As of December 31, 2011, the Company sponsored two stock incentive plans under which awards denominated or payable in shares or options to purchase shares of Knoll common stock may be granted to officers, certain other employees, directors and consultants of the Company. In May 2007, the Company approved the 2007 Stock Incentive Plan which authorized the issuance of 2,000,000 shares of common stock. As of December 31, 2011, 100,774 shares remained available for issuance under this plan. In May of 2010, the Company approved the 2010 Stock Incentive Plan which authorized the issuance of 2,000,000 shares of common stock. As of December 31, 2011, 1,979,000 shares remained available for issuance under this plan.

A Stock Option Committee currently consisting of the Compensation Committee of the Company's Board of Directors ("Stock Option Committee") has sole discretion concerning administration of the plans, 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. Options that are granted have a maximum contractual life of seven to ten years. Grants to employees generally become partially vested one year from the date of grant. The options granted generally vest 25% each year over a four year period. In addition, the options have accelerated vesting provisions upon a change of control of the Company. The Company is recognizing compensation expense using the graded vesting attribution method which treats each option grant as multiple grants each with its own requisite service period.

In 2005, the Company granted performance-based restricted stock awards to certain key employees aggregating 1,650,000 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. The Company determined the fair value of the shares on the date of grant and recognized compensation expense ratably over the vesting period. These awards are all vested as of December 31, 2011.

In 2007, the Company granted restricted stock awards to certain key employees aggregating 360,000 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. These shares will vest as to one-fifth of the shares underlying each award to the extent that Knoll's operating profit for a calendar year is equal to $141.0 million. An additional one-fifth will vest based on additional increments to operating profit of $15.0 million with full vesting upon the achievement of $201.0 million in operating profit. In any event, the awards will fully vest on the fifth anniversary of the date of the grant. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period. In certain conditions vesting may be accelerated as defined in the restricted share agreements.

In 2008, the Company granted restricted stock awards to certain key employees and the Company's Board of Directors aggregating 992,117 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. 900,000 of these shares will vest as to one-fifth of the shares underlying each award on each grant date anniversary, without regard to operating profit targets. 26,117 of these shares granted in 2008 vested one-third over each of the subsequent three years, without regard to operating profit targets. 66,000 of these shares will vest as to one-fifth of the restricted shares underlying each award to the extent that Knoll's operating profit for the period is equal to $156.0 million. An additional one-fifth will vest based on additional increments to operating profit of $15.0 million with full vesting upon the achievement of $216.0 million in operating profit. In any event, the awards will fully vest on the fifth anniversary of the date of the grant. In certain conditions vesting may be accelerated as defined in the restricted share agreements. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period.

In 2009, the Company granted restricted stock awards to the Company's Board of Directors aggregating 40,818 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. These shares vest one-third over each of the subsequent three years, without regard to operating profit targets. In certain conditions vesting may be accelerated as defined in the restricted share agreements. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period. In 2009, the Company also granted 935,000 stock options to certain key employees of the Company. These options vest ratably over a four-year period on the anniversary of the grant date.

In 2010, the Company granted restricted stock awards to the Company's Board of Directors aggregating 25,446 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. These shares vest one-third over each of the subsequent three years, without regard to operating profit targets. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period. In addition, the Company granted 25,000 restricted stock awards to a certain key employee. These shares vest one-third over the subsequent three years, without regard to operating profits. In certain conditions vesting may be accelerated as defined in the restricted share agreements. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period.

In 2011, the Company granted restricted stock awards to certain key employees and the Company's Board of Directors aggregating 762,004 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. 748,000 of these shares will vest as to one-third of the shares underlying each award to the extent that Knoll's operating profit for 2011 is equal to $77 million. An additional one-third will vest if Knoll's annual operating profit is equal to $92 million in 2012. In any event, the awards will fully vest on the third anniversary of the date of grant. The remaining 14,004 shares granted in 2011 will vest as to one-third over each of the subsequent three years, without regard to operating targets. In certain conditions vesting may be accelerated as defined in the restricted share agreements. The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period.

The following table summarizes the Company's restricted stock activity during the year:

			Weighted Average Fair Value

Outstanding at December 31, 2010	878,520		$	14.94
Granted	762,004			21.42
Forfeited	(30,000	)		21.58
Vested	(223,972	)		12.92

Outstanding at December 31, 2011	1,386,552		$	18.69

The following table summarizes the Company's stock option for the preceding three years.

			Weighted Average Exercise Price			Aggregate Intrinsic Value

						(in thousands)
Outstanding at December 31, 2008	2,758,979		$	15.20		$	—
Granted	935,000			10.24			—
Forfeited	(286,218	)		16.25			—

Outstanding at December 31, 2009	3,407,761		$	13.75	4.38	$	—

Exercisable at December 31, 2009	2,245,511		$	14.86	3.02	$	—

Outstanding at December 31, 2009	3,407,761		$	13.75		$	—
Exercised	(790,596	)		12.20			905,051
Forfeited	(112,064	)		14.20			35,192

Outstanding at December 31, 2010	2,505,101		$	14.22	4.47	$	7,742,565

Exercisable at December 31, 2010	1,683,101		$	15.67	3.72	$	2,961,443

Outstanding at December 31, 2010	2,505,101		$	14.22		$	7,742,565
Exercised	(878,658	)		14.97			4,731,919
Forfeited	(86,250	)		13.54			565,800

Outstanding at December 31, 2011	1,540,193		$	13.83	4.35	$	3,631,381

Exercisable at December 31, 2011	1,062,193		$	15.28	4.06	$	1,597,081

The following table summarizes information regarding stock options outstanding and exercisable at December 31, 2011:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$10.24 - $15.00		1,138,623		4.48 years	$	11.67		660,623	$	12.45
$15.01 - $18.77		226,570		3.09		17.75		226,570		17.75
$18.78 - $23.47		175,000		5.12		22.77		175,000		22.77

$10.24 - $23.47		1,540,193		4.35	$	13.83		1,062,193	$	15.28

There were no options granted during 2011 or 2010. The weighted-average grant-date fair value of options granted during the year ended December 31, 2009 was $4.32 based on the following weighted-average assumptions used in the lattice option pricing model:



Expected volatility	44	%
Expected dividend yield	0.78	%
Expected term (in years)	6
Risk-free rate	3.34	%
Forfeiture rate	5	%

A summary of the status of the Company's non-vested options as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below.

			Weighted Average Grant-Date Fair Value

Nonvested at January 1, 2011	822,000		$	4.43
Granted	—			—
Vested	(287,750	)		4.75
Forfeited	(56,250	)		4.32

Nonvested at December 31, 2011	478,000		$	4.26

The total fair value of options vested during the years 2011, 2010, and 2009 was $1.4 million, $1.5 million, and $1.1 million, respectively.

Compensation costs related to stock-based compensation for the years ended December 31, 2011, 2010, and 2009 totaled $9.7 million pre-tax ($5.9 million after-tax), or $0.12 per diluted share, $9.2 million pre-tax ($5.6 million after-tax), or $0.12 per diluted share, and $8.2 million pre-tax ($5.0 million after-tax), or $0.11 per diluted share, respectively, and are included in the consolidated statements of income under selling, general, and administrative expenses.

At December 31, 2011 and December 31, 2010, the total compensation cost related to non-vested awards not yet recognized equaled $16.8 million and $10.9 million, respectively, including $0.6 million and $1.6 million for stock options, respectively, and $16.2 million and $9.3 million for restricted stock, respectively. The weighted average remaining period over which the cost is to be recognized is 1.5 years.

As of December 31, 2011 the Company terminated its Employee Stock Purchase Plan (ESPP) whereby employees of the Company were able to purchase shares of Knoll common stock at a discounted rate. The discount rate was 5% off the average of the high and low sale price per share on the last trading day of the purchase period. Employees were able to contribute 1-10% of their eligible gross pay up to a $25,000 annual stock value limit. In 2011, 2010, and 2009 employees purchased 2,567, 3,251, and 6,716 shares, respectively, in accordance with the terms of the ESPP.