17. STOCK PLANS

As of December 31, 2012, the Company sponsors 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, 2012, 25,857 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, 2012, 1,632,662 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.

Restricted Stock and Restricted Stock Units

In 2007, the Company granted restricted stock awards to certain key employees aggregating 360,000 shares of common stock. These awards provided 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, 2012.

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 provided for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. These shares vested 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 recognized compensation expense ratably over the vesting period. In certain conditions vesting may be accelerated as defined in the restricted share agreements.

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 cliff vest on the third anniversary of the grant date. 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 vested as to one-third of the shares underlying each award since Knoll's operating profit was equal to $77 million. An additional one-third would have vested if Knoll's annual operating profit was equal to $92 million. 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.

In 2012, the Company granted restricted stock awards to certain key employees and the Company's Board of Directors aggregating 315,030 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. 292,500 of these awards cliff vest on the third anniversary of the grant date. 22,530 of these awards will vest as to the 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. In addition, during 2012 the Company granted 110,000 restricted stock units to certain key employees. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. 90,000 of these awards vest as to one-sixth over each of the subsequent six years, without regard to operating targets. 20,000 of these awards cliff vest on the third anniversary of the grant date. In certain conditions vesting may be accelerated as defined in the restricted unit agreements. The Company determined the fair value of the awards on the date of grant and is recognizing compensation expense ratably over the vesting period.

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

			Weighted Average Fair Value			Weighted Average Fair Value

Outstanding at December 31, 2011	1,386,552		$	18.69	—	$	—
Granted	315,030			15.98	110,000		14.04
Forefeited	(10,166	)		18.91	—		—
Vested	(625,427	)		18.89	—		—

Outstanding at December 31, 2012	1,065,989		$	17.77	110,000	$	14.04

Stock Options

The Company recognizes compensation expense using the graded vesting attribution method which treats each option grant as multiple grants each with its own requisite service period.

In 2009, the Company 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. The contractual life of these options is 7 years. In addition, the options have accelerated vesting provisions upon a change of control of the Company.

In 2012, the Company granted 20,000 stock options to certain key employees of the Company. These options vest ratably over a five-year period on the anniversary of the grant date. The contractual life of these options is 10 years. In addition, the options have accelerated vesting provisions upon a change of control of the Company. The grant-date fair value of these options granted was $6.26 based on the following assumptions used in the Black Scholes option pricing model:


Expected volatility		51	%
Expected dividend yield		2.50	%
Expected term (in years)		6
Risk-free interest rate		1.36	%
Exercise price	$	15.98

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

			Weighted Average Exercise Price			Aggregate Intrinsic Value

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

Outstanding at December 31, 2011	1,540,193		$	13.83		$	3,631,381
Granted	20,000			15.98			—
Exercised	(93,839	)		11.09			426,278
Expired	(37,070	)		16.34			37,070
Forfeited	(65,000	)		16.76			76,425

Outstanding at December 31, 2012	1,364,284		$	13.84	3.53	$	3,686,098

Exercisable at December 31, 2012	1,120,284		$	14.46	3.34	$	2,608,058

The following table summarizes information regarding stock options outstanding and exercisable at December 31, 2012:

	Options Outstanding						Options Exercisable

Ranges of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$10.24 - $15.00		1,014,784		3.48	$	11.73		790,784	$	12.06
$15.01 - $18.77		194,500		3.31		17.81		174,500		18.02
$18.78 - $23.47		155,000		4.11		22.68		155,000		22.68

$10.24 - $23.47		1,364,284		3.53	$	13.84		1,120,284	$	14.46

A summary of the status of the Company's non-vested options as of December 31, 2012, and changes during the year ended December 31, 2012, is presented below.

			Weighted Average Grant-Date Fair Value

Nonvested at December 31, 2011	478,000		$	4.26
Granted	20,000			6.26
Vested	(234,000	)		4.24
Forfeited	(20,000	)		4.32

Nonvested at December 31, 2012	244,000		$	4.43

The total fair value of options vested during the years 2012, 2011, and 2010 was $1.0 million, $1.4 million, and $1.5 million, respectively.

Compensation costs related to stock-based compensation for the years ended December 31, 2012, 2011, and 2010 totaled $10.4 million pre-tax ($6.6 million after-tax), $9.7 million pre-tax ($5.9 million after-tax), and $9.2 million pre-tax ($5.6 million after-tax), respectively, and are included within selling, general, and administrative expenses.

At December 31, 2012 and December 31, 2011, the total compensation cost related to non-vested awards not yet recognized equaled $12.9 million and $16.8 million, respectively, including $0.3 million and $0.6 million for stock options, respectively, and $12.7 million and $16.2 million for restricted stock awards and restricted stock units, respectively. The weighted average remaining period over which the cost is to be recognized is 1.5 years.

Other Stock-Based Compensation Plans

On 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 and 2010 employees purchased 2,567 and 3,251 shares, respectively, in accordance with the terms of the ESPP.