**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K/A**

**(Amendment No. 1)**

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934**

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 

Commission file number 0-14800 

**X-RITE, INCORPORATED**

 

 

 

**Michigan**

 

**38-1737300**

**(State of Incorporation)**

 

**(I.R.S. Employer Identification No.)**

**3100 44th Street S.W., Grandville, Michigan 49418**

**(Address of principal executive offices)**

**616-534-7663**

**(Registrant’s telephone number, including area code)**

**Securities registered pursuant to Section** **12(b) of the Act: (none)**

**Securities registered pursuant to Section** **12(g) of the Act:**

**Common Stock, par value $.10 per share**

**(Title of Class)**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    o  Yes    x  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section15 (d) of the Act.    o  Yes    x  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one): 

 

Large accelerated filer  o

 

Accelerated filer  x

 

Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)  

o  Yes  

x  No

On April 25, 2006, the number of outstanding shares of the registrant’s common stock, par value $.10 per share, was 21,339,657.

The aggregate market value of the common stock held by non-affiliates of the registrant (i.e., excluding shares held by executive officers, directors and control persons as defined in Rule 405, 17 CFR 230.405) as of the last business day of the second quarter of the Company’s fiscal year was $242,530,779 computed at the closing price on that date. 

**EXPLANATORY NOTE**

This Amendment No. 1 on Form 10-K/A (this “Amendment”) is being filed to amend the Annual Report on Form 10-K of X-Rite, Incorporated for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission on March 8, 2006  (the “Original 10-K”).  The purpose of this Amendment is to amend Items 10, 11, 12, 13 and 14 to include information that was originally intended to be incorporated by reference to our proxy statement for the 2006 annual meeting of shareholders.  Unless otherwise stated, all information contained in this Amendment is as of March 8, 2006, the filing date of our Original 10-K.  We have not updated the disclosures contained in the Original 10-K to reflect any events that have occurred after the filing date of our Original 10-K.

 

 

**FORM 10-K/A**

**X-Rite, Incorporated**

**For The Year-Ended December** **31, 2005**

**Table of Contents**

**Part**

  

**Topic**

  

**Page**

 

 

 

**Part** **III**

  

 

  

 

 

 

 

Item 10

  

Directors and Executive Officers of the Registrant

  

3

 

 

 

Item 11

  

Executive Compensation

  

5

 

 

 

Item 12

  

Security Ownership of Certain Beneficial Owners and Management

  

9

 

 

 

Item 13

  

Certain Relationships and Related Transactions

  

11

 

 

 

Item 14

  

Principal Accounting Fees and Services

  

12

 

 

 

 

  

Signatures

  

13

 

 

 

 

  

Exhibit Index

  

14

 

 

**PART III**

**ITEM** **10.**

**DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

**(a)** **Directors**

The Company’s Articles of Incorporation specify that the Board of Directors shall consist of at least six (6), but not more than nine (9) members, with the exact number to be fixed by the Board from time to time. The Board currently consists of eight (8) members. The Articles also specify that the Board of Directors be divided into three classes, with the directors of the classes to hold office for staggered terms of three (3) years each.

 

The content of the following table relating to age and business experience is based upon information furnished to the Company by the nominees and directors as of March 1, 2006. 

 

 

**Directors Whose Terms Expire in 2006**

 

Michael C. Ferrara (63) is the CEO and President of the Company and has held that position since July of 2003. For the period June 2001 to 2003, he served as President and COO of the Company. Previously, he was the President of Marine Optical Group, a worldwide design and marketing company in the eyewear business headquartered in Boston, Massachusetts, and he held that position for more than five years.

 

Director since July 2003

Paul R. Sylvester (46) is CEO and President of Manatron, Inc., a publicly traded company headquartered in Michigan that specializes in local government software and services. He has held that position since 1996, and originally joined Manatron in 1987 as its Vice President of Finance and CFO. He is a CPA and has served on Manatron’s Board of Directors since 1987.    

Director since January 2003

Chairman of the Audit Committee and Member of Compensation Committee

Mark D. Weishaar (48) is CEO and President of Sturgis Molded Products, a custom injection molding company headquartered in Michigan, and has held that position since 1997. Previously, he was Vice President of Business Development at Moore Corporation Limited, a multi-national business forms printer.  Mr. Weishaar is a CPA and served as a Partner and Member of the Board of Directors for BDO Seidman, LLP where he worked for 15 years in various capacities.

 

Director since January 2003

Member of the Audit Committee

 

**Directors Whose Terms Expire in 2007**

 

Peter M. Banks (68) is the President of the Institute for the Future, a non-profit research group located in Menlo Park, CA.  From April 2003 to January 2004, he was a co-founder, director and CEO of Akonni Biosystems, Inc., a startup venture headquartered in Gregory, Michigan. Prior to that, he had retired in 2000 from ERIM International Inc., a high technology research and development defense systems company headquartered in Michigan, following its purchase by the Veridian Corporation of Washington, D.C. He continued to work as a part-time consultant with Veridian through September of 2002.  He currently serves as a director of Tecumseh Products Company, a publicly traded company.

 

Director since 1998

Member of the Nominating & Governance Committee and Compensation Committee

 

 

 

 

L. Peter Frieder (62) is the President and CEO of Gentex Corporation, a designer, developer and manufacturer of integrated life support systems for human protection and enhanced human performance headquartered in Carbondale, Pennsylvania.  He has held that position for more than five years.  Mr. Frieder also serves as a Senior Vice President for U.S. Business Development for Essilor, a publicly traded company on the Paris Stock Exchange, which designs and manufactures corrective lenses worldwide.

 

Director since November 2003

Member of the Nominating & Governance Committee

Ronald A. VandenBerg (66) is a general business consultant. He served in several senior management positions for more than five years, including Senior Vice President at Donnelly Corporation (now Magna Donnelly Corporation) until his retirement in 1999. Magna Donnelly Corporation is a manufacturer of glass related products for the automotive and electronics industries, headquartered in Michigan.

Director since 1989 

Chairman of the Compensation Committee

 

**Directors Whose Terms Expire in 2008**

 

 

Stanley W. Cheff (64) retired in 2004 as Chairman of the Board of Wolverine Building Group, a construction firm headquartered in Michigan.  Previously, Mr. Cheff served as President and Chief Executive Officer of Wolverine Building Group, holding that position for more than five years.

 

 

Director since 1996

Chairman of Nominating & Governance Committee and Member of the Compensation Committee

 

John E. Utley (65) retired in 1999 as Acting Deputy President of Lucas Varity Automotive.  Lucas Varity was headquartered in London, England prior to being sold to TRW, Inc. Prior to that, he served in several senior management positions for more than five years,  including Senior Vice President Strategic Marketing for Varity Corporation and served as Chairman of the Board of both Kelsey Hayes Co. and Walbro Corporation. 

 

 

Director Since 2000

Chairman of the Board of Directors and Member of the Audit Committee and Ex-officio member of all other Board Committees

**(b) Officers**

Information relating to executive officers is included in this report in Item 4 of Part I of the Original 10-K under the caption “Executive Officers of the Registrant.” 

Prior to his employment with the Company, Mr. Ferrara was the President of Marine Optical Group from March 1990 to June 2001. Following Mr. Ferrara's service as President of Marine Optical Group, Marine Optical Group commenced bankruptcy proceedings in October 2001 under Chapter 7 of the Bankrupty Code. 

**(c) Compliance with Section** **16(a)**

Based upon a review of Forms 3, 4, and 5 furnished to the Company during or with respect to the preceding fiscal year and written representations from certain reporting persons, the Company is not aware of any failure by any reporting person to make timely filings of those Forms as required by Section 16(a) of the Securities Exchange Act of 1934.

**(d) Code of Ethics**

The Company has adopted a code of ethics that applies to its senior executive team, including its Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. The code of ethics is posted on the Company’s website at www.xrite.com. The Company intends to satisfy the requirements under Item 5.05 of Form 8-K regarding disclosure of amendments to, or waivers from, provisions of its code of ethics that apply to the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer by posting such information on the Company’s website. Copies of the code of ethics will be provided free of charge upon written request directed to Investor Relations at corporate headquarters. 

 

 

**ITEM** **11.**

**EXECUTIVE COMPENSATION**

**Executive Compensation**

 

The following table contains information regarding compensation paid by the Company with respect to each of the last three fiscal years to its chief executive officer and to the four other most highly compensated executive officers who were serving at the end of fiscal year 2005 for services rendered to the Company (collectively, the “named executive officers”). 

 

**Summary Compensation Table**

 

 

 

 

Long Term 

              Compensation             

 

 

 

 

 

Year

Annual

Compensation       

Salary                                Bonus

($)                                ($)(2)

Restricted

Stock

Award(s)

($)

Securities

Underlying

Options

(#)

 

All Other

Compensation 

($)(3)

Michael C. Ferrara (1)

Chief Executive Officer

2005

2004

2003

389,519

372,019

323,029

 

 

 

- 

519,965

591,974

141,000

233,590

137,988  

(1)(2)

(1)(2)

(1)(2)

32,000

30,000

75,000

10,708

11,949

10,114

 
 

Mary E. Chowning

Vice President - Finance

Chief Financial Officer

 

 

2005

2004

2003

 

 

 

270,288

229,231

88,846

 

 

 

(4)

 

-

213,684

175,177

 

100,040

83,280

-

 

 

(2)

 

25,000

30,000

5,000

 

 

13,025

8,601

5,434

 

 
Joan Mariani Andrew

Vice President -

Global Sales

2005

2004

2003

 

221,904

220,654

311,425

 

 

 

(5)

 

-

206,087

232,126

 

206,082

232,108

-

 

 

(2)

25,000

20,000

20,000

 

12,871

17,880

8,153

 

 
 

Bernard J. Berg

Senior Vice President -

Engineering

 

2005

2004

2003

 

 

205,885

203,846

200,000

 

 

 

-

189,942

244,343

 

 

-

-

-

 

 

 

25,000

20,000

20,000

 

 

21,555

20,759

19,865

 

 
Jeffrey L. Smolinski

Vice President -

Operations

2005

2004

2003

219,904

218,654

189,904

 

-

204,187

232,008

-

-

-

 

25,000

20,000

20,000

22,768

19,004

10,157

 

 
 
 
(1)

As part of Mr. Ferrara revised employment contract, he received an award of 10,000 shares of restricted stock on December 31, 2005, December 31, 2004 and on December 31, 2003. These restricted shares will become fully vested on December 31, 2006.  The price used to calculate the value of the shares was $10.00 for the 2005 award, $16.36 for the 2004 award and $11.80 for the 2003 award, representing the closing prices of X-Rite stock on the day prior to grant. The corresponding market value for the 2005, 2004 and 2003 awards was $300,000 as of December 31, 2005. The shares were issued under the Company’s Second Restricted Stock Plan and are subject to certain restrictions on transfer and risks of forfeiture. Dividends are paid on these shares to the same extent paid on the Company’s common stock.
 
 
 
(2)

Pursuant to the Company’s Cash Bonus Conversion Plan, executive officers had the option to convert their bonuses into common stock.  Bonuses were converted at a discount of 50 percent from the market value of the stock at the time the bonus was determined.  The Cash Bonus Conversion Plan expired with respect to bonuses for the 2004 fiscal year and was not renewed.  The shares received are subject to certain restrictions on transfer and risks of forfeiture.  Restrictions lapse as to 20 percent of the shares six months after grant and as to 20 percent on each of the first four anniversaries of the grant date, or as to all shares in the event of death, disability, retirement, or change in control of the Company. Dividends are paid on these shares to the same extent paid on the Company’s common stock. Restricted shares issued under the Cash Bonus ConversionPlan and held at the close of the Company’s fiscal year were Mr. Ferrara 2,132 shares in 

 

2003, 6,051 shares in 2004, and 4,000 shares in 2005; Ms. Chowning 7,200 shares in 2004 and 9,760 shares in 2005; and Ms. Andrew 20,067 shares in 2004, and 20,104 shares in 2005. Corresponding market values net of purchase price paid as of that same date were Mr. Ferrara $13,325 for 2003 and $18,516 for 2004, and $7,200 for 2005; Ms. Chowning $22,032 for 2004 and $17,568 for 2005; and Ms. Andrew $61,405 for 2004 and $36,187 for 2005.

 
 
(3)

These amounts represent "matching" contributions by the Company pursuant to its 401(k) Plan, annual premiums for term life insurance, and auto allowance attributable to each named executive officer. 

 

(4)

Mary E. Chowning joined the Company on July 28, 2003 as its Vice President Finance and Chief Financial Officer. 

 

(5)

Included in this amount is base compensation of $190,000 and cost of living, currency and tax differential payments for assignment outside of the U.S.

 

The following table contains information regarding stock options granted to the named executive officers during the preceding fiscal year.

 

**Option Grants in Last Fiscal Year**

 

 

Number of

Securities 

Underlying

Options

Granted (1)

 

Percent of Options

Granted to

All Employees

In Fiscal Year

 

 

Exercise

Price

($/sh)(2)

 

 

 

Expiration

Date

 

 

Grant Date

Present Value

($)(3)

 

 

 

 

 

 

 

Michael C. Ferrara

 

32,000

 

11.0%

 

$16.40

 

2/8/15

 

$253,760

 
 

Mary E. Chowning

 

25,000

 

8.6%

 

$16.40

 

2/8/15

 

$198,250

 
 

Joan Mariani Andrew

 

25,000

 

8.6%

 

$16.40

 

2/8/15

 

$198,250

 
 

Bernard J. Berg

 

25,000

 

8.6%

 

$16.40

 

2/8/15

 

$198,250

 
 

Jeffrey L. Smolinski

 

25,000

 

8.6%

 

$16.40

 

2/8/15

 

$198,250

 
 

 

 

 

 

 

 
 
(1)

These options are fully vested.  On December 27, 2005, the Board of Directors of the Company approved the acceleration of vesting of all unvested and out-of-the- money (i.e. exercise price above the then-current market price) stock options.  The decision to accelerate the vesting of these options was made primarily to reduce the Company’s non-cash compensation expense that would have been recorded in future periods following the Company’s adoption of SFAS No. 123(R*), Share Based Payment*.  

 

(2)

The exercise price is the closing price of the Company’s stock on the day prior to the grant date.  

 

(3)

Present value calculated under the Black-Scholes Valuation Model, assuming a risk-free rate of return of 3.68 percent, 1.02 percent dividend yield, 52 percent volatility, and exercise in 6.0 years. This model is an alternative suggested by the Securities and Exchange Commission, and the Company neither endorses this particular model nor necessarily agrees with the method for valuing options. The future performance of the Company and the price of its shares will ultimately determine the value of these options.  

 

The following table contains information regarding the exercise of options during fiscal 2005 by the named executive officers, as well as unexercised options held by them at fiscal year-end.

 

 

 

Aggregate Option Exercises in Last Fiscal Year and Year-end Values

 

 

Shares

Acquired on

Exercise

(#)

 

 

Value

Realized

($)

 

Number of Securities

Underlying Unexercised

Options at Fiscal

                      Year-End                   

Exercisable        Unexercisable

 

 

Value of Unexercised

In-the-Money Options at

            Fiscal Year-End (1)     
Exercisable       Unexercisable

 

Michael C. Ferrara

 

-

 

-

 

154,500

 

-

 

125,250

 

-

 
 

Mary E. Chowning

 

-

 

-

 

60,000

 

-

 

0

 

-

 
 

Joan Mariani Andrew

 

-

 

-

 

165,000

 

-

 

216,900

 

-

 
 

Bernard J. Berg

 

-

 

-

 

165,000

 

-

 

216,900

 

-

 
 

Jeffrey L. Smolinski

 

-

 

-

 

120,000

 

-

 

90,300

 

-

 

 
 

(1)

Based upon the closing price of $10.00 per share of common stock on December 30, 2005, which was the last trading day of fiscal year 2005.

 

**Compensation of Directors**

 

Our outside Directors, that is Directors who are not employees of X-Rite, Incorporated, receive an annual retainer of $20,000 ($37,000 for chairperson), plus a meeting fee of $1,000 ($1,500 for chairpersons) for each meeting of the Board or a committee attended with the exception of the Audit Committee where a meeting fee of $1,500 ($2,000 for chairperson) is paid.  In addition, each outside director immediately following each Annual Meeting of Shareholders is granted an option to purchase 8,000 shares of the Company’s common stock at a price per share equal to the fair market value on the previous day.  Each option has a term of ten years and becomes exercisable six months following the date of issue.  

 

**Change in Control and Employment Agreements**

 

Effective as of a change in control of the Company, the Company has made available to its executive officers’ contracts assuring them of continued employment for a period of three years. Following a change in control, if the executive's employment is terminated by the Company during the three-year employment term without good cause, either actually or constructively, the executive is entitled to receive continued compensation and employee benefits for the remainder of the term.

 

CEO Ferrara has an Employment Agreement with the Company for an initial term of approximately four years, ending December 31, 2007, renewable annually thereafter for three successive one-year periods unless terminated by either party as of the end of the initial term or any renewal term. During its continuation, either party may terminate the Agreement for specified reasons. Mr. Ferrara is entitled to receive cash compensation for a minimum of eighteen months and certain perquisites for the unexpired portion of the then current term if his employment is terminated for any reason other than death, disability, voluntary quit, or discharge for good cause. Mr. Ferrara is obligated not to compete with the Company or solicit its employees for a period of two years after termination of his employment. Mr. Ferrara's Agreement has been coordinated with the above-described change in controlarrangement in the event a change in control of the Company occurs. 

 

On October 3, 2005 the Company entered into two employment related agreements with Michael C. Ferrara, its Chief Executive Officer. The first agreement is Amendment No. 1 to the Employment Agreement between X-Rite, Incorporated and Michael C. Ferrara.  The amendment modifies provisions of the employment agreement entered into between the Company and Mr. Ferrara dated September 30, 2003. The amendment extends the term of the original agreement by twelve months and provides for automatic renewal periods should both parties elect to do so. Furthermore, it defines the vesting period of restricted stock grants during the extension period and 

 

provides certain minimal financial planning benefits to Mr. Ferrara for the years 2005 and beyond. The amendment also defines the method by which either party may terminate it prior to expiration of the then current term, as well as describe the basis for severance pay and benefits calculations.

 

The Company has also entered into an agreement to provide certain medical, dental and prescription drug benefits to Mr. Ferrara following his employment with the Company. These benefits are comparable to those provided the Company's employees and will be secondary to all Medicare benefits for which Mr. Ferrara is eligible. The Company's obligation under this agreement will expire on December 31, 2015. Should Mr. Ferrara's employment terminate at the completion of his current employment agreement on December 31, 2008 this health plan will be active for a period of seven years.

 

 

 

**ITEM** **12.**

**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

**Securities Ownership of Management**

 

The following table contains information regarding ownership of the Company’s common stock by each director, each named executive officer and all directors and executive officers as a group. The content of this table is based upon information supplied by the persons identified in the table or known to the Company and represents the Company’s understanding of circumstances in existence as of March 1, 2006. 

 

**Amount and Nature of Ownership**

 

 

 

Name of Beneficial Owner

Shares Beneficially Owned (1)

 

Exercisable Options(2)

 

 

Total

 

 

Percent of Class (3)

 

 

 

 

 

 

 

Chief Executive Officer & Named Executive Officers

 

 

 

 

Michael C. Ferrara

87,360

154,500

 

241,860

 

1.1

Joan Mariani Andrew

55,446

165,000

 

220,446

 

1.0

Bernard J. Berg

41,458

165,000

 

206,458

 

1.0

Mary E. Chowning

38,058

60,000

 

98,058

 

*

Jeffrey L. Smolinski

35,643

120,000

 

155,643

 

*

Non-Employee Directors

 

 

 

Peter M. Banks

1,000

54,000

 

55,000

 

*

Stanley W. Cheff

5,000

92,000

 

97,000

 

*

L. Peter Frieder

5,250

19,551

 

24,801

 

*

Paul R. Sylvester

500

26,455

 

26,955

 

*

John E. Utley

7,000

54,000

 

61,000

 

*

Ronald A. VandenBerg

6,666

64,000

 

70,666

 

*

Mark D. Weishaar

3,000

26,455

 

29,455

 

*

All Directors and Executive Officers as a Group

(13 persons) 

 

317,438

 

1,058,961

 

 

1,376,399

 

 

6.1

 

*Less than one percent

 
 
(1)

Each person named in the table has sole voting and investment power with respect to the issued shares listed in this column.

 

(2)

This column reflects shares subject to options exercisable as of March 1, 2006, or within 60 days thereafter.

 

(3)

The percentages are calculated on the basis of the number of outstanding shares of common stock plus common stock deemed outstanding pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.

****

 

 

**Securities Ownership of Certain Beneficial Owners**

 

The following table contains information regarding ownership of the Company’s common stock by persons or entities beneficially owning more than five percent (5%) of the Company's common stock. The content of this table is based upon information contained in Schedules 13G furnished to the Company and represents the Company’s understanding of circumstances in existence as of March 1, 2006.   

 

Name and Address of

Beneficial Owner

Amount and Nature of Beneficial Ownership

Percent of Class (1)

 

Putnam Investments, Inc.

One Post Office Square

Boston, MA 02109

 

1,780,990

 

8.4

 

Lord Abbot & Co. LLC

90 Hudson Street Jersey City, NJ  07302

 

1,634.452

 

7.1

 

Ted Thompson

1980 76th Street, SW

Byron Center, MI  49315

 

1,435,800(2) 

 

6.8

 

Rufus S. Teesdale

3152 East Gatehouse, S.E.

Grand Rapids, MI 49546

 

1,169,911(3)

 

5.5

 

Downtown Associates

674 Unionville Road

Kennett Square PA 19348

 

 

1,099,725

 

5.2

 

(1) 

The percentages are calculated on the basis of the number of outstanding shares of common stock plus common stock deemed outstanding pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.

 

(2)

Mr. Thompson is one of the original founders of the Company.  His holdings include 67,500 shares subject to options exercisable within 60 days of March 1, 2006.  His holdings include 160,000 shares held by a trust established by Mr. Thompson’s late wife, as to which he disclaims beneficial ownership.

 

(3)

Mr. Teesdale is one of the original founders of the Company.  His holdings include 70,000 shares subject to options exercisable within 60 days of March 1, 2006.
 
 

 

 

The following table provides information about the Company’s equity compensation plans as of December 31, 2005. 

 

 

**Equity Compensation Plan Summary**

 

 

 

 

Number of securities

to be issued upon exercise of outstanding options

 

 

 

Weighted-average exercise price of outstanding options

Number of securities

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in the first column)

 

Equity compensation plans 

approved by shareholders

 

2,096,461(1)

 

$12.22

 

4,114,495(2)

 

Equity compensation plans

not approved by shareholders

 

 

0

 

n/a

 

0

 

Total

2,096,461

$12.22

4,114,495

 

(1)

Represents outstanding options to purchase the Company’s Common Stock granted under the X-Rite, Incorporated 2003 and 1993 Employee Stock Option Plans, as amended and restated, and the X-Rite, Incorporated 2003 and 1993 Outside Directors Stock Option Plans, as amended and restated.

 

(2)

Represents options available to purchase the Company’s common stock under the X-Rite, Incorporated 2003 Employee Stock Option Plan and the X-Rite Incorporated 2003 Outside Director Stock Option Plan. Included are 955,456 shares available for issuance under the 2004 Amended and Restated Employee Stock Purchase Plan.
 
 

**ITEM** **13.**

**CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

**Other Arrangements**

 

The Company has not adopted any long-term incentive plan or any defined benefit or actuarial plan, as those terms are defined in the applicable regulations promulgated by the Securities and Exchange Commission.  

 

At the time former Chairman Ted Thompson retired from his position as the Company's Chief Executive Officer and retired from day-to-day management of the Company's affairs, the Company entered into an agreement with Mr. Thompson for the purpose of defining an ongoing relationship with the Company. In addition to specifying his responsibilities, compensation, and benefits, the agreement provided for compensation and insurance benefits for a period of five years after conclusion of his service as Chairman. On September 13, 2001, Mr. Thompson retired as Chairman of the Company and an amendment to that agreement was entered into providing Mr. Thompson certain health benefits in lieu of certain compensation. Mr. Thompson is obligated not to compete with the Company for a period ending two years after termination of the agreement. 

 

Any director of the Corporation serving prior to February 10, 2004, who serves the shorter of at least: (i) nine years or (ii) three maximum length terms of office as a director and who either resigns as a director or does not stand for reelection, shall be entitled to be considered for the position of "Director Emeritus." If nominated by the Nominating and Governance Committee and elected by the Board of Directors, a Director Emeritus shall continue in that position for a period equal to the time served as a regular director prior to February 10, 2004, or until an earlier resignation or death.  During their tenure, Directors Emeritus shall be given notices of all meetings of the Board of Directors, and they shall perform such consulting services for the Corporation as the Board of Directors may reasonably request from time to time.  Directors Emeritus shall be entitled to attend andparticipate in all such meetings of the Board of Directors, except that they may not vote and they shall not be counted for purposes of determining a quorum.  Directors Emeritus shall receive an annual cash retainer fee equal to the lesser of:  (i) the annual cash retainer fee in place at the time the director resigned as a director or did not stand for reelection; or (ii) the annual cash retainer fee in place at any time during the period such director holds the position of Director Emeritus, and shall be entitled to reimbursement for expenses of attendance at meetings of the Board, but they shall receive no other compensation from the Corporation. Currently, there are six (6) individuals who hold the Director Emeritus position and receive an annual cash retainer fee of $20,000 each.  They are Marvin DeVries, James Knister, Rufus Teesdale, Ted Thompson, Charles VanNamen and Glenn Walters.  Messrs. Teesdale and Thompson each beneficially own more than five percent (5%) of theCompany’s common stock as reported in the Securities Ownership of Certain Beneficial Owners chart that appears in this Proxy Statement.****

 

**Certain Relationships and Related Transactions**

 

XR Ventures, LLC is a joint venture between the Company and Peter M. Banks and James A. Knister. The main focus of XR Ventures was to find, acquire, develop, and operate interests in businesses or technologies important to the growth of new markets for the Company. Prior to December 2003, Dr. Banks and Mr. Knister were responsible for the day-to-day operations of XR Ventures with input from the Company. The Company funded all acquisitions made by XR Ventures and, in exchange, will receive its investment back in full before any distributions 

 

are made. The Company will receive 80 percent of the gains on investments. Dr. Banks and Mr. Knister will receive 20 percent of the gains on investments. Dr. Banks and Mr. Knister are reimbursed for their expenses, but receive no salary or additional Board fees relating to XR Ventures. The Company reached the XR Ventures arrangement with Dr. Banks and Mr. Knister through arms-length negotiation, in which the Company was represented by it regular counsel and Dr. Banks and Mr. Knister were represented by separate counsel.  In December of 2003, the Company, Dr. Banks and Mr. Knister amended the XR Ventures, LLC agreement, and Dr. Banks and Mr. Knister resigned as managing members in XR Ventures, LLC.  Dr. Banks and Mr. Knister remain members of XR Ventures, LLC, but have no formal day to day operating duties.  

 

The Company entered into a five year lease on October 2, 2000 on a facility owned by a partnership in which Stanley W. Cheff is a fifty percent partner. The Company paid $198,416 of rent during 2005 for this facility. As of January 1, 2006, the Company is no longer leasing the facility and has vacated the premises.  

 

**ITEM** **14.**

**PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

**Auditor Fees**

 

The consolidated financial statements of the Company and its subsidiaries for the year ended December 31, 2005, have been audited by Ernst & Young LLP, independent public accountants

 

The aggregate fees billed by Ernst & Young LLP for the 2005 and 2004 fiscal years are as follows:

 

 

**2005**

 

**2004**

 

Audit Fees

 

$405,391

 

 

$567,344

Audit Related Fees

39,130 

 

5,500

Tax Fees

11,000

 

13,095

Other Fees

-

 

-

 

$455,521

 

$585,939

 

Audit fees include amounts incurred for the annual audits of the Company’s consolidated financial statements, interim reviews of quarterly financial information and statutory audits.  Other audit related fees include amounts billed for services that are unrelated to the annual audit, such as S-8 filings and accounting research tool fees. Fees billed for tax services primarily include tax compliance services. 

 

**Preapproval Policy for Auditor Services**

 

The Audit Committee's policy is to preapprove all audit and nonaudit services provided by the Company's independent auditors.  These services may include audit services, audit related services, tax services, and other services.  Preapproval is generally provided for up to one (1) year and any preapproval is detailed as to a particular service or category of services and is generally subject to a specific budget.  The Audit Committee has delegated preapproval authority to its Chairperson when expedition of service is necessary.  Both the Company's independent auditors and management are required to periodically report to the whole Audit Committee regarding the extent of services provided by the Company's independent auditors in accordance with this preapproval policy, and the fees for such services. 

 

**SIGNATURES**

 

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

 

 

 

**X-RITE, INCORPORATED**

 

 

 

 

 

 

 

 

 

April 27, 2006

 

/s/ Mary E. Chowning

 

 

Mary E. Chowning, Vice President and Chief Financial Officer (principal financial and accounting officer)

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below on this 27th day of April, 2006, by the following persons on behalf of the Registrant and in the capacities indicated. 

 

 

 

 

 

 

*

Dr. Peter M. Banks, Director

 

 

 

*

Stanley W. Cheff, Director

 

 

 

*

Michael C. Ferrara, Director

 

 

 

*

L. Peter Frieder, Director

 

 

 

*

Paul R. Sylvester, Director

 

 

 

*

John E. Utley, Director

 

 

 

*

Ronald A. Vandenberg, Director

 

 

 

*

Mark D. Weishaar, Director

 

 

* By: /s/ Mary E. Chowning                                          

As: Attorney-in-fact

 

 

 

 

 

 

**EXHIBIT INDEX**

 

 

 

 

1(1)

  

First Lien Credit and Guaranty Agreement dated January 30, 2006, between X-Rite, Incorporated and Goldman Sachs Credit Partners L.P. (previously filed as an exhibit to the Original 10-K)

 

 

1(2)

  

Second Lien Credit and Guaranty Agreement dated January 30, 2006, between X-Rite, Incorporated and Goldman Sachs Credit Partners L.P. (previously filed as an exhibit to the Original 10-K)

 

 

2(1)

  

Transaction Agreement dated January 30, 2006, between X-Rite, Incorporated and Amazys Holding A.G.(filed as exhibit to Form 8-K dated January 31, 2006 (Registration No. 33-3954C) and incorporated herein by reference)

 

 

3(1)

  

Restated Articles of Incorporation (filed as exhibit to Form S-18 dated April 10, 1986 (Registration No. 33-3954C) and incorporated herein by reference)

 

 

3(2)

  

Certificate of Amendment to Restated Articles of Incorporation adding Article IX (filed as exhibit to Form 10-Q for the quarter ended June 30, 1987 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

3(3)

  

Certificate of Amendment to Restated Articles of Incorporation amending Article III (filed as exhibit to Form 10-K for the year ended December 31, 1995 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

3(4)

  

Certificate of Amendment to Restated Articles of Incorporation amending Article IV as filed with the Michigan Department of Consumer & Industry Services (filed as exhibit to Form 10-K for the year ended January 2, 1999 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

3(5)

  

Amended and Restated Bylaws of X-Rite, Incorporated, as amended and restated February 10, 2004 (filed as exhibit to Form 10-Q for the quarter ended July 3, 2004 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

4(1)

  

X-Rite, Incorporated common stock certificate specimen (filed as exhibit to Form 10-Q for the quarter ended June 30, 1986 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

4(2)

  

Shareholder Protection Rights Agreement, dated as of March 29, 2002, including as Exhibit A the form of Rights Certificate and of Election to Exercise, and as Exhibit B the form of Certificate of Adoption of Resolution Designating and Prescribing Rights, Preferences and Limitations of Junior Participating Preferred Stock of the Company (filed as exhibit to Form 10K for the year ended December 29, 2001 (Commission File No. 0-14800) and incorporated herein by reference)

The following material contracts identified with “*” preceding the exhibit number are agreements or compensation plans with or relating to executive officers, directors or related parties. 

 

 

 

*10(1)

 

X-Rite, Incorporated Amended and Restated Outside Director Stock Option Plan, effective as of September 17, 1996 (filed as exhibit to Form 10-Q for the quarter ended September 30, 1996 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(2)

 

X-Rite, Incorporated Cash Bonus Conversion Plan (filed as Appendix A to the definitive proxy statement dated April 8, 1996 relating to the Company’s 1996 annual meeting (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(3)

 

Form of Indemnity Contract entered into between the registrant and members of the board of directors (filed as exhibit to Form 10-Q for the quarter ended June 30, 1996 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

 

 

 

 

*10(4)

 

Chairman’s agreement dated July 16, 1999 between the registrant and Ted Thompson (filed as exhibit to Form 10-Q for the quarter ended July 3, 1999 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(5)

 

Employment arrangement effective upon a change in control entered into between the registrant and certain persons together with a list of such persons (filed as exhibit to Form 10-K for the year ended January 1, 2000 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(6)

 

Deferred compensation trust agreement dated November 23, 1999 between the registrant and Richard E. Cook. (filed as exhibit to Form 10-K for the year ended January 1, 2000 (Commission File No.0-14800) and incorporated herein by reference)

 

 

*10(7)

 

Operating Agreement for XR Ventures, LLC dated September 14, 2000, by and between XR Ventures, LLC the registrant, Dr. Peter M. Banks and Mr. James A. Knister. (filed as exhibit to Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(8)

 

First Amendment to the X-Rite, Incorporated Amended and Restated Cash Bonus Conversion Plan dated May 24, 2001 (filed as exhibit to Form 10-Q for the quarter ended September 29, 2001 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(9)

 

First Amendment to the Chairman’s Agreement dated September 13, 2001 entered into between the registrant and Ted Thompson (filed as exhibit to Form 10-Q for the quarter ended September 29, 2001 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(10)

 

Form of Indemnity Agreement entered into between the registrant and members of its board of directors and officers together with a list of such persons (filed as exhibit to Form 10-Q for the quarter ended September 28, 2002 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(11)

 

Form of Indemnity Agreement entered into between the registrant and Paul R. Sylvester (filed as exhibit to Form 10-Q for the quarter ended September 28, 2002 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(12)

 

Form of Indemnity Agreement entered into between the registrant and Mark D. Weishaar (filed as exhibit to Form 10-Q for the quarter ended September 28, 2002 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(13)

 

X-Rite, Incorporated Amended and Restated Outside Director Stock Option Plan, effective as of January 26, 2003 (filed as Appendix A to the definitive proxy statement dated April 11, 2003 relating to the Company’s 2003 annual meeting (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(14)

 

X-Rite, Incorporated Amended and Restated Employee Stock Option Plan, effective as of January 26, 2003 (filed as Appendix A to the definitive proxy statement dated April 11, 2003 relating to the Company’s 2003 annual meeting (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(15)

 

Employment Agreement entered into between the registrant and Michael C. Ferrara, effective as of September 30, 2003,(filed as exhibit to Form 10-Q for the quarter ended September 27, 2003 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(16)

 

Second Amendment to the Operating Agreement entered into between the registrant and XR Ventures, LLC, effective December 12, 2003, (filed as exhibit to Form 10-K for the year ended January 3, 2004 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

 

 

 

 

*10(17)

 

X-Rite Incorporated Amended and Restated Employee Stock Purchase Plan effective as of February 10, 2004 (filed as Appendix A to the definitive proxy statement dated April 7, 2004 relating to the Company’s 2004 annual meeting (Commission File No. 0-14800) and incorporated herein by reference.)

 

 

*10(18)

 

First Amendment to the X-Rite, Incorporated Amended and Restated Outside Director Stock Option Plan, effective as of January 26, 2003 (filed as exhibit to Form 10-Q for the quarter ending July 3, 2004 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(19)

 

Third Amendment to the Operating Agreement entered into between the registrant and XR Ventures, LLC, effective December 12, 2003, (filed as exhibit to Form 10-Q for the quarter end April 3, 2004, (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(20)

 

Lease Amendment entered into between the registrant and Eagle Development Company, effective April 30, 2004, (filed as exhibit to Form 10-Q for the quarter ending April 3, 2004 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(21)

 

Form of Indemnity Agreement entered into between the registrant and L. Peter Frieder (filed as exhibit to Form 10-K for the year ending January 1, 2005 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(22)

 

Form of Stock Option Agreement from the 2003 Amended and Restated Outside Director Stock Option Plan filed as exhibit to Form 10-K for the year ending January 1, 2005 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(23)

 

Form of Stock Option Agreement from the 2003 Amended and Restated Employee Stock Option Plan filed as exhibit to Form 10-K for the year ending January 1, 2005 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(24)

 

Form of X-Rite, Incorporated Second Restricted Stock Plan Agreement filed as exhibit to Form 10-K for the year ending January 1, 2005 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(25)

 

Second Amendment to the Employment Agreement entered into between the registrant and Michael C. Ferrara, effective as of January 30, 2006,(filed as exhibit to Form 8-K dated January 31, 2006 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

*10(26)

 

Employment Agreement entered into between the registrant and Mary E. Chowning, effective as of January 30, 2006,(filed as exhibit to Form 8-K dated January 31, 2006 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

10(27)

 

Amendment No. 1 to the Employment Agreement between X-Rite, Incorporated and Michael C. Ferrara (incorporated by reference to Exhibit 10.1 of X-Rite, Incorporated’s current report on Form 8-K filed with the commission on October 6, 2005).

 

 

10(28)

 

Special Post Employment Health Plan for Michael C. Ferrara (incorporated by reference to Exhibit 10.2 of X-Rite, Incorporated’s current report on Form 8-K filed with the commission on October 6, 2005).

 

 

10(29)

 

Schedule of Executive Compensation for the Company’s Officers (filed as exhibit to Form 8-K dated November 21, 2005 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

10(30)

 

Schedule of Executive Option and restricted Stock Compensation for the Company’s Officers (filed as exhibit to Form 8-K dated February 10, 2006 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

14

 

X-Rite, Incorporated Code of Ethics for Senior Executive Team, (filed as exhibit to Form 10-K for the year ended January 3, 2004 (Commission File No. 0-14800) and incorporated herein by reference)

 

 

 

 

 

 

21

 

Subsidiaries of the registrant (previously filed as an exhibit to the Original 10-K)

 

 

31.1

 

Certification of the Chief Executive Officer and President of X-Rite, Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

 

31.2

 

Certification of the Chief Financial Officer and Vice President of Finance of X-Rite, Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

 

32.1

 

Certification Pursuant To 18 U.S.C. Section 1350 as Adopted Pursuant To Section 906 of The Sarbanes -Oxley Act of 2002

 

****