1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
-----------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File No. 0-14800
---------------
X-RITE, INCORPORATED
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-1737300
- ------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3100 44th Street, SW, Grandville, Michigan 49418
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(616) 534-7663
- ------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
The number of shares outstanding of registrant's common stock, par value
$.10 per share, at October 31, 1995 was 21,007,618 shares.
Exhibit Index on page 12.
1 of 23
2
X-RITE INCORPORATED AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30,1995 (Unaudited) and December 31, 1994 3-4
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended September 30, 1995
and 1994 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 1995 and 1994 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Index to Exhibits 12-13
2 of 23
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
X-RITE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 5,452,000 $ 1,171,000
Short-term investments 13,762,000
Accounts receivable, less allowances of
$444,000 in 1995 and $251,000 in 1994 13,093,000 10,211,000
Inventories 12,514,000 12,858,000
Deferred tax assets 557,000 557,000
Prepaid expenses and other current assets 1,219,000 862,000
----------- -----------
Total current assets 32,835,000 39,421,000
PROPERTY, PLANT AND EQUIPMENT, at cost 24,686,000 18,254,000
Less accumulated depreciation (9,306,000) (6,553,000)
----------- -----------
15,380,000 11,701,000
INTANGIBLE ASSETS, net 13,375,000 3,436,000
----------- -----------
$61,590,000 $54,558,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3 of 23
4
X-RITE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 826,000 $ 1,419,000
Accrued liabilities 1,912,000 1,429,000
----------- -----------
Total current liabilities 2,738,000 2,848,000
DEFERRED INCOME TAXES 637,000 578,000
SHAREHOLDERS' EQUITY:
Common stock 2,101,000 2,099,000
Additional paid-in capital 6,287,000 6,075,000
Retained earnings 49,822,000 43,010,000
Cumulative translation adjustment 5,000 (52,000)
----------- -----------
58,215,000 51,132,000
----------- -----------
$61,590,000 $54,558,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4 of 23
5
X-RITE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
Net sales $18,755,000 $15,638,000 $55,607,000 $42,749,000
Cost of sales 6,843,000 4,690,000 18,797,000 12,913,000
----------- ----------- ----------- -----------
Gross profit 11,912,000 10,948,000 36,810,000 29,836,000
Operating expenses:
Selling & marketing 3,730,000 3,470,000 11,674,000 8,815,000
Engineering, general
& administrative 2,784,000 1,929,000 8,188,000 5,133,000
Research & development 1,550,000 933,000 4,581,000 2,798,000
----------- ----------- ----------- -----------
8,064,000 6,332,000 24,443,000 16,746,000
----------- ----------- ----------- -----------
Operating income 3,848,000 4,616,000 12,367,000 13,090,000
Other (expense) income (60,000) 121,000 97,000 369,000
----------- ----------- ----------- -----------
Income before
income taxes 3,788,000 4,737,000 12,464,000 13,459,000
Income taxes 1,257,000 1,415,000 4,077,000 4,300,000
----------- ----------- ----------- -----------
NET INCOME $ 2,531,000 $ 3,322,000 $ 8,387,000 $ 9,159,000
=========== =========== =========== ===========
Average number of common
and common equivalent
shares outstanding 21,186,000 21,067,000 21,173,000 21,055,000
========== ========== ========== ==========
Earnings per common and
common equivalent share $.12 $.16 $.40 $.43
==== ==== ==== ====
Cash dividends per share $.025 $.020 $.075 $.060
===== ===== ===== =====
See accompanying notes to condensed consolidated financial statements.
5 of 23
6
X-RITE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
1995 1994
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES $ 8,143,000 $ 923,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of short-term
investments 13,762,000 8,668,000
Acquisition of Labsphere, Inc., net
of cash acquired (11,490,000) -
Capital expenditures (3,035,000) (2,941,000)
----------- ----------
Net cash provided by (used for)
investing activities (763,000) 5,727,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Labsphere, Inc. long-term debt (1,795,000) -
Dividends paid (1,575,000) (1,257,000)
Issuance of common stock 214,000 268,000
----------- ----------
Net cash used for financing
activities (3,156,000) (989,000)
Effect of exchange rate changes on cash
and cash equivalents 57,000 (11,000)
----------- ----------
NET INCREASE IN CASH AND EQUIVALENTS 4,281,000 5,650,000
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 1,171,000 2,544,000
----------- ----------
CASH AND EQUIVALENTS AT END OF QUARTER $ 5,452,000 $8,194,000
=========== ==========
See accompanying notes to condensed consolidated financial statements.
6 of 23
7
X-RITE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by X-Rite Incorporated ("X-Rite" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in X-Rite's 1994 annual report on Form 10-K.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of September 30,
1995 and the results of its operations and its cash flows for the three and
nine month periods ended September 30, 1995 and 1994. All such adjustments
are of a normal and recurring nature.
Certain reclassifications have been made to prior year operating expenses
to conform with the 1995 presentation.
NOTE 2--INVENTORIES
Inventories consisted of the following:
September 30, December 31,
1995 1994
------------ -----------
Raw materials $ 3,254,000 $ 3,294,000
Work in process 4,880,000 5,044,000
Finished goods 4,380,000 4,520,000
----------- -----------
$12,514,000 $12,858,000
=========== ===========
NOTE 3--ACQUISITION
In February of 1995 the Company acquired all the outstanding stock of
Labsphere, Inc. for $11,500,000 in cash. The acquisition was accounted for
under the purchase method of accounting and was funded by short-term
investments. Labsphere, Inc. manufactures products that measure color and
light through transmission reflectance technology.
7 of 23
8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Net Sales:
Consolidated net sales of $18,755,000 in the third quarter of 1995 were
20.0% higher than sales of $15,638,000 in the same quarter a year ago. The
increase was mainly due to the inclusion of $2,127,000 in sales from
Labsphere, Inc., a company acquired by X-Rite in the first quarter of 1995.
Excluding the Labsphere sales, third quarter X-Rite sales increased 6.3%
compared to the third quarter of 1994. That sales growth was driven by
volume increases.
Consolidated net sales for the nine months ended September 30, 1995
increased 30.1% to $55,607,000, from $42,749,000 for the same period in
1994. Labsphere, Inc. sales accounted for $5,355,000 of the year-to-date
increase. Excluding the Labsphere sales, year-to-date X-Rite sales
increased 17.6% compared to the first nine months of 1994. The increase
was due primarily to higher unit volume sales of point-of-purchase paint
matching systems.
Cost of Sales and Gross Profit:
Higher manufacturing costs resulted in unfavorable overhead absorption,
which affected third quarter and year-to-date profitability. During the
third quarter the Company made certain work force reductions, where
appropriate, in order to improve manufacturing costs.
Gross profit as a percentage of sales was 63.5% for the third quarter of
1995, compared to 70.0% for the third quarter of 1994. Year to date, gross
profit as a percentage of sales was 66.2% in 1995 and 69.8% in 1994. In
addition to increased manufacturing costs, product sales mix unfavorably
impacted gross profit margins in the quarter and year to date. The
inclusion of Labsphere, Inc. sales also contributed to the third quarter
and year-to-date margin decline; gross profit margins earned on those
products are typically less than margins earned on X-Rite products.
Operating Expenses:
Selling and marketing expenses in the third quarter increased 7.5% and year
to date increased 32.4% compared to the same periods in 1994. The
increases resulted principally from volume-related selling expenses, higher
trade show costs, the inclusion of Labsphere, Inc. selling expenses in the
current year only and increased marketing expenditures for new product
introductions.
8 of 23
9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition, continued
RESULTS OF OPERATIONS, continued
Third quarter engineering, general and administrative ("EG&A") expenses
increased 44.3% compared to the same quarter in the prior year; year to
date those expenses increased 59.5% over 1994. The increases were due to
EG&A expenses being included from the Labsphere, Inc. operations, versus no
comparable costs in the prior year, in addition to ongoing investments to
support the Company's international subsidiary operations where X-Rite
products continue to gain market acceptance. Engineering maintenance
support has also increased relative to the Company's expanded product line.
Research and development expenses in the third quarter and year to date
increased 66.1% and 63.7%, respectively, compared with the same periods in
1994. X-Rite continues its ongoing commitment to make investments in
leading edge technology in order to advance efforts in strategic product
development.
As part of an overall effort to contain costs and maximize operating
efficiencies, the Company moved certain engineering, administrative and
development functions from a subsidiary location during the third quarter
to the main facility in Grandville, Michigan.
Other (Expense) Income:
Interest income earned in the third quarter and year to date was less than
comparable periods in 1994 due to a reduction in funds available for
investment. Cash and short-term investments declined during the first
quarter of 1995 due to the acquisition of Labsphere, Inc.
Net Income:
The Company recorded net income of $2,531,000 for the three months ended
September 30, 1995 compared to $3,322,000 in the same period of 1994. On a
per share basis, third quarter net income was $.12 in 1995 compared to $.16
in 1994. For the first nine months of 1995, net income was $8,387,000, or
$.40 per share, compared to $9,159,000, or $.43 per share in 1994.
The decline in earnings and earnings per share for the quarter and year to
date was due to the factors described in the preceding "Cost of Sales and
Gross Profit" and "Operating Expenses" sections. The average number of
common and common equivalent shares outstanding was not significantly
different between the periods.
9 of 23
10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition, continued
FINANCIAL CONDITION AND LIQUIDITY
Working capital at September 30, 1995 was $30,097,000 compared to
$36,573,000 at December 31, 1995. The reduction was due to the use of
$11,500,000 in short-term investments to fund the acquisition of Labsphere,
Inc. during the first quarter of 1995, offset by an increase in accounts
receivable and additional cash generated since the Labsphere acquisition.
Property and equipment additions in the first nine months of 1995 consisted
of approximately $1,800,000 for machinery and equipment, and approximately
$1,200,000 for an installment payment for land and a building adjacent to
X-Rite's main facility in Grandville, Michigan. X-Rite currently
anticipates capital expenditures for the remainder of 1995 will be
approximately $3,000,000, which will consist mainly of the final payment
for the land and building purchase.
Management believes the Company's present liquidity, combined with cash
flow from future operations and the Company's revolving credit facility,
will be adequate to fund operations and capital expenditures for the
remainder of 1995 and 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index on Page 12 of
this Form 10-Q report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during
the three months ended September 30, 1995.
10 of 23
11
SIGNATURES
Pursuant to the requirements 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
November 13, 1995 /s/ Ted Thompson
----------------------
Ted Thompson
Chairman and Chief
Executive Officer
November 13, 1995 /s/ Duane F. Kluting
----------------------
Duane F. Kluting
Vice President and
Chief Financial Officer
11 of 23
12
EXHIBIT INDEX
Page in
Sequentially
Exhibit Numbered
Number Description Copy
- -------- ------------------------------------------------ ------------
3(a) Restated Articles of Incorporation (filed as n/a
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 n/a
of Incorporation adding Article IX (filed as
an 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 14
of Incorporation amending Article III as filed
with the Michigan Department of Commerce; stamped
received on May 19, 1992, and stamped filed on
May 26, 1992
3(d) Bylaws, as amended through June 16, 1994 (filed n/a
as an exhibit to Form 10-K for the year ended
December 31, 1994 (Commission File No. 0-14800)
and incorporated herein by reference)
4 X-Rite, Incorporated common stock certificate n/a
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)
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 1993 Outside Director Stock n/a
Option Plan (filed as exhibit to Form S-8 dated
July 19, 1994 (Commission File No. 0-14800) and
incorporated herein by reference)
*10(b) X-Rite, Incorporated 1993 Employee Stock Option n/a
Plan (filed as exhibit to Form S-8 dated July 19,
1994 (Commission File No. 0-14800) and incorporated
herein by reference)
12 of 23
13
EXHIBIT INDEX
Page in
Sequentially
Exhibit Numbered
Number Description Copy
- -------- ------------------------------------------------ ------------
*10(c) Form of Indemnity Contract entered into between 18
the registrant and certain persons, together
with a list of such persons
10(d) Exchange Agreement entered into between the n/a
registrant and Ronald L. Sisson (filed as exhibit
to Form 10-K for the year ended December 31, 1994
(Commission File No. 0-14800) and incorporated
herein by reference)
27 Financial Data Schedule n/a
13 of 23
14
<EX-3.c>
Exhibit 3(c)
________________________________________________________________________
| MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU |
|________________________________________________________________________|
|(For Bureau Use Only) | Date Received |
| | |
| |_______________|
| | |
| | |
| |_______________|
| | |
| | |
| |_______________|
| | |
| | |
|________________________________________________________|_______________|
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
________________________________________________________________________
| |
| 1. The present name of the corporation is: X-Rite, Incorporated |
| |
| 2. The corporation identification number (CID) assigned by the |
| Bureau is: 091-366 |
| |
| 3. The location of its registered office is: |
| |
| 3100 44th Street, S.W., Grandville, Michigan 49418 |
|________________________________________________________________________|
________________________________________________________________________
| |
| 4. Article III of the Articles of Incorporation is hereby amended |
| to read as follows: |
| |
| |
| See Exhibit A attached hereto. |
| |
| |
| |
| |
| |
| |
| |
| |
|________________________________________________________________________|
14 of 23
15
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD
OF DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a.___The foregoing amendment to the Articles of Incorporation was duly
adopted on the ____ day of ___________, 19___, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this__________________day of__________________________, 19___.
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
b._X_The foregoing amendment to the Articles of Incorporation was duly
adopted on the ___11th___ day of ___May___, 1992. The amendment:
(check one of the following)
_X_ was duly adopted in accordance with Section 611(2) of the Act by
the vote of the shareholders if a profit corporation, or by the
vote of the shareholders or members if a nonprofit corporation, or
by the vote of directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in
favor of the amendment.
___ was duly adopted by the written consent of all the directors pur-
suant to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a nonstock directorship basis.
___ was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required
by statute in accordance with Section 407(1) and (2) of the Act if
a nonprofit corporation, and Section 407(1) of the Act if a profit
corporation. Written notice to shareholders or members who have
not consented in writing has been given. (Note: Written consent by
less than all of the shareholders or members is permitted only if
such provision appears in the Articles of Incorporation.)
___ was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the
Act if a non-profit corporation, and Section 407(2) of the Act if
a profit corporation.
Signed this ___11th___ day of _____May_____, 1992
By _____/s/Ted Thompson__________________________
(Only signature of: President, Vice President,
Chairperson and Vice-Chairperson)
____Ted Thompson, President______________________
(Type or Print Name) (Type or Print Title)
15 of 23
16
DOCUMENT WILL BE RETURNED TO NAME AND MAILING Name of person or organ-
ADDRESS INDICATED IN THE BOX BELOW. Include ization remitting fees:
name, street and number (or P.O. box), city, Varnum, Riddering,
state and ZIP code. Schmidt & Howlett
____________________________________________
| J. Terry Moran | Preparer's name and busi-
| Varnum, Riddering, Schmidt & Howlett | ness telephone number:
| Suite 800, 171 Monroe Ave., N.W. | J. Terry Moran
| Grand Rapids, MI 49503 | (616) 459-4186
|____________________________________________|
________________________________________________________________________
| INFORMATION AND INSTRUCTIONS |
|1. The Amendment cannot be filed until this form, or a comparable |
| document, is submitted. |
|2. Submit one original copy of this document. Upon filing, a microfilm |
| copy will be prepared for the records of the Corporation and |
| Securities Bureau. The original copy will be returned to the address |
| appearing in the box above as evidence of filing. |
| Since this document must be microfilmed, it is important that the |
| filing be legible. Documents with poor black and white contrast, |
| or otherwise illegible, will be rejected. |
|3. This document is to be used pursuant to the provisions of section 631|
| of the Act for the purpose of amending the articles of incorporation |
| of a domestic profit or nonprofit corporation. Do not use this form |
| for restated articles. A nonprofit corporation is one incorporated to|
| carry out any lawful purpose or purposes not involving pecuniary |
| profit or gain for its directors, officers, shareholders, or members.|
| A nonprofit corporation formed on a nonstock directorship basis, as |
| authorized by Section 302 of the Act, may or may not have members, |
| but if it has members, the members are not entitled to vote. |
|4. Item 2-Enter the identification number previously assigned by the |
| Bureau. If this number is unknown, leave it blank. |
|5. Item 4-The article being amended must be set forth in its entirety. |
| However, if the article being amended is divided into separate iden- |
| tifiable sections, only the sections being amended need be included. |
|6. This document is effective on the date approved and filed by the |
| Bureau. A later effective date, no more than 90 days after the date |
| of delivery, may be stated. |
|7. If the amendment is adopted before the first meeting of the board of |
| directors, item 5(a) must be completed and signed in ink by a major- |
| ity of the incorporators if more than one listed in Article V of the |
| Articles of Incorporation if a profit corporation, and all the in- |
| corporators if a non-profit corporation. If the amendment is other- |
| wise adopted, item 5(b) must be completed and signed in ink by the |
| president, vice-president, chairperson, or vice-chairperson of the |
| corporation. |
|8. FEE:(Make remittance payable to the State of Michigan. Include corp- |
| oration name and CID Number on check or money order).......$10.00|
| Franchise fee for profit corporations (payable only if authorized|
| shares have increased): each additional 20,000 authorized shares |
| or portion thereof.........................................$30.00|
|9. Mail form and fee to: |
| Michigan Department of Commerce, Corporation and Securities |
| Bureau, Corporation Division, P.O. Box 30054, 6546 Mercantile |
| Way, Lansing, MI 48909, Telephone:(517) 334-6302 |
|________________________________________________________________________|
16 of 23
17
X-RITE, INCORPORATED
EXHIBIT A
ARTICLE III.
Authorized Capital Stock
A. The total authorized capital stock of this Corporation is twenty-five
million (25,000,000) shares of common stock of the par value of ten cents
($.10) per share and five million (5,000,000) shares of preferred stock of
the par value of ten cents ($.10) per share.
Common Stock
B. The authorized shares of common stock of the par value of ten cents
($.10) per share are all of one class and each share of common stock is
equal in every respect to every other share of common stock. The holders
of common stock shall be entitled to one (1) vote in person or by proxy for
each share of common stock held. In the event of liquidation, dissolution,
or winding up of the Corporation, whether voluntary or involuntary, the
holders of common stock of the Corporation shall be entitled to participate
ratably according to their respective holdings in the division of the
assets of the Corporation which remain after payment in full of all amounts
owing to creditors of the Corporation and of all amounts payable to holders
of preferred stock of the Corporation which has been issued with
preferential rights upon liquidation, dissolution, or winding up of the
Corporation. Holders of common stock shall have the right to participate
ratably according to their respective holdings in such dividends and
distributions as may be declared by the Board of Directors of the
Corporation and paid on the common stock of the Corporation from time to
time from funds legally available for that purpose, subject to the prior
right of holders of preferred stock of the Corporation to receive such
distributions and dividends where such preferred stock of the Corporation
has been issued with a preference as to such distributions and dividends.
The holders of common stock of the Corporation shall not be entitled to
convert common stock into any other class of stock of the Corporation,
whether now or hereafter issued. The holders of common stock of the
Corporation shall have no preemptive rights to purchase or to subscribe to
any shares of any class of stock issued by the Corporation, now or
hereafter, whether voting or non-voting; or to any securities exchangeable
for or convertible into such shares; or to any warrants or other
instruments evidencing rights or options to subscribe for, purchase, or
otherwise acquire such shares. All shares of common stock issued by the
Corporation shall be deemed fully paid and non-assessable. The holders of
common stock shall have no voting rights with respect to issuance of
preferred stock or the rights, preferences or limitations of preferred
stock, which matters are reserved exclusively to the Corporation s Board of
Directors.
Preferred Stock
C. The authorized shares of preferred stock of the par value of ten
cents ($.10) may be divided into and issued in one or more series. The
Board of Directors is hereby authorized to cause the preferred stock to be
issued from time to time in one or more series, with such designations and
such relative voting, dividend, liquidation and other rights, preferences
and limitations as shall be stated and expressed in the resolution or
resolutions providing for the issue of such preferred stock adopted by the
Board of Directors. The Board of Directors by vote of majority of the
whole Board is expressly authorized to adopt such resolution or resolutions
and issue such stock from time to time as it may deem desirable.
17 of 23
18
<EX-10.c>
Exhibit 10(c)
INDEMNITY AGREEMENT
AGREEMENT made as of the _______ day of __________, 19__, by and among
X-Rite, Incorporated, a Michigan corporation (the "Corporation") and
________________________ (the "Indemnitee") with respect to the following:
WITNESSETH:
WHEREAS, the Board of Directors of the Corporation has recognized that
the present trend in litigation against corporate directors has created a
reluctance in persons to serve in such a capacity and that such effect is
likely to result in less effective direction and supervision of the
Corporation s business affairs;
WHEREAS, the Board of Directors of the Corporation has determined that
such consequences are so detrimental to the best interests of the
Corporation and its shareholders that its directors should be provided with
protection against inordinate risks in order to insure that the most
capable persons available will be attracted to such a position;
WHEREAS, in light of the rising costs of and reduced coverage of
director liability insurance and the recent amendment to the Michigan
Business Corporation Act, which permits an increase in the scope of
indemnification of directors, it is reasonable and necessary for the
Corporation to contractually obligate itself to indemnify its directors for
certain costs, expenses and other monetary liabilities to the fullest
extent permitted by law and as further provided in this Agreement.
NOW, THEREFORE, in order to induce Indemnitee to serve or continue to
serve the Corporation as a director, and in consideration of the mutual
covenants and agreements hereinafter set forth, the parties agree as
follows:
1. DEFINITIONS. As used herein, the following terms are defined as
follows:
(a) Claim. Any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether civil, criminal,
administrative or investigative and whether formal or informal, by reason
of the fact that Indemnitee is or was a director of the Corporation or is
or was serving at the request of the Corporation as a director of another
corporation or in a similar capacity of any other kind of entity.
(b) Expenses. Attorneys fees and all other costs, expenses and
obligations actually and reasonably paid or incurred in connection with
investigating, defending, participating or being a witness in, or preparing
to defend, participate or be a witness in any Claim or appeal therefrom.
18 of 23
19
2. AGREEMENT TO SERVE. Indemnitee agrees to serve as a director of the
Corporation to the best of his ability so long as he is duly elected and
qualified in accordance with the Articles of Incorporation and Bylaws of
the Corporation, or until his earlier resignation or removal.
3. INDEMNIFICATION. Subject to the terms and conditions of this
Agreement, the Corporation hereby agrees to indemnify Indemnitee as
follows:
(a) In the event Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or
other participant in a Claim, the Corporation shall indemnify Indemnitee to
the fullest extent permitted by law and as provided in this Agreement,
pursuant to the authorization of Section 565 of the Michigan Business
Corporation Act, against any and all Expenses, judgments, fines, penalties
and amounts paid in settlement of such Claim.
(b) The Corporation shall indemnify Indemnitee as soon as practicable,
but in any event not later than thirty (30) days after written demand is
presented to the Corporation.
4. CONDITION PRECEDENT TO INDEMNIFICATION. Indemnitee, as a condition
precedent to indemnification under this Agreement, shall tender written
notice to the Corporation as soon as practicable of any Claim made against
him for which indemnification will or likely will be sought under the terms
of this Agreement.
Notice to the Corporation shall be directed to X-Rite, Incorporated, 3100
Forty-fourth Street, S.W., Grandville, Michigan 49418, Attn: Corporate
Secretary. In addition, Indemnitee shall give the Corporation such
information and cooperation as may be reasonably necessary and requested by
the Corporation.
5. CONSENT OF CORPORATION. No amounts paid in settlement for which
indemnity will be sought hereunder shall be incurred without the
Corporation s written consent, which consent shall not be unreasonably
withheld.
6. LIMITATIONS ON INDEMNITY.
(a) The Corporation shall not be liable under this Agreement to make any
payment in connection with any Claim made against Indemnitee:
(1) For which payment is made to Indemnitee under a valid and
collectible insurance policy, except for any excess beyond the amount of
payment under such insurance policy;
-2-
19 of 23
20
(2) For which Indemnitee is indemnified by the Corporation otherwise
than pursuant to this Agreement;
(3) Based upon or attributable to any transaction: (i) involving
intentional misconduct or knowing violation of law; (ii) which is in
violation of Section 555(1), or any successor provision, of the Michigan
Business Corporation Act; or (iii) from which Indemnitee derived an
improper personal benefit;
(4) For an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation, within the meaning of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto, or
similar provisions of any state law; or
(5) For which payment of indemnification by the Corporation is otherwise
prohibited by applicable law.
(b) Except as provided in Paragraph 8 hereof, the Corporation shall not
be liable under this Agreement to make any payment in connection with any
action initiated by Indemnitee against the Corporation or any director of
the Corporation, unless the Corporation has joined in or consented to the
initiation of such action.
7. PAYMENT OF COSTS AND EXPENSES IN ADVANCE. If requested by
Indemnitee, the Corporation shall pay (within ten (10) days of such written
request) any and all costs and Expenses incurred by Indemnitee in defending
or investigating any Claim, in advance of the final disposition of such
Claim, upon the receipt of a written undertaking by Indemnitee to repay any
such amounts if it is ultimately determined that Indemnitee is not entitled
to indemnification by the Corporation.
8. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Corporation shall
indemnify Indemnitee against any and all expenses, including attorneys
fees, incurred by Indemnitee in connection with any action, including
expenses of preparation for such action, brought by Indemnitee for: (a)
indemnification or advance payment of Expenses by the Corporation under
this Agreement; or (b) recovery under any directors liability insurance
policy or policies maintained by the Corporation; provided, however, that
indemnification under this Paragraph 8 shall be limited to those
circumstances where the Indemnitee is successful in obtaining a recovery
of, or a determination that he is entitled to such indemnification, advance
expense payment or insurance recovery.
9. PARTIAL INDEMNIFICATION. In the event Indemnitee is entitled to
indemnification hereunder for a portion of the Expenses, judgments, fines,
penalties and amounts paid in settlement actually and reasonably
-3-
20 of 23
21
incurred by him in the investigation, defense, appeal or settlement of any
Claim but not, however, for all the total amount thereof, the Corporation
shall indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable the Corporation
effectively to bring suit or enforce such rights.
11. NO PRESUMPTION. For purposes of this Agreement, the termination of
any action, suit or proceeding by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is
not permitted by applicable law.
12. SPECIFIC DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. In the
event Indemnitee is found liable to the Corporation as a result of any
Claim brought by or in the right of the Corporation, whether and the extent
to which Indemnitee is nevertheless entitled to indemnification under this
Agreement shall be predicted on a determination that indemnification is
appropriate in light of the circumstances of the case and applicable legal
standards, which determination shall be made, at the option of Indemnitee,
by: (a) majority vote of a committee of two (2) or more disinterested
directors appointed by the Board of Directors; (b) independent legal
counsel in a written opinion; or (c) the court in which the Claim was
brought.
13. LIABILITY INSURANCE. To the extent the Corporation maintains an
insurance policy or policies providing liability insurance for directors,
Indemnitee shall be covered by such policy or policies, in accordance with
its or their terms, to the maximum extent of the coverage extended to any
other director of the Corporation.
14. SCOPE OF AGREEMENT. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under any provision of the
Corporation s Articles of Incorporation, Bylaws or laws of the State of
Michigan.
15. AMENDMENT, TERMINATION AND WAIVER. This Agreement may be amended,
modified or terminated and any of the terms and conditions herein may be
waived only by the written consent of the parties hereto. The failure of
any party at any time or times to require performance of any provisions
contained herein shall in no manner affect the right of such party at any
later time to enforce the same.
-4-
21 of 23
22
16. BINDING EFFECT AND ASSIGNMENT. This agreement shall be binding upon
and inure to the benefit of the Indemnitee and his personal
representatives, heirs and assigns, and the Corporation and its successors
and assigns, including any direct or indirect successor of the Corporation
by purchase, merger, consolidation or otherwise to all or substantially all
of the business and/or assets of the Corporation; provided, however, that
no assignment of any rights or delegation of obligations provided for
herein may be made by either party without the express written consent of
the other party. This Agreement shall continue in effect while Indemnitee
is a director of the Corporation and for the period immediately thereafter,
terminating two (2) years subsequent to the duration of any applicable
period of limitations for commencing any claims.
17. GOVERNING LAW. The parties hereto acknowledge and agree that this
Agreement shall be governed by, construed and enforced in accordance with
the laws, and in the courts, of the State of Michigan.
18. SEVERABILITY. Any provision of this Agreement which may be
prohibited by law, or otherwise held invalid by a court of competent
jurisdiction, shall be ineffective only to the extent of such prohibition
or invalidity and shall not invalidate or otherwise render ineffective the
remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
X-RITE, INCORPORATED
By ___________________________
Its _________________________
INDEMNITEE
______________________________
-5-
22 of 23
23
Indemnity Agreements in the foregoing form have been entered into between
the registrant and the following persons:
1. D. Ted Thompson
2. Dr. Marvin G. DeVries
3. Charles Van Namen
4. Quinten E. Ward
5. Glenn M. Walters
6. Rufus S. Teesdale
7. Lawrence E. Fleming
8. Leonard C. Blanding
9. Ronald A. VandenBerg
23 of 23