-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NEFDGBPWfLtxT9fQ2P+ZjIM91wqYBLbat/HRizT2hJTRNpCGVrZNysQ6AoCfJ3Z2 yqqi9HA01Mkt10iFjXf5VQ== 0000950115-96-001593.txt : 19961113 0000950115-96-001593.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950115-96-001593 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNOLL INC CENTRAL INDEX KEY: 0001011570 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FURNITURE & FIXTURES [2590] IRS NUMBER: 251648603 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-02972 FILM NUMBER: 96659734 BUSINESS ADDRESS: STREET 1: 1235 WATER ST CITY: EAST GREENVILLE STATE: PA ZIP: 18041 BUSINESS PHONE: 2156797991 MAIL ADDRESS: STREET 1: 1235 WATER STREET CITY: EAST GREENVILLE STATE: PA ZIP: 18041 10-Q 1 QUARTERLY REPORT 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, 1996 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 number: 333-02972 KNOLL, INC. (Exact name of registrant as specified in its charter) Delaware 25-1648603 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) T.K.G. Acquisition Corp. Delaware 13-3873847 Knoll Overseas, Inc. Delaware 25-1648603 Spinneybeck Enterprises, Inc. New York 16-1159029 (Exact name of registrants as (State or other (I.R.S. Employer specified in their charter) jurisdiction of Identification No.) incorporation or organization) 1235 Water Street, East Greenville, PA 18041 (Address of principal executive offices, zip code) (215) 679-7991 (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 outstanding shares of the registrant's common stock, par value $1.00 per share, as of September 30, 1996 was 1,000. KNOLL, INC. INDEX TO FORM 10-Q Page ---- PART I -- FINANCIAL INFORMATION ITEM 1 -- Financial Statements Consolidated Balance Sheets Knoll, Inc. as of September 30, 1996.................................... 3 The Knoll Group, Inc. (Predecessor) as of December 31, 1995............................................ 3 Consolidated Statements of Operations Knoll, Inc. for the three months ended September 30, 1996............... 4 The Knoll Group, Inc. (Predecessor) for the three months ended September 30, 1995.................................... 4 Knoll, Inc. for the seven months ended September 30, 1996............... 5 The Knoll Group, Inc. (Predecessor) for the two months ended February 29, 1996..................................... 5 The Knoll Group, Inc. (Predecessor) for the nine months ended September 30, 1995.................................... 5 Pro Forma Consolidated Statements of Operations Three months ended September 30, 1996 (Actual).......................... 6 Three months ended September 30, 1995................................... 6 Nine months ended September 30, 1996.................................... 6 Nine months ended September 30, 1995.................................... 6 Consolidated Statements of Cash Flows Knoll, Inc. for the seven months ended September 30, 1996............... 7 The Knoll Group, Inc. (Predecessor) for the two months ended February 29, 1996..................................... 7 The Knoll Group, Inc. (Predecessor) for the nine months ended September 30, 1995.................................... 7 Notes to Consolidated Financial Statements................................. 8 ITEM 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 11 PART II -- OTHER INFORMATION ITEM 6 -- Exhibits and Reports on Form 8-K................................. 15 Signature Pages............................................................ 16 2 KNOLL, INC. CONSOLIDATED BALANCE SHEETS ($ in thousands) The Knoll Group, Inc. (Predecessor) September 30, December 31, 1996 1995 ------------- ------------- (Unaudited) (Audited) ASSETS: Current assets: Cash and cash equivalents $ 21,729 $ 1,569 Accounts receivable, net 99,823 114,592 Inventories: Finished goods 17,646 14,842 Work in process 8,316 8,718 Raw materials 34,831 38,749 Reserves (5,291) (2,666) --------- --------- Total inventories 55,502 59,643 Deferred income taxes 7,941 18,273 Prepaid and other current assets 3,733 8,465 --------- --------- Total current assets 188,728 202,542 --------- --------- Property, plant, and equipment at cost 192,067 283,765 Less accumulated depreciation 14,487 119,132 --------- --------- Net property, plant and equipment 177,580 164,633 Goodwill and other intangible assets 311,726 240,772 Other noncurrent assets 12,564 48,763 --------- --------- Total assets $ 690,598 $ 656,710 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 42,587 $ 46,263 Accrued payroll 18,346 19,486 Accrued interest payable 4,781 -- Income taxes payable 2,836 13,973 Short term borrowings -- 1,496 Current portion of long term debt 13,758 3,287 Other current liabilities 32,984 35,339 --------- --------- Total current liabilities 115,292 119,844 --------- --------- Long term debt 366,882 251 Postretirement benefits obligation 24,591 20,593 Deferred income taxes -- 29,574 Other noncurrent liabilities 7,493 5,997 --------- --------- Total liabilities 514,258 176,259 --------- --------- Stockholders' equity: Cumulative translation adjustment 679 (22,866) Parent company investment -- 503,317 Common stock, $1.00 par value; authorized and issued 1,000 shares 1 -- Additional paid-in capital 159,999 -- Retained earnings 15,661 -- --------- --------- Total stockholders' equity 176,340 480,451 --------- --------- Total liabilities and stockholders' equity $ 690,598 $ 656,710 ========= ========= See accompanying notes. 3 KNOLL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ($ in thousands) The Knoll Group, Inc. (Predecessor) Three Months Three Months Ended Ended September 30, September 30, 1996 1995 ------------- -------------- Sales ................................... $ 167,184 $ 155,055 Cost of sales ........................... 107,988 101,563 --------- --------- Gross profit ............................ 59,196 53,492 Selling, general and administrative expenses ............... 36,416 30,615 Allocated corporate expenses .............................. -- 2,400 --------- --------- Operating income ........................ 22,780 20,477 Interest expense ........................ 9,653 276 Other income (expense) .................. 322 (244) --------- --------- Income before income taxes .................................. 13,449 19,957 Income taxes ............................ 5,764 7,783 --------- --------- Net income .............................. $ 7,685 $ 12,174 ========= ========= See accompanying notes. 4 KNOLL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ($ in thousands) The Knoll The Knoll Group, Inc. Group, Inc. (Predecessor) (Predecessor) Seven Months Two Months Nine Months Ended Ended Ended September 30, February 29, September 30, 1996 1996 1995 ------------- ------------- ------------ Sales .......................... $381,784 $ 90,232 $461,817 Cost of sales .................. 250,952 60,598 318,730 -------- -------- -------- Gross profit ................... 130,832 29,634 143,087 Selling, general and administrative expenses ..................... 81,082 20,372 99,657 Allocated corporate expenses ..................... -- 921 7,100 Westinghouse long term incentive compensation ................. -- 47,900 -- -------- -------- -------- Operating income (loss) ........ 49,750 (39,559) 36,330 Interest expense ............... 23,605 340 915 Other income (expense) ......... 662 (296) 334 -------- -------- -------- Income (loss) before income taxes ................. 26,807 (40,195) 35,749 Income taxes ................... 11,146 (16,107) 16,414 -------- -------- -------- Net income (loss) .............. $ 15,661 $(24,088) $ 19,335 ======== ======== ======== See accompanying notes. 5 KNOLL, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ($ in thousands)
Actual Pro Forma Three Months Three Months Pro Forma Ended Ended Nine Months Ended September 30, September 30, September 30, 1996 1995 1996 1995 ------------- ------------- --------- --------- Sales ............................... $ 167,184 $ 155,055 $ 472,016 $ 461,817 Cost of sales ....................... 107,988 102,622 312,654 323,461 --------- --------- --------- --------- Gross profit ........................ 59,196 52,433 159,362 138,356 Selling, general and administrative expenses ............ 36,416 32,364 102,486 103,875 Allocated corporate expenses ........................... -- 1,000 -- 3,000 --------- --------- --------- --------- Operating income .................... 22,780 19,069 56,876 31,481 Interest expense .................... 9,653 10,110 30,683 30,837 Other income (expense) .......................... 322 (244) 366 334 --------- --------- --------- --------- Income (loss) before income taxes ....................... 13,449 8,715 26,559 978 Income taxes ........................ 5,764 3,156 11,150 786 --------- --------- --------- --------- Net income .......................... $ 7,685 $ 5,559 $ 15,409 $ 192 ========= ========= ========= =========
See accompanying notes. 6 KNOLL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ($ in thousands)
The Knoll The Knoll Group, Inc. Group, Inc. (Predecessor) (Predecessor) Seven Months Two Months Nine Months Ended Ended Ended September 30, February 29, September 30, 1996 1996 1995 ------------- ------------ -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 15,661 $(24,088) $ 19,335 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 14,464 3,150 15,321 Amortization of intangible assets 5,477 1,167 5,244 Changes in assets and liabilities: Accounts receivable 5,970 8,798 (10,716) Inventories 1,822 671 4,156 Accounts payable 12,445 (15,292) (5,743) Other current assets and liabilities 12,132 (21,534) 4,068 Noncurrent assets and liabilities 5,236 (6,911) 22,062 -------- -------- -------- Net cash provided by (used in) operating activities 73,207 (54,039) 53,727 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (6,773) (2,296) (13,908) -------- -------- -------- Net cash used in investing activities (6,773) (2,296) (13,908) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of short term borrowings (1,476) (3,805) (17,227) Repayment of long term borrowings (45,592) -- (2,865) Net receipts from (payments to) parent company -- 60,848 (26,251) -------- -------- -------- Net cash provided by (used in) financing activities (47,068) 57,043 (46,343) -------- -------- -------- Effect of exchange rate on cash 28 58 1,040 -------- -------- -------- Increase (decrease) in cash 19,394 766 (5,484) Cash and cash equivalents at beginning of period 2,335 1,569 5,484 -------- -------- -------- Cash and cash equivalents at end of period $ 21,729 $ 2,335 $ 0 ======== ======== ========
See accompanying notes. 7 KNOLL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1996 (Unaudited) Note 1: Basis of Presentation The accompanying unaudited, consolidated financial statements of Knoll, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Therefore, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the seven months ended September 30, 1996 are not necessarily indicative of the results to be expected for the ten months ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's registration statement on Form S-4. The pro forma statements of operations for the three and nine months ended September 30, 1995 and nine months ended September 30, 1996, reflect the acquisition of The Knoll Group, Inc. as if the acquisition occurred at the beginning of the applicable year. Note 2: Acquisition of Knoll T.K.G. Acquisition Corp. ("TKG") was formed in December 1995 in connection with the acquisition of The Knoll Group, Inc. and related entities ("Knoll") from Westinghouse Electric Corporation ("Westinghouse"). TKG does not have any significant assets, liabilities, or operations other than those incident to its formation, capitalization and acquisition of Knoll. On February 29, 1996, TKG issued and sold an aggregate of 1,000,000 shares of common stock, $.01 par value per share; and 1,599,000 shares of Series A 12% Participating Convertible Preferred Stock, $1.00 par value per share, for $100,000 and $159,900,000, respectively. On February 29, 1996, T.K.G. Acquisition Sub, Inc., a wholly owned subsidiary of TKG, acquired all of the outstanding capital stock of Knoll. On the same date, T.K.G. Acquisition Sub, Inc. and The Knoll Group, Inc. merged with and into Knoll North America, Inc., which thereupon changed its name to Knoll, Inc. As a result of these transactions, Knoll, Inc. became a direct wholly owned subsidiary of TKG. In addition to an equity contribution, the acquisition was funded through borrowings under the Company's credit facilities and the issuance of the Company's Senior Subordinated Notes. The specifics of the credit facilities and the Company's Senior Subordinated notes are: $160,000,000 term loan facility with a group of banks with interest at LIBOR plus 2.5% due $5,000,000 in 1996, $20,000,000 in 1997, $23,000,000 in 1998, $27,000,000 in 1999, $34,000,000 in 2000, $40,500,000 in 2001, and $10,500,000 in 2002. 8 $100,000,000 term loan facility with a group of banks with interest at LIBOR plus 3% due $250,000 in 1996, $1,000,000 in 1997, $1,000,000 in 1998, $1,000,000 in 1999, $1,000,000 in 2000, $1,000,000 in 2001, $47,500,000 in 2002 and $47,250,000 in 2003. $165,000,000 principal amount of 10-7/8% Senior Subordinated Notes due in 2006. The credit facilities and Senior Subordinated Notes of the Company are unconditionally guaranteed by TKG. The cost of the acquisition, subject to certain post-closing adjustments, and the allocation of the purchase price on a preliminary basis is as follows: Net working capital $ 97,715,000 Property, plant and equipment 184,691,000 Other non-current liabilities, net (15,447,000) Goodwill and other intangibles 318,041,000 ------------ Total $585,000,000 ------------ Note 3: Income Taxes Income taxes for the three and seven-month periods ended September 30, 1996 were computed using the effective tax rates estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management. In 1995, and for the first two months of 1996, Knoll is included in a consolidated U.S. income tax return with Westinghouse and its subsidiaries. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," income taxes were provided for the three and nine months ended September 30, 1995 and the two months ended February 29, 1996 as if Knoll had filed a separate tax return. The pro forma effective tax rates were 36.2% and 80.4% for the three month and nine month periods ended September 30, 1995, respectively. The effective rate for the nine month period ended September 30, 1995 differs from the U.S. statutory rate due to pro forma losses before income taxes generated in Europe for which no tax benefit has been recorded. Note 4: Stock Incentive Plan Effective February 29, 1996, TKG established the T.K.G. Acquisition Corp. 1996 Stock Incentive Plan (the "Plan") to increase its ability to attract and retain key employees of the Company. Under the Plan, awards denominated or payable in shares of TKG stock may be granted to employees of the Company. The maximum number of shares that may be granted under the Plan are 1,500,000 shares of common stock. A Stock Plan Committee of TKG's Board of Directors has sole discretion concerning administration of the Plan including: selection of individuals to receive awards, types of awards, the terms and conditions of the awards and the time at which awards will be granted. The Plan may be terminated at any time at the discretion of the Board of Directors. Note 5: Goodwill and Other Intangibles The Company reviews the carrying value of goodwill and other intangibles on an ongoing basis if the facts and circumstances suggest that it may be impaired. Management uses an estimate of the undiscounted cash flows of the asset over the remaining life of the asset in measuring whether the intangible asset is recoverable. If such analysis indicates that an impairment has in 9 fact occurred, the carrying value of the intangible asset is reduced to its estimated fair value. Note 6: Financial Instruments In managing interest rate exposure under the Company's term loan facilities, the Company has entered into interest rate collar agreements that effectively set the LIBOR component of the interest rate at a maximum and minimum rate on a notional principal amount. During the three month period ended September 30, 1996, the maximum and minimum rates ranged from 7.5% to 7.99% and from 5.00% to 5.50%, respectively. In addition, the total notional principal amount for 1996 is $200 million. This notional principal amount will decrease based on the following aggregate maturities: Year Amount ---- ------ 1998 $ 70,000,000 1999 130,000,000 ------------ $200,000,000 ------------ The interest rate collar agreements are with major financial institutions. The Company continually monitors its positions and the credit ratings of its counterparties and does not anticipate nonperformance by the counterparties. Note 7: Corporate Services For the two month period ended February 29, 1996, the three month period ended September 30, 1995 and the nine month period ended September 30, 1995, charges related to services provided by Westinghouse totaled $510,000, $826,000 and $2,478,000, respectively, and are included in selling, general and administrative expenses. Note 8: Westinghouse Long-Term Incentive Compensation The results of operations for the two-month period ended February 29, 1996 include $47,900,000 of incentive compensation payable to the Company's employees as a result of consummation of the acquisition of Knoll from Westinghouse. Such acquisition triggered the payment of awards and established the amounts of payments due under Westinghouse's long-term incentive plans. 10 KNOLL, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations General Knoll, Inc. (the "Company") is a leading manufacturer of office furniture, focusing on the middle to high end segments of the contract furniture market. The Company offers a broad range of office furniture and accessories, including office systems, seating, storage solutions and filing cabinets, desks and casegoods, and tables. The Company maintains manufacturing sites in the United States, Canada and Italy. The Company generally conducts its business in local currencies and reports its consolidated financial results in U.S. dollars. Fluctuations in the currency exchange rates of the countries in which the Company operates can affect the Company's consolidated U.S. dollar-denominated financial results. The Company has no operations in countries that have experienced highly inflationary economies. The Company was formed in connection with its acquisition of the Knoll business unit ("Knoll") of Westinghouse Electric Corporation ("Westinghouse") on February 29, 1996. Prior to the acquisition, Knoll's results of operations are included in the consolidated U.S. federal income tax return of Westinghouse. The income tax expense and other tax-related information included in the financial statements are presented as if Knoll were not included in the consolidated tax returns of Westinghouse and require certain assumptions, allocations and significant estimates that management believes are reasonable to measure the tax consequences as if Knoll were a stand-alone taxpayer. This "Management's Discussion and Analysis of Financial Condition and Results of Operations" has been prepared using the unaudited actual results for the three months ended September 30, 1996, the unaudited pro forma results for the nine months ended September 30, 1996 and the unaudited pro forma results for the three and nine months ended September 30, 1995. The unaudited pro forma consolidated statements of operations for these periods give effect to the acquisition of Knoll from Westinghouse as if the acquisition occurred at the beginning of the applicable year. This presentation provides information about the continuing impact of the acquisition by showing how it might have affected historical financial statements if the acquisition had been consummated at an earlier time. Management believes that a comparison between actual 1996 and pro forma 1995 results for the three months ended September 30 is more meaningful than a comparison between actual results due to the significance of the acquisition. The following discussion should be read in conjunction with the consolidated financial statements and related notes of Knoll, as predecessor to the Company, and the unaudited pro forma consolidated financial statements and related notes of the Company. 11 Results of Operations Comparison of Third Quarter and Pro Forma Nine Months Ended September 30, 1996 to Pro Forma Third Quarter and Pro Forma Nine Months Ended September 30, 1995. Sales. Sales for the Third Quarter of 1996 were $167.2 million, an increase of $12.1 million, or 7.8%, above sales of $155.1 million for the Third Quarter of 1995. Sales for the first nine months of 1996 were $472.0 million, an increase of $10.2 million, or 2.2% greater than the $461.8 million for the same period in 1995. These increases are attributable to sales growth in all major product lines in North America offset by a decrease in European volume and approximately $8.5 million in sales of discontinued product during the first six months of 1995. Gross Profit. Gross profit was $59.2 million for the Third Quarter of 1996, an increase of $6.8 million, or 12.9%, above the $52.4 million for the Third Quarter of 1995. For the first nine months of 1996, gross profit was $159.4 million, an increase of $21.0 million, or 15.2%, above the $138.4 million for the first nine months of 1995. These increases were principally due to improved margins from better pricing and sales mix, factory cost reductions and improved operating efficiencies. The gross profit margin, as a percentage of sales, increased to 35.4% for the Third Quarter of 1996 from 33.8% for the Third Quarter of 1995 and increased to 33.8% for the first nine months of 1996 from 30.0% for the first nine months of 1995. Selling, General and Administrative Expenses and Allocated Corporate Expenses. Selling, general and administrative expenses were $36.4 million for the Third Quarter of 1996, an increase of $3.0 million, or 9.0%, above the $33.4 million of selling, general, and administrative expenses and allocated corporate expenses for the Third Quarter of 1995. The increase is primarily due to increased sales incentive compensation related to higher volumes and increased costs of employee benefit plans. Selling, general and administrative expenses were $102.5 million for the first nine months of 1996, a decrease of $4.4 million, or 4.1%, below the $106.9 million of selling, general, and administrative expenses and allocated corporate expenses for the first nine months of 1995. This decrease is primarily attributable to the ongoing savings and operating efficiencies derived from the consolidation and centralization efforts begun in mid-1994. As a percentage of sales, selling, general and administrative expenses increased to 21.8% for the Third Quarter of 1996 from 21.5% for the Third Quarter of 1995 and decreased to 21.7% for the first nine months of 1996 from 23.1% for the first nine months of 1995. Operating Income. Operating income increased to $22.8 million for the Third Quarter of 1996, an increase of $3.7 million, or 19.4%, above the $19.1 million for the Third Quarter of 1995. For the first nine months of 1996, operating income was $56.9 million, an increase of $25.4 million, or 80.6%, over the $31.5 million for the first nine months of 1995. These improvements were driven by better pricing and sales mix, cost reductions, and improved operating efficiencies. As a percentage of sales, operating income increased to 13.6% for the Third Quarter of 1996 from 12.3% for the Third Quarter of 1995 and increased to 12.0% for the first nine months of 1996 from 6.8% for the first nine months of 1995. Interest Expense. Interest expense was calculated on a pro forma basis for the Third Quarter of 1995 and for the first nine months of 1996 and 1995 to approximate the capital structure that existed at the time of the acquisition. Interest expense for the three months ended September 30, 1996 12 benefitted from the prepayment of senior bank term debt during the Second and Third Quarters of 1996. Other Income (Expense). Other income (expense) primarily represents foreign exchange gains and losses in Europe. Income Taxes. Income taxes were $5.8 million for the Third Quarter of 1996 as compared to $3.2 million for the Third Quarter of 1995 and $11.2 million for the first nine months of 1996 compared to $0.8 million for the first nine months of 1995. The increase in income taxes was the result of higher pre-tax earnings in 1996. The pro forma effective tax rates were 36.2% and 80.4% for the three month and nine month periods ended September 30, 1995, respectively. The effective rate for the nine month period ended September 30, 1995 differs from the U.S. statutory rate due to pro forma losses before income taxes generated in Europe for which no tax benefit has been recorded. Liquidity and Capital Resources Net working capital at September 30, 1996 was $73.4 million, which reflects a decrease of $9.3 million over the year-end 1995 net working capital. During the seven months ended September 30, 1996, the Company generated cash flows of $73.2 million from operating activities. Cash provided by operations resulted primarily from net earnings, depreciation and amortization. Also contributing to cash flows from operations during this period were increases in accounts payable and other current liabilities along with reductions in accounts receivable and inventories. The $12.1 million of changes in other current assets and liabilities included increased accruals of $4.8 million for interest, $2.8 million for taxes and $5.0 for payroll. The Company's investing activities used $6.8 million during the seven months ended September 30, 1996 for capital expenditures. The $47.1 million used by the Company in its financing activities during the seven months ended September 30, 1996 included $45.0 million for the prepayment of senior bank term debt. As of September 30, 1996, the Company had available lines of credit of $50 million, all of which was available and unused. The Company believes that internally generated cash flow, together with borrowings under its lines of credit, will be sufficient to meet its cash needs for the next 12 months. Backlog As of September 30, 1996, the Company's backlog of unfilled orders was $92.5 million. At September 30, 1995, the Company's backlog totaled $80.4 million. The Company expects to fill substantially all of the orders comprising its backlog by December 31, 1996, as the Company manufactures substantially all of its products to order and its average manufacturing lead time is approximately five weeks. As a result, backlog is not a significant factor used to predict the Company's long-term business prospects. Statement Regarding Forward Looking Disclosure Certain portions of this Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which represent the Company's expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important 13 factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the high level of the Company's indebtedness, which requires a substantial portion of the Company's cash flows from operations to be dedicated to debt service, making such cash flows unavailable for other purposes, and which could limit the Company's flexibility in reacting to changes in its industry or economic conditions generally. In addition, these statements are further qualified by other important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the ability of the Company to sustain the cost savings achieved through its restructuring program; the Company's dependence on key personnel; the highly competitive nature of the markets in which the Company competes; the ability of the Company to maintain its relationships with its dealers; environmental laws and regulations, including those that may be enacted in the future, that affect the ownership and operation of the Company's manufacturing plants; fluctuations in foreign currency exchange rates; and fluctuations in industry revenues driven by a variety of macroeconomic factors, including white collar employment levels, corporate cash flows, and non-residential commercial construction, as well as by a variety of industry factors such as corporate reengineering and restructuring, technology demands, ergonomic, health and safety concerns and corporate relocations. 14 PART II - OTHER INFORMATION ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 3.1* Certificate of Incorporation of Knoll, Inc. 3.2* By-laws of Knoll, Inc. 3.3 Amended and Restated Certificate of Incorporation of T.K.G. Acquisition Corp. 3.4* By-laws of T.K.G. Acquisition Corp. 3.5* Restated Certificate of Incorporation of Knoll Overseas, Inc. 3.6* By-laws of Knoll Overseas, Inc. 3.7* Certificate of Incorporation of Spinneybeck Enterprises, Inc. 3.8* By-laws of Spinneybeck Enterprises, Inc. 4.1* Indenture, dated as of February 29, 1996, by and among T.K.G. Acquisition Sub, Inc., T.K.G. Acquisition Corp., The Knoll Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as guarantors, and IBJ Schroder Bank & Trust Company, as trustee, relating to $165,000,000 principal amount of 10-7/8% Senior Subordinated Notes due 2006, including form of Initial Global Note. 4.2* Supplemental Indenture, dated as of February 29, 1996, by and among the Company, as successor to T.K.G. Acquisition Sub, Inc., T.K.G. Acquisition Corp., The Knoll Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as guarantors, and IBJ Schroder Bank & Trust Company, as trustee, relating to $165,000,000 principal amount of 10-7/8% Senior Subordinated Notes due 2006, including form of Initial Global Note. 4.3* Credit Agreement, dated as of February 29, 1996, by and among T.K.G. Acquisition Sub, Inc., T.K.G. Acquisition Corp., The Knoll Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as guarantors, NationsBank N.A., Chemical Bank and other lending institutions. 4.4* Security Agreement, dated as of February 29, 1996, by and among T.K.G. Acquisition Sub, Inc., T.K.G. Acquisition Corp., The Knoll Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as guarantors, NationsBank N.A. and other lending institutions. 4.5* Registration Rights Agreement, dated as of February 29, 1996, by and among T.K.G. Acquisition Sub, Inc., T.K.G. Acquisition Corp., The Knoll Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as guarantors, and NationsBank Capital Markets, Inc., as Initial Purchaser. 10.1* Stock Purchase Agreement, dated as of December 20, 1995, by and between Westinghouse and T.K.G. Acquisition Corp. 10.2* T.K.G. Acquisition Corp. 1996 Stock Incentive Plan. 27 Financial Data Schedule. b. Current Reports on Form 8-K: The registrant did not file any reports on Form 8-K during the three month period ended September 30, 1996. - --------------------- * Incorporated by reference to the Company's Registration Statement in Form S-4 (Registration No. 333-2972), which was declared effective by the Commission on June 12, 1996. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KNOLL, INC. Date: November 12, 1996 By: /s/ Burton B. Staniar --------------------- Burton B. Staniar Chairman of the Board and Chief Executive Officer Date: November 12, 1996 By: /s/ Douglas J. Purdom --------------------- Douglas J. Purdom Senior Vice President and Chief Financial Officer 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. T.K.G. ACQUISITION CORP. Date: November 12, 1996 By: /s/ Burton B. Staniar --------------------- Burton B. Staniar Chairman of the Board and Chief Executive Officer Date: November 12, 1996 By: /s/ Douglas J. Purdom --------------------- Douglas J. Purdom Senior Vice President and Chief Financial Officer 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KNOLL OVERSEAS, INC. Date: November 12, 1996 By: /s/ Burton B. Staniar --------------------- Burton B. Staniar Chairman of the Board and Chief Executive Officer Date: November 12, 1996 By: /s/ Douglas J. Purdom --------------------- Douglas J. Purdom Vice President and Chief Financial Officer 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPINNEYBECK ENTERPRISES, INC. Date: November 12, 1996 By: /s/ Roger B. Wall ----------------- Roger B. Wall President Date: November 12, 1996 By: /s/ Douglas J. Purdom --------------------- Douglas J. Purdom Vice President and Chief Financial Officer 19 EX-3.(3) 2 CERTIFICATE OF INCORPORATION EXHIBIT 3.3 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF T.K.G. ACQUISITION CORP. It is hereby certified that: The present name of the corporation (hereinafter called the "Corporation") is T.K.G. Acquisition Corp. The date of filing of the original Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware was December 15, 1995. This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. The majority stockholder has consented in writing to the adoption of this Amended and Restated Certificate of Incorporation. The text of the certificate of incorporation of the Corporation as amended hereby is restated to read in its entirety as follows: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF T.K.G. ACQUISITION CORP. * * * * * * * FIRST: The name of the corporation (the "Corporation") is T.K.G. ACQUISITION CORP. SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as now in effect or as hereafter amended. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 27,000,000 shares, consisting of (i) 24,000,000 shares of common stock, par value $0.01 per share ("Common Stock"), and (ii) 3,000,000 shares of preferred stock, par value $1.00 per share (the "Preferred Stock"), of which 1,920,000 shares shall be designated as "Series A 12% Participating Convertible Preferred Stock" (the "Series A Preferred Stock"). The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the "Board of Directors") is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, for such consideration (not less than its par value) and with the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations, or restrictions thereof, as shall be determined by the Board of Directors and fixed by resolution or resolutions adopted by the Board of Directors providing for the number of shares in each such series. The Common Stock and Series A Preferred Stock shall have the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations, or restrictions thereof, as hereinafter set forth in this Article FOURTH. -2- The ability of the Corporation to issue shares of its capital stock shall be subject to the subscription rights of certain stockholders of the Corporation set forth in Section 1(d) of that certain Stockholders Agreement (Common Stock and Preferred Stock), dated as of February 29, 1996, by and among the Corporation, Warburg, Pincus Ventures, L.P. ("Warburg") and certain other stockholders of the Corporation, as the same may be amended from time to time. (A) COMMON STOCK. (1) Dividends. The holders of Common Stock shall be entitled to receive, when and as declared, out of assets and funds legally available therefor, cash or non-cash dividends payable as and when the Board of Directors in its sole business judgment so declares. Any such dividend shall be payable ratably to all record holders of Common Stock as of the record date fixed by the Board of Directors in accordance with the By-Laws of the Corporation for the payment thereof. (2) Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation ("Liquidation"), the holders of Common Stock then outstanding shall be entitled to be paid ratably out of the assets and funds of the Corporation available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Preferred Stock upon Liquidation, an amount equal to their share (including any declared but unpaid dividends on the Common Stock, subject to proportionate adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to such shares) of such assets and funds. (3)Voting. (a) Except as required by law, as may be limited in the T.K.G. Acquisition Corp. 1996 Stock Incentive Plan (the "Stock Plan") or any other incentive plan established for the directors or employees of the Corporation or any of its subsidiaries, or as otherwise provided herein or in any amendment hereof, the entire voting power of the Corporation shall be vested in the holders of the Common Stock and Series A Preferred Stock voting together as a single class. (b) Each holder of Common Stock entitled to vote shall at every meeting of the stockholders of the Corporation be entitled to one vote for each share of Common Stock registered in his or her name on the record of stockholders. -3- Prior to the Conversion Date (as defined herein), each holder of Series A Preferred Stock entitled to vote shall at every meeting of the stockholders of the Corporation be entitled to one thousand votes for each share of Series A Preferred Stock registered in his or her name on the record of stockholders. From and after the Conversion Date, each holder of Series A Preferred Stock entitled to vote shall at every meeting of the stockholders of the Corporation be entitled to the number of votes equal to the number of shares of Common Stock into which each share of Series A Preferred Stock would have been convertible at the Conversion Date (assuming all outstanding shares of Series A Preferred Stock were converted) for each share of Series A Preferred Stock registered in his or her name on the record of stockholders. (c) Without first obtaining the affirmative vote or written consent of a majority of the stockholders of the Corporation, the Corporation shall not amend the Stock Plan, adopt any other incentive plan that provides for the grant or sale of shares of the Corporation's capital stock or securities convertible or exchangeable therefor or issue any shares of the Corporation's capital stock or securities convertible or exchangeable therefor. (B) SERIES A PREFERRED STOCK. (1) Dividends. (a) The holders of Series A Preferred Stock shall be entitled to receive, when and as declared, out of funds legally available therefor, dividends at the rate of $12.00 per annum, payable as the Board of Directors may determine, before any dividends or other amounts shall be set apart for or paid upon the Common Stock in any year. All dividends declared upon the Series A Preferred Stock shall be declared pro rata per share. (b) Dividends on the Series A Preferred Stock shall be fully cumulative, whether or not in any fiscal year there shall be net profits or surplus available for the payment of dividends in such fiscal year, so that if in any fiscal year or years dividends in whole or in part are not paid upon the Series A Preferred Stock, unpaid dividends shall accumulate and be compounded quarterly. Dividends on the Series A Preferred Stock shall accrue on a quarterly basis. Notwithstanding the foregoing, no dividends on any shares of Series A Preferred Stock shall be declared after the Conversion Date or shall accrue from and after such date. -4- (c) Notwithstanding Section (A)(1) of this Article FOURTH, for so long as dividends on the Series A Preferred Stock are accrued and unpaid, the Corporation shall not pay any dividend upon the Common Stock, whether in cash or other property (other than Common Stock), or purchase, redeem or otherwise acquire any such Common Stock (other than redemptions or repurchases of any Common Stock held by employees of the Corporation or its subsidiaries, and then only upon such person's ceasing to be an employee of the Corporation or its subsidiaries, each in accordance with terms of any applicable agreement between the Corporation or its subsidiaries and any such employee or the terms of any agreement or plan pursuant to which such Common Stock was issued). (2) Liquidation Rights. (a) In the event of Liquidation, the holders of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders upon Liquidation, but before any payment shall be made to the holders of Common Stock, an amount equal to $100 per share plus any dividends thereon declared or accrued but unpaid (including as a result of quarterly compounding), subject to proportionate adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to such shares. (b) If upon Liquidation the remaining assets of the Corporation available for the distribution to its stockholders shall be insufficient to pay the holders of Series A Preferred Stock the full preferential amount set forth in paragraph (a) above, the holders of Series A Preferred Stock shall share ratably in any distribution of the remaining assets and funds of the Corporation in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. (c) After the payment of all preferential amounts required to be paid to the holders of Series A Preferred Stock upon Liquidation, the holders of Common Stock then outstanding shall be entitled to receive the remaining assets and funds of the Corporation available for distribution to its stockholders, as provided in Section (A)(2) above. (d) The merger or consolidation of the Corporation into or with another corporation, the merger or consolidation of any other corporation into or with the Corporation, or the sale, conveyance, mortgage, pledge or -5- lease of all or substantially all the assets of the Corporation shall not be deemed to be a Liquidation for purposes of this Section 3. (3) Voting. In addition to the voting rights of holders of Series A Preferred Stock provided in Section A(3) above or as required by law, the Corporation shall not (and the holders of the Common Stock shall not cause the Corporation to), without first obtaining the affirmative vote or written consent of the holders of a majority of the outstanding Series A Preferred Stock: (a) amend or repeal any provision of the Corporation's Certificate of Incorporation or By-Laws; (b) authorize or effect (i) any sale, lease, transfer or other disposition of all or substantially all the assets of the Corporation or of any assets of the Corporation not in the ordinary course of its business (including, without limitation, capital stock of or other ownership interests in any other entity); (ii) any merger or consolidation or other reorganization of the Corporation with or into another corporation, (iii) the acquisition by the Corporation of another corporation by means of a purchase of all or substantially all the assets of such corporation, or (iv) a liquidation, winding up or dissolution of the Corporation or adoption of any plan for the same; (c) employ or terminate the employment of the chief executive officer, chief financial officer or chief operating officer of the Corporation or any of its subsidiaries (or any person serving in any such capacity); or (d) amend the Stock Plan, adopt any other incentive plan that provides for the grant or sale of shares of the Corporation's capital stock or securities convertible or exchangeable therefor or issue any shares of the Corporation's capital stock or securities convertible or exchangeable therefor. (C) CONVERSION OF SERIES A PREFERRED STOCK. Each holder of Series A Preferred Stock shall be entitled to convert such Series A Preferred Stock into Common Stock upon the terms and subject to conditions hereinafter set forth in this Article FOURTH (C): (1) Conversion Decision. The holder or holders of a majority of the outstanding Series A Preferred Stock, upon written notice to the Corporation, may elect (the "Conversion Decision") to cause all or a portion of the -6- shares of Series A Preferred Stock to be converted into shares of Common Stock and to determine the percentage of the shares of Series A Preferred Stock outstanding to be so converted (the "Conversion Percentage") as set forth herein. Such notice shall set forth the date (the "Conversion Date"), which shall not precede the date of the Conversion Decision nor be more than sixty days following such date and which may be conditioned on the occurrence of one or more events. Within five days following receipt of such notice, the Corporation shall notify all holders of Series A Preferred Stock of the Conversion Decision and the terms thereof, including the Conversion Percentage and the Conversion Date. Such notice shall be sent by overnight mail, postage prepaid, to each record holder of Series A Preferred Stock at such holder's address appearing on the stock register of the Corporation. Upon conversion of shares of Series A Preferred Stock on the Conversion Date, the Series A Preferred Stock shall no longer be convertible into Common Stock or any other class of capital stock of the Corporation. Notwithstanding anything to the contrary contained herein, the holder or holders of a majority of the outstanding Series A Preferred Stock, upon written notice to the Corporation prior to the Conversion Date, may elect to revoke the Conversion Decision. Within five days following receipt of such notice, the Corporation shall notify all holders of Series A Preferred Stock of such revocation of the Conversion Decision. (2) Conversion of Shares. (a) On the Conversion Date, each share of Series A Preferred Stock to be converted pursuant to Section (C)(1) above (the aggregate of such shares of Series A Preferred Stock being the "Aggregate Preferred Conversion Shares") shall be converted into that number of fully paid and nonassessable shares of Common Stock as shall be equal to the quotient of (x) the Aggregate Common Conversion Shares (as defined below) divided by (y) the Aggregate Preferred Conversion Shares; provided, however, that if the Conversion Decision was made prior to March 1, 1998, then such number of fully paid and nonassessable shares of Common Stock shall be equal to the lesser of (i) the Ceiling Ratio (as defined below) and (ii) the foregoing quotient. (b) For purposes of the foregoing conversion formula, -7- (i) "Aggregate Common Conversion Shares" shall be equal to (NPF x GPS) ___________ - NPS 1 - NPF where GPS = the number of shares of Common Stock outstanding immediately prior to conversion that have been granted, whether vested or unvested, under the Stock Plan or any other incentive plan established for the directors or employees of the Corporation or any of its subsidiaries (also referred to herein as the "Granted Plan Shares"); NPS = the number of shares of Common Stock issued and outstanding immediately prior to conversion other than Granted Plan Shares (also referred to herein as the "Non-Plan Shares"); and NPF = the Non-Plan Fraction (as defined below). (ii) "Non-Plan Fraction" shall be equal to P + (M x (E - P)) ----------------- E where P = the sum of (x) the aggregate liquidation preference of the Aggregate Preferred Conversion Shares but not including any dividends declared or accrued thereon, less any dividends previously paid thereon, plus (y) the aggregate purchase price paid for the Non-Plan Shares; M = 1 minus the product of .15 and the Granted Plan Shares Percentage; and E = the fair market value of the Corporation (also referred to herein as the "Total Equity Value"), determined in good faith by the Board of Directors; provided that the fair market value of the Corporation with respect to any Conversion Decision made in connection -8- with an initial public offering of the Corporation's equity securities shall be determined by reference to the initial public offering price of such securities, net of any underwriting discounts or commissions. (iii) "Ceiling Ratio" shall be equal to (CRM x GPS) - ((1 - CRM) x NPS) --------------------------------------------------- (1 - CRM) x (Aggregate Preferred Conversion Shares) where CRM = 1 minus the product of .10 and the Granted Plan Shares Percentage. (iv) "Granted Plan Shares Percentage" shall be equal to the quotient of (x) the Granted Plan Shares divided by (y) the sum of (a) the Granted Plan Shares and (b) the total number of shares of Common Stock available for future grant under the Stock Plan or any other incentive plan established for the directors or employees of the Corporation or any of its subsidiaries. (c) If any fraction of a share of Common Stock would be issuable upon conversion of any Series A Preferred Stock, the Corporation may issue fractions of the shares of Common Stock, or in lieu thereof, pay to the person entitled thereto an amount in cash equal to the current value of such fraction, calculated to the nearest one-hundredth (1/100) of a share, to be computed (i) if the Common Stock is listed on any national securities exchange, on the basis of the last sales price per share of the Common Stock on such exchange (or the quoted closing bid price if there shall have been no sales) on the date of conversion, or (ii) if the Common Stock shall not be so listed, on the basis of the mean between the closing bid and asked prices per share for the Common Stock on the date of conversion as reported by NASDAQ, or its successor, and if there are not such closing bid and asked prices, on the basis of the fair market value per share as determined by the Board of Directors. (3) Conversion Procedure. (a) On or after the Conversion Date, each holder of Series A Preferred Stock (i) shall surrender the certificate or certificates therefor to the principal office of the transfer agent for the Series A Preferred Stock (or if no transfer agent be at the time appointed, then to the -9- Corporation at its principal office), and (ii) shall give written notice to the Corporation at such office of the name or names (with address) in which the certificate or certificates for Common Stock which shall be issuable on such conversion shall be issued, subject to any restrictions on transfer relating to shares of the Series A Preferred Stock or Common Stock upon conversion thereof. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly authorized in writing. As soon as practicable after receipt of such notice and the surrender of the certificate or certificates for Series A Preferred Stock as aforesaid, the Corporation shall cause to be issued and delivered at such office to such holder, or on such holder's written order, a certificate or certificates for (i) the number of full shares of Common Stock issuable on such conversion of each holder's Conversion Percentage of his Series A Preferred Stock in accordance with the provisions hereof and fractional shares of Common Stock or cash as provided in Section (C)(2)(c) in respect of any fraction of a Common Stock otherwise issuable upon such conversion, and (ii) the number of shares of Series A Preferred Stock not being converted. The Corporation may legend or alter the form of the certificates for such shares of Series A Preferred Stock not being converted to reflect changes in the rights thereof as a result of the conversion. (b) The Corporation shall at all times when Series A Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued stock, for the purposes of effecting the conversion of the Series A Preferred Stock, such number of shares of its duly authorized Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding Series A Preferred Stock. Notwithstanding the foregoing, for purposes of this Section (C) of Article FOURTH, the Corporation shall not be required to determine Total Equity Value except in connection with a Conversion Decision. -10- (c) From and after the Conversion Date, all Series A Preferred Stock which shall have been surrendered for conversion and converted as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holder thereof to receive certificates representing Common Stock in exchange therefor and payment of any accrued and unpaid dividends upon such Common Stock. Any Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Preferred Stock accordingly. FIFTH: The mailing address of the Corporation is as follows: c/o Warburg, Pincus Ventures, L.P. 466 Lexington Avenue New York, New York 10017 SIXTH: In furtherance and not in limitation of the powers conferred by statute, the by-laws of the Corporation may be made, altered, amended or repealed by the stockholders or by a majority of the entire Board of Directors. SEVENTH: Elections of directors need not be by written ballot. EIGHTH: 1. Indemnification. The Corporation shall indemnify to the fullest extent permitted under and in accordance with the laws of the State of Delaware any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, incorporator, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of or in any other similar capacity with another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, -11- conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, shall not, of itself, create a presumption that the person had reasonable cause to believe that his conduct was unlawful. 2. Payment of Expenses. Expenses (including attorneys' fees) incurred in defending any civil, criminal, administrative or investigative action, suit or proceeding shall (in the case of any action, suit or proceeding against a director of the Corporation) or may (in the case of any action, suit or proceeding against an officer, trustee, employee or agent) be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of the indemnified person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article EIGHTH. 3. Nonexclusivity of Provision. The indemnification and other rights set forth in this Article EIGHTH shall not be exclusive of any provisions with respect thereto in the by-laws or any other contract or agreement between the Corporation and any officer, director, employee or agent of the Corporation. 4. Effect of Repeal. Neither the amendment nor repeal of this Article EIGHTH, subparagraph 1, 2, or 3, nor the adoption of any provision of this Certificate of Incorporation inconsistent with Article EIGHTH, subparagraph 1, 2, or 3, shall eliminate or reduce the effect of this Article EIGHTH, subparagraphs 1, 2, and 3, in respect of any matter occurring before such amendment, repeal or adoption of an inconsistent provision or in respect of any cause of action, suit or claim relating to any such matter which would have given rise to a right of indemnification or right to receive expenses pursuant to this Article EIGHTH, subparagraph 1, 2, or 3, if such provision had not been so amended or repealed or if a provision inconsistent therewith had not been so adopted. 5. Limitation on Liability. No director or officer shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director or officer, except for any matter in respect of which such director or officer (A) shall be liable under Section 174 of the General Corporation Law of the State of Delaware or any amendment thereto or successor provision thereto, or (B) shall be liable by reason that, in addition to any and all other requirements for liability, he: -12- (i)shall have breached his duty of loyalty to the Corporation or its stockholders; (ii)shall not have acted in good faith or, in failing to act, shall not have acted in good faith; (iii)shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law; or (iv)shall have derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the date of the filing of this Amended and Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. -13- IN WITNESS WHEREOF, T.K.G. Acquisition Corp. has caused this Amended and Restated Certificate of Incorporation to be signed by Burton B. Staniar, its Chairman and Chief Executive Officer, this 17th day of October, 1996. /s/ Burton B. Staniar ----------------------------- Burton B. Staniar Chairman and Chief Executive Officer -14- EX-27 3 FDS
5 KNOLL, INC. FINANCIAL DATA SCHEDULE For the Seven Months Ended September 30, 1996 (unaudited) ($ in thousands) 1,000 U.S. 7-MOS DEC-31-1996 SEP-30-1996 1 21,729 0 99,823 0 55,502 188,728 192,067 14,487 690,598 115,292 366,882 0 0 1 176,339 690,598 381,784 381,784 250,952 250,952 81,082 0 23,605 26,807 11,146 15,661 0 0 0 15,661 0 0
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