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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K





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

FOR THE FISCAL YEAR ENDED DECEMBER 29, 2007

Commission file number 0-14800





X-RITE, INCORPORATED

(Name of registrant as specified in charter)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|Michigan                 |  | 38-1737300                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

4300 44th Street S.E., Grand Rapids, Michigan 49512

(Address of principal executive offices)

616-803-2100

(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.    Yes   ̈    No  x

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

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   ̈

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, or a smaller reporting company. See definitions of large accelerated filer, large accelerated
filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈    Accelerated filer  x    Non-accelerated filer   ̈    Smaller reporting company   ̈

Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    Yes   ̈    No  x

On March 3, 2008, the number of outstanding shares of the registrants common stock, par value $.10 per share, was 29,049,119.

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 $424,033,023 computed at the closing price on that date.

Portions of the Companys Proxy Statement for the 2008 Annual Meeting of Shareholders are incorporated by reference into Part III. Exhibit Index is
located at Page 79.









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##### Table of Contents

FORM 10-K

X-Rite, Incorporated

For The Year-Ended December 29, 2007

Table of Contents



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|Part     |  | Topic                                                                                                        |  | Page
|Part I   |  |                                                                                                              |  |     
|Item 1   |  | Business                                                                                                     |  | 1   
|Item 1A  |  | Risk Factors                                                                                                 |  | 6   
|Item 1B  |  | Unresolved Staff Comments                                                                                    |  | 12  
|Item 2   |  | Properties                                                                                                   |  | 13  
|Item 3   |  | Legal Proceedings                                                                                            |  | 14  
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 14  
|         |  |                                                                                                             
|Part II  |  |                                                                                                              |  |     
|Item 5   |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 15  
|Item 6   |  | Selected Financial Data                                                                                      |  | 17  
|Item 7   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 18  
|Item 7A  |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 38  
|Item 8   |  | Financial Statements and Supplementary Data                                                                  |  | 39  
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        |  | 81  
|Item 9A  |  | Controls and Procedures                                                                                      |  | 81  
|Item 9B  |  | Other Information                                                                                            |  | 81  
|         |  |                                                                                                             
|Part III |  |                                                                                                              |  |     
|Item 10  |  | Directors, Executive Officers, and Corporate Governance                                                      |  | 82  
|Item 11  |  | Executive Compensation                                                                                       |  | 82  
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 82  
|Item 13  |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 82  
|Item 14  |  | Principal Accountant Fees and Services                                                                       |  | 82  
|         |  |                                                                                                             
|Part IV  |  |                                                                                                              |  |     
|Item 15  |  | Exhibits, Financial Statement Schedules                                                                      |  | 83  
|         |  | Signatures                                                                                                   |  | 84  
|         |  | Exhibit Index                                                                                                |  | 86  

X-Rites internet website is www.xrite.com. X-Rites annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as
soon as reasonably practicable after we electronically file with or furnish them to the Securities and Exchange Commission.



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##### Table of Contents

PART I



|ITEM 1. | BUSINESS
|------- | --------

X-Rite, Incorporated (also referred to
as X-Rite, the Company, our, we, or us) is a technology company that develops a full range of color management systems and solutions. The Companys technologies assist manufacturers,
retailers, and distributors in achieving precise color appearance throughout their global supply chain. X-Rite products also assist printing companies, graphic designers, and professional photographers in achieving precise color reproduction of
images across a wide range of devices and from the first to the last print. The Companys products also provide retailers color harmony solutions at point of purchase. The key markets served include Imaging and Media, Industrial, and Retail. A
more detailed discussion of X-Rite products and markets appears below.

Products are sold worldwide through the Companys own sales
personnel and through independent sales representatives and dealers. The Company is headquartered in Grand Rapids, Michigan and has other domestic operations in New Jersey and Massachusetts. In addition, the Company has locations in Switzerland,
Germany, England, France, Italy, Spain, the Czech Republic, Russia, China, Japan and India. Manufacturing facilities are located in the United States, Switzerland, Germany, and Italy.

X-Rite was organized in 1958 as a Michigan corporation and completed its initial public offering of common stock in April of 1986. We have grown through
internal expansion and acquisitions, investing heavily over the past three years in our core color businesses.



| |  |  | Pantone, Inc. Acquisition
| | - |  | -------------------------

We completed the acquisition of Pantone, Inc. (Pantone) on October 24, 2007 for $176.1
million. Pantone is a leader in color inspiration, communication and specification standards in the creative design industries. Its flagship product, the PANTONE® MATCHING SYSTEM®, is a key color standard in the graphic arts, printing, publishing and advertising industries. Pantone also provides color standards and design tools for the fashion, home furnishings,
architecture, paint, interior and industrial design industries.



| |  |  | Amazys Holding AG Acquisition
| | - |  | -----------------------------

We completed the acquisition of Amazys Holding AG (Amazys) on July 5, 2006 for $306.7 million. Amazys is a color management solutions company, based in Switzerland that develops markets, and supports hardware, software, and services to
measure and communicate color for the imaging and media, photography, digital imaging, paints, plastics, apparel, textiles, and automotive industries.



| |  |  | Product Innovation
| | - |  | ------------------

In
2007, we introduced seven new products and three major product upgrades. We also devoted substantial resources to research and development, streamlining the development process, and achieving functional design excellence. In 2007, we spent
approximately fourteen percent of our revenues on engineering, research, and development. Our focus continues to center on color management solutions that incorporate software, hardware, standards, and services.



| |  |  | International Operations
| | - |  | ------------------------

With offices in thirteen countries outside the U.S. and service centers across Europe, Asia, and the Americas, X-Rite continues to improve its ability to conduct business with customers around the world. In 2007, international sales
represented 65.7 percent of total revenue. The Company began to accelerate its global presence in 1993 with the establishment of two foreign sales and service subsidiaries: X-Rite GmbH, Cologne, Germany and X-Rite Asia Pacific Limited, Hong Kong. In
1994, we established a U.K. subsidiary, X-Rite, Ltd., which acquired the outstanding stock of an X-Rite dealer located near Manchester, England. In 1998, a French subsidiary, X-Rite Méditerranée SARL, was established by



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acquiring a branch of an X-Rite dealer located near Paris. In 2002, we opened X-Rite, (Shanghai) International Trading Co. Ltd., a sales and service center
incorporated in The Peoples Republic of China. This subsidiary coordinates activity with previously opened representative offices in Beijing, Tianjin and Guangzhou strengthening our ability to serve Chinas growing markets. In 2003, we affirmed
our commitment to Japan and the many multi-national companies that reside there by expanding our sales office and creating a new company, X-Rite, K.K. In 2006, we expanded our global presence even further through the acquisition of Amazys Holding
AG, a color solutions company based in Switzerland. As a result of the Amazys acquisition the Company established its European headquarters in Regensdorf, Switzerland. As a result of the 2007 acquisition of Pantone the Company increased our global
presence through the addition of a sales office in Mumbai, India.

MAJOR MARKETS

X-Rite operates in two reportable business segments: (1) Color Measurement and (2) Color Standards. The Color Measurement segment represented
96.4 percent of X-Rites total net sales in 2007. The Color Measurement segment provides end-to-end solutions that combine hardware, software, and services to customers. The Color Standards segment represented 3.6 percent of X-Rites total
net sales in 2007. The Color Standards segment develops and markets products for the accurate communication and reproduction of color. Both reportable segments service the following major markets.

Further information relating to segments is provided in Note 2 to the Consolidated Financial Statements included in Item 8 of this report.

Imaging and Media

The Imaging
and Media market consists of two major markets: Digital Imaging and Printing.

X-Rites Digital Imaging markets consist of
solutions for graphic designers, photo processing, photography, graphic design, pre-press service bureaus, and a myriad of calibration tools for image setters, raster image processors, and other digital applications. Our product solutions work to
create value at key stages of the workflow by reducing waste, increasing productivity and enhancing quality.

The primary Printing
markets that we serve are in digital and traditional printing. X-Rites color-calibrated instruments, digital palettes, and output measurement devices support color communication for the entire printing and preprinting process reducing set up
time and eliminating costly mistakes. Our handheld products are straightforward, self-contained solutions that keep color on-target in the pre-press process, ink lab and pressroom. X-Rites automated scanning systems support the need for faster
and more frequent color data collection.

Industrial

Our Industrial market is concentrated in the quality and process control markets. We design, develop, and manufacture precision instrumentation, software, and systems for global manufacturers, fulfilling a need to
measure color for formulation, quality, and process control for paint, plastics, and textiles. Accurate color reproduction and global supply chain management offer businesses a competitive advantage, and are important factors when products are
assembled from parts made around the world. X-Rite industrial product solutions are designed to reduce waste, increase production uptime, improve process management, and enable global color communication.

Color Support Services

Our Color Support
Services market provides customers access to color professional specialists, training, and technical support worldwide through color seminars, classroom workshops, on-site consulting, and interactive media development. Our Color Services business
provides both major manufacturers and end users with



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comprehensive solutions for their color and workflow problems. Color Support Service additionally operates and manages the Companys service repair
operation with facilities around the world and specializing in repairing all X-Rite equipment. The products repaired by the service department include products currently covered by our warranty program as well as those products which are out of
warranties.

Retail

X-Rites Retail market serves two major markets: paint matching and home décor. The paint matching market is conducted under the name of Match Rite. X-Rite is a leading supplier of retail paint matching systems for home centers,
mass merchants, hardware stores and paint retailers in North America, and it has established a strong presence in Europe and other regions of the world. X-Rites Retail customers rely on its strength in color measurement instrumentation,
database creation and management, custom software development, and large scale account servicing. These solution-based products reduce paint inventory for the retailer and provide a user-friendly environment promoting sophisticated shade matching
capabilities for the consumer. We are leveraging our retail-based expertise to broaden this market and develop other shade matching applications for our retail customer base and other facets of the home décor industry.

Other

Medical and DentalX-Rite serves the medical x-ray markets imaging needs and provides instrumentation designed for use in controlling variables in the processing of x-ray film. Additionally, we
manufacture restorative tooth shade matching instruments and complementary software packages that are designed for use in cosmetic dental practices. Our ShadeVision® System is a significant
technological advance that improves patient care by replacing the subjective selection of tooth color with an accurate measurement. This product line is sold and marketed exclusively through our partner, Sullivan-Schein Dental, part of the Henry
Schein Company.

Light MeasurementX-Rite develops and manufactures color and light measurement instrumentation and
software. The light measurement product line precisely measures the light output of the most sophisticated high-intensity discharge (HID) lamps produced today. In addition, they have a line of laboratory products, including integrating
sphere systems for light measurement. The Light product line also specializes in color viewing systems designed to increase productivity and reduce costs, while providing accurate simulation of natural daylight.

PRODUCTS

X-Rites color measurement and
management solutions are comprised of hardware, software, and services. Here is a brief overview of the primary components that make up our product lines.

Instrumentation



| |  |  | Colorimeters measure light much like the human eye using red, green and blue receptors and are utilized to measure printed colors on packages, labels,
textiles and other materials where a products appearance is critical for buyer acceptance.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Spectrophotometers are related to colorimeters; however, they measure light at many points over the entire visible spectrum. Spectrophotometers are used in
color formulation for materials such as plastics, paints, inks, ceramics and metals. The Companys multi-angle spectrophotometer, which is used to measure the color of metallic finishes, is useful for controlling the color consistency of
automotive paints and other metallic and pearlescent coatings. In addition, the Company produces a spherical spectrophotometer, which measures the color of textured surfaces and is used in the textile, paint, and plastics industries.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Densitometers are instruments that measure optical or photographic density, compare such measurement to a reference standard, and signal the result to the
operator of the instrument. Some models are designed for use in controlling variables in the processing of x-ray film in medical and non-destructive testing applications. Other models are designed to be used to control process variables in the
production of photo-transparencies, such as photographic film and microfilm, or measure the amount of light that is reflected from a surface, such as ink on paper.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Spectrodensitometerscombine the function of a densitometer with the functions of a colorimeter and a spectrophotometer to provide measurements for
monitoring color reproduction used for controlling the color of printed inks in graphic arts applications.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sensitometers are used to expose various types of photographic film in a very precise manner for comparison to a reference standard. The exposed film is
processed and then read with a densitometer to determine the extent of variation from the standard.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Software and
Databases

The Company provides software and databases that interface with its color measurement instruments and other process
equipment. These software packages allow the user to collect and store color measurement data, compare that data to established standards and databases, communicate color results and formulate colors from a database.

Color Standards

The Color Standards segment
includes the operations of the Pantone, Inc. business unit. Pantone, Inc. is a leading developer and marketer of products for the accurate communication and reproduction of color, servicing worldwide customers in a variety of industries including
imaging and media, textiles, digital technology, plastics, and paint.

OTHER INFORMATION

Manufacturing, Sourcing and Service

We
manufacture the majority of our products at our manufacturing facilities in Grand Rapids, Michigan and Regensdorf, Switzerland. We generally have multiple sources for raw materials, supplies and components. Product repair and service is provided at
eleven locations throughout the world.

Competition

The Color Measurement and Color Standards businesses are competitive and subject to technological change, evolving customer requirements, and changing business models. We face strong competition in many areas of our
current business activities. The rapid pace of technological change creates new opportunities for both our existing competitors as well as start-ups. Moreover, the rise of new industry alliances and new mergers and acquisitions can dramatically
change our competitive landscape and can result in competitors with significant resources in research and development, marketing and sales. Customer requirements change quickly as a result from new and more cost efficient technologies. We face
direct competition from approximately three firms which are producing competing products in the Imaging and Media category, approximately six manufacturers of competing products in the retail and industrial markets, and approximately five
distributors in the Color Standards industry; some of whom have significant resources and sales. The primary basis of competition for all the Companys products is technology and IP, design, service, and price. Our competitive position may be
adversely affected in the future by one or more of the factors described in this section.



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Employees

As of December 29, 2007, the Company employed 1,018 people on a full time basis, of which 650 were in the United States. We believe generally we have good relationships with our employees.

Patents

As of December 29, 2007, X-Rite
owned 154 patents and had 197 patent applications on file. While the Company follows a policy of obtaining patent protection for its products where appropriate, it does not believe that the loss of any existing patent, or failure to obtain any new
patents, would have a material adverse impact on its current operations. We expect to protect our products and technology by asserting our intellectual property rights where appropriate and prudent.

Distribution Networks

X-Rites products
are sold by its own sales personnel and through independent manufacturers representatives. Certain products not sold directly to end-users are distributed through a network of independent dealers throughout Europe, Asia Pacific and the
Americas.

Seasonality

The
Companys business is generally not subject to seasonal variations that significantly impact sales, production, or net income.

Working Capital
Practices

The Company does not believe that it, or the industry in general, has any special practices or special conditions
affecting working capital items that are significant for an understanding of the Companys business.

Significant Customers

In 2007 the Color Measurement segment had one significant customer which accounted for $28.3 million or 11.4 percent, of total net sales in 2007. No
single customer accounted for more than 10 percent of total net sales in 2006 or 2005.

Backlog

The Companys backlog of scheduled but unshipped orders was $27.7 million as of January 26, 2008, and $16.8 million as of January 27, 2007.
This backlog is expected to be filled during the current fiscal year.

Research, Development and Engineering

During 2007, 2006, and 2005 the Company expensed $34.7, $25.3, and $15.0 million, respectively, on research, development, and engineering.

In addition to the research, development, and engineering costs reported as operating expenses, certain costs to develop new software products were
capitalized in each of the last three years. Software development costs capitalized totaled $3.7, $3.0, and $3.8 million in 2007, 2006, and 2005, respectively. The related amortization expense was included in cost of sales (see Note 1 to the
Consolidated Financial Statements).



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

There are many risk factors that may
adversely affect the Companys operating results including the following:

Our future results could be harmed by economic, political, geographic,
regulatory and other specific risks associated with international operations.

The acquisitions of Amazys in July of 2006 and Pantone in
October 2007 significantly expanded our international operations. During fiscal 2007, we derived approximately 65.7 percent of our total revenues from sales of our products outside of the United States, compared with 60.7 percent during fiscal 2006
and 48.4 percent during fiscal 2005. We intend to continue to pursue growth opportunities in sales internationally, which could expose us to greater risks associated with international sales and operations. There can be no assurance that we will
maintain or expand our international sales. If the revenues generated from international activities, especially in emerging markets, are inadequate to offset the expense of maintaining such international operations, our business, financial condition
and results of operations could be materially and adversely affected. The increasingly international reach of our businesses could also subject us and our results of operations to unexpected, uncontrollable and rapidly changing economic and
political conditions. Specifically, international sales and operations are subject to inherent risks, including:



| |  |  | lack of experience in a particular geographic market;
| | - |  | -----------------------------------------------------



| |  |  | tariffs and other barriers, including import and export requirements and taxes on subsidiary operations;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | different and changing regulatory requirements in various countries and regions;
| | - |  | --------------------------------------------------------------------------------



| |  |  | fluctuating exchange rates and currency controls;
| | - |  | -------------------------------------------------



| |  |  | difficulties in staffing and managing foreign sales and support operations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | longer accounts receivable payment cycles;
| | - |  | ------------------------------------------



| |  |  | potentially adverse tax consequences, including repatriation of earnings;
| | - |  | -------------------------------------------------------------------------



| |  |  | diminished protection of intellectual property in some countries outside the U.S.;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | development and support of localized and translated products;
| | - |  | -------------------------------------------------------------



| |  |  | lack of acceptance of localized products or X-Rite in foreign countries;
| | - |  | ------------------------------------------------------------------------



| |  |  | differing local product preferences and product requirements;
| | - |  | -------------------------------------------------------------



| |  |  | labor force instability, including possible shortages of skilled personnel required for local operations; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | political and/or economic instability, such as perceived or actual public health (e.g. SARS) or terrorist risks which impact a geographic region and business
operations therein.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As we expand our international operations, we may encounter new risks. For example, as we focus on
building our international sales and distribution networks in new geographic regions, we must continue to develop relationships with qualified local distributors and trading companies. If we are not successful in developing these relationships, we
may not be able to grow sales in these geographic regions.

If we fail to attract, hire and retain qualified personnel, we may not be able to design,
develop, market or sell our products or successfully manage our business.

Our ability to attract new customers, retain existing
customers and pursue our strategic objectives depends on the continued services of our current management, sales, product development and technical personnel and our ability to identify, attract, train and retain similar personnel. Competition for
top management personnel is intense and we may not be able to recruit and retain the personnel we need if we are unable to offer competitive



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compensation and benefits. The loss of any one of our management personnel, or our inability to identify, attract, train, retain and integrate additional
qualified management personnel, could make it difficult for us to manage our business successfully and pursue our strategic objectives. We do not carry key person life insurance on any of our employees. Similarly, competition for skilled sales,
product development and technical personnel is intense and we may not be able to recruit and retain the personnel we need. The loss of the services of key sales, product development and technical personnel, or our inability to hire new personnel
with the requisite skills, could restrict our ability to develop new products or enhance existing products in a timely manner, sell products to our customers or manage our business effectively.

Our indebtedness following our offer will be higher than our existing indebtedness.

On October 24, 2007, the Company entered into new secured senior credit facilities which provide for aggregate principal borrowings of up to $415 million and replace the Companys previous credit facilities
established with the Amazys acquisition. The new credit facilities consist of a $310 million first lien loan, which is comprised of a $270 million five-year term loan and a $40 million five-year revolving line of credit, and a $105 million six-year
term second lien loan. Obligations under these credit facilities are secured by essentially all of the tangible and intangible assets of the Company. Both facilities provide variable indices from which the Company may select for interest
calculations. Interest payments on LIBOR based loans are payable on the last day of each interest period, not to exceed three months. A small portion of the credit facilities are tied to the prime rate and require interest payments on a scheduled
quarterly basis. We have entered into certain interest rate swaps to, in effect; convert the interest rates of the floating-rates based on LIBOR into a fixed interest rate. Higher interest rates would accordingly result in increased interest
expense. While we presently mitigate the risk of higher interest rates through interest rate swaps, there can be no assurance that we will maintain a matched portfolio in the future

After the completion of the offer we will have a substantial amount of debt which will require significant interest and principal payments. Our level of
debt and the limitations imposed on us by our credit agreements could adversely affect our operating flexibility and put us at a competitive disadvantage. Our substantial debt level may adversely affect our future performance, because, among other
things:



| |  |  | we may be placed at a competitive disadvantage relative to our competitors, some of which have lower debt service obligations and greater financial resources than
we do;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to complete future acquisitions may be limited;
| | - |  | -----------------------------------------------------------



| |  |  | we will have to use a portion of our cash flow for debt service rather than for investment in research and development and capital expenditures
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to obtain further debt financing and/or we may have to pay more for such additional financing as we are able to obtain;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to take advantage of business opportunities; and
| | - |  | -------------------------------------------------------------------



| |  |  | we will be more vulnerable to adverse economic conditions.
| | - |  | ----------------------------------------------------------

The senior credit facilities contain certain covenants applicable to us and our subsidiaries that may adversely affect our ability to incur certain liens or engage in certain types of transactions

Our ability to make scheduled payments of principal of, to pay interest on, or to refinance our indebtedness will depend upon our future operating
performance, which may be affected by factors beyond our control. In addition, there can be no assurance that future borrowings or equity financing will be available to us on favorable terms or at all for the payment or refinancing of our
indebtedness. If we are unable to service our indebtedness, our business, financial condition and results of operations would be materially adversely affected.



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Moreover, if one or more rating agencies downgrades our credit rating, we may have difficulty obtaining
additional financing and/or our cost of obtaining additional financing or refinancing existing debt may be increased significantly.

Uncertainties exist
in integrating the business operations of X-Rite and Pantone.

We intend, to the extent reasonably practicable, to integrate our
operations with those of Pantone. Our goal in integrating these operations is to increase earnings and achieve cost savings by taking advantage of the anticipated synergies of consolidation and enhanced growth opportunities. Actual costs to complete
the synergies may exceed the our preliminary estimates. There can be no assurance that we will not encounter difficulties integrating our operations with Pantones operations, resulting in a delay or the failure to achieve the anticipated
synergies and, therefore, the expected increases in earnings and cost savings. The potential difficulties of combining the operations of the companies may include, among other things:



| |  |  | possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures between X-Rite and Pantone;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | coordinating and consolidating ongoing and future research and development efforts;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | consolidating sales and marketing operations;
| | - |  | ---------------------------------------------



| |  |  | retaining existing customers and attracting new customers;
| | - |  | ----------------------------------------------------------



| |  |  | retaining strategic partners and attracting new strategic partners;
| | - |  | -------------------------------------------------------------------



| |  |  | retaining key employees;
| | - |  | ------------------------



| |  |  | retaining and integrating distributors and key sales representatives;
| | - |  | ---------------------------------------------------------------------



| |  |  | consolidating corporate and administrative infrastructures, including consolidating and integrating computer information and financial systems;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | aligning and managing the technologies and products of the two companies;
| | - |  | -------------------------------------------------------------------------



| |  |  | identifying and eliminating redundant and underperforming operations and assets;
| | - |  | --------------------------------------------------------------------------------



| |  |  | using capital assets efficiently to develop the business of the combined company;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | minimizing the diversion of managements attention from ongoing business concerns;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | coordinating geographically separate organizations;
| | - |  | ---------------------------------------------------



| |  |  | possible tax costs or inefficiencies associated with integrating the operations of the combined company;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | possible modification of operating control standards in order to comply with the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | retaining and attracting new engineers and research and development personnel to support new products and new technology development.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

For these reasons, we may fail to complete successfully the anticipated integration of X-Rite and Pantone, or to realize any of the anticipated
benefits of the integration of the two companies. Actual cost savings and synergies may be lower than we currently expect and may take a longer time to achieve than we currently anticipate.

We are subject to risks arising from currency exchange rate fluctuations, which could increase our costs and may cause our profitability to decline.

In fiscal 2007, we derived approximately $163.4 million, or 65.7 percent of our total revenues, from sales of our products outside of the United
States. Measured in local currency, a substantial portion of our business



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foreign generated revenues were generated in Swiss Francs, Euros and British Pound Sterling. The United States dollar value of our foreign-generated revenues
varies with currency exchange rate fluctuations. Significant increases in the value of the United States dollar relative to other currencies could have a material adverse effect on our results of operations. We address currency risk management
through regular operating and financing activities. We currently have no hedging or similar foreign currency contracts to mitigate the risk of exchange rate fluctuations. Fluctuations in the value of foreign currencies could adversely impact the
profitability of our foreign operations.

If we are unable to protect our intellectual property rights, our business and prospects may be harmed.

We have made significant expenditures to develop and acquire technology and intellectual property rights. We actively patent and trademark
these properties when deemed appropriate and will vigorously defend them against infringement. Our failure to protect our intellectual property could seriously harm our business and prospects because developing new products and technologies is
critical to our success. We will incur substantial costs in obtaining patents and, if necessary, defending our intellectual propriety rights. We do not know whether we will obtain the patent protection we seek, or that the protection we do obtain
will be found valid and enforceable if challenged. Our efforts to protect our intellectual property through patents, trademarks, service marks, domain names, trade secrets, copyrights, confidentiality and nondisclosure agreements and other measures
may not be adequate to protect our proprietary rights. Patent filings by third parties could render our intellectual property less valuable. Disputes may arise as to ownership of our intellectual property or as to whether products designed by our
competitors infringe our intellectual property rights. Employees, consultants and others who participate in developing our products may breach their agreements with us regarding our intellectual property, and we may not have adequate remedies for
the breach. In addition, intellectual property rights may be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market position. Competitors may also capture market share from us by designing
products that mirror the capabilities of our products or technology without infringing on our intellectual property rights. In addition, as sales of our products continue to grow internationally, our exposure to intellectual property infringements
in countries where intellectual property rights protections are less stringent will increase. If we do not obtain sufficient international protection for our intellectual property, our competitiveness in international markets could be impaired,
which would limit our growth and future revenue.

We may be subject to intellectual property litigation and infringement claims, which could cause us to
incur significant expenses or prevent us from selling our products.

A successful claim of patent or other intellectual property
infringement against us could adversely affect our growth and profitability, in some cases materially. We cannot assure you that others will not claim that our proprietary or licensed products are infringing on their intellectual property rights or
that we do not in fact infringe on those intellectual property rights. From time to time, we receive notices from third parties of potential infringement and receive claims of potential infringement. We may be unaware of intellectual property rights
of others that may cover some of our technology. If someone claims that our products infringed on their intellectual property rights, any resulting litigation could be costly and time consuming and would divert the attention of management and key
personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement also might require us to enter into costly
royalty or license agreements or to modify our products. We also may be subject to significant damages or an injunction preventing us from manufacturing, selling or using some of our products in the event of a successful claim of patent or other
intellectual property infringement. Any of these adverse consequences could have a material adverse effect on our business, financial condition and results of operations.



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We may not have financing for future technology and capital requirements, which may prevent us from addressing gaps in
our product offerings, improving our technology or increasing our manufacturing capacity.

If we cannot incur additional debt or issue
equity or are limited with respect to incurring additional debt or issuing equity, we may be unable to address gaps in our product offerings, improve our technology or increase our manufacturing capacity, particularly through strategic acquisitions
or investments. Although historically our cash flow from operations has been sufficient to satisfy working capital, capital expenditures and research and development requirements, in the future we may need to incur additional debt or issue equity in
order to fund these requirements as well as to make acquisitions and other investments. We cannot assure you that debt or equity financing will be available to us on acceptable terms or at all. If we raise funds through the issuance of debt or
equity, any debt securities or preferred stock issued will have rights and preferences and privileges senior to those of holders of our common stock in the event of a liquidation. The terms of the debt securities may impose restrictions on our
operations. If we raised funds through the issuance of equity, this issuance would dilute your ownership of us.

Our ability to make
payments on and to refinance our indebtedness and to fund working capital, capital expenditures and strategic acquisitions and investments, will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general
economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

The markets for our products and services are
highly competitive. If we are unable to compete effectively with existing or new competitors, our business could be negatively impacted.

The businesses in which we compete are very competitive and subject to technological change, evolving standards, frequent product enhancements and introductions and changing customer requirements. Many of our current and potential
competitors have (1) longer operating histories, (2) significantly greater financial, technical and marketing resources, (3) greater name recognition, and/or (4) a larger installed customer base than X-Rite. A number of companies
offer products and services that are similar to those offered by us and that target the same markets. In addition, any of these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, and
to devote greater resources to the development, promotion and sale of their products than us. Our competitors may develop products and services that compete with those offered by us or may acquire companies, businesses and product lines that compete
with us. It also is possible that competitors may create alliances and rapidly acquire significant market share, including in new and emerging markets. If we are not able to differentiate our products and services in the market then competitive
pressures may potentially impact our sales volumes, pricing structure, gross margin, operating expenses an operating income.

Accordingly,
there can be no assurance that current or potential competitors of X-Rite will not develop or acquire products or services comparable or superior to those that we develop, combine or merge to form significant competitors, or adapt more quickly than
us to new technologies, evolving industry trends and changing customer requirements. Competition could cause price reductions, reduced margins or loss of market share for our products and services, any of which could materially and adversely affect
our business, operating results and financial condition. There can be no assurance that we will be able to compete successfully against current and future competitors of X-Rite or that the competitive pressures that the company may face will not
materially adversely affect our business, operating results, cash flows and financial condition.

We may be affected by environmental laws and
regulations.

We are subject to a variety of laws, rules and regulations relating to discharges of substances in the air, water and
land, the handling, storage and disposal of wastes and the cleanup of properties necessitated by pollutants. Any of those regulations could require us to acquire expensive equipment or to incur substantial other



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expenses to comply with them. If we incur substantial additional expenses, product costs could significantly increase. Also, if we fail to comply with
present or future environmental laws, rules and regulations, such failure could result in fines, suspension of production or cessation of operations.

We are vertically integrated and, therefore, must manage costs efficiently.

A significant portion of our manufacturing
processes are vertically integrated. Therefore, it is critical to efficiently manage the cost structure for capital expenditures, materials and overhead, as well as operating expenses such as wages and benefits.

Our reliance on outsourced manufacturing presents risks to our fulfillment process.

We rely on a number of strategic supply chain partners that produce key components or sub-assemblies that support our final assembly, calibration, and test process. Some of these suppliers are single sourced and
therefore present risks to our fulfillment process.

We depend on new product development to compete effectively.

We have made large investments in new products and services. There are no assurances as to when future revenues from these products will be received, or
that the ultimate profit margins received will be adequate to justify the investment.

Continual development of new products and
technologies as well as enhancements to existing products is a core component of our long-term growth plans. Our future business, financial condition and results of operations will depend to a significant extent on our ability to develop new
products that address these market opportunities. As a result, we believe that significant expenditures for research and development will continue to be required in the future. Product development requires a time-consuming and costly research and
development process. Unexpected delays in this process may significantly affect the timing of future revenues and increase costs. We must anticipate the features and functionality that customers will demand, incorporate those features and
functionality into products, price our products competitively and introduce new products to the market on a timely basis. We cannot assure you that the products we expect to introduce will incorporate the features and functionality demanded by our
customers, will be successfully developed, or will be introduced within the appropriate window of market demand. If there are delays in production of current or new products, our potential future business, financial condition, and results of
operations could be adversely affected. In addition, the time required for competitors to develop and introduce competing products may be shorter, their manufacturing yields may be better, and their production costs may be lower than those
experienced by us.

Any general economic slowdown could adversely affect our revenues and profitability.

Many of our products are used for quality control purposes within a larger manufacturing or production process. As such, our sales in some instances are
linked to capital goods spending. Should there be a prolonged slowdown in capital goods spending or changes in global economic conditions, our revenues and profitability could be noticeably impacted.

We may face potential tax liabilities.

We are
subject to taxation in many jurisdictions in the United States, Europe, Asia and elsewhere. In the ordinary course of business, there are transactions and calculations where the ultimate tax liability cannot be determined with certainty at the time
the transaction is entered into. Preparation of our income tax provision requires the use of judgments as to how these transactions will ultimately be taxed. We believe our tax accruals are accurate though the ultimate determination of these issues
may be different from that which is reflected in our historical provision and accruals. Should these determinations be different from what is previously recorded and additional tax is assessed, those assessments would be recorded in the period in
which they occur.



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The Companys reliance on a primary manufacturing center may affect timely product production and profitability.

Manufacturing and service of much of our core color products are performed at our headquarters facility in Grand Rapids, Michigan, and
in our European headquarters facility in Regensdorf, Switzerland. Should a catastrophic event occur at either of these facilities, our ability to manufacture products, complete existing orders, and provide other services would be severely impacted
for an undetermined period of time. We have purchased business interruption insurance to cover the costs of certain catastrophic events . Our inability to conduct normal business operations for a period of time may have an adverse impact on
long-term operating results.



|ITEM 1B. | UNRESOLVED STAFF COMMENTSNone
|-------- | ------------------------------



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|ITEM 2. | PROPERTIES
|------- | ----------

The Company and its subsidiaries own or
lease properties throughout the world. Listed below are the principal properties owned or leased as of March 1, 2008:



|                         |  |                                                                                                  |  |             
|------------------------ |  | ------------------------------------------------------------------------------------------------ |  | ------------
|Location                 |  | Principal Uses                                                                                   |  | Owned/Leased
|Grand Rapids, MI         |  | Company headquarters, manufacturing, RD&E, sales, customer service, warehouse and administration |  | Owned       
|                         |  |                                                                                                 
|Grandville, MI           |  | Previous headquarters, currently for sale                                                        |  | Owned       
|                         |  |                                                                                                 
|Tewksbury, MA            |  | RD&E, sales, customer service, and administration                                                |  | Leased      
|                         |  |                                                                                                 
|Greensboro, NC           |  | Sales, customer service                                                                          |  | Leased      
|                         |  |                                                                                                 
|Regensdorf, Switzerland  |  | Manufacturing, RD&E, sales, customer service, warehouse and administration                       |  | Leased      
|                         |  |                                                                                                 
|Carlstadt, NJ            |  | Manufacturing, RD&E, sales, customer service, warehouse and administration                       |  | Leased      
|                         |  |                                                                                                 
|Mumbai, India            |  | Sales and customer service                                                                       |  | Leased      
|                         |  |                                                                                                 
|Poynton, England         |  | Sales, customer service, and administration.                                                     |  | Leased      
|                         |  |                                                                                                 
|Berlin, Germany          |  | Manufacturing, RD&E, sales, customer service, warehouse, and administration                      |  | Leased      
|                         |  |                                                                                                 
|Neu-Isenburg, Germany    |  | Sales, customer service                                                                          |  | Leased      
|                         |  |                                                                                                 
|Martinsried, Germany     |  | Manufacturing, RD&E, sales, customer service, training                                           |  | Leased      
|                         |  |                                                                                                 
|Massy, France            |  | Sales, customer service, and administration                                                      |  | Leased      
|                         |  |                                                                                                 
|Prato, Italy             |  | Sales and customer service                                                                       |  | Leased      
|                         |  |                                                                                                 
|Brixen-Bressanone, Italy |  | Manufacturing, RD&E sales, customer service                                                      |  | Owned       
|                         |  |                                                                                                 
|Vyskov, Czech Republic   |  | Sales                                                                                            |  | Leased      
|                         |  |                                                                                                 
|Moscow, Russia           |  | Sales                                                                                            |  | Leased      
|                         |  |                                                                                                 
|Quarry Bay, Hong Kong    |  | Sales, customer service, and administration                                                      |  | Leased      
|                         |  |                                                                                                 
|Tokyo, Japan             |  | Sales, customer service, and administration                                                      |  | Leased      
|                         |  |                                                                                                 
|Shanghai, China          |  | Sales, customer service, and administration (3 sites)                                            |  | Leased      
|                         |  |                                                                                                 
|Beijing , China          |  | Sales and customer service                                                                       |  | Leased      
|                         |  |                                                                                                 
|Guangzhou, China         |  | Sales and customer service                                                                       |  | Leased      

As of March 1, 2008, X-Rite and its subsidiaries collectively own approximately 699,000
square feet of space and lease approximately 272,000 square feet. Included in these figures are 311,000 square feet owned and approximately 41,000 square feet leased related to facilities that have been closed or that are in the process of being
closed as of March 1, 2008 as part of the Companys restructuring plans. The Company is currently in the process of selling, subleasing, or negotiating lease break-fees for all of the closed facilities.

On February 14, 2006, the Company purchased a new corporate headquarters and manufacturing facility in Grand Rapids, Michigan for $13.4 million. The
new facility is approximately 375,000 square feet and is located ten miles from the Companys former headquarters. In December 2007, the Company entered into a definitive purchase agreement to sell the Companys former headquarters,
located in Grandville, Michigan, for $13.1 million plus reimbursement of certain property tax assessment payments made prior to closing of the transaction. The purchase agreement provides for a 120 day due diligence period for the buyer to evaluate
the property. The



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buyer has deposited an initial earnest money deposit of $125,000 with an escrow agent to be applied as a credit to the purchase price at closing. Final
closing on the sale will be based on completion of the Buyers inspection and due diligence process as well as the granting of governmental approvals related to the future planned usage of the property.

Management considers all the Companys properties and equipment to be suitable and adequate for its current and reasonably anticipated development,
production, distribution, and selling requirements.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

The Company is periodically
involved in legal proceedings, legal actions, and claims arising in the normal course of business, including proceedings related to product, labor, and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable.
The Company records amounts for losses that are deemed probable and subject to reasonable estimate. The Company does not believe that the ultimate resolution of any of these matters will have a material adverse effect on our financial statements.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 29, 2007.

EXECUTIVE OFFICERS
OF THE REGISTRANT

The following table lists the names, ages, and positions of all of the Companys executive officers as of
March 3, 2008.



|                        |  |     |  |                                                    |  |                    |    
|----------------------- |  | --- |  | -------------------------------------------------- |  | ------------------ | ---
|Name                    |  | Age |  | Position                                           |  | PositionHeld Since |    
|Thomas J. Vacchiano Jr. |  | 55  |  | President, Chief Executive Officer                 |  | 2006               | (1)
|Lynn J. Lyall           |  | 54  |  | Executive Vice President, Chief Financial Officer  |  | 2008               | (2)
|Francis Lamy            |  | 49  |  | Executive Vice President, Chief Technology Officer |  | 2006               | (3)



|(1) | Mr. Vacchiano joined X-Rite as its President in July 2006 as part of the Amazys acquisition, and was appointed CEO upon the retirement of Michael C. Ferrara from that position
in October 2006. Prior to joining X-Rite, Mr. Vacchiano served as President and Chief Executive Officer of Amazys, a color technology company headquartered in Switzerland, which was acquired by X-Rite on July 2006. He held that position for
five years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Lyall joined X-Rite on March 3, 2008 as Executive Vice President and Chief Financial Officer. Prior to joining X-Rite, Mr. Lyall served as Chief Financial Officer
of Alticor, Inc., a $7 billion global consumer products business from 1999 to 2007. Prior to Alticor, he held the position of Chief Financial Officer at Blockbuster Entertainment Group from 1997 to 1999.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Mr. Lamy joined X-Rite as part of the Amazys acquisition in July 2006. Prior to joining X-Rite, Mr. Lamy served as the Executive Vice President and Chief Technology
Officer for GretagMacbeth AG, the primary subsidiary of Amazys. He held that position for more than five years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART II

ITEM  5.   MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER  MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Companys common stock is quoted in the NASDAQNational Market System under the symbol XRIT. As of March 1, 2008, there
were approximately 906 shareholders of record. Ranges of high and low sales prices reported by The NASDAQ National Market System for the past two fiscal years appear in the following table.



|                              |  |      |       |     |   |                    |  |   |     
|----------------------------- |  | ---- | ----- | --- | - | ------------------ |  | - | ----
|                              |  | High |       | Low |   | DividendsPer Share
|Year Ended December 29, 2007: |  |      |       |     |   |                    |  |   |     
|Fourth Quarter                |  | $    | 16.22 |     | $ | 11.05              |  | $ | .000
|Third Quarter                 |  |      | 16.42 |     |   | 12.70              |  |   | .000
|Second Quarter                |  |      | 15.49 |     |   | 12.32              |  |   | .000
|First Quarter                 |  |      | 13.36 |     |   | 10.90              |  |   | .000
|                              |  |      |      
|Year Ended December 30, 2006: |  |      |       |     |   |                    |  |   |     
|Fourth Quarter                |  | $    | 12.55 |     | $ | 10.26              |  | $ | .025
|Third Quarter                 |  |      | 11.59 |     |   | 7.50               |  |   | .025
|Second Quarter                |  |      | 13.53 |     |   | 10.50              |  |   | .025
|First Quarter                 |  |      | 13.32 |     |   | 10.00              |  |   | .025

On January 8, 2007, the Company announced the Board of Directors decision to suspend payment
of its quarterly dividend of $.025 per share effective immediately. This decision was made to speed in the repayment of borrowings related to the Amazys acquisition and help fund future product development initiatives. Although the Board does not
anticipate reinstating the dividend payment in the foreseeable future, it will continue to reevaluate the policy on an on-going basis.



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Shareholder Return Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on the Companys common stock with that of the cumulative total return of the NASDAQ Stock Index
(US & foreign) and NASDAQ Non-Financial Index for the five-year period ended December 29, 2007. The graph assumes an investment of $100 on December 31, 2002 in the companys common stock, the NASDAQ Stock Index (US &
foreign) and the NASDAQ Non-Financial Index, with dividends re-invested.

LOGO



|                     |  |      |     |      |   |      |  |      |     |      |   |      |  |   |     |  |   |    
|-------------------- |  | ---- | --- | ---- | - | ---- |  | ---- | --- | ---- | - | ---- |  | - | --- |  | - | ---
|                     |  | 2002 |     | 2003 |   | 2004 |  | 2005 |     | 2006 |   | 2007
|X-Rite, Inc.         |  | $    | 100 |      | $ | 162  |  | $    | 229 |      | $ | 143  |  | $ | 176 |  | $ | 166
|NASDAQ US & foreign  |  | $    | 100 |      | $ | 151  |  | $    | 164 |      | $ | 168  |  | $ | 185 |  | $ | 205
|NASDAQ Non-Financial |  | $    | 100 |      | $ | 153  |  | $    | 165 |      | $ | 169  |  | $ | 185 |  | $ | 210



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##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

Selected financial data
for the five most recently completed fiscal years is summarized below. Such data should be read in conjunction with the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and notes thereto and information included elsewhere in this Annual Report on Form 10K.



|                                                      |  |                                       |         |   |      |   |         |      |  |      |         |      |   |         |  |   |        
|----------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                      |  | 2007                                  |         |   | 2006 |   |         | 2005 |  | 2004 |         | 2003
|                                                      |  | (in thousands, except per share data)
|Net sales from continuing operations                  |  | $                                     | 248,710 |   |      | $ | 167,641 |      |  | $    | 119,626 |      | $ | 116,159 |  | $ | 106,468
|Operating income (loss)                               |  |                                       | 16,643  |   |      |   | (25,660 | )    |  |      | 14,230  |      |   | 14,572  |  |   | 8,332  
|Income (loss) from continuing operations              |  |                                       | (20,822 | ) |      |   | (27,144 | )    |  |      | 9,406   |      |   | 12,122  |  |   | 5,494  
|Earnings (loss) per share from continuing operations: |  |                                       |         |   |      |   |         |      |  |      |         |      |   |         |  |   |        
|Basic(1)                                              |  |                                       | (.72    | ) |      |   | (1.09   | )    |  |      | .44     |      |   | .58     |  |   | .27    
|Diluted(1)                                            |  |                                       | (.72    | ) |      |   | (1.09   | )    |  |      | .44     |      |   | .57     |  |   | .27    
|Dividends per share                                   |  |                                       | .00     |   |      |   | .10     |      |  |      | .10     |      |   | .10     |  |   | .10    
|Total assets                                          |  | $                                     | 654,824 |   |      | $ | 462,259 |      |  | $    | 147,635 |      | $ | 134,293 |  | $ | 119,683
|Long-term debt, less current portion                  |  |                                       | 378,300 |   |      |   | 190,200 |      |  |      |        |      |   |        |  |   |       



|(1) | In 2007, the Company issued 363,162 shares of common stock in connection with option exercises and purchases under the Employee Stock Purchase Plan. In addition, 343,041 shares were
granted under the Companys Restricted Stock Plan including 141,144 shares issued in connection with the Pantone acquisition. In 2006, the Company issued 96,450 shares of common stock in connection with option exercises and purchases under the
Employee Stock Purchase Plan, 137,210 shares were granted under the Companys Restricted Stock Plan and 7,221,458 shares were issued in connection with the Amazys acquisition. During 2005, 283,827 shares of common stock were issued in
connection with employee stock option and purchase plans.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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ITEM 7.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS:

This discussion and analysis of financial condition and results of operations, as well as other
sections of the Companys Form 10-K, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on
managements beliefs, assumptions, current expectations, estimates and projections about the industries it serves, the economy, and about the Company itself. Words such as anticipates, believes, estimates,
expects, likely, plans, projects, should, variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence including those listed in Item 1A  Risk Factors. Therefore,
actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Furthermore, X-Rite, Incorporated undertakes no obligation to update, amend or clarify forward-looking statements, whether
as a result of new information, future events, or otherwise. Forward-looking statements include, but are not limited to, statements concerning liquidity, capital resources needs, tax rates, dividends, and potential new markets.

The following managements discussion and analysis describes the principal factors affecting the results of operations, liquidity and capital
resources, as well as the critical accounting policies of X-Rite, Incorporated (also referred to as X-Rite, or the Company). For purposes of this discussion, amounts from the accompanying consolidated financial statements and
related notes have been rounded to millions of dollars, except where separately disclosed, for convenience of the reader. These rounded amounts are the basis for calculations of comparative changes and percentages used in this discussion. This
discussion should be read in conjunction with the accompanying consolidated financial statements, which include additional information about the Companys significant accounting policies, practices and transactions that underlie its financial
results.

OVERVIEW OF THE COMPANY

X-Rite, Incorporated is a technology company that develops a full range of color management systems. The Companys technologies assist manufacturers, retailers, and distributors in achieving precise color appearance throughout their
global supply chain. X-Rite products also assist printing companies, graphic designers, and professional photographers in achieving precise color reproduction of images across a wide range of devices and from the first to the last print. The
Companys products also provide retailers color harmony solutions at point of purchase. The key markets served include Imaging and Media, Industrial, and Retail.

X-Rite generates revenue by selling products and services through a direct sales force as well as select distributors. The Company has sales and service facilities located in the United States, Europe, Asia, and Latin
America.

Overview of 2007

Our results
in 2007 were impacted significantly by the integration of the acquisition of our largest competitor, Amazys Holding AG. Additionally, we acquired the leading color communications and standards company, Pantone, Inc. These two acquisitions position
X-Rite as a leader in the marketplace for color solutions. Significant events in 2007 include:



| |  |  | In October 2007, we announced the acquisition of Pantone for approximately $175 million in cash. The strategic rationale for the acquisition includes the following:
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Creates the market leader in the color management industry
| | - |  | ----------------------------------------------------------



| |  |  | Acquisition of an important color brand and customer and partner base
| | - |  | ---------------------------------------------------------------------



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| |  |  | Economies of scale are expected to result in annual operational cost savings estimated at $6 million by the end of year two
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Extends our market opportunities in the design area and with new addressable markets
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Augments our existing talent pool in marketing and brand building skills
| | - |  | ------------------------------------------------------------------------



| |  |  | We achieved a record annual revenue level of $248.7 million, a 48 percent increase over 2006 levels, as a result of our acquisitions of Amazys and Pantone.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We completed the sale of our Labsphere business at a favorable price in February 2007.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | We launched seven new products including the innovative Vericolor Spectro non-contact soliution, Hubble home entertainment system, Personal Color Trainer,
InpressControl CD74, and Personal Designer
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During 2007 we continued to execute our comprehensive plan to integrate the
Amazys acquisition which resulted in approximately $15 million of incremental achieved synergies. Since the transaction closed on July 5, 2006 we have achieved $21.1 million of cost synergies including the following:



| |  |  | Closure of 15 facilities worldwide including the Amazys US headquarters and manufacturing operations
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Implementation of product line integration plans
| | - |  | ------------------------------------------------



| |  |  | Consolidation of key financial and back office operations including the conversion of substantially all IT systems to a common platform
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reduction of headcount by approximately 20 percent
| | - |  | --------------------------------------------------

As we look forward, our 2008 focus is on several key prioritiescompleting the final elements of the integration of Amazys, achieving our planned integration cost synergies for Pantone, growing and expanding our
revenues and investing in product and technology innovation. Further, we believe the demand for innovative, cost effective color technology and solutions will continue to grow as our solutions become easier to use and our customers view color as an
integral differentiator in their products and services. We are focused on developing the innovative products and solutions that our customers demand and executing our business strategies.



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##### Table of Contents

RESULTS OF OPERATIONS

The following table summarizes the results of the Companys operations for the 2007, 2006 and 2005 fiscal years and includes amounts expressed as a percentage of net sales (in millions):



|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|---------------------------------------- |  | ---- | ----- | - | ---- | ----- | -- | ---- | - | ----- | - |  | ----- | -- |  | - | ----- | - |  | ----- | -
|                                         |  | 2007 |       |   | 2006 |       |    | 2005 |  
|Net Sales                                |  | $    | 248.7 |   |      | 100.0 | %  |      | $ | 167.6 |   |  | 100.0 | %  |  | $ | 119.6 |   |  | 100.0 | %
|Cost of sales:                           |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Products sold                            |  |      | 99.7  |   |      | 40.1  |    |      |   | 65.5  |   |  | 39.1  |    |  |   | 39.3  |   |  | 32.9  |  
|Restructuring charges                    |  |      | 0.2   |   |      | 0.1   |    |      |   | 6.1   |   |  | 3.6   |    |  |   |      |   |  |      |  
|Inventory valuation adjustment           |  |      | 2.6   |   |      | 1.0   |    |      |   | 4.9   |   |  | 2.9   |    |  |   |      |   |  |      |  
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Gross profit                             |  |      | 146.2 |   |      | 58.8  |    |      |   | 91.1  |   |  | 54.4  |    |  |   | 80.3  |   |  | 67.1  |  
|Operating expenses                       |  |      | 129.6 |   |      | 52.1  |    |      |   | 116.8 |   |  | 69.7  |    |  |   | 66.1  |   |  | 55.2  |  
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Operating income (loss)                  |  |      | 16.6  |   |      | 6.7   |    |      |   | (25.7 | ) |  | (15.3 | )  |  |   | 14.2  |   |  | 11.9  |  
|Interest expense                         |  |      | (22.1 | ) |      | (8.8  | )  |      |   | (8.8  | ) |  | (5.3  | )  |  |   |      |   |  |      |  
|Gain on derivative financial instruments |  |      |      |   |      |      |    |      |   | 2.1   |   |  | 1.3   |    |  |   |      |   |  |      |  
|Write-off of deferred financing costs    |  |      | (5.5  | ) |      | (2.2  | )  |      |   |      |   |  |      |    |  |   |      |   |  |      |  
|Gain (loss) sale of investments          |  |      | 0.8   |   |      | 0.3   |    |      |   |      |   |  |      |    |  |   | (0.6  | ) |  | (0.5  | )
|Other income (expense)                   |  |      | (1.0  | ) |      | (0.5  | )  |      |   | 0.3   |   |  | 0.1   |    |  |   | (0.7  | ) |  | (0.6  | )
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Income (loss) before income taxes        |  |      | (11.2 | ) |      | (4.5  | )  |      |   | (32.1 | ) |  | (19.2 | )  |  |   | 12.9  |   |  | 10.8  |  
|Income taxes (benefit)                   |  |      | 9.6   |   |      | 3.9   |    |      |   | (5.0  | ) |  | (3.0  | )  |  |   | 3.5   |   |  | 2.9   |  
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Income (loss) from continuing operations |  |      | (20.8 | ) |      | (8.4  | )  |      |   | (27.1 | ) |  | (16.2 | )  |  |   | 9.4   |   |  | 7.9   |  
|Discontinued operations:                 |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Income from operations                   |  |      |      |   |      |      |    |      |   | 1.7   |   |  | 1.0   |    |  |   | 1.7   |   |  | 1.4   |  
|Net gain on sale                         |  |      | 8.2   |   |      | 3.3   |    |      |   |      |   |  |      |    |  |   |      |   |  |      |  
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  
|Net income (loss)                        |  | $    | (12.6 | ) |      | (5.1  | )% |      | $ | (25.4 | ) |  | (15.2 | )% |  | $ | 11.1  |   |  | 9.3   | %
|                                         |  |      |       |   |      |       |    |      |   |       |   |  |       |    |  |   |       |   |  |       |  

On October 24, 2007, the Company acquired Pantone, Inc., a worldwide market leader in color
communication and specification standards in the creative design industries. Anticipated strategic, operational and financial benefits of the acquisition include a deepening of X-Rites range of offerings by adding color standards to its
leadership position in hardware, software, and services solutions.

On July 5, 2006, the Company acquired Amazys Holding, AG, a
primary competitor in key markets. The Company has a comprehensive plan to integrate the operations of the two Companies which includes:



| |  |  | Consolidation of product lines
| | - |  | ------------------------------



| |  |  | Consolidation of global sales and marketing functions
| | - |  | -----------------------------------------------------



| |  |  | Elimination of duplication in engineering and general and administrative functions
| | - |  | ----------------------------------------------------------------------------------

As a result of executing this comprehensive integration plan, various Amazys operations have been integrated into the operations of X-Rite as of
December 29, 2007 and included in the sales attributable to X-Rite for the 2007 periods presented. As Amazys financial information is not included in the consolidated results for the first six months of 2006 or for the 2005 fiscal year
(i.e., prior to the date of acquisition), comparability on a period to period basis is limited.



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##### Table of Contents

A key component of the integration plan for the Amazys acquisition involves consolidating the two
companies product lines. This process includes elimination of certain overlapping products from each Company over the next one to two years. As such, the relative sales of products from each company may shift.



|                                |  |               |       |  |       |   |  |      |       |  |       |   |  |   |       |  |       |  
|------------------------------- |  | ------------- | ----- |  | ----- | - |  | ---- | ----- |  | ----- | - |  | - | ----- |  | ----- | -
|                                |  | 2007          |       |  | 2006  |   |  | 2005 |      
|                                |  | (in millions) |      
|Net Sales                       |  |               |       |  |       |   |  |      |       |  |       |   |  |   |       |  |       |  
|Imaging and Media               |  | $             | 124.2 |  | 50.0  | % |  | $    | 78.9  |  | 47.1  | % |  | $ | 47.8  |  | 40.0  | %
|Industrial                      |  |               | 48.0  |  | 19.3  |   |  |      | 36.0  |  | 21.5  |   |  |   | 27.0  |  | 22.6  |  
|Color Support Services          |  |               | 28.3  |  | 11.4  |   |  |      | 21.8  |  | 13.0  |   |  |   | 12.8  |  | 10.7  |  
|Retail                          |  |               | 22.2  |  | 8.9   |   |  |      | 20.7  |  | 12.3  |   |  |   | 24.6  |  | 20.5  |  
|Other                           |  |               | 17.0  |  | 6.8   |   |  |      | 10.2  |  | 6.1   |   |  |   | 7.4   |  | 6.2   |  
|                                |  |               |       |  |       |   |  |      |       |  |       |   |  |   |       |  |       |  
|Total Color Measurement Segment |  |               | 239.7 |  | 96.4  |   |  |      | 167.6 |  | 100.0 |   |  |   | 119.6 |  | 100.0 |  
|Color Standards Segment         |  |               | 9.0   |  | 3.6   |   |  |      |      |  |      |   |  |   |      |  |      |  
|                                |  |               |       |  |       |   |  |      |       |  |       |   |  |   |       |  |       |  
|Total Net Sales                 |  | $             | 248.7 |  | 100.0 | % |  | $    | 167.6 |  | 100.0 | % |  | $ | 119.6 |  | 100.0 | %

As a result of the Pantone acquisition, the Company has two reportable segments, Color Measurement
and Color Standards. The Color Measurement segment is engaged in X-Rites traditional hardware and software technology business that develops a full range of color management systems. The Companys technologies assist manufacturers,
retailers, and distributors in achieving precise color appearance throughout their global supply chain. The Color Standards segment includes the operations of the Pantone, Inc. business unit. Pantone, Inc. is a leading developer and marketer of
products for the accurate communication and reproduction of color, servicing worldwide customers in a variety of industries including imaging and media, textiles, digital technology, plastics, and paint.

Net sales for 2007 increased $81.1 million, or 48.4 percent, over 2006. The Amazys acquisition and changes in product mix and selling price in the Color
Measurement segment, as discussed below, increased revenue by $72.1 million. The addition of the Color Standards segment, as of October 24, 2007, contributed $9.0 million in revenue to the Companys increased sales. The impact of
translating foreign denominated revenue to U.S. dollars improved revenue by $6.7 million in 2007. Both domestic and international revenue increased, with international revenue accounting for 65.7 percent of net sales in 2007 compared to 60.7 percent
in 2006.

Color Measurement Segment

The Imaging and Media product lines provide solutions for commercial and package printing applications, digital printing and photo processing, photographic, graphic design and pre-press service bureaus in the imaging industries. The Imaging
and Media business unit reported an increase in revenue of $45.3 million, or 57.4 percent, as compared to 2006. The increase in the Imaging and Media business unit was assisted by incremental European sales of $28.9 million, or 91.6 percent,
compared to 2006. The growth in the Imaging and Media business unit was primarily through the acquisition of Amazys in mid 2006. As a result of the acquisition, the Company had year over year incremental sales to its largest customer of $17.1
million compared to 2006. In 2007, the company introduced several new products which contributed to increased sales and had full year sales for products that were launched in the second half of 2006.

In 2006, the Imaging and Media products group recorded an increase in net sales of $31.1 million, or 65.1 percent, compared with 2005. The increase
consisted of $33.3 million of Amazys product sales since the acquisition, a $0.7 million increase in X-Rite Media sales, and a decrease in X-Rite Imaging sales of $2.9 million. On a combined basis the Company noted strengths in its major accounts
and OEM channels which were fueled by strong demand for online, embedded, and bundled product solutions. These gains were offset by weakness in our other sales channels. The increase in Media sales for the traditional X-Rite product lines compared
with 2005 was primarily the result of the successful launch of the Intellitrax product in late 2005. The decrease in sales of X-Rite Imaging products was primarily attributable to market uncertainty surrounding the Companys product
rationalization activities.



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##### Table of Contents

The Industrial group provides color measurement solutions for the automotive quality control, process
control and global supply chain markets. The Companys products are an integral part of the manufacturing process for automotive interiors and exteriors, as well as textiles, plastics, and dyes. The Industrial business units net sales
increased by $12.0 million, or 33.3 percent compared to the prior year. European sales accounted for 43.0 percent, or $5.2 million, of the total sales increase for the industrial business unit. The year over year increase was primarily due to the
Amazys acquisition and increased software sales in the industrial business unit.

Industrial sales in 2006, increased $9.0 million, or 33.3
percent, compared with 2005. Sales of Amazys products post acquisition contributed $13.3 million to 2006 net sales. Sales of the traditional X-Rite product lines increased $0.7 million or 2.2 percent in 2006, compared with 2005, primarily due to
strong sales in the portables lines used in the plastics industry. Overall, sales for both Companies were negatively impacted by softening in the auto refinishing market, a slow down in supply chain business in the Americas and Asia due to project
timing and competitive actions, as well as uncertainties in the market place over the product rationalization process that was on-going in the latter half of 2006.

The Color Support Services business provides professional color training and support worldwide through seminar training, classroom workshops, on-site consulting, technical support and interactive media development.
The Color Support Service division group also manages the Companys service repair departments. The products repaired by the service department include the Companys products currently covered by our warranty program as well as those
products which have expired warranties. The Color Support Services business unit was formed in 2007 as a result of the Amazys acquisition. The Color Support Services group recorded an increase in sales of $6.5 million or 29.8 percent compared to
2006. The increase in the Color Support Services business unit was primarily due to the Amazys acquisition. Increased sales of $5.9 million in Europe accounted for 91.0 percent of the Color Support Services increase from 2006.

The Retail business unit experienced a sales increase of $1.5 million, or 7.2 percent, for 2007 compared with 2006. This increase in sales was a result
of an increase in European sales $2.1 million offset partially by decrease sales in North America of $0.8 million. The increase in Europe sales was a result of an expanded presence with key customers and the continued development of strong regional
dealer partners. These factors, combined with a stronger resource commitment to the region, have enabled the growth.

For 2006, the Retail
sales group had net sales of $20.7 million, a decrease of $3.9 million, or 15.9 percent, compared with 2005. The decline was attributable to softness in the North America market, which declined $5.7 million over 2005. This decline was partially
off-set by growth in European sales, which increased $1.8 million over 2005. North American sales in 2006 were also negatively impacted by a lack of growth in the market size and the delayed launch of the Matchstik 1.1 handheld instrument. Several
large rollout orders totaling $4.0 million in late 2005 also negatively impacted the 2006 to 2005 comparison.

The Companys product
lines denoted as Other consist of three primary categories, Medical, Dental and Light. The Medical product line provides instrumentation designed for use in controlling variables in the processing of x-ray film. The Dental product line provides
matching technology to the cosmetic dental industry thorough X-Rites ShadeVision systems. The Light product line specializes in color viewing systems designed to increase productivity and reduce costs, while providing accurate simulation of
natural daylight. Other product sales represented $17.0, $10.2, and $7.4 million for the 2007, 2006, and 2005 years, respectively. Other product sales have ranged from 6.8 percent of sales to 6.1 percent of sales in the three years.

Color Standards Segment

The Color Standards
segment includes the operations of the Pantone, Inc. business unit. Pantone, Inc. is a leading developer and marketer of products for the accurate communication and reproduction of color, servicing worldwide customers in a variety of industries
including imaging and media, textiles, digital technology, plastics, and paint. For 2007, the results presented in the color standards segment reflect the operations of Pantone since the October 24, 2007 acquisition date. For 2007, the color
standards segment recorded $9.0 million in net sales.



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##### Table of Contents

Cost of Sales and Gross Profit

X-Rites cost of sales consists primarily of materials, labor, and manufacturing overhead associated with manufacturing its products. Primary
manufacturing activities are conducted at facilities in Michigan and Switzerland, with smaller operations located in Italy and Germany. Software development is also conducted at these facilities, as well as at additional facilities in Massachusetts
and Germany. The Companys gross profit historically has fluctuated within a narrow range. Principal drivers of gross profit include production volumes, product mix, labor, facilities and materials costs.

Gross profit for 2007 was $146.2 million, or 58.8 percent of sales, compared with $91.1 million, or 54.4 percent of sales, in 2006. Included in cost of
sales in 2007 was $0.2 million in restructuring expenses representing charges for the write-down of inventory and capitalized software directly related to X-Rite product lines that were discontinued as a result of the Amazys acquisition. In
addition, the Company recorded $2.6 million, or 1.0 percent of margin, in purchase accounting inventory adjustments as a result of the Pantone acquisition purchase price allocation. This allocation process required the Company to value the Pantone
acquired inventory at estimated fair value less a normal profit margin as of the date of the acquisition and subsequently recognize this amount in operations as the related inventory was sold. The fair value valuation resulted in an increase to
inventory of $15.4 million. The Companys gross margin related to continuing operations was $149.0 million, or 59.9 percent of sales compared to $102.1 million, or 60.9 percent, in 2006. The decrease in margin was primarily due to the full year
of Amazys production, whose gross margins have historically run 4 to 8 percent lower than X-Rites. Other factors contributing to the 2007 gross margin include manufacturing and material variances, and efficiencies generated from the movement
of production from subsidiaries to the Michigan location.

Gross profit for 2006, was $91.1 million, or 54.4 percent of sales, compared
with $80.3 million, or 67.1 percent of sales, in 2005. Included in cost of sales in 2006, was $6.1 million in restructuring expenses representing charges for the write-down of inventory, tooling, capitalized software and other intangible assets
directly related to X-Rite product lines that were discontinued as a result of the Amazys acquisition. In addition, the Company recorded $4.9 million in purchase accounting inventory adjustments as a result of the Amazys acquisition purchase price
allocation. The Companys gross margin would have been $102.1 million, or 60.9 percent, for 2006. The year over year decline in margins from 2005 was primarily attributable to the inclusion of Amazys for the second half of 2006. Other factors
contributing to the decline in margins compared with 2005 include unfavorable manufacturing variances and increases in inventory scrap and obsolescence reserves including reserves for non-Rohs-Wees compliant components that are no longer used in
production.

Operating Expenses

The following table compares operating expense components as a percentage of net sales (in millions):



|                                             |  |      |       |  |      |   |  |      |       |  |      |   |  |   |      |   |  |      |  
|-------------------------------------------- |  | ---- | ----- |  | ---- | - |  | ---- | ----- |  | ---- | - |  | - | ---- | - |  | ---- | -
|                                             |  | 2007 |       |  | 2006 |   |  | 2005 |      
|Selling and marketing                        |  | $    | 60.6  |  | 24.4 | % |  | $    | 43.4  |  | 25.9 | % |  | $ | 34.9 |   |  | 29.2 | %
|Research, development and engineering        |  |      | 34.7  |  | 14.0 |   |  |      | 25.3  |  | 15.1 |   |  |   | 15.0 |   |  | 12.5 |  
|General and administrative                   |  |      | 28.2  |  | 11.3 |   |  |      | 23.7  |  | 14.1 |   |  |   | 17.4 |   |  | 14.5 |  
|Acquired in-process research and development |  |      |      |  |     |   |  |      | 11.1  |  | 6.6  |   |  |   |     |   |  |     |  
|Restructuring                                |  |      | 2.8   |  | 1.1  |   |  |      | 10.0  |  | 6.0  |   |  |   |     |   |  |     |  
|Integration                                  |  |      | 3.3   |  | 1.3  |   |  |      | 3.3   |  | 2.0  |   |  |   |     |   |  |     |  
|Founders insurance gain                      |  |      |      |  |     |   |  |      |      |  |     |   |  |   | (1.2 | ) |  | (1.0 | )
|                                             |  |      |       |  |      |   |  |      |       |  |      |   |  |   |      |   |  |      |  
|Total                                        |  | $    | 129.6 |  | 52.1 | % |  | $    | 116.8 |  | 69.7 | % |  | $ | 66.1 |   |  | 55.2 | %
|                                             |  |      |       |  |      |   |  |      |       |  |      |   |  |   |      |   |  |      |  

The effect of foreign exchange rates on operating expenses accounted for $3.8 million of
additional operating expenses in 2007, $0.2 million in 2006, and was nominal in 2005.



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##### Table of Contents

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of wages, commissions, facility costs, travel, advertising, trade shows, media and product promotion
costs. Selling and marketing expenses for 2007 were $60.6 million, an increase of $17.2 million, or 39.6 percent, compared with 2006. The increase was primarily a result of the full year selling expenses related to the Amazys acquisition. Included
in the 2007 selling and marketing expenses are the costs associated with Pantones selling and marketing group of $1.9 million since the acquisition date. In addition selling and marketing expenses also include $1.8 million of acquisition
related amortization expenses. As a percentage of sales, 2007 expenses were 24.4 percent compared to 25.9 and 29.2 percent for 2006 and 2005, respectively.

Selling and marketing expenses for 2006 were $43.4 million, an increase of $8.5 million, or 24.4 percent compared with 2005. The increase was primarily a result of the costs associated with the Amazys selling and
marketing group which has incurred $8.9 million in 2006 since the acquisition date. In addition selling and marketing expenses also include $1.3 million of acquisition related amortization expenses. Excluding the increases due to Amazys related
costs the X-Rite selling and marketing spending decreased $1.6 million compared to the prior year, or 4.4 percent.

Research, Development and
Engineering Expenses

Research, development and engineering (RD&E) expenses include compensation, facility costs, consulting
fees, and travel for the Companys engineering staff. These costs are incurred primarily in the United States and Switzerland for both new product development and the support and refinement of existing product lines. RD&E expenses in 2007
increased $9.4 million, or 37.2 percent. Of this increase $3.5 million was attributable to acquisition related intangible amortization incurred from the July 2006 acquisition of Amazys and the October 2007 acquisition of Pantone. Also contributing
to the increase over 2006 was the full year costs of the Amazys acquisition RD&E expenses. RD&E expenses as a percentage of sales were 14.0, 15.1 and 12.5 percent for 2007, 2006 and 2005, respectively. The Company intends to make investments
in RD&E in the range of 12 to 14 percent of net sales for the foreseeable future.

RD&E expenses in 2006 increased $10.3 million,
or 68.7 percent. Of this increase, $5.7 million was attributable to Amazys RD&E costs and $3.4 million was attributable to acquisition related intangible amortization, both incurred after the acquisition in July 2006. Excluding the Amazys
related expenses, RD&E expenses for X-Rite increased $1.1 million, or 6.7 percent, over 2005 levels. Also contributing to the increase over 2005, an increase in non-capitalized software costs, increased costs of Rohs-Wees compliance, and
expensing of share-based compensation as required by the adoption of SFAS 123 (R) in 2006. These costs were not expensed prior to this adoption (see Note 9 to the Consolidated Financial Statements for further discussion of share-based
compensation).

In addition to the RD&E costs reported as operating expenses, certain costs to develop new software products were
capitalized in each of the last three years. Software development costs capitalized totaled $3.7, $3.0, and $3.8 million in 2007, 2006, and 2005, respectively. The related amortization expense was included in cost of sales (see Note 1 to the
Consolidated Financial Statements).

General and Administrative Expenses

General and administrative (G&A) expenses include compensation, facility costs, and travel for the Companys executive, finance, human resources
and administrative functions, as well as legal and consulting costs. G&A expenses in 2007 increased $4.5 million, or 19.0 percent, over 2006. This increase is primarily attributable to a full year of expenses related to the Amazys G&A
expenses. In addition, 2007 G&A expenses included $1.7 million of incremental expense related to amortization of intangible assets recorded as part of the Pantone and Amazys purchase price allocations. G&A expenses also included the results
of Pantone of $0.9 million for the two months ended December 29, 2007.



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##### Table of Contents

G&A expenses in 2006 increased $6.3 million, or 36.2 percent, over 2005. This increase includes $4.2
million attributable to Amazys G&A expenses incurred since the acquisition. In addition, 2006 G&A expenses also included $0.6 million of expense related to amortization of intangible assets recorded as part of the Amazys purchase price
allocation and an incremental charge of $1.3 million for share-based compensation which was not required to be expensed in 2005.

Acquired In-Process
Research and Development

In 2006, the Company allocated $11.1 million to acquired in-process research and development (IPR&D)
as part of the intangibles valuation process in connection with the Amazys acquisition. This value was calculated utilizing the income approach by determining cash flow projections related to IPR&D projects at the date of the acquisition. The
full value of the acquired IPR&D intangible assets was written off at the date of acquisition in accordance with U.S. generally accepted accounting principles as technological feasibility had not been established and no future alternative uses
existed. This write-off was included in a separate line on the Companys Consolidated Statement of Operations. See Note 3 to the Consolidated Financial Statements for further discussion of the Amazys acquisition.

Restructuring

During 2006 and 2007, the
Company executed restructuring actions relating to the integration of Amazys. The Companys plan to integrate the two businesses includes closure of duplicate facilities, elimination of redundant jobs, and consolidation of product lines. The
restructuring plan includes estimated workforce reductions of approximately 81 employees, all of which have been completed as of December 29, 2007, facility closures of approximately 14,348 square feet, various asset write-downs, and other
restructuring charges related to consulting and legal fees. Total restructuring charges related to this plan in 2007 and 2006 are $19.2 million, comprised of $6.4 million in cost of sales related charges ($6.2 in 2006 and $0.2 million in 2007) and
$12.8 million of operating expenses ($10.0 million in 2006 and $2.8 million in 2007). To date the Company has incurred all of these costs as of December 29, 2007, consisting of $10.9 million related to severance, $7.4 million related to asset
write-downs, $0.7 million related to consulting and legal fees, and $0.2 million in facility closure costs. Asset write-downs include inventory, tooling, capitalized software, and other intangible asset write-downs directly related to discontinued
product lines.

Costs associated with Amazys workforce reductions, facility closures, and other related items were included in the related
purchase accounting. See Note 4 to the Consolidated Financial Statements for further discussion of purchase accounting.

As of
December 29, 2007, the Company continues to evaluate restructuring activities, if any, associated with the Pantone acquisition.

Integration

Costs incurred related to the integration of the Companys acquisitions that do not qualify as restructuring under the
provisions of SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities, have been included in a separate line on the Companys Consolidated Statements of Operations titled Integration. These costs include
costs related to personnel working fulltime on integration work, integration related travel, and outside consultants work on strategic planning and culture and synergy assessments. All costs included in this caption were solely related to the
Companys integration efforts and do not include normal business operating costs. Integration costs associated with the Amazys acquisition were $3.3 million and $3.3 million for the fiscal years ended 2007 and 2006, respectively. Integration
costs associated with the Pantone acquisition were $0.1 million for the fiscal year ended 2007.



25



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##### Table of Contents

Founders Insurance

Included in 2005 operating expenses was a $1.2 million gain related to the sale of life insurance policies originally purchased to fund the Founders Share Redemption Program. Consistent with the treatment of
expenses related to these life insurance policies, the gain has been included as a component of operating income. See Note 12 to the Consolidated Financial Statements and Founders Shares Redemption Program below for further discussion of the
Founders Share Redemption Agreements and related life insurance policies.

Other Income (Expense)

Interest Expense

Interest expense was $22.1
million in 2007. In 2006, the Company had interest expense of $8.8 million. Interest expense in 2007 was related to the Companys new debt facility obtained in connection with the October 2007 acquisition of Pantone and a full years interest
expense related to the 2006 acquisition of Amazys. Interest expense in 2006 was primarily related to the debt incurred and amortization of associated financing costs in order to finance the acquisition of Amazys that occurred during July of 2006.
The Company did not incur interest expense in 2005 since it did not have any amounts outstanding under its credit facility. See Note 7 to the Consolidated Financial Statements for further discussion of the Companys short and long-term
indebtedness.

Write-off of Deferred Financing Costs

In connection with the Pantone acquisition, the Company entered into new secured senior credit facilities which provide for aggregate principal borrowings of up to $415 million in 2007 and replace the Companys
previous credit facilities entered into as a result of the Amazys acquisition. As the Companys prior credit facilities were extinguished, the Company wrote off the remaining value of the deferred financing costs associated with the original
credit facility. The net write-off related to the Companys prior credit facility was $5.5 million in 2007.

Gain on Derivative Financial
Instruments

In 2006, the Company utilized foreign currency forward exchange contracts to manage the variability associated with the
cash requirements associated with the acquisition of Amazys. These contracts had a notional value of CHF 260.1 million ($210.3 million) and were not designated as hedges as they did not meet the criteria specified by SFAS 133. The contracts
expired on July 5, 2006, the date of the acquisition, in a net gain position of $2.1 million, which was recorded as a component of other income.

Gain on sale of investment

In prior years, the Company had made $12.2 million of investments through its strategic
venture capital group, XR Ventures, LLC (XRV). Each investment represents less than twenty percent of the respective portfolio companies. The investments have been recorded at cost since the Company does not exercise significant influence over the
operating and financial policies of each portfolio company.

All venture capital investments are fully impaired. Although XRV continues to
hold positions in several portfolio companies, no future investments will be made except where necessary to protect an existing position.

During the second quarter of 2007, an investment held by the Companys former venture capital firm, XR Ventures (XRV), which had previously been written off, was sold. Proceeds from the transaction for the XRV interest in
this investment were received in the form of restricted stock of a publicly traded company which was valued at $0.8 million at the date of sale. The restriction on the stock will lift in the second quarter of 2008. The Company could also receive
additional shares in this transaction upon finalization of certain acquisition contingencies. The value of these additional shares, if any, is not expected to be significant.



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In the first two quarters of 2005, XRV provided working capital advances totaling $0.3 million to two
companies in which it had previously invested. This new funding was made in coordination with the investees previous third-party investors and was made to protect the Companys ownership position in the investees. Due to uncertainty over the
timing and proceeds from the expected sale of the investees, these investments were deemed impaired, and the appropriate charge was taken. The Company did not make any investments during 2006.

Other, net

Other income consists of foreign
currency, investment income and investment impairments. The Companys investment portfolio was liquidated in June 2006 to provide funding for the Amazys acquisition. Historically, investment income was derived primarily from tax-free variable
rate demand notes and corporate securities.

Income Taxes

In 2007, the Company recorded a tax expense of $9.6 million against a pre-tax loss from continuing operations of $11.3 million. The Companys effective tax rate was negatively impacted by the recording of
valuation allowances of $13.4 million against many of its current deferred income tax assets, research and experimentation credit carry-forwards and net operating loss carry-forwards for which it is currently not more likely than not that a future
benefit will be realized under the current accounting standards. The net operating loss carry-forwards are on operations in the United States which expire in twenty years and also on operations outside of the United States which do not have
expiration dates. Valuation allowances on deferred income tax assets related to the Amazys and Pantone acquisitions were recorded as an offset to Goodwill.

Effective December 31, 2006, (fiscal year 2007), the Company adopted the provisions of FIN 48. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprises
financial statements in accordance with SFAS No. 109 and prescribes a threshold of more likely than not to be sustained upon examination. The adjustment to retained earnings upon adoption of FIN 48 on December 31, 2007 was $0.2 million.

The following table summarizes the activity related to the Companys gross unrecognized tax benefits from December 31, 2006 to
December 29, 2007 (in thousands):



|                                                               |  |   |       |  
|-------------------------------------------------------------- |  | - | ----- | -
|Balance as of December 31, 2006                                |  | $ | 4,331 |  
|                                                               | 
|Increases related to prior year tax positions                  |  |   | 636   |  
|Decreases related to prior year tax positions                  |  |   | (532  | )
|Increases related to current year tax positions                |  |   | 88    |  
|Decreases related to settlements with taxing authorities       |  |   | (49   | )
|Decreases related to the lapsing of the statute of limitations |  |   | (456  | )
|                                                               |  |   |       |  
|Balance as of December 29, 2007                                |  | $ | 4,018 |  
|                                                               |  |   |       |  

The Companys FIN 48 liabilities are recorded as a component of accrued income taxes in the
accompanying consolidated financial statements.

The Company is currently in negotiations or has settled several tax matters in 2008 with a
value of $4.1 million, but does not anticipate other significant changes to its FIN 48 liabilities during the next twelve months.

Unrecognized tax benefits including interest and penalties, that, if recognized would favorably affect the Companys effective tax rate in the future were $5.8 and $5.1 million as of December 29, 2007 and December 30, 2006,
respectively.



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It is the Companys policy to include interest and penalties related to gross unrecognized tax
benefits in its provision for income taxes, as of December 29, 2007, the Company had accrued $1.8 million for payment of interest and penalties.

The Company and its subsidiaries are periodically examined by various taxing authorities. The Company files federal state and local tax returns in the United States as well as several foreign countries. Its primary
income tax jurisdictions are the United States and Switzerland. The Internal Revenue Service has examined the Companys federal tax returns through 2001. The tax years 2002 -2007 remain subject to examination by the Internal Revenue Service for
federal income tax purposes, and the years 2004-2007 remain subject to examination by the appropriate governmental agencies for Swiss tax purposes.

In 2006, the Company recorded an income tax benefit of $5.0 million against a pre-tax loss of $32.2 million, for an effective tax rate of 15.7 percent. The 2006 effective tax rate was favorably impacted by benefits associated with the
X-Rite international operations and research and development credits that were offset by nondeductible in-process research and development costs and a change in the valuation allowance associated with the recognition of deferred income tax assets.
Amazys operations since the acquisition date incurred $2.6 million of domestic and foreign income taxes in 2006.

The Company is currently
in the process of evaluating potential tax structures related to the Amazys and Pantone acquisitions that may allow for some or all of the purchase accounting adjustments to receive more favorable tax treatment.

In 2005, the Company recorded income tax expense of $3.5 million against pre-tax income of $12.9 million, which equated to an effective tax rate of 27.3
percent. The 2005 provision calculation was impacted favorably by certain international tax benefits, research and development credits, and tax benefits associated with the sale of the Founders life insurance policies.

Net Income

As a result of the revenue, gross
margin, and expense changes discussed above, the Company recorded income (loss) from continuing operations of $(20.8), $(27.1), and $9.4 million for 2007, 2006, and 2005, respectively. On a per share basis, fully diluted earnings (loss) per share
were $(0.72), $(1.09) and $0.44 for 2007, 2006 and 2005, respectively.

On February 7, 2007, the Company completed the sale of its
Labsphere subsidiary to Halma Holdings plc (Halma). Labsphere, which is based in North Sutton, New Hampshire, provides integrated spheres and systems as well as reflectance materials to the light measurement markets. This divestiture was
part of the Companys ongoing strategy to focus resources on its core color-related businesses. Under the terms of the agreement, Halma acquired all of the outstanding Labsphere stock for $14.3 million in cash. Proceeds from the sale were used
to reduce the principal balance of the Companys first lien credit facility.

The Company recorded a net gain on the sale of $8.2
million for the year ended December 29, 2007, which is presented as a gain on sale of discontinued operations in the accompanying Condensed Consolidated Statement of Operations. The results of operations for the Labsphere subsidiary through the
date of sale were reported within discontinued operations in the accompanying Condensed Consolidated Statements of Operations. In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company has also
reclassified the prior year statement of operations to present the results of Labsphere within discontinued operations. Interest expense was not allocated to Labsphere, therefore, all of the Companys interest expense is included within
continuing operations.

As a result of the sale of Labsphere the Company recorded net income from discontinued operations of $8.2, $1.7,
and $1.7 million for 2007, 2006, and 2005, respectively. On a per share basis, fully diluted earnings per share from discontinued operations were $0.28, $0.06 and $0.08 for 2007, 2006 and 2005, respectively.



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The Company recorded net income (loss) of $(12.6), $(25.4) and $11.1 million for 2007, 2006 and 2005,
respectively. On a per share basis, fully diluted earnings (loss) per share were $(0.44), $(1.03) and $0.52 for 2007, 2006 and 2005, respectively.

The average number of common shares outstanding for purposes of calculating basic shares outstanding was higher in 2007 and 2006 than in 2005, due to the issuance of 7.2 million shares in the third quarter of 2006 as part of the
consideration paid to acquire Amazys. In addition, the average number of common shares outstanding was slightly higher each year in 2007, 2006, and 2005 due to shares being issued in connection with the Companys employee stock purchase
program, stock option plan and share grant activity, and shares issued in connection with prior acquisitions.

FINANCIAL CONDITION AND LIQUIDITY

Liquidity and Capital Resources

As highlighted in the Consolidated Statements of Cash Flows, the Companys liquidity and available capital resources are impacted by four key components: (i) cash and cash equivalents, and short-term investments,
(ii) operating activities, (iii) investing activities and (iv) financing activities. These components are summarized below (in millions):



|                                                             |  |      |        |   |      |   |        |      |  |   |       |  
|------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                             |  | 2007 |        |   | 2006 |   |        | 2005 | 
|Net cash flow provided by (used for):                        |  |      |        |   |      |   |        |      |  |   |       |  
|Operating activities                                         |  | $    | 8.8    |   |      | $ | 20.5   |      |  | $ | 8.9   |  
|Investing activities                                         |  |      | (168.6 | ) |      |   | (210.2 | )    |  |   | (12.2 | )
|Financing activities                                         |  |      | 166.4  |   |      |   | 195.8  |      |  |   | (0.4  | )
|Effect of exchange rate changes on cash and cash equivalents |  |      | 0.8    |   |      |   | 0.3    |      |  |   | 0.5   |  
|                                                             |  |      |        |   |      |   |        |      |  |   |       |  
|Net increase (decrease) in cash and cash equivalents         |  |      | 7.4    |   |      |   | 6.4    |      |  |   | (3.2  | )
|Cash and cash equivalents, beginning of period               |  |      | 12.9   |   |      |   | 6.5    |      |  |   | 9.7   |  
|                                                             |  |      |        |   |      |   |        |      |  |   |       |  
|Cash and cash equivalents, end of period                     |  | $    | 20.3   |   |      | $ | 12.9   |      |  | $ | 6.5   |  
|                                                             |  |      |        |   |      |   |        |      |  |   |       |  

Cash, Cash Equivalents and Short-Term Investments

At December 29, 2007, the Company had cash and cash equivalents of $20.3 million and no short-term investments. At December 30, 2006, the
Company had cash and cash equivalents of $12.9 million and no short-term investments. As of December 29, 2007, approximately $12.4 million of cash and cash equivalents were held by subsidiaries outside of the United States.

Operating Activities

Net cash provided by
operating activities was $8.8, $20.5 and $8.9 million for 2007, 2006 and 2005, respectively. In 2007, cash used for operating activities consisted of a net loss of $12.6 million and net cash used for operating assets and liabilities of $12.7 million
offset by non-cash items of $34.0 million. Significant uses of cash in 2007 included decreases in other current and non-current liabilities of $15.1 million and increases in inventories of inventories of $7.8 million, respectively, partially offset
by increases in accounts receivable.

In 2006, cash provided by operating activities consisted of a net loss of $25.5 million, offset by
non-cash items of $36.5 million and net cash provided by operating assets and liabilities of $9.5 million. Significant sources of cash in 2006 included decreases in accounts receivable of $10.0 million and decreases in other current and non current
assets of $9.4 million, partially offset by decreases in other current and non current liabilities, income taxes, and accounts payable.



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In 2005, net cash from operating activities consisted of net income of $11.1 million plus non-cash items
of $8.1 million and reduced by net cash used for operating assets and liabilities of $10.3 million. The adjustment for non-cash items included $6.2 million in depreciation and amortization charges and $1.4 million in deferred tax benefits, partially
offset by a $1.2 million gain on sale of life insurance policies related to the Founders Share Redemption Program, as discussed more fully in Note 12 to the Consolidated Financial Statements and below in Founders Share Redemption
program. The use of operating funds was primarily driven by increased sales volume in the fourth quarter of 2005, compared with 2004. Increases were recorded in accounts receivable, inventories, prepaid expenses and other current assets of $6.9,
$3.4, and $2.2 million, respectively. These cash uses were partially offset by cash provided by increases in accounts payable and income taxes payable of $1.3 and $1.0 million, respectively.

Investing Activities

The most significant
components of the Companys investment activities are (i) strategic acquisitions, (ii) capital expenditures, (iii) proceeds from sales of subsidiaries, and (iv) proceeds from sales of property and equipment. Net cash used
for investing activities during 2007, 2006 and 2005 was $168.6, $210.2 and $12.2 million, respectively.

The significant increase in cash
used for investing activities in 2007 was primarily attributable to the acquisition of Pantone, which required $176.1 million, net of cash received (see Acquisition of Pantone below), and capital expenditures of $7.6 million. Sources of cash to meet
these needs came from the sale of the companys Labsphere subsidiary and short and long term borrowings (see Financing Activities below).

The significant increase in cash used for investing activities in 2006 was primarily attributable to the acquisition of Amazys, which required $195.2 million, net of cash received (see Acquisition of Amazys Holding AG below), and capital
expenditures of $28.9 million, which include the purchase and renovation of the Companys new corporate headquarters and manufacturing facility. Sources of cash to meet these needs came from short and long term borrowings, operating cash flows,
liquidation of the short-term investment portfolio, and cash acquired as part of the Amazys transaction.

Significant cash used for
investing activities in 2005, included net purchases of short term investments of $8.6 million, capital expenditures of $4.7 million, increases in other assets of $3.9 million and the final of two payments for the purchase of Monaco Systems, Inc. of
$0.8 million. Offsetting cash used in investing activities were proceeds of $6.5 million from the sale of three life insurance policies originally purchased to fund the Founders Shares Redemption Program, described more fully in Note 12 to the
Consolidated Financial Statements and below in Founders Shares Redemption Program. Additional funding for investing activities was generated by operating cash flows and periodic sales of short-term investments.

Under provisions of the life insurance policies originally purchased to fund the Founders Shares Redemption Program, the Company is allowed to
determine the timing and amount of premium payments. The Company did not make any premium payments for the 2007, 2006 or 2005 policy years. The Company does not expect this to materially impact the cash surrender values in the short-term, or payment
of benefits under the policies. The Company continues to review its options with regards to the future of the remaining policies.

Capital
expenditures were $7.6 million in 2007, compared with $28.9 million in 2006 and $4.7 million in 2005. The large amount of capital expenditures in 2006 was due to $24.3 million related to the purchase and renovation of the Companys new
corporate headquarters and manufacturing facility in Grand Rapids, Michigan.

Financing Activities

In the first quarter of 2006, the Company incurred short-term borrowings of $13.5 million under its former revolving line of credit in connection with the
acquisition of its new corporate headquarters and manufacturing



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facility in Grand Rapids, Michigan. This loan was converted to a mortgage loan in June 2006, secured by the Companys former headquarters and
manufacturing facility in Grandville, Michigan. The mortgage was renewed and extended in October of 2007, during which time the Company made a principal payment of $4.8 million.

Prior to July 1, 2006, the Company maintained a revolving line of credit agreement with a bank, which provided for maximum borrowings of $25 million
with variable interest at LIBOR plus 75 to 100 basis points as defined in the agreement. Borrowings under this facility were unsecured and no compensating balances were required under the agreement. This agreement was terminated and replaced by a
new revolving line of credit in conjunction with the Amazys acquisition.

In connection with the July 5, 2006 Amazys acquisition, the
Company entered into secured senior credit facilities which provided for aggregate principal borrowings of up to $220 million and replaced the Companys previous line-of-credit. The credit facilities consisted of a $160 million first lien loan,
which was comprised of a $60 million seven-year term loan and a $40 million five-year revolving line of credit, and a $60 million six-year term second lien loan. Obligations under these credit facilities were secured by essentially all of the
tangible and intangible assets of the Company. Both facilities provided variable interest rate options from which the Company selected for interest calculations. Subsequent to the end of the third quarter in 2007, the Company elected to change the
indices to the Prime Rate plus 125 and 400 basis points for the first and second lien facilities, respectively, in anticipation of re-financing activity associated with the acquisition of Pantone, Inc., which was completed on October 24, 2007.
See Note 3 for further discussion of the Pantone acquisition.

In connection with the October 24, 2007 Pantone acquisition, the
Company entered into new secured senior credit facilities which provide for aggregate principal borrowings of up to $415 million and replace the Companys previous credit facilities established with the Amazys acquisition. The new credit
facilities consist of a $310 million first lien loan, which is comprised of a $270 million five-year term loan and a $40 million five-year revolving line of credit, and a $105 million six-year term second lien loan. Obligations under these credit
facilities are secured by essentially all of the tangible and intangible assets of the Company. Both facilities provide variable indices from which the Company may select for interest calculations. As of December 29, 2007, the Company has
selected the three month LIBOR plus 350 and 750 basis points for most of the first and second lien facilities, respectively, as its primary interest rate index. Interest payments on LIBOR based loans are payable on the last day of each interest
period, not to exceed three months. A small portion of the credit facilities are tied to the prime rate and require interest payments on a scheduled quarterly basis.

As of December 29, 2007, the Company had $6.0 million drawn against the revolving line of credit. Further draws on the $40 million revolving line of credit will be restricted to a total outstanding balance of
$31.3 million until such time that the mortgage loan on the Companys Grandville, Michigan facility is repaid in full. The unused portion of the revolving credit facility is subject to a fee of 0.5% per annum.

The Company recorded deferred financing costs in connection with the secured senior credit facilities discussed above. These costs are currently being
amortized over the lives of the related facilities. The remaining unamortized balance as of December 29, 2007 was $15.8 million.

The
Company utilizes interest rate swap agreements designated as cash flow hedges of the outstanding variable rate borrowings of the Company. These agreements result in the Company paying or receiving the difference between three month LIBOR and fixed
interest rates at specified intervals, calculated based on the notional amounts. The interest rate differential to be paid or received is accrued as interest rates change and is recorded as interest income or expense. The effective portion of the
derivatives gain or loss is initially recorded as a component of other comprehensive income, net of taxes, and subsequently reclassified into earnings when the hedged interest expense affects earnings. The ineffective portion of the gain or
loss, if any, is recognized in current period earnings in general and administrative expenses.

As of December 29, 2007, the combined
notional amount of outstanding swap agreements was $336.1 million. Certain of these swap agreements have notional amounts that fluctuate over their lives. The fair value of



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outstanding interest rate swaps at December 29, 2007 was a liability of $4.9 million which was recorded in both current and long-term other accrued
liabilities, depending on the expiration date of the underlying instrument.

In 2007, the Company issued 363,162 shares of common stock in
connection with option exercises and purchases under the Employee Stock Purchase Plan, which generated $3.4 million of cash. In addition, 343,041 shares were granted under the Companys Omnibus Stock Plan. In 2006, the Company issued 96,450
shares of common stock in connection with option exercises and purchases under the Employee Stock Purchase Plan, which generated $0.9 million of cash. In addition, 137,210 shares were granted under the Companys Restricted Stock Plan and
7,221,458 shares were issued in connection with the Amazys acquisition. During 2005, 283,827 shares of common stock were issued in connection with employee stock option and purchase plans, which generated $1.7 million of cash.

On January 8, 2007, the Company announced the Board of Directors decision to suspend payment of its quarterly dividend of $.025 per share effective
immediately. The Company paid annual dividends at a rate of $.10 per share in 2006, and 2005 requiring the use of $2.5, and $1.1 million of cash, respectively. This decision was made to suspend the payment of its quarterly dividend to speed in the
repayment of borrowings related to the Amazys acquisition and help fund future product development initiatives. Although the Board does not anticipate reinstating the dividend payment it will continue to reevaluate the policy on an on-going basis.

The Company believes its current liquidity, future cash flows, and secured indebtedness should provide the necessary financial resources
to meet its expected operating requirements for the foreseeable future. These requirements include the payment of principal and interest on indebtedness, funding of operations, life insurance premiums, and capital expenditures. The company intends
to enter into discussions to amend certain terms in its credit arrangements to allow for greater operating flexibility. Should additional funding be required, supplemental borrowing arrangements are the most probable alternative for meeting capital
resource and liquidity needs.

Acquisition of Pantone

On October 24, 2007, the Company completed its acquisition of Pantone, Inc. (Pantone), for a purchase price of $174.4 million. Pantone is the worldwide market leader in color communication and
specification standards in the creative design industries. The Company also provides color standards and design tools for the fashion, home furnishings, architecture, paint, interior, and industrial design industries. The Company believes that the
grouping of X-Rite and Pantones technology platforms and standards and the expanded customer base that the acquisition brings should help drive innovation and growth and further diversify the Companys business.

The following table summarizes the aggregate consideration paid for the acquisition (in thousands):



|                                    |  |   |        
|----------------------------------- |  | - | -------
|Cash consideration paid for Pantone |  | $ | 174,379
|Transaction costs                   |  |   | 1,738  
|                                    |  |   |        
|Total acquisition consideration     |  | $ | 176,117
|                                    |  |   |        

The transaction was funded exclusively with cash, financed through new borrowings. Total cash
acquired with the Pantone purchase was $0.7 million.

Assets acquired and liabilities assumed in the acquisition were recorded on the
Companys Consolidated Balance Sheets based on their estimated fair values as of the date of the acquisition. The results of operations of Pantone have been included in the Companys Consolidated Statements of Operations since the date of
the acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. Pantone is included in the Companys Color Standards segment; therefore all of
the Goodwill recorded in the Pantone acquisition has been allocated to that segment. The



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purchase price allocation is preliminary and a final determination of required purchase accounting adjustments will be made upon finalization of asset
valuations and tax structuring decisions, as well as the completion of the integration process. Revisions to the fair values, which may be significant, will be recorded by the Company as further adjustments to the purchase price allocation.

Acquisition of Amazys Holding AG

On July 5, 2006, the Company consummated its exchange offer (the Offer) for all publicly held registered shares of Amazys Holding AG (Amazys), a listed company incorporated in Switzerland. Amazys is a color
management solutions company that develops, markets, and supports hardware, software and services to measure and communicate color for the imaging and media, photography, digital imaging, paints, plastics, apparel, textiles, and automotive
industries. The Company believes the combining of X-Rite and Amazys will result in significant benefits to the Company including creating a global market leader in the color industry, accelerating technological innovation, and building the strongest
talent pool in the industry.

In the Offer, the Company acquired an aggregate of 3,422,492 Amazys shares, representing approximately 99.7%
of the shares outstanding on a fully diluted basis. On January 31, 2007, the Company completed the compulsory acquisition process under Swiss law whereby, each Amazys share that remained outstanding was cancelled and converted into the right to
receive the Offer consideration. Pursuant to the terms of the Offer, the Company paid 2.11 shares of its common stock and 77 Swiss Francs (CHF) in cash for each tendered Amazys share. Cash consideration for this portion of the acquisition was $0.6
million including transaction costs, and the fair value of common stock issued was $0.2 million.

The following table summarizes the
aggregate consideration paid for the acquisition, with a reconciliation to the total net assets acquired, (in thousands):



|                                                     |  |   |        
|---------------------------------------------------- |  | - | -------
|Cash consideration for Amazys common shares tendered |  | $ | 215,787
|Transaction costs                                    |  |   | 9,497  
|                                                     |  |   |        
|Total cash consideration                             |  |   | 225,284
|                                                     | 
|Fair value of X-Rite stock (7,240,478 shares)        |  |   | 81,383 
|                                                     |  |   |        
|Total acquisition consideration                      |  | $ | 306,667
|                                                     |  |   |        

The cash consideration exchanged for Amazys shares consisted of existing cash, the issuance of new
debt totaling $205.0 million and cash of $2.1 million derived from the settlement of a derivative financial instrument associated with the transaction. Total cash acquired with the Amazys purchase was $29.2 million; of which $17.5 was used to pay
down long-term debt incurred for the acquisition. The fair value of shares issued was determined based upon closing market price on the date of the acquisition.

Founders Shares Redemption Program

During 1998, the Company entered into agreements with its founding
shareholders for the future repurchase of 4.5 million shares of the Companys outstanding stock. The agreements were terminated in November 2004. At that time, 3.4 million shares remained subject to repurchase. Prior to their
termination, the agreements required stock repurchases following the later of the death of each founder or his spouse. The cost of the repurchase agreements was to be funded by $160.0 million of proceeds from life insurance policies the Company
purchased on the lives of certain of these individuals.

In June 2005, the Company entered into agreements with two life settlement
providers for the sale of three life insurance policies owned by the Company with a total face value of $30.0 million. The Company received



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proceeds of $6.5 million, net of closing costs, from the sale of these policies. The Company recorded a gain of $1.2 million in the second quarter of 2005 in
connection with the sale of these policies, which was included as a component of Operating Income. At December 29, 2007, the Companys remaining life insurance portfolio consists of eleven policies with a face value of $130.0 million.

Under provisions of the life insurance policies originally purchased to fund the agreements, the Company is allowed to determine the
timing and amount of premium payments. Premiums on the remaining policies total $3.5 million per year. The Company elected not to make premium payments for the 2007, 2006, and 2005 policy years. This election has not materially impacted the cash
surrender values during those periods, nor is it expected to affect payment of future benefits under the policies. The Company continues to review its options with regard to the future of the remaining policies.

Corporate Headquarters

On February 14,
2006, the Company completed the purchase of its new corporate headquarters and manufacturing facility in Grand Rapids, Michigan, for $13.4 million. Funds for the purchase were drawn from the Companys revolving line of credit which was
subsequently refinanced with a mortgage loan on the Companys prior corporate headquarters in Grandville. This facility is approximately 375,000 square feet and is located ten miles from the Companys prior headquarters. State and local
governments have provided an incentive package of approximately $21.0 million in connection with the purchase. Full realization of the incentive package will occur over a number of years and is dependent upon the Company meeting certain job creation
and growth goals. The Company relocated its headquarters to the facility in Grand Rapids during the first quarter of 2007.

In December
2007, the Company entered into a definitive purchase agreement to sell the Grandville property for $13.1 million plus reimbursement of certain property tax assessment payments made prior to closing of the transaction. The purchase agreement provides
for a 120 day due diligence period for the buyer to evaluate the property. The buyer has deposited an initial earnest money deposit of $125,000 with an escrow agent to be applied as a credit to the purchase price at closing. Final closing on the
sale will be based on completion of the Buyers inspection and due diligence process as well as the granting of governmental approvals related to the future planned usage of the property.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The
Company strives to report its financial results in a clear and understandable manner. It follows accounting principles generally accepted in the United States in preparing its consolidated financial statements, which requires management to make
certain estimates and apply judgments that affect its financial position and results of operations. There have been no material changes in the Companys policies or estimates since December 30, 2006.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to adopt
accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In some instances, there may be alternative policies or estimation techniques that could be used. Management
maintains a thorough process to review the application of accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements. However, even under optimal circumstances, estimates
routinely require adjustment based on changing circumstances and the receipt of new or better information.

The policies and estimates
discussed below include the financial statement elements that are either the most judgmental or involve the selection or application of alternative accounting policies and are material to the financial statements. Management has discussed the
development and selection of these accounting policies with the Audit Committee of the Board of Directors.



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Accounts Receivable Allowances

Accounts receivable allowances are based on known customer exposures, historic credit experience, and the specific identification of potentially
uncollectible accounts. In addition to known or judgmental components, a policy that consistently applies reserve rates based on the age of outstanding accounts receivable is followed. Actual collections may differ, requiring adjustments to the
reserves.

Inventory Reserves

Inventories are valued at the lower of cost or market. In assessing the ultimate realization of inventories, judgments are made as to future demand requirements and compared with current inventory levels. Reserves are established for excess
and obsolete inventory, based on material movement, market conditions, and technological advancements.

Self-Insurance Reserves

The Company is self insured up to certain limits for costs associated with benefits paid under employee health care programs. The measurement of these
costs requires the consideration of historic loss experience and judgments about the present and expected levels of costs per claim. These costs are accounted for by developing estimates of the undiscounted liability for claims incurred, including
those claims incurred but not reported. This method provides estimates of future ultimate claim costs based on claims incurred as of the balance sheet date.

Long-Lived Assets

Evaluations are periodically made of long-lived assets for indicators of impairment when events or
circumstances indicate that this risk may be present. Judgments regarding the existence of impairment are based on several factors including but not limited to, market conditions, operational performance, technological advancements and estimated
future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its fair value.

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with SFAS No.142, Goodwill
and Other Intangible Assets (SFAS 142). SFAS 142 requires companies to review goodwill and intangible assets with indefinite useful lives for impairment annually, or more frequently if indicators of impairment occur. Impairment indicators could
include a significant adverse change in the business climate, operating performance indicators, or the decision to sell or dispose of a reporting unit. The Company is required to test the carrying value of goodwill for impairment at the reporting
unit level (operating segment or one level below an operating segment). A discounted cash flow method is used to establish the fair value of reporting units. This model requires the use of estimates about the future cash flows of each reporting unit
to determine estimated fair values. An impairment charge is recognized for any amount by which the carrying amount of a reporting units goodwill exceeds its fair value. Changes in forecasted operations and changes in discount rates can
materially affect these estimates. Once an impairment of goodwill has been recorded it cannot be reversed.

SFAS 142 also requires that
intangible assets with estimable useful lives be amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Derivative Financial Instruments

The Company
uses derivative financial instruments to manage exposures to movements in interest rates and foreign exchange rates. Derivatives are not used for speculative or trading purposes.



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##### Table of Contents

The Company accounts for derivative financial instruments in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended. As a result the Company recognizes derivative financial instruments in its consolidated financial statements at fair value regardless of the purpose or
intent for holding the instruments. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective hedges, are recorded in other comprehensive income. Changes in fair values of derivatives not qualifying as
hedges are reported in income.

Deferred Income Tax Valuation Allowance

The Company periodically evaluates its deferred income tax assets to assess the probability of their being ultimately realized. Upon determination that a
deferred income tax asset may not be realized, a valuation allowance is established for the potential unrealizable amount. This evaluation process requires a review of the underlying transaction to determine that the conditions that led to the
creation of the asset still exist and that the related tax benefit will be realized.

Software Development Costs

Development costs incurred for research and development of new software products and enhancements to existing software products are expensed as incurred
until technological feasibility is achieved. After technological feasibility is achieved, any additional development costs are capitalized until the product is available for general release to customers and then amortized using the straight-line
method over a three-year period.

Revenue Recognition

Revenue is recognized when earned in accordance with applicable accounting standards. Revenue from sales of products and services is recognized when a purchase order has been received, the product has been shipped or
the service has been performed, the sales price is fixed and determinable, and collection of any resulting receivable is probable.

For
transactions involving the sale of software which is not incidental to the product, revenue is recognized in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) No. 97-2, Software Revenue
Recognition,as amended by SOP No. 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions(SOP 98-9). We recognize revenue when there is persuasive evidence of an arrangement, delivery
has occurred, the sales price is fixed or determinable and collection is probable. In instances where an arrangement contains multiple elements, revenue is deferred related to the undelivered elements to the extent that vendor-specific objective
evidence of fair value (VSOE) exists for such elements. VSOE is the price charged when the element is sold separately. Revenue for the separate elements is only recognized where the functionality of the undelivered element is not essential to the
delivered element.



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##### Table of Contents

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company has no significant off balance sheet transactions other than operating leases for equipment, real estate, and vehicles. It also is not the
Companys policy to issue guarantees to third parties. The following table sets forth information about the Companys long-term contractual obligations outstanding at December 29, 2007. It brings together data for easy reference from
the consolidated balance sheet and from individual notes to the consolidated financial statements.



|                              |  |                |         |                 |   |           |  |           |        |              |   |         |  |   |        
|----------------------------- |  | -------------- | ------- | --------------- | - | --------- |  | --------- | ------ | ------------ | - | ------- |  | - | -------
|                              |  | Total          |         | Less Than1 Year |   | 1-3 Years |  | 3-5 Years |        | After 5Years
|                              |  | (in thousands)
|Payments Due by Period        |  |                |         |                 |   |           |  |           |        |              |   |         |  |   |        
|Long-term debt                |  | $              | 381,000 |                 | $ | 2,700     |  | $         | 5,400  |              | $ | 267,900 |  | $ | 105,000
|Interest on long-term debt    |  |                | 252,100 |                 |   | 37,000    |  |           | 72,600 |              |   | 71,700  |  |   | 70,800 
|Short-term borrowings         |  |                | 8,680   |                 |   | 8,680     |  |           |       |              |   |        |  |   |       
|Operating leases              |  |                | 11,864  |                 |   | 3,457     |  |           | 4,979  |              |   | 3,262   |  |   | 166    
|                              |  |                |         |                 |   |           |  |           |        |              |   |         |  |   |        
|Total contractual obligations |  | $              | 653,644 |                 | $ | 51,837    |  | $         | 82,979 |              | $ | 342,862 |  | $ | 175,966
|                              |  |                |         |                 |   |           |  |           |        |              |   |         |  |   |        

The Company is currently in negotiations or has settled several tax matters in 2008 with a value
of $4.1 million, but does not anticipate other significant changes to its FIN 48 liabilities during the next twelve months. At this time the Company is unable to make a reasonable estimate of the timing of payments in individual years beyond
12 months due to uncertainties in the timing of tax audit outcomes. The Company expects to contribute $1.5 million to its pension plan in 2008. Funding amounts are calculated on an annual basis and no required or planned funding beyond one
year has been determined. Additionally, the Company is unable to make a reliable estimate of the timing of payments related to purchase obligations for inventory and fixed assets.

OTHER MATTERS

In November of 2001, the Companys Board of Directors adopted a Shareholder
Protection Rights Plan (the Plan), which became effective in the first quarter of 2002. The Plan is designed to protect shareholders against unsolicited attempts to acquire control of the Company in a manner that does not offer a fair
price to all shareholders.

Under the Plan, one purchase right automatically trades with each share of the Companys common stock.
Each Right entitles a shareholder to purchase 1/100 of a share of junior participating preferred stock at a price of $30.00, if any person or group attempts certain hostile takeover tactics toward the Company. Under certain hostile circumstances,
each Right may entitle the holder to purchase the Companys common stock at one-half its market value or to purchase the securities of any acquiring entity at one-half their market value. Rights are subject to redemption by the Company at $.005
per Right and, unless earlier redeemed, will expire in the first quarter 2012. Rights beneficially owned by holders of 15 percent or more of the Companys common stock, or their transferees and affiliates, automatically become void.



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##### Table of Contents

|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

The Company is exposed to a variety of risks including foreign currency exchange fluctuations, and market volatility in its derivative and insurance portfolios. In the normal course of business, the Company employs established procedures to
evaluate its risks and take corrective actions when necessary to manage these exposures.

The Company utilizes interest rate swap contracts
to manage the potential variability in interest rates associated with debt incurred in connection with the acquisitions of Pantone and Amazys. As of December 29, 2007, the combined notional amount of outstanding swap agreements was $336.1
million. Certain of these swap agreements have notional amounts that fluctuate over their lives. The fair value of outstanding interest rate swaps at December 29, 2007 was a liability of $4.9 million which was recorded in both current and
long-term other accrued liabilities, depending on the expiration date of the underlying instrument. During 2007, the Company reclassified a $0.3 million benefit related to net interest settlements from other comprehensive income to interest expense.
The Company does not trade in financial instruments for speculative purposes.

Foreign currency exchange risks arise from transactions
denominated in a currency other than the entitys functional currency and from foreign denominated transactions translated into U.S. dollars. The Companys largest exposures are to the Euro and Swiss Franc. As these currencies fluctuate
relative to the dollar, it may cause profitability to increase or decrease accordingly.



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##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The
following report, financial statements, and notes are included with this report:



|                                                                                                     |  |   
|---------------------------------------------------------------------------------------------------- |  | --
|                                                                                                     | 
|Managements Report on Internal Control over Financial Reporting                                     |  | 40
|                                                                                                     | 
|Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |  | 41
|                                                                                                     | 
|Report of Independent Registered Public Accounting Firm on Financial Statements                      |  | 42
|                                                                                                     | 
|Consolidated Balance Sheets                                                                          |  | 43
|                                                                                                     | 
|Consolidated Statements of Operations                                                                |  | 45
|                                                                                                     | 
|Consolidated Statements of Shareholders Investment                                                  |  | 46
|                                                                                                     | 
|Consolidated Statements of Cash Flows                                                                |  | 47
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | 48



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##### Table of Contents

Managements Report on Internal Control over Financial Reporting

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 29, 2007 based on the framework in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation and those criteria, our management
concluded that our internal control over financial reporting was effective as of December 29, 2007.

Our independent registered public
accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting, as stated in their report which appears on page 41.



40



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##### Table of Contents

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The Board
of Directors and Shareholders of X-Rite, Incorporated

We have audited X-Rite, Incorporated and subsidiaries internal control over
financial reporting as of December 29, 2007, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). X-Rite,
Incorporateds management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, X-Rite, Incorporated and subsidiaries maintained, in all
material respects, effective internal control over financial reporting as of December 29, 2007, based on the COSO criteria.

We also
have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of X-Rite, Incorporated and subsidiaries as of December 29, 2007 and December 30, 2006, and
the related consolidated statements of operations, shareholders investment, and cash flows for each of the three years in the period ended December 29, 2007, and our report dated March 7, 2008 expressed an unqualified opinion
thereon.



|                        
|------------------------
|/s/    Ernst & Young LLP
|                        
|Grand Rapids, Michigan  
|March 7, 2008           



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##### Table of Contents

Report of Independent Registered Public Accounting Firm on Financial Statements

The Board of Directors and
Shareholders of X-Rite, Incorporated

We have audited the accompanying consolidated balance sheets of X-Rite, Incorporated and subsidiaries
as of December 29, 2007 and December 30, 2006, and the related consolidated statements of operations, shareholders investment, and cash flows for each of the three years in the period ended December 29, 2007. Our audits also
included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to
above present fairly, in all material respects, the consolidated financial position of X-Rite, Incorporated and subsidiaries at December 29, 2007 and December 30, 2006, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 29, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 11
to the consolidated financial statements, in 2007 X-Rite, Incorporated changed its method of accounting for uncertain tax positions in connection with the required adoption of FASB Interpretation No. 48. In 2006, X-Rite, Incorporated also
changed its methods of accounting for share-based payments and retirement plans in connection with the required adoption of Statement of Financial Accounting Standards Nos. 123(R) and 158.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), X-Rite, Incorporated and
subsidiaries internal control over financial reporting as of December 29, 2007, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated March 7, 2008 expressed an unqualified opinion thereon.



|                        
|------------------------
|/s/    Ernst & Young LLP
|                        
|Grand Rapids, Michigan  
|March 7, 2008           



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##### Table of Contents

X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



|                                                                                           |  |                  |          |   |                  |   |         |  
|------------------------------------------------------------------------------------------ |  | ---------------- | -------- | - | ---------------- | - | ------- | -
|                                                                                           |  | December 29,2007 |          |   | December 30,2006 |  
|ASSETS                                                                                     |  |                  |          |   |                  |   |         |  
|Current assets:                                                                            |  |                  |          |   |                  |   |         |  
|Cash and cash equivalents                                                                  |  | $                | 20,300   |   |                  | $ | 12,876  |  
|Accounts receivable, less allowance of $2,328 in 2007 and $1,584 in 2006                   |  |                  | 47,050   |   |                  |   | 40,226  |  
|Inventories                                                                                |  |                  | 61,839   |   |                  |   | 30,165  |  
|Deferred income taxes                                                                      |  |                  | 2,571    |   |                  |   | 4,749   |  
|Assets held for sale                                                                       |  |                  | 7,614    |   |                  |   | 12,081  |  
|Prepaid expenses and other current assets                                                  |  |                  | 6,318    |   |                  |   | 5,378   |  
|                                                                                           |  |                  |          |   |                  |   |         |  
|                                                                                           |  |                  | 145,692  |   |                  |   | 105,475 |  
|Property, plant and equipment:                                                             |  |                  |          |   |                  |   |         |  
|Land                                                                                       |  |                  | 2,796    |   |                  |   | 120     |  
|Buildings and improvements                                                                 |  |                  | 25,723   |   |                  |   | 8,333   |  
|Machinery and equipment                                                                    |  |                  | 27,250   |   |                  |   | 28,869  |  
|Furniture and office equipment                                                             |  |                  | 22,596   |   |                  |   | 18,282  |  
|Construction in progress                                                                   |  |                  | 1,614    |   |                  |   | 26,188  |  
|                                                                                           |  |                  |          |   |                  |   |         |  
|                                                                                           |  |                  | 79,979   |   |                  |   | 81,792  |  
|Less accumulated depreciation                                                              |  |                  | (32,619  | ) |                  |   | (33,232 | )
|                                                                                           |  |                  |          |   |                  |   |         |  
|                                                                                           |  |                  | 47,360   |   |                  |   | 48,560  |  
|Other assets:                                                                              |  |                  |          |   |                  |   |         |  
|Goodwill                                                                                   |  |                  | 288,208  |   |                  |   | 203,101 |  
|Other intangibles, net                                                                     |  |                  | 123,314  |   |                  |   | 64,143  |  
|Cash surrender values (Founders policies)                                                  |  |                  | 21,168   |   |                  |   | 21,377  |  
|Capitalized software, net of accumulated amortization of $6,121 in 2007 and $3,075 in 2006 |  |                  | 7,805    |   |                  |   | 8,548   |  
|Deferred financing costs, net of accumulated amortization of $527 in 2007 and $624 in 2006 |  |                  | 15,786   |   |                  |   | 6,882   |  
|Deferred income taxes                                                                      |  |                  | 2,428    |   |                  |   |        |  
|Other non-current assets                                                                   |  |                  | 3,063    |   |                  |   | 4,173   |  
|                                                                                           |  |                  |          |   |                  |   |         |  
|                                                                                           |  |                  | 461,772  |   |                  |   | 308,224 |  
|                                                                                           |  |                  |          |   |                  |   |         |  
|                                                                                           |  |                  | $654,824 |   |                  | $ | 462,259 |  
|                                                                                           |  |                  |          |   |                  |   |         |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETSContinued

(In thousands, except share and
per share data)



|                                                                                                                                                                  |  |                  |         |                  |   |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | -------
|                                                                                                                                                                  |  | December 29,2007 |         | December 30,2006
|LIABILITIES AND SHAREHOLDERS INVESTMENT                                                                                                                          |  |                  |         |                  |   |        
|Current liabilities:                                                                                                                                              |  |                  |         |                  |   |        
|Short-term borrowings                                                                                                                                             |  | $                | 8,680   |                  | $ | 13,500 
|Current portion of long-term debt                                                                                                                                 |  |                  | 2,700   |                  |   | 1,200  
|Accounts payable                                                                                                                                                  |  |                  | 17,724  |                  |   | 10,574 
|Accrued liabilities:                                                                                                                                              |  |                  |         |                  |   |        
|Payroll and employee benefits                                                                                                                                     |  |                  | 19,153  |                  |   | 18,915 
|Income taxes                                                                                                                                                      |  |                  | 5,928   |                  |   | 4,759  
|Deferred income taxes                                                                                                                                             |  |                  | 6,090   |                  |   |       
|Derivative financial instruments                                                                                                                                  |  |                  | 81      |                  |   | 12     
|Interest                                                                                                                                                          |  |                  | 1,368   |                  |   | 1,283  
|Other                                                                                                                                                             |  |                  | 10,740  |                  |   | 12,822 
|                                                                                                                                                                  |  |                  |         |                  |   |        
|                                                                                                                                                                  |  |                  | 72,464  |                  |   | 63,065 
|Long-term liabilities:                                                                                                                                            |  |                  |         |                  |   |        
|Long-term debt, less current portion                                                                                                                              |  |                  | 378,300 |                  |   | 190,200
|Restructuring                                                                                                                                                     |  |                  | 2,232   |                  |   | 3,729  
|Long-term compensation and benefits                                                                                                                               |  |                  | 1,541   |                  |   | 1,410  
|Derivative financial instruments                                                                                                                                  |  |                  | 4,862   |                  |   | 520    
|Deferred income taxes                                                                                                                                             |  |                  | 8,839   |                  |   | 16,841 
|Accrued income taxes                                                                                                                                              |  |                  | 1,713   |                  |   |       
|Other                                                                                                                                                             |  |                  | 569     |                  |   | 884    
|                                                                                                                                                                  |  |                  |         |                  |   |        
|                                                                                                                                                                  |  |                  | 470,520 |                  |   | 213,584
|Shareholders investment:                                                                                                                                         |  |                  |         |                  |   |        
|Preferred stock, $.10 par value, 5,000,000 shares authorized; none issued                                                                                         |  |                  |        |                  |   |       
|Common stock, $.10 par value, 50,000,000 shares authorized; 29,026,073 shares issued and outstanding in 2007 and 28,568,630 shares issued and
outstanding in 2006 |  |                  | 2,903   |                  |   | 2,857  
|Additional paid-in capital                                                                                                                                        |  |                  | 109,439 |                  |   | 100,665
|Retained earnings                                                                                                                                                 |  |                  | 66,314  |                  |   | 79,119 
|Accumulated other comprehensive income                                                                                                                            |  |                  | 5,648   |                  |   | 2,969  
|                                                                                                                                                                  |  |                  |         |                  |   |        
|                                                                                                                                                                  |  |                  | 184,304 |                  |   | 185,610
|                                                                                                                                                                  |  |                  |         |                  |   |        
|                                                                                                                                                                  |  | $                | 654,824 |                  | $ | 462,259
|                                                                                                                                                                  |  |                  |         |                  |   |        

The accompanying notes are an integral part of these statements.



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##### Table of Contents

X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|-------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ------- | -
|                                             |  | For the Year Ended |        
|                                             |  | December 29,2007   |         |   | December 30,2006 |   |         | December 31,2005 | 
|Net sales                                    |  | $                  | 248,710 |   |                  | $ | 167,641 |                  |  | $ | 119,626 |  
|Cost of sales:                               |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Products sold                                |  |                    | 99,665  |   |                  |   | 65,506  |                  |  |   | 39,288  |  
|Restructuring charges                        |  |                    | 245     |   |                  |   | 6,159   |                  |  |   |        |  
|Inventory valuation adjustment               |  |                    | 2,563   |   |                  |   | 4,854   |                  |  |   |        |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|                                             |  |                    | 102,473 |   |                  |   | 76,519  |                  |  |   | 39,288  |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Gross profit                                 |  |                    | 146,237 |   |                  |   | 91,122  |                  |  |   | 80,338  |  
|                                             |  |                    |        
|Operating expenses (income):                 |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Selling and marketing                        |  |                    | 60,558  |   |                  |   | 43,423  |                  |  |   | 34,866  |  
|Research, development and engineering        |  |                    | 34,672  |   |                  |   | 25,280  |                  |  |   | 14,994  |  
|General and administrative                   |  |                    | 28,230  |   |                  |   | 23,678  |                  |  |   | 17,402  |  
|Acquired in-process research and development |  |                    |        |   |                  |   | 11,107  |                  |  |   |        |  
|Restructuring                                |  |                    | 2,839   |   |                  |   | 9,986   |                  |  |   |        |  
|Integration                                  |  |                    | 3,295   |   |                  |   | 3,308   |                  |  |   |        |  
|Founders insurance gain                      |  |                    |        |   |                  |   |        |                  |  |   | (1,154  | )
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|                                             |  |                    | 129,594 |   |                  |   | 116,782 |                  |  |   | 66,108  |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Operating income (loss)                      |  |                    | 16,643  |   |                  |   | (25,660 | )                |  |   | 14,230  |  
|                                             |  |                    |        
|Interest expense                             |  |                    | (22,089 | ) |                  |   | (8,758  | )                |  |   |        |  
|Gain on derivative financial instruments     |  |                    |        |   |                  |   | 2,083   |                  |  |   |        |  
|Write-off of deferred financing costs        |  |                    | (5,515  | ) |                  |   |        |                  |  |   |        |  
|Gain (loss) on sale of investments           |  |                    | 837     |   |                  |   | (2      | )                |  |   | (540    | )
|Write-down of other investments              |  |                    |        |   |                  |   |        |                  |  |   | (332    | )
|Other, net                                   |  |                    | (1,134  | ) |                  |   | 145     |                  |  |   | (422    | )
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Income (loss) before income taxes            |  |                    | (11,258 | ) |                  |   | (32,192 | )                |  |   | 12,936  |  
|                                             |  |                    |        
|Income taxes (benefit)                       |  |                    | 9,564   |   |                  |   | (5,048  | )                |  |   | 3,530   |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Income (loss) from continuing operations     |  |                    | (20,822 | ) |                  |   | (27,144 | )                |  |   | 9,406   |  
|                                             |  |                    |        
|Discontinued operations:                     |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Income from operations                       |  |                    | 17      |   |                  |   | 1,653   |                  |  |   | 1,646   |  
|Net gain on sale                             |  |                    | 8,226   |   |                  |   |        |                  |  |   |        |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|                                             |  |                    | 8,243   |   |                  |   | 1,653   |                  |  |   | 1,646   |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Net income (loss)                            |  | $                  | (12,579 | ) |                  | $ | (25,491 | )                |  | $ | 11,052  |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Basic and diluted income (loss) per share:   |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Income (loss) from continuing operations     |  | $                  | (.72    | ) |                  | $ | (1.09   | )                |  | $ | .44     |  
|Discontinued operations:                     |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Income from operations                       |  |                    |        |   |                  |   | .06     |                  |  |   | .08     |  
|Net gain on sale                             |  |                    | .28     |   |                  |   |        |                  |  |   |        |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  
|Net income (loss)                            |  | $                  | (.44    | ) |                  | $ | (1.03   | )                |  | $ | .52     |  
|                                             |  |                    |         |   |                  |   |         |                  |  |   |         |  

The accompanying notes are an integral part of these statements.



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X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS INVESTMENT

(In thousands, except share and per share data)



|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------- | ----- | ------------------------ | - | ------- | ---------------- |  | - | ----------------------------------- | - |  | ---------------------- | ------ | - | ---------------------------- | - | ---- | - |  | - | ------- | -
|                                                                                                   |  | CommonStock |       | AdditionalPaid-inCapital |   |         | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome |   |  | StockConversionProgram |        |   | TotalShareholdersInvestment |  
|BALANCES, JANUARY 1, 2005                                                                          |  | $           | 2,095 |                          | $ | 13,792  |                  |  | $ | 98,177                              |   |  | $                      | 2,810  |   |                              | $ | (410 | ) |  | $ | 116,464 |  
|Net income                                                                                         |  |             |      |                          |   |        |                  |  |   | 11,052                              |   |  |                        |       |   |                              |   |     |   |  |   | 11,052  |  
|Translation adjustment                                                                             |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | (1,396 | ) |                              |   |     |   |  |   | (1,396  | )
|Unrealized gain on short-term investments (net of tax of $165)                                     |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | 307    |   |                              |   |     |   |  |   | 307     |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|Total comprehensive income                                                                         |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   | 9,963   |  
|Cash dividends declared of $.10 per share                                                          |  |             |      |                          |   |        |                  |  |   | (2,124                              | ) |  |                        |       |   |                              |   |     |   |  |   | (2,124  | )
|Issuance / release of shares under employee benefit plans, including tax benefits (186,182 shares) |  |             | 19    |                          |   | 1,832   |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 1,851   |  
|Issuance of shares pursuant to a business acquisition (62,819 shares)                              |  |             | 6     |                          |   | 933     |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 939     |  
|Stock conversion program                                                                           |  |             | 4     |                          |   | 601     |                  |  |   |                                    |   |  |                        |       |   |                              |   | (116 | ) |  |   | 489     |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|BALANCES, DECEMBER 31, 2005                                                                        |  |             | 2,124 |                          |   | 17,158  |                  |  |   | 107,105                             |   |  |                        | 1,721  |   |                              |   | (526 | ) |  |   | 127,582 |  
|Adoption of SFAS 123(R)                                                                            |  |             |      |                          |   | (526    | )                |  |   |                                    |   |  |                        |       |   |                              |   | 526  |   |  |   |        |  
|Net loss                                                                                           |  |             |      |                          |   |        |                  |  |   | (25,491                             | ) |  |                        |       |   |                              |   |     |   |  |   | (25,491 | )
|Translation adjustment                                                                             |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | 1,726  |   |                              |   |     |   |  |   | 1,726   |  
|Unrealized loss on derivative financial instruments (net of tax benefits of $200)                  |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | (478   | ) |                              |   |     |   |  |   | (478    | )
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|Total comprehensive loss                                                                           |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   | (24,243 | )
|Cash dividends declared of $.10 per share                                                          |  |             |      |                          |   |        |                  |  |   | (2,495                              | ) |  |                        |       |   |                              |   |     |   |  |   | (2,495  | )
|Share-based compensation                                                                           |  |             |      |                          |   | 2,555   |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 2,555   |  
|Issuance / release of shares under employee benefit plans, including tax benefits (110,380 shares) |  |             | 11    |                          |   | 1,031   |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 1,042   |  
|Issuance of shares pursuant to a business acquisition (7,221,458 shares)                           |  |             | 722   |                          |   | 80,447  |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 81,169  |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|BALANCES, DECEMBER 30, 2006                                                                        |  |             | 2,857 |                          |   | 100,665 |                  |  |   | 79,119                              |   |  |                        | 2,969  |   |                              |   |     |   |  |   | 185,610 |  
|Net loss                                                                                           |  |             |      |                          |   |        |                  |  |   | (12,579                             | ) |  |                        |       |   |                              |   |     |   |  |   | (12,579 | )
|Translation adjustment                                                                             |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | 5,556  |   |                              |   |     |   |  |   | 5,556   |  
|Unrealized loss on derivative financial instruments (net of tax benefit of $1,544)                 |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | (2,732 | ) |                              |   |     |   |  |   | (2,732  | )
|Pension adjustments                                                                                |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | (244   | ) |                              |   |     |   |  |   | (244    | )
|Other                                                                                              |  |             |      |                          |   |        |                  |  |   |                                    |   |  |                        | 99     |   |                              |   |     |   |  |   | 99      |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|Total comprehensive loss                                                                           |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   | (9,900  | )
|Share-based compensation                                                                           |  |             |      |                          |   | 4,716   |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 4,716   |  
|Adjustment to adopt FIN 48 (net of tax benefit of $781)                                            |  |             |      |                          |   |        |                  |  |   | (226                                | ) |  |                        |       |   |                              |   |     |   |  |   | (226    | )
|Issuance / release of shares under employee benefit plans, including tax benefits (438,423 shares) |  |             | 44    |                          |   | 3,846   |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 3,890   |  
|Issuance of shares pursuant to a business acquisition (19,020 shares)                              |  |             | 2     |                          |   | 212     |                  |  |   |                                    |   |  |                        |       |   |                              |   |     |   |  |   | 214     |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  
|BALANCES, DECEMBER 29, 2007                                                                        |  | $           | 2,903 |                          | $ | 109,439 |                  |  | $ | 66,314                              |   |  | $                      | 5,648  |   |                              |   |     |   |  | $ | 184,304 |  
|                                                                                                   |  |             |       |                          |   |         |                  |  |   |                                     |   |  |                        |        |   |                              |   |      |   |  |   |         |  

The accompanying notes are an integral part of these statements.



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##### Table of Contents

X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ------------------ | -------- | - | ---------------- | - | -------- | ---------------- |  | - | ------- | -
|                                                                                                    |  | For the Year Ended |         
|                                                                                                    |  | December 29,2007   |          |   | December 30,2006 |   |          | December 31,2005 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Net income (loss)                                                                                   |  | $                  | (12,579  | ) |                  | $ | (25,491  | )                |  | $ | 11,052  |  
|Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Depreciation                                                                                        |  |                    | 6,943    |   |                  |   | 5,464    |                  |  |   | 3,875   |  
|Amortization of intangible assets                                                                   |  |                    | 16,332   |   |                  |   | 9,352    |                  |  |   | 2,343   |  
|Amortization of deferred financing costs                                                            |  |                    | 1,559    |   |                  |   | 624      |                  |  |   |        |  
|Allowance for doubtful accounts                                                                     |  |                    | 368      |   |                  |   | 104      |                  |  |   | 258     |  
|Deferred income taxes (benefit)                                                                     |  |                    | 6,837    |   |                  |   | (6,286   | )                |  |   | 1,378   |  
|Gain on sale of business, excluding income tax benefit of $1,859                                    |  |                    | (6,367   | ) |                  |   |         |                  |  |   |        |  
|Gain on sale of investment                                                                          |  |                    | (837     | ) |                  |   |         |                  |  |   |        |  
|Gain on sale of life insurance policies                                                             |  |                    |         |   |                  |   |         |                  |  |   | (1,154  | )
|Share-based compensation                                                                            |  |                    | 3,607    |   |                  |   | 1,659    |                  |  |   |        |  
|Tax benefit from stock options exercised                                                            |  |                    | 493      |   |                  |   | 66       |                  |  |   | 174     |  
|Excess tax benefit from stock-based compensation                                                    |  |                    | (163     | ) |                  |   |         |                  |  |   |        |  
|Gain on derivative financial instruments                                                            |  |                    |         |   |                  |   | (2,083   | )                |  |   |        |  
|Acquired in-process research and development                                                        |  |                    |         |   |                  |   | 11,107   |                  |  |   |        |  
|Restructuring (including amortization expense of $133 in 2007 and $1,271 in 2006)                   |  |                    | 3,084    |   |                  |   | 16,145   |                  |  |   |        |  
|Write-off of deferred financing costs                                                               |  |                    | 5,448    |   |                  |   |          |                  |  |   |         |  
|Other                                                                                               |  |                    | 113      |   |                  |   | 337      |                  |  |   | 1,272   |  
|Changes in operating assets and liabilities net of effects from acquisitions:                       |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Accounts receivable                                                                                 |  |                    | 2,619    |   |                  |   | 9,951    |                  |  |   | (6,920  | )
|Inventories                                                                                         |  |                    | (7,849   | ) |                  |   | 1,010    |                  |  |   | (3,397  | )
|Other current and non current assets                                                                |  |                    | 1,803    |   |                  |   | 9,416    |                  |  |   | (2,236  | )
|Accounts payable                                                                                    |  |                    | 2,370    |   |                  |   | (2,243   | )                |  |   | 1,302   |  
|Income taxes                                                                                        |  |                    | 88       |   |                  |   | (2,338   | )                |  |   | 979     |  
|Other current and non-current liabilities                                                           |  |                    | (15,072  | ) |                  |   | (6,249   | )                |  |   | (44     | )
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Net cash provided by operating activities                                                           |  |                    | 8,797    |   |                  |   | 20,545   |                  |  |   | 8,882   |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Proceeds from sales of short-term investments                                                       |  |                    |         |   |                  |   | 18,619   |                  |  |   | 1,940   |  
|Proceeds from maturities of short-term investments                                                  |  |                    |         |   |                  |   | 552      |                  |  |   | 505     |  
|Purchases of short-term investments                                                                 |  |                    |         |   |                  |   | (4,310   | )                |  |   | (11,088 | )
|Capital expenditures                                                                                |  |                    | (7,632   | ) |                  |   | (28,853  | )                |  |   | (4,655  | )
|Proceeds from sales of property and equipment                                                       |  |                    | 4,184    |   |                  |   |         |                  |  |   |        |  
|Investment in Founders life insurance, net                                                         |  |                    | 209      |   |                  |   | (421     | )                |  |   | (441    | )
|Proceeds from sales of life insurance policies                                                      |  |                    |         |   |                  |   |         |                  |  |   | 6,454   |  
|Proceeds from sale of Labsphere, Inc.                                                               |  |                    | 14,314   |   |                  |   |         |                  |  |   |        |  
|Increase in other assets                                                                            |  |                    | (3,699   | ) |                  |   | (2,980   | )                |  |   | (3,928  | )
|Acquisitions, net of cash acquired                                                                  |  |                    | (176,052 | ) |                  |   | (195,187 | )                |  |   | (750    | )
|Proceeds from derivative financial instruments                                                      |  |                    |         |   |                  |   | 2,083    |                  |  |   |        |  
|Other                                                                                               |  |                    | 81       |   |                  |   | 257      |                  |  |   | (190    | )
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Net cash used for investing activities                                                              |  |                    | (168,595 | ) |                  |   | (210,240 | )                |  |   | (12,153 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Short-term borrowings, net                                                                          |  |                    | (4,820   | ) |                  |   | 13,500   |                  |  |   |        |  
|Proceeds from issuance of long-term debt                                                            |  |                    | 383,500  |   |                  |   | 211,000  |                  |  |   |        |  
|Payment of long-term debt                                                                           |  |                    | (199,910 | ) |                  |   | (19,600  | )                |  |   |        |  
|Excess tax benefit from stock-based compensation                                                    |  |                    | 163      |   |                  |   |         |                  |  |   |        |  
|Debt issuance costs                                                                                 |  |                    | (15,911  | ) |                  |   | (7,506   | )                |  |   |        |  
|Dividends paid                                                                                      |  |                    |         |   |                  |   | (2,495   | )                |  |   | (1,124  | )
|Issuance of common stock                                                                            |  |                    | 3,391    |   |                  |   | 856      |                  |  |   | 1,750   |  
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|Net cash provided by (used for) financing activities                                                |  |                    | 166,413  |   |                  |   | 195,755  |                  |  |   | (374    | )
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                        |  |                    | 809      |   |                  |   | 320      |                  |  |   | 448     |  
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                |  |                    | 7,424    |   |                  |   | 6,380    |                  |  |   | (3,197  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                      |  |                    | 12,876   |   |                  |   | 6,496    |                  |  |   | 9,693   |  
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                            |  | $                  | 20,300   |   |                  | $ | 12,876   |                  |  | $ | 6,496   |  
|                                                                                                    |  |                    |          |   |                  |   |          |                  |  |   |         |  

The accompanying notes are an integral part of these statements.



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

X-Rite, Incorporated is a technology company that develops a full range of color management systems. The Companys technologies assist manufacturers, retailers, and distributors in achieving precise color
appearance throughout their global supply chain. X-Rite products include hardware, software, and color standards which assist printing companies, graphic designers, and professional photographers in achieving precise color communication and
reproduction across a wide range of devices. The Companys products also provide retailers color harmony solutions at point of purchase. The key markets served include Imaging and Media, Retail, and Industrial.

Products are sold worldwide through the Companys own sales personnel and through independent sales representatives and dealers. The Company is
headquartered in Grand Rapids, Michigan and has other domestic operations in New Jersey and Massachusetts. In addition, the Company has locations in Switzerland, Germany, England, France, Italy, Spain, the Czech Republic, Russia, Hong Kong, China,
Japan and Singapore. Manufacturing facilities are located in the United States, Switzerland, Germany, and Italy.

Principles of Consolidation

The consolidated financial statements include the accounts of X-Rite, Incorporated and its subsidiaries. All inter-company accounts
and transactions have been eliminated.

Fiscal Year

The Company reports its operations and cash flows on a 52-53 week basis ending on the Saturday closest to December 31. The fiscal year ended December 29, 2007 (fiscal year 2007) contained 53 weeks, while the
fiscal years ended December 30, 2006 (fiscal year 2006) and December 31, 2005 (fiscal year 2005) contained 52 weeks.

Financial Instruments

The Companys financial instruments consist of cash and cash equivalents, accounts receivable, accounts and notes payable,
short-term and long-term debt, and derivative financial instruments. The Companys estimate of the fair values of these financial instruments approximates their carrying amounts for the respective years. The Company does not hold or issue
financial instruments for trading purposes.

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with maturities of three months or less when purchased to be cash equivalents.

Accounts Receivable Allowance

The carrying
amount of accounts receivable is reduced by a valuation allowance that reflects an estimate of the amounts that will not be collected. The valuation allowance is comprised of an allowance for doubtful accounts and sales returns. In addition to
reviewing delinquent accounts receivable, other factors are considered in estimating the allowance, including historical data, customer types, credit worthiness and economic trends. Actual collections may differ, requiring adjustments to the
allowance.



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Inventories

Inventories are stated at the lower of cost, determined on a first-in, first-out basis, or market. Reserves are established for excess and obsolete inventory, based on material movement and a component of judgment for
current events such as market conditions or technological advancement. Components of inventories are summarized as follows (in thousands):



|                |  |      |        |      |   |       
|--------------- |  | ---- | ------ | ---- | - | ------
|                |  | 2007 |        | 2006
|Raw materials   |  | $    | 16,418 |      | $ | 13,957
|Work in process |  |      | 28,532 |      |   | 5,297 
|Finished goods  |  |      | 16,889 |      |   | 10,911
|                |  |      |        |      |   |       
|                |  | $    | 61,839 |      | $ | 30,165
|                |  |      |        |      |   |       

In connection with the acquisition of Pantone, Inc on October 24, 2007 the company had to
write the acquired inventory balance up to fair market value. The write up of inventory in the amount of $15.4 million will be expensed as the related inventory is sold.

Property, Plant, and Equipment and Depreciation

Property, plant and equipment are stated at
cost and include expenditures for major renewals and betterments. Maintenance and repairs that do not extend the lives of the respective assets are charged to expense as incurred. Depreciation expense is computed using the straight-line method over
the estimated useful lives of the related assets. Estimated depreciable lives are as follows: buildings and improvements, 3 to 30 years; machinery and equipment, 3 to 8 years; and furniture and office equipment, 3 to 13 years.

Software Development Costs

Development costs
incurred for research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility is achieved. After technological feasibility is achieved, any additional
development costs are capitalized until the product is available for general release to customers and then amortized using the straight-line method over a three-year period.

The Company capitalized $3.7, $3.0 and $3.8 million of software development costs during 2007, 2006 and 2005, respectively. Amortization expense was
$3.8, $4.4 and $1.5 million in 2007, 2006 and 2005, respectively. The 2007 and 2006 amortization expense figures include $0.1 million and $1.2 million, respectively, of amortization classified as a restructuring charge within cost of sales as it
related to write-downs associated with product lines discontinued as part of the Companys restructuring plans discussed in Note 4.

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards
No.142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires companies to review goodwill and intangible assets with indefinite useful lives for impairment annually, or more frequently if indicators of impairment occur.
Impairment indicators could include a significant adverse change in the business climate, operating performance indicators, or the decision to sell or dispose of a reporting unit. The Company is required to test the carrying value of goodwill for
impairment at the reporting unit level (operating segment or one level below an operating segment). A discounted cash flow method is used to establish the fair



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



value of reporting units. This model requires the use of estimates about the future cash flows of each reporting unit to determine estimated fair values. An
impairment charge is recognized for any amount by which the carrying amount of a reporting units goodwill exceeds its fair value. Changes in forecasted operations and changes in discount rates can materially affect these estimates. Once an
impairment of goodwill has been recorded it cannot be reversed. SFAS 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives, and reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).

Long Lived Assets

In accordance with SFAS 144, when there are indicators of impairment, the Company evaluates the recoverability of its long-lived assets by determining
whether unamortized balances could be recovered through undiscounted future operating cash flows over the remaining lives of the assets. The estimated fair value is determined by discounting the expected future cash flows at a rate that is required
for a similar investment with like risks. If the sum of the expected future cash flows is less than the carrying value of the assets, an impairment loss would be recognized for the excess of the carrying value over the fair value.

Assets held for sale are stated at the lower of depreciated cost or estimated fair value less costs to sell. As of December 29, 2007, the Company had $7.6 million
in assets held for sale, which related to the Companys former corporate headquarters (see Note 7).

Deferred Financing Costs

The Company capitalizes costs incurred in connection with the establishment of credit facilities and related borrowings. These
costs are amortized to interest expense over the life of the borrowing or life of the credit facility using the straight-line method, which approximates the interest method. In the case of early debt principal repayments, the Company adjusts the
value of the corresponding deferred financing costs with a charge to interest expense, and similarly adjusts the future amortization expense.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage exposures to movements
in interest rates. Derivatives are not used for speculative or trading purposes.

The Company accounts for derivative financial instruments
in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended. As a result the Company recognizes derivative financial instruments in its consolidated financial statements at fair
value regardless of the purpose or intent for holding the instruments. Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective hedges, are originally recorded as a component of other comprehensive
income, net of tax, and subsequently reclassified into earnings when the hedged exposure affects earnings. Changes in fair values of derivatives not qualifying as hedges are reported in earnings immediately.

Revenue Recognition

Revenue is recognized
when earned in accordance with applicable accounting standards. Revenue from sales of products and services is recognized when a purchase order has been received, the product has been shipped or the service has been performed, the sales price is
fixed and determinable, and collection of any resulting receivable is probable.



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For transactions involving the sale of software which is not incidental to the product, revenue is
recognized in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions (SOP 98-9). The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable and collection is probable.
In instances where an arrangement contains multiple elements, revenue is deferred related to the undelivered elements to the extent that vendor-specific objective evidence of fair value (VSOE) exists for such elements. VSOE is the price charged when
the element is sold separately. Revenue for the separate elements is only recognized where the functionality of the undelivered element is not essential to the delivered element.

Shipping and Handling

The Company records shipping and handling charged to customers in net
sales and the related expenses in cost of sales in the Consolidated Statements of Operations.

Advertising Costs

Advertising costs are charged to operations in the period incurred and totaled $0.8, $0.6 and $0.8 million in 2007, 2006 and 2005, respectively.

Income Taxes

Income taxes are
accounted for in accordance with SFAS No. 109 (SFAS 109), Accounting for Income Taxes. Income tax expense includes the current tax obligation or benefit and the change in deferred income tax balance for the period. Deferred income taxes
result from the temporary differences between financial and income tax bases of certain assets and liabilities and are measured using the statutory tax rates expected to apply to the taxable income in the years in which those temporary differences
are expected to reverse. The Company records valuation allowances on its deferred income tax assets for which it is not more likely than not that a future benefit will be received. Uncertain tax positions are accounted for in accordance with FASB
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes.

Self-Insurance Reserves

The Company is self insured up to certain limits for costs associated with benefits paid
under health care programs for its domestic employees. The measurement of these costs requires the consideration of historic loss experience and judgments about the present and expected levels of costs per claim. These costs are accounted for
through actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred but not reported. This method provides estimates of future ultimate claim costs based on claims incurred as of the
balance sheet date.



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Accumulated Other Comprehensive Income

The components of ending accumulated other comprehensive income, net of tax, are as follows (in thousands):



|                                              |  |      |        |   |      |   |       |  
|--------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | -
|                                              |  | 2007 |        |   | 2006 |  
|Currency translation adjustments              |  | $    | 9,003  |   |      | $ | 3,447 |  
|Net unrealized loss on derivative instruments |  |      | (3,210 | ) |      |   | (478  | )
|Pensions adjustments                          |  |      | (244   | ) |      |   |      |  
|Other                                         |  |      | 99     |   |      |   |      |  
|                                              |  |      |        |   |      |   |       |  
|Accumulated other comprehensive income        |  | $    | 5,648  |   |      | $ | 2,969 |  
|                                              |  |      |        |   |      |   |       |  

Stock Option Plans

At December 29, 2007, the Company has employee and outside director stock option plans which are described more fully in Note 9.

Prior to January 1, 2006, the Companys employee and outside director share-based compensation plans were accounted for under the measurement and recognition provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Under APB 25, no compensation expense was recognized for stock options because the exercise price of the Companys stock options equaled the market price of the
underlying stock on the date of the grant. In accordance with SFAS No. 123, Accounting for Stock- Based Compensation (SFAS 123), the Company provided pro forma disclosures for each period as if the Company had applied the fair
value-based method in measuring compensation expense for its share-based compensation plans.

On January 1, 2006, the Company adopted
SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options
and employee stock purchases under the Employee Stock Purchase Plan, based on estimated fair values. The Company has elected to use the modified prospective transition method; therefore prior periods have not been restated to reflect, and do not
include, the impact of SFAS 123(R). In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107), which provides supplemental implementation guidance for SFAS 123(R). The Company has applied the
provisions of SAB 107 in its adoption of SFAS 123(R).



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Per Share Data

Basic earnings per share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding in each year. Diluted EPS is computed by dividing net income by the weighted-average number
of common shares outstanding plus all shares that would have been outstanding if every potentially dilutive common share had been issued. The following table reconciles the numerators and denominators used in the calculations of basic and diluted
EPS for each of the last three years (in thousands, except per share data):



|                                           |  |      |         |   |      |   |         |      |  |   |       
|------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------
|                                           |  | 2007 |         |   | 2006 |   |         | 2005
|Net Income (Loss)                          |  |      |         |   |      |   |         |      |  |   |       
|Income (loss) from continuing operations   |  | $    | (20,822 | ) |      | $ | (27,144 | )    |  | $ | 9,406 
|Discontinued operations:                   |  |      |         |   |      |   |         |      |  |   |       
|Income from operations                     |  |      | 17      |   |      |   | 1,653   |      |  |   | 1,646 
|Net gain on sale                           |  |      | 8,226   |   |      |   |        |      |  |   |      
|                                           |  |      |         |   |      |   |         |      |  |   |       
|Net income (loss)                          |  | $    | (12,579 | ) |      | $ | (25,491 | )    |  | $ | 11,052
|                                           |  |      |         |   |      |   |         |      |  |   |       
|Weighted-Average Common Shares Outstanding |  |      |         |   |      |   |         |      |  |   |       
|Basic                                      |  |      | 28,866  |   |      |   | 24,865  |      |  |   | 21,150
|Diluted                                    |  |      | 28,866  |   |      |   | 24,865  |      |  |   | 21,419
|                                           |  |      |        
|Basic and Diluted Income (Loss) Per Share  |  |      |         |   |      |   |         |      |  |   |       
|Income (loss) from continuing operations   |  | $    | (.72    | ) |      | $ | (1.09   | )    |  | $ | .44   
|Discontinued operations                    |  |      |         |   |      |   |         |      |  |   |       
|Income from operations                     |  |      |        |   |      |   | .06     |      |  |   | .08   
|Net gain on sale                           |  |      | .28     |   |      |   |        |      |  |   |      
|                                           |  |      |         |   |      |   |         |      |  |   |       
|Net income (loss)                          |  | $    | (.44    | ) |      | $ | (1.03   | )    |  | $ | .52   
|                                           |  |      |         |   |      |   |         |      |  |   |       

Dilutive potential shares consist of employee stock options and restricted common stock awards.
The number of stock options and awards that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 1,292,000 in 2007, 1,615,000 in 2006, and 1,220,000 in 2005.

Foreign Currency Translation

Most of the
Companys foreign operations use the local currency as their functional currency. Accordingly, foreign currency balance sheet accounts are translated into U.S. dollars at the exchange rate in effect at year-end, and income statement accounts
are translated at the average rate of exchange in effect during the year. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income in the Consolidated Statements of Shareholders Investment.
Gains and losses arising from re-measuring foreign currency transactions into the functional currency are included in the determination of net income. Net realized and unrealized losses from re-measurement of foreign currency transactions were $1.2,
$0.7, and $0.1 million for 2007, 2006 and 2005, respectively.

Use of Estimates

The preparation of the Companys consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of
assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent liabilities. Management makes its best estimate of the ultimate



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outcome for these items based on the historic trends and other information available when the financial statements are prepared. Changes in estimates are
recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates; however, management believes that any
subsequent revisions to estimates used would not have a material effect on the financial condition or results of operations of the Company.

New
Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157). SFAS No. 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various
existing accounting standards that permit, or in some cases require, estimates of fair market value. SFAS No. 157 also expands financial statement disclosure requirements about a companys use of fair value measurements, including the
effect of such measures on earnings. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 (fiscal year 2008 for the Company). In February 2008, the FASB issued FASB Staff Position (FSP) 157-2,Partial Deferral of
the Effective Date of Statement 157 (FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008 (fiscal year 2009 for the Company). The adoption is not expected to have a material impact on the Companys consolidated financial
statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities,
including an amendment of SFAS No. 115 (SFAS No. 159). SFAS No. 159 allows companies the option to measure eligible financial instruments at fair value. Such election, which may be applied on an instrument by instrument basis, is
typically irrevocable once elected. The Company will adopt SFAS No. 159 effective December 30, 2007, as required, and anticipates it will not apply the fair value option to any of its financial instruments.

In December 2007 the FASB issued SFAS No. 141(R),Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) establishes
principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also
provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after an entitys fiscal year that begins after December 15, 2008 (fiscal year 2009 for the Company). The
Company expects the adoption will have an impact on the consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions consummated after the
effective date. The Company will assess the impact of this standard on the consolidated financial statements if and when a future acquisition occurs.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 establishes new accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parents equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that
changes in a parents ownership interest in a subsidiary that do not result



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in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded
disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (fiscal year
2009 for the Company). Earlier adoption is prohibited. The Company currently does not have any noncontrolling interests and will assess the impact of this standard on the consolidated financial statements if and when a future acquisition occurs

Reclassifications

Certain
prior year information has been reclassified to conform to the current year presentation, primarily as a result of discontinued operations.

NOTE
2BUSINESS SEGMENTS

The company is comprised of two primary operating segments, as defined in SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. The Color Measurement segment consists of quality control instrumentation that measure, communicate, and simulate color. These products are used in several industries but in all cases
their core application is the measurement of color. Company management views its products, technology, and key strategic decisions in terms of the global color measurement market and not the specific components of the markets it serves.

The Color Standards segment includes the operations of the Pantone, Inc. business unit. Pantone, Inc. is a leading developer and marketer of products
for the accurate communication and reproduction of color, servicing worldwide customers in a variety of industries including imaging and media, textiles, digital technology, plastics, and paint. The company created the Color Standards business
segment in connection with the acquisition of Pantone on October 24, 2007.



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The performance of the operating segments is evaluated by the companys management using various
financial measures. The following is a summary of certain key financial measures for the respective fiscal years indicated.



|                               |  |      |         |   |      |   |         |      |  |   |        
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------
|(in thousands)                 |  | 2007 |         |   | 2006 |   |         | 2005
|Net Sales:                     |  |      |         |   |      |   |         |      |  |   |        
|Color Measurement              |  | $    | 239,698 |   |      | $ | 167,641 |      |  | $ | 119,626
|Color Standards                |  |      | 9,012   |   |      |   |        |      |  |   |       
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total                          |  | $    | 248,710 |   |      | $ | 167,641 |      |  | $ | 119,626
|                               |  |      |         |   |      |   |         |      |  |   |        
|Depreciation and Amortization: |  |      |         |   |      |   |         |      |  |   |        
|Color Measurement              |  | $    | 21,666  |   |      | $ | 16,087  |      |  | $ | 6,218  
|Color Standards                |  |      | 1,742   |   |      |   |        |      |  |   |       
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total                          |  | $    | 23,408  |   |      | $ | 16,087  |      |  | $ | 6,218  
|                               |  |      |         |   |      |   |         |      |  |   |        
|Operating Income (Loss):       |  |      |         |   |      |   |         |      |  |   |        
|Color Measurement              |  | $    | 18,041  |   |      | $ | (25,660 | )    |  | $ | 14,230 
|Color Standards                |  |      | (1,398  | ) |      |   |        |      |  |   |       
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total                          |  | $    | 16,643  |   |      | $ | (25,660 | )    |  | $ | 14,230 
|                               |  |      |         |   |      |   |         |      |  |   |        
|Capital Expenditures:          |  |      |         |   |      |   |         |      |  |   |        
|Color Measurement              |  | $    | 7,623   |   |      | $ | 28,853  |      |  | $ | 4,655  
|Color Standards                |  |      | 9       |   |      |   |        |      |  |   |       
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total                          |  | $    | 7,632   |   |      | $ | 28,853  |      |  | $ | 4,655  
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total Assets:                  |  |      |         |   |      |   |         |      |  |   |        
|Color Measurement              |  | $    | 468,609 |   |      | $ | 462,259 |      |  | $ | 147,635
|Color Standards                |  |      | 186,215 |   |      |   |        |      |  |   |       
|                               |  |      |         |   |      |   |         |      |  |   |        
|Total                          |  | $    | 654,824 |   |      | $ | 462,259 |      |  | $ | 147,635
|                               |  |      |         |   |      |   |         |      |  |   |        

The accounting policies used to determine profitability and total assets of the reportable
operating segments are the same as those of the company, which are disclosed in Note 1.

The following table summarizes net sales from
continuing operations by product line (in thousands):



|                          |  |      |         |      |   |         |  |   |        
|------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                          |  | 2007 |         | 2006 |   | 2005   
|Imaging and Media         |  | $    | 124,209 |      | $ | 78,849  |  | $ | 47,802 
|Industrial                |  |      | 47,965  |      |   | 35,994  |  |   | 26,987 
|Color Support Services    |  |      | 28,285  |      |   | 21,850  |  |   | 12,816 
|Retail                    |  |      | 22,249  |      |   | 20,674  |  |   | 24,592 
|Other                     |  |      | 16,990  |      |   | 10,274  |  |   | 7,429  
|                          |  |      |         |      |   |         |  |   |        
|Color Measurement Segment |  |      | 239,698 |      |   | 167,641 |  |   | 119,626
|Color Standards Segment   |  |      | 9,012   |      |   |        |  |   |       
|                          |  |      |         |      |   |         |  |   |        
|Total Net Sales           |  | $    | 248,710 |      | $ | 167,641 |  | $ | 119,626
|                          |  |      |         |      |   |         |  |   |        



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Sales by geographic area are based on the location of the customer. Long-lived assets consist of
long-term assets of the company, excluding financial instruments and deferred tax assets. The following is a summary of geographic information for the respective fiscal years indicated. Individual foreign country information is not provided as none
of the individual foreign countries in which we operate are considered material for separate disclosure based on quantitative and qualitative considerations (in thousands):



|                                           |  |      |         |      |   |         |  |   |        
|------------------------------------------ |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                           |  | 2007 |         | 2006 |   | 2005   
|Domestic sales                             |  | $    | 85,326  |      | $ | 65,847  |  | $ | 61,711 
|International sales:                       |  |      |         |      |   |         |  |   |        
|Europe                                     |  |      | 106,774 |      |   | 59,591  |  |   | 31,023 
|Asia                                       |  |      | 46,366  |      |   | 33,141  |  |   | 17,012 
|Other Countries                            |  |      | 10,243  |      |   | 9,062   |  |   | 9,880  
|                                           |  |      |         |      |   |         |  |   |        
|                                           |  |      | 163,384 |      |   | 101,794 |  |   | 57,915 
|                                           |  |      |         |      |   |         |  |   |        
|Total net sales from continuing operations |  | $    | 248,710 |      | $ | 167,641 |  | $ | 119,626
|                                           |  |      |         |      |   |         |  |   |        

The Companys long-lived assets, primarily goodwill and intangible assets, are as follows (in
thousands):



|                   |  |      |         |      |   |         |  |   |       
|------------------ |  | ---- | ------- | ---- | - | ------- |  | - | ------
|                   |  | 2007 |         | 2006 |   | 2005   
|Long lived assets: |  |      |         |      |   |         |  |   |       
|U.S. operations    |  | $    | 470,001 |      | $ | 318,856 |  | $ | 44,631
|International      |  |      | 14,810  |      |   | 15,067  |  |   | 2,563 
|                   |  |      |         |      |   |         |  |   |       
|                   |  | $    | 484,811 |      | $ | 333,923 |  | $ | 47,194
|                   |  |      |         |      |   |         |  |   |       

For fiscal year 2007 the Color Measurement segment had one significant customer which accounted
for $28.3 million, or 11.4 percent, of total net sales in 2007. No single customer accounted for more than 10 percent of total net sales in 2006 or 2005.

NOTE 3ACQUISITIONS

Pantone, Inc.

On October 24, 2007, the Company completed its acquisition of Pantone, Inc. (Pantone), for a purchase price of $174.4 million plus transaction costs. Pantone is a leader in color communication
and specification standards in the creative design industries. The Company also provides color standards and design tools for the fashion, home furnishings, architecture, paint, interior and industrial design industries.

The following table summarizes the aggregate consideration paid for the acquisition (in thousands):



|                                    |  |   |        
|----------------------------------- |  | - | -------
|Cash consideration paid for Pantone |  | $ | 174,379
|Transaction costs                   |  |   | 1,738  
|                                    |  |   |        
|Total acquisition consideration     |  | $ | 176,117
|                                    |  |   |        

The transaction was funded exclusively with cash, financed through new borrowings. Total cash
acquired with the Pantone purchase was $0.7 million.

Assets acquired and liabilities assumed in the acquisition were recorded on the
Companys Consolidated Balance Sheets based on their estimated fair values as of the date of the acquisition. The results of operations of



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Pantone have been included in the Companys Consolidated Statements of Operations since the date of the acquisition. The excess of the purchase price
over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. Pantone is included in the Companys Color Standards segment; therefore all of the Goodwill recorded in the Pantone acquisition
has been allocated to that segment. The purchase price allocation is preliminary and a final determination of required purchase accounting adjustments will be made upon finalization of working capital adjustments, asset valuations, and tax
structuring decisions, as well as the completion of the integration process. Revisions to the fair values, which may be significant, will be recorded by the Company as further adjustments to the purchase price allocation. The following table
summarizes the estimated fair values of the assets acquired and liabilities assumed on October 24, 2007 (in thousands):



|                                                                   |  |        |  |   |         |  
|------------------------------------------------------------------ |  | ------ |  | - | ------- | -
|Current assets                                                     |  |        |  | $ | 33,299  |  
|Property, plant and equipment                                      |  |        |  |   | 2,131   |  
|Goodwill                                                           |  |        |  |   | 82,449  |  
|Identifiable intangible assets                                     |  |        |  |   |         |  
|Customer relationships (estimated useful lives of 15 years)        |  | 29,400 |  |   |         |  
|Trademarks and trade names (estimated useful lives of 1030 years) |  | 20,280 |  |   |         |  
|Technology and patents (estimated useful lives of 15 years)        |  | 9,100  |  |   |         |  
|Covenants not to compete (estimated useful life of 23 years)      |  | 13,400 |  |   |         |  
|                                                                   |  |        |  |   |         |  
|Total intangible assets                                            |  |        |  |   | 72,180  |  
|Other assets                                                       |  |        |  |   | 114     |  
|                                                                   |  |        |  |   |         |  
|Total assets acquired                                              |  |        |  |   | 190,173 |  
|                                                                   |  |       
|Current liabilities                                                |  |        |  |   | (13,541 | )
|Long-term liabilities                                              |  |        |  |   | (515    | )
|                                                                   |  |        |  |   |         |  
|Total liabilities assumed                                          |  |        |  |   | (14,056 | )
|                                                                   |  |        |  |   |         |  
|Net assets acquired                                                |  |        |  | $ | 176,117 |  
|                                                                   |  |        |  |   |         |  

As part of the purchase price allocation, an adjustment of $15.4 million was recorded to reflect
the fair value of inventory at the date of the acquisition. Based on the average rate at which inventory turns, this adjustment is expected to be expensed through cost of sales during the next twelve months. As of December 29, 2007, the company
expensed $2.6 million related to the fair value valuation of Pantones inventory. The identifiable intangible assets are amortized on a straight-line basis over their expected useful lives. The total weighted average amortization period for
these intangible assets is 16 years.

The following unaudited pro forma information assumes the Pantone and Amazys acquisitions occurred as
of the beginning of each of the periods presented. The pro forma information contains the actual combined operating results of X-Rite, Pantone and Amazys with the results prior to the acquisition date, adjusted to reflect the pro forma impact of the
acquisition occurring at the beginning of the period. Pro forma adjustments include elimination of sales between X-Rite and Pantone during the period presented, the amortization of acquired intangible assets, and the interest expense on debt
incurred to finance the transaction. The pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the years presented (in thousands, except per share data):



|                                 |  |      |         |   |      |   |         |  
|-------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                 |  | 2007 |         |   | 2006 |  
|Revenue                          |  | $    | 283,353 |   |      | $ | 262,611 |  
|Net loss                         |  |      | (31,988 | ) |      |   | (52,683 | )
|Basic and diluted loss per share |  | $    | (1.11   | ) |      | $ | (2.12   | )



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Amazys Holding AG

On July 5, 2006, the Company consummated its exchange offer (the Offer) for all publicly held registered shares of Amazys Holding AG (Amazys), a listed company incorporated in Switzerland. Amazys is a color
management solutions company that develops, markets, and supports hardware, software and services to measure and communicate color for the imaging and media, photography, digital imaging, paints, plastics, apparel, textiles, and automotive
industries.

In the Offer, the Company acquired an aggregate of 3,422,492 Amazys shares, representing approximately 99.7% of the shares outstanding on a
fully diluted basis. On January 31, 2007, the Company completed the compulsory acquisition process under Swiss law whereby, each Amazys share that remained outstanding was cancelled and converted into the right to receive the Offer
consideration. Pursuant to the terms of the Offer, the Company paid 2.11 shares of its common stock and 77 Swiss Francs (CHF) in cash for each tendered Amazys share. Cash consideration for this portion of the acquisition was $0.6 million including
transaction costs, and the fair value of common stock issued was $0.2 million.

The following table summarizes the aggregate consideration paid for the
acquisition, with a reconciliation to the total net assets acquired (in thousands, except share amounts):



|                                                     |  |   |        
|---------------------------------------------------- |  | - | -------
|Cash consideration for Amazys common shares tendered |  | $ | 215,787
|Transaction costs                                    |  |   | 9,497  
|                                                     |  |   |        
|Total cash consideration                             |  |   | 225,284
|Fair value of X-Rite stock (7,240,478 shares)        |  |   | 81,383 
|                                                     |  |   |        
|Total acquisition consideration                      |  | $ | 306,667
|                                                     |  |   |        

The cash consideration exchanged for Amazys shares consisted of existing cash, the issuance of new
debt totaling $205.0 million and cash of $2.1 million derived from the settlement of a derivative financial instrument associated with the transaction. Total cash acquired with the Amazys purchase was $29.2 million; of which $17.5 was used to pay
down long-term debt incurred for the acquisition. The fair value of shares issued was determined based upon closing market price on the date of the acquisition.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Assets acquired and liabilities assumed in the acquisition were recorded on the Companys
Consolidated Balance Sheets based on their estimated fair values as of the date of the acquisition. The results of operations of Amazys have been included in the Companys Consolidated Statements of Operations since the date of the acquisition.
The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed on July 5, 2006 (in thousands):



|                                                                    |  |        |  |   |         |  
|------------------------------------------------------------------- |  | ------ |  | - | ------- | -
|Current assets                                                      |  |        |  | $ | 75,215  |  
|Property, plant and equipment                                       |  |        |  |   | 9,734   |  
|Goodwill                                                            |  |        |  |   | 196,566 |  
|Identifiable intangible assets                                      |  |        |  |   |         |  
|Customer relationships (estimated useful lives of 2  7 years)      |  | 9,963  |  |   |         |  
|Trademarks and trade names (estimated useful lives of 5  10 years) |  | 4,410  |  |   |         |  
|Technology and patents (estimated useful lives of 3  7 years)      |  | 51,695 |  |   |         |  
|Covenants not to compete (estimated useful life of 2 years)         |  | 898    |  |   |         |  
|Acquired in-process Research and Development (IPR&D)                |  | 11,107 |  |   |         |  
|                                                                    |  |        |  |   |         |  
|Total intangible assets                                             |  |        |  |   | 78,073  |  
|Other assets                                                        |  |        |  |   | 8,665   |  
|                                                                    |  |        |  |   |         |  
|Total assets acquired                                               |  |        |  |   | 368,253 |  
|Current liabilities                                                 |  |        |  |   | (33,294 | )
|Long-term liabilities                                               |  |        |  |   | (28,292 | )
|                                                                    |  |        |  |   |         |  
|Total liabilities assumed                                           |  |        |  |   | (61,586 | )
|                                                                    |  |        |  |   |         |  
|Net assets acquired                                                 |  |        |  | $ | 306,667 |  
|                                                                    |  |        |  |   |         |  

As part of the purchase price allocation, an adjustment of $4.9 million was recorded to reflect
the fair value of inventory at the date of the acquisition. Based on the average rate at which inventory turns, this adjustment was fully expensed through cost of sales during the quarter ended September 30, 2006.

The identifiable intangible assets are amortized on a straight-line basis over their expected useful lives. The total weighted average amortization
period for these intangible assets is 7 years. The acquired IPR&D intangible assets of $11.1 million were written off at the date of acquisition as technological feasibility had not been established and no future alternative uses existed. The
value of the IPR&D was determined utilizing the income approach by determining cash flow projections related to the projects.

As of
June 30, 2007, the Company had completed its analysis of the income tax matters and elections related to the Amazys acquisition and determined the final amount of deferred income taxes for temporary differences existing between the basis of
assets and liabilities for financial reporting and income tax purposes. At December 30, 2006, the Company identified $23.5 million of deferred income tax liabilities that were recorded in purchase accounting. The Company decreased deferred
income tax liabilities by $2.3 million during the quarter ended June 30, 2007, as a result of finalization of purchase accounting. In addition, the Company identified and recorded deferred income tax assets of $18.5 million during the quarter
ended June 30, 2007 which decreased goodwill. These adjustments brought the net deferred income tax liability acquired to $2.7 million.

In connection with the Amazys acquisition and as part of the purchase price allocation, the Company recorded liabilities of $4.7 million related to involuntary terminations and relocation of certain Amazys employees, and $1.5 million
related to facility closure costs.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 4RESTRUCTURING AND INTEGRATION

Restructuring

During 2007, the Company continued to execute the restructuring actions
initiated in 2006 related to the integration of Amazys. The Companys plan to integrate the two businesses includes closure of duplicate facilities, elimination of redundant jobs, and consolidation of product lines. The restructuring plan
includes estimated workforce reductions of 81 employees, all of which have been completed as of December 29, 2007, facility closures of approximately 14,000 square feet, various asset write-downs, and related costs for consulting and legal
fees. The work force reductions include approximately $6.0 million related to the former CEOs contract settlement. Asset write-downs include inventory, tooling, capitalized software, and other intangible asset write-downs directly related to
discontinued product lines. Of these asset write-downs, $6.4 million were classified as a component of cost of sales in 2007, while all other restructuring charges were included in a separate restructuring line within operating expenses on the
accompanying Consolidated Statement of Operations.

The Company has fully executed its restructuring plan related to Amazys. The only
future charges that the Company anticipates incurring for this restructuring are related to true-up of the former CEOs severance estimate, the value of which is variable based on future results and stock price performance of the Company. The
following table summarizes the severance accrual balances and utilization for these restructuring actions (in thousands):



|                                 |  |           |        |   |                 |   |        |                                        |  |   |       |   |  |       |      |   |  |   |        |  
|-------------------------------- |  | --------- | ------ | - | --------------- | - | ------ | -------------------------------------- |  | - | ----- | - |  | ----- | ---- | - |  | - | ------ | -
|                                 |  | Severance |        |   | AssetWriteDowns |   |        | Facility Exitand LeaseTerminationCosts |  |   | Other |   |  | Total |     
|Charges incurred in 2006         |  | $         | 8,895  |   |                 | $ | 6,843  |                                        |  | $ |      |   |  | $     | 407  |   |  | $ | 16,145 |  
|Amounts paid or utilized in 2006 |  |           | (2,379 | ) |                 |   | (6,843 | )                                      |  |   |      |   |  |       | (407 | ) |  |   | (9,629 | )
|                                 |  |           |        |   |                 |   |        |                                        |  |   |       |   |  |       |      |   |  |   |        |  
|Balance at December 30, 2006     |  | $         | 6,516  |   |                 | $ |       |                                        |  | $ |      |   |  | $     |     |   |  | $ | 6,516  |  
|Charges incurred in 2007         |  |           | 2,052  |   |                 |   | 594    |                                        |  |   | 176   |   |  |       | 262  |   |  |   | 3,084  |  
|Amounts paid or utilized in 2007 |  |           | (4,202 | ) |                 |   | (594   | )                                      |  |   | (176  | ) |  |       | (262 | ) |  |   | (5,234 | )
|                                 |  |           |        |   |                 |   |        |                                        |  |   |       |   |  |       |      |   |  |   |        |  
|Balance at December 29, 2007     |  | $         | 4,366  |   |                 | $ |       |                                        |  | $ |      |   |  | $     |     |   |  | $ | 4,366  |  
|                                 |  |           |        |   |                 |   |        |                                        |  |   |       |   |  |       |      |   |  |   |        |  

As of December 29, 2007, the Company continues to evaluate restructuring activities, if any,
associated with the Pantone acquisition.

Integration

Incremental costs incurred related to the integration of the Companys acquisitions that do not qualify as restructuring under the provisions of SFAS 146, Accounting for Costs Associated with Exit or Disposal
Activities, have been included in a separate line on the Companys Consolidated Statements of Operations titled Integration. These costs include costs related to personnel working fulltime on integration work, integration
related travel, and outside consultants work on strategic planning and culture and synergy assessments. All costs included in this caption were solely related to the Companys integration efforts and do not include normal business
operating costs. Integration costs associated with the Amazys acquisition were $3.3 and $3.3 million for the fiscal years ended 2007 and 2006, respectively. Integration costs associated with the Pantone acquisition were $0.1 million for the fiscal
year ended 2007.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 5DISCONTINUED OPERATIONS

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company classifies a business component
that has been disposed of as a discontinued operation if the cash flow of the component has been eliminated from the Companys ongoing operations and the Company will no longer have any significant continuing involvement in the component.

On February 7, 2007, the Company completed the sale of its Labsphere subsidiary to Halma Holdings plc (Halma). Labsphere,
which is based in North Sutton, New Hampshire, provides integrated spheres and systems as well as reflectance materials to the light measurement markets. This divestiture was part of the Companys ongoing strategy to focus resources on its core
color-related businesses. Under the terms of the agreement, Halma acquired all of the outstanding Labsphere stock for $14.3 million in cash. Proceeds from the sale were used to reduce the principal balance of the Companys first lien credit
facility.

The Company recorded a net gain on the sale of $8.2 million for the year ended December 29, 2007, which is presented as a
gain on sale of discontinued operations in the accompanying Consolidated Statements of Operations. The results of operations for the Labsphere subsidiary through the date of sale were reported within discontinued operations in the accompanying
Consolidated Statements of Operations. In accordance with SFAS 144, the Company has also reclassified the prior year statement of operations to present the results of Labsphere within discontinued operations. Interest expense was not allocated to
Labsphere, therefore, all of the Companys interest expense is included within continuing operations.

The components of the income
(loss) from discontinued operations are presented below (in thousands):



|                                                  |  |      |       |   |      |   |        |  |   |       
|------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ |  | - | ------
|                                                  |  | 2007 |       |   | 2006 |   | 2005  
|Net sales                                         |  | $    | 793   |   |      | $ | 12,162 |  | $ | 11,313
|                                                  |  |      |       |   |      |   |        |  |   |       
|Income (loss) from operations before income taxes |  | $    | (52   | ) |      | $ | 2,565  |  | $ | 2,099 
|Income tax expense (benefit)                      |  |      | (69   | ) |      |   | 912    |  |   | 453   
|                                                  |  |      |       |   |      |   |        |  |   |       
|Income from operations                            |  | $    | 17    |   |      | $ | 1,653  |  | $ | 1,646 
|                                                  |  |      |       |   |      |   |        |  |   |       
|Gain on sale                                      |  | $    | 6,367 |   |      |   |        |  |   |       
|Income tax benefit                                |  |      | 1,859 |   |      |   |        |  |   |       
|                                                  |  |      |       |   |      |   |        |  |   |       
|Net gain on sale                                  |  | $    | 8,226 |   |      |   |        |  |   |       
|                                                  |  |      |       |   |      |   |        |  |   |       

There were no remaining assets or liabilities of discontinued operations reported in the
Consolidated Balance Sheets as of December 29, 2007. The assets and liabilities of Labsphere have not been reclassified for fiscal 2006. In addition, in the Consolidated Statements of Cash Flows the cash flows of discontinued operations were
not disclosed separately in any period presented.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 6GOODWILL AND OTHER INTANGIBLE ASSETS

A summary of changes in goodwill by segment for the years ending December 29, 2007 and December 30, 2006, is as follows (in thousands):



|                             |  |                  |         |                |   |        |  |   |        
|---------------------------- |  | ---------------- | ------- | -------------- | - | ------ |  | - | -------
|                             |  | ColorMeasurement |         | ColorStandards |   | Total 
|December 31, 2005            |  | $                | 8,951   |                | $ |       |  | $ | 8,951  
|                             |  |                  |        
|Acquisitions                 |  |                  | 193,961 |                |   |       |  |   | 193,961
|Foreign currency adjustments |  |                  | 189     |                |   |       |  |   | 189    
|                             |  |                  |         |                |   |        |  |   |        
|December 30, 2006            |  |                  | 203,101 |                |   |       |  |   | 203,101
|                             |  |                  |        
|Acquisitions                 |  |                  | 2,606   |                |   | 82,449 |  |   | 85,055 
|Foreign currency adjustments |  |                  | 52      |                |   |       |  |   | 52     
|                             |  |                  |         |                |   |        |  |   |        
|December 29, 2007            |  | $                | 205,759 |                | $ | 82,449 |  | $ | 288,208
|                             |  |                  |         |                |   |        |  |   |        

In 2006, the Company recorded $194.0 million of goodwill and $78.1 million in intangible assets in
connection with the Amazys acquisition. During 2007, the Company recorded a final purchase accounting adjustments resulting in additional goodwill of $2.6 million. In connection with the Pantone acquisition in October 2007, the Company recorded
$82.4 million of goodwill and $72.2 million of intangible assets. See Note 3 for further discussion of these acquisitions.

The following
amounts were included in other intangibles as of December 29, 2007 and December 30, 2006 (in thousands):



|                           |  |        |         |                         |      |         |        |  |                         |        |  |   |        |  
|-------------------------- |  | ------ | ------- | ----------------------- | ---- | ------- | ------ |  | ----------------------- | ------ |  | - | ------ | -
|                           |  | 2006   |         |                         | 2007 |        
|                           |  | Assets |         | AccumulatedAmortization |      |         | Assets |  | AccumulatedAmortization |       
|Technology and patents     |  | $      | 61,729  |                         | $    | (12,461 | )      |  | $                       | 52,633 |  | $ | (4,492 | )
|Customer relationships     |  |        | 42,443  |                         |      | (4,562  | )      |  |                         | 13,043 |  |   | (2,023 | )
|Trademarks and trade names |  |        | 25,704  |                         |      | (2,195  | )      |  |                         | 5,428  |  |   | (1,307 | )
|Covenants not to compete   |  |        | 14,958  |                         |      | (2,302  | )      |  |                         | 1,570  |  |   | (709   | )
|                           |  |        |         |                         |      |         |        |  |                         |        |  |   |        |  
|Total                      |  | $      | 144,834 |                         | $    | (21,520 | )      |  | $                       | 72,674 |  | $ | (8,531 | )
|                           |  |        |         |                         |      |         |        |  |                         |        |  |   |        |  

As discussed in Note 1, the Company accounts for goodwill and other intangible assets in
accordance with SFAS 142, which requires the Company to test the carrying value of goodwill for impairment at the reporting unit level annually, or more frequently if a triggering event occurs. As a matter of practice, the Company performs the
required annual impairment testing during the fourth quarter of each fiscal year. The annual testing performed for the last three fiscal years indicated the fair value exceeded the recorded carrying value of the Companys reporting units and
accordingly no goodwill impairment charge was required for the years ending December 29, 2007, December 30, 2006, and December 31, 2005.

SFAS 142 also requires that intangible assets with determinable useful lives be amortized over their respective estimated useful lives and reviewed annually for impairment in accordance with SFAS 144. As a result of
the product integration related to the Amazys acquisition, and in accordance with the provisions of SFAS 144, the Company wrote off $0.7 million in trademarks and trade names for the fiscal year end December 30, 2006. As this impairment was a
direct result of product integration related to the Amazys acquisition, the charge was included in the Restructuring line on the Companys Consolidated Statements of Operations (see Note 4 for further discussion of the restructuring).



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The acquired in-process research and development intangible assets of $11.1 million recorded as part
of the Amazys acquisition in 2006 were written off at the date of acquisition because technological feasibility had not been established and no future alternative uses existed at that date. The write-off was included in a separate line in the
Companys 2006 Consolidated Statements of Operations.

Amortization expense is computed using the straight-line method over the
estimated useful lives of the intangible assets as follows:



|                                        |  |              
|--------------------------------------- |  | -------------
|Customer and distribution relationships |  | 2 to 15 years
|Trademarks and trade names              |  | 5 to 30 years
|Technology and patents                  |  | 3 to 15 years
|Covenants not to compete                |  | 2 to 3 years 

Amortization expense, excluding the impairment discussed above, was $13.0 million for 2007, $6.0
million for 2006 and $0.7 for 2005. Estimated amortization expense for intangible assets for each of the succeeding five years is as follows (in thousands):



|     |  |   |       
|---- |  | - | ------
|2008 |  | $ | 19,853
|2009 |  |   | 18,017
|2010 |  |   | 13,917
|2011 |  |   | 12,456
|2012 |  |   | 12,456

NOTE 7SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Prior to July 1, 2006, the Company maintained a revolving line of credit agreement with a bank, which provided for maximum borrowings of $25 million
with variable interest at LIBOR plus 75 to 100 basis points as defined in the agreement. Borrowings under this facility were unsecured and no compensating balances were required under the agreement. This agreement was terminated and replaced by a
new revolving line of credit in conjunction with the Amazys acquisition.

In the first quarter of 2006, the Company incurred short-term
borrowings of $13.5 million under its former revolving line of credit in connection with the acquisition of its new corporate headquarters and manufacturing facility in Grand Rapids, Michigan. This loan was converted to a mortgage loan in June 2006,
secured by the Companys former headquarters and manufacturing facility in Grandville, Michigan. The mortgage was renewed and extended in October of 2007 during which time the Company made a principal payment of $4.8 million. The new mortgage
agreement requires monthly interest payments based on LIBOR plus 2.50%, with the principal balance due in full in June 2008. In December 2007, the Company entered into a definitive purchase agreement to sell the property for $13.1 million plus
reimbursement of certain property tax assessment payments made prior to closing of the transaction. The purchase agreement provides for a 120 day due diligence period for the buyer to evaluate the property. The buyer has deposited an initial earnest
money deposit of $125,000 with an escrow agent to be applied as a credit to the purchase price at closing. Final closing on the sale will be based on completion of the Buyers inspection and due diligence process as well as the granting of
governmental approvals related to the future planned usage of the property.

In connection with the Amazys acquisition, the Company entered
into secured senior credit facilities which provided for aggregate principal borrowings of up to $220 million and replaced the Companys previous line-of-credit. The credit facilities consisted of a $160 million first lien loan, which was
comprised of a $60 million seven-year term loan and a $40 million five-year revolving line of credit, and a $60 million six-year term



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



second lien loan. Obligations under these credit facilities were secured by essentially all of the tangible and intangible assets of the Company. Both
facilities provided variable interest rate options from which the Company selected for interest calculations. Subsequent to the end of the third quarter 2007, the Company elected to change the indices to the Prime Rate plus 125 and 400 basis points
for the first and second lien facilities, respectively, in anticipation of re-financing activity associated with the acquisition of Pantone, Inc., which was completed on October 24, 2007. See Note 3 for further discussion of the Pantone
acquisition.

In connection with the Pantone acquisition, the Company entered into new secured senior credit facilities which provide for
aggregate principal borrowings of up to $415 million and replace the Companys previous credit facilities established with the Amazys acquisition. The new credit facilities consist of a $310 million first lien loan, which is comprised of a $270
million five-year term loan and a $40 million five-year revolving line of credit, and a $105 million six-year term second lien loan. Obligations under these credit facilities are secured by essentially all of the tangible and intangible assets of
the Company. Both facilities provide variable indices from which the Company may select for interest calculations. As of December 29, 2007, the Company has selected the three month LIBOR plus 350 and 750 basis points for most of the first and
second lien facilities, respectively, as its primary interest rate index. Interest payments on LIBOR based loans are payable on the last day of each interest period, not to exceed three months. A small portion of the credit facilities are tied to
the prime rate and require interest payments on a scheduled quarterly basis.

As of December 29, 2007, the Company had $6.0 million
drawn against the revolving line of credit. Further draws on the $40 million revolving line of credit will be restricted to a total outstanding balance of $31.3 million until such time that the mortgage loan on the Companys Grandville,
Michigan facility is repaid in full. The unused portion of the revolving credit facility is subject to a fee of 0.5% per annum.

The
Company has entered into interest rate swap agreements to fix a substantial portion of its LIBOR exposure (See Note 8 for further discussion).

The Company recorded deferred financing costs in connection with the secured senior credit facilities discussed above. These costs are currently being amortized over the lives of the related facilities. The remaining unamortized balance as
of December 29, 2007 was $15.8 million. In connection with this new financing, the Company wrote off $5.5 million of deferred financing costs associated with the prior credit facility

As of December 29, 2007 and December 30, 2006, the Companys long-term debt consisted of the following (in thousands):



|                         |  |      |         |   |      |   |         |  
|------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                         |  | 2007 |         |   | 2006 |  
|First Lien Facility      |  | $    | 270,000 |   |      | $ | 119,400 |  
|Second Lien Facility     |  |      | 105,000 |   |      |   | 60,000  |  
|Revolving Line Of Credit |  |      | 6,000   |   |      |   | 12,000  |  
|                         |  |      |         |   |      |   |         |  
|                         |  |      | 381,000 |   |      |   | 191,400 |  
|Less current portion     |  |      | (2,700  | ) |      |   | (1,200  | )
|                         |  |      |         |   |      |   |         |  
|Total long-term debt     |  | $    | 378,300 |   |      | $ | 190,200 |  
|                         |  |      |         |   |      |   |         |  

As of December 29, 2007 and December 30, 2006, the credit facilities variable
rates ranged from 7.13 to 12.38 percent and from 7.13 to 10.37 percent, respectively. As of these dates, the weighted average interest rates for all of the Companys debt were 9.40 percent and 8.42 percent, respectively, exclusive of
amortization of deferred financing costs and the effect of derivative instruments. Total interest expense incurred by the Company



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



in 2007 was $22.1 million, including $1.6 million of amortization of deferred financing fees. Total interest expense incurred by the Company in 2006 was $8.8
million, including $0.6 million of amortization of deferred financing fees. In addition, $0.8 million of interest in 2006 was capitalized related to renovations of the Companys corporate headquarters. Cash paid for interest during 2007 and
2006 totaled $20.4 million and $7.7 million, respectively.

The aggregate amount of long-term debt maturing in the next five years is as
follows (in thousands):



|           |  |                           |         |                            |   |                         |  |       |       |  |   |        
|---------- |  | ------------------------- | ------- | -------------------------- | - | ----------------------- |  | ----- | ----- |  | - | -------
|           |  | First LienCredit Facility |         | Second LienCredit Facility |   | RevolvingLine of Credit |  | Total
|2008       |  | $                         | 2,700   |                            | $ |                        |  | $     |      |  | $ | 2,700  
|2009       |  |                           | 2,700   |                            |   |                        |  |       |      |  |   | 2,700  
|2010       |  |                           | 2,700   |                            |   |                        |  |       |      |  |   | 2,700  
|2011       |  |                           | 2,700   |                            |   |                        |  |       |      |  |   | 2,700  
|2012       |  |                           | 259,200 |                            |   |                        |  |       | 6,000 |  |   | 265,200
|Thereafter |  |                           |        |                            |   | 105,000                 |  |       |      |  |   | 105,000
|           |  |                           |         |                            |   |                         |  |       |       |  |   |        
|           |  | $                         | 270,000 |                            | $ | 105,000                 |  | $     | 6,000 |  | $ | 381,000
|           |  |                           |         |                            |   |                         |  |       |       |  |   |        

In addition to the above repayment schedule, the Company is obligated to make additional principal
payments in the amount of 75 percent of consolidated excess cash flow, as defined in the first lien credit facility agreement. Consolidated excess cash flow is a measure that starts with earnings before interest, depreciation, taxes, and
amortization and adjusts for changes in working capital, capital expenditures, financing and asset sales used to fund capital expenditures, and tax provisions.

The credit facilities contain certain operational and financial covenants regarding the Companys ability to create liens, incur indebtedness, make certain investments or acquisitions, enter into certain
transactions with affiliates, incur capital expenditures beyond prescribed limits, and meet certain financial ratios. The Company was in compliance with all covenants as of December 29, 2007.

NOTE 8DERIVATIVE FINANCIAL INSTRUMENTS

Foreign Currency
Forward Contracts

The Company utilized foreign currency forward exchange contracts to manage the variability associated with the
cash requirements associated with the acquisition of Amazys in 2006. These contracts had a notional value of CHF 260.1 million ($210.3 million USD) and were not designated as hedges as they did not meet the criteria specified by SFAS 133. The
contracts expired on July 5, 2006, the date of the acquisition, in a net gain position of $2.1 million, which was recorded as a component of other income in the consolidated statements of operations.

Interest Rate Swaps

The Company utilizes
interest rate swap agreements designated as cash flow hedges of the outstanding variable rate borrowings of the Company. These agreements result in the Company paying or receiving the difference between three month LIBOR and fixed interest rates at
specified intervals, calculated based on the notional amounts. The interest rate differential to be paid or received is accrued as interest rates change and is recorded as interest income or expense. The effective portion of the derivatives
gain or loss is initially recorded



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as a component of accumulated other comprehensive income, net of taxes, and subsequently reclassified into earnings when the hedged interest expense affects
earnings. The ineffective portion of the gain or loss, if any, is recognized in current period earnings in general and administrative expenses.

As of December 29, 2007, the combined notional amount of outstanding swap agreements was $336.1 million. Certain of these swap agreements have notional amounts that fluctuate over their lives. The fair value of outstanding interest
rate swaps at December 29, 2007 was a liability of $4.9 million which was recorded in both current and long-term other accrued liabilities, depending on the expiration date of the underlying instrument. During 2007, the Company reclassified a
$0.3 million benefit related to net interest settlements from other comprehensive income to interest expense. The impact of interest accruals on these instruments was not material. Ineffectiveness related to these swaps was not material in 2006 or
2007.

In 2008, the Company expects to reclassify a charge of $1.7 million from other comprehensive income to interest expense in
connection with the swap position as of December 29, 2007.

At December 29, 2007, interest rate swap contract details were as
follows (in thousands):



|                |  |                |  |                    |  |          
|--------------- |  | -------------- |  | ------------------ |  | ---------
|Expiration Date |  | NotionalAmount |  | FloatingLIBOR Rate |  | FixedRate
|June, 2008      |  | $32,500        |  | 5.141%             |  | 5.260%   
|June, 2009      |  | 42,500         |  | 5.141%             |  | 5.188%   
|June, 2010      |  | 53,100         |  | 5.141%             |  | 5.188%   
|December, 2011  |  | 58,000         |  | 4.858%             |  | 4.326%   
|December, 2012  |  | 50,000         |  | 4.858%             |  | 4.464%   
|December, 2012  |  | 50,000         |  | 4.858%             |  | 4.422%   
|December, 2012  |  | 50,000         |  | 4.858%             |  | 4.422%   

The counterparty to all of the Companys derivative financial instruments is a major
financial institution with which the Company also has other financial relationships. The counterparty exposes the Company to credit loss in the event of non-performance. If the counterparty fails to meet the term of the agreement, the Companys
exposure is limited to the net amount that would have been received, if any, over each agreements remaining life. The Company does not anticipate non-performance by the counterparty given their high credit ratings, and no material loss would
be expected from non-performance by the counterparty.

NOTE 9SHARE-BASED COMPENSATION

Description of Share-Based Compensation Plans

Employee Stock Purchase PlanThe Company may sell up to one million shares of common stock to its employees under an employee stock purchase plan. Eligible employees who participate purchase shares quarterly at 85 percent of the
market price on the date purchased.

Cash Bonus Conversion PlanThe Company had a Cash Bonus Conversion Plan that expired in
2005 after share purchases with 2004 bonuses payments were completed and was not renewed. This plan, which was allotted up to 400,000 shares of the Companys common stock, provided an opportunity for certain executives of the Company to
purchase restricted stock at 50 percent of market value, up to an amount equal to their annual cash bonus. Shares were issued in the name of the executive, who maintained all rights of a shareholder, subject to certain restrictions on
transferability and a risk of forfeiture. The forfeiture provisions lapsed by 20 percent after six months and an additional 20 percent annually thereafter. The difference between the purchase price and



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the fair value of the restricted stock at the date of purchase for shares subject to forfeiture provisions was charged to expense as the forfeiture
provisions lapse. All forfeiture provisions have lapsed by the end of fiscal 2007.

Stock Option and Restricted Stock PlanThe
Company has a stock incentive plan covering 3.5 million shares of common stock. This plan became effective on June 30, 2006, and replaced the Companys previous option and restricted stock plans. The new plan permits stock options,
stock appreciation rights, restricted stock awards, and restricted stock units to be granted to employees, the Companys Board of Directors, and consultants and advisors to the Company. To date, only stock options and restricted stock awards
have been granted under this plan. Stock options are granted with an exercise price equal to market price on the date of grant and are exercisable based on vesting schedules determined at the time of grant, which range from immediate to three year
vesting. No options are exercisable later than ten years after the date of grant. Restricted shares awarded under this plan entitle the shareholder to all rights of common stock ownership except that the shares may not be sold, transferred, pledged,
exchanged, or otherwise disposed of during the restriction period. The restriction period is determined by a committee appointed by the Board of Directors and range from immediate to four years.

Valuation of Share-Based Compensation

Valuation and Amortization MethodThe Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. Restricted stock awards are valued at closing market price on the date of grant.
Options and awards either cliff vest or are subject to graded vesting based upon either service or performance conditions. Compensation expense related to options and awards is recognized on a straight-line basis over their requisite service or
performance periods. Compensation expense for shares issued under the Employee Stock Purchase Plan is recognized for 15 percent of the market value of shares purchased, in the quarter to which the purchases relate.

Expected TermExpected term estimates for employee options are based upon prior exercise, cancellation, and expiration history, which the
Company believes to be representative of future behavior. The Company has considered the effects of analyzing expected term separately for different groups of employees, and has concluded that historical exercise patterns are not significantly
different between groups. Therefore, one expected term is used for all employee options.

Expected VolatilityThe expected
volatility is based upon historical volatility of the Companys stock for a period of time equivalent to that of the expected term of the option. Consideration is given to unusual factors that might cause the historical period to be
unrepresentative of future expectations.

Risk-Free Interest RateThe risk-free interest rate is based on the U.S. Treasury
yield in effect at the time of option grant for zero-coupon issues with terms equivalent to the expected term of the options.

DividendsThe Companys dividend yield is calculated as the percentage of dividends issued on shares relative to the average market price of those shares and is calculated over an historical period equivalent to that of the
expected term of the option. Beginning in 2007, the Company suspended its quarterly dividend payment, therefore options granted after 2006 have been valued using a zero percent dividend yield.

ForfeituresThe Company applies an estimated forfeiture rate to options as they vest. SFAS 123(R) requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience. In the Companys pro forma information required under SFAS 123 for the
periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.



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Accuracy of Fair Value EstimatesThe Black-Scholes model is a trading option-pricing
model that does not consider the non-traded nature of employee stock options, the restrictions on trading, lack of transferability or the ability of the employees to forfeit options prior to expiration. If the model adequately permitted
consideration of these characteristics, the resulting stock option valuations may be different. In addition, the valuation model relies on subjective assumptions that can materially affect the estimated value of options and it may not provide an
accurate measure of the fair value of the Companys stock options.

The Company used the following assumptions in valuing employee
options granted during 2007, 2006, and 2005:



|                         |  |            |  |            |  |           
|------------------------ |  | ---------- |  | ---------- |  | ----------
|                         |  | 2007       |  | 2006       |  | 2005      
|Dividend yield           |  | 0.0%       |  | 1.0%       |  | 0.9% 1.0%
|Volatility               |  | 52%  54%  |  | 56% 58%   |  | 43%  52% 
|Risk-free interest rates |  | 4.5% 4.8% |  | 4.5% 5.2% |  | 3.6% 3.9%
|Expected term of options |  | 7 years    |  | 7 years    |  | 6 years   

Pro Forma Information Under SFAS 123 for Periods Prior to Fiscal 2006

As discussed in Note 1, prior to January 1, 2006, the Company accounted for share-based employee compensation under APB 25, therefore no compensation
expense was recognized for stock option activities or shares issued under the Employee Stock Purchase Plan. Had compensation expense for the Companys share-based compensation plans been determined based upon the fair value at the grant dates,
consistent with SFAS 123, the Companys net income and net income per share prior to the adoption of SFAS 123(R) would have been as follows (in thousands):



|                                                                                |  |      |        |  
|------------------------------------------------------------------------------- |  | ---- | ------ | -
|                                                                                |  | 2005 |       
|Net Income                                                                      |  |      |        |  
|Net Incomeas reported                                                          |  | $    | 11,052 |  
|Deduct: Share-based compensation expense, fair value method (net of income tax) |  |      | (2,120 | )
|                                                                                |  |      |        |  
|Pro forma net income                                                            |  | $    | 8,932  |  
|                                                                                |  |      |        |  
|Basic net income per share                                                      |  |      |        |  
|As reported                                                                     |  | $    | .52    |  
|                                                                                |  |      |        |  
|Pro forma                                                                       |  | $    | .42    |  
|                                                                                |  |      |        |  
|Diluted net income per share                                                    |  |      |        |  
|As reported                                                                     |  | $    | .52    |  
|                                                                                |  |      |        |  
|Pro forma                                                                       |  | $    | .42    |  
|                                                                                |  |      |        |  

On December 27, 2005, the Board of Directors of the Company approved the acceleration of
vesting for unvested and out of the money (exercise price above current market price) stock options. There were no unvested options that were in the money at that date. As a result of this action, options to purchase 396,000 shares of common stock,
that otherwise would have vested in 2006 and 2007, became fully vested. The decision to accelerate the vesting of these options was made primarily to reduce non-cash compensation expense that would have been recorded in future periods following the
Companys adoption of SFAS 123(R). As a result of this vesting acceleration, the Company reduced its non-cash compensation expense related to these options by approximately $0.8 million (pre-tax) in the aggregate over the Companys 2006
and 2007 fiscal years, based on



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estimated value calculated using the Black-Scholes option-pricing model. The remaining pro-forma compensation expense under SFAS 123 relating to these early
vested options was recognized in 2005 for the pro-forma disclosures presented above.

Stock Option and Award Activity

Restricted Stock Awards

Restricted stock
activity for 2007 was as follows:



|                                      |  |         |   |  |                                     |      
|------------------------------------- |  | ------- | - |  | ----------------------------------- | -----
|                                      |  | Shares  |   |  | WeightedAverageGrant DateFair Value
|Unvested balance at December 30, 2006 |  | 123,780 |   |  | $                                   | 10.72
|Granted                               |  | 343,041 |   |  |                                     | 13.51
|Vested                                |  | (75,761 | ) |  |                                     | 10.23
|Forfeited                             |  | (9,813  | ) |  |                                     | 12.50
|                                      |  |         |   |  |                                     |      
|Unvested balance at December 29, 2007 |  | 381,247 |   |  | $                                   | 13.28
|                                      |  |         |   |  |                                     |      

The total fair value of shares vested, determined as of the release date, during the year ended
December 29, 2007 approximated $1.0 million. During the years ended December 30, 2006 and December 31, 2005, the weighted average grant date fair value of awards issued was $10.86 and $10.31 per share, respectively. The total fair
value of shares vested, determined as of the release date, was $0.6 million during the year ended December 30, 2006 and was not significant during the year ended December 31, 2005.

Stock Options

Stock option activity for 2007
was as follows:



|                                                 |  |           |   |  |                              |       |                                                 |      |                                     |   |      
|------------------------------------------------ |  | --------- | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | ----------------------------------- | - | -----
|                                                 |  | Shares    |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsic Value(thousands)
|Outstanding at December 30, 2006                 |  | 2,330,455 |   |  | $                            | 11.88 |                                                 |      |                                     |   |      
|Granted                                          |  | 441,764   |   |  |                              | 12.67 |                                                 |      |                                     |   |      
|Exercised                                        |  | (340,021  | ) |  |                              | 9.20  |                                                 |      |                                     |   |      
|Forfeited                                        |  | (36,492   | ) |  |                              | 12.09 |                                                 |      |                                     |   |      
|Expired                                          |  | (217,600  | ) |  |                              | 16.16 |                                                 |      |                                     |   |      
|                                                 |  |           |   |  |                              |       |                                                 |      |                                     |   |      
|Outstanding at December 29, 2007                 |  | 2,178,106 |   |  | $                            | 12.03 |                                                 | 5.83 |                                     | $ | 2,046
|                                                 |  |           |   |  |                              |       |                                                 |      |                                     |   |      
|Vested and expected to vest at December 29, 2007 |  | 2,127,775 |   |  | $                            | 12.03 |                                                 | 5.76 |                                     | $ | 2,040
|                                                 |  |           |   |  |                              |       |                                                 |      |                                     |   |      
|Exercisable at December 29, 2007                 |  | 1,539,980 |   |  | $                            | 11.94 |                                                 | 4.58 |                                     | $ | 1,979
|                                                 |  |           |   |  |                              |       |                                                 |      |                                     |   |      

The aggregate intrinsic value of options outstanding as of December 29, 2007, was calculated
as the difference between the exercise price of the underlying options and the market price of the Companys common stock for options that were in-the-money as of that date. Options that were not in-the-money as of that date, and therefore have
a negative intrinsic value, have been excluded from this figure.



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The weighted average grant date fair value of options granted during the year ended December 29,
2007, was $7.58 per share. The total intrinsic value of options exercised, determined as of the exercise date, during the same period was $1.4 million. During the years ended December 30, 2006 and December 31, 2005, the weighted average
grant date fair value of options granted was $6.33 and $7.46 per share, respectively, and the total intrinsic value of options exercised, determined as of the exercise date, was $0.2 million and $1.0 million, respectively.

Share-Based Compensation Expense

Total
share-based compensation expense recognized in the Consolidated Statements of Operations for the years ended December 29, 2007 and December 30, 2006 was as follows (in thousands):



|                                                         |  |      |       |      |   |      
|-------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                         |  | 2007 |       | 2006
|Stock options                                            |  | $    | 1,938 |      | $ | 1,242
|Restricted stock                                         |  |      | 1,559 |      |   | 426  
|Employee stock purchase plan                             |  |      | 46    |      |   | 60   
|Cash bonus conversion plan                               |  |      | 94    |      |   | 180  
|                                                         |  |      |       |      |   |      
|                                                         |  |      | 3,637 |      |   | 1,908
|                                                         |  |     
|Accelerated vesting related to restructuring activities: |  |      | 542   |      |   | 1,016
|                                                         |  |      |       |      |   |      
|Total share-based compensation expense                   |  | $    | 4,179 |      | $ | 2,924
|                                                         |  |      |       |      |   |      

All share-based compensation expense was recorded in the Consolidated Statements of Operations in
the line in which the salary of the individual receiving the benefit was recorded. The total income tax benefit recognized related to this compensation was $0.7 million for the year ended December 29, 2007 and $0.5 million for the year ended
December 30, 2006. As of December 29, 2007, there was unrecognized compensation cost for non-vested share-based compensation of $2.3 million related to options and $3.1 million related to restricted share awards. These costs are expected
to be recognized over remaining weighted average periods of 1.67 and 1.74 years, respectively.

Cash received from options exercised during
2007 and 2006 was $3.1 and $0.5 million, respectively. The tax benefit that was recognized related to these option exercises was $0.4 and $0.1 million, respectively.

NOTE 10EMPLOYEE BENEFIT PLANS

401(k) Retirement Savings Plans

The Company maintains 401(k) retirement savings plans for the benefit of substantially all full time U.S. employees. Investment decisions are made by
individual employees. Investments in Company stock are not allowed under the plans. Participant contributions are matched by the Company based on applicable matching formulas. The Companys matching expense for the plans was $0.8, $1.0, and
$0.7 million in 2007, 2006 and 2005, respectively.

Defined Benefit Plan

The Company maintains a defined benefit plan for employees of its X-Rite, Europe subsidiary in Switzerland. The plan is part of an independent collective
fund which provides pensions combined with life and disability insurance. The assets of the funded plan are held independently of the Companys assets in a legally



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distinct and independent collective trust fund which serves various unrelated employers. The Funds benefit obligations are fully reinsured by Swiss
Life Insurance Company. The plan is valued by independent actuaries using the projected unit credit method. The liabilities correspond to the projected benefit obligations of which the discounted net present value is calculated based on years of
employment, expected salary increases, and pension adjustments.

On December 30, 2006, the Company adopted SFAS 158, which required
the Company to recognize the funded status of its pension plan (measured as the difference between the fair value of plan assets and the projected benefit obligation) on the balance sheet as a net asset or liability. As of December 30, 2006,
the Companys net pension asset of $1.5 million was included in the other non-current assets line of its Consolidated Balance Sheets. The adoption of SFAS 158 had no effect on the Companys Consolidated Statements of Operations.

The last actuarial valuation was carried out as of December 29, 2007. The amounts recognized in the Consolidated Balance Sheets,
shown in other non-current assets, as of December 29, 2007 and December 30, 2006, were determined as follows (in thousands):



|                               |  |      |         |   |      |   |         |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                               |  | 2007 |         |   | 2006 |  
|Fair value of plan assets      |  | $    | 22,867  |   |      | $ | 20,828  |  
|Projected benefit obligation   |  |      | (22,142 | ) |      |   | (19,342 | )
|                               |  |      |         |   |      |   |         |  
|Net asset in the balance sheet |  | $    | 725     |   |      | $ | 1,486   |  
|                               |  |      |         |   |      |   |         |  

The following weighted-average assumptions were used in accounting for the defined benefit plan:



|                               |  |      |   |  |      |  
|------------------------------ |  | ---- | - |  | ---- | -
|                               |  | 2007 |   |  | 2006 |  
|Discount rate                  |  | 3.50 | % |  | 3.25 | %
|Expected return on plan assets |  | 4.50 | % |  | 5.00 | %
|Future salary increases        |  | 1.50 | % |  | 1.50 | %
|Future pension increases       |  | 0.25 | % |  | 0.25 | %

Future benefits, to the extent that they are based on compensation, include assumed salary
increases, as presented above, consistent with past experience and estimates of future increases in the Swiss industrial labor market.

During the year ended December 29, 2007, the pension funds weighted average expected long-term rate of return on assets was 4.5 percent. In developing this assumption, the input from third party pension plan asset managers was
evaluated, including their review of asset class return expectations, long-term inflation assumptions, and historical average return.

Net
periodic pension cost has been included in the Companys results since the acquisition of Amazys in July of 2006. Net periodic pension cost during 2007 and 2006 includes the following (in thousands):



|                               |  |      |       |   |      |   |      |  
|------------------------------ |  | ---- | ----- | - | ---- | - | ---- | -
|                               |  | 2007 |       |   | 2006 |  
|Current service costs          |  | $    | 1,488 |   |      | $ | 705  |  
|Interest                       |  |      | 668   |   |      |   | 310  |  
|Expected return on plan assets |  |      | 1,058 | ) |      |   | (500 | )
|                               |  |      |       |   |      |   |      |  
|Net periodic pension cost      |  | $    | 1,098 |   |      | $ | 515  |  
|                               |  |      |       |   |      |   |      |  



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During 2007, the Company recorded a charge of $0.2 million in Other Comprehensive Income related to
actuarial losses. This is the only amount in accumulated other comprehensive income related to the pension as of December 29, 2007. There was no pension related balance in accumulated other comprehensive income as of December 30, 2006.

Changes in pension benefit obligation during 2007 and 2006 were as follows (in thousands):



|                                    |  |      |        |   |      |   |        |  
|----------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                    |  | 2007 |        |   | 2006 |  
|Obligations at beginning of period  |  | $    | 19,342 |   |      | $ | 18,752 |  
|Purchase accounting adjustments     |  |      | 891    |   |      |   |       |  
|Service cost                        |  |      | 1,488  |   |      |   | 705    |  
|Interest cost                       |  |      | 668    |   |      |   | 310    |  
|Participant contributions           |  |      | 801    |   |      |   | 369    |  
|Actuarial gain                      |  |      | (2,341 | ) |      |   |       |  
|Benefit payments                    |  |      | (374   | ) |      |   | (833   | )
|Foreign exchange translation effect |  |      | 1,667  |   |      |   | 39     |  
|                                    |  |      |        |   |      |   |        |  
|Obligations at end of period        |  | $    | 22,142 |   |      | $ | 19,342 |  
|                                    |  |      |        |   |      |   |        |  

During 2007, the Company finalized the purchase accounting for the Amazys acquisition (see Note 3
for further discussion), which included the final valuation of the pension plan as of the date of the acquisition resulting in a decrease of $0.9 million to the net pension asset.

Accumulated benefit obligations were $18.5 million as of December 29, 2007.

Changes in the fair value of plan assets for 2007 and 2006 were as follows (in thousands):



|                                    |  |      |        |   |      |   |        |  
|----------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                    |  | 2007 |        |   | 2006 |  
|Fair value at beginning of period   |  | $    | 20,828 |   |      | $ | 20,477 |  
|Benefit payments                    |  |      | (374   | ) |      |   | (833   | )
|Employer contributions              |  |      | 1,405  |   |      |   | 612    |  
|Participant contributions           |  |      | 801    |   |      |   | 369    |  
|Gain (loss) on plan assets          |  |      | (1,513 | ) |      |   | 116    |  
|Foreign exchange translation effect |  |      | 1,720  |   |      |   | 87     |  
|                                    |  |      |        |   |      |   |        |  
|Fair value at end of period         |  | $    | 22,867 |   |      | $ | 20,828 |  
|                                    |  |      |        |   |      |   |        |  

The weighted average actual asset allocations, by asset category, for the pension plan assets as
of December 29, 2007 were as follows:



|                                     |  |       |   |  |       |  
|------------------------------------ |  | ----- | - |  | ----- | -
|                                     |  | 2007  |   |  | 2006  |  
|Reinsurance contract with Swiss Life |  | 88.8  | % |  | 88.1  | %
|Equity securities                    |  | 4.7   | % |  | 5.1   | %
|Debt securities                      |  | 1.5   | % |  | 1.5   | %
|Real estate                          |  | 1.6   | % |  | 1.6   | %
|Other                                |  | 3.4   | % |  | 3.7   | %
|                                     |  |       |   |  |       |  
|Total                                |  | 100.0 | % |  | 100.0 | %
|                                     |  |       |   |  |       |  



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The assets held under the collective reinsurance contract by the Plans re-insurer Swiss Life
Insurance Company are invested in a mix of Swiss and international bond and equity securities within the limits prescribed by the Swiss Pension Law.

The following estimated future benefit payments, which reflect expected future service, are expected to be paid in the years indicated (in thousands):



|          |  |   |       
|--------- |  | - | ------
|2008      |  | $ | 1,868 
|2009      |  |   | 1,634 
|2010      |  |   | 1,592 
|2011      |  |   | 1,697 
|2012      |  |   | 1,942 
|2013-2017 |  |   | 11,878

The Company expects to contribute $1.5 million to the Plan during 2008.

NOTE 11INCOME TAXES

The provision (benefit)
for income taxes associated with continuing operations consisted of the following (in thousands):



|          |  |      |        |   |      |   |        |      |  |   |      
|--------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | -----
|          |  | 2007 |        |   | 2006 |   |        | 2005
|Current:  |  |      |        |   |      |   |        |      |  |   |      
|Federal   |  | $    | (2,566 | ) |      | $ | (1,645 | )    |  | $ | 1,413
|State     |  |      | 95     |   |      |   | 32     |      |  |   | 441  
|Foreign   |  |      | 5,198  |   |      |   | 2,865  |      |  |   | 148  
|          |  |      |        |   |      |   |        |      |  |   |      
|          |  |      | 2,727  |   |      |   | 1,252  |      |  |   | 2,002
|Deferred: |  |      |        |   |      |   |        |      |  |   |      
|Federal   |  |      | 8,070  |   |      |   | (6,300 | )    |  |   | 1,528
|State     |  |      | (360   | ) |      |   |       |      |  |   |     
|Foreign   |  |      | (873   | ) |      |   |       |      |  |   |     
|          |  |      |        |   |      |   |        |      |  |   |      
|          |  |      | 6,837  |   |      |   | (6,300 | )    |  |   | 1,528
|          |  | $    | 9,564  |   |      | $ | (5,048 | )    |  | $ | 3,530
|          |  |      |        |   |      |   |        |      |  |   |      



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Major components of the Companys deferred income tax assets and liabilities are as follows (in
thousands):



|                                    |  |      |         |   |      |   |         |  
|----------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                    |  | 2007 |         |   | 2006 |  
|Assets:                             |  |      |         |   |      |   |         |  
|Net operating losses                |  | $    | 19,231  |   |      | $ | 5,682   |  
|XRV impairment allowances           |  |      | 3,343   |   |      |   | 3,658   |  
|Acquired intangibles                |  |      | 3,134   |   |      |   |        |  
|Tax credits                         |  |      | 2,946   |   |      |   | 671     |  
|Capital losses                      |  |      | 2,939   |   |      |   | 702     |  
|Accruals not currently deductible   |  |      | 2,903   |   |      |   | 2,200   |  
|Inventories                         |  |      | 2,568   |   |      |   | 3,389   |  
|Severance accruals                  |  |      | 1,926   |   |      |   | 1,833   |  
|Derivative financial instruments    |  |      | 1,730   |   |      |   | 67      |  
|Amortization of intangible assets   |  |      | 1,550   |   |      |   | 1,010   |  
|Share-based compensation            |  |      | 1,122   |   |      |   | 504     |  
|Tax accruals under FIN 48           |  |      | 966     |   |      |   |        |  
|Accounts receivable                 |  |      | 408     |   |      |   | 195     |  
|Gain and losses on disposals        |  |      | 244     |   |      |   | 146     |  
|                                    |  |      |         |   |      |   |         |  
|                                    |  |      | 45,010  |   |      |   | 20,057  |  
|Valuation allowance                 |  |      | (32,100 | ) |      |   | (7,182  | )
|                                    |  |      |         |   |      |   |         |  
|Deferred income tax assets          |  |      | 12,910  |   |      |   | 12,875  |  
|                                    |  |     
|Liabilities:                        |  |      |         |   |      |   |         |  
|Acquired intangibles                |  |      | 18,228  |   |      |   | 21,577  |  
|Software development costs          |  |      | 2,156   |   |      |   | 2,073   |  
|Depreciation and amortization       |  |      | 1,653   |   |      |   | 898     |  
|Other                               |  |      | 803     |   |      |   | 419     |  
|                                    |  |      |         |   |      |   |         |  
|Deferred income tax liabilities     |  |      | 22,840  |   |      |   | 24,967  |  
|                                    |  |      |         |   |      |   |         |  
|Net deferred income tax liabilities |  | $    | (9,930  | ) |      | $ | (12,092 | )
|                                    |  |      |         |   |      |   |         |  

Under FASB 109, the Company has recorded valuation allowances on many of its current deferred
income tax assets, research and experimentation credit carry-forwards and net operating loss carry-forwards for which it is not more likely than not that a future benefit will be realized. The net operating loss carry-forwards relate to operations
in the United States which expire at various rates through 2027 and also pertain to operations outside of the United States which do not have expiration dates.

Valuation allowances of $10.5 million on deferred income tax assets related to the Amazys and Pantone acquisitions were recorded as an offset to Goodwill. The Company has aggregate valuation allowances of
$11.5 million on deferred tax assets which if subsequently realized will be allocated to reduce goodwill associated with prior acquisitions.



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table represents a reconciliation of income taxes at the United States statutory rate
with the effective rate as follows (in thousands):



|                                                         |  |      |        |   |      |   |         |      |  |   |        |  
|-------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                         |  | 2007 |        |   | 2006 |   |         | 2005 | 
|Income taxes (benefit) computed at statutory rate of 35% |  | $    | (3,940 | ) |      | $ | (11,267 | )    |  | $ | 4,772  |  
|Increase (decrease) in taxes resulting from:             |  |      |        |   |      |   |         |      |  |   |        |  
|Change in valuation allowance                            |  |      | 13,446 |   |      |   | 3,377   |      |  |   | 3,576  |  
|Rate differential on foreign income                      |  |      | (2,785 | ) |      |   | (317    | )    |  |   | (3,266 | )
|Foreign income subject to tax in the United States       |  |      | 1,456  |   |      |   |        |      |  |   |       |  
|Share-based compensation                                 |  |      | 544    |   |      |   | 275     |      |  |   |       |  
|FIN 48 interest included in income taxes                 |  |      | 393    |   |      |   |        |      |  |   |       |  
|State income taxes                                       |  |      | (264   | ) |      |   | 21      |      |  |   | 287    |  
|Foreign sales corporation                                |  |      |       |   |      |   | (744    | )    |  |   | (810   | )
|Non-deductible in-process research and development costs |  |      |       |   |      |   | 3,887   |      |  |   |       |  
|Research tax credits                                     |  |      |       |   |      |   | (544    | )    |  |   | (461   | )
|Other                                                    |  |      | 714    |   |      |   | 264     |      |  |   | (568   | )
|                                                         |  |      |        |   |      |   |         |      |  |   |        |  
|                                                         |  | $    | 9,563  |   |      | $ | (5,048  | )    |  | $ | 3,530  |  
|                                                         |  |      |        |   |      |   |         |      |  |   |        |  

Cash expended for income taxes was $1.3, $4.9, and $1.4 million in 2007, 2006 and 2005,
respectively.

The Company expects to repatriate any future earnings of its non-U.S. operations to pay down existing debt. As of
December 29, 2007 and December 30, 2006, the Company did not have material undistributed earnings from non-U.S. operations, and therefore, U.S. federal income and foreign withholding taxes associated therewith were not significant, after
considering the effects of related foreign tax credits.

Uncertain Tax Positions

Effective December 31, 2006 (fiscal year 2007), the Company adopted the provisions of FIN 48. This Interpretation clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS No. 109 and prescribes a threshold of more likely than not to be sustained upon examination. The adjustment to retained earnings upon
adoption of FIN 48 on December 31, 2006 was $0.2 million. The balance recorded as of December 29, 2007 is included as a component of the Companys accrued income taxes.

The following table summarizes the activity related to amounts recorded for uncertain tax positions exclusive of interest and penalties from
December 31, 2006 to December 29, 2007 (in thousands):



|                                                               |  |   |       |  
|-------------------------------------------------------------- |  | - | ----- | -
|Balance as of December 31, 2006                                |  | $ | 4,331 |  
|                                                               | 
|Increases related to prior year tax positions                  |  |   | 636   |  
|Decreases related to prior year tax positions                  |  |   | (532  | )
|Increases related to current year tax positions                |  |   | 88    |  
|Decreases related to settlements with taxing authorities       |  |   | (49   | )
|Decreases related to the lapsing of the statute of limitations |  |   | (456  | )
|                                                               |  |   |       |  
|Balance as of December 29, 2007                                |  | $ | 4,018 |  
|                                                               |  |   |       |  



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Companys FIN 48 liabilities are recorded as a component of accrued income taxes in the
accompanying consolidated financial statements.

The Company is currently in negotiations or has settled several tax matters in 2008 with a
value of $4.1 million, but does not anticipate other significant changes to its FIN 48 liabilities during the next twelve months.

Unrecognized tax benefits including interest and penalties, that, if recognized would favorably affect the Companys effective tax rate in the future were $5.8 and $5.1 million as of December 29, 2007 and December 30, 2006,
respectively.

It is the Companys policy to include interest and penalties related to gross unrecognized tax benefits in its
provision for income taxes. As of December 29, 2007, the Company had accrued $1.8 million for payment of interest and penalties.

The
Company and its subsidiaries are periodically examined by various taxing authorities. The Company files federal state and local tax returns in the United States as well as several foreign countries. Its primary income tax jurisdictions are the
United States and Switzerland. The Internal Revenue Service has examined the Companys federal tax returns through 2001. The tax years 2002 -2007 remain subject to examination by the Internal Revenue Service for federal income tax purposes, and
the years 2004-2007 remain subject to examination by the appropriate governmental agencies for Swiss tax purposes.

NOTE 12FOUNDERS STOCK
REDEMPTION AGREEMENTS

During 1998, the Company entered into agreements with its founding shareholders for the future repurchase of
4.5 million shares of the Companys outstanding stock. The agreements were terminated in November 2004. At that time, 3.4 million shares remained subject to repurchase. Prior to their termination, the agreements required stock
repurchases following the later of the death of each founder or his spouse. The cost of the repurchase agreements was to be funded by $160.0 million of proceeds from life insurance policies the Company purchased on the lives of certain of these
individuals.

In June 2005, the Company entered into agreements with two life settlement providers for the sale of three life insurance
policies owned by the Company with a total face value of $30.0 million. The Company received proceeds of $6.5 million, net of closing costs, from the sale of these policies. The Company recorded a gain of $1.2 million in the second quarter of 2005
in connection with the sale of these policies, which was included as a component of Operating Income. At December 29, 2007, the Companys remaining life insurance portfolio consists of eleven policies with a face value of $130.0 million.

Under provisions of the life insurance policies originally purchased to fund the agreements, the Company is allowed to determine the
timing and amount of premium payments. Premiums on the remaining policies total $3.5 million per year. The Company elected not to make premium payments for the 2007, 2006, and 2005 policy years. This election has not materially impacted the cash
surrender values during those periods, nor is it expected to affect payment of future benefits under the policies. The Company continues to review its options with regard to the future of the remaining policies.

NOTE 13CONCENTRATION OF CREDIT RISK

Certain
financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash equivalents, trade receivables, and interest rate derivatives. In all cases, the maximum exposure to loss
from credit risk equals the gross fair value of the financial instruments. The



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



need for reserves for such losses is continually assessed, and historically has been within expectations. The Company does not require collateral or other
security to support financial instruments subject to credit risk.

With respect to cash equivalents and interest rate derivatives, the
Companys credit risk is limited due to the counterparties being high credit quality financial institutions.

With respect to trade
receivables, the Companys credit risk is limited due to a relatively large customer base and its dispersion across different industries and geographic areas.

See Note 2 regarding revenues from significant customers.

NOTE 14OPERATING LEASES

The Company leases real property, equipment and automobiles under agreements that expire on various dates. Certain leases contain renewal provisions and
generally require the company to pay utilities, insurance, taxes, and other operating expenses. Future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of
December 29, 2007, are as follows (in thousands):



|     |  |   |      
|---- |  | - | -----
|2008 |  | $ | 3,457
|2009 |  |   | 2,783
|2010 |  |   | 2,196
|2011 |  |   | 1,959
|2012 |  |   | 1,303

Total rental expense charged to continuing operations was $3.3, $2.2, and $1.3 million, in 2007,
2006, and 2005. Substantially all of the minimum rental payments under operating leases are related to rent expense.

NOTE 15CONTINGENCIES,
COMMITMENTS AND GUARANTEES

The Company is involved in legal proceedings, legal actions, and claims arising in the normal course of
business, including proceedings related to product, labor, and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company records amounts for losses that are deemed probable and
subject to reasonable estimate. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its financial statements.

Pursuant to a standby letter of credit agreement, the Company has provided a financial guarantee to a third party on behalf of its subsidiary, located in
England. The term of the letter of credit is one year, with an automatic renewal provision at the grantors discretion. The face amount of the agreement is 130,000 British pounds sterling or approximately $0.3 million at December 29, 2007.

The Companys product warranty reserves were not significant.

NOTE 16SHAREHOLDER PROTECTION RIGHTS AGREEMENT

In November of 2001, the Companys Board
of Directors adopted a Shareholder Protection Rights Plan (Plan), which was implemented in the first quarter of 2002. The Plan is designed to protect shareholders against unsolicited attempts to acquire control of the Company in a manner that does
not offer a fair price to all shareholders.



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X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Under the Plan, one purchase right automatically trades with each share of the Companys common
stock. Each Right entitles a shareholder to purchase 1/100 of a share of junior participating preferred stock at a price of $30.00, if any person or group attempts certain hostile takeover tactics toward the Company. Under certain hostile
circumstances, each Right may entitle the holder to purchase the Companys common stock at one-half its market value or to purchase the securities of any acquiring entity at one-half their market value. Rights are subject to redemption by the
Company at $.005 per Right and, unless earlier redeemed, will expire in the first quarter of 2012. Rights beneficially owned by holders of 15 percent or more of the Companys common stock, or their transferees and affiliates, automatically
become void.



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##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Set
forth below is a summary of the quarterly operating results on a consolidated basis for the years ended December 29, 2007 and December 30, 2006. Refer to Managements Discussion and Analysis provided in Item 7 and the Notes to
the Consolidated Financial Statements for further disclosure of significant accounting transactions that may have affected the quarterly operating results for each of the periods presented.



|               |  |                                       |        |             |   |                       |  |   |                 |   |  |                                |         |   |  |   |      |  
|-------------- |  | ------------------------------------- | ------ | ----------- | - | --------------------- |  | - | --------------- | - |  | ------------------------------ | ------- | - |  | - | ---- | -
|QUARTER        |  | Sales                                 |        | GrossProfit |   | OperatingIncome(Loss) |  |   | NetIncome(Loss) |   |  | DilutedEarnings(Loss)Per Share |        
|               |  | (In thousands, except per share data) |       
|2007:          |  |                                       |        |             |   |                       |  |   |                 |   |  |                                |         |   |  |   |      |  
|First Quarter  |  | $                                     | 57,717 |             | $ | 35,836                |  | $ | 5,008           |   |  | $                              | 7,810   |   |  | $ | .27  |  
|Second Quarter |  |                                       | 60,745 |             |   | 36,967                |  |   | 6,913           |   |  |                                | 2,068   |   |  |   | .07  |  
|Third Quarter  |  |                                       | 55,561 |             |   | 30,858                |  |   | 443             |   |  |                                | (2,862  | ) |  |   | (.10 | )
|Fourth Quarter |  |                                       | 74,687 |             |   | 42,576                |  |   | 4,279           |   |  |                                | (19,595 | ) |  |   | (.68 | )
|               |  |                                       |        |             |  
|2006:          |  |                                       |        |             |   |                       |  |   |                 |   |  |                                |         |   |  |   |      |  
|First Quarter  |  | $                                     | 27,162 |             | $ | 17,925                |  | $ | (380            | ) |  | $                              | 236     |   |  | $ | .01  |  
|Second Quarter |  |                                       | 28,859 |             |   | 17,649                |  |   | (261            | ) |  |                                | 1,620   |   |  |   | .07  |  
|Third Quarter  |  |                                       | 51,198 |             |   | 20,798                |  |   | (29,962         | ) |  |                                | (28,260 | ) |  |   | (.99 | )
|Fourth Quarter |  |                                       | 60,422 |             |   | 34,750                |  |   | 4,943           |   |  |                                | 913     |   |  |   | .03  |  

The aggregate quarterly earnings (loss) per share amounts as disclosed in the table above does not
equal the 2006 annual diluted loss per share because each quarter is calculated independently of the annual period.



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|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone
|------- | -----------------------------------------------------------------------------------------



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

(i) CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Companys senior management, including the Chief Executive Officer and
Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act), as of the end of the period covered by this annual report (the Evaluation Date). Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded as of the
Evaluation Date that the Companys disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission
(SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Companys management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(ii) INTERNAL CONTROLS OVER FINANCIAL REPORTING

(a) Managements Report on Internal Control over Financial Reporting

Managements Report on Internal Control over Financial Reporting is set forth on page 37 of this report on Form 10-K.

(b) Attestation Report of the Registered Public Accounting Firm.

The attestation report of Ernst & Young LLP, the Companys independent registered public accounting firm, on the effectiveness of the Companys internal control over financial reporting is set forth
on page 38 of this report on Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no material changes in internal control over financial reporting that occurred during the quarter ended December 29, 2007 that have
materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATIONNone
|-------- | ----------------------



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT, AND CORPORATE GOVERNANCE
|-------- | -------------------------------------------------------------------------

(a) Directors

Information relating to directors appearing under the caption Election of Directors in the
definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is incorporated by reference.

(b) Officers

Information relating to executive officers is included in this report in Item 4 of Part I under the caption Executive Officers of the
Registrant.

(c) Compliance with Section 16(a)

Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 appearing under the caption Compliance with Reporting Requirements in the definitive Proxy Statement for the
2008 Annual meeting of Shareholders is incorporated herein by reference.

(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
|-------- | ----------------------

The information contained
under the caption Executive Compensation contained in the definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is incorporated herein by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information contained under the captions Securities Ownership of Management and Securities Ownership of Certain Beneficial Owners
and Equity Compensation Plan Summary contained in the definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is incorporated herein by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information contained under the caption Certain Relationships and Related Transactions contained in the definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is incorporated herein by
reference.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The
information contained under the caption Our Relationship with Our Independent Auditors contained in the definitive Proxy Statement for the 2008 Annual Meeting of Shareholders is incorporated herein by reference.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
|-------- | -------------------------------------------



|(a) 1 | The following financial statements, all of which are set forth in Item 8, are filed as a part of this report:
|----- | -------------------------------------------------------------------------------------------------------------



|                                                                                                     |  |   
|---------------------------------------------------------------------------------------------------- |  | --
|Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |  | 41
|                                                                                                     | 
|Report of Independent Registered Public Accounting Firm on Financial Statements                      |  | 42
|                                                                                                     | 
|Consolidated Balance Sheets                                                                          |  | 43
|                                                                                                     | 
|Consolidated Statements of Operations                                                                |  | 45
|                                                                                                     | 
|Consolidated Statements of Shareholders Investment                                                   |  | 46
|                                                                                                     | 
|Consolidated Statements of Cash Flows                                                                |  | 47
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | 48



|(a) 2 | The following financial statements schedule is filed as a part of this report beginning on page 85:
|----- | ---------------------------------------------------------------------------------------------------

Schedule II Valuation and Qualifying Accounts



|(b) | See Exhibit Index located on page 86.
|--- | -------------------------------------



|(c) | All other schedules required by Form 10-K Annual Report have been omitted because they were inapplicable, included in the notes to the consolidated financial statements, or
otherwise not required under the instructions contained in Regulation S-X.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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



|               |  |                                                                              
|-------------- |  | -----------------------------------------------------------------------------
|March 13, 2008 |  | /s/    THOMAS J. VACCHIANO
JR.                                               
|               |  | Thomas J. Vacchiano Jr. Chief Executive Officer (principal executive officer)
|               | 
|March 13, 2008 |  | /s/    LYNN J.
LYALL                                                         
|               |  | Lynn J. Lyall, Executive 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 13th day of March, 2008, by the following persons on behalf of the Registrant and in the capacities indicated.

Each
director of the Registrant whose signature appears below, hereby appoints Thomas J. Vacchiano Jr. and Lynn J. Lyall, and each of them individually as his attorney-in-fact to sign in his name and on his behalf as a Director of the Registrant, and to
file with the Commission any and all amendments to this report on Form 10-K to the same extent and with the same effect as if done personally.



|                                                         |  |                                                                 
|-------------------------------------------------------- |  | ----------------------------------------------------------------
|/s/    GIDEON
ARGOV Gideon Argov, Director               |  | /s/    STANLEY W.
CHEFF Stanley W. Cheff, Director              
|                                                         | 
|/s/    MARIO
FONTANA Mario Fontana, Director             |  | /s/    L. PETER
FRIEDER L. Peter Frieder, Director              
|                                                         | 
|/s/    MASSIMO S.
LATTMANN Massimo S. Lattmann, Director |  | /s/    PAUL R.
SYLVESTER Paul R. Sylvester, Director            
|                                                         | 
|/s/    JOHN E.
UTLEY John E. Utley, Director             |  | /s/    THOMAS J. VACCHIANO
JR. Thomas J. Vacchiano Jr., Director
|                                                         | 
|/s/    MARK D.
WEISHAAR Mark D. Weishaar, Director       |  |                                                                 



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Valuation and Qualifying Accounts

X-Rite, Incorporated



|                                            |  |                              |       |                                      |   |             |  |                                |     |  |   |      
|------------------------------------------- |  | ---------------------------- | ----- | ------------------------------------ | - | ----------- |  | ------------------------------ | --- |  | - | -----
|                                            |  | Balance atBeginningof Period |       | AdditionsCharged toCosts andExpenses |   | Deductions* |  | DeductedBalanceat endof Period
|                                            |  | (in thousands)              
|Year ended December 29, 2007                |  |                              |       |                                      |   |             |  |                                |     |  |   |      
|Allowance for losses on accounts receivable |  | $                            | 1,584 |                                      | $ | 853         |  | $                              | 109 |  | $ | 2,328
|                                            |  |                              |       |                                     
|Year ended December 30, 2006                |  |                              |       |                                      |   |             |  |                                |     |  |   |      
|Allowance for losses on accounts receivable |  | $                            | 1,185 |                                      | $ | 786         |  | $                              | 387 |  | $ | 1,584
|                                            |  |                              |       |                                     
|Year ended December 31, 2005                |  |                              |       |                                      |   |             |  |                                |     |  |   |      
|Allowance for losses on accounts receivable |  | $                            | 1,470 |                                      | $ | 258         |  | $                              | 543 |  | $ | 1,185



|* | Deductions represent uncollectible accounts written-off, net of recoveries.
|- | ---------------------------------------------------------------------------



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EXHIBIT INDEX



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2    |  | Transaction Agreement dated as of January 30, 2006, between X-Rite, Incorporated and Amazys Holding AG (filed as exhibit to Form 8-K dated January 31, 2006 (Commission File
No. 0-14800) and incorporated herein by reference).                                                                                                                                                                                                                                                          
|2(1) |  | Agreement and Plan of Merger by and among X-Rite, Incorporated and Pantone, Inc., Pantone Germany, Inc., Pantone India, Inc., Pantone UK, Inc., Pantone Asia, Inc. and Pantone Japan, Inc. and all
of the Stockholders of each of the Companies and Stockholders Representation named herein dated August 23, 2007.                                                                                                                                                                      
|2(2) |  | Amendment Number 1 To Agreement and Plan of Merger by and among X-Rite, Incorporated and Pantone, Inc., Pantone Germany, Inc., Pantone India, Inc., Pantone UK, Inc., Pantone Asia, Inc. and
Pantone Japan, Inc. and all of the Stockholders of each of the Companies and Stockholders Representation named herein dated October 15, 2007.                                                                                                                                               
|2(3) |  | Amendment Number 2 To Agreement and Plan of Merger by and among X-Rite, Incorporated and Pantone, Inc., Pantone Germany, Inc., Pantone India, Inc., Pantone UK, Inc., Pantone Asia, Inc. and
Pantone Japan, Inc. and all of the Stockholders of each of the Companies and Stockholders Representation named herein dated October 24, 2007.                                                                                                                                               
|     | 
|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 November 14, 2006 (filed as exhibit to Form 8-K dated November 20, 2006 (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 10-K 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) |  | Form of Indemnity Contract entered into between X-Rite, Incorporated 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(2) |  | Employment Arrangement Effective Upon a Change in Control entered into between X-Rite, Incorporated 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).



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EXHIBIT INDEXcontinued



|        |  |                                                                                                                                                                                                                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10(3)  |  | Operating Agreement for XR Ventures, LLC, dated as of September 14, 2000, among XR Ventures, LLC, X-Rite, Incorporated, 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(4)  |  | Form of Indemnity Agreement entered into between X-Rite, Incorporated 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(5)  |  | Form of Indemnity Agreement entered into between X-Rite, Incorporated 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(6)  |  | Form of Indemnity Agreement entered into between X-Rite, Incorporated 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(7)  |  | 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(8)  |  | 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(9)  |  | Second Amendment to the Operating Agreement between X-Rite, Incorporated and XR Ventures, LLC, effective as of 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(10) |  | 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(11) |  | 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(12) |  | Third Amendment to the Operating Agreement between X-Rite, Incorporated and XR Ventures, LLC, effective as of 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(13) |  | Form of Indemnity Agreement between X-Rite, Incorporated and L. Peter Frieder (filed as exhibit to Form 10-K for the year ended January 1, 2005 (Commission File No. 0-14800) and
incorporated herein by reference).                                                                                            
|        | 
|*10(14) |  | 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 ended January 1, 2005 (Commission File
No. 0-14800) and incorporated herein by reference).                                                                     
|        | 
|*10(15) |  | 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 ended January 1, 2005 (Commission File
No. 0-14800) and incorporated herein by reference).                                                                             
|        | 
|*10(16) |  | Form of X-Rite, Incorporated Second Restricted Stock Plan Agreement (filed as exhibit to Form 10-K for the year ended January 1, 2005 (Commission File No. 0-14800) and
incorporated herein by reference).                                                                                                      



87



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EXHIBIT INDEXcontinued



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10(17) |  | Employment Agreement between X-Rite, Incorporated 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(18)  |  | Mortgage and Security Agreement, dated as of June 30, 2006, between X-Rite, Incorporated and Fifth Third Bank (filed as exhibit to Form 10-Q for the quarter ended July 1, 2006
(Commission File No. 0-14800) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                
|        | 
|*10(19) |  | Separation Agreement, dated as of July 5, 2006, between X-Rite, Incorporated and Dr. Peter Banks (filed as exhibit to Form 8-K dated July 7, 2006 (Commission File No. 0-14800) and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                              
|        | 
|*10(20) |  | Employment Agreement between X-Rite, Incorporated and Francis Lamy, effective as of July 5, 2006 (filed as exhibit to Form 8-K dated January 31, 2006 (Commission File No.
0-14800) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                          
|        | 
|*10(21) |  | Employment Agreement between X-Rite, Incorporated and Thomas J. Vacchiano, Jr., effective as of July 5, 2006 (filed as exhibit to Form 8-K dated January 31, 2006 (Commission File
No. 0-14800) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                              
|        | 
|*10(22) |  | X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan, effective as of June 30, 2006 (filed as Exhibit A to the definitive proxy statement dated July 24, 2006 relating to the
Companys 2006 annual meeting (Commission File No. 0-14800) and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                              
|        | 
|*10(23) |  | Form of Officer Stock Option Agreement under the X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 
|*10(24) |  | Form of Outside Director Stock Option Agreement under the X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 
|*10(25) |  | Form of Employee Stock Option Agreement under the X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 
|*10(26) |  | Form of Consultant & Advisor Stock Option Agreement under the X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 
|*10(27) |  | Form of Restricted Stock Agreement under the X-Rite, Incorporated 2006 Omnibus Long Term Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 
|*10(28) |  | Employment Agreement between X-Rite, Incorporated and Bernard J. Berg, effective as of February 20, 2007 (filed as exhibit to Form 8-K dated February 26, 2007 (Commission File No. 0-14800) and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                 
|        | 
|*10(29) |  | Consulting Agreement between X-Rite, Incorporated and Bernard J. Berg, effective as of January 1, 2009 (filed as exhibit to Form 8-K dated February 26, 2007 (Commission File No. 0-14800) and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                   
|        | 
|10(30)  |  | Amended and Restated First Lien Credit and Guaranty Agreement dated as of June 30, 2006 among X-Rite, Incorporated as Borrower, Certain Subsidiaries of X-Rite, Incorporated as Guarantors,
Various Lenders, Goldman Sachs Credit Partners L.P. as Lead Arranger and Bookrunner, Goldman Sachs Credit Partners L.P. as Administrative Agent and Collateral Agent and Merrill Lynch Capital, a Division of Merrill Lynch Business Financial Services
Inc. as Syndication Agent (filed as exhibit to Form 10-Q for the quarter ended July 1, 2006 (Commission File No. 0-14800) and incorporated herein by reference).
|        | 
|10(31)  |  | Amended and Restated Second Lien Credit and Guaranty Agreement dated as of June 30, 2006 among X-Rite, Incorporated as Borrower, Certain Subsidiaries of X-Rite, Incorporated as Guarantors,
Various Lenders, Goldman Sachs Credit Partners L.P. as Lead Arranger, Bookrunner and Syndication Agent and Goldman Sachs Credit Partners L.P. as Administrative Agent and Collateral Agent (filed as exhibit to Form 10-Q for the quarter ended July
1, 2006 (Commission File No. 0-14800) and incorporated herein by reference).                                                                                      



88



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EXHIBIT INDEXcontinued



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10(32) |  | Change of Control Severance Plan for Senior Executives dated April 1, 2007 (filed as exhibit to Form 8-K dated April 5, 2007 and incorporated here-in by reference).                                                                                                                                                                                                                                                                                                                                             
|       | 
|10(33) |  | First Lien Credit and Guaranty Agreement dated as of October 24, 2007 among X-Rite, Incorporated, as Company, Certain Subsidiaries of X-Rite, Incorporated, as Guarantors, Various Lenders, Fifth
Third Bank, a Michigan banking corporation, as Administrative Agent and Collateral Agent, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services, Inc., as Syndication Agent, National City Bank, as Co-documentation Agent, and
LaSalle Bank Midwest, N.A., as Co-documentation Agent.
|       | 
|10(34) |  | Second Lien Credit and Guaranty Agreement dated as of October 24, 2007 among X-Rite, Incorporated, as Company, Certain Subsidiaries of X-Rite, Incorporated, as Guarantors, Various Lenders,
GoldenTree Capital Solutions Fund Financing, as Lead Arranger, and The Bank of New York, as Administrative Agent and Collateral Agent.                                                                                                                                                                              
|       | 
|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 X-Rite, Incorporated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       | 
|23     |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|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.                                                                                                                                                                                                                                                                                                                                                                                          



89