
      In addition, Lender shall have and may exercise any or all other rights and
      remedies it may have available at law, in equity, or otherwise.

     

    Election
      of Remedies.
      Except
      as may be prohibited by applicable law, all of Lender's rights and remedies,
      whether evidenced by this Agreement, the Related Documents, or by any other
      writing, shall be cumulative and may be exercised singularly or concurrently.
      Election by Lender to pursue any remedy shall not exclude pursuit of any other
      remedy, and an election to make expenditures or to take action to perform an
      obligation of Grantor under this Agreement, after Grantor's failure to perform,
      shall not affect Lender's right to declare a default and exercise its
      remedies.

    MISCELLANEOUS
      PROVISIONS.
      The
      following miscellaneous provisions are a part of this Agreement:

     

    Amendments.
      This
      Agreement, together with any Related Documents, constitutes the entire
      understanding and agreement of the parties as to the matters set forth in this
      Agreement. No alteration of or amendment to this Agreement shall be effective
      unless given in writing and signed by the party or parties sought to be charged
      or bound by the alteration or amendment.

     

    Attorneys'
      Fees; Expenses.
      Grantor
      agrees to pay upon demand all of Lender's costs and expenses, including Lender's
      attorneys' fees and Lender's legal expenses, incurred in connection with the
      enforcement of this Agreement. Lender may hire or pay someone else to help
      enforce this Agreement, and Grantor shall pay the costs and expenses of such
      enforcement. Costs and expenses include Lender's attorneys' fees and legal
      expenses whether or not there is a lawsuit, including attorneys' fees and legal
      expenses for bankruptcy proceedings (including efforts to modify or vacate
      any
      automatic stay or injunction), appeals, and any anticipated post-judgment
      collection services. Grantor also shall pay all court costs and such additional
      fees as may be directed by the court.

     

    Caption
      Headings. Caption
      headings in this Agreement are for convenience purposes only and are not to
      be
      used to interpret or define the provisions of this Agreement.

     

    Governing Law.
      With respect to procedural matters related to the perfection and enforcement
      of
      Lender’s rights against the Collateral, this Agreement will be governed by
      federal law applicable to Lender and to the extent not preempted by federal
      law,
      the laws of the State of West Virginia. In all other respects, this Agreement
      will be governed by the federal law applicable to Lender and, to the extent
      not
      preempted by federal law, the laws of the Commonwealth of Kentucky without
      regard to its conflicts of law provisions. However, if there ever is a question
      about whether any provision of this Agreement is valid or enforceable, the
      provision that is questioned will be governed by whichever state or federal
      law
      would find the provision to be valid and enforceable. The loan transaction
      that
      is evidenced by the Note and this Agreement has been applied for, considered,
      approved and made, and all necessary loan documents have been accepted by Lender
      in the Commonwealth of Kentucky. 

     

    Choice
      of Venue. If
      there
      is a lawsuit, Grantor agrees upon Lender’s request to submit to the jurisdiction
      of the courts of Pike County, Commonwealth of Kentucky. 

     

    

     

    

    COMMERCIAL
      SECURITY AGREEMENT (Continued)

    Loan
      No: 6010040275500005

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

     

    

    Page
      4

    Notices.
      Any
      notice required to be given under this Agreement shall be given in writing,
      and
      shall be effective when actually delivered, when actually received by
      telefacsimile (unless otherwise required by law), when deposited with a
      nationally recognized overnight courier, or, if mailed when deposited in the
      United States mail, as first class, certified or registered mail postage
      prepaid, directed to the addresses shown near the beginning of this Agreement.
      Any party may change its address for notices under this Agreement by giving
      formal written notice to the other parties, specifying that the purpose of
      the
      notice is to change the party's address. For notice purposes, Grantor agrees
      to
      keep Lender informed at all times of Grantor's current address. Unless otherwise
      provided or required by law, if there is more than one Grantor, any notice
      given
      by Lender to any Grantor is deemed to be notice given to all
      Grantors.

     

    Power
      of Attorney.
      Grantor
      hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose
      of executing any documents necessary to perfect, amend, or to continue the
      security interest granted in this Agreement or to demand termination of filings
      of other secured parties. Lender may at any time, and without further
      authorization from Grantor, file a carbon, photographic or other reproduction
      of
      any financing statement or of this Agreement for use as a financing statement.
      Grantor will reimburse Lender for all expenses for the perfection and the
      continuation of the perfection of Lender's security interest in the
      Collateral.

     

    Severability.
      If a
      court of competent jurisdiction finds any provision of this Agreement to be
      illegal, invalid, or unenforceable as to any circumstance, that finding shall
      not make the offending provision illegal, invalid, or unenforceable as to any
      other circumstance. If feasible, the offending provision shall be considered
      modified so that it becomes legal, valid and enforceable. If the offending
      provision cannot be so modified, it shall be considered deleted from this
      Agreement. Unless otherwise required by law, the illegality, invalidity, or
      unenforceability of any provision of this Agreement shall not affect the
      legality, validity or enforceability of any other provision of this
      Agreement.

     

    Successors
      and Assigns.
      Subject
      to any limitations stated in this Agreement on transfer of Grantor's interest,
      this Agreement shall be binding upon and inure to the benefit of the parties,
      their successors and assigns. If ownership of the Collateral becomes vested
      in a
      person other than Grantor, Lender, without notice to Grantor, may deal with
      Grantor's successors with reference to this Agreement and the Indebtedness
      by
      way of forbearance or extension without releasing Grantor from the obligations
      of this Agreement or liability under the Indebtedness.

     

    Survival
      of Representations and Warranties.
      All
      representations, warranties, and agreements made by Grantor in this Agreement
      shall survive the execution and delivery of this Agreement, shall be continuing
      in nature, and shall remain in full force and effect until such time as
      Grantor's Indebtedness shall be paid in full.

    Time
      is of the Essence.
      Time is
      of the essence in the performance of this Agreement.

     

    Waive
      Jury.
      All
      parties to this Agreement hereby waive the right to any jury trial in any
      action, proceeding, or counterclaim brought by any

    party
      against any other party.

     

    DEFINITIONS.
      The
      following capitalized words and terms shall have the following meanings when
      used in this Agreement. Unless specifically stated to the contrary, all
      references to dollar amounts shall mean amounts in lawful money of the United
      States of America. Words and terms used in the singular shall include the
      plural, and the plural shall include the singular, as the context may require.
      Words and terms not otherwise

    defined
      in this Agreement shall have the meanings attributed to such terms in the
      Uniform Commercial Code:

     

    Agreement.
      The
      word
      "Agreement" means this Commercial Security Agreement, as this Commercial
      Security Agreement may be amended or modified from time to time, together with
      all exhibits and schedules attached to this Commercial Security Agreement from
      time to time.

     

    Borrower.
      The
      word
      "Borrower" means CHAMPION INDUSTRIES, INC. and includes all co-signers and
      co-makers signing the Note and all their successors and assigns.

     

    Collateral.
      The word
      "Collateral" means all of Grantor's right, title and interest in and to all
      the
      Collateral as described in the Collateral Description section of this
      Agreement.

    Default.
      The
      word
      "Default" means the Default set forth in this Agreement in the section titled
      "Default".

     

    Environmental
      Laws. The
      words
      "Environmental Laws" mean any and all state, federal and local statutes,
      regulations and ordinances relating to the protection of human health or the
      environment, including without limitation the Comprehensive Environmental
      Response. Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
      9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act
      of
      1986, Pub. L. No. 99-499 ("SARA"). the Hazardous Materials Transportation Act,
      49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,
      42
      U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules
      or regulations adopted pursuant thereto.

     

    Event
      of Default. The
      words
      "Event of Default" mean any of the events of default set forth in this Agreement
      in the default section of this Agreement.

    Grantor.
      The word
      "Grantor" means CHAMPION INDUSTRIES. INC.

     

    Guaranty.
      The word
      "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation
      party to lender, including without limitation a guaranty of all or part of
      the
      Note.

     

    Hazardous
      Substances.
      The
      words "Hazardous Substances" mean materials that, because of their quantity,
      concentration or physical, chemical or infectious characteristics, may cause
      or
      pose a present or potential hazard to human health or the environment when
      improperly used, treated, stored, disposed of generated, manufactured,
      transported or otherwise handled. The words "Hazardous Substances" are used
      in
      their very broadest sense and include without limitation any and all hazardous
      or toxic substances, materials or waste as defined by or listed under the
      Environmental laws. The term "Hazardous Substances" also includes, without
      limitation, petroleum and petroleum by-products or any fraction thereof and
      asbestos.

     

    Indebtedness.
      The word
      "Indebtedness" means the indebtedness evidenced by the Note or Related
      Documents, including all principal and interest together with all other
      indebtedness and costs and expenses for which Grantor is responsible under
      this
      Agreement or under any of the Related Documents.

    Lender.
      The word
      "Lender" means COMMUNITY TRUST BANK, INC., its successors and
      assigns.

     

    Note.
      The
      word "Note" means the Note executed by CHAMPION INDUSTRIES INC in the principal
      amount of $1,200,000.00 dated July 28, 2006, together with all renewals of
      extensions of, modifications of, refinancings of, consolidations of, and
      substitutions for the note or credit agreement.

     

    Property.
      The word
      "Property" means all of Grantor's right, title and interest in and to all the
      Property as described in the "Collateral Description" section of this
      Agreement.

     

    Related
      Documents. The
      words
      "Related Documents" mean all promissory notes, credit agreements, loan
      agreements, environmental agreements, guaranties, security agreements,
      mortgages, deeds of trust, security deeds, collateral mortgages, and all other
      instruments, agreements and documents, whether now or hereafter existing,
      executed in connection with the Indebtedness.

     

    GRANTOR
      HAS READ AND UNDERSTOOD All THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT
      AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 28,
      2006.

    GRANTOR:

    CHAMPION
      INDUSTRIES, INC.

    By:

    TONEY
      K. ADKINS, President of CHAMPION INDUSTRIES, INC.

    X

     AUTHORIZED
      SIGNER

    COMMUNITY
      TRUST BANK, INC.

     

    No
      Waiver by Lender.
      Lender
      shall not be deemed to have waived any rights under this Agreement unless such
      waiver is given in writing and signed by Lender. No delay or omission on the
      part of Lender in exercising any right shall operate as a waiver of such right
      or any other right. A waiver by Lender of a provision of this Agreement shall
      not prejudice or constitute a waiver of Lender's right otherwise to demand
      strict compliance with that provision or any other provision of this Agreement.
      No prior waiver by Lender, nor any course of dealing between Lender and Grantor,
      shall constitute a waiver of any of Lender's rights or of any of Grantor's
      obligations as to any future transactions. Whenever the consent of Lender is
      required under this Agreement, the granting of such consent by Lender in any
      instance shall not constitute continuing consent to subsequent instances where
      such consent is required and in all cases such consent may be granted or
      withheld in the sole discretion of Lender.

     

    

     

    

    

    

     

    

    

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular loan or item. Any item above containing"
      * *
      *" has been omitted due to text length limitations.

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    Lender:

    Borrower: CHAMPION
      INDUSTRIES, INC. (TIN: 55-0717455)

    P.O.
      BOX 2968

    HUNTINGTON.
      WV 25728-2968

     

    

     

    AGREEMENT
      TO PROVIDE INSURANCE

     

    

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              6010040275500005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

     

    

     

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    

    INSURANCE
      REQUIREMENTS.
      Grantor,
      CHAMPION INDUSTRIES, INC. ("Grantor"), understands that insurance coverage
      is
      required in connection with the extending of a loan or the providing of other
      financial accommodations to Grantor by Lender. These requirements are set forth
      in the security documents for the loan. The following minimum insurance
      coverages must be provided on the following described collateral (the
      "Collateral"):

     

    Collateral:  HEIDELBERG
      COLOR PRINTING PRESS SM 74-6-P + L S/N 327630 WITH THE FOLLOWING ATTACHMENTS
      (1)
      DOM.ACC.HEAD FOR M7012V000/SUVAM7012V00, (1) S/W LICENSE PRE.INTERF. 74 VERSION
      S/N 12530 14566A AND (1) PRINECT PRE-PRESS INTERFACE
      LAUFWERK.

    Type:
      All
      risks, including fire, theft and liability.

    Amount:
      Full
      Insurable Value.

    Basis:
      Replacement value.

    Endorsements:
      Lender
      loss payable clause with stipulation that coverage will not be cancelled or
      diminished without a minimum of 30 days prior written notice to
      Lender.

    Deductibles:
      $500.00.

    Latest
      Delivery Date:
      By the
      loan closing date.

     

    INSURANCE
      COMPANY.
      Grantor
      may obtain insurance from any insurance company Grantor may choose that is
      reasonably acceptable to Lender. Grantor understands that credit may not be
      denied solely because insurance was not purchased through Lender.

     

    FAILURE
      TO PROVIDE INSURANCE.
      Grantor
      agrees to deliver to Lender, on the latest delivery date stated above, proof
      of
      the required insurance as provided above, with an effective date of March 30,
      2006, or earlier. UNLESS
      GRANTOR PROVIDES LENDER WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY
      GRANTOR'S AGREEMENT WITH LENDER, LENDER MAY PURCHASE INSURANCE AT GRANTOR'S
      EXPENSE TO PROTECT LENDER'S INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY,
      BUT
      NEED NOT, PROTECT GRANTOR'S INTERESTS. THE COVERAGE THAT LENDER PURCHASES MAY
      NOT PAY ANY CLAIM THAT GRANTOR MAKES, OR ANY CLAIM THAT IS MADE AGAINST GRANTOR
      IN CONNECTION WITH THE COLLATERAL. GRANTOR MAY LATER CANCEL ANY INSURANCE
      PURCHASED BY LENDER, BUT ONLY AFTER PROVIDING LENDER WITH EVIDENCE THAT GRANTOR
      HAS OBTAINED INSURANCE AS REQUIRED BY THEIR AGREEMENT. IF LENDER PURCHASES
      INSURANCE FOR THE COLLATERAL, GRANTOR WILL BE RESPONSIBLE FOR THE COSTS OF
      THAT
      INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES LENDER MAY IMPOSE IN
      CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF
      THE
      CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY
      BE
      ADDED TO GRANTOR'S TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE
      INSURANCE MAY BE MORE THAN THE COST OF INSURANCE GRANTOR MAY BE ABLE TO OBTAIN
      ON GRANTOR'S OWN.

    

    IN
      ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
      INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
      RESPONSIBILITY LAWS.

    

    AUTHORIZATION.
      For
      purposes of insurance coverage on the Collateral, Grantor authorizes Lender
      to
      provide to any person (including any insurance agent or
      company) all information Lender deems appropriate, whether regarding the
      Collateral, the loan or other financial accommodations, or both.

    

    GRANTOR
      ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
      INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 28,
      2006.

    CHAMPION
      INDUSTRIES, INC.

    By:

    TONEY
      K. ADKINS, President of CHAMPION INDUSTRIES, INC.

    

    
      GRANTOR:

    

    

    

    

    

    

    

    

    

     

    AGREEMENT
      TO PROVIDE INSURANCE

    Page
      2

    Loan
      No: 6010040275500005

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 

    

     

    (Continued)

     

    

    

    
      FOR
        LENDER USE ONLY

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    [Missing
      Graphic Reference]

     

    NOTICE
      OF FINAL AGREEMENT

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              6010040275500005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular loan or item. Any item above containing"
      * *
      *" has been omitted due to text length limitations.

    Borrower: CHAMPION
      INDUSTRIES, INC. (TIN: 55-0717455)

    P.O.
      BOX 2968

    HUNTINGTON.
      WV 25728-2968

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    Lender:

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 
	
              BY
                SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A)
                THE
                WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
                PARTIES,
                (B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND
                (C)
                THE WRITTEN LOAN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF
                ANY
                PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS
                OF
                THE PARTIES.

            
	
              As
                used in this Notice, the following terms have the following
                meanings:

              Loan.
                The term "Loan" means the following described loan: a Variable Rate
                Nondisclosable Loan to a Corporation for $1,200,000.00 due on July
                28,
                2011. The reference rate (Highest Prime Rate most recently published
                in
                “The Wall Street Journal’s money rates column” as the base rate on
                corporate loans at large U.S. money center commercial banks, currently
                8.250%), resulting in an initial rate of 8.250. 

               

              Loan
                Agreement.
                The term "Loan Agreement" means one or more promises, promissory
                notes,
                agreements, undertakings, security agreements, deeds of trust or
                other
                documents, or commitments, or any combination of those actions or
                documents, relating to the Loan, including without limitation the
                following:

               

              LOAN
                DOCUMENTS

            
	
              Corporate
                Resolution: CHAMPION INDUSTRIES, INC.

              Promissory
                Note

              WV
                National UCC Financing Statement (Rev. OS/22/02):

              Purchase
                Money Security Interest in (1) HEIDELBERG COLOR PRINTING PRESS SM
                74-6-P +
                L S/N 627630 WITH THE FOLLOWING ATTACHMENTS (1) DOM.ACC.HEAD FOR
                M7012V000/SUVAM7012V00, (1) S.W LICENSE PRE.INTERF. 74 VERSION S/N
                12530
                14566A AND (1) PRINECT PREPRESS INTERFACE OHNE LAUFWERK; owned by
                CHAMPION
                INDUSTRIES, INC. 

            	
              Business
                Loan Agreement

              WV
                Commercial Security Agreement: Purchase Money Security Interest in
                (1)
                HEIDELBERG COLOR PRINTING PRESS SM 74-6-P + L S/N 627630 WITH THE
                FOLLOWING ATTACHMENTS (1) DOM.ACC.HEAD FOR M7012V000/SUVAM7012V00,
                (1) S.W
                LICENSE PRE.INTERF. 74 VERSION S/N 12530 14566A AND (1) PRINECT PREPRESS
                INTERFACE OHNE LAUFWERK; owned by CHAMPION INDUSTRIES, INC. 

              Disbursement
                Request and Authorization

              Notice
                of Final Agreement

            
	
               

              Parties.
                The term "Parties" means COMMUNITY TRUST BANK, INC. and any and all
                entities or individuals who are obligated to repay the loan or have
                pledged property as security for the Loan, including without limitation
                the following:

               

              Borrower:CHAMPION
                INDUSTRIES, INC.

              Grantor(s):CHAMPION
                INDUSTRIES, INC.

            

    

    

    

    

    

    Each
      party who signs below other than Community Trust Bank, Inc., acknowledges,
      represents, and warrants to Community Trust Bank, Inc. that it has received,
      read, and understood this Notice of Final Agreement. This notice is dated July
      28, 2006.

    

    

    
      BORROWER:

    

    

    CHAMPION
      INDUSTRIES, INC.

    

    

    By:

    TONEY
      K. ADKINS, President of CHAMPION INDUSTRIES, INC.

    

    

    

     

    

     

    

     

    LENDER:

     

    

     

    COMMUNITY
      TRUST BANK, INC. 

     

    

     

    

     

    X__________________________________________

     

     AUTHORIZED
      SIGNER

     

     

    

    

    

    

    

    

    

    

    

    

    THIS
      BUSINESS LOAN AGREEMENT dated July 28,2006, is made and executed between
      CHAMPION INDUSTRIES, INC. ("Borrower") and COMMUNITY TRUST BANK, INC. ("Lender")
      on the following terms and conditions. Borrower has received prior commercial
      Loans from Lender or has applied to Lender for a commercial Loan or Loans or
      other financial accommodations, including those which may be described on any
      exhibit or schedule attached to this Agreement ("Loan"). Borrower understands
      and agrees that: (A) in granting, renewing. or extending any Loan, Lender is
      relying upon Borrower's representations, warranties, and agreements as set
      forth
      in this Agreement; (B) the granting, renewing, or extending of any Loan by
      Lender at all times shall be subject to Lender's sole judgment and discretion;
      and (C) all such Loans shall be and remain subject to the terms and conditions
      of this Agreement.

     

    TERM.
      This
      Agreement shall be effective as of July 28, 2006, and shall continue in full
      force and effect until such time as all of Borrower's Loans in favor of Lender
      have been paid in full, including principal, interest, costs, expenses,
      attorneys' fees, and other fees and charges, or until July 28, 2011.

     

    CONDITIONS
      PRECEDENT TO EACH ADVANCE.
      Lender's obligation to make the initial Advance and each subsequent Advance
      under this Agreement shall be subject to the fulfillment to Lender's
      satisfaction of all of the conditions set forth in this Agreement and in the
      Related Documents.

     

    Loan
      Documents.
      Borrower shall provide to Lender the following documents for the Loan: (1)
      the
      Note; (2) Security Agreements granting to Lender security interests in the
      Collateral; (3) financing statements and all other documents perfecting Lender's
      Security Interests; (4) evidence of insurance as required below; (5) together
      with all such Related Documents as Lender may require for the Loan; all in
      form
      and substance satisfactory to Lender and Lender's counsel.

     

    Borrower's
      Authorization.
      Borrower shall have provided in form and substance satisfactory to Lender
      properly certified resolutions, duly authorizing the execution and delivery
      of
      this Agreement, the Note and the Related Documents. In addition, Borrower shall
      have provided such other resolutions, authorizations, documents and instruments
      as Lender or its counsel, may require.

     

    Payment
      of Fees and Expenses.
      Borrower shall have paid to Lender all fees, charges, and other expenses which
      are then due and payable as specified in this Agreement or any Related
      Document.

     

    Representations
      and Warranties.
      The
      representations and warranties set forth in this Agreement, in the Related
      Documents, and in any document or certificate delivered to Lender under this
      Agreement are true and correct.

     

    No
      Event of Default.
      There
      shall not exist at the time of any Advance a condition which would constitute
      an
      Event of Default under this

    Agreement
      or under any Related Document.

     

    REPRESENTATIONS
      AND WARRANTIES.
      Borrower represents and warrants to Lender, as of the date of this Agreement,
      as
      of the date of each disbursement of Loan proceeds, as of the date of any
      renewal, extension or modification of any Loan and at all times any Indebtedness
      exists:

     

    Organization.
      Borrower
      is a corporation for profit which is, and at all times shall be, duly organized,
      validly existing, and in good standing under and by virtue of the laws of the
      State of West Virginia. Borrower is duly authorized to transact business in
      all
      other states in which Borrower is doing business, having obtained all necessary
      filings, governmental licenses and approvals for each state in which Borrower
      is
      doing business. Specifically, Borrower is, and at all times shall be, duly
      qualified as a foreign corporation in all states in which the failure to so
      qualify would have a material adverse effect on its business or financial
      condition. Borrower has the full power and authority to own its properties
      and
      to transact the business in which it is presently engaged or presently proposes
      to engage. Borrower maintains its principal office at 2450-90 FIRST AVENUE,
      HUNTINGTON, WV 25703. Unless Borrower has designated otherwise in writing,
      this
      is the principal office at which Borrower keeps its books and records including
      its records concerning the Collateral. Borrower will notify Lender prior to
      any
      change in the location of Borrower's state of organization or any change in
      Borrower's name. Borrower shall do all things necessary to preserve and to
      keep
      in full force and effect its existence, rights and privileges, and shall comply
      with all regulations, rules, ordinances, statutes, orders and decrees of any
      governmental or quasi-governmental authority or court applicable to Borrower
      and
      Borrower's business activities.

     

    Assumed
      Business Names.
      Borrower has filed or recorded all documents or filings required by law relating
      to all assumed business names used by Borrower. Excluding the name of Borrower,
      the following is a complete list of all assumed business names under which
      Borrower does business: None.

     

    

     

    

     

    

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              601004027550005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

    Borrower: CHAMPION
      INDUSTRIES INC (TIN: 55-0717455)

    POST
      OFFICE BOX 2968

    HUNTINGTON,
      WV 25728

    Lender:

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular Loan or item. Any item above containing"***"
      has been omitted due to text length limitations.

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

    

    Authorization.
      Borrower's execution, delivery, and performance of this Agreement and all the
      Related Documents have been duly authorized by all necessary action by Borrower
      and do not conflict with, result in a violation of, or constitute a default
      under (1) any provision of (a) Borrower's articles of incorporation or
      organization, or bylaws, or (b) any agreement or other instrument binding upon
      Borrower or (2) any law, governmental regulation, court decree, or order
      applicable to Borrower or to Borrower's properties.

     

    Financial
      Information.
      Each of
      Borrower's financial statements supplied to Lender truly and completely
      disclosed Borrower's financial condition as of the date of the statement, and
      there has been no material adverse change in Borrower's financial condition
      subsequent to the date of the most recent financial statement supplied to
      Lender. Borrower has no material contingent obligations except as disclosed
      in
      such financial statements.

     

    Legal
      Effect.
      This
      Agreement constitutes, and any instrument or agreement Borrower is required
      to
      give under this Agreement when delivered will constitute legal, valid, and
      binding obligations of Borrower enforceable against Borrower in accordance
      with
      their respective terms.

     

    Properties.
      Except
      as contemplated by this Agreement or as previously disclosed in Borrower's
      financial statements or in writing to Lender and as accepted by Lender, and
      except for property tax liens for taxes not presently due and payable, Borrower
      owns and has good title to all of Borrower's properties free and clear of all
      Security Interests, and has not executed any security documents or financing
      statements relating to such properties. All of Borrower's properties are titled
      in Borrower's legal name, and Borrower has not used or filed a financing
      statement under any other name for at least the last five (5)
      years.

     

    Hazardous
      Substances.
      Except
      as disclosed to and acknowledged by Lender in writing, Borrower represents
      and
      warrants that: (1) During the period of Borrower's ownership of the Collateral,
      there has been no use, generation, manufacture, storage, treatment, disposal,
      release or threatened release of any Hazardous Substance by any person on,
      under, about or from any of the Collateral. (2) Borrower has no knowledge of,
      or
      reason to believe that there has been (a) any breach or violation of any
      Environmental laws; (b) any use, generation, manufacture, storage, treatment,
      disposal, release or threatened release of any Hazardous Substance on, under,
      about or from the Collateral by any prior owners or occupants of any of the
      Collateral; or (c) any actual or threatened litigation or claims of any kind
      by
      any person relating to such matters. (3) Neither Borrower nor any tenant,
      contractor, agent or other authorized user of any of the Collateral shall use,
      generate, manufacture, store, treat, dispose of or release any Hazardous
      Substance on, under, about or from any of the Collateral; and any such activity
      shall be conducted in compliance with all applicable federal, state, and local
      laws, regulations, and ordinances, including without limitation all
      Environmental laws. Borrower authorizes Lender and its agents to enter upon
      the
      Collateral to make such inspections and tests as Lender may deem appropriate
      to
      determine compliance of the Collateral with this section of the Agreement.
      Any
      inspections or tests made by Lender shall be at Borrower's expense and for
      Lender's purposes only and shall not be construed to create any responsibility
      or liability on the part of Lender to Borrower or to any other person. The
      representations and warranties contained herein are based on Borrower's due
      diligence in investigating the Collateral for hazardous waste and Hazardous
      Substances. Borrower hereby (1) releases and waives any future claims against
      Lender for indemnity or contribution in the event Borrower becomes liable for
      cleanup or other costs under any such laws, and (2) agrees to indemnify and
      hold
      harmless Lender against any and all claims, losses, liabilities, damages,
      penalties, and expenses which Lender may directly or indirectly sustain or
      suffer resulting from a breach of this section of the Agreement or as a
      consequence of any use, generation, manufacture, storage, disposal, release
      or
      threatened release of a hazardous waste or substance on the Collateral. The
      provisions of this section of the Agreement, including the obligation to
      indemnify, shall survive the payment of the Indebtedness and the termination,
      expiration or satisfaction of this Agreement and shall not be affected by
      Lender's acquisition of any interest in any of the Collateral, whether by
      foreclosure or otherwise.

     

    Litigation
      and Claims.
      No
      litigation, claim, investigation, administrative proceeding or similar action
      (including those for unpaid taxes) against Borrower is pending or threatened,
      and no other event has occurred which may materially adversely affect Borrower's
      financial condition or properties, other than litigation, claims, or other
      events, if any, that have been disclosed to and acknowledged by Lender in
      writing.

    

    BUSINESS
      LOAN
      AGREEMENT

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    BUSINESS
      LOAN AGREEMENT (Continued)

    Page
      2

     

    Taxes.
      To the
      best of the Borrower’s knowledge, all of Borrower’s tax returns and reports that
      are or were required to be filed, have been filed, and all taxes, assessments
      and other governmental charges have been paid in full, except those presently
      being or to be contested by Borrower in good faith in the ordinary course of
      business and for which adequate reserves have been provided.

     

    Lien
      Priority.
      Unless
      otherwise previously disclosed to Lender in writing, Borrower has not entered
      into or granted any Security Agreements, or permitted the filing or attachment
      of any Security Interests on or affecting any of the Collateral directly or
      indirectly securing repayment of Borrower’s Loan and Note, that would be prior
      or that may in any way be superior to Lender’s Security Interests and rights in
      and to such Collateral.

     

    Binding
      Effect.
      This
      Agreement, the Note, all Security Agreements (if any), and all Related Documents
      are binding upon the signers thereof, as well as upon their successors,
      representatives and assigns, and are legally enforceable in accordance with
      their respective terms.

    AFFIRMATIVE
      COVENANTS.
      Borrower covenants and agrees with Lender that, so long as this Agreement
      remains in effect, Borrower will:

     

    Notices
      of Claims and Litigation.
      Promptly inform Lender in writing of (1) all material adverse changes in
      Borrower's financial condition, and (2) all existing and all threatened
      litigation, claims, investigations, administrative proceedings or similar
      actions affecting Borrower or any Guarantor which could materially affect the
      financial condition of Borrower or the financial condition of any
      Guarantor.

     

    Financial
      Records.
      Maintain its books and records in accordance with GAAP, applied on a consistent
      basis, and permit Lender to examine and audit Borrower's books and records
      at
      all reasonable times.

    Financial
      Statements.
      Furnish
      Lender with the following:

     

    Annual
      Statements.
      As soon
      as available, but in no event later than one-hundred-twenty (120) days after
      the
      end of each fiscal year, Borrower's balance sheet and income statement for
      the
      year ended, compiled by a certified public accountant satisfactory to
      Lender.

     

    Tax
      Returns.
      As soon
      as available, but in no event later than one-hundred-twenty (120) days after
      the
      applicable filing date for the tax reporting period ended, Federal and other
      governmental tax returns, prepared by a certified public accountant satisfactory
      to Lender.

     

    All
      financial reports required to be provided under this Agreement shall be prepared
      in accordance with GAAP, applied on a consistent basis, and certified by
      Borrower as being true and correct.

    Additional
      Information.
      Furnish
      such additional information and statements, as Lender may request from time
      to
      time.

     

    Insurance.
      Maintain fire and other risk insurance, public liability insurance, and such
      other insurance as Lender may require with respect to Borrower's properties
      and
      operations, in form, amounts, coverages and with insurance companies acceptable
      to Lender. Borrower, upon request of Lender, will deliver to Lender from time
      to
      time the policies or certificates of insurance in form satisfactory to Lender,
      including stipulations that coverages will not be cancelled or diminished
      without at least thirty (30) days prior written notice to Lender. Each insurance
      policy also shall include an endorsement providing that coverage in favor of
      Lender will not be impaired in any way by any act, omission or default of
      Borrower or any other person. In connection with all policies covering assets
      in
      which Lender holds or is offered a security interest for the Loans, Borrower
      will provide Lender with such Lender's loss payable or other endorsements as
      Lender may require.

     

    Insurance
      Reports.
      Furnish
      to Lender, upon request of Lender, reports on each existing insurance policy
      showing such information as Lender may reasonably request, including without
      limitation the following: (1) the name of the insurer; (2) the risks insured;
      (3) the amount of the policy; (4) the properties insured; (5) the then current
      property values on the basis of which insurance has been obtained, and the
      manner of determining those values; and (6) the expiration date of the policy.
      In addition, upon request of Lender (however not more often than annually).
      Borrower will have an independent appraiser satisfactory to Lender determine,
      as
      applicable, the actual cash value or replacement cost of any Collateral. The
      cost of such appraisal shall be paid by Borrower.

     

    Other
      Agreements.
      Comply
      with all terms and conditions of all other agreements, whether now or hereafter
      existing, between Borrower and any other party and notify Lender immediately
      in
      writing of any default in connection with any other such
      agreements.

     

    Loan
      Proceeds.
      Use all
      Loan proceeds solely for Borrower's business operations, unless specifically
      consented to the contrary by Lender in writing.

     

    Taxes,
      Charges and Liens.
      Pay and
      discharge when due all of its indebtedness and obligations, including without
      limitation all assessments, taxes, governmental charges, levies and liens,
      of
      every kind and nature, imposed upon Borrower or its properties, income, or
      profits, prior to the date on which penalties would attach, and all lawful
      claims that, if unpaid, might become a lien or charge upon any of Borrower's
      properties, income, or profits.

     

    Performance.
      Perform
      and comply, in a timely manner, with all terms, conditions, and provisions
      set
      forth in this Agreement, in the Related Documents, and in all other instruments
      and agreements between Borrower and Lender. Borrower shall notify Lender
      immediately in writing of any default in connection with any
      agreement.

     

    Operations.
      Maintain executive and management personnel with substantially the same
      qualifications and experience as the present executive and management personnel;
      provide written notice to Lender of any change in executive and management
      personnel; conduct its business affairs in a reasonable and prudent
      manner.

     

    Environmental
      Studies.
      Promptly conduct and complete, at Borrower's expense, all such investigations,
      studies, samplings and testings as may be requested by Lender or any
      governmental authority relative to any substance, or any waste or by-product
      of
      any substance defined as toxic or a hazardous substance under applicable
      federal, state, or local law, rule, regulation, order or directive, at or
      affecting any property or any facility owned, leased or used by
      Borrower.

     

    Compliance
      with Governmental Requirements.
      Comply
      with all laws, ordinances, and regulations, now or hereafter in effect, of
      all
      governmental authorities applicable to the conduct of Borrower's properties,
      businesses and operations, and to the use or occupancy of the Collateral,
      including without limitation, the Americans With Disabilities Act. Borrower
      may
      contest in good faith any such law, ordinance, or regulation and withhold
      compliance during any proceeding, including appropriate appeals, so long as
      Borrower has notified Lender in writing prior to doing so and so long as, in
      Lender's sole opinion, Lender's interests in the Collateral are not jeopardized.
      Lender may require Borrower to post adequate security or a surety bond,
      reasonably satisfactory to Lender, to protect Lender's interest.

     

    Inspection.
      Permit
      employees or agents of Lender at any reasonable time to inspect any and all
      Collateral for the Loan or Loans and Borrower's other properties and to examine
      or audit Borrower's books, accounts, and records and to make copies and
      memoranda of Borrower's books, accounts, and records. If Borrower now or at
      any
      time hereafter maintains any records (including without limitation computer
      generated records and computer software programs for the generation of such
      records) in the possession of a third party, Borrower, upon request of Lender,
      shall notify such party to permit Lender free access to such records at all
      reasonable times and to provide Lender with copies of any records it may
      request, all at Borrower's expense.

     

    Compliance
      Certificates.
      Unless
      waived in writing by Lender, provide Lender at least annually, with a
      certificate executed by Borrower’s chide financial officer, or other officer or
      person acceptable to Lender, certifying that the representations and warranties
      set forth in this Agreement are true and correct as of the date of the
      certificate and further certifying that, as of the date of the certificate,
      no
      Event of Default exists under this Agreement.

     

    Environmental
      Compliance and Reports.
      Borrower shall comply in all respects with any and all Environmental laws;
      not
      cause or permit to exist, as a result of an intentional or unintentional action
      or omission on Borrower's part or on the part of any third party, on property
      owned and/or occupied by Borrower, any environmental activity where damage
      may
      result to the environment, unless such environmental activity is pursuant to
      and
      in compliance with the conditions of a permit issued by the appropriate federal,
      state or local governmental authorities; shall furnish to Lender promptly and
      in
      any event within thirty (30) days after receipt thereof a copy of any notice,
      summons, lien, citation, directive, letter or other communication from any
      governmental agency or instrumentality concerning any intentional or
      unintentional action or omission on Borrower's part in connection with any
      environmental activity whether or not there is damage to the environment and/or
      other natural resources.

     

    Additional
      Assurances.
      Make,
      execute and deliver to Lender such promissory notes, mortgages, deeds of trust,
      security agreements, assignments, financing statements, instruments, documents
      and other agreements as Lender or its attorneys may reasonably request to
      evidence and secure the Loans and to perfect all Security
      Interests.

     

    LENDER'S
      EXPENDITURES.
      If any
      action or proceeding is commenced that would materially affect Lender's interest
      in the Collateral or if Borrower fails to comply with any provision of this
      Agreement or any Related Documents, including but not limited to Borrower's
      failure to discharge or pay when due any amounts Borrower is required to
      discharge or pay under this Agreement or any Related Documents, Lender on
      Borrower's behalf may (but shall not be obligated to) take any action that
      Lender deems appropriate, including but not limited to discharging or paying
      all
      taxes, liens, security interests, encumbrances and other claims, at any time
      levied or placed on any Collateral and paying all costs for insuring,
      maintaining and preserving any Collateral. All such expenditures incurred or
      paid by Lender for such purposes will then bear interest at the rate charged
      under the Note from the date incurred or paid by Lender to the date of repayment
      by Borrower. All such expenses will become a part of the indebtedness and,
      at
      Lender's option, will (A) be payable on demand; (B) be added to the balance
      of
      the Note and be apportioned among and be payable with any installment payments
      to become due during either (1) the term of any applicable insurance policy;
      or
      (2) the remaining term of the Note; or (C) be treated as a balloon payment
      which
      will be due and payable at the Note's maturity.

    Loan
      No: 6010040275500005

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 

    

    

    BUSINESS
      LOAN AGREEMENT (Continued)

    Loan
      No: 6010040275500005

    Page
      3

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 

    

    

    

    NEGATIVE
      COVENANTS. Borrow
      covenants and agrees with Lender that while this Agreement is in effect,
      Borrower shall not, without prior written consent of Lender:

    

    Indebtedness
      and Liens. (1)
      Except for trade debt incurred in the normal course of business and indebtedness
      to Lender contemplated by this Agreement, create, incur, or assume indebtedness
      for borrowed money, including capital leases, (2) sell, transfer, mortgage,
      assign, pledge, lease, grant a security interest in, or encumber any of the
      Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with
      recourse any of Borrower’s accounts, except to Lender.

    

    Continuity
      of Operations.
      (1)
      Engage in any business activities substantially different than those in which
      Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer,
      acquire or consolidate with any other entity, change its name, dissolve or
      transferor sell the Collateral out of the ordinary course of business, or (3)
      pay any dividends on Borrower’s stock (other than dividends payable in its
      stock) provided, however, that notwithstanding the foregoing, but only so long
      as no Event of Default has occurred and is continuing or would result from
      the
      payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined in
      the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
      on its stock to its shareholders from time to time in amounts necessary to
      enable the shareholder to pay income taxes and make estimated income tax
      payments to satisfy their liabilities under federal and state law which arise
      solely from their status as Shareholders of a Subchapter S Corporation because
      of their ownership of share of Borrower’s stock, or purchase or retire any of
      Borrower’s outstanding share or alter or amend Borrower’s capital
      structure.

    

    Loans,
      Acquisitions and Guaranties. (1)
      Loan,
      invest in or advance money or assets to any other person, enterprise or entity,
      (2) purchase, create or acquire any interest in any other enterprise or entity,
      or (3) incur any obligation as surety to guarantor other than in the ordinary
      course of business.

    

    Agreements.
      Borrower
      will not enter into any agreement containing any provisions which would be
      violated or breached by the performance of Borrower’s obligations under this
      Agreement or in connection herewith.

    

     

    CESSATION
      OF ADVANCES.
      If
      Lender has made any commitment to make any Loan to Borrower, whether under
      this
      Agreement or under any other agreement, Lender shall have no obligation to
      make
      Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
      is
      in default under the terms of this Agreement or any of the Related Documents
      or
      any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower
      or any Guarantor dies, becomes incompetent or becomes insolvent, files a
      petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C)
      there occurs a material adverse change in Borrower's financial condition, in
      the
      financial condition of any Guarantor, or in the value of any Collateral securing
      any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit,
      modify or revoke such Guarantor's guaranty of the Loan or any other Loan with
      Lender; or (E) Lender in good faith deems itself insecure, even though no Event
      of Default shall have occurred.

    

    RIGHT
      OF SETOFF.
      To the
      extent permitted by applicable law, Lender reserves a right of setoff in all
      Borrower's accounts with Lender (whether checking, savings, or some other
      account). This includes all accounts Borrower holds jointly with someone else
      and all accounts Borrower may open in the future. However, this does not include
      any IRA or Keogh accounts, or any trust accounts for which setoff would be
      prohibited by law. Borrower authorizes Lender, to the extent permitted by
      applicable law, to charge or setoff all sums owing on the Indebtedness against
      any and all such accounts.

    

    DEFAULT.
      Each of
      the following shall constitute an Event of Default under this
      Agreement:

    

    Payment
      Default.
      Borrower fails to make any payment when due under the Loan.

     

    

     

    Other
      Defaults.
      Borrower fails to comply with or to perform any other term, obligation, covenant
      or condition contained in this Agreement or in any of the Related Documents
      or
      to comply with or to perform any term, obligation, covenant or condition
      contained in any other agreement between Lender and Borrower.

    

    Default
      in Favor of Third Parties.
      Borrower or any Grantor defaults under any Loan, extension of credit, security
      agreement, purchase or sales agreement, or any other agreement, in favor of
      any
      other creditor or person that may materially affect any of Borrower's or any
      Grantor's property or Borrower's or any Grantor's ability to repay the Loans
      or
      perform their respective obligations under this Agreement or any of the Related
      Documents.

    

    False
      Statements.
      Any
      warranty, representation or statement made or furnished to Lender by Borrower
      or
      on Borrower's behalf under this Agreement or the Related Documents is false
      or
      misleading in any material respect, either now or at the time made or furnished
      or becomes false or misleading at any time thereafter.

    

    Insolvency.
      The
      dissolution or termination of Borrower's existence as a going business, the
      insolvency of Borrower, the appointment of a receiver for any part of Borrower's
      property, any assignment for the benefit of creditors, any type of creditor
      workout, or the commencement of any proceeding under any bankruptcy or
      insolvency laws by or against Borrower.

    

    Defective
      Collateralization.
      This
      Agreement or any of the Related Documents ceases to be in full force and effect
      (including failure of any collateral document to create a valid and perfected
      security interest or lien) at any time and for any reason.

    

    Creditor
      or Forfeiture Proceedings.
      Commencement of foreclosure or forfeiture proceedings, whether by judicial
      proceeding, self-help, repossession or any other method, by any creditor of
      Borrower or by any governmental agency against any collateral securing the
      Loan.
      This includes a garnishment of any of Borrower's accounts, including deposit
      accounts, with Lender. However, this Event of Default shall not apply if there
      is a good faith dispute by Borrower as to the validity or reasonableness of
      the
      claim which is the basis of the creditor or forfeiture proceeding and if
      Borrower gives Lender written notice of the creditor or forfeiture proceeding
      and deposits with Lender monies or a surety bond for the creditor or forfeiture
      proceeding, in an amount determined by Lender, in its sole discretion, as being
      an adequate reserve or bond for the dispute.

    

    Events
      Affecting Guarantor.
      Any of
      the preceding events occurs with respect to any Guarantor of any of the
      Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
      disputes the validity of, or liability under, any Guaranty of the Indebtedness.
      In the event of a death, Lender, at its option, may, but shall not be required
      to, permit the Guarantor's estate to assume unconditionally the obligations
      arising under the guaranty in a manner satisfactory to Lender, and, in doing
      so,
      cure any Event of Default.

    

    Change
      in Ownership.
      Any
      change in ownership of twenty-five percent (25%) or more of the common stock
      of
      Borrower.

    

    Adverse
      Change.
      A
      material adverse change occurs in Borrower's financial condition, or Lender
      believes the prospect of payment or performance of the Loan is
      impaired.

    

    Insecurity.
      Lender
      in good faith believes itself insecure.

    

    Right
      to Cure.
      If any
      default, other than a default on Indebtedness, is curable and if Borrower or
      Grantor, as the case may be, has not been given a notice of a similar default
      within the preceding twelve (12) months, it may be cured if Borrower or Grantor,
      as the case may be, after receiving written notice from Lender demanding cure
      of
      such default: (1) cure the default within ten (10) days; or (2) if the cure
      requires more than ten (10) days, immediately initiate steps which Lender deems
      in Lender's sole discretion to be sufficient to cure the default and thereafter
      continue and complete all reasonable and necessary steps sufficient to produce
      compliance as soon as reasonably practical.

    

    EFFECT
      OF AN EVENT OF DEFAULT.
      If any
      Event of Default shall occur, except where otherwise provided in this Agreement
      or the Related Documents, all commitments and obligations of Lender under this
      Agreement or the Related Documents or any other agreement immediately will
      terminate (including any obligation to make further Loan Advances or
      disbursements), and, at Lender's option, all Indebtedness immediately will
      become due and payable, all without notice of any kind to Borrower, except
      that
      in the case of an Event of Default of the type described in the "Insolvency"
      subsection above, such acceleration shall be automatic and not optional. In
      addition, Lender shall have all the rights and remedies provided in the Related
      Documents or available at law, in equity, or otherwise. Except as may be
      prohibited by applicable law, all of Lender's rights and remedies shall be
      cumulative and may be exercised singularly or concurrently. Election by Lender
      to pursue any remedy shall not exclude pursuit of any other remedy, and an
      election to make expenditures or to take action to perform an obligation of
      Borrower or of any Grantor shall not affect Lender's right to declare a default
      and to exercise its rights and remedies.

    

    

    MISCELLANEOUS
      PROVISIONS.
      The
      following miscellaneous provisions are a part of this Agreement:

    

    

    

    BUSINESS
      LOAN AGREEMENT (Continued)

    Page
      4

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 

    

    

    

    

    Amendments.
      This
      Agreement, together with any Related Documents, constitutes the entire
      understanding and agreement of the parties as to the matters set forth in this
      Agreement. No alteration of or amendment to this Agreement shall be effective
      unless given in writing and signed by the party or parties sought to be charged
      or bound by the alteration or amendment.

    

    Attorneys'
      Fees; Expenses.
      Borrower agrees to pay upon demand all of Lender's costs and expenses, including
      Lender's attorneys' fees and Lender's legal expenses, incurred in connection
      with the enforcement of this Agreement. Lender may hire or pay someone else
      to
      help enforce this Agreement, and Borrower shall pay the costs and expenses
      of
      such enforcement. Costs and expenses include Lender's attorneys' fees and legal
      expenses whether or not there is a lawsuit, including attorneys' fees and legal
      expenses for bankruptcy proceedings (including efforts to modify or vacate
      any
      automatic stay or injunction), appeals, and any anticipated post-judgment
      collection services. Borrower also shall pay all court costs and such additional
      fees as may be directed by the court.

    

    Caption
      Headings.
      Caption
      headings in this Agreement are for convenience purposes only and are not to
      be
      used to interpret or define the provisions of this Agreement.

    

    Consent
      to Loan Participation.
      Borrower agrees and consents to Lender's sale or transfer, whether now or later,
      of one or more participation interests in the Loan to one or more purchasers,
      whether related or unrelated to Lender. Lender may provide, without any
      imitation whatsoever, to anyone or more purchasers, or potential purchasers,
      any
      information or knowledge Lender may have about Borrower or about any other
      matter relating to the Loan, and Borrower hereby waives any rights to privacy
      Borrower may have with respect to such matters. Borrower additionally waives
      any
      and all notices of sale of participation interests, as well as all notices
      of
      any repurchase of such participation interests. Borrower also agrees that the
      purchasers of any such participation interests will be considered as the
      absolute owners of such interests in the Loan and will have all the rights
      granted under the participation agreement or agreements governing the sale
      of
      such participation interests. Borrower further waives all rights of offset
      or
      counterclaim that it may have now or later against Lender or against any
      purchaser of such a participation interest and unconditionally agrees that
      either Lender or such purchaser may enforce Borrower's obligation under the
      Loan
      irrespective of the failure or insolvency of any holder of any interest in
      the
      Loan. Borrower further agrees that the purchaser of any such participation
      interests may enforce its interests irrespective of any personal claims or
      defenses that Borrower may have against Lender.

    

    Governing
      Law. This Agreement will be governed by federal law applicable to Lender and,
      to
      the extent not preempted by federal law, the laws of the Commonwealth of
      Kentucky without regard to its conflicts of law provisions. This Agreement
      has
      been accepted by Lender in the Commonwealth of Kentucky.

    

    No
      Waiver by Lender.
      Lender
      shall not be deemed to have waived any rights under this Agreement unless such
      waiver is given in writing and signed by Lender. No delay or omission on the
      part of Lender in exercising any right shall operate as a waiver of such right
      or any other right. A waiver by Lender of a provision of this Agreement shall
      not prejudice or constitute a waiver of Lender's right otherwise to demand
      strict compliance with that provision or any other provision of this Agreement.
      No prior waiver by Lender, nor any course of dealing between Lender and
      Borrower, or between Lender and any Grantor, shall constitute a waiver of any
      of
      Lender's rights or of any of Borrower's or any Grantor's obligations as to
      any
      future transactions. Whenever the consent of Lender is required under this
      Agreement, the granting of such consent by Lender in any instance shall not
      constitute continuing consent to subsequent instances where such consent is
      required and in all cases such consent may be granted or withheld in the sole
      discretion of Lender.

     

    Notices.
      Any
      notice required to be given under this Agreement shall be given in writing,
      and
      shall be effective when actually delivered, when actually received by
      telefacsimile (unless otherwise required by law), when deposited with a
      nationally recognized overnight courier, or, if mailed, when deposited in the
      United States mail, as first class, certified or registered mail postage
      prepaid, directed to the addresses shown near the beginning of this Agreement.
      Any party may change its address for notices under this Agreement by giving
      formal written notice to the other parties, specifying that the purpose of
      the
      notice is to change the party's address. For notice purposes, Borrower agrees
      to
      keep Lender informed at all times of Borrower's current address. Unless
      otherwise provided or required by law, if there is more than one Borrower,
      any
      notice given by Lender to any Borrower is deemed to be notice given to all
      Borrowers.

     

    Severability.
      If a
      court of competent jurisdiction finds any provision of this Agreement to be
      illegal, invalid, or unenforceable as to any circumstance, that finding shall
      not make the offending provision illegal, invalid, or unenforceable as to any
      other circumstance. If feasible, the offending provision shall be considered
      modified so that it becomes legal, valid and enforceable. If the offending
      provision cannot be so modified, it shall be considered deleted from this
      Agreement. Unless otherwise required by law, the illegality, invalidity, or
      unenforceability of any provision of this Agreement shall not affect the
      legality, validity or enforceability of any other provision of this
      Agreement.

     

    Subsidiaries
      and Affiliates of Borrower.
      To the
      extent the context of any provisions of this Agreement makes it appropriate,
      including without limitation any representation, warranty or covenant, the
      word
      "Borrower" as used in this Agreement shall include all of Borrower's
      subsidiaries and affiliates. Notwithstanding the foregoing however, under no
      circumstances shall this Agreement be construed to require Lender to make any
      Loan or other financial accommodation to any of Borrower's subsidiaries or
      affiliates.

     

    Successors
      and Assigns.
      All
      covenants and agreements by or on behalf of Borrower contained in this Agreement
      or any Related Documents shall bind Borrower's successors and assigns and shall
      inure to the benefit of Lender and its successors and assigns. Borrower shall
      not, however, have the right to assign Borrower's rights under this Agreement
      or
      any interest therein, without the prior written consent of Lender.

     

    Survival
      of Representations and Warranties.
      Borrower understands and agrees that in making the Loan, Lender is relying
      on
      all representations, warranties, and covenants made by Borrower in this
      Agreement or in any certificate or other instrument delivered by Borrower to
      Lender under this Agreement or the Related Documents. Borrower further agrees
      that regardless of any investigation made by Lender, all such representations,
      warranties and covenants will survive the making of the Loan and delivery to
      Lender of the Related Documents, shall be continuing in nature, and shall remain
      in full force and effect until such time as Borrower's Indebtedness shall be
      paid in full, or until this Agreement shall be terminated in the manner provided
      above, whichever is the last to occur.

    

    Time
      is of the Essence.
      Time is
      of the essence in the performance of this Agreement. 

    

    Waive
      Jury. All parties to this Agreement hereby waive the right to any jury trial
      in
      any action, proceeding, or counterclaim brought by any party against any other
      party.

    

    

    

    

    

    

    

    

    Choice
      of Venue.
      If there
      is a lawsuit, Borrower agrees upon Lender’s request to submit tot he
      jurisdiction of the courts of Pike County, Commonwealth of
      Kentucky.

    
      DEFINITIONS.

    

    Loan
      No: 6010040275500005

    

    

    

    

    Page
      5

    BUSINESS
      LOAN AGREEMENT (Continued)

    Loan
      No: 6010040275500005

    

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	 

    

    Security
      Interest.
      The
      words "Security Interest" mean, without limitation, any and all types of
      collateral security, present and future, whether in the form of a lien, charge,
      encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop
      pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's
      lien, equipment trust, conditional sale, trust receipt, lien or title retention
      contract, lease or consignment intended as a security device, or any other
      security or lien interest whatsoever whether created by law, contract, or
      otherwise.

     

    BORROWER
      ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
      AND
      BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JULY 28,
      2006.

    

    GAAP.
      The word
      "GAAP" means generally accepted accounting principles.

    Grantor.
      The
      word "Grantor" means each and all of the persons or entities granting a Security
      Interest in any Collateral for the Loan, including without limitation all
      Borrowers granting such a Security Interest.

    Guarantor.
      The
      word "Guarantor" means any guarantor, surety, or accommodation party of any
      or
      all of the Loan.

    Guaranty.
      The
      word "Guaranty" means the guaranty from Guarantor to Lender, including without
      limitation a guaranty of all or part of the Note.

    Hazardous
      Substances.
      The
      words "Hazardous Substances" mean materials that, because of their quantity,
      concentration or physical, chemical or infectious characteristics, may cause
      or
      pose a present or potential hazard to human health or the environment when
      improperly used, treated, stored, disposed of, generated, manufactured,
      transported or otherwise handled. The words "Hazardous Substances" are used
      in
      their very broadest sense and include without limitation any and all hazardous
      or toxic substances, materials or waste as defined by or listed under the
      Environmental Laws. The term "Hazardous Substances" also includes, without
      limitation, petroleum and petroleum by-products or any fraction thereof and
      asbestos.

    Indebtedness.
      The
      word "Indebtedness" means the indebtedness evidenced by the Note or Related
      Documents, including all principal and interest together with all other
      indebtedness and costs and expenses for which Borrower is responsible under
      this
      Agreement or under any of the Related Documents.

    Lender.
      The
      word "Lender" means COMMUNITY TRUST BANK, INC., its successor and assigns.
      

    Loan.
      The word
      "Loan" means any and all Loans and financial accommodations from Lender to
      Borrower whether now or hereafter existing, and however evidenced, including
      without limitation those Loans and financial accommodations described herein
      or
      described on any exhibit or schedule attached to this Agreement from time to
      time.

    Note.
      The word
      "Note" means the Note executed by CHAMPION INDUSTRIES,INC. in the principal
      amount of $1,200,000.00 dated July 28, 2006, together with all renewals of,
      extensions of, modifications of, refinancings of, consolidations of, and
      substitutions for the note or credit agreement.

    Permitted
      Liens.
      The
      words “Permitted Liens” mean (1) liens and security interests securing
      Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments,
      or
      similar charges either not yet due or being contested in good faith; (3) liens
      of materialmen, mechanics, warehousemen, or carriers, or other like liens
      arising in the ordinary course of business and securing obligations which are
      not yet delinquent; (4) purchase money liens or purchase money security
      interests upon or in any property acquired or held by Borrower in the ordinary
      course of business to secure indebtedness outstanding on the date of this
      Agreement or permitted to be incurred under the paragraph of this Agreement
      titled “Indebtedness and Liens”; (5) liens and security interests which as of
      the date of this Agreement, have been disclosed to and approved by the Lender
      in
      writing; and (6) those liens and security interests which in the aggregate
      constitute an immaterial and insignificant monetary amount with respect to
      the
      net value of Borrower’s assets. 

    Related
      Documents.
      The
      words "Related Documents" mean all promissory notes, credit agreements, Loan
      agreements, environmental agreements, guaranties, security agreements,
      mortgages, deeds of trust, security deeds, collateral mortgages, and all other
      instruments, agreements and documents, whether now or hereafter existing,
      executed in connection with the Loan.

    Security
      Agreement.
      The
      words "Security Agreement" mean and include without limitation any agreements,
      promises, covenants, arrangements, understandings or other agreements, whether
      created by law, contract, or otherwise, evidencing, governing, representing,
      or
      creating a. Security Interest.

    

    

    

    

    

    

    
      BORROWER:

    

    

    

    

    CHAMPION
      INDUSTRIES, INC.

    

    By:

    TONEY
      K. ADKINS, President of CHAMPION INDUSTRIES, INC.

    

    

     

    

     

    

     

    LENDER:

     

    

     

    COMMUNITY
      TRUST BANK, INC. 

     

    

     

    

     

    X__________________________________________

     

     AUTHORIZED
      SIGNER

     

     

    

    

    

    

    
      	
              Principal

              $1,200,000.00

            	
              Loan
                Date

              07-28-2006

            	
              Maturity

              07-28-2011

            	
              Loan
                No.

              6010040275500005

            	
              Call
                / Coll

              25

            	
              Account

            	
              Officer

              906

            	
              Initials

            

    

    COMMUNITY
      TRUST BANK, INC.

    COMMERCIAL
      LENDING (PIKEVILLE MAIN)

    346
      NORTH MAYO TRAIL

    P.O.
      BOX 2947

    PIKEVILLE,
      KY 41502-2947

    

    DISBURSEMENT
      REQUEST AND AUTHORIZATION

    

    References
      in the shaded area are for Lender's use only and do not limit the applicability
      of this document to any particular loan or item. Any item above containing
      "***"
      has been omitted due to text length limitations.

    Borrower: CHAMPION
      INDUSTRIES INC (TIN: 55-0717455)

    POST
      OFFICE BOX 2968

    HUNTINGTON,
      WV 25728

    Lender:

    
      	o  	
              Personal,
                Family, or Household Purposes or Personal Investment.
                

            

    

    
      	x  	
              Business
                (Including Real Estate
                Investment).

            

    

    SPECIFIC
      PURPOSE.
      The
      specific purpose of this loan is: Financing new printing equipment.

     

    DISBURSEMENT
      INSTRUCTIONS.
      Borrower
      understands that no loan proceeds will be disbursed until all of Lender's
      conditions for making the

    loan
      have
      been satisfied. Please disburse the loan proceeds of $1,200,000.00 as
      follows:

    Amount
      paid to Borrower directly:     

    $196,850.00
      Lender's Check # 220961    $196,850.00

    

     

    Other
      Charges Financed:       

    $1,003,150.00
      to Heidelberg USA, Inc.   
      $1,003,150.00

    

    Note
      Principal:      
      $1,200,000.00 

     

    FINANCIAL
      CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS
      TO
      LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE
      HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
      DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
      AUTHORIZATION IS DATED JULY 28, 2006.

    BORROWER:

    
      	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            

    

     

    

     LOAN
      TYPE.
      This is
      a Variable Rate Nondisclosable Loan to a Corporation for $1,200,000.00 due
      on
      July 28, 2011. The reference rate (Highest Prime Rate most recently published
      in
“The Wall Street Journal’s money rates column” as the vase rate on corporate
      loans at large U.S. money center commercial banks, currently 8.250%), resulting
      in an initial rate of 8.250.

    

     PRIMARY
      PURPOSE OF LOAN.
      The
      primary purpose of this loan is for:

    Prepaid
      Finance Charges Paid In Cash:    
      $0.00

     

     

    Other
      Charges Paid in Cash      
      $20.00 

    $20.00
      Recording    

    

    Total
      Charges Paid In Cash      
      $20.00 

     

    By:

    TONEY
      K. ADKINS, President of CHAMPION INDUSTRIES, INC.

    CHAMPION
      INDUSTRIES, INC.

    
      	
              
                CHARGES
                  PAID IN CASH.

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