<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
X-RITE, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
X-RITE, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
X-RITE, INCORPORATED
3100 44TH STREET, S.W.
GRANDVILLE, MICHIGAN 49418
NOTICE OF ANNUAL MEETING TO BE HELD MAY 20, 1996
The Annual Meeting of Shareholders of X-Rite, Incorporated will be held at
the Grand Valley State University Eberhard Center, 301 West Fulton Street, Grand
Rapids, Michigan, on Monday, May 20, 1996, at 4:30 p.m., for the following
purposes:
1. To elect three directors as set forth in the accompanying Proxy
Statement.
2. To approve the adoption of the X-Rite, Incorporated Cash Bonus
Conversion Plan.
3. To transact any other business that may properly come before the
meeting.
Shareholders of record as of the close of business on March 22, 1996, are
entitled to notice of, and to vote at the meeting. You are requested to sign,
date, and return the accompanying Proxy in the enclosed, self-addressed
envelope, regardless of whether you expect to attend the meeting in person. If
you attend the meeting in person, you may withdraw your Proxy and vote your
shares in person if you wish.
By Order of the Board of Directors
DUANE KLUTING
Secretary
- --------------------------------------------------------------------------------
X-RITE MAP
- --------------------------------------------------------------------------------
<PAGE> 3
X-RITE, INCORPORATED
3100 44TH STREET, S.W.
GRANDVILLE, MICHIGAN 49418
------------------------
PROXY STATEMENT
APRIL 8, 1996
------------------------
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of X-Rite,
Incorporated (the "Company") on or about April 8, 1996, in connection with the
solicitation by the Board of Directors of the Company of Proxies to be used at
the Annual Meeting of Shareholders to be held on Monday, May 20, 1996, at 4:30
p.m. at the Grand Valley State University Eberhard Center, 301 West Fulton
Street, Grand Rapids, Michigan.
If the form of Proxy accompanying this Proxy Statement is properly executed
and returned, the shares represented by the Proxy will be voted at the Annual
Meeting of Shareholders in accordance with the directions given in the Proxy.
Where shareholders specify a choice by marking on the Proxy card, the Proxy will
be voted as specified. If no choice is specified, the shares represented by the
Proxy will be voted for the election of the directors listed as nominees in the
Proxy, for the approval of the Cash Bonus Conversion Plan, and in the discretion
of the Proxy voters on any other matter voted upon at the meeting. A Proxy may
be revoked prior to its exercise by delivering a written notice of revocation to
the Secretary of the Company, executing a subsequent Proxy or attending the
meeting and voting in person.
The cost of the solicitation of Proxies will be borne by the Company. In
addition to the use of the mails, Proxies may be solicited personally or by
telephone or facsimile by a few regular employees of the Company without
additional compensation. The Company has retained D.F. King & Co., Inc., to aid
in the solicitation of proxies at an estimated cost of $4,500, plus expenses. In
addition, brokers, nominees, custodians, and other fiduciaries will be
reimbursed by the Company for their expenses in connection with sending proxy
materials to beneficial owners and obtaining their Proxies.
VOTING SECURITIES AND RECORD DATE
March 22, 1996, has been fixed by the Board of Directors as the record date
for determining shareholders entitled to vote at the Annual Meeting. On that
date, 21,015,706 shares of the Company's common stock, par value $.10 per share,
were issued and outstanding. Shareholders are entitled to one vote for each
share of the Company's common stock registered in their names at the close of
business on the record date.
ELECTION OF DIRECTORS
The Company's Articles of Incorporation specify that the Board of Directors
shall consist of nine (9) members, divided into three classes, with the
directors of the classes to hold office for staggered terms of three (3) years
each. Dr. Marvin G. DeVries and Messrs. Stanley W. Cheff and James A. Knister,
as described in the following table, have been nominated for election to three
year terms expiring in 1999.
The terms of office of incumbent directors Leonard C. Blanding and Glenn M.
Walters will expire as of the date of the Annual Meeting and they will each
assume the position of Director Emeritus (See discussion under the caption
Executive Compensation following the Stock Performance Graph.)
Unless otherwise specifically directed by a marking on a shareholder's
Proxy, the persons named as proxy voters in the accompanying Proxy will vote for
the nominees described below. In the event any of these nominees is no longer a
candidate at the time of the Annual Meeting of Shareholders (a situation which
is not now anticipated), the Board of Directors may designate a substitute
nominee, in which case the accompanying Proxy will be voted for the substituted
nominee.
Directors are elected by a plurality of the votes cast by shareholders.
Therefore, the nominees for each class receiving the most affirmative votes cast
will be elected, irrespective of the number of votes received. Broker nonvotes,
votes withheld, and votes against any candidate will not have a bearing on the
outcome of the election. Votes will be counted by Inspectors of Election
appointed by the presiding officer at the meeting.
<PAGE> 4
The Board of Directors recommends a vote FOR the election of all the
persons nominated by the Board.
The content of the following table relating to business experience is based
upon information furnished to the Company by the nominees and directors.
<TABLE>
<CAPTION>
NAMES, (AGES), POSITIONS AND BACKGROUNDS
OF DIRECTORS AND NOMINEES SERVICE AS A DIRECTOR
<S> <C>
- ---------------------------------------------------------------------------------------------
Nominees For Terms to Expire in 1999
Stanley W. Cheff (54) is the President and Chief Executive
Officer of Wolverine Building, Inc., a construction firm
headquartered in Grand Rapids, Michigan, and he has held
that position for more than five years.
Dr. Marvin G. DeVries (62) is an economics consultant, and Director since 1986
he was a Professor of Economics at the F.E. Seidman School Member of Audit Committee
of Business, Grand Valley State University, Allendale,
Michigan, for more than five years prior to his retirement
in 1994. In addition, Dr. DeVries served as Dean of the
Business School from 1973 to 1988.
James A. Knister (58) is Senior Vice President and Group
Manager of Donnelly Corporation, a manufacturer of glass
related products for the automotive and electronics
industries, headquartered in Holland, Michigan, and he has
held that position since October of 1994. Previously, Mr.
Knister was Senior Vice President and Chief Financial
Officer of Donnelly Corporation.
Directors Whose Terms Expire in 1998
Ted Thompson (66) is the Chairman of the Board and Chief Director since 1958
Executive Officer of X-Rite, Incorporated, and he has held Chairman of the Board
that position for more than five years. Mr. Thompson also and Chief Executive Officer
serves as a director of Gentex Corporation. Member of Nominating Committee
Ronald A. VandenBerg (56) is a Business Unit Vice President Director since 1989
of Donnelly Corporation, a manufacturer of glass related Chairman of Compensation
products for the automotive and electronics industries, Committee and Member of
headquartered in Holland, Michigan. Mr. VandenBerg has held Nominating Committee
several executive positions with Donnelly for many years.
Quinten E. Ward (70) has been retired for more than five Director since 1958
years. Prior to retirement he was a Senior Engineer with Member of Compensation
the Instrument Division of Lear Siegler, Inc., Grand Rapids, Committee
Michigan (a manufacturer of aerospace instruments).
Directors Whose Terms Expire in 1997
Lawrence E. Fleming (71) has been retired for more than five Director since 1958
years. Prior to retirement he was a Senior Engineer with Chairman of Nominating
the Instrument Division of Lear Siegler, Inc., in Grand Committee and Member of
Rapids, Michigan (a manufacturer of aerospace instruments). Compensation Committee
Rufus S. Teesdale (75) has been retired for more than five Director since 1958
years. Prior to retirement he was a Partner in Loan Chairman of Audit Committee
Services and Systems in Glen Ellyn, Illinois (a software
supplier to financial institutions).
Charles VanNamen (70) has been retired for more than five Director since 1958
years. Prior to retirement he was a Senior Engineer with Member of Audit and
the Instrument Division of Lear Siegler, Inc., in Grand Compensation Committees
Rapids, Michigan (a manufacturer of aerospace instruments).
- ---------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
The Company has an Audit Committee which recommends to the Board of
Directors the selection of independent public accountants to serve as the
Company's auditors, and reviews the scope of their audit and their audit report.
This Committee met on two occasions during the fiscal year ended December 31,
1995.
The Company has a Compensation Committee which makes recommendations to the
Board regarding annual remuneration of the Company's executive officers, and
which is responsible for administering the Company's various incentive plans
involving the Company's common stock. This Committee met on four occasions
during the fiscal year ended December 31, 1995. A report from this Committee
appears infra under the caption Report on Executive Compensation.
The Company has a Nominating Committee that is responsible for recommending
to the Board of Directors annually a slate of nominees for election as directors
to be submitted to the shareholders of the Company at the Annual Meeting. The
Committee is also responsible for recommending nominees to fill vacancies that
may occur at other times. The Committee will consider persons suggested as
nominees by shareholders, and suggestions should be sent to the Nominating
Committee c/o the Company's Secretary at its headquarters. This Committee met
once during the fiscal year ended December 31, 1995.
The Board of Directors met eight times during the past fiscal year, and all
directors attended at least seventy-five percent (75%) of the aggregate number
of meetings of the Board and meetings of committees on which they served.
CASH BONUS CONVERSION PLAN
In May of 1995, the Board of Directors adopted the X-Rite, Incorporated
Cash Bonus Conversion Plan (the "Conversion Plan"), subject to approval of the
Company's shareholders. The Conversion Plan provides an opportunity for
executives of the Company to elect to receive cash bonuses awarded under the
Company's Executive Compensation and Incentive Plan, if any, in shares of
Restricted Stock (described below), rather than cash. Shareholders will be asked
to consider and approve the Plan at the Annual Meeting. The following paragraphs
summarize the principal features of the Conversion Plan, and the full text of
the Conversion Plan is appended to this Proxy Statement as Appendix A.
Purpose. The Board of Directors believes that it is important for
executives of the Company to hold significant amounts of the Company's common
stock so that their interests will be aligned more closely with the interests of
all shareholders. Therefore, the Conversion Plan was developed to make it
attractive for executives to elect to receive their performance bonuses, to the
extent earned, in common stock of the Company, rather than cash.
Operation of the Plan. The Company maintains an Executive Compensation and
Incentive Plan that makes provision for annual bonuses that historically have
been based approximately one-half on individual achievement and one-half on
corporate performance against an annual budget approved by the Board of
Directors. (See "Report On Executive Compensation" infra). The Conversion Plan
provides an opportunity for any executive awarded such a bonus to elect to
receive all, or any portion, of that bonus in shares of common stock of the
Company. The conversion ratio for that common stock is one-half of the then
current market value, so that each dollar of bonus converted will yield two
dollars worth of common stock as of the date the bonus is established. However,
the common stock issued will be Restricted Stock, i.e., the shares may not be
sold or otherwise disposed of until the restrictions lapse, and any shares
subject to restrictions are subject to forfeiture back to the Company in the
event of termination of the executive's employment for any reason. The
restrictions lapse as to 20 percent after six months and an additional 20
percent annually thereafter, or with respect to all of the shares in the event
of the executive's death, disability, or retirement after age of 60, or in the
event of a hostile change in control of the Company.
Shares Subject to Plan. A maximum of 400,000 shares of the Company's common
stock are authorized for sale pursuant to the Conversion Plan. Shares may be
supplied to satisfy the requirements of conversions under the Conversion Plan
out of shares held in treasury, authorized but unissued shares, or partly out of
each. In the event any shares subject to restrictions are forfeited, those
shares shall again be available for use under
3
<PAGE> 6
the Conversion Plan. In addition, the Plan provides for appropriate adjustments
in the number of shares in the event of any stock dividends or recapitalization
without the receipt of consideration by the Company.
Amendment and Termination. The Conversion Plan will terminate automatically
after application to cash bonuses with respect to performance during the fiscal
year ending December 31, 2004, unless terminated earlier by the Board of
Directors. The Board may amend the Conversion Plan at anytime, provided that no
amendment may, without shareholder approval: (i) increase the total number of
shares which may be issued under the Plan; (ii) reduce the price at which shares
may be sold pursuant to the Plan; or (iii) modify the eligibility requirements
for participation in the Plan.
Summary of Federal Income Tax Consequences. Any cash bonus received by an
executive will be treated as ordinary income to the recipient under the Internal
Revenue Code of 1986, as amended (the "Code"). To the extent the executive
elects to convert cash bonus into Restricted Stock, the income tax consequences
to him or her will depend upon whether an election is filed with the I.R.S.
under sec.83(b) of the Code. If no election is filed, the excess of the fair
market value of the shares at the time the restrictions on those shares lapse
over the amount of cash bonus converted, will be taxable as ordinary income to
the executive. However, the executive may file an election under sec.83(b) to
have the entire value of all shares in excess of the amount of cash bonus
collected, taxed as ordinary income in the year of receipt, in which case the
shares will be valued at the market value for the Company's common stock at the
time of conversion. If the shares are subsequently forfeited, no deduction or
refund will be allowed to the executive on account of taxes paid on the
forfeited shares.
The income tax consequences to the Company are dependent upon the tax
consequences to the executive. The Company will be entitled to a deduction to
the same extent, and at the same time as the amount in question becomes taxable
to the executive.
The rules governing the tax treatment of executive compensation are quite
technical; consequently, the foregoing discussion of tax consequences is
necessarily general in nature and does not purport to be complete. In addition,
tax consequences under applicable state and local laws may not be the same as
under federal law.
Initiation of Plan. Subject to approval by shareholders, the Conversion
Plan has been made applicable to cash bonuses paid in calendar year 1995, with
respect to performance during calendar year 1994. In the event the Plan is not
approved by shareholders, or in the event a participating executive's employment
with the Company terminates before the Plan is submitted to shareholders for
approval, then all affected transactions with respect to the Conversion Plan are
rescinded. Both former President Bruce Jorgensen and Chief Financial Officer
Duane Kluting elected to convert $33,250 of their bonuses received in 1995 with
respect to 1994 performance which, in each case, at a purchase price of $9.50
per share, resulted in the acquisition of 3,500 shares of restricted stock.
However, Mr. Jorgensen's conversion transaction was automatically rescinded as a
result of the termination of his employment. Chairman and Chief Executive
Officer Ted Thompson is not eligible to participate in the Plan since he owns
more than five percent of the Company's outstanding shares.
The affirmative vote of a majority of the Company's outstanding common
stock represented and voted at the Annual Meeting is required to approve the
adoption of the Conversion Plan. Since a majority of votes cast is required for
approval, a negative vote will necessitate an offsetting affirmative to assure
approval. Any ballot or proxy marked "abstain" and any broker nonvote will be
counted as a negative vote. Votes will be counted by inspectors of election
appointed by the presiding officer at the Annual Meeting.
The Board of Directors recommends a vote FOR the approval of the Conversion
Plan.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table contains information regarding ownership of the
Company's common stock by each director and nominee for election as a director,
each executive officer named in the tables under the caption Executive
Compensation, and all directors and executive officers as a group. The content
of this table is based upon information supplied by the persons identified in
the table and represents the Company's understanding of circumstances in
existence as of March 1, 1996.
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF OWNERSHIP
-------------------------------------------------
NAME AND ADDRESS OF SHARES BENEFICIALLY EXERCISABLE
BENEFICIAL OWNER OWNED(1) OPTIONS(2) TOTAL PERCENT OF CLASS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leonard C. Blanding 1,448,323(3) 20,000 1,468,323 6.8
6600 Tanglewood, S.E.
Grand Rapids, MI 49546
Lawrence E. Fleming 1,620,000 20,000 1,640,000 7.6
6200 Hall St., S.E.
Grand Rapids, MI 49546
Rufus S. Teesdale 1,528,834(4) 20,000 1,548,834 7.2
3152 E. Gatehouse, S.E.
Grand Rapids, MI 49546
Ted Thompson 1,538,300(5) 80,000 1,618,300 7.5
3100 44th Street
Grandville, MI 49418
Quinten E. Ward 1,366,000(6) 20,000 1,386,000 6.5
2251 N. Rampart Blvd., Suite 102
Las Vegas, NV 89128
Bernard J. Berg 8,600 58,000 66,000 *
Stanley W. Cheff (director nominee) 3,000 -0- 3,000 *
Dr. Marvin DeVries -0- 48,000 48,000 *
Duane Kluting 17,685 42,000 59,685 *
James A. Knister (director nominee) -0- -0- -0-
Jeffrey Smolinski 1,581 10,000 11,581 *
Ronald A. VandenBerg 8,000 42,000 50,000 *
Charles VanNamen 714,500(7) 20,000 734,500 3.4
Glenn M. Walters 48,000(8) 50,000 98,000 *
All Directors, Director Nominees and 8,302,823 430,000 8,732,823 40.7
Executive Officers as a Group
(14 persons)
</TABLE>
- --------------------------------------------------------------------------------
* Less than one percent
(1) Except as disclosed in the footnotes below, each person named in the table
is the record holder of, and has sole voting and investment power with
respect to the issued shares listed in this column.
(2) This column reflects shares subject to options exercisable within 60 days.
(3) Includes 1,130,943 shares issued to trusts established by Mr. Blanding for
which he serves as trustee, with full power to vote and dispose of those
shares, and 317,380 shares held in a trust for which Mr. Blanding's wife
serves as trustee, with full power to vote and dispose of those shares. Mr.
Blanding disclaims beneficial ownership of the shares held by his wife's
trust.
(4) All shares beneficially owned by Mr. Teesdale have been issued to a trust
established by him, and he serves as sole trustee, with full power to vote
and dispose of the specified shares.
(5) Includes 160,000 shares issued to a trust established by Mr. Thompson's
wife, for which she serves as a sole trustee, with full power to vote and
dispose of those shares. Mr. Thompson disclaims beneficial ownership of the
shares held by his wife's trust.
(6) Includes 1,184,000 shares issued to a trust established by Mr. Ward, for
which he serves as sole trustee, and 182,000 shares issued to Mr. Ward's
wife. Mr. Ward disclaims beneficial ownership of the shares held by his
wife.
(7) Includes 444,600 shares issued to a trust established by Mr. VanNamen, for
which he serves as sole trustee, with full power to vote and dispose of
those shares, and 269,900 shares issued to a trust established by Mr.
VanNamen's wife, for which she serves as a co-trustee, with shared power to
vote and dispose of those shares. Mr. VanNamen disclaims beneficial
ownership of the shares held by his wife's trust.
5
<PAGE> 8
(8) Includes 43,000 shares issued to a trust established by Mr. Walters, for
which he serves as sole trustee, with full power to vote and dispose of
those shares, and 5,000 shares issued to a trust established by Mr. Walters'
wife, for which she serves as sole trustee, with full power to vote and
dispose of those shares. Mr. Walters disclaims beneficial ownership of the
shares held in his wife's trust.
EXECUTIVE COMPENSATION
The following table contains information regarding compensation paid by the
Company with respect to the preceding fiscal year to its chief executive officer
and to the four other most highly compensated executive officers whose salary
and bonus compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------------------
COMPENSATION RESTRICTED SECURITIES
------------------ STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS COMPENSATION
EXECUTIVE YEAR ($) ($)(1) ($)(2) (#) ($)(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ted Thompson 1995 280,947 20,200 -- 20,000 13,650
Chairman and 1994 246,634 164,700 -- 20,000 13,650
Chief Executive Officer 1993 239,200 22,800 -- 40,000 8,567
Bruce L. Jorgensen 1995 192,373 -- -- 15,000 4,902
President and 1994 153,965 81,000 -- 20,000 1,488
Chief Operating Officer
Bernard J. Berg 1995 147,841 10,900 -- 10,000 3,691
Vice President -- 1994 130,385 74,500 -- 10,000 3,071
Engineering 1993 128,860 18,000 -- 10,000 2,987
Duane Kluting 1995 142,621 10,600 -- 10,000 3,593
Vice President -- 1994 120,961 69,700 -- 6,000 2,614
Chief Financial Officer 1993 111,924 16,500 -- 6,000 573
Jeffrey Smolinski 1995 115,003 8,600 -- 10,000 292
Vice President --
Operations
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In the event shareholders approve the adoption of the Cash Bonus Conversion
Plan described supra, certain of these cash bonuses, paid in 1995 for
performance in fiscal 1994, will be converted in shares of the Company's
common stock that will be subject to certain restrictions and risks of
forfeiture as described under the caption "Cash Bonus Conversion Plan."
(2) There are no unvested Restricted Stock grants outstanding, except for the
bonus conversions described under the caption "Cash Bonus Conversion Plan."
(3) These amounts represent "matching" contributions by the Company pursuant to
its 401(k) Plan and annual premiums for term life insurance attributable to
each named executive officer.
------------------------
6
<PAGE> 9
The following table contains information regarding stock options granted to
the above-named executive officers during the preceding fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
OPTIONS PERCENT OF OPTIONS EXERCISE GRANT DATE
GRANTED GRANTED TO ALL PRICE EXPIRATION PRESENT VALUE
EXECUTIVE (1) EMPLOYEES ($/SH)(2) DATE ($)(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ted Thompson 20,000 19.0 19.50 3/21/05 228,400
Bruce L. Jorgensen 15,000 14.3 19.50 3/21/05 171,300
Bernard J. Berg 10,000 9.5 19.50 3/21/05 114,200
Duane Kluting 10,000 9.5 19.50 3/21/05 114,200
Jeffrey Smolinski 10,000 9.5 19.50 3/21/05 114,200
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options become exercisable one year after the date of grant.
(2) The price may be paid in any combination of cash, surrender of outstanding
shares, and/or the surrender of exercisable options valued at the excess of
market price of the underlying shares over the exercise price for the
options.
(3) Present value calculated under the Black-Scholes Valuation Model, assuming
7.17% risk-free rate of return, .5% dividend yield, .40 volatility, and
exercise in 10 years. This model is an alternative suggested by the
Securities and Exchange Commission, and the Company neither endorses this
particular model nor necessarily agrees with the method for valuing options.
The future performance of the Company and the price of its shares will
ultimately determine the value of these options.
------------------------
The following table contains information regarding the exercise of options
during the preceding fiscal year by the above-named executives, as well as
unexercised options held by them at fiscal year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES VALUE YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ted Thompson -- -- 60,000 20,000 202,500 -0-
Bruce L. Jorgensen -- -- -0- 35,000 -0- 66,250
Bernard Berg -- -- 48,000 10,000 335,500 -0-
Duane Kluting -- -- 32,000 10,000 174,125 -0-
Jeffrey Smolinski -- -- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is currently comprised of five members, and all
members are outside directors; i.e., none is an employee of the Company. The
Committee makes recommendations to the Board of Directors with respect to all
executive compensation except for the award of stock-based incentives, which are
the exclusive prerogative of the Committee.
The Compensation policies established for executive officers are designed
to assure the Company's ability to attract, motivate, and retain competent and
dedicated senior management. In constructing and applying these policies, a
conscious effort is made to identify and evaluate the executive compensation
programs for comparable employers, considering such factors as geographic and
industry influences, relative sizes, growth
7
<PAGE> 10
stages, and market capitalizations. With the assistance of a consulting firm,
the Committee has established a peer group of corporations that it uses for
compensation comparison purposes.
In general, compensation packages for executive officers are composed of
three elements: base salary, annual bonus, and stock-based incentives. Base
salary for an executive is determined by the executive's responsibility and the
Company's need to be competitive in the market for executive services. Bonus
compensation is based on personal performance as well as achievement of
corporate goals. Stock-based incentives are intended to strengthen the alignment
of interests between shareholders and senior management and to address long-term
performance.
In the early part of 1995, the Compensation Committee reviewed the annual
salary plan with the Chief Executive Officer for all other executive officers,
and made such adjustments as they thought appropriate, based upon salary survey
data for comparable employers, economic conditions in general, and individual
evaluations by the Chief Executive Officer. Annual salary for the Chief
Executive Officer was reviewed independently by the Committee and adjusted based
upon the same considerations for other executive salaries, plus the Committee's
evaluation of his performance as corporate leader.
At the same time, the Committee established the annual bonus program to be
based one-half on individual achievement and one-half on corporate performance
against the annual budget approved by the Board of Directors. A maximum award
was set at thirty percent (30%) of base salary in the case of the Chief
Executive Officer, and twenty percent (20%) of base salary in the case of all
other executives. Actual bonuses under this program were determined by the
Committee, in consultation with the Chief Executive Officer (except as to his
own bonus), after the close of the fiscal year. An additional incentive program
was in place for 1995 for exceeding forecasted sales, but no payments were made
under this program since sales did not exceed the forecast. All cash bonus
programs have been replaced for 1996 by a program based on operating profit in
excess of the annual budget approved by the Board of Directors.
The Committee also awarded stock options to seven executives during 1995
under the Employee Stock Option Plan, including the grants to the named
executives detailed in the foregoing table captioned Option Grants in Last
Fiscal Year. The options awarded to the executives, other than the Chief
Executive Officer, were awarded based upon recommendations from the Chief
Executive Officer, taking into account for each executive his contribution to
success in prior periods by achieving agreed upon goals, and his ability and
willingness to influence success in the future by striving to achieve individual
and corporate goals. The Chief Executive Officer was awarded an option based
primarily on the Committee's judgment that it is in the best interest of
shareholders to provide incentive for the Chief Executive Officer in the form of
stock options, in an amount that is appropriate relative to the options granted
other executives, considering their abilities to influence corporate
performance.
COMPENSATION COMMITTEE
Lawrence E. Fleming
Glenn M. Walters
Quinten E. Ward
Ronald A. VandenBerg
Charles VanNamen
8
<PAGE> 11
STOCK PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
common stock compared to the cumulative total return on the indices for NASDAQ
market (U.S. and foreign) and NASDAQ nonfinancial stocks. The graph assumes an
investment of $100 on the last trading day of 1990, and reinvestment of
dividends in all cases.
<TABLE>
<CAPTION>
NASDAQ Stock NASDAQ
Measurement Period X-Rite, In- Market (US & Non-Finan-
(Fiscal Year Covered) corporated Foreign) cial Stocks
<S> <C> <C> <C>
1990 100.00 100.00 100.00
127.591 129.388 131.362
125.596 128.225 127.605
165.910 142.934 143.262
1991 240.793 159.612 160.983
243.425 164.938 163.523
326.576 153.747 146.859
447.082 159.564 151.526
1992 489.338 185.196 176.094
395.366 189.413 176.422
393.821 194.014 183.013
427.139 210.202 197.314
1993 409.337 214.399 203.330
391.403 205.427 193.578
443.472 194.990 178.506
645.232 211.449 196.209
1994 739.620 207.370 194.856
731.148 225.140 210.923
694.542 256.075 242.332
704.879 286.983 270.670
1995 531.880 288.172 268.169
</TABLE>
The Company has not adopted any long-term incentive plan or any defined
benefit or actuarial plan, as those terms are defined in the applicable
regulations promulgated by the Securities and Exchange Commission. Neither does
the Company have any contracts with its executive officers assuring them of
continued employment, nor any compensatory arrangement for executives linked to
a change in control of the Company.
During 1995, members of the Company's Board of Directors received an annual
retainer of $12,000, plus a meeting fee of $750 ($1,500 for chairpersons) for
each meeting of the Board or a committee attended. In addition, each person who
is a director immediately following each Annual Meeting of Shareholders is
entitled to receive an option to purchase 10,000 shares of the Company's common
stock at a price per share equal to the fair market value on that date. Each
option has a term of ten years and becomes exercisable in full six months after
the date of the grant.
Directors who have served three or more terms (nine years) automatically
become Directors Emeritus at such time as they no longer hold the position of a
director of the Company. Directors Emeritus are entitled to attend meetings of
the Board, but they may not vote, and they are entitled to receive the
directors' annual retainer, but no meeting fees. Director Emeritus status lasts
for a period equal to the length of service as a director or until any earlier
resignation or death.
Subsequent to the close of the 1995 fiscal year, the employment
relationship between Bruce L. Jorgensen, President and Chief Operating Officer,
and the Company was terminated. As a part of the severance arrangement, the
Company agreed to continue Mr. Jorgensen's salary ($16,000 per month) and
continue his health insurance ($400 per month) for up to one year, permit him to
exercise certain existing stock options in the future that would have become
unexercisable, and pay for certain out placement services ($20,000) to assist
him in his efforts to secure other employment.
9
<PAGE> 12
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company and its subsidiaries
for the year ended December 31, 1995, have been audited by Arthur Andersen LLP,
independent public accountants, and the Board of Directors has selected Arthur
Andersen LLP to serve as the Company's independent accountants for the year
ending December 31, 1996. Representatives of Arthur Andersen LLP are expected to
be present at the Annual Meeting to respond to appropriate questions and will
have an opportunity to make a statement if they desire.
COMPLIANCE WITH REPORTING REQUIREMENTS
Based upon a review of Forms 3, 4, and 5 furnished to the Company during or
with respect to the preceding fiscal year and written representations from
certain reporting persons, the Company is not aware of any failure by any
reporting person to make timely filings of those Forms as required by Section
16(a) of the Securities Exchange Act of 1934, except for Robert D. Claflin,
President of Labsphere, Inc., a subsidiary of the Company, who was late filing a
Form 3 that was necessitated by the Company's acquisition of this subsidiary
during 1995.
SHAREHOLDER PROPOSALS -- 1996 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the 1997 Annual
Meeting of the Shareholders of the Company must be received by the Company at
its headquarters, 3100 44th Street, S.W., Grandville, Michigan 49418, no later
than December 11, 1996, if the shareholder wishes the proposal to be included in
the Company's Proxy Statement relating to that meeting.
MISCELLANEOUS
The Company's Annual Report to Shareholders including financial statements,
is being mailed to shareholders with this Proxy Statement.
Management is not aware of any matters to be presented for action at the
Annual Meeting other than as set forth in this Proxy Statement. If other
business should come before the meeting, the persons named as proxy holders in
the accompanying Proxy intend to vote the shares in accordance with their
judgment, and discretionary authority to do so is included in the Proxy.
A COPY OF THE COMPANY'S REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE, WITHOUT CHARGE, UPON WRITTEN REQUEST FROM
DUANE KLUTING, THE COMPANY'S VICE PRESIDENT/CHIEF FINANCIAL OFFICER, 3100 44TH
STREET, S.W., GRANDVILLE, MICHIGAN 49418.
SHAREHOLDERS ARE URGED TO PROMPTLY DATE, SIGN, AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
DUANE KLUTING
Secretary
April 8, 1996
Grandville, Michigan
10
<PAGE> 13
APPENDIX A
X-RITE, INCORPORATED
CASH BONUS CONVERSION PLAN
1. Purpose and Scope. The purposes of this Plan are to encourage stock
ownership by management employees of X-Rite, Incorporated, to provide an
incentive for its employees to expand and improve the profits and prosperity of
the Company, and to assist the Company in attracting and retaining key
personnel.
2. Definitions. The following words and phrases shall have the following
meanings as used in this Plan:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the committee appointed by the Board pursuant to
Section 3 of this Plan.
(c) "Cash Bonus" means the bonus designated as eligible by the
Committee and paid pursuant to the Company's Executive Compensation and
Incentive Plan.
(d) "Change in Control" means: (i) the acquisition or accumulation of
twenty percent (20%) or more of the Company's outstanding shares of Stock
by any person, entity, or group pursuant to a published offer to the
Company's shareholders, or any merger or consolidation with any other
corporation, or other entity, where the transaction in question was not
either initiated by the Company or certified as "friendly" in a resolution
by the Company's Board of Directors passed by the affirmative vote of at
least eighty percent (80%) of all directors; or (ii) the election to the
Board of Directors of persons constituting more than one-third of the
directors who were not endorsed as candidates for the Board by the
affirmative vote of the majority of entire Board of Directors.
(e) "Company" means X-Rite, Incorporated.
(f) "Market Value" means the closing sale price reported in the Nasdaq
Stock Market or, if such value is not available, such other estimate of
fair market value as the Committee shall determine.
(g) "Stock" means the common stock of the Company, par value $0.10 per
share.
(h) "Participant" means an employee of the Company, or any controlled
subsidiary, designated by the Committee to be eligible for cash bonuses
under the Company's Executive Compensation and Incentive Plan; provided,
however, that any employee who beneficially owns five percent (5%) or more
of the outstanding shares of Stock at the time this Plan is adopted, or at
any time thereafter, shall not be eligible to participate in this Plan.
3. Administration.
(a) The Plan shall be administered by a Committee appointed by the
Board, consisting of such number of persons as the Board shall determine
from time to time. A majority of members of the Committee shall constitute
a quorum for the transaction of business. The Committee shall be
responsible for the operation of the Plan, and the determination as to
persons entitled to participate in the Plan. The interpretation and
construction of any provision of the Plan by the Committee shall be final
and binding.
(b) The Committee shall consist entirely of members who, during the
one year prior to service on the Committee, or during such service, have
not been granted or awarded equity securities of the Company (including
derivative securities) pursuant to this Plan or any other plan of the
Company or any of its affiliates, except for the types of plans set forth
in Rule 16b-3(c)(2)(i)(A)-(D) promulgated by the Securities and Exchange
Commission.
(c) Designation of an employee to be eligible to participate in this
Plan shall be entirely within the discretion of the Committee, and nothing
contained in this Plan shall be interpreted or construed to give any person
any right to participate under this Plan.
(d) Each person who is or shall have been a member of the Committee
shall be defended, indemnified, and held harmless by the Company, to the
maximum extent permitted by law, from and
A-1
<PAGE> 14
against any cost, liability, or expense imposed or incurred in connection
with such persons taking or failing to take any action under the Plan.
4. Shares Subject to Plan. The maximum number of shares of Stock subject to
sale under the Plan shall be 400,000 shares, subject to adjustment as provided
in Section 7 below. The shares of Stock may be authorized but unissued shares or
treasury shares. If any shares subject to restrictions are forfeited hereunder,
those shares shall be available for future sale under this Plan.
5. Conversion Option. Effective as of the date a Cash Bonus is made to a
Participant, that Participant shall be deemed to have been granted an option to
purchase shares of Stock at a rate equal to one-half the Market Value for up to
as many whole shares of Stock as can be purchased with the Cash Bonus received
(net of tax withholdings and other deductions); provided, however, that the
shares of Stock acquired shall be Restricted Stock, subject to all of the terms,
conditions, and limitations contained in this Plan, including the restrictions
specified in Section 6. The option must be exercised, if at all, on or before
the 180th day following the grant date by delivering a written notice of
election to the Company's Chief Financial Officer on a form provided for that
purpose by the Company, accompanied by payment of the exercise price in full
plus any withholding and other taxes deemed necessary by the Company. Options
are nontransferable and may only be exercised by the option holder during his or
her lifetime while in the Company's full-time employ.
6. Restrictions. Shares of Stock issued under this Plan shall be subject to
the following restrictions and risks of forfeiture:
(a) Prior to the lapse of the restrictions pursuant to Section 6(b)
below: (i) such shares may not be sold, exchanged, pledged, hypothecated,
or otherwise transferred or disposed of by the Participant; and (ii) such
shares shall be forfeited to the Company if the Participant's employment
with the Company is terminated for any reason whatsoever. The restrictions
specified herein shall apply to any securities distributed as a dividend
upon, or in respect of any such shares that are subject to these
restrictions at the time of distribution.
(b) The restrictions set forth in Section 6(a) above shall lapse: (i)
with respect to twenty percent (20%) of the shares on the one hundred
eightieth (180th) day after the date the Restricted Stock is issued; (ii)
with respect to an additional twenty percent (20%) on each of the first
four anniversaries of the date the Restricted Stock is issued; (iii) with
respect to all of the shares in the event of Participant's death or
permanent disability while employed by the Company; (iv) with respect to
all of the shares upon Participant's retirement with the consent of the
Company after age sixty (60); and (v) with respect to all of the shares in
the event of a Change in Control.
(c) The following restrictive legend shall be placed on each
certificate issued under this Plan, and upon the certificate(s) of any
securities distributed as a dividend upon, or in respect of such shares:
The shares represented by this certificate are Restricted Stock
that have been issued pursuant to the X-Rite, Incorporated Cash
Bonus Conversion Plan and may not be sold, exchanged, pledged,
hypothecated, or otherwise transferred or disposed of until
such time as the restrictions set forth in that Plan lapse. The
Plan provides that this certificate may be confiscated by the
Company, or its transfer agent, and the shares forfeited in the
event of any attempted transfer prior to the lapse of those
restrictions.
(d) In the event of any forfeiture of shares of Stock as provided in
this Plan, the Participant shall promptly surrender the certificate
representing those shares to the Company for cancellation, in whole or in
part as the case may be, all rights and privileges with respect to those
shares shall cease as of the forfeiture date, and any attempted transfer in
violation of the restrictions set forth in this Section 6 shall result in a
forfeiture of those shares.
7. Effect of Change in Stock Subject to the Plan. The aggregate number of
shares of Stock available for sale under the Plan shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
subject to the effective date of the Plan resulting from: (a) a subdivision or
consolidation of
A-2
<PAGE> 15
shares or any other capital adjustment; (b) the payment of a stock dividend; or
(c) other increase or decrease in such shares effected without receipt of
consideration by the Company.
8. Compliance With Other Laws and Regulations. The obligation of the
Company to sell and deliver shares under the Plan shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
by any government or regulatory agency as may be required. The Company shall not
be required to issue or deliver any certificates for shares of Stock prior to
the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body which
the Company shall, in its sole discretion, determine to be necessary or
advisable.
9. Amendments. The Board may discontinue the Plan at any time, and may
amend it from time to time in any manner that the Board deems advisable;
provided, however, that no such amendment shall adversely affect the rights of
any Participant with respect to shares issued prior to such amendment.
10. No Rights as Shareholder. No Participant shall have any rights as a
shareholder with respect to any share of Stock prior to the date of issuance of
a certificate evidencing ownership of such Stock, and no adjustment will be made
for dividends or other rights for which the record date is prior to the date of
the certificate, except as provided in Section 7.
11. Continued Employment Not Presumed. This Plan and any document
describing this Plan shall not give any Participant or other employee a right to
continued employment by the Company or affect the right of the Company to
terminate the employment of any such person, with or without cause.
12. Initiation of Plan. This Plan has been adopted by the Board subject to
approval by the Company's shareholders at the first meeting of shareholders
after adoption where it is practical to submit the Plan to shareholders for
approval. The Plan shall be applicable to the Cash Bonuses paid in 1995 with
respect to performance during 1994, provided that: (i) the initial "grant date"
shall be the date this Plan is adopted by the Board; (ii) no shares acquired
pursuant to such grant may be disposed of in any manner whatsoever until the
expiration of six months after this Plan is approved by the Company's
shareholders (after which the provisions of Section 6 shall be applied in the
normal manner); and (iii) in the event a Participant's employment with the
Company terminates before the Plan is submitted to the shareholders for
approval, or the shareholders do not approve the Plan at or before the 1996
Annual Meeting of Shareholders, then all affected transactions under the Plan
shall be rescinded, i.e., all payments shall be returned to affected
Participants, and all certificates for affected shares of Stock, and all
dividends and other distributions thereon, shall be returned to the Company.
13. Expiration. Unless earlier terminated by the Board, this Plan shall
terminate after application to Cash Bonuses with respect to performance during
the fiscal year ending December 31, 2004.
CERTIFICATION
The foregoing Plan was originally adopted by the Company's Board of
Directors on May 1, 1995, and reflects all amendments through March 19, 1996.
--------------------------------------
Duane Kluting
Secretary
A-3
<PAGE> 16
X-RITE, INCORPORATED
3100 44TH STREET, S.W.
GRANDVILLE, MI 49418
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) J. Terry Moran and Duane Kluting, and
each of them, as Proxies, each with the power to appoint a substitute, to
represent and to vote, as designated below, all of the shares of common stock of
X-Rite, Incorporated held of record by the undersigned on March 22, 1996, at the
Annual Meeting of Shareholders to be held on May 20, 1996, or any adjournment
thereof.
When properly executed, this proxy will be voted in the manner directed by
the undersigned shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON REVERSE SIDE FOR A THREE-YEAR
TERM, AND FOR THE APPROVAL OF THE ADOPTION OF THE X-RITE, INCORPORATED CASH
BONUS CONVERSION PLAN.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this Proxy exactly as your name appears on the reverse side. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED: DO YOU HAVE ANY COMMENTS?
_________________________________ ___________________________________
_________________________________ ___________________________________
_________________________________ ___________________________________
- -------------------------------------------------------------------------------
<PAGE> 17
<TABLE>
<S><C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
With- For all
For hold Except For Against Abstain
1.) Election of Directors / / / / / / 2.) To approve the adoption / / / / / /
of the X-Rite, Incorporated
STANLEY W. CHEFF, DR. MARVIN G. DEVRIES Cash Bonus Conversion Plan.
AND JAMES A. KNISTER
3.) In their discretion, the Proxies
Instructions: To withhold authority to vote for any individual nominee, are authorized to vote upon such other business
mark "For All Except" box and strike a line through the nominee(s) as may properly come before the Meeting.
name. Your shares will be voted for the remaining nominee(s).
RECORD DATE SHARES:
Mark box at right if you plan / /
to attend the meeting.
Mark box at right if comments or address / /
change have been noted on the reverse side.
Please be sure to sign and date this Proxy. Date______________
________________________________________________________________________
Shareholder sign here Co-owner sign here
- ----------------------------------------------------------------------------------------------------------------------------------
DETACH CARD DETACH CARD
X-RITE, INCORPORATED
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot. There are a number of issues related
to the management and operation of your Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be voted. Then sign the card, detach it
and return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders scheduled for May 20, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
X-RITE, INCORPORATED
</TABLE>
