# U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, 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, 2001

Commission file number 0-14800

X-RITE, INCORPORATED(Name of registrant as specified in charter)

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

3100 44th Street S.W., Grandville, Michigan 49418
                                     (Address of principal executive offices)

616-534-7663
                               (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: (none)
                            Securities registered pursuant to Section 12(g) of the Act:
                                  Common Stock, $.10 per share
                                                 (Title of Class)

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 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. [     ]

On March 1, 2002, the
number of shares of the registrants common stock, par value $.10 per share
outstanding was 20,200,166. 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)
on that date was $168,560,286 computed at the closing price on that date.

Portions of the
Companys Proxy Statement for the 2002 Annual Meeting of Shareholders are
incorporated by reference into Part III. Exhibit Index is located at Page 31.



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## PART I
ITEM 1.BUSINESS

## (a)        General
Development of Business

X-Rite, Incorporated
(X-Rite or the Company) was organized in 1958 as a
Michigan corporation. The business currently conducted by the Company is the
development and marketing of instrument technologies in the fields of color,
light and shape measurement. The Company has successfully developed and marketed
numerous quality control instruments and accessories.

The Company made its
initial public offering of common stock during 1986. Proceeds from that public
offering were used to finance the construction of a new building for office,
manufacturing and warehouse needs, purchase new production and laboratory
equipment, retire debt and provide working capital.

X-Rite has grown through
internal expansion and through acquisitions. In 1993 the Company established two
foreign sales and service subsidiaries; X-Rite GmbH, Cologne, Germany and X-Rite
Asia-Pacific Limited, Hong Kong. In 1994 the Company established an English
subsidiary, X-Rite, Ltd., which acquired the outstanding stock of an X-Rite
dealer located near Manchester, England. Also in 1994, the Company acquired the
assets of Colorgen, Inc. (Colorgen), a Massachusetts-based
manufacturer of retail paint matching systems. In 1995, the Company acquired the
outstanding stock of Labsphere, Inc. (Labsphere) of New Hampshire.
Labsphere is a leading manufacturer of light measurement and light source
integrating systems and instrumentation. In 1997, the Company acquired the
assets of Light Source Computer Images, Inc. (Light Source) a
California-based producer of scanning, imaging and print optimization software.
In 1998, the Company established a French subsidiary, X-Rite
Méditerranée SARL, which acquired a branch of an X-Rite dealer located
near Paris. In 2000, the Company acquired the assets of Optronik, GmbH
(Optronik) of Berlin, Germany, a leading developer and manufacturer
of non-contact, on-line color and light measurement technologies.
Optroniks facility is the Companys first research, development and
manufacturing location in Europe. Also in 2000, the Company formed a domestic
subsidiary, Coherix Corporation (Coherix), which acquired the assets
of the HoloVision Products Group of Veridian-ERIM International. The Coherix
product line uses tunable laser technology to provide three dimensional mapping
of the surface of physical objects. In addition in 2000, the Company formed a
strategic venture capital group, XR Ventures, LLC. The groups purpose is
to direct and manage X-Rites investments in start up companies in the high
technology field.

## (b)        Financial
Information About Operating Segments

The Company operates in one segment: quality control instruments and accessories. Accordingly, no separate
operating segment information is presented.

## (c)        Narrative Description
of Business

Principal Products
The Companys principal products are proprietary quality control instruments which utilize
advanced optical and electronic technologies. The principal types of products
and markets served include:

|Color Products and Markets
|--------------------------
|                          

2

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| | Spectrodensitometers combine the function of a densitometer with the functions of a colorimeter
and a spectrophotometer (see following paragraphs) to provide measurements for
monitoring color reproduction used for controlling the color of printed inks in
graphic arts applications. Digital imaging applications include products which
calibrate image setters, raster image processors and digital printers. The
Companys products incorporate a spectral engine which is the most accurate
type of measurement technology available and offer precise, repeatable and
reliable measurements for pressroom quality control. Other similar Company
products include the micro-spot spectrodensitometer, the first hand held
measurement instrument to accurately read color bars and related micro sized
color control elements, and the Auto Tracking Densitometer designed specifically
for newspaper presses to evaluate and adjust gray balance in newspaper
production.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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.                                                                                                                                                                                                                                                                                                                                     
| | Point-of-purchase paint matching systems are designed by the Company for use by paint stores,
hardware stores, mass merchants and home improvement centers. X-Rite has
established a significant market presence in the point-of-purchase paint
matching business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Color formulation and quality control software packages are designed by the
Company for use with many of its products. This software is often combined with
a computer and an instrument and sold as a turn-key system. Marketing efforts
with respect to this family of related products are being directed at packaging
material printers, textile, plastic, paint, ink and coatings manufacturers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Light Products and Markets
Through its subsidiaries, Labsphere and Optronik, the Company produces integrating spheres and integrating
sphere systems for numerous applications including the testing of incandescent
and fluorescent lamp output, testing light emitting diodes and fiber optics,
calibration of remote sensors and reflectance and transmittance light
measurements. Labsphere is also a supplier of proprietary reflectance materials
and coating services used in such products as photographic processing equipment,
check scanning systems, x-ray film analysis, backlight illuminators and surface
profiling equipment.

Shape Products and Markets
The Coherix Corporation
subsidiary produces instruments that use tunable laser technology to provide
three dimensional mapping of the surface of physical objects. These products can
serve many markets including electronic component evaluation, micro-machines,
automotive and metrology.

Distribution Networks
Sales of the Companys
products are made 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 in seventy
countries. Independent dealers are managed and serviced by the Companys
sales staff and by independent sales representatives.

3

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New Product Information
In 2001, the Company
expanded into the dental market by the development of a significant
technological advance in restorative tooth shade matching. The X-Rite
ShadeVision® System improves patient care by replacing the subjective
selection of tooth color with an accurate measurement.

Raw Materials
With few exceptions, raw
materials and components necessary for manufacturing products and providing
services are generally available from several sources. The Company does not
foresee any unavailability of materials or components which would have a
material adverse effect on its overall business.

Patents
The Company owns 42 U.S.
and 20 non-U.S. patents. In addition, the Company currently has 44 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.

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
No single customer
accounted for more than 10% of total net sales in 2001, 2000 or 1999. The
Company does not believe that the loss of any single customer would have a
material adverse effect on the Company.

Backlog
The Companys backlog
of scheduled but unshipped orders was $4.8 million at February 23, 2002 and $8.9
million at March 1, 2001. The February 23, 2002 backlog is expected to be filled
during the current fiscal year.

Competition
The Company has few
competitors producing competing medical and photographic instruments and
believes its share in those markets is substantial. There are approximately ten
firms producing competing products in the graphic arts/digital imaging
categories, and approximately five manufacturers of competing products in the
color and appearance market, some of whom have significant resources and sales.
The primary basis of competition for all the Companys products is
technology, design and service. The Company believes that technologically
advanced features are the primary advantages of its products.

Research, Development and Engineering
During 2001, 2000 and 1999,
respectively, the Company expensed $15.5, $11.8 and $10.7 million on research,
development and engineering. X-Rite has no customer sponsored research and
development activities.

Human Resources
As of March 1, 2002, the
Company employed 688 persons; 555 in its U.S. operations and 113 in its foreign
subsidiaries. The Company believes that its relations with employees are
excellent.

## (d)        Financial
Information About Foreign and Domestic Operations

See Note 1 to the
consolidated financial statements contained in Part II, Item 8 of this report.

4

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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, 2002:

|Location              | Principal Uses                                                               | Owned/Leased
|--------------------- | ---------------------------------------------------------------------------- | ------------
|Grandville, MI        | Manufacturing, R,D&E, sales, customer service, warehouse and administration. | Owned       
|Grandville, MI        | Sales and training.                                                          | Leased      
|North Sutton, NH      | Manufacturing, R,D&E, sales, customer service, warehouse and administration. | Owned       
|Littleton, MA         | Customer service, R,D&E and sales.                                           | Leased      
|Ann Arbor, MI         | Customer service, R,D&E and sales.                                           | Leased      
|Poynton, England      | Sales and customer service.                                                  | Leased      
|Cologne, Germany      | Sales and customer service.                                                  | Leased      
|Berlin, Germany       | Manufacturing, R,D&E, sales, customer service, warehouse and administration. | Leased      
|Quarry Bay, Hong Kong | Sales and customer service.                                                  | Leased      
|Brno, Czech Republic  | Sales and customer service.                                                  | Leased      
|Massy, France         | Sales and customer service.                                                  | Leased      
|Tokyo, Japan          | Sales and customer service.                                                  | Leased      
|Beijing , China       | Sales and customer service.                                                  | Leased      
|Tianjin, China        | Sales and customer service.                                                  | Leased      
|Shanghai, China       | Sales and customer service.                                                  | Leased      
|Origgio, Italy        | Sales and customer service.                                                  | Leased      

Collectively, X-Rite and
its subsidiaries own approximately 288,000 square feet of space and lease
approximately 60,000 square feet. Management considers all the Companys
properties and equipment to be well maintained, in excellent operating
condition, and suitable and adequate for the Companys development,
production, distribution and selling requirements.

## ITEM 3. LEGAL
PROCEEDINGS

The Company is not
presently engaged in any material litigation within the meaning of Item 103 of
Regulation S-K. However, very recently, on February 19, 2002, Ivoclar Vivadent,
Inc. and Shade Analyzing Technologies, Inc. sued the Company seeking injunctive
relief and unspecified damages in U.S. District Court for the Western District
of New York alleging infringement of certain U.S. Patents by the Companys
ShadeVision system. The Company has reviewed the claims (with patent counsel)
and does not believe that it infringes any valid claim of any of the
plaintiffs patents. The Company has asked the court to declare that all
claims by plaintiffs are invalid, unenforceable, and/or not infringed by its
system. The suit is in the preliminary stages of discovery and it is not
possible to determine whether the litigation will proceed to trial. Although it
cannot be predicted with certainty, management believes the ultimate resolution
of this matter will not have a material adverse effect on the Company. The
Company is also involved in other legal proceedings and litigation arising in
the ordinary course of business.

## 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,
2001.

5

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## EXECUTIVE
OFFICERS OF THE REGISTRANT

The following table lists
the names, ages and positions of all of the Companys executive officers.
Officers are elected annually by the Board of Directors at the first meeting of
the Board following the Annual Meeting of Shareholders. Except as discussed,
each of the named officers has served the Company in an executive capacity for
more than five years.

|Name                 | Age | Position                                | PositionHeld Since
|-------------------- | --- | --------------------------------------- | ------------------
|Richard E. Cook      | 56  | Chief Executive Officer                 | 1998(1)           
|Michael C. Ferrara   | 59  | President, Chief Operating Officer      | 2001(2)           
|Bernard J. Berg      | 58  | Senior Vice President, Engineering      | 1983              
|Duane F. Kluting     | 52  | Vice President, Chief Financial Officer | 1992              
|Jeffrey L. Smolinski | 40  | Vice President, Operations              | 1994              
|Joan Mariani Andrew  | 43  | Vice President, International           | 1995              

(1) Mr. Cook was
named Chief Executive Officer in 2000. For the period 1998 to 2000, Mr. Cook was
President and COO of X-Rite, Incorporated. Previously, he was the President of
Cascade Engineering, a developer and producer of plastic mold injection
technology headquartered in Grand Rapids, Michigan, and he held that position
for more than five years.

(2) Prior to
joining X-Rite, Mr. Ferrara served as the Chief Executive Officer of Marine
Optical Group, a worldwide design and marketing company in the eyewear business
and he held that position for more than five years.

## PART II.

## ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

The Companys common
stock is quoted in the NASDAQ  National Market System under the symbol
XRIT. As of March 1, 2002, there were approximately 1,500 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, 2001:
       First Quarter
       Second Quarter
       Third Quarter
       Fourth Quarter | $10.31  
 10.30
    9.75
 10.00 | $ 6.50   
  8.15
  6.70
  6.75 | $ .025   
  .025
  .025
  .025
|Year Ended December 30, 2000:
       First Quarter
       Second Quarter
       Third Quarter
       Fourth Quarter | $13.25  
 13.50
 11.75
    9.00 | $ 6.00   
  8.56
  8.00
  5.00 | $ .025   
  .025
  .025
  .025

The Board of Directors intends to continue paying dividends at the current quarterly rate of 2.5 cents per share
in the foreseeable future.

6

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## ITEM 6.
SELECTED FINANCIAL DATA

Selected quarterly
financial data for the two years ended December 29, 2001 is summarized as
follows:

(000 except per share data)

|QUARTER                                                                                     | Sales                                                                  | GrossProfit                                                   | OperatingIncome(Loss)                                           | NetIncome(Loss)                                               | DilutedEarnings(Loss)Per Share                                 
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------------------------------------------
|2001:
       First Quarter
       Second Quarter
       Third Quarter
       Fourth Quarter | $25,360     
    24,429     
    21,739     20,130     
 $91,658       | $16,263     
   15,448     
   13,579     11,781     
$57,071 | $ 2,844     
     1,927     
    (1,199)    (1,473)    
 $2,099 | $ 2,429     
   1,755     
     404     (2,655)    
 $1,933   | $  .11        
   .08         
   .02         (.12)       
$.09
|2000:
       First Quarter
       Second Quarter
       Third Quarter
       Fourth Quarter | $26,134     
     26,232     
     23,087     27,996     
    $103,449 | $17,123     
   16,756     
   14,619     18,008     
$66,506 | $ 5,259     
     5,215     
    2,963     4,636     
 $18,073  | $ 3,556     
   3,616     
     1,863     3,373     
 $12,408 | $  .17        
   .07         
   .09         .15        
$.58 

Selected financial data for
the five years ended December 29, 2001 is summarized as follows:

(000 except per share data)

|                                                                                                                                     | 2001                                                                                                                                  | 2000                                                                                                                     | 1999                                                                                                                     | 1998                                                                                                                     | 1997                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------
|Net sales 
  Net income 
  Net income per share:
       Basic
       Diluted 
  Dividends per share
  Total assets 
  Long-term debt | $91,658     
     1,933     
               
       .09     
       .09     
       .10     
               
 $118,952     
        - | $103,449     
  12,408     
             
     .59     
     .58     
     .10     
             
$125,683     
       - | $100,209     
  13,649     
             
     .65     
     .62     
     .10     
             
$107,819     
       - | $ 94,811     
   6,862     
             
     .33     
     .32     
     .10     
             
$ 95,444     
       - | $ 96,991     
  18,022     
             
     .85     
     .85     
     .10     
             
$ 92,468     
       -

7

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

The issues discussed in
managements discussion and analysis should be read in conjunction with the
Companys consolidated financial statements and notes to the consolidated
financial statements. The following table sets forth information derived from
the Companys consolidated statements of income expressed as a percentage
of net sales.

|                                                                                                                                                                                                                                                                                                                                                | 2001                                                                                                                                                                                                        | 2000                                                                                                                                                                                                                           | 1999                                                                                                                                                                                                                 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net sales
  Cost of sales
     Gross profit
  Operating expenses:
     Selling and marketing
     General and administrative
     Research, development &
        engineering
     Restructuring charges
  Operating income
  Other income
  Write down of other
    investments
     Income before income taxes
  Income taxes
     Net income | 100.0%     37.7         
   62.3         
   25.4         
   16.8         
   16.9         .9         
   60.0         
    2.3         
    1.0         
   (1.2)         
    2.1         -         2.1% | 100.0%     35.7         
    64.3          
    21.0          
    14.5          
    11.4          -         
    46.9          
    17.4          
     1.0          
       -          
    18.4          6.5         11.9% | 100.0%     34.1         
   65.9          
   20.1          
   14.9          
   10.7          -         
   45.7          
   20.2          
    0.8          
      -          
   21.0          7.4         13.6%

Net Sales
The economic slowdown
coupled with a severe decline in capital goods spending had a significant impact
on the Companys sales in 2001. Consolidated sales for the year were $91.7
million, an 11.4 percent decrease from 2000 sales of $103.4 million. Sales in
2000 were a 3.2 percent increase over 1999 sales of $100.2 million. The
declining sales trend was more pronounced in the second half of the year.
Combined sales in the third and fourth quarters were $41.9 million, a 15.9
percent decrease compared to the $49.8 million in sales recorded in quarters one
and two.

Weakness in the industrial,
retail paint matching and after market auto refinishing sectors caused the Color
and Appearance business (Coatings) to experience a 16.9 percent drop in sales
compared to 2000. Decreased demand was also noted in the Printing and Imaging
business which decreased 13.9 percent compared to 2000. The primary components
of the Graphic Arts product lines were down compared to 2000. Printing declined
11.0 percent while imaging decreased 16.6 percent. The Company recorded
increases in both its biodiagnostic and light measurement product lines. Sales
to the biodiagnostic industries increased by 20.7 percent over 2000, while light
measurement sales increased by 2.2 percent over 2000.

From a geographic
perspective the Company experienced mixed results in 2001. A strong Asian
economy enabled the Company to achieve a 6.8 percent increase over 2000, in this
region. Sales in Europe decreased 1.3 percent year over year, as economic
conditions in this region deteriorated in the second half of the year. The
economy in North America declined through the year presenting many challenges to
our sales and marketing efforts. For the year sales declined 17.8 percent over
2000.

Sales from the Coherix and
Optronik units which were acquired in the third quarter of 2000 (See
Acquisitions and Investments, below) had a nominal impact on sales in 2001 and
2000.

Price increases had a marginal impact on sales levels in 2001, 2000 and 1999.

8

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Gross Profit
Gross profit as a percent
of net sales was 62.3 percent in 2001 as compared to 64.3 and 65.9 percent in
2000 and 1999, respectively. The Companys manufacturing processes have a
high degree of vertical integration. Vertical integration allows for many
efficiencies in an increasing volume environment, but will also increase costs
as a percent of net sales should volumes decrease. The Companys efforts to
refine manufacturing processes and contain costs have met with success for many
of its products, however in 2001, many of these costs savings were offset by
lower production volumes against which to apply overhead. Competition in the
capital goods markets makes it difficult to increase prices significantly to
offset lower volumes.

Selling and Marketing Expenses
The Companys sales
and marketing efforts have expanded as we enter into new markets and previously
underserved geographic regions. In 2001, selling and marketing expenses were
$23.2 million, a 7.1 percent increase over 2000. Selling and marketing expenses
in 2000 were $21.7 million, an 8.0 percent increase over the 1999 costs of $20.1
million. The increased costs in 2001 were focused primarily on establishing our
presence in the light and shape measurement markets, as well as the introduction
of the new ShadeVision dental product. These investments were rewarded on
several fronts. Labsphere was able to record a sales increase even though many
of the markets it serves are being impacted by the economic slow down in North
America. The ShadeVision dental instrument has received a strong reception
during its introduction phase which culminated with the Company entering into an
exclusive U.S. distribution agreements with Sullivan-Schein Dental and Zahn
Dental Company, Inc., the largest distributors of dental and dental laboratory
supplies in the U.S. The formal product rollout will occur in the first quarter
of 2002.

In addition to new market
development, the Company expanded its physical presence for the traditional
Company color products in 2001 with the opening of additional sales offices in
China and Italy. China offers many exciting markets for the Company as it is
quickly becoming the manufacturing and financial center of the Asia Pacific
region. The Company intends to become the provider of choice for color, light
and shape measurement solutions to this dynamic region.

While firmly committed to
its core markets, the Company intends to leverage the skills and talents of its
employees to develop niches in new markets such as biodiagnostics,
telecommunications, fiber optics and advanced quality control processes. It is
anticipated that these markets will play a significant role in the future of the
Company.

General and Administrative
General and administrative
expenses grew modestly in 2001. Total expenditures in 2001 were $15.4 million,
compared to 15.0 in 2000 a 2.7 percent increase. The 1999 expenses were also
$15.0 million. The year over year growth in 2001 can be attributed primarily to
the costs of a full year of operations for our 2000 acquisitions Coherix and
Optronik. Additional costs were incurred for the opening of new international
offices as noted above.

Research Development and Engineering
Research, Development and
Engineering (RD&E) grew substantially in 2001. In 2001, expenditures were
$15.5 million compared to $11.8 and $10.7 million in 2000 and 1999,
respectively. The year over year percentage increases were 31.4 and 10.3
percent, respectively. The $3.7 million increase in 2001 includes the research
and development costs of Coherix and Optronik for a full year. Additional
research investments were made at Labsphere for the development of its Vertical
Cavity Surface Emitting Lasers (VCSELs) Wafer Probe and Light Emitting Diodes
(LEDs) Wafer Probe Systems, and at the Company for the development of the
ShadeVision dental shade matching system. The Company is committed to creating
measurement solutions for many new industries and anticipates that its RD&E
investments will continue to be substantial.

In addition to the RD&E
costs reported as operating expenses, costs were incurred to develop new
software products in each of the last three years that were not included with
RD&E expenses. Those costs were capitalized, and the related amortization
expense was included in cost of sales (see Note 2 to the accompanying
consolidated financial statements). Software development costs capitalized
totaled $1.6, $1.6 and $1.3 million in 2001, 2000 and 1999, respectively.

9

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Restructuring Charge
In September 2001, the
Company announced a workforce reduction plan and recorded $.9 million pretax
charge to earnings. This charge has been classified separately as a component of
Operating Expense under the caption of Restructuring Charge and
represents costs associated with non voluntary termination benefits for
approximately sixty positions. The Company expects this workforce reduction will
save approximately $3.5 million annually. Benefit payments began during the
fourth quarter of 2001. As of December 29, 2001, 43 positions have been
eliminated. The Company anticipates the balance of the restructuring will be
complete by September 2002. The remaining unpaid benefits at December 29, 2001of
$.5 million are included in accrued liabilities.

Other Income
Other income in 2001, 2000
and 1999 consists primarily of interest income and foreign exchange gains and
losses. The Companys investment portfolio is made up of short term tax
exempt municipal bonds, mutual funds and corporate securities. The decline in
income in 2001 is due to decreased yields in the tax exempt markets as well as
lower funds available for investment.

Write-Down of Other Investments
Included in other
investments in 2001 and 2000, is net $8.6 and $4.6 million, respectively,
related to investments made by the Companys strategic venture capital
group, XR Ventures, LLC (See Acquisitions and Investments, below). Each
investment represents less than 20 percent of the ownership of the respective
investees. Since the Company does not exercise significant influence over the
operating and financial policies of each investee, the investments have been
recorded at cost. The Company periodically evaluates the carrying value of each
investment to determine whether a decline in fair value below the cost has
occurred. If the decline is determined to be other than temporary, the carrying
value is adjusted to the current fair value and a loss is recognized. In the
fourth quarter of 2001 it was determined that certain investments had been
permanently impaired requiring a write-down of $1.1 million. No such write-downs
occurred in 2000.

Income Taxes
The effective tax rate for
2001 was zero percent, and approximately 35 percent for both 2000 and 1999,
respectively. The 2001 rate has benefited from the execution of certain
international tax strategies.

Inflation
The Company has experienced
the effects of inflation on its business through increases in the cost of
services, employee compensation and fringe benefits. Although modest adjustments
to selling prices have offset the effects of inflation, the Company continues to
explore ways to improve productivity and reduce operating costs. The Company
does not anticipate any significant adverse impact from inflation in the coming
year.

Approximately 80 percent of the Company's transactions are invoiced and paid in U.S. dollars, a level that is
anticipated to increase.

Liquidity and Capital Resources
Cash flow from operations in
2001 was $12.0 million, compared to $20.5 million in 2000, a decrease of $8.5
million or 41.5 percent. Cash flow from operations was $20.4 million in 1999.
Reduced working capital investment, principally accounts receivable, was the
largest source of cash from operations. Certain expenses included in net income
did not require the use of cash. The most significant non-cash expenses in 2001,
which totaled $6.2 million, were depreciation and amortization. For 2000 and
1999 depreciation and amortization charges were $5.7 and $5.9 million,
respectively.

Lower earnings caused a
decrease in the Companys liquidity. Cash and short-term investments at
December 29, 2001, were $24.8 million as compared to $31.1 million at December
30, 2000. Working capital at December 29, 2001, was $52.1 million as compared to
$61.7 million at December 30, 2000. A reduction in current income taxes payable
allowed the current ratio to improve to 8.2:1 at December 29, 2001 compared to
5.9:1 at December 30, 2000. Current liabilities were $7.2 million at December
29, 2001, compared to $12.5 million at December 30, 2000.

10

---

Since going public in 1986,
the Company has funded its operations, investing, acquisitions and financing
activities from internally generated cash flows and cash reserves. Management
anticipates that the Companys current liquidity, future cash flows and
credit line will be sufficient to fund the Companys operations, life
insurance premiums, capital expenditures, stock repurchases and dividends for
the foreseeable future. Should additional funding be necessary, additional short
or long-term borrowing arrangements are the most probable alternatives for
meeting capital resource and liquidity needs. The Company maintains a revolving
line of credit of $20 million. The line was not used during 2001.

X-Rites short-term
investments consist primarily of tax free municipal bonds, government agency
bonds, high grade corporate bonds, mutual funds and preferred stocks. The
Company records an allowance for unrealized gains and losses related to its
portfolio. Changes to the allowance are reported as a component of other
comprehensive income. The allowance was $.6 and $.5 million at December 29, 2001
and December 30, 2000, respectively.

Capital expenditures of
$5.0 million were made in 2001. These expenditures were made primarily for
machinery, equipment, building improvements, computer hardware and software.
Capital expenditures in 2000 were $4.1 million. The Company anticipates making
capital expenditures in 2002 of approximately $3.5 million.

During 1998, the Company
entered into agreements with its founding shareholders for the future purchase
of 4.5 million shares, or 21.3 percent of the Companys outstanding stock
at December 29, 2001. The stock purchases will occur following the later of the
death of each founder and his spouse. The price the Company will pay the
founders estates for these shares will reflect a 10 percent discount from
the market price, although the discounted price may not be less than $10 per
share (a total of $45.4 million) or more than $25 per share (a total of $113.5
million).

The cost of the purchase
agreements will be funded by $160.0 million of proceeds from life insurance
policies the Company has purchased on the lives of certain of these individuals.
The Company anticipates that stock purchases will not coincide with the receipt
of insurance proceeds; therefore, borrowed funds may be needed from time to time
to finance the Companys purchase obligations. Insurance was purchased at
the $160.0 million level in order to cover both the maximum aggregate purchase
price and anticipated borrowing costs. Life insurance premiums total $4.3
million each year while all the policies remain in effect. Of the $4.3 million
paid in 2001, 2000 and 1999 approximately $1.0, $1.0 and $1.2, respectively,
were classified as expense.

During the fourth quarter
of 2001, the Company was notified of the death of one its founders whose shares
are included in the purchase program. Under the terms of the agreement with that
founder, the Company is obligated to purchase 1,120,000 shares of stock at
$10.00 per share or $11.2 million. This founder was not insured; therefore, as
anticipated at the time the agreement was entered into, the Company will fund
this obligation with cash and short-term investments. The transaction was
completed in January of 2002.

The Companys most
significant financing activities in 2001 were the payment of dividends to
shareholders and the repurchase of common stock outstanding. During the last
three years dividends were paid at a rate of 10 cents per share or $2.1 million
dollars annually. At the present time, the Board of Directors intends to
continue payments at this rate. In September 2000, the Board of Directors
authorized a common stock repurchase program of up to one million shares of
outstanding stock. The timing of the program and amount of the stock repurchases
will be dictated by overall financial and market conditions. During 2001, the
Company repurchased 231,364 shares at an average cost of $7.56 per share. There
were no shares repurchased during 2000.

## Acquisitions and Investments

In 2000, the Company
purchased the assets of Optronik GmbH. Based in Berlin, Germany, Optronik is a
leading provider of color and light measurement instrumentation and software.
Focused primarily on on-line color and light measurement for web based
processes, its non-contact measurement technologies are new to the Company. The
Berlin location gives the Company its first research, development and
manufacturing capabilities in Europe.

11

---

Also during 2000, the
Company purchased the assets of the HoloVision Products Group of Veridian-ERIM
International. The products produced by this group use tunable lasers to map the
surface of physical objects for a variety of industrial applications. Currently
the products are used to provide non-contact measurement applications requiring
a three dimensional perspective. The measurement of shape complements the
Companys technologies for color and light measurement. The ability to
provide high resolution, non contact, spatial measurement will elevate the
Companys exposure to many dynamic markets, such as, micro-machines,
telecommunications and biodiagnostics.

XR Ventures, LLC is a
strategic venture capital group formed in 2000 and majority owned by the
Company. Its mission is to direct and manage the Companys investments in
start up companies in high technology fields. The Companys partners in the
group are Dr. Peter M. Banks and Mr. James A. Knister. Both have had extensive
careers as executives in technology companies. In addition to their roles with
XR Ventures, both serve on the Board of Directors of the Company. The venture
group seeks out, but is not restricted to companies with technologies that are
directly related to current Company technologies, or technologies that the
Company is interested in pursuing including biosensors, micro mechanical
systems, telecommunication components and information technologies. At December
29, 2001 and December 30, 2000 XR Ventures, LLC held minority positions in
eleven and seven companies, with a total net investment of $ 8.6 and $4.6
million, respectively. The Board of Directors of the Company evaluated the
fairness, on-going risks and uncertainty involved in partnering with two of its
directors. The arrangement was negotiated at arms-length with Dr. Banks and Mr.
Knister who were represented by their own counsel while the Company was
represented by its regular counsel.

## Other Matters

In November of 2001, the
Companys Board of Directors adopted a Shareholder Protection Rights Plan
(the Plan), to be 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.

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.

## 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, such as those related to refining manufacturing
processes, new products and new markets, 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. 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.

## ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk sensitive financial instruments do not subject the Company to material market risk
exposures.

12

---

## ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following report,
financial statements and notes are included with this report:
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Permanent Shareholders' Investment
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

# Report of
Independent Public Accountants

To the Shareholders of X-Rite, Incorporated:

We have audited the
accompanying consolidated balance sheets of X-Rite, Incorporated (a Michigan
corporation) and subsidiaries as of December 29, 2001 and December 30, 2000, and
the related consolidated statements of income, permanent shareholders
investment and cash flows for each of the three years in the period ended
December 29, 2001. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in
accordance with auditing standards generally accepted in the 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
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of X-Rite, Incorporated and
subsidiaries as of December 29, 2001 and December 30, 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 29, 2001, in conformity with accounting principles generally
accepted in the United States. 
/s/ Arthur Andersen LLP
Grand Rapids, Michigan,
January 29, 2002

13

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# X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

`December 29,       December 30,
                                                                           2001               2000    
ASSETS
Current assets:
   Cash and cash equivalents                                              $ 9,164           $ 18,595
   Short-term investments                                                  15,667             12,469
   Accounts receivable, less allowance of
     $1,237 in 2001 and $1,506 in 2000                                     12,048             19,463
   Inventories                                                             15,235             15,800
   Refundable income taxes                                                  4,079                  -
   Deferred taxes                                                           2,139              6,503
   Prepaid expenses and other current assets                                1,022              1,427
                                                                           59,354             74,257

 Property plant and equipment:
   Land                                                                     2,278              2,278
   Buildings and improvements                                              16,745             15,872
   Machinery and equipment                                                 14,364             13,270
   Furniture and office equipment                                          17,477             14,918
   Construction in progress                                                   377                574
                                                                           51,241             46,912
   Less accumulated depreciation                                         (28,899)           (25,046)
                                                                           22,342             21,866
Other assets:
   Cash surrender values (founders' policies)                              13,197              9,918
   Costs in excess of net assets acquired                                   9,599             10,604
   Other investments                                                        8,634              4,610
   Other noncurrent assets                                                  5,826              4,428
                                                                           37,256             29,560

                                                                        $ 118,952          $ 125,683

                         The accompanying notes are an integral part of these statements.`

14

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# X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS  Continued

(in thousands, except share and per share data)

`December 29,       December 30,
                                                                           2001               2000    
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
   Accounts payable                                                       $ 1,713            $ 2,456
     Accrued liabilities:
       Payroll and employee benefits                                        2,743              2,603
       Income taxes                                                             -              5,063
       Other                                                                2,767              2,423
                                                                            7,223             12,545

Temporary shareholders' investment:
   Value of shares subject to redemption agreements;
     4,540,000 shares issued and outstanding in 2001 and 2000              45,400             45,400

Permanent shareholders' investment:
   Preferred stock, $.10 par value, 5,000,000 shares
     authorized; none issued                                                    -                  -
   Common stock, $.10 par value, 50,000,000 shares
     authorized; 16,761,118 and 16,797,321 shares
     issued and outstanding in 2001 and 2000 respectively,
     not subject to redemption agreements                                   1,676              1,680
   Additional paid-in capital                                               5,792              5,993
   Retained earnings                                                       61,431             61,639
   Accumulated other comprehensive loss                                   (2,208)            (1,574)
   Stock conversion program                                                 (362)                  -
                                                                           66,329             67,738
                                                                        $ 118,952          $ 125,683

                         The accompanying notes are an integral part of these statements.`

15

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# X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

`For the Year Ended               
                                                         December 29,        December 30,      January 1,
                                                             2001                2000             2000   

Net sales                                                $  91,658           $ 103,449        $ 100,209
Cost of sales                                               34,587              36,943           34,218
     Gross Profit                                           57,071              66,506           65,991

Operating expenses:
     Selling and marketing                                  23,231              21,685           20,096
     General and administrative                             15,380              14,977           14,953
     Research, development and engineering                  15,499              11,771           10,689
     Restructuring charge                                      862                   -                -
                                                            54,972              48,433           45,738

     Operating income                                        2,099              18,073           20,253

Other income                                                   959               1,090              827
Write-down of other investments                             (1,125)                  -                -

     Income before income taxes                              1,933              19,163           21,080

Income taxes                                                     -               6,755            7,431

Net Income                                               $   1,933           $  12,408        $  13,649

Earnings per share

     Basic                                               $     .09           $     .59        $     .65

     Diluted                                             $     .09           $     .58        $     .62


                         The accompanying notes are an integral part of these statements.`

16

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# X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PERMANENT SHAREHOLDERS INVESTMENT

(in thousands, except share data)

`Accumulated
                                                                                 Other                      Total
                                         Additional                          Comprehensive    Stock       Permanent
                                Common     Paid-in    Retained  Shares in       Income      Conversion   Shareholders'
                                Stock      Capital    Earnings    Escrow        (Loss)       Program      Investment 
BALANCES
   JANUARY 2, 1999            $ 1,664     $ 8,143    $ 39,793   $ (4,794)     $    (87)       $     -       $ 44,719
Net income                          -           -      13,649           -             -             -         13,649
Translation adjustment              -           -           -           -         (659)             -          (659)
Unrealized loss on short-
  term investments                  -           -           -           -         (468)             -          (468)
Total comprehensive income                                                                                    12,522
Cash dividends declared
   of $.10 per share                -           -      (2,095)       (26)             -             -        (2,121)
Issuance of 62,717 shares
   of common stock under
   employee benefit plans           6         296           -           -             -             -            302
BALANCES,
   JANUARY 1, 2000              1,670       8,439      51,347     (4,820)       (1,214)             -         55,422
Net income                          -           -      12,408           -             -             -         12,408
Translation adjustment              -           -           -           -         (522)             -          (522)
Unrealized gain on short-
   term investments                 -           -           -           -           162                          162
Total comprehensive income                                                                                    12,048
Cash dividends declared
   of $.10 per share                -           -     (2,116)        (13)             -             -        (2,129)
Issuance of 96,425 shares
   of common stock under
   employee benefit plans          10         467           -           -             -             -            477
Sale of 257,264 shares
   by escrow fund                   -     (2,913)           -       4,833             -             -          1,920
BALANCES,
   DECEMBER 30, 2000            1,680       5,993      61,639           -       (1,574)             -         67,738
Net income                          -           -       1,933           -             -             -          1,933
Translation adjustment              -           -           -           -         (565)             -          (565)
Unrealized loss on short-
   term investments                 -           -           -           -          (69)             -           (69)
Total comprehensive income                                                                                     1,299
Cash dividends declared
   of $.10 per share                -           -      (2,141)          -             -             -        (2,141)
Issuance of 195,161 shares
   of common stock under
   employee benefit plans          19       1,525           -           -             -         (517)          1,027
Repurchase of 231,364
   shares of common stock        (23)     (1,726)           -           -             -             -        (1,749)
Stock conversion program            -           -           -           -             -           155            155
BALANCES,
   DECEMBER 29, 2001          $ 1,676     $ 5,792    $ 61,431   $       -     $ (2,208)       $ (362)       $ 66,329


                         The accompanying notes are an integral part of these statements.`

17

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# X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

`For the year ended          
                                                                   December 29,   December 30,  January 1,
CASH FLOWS FROM OPERATING ACTIVITIES:                                  2001           2000         2000  
   Net Income                                                        $  1,933       $ 12,408     $ 13,649
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                                    6,168          5,717        5,862
       Allowance for doubtful accounts                                    494            388          412
       Deferred income taxes                                            4,082        (4,669)        (246)
       Write-down of other investments                                  1,125              -            -
       Other                                                              299             18         (58)
   Changes in operating assets and liabilities
     net of effects from acquisitions:
       Accounts receivable                                              7,246            335      (1,576)
       Inventories                                                        700            415          278
       Prepaid expenses and other current and noncurrent assets         (880)            144        (547)
       Accounts payable                                                 (806)            217          638
       Income taxes payable                                           (9,142)          4,738          135
       Other accrued liabilities                                          775            792        1,818
         Net cash provided by operating activities                     11,994         20,503       20,365

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from maturities of short-term investments                   1,442          2,606        1,258
   Proceeds from sales of short-term investments                       24,273         19,420       19,875
   Purchases of short-term investments                               (29,020)       (12,378)     (24,473)
   Capital expenditures                                               (4,972)        (4,140)      (4,343)
   Acquisitions, less cash acquired                                         -        (4,505)            -
   Investment in founders' life insurance                             (3,279)        (3,302)      (3,525)
   Increase in other investments                                      (5,149)        (4,610)            -
   Purchases of other assets                                          (1,641)        (1,628)      (1,373)
   Other investing activities                                              56           (16)           85
         Net cash used for investing activities                      (18,290)        (8,553)     (12,496)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid                                                     (2,141)        (2,129)      (2,121)
   Issuance of common stock                                             1,027            477          302
   Repurchase of common stock                                         (1,749)              -            -
   Proceeds from sales of escrow investments                                -          1,920            -
         Net cash provided by (used for) financing activities         (2,863)            268      (1,819)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
   CASH EQUIVALENTS                                                     (272)          (521)        (688)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  (9,431)         11,697        5,362

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                         18,595          6,898        1,536

CASH AND CASH EQUIVALENTS AT END OF YEAR                             $  9,164       $ 18,595     $  6,898


                         The accompanying notes are an integral part of these statements.`

18

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# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 1--THE
COMPANY AND OTHER INFORMATION

X-Rite, Incorporated and
its subsidiaries (individually X-Rite and all of its subsidiaries
the Company) are engaged in the development, manufacture and sale of
technically sophisticated instrumentation and user friendly software solutions
for a wide variety of color, light and shape measurement applications. Principal
markets for the Companys products include the paint, plastic, textile,
packaging, photographic, graphic arts and medical industries, in addition to
commercial and research laboratories. Based on the nature of its products,
customers and markets, the Companys management evaluates its business as a
single reportable operating segment.

Products are sold worldwide
through the Companys own sales personnel and through independent sales
representatives. The Company is headquartered in Grandville, Michigan and has
other domestic operations in New Hampshire and Massachusetts. In addition, the
Company has locations in Germany, England, Hong Kong, the Czech Republic,
France, Italy, China and Japan. Manufacturing is done in the United States and
Germany.

Sales to customers are
attributed to the geographic areas based upon the location of the customer. Long
lived assets consist of plant and equipment (in thousands):

`2001              2000             1999  
Domestic sales:
   U.S. operations                                    $ 52,637         $  65,136        $  65,732
International sales:
   U.S. operations export sales
     to unaffiliated customers                          13,530            12,002           11,023
   Foreign subsidiary sales                             25,491            26,311           23,454

                                                        39,021            38,313           34,477

                                                      $ 91,658         $ 103,449        $ 100,209

Long lived assets:
   U.S. operations                                    $ 21,054         $  20,285        $  19,884
   International                                         1,288             1,581            1,171

                                                      $ 22,342         $  21,866        $  21,055`

No single customer
accounted for more than 10 percent of total net sales in 2001, 2000 or 1999.

## NOTE
2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
The consolidated financial
statements include the accounts of X-Rite, Incorporated and its subsidiaries.
All significant inter-company accounts and transactions have been eliminated.
The Company utilizes a 4-4-5 quarterly accounting cycle. Accordingly, 2001 ended
on December 29, 2001, 2000 ended on December 30, 2000 and 1999 ended on January
1, 2000. The Companys 2001, 2000 and 1999 results from operations would
have been approximately the same if each year had ended on December 31.

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.

19

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# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Inventories
Inventories are stated at
the lower of cost, determined on a first-in first-out basis, or market.
Components of inventories are summarized as follows (in thousands):

`2001                      2000

       Raw materials                         $  6,079                  $   7,024
       Work in process                          5,078                      4,903
       Finished goods                           4,078                      3,873
                                            $  15,235                   $ 15,800`

Property, Plant, and Equipment and Depreciation
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, 5 to 40
years; machinery and equipment, 3 to 10 years; and furniture and office
equipment, 3 to 10 years.

Software Development Costs
Development costs incurred
in the 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 and amortized using the greater of
the straight-line method over a three-year period, or the amount computed by
applying the ratio of current product revenues to total estimated product
revenues.

The Company capitalized
$1.6, $1.6 and $1.3 million of software development costs during 2001, 2000 and
1999, respectively. Amortization expense was $1.2, $1.4 and $1.2 million in
2001, 2000 and 1999, respectively. The net capitalized software development
costs included in other noncurrent assets were $2.8 and $2.4 million as of
December 29, 2001 and December 30, 2000, respectively.

Costs in Excess of Net Assets Acquired
Costs in excess of net
assets acquired resulted primarily from the 1995 acquisition of Labsphere, Inc.,
and the 2000 acquisitions of the assets of Optronik GmbH and the HoloVision
Products group. The costs associated with the Labsphere acquisition are being
amortized using the straight-line method over twenty years. The costs associated
with the Optronik GmbH and HoloVision Products Group acquisitions are being
amortized using the straight-line method over ten years. Accumulated
amortization of excess acquisition costs was $4.4 and $3.4 million at December
29, 2001 and December 30, 2000, respectively.

Long Lived Assets
The Company evaluates the
recoverability of its long lived assets by determining whether unamortized
balances can be recovered through undiscounted future operating cash flows over
the remaining lives of the assets in accordance with the provisions of Statement
of Financial Accounting Standards (SFAS) No. 121. If the sum of the expected
future cash flows is less than the carrying value of the assets, an impairment
loss is recognized for the excess of the carrying value over the fair value. The
estimated fair value is determined by discounting the expected future cash flows
at a rate that would be required for a similar investment with like risks. No
significant impairments were provided for in 2001, 2000 or 1999.

Investments Carried at Cost
Included in other
investments in 2001 and 2000, respectively, are net $8.6 and $4.6 million
related to investments made by the Companys strategic venture capital
group, XR Ventures, LLC which was formed in 2000. The Company funds acquisitions
made by XR Ventures, LLC and in exchange receives its investment back in full
before any distributions are made. Each investment represents less than 20
percent of the ownership of the respective investee. Because the Company is
unable to exercise significant influence over the operating and

20

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# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Investments Carried at Cost, continued
financial policies of each
respective investee, the investments have been recorded at cost. The Company
periodically evaluates the carrying value of each investment to determine
whether a decline in fair value below the respective cost has occurred. If the
decline is determined to be other than temporary, the carrying value is adjusted
to the then current fair value as the new cost basis and a loss is recognized.
In 2001 it was determined that the fair value of certain investments had been
permanently impaired requiring a write down of $1.1 million. No such write downs
occurred in 2000.

Temporary and Permanent Shareholders Investment
During 1998 the Company
entered into agreements with its founding shareholders for the future redemption
of 4.54 million shares or 21.3 percent of its outstanding stock at December 29,
2001 (see Note 8). These shares have been reclassified on the balance sheet to a
temporary equity account. The Company records the results of its operations and
all other equity transactions as a component of permanent shareholders
investment.

Income Taxes
The provision for income
taxes is based on earnings reported in the financial statements. Deferred income
taxes are recognized for all temporary differences between tax and financial
reporting, and are measured using the enacted tax rates expected to apply to the
taxable income in the years in which those temporary differences are expected to
reverse.

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.

Advertising Costs
Advertising costs are charged to operations in the period incurred and totaled $1.5, $1.7 and $2.0 million in
2001, 2000 and 1999, respectively.

Per Share Data
Basic earnings per share
(EPS) are 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:

`2001             2000             1999
  Numerators:
    Net income numerators for
      both basic and diluted EPS (in thousands)         $1,933          $12,408          $13,649

  Denominators:
    Denominators for basic EPS
      Weighted-average common
        shares outstanding                          21,394,775       21,171,963       20,951,692
    Potentially dilutive shares
      Shares subject to
        redemption agreements (see Note 8)             384,252          358,722        1,155,096
      Stock options                                     51,542           37,768            6,985

    Denominators for diluted EPS                    21,830,569       21,568,453       22,113,773`

21

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Per Share Data, continued
Certain exercisable stock
options were not included in the calculations of diluted EPS because option
prices were greater than average market prices for the periods presented. The
number of stock options not included in the calculation and the ranges of
exercise prices were 1,022,900 and $10.13 - $19.50 in 2001, 1,005,800 and $7.03
- $19.50 in 2000, and 984,500 and $7.03 - $19.50 in 1999.

Foreign Currency Translation
Foreign currency balance
sheet accounts are translated into U.S. dollars at the exchange rate in effect
at year end. 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 (loss) in the
statements of permanent shareholders investment. Gains and losses arising
from re-measuring foreign currency transactions into the appropriate currency
are included in the determination of net income.

Fair Value of
Financial Instruments
The fair value of the Company's financial instruments included in current assets and current liabilities
approximates fair value due to their short-term nature.

Use of
Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. 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
On December 31, 2000, the
Company adopted SFAS No. 133, 137 and 138. These standards establish accounting
and reporting standards requiring that every derivative instrument be recorded
in the balance sheet as an asset or liability measured at its current fair value
and that changes in a derivatives fair value be recognized currently in
the determination of net income unless specific hedge accounting criteria are
met. The impact of adopting this standard was not material to the consolidated
financial statements of the Company.

SFAS No. 141,
Business Combinations and SFAS No. 142 Goodwill and Other
Intangible Assets amend the accounting for business combinations, goodwill
and intangible assets. Effective for any business combination that is completed
after June 30, 2001, SFAS No. 141 eliminates the pooling of interests method of
accounting for business combinations and further clarifies the criteria to
recognize intangible assets separately from goodwill. SFAS No. 142 no longer
requires amortization of goodwill and indefinite lived intangible assets.
Separate intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. In addition, SFAS No 142
establishes a new method of testing goodwill for impairment by using a fair
value approach. The amortization provisions of SFAS No. 142 apply to goodwill
and intangible assets acquired after June 30, 2001. For goodwill and intangible
assets acquired prior to July 1, 2001, companies are required to adopt the
pronouncement in their fiscal year beginning after December 15, 2001.

Total goodwill included in
the Companys statements was $9.6 million at December 29, 2001 and $10.6
million at December 30, 2000. Goodwill amortization expense was $1.0, $.7 and
$.5 million for the years ended December 29, 2001, December 30, 2000 and January
1, 2000, respectively. The Company is currently assessing the effect of the new
standards related to impairment testing of goodwill, but at this time can not
estimate the impact if any, on the consolidated financial statements.

22

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

New Accounting
Standards, continued
In addition, SFAS No. 144, Accounting
for Impairment or Disposal of Long-Lived Assets, requires long-lived
assets to be measured at the lower of either the carrying amount or of the fair
value less the cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet occurred. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. This standard is
effective for the Companys fiscal year ending December 28, 2002. The
Company does not expect that adoption of this statement will have a material
effect on the consolidated financial statements.

Reclassifications
Certain prior year
information has been reclassified to conform to the current year presentation.

## NOTE
3--SHORT-TERM INVESTMENTS

The Company classifies all
of its short-term investments as available for sale securities. Such short-term
investments consist primarily of United States federal agency securities, state
and municipal securities, mutual funds, corporate bonds and preferred stocks,
which are stated at market value with unrealized gains and losses on such
securities reflected net of tax as other comprehensive income (loss) in
permanent shareholders investment. Realized gains and losses are included
in earnings and are derived using the specific identification method for
determining the cost of the securities. It is the Companys intent to
maintain a liquid portfolio to take advantage of investment opportunities;
therefore, all securities are considered to be available-for-sale and are
classified as current assets.
The carrying value of the Company's investments were as follows (in thousands):

`2001                     2000      
                                                                     Market                   Market
                                                           Cost       Value          Cost      Value

Investments:
  U.S. federal agency obligations                      $ 2,570       $ 2,551     $ 1,000    $     979
  State and municipal securities                        10,110        10,110       7,616        7,615
  Mutual funds                                           1,530         1,151       1,530        1,361
  Corporate bonds                                          820           809       1,680        1,611
  Preferred stocks                                       1,217         1,046       1,117          903

                                                        16,247        15,667      12,943       12,469
Unrealized losses                                         (580)           -         (474)          - 

    Totals                                             $15,667       $15,667     $12,469      $12,469`

Maturities of short-term
investments at December 29, 2001 were as follows (in thousands):

`Market
                                                      Cost            Cost
  Due within one year                             $     -         $      -
  Due after one year through five years              4,765           4,744
  Due after five years                               8,735           8,726
  No set maturity                                    2,747           2,197
                                                  $ 16,247        $ 15,667`

23

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 4--REVOLVING CREDIT AGREEMENT

The Company maintains a
revolving line of credit agreement with a bank which provides for maximum
borrowings of $20 million with interest at 1.5% over the Effective Federal
Funds Rate (1.52% at December 29, 2001). The borrowings are unsecured and
no compensating balances are required by the agreement. There were no
significant borrowings under this agreement during 2001, 2000 or 1999.

## NOTE
5--RESTRUCTURING

In September 2001, the
Company announced a workforce reduction plan and recorded a $.9 million pretax
charge to earnings. This charge has been classified separately as a component of
operating expense under the caption of Restructuring Charge and
represents costs associated with non-voluntary termination benefits for
approximately 60 positions. Benefit payments began during the fourth quarter of
2001. As of December 29, 2001, 43 positions have been eliminated. The Company
anticipates the balance of the restructuring will be complete by September 2002.

## NOTE 6--INCOME
TAXES

The provision for income taxes consisted of the following (in thousands):

`2001            2000           1999
              Current:
                  Federal                              $(4,264)        $10,988        $ 7,386
                  State                                    180             254            256
                  Foreign                                  (35)             15             35

                                                        (4,119)         11,257          7,677
               Deferred:
                  Federal                                4,119          (4,502)          (246)

                                                       $     -         $ 6,755        $ 7,431`

The preceding table
excludes a tax benefit of $.2 million in 2000 related to market value
adjustments on short-term investments, which is recorded as a component of other
comprehensive income.

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

`2001              2000
Assets:
  Inventory reserves                                   $   710          $    610
  Accounts receivable reserves                             355               209
  Amortization of intangible assets                      2,253             2,282
  Deferred income                                          185             5,008
  Financial accruals and reserves
    not currently deductible                             1,553               997

                                                       $ 5,056           $ 9,106

Liabilities:
  Depreciation                                         $   117           $   181
  Software development costs                               966               820
  Other                                                      -                50
                                                       $ 1,083           $ 1,051`

24

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE 6--INCOME
TAXES, continued

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

`2001               2000             1999
Income taxes computed at statutory rate of 35%                $ 677             $6,707           $7,378
Increase (decrease) in taxes resulting from
    Life insurance premiums                                     365                358              279
   Non-deductible goodwill                                      209                196              190
   State taxes                                                  117                165              166
   Foreign sales corporation                                   (865)              (748)            (794)
   Tax exempt interest                                         (100)              (255)            (177)
   Other                                                       (403)               332              389

                                                              $   -             $6,755           $7,431`

Cash expended for income
taxes was $5.1, $6.8 and $7.6 million in 2001, 2000 and 1999, respectively.

## NOTE
7--EMPLOYEE BENEFIT AND STOCK 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 plan. Participant
contributions are matched by the Company based on applicable matching formulas.
The Companys matching expense for the plans was $.4, $.6 and $.5 million
in 2001, 2000 and 1999, respectively.

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. During 2001, 2000 and
1999, employees purchased 32,711, 36,940 and 40,137 shares, respectively. The
weighted average fair value of shares purchased was $8.54, $9.47 and $6.77 in
2001, 2000 and 1999, respectively. At December 29, 2001, 763,833 shares were
available for future purchases.

The Company has two stock
option plans covering 2.8 million shares of common stock. These plans permit
options to be granted to key employees and the Companys Board of
Directors. Options are granted at market price on the date of grant and are
exercisable based on vesting schedules determined at the time of grant. No
options are exercisable after ten years from the date of grant. At December 29,
2001, 1.2 million shares were available for future granting. A summary of shares
subject to options follows:

`2001                   2000                   1999      
                                                   Weighted               Weighted               Weighted
                                                    Average                Average                Average
                                                   Exercise               Exercise               Exercise
                                           Shares    Prices       Shares    Prices      Shares     Prices

Outstanding at beginning of year        1,541,300    $12.53    1,305,200    $13.26    1,093,100    $14.54
  Granted                                 266,500      8.63      247,500      8.69      244,500      7.08
  Exercised                               (53,500)     6.35             -               (10,000)     2.47
  Canceled                                (66,900)    12.56      (11,400)    12.33      (22,400)    13.39

Outstanding at end of year              1,687,400     12.11    1,541,300     12.53    1,305,200     13.26

Exercisable at end of year              1,406,400     12.77    1,274,300     13.57    1,076,500     14.27

Weighted average fair value of
  options granted                           $4.11                  $4.30                  $2.85`

25

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
7--EMPLOYEE BENEFIT AND STOCK PLANS, continued

A summary of stock options outstanding at December 29, 2001 follows:

`Outstanding                                Exercisable         
                                                       Weighted
                                          Weighted      Average                             Weighted
                                          Average      Remaining                            Average
                                          Exercise    Contractual                           Exercise
    Price Ranges            Shares         Price      Life(Years)            Shares          Price

   $ 6.38 - $ 8.39           415,500       $ 7.05        7.5                 328,500         $6.91
     9.11 -  12.00           529,100        10.17        6.2                 335,100         10.67
    13.00 -  15.00           256,400        13.93        5.5                 256,400         13.93
    15.63 -  19.50           486,400        17.58        4.7                 486,400         17.58

                           1,687,400        12.11        6.0               1,406,400         12.77`

The Company accounts for
its employee stock purchase plan and its stock option plans under APB Opinion
25; therefore, no compensation costs are recognized when employees purchase
stock or when stock options are authorized, granted or exercised.

If compensation costs had
been computed under SFAS No. 123, Accounting for Stock-Based
Compensation, the Companys net income and earnings per share (basic
and diluted) would have been reduced by approximately $.7 million and $.03 in
2001, $.7 million and $.03 in 2000, and $.5 million and $.02 in 1999.

For purposes of computing compensation costs of stock options granted, the fair value of each stock option grant
was estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:

`2001               2000             1999

  Dividend yield                                  .9%               .9%              .7%
  Volatility                                      52%               54%              40%
  Risk-free interest rates                3.9% - 5.0%       5.7% - 6.7%      4.7% - 5.9%
  Expected term of options                    5 years           5 years          5 years`

Black-Scholes is a widely
accepted stock option pricing model, however, the ultimate value of stock
options granted will be determined by the actual lives of options granted and
future price levels of the Companys common stock.

The Company has a Cash
Bonus Conversion Plan covering 400,000 shares of stock. This plan provides an
opportunity for certain executives of the Company to purchase restricted stock
in an amount equal to their annual cash bonus. Shares are issued in the name of
the employee, who has all rights of a shareholder, subject to certain
restrictions on transferability and a risk of forfeiture. The forfeiture
provisions lapse as to 20 percent after six months and an additional 20 percent
annually thereafter. During 2001, 106,450 shares were issued under this plan, no
shares were forfeited, and the forfeiture provisions expired on 23,031 shares.
At December 29, 2001, 147,173 shares remained subject to forfeiture provisions
and restrictions on transferability. During 2000, 59,485 shares were issued
under this plan, no shares were forfeited, and the forfeiture provisions expired
on 11,273 shares. During 1999, 12,580 shares were issued under this plan, no
shares were forfeited, and the forfeiture provisions expired on 1,831 shares.

The difference between the
purchase price and the fair value of the restricted stock at the date of
purchase, if any, for remaining shares subject to forfeiture provisions has been
recorded as unearned compensation. This amount is included as a separate
component of permanent shareholders investment under the caption Stock
Conversion Program. The unearned compensation is being charged to expense as the
forfeiture provisions lapse.

26

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## NOTE
7--EMPLOYEE BENEFIT AND STOCK PLANS, continued

The Company also has a
restricted stock plan covering 400,000 shares of common stock. 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, but in no event
shall have a duration period in excess of ten years. In 2001, 2,500 shares were
awarded. No shares were awarded in 2000 or 1999. At December 29, 2001, there
were 342,700 shares available for future awards.

## NOTE
8--FOUNDERS STOCK REDEMPTION AGREEMENTS

During 1998, the Company
entered into agreements with its founding shareholders for the future purchase
of 4.5 million shares, or 21.3 percent of the Companys outstanding stock
at December 29, 2001. The stock purchases will occur following the later of the
death of each founder and his spouse. The price the Company will pay for these
shares will reflect a 10 percent discount from the average closing price for the
ninety trading days preceding the later death of the founder and his spouse,
although the discounted price may not be less than $10 per share (a total of
$45.4 million) or more than $25 per share (a total of $113.5 million).

The shares subject to the
agreements have been classified on the balance sheet as temporary equity. The
classification of $45.4 million was determined by multiplying the applicable
shares by the minimum purchase price of $10, since the average closing price of
the Companys common stock, after applying the 10 percent discount, for the
ninety trading days preceding December 29, 2001 was less than $10. The cost of
the purchase agreements will be funded by $160.0 million of proceeds from life
insurance policies the Company has purchased on the lives of certain of these
individuals. The Company anticipates that stock purchases will not coincide with
the receipt of insurance proceeds; therefore, borrowed funds may be needed from
time to time to finance the Companys purchase obligations. Insurance was
purchased at the $160.0 million level in order to cover both the maximum
aggregate purchase price and anticipated borrowing costs. Life insurance
premiums total $4.3 million each year while all the policies remain in effect.
Of the $4.3 million paid in 2001, 2000 and 1999 approximately $1.0, $1.0 and
$1.2, respectively, were classified as expense.

During the fourth quarter
of 2001 the Company was notified of the death of one its founders whose shares
are included in the purchase program. Under the terms of the agreement with that
founder, the Company is obligated to purchase 1,120,000 shares of stock at
$10.00 per share or $11.2 million. This founder was not insured; therefore, as
anticipated at the time the agreement was entered into, the Company will fund
this obligation with cash and short-term investments. The transaction was
completed in January of 2002.

## NOTE
9SHAREHOLDER PROTECTION RIGHTS AGREEMENT

In November of 2001, the
Companys Board of Directors adopted a Shareholder Protection Rights
Plan(Plan), to be 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.

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.

## ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

27

---

# X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

## (a)      Directors

Information relating to
directors appearing under the caption Election of Directors in the
definitive Proxy Statement for the 2002 Annual Meeting of shareholders and filed
with the Commission is incorporated by reference.

## (b)      Officers

Information relating to executive officers is included in this report in the last section 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 2002 Annual meeting of Shareholders and filed
with the Commission is incorporated herein by reference.

## ITEM 11.
EXECUTIVE COMPENSATION

The information contained
under the caption Executive Compensation contained in the definitive
Proxy Statement for the 2002 Annual Meeting of Shareholders and filed with the
Commission is incorporated herein by reference.

## ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the captioned "Securities Ownership of Management" contained in the definitive
Proxy Statement for the 2002 Annual Meeting of Shareholders and filed with the Commission is incorporated herein
by reference.

## ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

## PART IV
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

|(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 Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Permanent Shareholders Investment
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
|(a)2 | The following financial statements schedule is filed as a part of this report on page 30:                                                                                                                                                           
|     | Report of Independent Public Accounts on Financial Statement Schedule and Schedule II
Valuation and Qualifying Accounts and Reserves for the years ended December 29,
2001, December 30, 2000 and January 1, 2000.                                  
|(b)  | See Exhibit Index located on page 31.                                                                                                                                                                                                               

28

---

|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## 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 29, 2002 | /s/ Richard E. Cook
_______________________________________________
Richard E. Cook, Chief Executive                             
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------
|March 29, 2002 | /s/ Duane F. Kluting
_______________________________________________
Duane F. Kluting, Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below on
this 29th day of March, 2002, 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 Richard E. Cook and
Duane F. Kluting, 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/ Peter M. Banks
__________________________________
Dr. Peter M. Banks, Director         | /s/ Stanley W. Cheff
__________________________________
Stanley W. Cheff, Director
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------
|/s/ Richard E. Cook    
__________________________________
Richard E. Cook, Director       | /s/ James A. Knister
__________________________________
James A. Knister, Director
|/s/ Rufus S. Teesdale  
__________________________________
Rufus S. Teesdale, Director     | /s/ John E. Utley
__________________________________
John E. Utley, Director      
|/s/ Ronald A. Vandenberg
__________________________________
Ronald A. VandenBerg, Director |                                                                                   

29

---

Report of Independent Public Accountants on Financial Statement Schedule

To the Shareholders of X-Rite, Incorporated:
We have audited in
accordance with auditing standards generally accepted in the United States, the
consolidated financial statements of X-Rite, Incorporated included in this Form
10-K, and have issued our report thereon dated January 29, 2002. Our audits were
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule listed at Item 14(a)2 above is the responsibility
of the Companys management and is presented for the purpose of complying
with the Securities and Exchange Commissions rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/Arthur Andersen LLP
Grand Rapids, Michigan
January 29, 2002

Valuation and Qualifying Accounts
X-Rite, Incorporated
(in thousands)

`Additions    Deducted
                                                      Balance at     Charged to      from      Balance at
                                                       Beginning       Costs &      Costs &        End
                                                       of Period      Expenses     Expenses     of Period
Year ended December 29, 2001

Allowance for losses on accounts receivable               1,506          494          763        1,237
Restructuring reserve                                         -          862          347          515

Year ended December 30, 2000

Allowance for losses on accounts receivable               1,110          746          350        1,506

Year ended January 1, 2000

Allowance for losses on accounts receivable                 798          412          100        1,110`

30

---

# EXHIBIT INDEX

|3(a)                                                                                                                                                                                         | 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(b)                                                                                                                                                                                         | 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(c)                                                                                                                                                                                         | 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(d)                                                                                                                                                                                         | 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(e)                                                                                                                                                                                         | Amended and Restated Bylaws of X-Rite, Incorporated, as amended and restated September 19, 2001.                                                                                                                                                                                                                                                 
|4(a)                                                                                                                                                                                         | 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(b)                                                                                                                                                                                         | 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
|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(a)                                                                                                                                                                                       | X-Rite, Incorporated Amended and Restated Outside Director Stock Option Plan,
effective as of September 17, 1996 (filed as exhibit to Form 10-Q for the
quarter ended September 30, 1996 (Commission File No.                                                                                                                                    
|*10(a)                                                                                                                                                                                       | X-Rite, Incorporated Amended and Restated Outside Director Stock Option Plan,
effective as of September 17, 1996 (filed as exhibit to Form 10-Q for the
quarter ended September 30, 1996 (Commission File No. 0-14800) and incorporated herein by reference)                                                                                     
|*10(b)                                                                                                                                                                                       | X-Rite, Incorporated Cash Bonus Conversion Plan (filed as Appendix A to the
definitive proxy statement dated April 8, 1996 relating to the Companys
1996 annual meeting (Commission File No. 0-14800) and incorporated herein by
reference)                                                                                                     
|*10(c)                                                                                                                                                                                       | Form of Indemnity Contract entered into between the registrant and members of
the board of directors (filed as exhibit to Form 10-Q for the quarter ended June
30, 1996 (Commission File No. 0-14800) and incorporated herein by reference)                                                                                                      
|*10(d)                                                                                                                                                                                       | Employment Agreement dated April 17,1998 between the registrant and Richard E. Cook (filed as exhibit to
Form 10-K for the year ended January 2, 1999 (Commission File No. 0-14800) and incorporated herein by
reference)                                                                                                                        
|*10(f)                                                                                                                                                                                       | Form of X-Rite, Incorporated Founders Redemption Agreement entered into between
the registrant and certain persons, together with a list of such persons (filed
as exhibit to Form 10-Q for the quarter ended July 3, 1999 Commission File No.
0-14800) and incorporated herein by reference)                                                    
|*10(g)                                                                                                                                                                                       | First Amendment to X-Rite, Incorporated Founders Redemption Agreement dated July
16, 1999 between the registrant and Ted Thompson (filed as exhibit to Form 10-Q
for the quarter ended July 3, 1999 (Commission File No. 0-14800) and
incorporated herein by reference)                                                                          
|*10(h)                                                                                                                                                                                       | Chairmans agreement dated July 16, 1999 between the registrant and Ted
Thompson (filed as exhibit to Form 10-Q for the quarter ended July 3, 1999
(Commission File No. 0-14800) and incorporated herein by reference)                                                                                                                           

31

---

|*10(i) | Employment arrangement effective upon a change in control entered into between
the registrant and certain persons together with a list of such persons (filed
as exhibit to Form 10-K for the year ended January 1, 2000 (Commission File No.
0-14800) and incorporated herein by reference)               
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10(j) | Deferred compensation trust agreement dated November 23, 1999 between the registrant and Richard E.
Cook. (filed as exhibit to Form 10-K for the year ended January 1, 2000 (Commission File No.0-14800) and
incorporated herein by reference)                                                             
|*10(k) | Operating Agreement for XR Ventures, LLC dated September 14, 2000, by and between XR Ventures, LLC the
registrant, Dr. Peter M. Banks and Mr. James A. Knister. (filed as exhibit to Form 10-Q for the quarter
ended September 30, 2000 (Commission File No. 0-14800) and incorporated herein by reference)
|*10(l) | Employment Agreement dated June 12, 2001 between the registrant and Michael C.
Ferrara (filed as exhibit to Form 10-Q for the quarter ended June 30, 2001
(Commission File No. 0-14800) and incorporated herein by reference)                                                                              
|*10(m) | First Amendment to the X-Rite, Incorporated Amended and Restated Cash Bonus
Conversion Plan dated May 24, 2001 (filed as exhibit to Form 10-Q for the
quarter ended September 29, 2001 (Commission File No. 0-14800) and incorporated
herein by reference.                                                 
|*10(n) | First Amendment to the Chairmans Agreement dated September 13, 2001
entered into between the registrant and Ted Thompson (filed as exhibit to Form
10-Q for the quarter ended September 29, 2001 (Commission File No. 0-14800) and
incorporated herein by reference.                                      
|21     | Subsidiaries of the registrant                                                                                                                                                                                                                                                                             
|23     | Consent of independent public accountants                                                                                                                                                                                                                                                                  
|99.1   | Letter to Commission Pursuant to Temporary Note 3T                                                                                                                                                                                                                                                         

32

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EXHIBIT 3(e)

# AMENDED AND RESTATED BYLAWS

of

X-RITE, INCORPORATED

A Michigan Corporation

As Amended and Restated September 19, 2001

# ARTICLE I.  OFFICES

Section 1. Registered Office. The registered office of the Corporation shall be as specified in the
Articles of Incorporation.  The Corporation shall keep records containing the names and addresses of all
shareholders, the number, class and series of shares held by each, and the dates when they respectively became
holders of record thereof, at its registered office or at the office of its transfer agent.

Section 2.  Other Offices.  The business of the Corporation may be transacted in such locations other
than the registered office, within or outside the State of Michigan, as the Board of Directors may from time to
time determine.

# ARTICLE II.  CAPITAL STOCK

Section 1.  Stock Certificates. Certificates representing shares of the capital stock of the Corporation
shall be in such form as is approved by the Board of Directors.  Certificates shall be signed by the Chairman of
the Board of Directors, Chief Executive Officer, President or a Vice President, and may also be signed by another
officer designated by the Board of Directors, and shall be sealed with the seal of the Corporation, or a
facsimile thereof, if one be adopted.  The signatures of the officers may be facsimiles.  In the event an officer
who has signed, or whose facsimile signature has been placed upon, a certificate ceases to be such officer before
the certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at
the date of issue.

Section 2.   Replacement of Lost or Destroyed Certificates.  In the event of the loss or destruction of
a stock certificate, no new certificate shall be issued in place thereof until the Corporation has received from
the registered holder such assurances, representations, warranties and/or guarantees as the Board of Directors,
in its sole discretion, shall deem advisable, and until the Corporation receives sufficient indemnification
protecting it against any claim that may be made on account of such loss or destroyed certificate, or the
issuance of any new certificate in place thereof, including an indemnity bond in such amount and with sureties,
if any, as the Board of Directors, in its sole discretion, deems advisable.

Section 3.  Transfer of Shares.  Shares of stock of the Corporation shall be transferable only upon the
books of the Corporation.  The old certificates shall be surrendered to the Corporation by delivery thereof to
the person in charge of the stock transfer books of the Corporation, or to such other person as the Board of
Directors may designate, properly endorsed for transfer, and such certificates shall be canceled before a new
certificate is issued.  The Corporation shall be entitled to treat the person in whose name any share, right or
option is registered as the owner thereof for all purposes, and shall not be bound to recognize any equitable or
other claim with respect thereto, regardless of any notice thereof, except as may be specifically required by the
laws of the State of  Michigan.



---

Section 4.  Rules Governing Stock Certificates.  The Board of Directors shall have the power and
authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and
registration of certificates of stock, and may appoint a transfer agent and a registrar of transfer, and may
require all such certificates to bear the signature of such transfer agent and of such registrar of transfers.

Section 5.  Record Date for Stock Rights.  The Board of Directors may fix in advance a date not
exceeding sixty (60) days preceding the date of payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for
the determination of the shareholders entitled to receive payment of any such dividends, or any such allotment of
rights, or to exercise the rights with respect to any such change, conversion, or exchange of capital stock; and
in such case, only shareholders of record on the date so fixed shall be entitled to receive payment of such
dividends, or allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of
any stock on the books of the Corporation after any such record date is fixed.

In the event the Board of Directors shall fail to fix a record date as provided in this Section 5 of
Article II, the record date for the purposes specified herein shall be the close of business on the day on which
the resolution of the Board of Directors relating thereto is adopted.

Section 6.  Dividends. The Board of Directors, in its discretion, may from time to time declare and make
a distribution to shareholders in respect of the Corporation's outstanding shares, payable in cash, the
Corporation's indebtedness (but not the Corporation's shares) or the Corporation's other property, including the
shares or indebtedness of other corporations; provided, however, no such distribution shall be made if, after
giving effect to the distribution, the Corporation would not be able to pay its debts as they become due in the
usual course of business, or the Corporation's total assets would be less than its total liabilities plus the
amount that would be needed if the Corporation were to be dissolved at the time of the distribution to satisfy
the preferential rights upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.

In addition, the Board of Directors, in its discretion, from time to time may declare and direct the
payment of a share dividend of the Corporation's shares, issued pro rata and without consideration, to the
Corporation's shareholders or to the shareholders of one or more classes or series; provided, however, shares of
one class or series may not be issued as a share dividend in respect of shares of another class or series unless
the Articles of Incorporation so authorize, a majority of the votes entitled to be cast by the class or series to
be issued approve the issue, or there are no outstanding shares of the class or series to be issued.

Section 7.  Treasury Shares. Shares that have been issued and reacquired by the Corporation shall
constitute authorized but unissued shares.



---

Section 8.  Redemption of Control Shares.  Control shares acquired in a control share acquisition, with
respect to which no acquiring person statement has been filed with the Corporation, shall, at any time during the
period ending 60 days after the last acquisition of control shares or the power to direct the exercise of voting
power of control shares by the acquiring person, be subject to redemption by the Corporation.  After an acquiring
person statement has been filed with the Corporation and after the meeting at which the voting rights of the
control shares acquired in a control share acquisition are submitted to the shareholders, the shares shall be
subject to redemption by the Corporation unless the shares are accorded full voting rights by the shareholders as
provided in Section 798 of the Michigan Business Corporation Act.  Redemptions of shares pursuant to this bylaw
shall be at the fair value of the shares pursuant to procedures adopted by the Board of Directors of the
Corporation.

The terms "control shares," "control share acquisition," "acquiring person statement" "acquiring person"
and "fair value" as used in this bylaw, shall have the meanings ascribed to them, respectively, in Chapter 7B of
the Michigan Business Corporation Act.

# ARTICLE III.  SHAREHOLDERS

Section 1.  Place of Meetings.  Meetings of shareholders shall be held at the registered office of the
Corporation or at such other place, within or outside the State of Michigan, as may be determined from time to
time by the Board of Directors; provided, however, if a meeting of shareholders is to be held at a place other
than the registered office of the Corporation, the notice of the meeting shall designate such place.

Section 2.  Annual Meeting.  Annual meetings of shareholders for election of directors and for such
other business as may come before the meeting shall be held on such date prior to June 1 of each year and at such
time as may be fixed from year to year by the Board of Directors.

Section 3.  Special Meetings.  Special meetings of shareholders may be called by the Chairman or the
Secretary, and shall be called by either of them pursuant to resolution therefor by the Board of Directors, or
upon receipt by them of a request in writing, stating the purpose or purposes thereof, and signed by shareholders
of record owning a majority of the voting shares of the Corporation issued and outstanding.

Section 4.  Record Date for Notice and Vote.  The Board of Directors may fix a date not more than sixty
(60) days nor less than ten (10) days before the date of a shareholders' meeting as the record date for the
purposes of determining shareholders entitled to notice of and to vote at the meeting or adjournments thereof;
provided, however, that the record date shall not precede the date on which the Board takes action to fix the
record date.  In the event the Board of Directors fails to fix a record date as provided in this Section 4 of
Article III, the record date for determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the close of business on the day preceding the day on which notice is given, or if no
notice is given, the day next preceding the day on which the meeting is held.



---

Section 5.  Notice of Shareholder Meetings.  Written notice of the time, place, and purposes of any
meeting of shareholders shall be given to shareholders entitled to vote thereat, not less than ten (10) nor more
than sixty (60) days before the date of the meeting, which notice may be given either by delivery in person to
such shareholders or by mailing such notice to shareholders at their addresses as the same appear on the stock
books of the Corporation.  A shareholder's attendance at a meeting will result in a waiver of objection to lack
of notice or defective notice unless the shareholder, at the beginning of the meeting, objects to the holding of
the meeting or the transaction of business at the meeting, and a waiver of objection to consideration of a
particular matter at the meeting as not being within the purpose or purposes described in the meeting notice
unless the shareholder objects to considering the matter when it is presented.

Section 6.  Voting Lists.  The Corporation's officer or agent having charge of its stock transfer books
shall prepare and certify a complete list of the shareholders entitled to vote at a shareholders' meeting or any
adjournment thereof, which list shall be arranged alphabetically within each class and series, and shall show the
address of, and the number of shares held by each share holder.  The list shall be produced at the time and place
of the meeting of shareholders and be subject to inspection by any shareholder at any time during the meeting.
If for any reason the requirements with respect to the shareholder list specified in this Section 6 of Article
III have not been complied with, any shareholder, either in person or by proxy, who in good faith challenges the
existence of sufficient votes to carry any action at the meeting, may demand that the meeting be adjourned and
the same shall be adjourned until the requirements are complied with; provided, however, that failure to comply
with such requirements does not affect the validity of any action taken at the meeting before such demand is made.

Section 7.  Voting. Each shareholder entitled to vote at a meeting of shareholders or to express consent
or dissent without a meeting, shall be entitled to one (1) vote, in person or by proxy, for each share entitled
to vote that is held by such shareholder; provided, however, no proxy shall be voted after three years from its
date unless such proxy expressly provides for a longer period.  A vote may be cast either orally or in writing as
announced or directed by the person presiding at the meeting prior to the taking of the vote.  When an action
other than the election of directors is to be taken by vote of the shareholders, it shall be authorized by a
majority of the votes cast by the holders of shares entitled to vote on the action, unless a greater vote is
required by the Michigan Business Corporation Act.  Directors shall be elected by a plurality of the votes cast
in an election.

Section 8.  Quorum.  Shares equaling a majority of all of the voting shares of the capital stock of the
Corporation issued and outstanding represented in person or by proxy, shall constitute a quorum at the meeting.
Meetings at which less than a quorum is represented may be adjourned by a vote of a majority of the shares
present to a further date without further notice other than the announcement at such meeting, and when the quorum
shall be present upon such adjourned date, any business may be transacted which might have been transacted at the
meeting as originally called.  Shareholders present in person or by proxy at any meeting of shareholders may
continue to do business until adjournment, notwithstanding the withdrawal of shareholders to leave less than a
quorum.

Section 9.  Conduct of Meetings. The officer who is to preside at meetings of shareholders pursuant to
Article V of these Bylaws, or his or her designee, shall determine the agenda, the order in which business shall
be conducted and rules for the conduct of the meeting (which shall be fair to shareholders), unless the agenda,
the order of business and/or such rules have been fixed by the Board of Directors.  Such officer or designee
shall call meetings of shareholders to order and shall preside, shall appoint a person to act as secretary of the
meeting, and may appoint a parliamentarian, who may be the same person as the secretary.



---

Section 10.  Inspectors of Elections.  The Board of Directors may, in advance of a meeting of
shareholders, appoint one or more inspectors to act at the meeting or any adjournment thereof.  In the event
inspectors are not so appointed, or an appointed inspector fails to appear or act, the person presiding at the
meeting of shareholders may appoint one or more persons to fill such vacancy or vacancies, or to act as
inspector.  The inspector(s) shall determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall
receive votes, ballots, or consents, hear and determine challenges and questions arising in connection with the
right to vote, count and tabulate votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders.

Section 11.  Notice of Shareholder Proposals.

(a)     Except for the election of directors, which is governed by Article V of the
Corporation's Articles of Incorporation, only such business shall be conducted at any meeting of shareholders,
and only such proposals shall be acted upon at such meetings, as shall have been brought before the meeting:  (i)
by, or at the direction of, the Board of Directors; or (ii) by any shareholder of the Corporation who complies
with the notice procedures set forth in this Section of these Bylaws.  For a proposal to be properly brought
before the meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation.  To be timely, a shareholder's notice must be delivered to, or mailed and received
at, the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90)
days prior to the scheduled meeting date, regardless of any postponements, deferrals, or adjournments of that
meeting to any later date; provided, however, that if less than seventy (70) days' notice, or prior public
disclosure of the date of a scheduled meeting is given or made, notice by the shareholder to be timely must be
delivered or received not later than the close of business on the tenth (10) day following the earlier of the day
on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure
was made.  A shareholder's notice to the Secretary shall set forth, as to each matter the shareholder proposes to
bring before the meeting:  (i) a brief description of a proposal desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address, as they appear, on the
Corporation's stock record of the shareholder proposing such business and any other shareholders known by such
shareholder to be supporting such proposal; (iii) the class and number of shares of the Corporation's stock which
are beneficially owned by the shareholder on the date of such shareholder notice and by any other shareholders
known by such shareholder to be supporting such proposal on the date of such shareholder notice; and (iv) any
financial interest of the shareholder in such proposal.

(b)     If the presiding officer at the meeting of shareholders determines that a shareholder
proposal was not made in accordance with the terms of this Section, the presiding officer shall declare the
matter to be out of order and the matter shall not be acted upon at the meeting.



---

(c)     Nothing contained in this Section shall prevent the consideration and approval or
disapproval at any meeting of shareholders of reports of officers, directors, and committees of the Board of
Directors, but, in connection with such reports, no business shall be acted upon at such meeting unless stated,
filed, and received as provided herein.

# ARTICLE IV.  DIRECTORS

Section 1.  Board of Directors.  The authority and size of the Board of Directors, and the procedures
for nominating, electing and removing directors shall be as specified in the Corporation's Articles of
Incorporation.

Section 2.  Place of Meetings and Records.  The directors shall hold their meetings, and maintain the
minutes of the proceedings of meetings of shareholders, Board of Directors, and executive and other committees,
if any, and keep the books and records of account for the Corporation, in such place or places, within or outside
the State of Michigan, as the Board may from time to time determine.

Section 3.  Regular Meetings of the Board.  Regular meetings of the Board of Directors may be held at
such times and places and pursuant to such notice, if any, as may be established from time to time by resolution
of the Board of Directors.

Section 4.  Special Meetings of the Board.  Special meetings of the Board of Directors may be called by
the Chairman of the Board, or the Secretary, and shall be called by one of them upon the written request of a
majority of the directors.  Notice of the time and place of special meetings of the Board shall be given to each
director at least twenty-four (24) hours prior thereto.  Notices of special meetings may state a purpose or
purposes for the meeting, but such notices shall not be required to state any purpose and shall not be deemed
deficient if the statement or purpose is incomplete or inaccurate.  Notice of any meeting may be made by hand
delivery, telephone, facsimile or e-mail with confirmation, nationally recognized overnight mail service, or
first class mail, to each director at such location as he or she may have furnished to the Corporation.  The
notice shall be deemed to have been given at the time of personal delivery, or telephone contact, or the time of
confirmation for facsimile or e-mail, and as of the close of business on the first business day following the
date delivered to the overnight or government mail carrier.

Section 5.  Quorum and Vote.  A majority of the members of the Board then in office constitutes a quorum
for the transaction of business, and the vote of a majority of the members present at any meeting at which a
quorum is present constitutes the action of the Board of Directors.

Section 6.  Meeting Participation.  A director may participate in a meeting of the Board of Directors or
any committee by means of conference telephone or similar communications equipment through which all persons
participating in the meeting can communicate with all other participants.  Participation in a meeting pursuant to
this Section shall constitute presence in person at the meeting.

Section 7.  Action of the Board Without a Meeting.  Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the Board of Directors may be taken without a meeting if, before
or after the action, all members of the Board of Directors consent thereto in writing.  Such written consent
shall be filed with the minutes of the proceedings of the Board of Directors and the consent shall have the same
effect as a vote of the Board of Directors for all purposes.



---

Section 8.  Report to Shareholders.  At least once in each year the Board of Directors shall cause a
financial report of the Corporation for the preceding fiscal year to be made and distributed to each shareholder
within four months after the end of such fiscal year.  The report shall include the Corporation's statement of
income, its year-end balance sheet and, if prepared by the Corporation's statement of source and application of
funds.

Section 9.  Corporate Seal.  The Board of Directors may provide a suitable corporate seal, which seal
shall be kept in the custody of the Secretary.

Section 10.  Compensation of Directors.  Each of the directors shall be entitled to receive compensation
for service as a director and/or member of a committee of the Board of Directors and shall be reimbursed their
expenses for attendance at meetings of the Board of Directors or any committee of which a director is a member,
all in accordance with resolutions adopted by the Board of Directors from time to time.

Section 11.  Executive Committee.  The Board of Directors may by resolution establish an executive
committee composed of two (2) or more of the directors to exercise such powers and authority of the Board of
Directors to the extent provided in such resolution and not prohibited by the Michigan Business Corporation Act
for the management of the business and affairs of the Corporation.  Such committee shall exist, and each member
thereof shall serve, at the pleasure of the Board of Directors.

Section 12.  Other Committees.  The Board of Directors shall establish a compensation committee and an
audit committee, each composed of two (2) or more directors with such authority and responsibilities as are
specified in the charters for those committees that are approved by the Board of Directors.  In addition, the
Board of Directors may, by resolution, establish such other committees from time to time as the directors think
advisable with such purposes, authority and membership as may be set forth in the resolution establishing any
such committee.

Section 13.  Directors Emeritus.  Any director of the Corporation who has at least nine years of service
as a director and who either resigns as a director or does not stand for reelection, shall be entitled to be
considered for the position of "Director Emeritus." If nominated by the Nominating committee and elected by the
Board of Directors, a Director Emeritus shall continue in that position for a period equal to the time served as
a regular director or until an earlier resignation or death.  During their tenure, Directors Emeritus shall be
given notices of all meetings of the Board of Directors, and they shall perform such consulting services for the
Corporation as the Board of Directors may reasonably request from time to time.  Directors Emeritus shall be
entitled to attend and participate in all such meetings of the Board of Directors, except that they may not vote
and they shall not be counted for purposes of determining a quorum.  Directors Emeritus shall receive the same
annual retainer fee as is provided for regular directors and shall be entitled to reimbursement for expenses of
attendance at meetings of the Board, but they shall receive no other compensation from the Corporation.



---

# ARTICLE V.  OFFICERS

Section 1.  Designation of Officers.  The officers of the Corporation shall consist of such officers as
the Board of Directors shall determine from time to time, and may include a Chairman of the Board, a Chief
Executive Officer, a President, a Secretary, a Treasurer, one or more Vice Presidents, and such other or
different offices as may be established by the Board of Directors.  The officers of the Corporation need not be
directors or shareholders.  Any two or more offices may be held by the same person, but an officer shall not
execute, acknowledge or verify any instrument in more than one capacity if the instrument is required by law to
be executed, acknowledged or verified by two or more officers.

Section 2.  Election of Officers.  The officers of the Corporation shall be elected at the first meeting
of the Board of Directors, or by action taken pursuant to written consent, after the annual meeting of
shareholders.  Officers shall hold office for the term of their election and until their respective successors
are elected and qualified, or until resignation or removal.

Section 3.  Resignation and Removal.  An officer may resign by written notice to the Corporation, which
resignation is effective upon its receipt by the Corporation or at a subsequent time specified in the notice of
resignation.  Officers of the Corporation serve at the pleasure of the Board of Directors and may be removed by
the Board at any time, with or without cause.

Section 4.  Compensation of Officers.  The Board of Directors, or an appropriate committee if one be
appointed, may establish compensation of officers for services to the Corporation irrespective of the personal
interest of any such director or committee member.

Section 5.  Chairman of the Board. The Chairman of the Board of Directors shall be elected by the
directors from among the directors then serving.  The Chairman of the Board, shall preside at all meetings of the
Board of Directors and shareholders, and shall perform such other duties as from time to time may be determined
by resolution of the Board of Directors not inconsistent with these Bylaws.

Section 6.  Chief Executive Officer.  The Chief Executive Officer of the Corporation shall have such
authority and shall perform such duties in the management of the Corporation as are usually vested in or incident
to the office of a chief executive officer of a corporation.  In the absence or nonelection of the Chairman of
the Board of Directors, the Chief Executive Officer shall preside at all meetings of the Board of Directors and
meetings of the shareholders.

Section 7.  President.  The President shall be the chief operating officer of the Corporation and shall
have such authority and shall perform such duties in the management of the Corporation as from time to time may
be determined by resolution of the Board of Directors not inconsistent with these Bylaws.

Section 8.  Vice Presidents.  The Vice Presidents shall have such authority and shall perform such
duties as shall be assigned to them by the Board of Directors and may be designated by such special titles as the
Board of Directors shall approve.



---

Section 9.  Treasurer. The Treasurer, if one be elected, shall have such authority and responsibilities
as may be determined by the Board of Directors from time to time.

Section 10.  Secretary. The Secretary shall give, or cause to be given, notice of all meetings of
shareholders and directors and all other notices required by law or by these Bylaws, and in the case of his or
her absence or refusal or neglect to do so, any such notice may be given by any person so directed by the Chief
Executive Officer or by the directors.  The Secretary shall maintain a record of all of the proceedings of
minutes of shareholders, the Board of Directors and committees of the Board in one or more books provided for
that purpose, and shall perform all duties incident to the office of Secretary, and such other duties as may be
assigned by the Board of Directors.

Section 11.  Other Offices.  Other officers elected by the Board of Directors shall have such authority
and shall perform such duties in the management of the Corporation as may be determined by resolution of the
Board of Directors not inconsistent with these Bylaws.  In addition, the Chairman of the Board and the Chief
Executive Officer may jointly approve the employment of managerial employees for positions which may involve the
use of the title of "Vice President" or some other official title, without the necessity of the Board of
Directors' election of such person as an officer of the Corporation.  In such case, such persons shall not
constitute officers of the Corporation within the meaning of the Corporation's Articles of Incorporation or
Bylaws, and they shall have such duties and authority as may be assigned to them by the Chairman and the Chief
Executive Officer.

# ARTICLE VI.  MISCELLANEOUS

Section 1.  Contracts.  The Board of Directors may authorize any officer or officers, agent or agents to
enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific instances.

Section 2.  Loans.  No loans shall be contracted on behalf of the Corporation, and no evidences of
indebtedness shall be issued in its name, unless authorized by a resolution of the Board of Directors.  Such
authorization may be general or confined to specific instances.

Section 3.  Checks.  All checks, drafts, or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of
the Board of Directors.

Section 4.  Deposits.  All funds of the Corporation, not otherwise employed, shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board
of Directors may determine.

Section 5.  Fiscal Year.  The fiscal year of this Corporation shall be as determined by the Board of
Directors.

Section 6.  Waiver of Notice.  Whenever any notice is required to be given under the provisions of any
law, or the Articles of Incorporation for this Corporation, or these Bylaws, a waiver thereof in writing, signed
by the person or persons entitled to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.



---

Section 7.  Voting of Securities.  Securities of another corporation or other equity interests standing
in the name of this Corporation which are entitled to vote may be voted in person or by proxy by any executive
officer of this Corporation or such other persons as may be designated by the Board of Directors.

Section 8.  Interpretation.  Unless the context of these Bylaws otherwise requires, the terms used in
these Bylaws shall have the meanings specified in, and these Bylaws shall be interpreted and construed in
accordance with, the Michigan Business Corporation Act.

## ARTICLE VII. AMENDMENTS

These Bylaws may be amended, repealed or new Bylaws adopted either by a majority vote of the Board of
Directors at any regular or special meeting of the Board, and without prior notice of intent to do so, or by
majority vote of shareholders at any annual or special meeting, if notice of the proposed amendment, repeal, or
adoption be contained in the notice of such meeting.



---

EXHIBIT 4(b)

# SHAREHOLDER PROTECTION RIGHTS AGREEMENT

# dated as of

# March 29, 2002

# between

# X-RITE, INCORPORATED

# and

# EQUISERVE TRUST COMPANY, N.A.,

# as Rights Agent



---

# TABLE OF CONTENTS

|ARTICLE I - CERTAIN DEFINITIONS.....................................................................................................................            | 1   
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                                                                | 1.1 
|ARTICLE II - THE RIGHTS........................................................................................................................................ | 6   
|                                                                                                                                                                | 2.1 
|                                                                                                                                                                | 2.2 
|                                                                                                                                                                | 2.3 
|                                                                                                                                                                | 2.4 
|                                                                                                                                                                | 2.5 
|                                                                                                                                                                | 2.6 
|                                                                                                                                                                | 2.7 
|                                                                                                                                                                | 2.8 
|                                                                                                                                                                | 2.9 
|                                                                                                                                                                | 2.10
|                                                                                                                                                                | 2.11
|ARTICLE III - ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS.............                                                                       | 13  
|                                                                                                                                                                | 3.1 
|                                                                                                                                                                | 3.2 
|ARTICLE IV - THE RIGHTS AGENT.........................................................................................................................          | 15  
|                                                                                                                                                                | 4.1 
|                                                                                                                                                                | 4.2 
|                                                                                                                                                                | 4.3 
|                                                                                                                                                                | 4.4 
|ARTICLE V - MISCELLANEOUS...............................................................................................................................        | 18  
|                                                                                                                                                                | 5.1 

i

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| | 5.2  | Expiration................................................................................................................................................  | 19
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | --
| | 5.3  | Issuance of New Rights Certificates.......................................................................................................                  | 19
| | 5.4  | Supplements and Amendments..............................................................................................................                    | 19
| | 5.5  | Fractional Shares.....................................................................................................................................      | 19
| | 5.6  | Rights of Action......................................................................................................................................      | 19
| | 5.7  | Holder of Rights Not Deemed a Shareholder..........................................................................................                         | 20
| | 5.8  | Notice of Proposed Actions...................................................................................................................               | 20
| | 5.9  | Notices.................................................................................................................................................... | 20
| | 5.10 | Suspension of Exercisability...................................................................................................................             | 21
| | 5.11 | Costs of Enforcement..............................................................................................................................          | 21
| | 5.12 | Successors...............................................................................................................................................   | 21
| | 5.13 | Benefits of this Agreement......................................................................................................................            | 21
| | 5.14 | Descriptive Headings...............................................................................................................................         | 21
| | 5.15 | Governing Law.........................................................................................................................................      | 21
| | 5.16 | Counterparts............................................................................................................................................    | 21
| | 5.17 | Severability..............................................................................................................................................  | 21

ii

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EXHIBITS

|EXHIBIT A | Form of Rights Certificate
(Together with Form of Election of Exercise)                                             
|--------- | --------------------------------------------------------------------------------------------------------------------
|EXHIBIT B | Form of Certificate of Adoption of Resolution
Establishing Series of Shares of 
Participating Junior Preferred Stock

iii

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# SHAREHOLDER PROTECTION RIGHTS AGREEMENT

SHAREHOLDER
PROTECTION RIGHTS AGREEMENT (this Agreement), dated as of March 29,
2002, between X-RITE, INCORPORATED, a Michigan corporation (the
Company), and EQUISERVE TRUST COMPANY, N.A., as Rights Agent
(Rights Agent), which term shall include any successor Rights Agent
hereunder;

WHEREAS,
the Board of Directors of the Company (a) authorized and declared a dividend of
one right (Right) in respect of each share of Common Stock (as
hereinafter defined) held of record as of the close of business on March 29,
2002 (the Record Time) and (b) authorized the issuance of one Right
in respect of each share of Common Stock issued after the Record Time and prior
to the Separation Time (as hereinafter defined);

WHEREAS,
each Right entitles the holder thereof after the Separation Time, to purchase
securities of the Company (or, in certain cases, of certain other entities)
pursuant to the terms and subject to the conditions set forth herein; and

WHEREAS,
the Company desires to appoint the Rights Agent to act on behalf of the Company,
and the Rights Agent was willing so to act, in connection with the issuance,
transfer, exchange and replacement of Rights Certificates (as hereinafter
defined), the exercise of Rights and other matters referred to herein;

NOW
THEREFORE, in consideration of the premises and the respective agreements set
forth herein, the parties hereby agree as follows:

ARTICLE I - CERTAIN DEFINITIONS

1.1      Certain  Definitions.  For  purposes of this  Agreement,  the  following  terms have the meanings
indicated:

Acquiring
Person shall mean any Person who or which, together with all Affiliates
and Associates, is a Beneficial Owner of 15% or more of the outstanding shares
of Common Stock; provided, however, that the term Acquiring
Person shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any Person who shall become the Beneficial Owner of 15% or more
of the outstanding shares of Common Stock solely as a result of an acquisition
by the Company of shares of Common Stock, until such time thereafter as such
Person shall become the Beneficial Owner (other than by means of a stock
dividend or stock split) of any additional shares of Common Stock, and (iv) any
such Person who has reported or is required to report such ownership (but less
than 20%) on Schedule 13G under the Exchange Act (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such Schedule (other than
the disposition of the Common Stock) and, within 10 Business Days of being
requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock representing in excess
of 14.9% of the outstanding Common Stock inadvertently or without knowledge of
the terms of the



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Rights and who, together with all Affiliates and Associates,
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
provided, however, that if the Person described in this clause (iv) is required
to so certify and fails to do so within 10 Business Days, then such Person shall
become an Acquiring Person immediately after such 10 Business Day period.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an Acquiring
Person, as defined pursuant to the foregoing provisions of this Agreement,
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this Agreement, then such Person shall not be deemed an
Acquiring Person for any purposes of this Agreement. The
determination of whether such a Person has become an Acquiring Person in an
inadvertent manner, and the determination of whether the divestment of
sufficient shares shall have been made as promptly as practicable after becoming
an inadvertent Acquiring Person, shall be made by a majority vote of the Board
of Directors of the Company.

Affiliate
and Associate shall have the respective meanings ascribed to such
terms in Rule 12b-2 under the Securities Exchange Act of 1934, as such Rule is
in effect on the date of this Agreement.

A
Person shall be deemed the Beneficial Owner, and to have
Beneficial Ownership, of, and to Beneficially Own, any
securities as to which such Person or any of such Persons Affiliates or
Associates is or may be deemed to be the beneficial owner pursuant to Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as such Rules are in
effect on the date of this Agreement, as well as any securities as to which such
Person or any of such Persons Affiliates or Associates has the right to
become Beneficial Owner (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
Beneficial Owner, or to have Beneficial Ownership, of,
or to Beneficially Own, any security (i) solely because such
security has been tendered pursuant to a tender or exchange offer made by such
Person or any of such Persons Affiliates or Associates until such tendered
security is accepted for payment or exchange, (ii) solely because such Person or
any of such Persons Affiliates or Associates has or shares the power to
vote or direct the voting of such security pursuant to a revocable proxy given
in response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Securities
Exchange Act of 1934, except if such power (or the arrangements relating
thereto) is then reportable under Item 6 of Schedule 13D under the Securities
Exchange Act of 1934 (or any similar provision of a comparable or successor
report), (iii) solely because of the grant by the Company to such Person, in
connection with the execution of an agreement to acquire the Company, of options
to acquire such security, or (iv) held for or pursuant to the terms of any
employee stock ownership or other employee benefit plan of the Company or a
majority-owned Subsidiary of the Company. For purposes of this Agreement, in
determining the percentage of the outstanding shares of Common Stock with
respect to which a Person is the Beneficial Owner, all shares as to which such
Person is deemed the Beneficial Owner shall be deemed outstanding.

2

---

Business
Day shall mean any day other than a Saturday, Sunday or a day on which
banking institutions in New York, New York, or Grandville, Michigan, are
generally authorized or obligated by law or executive order to close.

Close
of business on any given date shall mean the time on such date (or, if
such date is not a Business Day, the time on the next succeeding Business Day)
at which the offices of the transfer agent for the Common Stock (or, after the
Separation Time, the offices of the Rights Agent) are closed to the public.

Common
Stock shall mean the shares of Common Stock, $.10 par value, of the
Company.

Exercise
Price shall mean, as of any date, the price at which a holder may purchase
the securities issuable upon exercise of one whole Right. Until adjustment
thereof in accordance with the terms hereof, the Exercise Price shall equal
$30.00.

Expiration
Time shall mean the earlier of (i) the Redemption Time or (ii) the close
of business on March 29, 2012.

Flip-in
Date shall mean any Stock Acquisition Date which is not the result of a
Flip-over Transaction or Event or such later date (not beyond the thirtieth day
after such Stock Acquisition Date) as the Board of Directors of the Company may
from time to time fix by resolution adopted prior to the Flip-in Date.

Flip-over
Stock of any Person shall mean the capital stock (or similar equity
interest) with the greatest voting power in respect of the election of directors
(or other Persons similarly responsible for the direction of the business and
affairs) of such Person or, if such Person is a Subsidiary of another Person,
the Person or Persons which ultimately controls such first-mentioned Person.

Flip-over
Transaction or Event shall mean a transaction or series of transactions
after the time when an Acquiring Person has become such in which, directly or
indirectly, (A) the Company shall consolidate with or merge with or into the
Acquiring Person or any other Person acting together in any respect with the
Acquiring Person, or the Acquiring Person or any other Person acting together in
any respect with the Acquiring Person shall merge with or into the Company, (B)
the Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer) assets (i) aggregating more than 50% of the
assets (measured by either book value or fair market value) or (ii) generating
more than 50% of the operating income or cash flow, of the Company and its
Subsidiaries (taken as a whole) to the Acquiring Person or any other Person
acting together in any respect with the Acquiring Person (provided that
for purposes of clauses (A) and (B), but without limitation, a Person shall be
deemed to be acting together in any respect with an Acquiring Person if such
Person enters into any transaction of the type described in clause (A) or (B)
within one year after the time the Acquiring Person has become such, unless (x)
such transaction was initiated by the Company and (y) the Acquiring Person or
any Person acting together in any respect with the Acquiring Person has not
acquired control of the Board of Directors of the Company), (C) any Acquiring
Person shall (i) sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of, to, from, or with, as the case may be, the
Company or any of its Subsidiaries, over any period of 12

3

---

consecutive calendar months, assets or liabilities (x) having an aggregate fair market value of more
than $15,000,000, or (y) on terms and conditions less favorable to the Company
than the Company would be able to obtain through arms-length negotiations with
an unaffiliated third party, (ii) receive any compensation for services from the
Company or any of its Subsidiaries, other than compensation for full-time
employment as a regular employee at rates in accordance with the Companys
(or its Subsidiaries) past practices, or (iii) receive the benefit,
directly or indirectly (except proportionately as a shareholder), over any
period of 12 consecutive calendar months, of any loans, advances, guarantees,
pledges, insurance, reinsurance or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its Subsidiaries
involving an aggregate principal amount in excess of $15,000,000, or an
aggregate cost or transfer of benefits from the Company or any of its
Subsidiaries in excess of $15,000,000 or, in any case, on terms and conditions
less favorable to the Company than the Company would be able to obtain through
arms-length negotiations with a third party, or (D) as a result of any
reclassification of securities (including any reverse stock split), or
recapitalization, of the Company, or any merger or consolidation of the Company
with any of its Subsidiaries or any other transaction or series of transactions
(whether or not with or into or otherwise involving an Acquiring Person), the
proportionate share of the outstanding shares of any class of equity or
convertible securities of the Company or any of its Subsidiaries which is
directly or indirectly owned by any Acquiring Person is increased by more than
1%. For purposes of the foregoing description, the term Acquiring
Person shall include any Acquiring Person and its Affiliates and
Associates (other than the Company, a wholly owned Subsidiary of the Company or
an employee stock ownership or other employee benefit plan of the Company or a
wholly owned Subsidiary of the Company), counted together as a single Person.

Junior
Preferred Stock shall mean the series of Junior Participating Preferred
Stock, without par value, of the Company created by a Certificate of Adoption of
Resolution establishing a series of shares of preferred stock of the Company in
substantially the form set forth in Exhibit B hereto appropriately completed.

Market
Price per share of any security on any date (the Determination
Date) shall mean the arithmetic average of the daily closing prices per
share of such security (determined as described below) on each of the 20
consecutive Trading Days through and including the Trading Day immediately
preceding the Determination Date; provided, however, that if an
event of a type analogous to any of the events described in Section 2.4 hereof
shall have caused the closing price on one or more Trading Days during such
period of 20 Trading Days not to be fully comparable with the closing price on
the Determination Date, each such closing price so used shall be appropriately
adjusted in order to make it fully comparable with the closing price on the
Determination Date. The closing price per share of any security on any date
shall be the last reported sale price, regular way, or, in case no such sale
takes place or is reported on such date, the average of the closing bid and
asked prices, regular way, for such security, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, Inc. or, if such
security is not listed or admitted to trading on the New York Stock Exchange,
Inc., as reported in the principal consolidated transaction system with respect
to securities listed on the principal national securities exchange on which such
security is listed or admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
(NASDAQ) or such other self-regulatory organization or registered
securities information processor (as such terms are

4

---

used under the Securities Exchange Act of 1934) as then reports trading information concerning such
security, or, if on any such date such security is not listed or admitted to
trading on any national securities exchange or quoted by any such organization,
the average of the closing bid and asked prices as furnished by any registered
securities dealer that is a market maker (as such term is used under the
Securities Exchange Act of 1934) in such security and which is selected by the
Board of Directors of the Company; provided, however, that if on any such
date such security is not listed or admitted to trading on a national securities
exchange or traded in the over-the-counter market, the closing price of such
security on such date shall mean the fair value of such security on such date as
determined in good faith by the Board of Directors of the Company, after
consultation with a nationally recognized investment banking firm, and set forth
in a certificate delivered to the Rights Agent.

Person
shall mean any individual, firm, partnership, association, group (as such term
is used in Rule 13d-5 under the Securities Exchange Act of 1934, as such Rule is
in effect on the date of this Agreement), corporation, or other entity.

"Record Time" shall mean March 29, 2002.

"Redemption Price" shall mean an amount equal to $.005.

Redemption
Time shall mean the time at which the right to exercise the Rights shall
terminate pursuant to Section 5.1 hereof.

Separation
Time shall mean the close of business on the earlier of (i) the later of
(A) the tenth day after the date on which any Person (other than the Company, a
majority-owned Subsidiary of the Company or an employee stock ownership or other
employee benefit plan of the Company or of a majority-owned Subsidiary of the
Company) commences a tender or exchange offer which, if consummated, would
result in such Persons becoming an Acquiring Person, or (B) such later
date as the Board of Directors of the Company may from time to time fix by
resolution adopted prior to the Separation Time, or (ii) the Flip-in Date;
provided that, if the foregoing results in the Separation Time being
prior to the Record Time, the Separation Time shall be the Record Time and
provided further that, if any tender or exchange offer referred to in
clause (i) of this definition is cancelled, terminated or otherwise withdrawn
prior to the Separation Time, such offer shall be deemed, for purposes of this
definition, never to have been made. Notwithstanding the foregoing, any tender
or exchange offer referred to in clause (i) of this definition that has been
approved by the Board of Directors of the Company prior to such offer being made
to the Companys shareholders, shall not cause the occurrence of a
Separation Time.

Stock
Acquisition Date shall mean the first date of public announcement by the
Company (by any means) or by an Acquiring Person (by means of filing a Schedule
l3D under the Securities Act of 1934 [or any comparable or successor report or
schedule] or an amendment thereto) that an Acquiring Person has become such.

Subsidiary
of any specified Person shall mean any corporation or other entity of which a
majority of the voting power of the equity securities ordinarily having voting
power in respect of the election of directors (or other Persons similarly
responsible for the direction of the business and affairs) of such corporation
or other entity, or a majority of the equity interest is Beneficially Owned,
directly or indirectly, by such Person.

5

---

Trading
Day, when used with respect to any security, shall mean a day on which the
New York Stock Exchange, Inc. is open for the transaction of business or, if
such security is not listed or admitted to trading on the New York Stock
Exchange, Inc., a day on which the principal national securities exchange on
which such security is listed or admitted to trading is open for the transaction
of business or, if such security is not listed or admitted to trading on any
national securities exchange, a Business Day.

ARTICLE II - THE RIGHTS

2.1      Summary of Rights. As soon as practicable after the Record Time, the
Company will mail a copy of a letter to shareholders again summarizing the terms
of the Rights to each holder of record of Common Stock as of the Record Time, at
such holders address as shown by the records of the Company.

2.2      Legend on Common Stock Certificates. Certificates for the Common Stock
issued after the Record Time but prior to the Separation Time shall evidence one
Right for each share of Common Stock represented thereby and shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

| | Until
the Separation Time (as defined in the Rights Agreement referred to below), this
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in a Rights Agreement, dated as of March 29, 2002 (as such may be
amended from time to time, the Rights Agreement), between X-Rite,
Incorporated (the Company) and EquiServe Trust Company, N.A., as
Rights Agent, the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such Rights
may be redeemed, may be exchanged for shares of Common Stock or other securities
or assets of the Company, may expire, may become void (if they are
Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof, as such terms are defined in the Rights
Agreement, or by any transferee of any of the foregoing) or may be evidenced by
separate certificates and may no longer be evidenced by this certificate. The
Company will mail or arrange for the mailing of a copy of the Rights Agreement
to the holder of this certificate without charge within five days after the
receipt of a written request therefor. | 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Certificates representing
shares of Common Stock that are issued and outstanding at the Record Time shall
evidence one Right for each share of Common Stock evidenced thereby
notwithstanding the absence of the foregoing legend.

2.3      Exercise of Rights; Separation of Rights.

| | (a)      
Subject to adjustment as herein set forth, each Right will entitle the holder
thereof, after the Separation Time, to purchase, for the Exercise Price, one
one-hundredth of a share of Junior Preferred Stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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| | (b)      
Until the Separation Time, (i) no Right may be exercised and (ii) each Right
will be evidenced by the certificate for the associated share of Common Stock
and will be transferable only together with, and will be transferred by a
transfer of, such associated share. Notwithstanding any other provision of this
Agreement, any Rights held by the Company or any of its Subsidiaries other than
in a fiduciary capacity shall not be exercisable. Nothing in the preceding
sentence shall be construed as limiting the right of the Company and it
Subsidiaries to acquire or transfer Rights.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)      
Subject to the terms and conditions herein set forth, after the Separation Time
and prior to the Expiration Time, the Rights (i) may be exercised and (ii) may
be transferred independently of the shares of Common Stock in respect of which
they were originally issued. Promptly following the Separation Time, the Rights
Agent will mail to each holder of record of Common Stock as of the Separation
Time, at such holders address as shown by the records of the Company (the
Company hereby agreeing to furnish copies of such records to the Rights Agent
for this purpose), (x) a certificate (a Rights Certificate) in
substantially the form of Exhibit A hereto appropriately completed, representing
the number of Rights held by such holder at the Separation Time and having such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any national securities exchange or other
self-regulatory organization (as such terms are used under the Securities
Exchange Act of 1934) on which the Rights may from time to time be listed or
through which the Rights may from time to time be traded, or to conform to
usage, and (y) a disclosure statement describing the Rights.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      
Subject to Sections 2.3(b) and 5.10, Rights may be exercised on any Business Day
after the Separation Time and prior to the Expiration Time by submitting to the
Rights Agent the Rights Certificate evidencing such Rights with an Election to
Exercise (an Election to Exercise) substantially in the form
attached to the Rights Certificate duly completed, accompanied by payment in
cash, or by certified or official bank check or money order payable to the order
of the Company, of a sum equal to the Exercise Price multiplied by the number of
Rights being exercised together with a sum sufficient to cover any transfer tax
or charge which may be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance or delivery of
certificates for shares or depositary receipts (or both) in a name other than
that of the holder of the Rights being exercised.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)      
Upon receipt of a Rights Certificate, with an Election to Exercise accompanied
by payment as set forth in Section 2.3(d) above, and subject to the conditions
set forth in this Agreement, the Rights Agent will thereupon promptly (i) (A)
requisition from a transfer agent for the stock or other securities purchasable
upon exercise of the Rights certificates evidencing such number of shares or
other securities to be purchased (the Company hereby irrevocably authorizing its
transfer agents to comply with all such requisitions) and (B) if the Company
elects pursuant to Section 5.5 hereof not to issue certificates representing
fractional shares, requisition from the depositary selected by the Company
depositary receipts representing the fractional shares to be purchased or
requisition from the Company the amount of cash to be paid in lieu of fractional
shares in accordance with Section 5.5 hereof and (ii) after receipt of such
certificates, depositary receipts and/or cash, deliver the same to or upon the
order of the registered holder of such Rights Certificate, registered (in the
case of certificates or depositary receipts) in such name or names as may be
designated by such holder.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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| | (f)      
In case the holder of any Rights shall exercise less than all the Rights
evidenced by such holders Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holders duly authorized assigns.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)      
The Company covenants and agrees that it will (i) cause to be kept available
until the Expiration Time out of its authorized and unissued shares of capital
stock a number of shares of preferred stock that will be sufficient to permit
the creation and establishment of the Junior Preferred Stock and the exercise in
full of all outstanding Rights; (ii) immediately upon the occurrence of the
Separation Time, file with the Michigan Department of Consumer & Industry
Services a Certificate of Adoption of Resolution establishing a series of shares
in substantially the form set forth in Exhibit B hereto and take all such
further action as may be necessary to create and establish the Junior Preferred
Stock; (iii) take all such action as may be necessary to ensure that all shares
delivered upon exercise of Rights shall, at the time of delivery thereof
(subject to payment of the Exercise Price), be duly and validly authorized,
executed, issued and delivered and fully paid and nonassessable; (iv) take all
such action as may be necessary to ensure that all securities other than shares
delivered upon exercise of Rights shall, at the time of delivery thereof
(subject to payment of the Exercise Price), be duly and validly authorized,
executed, issued and delivered and valid and binding obligations of the issuer
thereof; (v) take all such action as may be necessary to comply with any
applicable requirements of the Securities Act of 1933 or the Securities Exchange
Act of 1934, and the rules and regulations thereunder, and any other applicable
law, rule or regulation, in connection with the issuance of any shares upon
exercise of Rights; (vi) use its best efforts to cause all shares and other
securities issued upon exercise of Rights to be listed on a national securities
exchange or traded in the over-the-counter market, as reported by Nasdaq or
another self-regulatory organization or registered securities information
processor (as such terms are used under the Securities Exchange Act of 1934),
upon issuance; and (vii) pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the original
issuance or delivery of the Rights Certificates or of any shares issued upon the
exercise of Rights, provided that the Company shall not be required to pay any
transfer tax or charge which may be payable in respect of any transfer involved
in the transfer or delivery of Rights Certificates or the issuance or delivery
of certificates for shares in a name other than that of the holder of the Rights
being transferred or exercised.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.4      Adjustments to Exercise Price; Number of Rights.

| | (a)
In the event the Company shall at any time after the Record Time and prior to
the Separation Time (i) declare or pay a dividend on Common Stock payable in
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares of Common Stock, (x)
the
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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| | Exercise Price in effect after such adjustment will be equal to the Exercise
Price in effect immediately prior to such adjustment divided by the number of
shares of Common Stock (the Expansion Factor) that a holder of one
share of Common Stock immediately prior to such dividend, subdivision or
combination would hold thereafter as a result thereof and (y) each Right held
prior to such adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be deemed to be
distributed among the shares of Common Stock with respect to which the original
Rights were associated (if they remain outstanding) and the shares issued in
respect of such dividend, subdivision or combination, so that each such share of
Common Stock will have exactly one Right associated with it. Each adjustment
made pursuant to this paragraph shall be made as of the payment or effective
date for the applicable dividend, subdivision or combination.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the event the Company shall at any time after the Record Time and prior to the
Separation Time issue any shares of Common Stock otherwise than in a transaction
referred to in the preceding paragraph, each such share of Common Stock so
issued shall automatically have one new Right associated with it, which Right
shall be evidenced by the certificate representing such share.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      In the event the Company shall at any time after the Record Time and prior to
the Separation Time issue or distribute any securities or assets in respect of,
in lieu of or in exchange for Common Stock (other than pursuant to a regular
periodic cash dividend or a dividend paid solely in Common Stock) whether by
dividend, in a reclassification or recapitalization (including any such
transaction involving a merger, consolidation or binding share exchange), or
otherwise, the Company shall make such adjustments, if any, in the Exercise
Price, number of Rights and/or securities or other property purchasable upon
exercise of Rights as the Board of Directors of the Company, in its sole
discretion, may deem to be appropriate under the circumstances in order to
adequately protect the interests of the holders of Rights generally, and the
Company and the Rights Agent shall amend this Agreement as necessary to provide
for such adjustments.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)      Each adjustment to the Exercise Price made pursuant to this Section 2.4 shall be
calculated to the nearest cent. Whenever an adjustment to the Exercise Price is
made pursuant to this Section 2.4, the Company shall (i) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (ii) promptly file with the Rights Agent and
with each transfer agent for the Common Stock a copy of such certificate and
(iii) mail a brief summary thereof to each holder of Rights.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      Irrespective of any adjustment or change in the securities purchasable upon
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the securities so purchasable which were
expressed in the initial Rights Certificates issued hereunder.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.5      Date on Which Exercise is Effective. Each person in whose name any
certificate for shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on, and such certificate shall be dated, the

9

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date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided,
however,that if the date of such surrender and payment is a date upon which
the stock transfer books of the Company are closed, such person shall be deemed
to have become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the stock transfer books of
the Company are open.

2.6      Execution, Authentication, Delivery and Dating of Rights Certificates.

| | (a)      The Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, Chief Executive Officer, President, or one of its Vice
Presidents, and by its Secretary or Treasurer. The signature of any of these
officers on the Rights Certificates may be manual or facsimile.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Rights
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the countersignature and delivery of such Rights Certificates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Promptly
after the Company learns of the Separation Time, the Company will notify the
Rights Agent of such Separation Time and will deliver Rights Certificates
executed by the Company to the Rights Agent for countersignature, and the Rights
Agent shall manually countersign and deliver such Rights Certificates to the
holders of the Rights pursuant to Section 2.3(c) hereof. No Rights Certificate
shall be valid for any purpose until manually countersigned by the Rights Agent.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      Each Rights Certificate shall be dated the date of countersignature thereof.
| | -------------------------------------------------------------------------------------

2.7      Registration, Registration of Transfer and Exchange.

| | (a)      After the Separation Time, the Company will cause to be kept a register (the
Rights Register) in which, subject to such reasonable regulations as
it may prescribe, the Company will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed Rights Registrar for
the purpose of maintaining the Rights Register for the Company and registering
Rights and transfers of Rights after the Separation Time as herein provided. In
the event that the Rights Agent shall cease to be the Rights Registrar, the
Rights Agent will have the right to examine the Rights Register at all
reasonable times after the Separation Time.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | After
the Separation Time and prior to the Expiration Time, upon surrender for
registration of transfer or exchange of any Rights Certificate, and subject to
the provisions of Section 2.7(c) below, the Company will execute, and the Rights
Agent will countersign and deliver, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holders
instructions, one or more new Rights Certificates evidencing the same aggregate
number of Rights as did the Rights Certificate so surrendered.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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| | (b)      Except as otherwise provided in Section 3.1(b) hereof, all Rights issued upon
any registration, transfer, or exchange of Rights Certificates shall be the
valid obligations of the Company, and such Rights shall be entitled to the same
benefits under this Agreement as the Rights surrendered upon such registration
of transfer or exchange.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)      Every Rights Certificate surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holders attorney duly authorized in
writing. As a condition to the issuance of any new Rights Certificate under this
Section 2.7, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      The Company shall not be required to register the transfer or exchange of any
Rights after the Rights have been redeemed under Section 5.1 hereof or become
void pursuant to Section 3.1(b) hereof.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.8      Mutilated, Destroyed, Lost and Stolen Rights Certificates.

| | (a)      If any mutilated Rights Certificate is surrendered to the Rights Agent prior to
the Expiration Time, the Company shall execute and the Rights Agent shall
countersign and deliver in exchange therefor a new Rights Certificate evidencing
the same number of Rights as did the Rights Certificate so surrendered.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      If there shall be delivered to the Company and the Rights Agent prior to the
Expiration Time (i) evidence to their satisfaction of the destruction, loss or
theft of any Rights Certificate and (ii) such security or indemnity as may be
required by them to save each of them and any of their agents harmless, then, in
the absence of notice to the Company or the Rights Agent that such Rights
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon its request the Rights Agent shall countersign and deliver, in
lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so destroyed, lost or stolen.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)      As a condition to the issuance of any new Rights Certificate under this Section
2.8, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Rights Agent) connected
therewith.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      Every new Rights Certificate issued pursuant to this Section 2.8 in lieu of any
destroyed, lost or stolen Rights Certificate shall evidence an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Rights Certificate shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Rights duly issued hereunder.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.9      Persons Deemed Owners. Prior to due presentment of a Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) for
registration

11

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of transfer, the Company, the Rights Agent and any agent of the
Company or the Rights Agent may deem and treat the person in whose name such
Rights Certificate (or, prior to the Separation Time, such Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary. As used in this
Agreement, unless the context otherwise requires, the term holder of
any Rights shall mean the registered holder of such Rights (or, prior to the
Separation Time, the associated shares of Common Stock).

2.10      Delivery and Cancellation of Certificates. All Rights Certificates
surrendered upon exercise or for redemption, registration of transfer or
exchange shall, if surrendered to any person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent. The Company may at any time deliver to the Rights Agent for
cancellation any Rights Certificates previously countersigned and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificates shall be countersigned in lieu of or in exchange
for any Rights Certificates cancelled as provided in this Section 2.10, except
as expressly permitted by this Agreement. The Rights Agent shall return all
cancelled Rights Certificates to the Company.

2.11      Agreement of Rights  Holders.  Every holder of Rights by accepting  the same  consents and agrees
with the Company and the Rights Agent and with every other holder of Rights that:

| | (a)      prior to the Separation Time, each Right will be transferable only together
with, and will be transferred by a transfer of, the associated share of Common
Stock;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      after the Separation  Time, the Rights  Certificates  will be  transferable  only on the
Rights Register as provided herein;
| | -------------------------------------------------------------------------------------------------------------------------------------

| | (c)      prior to due presentment of a Rights Certificate (or, prior to the Separation
Time, the associated Common Stock certificate) for registration of transfer, the
Company, the Rights Agent and any agent of the Company or the Rights Agent may
deem and treat the person in whose name the Rights Certificate (or, prior to the
Separation Time, the associated Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      Rights beneficially owned by certain Persons will, under the circumstances set forth
in Section 3.1(b), become void; and
| | ---------------------------------------------------------------------------------------------------------------------------------

| | (e)      this Agreement may be supplemented or amended from time to time pursuant to Section
2.4(b) or 5.4 hereof.
| | ------------------------------------------------------------------------------------------------------------------

12

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ARTICLE III - ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS

3.1      Flip-in.

| | (a)      In the event that prior to the Expiration Time a Flip-in Date shall occur, then,
if applicable law permits Rights owned by certain Persons referred to in Section
3.1(b) hereof to become void pursuant to the provisions thereof, the Company
shall take such action as shall be necessary to ensure and provide that, except
as provided below, each Right shall constitute the right to purchase from the
Company, upon exercise thereof in accordance with the terms hereof (but subject
to Section 5.10 hereof), that number of shares of Common Stock having an
aggregate Market Price on the Stock Acquisition Date equal to twice the Exercise
Price for an amount in cash equal to the Exercise Price (such right to be
appropriately adjusted in order to protect the interests of the holders of
Rights generally in the event that on or after such Stock Acquisition Date an
event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      Notwithstanding the foregoing, to the extent permitted by applicable law, any
Rights that are or were Beneficially Owned on or after the Stock Acquisition
Date by an Acquiring Person or an Affiliate or Associate thereof or by any
transferee, direct or indirect, of any of the foregoing shall become void and
any holder of such Rights (including transferees) shall thereafter have no right
to exercise or transfer such Rights. If any Rights Certificate is presented for
assignment or exercise and the Person presenting the same does not complete the
certification set forth at the end of the form of assignment or notice of
election to exercise and provide such additional evidence of the identity of the
Beneficial Owner and its Affiliates and Associates (or former Beneficial Owners
and their Affiliates and Associates) as the Company shall reasonably request,
then the Company shall be entitled to conclusively deem the Beneficial Owner
thereof to be an Acquiring Person or an Affiliate or Associate thereof or a
transferee of any of the foregoing and accordingly will, to the extent permitted
by applicable law, deem the Rights evidenced thereby to be void and not
transferable or exercisable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)      The Board of Directors of the Company may, at its option, at any time after a
Flip-in Date and prior to the time that an Acquiring Person becomes the
Beneficial Owner of more than 50% of the outstanding shares of Common Stock, but
only if applicable law permits Rights owned by certain Persons referred to in
Section 3.1(b) hereof to become void pursuant to the provisions thereof, elect
to exchange all (but not less than all) the then outstanding Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
3.1(b)) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted in order to protect the interests of
holders of Rights generally in the event that after the Separation Time an event
of a type analogous to any of the events described in Section 2.4(a) or (b)
shall have occurred with respect to the Common Stock (such exchange ratio, as
adjusted from time to time, being hereinafter referred to as the Exchange
Ratio).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Immediately
upon the action of the Board of Directors of the Company electing to exchange
the Rights, without any further action and without any notice, the right to
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

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| | exercise the Rights will terminate and each Right will thereafter represent only
the right to receive a number of shares of Common Stock equal to the Exchange
Ratio. Promptly after the action of the Board of Directors electing to exchange
the Rights, the Company shall give notice thereof (specifying the steps to be
taken to receive shares of Common Stock in exchange for Rights) to the Rights
Agent and the holders of the then outstanding Rights by mailing such notice in
accordance with Section 5.9.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      Whenever the Company shall become obligated under Section 3.1(a) or (c) to issue
shares of Common Stock upon exercise of or in exchange for Rights, the Company,
at its option, may substitute therefor shares of Junior Preferred Stock, at a
ratio of one one-hundredth of a share of Junior Preferred Stock for each share
of Common Stock so issuable.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)      In the event that there shall not be sufficient treasury shares or authorized
but unissued shares of Common Stock or Junior Preferred Stock of the Company to
permit the exercise or exchange in full of the Rights in accordance with Section
3.1(a) or (c), the Company shall either (i) cause sufficient additional shares
to be authorized (provided that if such authorization is not obtained,
the Company will take the action specified in clause (ii) of this sentence) or
(ii) take such action as shall be necessary to ensure and provide, to the extent
permitted by applicable law and any agreements or instruments in effect on the
Stock Acquisition Date to which it is a party, that each Right shall thereafter
constitute the right to receive, (x) at the Companys option, either (A) in
return for the Exercise Price, debt or equity securities or other assets (or a
combination thereof) having a fair value equal to twice the Exercise Price, or
(B) without payment of consideration (except as otherwise required by applicable
law), debt or equity securities or other assets (or a combination thereof)
having a fair value equal to the Exercise Price, or (y) if the Board of
Directors of the Company elects to exchange the Rights in accordance with
Section 3.1(c), debt or equity securities or other assets (or a combination
thereof) having a fair value equal to the product of the Market Price of a share
of Common Stock on the Flip-in Date times the Exchange Ratio in effect on the
Flip-in Date, where in any case set forth in (x) or (y) above the fair value of
such debt or equity securities or other assets shall be as determined in good
faith by the Board of Directors of the Company, after consultation with a
nationally recognized investment banking firm.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.2      Flip-over.

| | (a)      Prior to the Expiration Time the Company shall not enter into any agreement with
any Acquiring Person with respect to, or consummate or permit to occur, any
Flip-over Transaction or Event, unless and until it shall have entered into a
supplemental agreement with the Person engaging in such Flip-over Transaction or
Event (the Flip-over Entity) for the benefit of the holders of the
Rights, providing that, upon consummation or occurrence of the Flip-over
Transaction or Event (i) each Right shall thereafter constitute the right to
purchase from the Flip-over Entity, upon exercise thereof in accordance with the
terms hereof, that number of shares of Flip-over Stock of the Flip-over Entity
having an aggregate Market Price on the date of consummation or occurrence of
such Flip-over Transaction or Event equal to twice the Exercise Price for an
amount in cash equal to the Exercise Price (such right to be appropriately
adjusted in order to protect the interests of the holders of Rights generally in
the event that after such date of consummation or occurrence an event of a type
analogous to any of the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Flip-over Stock) and (ii) the Flip-over Entity
shall thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations and
duties of the Company pursuant to this Agreement. The provisions of this Section
3.2 shall apply to successive Flip-over Transactions or Events.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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| | (b)      Prior to the Expiration Time, unless the Rights will be redeemed pursuant to
Section 5.1 hereof in connection therewith, the Company shall not enter into any
agreement with respect to, or consummate or permit to occur, any Flip-over
Transaction or Event if at the time thereof there are any rights, warrants or
securities outstanding or any other arrangements, agreements or instruments
which would eliminate or otherwise diminish in any respect the benefits intended
to be afforded by this Rights Agreement to the holders of Rights upon
consummation or occurrence of such transaction or event.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ARTICLE IV - THE RIGHTS AGENT

4.1      General.

| | (a)      The Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company agrees to pay to the Rights Agent
reasonable compensation as shall be agreed to in writing from time to time for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses (including expenses incurred by the Rights
Agent under Section 4.4) and counsel fees and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability. In
no event will the Rights Agent be liable for special, indirect, incidental, or
consequential loss or damage of any kind whatsoever, even if Rights Agent has
been advised of the possibility of such loss or damage.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for securities
purchasable upon exercise of Rights, Rights Certificate, certificate for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

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4.2      Merger or Consolidation or Change of Name of Rights Agent.

| | (a)      Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent is a party, or any corporation succeeding to the shareholder services
business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In case, at the time
such successor Rights Agent succeeds to the agency created by this Agreement,
any of the Rights Certificates have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates have not been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates will have the full force
provided in the Rights Certificates and in this Agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      In case at any time the name of the Rights Agent is changed and at such time any
of the Rights Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.3      Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:

| | (a)      The Rights Agent may consult with legal counsel (who may be legal counsel for
the Company), and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      Whenever in the performance of its duties under this Agreement the Rights Agent
deems it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by a person believed by the Rights Agent to be the Chairman
of the Board, the Chief Executive Officer, the President, or any Vice President
and by the Secretary or the Treasurer of the Company and delivered to the Rights
Agent; and such certificate will be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

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| | (c)      The Rights Agent will be liable hereunder only for its own gross negligence, bad faith
or willful misconduct.
| | ----------------------------------------------------------------------------------------------------------------------

| | (d)      The Rights Agent will not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the certificates for
securities purchasable upon exercise of Rights or the Rights Certificates
(except its countersignature thereof) or be required to verify the same, but all
such statements and recitals are and will be deemed to have been made by the
Company only.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e)      The Rights Agent will not be under any responsibility in respect of the validity
of this Agreement or the execution and delivery thereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in respect
of the validity or execution of any certificate for securities purchasable upon
exercise of Rights or Rights Certificate (except its countersignature thereof);
nor will it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor will it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 3.1(b) hereof) or any adjustment
required under the provisions of Section 2.4, 3.1 or 3.2 hereof or responsible
for the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights after receipt of the certificate contemplated
by Section 2.4 describing any such adjustment); nor will it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any securities purchasable upon exercise of Rights or any Rights
or as to whether any securities purchasable upon exercise of Rights will, when
issued, be duly and validly authorized, executed, issued and delivered and fully
paid and nonassessable.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f)      The Company agrees that it will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g)      The Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any person believed by
the Rights Agent to be the Chairman of the Board, the President, or any Vice
President and the Secretary or the Treasurer of the Company, and to apply to
such persons for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such person.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h)      The Rights Agent and any shareholder, director, officer or employee of the
Rights Agent may buy, sell or deal in Common Stock, Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

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| | (i)      The Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent will not be answerable or accountable
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.4      Change of Rights Agent. The Rights Agent may resign and be discharged
from its duties under this Agreement upon 60 days notice (or such lesser
notice as is acceptable to the Company) in writing mailed to the Company and to
each transfer agent of Common Stock by registered or certified mail, and to the
holders of the Rights in accordance with Section 5.9. In the event the Transfer
Agency and Services Agreement between the Company and the Rights Agent
terminates, the Rights Agent will be deemed to resign automatically on the
effective date of such termination, and any required notice will be sent by the
Company. The Company may remove the Rights Agent upon 60 days notice in
writing, mailed to the Rights Agent and to each transfer agent of the Common
Stock by registered or certified mail, and to the holders of the Rights in
accordance with Section 5.9. If the Rights Agent should resign or be removed or
otherwise become incapable of acting, the Company will appoint a successor to
the Rights Agent. If the Company fails to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of any Rights (which holder shall, with such notice, submit such
holders Rights Certificate for inspection by the Company), then the holder
of any Rights or the Rights Agent may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state in the United States, which is authorized under such laws to
exercise the powers of the Rights Agent contemplated by this Agreement. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail a
notice thereof in writing to the holders of the Rights. Failure to give any
notice provided for in this Section 4.4, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

ARTICLE V - MISCELLANEOUS

5.1      Redemption.

| | (a)      The Board of Directors of the Company may, at its option, at any time prior to
the Flip-in Date, elect to redeem all (but not less than all) the then
outstanding Rights at the Redemption Price. The aggregate Redemption Price paid
to the holders of odd numbers of Rights shall be rounded upward to the next
largest whole cent.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

---

| | (b)      Immediately upon the action of the Board of Directors of the Company electing to
redeem the Rights, without any further action and without any notice, the right
to exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price in cash. Promptly after the
action of the Board of Directors electing to redeem, and thereby redeeming, the
Rights, the Company shall give notice of such redemption to the Rights Agent and
the holders of the then outstanding Rights by mailing such notice in accordance
with Section 5.9.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.2      Expiration. No Person shall have any rights pursuant to this Agreement or
any Right after the Expiration Time, except, if the Rights are redeemed, as
provided in Section 5.1 hereof.

5.3      Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the number or kind or class of shares of stock purchasable upon exercise of
Rights made in accordance with the provisions of this Agreement.

5.4      Supplements and Amendments. The Company and the Rights Agent may from
time to time supplement or amend this Agreement without the approval of any
holders of Rights (i) in any respect prior to the Flip-in Date (other than to
change the Redemption Price or the Expiration Time, except as contemplated
elsewhere herein) (ii) to make any changes following the close of business on
the Flip-in Date which the Company may deem necessary or desirable and which
shall not materially adversely affect the interests of the holders of Rights
generally or (iii) in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be inconsistent with any other
provisions herein or otherwise defective. The Rights Agent will duly execute and
deliver any supplement or amendment hereto requested by the Company which
satisfies the terms of the preceding sentence.

5.5      Fractional Shares. If the Company elects not to issue certificates
representing fractional shares upon exercise of Rights, the Company shall, in
lieu thereof, (a) evidence such fractional shares by depositary receipts issued
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that each
holder of a depositary receipt shall have all of the rights, privileges and
preferences to which such holder would be entitled as a beneficial owner of such
fractional share, or (b) pay to the registered holder of such Rights the same
fraction of the Market Price (determined as of the date of exercise) of one
share of the stock issuable upon such exercise.

5.6      Rights of Action. Subject to the terms of this Agreement, rights of
action in respect of this Agreement, other than rights of action vested solely
in the Rights Agent, are vested in the respective holders of the Rights; and any
holder of any Rights, without the consent of the Rights Agent or of the holder
of any other Rights, may, on such holders own behalf and for such
holders own benefit and the benefit of other holders of Rights, enforce,
and may institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, such holders right to
exercise such holders Rights in the manner provided in such holders
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations of any Person subject to this Agreement.

19

---

5.7      Holder of Rights Not Deemed a Shareholder. No holder, as such, of any
Rights shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of shares or any other securities which may at any time be issuable
on the exercise of such Rights, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 5.8 hereof), or to receive dividends or subscription rights,
or otherwise, until such Rights shall have been exercised in accordance with the
provisions hereof.

5.8      Notice of Proposed Actions. In case the Company shall propose after the
Separation Time and prior to the Expiration Time (i) to effect or permit (in
cases where the Companys permission is required) occurrence of any Flip-in
Date or Flip-over Transaction or Event or (ii) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Right, in accordance with Section 5.9 hereof, a
notice of such proposed action, which shall specify the Flip-in Date or the date
on which such Flip-over Transaction or Event, liquidation, dissolution, or
winding up is to take place, and such notice shall be so given at least 20
Business Days prior to the date of the taking of such proposed action.

5.9      Notices. Notices or demands authorized or required by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights to or on the
Company shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

| | X-Rite, Incorporated
Attn: Duane F. Kluting
3100 - 44th Street, S.W.
Grandville, MI 49418
| | -----------------------------------------------------------------------------------------

Any notice or demand
authorized or required by this Agreement to be given or made by the Company or
by the holder of any Rights to or on the Rights Agent shall be sufficiently
given or made if delivered or sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:

| | EquiServe Trust Company, N.A.
Attn:  Client Administration 
150 Royall Street            
Canton, MA  02021
| | -----------------------------------------------------------------------------------------------------------

Notices or demands
authorized or required by this Agreement to be given or made by the Company or
the Rights Agent to or on the holder of any Rights shall be sufficiently given
or made if delivered or sent by first-class mail, postage prepaid, addressed to
such holder at the address of such holder as it appears upon the registry books
of the Rights Agent or, prior to the Separation Time, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice.

20

---

5.10      Suspension of Exercisability. To the extent that the Company determines
in good faith that some action need be taken pursuant to Section 3.1(e) or to
comply with federal or state securities laws, the Company may suspend the
exercisability of the Rights for a period of up to ninety (90) days following
the date of the occurrence of the Separation Time or the Flip-in Date in order
to take such action or comply with such laws. In the event of any such
suspension, the Company shall issue as promptly as practicable a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.

5.11      Costs of Enforcement. The Company agrees that if the Company or any other
Person the securities of which are purchasable upon exercise of Rights fails to
fulfill any of its obligations pursuant to this Agreement, then the Company or
such Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce such
holders rights pursuant to any Rights or this Agreement.

5.12      Successors. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.

5.13      Benefits of this Agreement. Nothing in this Agreement shall be construed
to give to any Person other than the Company, the Rights Agent and the holders
of the Rights any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the holders of the Rights.

5.14      Descriptive Headings. Descriptive headings appear herein for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

5.15      Governing Law. This Agreement and each Right issued hereunder shall be
deemed to be a contract made under the laws of the State of Michigan and for all
purposes shall be governed by and construed in accordance with the laws of such
state applicable to contracts to be made and performed entirely within such
state.

5.16      Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

5.17      Severability. If any term or provision hereof or the application thereof
to any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable.

21

---

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

| | X-RITE, INCORPORATED
By        /s/ Duane Kluting
             Duane Kluting
             Its Chief Financial Officer
EQUISERVE TRUST COMPANY, N.A.
By        /s/ Carol Mulvey-Eori
             Carol Mulvey-Eori
             Its Managing Director
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

590634v3

22

---

EXHIBIT A

[Form of Rights Certificate]

|Certificate No. W- | ________ Rights
|------------------ | ---------------

| | THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF THE FOREGOING WILL
BE VOID. | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

Rights Certificate

                                                X-RITE, INCORPORATED

This
certifies that ________________________, or registered assigns, is the registered holder of the number
of Rights set forth above, each of which entitles the registered holder thereof,
subject to the terms, provisions and conditions of the Shareholder Protection
Rights Agreement, dated as of March 29, 2002 (as such may be amended from time
to time, the Rights Agreement), between X-Rite, Incorporated., a
Michigan corporation (the Company), and EquiServe Trust Company,
N.A., as Rights Agent (the Rights Agent, which term shall include
any successor Rights Agent under the Rights Agreement), to purchase from the
Company at any time after the Separation Time (as such term is defined in the
Rights Agreement) and prior to the close of business on March 29, 2012, one
one-hundredth of a fully paid share of Junior Participating Preferred Stock,
without par value (the Junior Preferred Stock), of the Company
(subject to adjustment as provided in the Rights Agreement) at the Exercise
Price referred to below, upon presentation and surrender of this Rights
Certificate with the Form of Election to Exercise duly executed at the principal
office of the Rights Agent. The Exercise Price shall initially be $30.00 per
Right and shall be subject to adjustment in certain events as provided in the
Rights Agreement.

In
certain circumstances described in the Rights Agreement, the Rights evidenced
hereby may entitle the registered holder thereof to purchase capital stock of an
entity other than the Company or shares of capital stock of the Company other
than Junior Preferred Stock, all as provided in the Rights Agreement.

This
Rights Certificate is subject to all of the terms, provisions and conditions of
the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available without cost upon written request.

A-1

---

This
Rights Certificate, with or without other Rights Certificates, upon surrender at
the office of the Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing an aggregate number of Rights equal to the aggregate number of Rights
evidenced by the Rights Certificate or Rights Certificates surrendered. If this
Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be (a) redeemed by the Company under certain circumstances at
its option at a redemption price of $.005 per Right, or (b) exchanged by the
Company under certain circumstances at its option for one share of Common Stock
or one one-hundredth of a share of Junior Preferred Stock per Right (or, in
certain cases, other securities or assets of the Company), subject in each case
to adjustment in certain events as provided in the Rights Agreement.

No
holder of this Rights Certificate, as such, shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of any securities which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Rights evidenced by this Rights Certificate
shall have been exercised as provided in the Rights Agreement.

This
Rights Certificate shall not be valid or obligatory for any purpose until it
shall have been countersigned by the Rights Agent.

WITNESS
the facsimile signature of the proper officers of the Company and its corporate
seal.

|Date:  ____________________, 20____
ATTEST:
______________________________________
          
          
       Secretary
Countersigned:
EQUISERVE TRUST COMPANY, N.A.,
as Rights Agent
By:      ________________________________
            Authorized Signatory | X-RITE, INCORPORATED
By______________________________________
     Its____________________________________
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------

A-2

---

[Form of Reverse Side of Rights Certificate]FORM OF ASSIGNMENT
                  (To be executed  by the  registered  holder if such holder  desires to transfer the Rights Certificates.)

FOR VALUE RECEIVED ____________________________________ hereby sells, assigns and transfers
unto _______________________________________________
_____________________________________________________________________________________________________________________________________________

(Please print name and address of transferee)

this Rights Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ______________________ Attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full power of substitution.
Dated: ______________________, 20_____.

|Signature Guaranteed: | Signature
____________________________________________
(Signature  must  correspond  to name as 
written upon the face of this Rights Certificate
in every particular, without alteration or 
enlargement or any change whatsoever)
|--------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Signatures
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States.

A-3

---

---------------------------------------------------------------
(To be completed if true)

The undersigned hereby
represents, for the benefit of all holders of Rights and shares of Common Stock,
that the Rights evidenced by this Rights Certificate are not, and, to the
knowledge of the undersigned, have never been, Beneficially Owned by an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

| | _______________________________________________
Signature
| | ---------------------------------------------------------

----------------------------------------------------------------NOTICE

In
the event the certification set forth above is not completed in connection with
a purported assignment, the Company will deem the Beneficial Owner of the Rights
evidenced by the enclosed Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) or a
transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.

A-4

---

[To be attached to each Rights Certificate]FORM OF ELECTION TO EXERCISE
                                        (To be executed if holder desires to
                                          exercise the Rights Certificate.)

TO:      X-RITE, INCORPORATED

The undersigned hereby irrevocably elects to exercise _______________________ whole Rights
represented by the attached Rights Certificate to purchase the shares of Preferred Stock issuable upon the
exercise of such Rights and requests that certificates for such shares be issued in the name of:

| | ______________________________________
Address: ______________________________
______________________________________
Social Security or Other Taxpayer
Identification Number: ___________________
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If such number of Rights
shall not be all the Rights evidenced by this Rights Certificate, a new Rights
Certificate for the balance of such Rights shall be registered in the name of
and delivered to:

| | ______________________________________
Address: ______________________________
______________________________________
Social Security or Other Taxpayer
Identification Number: ___________________
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: ______________________, 20_____.

|Signature Guaranteed: | Signature
____________________________________________
(Signature  must  correspond  to name as 
written upon the face of this Rights Certificate
in every particular, without alteration or 
enlargement or any change whatsoever)
|--------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A-5

---

Signatures
must be guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States.

---------------------------------------------------------------
(To be completed if true)

The undersigned hereby
represents, for the benefit of all holders of Rights and shares of Common Stock,
that the Rights evidenced by this Rights Certificate are not, and, to the
knowledge of the undersigned, have never been, Beneficially Owned by an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

Signature
---------------------------------------------------------------NOTICE

In
the event the certification set forth above is not completed in connection with
a purported exercise of the Rights, the Company will deem the Beneficial Owner
of the Rights evidenced by the enclosed Rights Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
or a transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.

A-6

---

EXHIBIT B
                                       CERTIFICATE OF ADOPTION OF RESOLUTION
                                         DESIGNATING AND PRESCRIBING RIGHTS,
                                           PREFERENCES AND LIMITATIONS OF
                                       JUNIOR PARTICIPATING PREFERRED STOCK OF
                                                X-RITE, INCORPORATED

The
undersigned corporation executes the following certificate pursuant to the
provisions of Section 302, Act 284, Public Acts of 1972, as amended:

A.      The name of the Corporation is X-Rite, Incorporated (the "Company").

B.      The Corporation Identification Number (CID) assigned by the Bureau is: 091-366.

C.      The location of the registered office is 3100 - 44th Street, S.W., Grandville, Michigan 49418.

D.      The following is a true and correct copy of a resolution designating and
prescribing the relative rights, preferences and limitations of the
Companys Junior Participating Preferred Stock, which was duly adopted by
the Board of Directors on _____________, 20___:

| | RESOLVED,
that there is hereby established a series of Preferred Stock, without par value,
of the Company, and the designation and certain powers, preferences and other
rights of the shares of such series, and certain qualifications, limitations and
restrictions thereon, are hereby fixed as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1.      Designation and Amount. The distinctive serial designation of this series
shall be Junior Participating Preferred Stock (hereinafter called
this Series). Each share of this Series shall be identical in all
respects with the other shares of this Series except as to the dates from and
after which dividends thereon shall be cumulative. The number of shares in this
Series shall initially be Three Hundred Thousand (300,000), which number may
from time to time be increased or decreased (but not below the number then
outstanding plus the number of shares issuable upon exercise of outstanding
options, rights, or warrants or upon conversion of any outstanding securities
issued by the Company convertible into shares of this series) by the Board of
Directors. Shares of this Series purchased by the Company shall be cancelled and
shall revert to authorized but unissued shares of Preferred Stock undesignated
as to series.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.      Dividends and Distributions.
| | ------------------------------------

| | (i)      The holders of shares of this Series, in preference to the holders of
         Common  Stock  and of any other  stock  ranking  junior  to this  Series,  shall be  entitled  to
         receive,  when, as, and if declared by the Board of Directors out of funds legally  available for
         the purpose,  quarterly  dividends payable in cash on the 10th day of February,  May, August, and
         November in each year (each such
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B-1

---

| | date being referred to herein as a "Quarterly  Dividend  Payment
         Date"),  commencing on the first  Quarterly  Dividend  Payment Date after the first issuance of a
         share of this Series, or fraction  thereof,  in an amount per share (rounded to the nearest cent)
         equal to the  greater of (a) $1.00 or (b) subject to the  provision  for  adjustment  hereinafter
         set forth,  one hundred  (100) times the aggregate  per share amount of all cash  dividends,  and
         one  hundred  (100)  times the  aggregate  per share  amount  (payable  in kind) of all  non-cash
         dividends  or  other  distributions,  other  than  a  dividend  payable  in  Common  Stock  or  a
         subdivision of the outstanding Common Stock (by  reclassification or otherwise),  declared on the
         Common Stock since the immediately  preceding  Quarterly  Dividend  Payment Date, or with respect
         to the first  Quarterly  Dividend  Payment  Date,  since the first  issuance of any share of this
         Series,  or fraction  thereof.  In the event the Company  shall at any time after March 29, 2002,
         declare or pay any dividend on Common Stock payable in Common Stock,  or effect a subdivision  or
         combination or consolidation of the outstanding Common Stock (by  reclassification  or otherwise)
         into a greater or lesser number of shares of Common  Stock,  then in each such case the amount to
         which  holders of shares of this  Series  were  entitled  immediately  prior to such event  under
         clause  (b) of the  preceding  sentence  shall  be  adjusted  by  multiplying  such  amount  by a
         fraction,  the  numerator  of  which  is  the  number  of  shares  of  Common  Stock  outstanding
         immediately  after  such  event and the  denominator  of which is the  number of shares of Common
         Stock that were outstanding immediately prior to such event.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)      The Company shall declare a dividend or  distribution on the shares of
         this  Series  as  provided  in  subparagraph  (i) of this  paragraph  2  simultaneously  with its
         declaration of a dividend or distribution  on the Common Stock (other than a dividend  payable in
         Common Stock or a subdivision of the  outstanding  Common Stock);  provided that, in the event no
         dividend or  distribution  shall have been declared on the Common Stock during the period between
         any Quarterly  Dividend Payment Date and the next subsequent  Quarterly  Dividend Payment Date, a
         dividend of $1.00 per share on the shares of this Series shall  nevertheless  be payable,  out of
         funds legally available for such purpose, on such subsequent Quarterly Dividend Payment Date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii)      Dividends  shall  begin to accrue  and be  cumulative  on  outstanding
         shares of this  Series  from the date of issue of such  shares,  unless the date of issue of such
         shares  is a date  after the  record  date for the  determination  of  holders  of shares of this
         Series  entitled  to receive a quarterly  dividend  and before such  Quarterly  Dividend  Payment
         Date, in which event such dividends  shall begin to accrue and be cumulative  from such Quarterly
         Dividend  Payment Date.  Accrued but unpaid  dividends  shall not bear  interest.  Dividends paid
         on the shares of this Series in an amount  less than the total  amount of such  dividends  at the
         time  accrued and payable on such shares shall be allocated  pro rata on a  share-by-share  basis
         among all such shares  outstanding  at that time.  The Board of  Directors  may fix a record date
         for the  determination  of  holders of shares of this  Series  entitled  to receive  payment of a
         dividend or distribution  declared  thereon,  which record date shall be not more than sixty (60)
         days prior to the date fixed for the payment thereof.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B-2

---

| | 3.      Voting  Rights.  The holders of shares of this Series shall have the  following
voting rights:
| | ------------------------------------------------------------------------------------------------------

| | (i)      Subject to the provision for adjustment  hereinafter  set forth,  each
         share of this Series shall  entitle the holder  thereof to one hundred (100) votes on all matters
         submitted to a vote of the  shareholders  of the Company.  In the event the Company  shall at any
         time after March 29, 2002,  declare or pay any dividend on Common Stock  payable in Common Stock,
         or effect a subdivision or  combination  or  consolidation  of the  outstanding  Common Stock (by
         reclassification  or otherwise)  into a greater or lesser number of shares of Common Stock,  then
         in each such case the number of votes per share to which  holders of shares of this  Series  were
         entitled  immediately  prior to such event  shall be  adjusted  by  multiplying  such number by a
         fraction,  the  numerator  of  which  is  the  number  of  shares  of  Common  Stock  outstanding
         immediately  after  such  event and the  denominator  of which is the  number of shares of Common
         Stock that were outstanding immediately prior to such event.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)      Except as  otherwise  provided  herein,  in any other  Certificate  of
         Adoption of a Resolution  creating a series of Preferred  Shares or by law, the holders of shares
         of this  Series  and the  holders  of Common  Stock and any other  capital  stock of the  Company
         having  general  voting  rights  shall vote  together as one class on all matters  submitted to a
         vote of the shareholders of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii)      Except as otherwise  provided  herein or by law, the holders of shares
         of this  Series  shall have no special  voting  rights and their  consent  shall not be  required
         (except to the  extent  they are  entitled  to vote with  holders  of Common  Stock and any other
         capital  stock of the Company  having  general  voting rights as set forth herein) for taking any
         corporate action.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.      Certain Restrictions.
| | -----------------------------

| | (i)      Whenever  quarterly  dividends  or other  dividends  or  distributions
         payable  on the  shares  of this  Series  as  provided  in  paragraph  2 hereof  are in  arrears,
         thereafter  and  until all  accrued  and  unpaid  dividends  and  distributions,  whether  or not
         declared,  on shares of this Series  outstanding  shall have been paid in full, the Company shall
         not:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a)      declare  or pay  dividends,  or make any other  distributions,
         on any  shares of stock  ranking  junior  (either as to  dividends  or upon  liquidation)  to the
         shares of this Series;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)      declare  or pay  dividends,  or make any other  distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation) with the shares of this Series, except dividends paid ratably on
the shares of this Series and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B-3

---

| | (c)      redeem or purchase  or
otherwise  acquire  for  consideration shares
of any stock ranking junior (either as to dividends or upon liquidation) to the
shares of this Series, provided that the Company may at any time redeem,
purchase, or otherwise acquire shares of any such junior stock in exchange for
shares of stock of the Company ranking junior (both as to dividends and upon
liquidation) to the share of this Series; or
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d)      redeem or purchase  or
otherwise  acquire  for  consideration any
shares of this Series, or any shares of stock ranking on a parity with the
shares of this Series, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)      The Company shall not permit any subsidiary of the Company to purchase or
otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under subparagraph (i) of this paragraph 4, purchase or
otherwise acquire such shares at such time and in such manner.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.      Reacquired Shares. Any shares of this Series purchased or otherwise
acquired by the Company in any manner whatsoever shall constitute authorized but
unissued Preferred Stock and may be reissued as part of a new series of
Preferred Stock by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein, in the Articles
of Incorporation, or in any other Certificate of Adoption of a Resolution
creating a series of Preferred Stock or as otherwise required by law.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.      Liquidation, Dissolution, or Winding Up. Upon any liquidation,
dissolution, or winding up of the Company, no distribution shall be made (a) to
the holders of shares of stock, ranking junior (either as to dividends or upon
liquidation), to the shares of this Series unless, prior thereto, the holders of
shares of this Series shall have received the greater of (i) $100.00 per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, or (ii) an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to one hundred (100) times the aggregate amount to be distributed per
share to holders of Common Stock, or (b) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation) with the shares
of this Series, except distributions made ratably on the shares of this Series
and all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution, or
winding up. In the event the Company shall at any time after March 29, 2002,
declare or pay any dividend on the Common Stock payable in Common Stock, or
effect a subdivision or combination or consolidation of the outstanding Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of this Series were entitled immediately prior to such event
under clause (a)(ii) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B-4

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| | 7.      Consolidation, Merger, Exchange, Etc. In the event the Company shall
enter into any consolidation, merger, combination, statutory share exchange, or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, money and/or any other property, then in
any such case the shares of this Series shall at the same time be similarly
exchanged or changed into an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to one hundred (100) times the aggregate
amount of stock, securities, money, and/or other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is changed
or exchanged. In the event the Company shall at any time after March 29, 2002,
declare or pay any dividend on Common Stock payable in Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of this
Series shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8.      No Redemption.  The shares of this Series shall not be redeemable.
| | --------------------------------------------------------------------------

| | 9.      Rank. The shares of this Series shall rank junior in terms of a dividend
and liquidation rights to all other series of the Companys Preferred Stock
hereinafter issued that specifically provide that they shall rank senior to the
shares of this Series.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.      Fractional  Shares.  Shares of this Series may be issued in  fractions  of a share which
         shall  entitle the holder,  in  proportion  to such  holder's  fractional  shares,  to receive  dividends,
         participate  in  distributions  and to have the  benefit  of all other  rights of holders of the shares of
         this Series.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B-5

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IN
WITNESS WHEREOF, the undersigned have signed and attested this certificate on
the day of ___________________, 20____.

|Attest:
X-Rite, Incorporated
By______________________________________
     Its Secretary | X-RITE, INCORPORATED
By______________________________________
     Its____________________________________
|---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------

B-6

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## EXHIBIT 21

# X-RITE, INCORPORATED
LIST OF CONSOLIDATED SUBSIDIARIES

|1.  | X-Rite International, Inc., a Barbados Corporation, is a wholly owned subsidiary of X-Rite,
Incorporated, being utilized as a foreign sales corporation.                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | X-Rite Holdings, Inc., a U.S. Corporation, is a wholly owned subsidiary of X-Rite, Incorporated, being
utilized as a stockholder of certain foreign subsidiaries.                   
|3.  | X-Rite GmbH, a German Corporation, is wholly owned by X-Rite, Incorporated and X-Rite Holdings, Inc.,
and being utilized as a sales and service office.                             
|4.  | X-Rite Asia Pacific Limited, a Hong Kong Corporation, is wholly owned by X-Rite, Incorporated and X-Rite
     Holdings, Inc., and being utilized as a sales and service office.     
|5.  | X-Rite Ltd., a United Kingdom Corporation, is wholly owned by X-Rite, Incorporated and being utilized as
     a sales and service office.                                           
|6.  | X-Rite MA, Incorporated, a U.S. Corporation, is wholly owned by X-Rite, Incorporated and being utilized
     as a sales and service office.                                         
|7.  | OTP, Incorporated, a U.S. Corporation, is wholly owned by X-Rite, Incorporated and was used to execute a
     real estate transaction.                                              
|8.  | Labsphere, Inc., a U.S. Corporation, is wholly owned by X-Rite, Incorporated and is a manufacturer of
     light measurement systems and related proprietary materials.             
|9.  | Labsphere Ltd., a United Kingdom Corporation, is wholly owned by Labsphere, Incorporated and being
     utilized as a sales office.                                                 
|10. | X-Rite Mediterranee SARL, a French Corporation, is wholly owned by X-Rite, Incorporated and X-Rite
     Holdings, Inc., and being utilized as a sales and service office.           
|11. | X-Rite Global, Inc., a U.S. Corporation, is a wholly owned subsidiary of X-Rite, Incorporated, being
     utilized as a stockholder of certain foreign subsidiaries.                
|12. | XR Ventures, LLC, a U.S. Limited Liability Corporation, is a majority owned subsidiary of X-Rite,
     Incorporated, being utilized as a venture capital company.                   
|13. | Coherix, Corporation, a U.S. Corporation, is majority owned by X-Rite, Incorporated and is a
     manufacturer of laser based measurement systems and related proprietary materials.
|14. | Optronik GmbH, a German Corporation, is a wholly owned subsidiary of
X-Rite GmbH, and is a manufacturer of color and light measurement systems and
related proprietary materials.   



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## EXHIBIT 23

# CONSENT OF
INDEPENDENT PUBLIC ACCOUNTANTS

As independent public
accountants, we hereby consent to the incorporation of our report dated January
29, 2002, included in this Form 10-K, into X-Rite, Incorporateds
previously filed Registration Statement File Numbers 33-29288, 33-29290,
33-82258 and 33-82260.

/s/ Arthur Andersen LLP
Grand Rapids, Michigan,
March 29, 2002



---

EXHIBIT 99.1

[X-Rite, Incorporated Letterhead]

March 29, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC   20549

|Re: | X-Rite, Incorporated
Form 10-K for FYE December 29, 2001
Letter Pursuant to Temporary Note 3T
|--- | ---------------------------------------------------------------------------------------------

To Whom It May Concern:

Pursuant
to Temporary Note 3T to Article 3 of Regulation S-X, Arthur Andersen LLP
(Andersen) has represented to X-Rite, Incorporated (the
Company) that (1) the audit of the financial statements of the
Company and subsidiaries as of December 29, 2001, and for the year then ended
was subject to Andersens quality control system for U.S. accounting and
auditing practice to provide reasonable assurance that the engagement was
conducted in compliance with professional standards, (2) there was appropriate
continuity of Arthur Andersen personnel working on the audit, (3) there was
availability of national office consultation, and (4) there was availability of
personnel at foreign affiliates of Anderson to conduct the relevant portions of
the audit.
Sincerely,
/s/ Duane Kluting
Duane Kluting
Chief Financial Officer
JBL\rer
Enclosure