S-1

As filed with the Securities and Exchange Commission on September 10, 2004

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

KNOLL, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	2522	13-3873847
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1235 Water Street

East Greenville, Pennsylvania 18041

(215) 679-7991

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Patrick A. Milberger, Esq.

Senior Vice President, General Counsel and Secretary

Knoll, Inc.

1235 Water Street

East Greenville, Pennsylvania 18041

(215) 679-7991

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael A. Schwartz, Esq. Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019 (212) 728-8000 Kirk A. Davenport II, Esq. Latham & Watkins LLP 885 Third Avenue Suite 1000 New York, New York 10022 (212) 906-1200

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (1) (2)	Amount of Registration Fee
Common Stock, par value $0.01 per share	$230,000,000	$29,141

(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2) Includes shares of common stock that underwriters have an option to purchase solely to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement that is filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion. Dated September 10, 2004.

PRELIMINARY PROSPECTUS

             Shares

Knoll, Inc.

Common Stock

The selling stockholders of Knoll, Inc. are offering              shares of common stock. Knoll will not receive any of the proceeds from the sale of shares of common stock being sold by the selling stockholders. Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $             and $             per share. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “KNL.”

Before buying any shares, you should carefully consider the risk factors described in “ Risk Factors” beginning on page 10.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to the selling stockholders	$	$

The underwriters may also purchase up to an additional              shares of common stock from the selling stockholders at the public offering price, less the underwriting discount and commissions within 30 days from the date of this prospectus.

The underwriters expect to deliver the shares against payment in New York, New York on or about                     , 2004.

Joint Book-Running Lead Managers
Goldman, Sachs & Co.	UBS Investment Bank
Co-Managers
Banc of America Securities LLC          JPMorgan           Merrill Lynch & Co.

The date of this prospectus is                     , 2004.

TABLE OF CONTENTS

Market and Industry Data	i
Prospectus Summary	1
Risk Factors	10
Special Note Regarding Forward-Looking Statements	19
Use of Proceeds	19
Dividend Policy	19
Capitalization	20
Dilution	21
Unaudited As Adjusted Consolidated Financial Information	22
Selected Consolidated Financial Data	25
Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Business	40
Management	57
Certain Relationships and Related Party Transactions	67
Principal and Selling Stockholders	69
Description of Capital Stock	71
Description of Certain Indebtedness	72
Shares Eligible for Future Sale	74
Material U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock	76
Underwriting	79
Validity of Securities	82
Experts	82
Where You Can Find More Information	82
Index to Consolidated Financial Statements	F-1

We have not authorized anyone to provide you with any information other than the information contained in this prospectus. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus regardless of the time of delivery of this prospectus or any sale of our common stock.

MARKET AND INDUSTRY DATA

The market and industry data presented in this prospectus are generally estimates and are based upon third-party data, including The Business and Institutional Furniture Manufacturers Association, or BIFMA, and our own internal estimates. While we believe that these data are reasonable, in some cases the data are based on our or others’ estimates and cannot be independently verified by us.

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PROSPECTUS SUMMARY

You should read the following summary together with the more detailed information regarding us, the sale of our common stock in this offering, our financial statements and notes to those financial statements that appear elsewhere in this prospectus.

Knoll, Inc.

Business Overview

We are a leading designer and manufacturer of branded office furniture products and textiles. Our commitment to innovation and modern design has yielded a comprehensive portfolio of products designed to provide enduring value and help clients shape their workplaces with imagination and vision. Our products are recognized for high quality and a sophisticated image and are targeted at the middle to upper end of the market. We sell our products primarily in North America through a direct sales force and a broad network of independent dealers. Our distinctive operating approach has driven industry leading operating income margins among our primary publicly-held competitors. Our net revenues, operating income and net income for the twelve months ended June 30, 2004 were $687.7 million, $73.1 million and $35.0 million, respectively.

Since our founding in 1938, we have been recognized worldwide as a design leader within our industry. Our status as a pioneer in bringing the principles of modern design to the workplace is well established. Our products are exhibited in major art museums worldwide, including more than 30 pieces in the permanent Design Collection of The Museum of Modern Art in New York. This design legacy continues to flourish today and is embodied in recently introduced, award winning products, including the innovative LIFE^™ chair and AutoStrada^™ office furniture system. Our design excellence is complemented by a management philosophy that fosters a strong collaborative culture, client-driven processes and a lean, agile operating structure. Our employees are performance-driven and motivated by a variable incentive compensation system and broad-based equity ownership in the company. Together, these core attributes have enabled us to achieve superior financial performance and have positioned us for profitable growth.

We offer a comprehensive and expanding portfolio of high quality office furniture and textiles across five product categories. Historically, we have derived most of our revenues from office systems, which are modular workspaces with integrated panels, work surfaces, storage and lighting, and from specialty products, including our KnollStudio^® collection of signature design classics furnishings, KnollTextiles^™, Spinneybeck^® leather and KnollExtra^® accessories. However, in recent years, we have significantly expanded our product offerings in seating, files and storage, desks and casegoods and tables. We manufacture and assemble our products at our ISO-14001 certified facilities in North America and our ISO-9000 certified facilities in Europe. These facilities operate under a philosophy of continuous improvement, lean manufacturing and efficient asset utilization. Our direct sales force of 314 professionals and network of 225 independent dealers in North America work in close partnership with clients and design professionals to create distinctive work environments. Our products and knowledgeable sales force have generated strong brand recognition and loyalty among architects, designers and corporate facility managers, all of whom are key decision makers in the office furnishings purchasing process. Our clients are typically Fortune 1000 companies, governmental agencies and other medium to large sized organizations in a variety of industries. We have an over $6 billion installed base of office systems, which provides a strong platform for recurring and add-on sales of products across all our categories.

Industry Overview

Overview. According to BIFMA, the U.S. office furniture market had $8.5 billion in shipments in 2003. Office systems and seating are the largest product categories, accounting for $2.6 billion (31%) and $2.3 billion (27%) of industry-wide shipments, respectively, in 2003. Industry demand is largely driven by macroeconomic

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factors, including corporate profitability, business confidence and service-sector employment. Together, these factors impact commercial construction, business expansion, absorption of vacant office space and, ultimately, demand for our products.

In addition to these macroeconomic factors, the demand for office furniture is influenced by workplace trends, including changes in work processes such as increases in the use of technology and the number of knowledge workers. Customers in the middle to upper end of the market are focused on improving productivity and efficiency, worker health and safety, ergonomics and environmental standards for the workplace. In addition, clients in these market segments demand highly customized solutions and premium service levels, including short lead times of generally three to five weeks, and strong after-market support. These trends have heightened the importance of providing office furnishings of superior quality, design and function.

Historical Industry Environment The U.S. office furniture industry experienced positive growth in 23 of the 25 years preceding 2001. Moreover, in the four years from 1997 to 2000, the industry grew at an above-average compounded annual rate of 7.3%, driven by strong corporate profitability, business expansion and investment in infrastructure during the Y2K and “dot-com” booms. However, in 2001 through 2003, the economy suffered significant reductions in corporate profitability, business confidence, service-sector employment and commercial real estate occupancy rates. As a result, our industry experienced a sales decline of more than 35% during that period. This steep decline had a particularly pronounced effect on office systems due to the deferral of infrastructure investments by our clients and a saturation of the market by “just new” used office systems created by the increase in vacated office space. As a consequence, industry-wide shipments in the office systems category declined by 48.7%, more than any other category in the three years from 2001 to 2003.

Industry Recovery. During the first half of 2004, higher levels of corporate profitability, improving business confidence, increasing service-sector employment and increasing absorption of vacant office space all contributed to improving demand for office furniture products. During that period, the U.S. office furniture market experienced positive period-over-period growth in orders and shipments of 8.0% and 4.0%, respectively. According to BIFMA, U.S. office furniture shipments are forecasted to grow 5.7% in 2004 and 11.5% in 2005. The early stages of a recovery have been most evident in the seating, files and storage and casegoods categories, which are generally lower ticket purchases. We expect that a rebound in office systems will occur later in this recovery due to the typically larger commitment that the purchase of these products represents. We also believe that demand for office systems in North America will benefit from a general economic recovery, as companies expand, relocate to take advantage of lower rents, hire additional knowledge workers and reorganize to improve efficiency and productivity.

Long-Term Prospects for Industry Growth. Over the longer term, we believe demand for office furnishings in the middle to upper end of the market will increase due to a number of factors. These factors include the trend toward an information-based economy, higher levels of service-sector employment, and a flattening of organizational structures, all of which drive demand for office systems products. In addition, we expect demand will be supplemented by ongoing trends in work processes, concerns surrounding worker health and safety, ergonomics and an increased awareness of, and interest in, meeting environmental standards for the workplace.

Our Competitive Strengths

Legacy of innovative modern design. One of our greatest strengths is our 66-year history of creating modern furniture with enduring design, quality and innovation. This design heritage, pioneered by Hans and Florence Knoll, has been fostered over time and has enabled us to build strong associations and relationships with some of the world’s preeminent designers and architects, including Ludwig Mies van der Rohe, Eero Saarinen, Frank O. Gehry and Don Chadwick. By combining their creative vision with our commitment to developing modern, high quality products that address changing business needs, we are able to generate strong demand for our new product offerings and cultivate brand loyalty among our target clients.

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Premier brand identity in office furniture and specialty products. Our brand identity provides credibility and prestige and is a key factor in our clients’ purchasing decisions as they seek to create workplaces that will help project a desired image, enhance facility performance and attract and retain employees. We believe our products represent a modern, high-quality collection of office furnishings with a sophisticated image. We target our products toward the middle to upper end of the market, where clients typically value the image and performance of their work environment. Our KnollStudio and KnollTextiles collections also showcase our design strength outside of the traditional office environment, and in many cases have become collectibles, which has further elevated our brand.

Strong margins and cash flow generation throughout the business cycle. Our distinctive operating approach has driven our industry leading operating income margins among our primary publicly-held competitors. Our lean organization, highly variable cost structure, motivated associates and disciplined approach to business and capital management have enabled us to remain profitable throughout the business cycle. For example, despite industry-wide revenue declines from the beginning of 2001 through 2003, we reduced our debt by $266 million and generated positive operating income and net income in each quarter during this period. As a result, we were able to maintain our focus on enhancing the client experience, introducing new products, developing our sales and marketing organizations and strengthening our competitive position, rather than devoting material resources to costly restructuring initiatives.

Performance-driven culture and experienced management team. Our corporate culture is highly collaborative and encourages employees at all levels to communicate ideas and explore ways to improve our performance. Our associates are dedicated to producing quality products and take great pride in their work and in our reputation. Our senior management team has over 130 years of cumulative industry experience and a proven track record of achieving profitability throughout the business cycle. Moreover, managers throughout our organization are held accountable for achieving sales and cost targets and are motivated by and rewarded with performance-based compensation and equity ownership.

Reputation for superior products and client service. Our reputation for product and service excellence serves as an important factor when marketing to the architecture and design community and to new and existing clients. Our products are constructed with high quality materials and exhibit what we believe to be market leading workmanship, aesthetics and durability, as evidenced by the lifetime warranty we offer on many of our products. We work with clients to customize our products for their individual needs, and through our broad dealer network we provide installation and support services that enhance our clients’ purchasing experience. In addition, our client service organization, investments in management information systems and electronically linked dealer network allow us to provide clients who have many facilities with an integrated and reliable single point of contact for all their office furniture purchases.

Significant market position in office systems and an over $6 billion installed base. We enjoyed an estimated 16% category share in 2003 in the $2.6 billion U.S. office systems category. Office systems is the largest category in the U.S. office furniture industry and typically represents the largest portion of a client’s furniture expenditure. Office systems are long-lasting, are often the first furniture element a client specifies and are, therefore, key to securing long-term relationships. We believe our position provides us a strong base for recurring and add-on sales of products across all our categories. We estimate that more than half of our revenues are derived from our installed client base.

Strong direct selling organization and dealer network. Our experienced 314 person direct sales force and our network of 225 independent dealers in North America have close relationships with architects, designers, corporate facility managers and other professionals who influence product selection decisions for large clients and provide valuable input in the product development process. We have strong, long-standing relationships with our dealers and have historically experienced little dealer turnover. In addition, we have a dealer presence in every major metropolitan area across North America and our regional dealer network allows us to jointly and cost-effectively market to small and mid-sized accounts.

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Our Strategy

We pursue profitable growth by working closely with clients, architects, designers and dealers to identify areas of opportunity, while maintaining and enhancing our brand image and reputation for design and quality. We will seek to drive gains in market share, revenues and profitability by pursuing the following initiatives:

Build on our strength in office systems. We are focused on growing our significant category share in office systems through continuous innovation, superior performance and aesthetics, and targeted customization. We will continue to offer systems with a broad range of features and price points to meet the needs of our existing and future clients and ensure our competitiveness. For example, in the second half of 2004, we plan to begin shipping the AutoStrada office system, which won a silver Best of NeoCon^® award at this year’s national industry trade show.

Expand our market opportunity in seating, storage and casegoods. We believe we have the opportunity to increase our share in non-systems categories by cross selling to our existing and future office systems clients and securing stand-alone opportunities for the sales of seating, files and storage and casegoods. Over the last three years, we have actively begun to expand our product lines in these non-systems categories to address the $5.0 billion U.S. market for those goods. The following table shows the estimated percentages of total 2003 U.S. office furniture shipments represented by office systems, seating, files and storage and desks and casegoods, as compared to the corresponding percentages for our total U.S. shipments in 2003.

Product Category	% of Industry’s 2003 U.S. Shipments	% of Knoll’s 2003 U.S. Shipments
Office systems	30.6%	65.3%
Seating	26.6%	8.6%
Files and storage	21.5%	5.5%
Desks and casegoods	11.0%	3.0%

We have begun to realize the benefits of these expanded market opportunities. For example, our seating sales grew over 25% in the first half of 2004 versus the same period in 2003, substantially outpacing industry-wide growth in this category. In 2005, we plan to introduce new seating lines, including the next chair by the renowned seating designer Don Chadwick, which will further broaden the price range and performance breadth of our offerings in this category.

Capture a greater share of our dealer network’s sales. While our dealer network does not offer any products of our principal direct competitors, we estimate that a significant portion of our dealers’ non-systems sales consist of seating, files and storage and casegoods products of other manufacturers. We introduced the Knoll Essentials collection of easy-to-order, best-selling products from our broad range of office furnishings in January 2004 to target this opportunity. With a standard delivery lead-time of four weeks and special dealer incentives, we have made it easy and profitable for our dealers’ salespeople to sell these products. As we introduce new seating, storage and accessories products, our dealers are agreeing to refrain from selling other manufacturers’ comparable products.

Grow the Knoll high margin specialty businesses through expanded distribution and new product introductions. Our specialty businesses enhance our reputation for design and quality and represent our highest margin businesses. During the second half of 2004, we plan to expand our KnollStudio distribution network to include residential furniture dealers and take advantage of growing consumer interest in modern and mid-century design for the home. We intend to double the pace of our KnollTextiles new product introductions in 2005 to help gain share in this very fragmented market.

Improve margins through our continuous improvement program and global sourcing initiative. During the past five years, we have implemented a culture of continuous improvement throughout our product development, manufacturing, client service and logistics operations. In addition to rationalizing capacity during

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the industry downturn, we improved processes, reduced lead-times, outsourced our logistics operations, improved working capital efficiency and enhanced client service performance. In addition, we recently launched a global sourcing initiative to capitalize on significant near-term opportunities to cost-effectively source selected components and raw materials globally.

Our Recent Refinancing

On September     , 2004, in order to extend the maturities of our outstanding debt, obtain greater financial flexibility, take advantage of favorable debt capital markets and historically low interest rates and provide liquidity to our existing stockholders, we entered into the following new financial arrangements:

• a $75.0 million revolving credit facility; and

• a $425.0 million term loan facility.

We used the proceeds of the term loan facility to repay our prior revolving and term loan credit facilities and pay accrued interest in the aggregate amount of $             million and to fund a cash dividend of $             million to our existing stockholders. These transactions are referred to as our Refinancing. For additional information on our revolving and term loan facilities, or our new credit facility, see “Description of Certain Indebtedness.”

Our Principal Stockholder

Our principal stockholder is Warburg, Pincus Ventures, L.P. As of June 30, 2004, Warburg Pincus and its affiliates beneficially owned approximately 90.6% of our outstanding common stock. Following the completion of this offering, Warburg Pincus and its affiliates will beneficially own approximately     % of our common stock, or     % if the underwriters’ over-allotment option is fully exercised.

Our principal executive offices are located at 1235 Water Street, East Greenville, Pennsylvania 18041. Our telephone number is (215) 679-7991. We were incorporated in 1995 under Delaware law. Our website is located at http://www.knoll.com. The information on our website is not a part of this prospectus.

All trademarks or trade names referred to in this prospectus are the property of their respective owners.

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THE OFFERING

Common stock offered              shares

Common stock to be outstanding after this offering              shares

Use of proceeds The proceeds from the sale of shares of our common stock offered pursuant to this prospectus are solely for the account of the selling stockholders. We will not receive any proceeds from the sale of shares by the selling stockholders.

Risk factors See “Risk Factors” on page 10 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Dividend policy Our board of directors currently intends to declare and pay quarterly dividends of $              per share on our common stock. The declaration and payment of dividends is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors.

Proposed New York Stock Exchange symbol KNL

The number of shares to be outstanding immediately after this offering excludes:

• 5,369,795 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2004, with exercise prices ranging from $13.47 to $36.00 per share and a weighted average exercise price of $24.44 per share; and

• 287,555 shares of common stock reserved for future grants under our stock option plans as of June 30, 2004.

Except as otherwise noted, all information in this prospectus assumes:

• no exercise by the underwriters of their right to purchase up to an additional              shares to cover over-allotments; and

• a              for              stock split of our common stock that will occur prior to the closing of this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus, and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated financial data for the years ended December 31, 2001, 2002 and 2003 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated financial data for the six months ended June 30, 2003 and 2004, and as of June 30, 2004, are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal, recurring adjustments, that management considers necessary for a fair statement of the results of those periods. The historical results are not necessarily indicative of results to be expected in any future period, and the results for the six months ended June 30, 2004 should not be considered indicative of results for the full fiscal year.

The as adjusted consolidated statement of operations data for the year ended December 31, 2003 and the six months ended June 30, 2004 give effect to our Refinancing and this offering for both fiscal 2003 and the six months ended June 30, 2004 as if they had occurred on January 1, 2003 and January 1, 2004, respectively. The as adjusted consolidated balance sheet data at June 30, 2004 gives effect to our Refinancing and this offering as if they had occurred on June 30, 2004 (see “Unaudited As Adjusted Consolidated Financial Information” and related notes included elsewhere in this prospectus). The as adjusted statements of operations are not necessarily indicative of results that would have occurred had our Refinancing and this offering been completed on January 1, 2003 and January 1, 2004 and should not be construed as being representative of future results of operations. Likewise, the as adjusted consolidated balance sheet data at June 30, 2004 is not necessarily indicative of what our financial position would have been had these transactions been completed on June 30, 2004. Certain information normally included in financial statements prepared in accordance with the accounting principles generally accepted in the U.S. has been omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission, or the SEC. For more information regarding our Refinancing, see “Description of Certain Indebtedness.”

									As adjusted							As adjusted
	Years Ended December 31,								Year Ended December 31,		Six Months Ended June 30,					Six Months Ended June 30,
	2001			2002		2003			2003		2003			2004		2004
									(unaudited)		(unaudited)					(unaudited)
	(in thousands)
Consolidated Statement of Operations Data:
Sales	$	985,388		$	773,263	$	697,246		$	697,246	$	341,644		$	332,145	$	332,145
Cost of sales		594,446			492,902		460,911			460,911		226,602			222,910		222,910
Gross profit		390,942			280,361		236,335			236,335		115,042			109,235		109,235
Selling, general and administrative expenses		195,532			156,314		149,739			149,739		72,013			79,697		79,697
Restructuring charge		1,655			—		—			—		—			—		—
Operating income		193,755			124,047		86,596			86,596		43,029			29,538		29,538
Interest expense		42,101			26,541		20,229					10,159			8,367
Other (expense) income, net		(3,670	)		2,933		(2,473	)				(5,411	)		2,747

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							As adjusted					As adjusted
	Years Ended December 31,						Year Ended December 31,	Six Months Ended June 30,				Six Months Ended June 30,
	2001		2002		2003		2003	2003		2004		2004
							(unaudited)	(unaudited)				(unaudited)
	(in thousands, except per share data)
Income before income tax expense		147,984		100,439		63,894			27,459		23,918
Income tax expense		60,794		40,667		27,545			12,112		9,893
Net income	$	87,190	$	59,772	$	36,349	$	$	15,347	$	14,025	$
Per Share Data:
Earnings per share:
Basic	$	3.77	$	2.58	$	1.57	$	$	.66	$	.61	$
Diluted	$	3.60	$	2.47	$	1.50	$	$	.63	$	.58	$
Weighted average shares outstanding:
Basic		23,142,554		23,172,857		23,158,765			23,162,400		23,151,016
Diluted		24,197,537		24,237,324		24,207,187			24,218,215		23,983,214

	As of June 30, 2004
	Actual			As adjusted
	(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Working (deficit) capital	$	(36,175	)	$
Total assets		560,415
Total long-term debt, including current portion		363,135
Total liabilities		557,475
Stockholders’ equity		2,940

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SUMMARY CONSOLIDATED UNAUDITED QUARTERLY FINANCIAL DATA

The following summary consolidated unaudited quarterly financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus, and our consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated financial data for each quarter are unaudited and have been prepared on the same basis as the audited financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal, recurring adjustments, that management considers necessary for a fair statement of the unaudited quarterly results. The historical results are not necessarily indicative of results to be expected in any future period, and the results for the quarters during 2004 should not be considered indicative of results for the full fiscal year.

	Three Months Ended
	March 31, 2003			June 30, 2003			September 30, 2003			December 31, 2003			March 31, 2004			June 30, 2004
	(unaudited)
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Sales	$	164,630		$	177,014		$	176,563		$	179,039		$	153,324		$	178,821
Gross profit		55,751			59,291			59,924			61,369			47,061			62,174
Selling, general and administrative expenses		35,662			36,351			38,417			39,309			35,548			44,149
Operating income		20,089			22,940			21,507			22,060			11,513			18,025
Interest expense		5,084			5,075			5,066			5,004			3,732			4,635
Other (expense) income, net		(3,592	)		(1,819	)		3,259			(321	)		1,418			1,329
Income before income tax expense		11,413			16,046			19,700			16,735			9,199			14,719
Income tax expense		5,114			6,998			7,976			7,457			3,973			5,920
Net income	$	6,299		$	9,048		$	11,724		$	9,278		$	5,226		$	8,799
Per Share Data:
Earnings per share:
Basic	$	.27		$	.39		$	.51		$	.40		$	.23		$	.38
Diluted	$	.26		$	.37		$	.49		$	.38		$	.22		$	.37
Weighted average shares outstanding:
Basic		23,170,153			23,162,400			23,160,376			23,158,765			23,157,118			23,151,016
Diluted		24,227,247			24,218,215			24,211,863			24,207,187			23,988,672			23,983,214
Statistical and Other Data:
Sales growth (decline) from comparable period during prior year		(16.8	)%		(12.7	)%		(5.9	)%		(3.3	)%		(6.9	)%		1.0	%
Gross profit margin		33.9	%		33.5	%		33.9	%		34.3	%		30.7	%		34.8	%

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, before making your decision to invest in shares of our common stock.

Risks Related to Our Business

Our product sales are tied to macroeconomic factors that are outside of our control.

Our sales of office furniture are significantly impacted by the level of corporate spending primarily in North America which, in turn, is a function of the general economic environment. In a strong economy, service-sector employment, corporate cash flows and non-residential commercial construction increase, which typically leads to an increase in demand for office furniture. In a recessionary economy, these same economic indicators decrease, which typically leads to a decrease in demand for office furniture. In addition, a recessionary economy may also result in saturation of the market by “just new” used office systems, leading to a decrease in demand. Sales of office systems, which have historically accounted for more than half of our revenues, represent longer term and higher cost investments for our clients. As a result, sales of office systems are more severely impacted by economic cycles than sales of seating, files and storage and casegoods, and demand for office systems typically takes longer to respond to an economic recovery. Due to a combination of these factors, we experienced a significant decrease in sales and operating profits during the recent economic recession, and we could experience a similar decrease in the future.

Despite the fact that the office furniture industry appears to be recovering from the recent economic recession, geopolitical uncertainties, terrorist attacks, acts of war, increases in energy and other costs or combinations of such and other factors could at any time have a significant effect on the North American economy, and, therefore, our business. The occurrence of any of these or similar events in the future could result in downward pressure on the economy, which we would expect to have a material adverse effect on our operating results.

Because we face significant competition in the office furniture industry, we may have difficulty capturing sales and maintaining our profit margins.

The office furniture industry is highly competitive, with a significant number of competitors offering like products. Many of our competitors, especially those in North America, are large and have substantially greater financial, marketing, manufacturing and technical resources than we have. Our most significant competitors in our primary markets are Herman Miller, Inc., Steelcase, Inc. and Haworth, Inc.

Our competitors have installed significant amounts of furniture at many businesses throughout the country, which may provide them with a competitive advantage in making future sales to those businesses. Moreover, our competitors’ products have strong acceptance in the marketplace, and our competitors could develop alternative product designs that could give them a competitive advantage over us in making future sales. We also face significant price competition from our competitors, and this pricing pressure has intensified during the industry downturn that occurred during the past three years. A continuation or acceleration of this price competition could negatively affect us and the value of our common stock. We may also encounter competition from new market entrants. As a result of the competition we face, we may have difficulty capturing sales, which, together with competitive pricing pressure, could lower our profit margins.

Our strategy to achieve growth may not be successful.

As part of our strategy to achieve profitable growth, we will seek to increase our sales and market share by building on our strength in office systems. We plan to do this by continuing to offer office systems with a broad range of features and price points and through the continued expansion of our product offerings in other

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categories where our market share is relatively low. Our growth strategy depends on our ability to introduce new products, increase sales of a broader range of products to existing clients, develop new clients for all of our product offerings and capture a greater percentage of our dealer network’s non-systems sales. We cannot assure you that our products, particularly new products, will achieve the same degree of success and client acceptance as that achieved by our products historically or that we will be able to replicate our success in the office systems category in other furniture product categories, such as seating, tables and storage. In addition, we may face difficulties in introducing new products if we cannot successfully align ourselves with independent architects and designers who are able to design in a timely manner high quality products consistent with our image. Furthermore, the introduction of new products requires the coordination of the design, manufacturing and marketing of such products, which may be affected by factors beyond our control. The design and engineering of certain of our new products can take up to a year or more, and further time may be required to achieve client acceptance. Accordingly, the launch of any particular product may be later or less successful than originally anticipated by us. If we fail to successfully implement our growth strategy, our financial condition and operating results may be harmed.

We may not be able to manage our business effectively if we are unable to attract and retain key personnel.

The success of our operations is highly dependent upon our ability to attract and retain qualified employees and upon the ability of our senior management and other key employees to implement our business strategy. We believe there are only a limited number of qualified executives in the industry in which we compete. Although we are not aware of any planned departures, we rely substantially upon the services of Andrew B. Cogan, our Chief Executive Officer, Kathleen G. Bradley, our President and Chief Executive Officer – Knoll, North America, and Stephen A. Grover, our Senior Vice President – Operations. Although each of Mr. Cogan and Ms. Bradley has an employment agreement with us, we cannot assure you that we will be able to retain their services or the services of other key employees. The loss of the services of any of these individuals or other key members of our management team could seriously harm our efforts to successfully implement our business strategy. While we currently maintain key man life insurance policies with respect to Mr. Cogan and Ms. Bradley, we cannot assure you that this insurance will be sufficient to compensate us for any harm to our business resulting from any loss of their services. The inability to attract and retain other talented personnel could also affect our ability to successfully implement our business strategy.

We are dependent on the pricing and availability of raw materials and components.

We require substantial amounts of raw materials, which we purchase from outside sources. Raw materials comprised our single largest total cost for the year ended December 31, 2003. Steel is the primary raw material used in the manufacture of our products. Steel prices have increased significantly in recent months, and as a result our costs of goods sold have increased. Plastics are another raw material used in the manufacture of our products. The prices of plastics are sensitive to the cost of oil, which is used in the manufacture of plastics, and have increased significantly in recent months; as a result, our costs of goods sold have increased. The prices and availability of raw materials may in the future be subject to change or curtailment due to, among other things, the supply of, and demand for, such raw materials, changes in laws or regulations, including duties and tariffs, suppliers’ allocations to other purchasers, interruptions in production by raw materials or component parts suppliers, changes in exchange rates and worldwide price levels. Future changes in the price for, or supply of, these raw materials and components could materially adversely affect our operating results.

In addition, contracts with most of our suppliers are short-term contracts. We cannot assure you that these suppliers will continue to provide raw materials to us at attractive prices, or, at all, or that we will be able to obtain the raw materials we need in the future from these or other providers on the scale and within the time frames we require. Moreover, we do not carry significant inventories of raw materials that could mitigate an interruption or delay in the availability of raw materials. Any failure to obtain raw materials on a timely basis at an affordable cost, or any significant delays or interruptions of raw materials, could have a material adverse effect on our business, financial condition or results of operations.

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We rely upon independent furniture dealers, and a loss of a significant number of dealers could affect our business, financial condition and results of operations.

We rely on a network of independent dealers for the joint marketing of our products to small and mid-sized accounts, and to assist us in the marketing of our products to large accounts. We also rely upon these dealers to provide a variety of important specification, installation and after-market services to our clients. Our dealers operate primarily under one-year non-exclusive agreements. There is nothing to prevent our dealers from terminating their relationships with us. In addition, individual dealers may not continue to be viable and profitable. If dealers go out of business or are restructured, we can suffer losses because they may not be able to pay us for furniture previously delivered to them. The loss of a significant number of dealers or the termination of a significant number of dealer relationships could cause difficulties for us in marketing and distributing our products and have a material adverse effect on our business, financial condition or results of operations. The loss of a dealer relationship could also negatively affect our ability to maintain market share in the affected geographic market and to compete for and service clients in that market until a new dealer relationship is established.

One of our largest clients currently is the U.S. government, which is subject to uncertain future funding levels and requires restrictive contract terms.

For the year ended December 31, 2003, we derived approximately 12.8% of our revenue from sales to over 60 agencies and departments within the U.S. government. Our ability to compete successfully for and retain business with the U.S. government is highly dependent on cost-effective performance, as well as the status of federal procurement laws that require certain government agencies to purchase products from Federal Prison Industries, Incorporated, or UNICOR, and whether certain waivers of the application of these laws will be continued. Our business is also sensitive to changes in national and international priorities and U.S. government budgets.

The U.S. government typically can terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract. A termination arising out of our default could expose us to liability and have an adverse effect on our ability to compete in the future for contracts and orders. Furthermore, if we were found to have committed fraud or a criminal offense in connection with any government contract, we could be suspended or debarred from all further government contracting, which could have a material adverse effect on our business, results of operations or financial condition.

We are highly leveraged, and a significant amount of cash will be required to service our indebtedness.

At June 30, 2004, we had total consolidated outstanding debt of approximately $363.1 million. Subject to the restrictions contained in our new credit facility, we and our subsidiaries may incur additional indebtedness from time to time to fund working capital requirements or to finance capital expenditures, research and development, acquisitions or for other purposes. The high level of our indebtedness could have important consequences to holders of our common stock, given that:

• a substantial portion of our cash flow from operations must be dedicated to fund scheduled payments of principal and debt service and will not be available for other purposes;

• our ability to obtain additional debt financing in the future for working capital, capital expenditures, research and development or acquisitions may be limited; and

• our level of indebtedness could limit our flexibility in reacting to changes in our industry or in economic conditions generally.

We are subject to restrictions imposed by the terms of our indebtedness that may limit our operating and financial flexibility.

The terms of our new credit facility will impose operating and financial restrictions on us. As a result, our ability to respond to changing business and economic conditions and to secure additional financing, if needed,

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may be significantly restricted, and we may be prevented from engaging in transactions that might further our growth strategy or otherwise be considered beneficial to us. A breach of any of the covenants in our new credit facility could result in a default thereunder. If payments to the lenders under our new credit facility were to be accelerated, our assets could be insufficient to repay in full our indebtedness under our new credit facility and our other liabilities. Any such acceleration would likely have a material adverse effect on the value of our common stock.

An inability to protect our intellectual property could have a significant impact on our business.

We attempt to protect our intellectual property rights, both in the United States and in foreign countries, through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Because of the differences in foreign trademark, patent and other laws concerning proprietary rights, our intellectual property rights do not generally receive the same degree of protection in foreign countries as they do in the United States. In some parts of the world, we have limited protections, if any, for our intellectual property. Our ability to compete effectively with our competitors depends, to a significant extent, on our ability to maintain the proprietary nature of our intellectual property. We cannot assure you that the degree of protection offered by the claims of the various patents, trademarks and service marks is broad enough to provide significant proprietary protection or competitive advantages to us, or of the likelihood that patents, trademarks or service marks will be issued on our pending or contemplated applications. In addition, not all of our products are covered by patents. It is also possible that our patents, trademarks and service marks may be challenged, invalidated, cancelled, narrowed or circumvented.

In the past, certain of our products have been copied and sold by others. We vigorously try to enforce our intellectual property rights, but we have to make choices about where and how we pursue enforcement and where we seek and maintain patent protection. In many cases, the cost of enforcing our rights is substantial, and we may determine that the costs of enforcement outweigh the potential benefits. If we are unable to maintain the proprietary nature of our intellectual property with respect to our significant current or proposed products, our business could be adversely affected.

If third parties claim that we infringe upon their intellectual property rights, our operating profits could be adversely affected.

We face the risk of claims that we have infringed third parties’ intellectual property rights. Companies operating in our industry routinely seek patent protection for their product designs, and many of our principal competitors have large patent portfolios. Prior to launching major new products in our key markets, we normally evaluate existing intellectual property rights. However, our competitors may also have filed for patent protection which is not as yet a matter of public knowledge. Further, we cannot assure you that our efforts to identify and avoid infringing third parties’ intellectual property rights will be successful. Any claims of patent or other intellectual property infringement, even those without merit, could (i) be expensive and time consuming to defend; (ii) cause us to cease making, licensing or using products that incorporate the challenged intellectual property; (iii) require us to redesign, reengineer, or rebrand our products or packaging, if feasible; or (iv) require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property.

We could incur substantial costs to comply with environmental requirements. Violations of, and liabilities under, environmental laws and regulations may increase our costs or require us to change our business practices.

Our past and present ownership and operation of manufacturing plants are subject to extensive and changing federal, state, local and foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. As a result, we are involved from time to time in administrative and judicial proceedings

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and inquiries relating to environmental matters and could become subject to fines or penalties related thereto. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response Compensation and Liability Act, or CERCLA, for remediation costs associated with waste disposal sites previously used by us. In general, CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or the legality of disposal and, under certain circumstances, liability may be joint and several, resulting in one party being held responsible for the entire obligation. Liability may also include damages for harm to natural resources. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. Based on the information currently known to us, we do not expect any liability we may have under CERCLA, or related to a CERCLA site, to be material. However we cannot assure you that our future expenditures for environmental compliance and remediation will not be material.

We are subject to potential labor disruptions, which could have a significant impact on our business.

Certain of our employees located in Grand Rapids, Michigan and Italy are represented by unions. The collective bargaining agreement for our Grand Rapids location has an initial term that expires on August 27, 2006 with evergreen one-year terms thereafter, but may be terminated by either party on August 27, 2006 and anniversaries thereof with 60 days’ notice. While we have good relations with our Grand Rapids associates and the union, we cannot assure you that we will successfully negotiate and agree upon a new collective bargaining agreement at that time if the current collective bargaining agreement is terminated. We have also had sporadic, to date unsuccessful, attempts to unionize our other North American manufacturing locations. Recently, a petition filed with the National Labor Relations Board seeking to unionize employees at our Muskegon, Michigan, facility was the subject of a vote by our employees at this facility. In this recent vote, our employees voted against unionization. In addition, we have experienced a number of brief work stoppages in recent years at our facilities in Italy as a result of national and local issues. While we believe that we have good relations with our workforce, we may experience work stoppages or other labor problems in the future, and further unionization efforts may be successful.

The interruption of manufacturing operations may adversely affect our business and reputation.

All of our manufacturing facilities are subject to the risks associated with manufacturing operations, including damage or loss and disruption of production from accidents, natural disasters and other causes. In addition, in the event that operations at certain of our facilities were interrupted for any reason and we were not able to obtain products or parts from that facility or from alternative sources, our manufacturing operations at other locations that depend on those products and parts could also be adversely affected. Moreover, because substantially all of our products are manufactured to order, we do not carry finished goods inventory that could mitigate an interruption in our manufacturing operations. Any prolonged interruption in our ability to manufacture certain products or parts may not be adequately covered by insurance and could have a material adverse effect on our business, including our reputation, our vendor relations and our dealership network.

We may incur expenses for product defects that may not adequately be covered by insurance.

We are subject to potential liabilities and expenses associated with product defects. If we discover that our products are or are alleged to be defective, we may be required to compensate users of our products who are harmed as a result or to repair, retrofit, replace or recall defective products. We maintain product liability and other insurance coverage that we believe to be generally in accordance with industry practices, but our insurance coverage may not be adequate to protect us fully against substantial claims and costs that may arise from product defects. Our insurance coverage does not extend to field visits to repair, retrofit or replace defective products, or to product recalls, which could have an adverse effect on our financial condition or results of operations.

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We may require additional capital in the future, which may not be available or may be available only on unfavorable terms.

Our capital requirements depend on many factors, including capital improvements, tooling and new product development. To the extent that our existing capital is insufficient to meet these requirements and cover any losses, we may need to raise additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. Equity financings could result in dilution to our stockholders, and the securities may have rights, preferences and privileges that are senior to those of our common stock. If our need for capital arises because of significant losses, the occurrence of these losses may make it more difficult for us to raise the necessary capital. If we cannot obtain adequate capital on favorable terms or at all, our business, operating results and financial condition could be adversely affected.

We may be vulnerable to the effects of currency exchange rate fluctuations.

Because our financial results are reported in U.S. dollars and we have expenses in other currencies, the translation of those expenses into U.S. dollars can result in a significant increase or decrease in the amount of those expenses. In the future, any foreign currency appreciation relative to the U.S. dollar would increase our expenses. From time to time we review our foreign currency exposure and evaluate whether we should enter into hedging transactions. We generally do not hedge our foreign currency exposure, and, to the extent that we determine not to do so in the future, we may be vulnerable to the effects of currency exchange rate fluctuations.

Changes in regulatory requirements and industry standards may increase our costs or require us to change our business practices.

Our products are subject to a variety of mandatory and voluntary regulatory and industry requirements that set environmental, health, safety and similar standards for the workplace and for product performance. Our clients are focused on products that meet both mandatory and voluntary standards. As a result, as these standards evolve, we may have to alter the components used in, or the design of, our products to enable our products to comply with these standards. Complying with these standards may result in increased costs, and delays in developing products that meet these standards could adversely affect our ability to sell products in jurisdictions requiring, or to clients demanding, products that meet these standards until we have compliant products.

Economic, political and other risks associated with international operations could adversely affect our business.

Since we manufacture and sell our products worldwide, our business is subject to risks associated with doing business internationally. The same macroeconomic factors, as well as geopolitical uncertainties, changes in applicable laws and regulations and trade restrictions, terrorist attacks, acts of war and other factors, that could affect our North American operations also impact our sales outside North America, which accounted for approximately 7% of our total sales for the year ended December 31, 2003.

Risks Related to Our Common Stock and this Offering

Our principal stockholder and its affiliates will be able to influence matters requiring stockholder approval and could discourage the purchase of our outstanding shares at a premium.

After the offering, our principal stockholder, Warburg Pincus will beneficially own approximately     % of our outstanding common stock. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale or merger of our company and may negatively affect the market price of our common stock. Transactions that could be affected by this concentration of ownership include proxy contests, tender offers, mergers or other purchases of common stock that could give you the opportunity to realize a premium over the then-prevailing market price for shares of our common stock.

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As a result of Warburg Pincus’ share ownership and representation on our board of directors, Warburg Pincus will be able to influence all affairs and actions of our company, including matters requiring stockholder approval such as the election of directors and approval of significant corporate transactions. The interests of our principal stockholder may differ from the interests of the other stockholders. For example, Warburg Pincus could oppose a third party offer to acquire us that you might consider attractive, and the third party may not be able or willing to proceed unless Warburg Pincus supports the offer. In addition, if our board of directors supports a transaction requiring an amendment to our certificate of incorporation, Warburg Pincus is currently in a position to defeat any required stockholder approval of the proposed amendment. If our board of directors supports an acquisition of us by means of a merger or a similar transaction, the vote of Warburg Pincus alone is currently sufficient to approve or block the transaction under Delaware law. In each of these cases and in similar situations, you may disagree with Warburg Pincus as to whether the action opposed or supported by Warburg Pincus is in the best interest of our stockholders.

We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are exempt from certain corporate governance requirements.

Because Warburg Pincus will control more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for the purposes of the New York Stock Exchange listing requirements. As such, we are permitted, and have elected, to opt out of the New York Stock Exchange listing requirements that would otherwise require our board of directors to have a majority of independent directors and our compensation and nominating and corporate governance committees to be comprised entirely of independent directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

Future sales of our common stock in the public market could lower our share price.

We and our existing stockholders may sell additional shares of common stock into the public markets after this offering. We may also issue convertible debt securities to raise capital in the future. After the consummation of this offering, we will have outstanding 23,149,629 shares of common stock and options to purchase an additional              shares of common stock. This number includes the              shares being sold by the selling stockholders in this offering, which may be resold immediately in the public market. Of the remaining              outstanding shares and shares issuable upon exercise of options,              or     % of our total outstanding shares and shares issuable upon exercise of options will be restricted from immediate resale under the “lock-up” agreements between certain of our current stockholders and the underwriters described in “Underwriting,” but may be sold into the market after those “lock-up” restrictions expire or if they are waived by Goldman, Sachs & Co. and UBS Securities LLC in their sole discretion. The outstanding shares and shares issuable upon exercise of options subject to the “lock-up” restrictions will generally become available for sale at various times following the expiration of the lock-up agreements, which is 180 days after the date of this prospectus, subject to volume limitations and manner-of-sale requirements under Rule 144 of the Securities Act of 1933, or the Securities Act. In addition, options to purchase              shares of common stock will expire within 90 days following this offering if they are not exercised before then, subject to extensions in certain circumstances. The shares underlying these options will be available for immediate sale into the market.

Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company.

Provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For example, our amended and restated certificate of incorporation authorizes our board of directors to issue up to 10,000,000 shares of “blank check” preferred stock. Without stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred stockholders could make it more difficult for a third party to acquire us. In addition, our amended and restated certificate of incorporation provides for a staggered board of directors, whereby directors serve for three-year terms, with approximately one third of the directors coming up for reelection each year. Having a staggered board will make it more difficult for a third party to obtain control of our board of directors through a proxy contest, which may be a necessary step in an acquisition of us that is not favored by our board of directors.

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We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203, “interested stockholder” means, generally, someone owning 15% or more of our outstanding voting stock or an affiliate of ours that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203. Under one such exception, Warburg Pincus and its affiliates do not constitute an “interested stockholder.”

Upon any change in control, the lenders under our new credit facility would have the right to require us to repay all of our outstanding obligations under the facility.

There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the New York Stock Exchange if we are approved for listing on the New York Stock Exchange or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for our common stock will be determined by negotiations between representatives of the underwriters and us and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering.

Our stock price may be volatile, and your investment in our common stock could suffer a decline in value.

There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. You may not be able to resell your shares at or above the initial public offering price due to fluctuations in the market price of our common stock caused by changes in our operating performance or prospects and other factors.

Some specific factors that may have a significant effect on our common stock market price include:

• actual or anticipated fluctuations in our operating results or future prospects;

• our announcements or our competitors’ announcements of new products;

• the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

• strategic actions by us or our competitors, such as acquisitions or restructurings;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidance, interpretations or principles;

• changes in our growth rates or our competitors’ growth rates;

• our inability to raise additional capital;

• conditions of the office furniture industry as a result of changes in financial markets or general economic conditions, including those resulting from war, incidents of terrorism and responses to such events;

• sales of common stock by us or members of our management team; and

• changes in stock market analyst recommendations or earnings estimates regarding our common stock, other comparable companies or the office furniture industry generally.

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We may not be able to pay dividends in the future.

Our board of directors currently intends to declare and pay quarterly dividends on our common stock. The declaration and payment of dividends is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors. Our new credit facility imposes restrictions on our ability to pay dividends, and thus our ability to pay dividends on our common stock will depend upon, among other things, our level of indebtedness at the time of the proposed dividend and whether we are or would be in default under any of our debt instruments. Our future dividend policy will also depend on the requirements of any future financing agreements to which we may be a party. For a discussion of our cash resources and needs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

This offering will cause immediate and substantial dilution in net tangible book value.

Purchasers of our common stock in this offering will experience immediate and substantial dilution in as adjusted net tangible book value of $              per share. Additional dilution is likely to occur upon the exercise of options granted by us. To the extent we raise additional capital by issuing equity securities, our stockholders may experience additional substantial dilution.

The requirements of being a public company may strain our resources and distract management.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, and the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These requirements may place a strain on our people, systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, significant resources and management oversight will be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Upon consummation of this offering, our costs will increase as a result of having to comply with the Exchange Act, the Sarbanes-Oxley Act and the New York Stock Exchange listing requirements, which will require us, among other things, to establish an internal audit function. We cannot assure you that we will be able to do so in a timely fashion or without incurring material costs.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, principally in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Statements and financial discussion and analysis contained in this prospectus that are not historical facts are forward-looking statements. These statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “possible”, “potential”, “predict”, “project”, or other similar words, phrases or expressions. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be inaccurate. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: the risks described on the previous pages; changes in the financial stability of our clients; changes in relationships with clients; the mix of products sold and of clients purchasing our products; the success of new technology initiatives; and changes in business strategies and decisions. The factors identified above are believed to be important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material adverse effects on us. All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. Except as required under the Federal securities laws and rules regulations of the SEC, we undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

USE OF PROCEEDS

The proceeds from the sale of shares of common stock offered pursuant to this prospectus are solely for the account of the selling stockholders. We will not receive any proceeds from the sale of shares by the selling stockholders.

DIVIDEND POLICY

Our board of directors currently intends to declare and pay quarterly dividends of $              per share on our common stock. The declaration and payment of dividends is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors. Our new credit facility imposes restrictions on our ability to pay dividends, and thus our ability to pay dividends on our common stock will depend upon, among other things, our level of indebtedness at the time of the proposed dividend and whether we are in default under any of our debt instruments. Our future dividend policy will also depend on the requirements of any future financing agreements to which we may be a party and other factors considered relevant by our board of directors. For a discussion of our cash resources and needs, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

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CAPITALIZATION

The following table sets forth our unaudited consolidated capitalization as of June 30, 2004 and on an as adjusted basis to reflect our Refinancing and this offering as though they had occurred on June 30, 2004. You should read this table in conjunction with “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	As of June 30, 2004
	Actual			As adjusted
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	13,272		$	13,272
Debt:
Term loan	$	118,750		$
Revolving credit facility		243,500
Other		885			885
Total Debt		363,135
Stockholders’ equity:
Common Stock ($0.01 par value; 100,000,000 shares authorized as of June 30, 2004, 150,000,000 shares authorized as adjusted; 23,149,629 shares issued and outstanding)	$	232		$	232
Paid-in-capital		2,038
Retained earnings (deficit)		1,957
Accumulated other comprehensive income		(1,287	)		(1,287	)
Total stockholders’ equity		2,940
Total capitalization	$	366,075		$

The number of shares of our common stock shown as issued and outstanding in the table above as of June 30, 2004 excludes:

• 5,369,795 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2004, with exercise prices ranging from $13.47 to $36.00 per share and a weighted average exercise price of $24.44 per share; and

• 287,555 shares of common stock reserved for future grants under our stock option plans as of June 30, 2004.

20

DILUTION

Our tangible net book value per share of our common stock will be substantially below the initial public offering price. You will, therefore, incur immediate and substantial dilution of $              per share, based on the initial public offering price of $              per share. As a result, if we are liquidated, you might not receive the full value of your investment.

Dilution in tangible net book value per share represents the difference between the amount per share of our common stock that you pay in this offering and the net tangible book value per share of our common stock immediately afterwards. Net tangible book value per share represents (1) our total net tangible assets (total assets less intangible assets), divided by (2) the number of shares of our common stock outstanding.

Our tangible net book value at June 30, 2004 was approximately $324.7 million, or $14.02 per share. The as adjusted tangible net book value at June 30, 2004 gives effect to our Refinancing as if it had occurred on June 30, 2004. The as adjusted tangible net book value at June 30, 2004 is not necessarily indicative of what our tangible net book value would have been had this transaction been completed on June 30, 2004. This amount represents an immediate dilution in net tangible book value of $              per share to you. The following table illustrates this dilution per share:

Initial public offering price per share	$
As adjusted net tangible book value per share as of June 30, 2004	$
Dilution per share to new investors	$

As of June 30, 2004, there were options outstanding to purchase 5,369,795 shares of common stock, with exercise prices ranging from $13.47 to $36.00 per share and a weighted average exercise price of $24.44 per share. The table above assumes that those options have not been exercised. To the extent outstanding options are exercised, you would experience further dilution if the exercise price is less than our net tangible book value per share.

The following table summarizes the total number of shares purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders, and, the total number of shares purchased from the selling stockholders, the total consideration paid to the selling stockholders and the average price per share paid by new investors purchasing shares in this offering:

	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent
Existing stockholders (1)		%		$	%		$
New investors
Total		100.0	%	$	100.0	%	$

(1) Excludes shares of common stock being sold by the selling stockholders and assumes exercise of outstanding options. As of June 30, 2004, there were options outstanding to purchase 5,369,795 shares of our common stock, with exercise prices ranging from $13.47 to $36.00 per share and a weighted average exercise price of $24.44 per share.

If the underwriters exercise their over-allotment option in full, the percentage of shares of common stock held by existing stockholders will be approximately     % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors will be increased to             , or approximately     % of the total number of shares of our common stock outstanding after this offering.

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UNAUDITED AS ADJUSTED CONSOLIDATED FINANCIAL INFORMATION

Our audited consolidated financial statements for fiscal 2003 and our unaudited consolidated financial statements for the six months ended June 30, 2004 are included elsewhere in this prospectus. The unaudited as adjusted consolidated financial information presented herein should be read together with those financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The unaudited as adjusted consolidated financial information has been provided to enable readers to understand our historical financial results in relation to our Refinancing, which occurred on September     , 2004.

Our historical June 30, 2004 balance sheet does not reflect the financial impact of our Refinancing or this offering. We prepared the unaudited as adjusted consolidated statements of operations for the year ended December 31, 2003 and the six months ended June 30, 2004 to reflect our Refinancing and this offering as if they had occurred on January 1, 2003 and January 1, 2004, respectively. We prepared the unaudited consolidated as adjusted balance sheet to reflect our Refinancing and this offering as if they had occurred on June 30, 2004.

Certain information normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. has been omitted pursuant to the rules and regulations of the SEC. The as adjusted consolidated statement of operations data are not necessarily indicative of results that would have occurred had our Refinancing and this offering been completed on January 1, 2003 and January 1, 2004, and should not be construed as being representative of future results of operations. Likewise, the as adjusted consolidated balance sheet data as of June 30, 2004, is not necessarily indicative of our financial position at June 30, 2004, had our Refinancing and this offering been completed on June 30, 2004.

	Year Ended December 31, 2003
	Historical			Adjustments		As adjusted
				(unaudited)
	(in thousands, except per share data)
As Adjusted Consolidated Statement of Operations Data:
Sales	$	697,246		$	—	$	697,246
Cost of sales		460,911			—		460,911
Gross profit		236,335			—		236,335
Selling, general and administrative expenses		149,739			—		149,739
Operating income		86,596			—		86,596
Interest expense		20,229
Other (expense), net		(2,473	)
Income before income tax expense		63,894
Income tax expense		27,545
Net income	$	36,349		$		$
Per Share Data:
Earnings per share:
Basic	$	1.57				$
Diluted	$	1.50				$
Weighted average shares outstanding:
Basic		23,158,765
Diluted		24,207,187

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	Six Months Ended June 30, 2004
	Historical		Adjustments		As adjusted
	(unaudited)
	(in thousands, except per share data)
As Adjusted Consolidated Statement of Operations Data:
Sales	$	332,145	$	—	$	332,145
Cost of sales		222,910		—		222,910
Gross profit		109,235		—		109,235
Selling, general and administrative expenses		79,697		—		79,697
Operating income		29,538		—		29,538
Interest expense		8,367
Other income, net		2,747
Income before income tax expense		23,918
Income tax expense		9,893
Net income	$	14,025	$		$
Per Share Data:
Earnings per share:
Basic	$	0.61			$
Diluted	$	0.58			$
Weighted average shares outstanding:
Basic		23,151,016
Diluted		23,983,214

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	As of June 30, 2004
	Historical			Adjustments		As adjusted
	(unaudited) (in thousands)
As Adjusted Consolidated Balance Sheet Data:
Assets
Current assets:
Cash and cash equivalents	$	13,272		$	—	$	13,272
Customer receivables, net		88,805			—		88,805
Inventories		45,156			—		45,156
Deferred income taxes		14,313			—		14,313
Prepaid and other current assets		7,402			—		7,402
Total current assets		168,948			—		168,948
Property, plant, and equipment, net		146,472			—		146,472
Intangible assets, net		235,750
Other non-trade receivables		5,158			—		5,158
Other noncurrent assets		4,087			—		4,087
Total assets	$	560,415				$
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	93,841		$		$
Accounts payable		55,451			—		55,451
Income taxes payable		8,846
Other current liabilities		46,985			—		46,985
Total current liabilities		205,123
Long-term debt		269,294
Deferred income taxes		39,797			—		39,797
Postretirement benefits other than pension		22,008			—		22,008
Pension liability		10,495			—		10,495
International retirement obligation		5,922			—		5,922
Other noncurrent liabilities		4,836			—		4,836
Total liabilities		557,475
Stockholders’ equity (deficit):
Common stock		232			—		232
Additional paid-in capital		2,038
Retained earnings		1,957
Accumulated other comprehensive loss		(1,287	)		—		(1,287	)
Total stockholders’ equity (deficit)		2,940
Total liabilities and stockholders’ equity	$	560,415		$		$

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. The selected financial data for the years ended December 31, 2001, 2002 and 2003 and as of December 31, 2002 and 2003 are derived from our audited financial statements included elsewhere in this prospectus. The selected financial data for the years ended December 31, 1999 and 2000 and as of December 31, 1999, 2000 and 2001 are derived from our audited financial statements not included elsewhere in this prospectus. The selected financial data as of and for the six months ended June 30, 2003 and 2004 are derived from our unaudited financial statements included in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, consisting only of normal, recurring adjustments, that management considers necessary for a fair statement of the results of those periods. The historical results are not necessarily indicative of results to be expected in any future period and the results for the six months ended June 30, 2004 should not be considered indicative of results for the full fiscal year.

	Years Ended December 31,													Six Months Ended June 30,
	1999			2000		2001			2002		2003			2003			2004
														(unaudited)
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Sales	$	984,511		$	1,163,477	$	985,388		$	773,263	$	697,246		$	341,644		$	332,145
Cost of sales		593,442			682,421		594,446			492,902		460,911			226,602			222,910
Gross profit		391,069			481,056		390,942			280,361		236,335			115,042			109,235
Selling, general and administrative expenses		206,919			243,885		195,532			156,314		149,739			72,013			79,697
Restructuring charge		—			—		1,655			—		—			—			—
Operating income		184,150			237,171		193,755			124,047		86,596			43,029			29,538
Interest expense		21,611			44,437		42,101			26,541		20,229			10,159			8,367
Refinancing expense		6,356	(a)		—		—			—		—			—			—
Other (expense) income, net		(17,671	)(b)		3,026		(3,670	)		2,933		(2,473	)		(5,411	)		2,747
Income before income tax expense		138,512			195,760		147,984			100,439		63,894			27,459			23,918
Income tax expense		60,151			79,472		60,794			40,667		27,545			12,112			9,893
Net income	$	78,361		$	116,288	$	87,190		$	59,772	$	36,349		$	15,347		$	14,025
Per Share Data:
Earnings per share:
Basic	$	2.12		$	5.10	$	3.77		$	2.58	$	1.57		$	.66		$	.61
Diluted	$	2.05		$	4.86	$	3.60		$	2.47	$	1.50		$	.63		$	.58
Cash dividends declared per share:	$	—		$	9.50	$	—		$	—	$	—		$	—		$	—
Weighted average shares outstanding:
Basic		36,880,509			22,786,326		23,142,554			23,172,857		23,158,765			23,162,400			23,151,016
Diluted		38,303,898			23,946,166		24,197,537			24,237,324		24,207,187			24,218,215			23,983,214

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	As of December 31,															As of June 30,
	1999			2000			2001			2002			2003			2003			2004
																(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Working capital (deficit)	$	104,087		$	32,678		$	4,020		$	(14,419	)	$	(28,238	)	$	(13,761	)	$	(36,175	)
Total assets		742,306			695,130			639,003			590,351			561,001			573,566			560,415
Total long-term debt, including current portion		610,376			425,755			547,524			452,042			380,871			422,944			363,135
Total liabilities		836,500			899,505			761,321			653,474			569,120			606,949			557,475
Stockholders’ equity (deficit)		(94,194	)		(204,375	)		(122,318	)		(63,123	)		(8,119	)		(33,383	)		2,940

(a) Cost incurred in connection with our leveraged recapitalization.

(b) Consists primarily of costs incurred in connection with the modification of terms of our senior subordinated notes.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion together with the financial statements, related notes and other financial information included elsewhere in this prospectus. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this prospectus. These risks could cause our actual results to differ materially from any future performance suggested below.

Overview

We are a leading designer and manufacturer of branded office furniture products and textiles. Our commitment to innovation and modern design has yielded a comprehensive portfolio of products designed to provide enduring value and help clients shape their workplaces with imagination and vision. Our products are recognized for high quality and a sophisticated image, and are targeted at the middle to upper end of the market. We sell our products primarily in North America through a direct sales force and a broad network of independent dealers.

We offer a comprehensive and expanding portfolio of high quality office furniture and textiles across five product categories. Historically, we have derived most of our revenues from office systems and specialty products, including our KnollStudio collection of signature design classics furnishings, KnollTextiles, Spinneybeck leather and KnollExtra accessories. However, in recent years, we have significantly expanded our product offerings in seating, files and storage, desks and casegoods and tables. Our clients are typically Fortune 1000 companies, governmental agencies and other medium to large sized organizations in a variety of industries. We have an over $6 billion installed base of office systems, which provides a strong platform for recurring and add-on sales of products across all our categories.

According to BIFMA, the U.S. office furniture market had $8.5 billion in shipments in 2003. Office systems and seating are the largest product categories, accounting for $2.6 billion (31%) and $2.3 billion (27%) of industry-wide shipments, respectively, in 2003. Industry demand is largely driven by macroeconomic factors, including corporate profitability, business confidence, and service-sector employment. Together, these factors impact commercial construction, business expansion, absorption of vacant office space, and ultimately, demand for our products. In addition to these macroeconomic factors, the demand for office furniture is influenced by workplace trends, including changes in work processes such as increases in the use of technology and the number of knowledge workers. These trends have heightened the importance of providing office furnishings of superior quality, design and function.

In the four years from 1997 to 2000, the industry grew at an above-average compounded annual rate of 7.3%, driven by strong corporate profitability, business expansion and investment in infrastructure during the Y2K and “dot-com” booms. However, in 2001 through 2003, the economy suffered significant reductions in corporate profitability, business confidence, service-sector employment and commercial real estate occupancy rates. As a result, our industry experienced a sales decline of more than 35% during that period. This steep decline had a particularly pronounced effect on office systems due to the deferral of infrastructure investments by our clients and a saturation of the market by “just new” used office systems created by the increase in vacated office space. As a consequence, industry-wide shipments in the office systems category declined by 48.7%, more than any other category in the three years from 2001 to 2003.

Starting in early 2001, in an effort to maintain our gross profit and operating income margins, we reduced hourly headcount in response to declining sales volumes, eliminated certain salaried positions in North America, reduced the amount of square footage leased for operations and aggressively managed our discretionary expenditures. As a result, we have been able to maintain operating income margins that exceed those of our primary publicly-held competitors.

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During the first half of 2004, higher levels of corporate profitability, improving business confidence, increasing service-sector employment and increasing absorption of vacant office space all contributed to improving demand for office furniture products. During that period, the U.S. office furniture market experienced positive period-over-period growth in orders and shipments of 8.0% and 4.0%, respectively. According to BIFMA, U.S. office furniture shipments are forecasted to grow 5.7% in 2004 and 11.5% in 2005. The early stages of a recovery have been most evident in the seating, files and storage and casegoods categories, which are generally lower ticket purchases. We expect that a rebound in office systems will occur later in this recovery due to the typically larger commitment that the purchase of these products represents. We also believe that demand for office systems in North America will benefit from a general economic recovery, as companies expand, relocate to take advantage of lower rents, hire additional knowledge workers and reorganize to improve efficiency and productivity.

Even with the more favorable recent macroeconomic environment, we have continued to aggressively manage our cost structure in order to maintain relatively strong profit margins, while maintaining our focus on growth initiatives that we believe will help to better position us to meet the needs of our clients as economic conditions continue to improve. These initiatives include investing in new product development and other sales and marketing initiatives designed to gain market share and investing in technology designed to streamline and simplify our order entry process and improve the client’s furniture buying experience. Upon consummation of this offering, however, our costs will increase as a result of having to comply with the Exchange Act, the Sarbanes-Oxley Act and the New York Stock Exchange listing requirements, which will require us, among other things, to establish an internal audit function.

In the first half of 2004, consistent with the performance of the U.S. office furniture industry, we experienced increases in sales of our seating, storage and specialty businesses. In addition, we have experienced two consecutive quarterly increases in backlog as shown in the following table, which sets forth our quarterly performance during the last six quarters.

	Three Months Ended
	March 31, 2003			June 30, 2003			September 30, 2003			December 31, 2003			March 31, 2004			June 30, 2004
	(unaudited)
	(in thousands, except statistical data)
Consolidated Statement of Operations Data:
Sales	$	164,630		$	177,014		$	176,563		$	179,039		$	153,324		$	178,821
Gross profit		55,751			59,291			59,924			61,369			47,061			62,174
Operating income		20,089			22,940			21,507			22,060			11,513			18,025
Interest expense		5,084			5,075			5,066			5,004			3,732			4,635
Other (expense) income, net		(3,592	)		(1,819	)		3,259			(321	)		1,418			1,329
Income tax expense		5,114			6,998			7,976			7,457			3,973			5,920
Net income	$	6,299		$	9,048		$	11,724		$	9,278		$	5,226		$	8,799
Statistical and Other Data:
Sales (decline) growth from comparable period during prior year		(16.8	)%		(12.7	)%		(5.9	)%		(3.3	)%		(6.9	)%		1.0	%
Gross profit margin		33.9	%		33.5	%		33.9	%		34.3	%		30.7	%		34.8	%
Backlog	$	142,667		$	125,508		$	107,443		$	107,023		$	111,784		$	116,206

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the amounts of reported assets, liabilities, revenues and expenses and the disclosure of certain contingent assets and liabilities. Actual results

28

may differ materially from such estimates. We believe that the critical accounting policies that follow are those of our policies that require the most judgment, estimation and assumption in preparing our consolidated financial statements.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our clients and dealers to make required payments. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. This allowance is adjusted if, in our judgment, the financial condition of our clients and dealers has deteriorated and resulted in an impairment of their ability to make payments.

Inventory

Inventories are valued at the lower of cost or market value. Cost is determined using the first-in, first-out method. We write down inventory that, in our judgment, is impaired or obsolete. Obsolescence may be caused by the discontinuance of a product line, changes in product material specifications, replacement products in the marketplace and other competitive influences.

Goodwill and Other Intangible Assets

Since January 1, 2002, we have accounted for our goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). In accordance with SFAS 142, we assigned an indefinite useful life to our trademarks and discontinued the amortization of both our goodwill and trademarks. We perform impairment tests of our trademarks and goodwill on an annual basis and whenever events or circumstances occur indicating that the trademarks or goodwill may be impaired. An impairment charge will be recognized for our trademarks if the estimated fair value of the trademarks is less than their carrying amount. An impairment charge will be recognized for our goodwill if the estimated fair value of goodwill of a reporting unit is less than its carrying amount. We continue to amortize our deferred financing fees over the life of the respective debt.

Product Warranty

We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in product quality programs and processes, our warranty obligation is affected by product failure rates and by material usage and service costs incurred in correcting a product failure. Cost estimates are based on historical product failure rates and identified one-time fixes for each specific product category. Should actual costs differ from original estimates, revisions to the estimated warranty liability would be required.

Employee Benefits

We are partially self-insured for our employee health benefits. We accrue for employee health benefit obligations based on an independent actuarial valuation. The actuarial valuation is based upon historical claims as well as a number of assumptions, including rates of inflation for medical costs and benefit plan changes. Actual results could be materially different from the estimates used.

We account for our defined benefit pension plan obligations and other postretirement benefit plan obligations in accordance with Statements of Accounting Standards No. 87, “Employers’ Accounting for Pensions,” and No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” respectively. The defined benefit pension and other postretirement benefit expenses and liabilities that we recognize in our financial statements, as well as our pension funding requirements, are based upon actuarial valuations. The actuarial valuations are dependent upon various assumptions, including, but not limited to,

29

selected discount rates, expected rates of return on plan assets, projected salary increases and benefits, expected health care cost trend rates and withdrawal and mortality rates. The actuarial assumptions used are reviewed annually by our benefits committee. Changes in assumptions as well as actual experience could potentially have a material impact on our pension and other postretirement expenses and related funding requirements.

Commitments and Contingencies

We establish reserves for the estimated cost of environmental and legal contingencies. A significant amount of judgment and use of estimates is required to quantify our ultimate exposure in these matters. We engage outside experts as we deem necessary or appropriate to assist in the evaluation of exposure. From time to time, as information becomes available regarding changes in circumstances for ongoing issues as well as information regarding emerging issues, we reassess our potential liability and adjust our reserve balances as necessary. Revisions to our estimates of potential liability, and actual expenditures related to environmental and legal contingencies, could have a material impact on our results of operations or financial position.

Income Taxes

We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”), which requires that deferred tax assets and liabilities be measured using enacted tax rates for the effect of future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. We evaluate the realizability of our deferred tax assets quarterly, and adjust our valuation allowance accordingly, based upon future taxable income and ongoing tax planning strategies.

We operate within multiple taxing jurisdictions and are subject to audit in all of these jurisdictions. These audits could result in tax obligations in excess of amounts previously recorded by us.

Interest Rate Collar Agreements

We account for our interest rate collar agreements in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”). Our interest rate collar agreements are classified as risk management instruments not eligible for hedge accounting. In accordance with SFAS 133, we record the fair value of these agreements on our balance sheet and recognize changes in their fair value in earnings during the period the value of the contract changes. The fair value of the interest rate collar agreements represents the present value of expected future payments, as estimated by the counterparties, who are dealers in these instruments, and is based upon a number of factors, including current interest rates and expectations of future interest rates. Changes in valuation assumptions and estimates used by the counterparties could materially affect our results of operations or financial position.

30

Results of Operations

Six months ended June 30, 2003 and 2004

	Three Months Ended						Six Months Ended			Three Months Ended						Six Months Ended
	March 31, 2003			June 30, 2003			June 30, 2003			March 31, 2004			June 30, 2004			June 30, 2004
	(unaudited)
	(in thousands, except statistical data)
Consolidated Statement of Operations Data:
Sales	$	164,630		$	177,014		$	341,644		$	153,324		$	178,821		$	332,145
Gross profit		55,751			59,291			115,042			47,061			62,174			109,235
Operating income		20,089			22,940			43,029			11,513			18,025			29,538
Interest expense		5,084			5,075			10,159			3,732			4,635			8,367
Other (expense) income, net		(3,592	)		(1,819	)		(5,411	)		1,418			1,329			2,747
Income tax expense		5,114			6,998			12,112			3,973			5,920			9,893
Net income	$	6,299		$	9,048		$	15,347		$	5,226		$	8,799		$	14,025
Statistical and Other Data:
Sales growth (decline) from comparable period of prior year		(16.8	)%		(12.7	)%		(14.7	)%		(6.9	)%		1.0	%		(2.8	)%
Gross profit margin		33.9	%		33.5	%		33.7	%		30.7	%		34.8	%		32.9	%

Sales

Sales for the six months ended June 30, 2004 were $332.1 million, a decrease of 2.8%, or $9.5 million, from sales of $341.6 million for the same period of 2003 primarily due to lower unit shipments. This decrease of $9.5 million in sales for the first six months of 2004 consisted of a decrease of $11.3 million in sales, or 6.9%, for the first quarter of 2004 as compared to the first quarter of 2003 and a $1.8 million increase in sales, or 1.0%, for the second quarter of 2004 as compared to the second quarter of 2003. This increase in the second quarter of 2004 is the first such quarter-to-quarter sales increase in the past 13 quarters.

The 2.8% period-over-period decrease in sales for the six months ended June 30, 2004 was directly attributable to a decrease in sales of office systems, offset by increases in our seating, storage and specialty businesses over the same period. The decrease in office systems sales over the six-month period was 11.8%, consisting of a first quarter decrease from 2003 of 17.3% and a second quarter decrease from 2003 of 6.4%. At the same time, sales of seating, storage and specialty products increased by 8.9% over the six-month period, with a first quarter increase of 5.5% and a second quarter increase of 11.8% over the comparable quarters in 2003.

At June 30, 2004, sales backlog was $116.2 million, representing a second sequential increase as compared to the end of the prior quarter. As of June 30, 2004 and as of the end of each of the five preceding quarters, backlog was:

As of	Backlog
	(unaudited)
	(in millions)
March 31, 2003	$	142.7
June 30, 2003		125.5
September 30, 2003		107.4
December 31, 2003		107.0
March 31, 2004		111.8
June 30, 2004		116.2

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Gross Profit and Operating Income

Gross profit for the six months ended June 30, 2004 was $109.2 million, a decrease of 5.0% from gross profit of $115.0 million for the same period in 2003. Operating income for the six months ended June 30, 2004 was $29.5 million, a decrease of 31.4% from gross profit of $43.0 million for the same period.

As a percentage of sales, gross profit decreased from 33.7% in the six months ended June 30, 2003 to 32.9% in the six months ended June 30, 2004. Operating income as a percentage of sales declined from 12.6% to 8.9% over the same period. The decreases in gross profit and operating income margins from the first six months of 2003 to the first six months of 2004 were primarily due to lower sales volumes which allowed less absorption of fixed overhead costs; increased benefit costs as a result of the overall increase in healthcare costs in the U.S. economy; and inflation in costs of materials, which were offset by our recent global sourcing initiatives and continuous improvement programs. The decrease in operating income margin from 2003 to 2004 was also largely due to increased spending for product development and sales and marketing initiatives and other employee-related costs, including a $3.8 million employee incentive and sales bonus accrual in the first half of 2004 for the six months ended June 30, 2004. This accrual reflects our expectations for improved performance based on a forecasted industry recovery. We accrued no incentive or bonus amounts during the six months ended June 30, 2003.

Within the first six months of 2004, gross profit margin increased from 30.7% in the first quarter to 34.8% in the second quarter, and operating profit margin increased from 7.5% to 10.1% over the same period. These sequential increases resulted from increased overhead absorption from higher sales volume and benefits from our continuous improvement programs and recent global sourcing initiatives, which help offset rising costs of materials. Within the first six months of 2003, gross profit margin decreased from 33.9% in the first quarter to 33.5% in the second quarter, and operating profit increased from 12.2% to 13.0% over the same period.

Interest Expense

Interest expense for the six months ended June 30, 2004 decreased $1.8 million from the comparable period in 2003, primarily as a result of our redemption on March 28, 2003 of the remaining $57.3 million principal amount of our 10.875% senior subordinated notes. The redemption was funded through our then-existing credit facility, which bore a lower rate of interest than the senior subordinated notes. In addition, we had net interest expense of $2.5 million under our interest rate collar and swap agreements in the six-month period ended June 30, 2003, whereas we had a net interest expense of only $0.8 million under our interest rate collar agreements during the same period of 2004. Our interest rate swap agreements, which increased the amount of net interest expense in the six-month period ended June 30, 2003, were terminated on March 11, 2003.

Other Income (Expense), Net

Other income for the six months ended June 30, 2004 includes a foreign exchange translation gain of $1.9 million and a gain of $0.8 million related to our interest rate collar agreement, which matured in February 2004.

Other expense for the six months ended June 30, 2003 includes a foreign exchange translation loss of $6.9 million, a net loss of $2.3 million related to our interest rate collar and swap agreements and a gain of $4.8 million related to the termination of our two interest rate swap agreements. Other expense for the six months ended June 30, 2003 also includes a $1.1 million loss on the early redemption of the remaining $57.3 million principal amount of our 10.875% senior subordinated notes due 2006.

Income Tax Expense

Our effective tax rate is directly affected by changes in our consolidated pretax income and mix of pretax income and by the varying effective tax rates in the countries in which we operate. Our mix of pretax income was primarily responsible for the decrease in the effective tax rate to 41.4% for the six months ended June 30, 2004 from 44.1% for the same period of 2003.

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Years ended December 31, 2002 and 2003

Sales

Sales during 2003 were $697.2 million, a decrease of 9.8% from sales of $773.3 million in 2002 due to lower unit shipments and pricing pressures. The decrease in sales was spread across all of our product categories, with our largest category, office systems, accounting for the greatest dollar and percentage decrease. The decrease in sales was primarily attributable to continued weakness in the U.S. economy and specifically in the macroeconomic factors (corporate profitability, business confidence and service-sector employment growth) that drive demand for our products. BIFMA estimates that U.S. office furniture shipments in 2003 declined 4.3% from shipments in 2002 and that U.S. office systems shipments declined 8.9% from 2002 to 2003. Although our sales in 2003 decreased year-over-year in all of our product categories, we believe that the weak U.S. economy disproportionately affected our sales because office systems decreased more than the other categories in the industry and represent a greater proportion of our sales than they do of industry sales.

Gross Profit and Operating Income

Gross profit in 2003 was $236.3 million, a decrease of 15.7%, from gross profit of $280.4 million in 2002. Operating income in 2003 was $86.6 million, a decrease of 30.2%, from operating income of $124.0 million in 2002. The decreases in gross profit and operating income were primarily attributable to the decrease in year-over-year sales during 2003, allowing for less absorption of fixed overhead costs and, to a lesser extent, competitive industry pricing pressure resulting from weakening industry demand and the weakening of the U.S. dollar versus foreign currencies. However, during 2003, we continued to outperform the industry with the highest operating income margin among our primary publicly-held competitors. Gross profit and operating income as percentages of sales during 2003 were 33.9% and 12.4%, respectively, as compared with 36.3% and 16.0% in 2002, respectively.

During 2003, we sought to maintain our profitability by continuing our efforts, initiated in early 2001, to aggressively manage expenditures and reduce hourly headcount in response to declining sales volumes.

Interest Expense

Interest expense during 2003 was $20.2 million, a decrease of $6.3 million from interest expense in 2002. The decrease was the result of lower interest rates on our variable-rate debt and the redemption on March 28, 2003 of the remaining 10.875% senior subordinated notes funded through our then-existing credit facility, which had lower interest rates than the senior subordinated notes that were redeemed. All of these offset net settlement payments of $6.6 million under our interest rate collar and swap agreements during 2003 versus a net payment of $4.4 million in 2002. The higher settlement payments resulted from the termination on March 11, 2003 of our two interest rate swap agreements that, historically, partially offset the payments required under our three interest rate collar agreements.

Other Income (Expense), Net

Other expense for 2003 includes a net foreign exchange translation loss of $7.7 million, a gain of $4.8 million related to the termination of our two interest rate swap agreements, and a $1.8 million net gain related to our interest rate collar and swap agreements. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments. Other expense also includes a $1.1 million loss on the early redemption of the remaining $57.3 million principal amount of our 10.875% senior subordinated notes due 2006.

Other income for 2002 includes a net gain of $4.9 million related to our interest rate collar agreements. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments. Other income for 2002 also includes a $1.9 million loss on the early redemption of $50.0 million of our senior subordinated notes due 2006 and a net foreign exchange translation loss of $0.4 million.

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Income Tax Expense

Our effective tax rate is directly affected by changes in our consolidated pretax income and mix of pretax income and by the varying effective tax rates in the countries in which we operate. Our geographic mix of pretax income and these varying tax rates were primarily responsible for the increase in the effective tax rate to 43.1% in 2003 from 40.5% in 2002.

Years ended December 31, 2001 and 2002

Sales

Sales in 2002 were $773.3 million, a decrease of 21.5% from sales of $985.4 million in 2001 primarily due to lower unit shipments and pricing pressures. The decrease in sales was spread across all of our product categories, with our largest category, office systems, accounting for the greatest dollar and percentage decrease. The decrease in sales was primarily attributable to continued weakness in the U.S. economy and specifically in the macroeconomic factors (corporate profitability, business confidence and service-sector employment growth) that drive demand for our products. BIFMA estimates that U.S. office furniture shipments in 2002 declined 18.9% from shipments in 2001 and that U.S. office systems shipments declined 24.4% from 2001 to 2002. Although our sales during 2002 decreased year-over-year in all of our product categories, we believe that the weak U.S. economy disproportionately affected our sales because office systems decreased more than the other categories in the industry and represent a greater proportion of our sales than they do of industry sales.

Gross Profit and Operating Income

Gross profit in 2002 was $280.4 million, a decrease of 28.3% from gross profit of $390.9 million in 2001. Operating income in 2002 was $124.0 million, a decrease of 36.0% from operating income of $193.8 million in 2001. The decreases in gross profit and operating income were primarily attributable to the decrease in year-over-year sales during 2002, allowing for less absorption of fixed overhead costs, and, to a lesser extent, competitive industry pricing pressure resulting from weakening industry demand. However, during 2002, we continued to outperform the industry with the highest operating income margin among our primary publicly-held competitors. Gross profit and operating income as percentages of sales in 2002 were 36.3% and 16.0%, respectively, as compared with 39.7% and 19.7% in 2001, respectively.

During 2002, we sought to maintain our profitability by continuing our efforts, initiated in early 2001, to aggressively manage our discretionary expenditures, reduce hourly headcount in response to declining sales volumes and eliminate certain salaried positions in North America.

Interest Expense

Interest expense during 2002 was $26.5 million, a decrease of $15.6 million from interest expense in 2001. The decrease in interest expense was the result of a net debt reduction of $95.5 million during 2002, lower short term borrowing rates in the U.S. and the redemption on April 30, 2002 of $50.0 million of 10.875% senior subordinated notes funded through our then-existing credit facility, which had lower interest rates than the senior subordinated notes that were redeemed. All of these offset net settlement payments of $4.4 million under our interest rate collar and swap agreements during 2002.

Other Income (Expense), Net

Other income for 2002 includes a net gain of $4.9 million related to our interest rate collar agreements. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments. Other income for 2002 also includes a $1.9 million loss on the early redemption of $50.0 million of our senior subordinated notes due 2006 and a net foreign exchange translation loss of $0.4 million.

Other expense for 2001 includes a loss of $7.5 million related to our interest rate collar agreements and a net foreign currency translation gain of $2.7 million. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments.

34

Income Tax Expense

Our effective tax rate is directly affected by changes in our consolidated pretax income and mix of pretax income and by the varying effective tax rates in the countries in which we operate. Our geographic mix of pretax income and these varying tax rates were primarily responsible for the decrease in the effective tax rate to 40.5% in 2002 from 41.1% in 2001.

Liquidity and Capital Resources

The following table highlights certain key cash flows and capital information pertinent to the discussion that follows:

	2001		2002			2003
	(in thousands)
Cash provided by operating activities	$	134,147	$	95,366		$	78,975
Capital expenditures		25,020		18,114			9,722
Purchase of common stock		403		494			526
Premium paid for early extinguishment of debt		—		1,813			1,037
Net proceeds from (repayment of) long-term debt		121,750		(95,570	)		(71,336	)
Payment of dividend		220,339		—			—

Historically, we have carried significant amounts of debt, and cash generated by operating activities has been used to fund working capital, capital expenditures and scheduled payments of principal and debt service. Our capital expenditures are typically for new product tooling and manufacturing equipment. These capital expenditures support new products and continuous improvements in our manufacturing processes. From time to time, we have used the proceeds of debt offerings to repay other debt and return capital to our stockholders.

At December 31, 2000, our outstanding indebtedness was $425.8 million. On January 5, 2001, we borrowed an additional $221.0 million under our then-existing credit facility to fund the payment of an aggregate dividend of $220.3 million to our stockholders. As a result of this borrowing, our aggregate debt on January 5, 2001 was $646.8 million. Despite industry-wide revenue declines from the beginning of 2001 through 2003, we generated positive operating income and net income in each quarter during the period and reduced debt by an aggregate of $266 million.

Net cash provided by operating activities was $79.0 million in 2003, $95.4 million in 2002 and $134.1 million in 2001. The decreases in operating cash flows in 2003 and 2002 were the result of lower sales during those years compared to the prior years. The decreases in sales in 2003 and 2002 were primarily attributable to continued weakness in the U.S. economy and specifically in the macroeconomic factors (corporate profitability, business confidence and service-sector employment growth) that drive demand for our products. In 2003, the decrease in cash flows from operations was offset by $4.8 million in proceeds received from the termination of our interest rate swap agreements and $1.5 million in proceeds received from the settlement of one of our foreign currency contracts.

In 2003, we used available cash, including the $79.0 million of net cash from operations and $49.8 million of net borrowings under our then-existing revolving credit facility, to fund $9.7 million of capital expenditures, repay $121.1 million of debt and pay $1.0 million of premiums for the early extinguishment of debt. In 2002, we used available cash, including the $95.4 million of net cash provided from operations and $7.0 million of net borrowings under our then-existing revolving credit facility, to fund $18.1 million of capital expenditures, repay $102.6 million of debt and pay $1.8 million of premium for the early extinguishment of debt. In 2001, we used available cash, including the $134.1 million of net cash from operations and $153.0 million of net borrowings under our then-existing revolving credit facility, to fund $25.0 million of capital expenditures, repay $31.3 million of debt and to pay a dividend to our common stockholders of $220.3 million.

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Cash used in investing activities was $10.1 million in 2003, $18.1 million in 2002 and $24.9 million in 2001, with the decreases in cash used in investing activities primarily attributable to decreases in capital expenditures. The sequential decreases in capital expenditures in 2001, 2002 and 2003 are the result of aggressive management of discretionary expenditures, one of the steps we took during this recessionary period to maintain our gross profit and operating income margins. We estimate that our capital expenditures in 2004 and 2005 will be $15 million for each year.

We repaid our then-existing revolving and term loan credit facilities on September     , 2004 with the proceeds of our new credit facility. Upon repayment of our then-existing credit facility, we paid as a dividend to our common stockholders an aggregate of $              million. As a result of the payment of the dividend, exercise prices for our outstanding options were adjusted in accordance with the terms of our equity incentive plans. Our new credit facility with various lenders and UBS AG, Stamford Branch, as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Syndication Agent, permits us to borrow an aggregate principal amount of up to $500.0 million, consisting of a $75.0 million revolving credit facility and $425.0 million term loan facility. Our new credit facility is guaranteed by all our existing and future domestic wholly owned subsidiaries. Our new credit facility includes a letter of credit subfacility.

In addition to our new credit facility, our foreign subsidiaries maintain local credit facilities to provide credit for overdraft, working capital and other purposes. As of June 30, 2004, total credit available under such facilities was approximately $10.3 million, or the foreign currency equivalent. We believe that we are currently in compliance with all terms of our indebtedness.

We continue to have significant liquidity requirements. In addition to our significant cash requirements for debt service, we have commitments under our operating leases for certain machinery and equipment as well as manufacturing, warehousing, showroom and other facilities used in its operations. Future minimum lease payments required under our operating leases that have an initial or remaining noncancelable lease term in excess of one year as of December 31, 2003 are as follows: $8.5 million in 2004, $7.5 million in 2005, $6.1 million in 2006, $4.7 million in 2007, $3.7 million in 2008 and $9.5 million thereafter.

We believe that existing cash balances and internally generated cash flows, together with borrowings available under our new revolving credit facility, will be sufficient to fund normal working capital needs, capital spending requirements and debt service requirements and dividend payments for at least the next twelve months. Future principal debt payments may also be paid out of cash flows from future refinancing of our debt. However, our ability to make scheduled payments of principal, to pay interest on or to refinance our indebtedness, to satisfy our other debt obligations and to pay dividends to stockholders will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. See “Risk Factors—We are highly leveraged, and a significant amount of cash will be required to service our indebtedness.”

Contractual Obligations

The following summarizes our fixed long-term contractual obligations as of June 30, 2004 (in thousands):

	Payments due by period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Long-term debt	$	102,210	$	271,102	$	370	$	168	$	373,850
Operating leases		9,136		19,024		11,987		6,605		46,752
Purchase commitments
Total	$		$		$		$		$

Contractual obligations for long-term debt include principal and interest payments. Interest has been included at either the fixed rate or the variable rate of 2.53% in effect as of December 31, 2003, as applicable.

36

Environmental Matters

Our past and present business operations and the past and present ownership and operation of manufacturing plants on real property are subject to extensive and changing federal, state, local and foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. As a result, we are involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters and could become subject to fines or penalties related thereto. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We have been identified as a potentially responsible party pursuant to CERCLA for remediation costs associated with waste disposal sites that we previously used. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. Based on the information currently known to us, we do not expect any liability we may have under CERCLA, or related to a CERCLA site, to be material.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Quantitative and Qualitative Disclosures about Market Risk

During the normal course of business, we are routinely subjected to market risk associated with interest rate movements and foreign currency exchange rate movements. Interest rate risk arises from our debt obligations and related interest rate collar and swap agreements. Foreign currency exchange rate risk arises from our foreign operations and purchases of inventory from foreign suppliers.

There was no significant impact on our operations as a result of inflation during the three years ended December 31, 2003.

Interest Rate Risk

We have both fixed and variable rate debt obligations for other than trading purposes that are denominated in U.S. dollars. Changes in interest rates have different impacts on the fixed and variable-rate portions of the debt. A change in interest rates impacts the interest incurred and cash paid on the variable-rate debt but does not impact the interest incurred or cash paid on the fixed rate debt.

We use interest rate collar agreements for other than trading purposes in order to manage our exposure to fluctuations in interest rates on our variable-rate debt. Such agreements effectively set agreed-upon maximum and minimum rates on a notional principal amount and utilize the three-month London Interbank Offered Rate, or LIBOR, as a floating rate reference. The notional amounts are utilized to measure the amount of interest to be paid or received by us, quarterly, and do not represent the amount of exposure to credit loss. Fluctuations in LIBOR affect both our net financial instrument position and the amount of cash to be paid or received by us, if any, under these agreements.

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The following table summarizes our market risks associated with our debt obligations and interest rate collar agreements as of December 31, 2003. For debt obligations, the table presents principal cash flows and related weighted average interest rates by year of maturity. Variable interest rates presented for variable-rate debt represent the weighted average interest rates on our then-existing credit facility borrowings as of December 31, 2003. For interest rate caps and floors, the table presents the notional amounts and related weighted average interest rates by year of maturity.

	2004			2005			2006			2007			2008			Thereafter			Total		Fair Value
	(dollars in thousands)
Rate Sensitive Liabilities
Long-term Debt:
Fixed Rate	$	90		$	97		$	102		$	106		$	110		$	366		$	871	$	871
Average Interest Rate		4.11	%		4.11	%		4.11	%		4.11	%		4.11	%		4.11	%
Variable Rate	$	81,250		$	298,750			—			—			—			—		$	380,000	$	380,000
Average Interest Rate		2.53	%		2.53	%		—			—			—			—
Rate Sensitive Derivative Financial Instruments
Interest Rate Caps:
Notional Amount	$	200,000			—			—			—			—			—		$	200,000	$	—
Strike Rate		10.00	%		—			—			—			—			—
Interest Rate Floors:
Notional Amount	$	200,000			—			—			—			—			—		$	200,000	$	(2,100	)
Strike Rate		5.12	%		—			—			—			—			—

A 1% interest rate increase would increase interest expense by $3.8 million. We will continue to review our exposure to interest rate fluctuations and evaluate whether we should manage such exposure through derivative transactions.

Foreign Currency Exchange Rate Risk

We manufacture our products in the United States, Canada and Italy and sell our products in those markets as well as in other European countries. Our foreign sales and certain expenses are transacted in foreign currencies. Our production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as we report currency in the U.S. dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Canadian dollar and the Euro. Approximately 7.0% of our revenues in 2003 and 6.6% in 2002, and 23.0% of our expenses in 2003 and 21.7% in 2002, were denominated in currencies other than the U.S. dollar. Foreign currency exchange rate fluctuations resulted in a $7.7 million loss in 2003 and did not have a material impact on our financial results during 2002.

From time to time, we enter into foreign currency forward exchange contracts and foreign currency option contracts for other than trading purposes in order to manage our exposure to foreign exchange rates associated with purchases of inventory from foreign suppliers. The terms of these contracts are generally less than a year.

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Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement is recorded as an adjustment to cost of sales, while the remaining change in fair value is recorded as a component of other income (expense). The aggregate fair market value of the foreign currency contracts outstanding at December 31, 2003 was $0.2 million, all of which was included in prepaid and other current assets on our consolidated balance sheet as of December 31, 2003. During 2003, we recognized a corresponding net gain related to the agreement. We also realized a net gain of $1.5 million related to agreements initiated and settled during 2003. We did not have any foreign currency forward exchange or option contracts outstanding at December 31, 2002. The aggregate net gain related to our foreign currency forward exchange contracts were not material for 2002.

Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 introduces a new consolidation model that determines control (and consolidation) based on potential variability in gains and losses of the entity being evaluated for consolidation. In December 2003, the FASB issued FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”) to address certain FIN 46 implementation issues. The consolidation requirements apply immediately to variable interest entities created after January 31, 2003, and apply to all other variable interest entities in the first interim period ending after March 15, 2004. The consolidation requirements will not have a material effect on our financial statements.

Quarterly Results of Operations

The following table sets forth the unaudited quarterly results of operations for each of the 10 quarters ended June 30, 2004. The information for each quarter is unaudited and has been prepared on the same basis as the audited financial statements appearing elsewhere in this document. In the opinion of management, all necessary adjustments, consisting only of normal, recurring adjustments, have been included to present fairly the unaudited quarterly results. The results of historical periods are not necessarily indicative of results for any future period.

	Three Months Ended
	March 31, 2002		June 30, 2002			September 30, 2002		December 31, 2002		March 31, 2003			June 30, 2003			September 30, 2003		December 31, 2003			March 31, 2004		June 30, 2004
	(unaudited)
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Sales	$	197,807	$	202,662		$	187,696	$	185,098	$	164,630		$	177,014		$	176,563	$	179,039		$	153,324	$	178,821
Cost of sales		123,675		126,666			120,649		121,912		108,879			117,723			116,639		117,670			106,263		116,647
Gross profit		74,132		75,996			67,047		63,186		55,751			59,291			59,924		61,369			47,061		62,174
Selling, general and administrative expenses		36,483		42,691			37,560		39,580		35,662			36,351			38,417		39,309			35,548		44,149
Operating income		37,649		33,305			29,487		23,606		20,089			22,940			21,507		22,060			11,513		18,025
Interest expense		8,123		7,150			5,768		5,500		5,084			5,075			5,066		5,004			3,732		4,635
Other income (expense), net		2,289		(3,910	)		3,731		823		(3,592	)		(1,819	)		3,259		(321	)		1,418		1,329
Income before income tax expense		31,815		22,245			27,450		18,929		11,413			16,046			19,700		16,735			9,199		14,719
Income tax expense		13,232		9,007			11,174		7,254		5,114			6,998			7,976		7,457			3,973		5,920
Net income	$	18,583	$	13,238		$	16,276	$	11,675	$	6,299		$	9,048		$	11,724	$	9,278		$	5,226	$	8,799
Per Share Data:
Earnings per share:
Basic	$	.80	$	.57		$	.70	$	.51	$	.27		$	.39		$	.51	$	.40		$	.23	$	.38
Diluted	$	.77	$	.55		$	.67	$	.48	$	.26		$	.37		$	.49	$	.38		$	.22	$	.37
Weighted average shares outstanding:
Basic		23,179,123		23,176,143			23,174,308		23,172,857		23,170,153			23,162,400			23,160,376		23,158,765			23,157,118		23,151,016
Diluted		24,249,499		24,244,651			24,240,211		24,237,324		24,227,247			24,218,215			24,211,863		24,207,187			23,988,672		23,983,214

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BUSINESS

General

We are a leading designer and manufacturer of branded office furniture products and textiles. Our commitment to innovation and modern design has yielded a comprehensive portfolio of products designed to provide enduring value and help clients shape their workplaces with imagination and vision. Our products are recognized for high quality and a sophisticated image and are targeted at the middle to upper end of the market. We sell our products primarily in North America through a direct sales force and a broad network of independent dealers. Approximately 7% of our sales are outside North America, the majority of which are through our European operations. In Europe, we sell our products to the international offices of our large North American clients and to local clients through a direct sales force and a network of local dealers.

Since our founding in 1938, we have been recognized worldwide as a design leader within our industry. Our status as a pioneer in bringing the principles of modern design to the workplace is well established. Our products are exhibited in major art museums worldwide, including more than 30 pieces in the permanent Design Collection of The Museum of Modern Art in New York. This design legacy continues to flourish today and is embodied in recently introduced, award winning products, including the innovative LIFE^™ chair and AutoStrada office furniture system. Additionally, Florence Knoll, our co-founder and first director of design, was awarded the 2002 National Medal Of Arts in recognition of her lifetime contributions to modern design. Our design excellence is complemented by a management philosophy that fosters a strong collaborative culture, client-driven processes and a lean, agile operating structure. Our employees are performance-driven and motivated by a variable incentive compensation system and broad-based equity ownership in the company. Together, these core attributes have enabled us to achieve superior financial performance and have positioned us for profitable growth.

Industry Overview

According to BIFMA, the U.S. office furniture market had $8.5 billion in shipments in 2003. The industry is divided into five primary categories: office systems, seating, files and storage, desks and casegoods, and tables. Office systems consist of moveable panels, work surfaces, storage units, electrical distribution, lighting, organizing tools and freestanding components. These modular systems are popular with clients who require flexible space configurations or have open plan floorspace as is common in today’s office. Products in the seating category range from executive desk chairs to general task and side chairs. Storage products include items such as file cabinets, pedestals, towers and bookcases. Desks and tables range from classic executive desks used in private offices to conference tables and highly adjustable worktables, which can accommodate increasing technological demands.

Office systems and seating are the largest product categories in the U.S. office furniture market. The following table indicates the estimated shipments and percentage of total shipments for each product category in the U.S. office furniture industry in 2003.

Product Category	U.S. Category Shipments		% of U.S. Market
	(in billions)
Office systems	$	2.6	30.6	%
Seating		2.3	26.6
Files and Storage		1.8	21.5
Desks and Casegoods		0.9	11.0
Tables		0.6	6.8
Other		0.3	3.5
Total	$	8.5	100.0	%

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Industry demand is largely driven by macroeconomic factors, including corporate profitability, business confidence and service-sector employment. Together, these factors impact commercial construction, business expansion, absorption of vacant office space and, ultimately, demand for our products.

In addition to these macroeconomic factors, the demand for office furniture is influenced by workplace trends, including changes in work processes such as increases in the use of technology and the number of knowledge workers. These workplace trends affect the style, features and functionality of new products. Customers in the middle to upper end of the market are focused on improving productivity and efficiency, worker health and safety, ergonomics and environmental standards for the workplace. In addition, clients in these market segments demand highly customized solutions and premium service levels, including short lead times of generally three to five weeks, and strong after-market support. These trends have heightened the importance of providing office furnishings of superior quality, design and function.

Companies increasingly rely on workplace design and office furniture layout to express and reinforce business processes, corporate culture and company identity. Several of the key workplace trends that we believe have impacted, and will continue to impact, demand for our products are as follows:

Continued organizational change and increased demand for space-efficient furniture. In an effort to continually improve workflow and greater operating efficiencies, clients are experimenting with workplace design to increase worker productivity and reduce facility costs. This focus on the benefits of reengineering, restructuring and reorganizing has led to changes in the nature of the work environment. An emphasis on teams, flatter organizational structures and more direct communication among employees at varying levels, coupled with the growing demand for efficient use of office space, has accelerated the need for redesigned space. Office furniture systems, which are simple, flexible and easy to install, offer superior space efficiency and significant advantages over traditional drywall offices. As a result, these systems have become an important part of office design.

New office technology and the resulting necessity for improved cable and data management. Technology proliferation in the workplace has placed new demands on furniture performance. Today, office furniture must have the capability to support multiple monitors, including flat panel technology, video conferencing, networked communications, fiber optics and portable technologies. As a result, facility managers demand an endless variety of workplace configurations that can easily accommodate these increasingly complex power and data requirements. In response, we have designed and modified all of our office systems lines to handle these requirements. Our systems are adaptable and can be easily enhanced and reconfigured to meet the different workflow solutions and future technological needs.

Corporate relocations. As companies expand or relocate to take advantage of lower rents and more technologically advanced facilities, they often take this opportunity to upgrade and install furniture that is better adapted to their business processes and corporate culture. As more companies move or renegotiate their leases to take advantage of lower rents, we expect that a portion of this rental savings may be reinvested in facility upgrades using our products.

Increased focus on workplace health and safety and ergonomic standards. Concerns about health and safety in the office have intensified in recent years in response to the soaring costs of workers’ compensation claims. This, coupled with a desire for more comfort in the workplace, has fostered an increased interest in ergonomic seating, adjustable tables, keyboard trays, monitor arms and laptop holders, which create a healthier, more comfortable and aesthetically pleasing work environment. We offer a wide selection of products with ergonomic features that enhance safety and comfort while also increasing user productivity.

Growing concern for indoor air quality. In response to the heightened awareness regarding indoor air quality, we have worked to design and modify our product offerings and manufacturing processes to help our clients meet voluntary indoor air quality standards for commercial real estate. Some of our products meet or

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exceed the voluntary indoor air quality standards developed by the GREENGUARD^™ Environmental Institute, or GEI, a non-profit organization that oversees the GREENGUARD^™ Certification Program for low-emitting products. Products such as these help our clients achieve voluntary indoor air quality criteria for buildings, such as the Leadership in Energy and Environmental Design, Commercial Interiors or LEED^®-CI certification, developed by the U.S. Green Building Council, a non-profit trade association with members from many sectors of the building industry.

Desire to create unique work environments that help attract and retain knowledge workers. Recent trends away from traditional cubical configurations and efforts to create unique or custom office environments have resulted in a new interest in less conventional workplace layouts, such as 120-degree planning, which allows clients to create hexagonal configurations, as well as more customized, architecturally-based approaches to office design. As a result of these changing needs, we have developed products that represent an alternative to the traditional office system, yet continue to offer high performance, flexibility and elegance to the workplace. For instance, our Equity^® and Morrison^™ office systems can be configured in 120-degree relationships between workstations, allowing for the creation of more open, adaptable and high-performance office environments. In addition, our new AutoStrada office system, which we plan to begin shipping in the second half of 2004, responds to the desire for a more customized, European architectural aesthetic and offers a rich combination of materials, including wood, aluminum and glass, for the creation of a more differentiated work environment.

Historical Industry Environment. The U.S. office furniture industry experienced positive growth in 23 of the 25 years preceding 2001. Moreover, in the four years from 1997 to 2000, the industry grew at an above-average compounded annual rate of 7.3%, driven by strong corporate profitability, business expansion and investment in infrastructure during the Y2K and “dot-com” booms. However, in 2001 through 2003, the economy suffered significant reductions in corporate profitability, business confidence, service-sector employment and commercial real estate occupancy rates. The economic recession, exacerbated by the tragic events of September 11, 2001, created economic hardships and uncertainty for a number of corporations, which cutback or eliminated investments in office space projects. As a result, our industry experienced a sales decline of more than 35% during that period. This steep decline had a particularly pronounced effect on office systems due to the deferral of infrastructure investments by our clients and a saturation of the market by “just new” used office systems created by the increase in vacated office space. As a consequence, industry-wide shipments in the office systems category declined by 48.7%, more than any other category in the three years from 2001 to 2003.

Industry Recovery. During the first half of 2004, higher levels of corporate profitability, improving business confidence, increasing service-sector employment and increasing absorption of vacant office space all contributed to improving demand for office furniture products. During that period, the U.S. office furniture market experienced positive period-over-period growth in orders and shipments of 8.0% and 4.0%, respectively. According to BIFMA, U.S. office furniture shipments are forecasted to grow 5.7% in 2004 and 11.5% in 2005. The early stages of a recovery have been most evident in the seating, files and storage and casegoods categories, which are generally lower ticket purchases. We expect that a rebound in office systems will occur later in this recovery due to the typically larger commitment that the purchase of these products represents. We also believe that demand for office systems in North America will benefit from a general economic recovery, as companies expand, relocate to take advantage of lower rents, hire additional knowledge workers and reorganize to improve efficiency and productivity.

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Long-Term Prospects for Industry Growth. Over the longer term, we believe demand for office furnishings in the middle to upper end of the market will increase due to a number of factors. These factors include the trend toward an information-based economy, higher levels of service-sector employment, and a flattening of organizational structures, all of which drive demand for office systems products. In addition, we expect demand will be supplemented by ongoing trends in work processes, concerns surrounding worker health and safety, ergonomics and an increased awareness of, and interest in, meeting environmental standards for the workplace.

Our Competitive Strengths

Our business philosophy is to pursue growth and profitability by maintaining and enhancing our brand image and reputation for design and quality by working closely with our clients and dealers to identify areas of opportunity and improvement. Our growth strategy is designed to leverage our competitive strengths, which include:

Legacy of innovative modern design. One of our greatest strengths is our 66-year history of creating modern furniture with enduring design, quality and innovation. This design heritage, pioneered by Hans and Florence Knoll, has been fostered over time and has enabled us to build strong associations and relationships with some of the world’s preeminent designers and architects. Our collection of classic and current designs includes works by such internationally recognized architects and designers as Ludwig Mies van der Rohe, Marcel Breuer, Eero Saarinen, Harry Bertoia, Massimo Vignelli, Frank O. Gehry, Emilio Ambasz, Maya Lin and Isamu Noguchi. We maintain a rich archive of historic designs that we periodically re-introduce, which excite the architectural and design community and reinforce our design heritage and our position as a design leader.

Today, we continue to engage prominent outside architects and designers, such as Don Chadwick, Piero Lissoni and 2x4, a New York-based design firm, to create new products and enhancements. By combining their creative vision with our commitment to developing modern, high-quality products that address changing business needs, we are able to generate strong demand for our new product offerings and cultivate brand loyalty among our target clients. For example, we developed the award winning and commercially successful LIFE^™ chair with the Formway Design Group in New Zealand. Since its introduction in 2002, LIFE^™ has helped drive our growth in the seating category and allowed us to compete successfully in the high-performance work chair market by improving sales of seating to our systems clients as well as by penetrating our competitors’ installed bases of office systems.

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Premier brand identity in office furniture and specialty products. Our brand identity provides credibility and prestige and is a key factor in our clients’ purchasing decisions as they seek to create workplaces that will help project a desired image, enhance facility performance and attract and retain employees. We believe our products represent a modern, high-quality collection of office furnishings with a sophisticated image. We target our products toward the middle to upper end of the market, where clients typically value the image and performance of their work environment.

Our specialty products allow us to broaden the recognition of the Knoll brand. Our KnollStudio collection of chairs, barstools, lounge seating, conference, dining and occasional tables and KnollTextiles collection of upholstery, panel fabrics, wall coverings and drapery also showcase our design strength outside of the traditional office environment. Our KnollStudio collection has extended our identity beyond the workplace, with pieces that meet client needs in upscale restaurants, hotel spaces and other image-conscious venues. Many pieces from our KnollStudio collection, such as the Barcelona^® Chair, the Saarinen Womb Chair and the Bertoia Diamond Chair, have become collectibles, which has further elevated our brand.

Strong margins and cash flow generation throughout the business cycle. Our distinctive operating approach has driven our industry leading operating income margins among our primary publicly-held competitors. We have developed an operations philosophy that emphasizes disciplined investments, expense control, cost accountability and operating efficiency, as embodied by our continuous improvement efforts and management of capital expenditures. Our lean organization, highly variable cost structure, motivated associates and disciplined approach to business and capital management have enabled us to remain profitable throughout the business cycle. For example, despite industry-wide revenue declines from the beginning of 2001 through 2003, we reduced our debt by $266 million and generated positive operating income and net income in each quarter during this period. As a result, we were able to maintain our focus on enhancing the client experience, introducing new products, developing our sales and marketing organizations and strengthening our competitive position, rather than devoting material resources to costly restructuring initiatives.

Performance-driven culture and experienced management team. Our corporate culture is highly collaborative and encourages employees at all levels to communicate ideas and explore ways to improve our performance. Our associates are dedicated to producing quality products and take great pride in their work and in our reputation. Our senior management team has over 130 years of cumulative industry experience and a proven track record of achieving profitability throughout the business cycle. Moreover, managers throughout our organization are held accountable for achieving sales and cost targets. For example, compensation of our sales managers is linked to the achievement of profitable sales and growth targets, and compensation of our operations managers is linked to the achievement of plant cost and client satisfaction targets. We believe that this variable, performance-based compensation, as well as equity ownership, motivates and rewards our employees by linking their compensation to performance criteria which they have the ability to affect as employees.

Reputation for superior products and client service. Our reputation for product and service excellence serves as an important factor when marketing to the architecture and design community and to new and existing clients. Our products, which exhibit what we believe to be market-leading workmanship, are created with high-quality materials, which are selected with a focus on using recycled materials and environmental responsibility. Our products are manufactured and assembled by experienced and dedicated associates who take great pride in our company. We believe the involvement of all of our associates, from plant associates to senior management, results in products with superior aesthetics and durability. The lifetime warranty we offer on many of our products gives clients confidence in their durability and supports our reputation for product quality and endurance. In addition, we enhance our clients’ purchasing experience by working with clients to customize our products for their individual needs. We estimate that over 30% of our total sales are uniquely customized by our clients. In addition to working with our clients to customize our products, we provide project management, installation and other support services through our broad dealer network. Recent investments in client service, management information systems and an electronically linked dealer network allow us to provide clients who have many facilities with an integrated and reliable single point of contact for all their office furniture purchases.

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Over the past five years, we have significantly improved our reputation for service and consistency as evidenced by dealer surveys and client service performance metrics. From 2000 to 2003, we increased our electronic orders from zero to more than 50% of total orders, and we have reduced order entry cycle times by two weeks. We also implemented a system of measures that allows us to quote delivery dates rather than ship dates to our clients, thus allowing them to better coordinate their space planning projects. Additionally, we introduced consolidated logistics centers to improve delivery quality and reduce costs. Based on recent dealer surveys, we believe that we have made significant progress in improving our reliability and service performance.

Significant market position in office systems and an over $6 billion installed base. We enjoyed an estimated 16% category share in 2003 in the $2.6 billion U.S. office systems category. Office systems is the largest category in the U.S. office furniture industry and typically represents the largest portion of a client’s furniture expenditure. Office systems are long-lasting, are often the first furniture element a client specifies, and are, therefore, key to securing long-term relationships. Our office systems are designed with the utmost flexibility in mind, which allows clients to add, update and change their office space without rendering their existing installed systems obsolete. This flexibility has been key in establishing our strong market position in the systems category. We believe our market position provides us a strong base for recurring and add-on sales of our products across all our categories. We are able to work with our existing clients and build on their satisfaction with our office systems to expand their purchases into seating, files and storage, casegoods and other areas. We estimate that more than half of our revenues are derived from our installed client base.

Strong direct selling organization and dealer network. Our experienced 314 person direct sales force and our network of 225 independent dealers in North America have close relationships with architects, designers, corporate facility managers and other professionals who influence product selection decisions for large clients and provide valuable input in the product development process. Our tradition of working closely with clients to help create spaces that elevate the appearance and productivity of the workplace dates back to our co-founder, Florence Knoll, and her pioneering work with many major American corporations in the 1950’s. Florence Knoll led the creation of the Knoll Planning Unit, focused on working with clients to plan and design office space, a revolutionary concept for the period. Today, that legacy is preserved in our experienced research team, which works with architects and design professionals to develop and implement workplace strategies. Our sales force’s compensation, we believe to a greater degree than the compensation of our competitors’ sales forces, is variable and is influenced by both volume and discount management, which drives them toward growth in profitable sales. We have strong, long-standing relationships with our dealers and have historically experienced little dealer turnover. In addition, we have a dealer presence in every major metropolitan area across North America and our regional dealer network allows us to jointly and cost effectively market to small and mid-sized accounts.

Our Strategy

We pursue profitable growth by working closely with clients, architects, designers and dealers to identify areas of opportunity, while maintaining and enhancing our brand image and reputation for design and quality. We will seek to drive gains in market share, revenue and profitability by pursuing the following initiatives:

Build on our strength in office systems. We are focused on growing our significant category share in office systems through continuous innovation, superior performance and aesthetics, and targeted customization. With an estimated 30% or more of our total sales uniquely customized by our clients, we believe that our ability to respond to client needs has contributed to our strong market position. We will continue to offer systems with a broad range of features and price points to meet the needs of our existing and future clients and ensure our competitiveness. For example, in the second half of 2004, we plan to begin shipping the AutoStrada office system, which won a silver Best of NeoCon^® award at this year’s national industry trade show. Continued strength in office systems is critical to achieving significant market share in the industry.

Expand our market opportunity in seating, storage and casegoods. Over the last three years, we have actively begun to expand our product lines in the seating, files and storage and casegoods categories to address

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the $5.0 billion U.S. market for those goods. The following table shows the estimated percentages of total 2003 U.S. office furniture shipments represented by office systems, seating, files and storage and desks and casegoods, as compared to the corresponding percentages for our total U.S. shipments in 2003.

Product Category	% of Industry’s 2003 U.S. Shipments		% of Knoll’s 2003 U.S. Shipments
Office systems	30.6	%	65.3	%
Seating	26.6	%	8.6	%
Files and storage	21.5	%	5.5	%
Desks and casegoods	11.0	%	3.0	%

We believe that we have the opportunity to increase our share in non-systems categories by cross selling to our existing and future office systems clients, which can increase our revenue on a specific order by up to 50%. Once clients have installed a Knoll office system, our selling organization has a platform from which to expand client purchases into our complementary products. We also have the opportunity to attract new clients and capture share in non-systems categories by securing stand-alone sales in seating, files and storage and casegoods. As part of the effort to expand our market opportunity, we have invested in key new product introductions and existing product enhancements, including the award winning LIFE^™ chair, the Visor^® stacking chair, the Jellyfish^™ laptop holder, the Reference^™ wood casegoods and the expanded Calibre^® files and architectural towers collection. In 2005, we are planning to introduce new seating platforms, including the next chair by the renowned seating designer Don Chadwick, which will further broaden the price range and performance breadth of our offerings in this category.

We have begun to realize the benefits of these expanded market opportunities. For example, our seating sales grew over 25% in the first half of 2004 versus the same period in 2003, substantially outpacing industry-wide growth in this category. Additionally, for the second year in a row the Office Furniture Dealers Alliance recognized us for the industry’s most comprehensive product line, which serves as recognition of our expanded product offering.

Capture a greater share of our dealer network’s sales. While our dealer network does not offer any products of our principal direct competitors, we estimate that a significant portion of our dealers’ non-systems sales consist of seating, files and storage and casegoods products of other manufacturers. We introduced the Knoll Essentials program, a collection of easy-to-order, best-selling products from our broad range of office furnishings, in January 2004 to target this opportunity. The Knoll Essentials catalog is a marketing tool that makes selling Knoll products easier and more appealing for our dealers and has translated into increased sales volumes from our dealer network. In conjunction with the Knoll Essentials introduction, we also placed sales representatives and technical specialists into certain key dealerships to work with dealers and clients to support the program. With a standard delivery lead-time of four weeks and special dealer incentives, we have made it easy and profitable for our dealers’ salespeople to sell these products. As we introduce new seating, storage and accessories products, our dealers are agreeing to refrain from selling other manufacturers’ comparable products.

Grow the Knoll high margin specialty businesses through expanded distribution and, new product introductions. The KnollStudio, KnollExtra, KnollTextiles and Spinneybeck businesses, which represent over 15% of our revenue, are our highest margin product lines and enhance our design and quality reputation. We intend to continue to design, commission and acquire products for our KnollStudio line and re-introduce Knoll design classics to generate publicity, goodwill and increased sales. During the second half of 2004, we plan to expand our specialty product distribution network through our Knoll Space retail program, a plan to introduce high-end residential furniture direct-to-client-retailers into our distribution network. This partnership with residential furniture dealers allows us to take advantage of growing consumer interest in modern and mid-century design for the home. We expect to have 50 residential retail dealers working with us through the Knoll Space program, by the end of 2005.

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We intend to double the pace of our KnollTextiles new product introductions in 2005 to help gain share in this very fragmented market. As another component to our strategy to grow the Knoll specialty business, we appointed new KnollTextiles management with experience in both the textiles and contract furniture markets in June 2004. Other specialty products, such as the KnollExtra office accessory division and our Spinneybeck leather division, also offer the opportunity to achieve incremental growth and attractive margins.

Improve margins through our continuous improvement program and global sourcing initiative. During the past five years, we have implemented a culture of continuous improvement throughout our product development, manufacturing, client service and logistics operations. One important initiative during the recent downturn was to reduce our operations’ square footage by eliminating leased warehouse facilities and subcontracting our logistics operation to Penske Logistics LLC. Additionally, we improved our shipped complete and correct performance from 94.3% to 95.2% and our manufacturing on-time performance from 94.0% to 95.7%. Through these and other actions, we were able to enhance processes and reduce cycle time to better utilize existing space and equipment instead of adding manufacturing square footage.

We also recently launched a global sourcing initiative to capitalize on significant near-term opportunities to cost-effectively source selected components and raw materials globally. We have identified over an estimated $60 million of domestically sourced materials that could be purchased overseas while maintaining product quality and lead times. To date, we have saved a significant amount on materials sourced globally that were previously purchased domestically.

Products

We offer a comprehensive and expanding portfolio of branded office furniture products, textiles and accessories noted for their high quality and sophisticated image. Our commitment to innovation, modern design and meeting environmental standards for the workplace is reflected in products designed to provide enduring value that consistently meets client needs.

We offer products across five categories: (i) office systems, which are typically modular and moveable workspaces with functionally integrated panels, work surfaces, desk components, pedestal and other storage units, power and data systems and lighting; (ii) specialty products, including high image side chairs, sofas, desks and tables for the office and home, textiles, accessories and leathers and related products; (iii) seating; (iv) files and storage; and (v) desks, casegoods and tables. Historically, we have derived most of our revenues from office systems and specialty products; however, in recent years, we have expanded our product offering in non-systems categories, with a particular focus on seating and accessories.

Our major product categories and lines include:

Systems Furniture

We believe that office systems purchases are divided primarily between architect and designer-oriented products, and entry-level products with technology, ergonomic and functional support. Our office systems furniture reflects the breadth of these segments with a variety of planning models and a corresponding depth of product features. Our office systems furniture can define or adapt to virtually any office environment from collaborative spaces for team interaction to private executive offices.

Systems furniture consists principally of functionally integrated panels, work surfaces, desk components, pedestal and other storage units, power and data systems and lighting. These components are combined to create flexible, space-efficient work environments that can be moved, re-configured and re-used. Our clients, often working with architects and designers, have the opportunity to select from our palette of laminates, paints, veneers and textiles to design workspaces appropriate to their organizations’ personality. Our systems furniture product development strategy aims to insure that our product line enhancements can be added to clients’ existing installations, maximizing the value of our clients’ investments in our systems products.

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Office systems furniture accounted for approximately 61.1% of our sales in 2003, 64.1% of sales in 2002 and 67.2% of sales in 2001.

Systems furniture product lines include the following panel and desk-based planning models:

AutoStrada

AutoStrada, which we plan to begin shipping in the second half of 2004, is one of the most comprehensive office concepts that we have developed. AutoStrada provides aesthetic and functional alternatives to traditional panel-based and desk-based systems furniture with four planning models that combine high-performance furniture with the look of custom millwork. The AutoStrada spine-based, storage-based, wall-based and collaborative/open table planning models leverage a consistent design aesthetic to create a distinctively modern office environment. Whether an office requires a high performance open plan system, architectural casegoods, progressive private office furniture or a collaborative “big table” concept, AutoStrada provides a solution. AutoStrada received a silver 2004 Best of NeoCon^® award.

Dividends^®

Dividends is a straightforward, versatile frame-and-tile furniture system featuring a universal panel frame. Removable panel inserts, which can be ordered in fabric, steel, glass or as marker boards, meet a range of clients’ design and budgetary needs. The Dividends panel frame enables our clients to utilize either monolithic, tiled or beltway panel type for applications throughout the workplace, and power and data access may be located virtually anywhere on the panel. The panel, in combination with the universal post, makes the Dividends system easy to re-configure, and workstations do not have to be dissembled to make changes to the panel. Dividends accommodates off-module planning, encouraging workstation design flexibility as well as the placement of freestanding Dividends desk components.

Equity

The distinguishing feature of Equity is its unique centerline modularity, which maximizes the efficient use of space for high-density workplaces with a minimal inventory of parts. Equity incorporates power and data capabilities, including desktop features, and integrates with Currents^®, which is described below, to provide advanced wire management capabilities. Equity components also create modular freestanding desks and Equity 120-degree planning enables clients to create sleek, hexagonal configurations that are well suited for call and data centers. For both 90-and 120-degree Equity planning, a variety of components accommodate clients’ needs for privacy and storage: add-on screens, bi-fold doors and side-door components. Add-on screens are available in perforated steel, polycarbonate, Plexiglas^® and Imago^™ to accommodate various aesthetic and budgetary requirements. Equity continues to lead the industry in terms of sustainable design. Equity was the first office system to use synthetic recycled gypsum composite for internal panel construction, which is composed of 64% recycled materials.

Morrison

We believe that Morrison, which meets essential power and data requirements for panel and desk-based planning and private offices, offers one of the broadest ranges of systems performance in the industry. Morrison 120-degree panel-based planning, introduced in June 2003, extends the Morrison legacy of systems planning flexibility through a definitive vocabulary of universal systems components. Morrison has been upgraded continually with interchangeable enhancements from its Morrison Network, Morrison Access and Morrison Options lines. In addition, Morrison integrates with Currents to provide advanced wire management capabilities, as well as with our Calibre and Series 2 desks, pedestals, lateral files, overhead storage cabinets and architectural towers to provide compatible, cost-effective panel and desk-based solutions.

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Reff ^®

Reff is our flagship wood systems furniture platform. It combines the high performance capabilities of panel-based systems furniture and the refined elegance of wood casegoods, showcasing sophisticated all-wood construction and precisely crafted detail. Reff is available in an extensive range of veneers, and durable laminates and metal options that can be used interchangeably in panel-based open areas as well as in private offices, as freestanding casegoods. Reff offers clients a variety of flexible panel types, making it easy to create virtually any type of workstation and has extensive power and data management capabilities for data and communications technology.

Currents

Our award-winning and innovative Currents system provides advanced power and data capabilities to organizations that require maximum space-planning freedom, advanced technology support and require the mobility of freestanding furniture. The groundbreaking Currents service wall divides space and manages technology. Currents may be used in tandem with existing freestanding (or panel-based) furniture, removing the constraints imposed by conventional panel systems. Currents also integrates with competitors’ systems and freestanding furniture.

Seating

We continuously research and assess the general landscape of the office seating market, and tailor our work chair product development initiatives to enhance our competitive position for ergonomics, aesthetics, comfort and value. We believe that the result of these efforts is an increasingly innovative, versatile seating collection consistent with our brand.

Key client criteria in work chair selection include superior ergonomics, aesthetics, comfort, quality and affordability, all of which we believe is consistent with our strengths and reputation. To support our efforts, we have expanded the number of seating specialists in our sales force from 7 in 2000 to 21 in 2004 and have trained our recently appointed dealer sales representatives to focus on generating increased seating sales in our dealerships.

Our seating product lines are designed and engineered for clients in businesses of all sizes who seek distinctive, comfortable, high performance executive, task, conference and visitor chairs. The LIFE^™, RPM^®, Sapper, Bulldog^®, SOHO^™ and Visor^™ product lines, offer a range of ergonomic features at various price levels. We are also pursuing work chair product offerings in the middle-market and entry price point segment with the expected introduction of two new seating lines in 2005.

In 2003, our office seating earned the GREENGUARD^™ Indoor Air Quality Certification for low emitting products from the GEI. The Institute verified that Knoll office seating products have low chemical emissions that meet or exceed the GREENGUARD^™ indoor air quality standards. In addition, Knoll office seating products can help clients meet LEED^®-CI, requirements.

Office seating accounted for approximately 7.8% of our sales in 2003, 6.3% of our sales in 2002 and 5.6% of our sales in 2004.

Our principal seating lines are:

LIFE^™. LIFE^™, introduced in 2002, has become an industry benchmark for ergonomic and sustainable design. Recognized for its overall lightness and agility, LIFE^™ features intuitive adjustments that bring comfort and effortless control to a new performance level with an extensive range of supportive sitting options and responsive lumbar support.

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LIFE^™ received the gold 2002 Best of NeoCon^® award in task seating, two Canadian International Interior Design Exhibition gold awards for both sustainable design and for work chairs and the U.K. FX awards as seating product of the year and overall Interior Product of the year.

RPM. RPM, recognized for outstanding comfort, extraordinary performance and exceptional value, is offered with distinctive fabrics that reflect its stylish design. Engineered for durability, RPM delivers comfort and support, especially for 24-hour work environments.

Files and Storage

Our files and storage products, featuring the Calibre and Series 2 product lines, are designed with unique features to maximize storage capabilities throughout the workplace. Our core files and storage products consist of lateral files, mobile pedestal and other storage units, bookcases and overhead storage cabinets. In 2004, we expanded the breadth of our storage products by introducing new storage towers, including wardrobe towers, bookcase towers and display towers. Knoll Calibre storage towers received a silver 2004 Best of NeoCon^® award.

Our range of files and storage completes our product offering, allowing clients to address all of their furniture needs with us, especially in competitive bid situations where our office systems, seating, tables and desks have been specified. The breadth of the product line also enables our dealers to offer our files and storage as stand alone products to businesses with smaller requirements.

Our files and storage are available in an extensive array of sizes, configurations and colors, which can be integrated with other manufacturers’ stand-alone furniture, thereby increasing our penetration in competitor accounts. In addition, certain elements of the product line can be configured as freestanding furniture in private offices or open-plan environments.

Files and storage accounted for approximately 5.0% of our sales in 2003, 5.4% of our sales in 2002 and 4.5% of our sales in 2001.

Tables and Desks

We offer collections of adjustable tables as well as meeting, conference, training, dining, and café tables for large scale projects and stand-alone desks and table desks. These items are also sold as stand-alone products through our dealers to businesses with smaller requirements.

Our Crinion, Interaction^™, and Upstart^™ product lines include adjustable, work, meeting, conference and training tables. These product lines range from independent tables to tables suitable for workstations that support individual preferences for computer and writing heights to plannable desks that can be linked together to build and reshape larger work areas. Additionally, Interaction tables are designed to be compatible with Dividends, Equity, Morrison and Reff office systems.

Our principal desk product lines, detailed to meet the needs of the contemporary office, offer traditional wood casegoods construction synonymous with the Knoll standard of quality. These desk product lines include: Magnusson^®, designed especially to serve the day-to-day wood casegoods requirements of Knoll dealers; Reference, with over thirty choices of natural veneers and finishes; and Crinion, a progressive casegoods aesthetic.

We synchronize our wood casegoods product development with standards provided by the Forest Stewardship Council (FSC), the industry’s most rigorous guidelines for forest stewardship. We offer Chain-of-Custody documentation for all of our FSC-certified wood products. In addition, our wood casegoods products can help clients to meet U.S. Green Building Council Leadership in Energy and Environmental Design, Commercial Interiors, or LEED^®-CI, requirements.

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Tables and desks accounted for approximately 2.8% of our sales in 2003, 2.5% of our sales in 2002 and 2.6% of our sales in 2001.

Specialty Products

The KnollStudio, KnollTextiles, KnollExtra and Spinneybeck businesses serve as a marketing and distribution umbrella for our portfolio of specialty product lines. These businesses, which represent over 15% of our revenue, are our highest margin product lines and enhance our design and quality reputation.

KnollStudio is a renowned source for classic modern furniture and spirited new designs for the workplace, homes, hotels, government and educational institutions. KnollStudio includes wood side chairs; conference, dining and occasional tables; and café chairs, barstools and lounge seating. These products were designed in collaboration with many of the twentieth century’s most prominent architects and designers, such as Marcel Breuer, Frank O. Gehry, Maya Lin, Ludwig Mies van der Rohe, Isamu Noguchi, Jorge Pensi, Jens Risom, Eero Saarinen and Kazuhide Takahama.

KnollTextiles, established in 1947 to create high-quality textiles for Knoll furniture, offers upholstery, panel fabrics, wall coverings and drapery that harmonize color, pattern and texture. KnollTextiles offers products for corporate, hospitality, healthcare and residential interiors. KnollTextiles products are used in the manufacture of Knoll furniture and are sold to clients for use in other manufacturers’ products. Extending KnollTextiles’ heritage of product innovation from classic upholstery to ecologically oriented panel fabrics, we introduced Imago in 2000, a product that defined an entirely new category of hard surface materials. Designers who collaborate with us on KnollTextiles include Suzanne Tick and 2x4.

KnollExtra offers accessories that complement our office furniture products, including technology support accessories, desktop organizational tools, lighting and storage. KnollExtra integrates technology comfortably into the workplace, meeting the increased demand for flat panel monitor supports, central processing unit holders as cable management with such products as Zorro, Wishbone^™ and Rotation, which deliver adjustability and space savings. In 2004, our innovative JellyFish laptop holder won a 2004 Best of NeoCon^® gold award.

Spinneybeck Enterprises, Inc., our wholly owned subsidiary, offers leathers and related products, including leather rugs and wall panels. Spinneybeck supplies high-quality upholstery leather for use on Knoll furniture and for sale directly to clients, including other office furniture manufacturers, upholsterers, aviation, custom coach and boating manufacturers.

Specialty products accounted for approximately 15.8% of our sales in 2003, 15.7% of our sales in 2002 and 14.1% of our sales in 2001.

European Products

Knoll Europe has a product offering that allows clients to purchase a complete office environment from a single source. In addition, we offer certain products designed specifically for the European market. Our presence in the European market provides strategic positioning with our clients that have international offices where they would like to maintain their Knoll facility standard. In addition to working with our North American clients’ international offices, we also have a local European client base.

In Europe our core product categories include: (i) desk systems, including the KnollScope, PL1 and the Alessandri system; (ii) KnollStudio; (iii) seating, including a comprehensive range of chairs; and (iv) storage units, which are designed to complement our desk products.

Knoll Europe accounted for approximately 7.2% of our sales in 2003, 6.0% of our sales in 2002 and 6.0% of our sales in 2001.

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Product Design and Development

Our design philosophy reflects our historical commitment to working with the world’s preeminent designers to develop products and product enhancements that delight and inspire. By combining our designers’ creative vision with our commitment to developing products that address changing business needs, we have been able to generate strong demand for our product offerings and cultivate brand loyalty among our target clients. Our reputation as a design leader and history of working with these preeminent designers allows us to continue to attract and collaborate with a diverse group of the world’s leading designers. In addition, these types of collaborations are consistent with our commitment to a lean organizational structure and incentive-based compensation, with the resulting costs a variable royalty-based fee as opposed to fixed costs associated with a larger in-house design staff.

As part of our continuous improvement program we have implemented a New Product Commercialization Process to ensure the quality and repeatability of our product development processes. This has helped us reduce product development cycle time and improve the quality of our output. We have also made a significant investment in Pro/ENGINEER^® design tools and rapid prototyping technology to reduce product design and development lead times and improve our responsiveness to special requests for customized solutions. We work very closely with our designers during this phase of design and development, to ensure the most viable products that balance innovative, modern design with practical, functional style. For all major development efforts we form cross-functional teams with dedicated leaders to facilitate a seamless flow into manufacture and accountability on cost and schedule. Additionally, throughout the development process, we evaluate the materials we use with a focus on incorporating recycled and recyclable materials into our products.

Sales and Distribution

Our clients are typically Fortune 1000 companies, governmental agencies and other medium to large sized organizations in a variety of industries including education, healthcare and hospitality. Our direct sales force of 314 professionals and network of 225 independent dealers in North America work in close partnership with clients and design professionals to specify distinctive work environments. Our direct sales representatives, in conjunction with our independent dealers, sell to and call directly on our key clients. Our independent dealers also call on many of our other medium and small sized clients to provide seamless sales support and client service.

Our products and knowledgeable sales force have generated strong brand recognition and loyalty among architects, designers and corporate facility managers, all of whom are key decision makers in the office furnishings purchasing process. Our strong relationships with architects and design professionals help us stay abreast of key workplace trends and position us to better meet the changing needs of our clients. For example, we have invested in training all of our Architect and Designer specialists as LEED^® accredited professionals to help our clients better address environmental issues that arise in the design of the workplace. We have an over $6 billion installed base of office systems, which provides a strong platform for recurring and add-on sales.

We recently realigned our sales force to target strategic areas of opportunity. For example, we created the Global Business Division to target competitively held accounts. We also placed sales representatives and technical specialists into certain dealerships to support programs such as Knoll Essentials, as well as strengthened our focused seating and KnollExtra sales team with new senior leadership.

In addition to coordinating sales efforts with our sales representatives, our dealers generally handle project management, installation and maintenance for client accounts after the initial product selection and sale. Although many of these dealerships also carry products of other manufacturers, they have agreed not to act as dealers for our principal direct competitors. We have not experienced significant dealer turnover. Our dealers’ substantial commitment to understanding our product line, and their strong relationship with us, serve to discourage dealers from changing vendor affiliations. We are not dependent on any one dealer, the largest of which accounted for less than 4.6% and 6.4% of our North American sales in 2003 and the first half of 2004, respectively.

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We provide product training for our sales force and dealer sales representatives, who make sales calls primarily to small to medium sized businesses. As part of our commitment to building relationships with our dealer sales representatives, we introduced the Knoll Essentials program in January 2004, a catalog program developed in response to dealer requests for a consolidated, user-friendly selling tool for day-to-day systems, seating, storage and accessory products. The Knoll Essentials program includes dealer incentives to sell our products, and has already, in the first half of 2004, increased dealer generated sales by $7 million as compared to the first half of 2003. We also employ a dedicated team of dealer sales representatives to work with Knoll dealerships.

No single client represented more than 2.8% of our North American sales during 2003. However, a number of U.S. government agencies purchase our products through multiple contracts with the General Services Administration, or “GSA”. Sales to government entities under the GSA contracts aggregated approximately 12.8% of consolidated sales in 2003, with no single U.S. government order accounting for more than 1% of consolidated sales.

In Europe, we sell our products in largely the same manner as in North America, through a direct sales force and a network of dealers. In Europe, the majority of our sales come from the United Kingdom, France and Italy, as well as export markets in the Middle East. We also sell our products designed and manufactured in North America to the international operations of our core clients.

Manufacturing and Operations

We operate manufacturing sites in North America, with plants located in East Greenville, Pennsylvania, Grand Rapids and Muskegon, Michigan and Toronto, Canada. In addition, we have two plants in Italy: one in Foligno and one in Graffignana. We manufacture and assemble our products to specific customer order and operate all of our facilities under a philosophy of continuous improvement, lean manufacturing and efficient asset utilization. All of our plants are registered under ISO 9000, an internationally developed set of quality criteria for manufacturing companies. Additionally, our North American plants are ISO 14001 certified, which reflects our commitment to environmentally responsible practices.

The root of our continuous improvement efforts lies in our philosophy of lean manufacturing that drives our operations. As part of this philosophy, we partner with suppliers who can supply our facilities efficiently, often with just-in-time deliveries, thus allowing us to reduce our raw materials inventory. We also form Kaizen work groups in the plants, to develop best practices, to minimize scrap and time and material waste, at all stages of the manufacturing process. The involvement of employees at all levels ensures an organizational commitment to lean and efficient manufacturing operations.

Starting in 2000, we implemented new programs and procedures, which improved our operations from order entry through shipment, resulting in more efficient workflows, reduced lead times and enhanced client service. We have significantly reduced order-processing time and accuracy by investing in order entry technology that provides a direct interface with our dealer network through an Internet based order entry tracking system. In addition, we have improved associate safety performance, outsourced our logistics operation, all while improving service performance. Other areas of focus have been process cycle time, percentage of orders shipped complete and on-time, order correctness and other key measures aimed at driving service improvements.

Below are some examples of our continuous improvement initiatives and the related benefits of these efforts:

• Currents Frame Welder Changeovers: Our goal was to reduce the number of changeovers by frame welders in the manufacture of our Currents products by 50% and to eliminate process waste in order to increase output by 20%. The changeover process was redesigned from a complex setting and gauge adjustment procedure to a single flip gauge procedure. Additionally, our team was able to simplify the

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flow of materials into the area, reducing the number of skids of materials required. Our actual result was a reduction in changeover time from 17.8 minutes to 2 minutes (89%), an increase in daily output by 44%, a reduction in floorspace by 44%, a decrease in work-in-process by 67%, and a reduction in throughput time from 72 hours to 24 hours (67%).

• LIFE^™ Line: Our goal was to increase productivity on the assembly line by 20%. Through improved line balance, parts organization and parts presentation, we were able to reduce cycle time and increase productivity by 40%, which equates to a cost savings at full volume of approximately $750,000 per year.

• Muskegon Paint Line Powder Scrap Reduction: Our goal was to reduce the amount of scrap powder on the paint line at our Muskegon facility. Our team implemented dual booths to reclaim scrap powder for the top five colors, which resulted in a total powder scrap savings of $152,000 per year.

• Muskegon Pedestal Fabrication Line Changeovers: Our goal was to reduce changeovers by 50%. Our team changed the method of materials presentation and redesigned equipment operations. Our actual result was a reduction in changeover time from 21 minutes to 5 minutes (76%).

In addition to our continued focus on enhancing the efficiency of our manufacturing operations, we also seek to reduce costs through our recently initiated global sourcing effort. We have capitalized on raw material and component cost savings available through lower cost global suppliers. This broader view of potential sources of supply has enhanced our leverage with domestic supply sources, and we have been able to reduce our cycle times by extracting improvements from all levels throughout the supply chain.

Raw Materials and Suppliers

Our purchasing function in North America is centralized at our East Greenville facility. This centralization, and our close relationships with our primary suppliers, has enhanced our ability to realize purchasing economies of scale and implement “just-in-time” inventory practices. We use steel, lumber, paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers and upholstery filling material. We currently do not have any long-term supply contracts and believe that the supply sources for these materials are adequate. We do not rely on any sole supplier as the sole source of any of our raw materials, except for certain electrical products.

Competition

The office furniture market is highly competitive. Office furniture companies compete on the basis of (i) product design, including performance, ergonomic and aesthetic features, (ii) product quality and durability, (iii) relationships with clients, architects and designers, (iv) strength of dealer and distributor network, (v) on-time delivery and (vi) price. We estimate that we had a 7.5% market share in the U.S. office furniture market in 2003. We estimate that five companies, including us, represented approximately 66% of the U.S. market in 2003.

Some of our competitors, especially those in North America, are large and have significantly greater financial, marketing, manufacturing and technical resources than we do. Our most significant competitors in our primary markets are Herman Miller, Inc., Steelcase, Inc. and Haworth, Inc. and, to a lesser extent, Allsteel, Inc. an operating unit of HNI Corporation, formerly known as HON Industries, Inc., and Teknion Corporation. These competitors have a substantial volume of furniture installed at businesses throughout the country, providing a continual source of demand for further products and enhancements. Moreover, the products of these competitors have strong acceptance in the marketplace. Although we believe that we have been able to compete successfully in our markets to date, there can be no assurance that we will be able to continue to do so in the future.

Patents and Trademarks

We consider securing and protecting our intellectual property rights to be important to our business. We own approximately 82 active U.S. utility patents on various components used in our products and systems and

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approximately 103 active U.S. design patents. We also own approximately 196 patents in various foreign countries. We own approximately 49 trademark registrations in the U.S., including registrations to the following trademarks, as well as related stylized depictions of the Knoll work mark: Knoll^®, KnollStudio^®, KnollExtra^®, Good Design Is Good Business^®, A3^®, Bulldog^®, Calibre^®, Currents^®, Dividends^®, Equity^®, Parachute^®, Propeller^®, Reff^®, RPM^®, Upstart^®, Visor^®. We also own approximately 144 trademarks registered in foreign countries. Additionally, we have the right to use the LIFE^™ trademark through an exclusive licensing arrangement.

Backlog

Our backlog of unfilled orders was $107.0 million at December 31, 2003 and $136.4 million at December 31, 2002. We manufacture substantially all of our products to order and expect to fill substantially all outstanding unfilled orders within the next twelve months. As such, backlog is not a significant factor used to predict our long-term business prospects.

Foreign and Domestic Operations

Our principal manufacturing operations and markets are in North America, and we also have manufacturing operations and markets in Europe. Our sales to clients, operating income and net property, plant and equipment are summarized by geographic areas below. Sales to clients are attributed to the geographic areas based on the point of sale.

	United States		Canada		Europe		Consolidated
	(in thousands)
2003
Sales to clients	$	627,844	$	19,263	$	50,139	$	697,246
Property, plant and equipment, net		111,213		30,448		12,992		154,653
2002
Sales to clients	$	708,409	$	18,746	$	46,108	$	773,263
Property, plant and equipment, net		128,256		25,814		11,434		165,504
2001
Sales to clients	$	899,042	$	26,807	$	59,539	$	985,388
Property, plant and equipment, net		137,200		27,115		10,723		175,038

Environmental Matters

We believe that we are substantially in compliance with all applicable laws and regulations for the protection of the environment and the health and safety of our employees based upon existing facts presently known to us. Compliance with federal, state, local and foreign environmental laws and regulations relating to the discharge of substances into the environment, the disposal of hazardous wastes and other related activities has had and will continue to have an impact on our operations, but has, since the formation of our predecessor in 1990, been accomplished without having a material adverse effect on our operations. There can be no assurance that such laws and regulations will not change in the future or that we will not incur significant costs as a result of such laws and regulations. We have trained staff responsible for monitoring compliance with environmental, health and safety requirements. Our goal is to reduce and, wherever possible, eliminate the creation of hazardous waste in its manufacturing processes. While it is difficult to estimate the timing and ultimate costs to be incurred due to uncertainties about the status of laws, regulations and technology, based on information currently known to us and accrued environmental reserves, we do not expect environmental costs or contingencies to have a material adverse effect on us. The operation of manufacturing plants entails risks in these areas, however, and we cannot assure you that we will not incur material costs or liabilities in the future which could adversely effect us.

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We have been identified as a potentially responsible party pursuant to CERCLA for remediation costs associated with waste disposal sites that we previously used. CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or the legality of disposal and, under certain circumstances liability, may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages for harm to natural resources. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. Based on the information currently known to us, we do not expect any liability we may have under CERCLA, or related to a CERCLA site, to be material.

Our Principal Stockholder

Our principal stockholder is Warburg, Pincus Ventures, L.P. As of June 30, 2004, Warburg Pincus and its affiliates beneficially owned approximately 90.6% of our outstanding common stock. Following the completion of this offering, Warburg Pincus and its affiliates will beneficially own approximately         % of our common stock, or         % if the underwriters’ over-allotment option is fully exercised.

Employees

As of June 30, 2004, we employed a total of 3,518 people, consisting of 2,256 hourly and 1,262 salaried employees. The Grand Rapids, Michigan plant is our only unionized plant within the U.S. In August 2002, we reached an agreement with the Carpenters and Joiners of America, Local 1615 on a new four-year collective bargaining agreement covering hourly employees at the plant. The new agreement expires on August 27, 2006, subject to automatic one-year renewals if the agreement is not terminated. From time to time, there have been unsuccessful efforts to unionize at our other North American locations. For example, recently, a petition filed with the National Labor Relations Board seeking to unionize employees at our Muskegon, Michigan, facility was the subject of a vote by our employees at this facility. In this recent vote, our employees voted against unionization. We believe that relations with our employees throughout North America are good. Nonetheless, it is possible that our employees may continue attempts to unionize. Our employees in Italy are represented by unions. We have experienced brief work stoppages from time to time at our plants in Italy, certain of which related to national or local issues. Such work stoppages have not materially affected us.

Legal Proceedings

We are from time to time subject to, and are presently involved in, litigation or other legal proceedings arising out of the ordinary course of business. Based upon information currently known to us, we believe the outcome of such proceedings will not have, individually or in the aggregate, a material adverse effect on our business, our financial condition or results of operations.

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MANAGEMENT

Executive Officers and Directors

Our executive officers and directors as of September 10, 2004 are:

Name	Age	Position
Burton B. Staniar	62	Chairman of the Board
Andrew B. Cogan	42	Chief Executive Officer, Knoll, Inc., and Director
Kathleen G. Bradley	55	President and Chief Executive Officer, Knoll North America, and Director
Arthur C. Graves	57	Senior Vice President—Sales and Distribution
Stephen A. Grover	52	Senior Vice President—Operations
Carl G. Magnusson	64	Executive Vice President and Director of Design
Barry L. McCabe	57	Senior Vice President and Chief Financial Officer
Patrick A. Milberger	47	Senior Vice President, General Counsel and Secretary
S. David Wolfe	47	Vice President—Human Resources
Jeffrey A. Harris	48	Director
Sidney Lapidus	66	Director
Kewsong Lee	39	Director
John H. Lynch	52	Director
Kevin Kruse	34	Director

Burton B. Staniar has served as Chairman of the Board since his appointment in December 1993. Mr. Staniar served as our Chief Executive Officer from December 1993 to January 1997. Prior to that time, Mr. Staniar held a number of assignments at Westinghouse, including President of Group W Cable and Chairman and Chief Executive Officer of Westinghouse Broadcasting. Mr. Staniar is also a director of Church and Dwight Co., Inc. and Journal Register, Co.

Andrew B. Cogan has served as a director since February 1996 and assumed the role of Chief Executive Officer of Knoll, Inc. in April 2001 after serving as Chief Operating Officer since December 1999. Mr. Cogan has held several positions in the design and marketing group worldwide since joining us in 1989, including Executive Vice President—Marketing and Product Development and Senior Vice President. Mr. Cogan is also a director of the Chinati Foundation in Marfa, Texas.

Kathleen G. Bradley has served as a director since November 1999 and assumed the role of President and Chief Executive Officer, Knoll North America, in April 2001. She was named as our President in December 1999, after serving as Executive Vice President—Sales, Distribution and Customer Service since August 1998, Senior Vice President since 1996 and Divisional Vice President for Knoll’s southeast division since 1988. Prior to that time, Ms. Bradley was regional manager for our Atlanta region, a position to which she was promoted in 1983. She began her career with Knoll in 1979.

Arthur C. Graves has served as our Senior Vice President—Sales and Distribution since 1999. He began his career with us in 1989 and has held several senior sales management positions with us since that time. Prior to joining us, Mr. Graves was with Herman Miller, Inc. from 1979 to 1989 where he held several sales and management positions. Mr. Graves’ career in the contract office furniture industry has spanned 25 years.

Stephen A. Grover has served as our Senior Vice President of Operations since May 1999 and is responsible for our Purchasing, Logistics, Product Development and Manufacturing teams. Prior to joining us, he was the Global Manufacturing Manager for General Electric’s Magnetic Resonance Imaging business. Over his 19-year career at GE, he also worked across the plastics business and medical systems business in progressively larger roles.

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Carl G. Magnusson joined our company in 1976 and has served as our Executive Vice President and Director of Design since July 2003. Prior to this role, Mr. Magnusson served as our Senior Vice President and Director of Design. In 1997, Mr. Magnusson received the Pacific Design Center’s award for lifetime achievement.

Barry L. McCabe was appointed as our Senior Vice President and Chief Financial Officer in May of 2002, after serving as Senior Vice President, Treasurer and Controller since January 2000 and serving as Vice President, Treasurer and Controller since January 1995. Prior to joining us in August 1990, Mr. McCabe worked with a number of Westinghouse business units during his 16 year career at Westinghouse.

Patrick A. Milberger was appointed as our Senior Vice President, General Counsel and Secretary in January 2000, after serving as Vice President, General Counsel and Secretary. Mr. Milberger joined us as Vice President and General Counsel in April 1994. Prior to joining us, Mr. Milberger served as an assistant general counsel and in a number of other positions in the Westinghouse law department, which he joined in 1986.

S. David Wolfe was promoted to Vice President—Human Resources in October 2000. Mr. Wolfe joined us in May 2000 as Process Improvement Manager. Prior to joining us, he spent seven years at General Electric Company, where he held a variety of management positions, the last being Manager of Installation Services for GE Medical Systems.

Jeffrey A. Harris has served as a director since February 1996. Mr. Harris is a Managing Director of Warburg Pincus LLC, where he has been employed since 1983. Mr. Harris is also a director of Bill Barrett Corporation, Spinnaker Exploration Company, Proxim Corporation and several private companies.

Sidney Lapidus has served as a director since February 1996. Mr. Lapidus is a Managing Director and Senior Advisor of Warburg Pincus LLC, where he has been employed since 1967. Mr. Lapidus is a director of Lennar Corporation and Information Holdings, Inc.

Kewsong Lee has served as a director since February 1996. Mr. Lee is a Managing Director of Warburg Pincus LLC, where he has been employed since 1992. Mr. Lee is a director of Arch Capital Group Ltd., Eagle Family Foods Holdings, Inc., TransDigm Holding Company, TransDigm Inc. and several private companies.

John H. Lynch has served as a director since 1994. Mr. Lynch is Chief Executive Officer of The Lynch Group, a management consulting firm he founded. Mr. Lynch resigned as our Chief Executive Officer effective March 31, 2001. Mr. Lynch joined us as Vice Chairman of the Board in May 1994. He was subsequently elected President and in January 1997 was elected Chief Executive Officer. Mr. Lynch is a director of Citizens Bank New Hampshire.

Kevin Kruse has served as a director since December 2003. Mr. Kruse has been a Vice President of Warburg Pincus LLC since January 2003 and has been employed by Warburg Pincus LLC since February 2002. Prior to joining Warburg Pincus, Mr. Kruse was employed by AEA Investors Inc. Prior to that, he was employed by Bain & Co., a management consulting firm. Mr. Kruse is also a director of Polypore International, Inc., TransDigm Holding Company and TransDigm Inc.

Board of Directors and Committees

Term of Directors and Composition of Board of Directors

Immediately prior to this offering, our board of directors will be divided into three staggered classes of directors of the same or nearly the same number. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The

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terms of the directors will expire upon election and qualification of successor directors at the Annual Meeting of Stockholders to be held during the years 2005 for the Class I directors, 2006 for the Class II directors and 2007 for the Class III directors.

• Our Class I directors will be             ,              and            ;

• Our Class II directors will be             ,              and             ; and

• Our Class III directors will be             ,             ,              and             .

Our amended and restated certificate of incorporation and bylaws provide that the number of our directors shall be fixed from time to time by a resolution of the majority of our board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class shall consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Term of Executive Officers

Each officer serves at the discretion of the board of directors and holds office until his successor is elected and qualified or until his earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Director Compensation

During 2003, our directors did not receive compensation for service on the board of directors but were reimbursed for certain expenses in connection with attendance at board and committee meetings.

Board Committees

As of the closing of this offering, our board of directors will have an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which has or will have the composition and responsibilities described below.

Audit Committee. Our audit committee oversees a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements. Our audit committee (i) assists our board in monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor’s qualifications and independence, and the performance of our internal audit function and independent auditors; (ii) assumes direct responsibility for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged for the purpose of performing any audit, review or attest services and for dealing directly with any such accounting firm; (iii) provides a medium for consideration of matters relating to any audit issues; and (iv) prepares the audit committee report that the SEC rules require be included in our annual proxy statement or annual report on Form 10-K. The members of our audit committee will be Messrs.             ,              and             . Mr.              will be our audit committee financial expert under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act. We believe that the composition of our audit committee meets the requirements for independence under the current requirements of the Sarbanes-Oxley Act, the New York Stock Exchange and SEC rules and regulations. We believe that the functioning of our audit committee will comply with the applicable requirements of the Sarbanes-Oxley Act, the New York Stock Exchange and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.

Compensation Committee. Our compensation committee reviews and recommends policy relating to compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior officers, evaluating the

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performance of these officers in light of those goals and objectives and setting compensation of these officers based on such evaluations. The compensation committee reviews and evaluates, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. The members of our compensation committee will be Messrs.             ,              and             . Our compensation committee has sole discretion concerning administration of our stock option 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 ten years. Because Warburg Pincus will own more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for the purposes of the New York Stock Exchange listing requirements. As such, we are permitted, and have elected, to opt out of the New York Stock Exchange listing requirements that would otherwise require our compensation committee to be comprised entirely of independent directors.

Nominating and Corporate Governance Committee. Upon the closing of this offering, we will establish a nominating and corporate governance committee consisting of Messrs.             ,              and             , each of whom is a non-management member of our board of directors. The nominating and corporate governance committee will oversee and assist our board of directors in identifying, reviewing and recommending nominees for election as directors; evaluate our board of directors and our management; develop, review and recommend corporate governance guidelines and a corporate code of business conduct and ethics; and generally advise our board of directors on corporate governance and related matters. Because Warburg Pincus will own more than 50% of the voting power of our common stock after this offering, we are considered to be a “controlled company” for the purposes of the New York Stock Exchange listing requirements. As such, we are permitted, and have elected, to opt out of the New York Stock Exchange listing requirements that would otherwise require our nominating and corporate governance committee to be comprised entirely of independent directors.

Our board of directors may from time to time establish other committees.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our board of directors or compensation committee.

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Executive Compensation

The following table sets forth summary information concerning the total compensation awarded to or earned in the years ended December 31, 2003, 2002 and 2001, respectively, by our chief executive officer and by each of our four other most highly compensated executive officers whose total annual salary and bonus exceeded $100,000. We refer to these persons elsewhere in this prospectus as our “named executive officers.”

Summary Compensation Table

Name and Principal Position	Year	Annual Compensation				Long-Term Compensation Awards Securities Underlying Options (1)	All Other Compensation (2)
		Salary		Bonus
Burton B. Staniar Chairman of the Board	2003 2002 2001	$	250,008 250,007 200,004	$	200,000 215,000 625,000	—   50,000 —	$	6,096 5,916 5,199
Andrew B. Cogan Chief Executive Officer, Knoll, Inc.	2003 2002 2001		400,008 400,008 391,673		400,000 425,000 750,000	—   100,000 100,000		96 96 99
Kathleen G. Bradley President and Chief Executive Officer, Knoll North America	2003 2002 2001		400,008 400,008 391,673		400,000 425,000 750,000	—   100,000 100,000		6,096 5,916 5,199
Stephen A. Grover Senior Vice President—Operations	2003 2002 2001		218,392 207,992 207,992		200,000 250,000 300,000	—   50,000 —		6,096 5,916 5,199
Arthur C. Graves Senior Vice President—Sales and Distribution	2003 2002 2001		212,176 208,016 208,016		150,000 200,000 300,000	—   50,000 —		6,096 5,916 5,199

(1) Represents the aggregate number of shares of common stock subject to options granted to the named executive officers.

(2) Amounts in this column represent our matching contributions to the Knoll, Inc. Retirement Savings Plan, which was $6,000 for each named executive officer, other than Mr. Cogan, in 2003, and the payment by us of premiums in respect of term life insurance, which was $96 for each named executive officer in 2003.

Aggregate Option Exercises and Year-End Option Values

There were no options exercised by the named executive officers in 2003. The following table sets the number and value of unexercised options held by each named executive officer as of December 31, 2003. Because there was no public trading market for our common stock as of December 31, 2003, the value of the unexercised in-the-money options at year-end have been calculated using the assumed initial public offering price of $             per share minus the applicable per share exercise price.

	Number of Securities Underlying Unexercised Options at December 31, 2003		Value of Unexercised In-the-Money Options at December 31, 2003
Name	Exercisable	Unexercisable	Exercisable	Unexercisable
Burton B. Staniar	192,420	35,000
Andrew B. Cogan	357,958	120,000
Kathleen G. Bradley	539,358	120,000
Stephen A. Grover	156,936	58,656
Arthur C. Graves	74,140	35,000

Stock Option Grants

We did not grant any stock options to our named executive officers during 2003 or during the first six months of 2004.

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Employment Agreements

Mr. Cogan serves as our Chief Executive Officer pursuant to an employment agreement dated March 23, 2001, as amended, and Ms. Bradley serves as President and Chief Executive Officer of Knoll North America pursuant to an employment agreement dated March 23, 2001, as amended. Effective September 1, 2004, each employment agreement provides for a base salary of $500,000 subject to annual review and a target annual bonus of 100% of base salary based upon the attainment of goals set by our board of directors. The employment agreements for Mr. Cogan and Ms. Bradley will renew automatically for additional one-year terms each April 1 unless either party gives 60 days notice of his, her or its intention not to renew. The agreements may be terminated by us at any time, but if so terminated without “cause,” or if we fail to renew the agreements, we must pay the employee termination compensation. In the case of Mr. Cogan, the termination compensation is an amount equal to 200% of his then current base salary plus the average of the annual bonuses paid to him for the last two completed fiscal years preceding the fiscal year of termination. In the case of Ms. Bradley, the termination compensation is an amount equal to 100% of her then current base salary plus the average of the annual bonuses paid to her for the last two completed fiscal years preceding the fiscal year of termination. The agreements also contain non-competition, non-solicitation (during the term of the agreement and for two years thereafter for Mr. Cogan and during the term of the agreement and for one year thereafter for Ms. Bradley) and confidentiality provisions.

Mr. Staniar serves as our Chairman of the Board pursuant to an amended and restated employment agreement dated January 1, 2000, as amended. The employment agreement with Mr. Staniar provides for a base salary of $250,000 subject to annual review and a target bonus of 100% of base salary based upon the attainment of goals set by the board of directors. The employment agreement for Mr. Staniar will continue to renew automatically for additional one-year terms each January 1, unless either party gives 60 days notice not to renew. Mr. Staniar’s agreement may be terminated at any time by us, but if so terminated without “cause,” or if we fail to renew the agreement, we must pay him an amount equal to 100% of his then current base salary. The agreement also contains non-competition, non-solicitation (during the term of the agreement and for one year thereafter) and confidentiality provisions.

Mr. Graves serves our Senior Vice President - Sales and Distribution in accordance with the terms set forth in an offer letter dated July 30, 1999. Effective September 1, 2004, as approved by our compensation committee, Mr. Graves’ base salary will be $240,000 subject to annual review and a target annual bonus of 100% of base salary based upon the attainment of goals set by our board of directors.

Mr. Grover serves our Senior Vice President of Operation in accordance with the terms set forth in an offer letter dated March 11, 1999. Effective January 1, 2004, as approved by our compensation committee, Mr. Grover’s base salary is $240,000 subject to annual review and a target annual bonus of 100% of base salary based upon the attainment of goals set by our board of directors.

Certain stock option agreements provide that upon a change of control (as defined therein) of our company, 100% of the options, to the extent not previously exercised, shall become fully vested and exercisable. This provision is included in each stock option agreement entered into with the named executive officers.

Severance Agreement

Effective May 2001, we implemented a severance plan for the benefit of full-time and certain part time non-union employees. Severance amounts paid under the plan are based on length of employment. We may modify, amend or terminate the severance plan for any reason at any time without prior notice.

Long-Term Incentive Plan

In 2003, we adopted the Knoll Inc. Long-Term Incentive Plan, or LTIP. Upon the closing of this offering, the LTIP will be terminated. No operating expense charge for the LTIP has been or will be recorded. The purpose

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of the LTIP was to attract, retain, and motivate key employees and promote long-term growth and profitability. The LTIP provided long-term incentives, contingent upon meeting certain corporate performance goals or upon a change in control.

Prior to its termination, awards under the LTIP were based upon achieving annual Operating Profit goals for two consecutive LTIP years within the four-year period ending December 31, 2006. The awards pool ranged from ten percent of Operating Profit if the average annual Operating Profit for two consecutive LTIP years equaled or exceeded $125 million up to a maximum of twenty-five percent on the average annual Operating Profit up to $200 million. The participants in the LTIP were granted interests in the awards pool in the form of LTIP units.

The following table sets forth information concerning the LTIP awards made to named executive officers in the year ended December 31, 2003.

Name	Number of Units	Performance Period	Estimated Future Payouts
Burton B. Staniar	7,000	1/1/03 - 12/31/06	$	0
Andrew B. Cogan	22,000	1/1/03 - 12/31/06		0
Kathleen G. Bradley	22,000	1/1/03 - 12/31/06		0
Stephen A. Grover	8,000	1/1/03 - 12/31/06		0
Arthur C. Graves	7,000	1/1/03 - 12/31/06		0

2004 Performance-Based Restricted Stock Awards

In lieu of and effective upon the termination of the LTIP and the closing of this offering, we intend to grant, under the Amended and Restated 1999 Stock Incentive Plan, performance-based restricted stock awards to former LTIP participants and certain other key employees covering 800,000 shares of common stock in the aggregate. These awards will provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. The restricted stock awards will vest as to one-sixth of the shares underlying each award to the extent that the average Knoll operating profit for any two-year period is equal to $100.0 million. The awards will vest as to an additional one-sixth upon the achievement of $115.0 million in average operating profit over such a period, an additional one-sixth upon the achievement of $130.0 million in average operating profit over such a period, an additional one-sixth upon the achievement of $145.0 million in average operating profit over such a period, an additional one-sixth upon the achievement of $160.0 million in average operating profit over such a period, with full vesting upon the achievement of $175.0 million in average operating profit over such a period. In any event, the awards will fully vest on the sixth anniversary of the date of grant and will be subject to pro rata vesting upon a change of control of us, if earlier, regardless of whether the operating profit targets are met. The awards will also be subject to pro rata vesting if the recipient’s employment is terminated on account of death, disability or a termination by us without cause.

Stock Incentive Plans

We sponsor three stock incentive plans:

• 1996 Stock Incentive Plan (Amended and Restated as of November 4, 1999);

• 1997 Stock Incentive Plan (Amended and Restated as of November 4, 1999); and

• 1999 Stock Incentive Plan (Amended and Restated as of             , 2004).

The plans were created to encourage stock ownership by officers, directors, consultants and certain other key employees in order to increase their proprietary interest in our success and to encourage them to remain with us.

The plans will be administered by our compensation committee that will have full power to determine persons eligible to participate in the plans, to interpret the plans, to adopt the rules, regulations and guidelines

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necessary or proper to carry out the plans, and to determine the type and terms of any awards to be granted. Awards may include but are not limited to the following:

• Stock Options: A stock option is a grant of a right to purchase a specified number of shares of our common stock at a stated price. The committee establishes the option exercise price. However, the exercise price must not be less than the fair market value per share at the time the option is granted. The committee retains the right to reprice options to a lower exercise price for any reason.

• Restricted Stock Awards: A restricted stock award is an award of stock which will vest if performance or other goals are achieved over a specified period.

• Other Awards: The committee may grant any other cash, stock or stock related awards that it deems appropriate, including, but not limited to, stock appreciation rights, limited stock appreciation rights, phantom stock awards, the bargain purchase of stock and stock bonuses.

The specific terms, conditions, performance requirements, limitations and restrictions of any award will be determined by our compensation committee and set forth in an award agreement entered into between us and a participant. Options have a maximum contractual life of ten years. Grants to employees generally become partially vested and available for exercise one year from the date of the award agreement. On such date, 30% of the shares covered by the options become available for exercise. An additional 20% vest and become available on the second and third anniversaries and an additional 30% on the fourth anniversary such that the entire number of shares covered by an option are vested and available by the fourth anniversary of the date of the award agreement. However, our compensation committee may set different vesting conditions for any option and retains the right to accelerate vesting for any reason. Options may be granted with a provision that automatically accelerates vesting upon an optionee’s death, disability or termination of employment without cause, or a change of control of us. All outstanding options are already vested or contain this automatic vesting provision. The terms of each outstanding option also provide that, subject to certain exceptions, the options will automatically vest if:

• Any person, entity or group becomes the beneficial owner of shares of our common stock having at least 50% of the total number of votes that may be cast for the election of our directors;

• Our stockholders approve any merger or other business combination of us, sale of our assets or combination of the foregoing transactions, other than (i) a transaction involving only us and one or more of our subsidiaries, or (ii) a transaction immediately following which our stockholders continue to have a majority of the voting power in the resulting entity; and

• Within any 24-month period, the persons who were members of the board at the beginning of such period cease to constitute at least a majority of members of the board.

Our compensation committee may provide for a different change of control definition in the future. Awards granted under the plans are generally not transferable by the participant except by law, will or the laws of the descent and distribution and are exercisable during the participant’s lifetime only by the participant. Although options generally must be exercised prior to termination of employment, the committee may provide for post-termination exercise periods. Following this offering, outstanding options may be exercised up to 90 days after any termination of employment without cause, to the extent that the participant was entitled to exercise the options on the date of termination. In the case of any termination of employment without cause prior to this offering, outstanding options may be exercised until the earlier of three years after the date of termination or 90 days after this offering, subject to extensions for certain periods during which the participant is prohibited from selling our common stock, to the extent that the participant was entitled to exercise the options on the date of termination. In the case of termination of employment on account of death, disability or retirement on or after age 65, outstanding options exercisable on the date of termination may be exercised within 12 months after the date of termination. However, in no event may an option be exercised later than the earlier of the expiration of the term of the option or ten years from the date of the grant of the option.

An option holder may exercise an option by written notice and payment of the exercise price in a form acceptable to our compensation committee, which may include: by cash or check; by the surrender of a number

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of share of common stock already owned by the participant for at least the minimum period required to avoid any accounting charge, with a fair market value equal to the exercise price; through the delivery of irrevocable instructions to a broker to sell shares obtained under the exercise of the option and to deliver to us an amount out of the proceeds of the sale equal to the aggregate exercise price for the shares being purchased; or by any other means acceptable to the committee.

The 1996 plan will terminate February 28, 2006, the 1997 plan will terminate February 13, 2007, and the 1999 plan will terminate November 4, 2009. Awards granted under the plans will remain in effect following termination of the plans, subject to the term of the applicable grant. The board of directors may at any time amend, modify or terminate the plans.

As of June 30, 2004, a total of 10,139,219 shares of common stock have been authorized for issuance under the plans, of which a total of 287,555 shares are eligible for grant. As of June 30, 2004, options to purchase 5,369,795 shares of common stock were outstanding at a weighted average exercise price of $24.44 per share and 4,486,851 were exercisable at a weighted average exercise price of $22.73 per share under the plans.

Knoll Stock Ownership Award Plan

On November 4, 1999, we established The Knoll Stock Ownership Award Plan for our Canadian employees to encourage, through an equity-based compensation plan, eligible employees to contribute to our growth and profitability.

The plan is administered by the Knoll Retirement Plans Administration Committee, or the Committee. The Committee has full power and authority to interpret, construe and administer the plan. Under the plan, we may grant notional stock units to substantially all individuals employed by us as of the effective date of the plan. Participants vest their interest in notional stock units ratably according to years of service, with such units being 100% vested at the end of five years of service.

On November 4, 1999, we granted a total of 54,900 notional stock units, with an estimated fair value of $28.00 per unit, to eligible employees. In January 2001, the number of notional units outstanding was adjusted, in accordance with the plan provisions, in response to the special cash dividend that was paid to stockholders.

The amount of the benefit payable to a participant, or in the case of a deceased participant, to his or her beneficiary or estate, will be equal to the number of notional plan stock units then vested in the participant’s account multiplied by the value of our stock as determined by an independent appraiser appointed by the Committee. Upon our becoming listed on a recognized stock exchange, the value of the shares will be the trading price of the shares on that exchange.

Settlement of these notional stock awards will be made in cash following a participant’s retirement, death, or termination of employment with us. In such event, we will pay the benefit amount to the participant or to the participant’s beneficiary or estate in a single lump sum cash payment no later then December 31 of the calendar year following the calendar year in which the employee retires, dies or terminates employment. Participants are not entitled to withdraw benefits under this plan prior to retirement, death or termination of employment.

The plan may be amended in whole or in part from time to time, or terminated, by action of the Committee. Upon termination of the plan, participants will automatically be 100% vested in their accounts and we will pay all amounts due to participants, as if their normal retirement dates were the date of termination of the plan.

As of June 30, 2004, approximately 56,690 notional units were outstanding, of which approximately 55,376 units were vested.

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Knoll Retirement Savings Plan

We also sponsor a 401(k) retirement savings plan for all U.S. employees. Under this plan, participants may defer a portion of their earnings up to the annual contribution limits established by the Internal Revenue Service. We match 40.0% of participant contributions up to the first 6.0% of compensation for nonunion employees and match 50.0% of participant contributions up to the first 6.0% of compensation for union employees. For participants who are nonunion employees, the plan provides for additional employer matching based on the achievement of certain profitability goals. The plan also provides that we may make discretionary contributions of our common stock to participant accounts on behalf of all actively employed U.S. participants. However, upon retirement, death or termination of employment, participants must sell vested shares of our common stock back to the plan, and any shares that are not vested at such time are forfeited by the participant and held by the plan. Company contributions generally vest ratably over a five-year period.

Our total expense under the 401(k) plan was $2,805,000, $3,707,000, and $3,460,000 for 2003, 2002 and 2001, respectively.

We intend to maintain the qualification of the 401(k) plan under Section 401 of the internal revenue code so that contributions by employees or by us, and income earned on plan contributions, are not taxable to employees until withdrawn. Our contributions, if any, will be deducted by us when made.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Stockholders Agreement

We are party to a stockholders agreement, dated November 4, 1999 and as amended on                     , 2004, with Warburg Pincus and four current or former senior members of management, or holders. The stockholders agreement governs certain matters related to corporate governance and registration of shares of common stock, or Registrable Securities, held by such holders (other than shares acquired pursuant to the our stock incentive plans).

Pursuant to the stockholders agreement, Warburg Pincus is entitled to request at any time that we file a registration statement under the Securities Act covering the sale of shares of common stock with an aggregate public offering price of at least $25 million, subject to certain conditions. If our officers or directors holding other of our securities request inclusion of their securities in any such registration, or if holders of our securities other than Registrable Securities who are entitled, by contract with us or otherwise, to have securities included in such a registration, referred to as Other Stockholders, request such inclusion, the holders of Registrable Securities will offer to include the securities of such officers, directors and Other Stockholders in any underwriting involved in such registration, provided, among other conditions, that the underwriter representative of any such offering has the right, subject to certain conditions, to limit the number of Registrable Securities or other securities included in the registration. We may defer the registration for 120 days if we believe that it would be seriously detrimental to our and our stockholders for such registration statement to be filed.

The stockholders agreement further provides that, if we propose to register any of our securities (other than registrations related solely to employee benefit plans or pursuant to Rule 145 or on a form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), either for our own account or for the account of other security holders, holders of Registrable Securities may require us to include all or a portion of their Registrable Securities in the registration and in any underwriting involved therein, provided, among other conditions, that the underwriter representative of any such offering has the right, subject to certain conditions, to limit the number of Registrable Securities included in the registration. In addition, after we become qualified to use Form S-3, the holders of Registrable Securities will have the right to request an unlimited number of registrations on Form S-3 to register such shares with an aggregate price to the public of more than $5 million, subject to certain conditions, provided that we will not be required to effect such a registration within 180 days of the effective date of the most recent registration pursuant to this provision. We may defer the registration for 120 days if we believe that it would be seriously detrimental to our and our stockholders for such registration statement to be filed.

In general, all fees, costs and expenses of such registrations (other than underwriting discounts and selling commissions applicable to sales of the Registrable Securities) and all fees and disbursements of counsel for the holders will be borne by us.

Stockholders Agreement (Common Stock Under Stock Incentive Plans)

We are party to an amended and restated stockholders agreement, dated November 14, 1999 and as amended on September 8, 2004, with Warburg Pincus and many of our current and former executive officers and other members of our management related to the issuance of restricted shares of our common stock pursuant to our stock incentive plans. Pursuant to this agreement, persons deemed to be “insiders” within the meaning of Section 16 of the Exchange Act have agreed not to transfer their shares except (i) to members of their immediate families and other related or controlled entities or (ii) to Warburg Pincus or an affiliate thereof. The restrictions on transfer will terminate when Warburg Pincus owns less than 10% of the outstanding shares of common stock. In addition, pursuant to this agreement, we agreed that, if we determine to register any shares of common stock for our own account or for the account of security holders, we will include in such registration certain vested shares of common stock received by management pursuant to the 1996 stock incentive plan, subject to certain

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limited exceptions. In addition, after we become qualified to use Form S-3, management will have the right to request an unlimited number of registrations on Form S-3 to register vested shares of common stock issued under our stock plans with an aggregate price to the public of more than $5 million, subject to certain conditions, provided that we will not be required to effect such a registration within 180 days of the effective date of the most recent registration pursuant to this provision. We may defer the registration for 120 days if we believe that it would be seriously detrimental to our and our stockholders for such registration statement to be filed.

In general, all fees, costs and expenses of such registrations (other than underwriting discounts and selling commissions applicable to sales of the registrable securities) and all fees and disbursements of counsel for the holders will be borne by us.

Substantially all individuals who were granted options under our stock incentive plans have also agreed to be bound by the terms of this stockholders agreement (common stock under stock incentive plans).

Other

We paid approximately $137,600, $297,921 and $276,844, for the six-months ended June 30, 2004, for the year ended December 31, 2003 and for the year ended December 31, 2002, respectively, to Emanuela Frattini Magnusson for design services, consulting services and product royalties. The majority of the payments were made pursuant to the terms of a July 1993 design development agreement between Emanuela Frattini Magnusson and us pertaining to our PROPELLER product line. Emanuela Frattini Magnusson also provides design services to us under a June 2003 design development agreement and consulting services to Spinneybeck, our leather goods subsidiary, under a January 2004 consulting services agreement. Emanuela Frattini Magnusson is the wife of Carl G. Magnusson, our Executive Vice President and Director of Design.

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PRINCIPAL AND SELLING STOCKHOLDERS

Principal Stockholders

The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as of June 30, 2004 for:

• each person known by us to beneficially own more than 5% of our common stock;

• each of our directors;

• each of our named executive officers; and

• all of our directors and executive officers as a group.

Except as indicated in the footnotes to this table and pursuant to state community property laws, each stockholder named in the table has sole voting and investment power for the shares shown as beneficially owned by them. Percentage of ownership is based on 23,149,629 shares of our common stock outstanding on June 30, 2004. Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Knoll, Inc., 1235 Water Street, East Greenville, Pennsylvania 18041.

	Common Stock Beneficially Owned
Name and Address of Beneficial Owner	Number	Percent (1)
Stockholders owning approximately 5% or more:
Warburg, Pincus Ventures, L.P. (2)	20,981,956	90.6	%
Directors and Executive Officers:
Burton B. Staniar (3)	867,659	3.7
Andrew B. Cogan (3)	593,080	2.5
Kathleen G. Bradley (3)	654,704	2.8
Stephen A. Grover (3)	190,592	*
Arthur C. Graves (3)	112,396	*
John H. Lynch (4)	811,284	3.5
Jeffrey A. Harris (5)	20,981,956	90.6
Sidney Lapidus (6)	20,981,956	90.6
Kewsong Lee (7)	20,981,956	90.6
Kevin Kruse	—	*
All directors and executive officers as a group (14 persons)	24,545,091	97.5

* Represents beneficial ownership of less than one percent of our common stock.

(1) Percentages are calculated pursuant to Rule 13d-3 under the Exchange Act. Percentage calculations assume, for each person and group, that all shares that may be acquired by such person or group pursuant to options currently exercisable or that become exercisable within 60 days following June 30, 2004 are outstanding for the purpose of computing the percentage of common stock owned by such person or group. However, those unissued shares of common stock described above are not deemed to be outstanding for calculating the percentage of common stock owned by any other person. Except as otherwise indicated, the persons in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and subject to the information contained in the footnotes to this table. The number of shares outstanding for these purposes as of June 30, 2004 was 23,149,629 shares of common stock.

(2) Includes 20,709,922 shares directly owned and 272,034 shares beneficially owned through Warburg Pincus & Co. The sole general partner of Warburg Pincus is Warburg Pincus & Co. Warburg Pincus LLC manages Warburg Pincus. The members of Warburg Pincus LLC are substantially the same as the partners of Warburg Pincus & Co. The address of Warburg Pincus entities is 466 Lexington Avenue, New York, NY 10017.

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(3) Excludes options to purchase 25,000, 80,000, 25,000, 25,000, 80,000 and 271,371 shares of common stock held by Messrs. Staniar, Cogan, Graves, Grover and Ms. Bradley and all directors and executive officers as a group, respectively, that will not vest within 60 days of June 30, 2004.

(4) The business address of Mr. Lynch is 889 Elm Street, Manchester, New Hampshire 03101.

(5) Mr. Harris, a director of Knoll, Inc., is a managing director of Warburg Pincus LLC and a general partner of Warburg Pincus & Co. All shares indicated as owned by Mr. Harris are included because of his affiliation with the Warburg Pincus entities. Mr. Harris owns no shares individually and disclaims beneficial ownership of all shares owned by the Warburg Pincus entities. His address is c/o Warburg Pincus LLC, 466 Lexington Avenue, New York, NY 10017.

(6) Mr. Lapidus, a director of Knoll, Inc., is a managing director and senior advisor of Warburg Pincus LLC and a general partner of Warburg Pincus & Co. All shares indicated as owned by Mr. Lapidus are included because of his affiliation with the Warburg Pincus entities. Mr. Lapidus owns no shares individually and disclaims beneficial ownership of all shares owned by the Warburg Pincus entities. His address is c/o Warburg Pincus LLC, 466 Lexington Avenue, New York, NY 10017.

(7) Mr. Lee, a director of Knoll, Inc., is a managing director of Warburg Pincus LLC and a general partner of Warburg Pincus & Co. All shares indicated as owned by Mr. Lee are included because of his affiliation with the Warburg Pincus entities. Mr. Lee owns no shares individually and disclaims beneficial ownership of all shares owned by the Warburg Pincus entities. His address is c/o Warburg Pincus LLC, 466 Lexington Avenue, New York, NY 10017.

Selling Stockholders

The following table sets forth certain information with respect to the common stock held by each selling stockholder as of June 30, 2004 and as adjusted to reflect the sale of              shares by the selling stockholders in this offering.

	Beneficially Ownership Prior to Offering			Shares Being Offered (1)		Beneficial Ownership After Offering
Name	Shares	Percent				Shares	Percent
Warburg, Pincus Ventures, L.P.	20,981,956	90.6	%		(2)
Burton B. Staniar	867,659	3.7		0	(3)	867,659	3.7
John H. Lynch	811,284	3.5		0	(4)	811,284	3.5
Other selling stockholders		*					*

* Less than 1%.

(1) Assumes no exercise of the underwriters’ over-allotment option.

(2) Warburg Pincus has granted the underwriters a 30-day option to purchase up to              shares of common stock it holds solely to cover over-allotments, if any. In the event the over-allotment option is exercised in full, Warburg Pincus will beneficially own              shares, or         % of the common stock after the offering.

(3) Mr. Staniar has granted the underwriters a 30-day option to purchase up to              shares of common stock he holds solely to cover over-allotments, if any. In the event the over-allotment option is exercised in full, Mr. Staniar will beneficially own              shares, or         % of the common stock after the offering.

(4) Mr. Lynch has granted the underwriters a 30-day option to purchase up to              shares of common stock he holds solely to cover over-allotments, if any. In the event the over-allotment option is exercised in full, Mr. Lynch will beneficially own              shares, or         % of the common stock after the offering.

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DESCRIPTION OF CAPITAL STOCK

General

After this offering, our authorized capital stock will consist of 150,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $1.00 per share. As of June 30, 2004, there were 23,149,629 shares of common stock outstanding and no shares of preferred stock outstanding. As of June 30, 2004, we had 39 record holders of our common stock. Upon the closing of this offering, we will have 23,149,629 of shares of common stock and no shares of preferred stock outstanding. In addition, as of June 30, 2004, options to purchase 5,369,795 shares of our common stock were outstanding and 287,555 shares of our common stock were reserved for future grants under our stock option plans.

Common Stock

Holders of common stock are entitled to one vote per share in all matters to be voted on by our stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the outstanding shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. In the event of our liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all assets remaining after payment of our liabilities and the liquidation preference, if any, of any outstanding preferred stock. Holders of shares of common stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to our common stock. All of the outstanding shares of common stock are fully paid and non-assessable. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future.

Preferred Stock

Our board of directors has the authority, by adopting resolutions, to issue shares of preferred stock in one or more series, with the designations and preferences for each series set forth in the adopting resolutions. Our certificate of incorporation authorizes our board of directors to determine, among other things, the rights, preferences and limitations pertaining to each series of preferred stock. Our board of directors could authorize the issuance of preferred stock with terms and conditions that could discourage a takeover or other transaction that some holders of our common stock might believe to be in their best interests or in which holders of common stock might receive a premium for their shares over and above market price.

Registration Rights

Some of our stockholders have the right to require us to register common stock for resale in some circumstances. See “Certain Relationships and Related Party Transactions.”

Transfer Agent and Registrar

Our transfer agent and registrar for our common stock is             .

NYSE Listing

At present, there is no established trading market for the common stock. We intend to apply to have our common stock approved for quotation on the New York Stock Exchange under the trading symbol “KNL.”

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DESCRIPTION OF CERTAIN INDEBTEDNESS

The following is a summary of the material provisions of the instruments evidencing our material indebtedness. It does not include all of the provisions of our material indebtedness, copies of which have been filed as exhibits of our Registration Statement filed in connection with this offering.

General. We expect to enter into our new credit facility prior to the offering. Our new credit facility with various lenders and UBS AG, Stamford Branch, as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Syndication Agent, permits us to borrow an aggregate principal amount of up to $500.0 million, consisting of a $75.0 million revolving credit facility and $425.0 million term loan facility. Our new credit facility is guaranteed by all our existing and future direct and indirect domestic subsidiaries. Our new credit facility includes a letter of credit subfacility. We expect to use the proceeds of the term loan facility to repay our prior revolving and term loan credit facility, to pay accrued interest in the aggregate amount of $             million and to fund a cash dividend of $             million to our existing stockholders.

Security. Our indebtedness under our new credit facility is secured by, among other things, (i) 100% of our capital stock and each of our domestic subsidiaries and (ii) 65% of the capital stock of each of our foreign subsidiaries that are directly owned by us or by a one of our wholly owned domestic subsidiaries. In addition, the Lenders hold a first priority security interest in substantially all of our assets and properties, as well as those of our domestic subsidiaries. The lenders will release all of the collateral (other than collateral consisting of our capital stock and the capital stock of each of our subsidiaries) securing our new credit facility (i) if our debt ratings reach specified levels or (ii) if we reach and maintain specified ratios of funded debt to EBITDA (as defined in our credit facility).

Interest. Indebtedness under our new credit facility bears interest at a floating rate based, at our option, upon (i) LIBOR (the London Interbank Offered Rate) for one, two, three or six months plus 2.5% in the case of both revolving credit facility loans and term loans or (ii) the greater of the federal funds rate plus 0.5% or the prime rate, in each case plus 1.5%. In the case of the revolving credit facility, these rates are subject to change based on our ratio of funded debt to EBITDA.

Maturity. Loans made pursuant to the revolving credit facility may be borrowed, repaid and reborrowed from time to time until September     , 2009, subject to satisfaction of certain conditions on the date of any such borrowing. No letter of credit shall have an expiration date that is more than one year after the issuance date thereof or that is less than 15 days prior to the termination date of the revolving credit facility (unless cash collateralized). The loan made under the term loan facility was made in a single drawing on September     , 2004 and will mature on September     , 2011. The term loan facility is subject to quarterly amortization of principal which commenced on                  , 2004, in an aggregate amount of $            . Our new credit facility will be permanently reduced with specified portions of the proceeds of asset sales that are not reinvested in assets useful in our business or the business of our subsidiaries within specified time periods.

Certain Fees. We are also required to pay to the lenders a commitment fee equal to 0.5% per annum on the committed undrawn amount of the revolving credit facility, subject to adjustment based upon our ratio of funded debt to EBITDA and letter of credit fees equal to the applicable margin payable on revolving credit facility loans maintained as LIBOR loans, subject to adjustment under similar circumstances.

Covenants. Our new credit facility requires us to meet two financial tests quarterly, a funded debt to EBITDA Ratio and an EBITDA to interest ratio, which tests become increasingly restrictive during the term of our new credit facility. Our new credit facility also contains covenants that limit, subject to certain exceptions, (i) the incurrence of additional indebtedness; (ii) capital expenditures in excess of a specified amount in any fiscal year with a two-year carry-over; (iii) sale/leaseback transactions; (iv) declaration or payment of dividends and stock repurchases; (v) loans to and investments in third parties; (vi) most transactions with affiliates other than on terms substantially as favorable as would be obtainable in a comparable arm’s length transaction; (vii) sales or leases of assets; (viii) acquisitions; (ix) mergers and consolidations, provided that any of our subsidiaries may be merged into one another or into us; (x) prepayments of subordinated indebtedness; (xi) liens and encumbrances;

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and (xii) changes to our fiscal year and other matters customarily restricted in such agreements. Our new credit facility also requires us to pledge after-acquired assets, including stock of after-acquired or formed subsidiaries, and to deliver guarantees by wholly owned domestic subsidiaries, with limited exceptions; to maintain its interest rate protection agreements for          years in an amount equal to         % or more of the outstanding principal amount under our new credit facility; and to maintain insurance.

Events of Default. Our new credit facility contains standard events of default, including (i) defaults in the payment of principal or interest, (ii) defaults in the observance of covenants contained in our new credit facility and related documentation, (iii) breach of representations contained in our new credit facility and related documentation, (iv) events that cause the guarantees to cease to be in full force and effect, (v) certain bankruptcy and insolvency events with respect to us and certain of our subsidiaries, (vi) cross defaults on at least $10 million of other indebtedness of ours or any of our subsidiaries, (vii) judgments, orders or decrees entered against us or certain of our subsidiaries involving $10 million or more, (viii) certain events related to ERISA, (ix) events that cause the subordination provisions of certain subordinated debt to cease to be in full force and effect, (x) loss of liens on collateral and (xi) a change of control. After consummation of this offering, a change of control is deemed to occur if, among other events, any person or group becomes the beneficial owner of more than 40% of the voting stock, other than Warburg Pincus and our senior management, or if a majority of the seats on our board of directors are occupied by persons who were neither nominated by the board of directors nor appointed by directors so nominated.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, no public market existed for our common stock. Market sales of shares of our common stock after this offering and from time to time, and the availability of shares for future sale, may reduce the market price of our common stock. Sales of substantial amounts of our common stock, or the perception that those sales could occur, could adversely affect prevailing market prices for our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities.

Based on shares outstanding on             , 2004, upon completion of this offering,              shares of common stock will be outstanding. Of these outstanding shares, the              shares sold in this offering (assuming no exercise of the underwriters’ over-allotment option) will be freely tradable without restrictions or further registration under the Securities Act, unless the shares are purchased by our affiliates as that term is defined under Rule 144 under the Securities Act.

An aggregate of approximately              shares of our common stock held by existing stockholders upon completion of this offering will be “restricted securities” (as that phrase is defined in Rule 144) and may not be resold in the absence of registration under the Securities Act or pursuant to exemptions from such registration, including among others, the exemption provided by Rule 144 under the Securities Act. Except as described below, ninety days after the date of this prospectus, approximately              shares of common stock (plus              shares issuable upon exercise of then vested options) will be eligible for sale in the public market pursuant to Rule 701 under the Securities Act, of which              shares are subject to lock-up agreements described below. In addition, approximately              shares will be eligible for sale in the public market under Rule 144, subject to the volume limitations and other restrictions described below, and approximately              shares will be eligible for sale without restriction under Rule 144(k), of which              shares and              shares, respectively, are subject to lock-up agreements described below.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of this offering, a person who has beneficially owned restricted securities for at least one year, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of restricted shares within any three-month period that does not exceed the greater of (1) one percent of the number of shares of common stock then outstanding, and (2) the average weekly trading volume of our common stock on the New York Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Sales of restricted shares under Rule 144 are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144 also provides that affiliates that sell our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, may sell those shares without complying with the manner-of-sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

Under Rule 701, common stock acquired upon the exercise of currently outstanding options or pursuant to other rights granted under our stock plans may be resold, to the extent not subject to lock-up agreements, (1) by persons other than affiliates, beginning 90 days after the effective date of this offering, subject only to the manner-of-sale provisions of Rule 144, and (2) by affiliates, subject to the manner-of-sale, current public information, and filing requirements of Rule 144, in each case, without compliance with the one-year holding period requirement of Rule 144.

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Form S-8 Registration Statements

We intend to file one or more registration statements on Form S-8 under the Securities Act following this offering to register our common stock that are issuable pursuant to our 1996 Stock Incentive Plan, 1997 Stock Incentive Plan and 1999 Stock Incentive Plan. These registration statements are expected to become effective upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to any applicable lock-up agreements and to Rule 144 limitations applicable to affiliates.

Registration Rights

Some of our securityholders have the right to require us to register common stock for resale in some circumstances. See “Certain Relationships and Related Party Transactions.”

Lock-up Agreements

In connection with this offering, we and our directors, officers and stockholders who hold approximately              shares of our outstanding common stock and options to purchase shares of our common stock have agreed that, without the prior written consent of Goldman, Sachs & Co. and UBS Securities LLC on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus: offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any common stock or any securities convertible into or exercisable or exchangeable for common stock; or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock; whether any such transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise. These restrictions, and certain exceptions, are described in more detail under “Underwriting.”

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

OF OUR COMMON STOCK

The following is a general discussion of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to a non-U.S. holder, but is not a complete analysis of all the potential tax consequences relating thereto. For the purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock that for U.S. federal income tax purposes is not a “U.S. person.” For purposes of this discussion, the term U.S. person means:

• an individual citizen or resident of the United States;

• a corporation or a partnership (or other entity taxable as a corporation or a partnership) created or organized in the United States or under the laws of the United States or any political subdivision thereof;

• an estate whose income is subject to U.S. federal income tax regardless of its source; or

• a trust (x) if a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.

If a partnership holds our common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships which hold our common stock and partners in such partnerships should consult their tax advisors.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of a non-U.S. holder’s special tax status or special circumstances. U.S. expatriates, insurance companies, tax-exempt organizations, dealers in securities, banks or other financial institutions, “controlled foreign corporations,” “passive foreign investment companies,” “foreign personal holding companies,” corporations that accumulate earnings to avoid U.S. federal income tax and investors that hold our common stock as part of a hedge, straddle or conversion transaction are among those categories of potential investors that may be subject to special rules not covered in this discussion. This discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Accordingly, each non-U.S. holder should consult its tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

Dividends

Payments on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a holder’s adjusted basis in the common stock, but not below zero, and then the excess, if any, will be treated as gain from the sale of the common stock.

Amounts treated as dividends paid to a non-U.S. holder of common stock generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividends or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, a non-U.S. holder must provide a valid Internal Revenue Service, or IRS, Form W-8BEN or other successor form certifying qualification for the reduced rate.

Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder are exempt from such withholding tax. In order to obtain this exemption, a

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non-U.S. holder must provide a valid IRS Form W-8ECI or other successor form properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are generally taxed at the same graduated rates applicable to U.S. persons, net of allowable deductions and credits.

In addition to the graduated tax described above, dividends received by a corporate non-U.S. holder that are effectively connected with a U.S. trade or business of such holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.

A non-U.S. holder may obtain a refund of any excess amounts currently withheld if an appropriate claim for refund is filed timely with the IRS. If a non-U.S. holder holds our common stock through a foreign partnership or a foreign intermediary, the foreign partnership or foreign intermediary will also be required to comply with additional certification requirements.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

• the gain is effectively connected with a U.S. trade or business of the non-U.S. holder or, if a tax treaty applies, attributable to a U.S. permanent establishment maintained by such non-U.S. holder;

• the non-U.S. holder is an individual who holds his or her common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period or periods aggregating 183 days or more during the taxable year in which the sale or disposition occurs and other conditions are met; or

• our common stock constitutes a U.S. real property interest by reason of our status as a “U.S. real property holding corporation” (a “USRPHC”) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the holder’s holding period for our common stock.

We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, as long as our common stock is regularly traded on an established securities market, however, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively held more than 5 percent of such regularly traded common stock.

Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to the U.S. federal income tax imposed on net income on the same basis that applies to U.S. persons generally and, for corporate holders under certain circumstances, the branch profits tax, but will generally not be subject to withholding, provided any certification requirements are met. Gain described in the second bullet point above (which may be offset by U.S. source capital losses) will be subject to a flat 30% U.S. federal income tax. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld, together with other information. A similar report is sent to the holder. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected dividends or withholding could have been reduced or eliminated by an applicable tax treaty. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

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Backup withholding (currently at a rate of 28%) will generally not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S. holder of our common stock if the holder has provided the certification described above that it is not a U.S. person or has otherwise established an exemption.

Payments of the proceeds from a disposition effected outside the United States by a non-U.S. holder of our common stock made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) will apply to such a payment if the broker is a U.S. person, a controlled foreign corporation for U.S. federal income tax purposes, a foreign person 50% or more of whose gross income is effectively connected with a U.S. trade or business for a specified three-year period, or a foreign partnership if (1) at any time during its tax year, one or more of its partners are U.S. persons who, in the aggregate hold more than 50 percent of the income or capital interest in such partnership or (2) at any time during its tax year, it is engaged in the conduct of a trade or business in the United States, unless in any such case the broker has documentary evidence that the beneficial owner is a non-U.S. holder and specified conditions are met or an exemption is otherwise established.

Payment of the proceeds from a disposition by a non-U.S. holder of common stock made by or through the U.S. office of a broker is generally subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. holder status under penalties of perjury or otherwise establishes an exemption from information reporting and backup withholding.

Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability provided the required information is furnished timely to the IRS.

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UNDERWRITING

Knoll, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., UBS Securities LLC, Banc of America Securities LLC, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are the representatives of the underwriters.

Underwriters	Number of Shares
Goldman, Sachs & Co.
UBS Securities LLC
Banc of America Securities LLC
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith                  Incorporated
Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional              shares from the selling stockholders to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by the selling stockholders. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase              additional shares.

Paid by the Selling Stockholders
	No Exercise	Full Exercise
Per Share	$	$
Total	$	$

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $             per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $             per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.

We and all of our officers, directors and principal stockholders, including the selling stockholders, have agreed with the underwriters not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. and UBS Securities LLC. This agreement does not apply to any existing employee benefit plans and contains certain limited exceptions. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

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Prior to the offering, there has been no public market for the shares. The initial public offering price has been determined by negotiations between representatives of the underwriters and Warburg Pincus. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We intend to apply to list the common stock on the New York Stock Exchange under the symbol “KNL.” In order to meet one of the requirements for listing the common stock on the NYSE, the underwriters have undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, if our common stock is approved for listing on the New York Stock Exchange, in the over-the-counter market or otherwise.

Each underwriter has represented, warranted and agreed that: (i) it has not offered or sold and, prior to the expiry of a period of six months from the closing date of this offering, will not offer or sell any shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of any shares in circumstances in which section 21(1) of the FSMA does not apply to Knoll; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

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The shares may not be offered or sold, transferred or delivered, as part of their initial distribution or at any time thereafter, directly or indirectly, to any individual or legal entity in the Netherlands other than to individuals or legal entities who or which trade or invest in securities in the conduct of their profession or trade, which includes banks, securities intermediaries, insurance companies, pension funds, other institutional investors and commercial enterprises which, as an ancillary activity, regularly trade or invest in securities.

The shares may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the shares may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than under circumstances in which such offer, sale or invitation does not constitute an offer or sale, or invitation for subscription or purchase, of the securities to the public in Singapore.

The securities have not been and will not be registered under the Securities and Exchange Law of Japan (the Securities and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

At our request, the underwriters have reserved, at the initial offering price, up to              shares offered hereby for sale to our directors, officers, employees, business associates, and related persons. The number of shares of common stock available for sale to the general public will be reduced to the extent such persons purchase the reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

We and the selling stockholders estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $            .

We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us and for Warburg Pincus or its affiliates, for which they have received or will receive customary fees and expenses.

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VALIDITY OF SECURITIES

Certain legal matters with respect to the validity of the issuance of our common stock offered by this prospectus will be passed upon for us by Willkie Farr & Gallagher LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.

EXPERTS

The consolidated financial statements of Knoll, Inc. at December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, appearing in the prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC for the shares we are offering by this prospectus. You should refer to the registration statement and its exhibits for additional information that is not contained in this prospectus. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly and special reports, proxy statements and other information with the SEC.

You can read our SEC filings, including this registration statement, over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any documents we file with the SEC at its public reference facilities at 450 Fifth Street, N.W., Judiciary Plaza, Washington D.C. 20549. You also may obtain copies of the documents at prescribed rates by writing to the Public Reference Room of the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

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INDEX TO FINANCIAL STATEMENTS

KNOLL, INC.

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 2003 and 2002	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002, and 2001	F-4
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2003, 2002, and 2001	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002, and 2001	F-6
Notes to the Consolidated Financial Statements	F-7
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2003 and June 30, 2004	F-28
Consolidated Statements of Operations for the Six Months Ended June 30, 2004 and 2003	F-29
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	F-30
Notes to the Unaudited Interim Consolidated Financial Statements	F-31

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Knoll, Inc.

We have audited the accompanying consolidated balance sheets of Knoll, Inc. as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Knoll, Inc. at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill and other indefinite-lived intangible assets.

/s/    ERNST & YOUNG LLP

Philadelphia, Pennsylvania

January 30, 2004, except for Note 22,

as to which the date is March 30, 2004

F-2

KNOLL, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2003 AND 2002

(dollars in thousands, except per share data)

	2003			2002
ASSETS
Current assets:
Cash and cash equivalents	$	11,517		$	12,873
Customer receivables, net		91,271			91,687
Inventories		38,354			47,882
Deferred income taxes		14,338			18,121
Prepaid and other current assets		5,702			11,723
Total current assets		161,182			182,286
Property, plant, and equipment, net		154,653			165,504
Intangible assets, net		235,466			235,643
Other non-trade receivables		5,602			5,164
Other noncurrent assets		4,098			1,754
Total Assets	$	561,001		$	590,351
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt	$	81,340		$	63,824
Accounts payable		54,502			56,785
Income taxes payable		—			2,369
Other current liabilities		53,578			73,727
Total current liabilities		189,420			196,705
Long-term debt		299,531			388,218
Deferred income taxes		39,908			31,483
Postretirement benefits other than pension		21,149			20,028
Pension liability		8,768			5,090
International retirement obligation		5,313			4,165
Other noncurrent liabilities		5,031			7,785
Total liabilities		569,120			653,474
Stockholders’ deficit:
Common stock, $0.01 par value; authorized 100,000,000 shares; 23,153,429 shares issued and outstanding (net of 52,700 treasury shares) in 2003 and 23,168,029 shares issued and outstanding (net of 38,100 treasury shares) in 2002		232			232
Additional paid-in capital		2,168			2,694
Accumulated deficit		(12,068	)		(48,417	)
Accumulated other comprehensive income (loss)		1,549			(17,632	)
Total stockholders’ deficit		(8,119	)		(63,123	)
Total Liabilities and Stockholders’ Deficit	$	561,001		$	590,351

See accompanying notes to the consolidated financial statements.

F-3

KNOLL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

(dollars in thousands, except per share data)

	2003			2002		2001
Sales	$	697,246		$	773,263	$	985,388
Cost of sales		460,911			492,902		594,446
Gross profit		236,335			280,361		390,942
Selling, general, and administrative expenses		149,739			156,314		195,532
Restructuring charge (Note 13)		—			—		1,655
Operating income		86,596			124,047		193,755
Interest expense		20,229			26,541		42,101
Other (expense) income, net		(2,473	)		2,933		(3,670	)
Income before income tax expense		63,894			100,439		147,984
Income tax expense		27,545			40,667		60,794
Net income	$	36,349		$	59,772	$	87,190
Earnings per share:
Basic	$	1.57		$	2.58	$	3.77
Diluted	$	1.50		$	2.47	$	3.60
Weighted-average shares outstanding:
Basic		23,158,765			23,172,857		23,142,554
Diluted		24,207,187			24,237,324		24,197,537

See accompanying notes to the consolidated financial statements.

F-4

KNOLL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

(dollars in thousands, except per share data)

	Common Stock		Additional Paid-In Capital			Unearned Stock Grant Compensation			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity (Deficit)
Balance at January 1, 2001 (23,181,829 shares)	$	232	$	3,591		$	(2	)	$	(195,379	)	$	(12,817	)	$	(204,375	)
Net income		—		—			—			87,190			—			87,190
Foreign currency translation adjustment		—		—			—			—			(4,732	)		(4,732	)
Comprehensive income																82,458
Purchase of common stock (11,800 shares)		—		(403	)		—			—			—			(403	)
Earned stock grant compensation		—		—			2			—			—			2
Balance at December 31, 2001	$	232	$	3,188		$	—		$	(108,189	)	$	(17,549	)	$	(122,318	)
Net income		—		—			—			59,772			—			59,772
Foreign currency translation adjustment		—		—			—			—			2,568			2,568
Minimum pension liability (net of income tax effect of $1,766)		—		—			—			—			(2,651	)		(2,651	)
Comprehensive income																59,689
Purchase of common stock (13,800 shares)		—		(494	)		—			—			—			(494	)
Balance at December 31, 2002	$	232	$	2,694		$	—		$	(48,417	)	$	(17,632	)	$	(63,123	)
Net income		—		—			—			36,349			—			36,349
Foreign currency translation adjustment		—		—			—			—			18,980			18,980
Minimum pension liability (net of income tax effect of $133)		—		—			—			—			201			201
Comprehensive income																55,530
Purchase of common stock (14,600 shares)		—		(526	)		—			—			—			(526	)
Balance at December 31, 2003 (23,153,429 shares)	$	232	$	2,168		$	—		$	(12,068	)	$	1,549		$	(8,119	)

See accompanying notes to the consolidated financial statements.

F-5

KNOLL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

(in thousands)

	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	36,349		$	59,772		$	87,190
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		28,217			28,768			27,735
Amortization of intangible assets		1,382			1,424			8,228
Loss on early extinguishment of debt		1,151			1,940			—
Proceeds from settlement of foreign currency contracts		1,484			—			—
Foreign currency loss (gain)		6,509			27			(2,593	)
Proceeds from termination of interest rate swap agreement		4,770			—			—
Other noncash items		(6,388	)		(4,690	)		7,895
Changes in assets and liabilities:
Customer receivables		3,117			9,832			32,019
Inventories		11,505			13,404			18,150
Accounts payable		(5,132	)		(4,014	)		(25,766	)
Current and deferred income taxes		1,217			10,462			757
Other current assets		920			(1,493	)		993
Other current liabilities		(15,894	)		(23,501	)		(22,780	)
Other noncurrent assets and liabilities		9,768			3,435			2,319
Cash provided by operating activities		78,975			95,366			134,147
CASH FLOWS FOR INVESTING ACTIVITIES
Capital expenditures		(9,722	)		(18,114	)		(25,020	)
Proceeds from sale of assets		235			37			71
Purchase of license agreement		(630	)		—			—
Cash used in investing activities		(10,117	)		(18,077	)		(24,949	)
CASH FLOWS FOR FINANCING ACTIVITIES
Proceeds from revolving credit facility, net		49,750			7,000			153,000
Repayment of long-term debt		(121,086	)		(102,570	)		(31,250	)
Payment of dividend		—			—			(220,339	)
Purchase of common stock		(526	)		(494	)		(403	)
Premium paid for early extinguishment of debt		(1,037	)		(1,813	)		—
Cash used in financing activities		(72,899	)		(97,877	)		(98,992	)
Effect of exchange rate changes on cash and cash equivalents		2,685			1,248			(332	)
(Decrease) increase in cash and cash equivalents		(1,356	)		(19,340	)		9,874
Cash and cash equivalents at beginning of year		12,873			32,213			22,339
Cash and cash equivalents at end of year	$	11,517		$	12,873		$	32,213

See accompanying notes to the consolidated financial statements.

F-6

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003

1. NATURE OF OPERATIONS

Knoll, Inc. and its subsidiaries (the “Company” or “Knoll”) are engaged in the design, manufacture and sale of office furniture products and accessories, focusing on the middle to high-end segments of the contract furniture market. The Company has operations in the United States (“U.S.”), Canada and Europe and sells its products primarily through its direct sales representatives and independent dealers.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Knoll, Inc. and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

The results of the European subsidiaries are reported and included in the consolidated financial statements on a one-month lag to allow for the timely presentation of consolidated information. The effect of this presentation is not material to the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with maturities of three months or less at the date of purchase.

Revenue Recognition and Accounts Receivable

Revenue from the sale of products is recognized upon transfer of title to the client, which usually occurs at the time of shipment.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients and dealers to make required payments. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. The Company evaluates the past-due status of its trade receivables based on contractual terms of sale. If the financial condition of the Company’s clients and dealers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

Property, Plant, Equipment and Depreciation

Property, plant, and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful lives are as follows: 45 years for buildings and 3 to 12 years for machinery and equipment.

Intangible Assets

Intangible assets consist of goodwill, trademarks and deferred financing fees. Goodwill is recorded at the amount by which cost exceeds the net assets of acquired businesses, and all other intangible assets are recorded at cost.

F-7

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company adopted Statements of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”) and No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), on January 1, 2002. The adoption of these statements did not result in any changes to the classification of the Company’s goodwill and other intangible assets. Effective January 1, 2002, the Company assigned an indefinite useful life to its trademarks and discontinued the amortization of both its goodwill and trademarks. The following table sets forth a reconciliation of reported net income to net income adjusted to exclude amortization expense recognized during the year ended December 31, 2001 for goodwill and trademarks:

	Twelve Months Ended December 31, 2001
	(in thousands except per share data)
Reported net income	$	87,190
Add back:
Goodwill amortization, net of tax benefit of $185		1,099
Trademark amortization, net of tax benefit of $2,189		3,309
Adjusted net income	$	91,598
Adjusted earnings per share – basic	$	3.96
Adjusted earnings per share – diluted	$	3.78

The Company completed the transitional impairment test of its trademarks as of January 1, 2002. The fair value of the trademarks was estimated by an independent appraiser using a discounted cash flow method. No impairment of the trademarks was determined to exist at January 1, 2002. The annual impairment test of trademarks is completed as of October 1 of each year. It was determined that no impairment existed based on the annual impairment tests for 2003 and 2002.

The Company has identified North America and Europe as its two reporting units and all of the Company’s goodwill is in North America. The Company completed its transitional goodwill impairment test as of January 1, 2002 and its annual impairment tests as of October 1, 2003 and 2002. An independent appraiser performed the first step of the goodwill impairment test, as prescribed by SFAS 142, to identify potential impairment. This first step included estimating the fair value of the reporting unit to which the Company’s goodwill is attributable and comparing that fair value to the carrying amount of the reporting unit. Fair value was estimated using discounted cash flows and comparable company market multiples. Step one yielded a fair value that exceeded the carrying amount of each reporting unit. As a result, goodwill was considered not impaired.

The Company continues to amortize its deferred financing fees over the life of the respective debt. The gross carrying amount and related accumulated amortization of these fees were as follows:

	2003			2002
	(in thousands)
Gross carrying amount	$	8,098		$	8,337
Accumulated amortization		(5,564	)		(4,307	)
Net amount	$	2,534		$	4,030

As further discussed in Note 8, the Company redeemed the remaining principal amount of its 10.875% Senior Subordinated Notes during 2003. As a result, $114,000 was written off for the related deferred financing fees net of approximately $125,000 of accumulated amortization. The Company recorded expense of approximately $1.4 million for the years ended December 31, 2003, 2002, and 2001 in connection with

F-8

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

amortizing its deferred financing fees. This amortization expense was recorded as a component of interest expense. The Company estimates that it will record amortization expense of $1.4 million in 2004 and $1.1 million in 2005.

Shipping and Handling

Amounts billed to clients for shipping and handling of products are classified as sales in the consolidated statements of operations. Costs incurred by the Company for shipping and handling are classified as cost of sales.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

Derivative Financial Instruments

The Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), on January 1, 2001. The adoption of SFAS 133 did not have a material effect on the earnings or financial position of the Company. On the date a derivative instrument is entered into, the Company designates the derivative as (i) a fair value hedge, (ii) a cash flow hedge, (iii) a hedge of a net investment in a foreign operation, or (iv) a risk management instrument not eligible for hedge accounting. The Company recognizes all derivatives on the consolidated balance sheet at fair value. All derivatives in effect during 2003, 2002 and 2001 were classified as risk management instruments not eligible for hedge accounting. Changes in the fair value of derivatives classified as risk management instruments not eligible for hedge accounting are reported in earnings in the period the value of the contract changes.

Foreign Currency Translation

Results of foreign operations are translated into U.S. dollars using average exchange rates during the period, while assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). As of December 31, 2003 and 2002, the accumulated foreign currency translation adjustments included in other comprehensive income (loss) amounted to $3,999,000 and $(14,981,000), respectively.

Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency are included in income in the year in which the change occurs.

Stock-Based Compensation

At December 31, 2003, the Company has three stock incentive plans, which are described more fully in Note 18. Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), encourages entities to record compensation expense for stock-based employee compensation plans at fair value but provides the option of measuring compensation expense using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). The Company accounts for stock-based compensation in accordance with APB 25. No stock-based employee compensation cost related to the three stock incentive plans is reflected in net income, as all options granted under those plans had an exercise price equal to the fair value of the underlying common stock on the date of grant.

F-9

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation.

	Twelve Months Ended December 31,
	2003			2002			2001
	(in thousands except per share data)
Net income, as reported	$	36,349		$	59,772		$	87,190
Deduct:
Total stock-based employee compensation expense determined under fair-value-based method, net of related tax effects		(2,230	)		(4,078	)		(4,240	)
As adjusted net income	$	34,119		$	55,694		$	82,950
Earnings per share:
Basic – as reported	$	1.57		$	2.58		$	3.77
Diluted – as reported	$	1.50		$	2.47		$	3.60
Basic – as adjusted	$	1.47		$	2.40		$	3.58
Diluted – as adjusted	$	1.41		$	2.30		$	3.43

The weighted average per share fair value of options was $10.45 for 2002 grants and $10.36 for 2001 grants. There were no options granted in 2003.

The fair value of the options and stock purchase rights was estimated at the date of grant using (i) a Black-Scholes option pricing model for grants made prior to March 24, 1999 and (ii) a minimum value method for grants made on or subsequent to March 24, 1999. The following assumptions were used for the Black-Scholes model in 1999: risk-free interest rate of 6.5%, dividend yield of zero, expected volatility of the market price of the common stock of 35.0% and weighted average expected lives of 7 years for the options and 3 months for the stock purchase rights. Under the minimum value method, the Company used the following assumptions: risk-free interest rate of 4.9% in 2002 and 5.1% in 2001; dividend yield of zero in 2002 and 2001; and weighted average expected lives of 7 years in 2002 and 2001. Volatility was not considered under the minimum value method. The estimated fair value of the options was amortized to expense over the vesting period of the options for purposes of determining as adjusted net income.

F-10

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive (loss) income, net of tax are as follows (in thousands):

	Beginning Balance			Before-Tax Amount			Tax Benefit (Expense)			Net-of-Tax Amount			Ending Balance
December 31, 2001
Minimum pension liability	$	—		$	—		$	—		$	—		$	—
Foreign currency translation adjustment		(12,817	)		(4,732	)		—			(4,732	)		(17,549	)
Accumulated other comprehensive (loss) income, net of tax	$	(12,817	)	$	(4,732	)	$	—		$	(4,732	)	$	(17,549	)
December 31, 2002
Minimum pension liability	$	—		$	(4,417	)	$	1,766		$	(2,651	)	$	(2,651	)
Foreign currency translation adjustment		(17,549	)		2,668			—			2,568			(14,981	)
Accumulated other comprehensive (loss) income, net of tax	$	(17,549	)	$	(1,849	)	$	1,766		$	(83	)	$	(17,632	)
December 31, 2003
Minimum pension liability	$	(2.651	)	$	334		$	(133	)	$	201		$	(2,450	)
Foreign currency translation adjustment		(14,981	)		18,980			—			18,980			3,999
Accumulated other comprehensive (loss) income, net of tax	$	(17,632	)	$	19,314		$	(133	)	$	19,181		$	1,549

Earnings per Share

Basic earnings per share excludes the dilutive effect of common shares that could potentially be issued, due to the exercise of stock options, and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share includes the effect of shares and potential shares issued under the stock incentive plans.

	Twelve Months Ended December 31,
	2003	2002	2001
	(in thousands)
Weighted average shares of common stock outstanding – basic	23,159	23,173	23,143
Assumed exercise of stock options, net of shares assumed reacquired	1,048	1,064	1,054
Weighted average common shares – diluted	24,207	24,237	24,197

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of certain contingent assets and liabilities. Actual results may differ from such estimates.

New Accounting Pronouncement

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 introduces a new consolidation model that determines control (and consolidation) based on

F-11

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

potential variability in gains and losses of the entity being evaluated for consolidation. This new model for consolidation applies to an entity in which either (i) the equity investors (if any) do not have a controlling financial interest; or (ii) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In December 2003, the FASB issued FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”) to address certain FIN 46 implementation issues. The consolidation requirements apply immediately to variable interest entities created after January 31, 2003, and apply to all other variable interest entities in the first interim period ending after March 15, 2004. The consolidation requirements will not have a material effect on our financial statements.

3. CUSTOMER RECEIVABLES

Customer receivables are presented net of an allowance for doubtful accounts of $7,468,000 and $7,790,000 at December 31, 2003 and 2002, respectively. Management performs ongoing credit evaluations of its clients and generally does not require collateral. As of December 31, 2003 and 2002, the U.S. government represented approximately 23.2% and 23.1%, respectively, of gross customer receivables.

4. INVENTORIES

	2003		2002
	(in thousands)
Raw materials	$	20,125	$	25,176
Work in process		5,893		6,212
Finished goods		12,336		16,494
Inventories	$	38,354	$	47,882

Inventory reserves for obsolescence and other estimated losses were $6,559 and $6,953 at December 31, 2003 and 2002, respectively.

5. PROPERTY, PLANT, AND EQUIPMENT

	2003			2002
	(in thousands)
Land and buildings	$	80,334		$	75,303
Machinery and equipment		268,942			249,025
Construction in progress		5,784			10,071
Property, plant and equipment		355,060			334,399
Accumulated depreciation		(200,407	)		(168,895	)
Property, plant and equipment, net	$	154,653		$	165,504

6. INTANGIBLE ASSETS

Information regarding the Company’s goodwill and other intangible assets follow (in thousands):

	2003							2002
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Unamortizable intangible assets:
Goodwill	$	53,351	$	(8,250	)	$	45,101	$	51,763	$	(7,981	)	$	43,782
Trademarks		219,900		(32,069	)		187,831		219,900		(32,069	)		187,831
Amortizable intangible assets:
Deferred financing fees		8,098		(5,564	)		2,534		8,337		(4,307	)		4,030
Total	$	281,349	$	(45,883	)	$	235,466	$	280,000	$	(44,357	)	$	235,643

F-12

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The changes in the carrying amount of goodwill are as follows (in thousands):

	2003							2002
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Balance at beginning of year	$	51,763	$	(7,981	)	$	43,782	$	51,664	$	(7,972	)	$	43,692
Foreign currency translation gain		1,588		(269	)		1,319		99		(9	)		90
Balance at end of year	$	53,351	$	(8,250	)	$	45,101	$	51,763	$	(7,981	)	$	43,782

7. OTHER CURRENT LIABILITIES

	2003		2002
	(in thousands)
Accrued employee compensation	$	23,160	$	27,225
Accrued product warranty		5,647		7,110
Accrued pension costs		6,251		8,055
Accrued group insurance		3,207		3,625
Accrued freight		2,808		2,569
Other		12,505		25,143
Other current liabilities	$	53,578	$	73,727

8. INDEBTEDNESS

The Company’s long-term debt is summarized as follows:

	2003			2002
	(in thousands)
10.875% Senior Subordinated Notes	$	—		$	57,250
Term loans, variable rate (2.515% at December 31, 2003 and 2.545% at December 31, 2002), due through 2005		156,250			220,000
Revolving loans, variable rate (2.515% – 4.375% at December 31, 2003 and 2.545% – 4.25% at December 31, 2002), due 2005		223,750			174,000
Other		871			792
		380,871			452,042
Less current maturities		(81,340	)		(63,824	)
Long-term debt	$	299,531		$	388,218

Senior Subordinated Notes

On March 28, 2003, the Company redeemed the remaining principal amount ($57,250,000) of its 10.875% Senior Subordinated Notes due 2006 at a redemption price of 101.812% of principal amount, plus accrued interest. The redemption was funded with borrowings under the senior revolving credit facility. The Company recorded a loss on the early extinguishment of debt of $1,151,000.

On April 30, 2002, the Company redeemed $50,000,000 aggregate principal amount of the Senior Subordinated Notes at 103.625% of principal amount. The Company recorded a loss on the early extinguishment of debt of $1,940,000.

F-13

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In accordance with Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” effective for fiscal years beginning after May 15, 2002, losses on extinguishments of debt no longer qualify for classification as an extraordinary item. These amounts have been included in other income (expense) on the consolidated statement of operations. The 2002 amounts have been reclassified to conform to the 2003 presentation.

Term and Revolving Loans

The Company has a senior credit agreement with a group of banks that includes a term-loan facility and a $325,000,000 revolving credit facility. The senior credit agreement contains a letter of credit subfacility that allows for the issuance of up to $25,000,000 in letters of credit and a swing-line loan subfacility that allows for the issuance of up to $10,000,000 in swing-line loans. The amount available for borrowing under the revolving credit facility is reduced by the total outstanding letters of credit and swing-line loans. At December 31, 2003, the Company had $5,038,000 of letters of credit outstanding, borrowings of $223,750,000 under the revolving credit facility and approximately $96,212,000 available for borrowing under the revolving credit facility. The letters of credit have expiration dates of May 30, 2004 and December 31, 2004 with auto-renew provisions, and one expires October 31, 2004.

The Company pays a commitment fee, depending on the Company’s leverage ratio, ranging from 0.175% to 0.50%, on the unused portion of the revolving credit facility. In addition, the Company is required to pay a letter of credit fee ranging from 0.625% to 1.625%, depending on the Company’s ratio of funded debt to earnings before income taxes, depreciation, amortization and other noncash charges (“EBITDA”), and an issuing lender fee equal to 0.25% on the amount available to be drawn under letters of credit. As of December 31, 2003, the commitment and letter of credit fees applicable to the Company were 0.375% and 1.375%, respectively.

Borrowings under the agreement bear interest at a floating rate based, at the Company’s option, upon (i) the Eurodollar rate (as defined therein) plus an applicable percentage that is subject to change based upon the Company’s ratio of funded debt to EBITDA or (ii) the greater of the federal funds rate plus 0.5% or the prime rate, plus an applicable percentage that is subject to change based upon the Company’s ratio of funded debt to EBITDA. The Company is required to make quarterly principal payments under the term loan facility of $18,750,000 through September 2004 increasing to $25,000,000 through September 2005. The revolving credit facility allows the Company to borrow, repay, and reborrow funds from time to time until November 4, 2005.

The agreement is secured by substantially all of the Company’s present and future domestic assets, 100% of the capital stock of the Company’s present and future domestic subsidiaries and 65% of the capital stock of the Company’s present and future foreign subsidiaries. Additionally, all borrowings are jointly and severally, unconditionally guaranteed by the Company’s existing and future domestic subsidiaries. However, if the Company is unable to satisfy all or any portion of its obligations with respect to the credit agreement, it is unlikely that the guarantors will be able to pay all or any portion of such unsatisfied obligations.

The credit agreement subjects the Company to various affirmative and negative covenants. Among other things, the covenants limit the Company’s ability to incur additional indebtedness, declare or pay dividends and purchase Company stock and require the Company to maintain certain financial ratios with respect to funded debt leverage and interest coverage. The Company was in compliance with the credit agreement covenants at December 31, 2003. See Note 10 for further discussion of interest rate protection agreements.

The Company also has several revolving credit agreements with various European financial institutions. These credit agreements provide credit primarily for overdraft and working capital purposes. As of December 31, 2003, total credit available under such agreements was approximately $10,251,000. There is

F-14

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

currently no expiration date on these agreements. The interest rate on borrowings is variable and is based on the monetary market rate that is linked to each country’s prime rate. As of December 31, 2003, the Company did not have any outstanding borrowings under the European credit facilities.

Interest Paid

During 2003, 2002 and 2001, the Company made interest payments including amounts paid related to the Company’s interest rate collar and swap agreements totaling $20,606,000, $26,577,000, and $40,202,000, respectively.

Maturities

Aggregate maturities of the Company’s indebtedness as of December 31, 2003 are as follows (in thousands):

2004	$	81,340
2005		298,847
2006		102
2007		106
2008		110
Subsequent years		366
	$	380,871

9. PREFERRED STOCK

The Company’s Certificate of Incorporation authorizes the issuance of 10,000,000 shares of preferred stock with a par value of $1.00 per share. 1,920,000 of these shares are designated as Series A 12% Participating Convertible Preferred Stock, of which 1,602,998 shares have been retired and canceled and 317,002 shares remain eligible to be issued. Subject to applicable laws, the Board of Directors is authorized to provide for the issuance of preferred shares in one or more series, for such consideration and with 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. There is no Preferred Stock outstanding as of December 31, 2003 and 2002.

10. DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Collar and Swap Agreements

The Company uses interest rate collar agreements to manage its exposure to fluctuations in interest rates on its variable-rate debt. Such agreements effectively set agreed-upon maximum and minimum rates on a notional principal amount and utilize the London Interbank Offered Rate (“LIBOR”) as a variable-rate reference. Changes in the fair value of interest rate collar agreements are reported in earnings in the period the value of the contract changes. The net amount paid or received upon quarterly settlements is recorded as an adjustment to interest expense, while the change in fair value is recorded as a component of other income (expense).

In February 2001, the Company negotiated modifications to its existing interest rate collar agreements that increased the aggregate notional principal amount from $135.0 million to $200.0 million, decreased the weighted average minimum rate from 5.64% to 5.12%, and extended the termination date to February 2004.

F-15

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In May 2002, the Company entered into two interest rate swap agreements that effectively convert the fixed rate floor on the Company’s interest rate collar agreements to a floating rate of interest. Under the interest rate swap agreements, the Company received a fixed rate of interest of 5.12% and paid a variable rate of interest equal to the three-month LIBOR, as determined on the last day of each quarterly settlement period, plus 1.35% on an aggregate notional principal amount of $200.0 million. On March 11, 2003, the Company terminated its two interest rate swap agreements for cash proceeds of $4,770,000, recognizing a loss of $758,000.

The aggregate fair market value of the interest rate collars from the Company’s perspective as of December 31, 2003 was ($2.1 million), all of which was included in other current liabilities in the Company’s consolidated balance sheet as of December 31, 2003. During 2003, the Company recognized an aggregate net loss related to the agreements of $22 thousand, of which $6.56 million was recorded as interest expense and $6.54 million was recorded as a component of other income in the Company’s consolidated statement of operations. The aggregate fair value of the interest rate collar and swap agreements from the Company’s perspective as of December 31, 2002 was ($3.7 million), of which $7.7 million was recorded as a current liability, $5.7 million was recorded as a current asset and $1.7 million was recorded as a noncurrent liability in the Company’s consolidated balance sheet as of December 31, 2002. During 2002, the Company recognized an aggregate net gain related to these agreements of $.5 million, of which $4.4 million was recorded as interest expense and $4.9 million was recorded as a component of other income in the Company’s consolidated statement of operations.

The Company will continue to review its exposure to interest rate fluctuations and evaluate whether it should manage such exposure through derivative transactions.

Foreign Currency Contracts

From time to time, the Company enters into foreign currency forward exchange contracts and foreign currency option contracts to manage its exposure to foreign exchange rates associated with purchases of inventory from foreign suppliers. The terms of these contracts are generally less than a year. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement is recorded as an adjustment to cost of sales, while the remaining change in fair value is recorded as a component of other income (expense).

The aggregate fair market value of the foreign currency option contract outstanding at December 31, 2003 was $200 thousand, all of which was included in prepaid and other current assets in the Company’s consolidated balance sheet as of December 31, 2003. During 2003, the Company recognized a corresponding net gain related to the agreement. The Company also realized a net gain of $1.5 million related to agreements initiated and settled during 2003.

The Company did not have any foreign currency forward exchange or option contracts outstanding at December 31, 2002. The aggregate net gain related to the Company’s foreign currency forward exchange contracts was not material for 2002 or 2001.

11. CONTINGENT LIABILITIES AND COMMITMENTS

The Company is subject to various claims and litigation in the ordinary course of its business. The Company is not a party to any lawsuit or proceeding which, in the opinion of management, based on information presently known, is likely to have a material adverse effect on the Company.

The Company offers a warranty for all of its products. The specific terms and conditions of those warranties vary depending upon the product sold. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized.

F-16

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Factors that affect the Company’s liability include historical product failure experience and estimated repair costs for identified matters for each specific product category. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s warranty reserve during the years ended December 31, 2003, 2002, and 2001 are as follows:

	2003			2002			2001
	(in thousands)
Balance, beginning of the year	$	7,110		$	8,113		$	10,485
Provision for warranty claims		4,729			4,452			5,037
Warranty claims paid		(6,070	)		(5,457	)		(7,493	)
Exchange rate impact		(122	)		2			84
Balance, end of the year	$	5,647		$	7,110		$	8,113

The Company is currently involved in various agreements in which it guarantees a percentage of the contract value between certain clients and a financing company. Under the terms of the agreements, the Company is liable for the guaranteed amount upon nonpayment by the client. As of December 31, 2003, the arrangements have expiration dates that range from 2004 to 2008 and the Company has recorded a liability of $628,000 for the guaranteed amounts. No recourse provisions or collateral exists which would allow the Company to recover amounts paid.

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143 (“Statement 143”), “Accounting for Asset Retirement Obligations”. The Statement requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company adopted Statement 143 on January 1, 2003 and recorded an asset retirement obligation of $390,000 related to the removal of leasehold improvements that have been made to one of the Company’s manufacturing and distribution centers. Such improvements must be removed upon termination of the lease agreement.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair values of each class of financial instruments:

Cash and Cash Equivalents, Accounts Receivable and Accounts Payable

The fair values of these financial instruments approximate their carrying amounts due to their immediate or short-term periods to maturity.

Long-Term Debt

The fair values of the Company’s long-term debt instruments approximate their carrying amounts.

Interest Rate Collar and Swap Agreements

The carrying value and fair value of the Company’s interest rate collar and swap agreements, as estimated by dealers, was ($2,100,000) from the Company’s perspective at December 31, 2003. The carrying value and the fair value of the Company’s interest rate collar and swap agreements at December 31, 2002 was ($3,700,000).

F-17

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. RESTRUCTURING

In September 2001, the Company adopted a restructuring plan to eliminate certain salaried positions in its workforce in North America. In connection with the restructuring plan, the Company recorded a restructuring charge of $1,655,000 for severance and other termination benefits. As of December 31, 2003, all benefits have been fully paid.

14. INCOME TAXES

Income (loss) before income tax expense consists of the following:

	2003			2002		2001
	(in thousands)
U.S. operations	$	67,024		$	96,775	$	135,447
Foreign operations		(3,130	)		3,664		12,537
	$	63,894		$	100,439	$	147,984

Income tax expense is comprised of the following:

	2003		2002		2001
	(in thousands)
Current:
Federal	$	11,817	$	20,452	$	45,595
State		3,202		4,773		9,909
Foreign		857		2,296		5,488
Total current		15,876		27,521		60,992
Deferred:
Federal		9,698		10,436		(667	)
State		1,914		2,437		(89	)
Foreign		57		273		558
Total deferred		11,669		13,146		(198	)
Income tax expense	$	27,545	$	40,667	$	60,794

Income taxes paid, net of refunds received, by the Company during 2003, 2002, and 2001 totaled $19,032,000, $30,242,000, and $59,901,000, respectively.

F-18

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the tax effects of temporary differences that give rise to the deferred tax assets and liabilities:

	2003			2002
	(in thousands)
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	2,876		$	2,998
Inventories		2,395			2,619
Net operating loss carryforwards		16,229			12,702
Obligation for postretirement benefits other than pension		8,920			8,519
Accrued liabilities and other items		14,615			17,463
Gross deferred tax assets		45,035			44,301
Valuation allowance		(17,033	)		(13,559	)
Net deferred tax assets		28,002			30,742
Deferred tax liabilities:
Intangibles, principally due to differences in amortization		35,744			29,436
Plant and equipment, principally due to differences in depreciation and assigned values		17,828			14,668
Gross deferred tax liabilities		53,572			44,104
Net deferred tax liabilities	$	(25,570	)	$	(13,362	)

As of December 31, 2003, the Company had net operating loss carryforwards totaling approximately $45,866,000 in various foreign tax jurisdictions, of which $549,000 expire in 2005, $1,079,000 in 2006, $541,000 in 2007, $498,000 in 2009, $940,000 in 2010, and $42,259,000 may be carried forward for an unlimited time.

Future tax benefits recognized through reductions of the valuation allowance for net operating loss carryforwards that existed as of February 29, 1996, the date the Company was formed, will generally reduce goodwill.

The following table sets forth a reconciliation of the statutory federal income tax rate to the effective income tax rate:

	2003		2002		2001
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Increase in the tax rate resulting from:
State taxes, net of federal effect	5.4		4.7		4.6
Effect of tax rates of other countries	0.1		(0.3	)	0.6
Nondeductible goodwill amortization	—		—		0.2
Other	2.6		1.1		0.7
Effective tax rate	43.1	%	40.5	%	41.1	%

The Company has not made provisions for U.S. federal and state income taxes as of December 31, 2003 on $52,325,000 of foreign earnings that are expected to be reinvested indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. federal and state income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of the unrecognized deferred tax liability is not practicable.

F-19

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. LEASES

The Company has commitments under operating leases for certain machinery and equipment as well as manufacturing, warehousing, showroom and other facilities used in its operations. Some of the leases contain renewal provisions and generally require the Company to pay certain operating expenses, including utilities, insurance and taxes, which are subject to escalation. Total rental expense for 2003, 2002, and 2001 was $8,945,000, $9,360,000, and $10,729,000, respectively. Future minimum rental payments required under those operating leases that have an initial or remaining noncancelable lease term in excess of one year are as follows (in thousands):

2004	$	8,451
2005		7,501
2006		6,060
2007		4,677
2008		3,664
Subsequent years		9,481
Total minimum rental payments	$	39,834

16. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has two domestic defined benefit pension plans and two plans providing for other postretirement benefits, including medical and life insurance coverage. One of the pension plans and one of the other postretirement benefits plans cover eligible U.S. nonunion employees while the other pension plan and other postretirement benefits plan cover eligible U.S. union employees. During 2002, an amendment was made to the nonunion pension plan, in accordance with the Economic Growth and Tax Relief Reconciliation Act effective for taxable years beginning after December 31, 2001, which increased the limit on compensation that may be taken into account under a defined benefit pension plan to $200,000. The impact of this amendment was reflected in the measurement of the related benefit obligation as of December 31, 2002.

F-20

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth a reconciliation of the benefit obligation, plan assets and accrued benefit cost related to the pension and other postretirement benefits provided by the Company:

	Pension Benefits						Other Benefits
	2003			2002			2003			2002
	(in thousands)
Change in benefit obligation:
Benefit obligation at January 1	$	58,204		$	44,403		$	23,085		$	20,882
Service cost		8,729			8,009			835			748
Interest cost		3,967			3,231			1,533			1,479
Participant contributions		222			141			—			—
Plan amendment		—			505			—			—
Actuarial loss		2,617			2,333			2,261			1,454
Benefits paid		(624	)		(418	)		(1,295	)		(1,478	)
Benefit obligation at December 31	$	73,115		$	58,204		$	26,419		$	23,085
Change in plan assets:
Fair value of plan assets at January 1		34,969			30,945			—			—
Actual return (loss) on plan assets		6,054			(2,510	)		—			—
Employer contributions		6,961			6,811			1,295			1,478
Participant contributions		222			141			—			—
Benefits paid		(624	)		(418	)		(1,295	)		(1,478	)
Fair value of plan assets at December 31		47,582			34,969			—			—
Funded status		(25,533	)		(23,235	)		(26,419	)		(23,085	)
Unrecognized net loss		14,838			14,651			6,630			4,530
Unrecognized prior service cost (benefit)		705			782			(2,679	)		(2,903	)
Net amount recognized	$	(9,990	)	$	(7,802	)	$	(22,468	)	$	(21,458	)
Amounts recognized in the consolidated balance sheet consist of:
Accrued benefit cost	$	(14,778	)	$	(13,001	)	$	(22,468	)	$	(21,458	)
Intangible asset		705			782			—			—
Accumulated other comprehensive income		4,083			4,417			—			—
Net amount recognized	$	(9,990	)	$	(7,802	)	$	(22,468	)	$	(21,458	)

F-21

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:

	Pension Benefits				Other Benefits
	2003		2002		2003		2002
Discount rate	6.25	%	6.75	%	6.25	%	6.75	%
Rate of compensation increase	4.00		4.00		4.00		4.00

The following table sets forth the components of the net periodic benefit cost for the Company’s pension and other postretirement benefits plans:

	Pension Benefits									Other Benefits
	2003			2002			2001			2003			2002			2001
	(in thousands)
Service cost	$	8,729		$	8,009		$	7,344		$	835		$	748		$	789
Interest cost		3,967			3,231			2,433			1,533			1,479			1,463
Expected return on plan assets		(3,761	)		(3,063	)		(2,210	)		—			—			—
Amortization of prior service cost		77			35			35			(223	)		(223	)		1
Recognized actuarial loss (gain)		137			—			—			161			90			(53	)
Net periodic benefit cost	$	9,149		$	8,212		$	7,602		$	2,306		$	2,094		$	2,200
Additional Information
(Decrease) increase in minimum liability included in other comprehensive income	$	(334	)	$	4,417		$	—		$	—		$	—		$	—

Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31 are as follows:

	Pension Benefits				Other Benefits
	2003		2002		2003		2002
Discount rate	6.75	%	6.75	%	6.75	%	6.75	%
Expected return on plan assets	8.50		8.50		N/A		N/A
Rate of compensation increase	4.00		4.00		4.00		4.00

The expected long-term rate of return on assets is based on management’s expectations of long-term average rates of return to be earned on the investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plan assets are invested.

At December 31, 2003 and 2002, both of the Company’s defined benefit pension plans had an accumulated benefit obligation in excess of plan assets. The accumulated benefit obligation applicable to both plans was $62,361,000 and $47,971,000, respectively, and the fair value of the related plan assets was $47,582,000 and $34,969,000, respectively. The projected benefit obligation for both plans at December 31, 2003 and 2002 was $73,115,000 and $58,204,000, respectively.

For purposes of measuring the benefit obligation and the net periodic benefit cost as of and for the year ended December 31, 2003, respectively, associated with the Company’s other postretirement benefits plans, a 9.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2004. The rate was then assumed to decrease 1.0% per year to an ultimate rate of 5.0% for 2008 and thereafter. Increasing the assumed health care cost trend rate by 1.0% in each year would increase the benefit obligation as of December 31, 2003 by $2,402,000 and increase the aggregate of the service and interest cost components of net

F-22

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

periodic benefit cost for 2003 by $262,000. Decreasing the assumed health care cost trend rate by 1.0% in each year would decrease the benefit obligation as of December 31, 2003 by $1,992,000 and decrease the aggregate of the service and interest cost components of net periodic benefit cost for 2003 by $217,000.

The Company’s pension plans’ weighted-average asset allocations as of December 31, 2003 and 2002, by asset category are as follows:

	Plan Assets at December 31
Asset Category	2003		2002
Temporary Investment Funds	1	%	6	%
Equity Investment Funds	60		50
Fixed Income Funds	39		44
Total	100	%	100	%

The Company’s pension plans’ investment policy includes an asset mix based on the Company’s risk posture. The investment policy states a target allocation of 60% equity funds and 40% fixed income funds. Inclusion of the fixed income funds is to provide growth through income and these funds should primarily invest in fixed income instruments of the U.S. Treasury and government agencies and investment-grade corporate bonds. The equity fund investments can consist of a broadly diversified domestic equity fund, an actively managed domestic equity fund and an actively managed international equity fund. The purpose of these funds is to provide the opportunity for capital appreciation, income, and the ability to diversify investments outside the U.S. equity market. Mutual funds are used as the plans’ investment vehicle since they have clearly stated investment objectives and guidelines, offer a high degree of investment flexibility, offer competitive long-term results, and are cost effective for small asset balances.

The Company expects to contribute $10,000,000 to its pension plans and $2,400,000 to its other postretirement benefit plans in 2004.

On December 8, 2003, President Bush signed into law a bill that expands Medicare, primarily adding a prescription drug benefit for Medicare-eligible retirees starting in 2006. Deferring the recognition of the new Medicare provisions’ impact on the Company’s postretirement benefit plan obligation is permitted by Financial Accounting Standards Board Staff Position 106-1 due to open questions about some of the new Medicare provisions and a lack of authoritative accounting guidance about certain matters. The final accounting guidance could require changes to reported information.

Employees of the Canadian, Belgium and United Kingdom operations participate in defined contribution pension plans sponsored by the Company. The Company’s expense related to these plans for 2003, 2002 and 2001 was $944,000, $721,000, and $704,000, respectively.

The Company also sponsors a retirement savings plan (i.e., 401(k) plan) for all U.S. employees. Under this plan, participants may defer a portion of their earnings up to the annual contribution limits established by the Internal Revenue Service. The Company matches 40.0% of participant contributions up to the first 6.0% of compensation for nonunion employees and matches 50.0% of participant contributions up to the first 6.0% of compensation for union employees. For participants who are nonunion employees, the plan provides for additional employer matching based on the achievement of certain profitability goals. The plan also provides that the Company may make discretionary contributions of Knoll common stock to participant accounts on behalf of all actively employed U.S. participants. However, upon retiring or leaving the Company, participants must sell

F-23

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

vested shares of Knoll common stock back to the plan, and any shares that are not vested at such time are forfeited by the participant and held by the plan. Participants generally vest their interest in Company contributions ratably according to years of service, with such contributions being 100% vested at the end of five years of service.

The Company’s total expense under the 401(k) plan was $2,805,000, $3,707,000, and $3,460,000 for 2003, 2002 and 2001, respectively.

17. LONG-TERM INCENTIVE PLAN

In 2003, the Company adopted the Knoll Inc. Long-Term Incentive Plan. The purpose of the plan is to attract, retain, and motivate key employees of the Company and promote long-term growth and profitability. The Plan provides long-term incentives, contingent upon a change in control or upon meeting certain corporate performance goals.

Awards under the plan are based upon achieving annual Operating Profit goals for two consecutive plan years within the four-year period ending December 31, 2006. The awards pool can range from ten percent of Operating Profit if the average annual Operating Profit for two consecutive plan years equals or exceeds $125 million up to a maximum of twenty-five percent on the average annual Operating Profit up to $200 million.

An operating expense charge for the plan will be recorded when it becomes probable that performance targets will be met and an award will be paid under the plan. At December 31, 2003, management concluded that it was not probable that the performance target would be met and, therefore, no expense related to the plan was recorded. If management concludes in a future period that it is probable that the performance target will be met, the change in estimate will be reflected as a cumulative catch-up adjustment in that period.

18. STOCK PLANS

Stock Incentive Plans

The Company sponsors three 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 key employees, directors and consultants of the Company. As of December 31, 2003, a combined maximum of 10,139,219 shares were authorized for issuance under the plans. A Stock Option 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 ten years.

F-24

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the Company’s stock option activity in the years indicated:

	2003				2002				2001
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding at beginning of year	4,948,113		$	23.62	4,475,734		$	22.10	3,706,445		$	25.51
February 2001 adjustment to outstanding	—			—	—			—	677,523			N/A
Granted	—			—	547,500			36.00	200,000			34.50
Forfeited	(127,354	)		26.13	(75,121	)		23.13	(108,234	)		23.44
Outstanding at end of year	4,820,759			23.55	4,948,113			23.62	4,475,734			22.10
Exercisable at end of year	4,287,227			22.41	3,421,475			21.51	2,500,364			21.40
Available for future grants	836,591				709,237				1,181,616

Options were granted with an exercise price that equals the market price of a share of Knoll common stock on the date of grant, while the Company’s stock was publicly traded, or the estimated fair value of a share of Knoll common stock on the date of grant, subsequent to November 4, 1999, when the Company’s stock was no longer publicly traded. Options that were granted generally vest in installments over either a four- or five-year period, beginning one year from the date of grant.

In February 2001, the Stock Option Committee approved certain adjustments to the outstanding options as well as the number of options available for grant under the stock incentive plans in response to dilution created by the special cash dividend paid on January 5, 2001. The adjustments included increasing the number of shares under option from 3,706,445 to 4,383,968, lowering the range of exercise prices from $15.93 – $33.13 to $13.47 – $28.01, and increasing the number of options available for future grants as of the time of adjustment from 1,076,584 to 1,273,382. These adjustments consequently increased the aggregate number of shares that are authorized for issuance under the stock incentive plans from 9,264,898 to 10,139,219. All vesting and term provisions of each award remained unchanged. No compensation expense was recognized in connection with these adjustments since (i) the adjustments were executed in response to an equity restructuring and (ii) the modifications to the awards did not increase the aggregate intrinsic value of each award and did not reduce the per share ratio of the exercise price to the market value.

The following table summarizes information regarding stock options outstanding and exercisable at December 31, 2003:

	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
$13.47 — $17.97	1,051,362	3.63	years	$	14.88	983,920	$	14.73
$20.45 — $22.62	79,245	2.83			21.81	75,695		21.88
$23.67 — $24.10	2,958,082	5.00			23.78	2,936,792		23.79
$28.01 — $36.00	732,070	7.54			35.27	290,820		34.67
$13.47 — $36.00	4,820,759	5.05			23.55	4,287,227		22.41

F-25

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Stock-Based Compensation Plans

On November 4, 1999, the Company established The Knoll Stock Ownership Award Plan, under which it may grant notional stock units to substantially all individuals employed by the Company in Canada as of the effective date of the plan. Participants vest their interest in notional stock units ratably according to years of service, with such units being 100% vested at the end of five years of service. On November 4, 1999, the Company granted a total of 54,900 notional stock units, with an estimated fair value of $28.00 per unit, to eligible employees. In January 2001, the number of notional units outstanding was adjusted, in accordance with the plan provisions, in response to the special cash dividend that was paid. Compensation expense is recognized based on the estimated fair value of notional stock units and vesting provisions. Total compensation expense (income) incurred in connection with this award was $(363,000) for 2003, $138,000 for 2002 and $248,000 for 2001. Units forfeited totaled 128; 217; and 1,135 for 2003, 2002 and 2001, respectively.

As of December 31, 2003, approximately 57,264 notional units were outstanding, of which approximately 55,338 units were vested.

As discussed in Note 16, the Company may contribute shares of Knoll common stock into participant 401(k) plan accounts at its discretion. The Company contributed 150,100 shares into the 401(k) plan for substantially all individuals employed by the Company in the U.S. as of November 4, 1999. In connection with this award, the Company recognized $4,203,000 of compensation expense, which was based on a value of $28.00 per share. During 2003, 2002, and 2001 the Company repurchased 14,600; 13,800; and 11,800 of the contributed common shares, respectively, from the 401(k) plan at a weighted average price per share of $36.00 during 2003 and 2002, and $34.20 during 2001. Such shares are held in treasury.

19. SEGMENT AND GEOGRAPHIC REGION INFORMATION

The Company operates exclusively in the business of design, manufacture and sale of office furniture products and accessories. In addition to its principal manufacturing operations and markets in North America, the Company has manufacturing operations and markets in Europe.

The Company’s sales to clients, operating income and net property, plant and equipment are summarized by geographic areas below. Sales to clients are attributed to the geographic areas based on the point of sale.

	United States		Canada		Europe		Consolidated
	(in thousands)
2003
Sales to clients	$	627,844	$	19,263	$	50,139	$	697,246
Property, plant and equipment, net		111,213		30,448		12,992		154,653
2002
Sales to clients	$	708,409	$	18,746	$	46,108	$	773,263
Property, plant and equipment, net		128,256		25,814		11,434		165,504
2001
Sales to clients	$	899,042	$	26,807	$	59,539	$	985,388
Property, plant and equipment, net		137,200		27,115		10,723		175,038

F-26

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A number of U.S. government agencies purchase the Company’s products through multiple contracts with the General Services Administration (“GSA”). Sales under GSA contracts amounted to $122,839,000 in 2003, $129,288,000 in 2002, and $118,552,000 in 2001.

20. QUARTERLY RESULTS (UNAUDITED)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Fiscal Year
	(in thousands, except per share data)
2003
Sales	$	164,630	$	177,014	$	176,563	$	179,039	$	697,246
Gross profit		55,751		59,291		59,924		61,369		236,335
Net income		6,299		9,048		11,724		9,278		36,349
Earnings per share – basic	$	.27	$	.39	$	.51	$	.40	$	1.57
Earnings per share – diluted	$	.26	$	.37	$	.49	$	.38	$	1.50
2002
Sales	$	197,807	$	202,662	$	187,696	$	185,098	$	773,263
Gross profit		74,132		75,996		67,047		63,186		280,361
Net income		18,583		13,238		16,276		11,675		59,772
Earnings per share – basic	$	.80	$	.57	$	.70	$	.51	$	2.58
Earnings per share – diluted	$	.77	$	.55	$	.67	$	.48	$	2.47

21. OTHER (EXPENSE) INCOME

	December 31
	2003			2002			2001
	(in thousands)
Foreign exchange translation (loss) gain	$	(7,733	)	$	(409	)	$	2,680
Gain on termination of interest rate swap agreement		4,770			—			—
Unrealized gain (loss) on derivatives		1,750			4,937			(7,531	)
Loss on early extinguishment of debt		(1,151	)		(1,940	)		—
Other		(109	)		345			1,181
Other (expense) income	$	(2,473	)	$	2,933		$	(3,670	)

22. SUBSEQUENT EVENT

On March 30, 2004, the Company executed a second amendment to its existing senior credit agreement. The amendment revised the related interest rates, commitment fees, and letter of credit fees that the Company will incur on outstanding borrowings and unused portions of the credit facility. Borrowings under the agreement will bear interest at a floating rate based, at the Company’s option, upon (i) the Eurodollar rate (as defined therein) plus 3.0% or (ii) the greater of the federal funds rate plus 0.5% or the prime rate plus 2.0%. The Company will incur a commitment fee of 0.50% on the unused portion of the revolving credit facility. In addition, the Company will be required to pay a letter of credit fee of 3.0%, and an issuing lender fee equal to 0.25% on the amount available to be drawn under letters of credit. The amendment also revised certain covenants as set forth in the credit agreement.

F-27

KNOLL, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2004 AND DECEMBER 31, 2003

(dollars in thousands, except per share data)

	June 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,272		$	11,517
Customer receivables, net		88,805			91,271
Inventories		45,156			38,354
Deferred income taxes		14,313			14,338
Other current assets		7,402			5,702
Total current assets		168,948			161,182
Property, plant, and equipment, net		146,472			154,653
Intangible assets, net		235,750			235,466
Other non-trade receivables		5,158			5,602
Other noncurrent assets		4,087			4,098
Total assets	$	560,415		$	561,001
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	93,841		$	81,340
Accounts payable		55,451			54,502
Income taxes payable		8,846			—
Other current liabilities		46,985			53,578
Total current liabilities		205,123			189,420
Long-term debt		269,294			299,531
Deferred income taxes		39,797			39,908
Postretirement benefits other than pensions		22,008			21,149
Pension liability		10,495			8,768
International retirement obligation		5,922			5,313
Other noncurrent liabilities		4,836			5,031
Total liabilities		557,475			569,120
Stockholders’ equity (deficit):
Common stock, $0.01 par value; authorized 100,000,000 shares; 23,149,629 and 23,153,429 shares issued and outstanding (net of 52,700 treasury shares) in 2004 and 2003, respectively		232			232
Additional paid-in capital		2,038			2,168
Retained earnings (deficit)		1,957			(12,068	)
Accumulated other comprehensive (loss) income		(1,287	)		1,549
Total stockholders’ equity (deficit)		2,940			(8,119	)
Total liabilities and stockholders’ equity (deficit)	$	560,415		$	561,001

See accompanying notes to unaudited interim consolidated financial statements.

F-28

KNOLL, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(dollars in thousands, except per share data)

	Six months ended
	June 30, 2004		June 30, 2003
	(unaudited)
Sales	$	332,145	$	341,644
Cost of goods sold		222,910		226,602
Gross profit		109,235		115,042
Selling, general, and administrative expenses		79,697		72,013
Operating income		29,538		43,029
Interest expense		8,367		10,159
Other income (expense), net		2,747		(5,411	)
Income before income tax expense		23,918		27,459
Income tax expense		9,893		12,112
Net income	$	14,025	$	15,347
Earnings per share:
Basic	$	0.61	$	0.66
Diluted	$	0.58	$	0.63
Weighted-average shares of common stock outstanding:
Basic		23,151,016		23,162,400
Diluted		23,983,214		24,218,215

See accompanying notes to unaudited interim consolidated financial statements.

F-29

KNOLL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands)

	Six months ended
	June 30, 2004			June 30, 2003
	(unaudited)
Cash flows from operating activities
Net earnings	$	14,025		$	15,347
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		10,692			14,478
Amortization of intangible assets		941			694
Loss on early extinguishment of debt		—			1,151
Foreign currency (gain) loss		(2,328	)		6,113
Proceeds from termination of interest rate swap agreements		—			4,770
Other noncash items		(833	)		(2,576	)
Changes in assets and liabilities:
Customer receivables		2,804			1,276
Inventories		(6,846	)		8,189
Accounts payable		1,021			(4,564	)
Current and deferred income taxes		9,030			2,072
Other current assets		(1,240	)		(155	)
Other current liabilities		(6,034	)		(21,490	)
Other noncurrent assets and liabilities		3,310			4,377
Net cash provided by operating activities		24,542			29,682
Cash flows from investing activities
Capital expenditures		(3,378	)		(3,871	)
Proceeds from disposal of property, plant, and equipment		2			222
Purchase of license agreement		—			(630	)
Net cash used in investing activities		(3,376	)		(4,279	)
Cash flows from financing activities
Proceeds from revolving credit facility, net		19,750			58,000
Repayment of long-term debt		(37,500	)		(87,250	)
Deferred financing fees		(1,522	)		—
Premium paid for early extinguishments of debt		—			(1,037	)
Purchase of common stock		(130	)		(333	)
Net cash used in financing activities		(19,402	)		(30,620	)
Effect of exchange rate changes on cash		(9	)		2,081
Net increase (decrease) in cash		1,755			(3,136	)
Cash and cash equivalents at beginning of period		11,517			12,873
Cash and cash equivalents at end of period	$	13,272		$	9,737

See accompanying notes to unaudited interim consolidated financial statements.

F-30

KNOLL, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Knoll, Inc. (the Company) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet of the Company, as of December 31, 2003, was derived from the Company’s audited consolidated balance sheet as of that date. All other consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of normal recurring nature. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year 2003.

NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS

In December 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 132 (revised 2003), Employer’s Disclosures about Pensions and Other Postretirement Benefits. The revisions to SFAS No. 132 are intended to improve financial statement disclosures for defined benefit plans and was initiated in 2003 in response to concerns raised by investors and other users of financial statements, about the need for greater transparency of pension information. In particular, the standard requires that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs, and other relevant quantitative and qualitative information. The guidance is effective for fiscal years ending after December 15, 2003. The Company has complied with these revised disclosure requirements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 introduces a new consolidation model that determines control (and consolidation) based on potential variability in gains and losses of the entity being evaluated for consolidation. In December 2003, the FASB issued FIN 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”) to address certain FIN 46 implementation issues. The consolidation requirements apply immediately to variable interest entities created after January 31, 2003, and apply to all other variable interest entities in the first interim period ending after March 15, 2004. The consolidation requirements will not have a material effect on the Company’s financial statements.

In the fourth quarter of 2003, Congress passed the Medicare Prescription Drug Act of 2003, which authorized Medicare to provide prescription drug benefits to retirees. To encourage employers to retain or provide postretirement drug benefits for their Medicare-eligible employees, beginning in 2006, the federal government will begin to make subsidy payments to employers who sponsor postretirement benefit plans under which retirees receive prescription drug benefits that are “actuarially equivalent” to the prescription drug benefits provided under Medicare. In May 2004, FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP No. 106-2”), was issued which provides guidance on accounting for the effects of the new Medicare legislation. Adoption of FSP No. 106-2, which is effective in the third quarter of 2004, is not expected to materially impact Knoll’s consolidated financial statements.

F-31

KNOLL, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 3: INVENTORIES

Inventories, net consist of:

	June 30, 2004		December 31, 2004
	(in thousands)
Raw Materials	$	21,341	$	20,125
Work-in-Process		4,782		5,893
Finished Goods		19,033		12,336
	$	45,156	$	38,354

NOTE 4: INCOME TAXES

The Company’s income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the six months ended June 30, 2004 and 2003 were based on the estimated effective tax rates applicable for the full years ending December 31, 2004 and 2003, after giving effect to items specifically related to the interim periods. The Company’s effective tax rate was 41% and 44% for the six months ended June 30, 2004 and 2003, respectively.

NOTE 5: WARRANTY

The Company provides for estimated product warranty expenses when the related products are sold and are primarily included within accrued expenses. Because warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, claims costs may differ from amounts provided. An analysis of changes in the liability for product warranties is as follows:

	Six months ended
	June 30, 2004			June 30, 2003
	(in thousands)
Balance at beginning of period	$	5,647		$	7,110
Provision for warranty claims		2,691			2,293
Warranty claims paid		(3,320	)		(2,010	)
Balance at end of period	$	5,018		$	7,393

NOTE 6: PENSIONS

The Company has adopted the disclosure requirements of SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits as is reflected in Note 16 of its consolidated financial statements for the year ended December 31, 2003. The following table presents the interim disclosure requirements of components of the Company’s net periodic cost (benefit) related to its defined benefit pension plans for the six months ended June 30, 2004 and 2003:

	Pension Benefits						Other Benefits
	Six months ended						Six months ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(in thousands)
Service cost	$	4,495		$	4,365		$	435		$	417
Interest cost		2,275			1,983			810			766
Expected return on plan assets		(2,083	)		(1,881	)		—			—
Amortization of prior service cost		38			39			(111	)		(111	)
Recognized actuarial loss		178			69			134			81
Net periodic benefit cost	$	4,903		$	4,575		$	1,268		$	1,153

F-32

KNOLL, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Significant assumptions used in the accounting for the pension benefit plans are as follows:

	Pension Benefits				Other Benefits
	Six months ended				Six months ended
	June 30, 2004		June 30, 2003		June 30, 2004		June 30, 2003
Discount rate	6.25	%	6.75	%	6.25	%	6.75	%
Expected return on plan assets	8.50	%	8.50	%	N/A		N/A
Rate of compensation increase	4.00	%	4.00	%	4.00	%	4.00	%

The Company expects to make cash contributions during the period July 1, 2004 through December 31, 2004 of approximately $6,038 to its Pension Benefits plans and $1,135 to its Other Benefits plan.

NOTE 7: STOCK PLANS

Under ABP No. 25, if the exercise price of the Company’s employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation as amended, to options granted under the stock option plans. For purposes of this pro forma disclosure, the estimated value of the options is amortized ratably to expense over the options vesting periods. Because the estimated value is determined as of the date of grant, the actual value ultimately realized by the employee may be significantly different.

	Six months ended
	June 30, 2004			June 30, 2003
	(in thousands, except per share data)
Net income – as reported	$	14,025		$	15,347
Stock-based compensation expense included in net earnings, net of tax		—			—
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(429	)		(1,076	)
Net	$	13,596		$	14,271
Net income per common share – basic – as reported	$	0.61		$	0.66
Net income per common share – basic – pro forma	$	0.59		$	0.62
Net income per common share – diluted – as reported	$	0.58		$	0.63
Net income per common share – diluted – pro forma	$	0.57		$	0.59
Weighted average fair value of options granted during the period	$	9.22		$	—

F-33

KNOLL, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 8: OTHER COMPREHENSIVE INCOME

Foreign Currency Translation

Results of foreign operations are translated into U.S. dollars using average exchange rates during the period, while assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss).

	Six months ended
	June 30, 2004			June 30, 2003
	(in thousands)
Net income	$	14,025		$	15,347
Other comprehensive income (loss):
Foreign currency translation adjustments		(2,836	)		14,725
Total comprehensive income	$	11,189		$	30,072

NOTE 9: EARNINGS PER SHARE

Net income per share – basic is based on the weighted average number of shares of Common Stock outstanding. Net income per share – diluted reflects the potential dilution that could occur if stock options were exercised. Weighted average common shares and common shares – diluted were as follows:

	Six months ended
	June 30, 2004	June 30, 2003
Weighted average shares of common stock outstanding – basic	23,151,016	23,162,400
Assumed exercise of stock options, net of shares assumed reacquired	832,198	1,055,815
Weighted average common shares – diluted	23,983,214	24,218,215

During the six months ended June 30, 2004 and 2003 there were 1,267,500 and 537,500 outstanding employee stock options, respectively, that are out-of-the money and therefore were excluded from the calculation of the dilutive effect of employee stock options.

NOTE 10: COMMITMENTS AND CONTINGENCIES

The Company is engaged in legal actions arising in the ordinary course of business. After taking into considerations legal counsel’s evaluation of such actions, management is of the opinion that the ultimate outcome will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

F-34

Through and including                     , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by Knoll in connection with the sale of common stock being registered.

Item	Amount to be Paid
SEC registration fee	$	29,141
NASD fee		23,500
NYSE listing fee		*
Blue Sky fees and expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Printing expenses		*
Transfer agent fees		*
Miscellaneous		*
Total	$	*

* To be filed by amendment.

Item 14. Indemnification of Directors and Officers

Our amended and restated certificate of incorporation provides that we will, and Delaware law permits us to, under certain situations, indemnify any of our directors, officers, employees or agents made or threatened to be made a party to a proceeding, by reason of the former or present official capacity of the person, against judgments, penalties, fines, settlements and reasonable expenses, including attorney’s fees, incurred by the person in connection with the proceeding if certain statutory standards are met. Any of these persons is also entitled, subject to certain limitations, to payment or reimbursement of reasonable expenses in advance of the final disposition of the proceeding. A proceeding means a threatened, pending or completed civil, criminal, administrative, arbitration or investigative proceeding, including one by or in the right of us. Reference is made to Section 145 of the Delaware Corporate Law and our amended and restated certificate of incorporation.

We maintain an insurance policy providing for indemnification of our officers, directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions. In addition, our employment agreements with Mr. Cogan, Ms. Bradley and Mr. Staniar provide that if during and after the term of such officers’ employment the executive is made a party or compelled to participate in any action by reason of the fact that he is or was a director or officer of us, the executive will be indemnified by us to the fullest extent permitted by Delaware general corporation law or authorized by the our amended and restated certificate of incorporation or bylaws or resolutions of our board of directors.

Item 15. Recent Sales of Unregistered Securities

Set forth below is information regarding stock options granted by us within the past three years that we were not registered under the Securities Act of 1933. These stock options and the common stock issuable upon exercise of stock options were issued pursuant to written compensatory plans or arrangements with our employees and directors, in reliance on the exemption provided by Rule 701 promulgated under the Securities Act of 1933, as well as Section 4(2) of the Securities Act of 1933. All recipients either received adequate information about us or had access, though employment or other relationships, to such information. Certain of the transactions described below involved directors and officers.

II-1

We sponsor three stock incentive plans: the 1996 Stock Incentive Plan (amended and restated as of November 4, 1999); the 1997 Stock Incentive Plan (amended and restated as of November 4, 1999); and the 1999 Stock Incentive Plan. As of June 30, 2004, options to purchase 5,369,795 shares of common stock were outstanding under the plans and 4,486,851 were exercisable.

From January 1, 2001 to June 30, 2004, we granted the following stock options to purchase an aggregate of 1,312,500 shares of common stock at exercise prices ranging from $32.00 to $36.00 per share to officers, employees and directors.

Option Grant Date	Total Number of Stock Options Granted	Exercise Price
2/6/01	200,000	$	34.50
2/5/02	547,500	$	36.00
6/7/04	565,000	$	32.00

As of June 30, 2004, 45,000 of the 547,500 options granted on February 5, 2002 have been cancelled. To date, no options to purchase shares of common stock granted under the plans have been exercised.

During the three years preceding this filing, we have not issued or sold any shares of our common stock.

Item 16. Exhibits and Financial Statement Schedules

(A) Exhibits

Exhibit Number	Description
1.1*	Form of Underwriting Agreement.
3.1*	Amended and Restated Certificate of Incorporation of Knoll, Inc.
3.2*	Amended and Restated By-Laws of Knoll, Inc.
4.1*	Form of Stock Certificate.
5.1*	Opinion of Willkie Farr & Gallagher LLP.
10.1 (a)	Stock Purchase Agreement, dated as of December 20, 1995, by and between Westinghouse and T.K.G. Acquisition Corp.
10.2*	Credit Agreement, dated as of                     , 2004, by and among Knoll, Inc., the Lenders (as defined therein), UBS AG, Stamford Branch, and, as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Syndication Agent.
10.3 (d)	Amended and Restated Employment Agreement, dated as of January 1, 2000, between Knoll, Inc. and Burton B. Staniar.
10.4 (f)	Amendment to Employment Agreement, dated as of March 25, 2002, between Knoll, Inc. and Burton B. Staniar.
10.5 (e)	Employment Agreement, dated as of March 23, 2001, between Knoll, Inc. and Andrew B. Cogan.
10.6	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Andrew B. Cogan.
10.7 (e)	Employment Agreement, dated as of March 23, 2001, between Knoll, Inc. and Kathleen G. Bradley.
10.8	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Kathleen G. Bradley.
10.9	Offer Letter, dated March 11, 1999, from Knoll, Inc. to Stephen A. Grover.

II-2

Exhibit Number	Description
10.10	Offer Letter, dated July 30, 1999, from Knoll, Inc. to Arthur C. Graves.
10.11 (d)	Amended and Restated Stockholders Agreement, dated as of November 4, 1999, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.12*	Amendment and Waiver to Amended and Restated Stockholders Agreement, dated as of                     , 2004, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.13 (d)	Amended and Restated Stockholders Agreement (Common Stock Under Stock Incentive Plans), dated as of November 4, 1999, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.14	Amendment and Waiver to Amended and Restated Stockholders Agreement (Common Stock Under Stock Incentive Plans), dated as of September 8, 2004, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.15 (d)	Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan.
10.16 (d)	Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan.
10.17*	Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan.
10.18 (g)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.19 (g)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.20 (d)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.21*	Form of Restricted Stock Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan.
10.22	Agreement between the Knoll, Inc. Grand Rapids and United Brotherhood of Carpenters and Joiners of America Midwestern Council of Industrial Workers Local 1615, dated August 25, 2002.
21	Subsidiaries of Knoll, Inc.
23.1	Consent of Ernst & Young LLP.
23.2*	Consent of Willkie Farr & Gallagher LLP (included in opinion referred to in 5.1 above).
24.1	Power of Attorney (included on signature page)

* To be filed by amendment.

(a) Incorporated by reference to Knoll, Inc.’s Registration Statement on Form S-4 (File No. 333-2972), which was declared effective by the Commission on June 12, 1996.

(b) Incorporated by reference to Knoll, Inc.’s Amendment No. 1 to Schedule 13E-3, which was filed with the Commission on September 10, 1999.

(c) Incorporated by reference to Knoll, Inc.’s Definitive Proxy Statement on Schedule 14A, which was filed with the Commission on September 30, 1999.

(d) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.

(e) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2000.

(f) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2001.

(g) See Exhibit 10.20. Exhibit is substantially identical to Exhibit 10.20.

(B) Financial Statement Schedules

Schedule II    Valuation and Qualifying Accounts

Other schedules for which provision is made in the applicable accounting regulations of the SEC are omitted because they are not required, are not applicable or the information is included in the financial statements or notes thereto.

II-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Knoll, Inc.

We have audited the consolidated financial statements of Knoll, Inc. as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, and have issued our report thereon dated January 30, 2004, except for Note 22, as to which the date is March 30, 2004 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(B) of Form S-1 of this Registration Statement. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/    ERNST & YOUNG LLP

Philadelphia, Pennsylvania

January 30, 2004

II-4

SCHEDULE II

KNOLL, INC.

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

	Balance at Beginning of Year		Additions Charged to Expense		Charge-Offs		Other (1)			Balance at End of Year
Allowance for doubtful accounts:
Year ended December 31, 2001	$	6,682	$	3,094	$	2,348	$	22		$	7,450
Year ended December 31, 2002	$	7,450	$	1,364	$	1,044	$	20		$	7,790
Year ended December 31, 2003	$	7,790	$	1,699	$	2,162	$	141		$	7,468
Allowance for inventory valuation:
Year ended December 31, 2001	$	6,265	$	3,310	$	3,224	$	235		$	6,586
Year ended December 31, 2002	$	6,586	$	2,060	$	1,857	$	164		$	6,953
Year ended December 31, 2003	$	6,953	$	1,400	$	2,199	$	405		$	6,559
Allowance for deferred income tax assets:
Year ended December 31, 2001	$	11,594	$	1,184	$	494	$	(13	)	$	12,271
Year ended December 31, 2002	$	12,271	$	1,765	$	478	$	1		$	13,559
Year ended December 31, 2003	$	13,559	$	3,426	$	—	$	48		$	17,033
Reserve for warranty claims:
Year ended December 31, 2001	$	10,485	$	5,037	$	7,493	$	84		$	8,113
Year ended December 31, 2002	$	8,113	$	4,452	$	5,457	$	2		$	7,110
Year ended December 31, 2003	$	7,110	$	4,729	$	6,070	$	(122	)	$	5,647

(1) Primarily the impact of currency changes.

II-5

Item 17. Undertakings

(a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to our amended and restated certificate of incorporation or bylaws, or otherwise, the registrant has been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of this issue.

(c) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-6

Signatures

Pursuant to the requirements of the Securities Act of 1933, we have duly caused this Registration Statement on Form S-1 to be signed on our behalf by the undersigned, thereunto duly authorized, in the city of New York, State of New York on this 10th day of September, 2004.

KNOLL, INC.
By:	/S/    ANDREW B. COGAN
	Andrew B. Cogan Chief Executive Officer

Power of Attorney

Each person whose signature appears below constitutes and appoints and hereby authorizes each of Andrew B. Cogan, Kathleen G. Bradley and Barry L. McCabe such person’s true and lawful attorney-in-fact, with full power of substitution or resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign on such person’s behalf, individually and in each capacity stated below, any and all amendments, including post-effective amendments to this registration statement and to sign any and all additional registration statements relating to the same offering of securities as this registration statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated, on September 10, 2004.

Signature	Title	Date
/S/    BURTON B. STANIAR Burton B. Staniar	Chairman of the Board of Directors	September 10, 2004
/S/    ANDREW B. COGAN Andrew B. Cogan	Chief Executive Officer, Knoll, Inc. and Director (Principal Executive Officer)	September 10, 2004
/S/    KATHLEEN G. BRADLEY Kathleen G. Bradley	President and Chief Executive Officer, Knoll North America and Director	September 10, 2004
/S/    BARRY L. MCCABE Barry L. McCabe	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	September 10, 2004
/S/    JOHN H. LYNCh John H. Lynch	Director	September 10, 2004

II-7

Signature	Title	Date
/S/    JEFFREY A. HARRIS Jeffrey A. Harris	Director	September 10, 2004
/S/    SIDNEY LAPIDUS Sidney Lapidus	Director	September 10, 2004
/S/    KEWSONG LEE Kewsong Lee	Director	September 10, 2004
/S/    KEVIN KRUSE Kevin Kruse	Director	September 10, 2004

II-8

EXHIBIT INDEX

Exhibit Number	Description
1.1*	Form of Underwriting Agreement.
3.1*	Amended and Restated Certificate of Incorporation of Knoll, Inc.
3.2*	Amended and Restated By-Laws of Knoll, Inc.
4.1*	Form of Stock Certificate.
5.1*	Opinion of Willkie Farr & Gallagher LLP.
10.1 (a)	Stock Purchase Agreement, dated as of December 20, 1995, by and between Westinghouse and T.K.G. Acquisition Corp.
10.2*	Credit Agreement, dated as of                     , 2004, by and among Knoll, Inc., the Lenders (as defined therein), UBS AG, Stamford Branch, as Administrative Agent, and Goldman Sachs Credit Partners L.P., as Syndication Agent.
10.3 (d)	Amended and Restated Employment Agreement, dated as of January 1, 2000, between Knoll, Inc. and Burton B. Staniar.
10.4 (f)	Amendment to Employment Agreement, dated as of March 25, 2002, between Knoll, Inc. and Burton B. Staniar.
10.5 (e)	Employment Agreement, dated as of March 23, 2001, between Knoll, Inc. and Andrew B. Cogan.
10.6	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Andrew B. Cogan.
10.7 (e)	Employment Agreement, dated as of March 23, 2001, between Knoll, Inc. and Kathleen G. Bradley.
10.8	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Kathleen G. Bradley.
10.9	Offer Letter, dated March 11, 1999, from Knoll, Inc. to Stephen A. Grover.
10.10	Offer Letter, dated July 30, 1999, from Knoll, Inc. to Arthur C. Graves.
10.11 (d)	Amended and Restated Stockholders Agreement, dated as of November 4, 1999, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.12*	Amendment and Waiver to Amended and Restated Stockholders Agreement, dated as of                     , 2004, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.13 (d)	Amended and Restated Stockholders Agreement (Common Stock Under Stock Incentive Plans), dated as of November 4, 1999, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.14	Amendment and Waiver to Amended and Restated Stockholders Agreement (Common Stock Under Stock Incentive Plans), dated as of September 8, 2004, among Knoll, Inc., Warburg, Pincus Ventures, L.P., and the signatories thereto.
10.15 (d)	Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan.
10.16 (d)	Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan.
10.17*	Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan.

Exhibit Number	Description
10.18 (g)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.19 (g)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.20 (d)	Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.
10.21*	Form of Restricted Stock Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan.
10.22	Agreement between the Knoll, Inc. Grand Rapids and United Brotherhood of Carpenters and Joiners of America Midwestern Council of Industrial Workers Local 1615, dated August 25, 2002.
21	Subsidiaries of Knoll, Inc..
23.1	Consent of Ernst & Young LLP.
23.2*	Consent of Willkie Farr & Gallagher LLP (included in opinion referred to in 5.1 above).
24.1	Power of Attorney (included on signature page)

* To be filed by amendment.

(a) Incorporated by reference to Knoll, Inc.’s Registration Statement on Form S-4 (File No. 333-2972), which was declared effective by the Commission on June 12, 1996.

(b) Incorporated by reference to Knoll, Inc.’s Amendment No. 1 to Schedule 13E-3, which was filed with the Commission on September 10, 1999.

(c) Incorporated by reference to Knoll, Inc.’s Definitive Proxy Statement on Schedule 14A, which was filed with the Commission on September 30, 1999.

(d) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999.

(e) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2000.

(f) Incorporated by reference to Knoll, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2001.

(g) See Exhibit 10.20. Exhibit is substantially identical to Exhibit 10.20.

EX-10.6

EXHIBIT 10.6

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to the Employment Agreement (“Amendment”) is entered into as of this 25^th day of August, 2004, between Knoll, Inc., a Delaware corporation (the “Company”), and Andrew B. Cogan (“Executive”).

WHEREAS, the parties wish to amend the March 23, 2001 Employment Agreement between Executive and the Company, (“Agreement”) in accordance with the direction of the Compensation Committee of the Company’s Board of Directors, as hereinafter set forth;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to become legally bound, the parties agree as follows:

1. All defined terms contained in this Amendment shall have the meanings ascribed to them in the Agreement.

2. Except as specifically set forth herein, the terms of the Agreement shall remain unchanged.

3. Executive’s “Base Salary” is changed to be $500,000 as of September 1, 2004.

IN WITNESS WHEREOF, each of the parties has duly executed this Agreement effective as of the date first above written.

KNOLL, INC.
By:	/s/    Barry L. McCabe
	Name: Barry L. McCabe
	Title:   Senior Vice President and
	Chief Financial Officer
	/s/    Andrew B. Cogan
	Andrew B. Cogan

EX-10.8

EXHIBIT 10.8

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to the Employment Agreement (“Amendment”) is entered into as of this 25^th day of August, 2004, between Knoll, Inc., a Delaware corporation (the “Company”), and Kathleen G. Bradley (“Executive”).

WHEREAS, the parties wish to amend the March 23, 2001 Employment Agreement between Executive and the Company, (“Agreement”) in accordance with the direction of the Compensation Committee of the Company’s Board of Directors, as hereinafter set forth;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to become legally bound, the parties agree as follows:

1. All defined terms contained in this Amendment shall have the meanings ascribed to them in the Agreement.

2. Except as specifically set forth herein, the terms of the Agreement shall remain unchanged.

3. Executive’s “Base Salary” is changed to be $500,000 as of September 1, 2004.

IN WITNESS WHEREOF, each of the parties has duly executed this Agreement effective as of the date first above written.

KNOLL, INC.
By:	/s/    Barry L. McCabe
	Name: Barry L. McCabe
	Title:   Senior Vice President and
	Chief Financial Officer
/s/    Kathleen G. Bradley
Kathleen G. Bradley

EX-10.9

EXHIBIT 10.9

Knoll

1235 Water Street

P.O. Box 157

East Greenville, PA 18041

Tel 215 679-7991

Fax 215 679-3904

March 11, 1999

Mr. Steve Grover

3308 Dunhill Court

Florence SC 29501

Dear Steve:

I am pleased to extend to you an offer of employment as Senior Vice President of Operations for Knoll, Inc. In this capacity, you will function as a key member of the Company’s senior management team.

You will receive a one-time signing bonus of $200,000 payable within ten days after you commence work at Knoll; provided, however, that you will repay the signing bonus if you voluntarily leave the employ of Knoll in the next twelve months.

Your annual salary will be $200,000, paid on a bi-monthly basis.

You will be eligible to participate in the Knoll Annual Incentive Program. Under the current program, you will have a target bonus opportunity to earn 100% of your base salary for performance during the balance of 1999. Payout under this program is based on achieving Company and individual objectives. Your bonus will be pro-rated for 1999. This incentive program will be outlined in a separate letter to you upon your acceptance of this offer.

Subject to the approval of the Knoll, Inc. Board of Directors, you will receive 100,000 stock options in Knoll, Inc. common stock at market rates. This grant would also be subject to the terms of the 1997 Stock Incentive Plan and the execution by you of the agreements prepared by Knoll’s general counsel.

You will be eligible for Knoll’s existing benefit package, including medical and dental insurance, life insurance, 401K, and pension plan. You will qualify for three vacation weeks per year and will be entitled’to Knoll’s relocation plan to assist you with your move to Pennsylvania.

If you are terminated in the next twelve (12) months, you will receive the sum of $200,000 as severance in complete satisfaction of any and all claims you have against Knoll; provided, however, that you will not receive any such severance if you are terminated for “cause”.

This offer is contingent upon verification of information you have provided and the completion of a pre-employment medical examination, which will include drug screening.

Steve, I am very enthusiastic about the prospect of you joining the senior management team. I believe that you can make a significant contribution to Knoll.

I very much look forward to seeing you on Thursday, March 18 in East Greenville.

Sincerely,

/s/ John Lynch

John H. Lynch

President and CEO

cc: Ms. Barb Ellixson

Mr. Pat Milberger

AGREED:

/s/    Steve Grover            

2

EX-10.10

EXHIBIT 10.10

Knoll

1235 Water Street

P.O. Box 157

East Greenville, PA 18041

Tel 215 679-7991

Fax 215 679-3904

July 30, 1999

Mr. Arthur Graves

222 Cazneau Avenue

Sausalito, CA 94965

Dear Art:

I am pleased to offer you a promotion to Senior Vice President, Sales and Distribution, effective September 1, 1999. In this capacity, you will function as a key member of the Company’s senior management team.

Your annual salary will be $200,000 paid on a bi-monthly basis.

As you have in the past, you will be eligible to participate in the Knoll Annual Incentive Program. Under this program you will have a target bonus opportunity to earn 100% of your base salary for performance during the balance of 1999. Payout under this program is based on achieving agreed upon Company gross profit objectives. Your bonus will be pro-rated for 1999.

You will also be eligible for the Knoll Relocation policy (copy attached).

Art, I am very enthusiastic about this new opportunity for you. I believe that you can make a significant contribution and that this experience can be both profitable and rewarding.

Very truly yours,

/s/    Kass Bradley

Kass Bradley

EX-10.14

EXHIBIT 10.14

KNOLL, INC.

AMENDMENT AND WAIVER TO

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

(COMMON STOCK UNDER STOCK INCENTIVE PLANS)

This Amendment and Waiver (the “Amendment”) to the Amended and Restated Stockholders Agreement, dated as of November 4, 1999 (the “Agreement”), is dated as of September 8, 2004, by and among Warburg, Pincus Ventures, L.P., a Delaware limited partnership (“Warburg”); and the individuals whose names appear on the signature page hereof (the “Management Parties”); and is acknowledged, accepted and agreed to by Knoll, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

R E C I T A L S

WHEREAS, the Company plans to file a registration statement with the U.S. Securities and Exchange Commission with respect to an Initial Public Offering (the “IPO”); and

WHEREAS, in connection with the IPO, Warburg and the Management Parties desire to amend and waive certain terms of the Agreement as set forth herein and in accordance with Section 7(d) of the Agreement; and

WHEREAS, the execution of this Amendment by Warburg and the undersigned Management Parties, constituting the holders of a majority of the Securities, is sufficient to effect the amendment and waiver contemplated hereby in accordance with Section 7(d) of the Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

1. Amendment to Transfer of Securities. Section 2 of the Agreement is hereby amended by deleting clause (iii) in its entirety.

2. Amendment of “Market Stand-off” Agreement. Section 4(i) of the Agreement is hereby amended in its entirety to read as follows:

“(i) “Market Stand-off” Agreement. Each of the Holders agrees, if requested by the Company and an underwriter of shares of Common Stock (or other securities of the Company), subject to any exceptions agreed to between each of the Holders and an underwriter, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of Common Stock (or other securities of the Company), or any options or warrants to purchase any shares of Common Stock (or other securities of the Company), or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock (or other securities of the Company) held by such Holder during the 180-day period after the public offering date set forth on a final prospectus pursuant to a registration statement of the Company filed under the Securities Act, provided that such agreement only applies to the first such registration statement of the Company.

If requested by the underwriters, the Holders shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares or other securities subject to the foregoing restriction until the end of said 180-day period. The provisions of this Section 4(i) shall be binding upon any transferee who acquires Registerable Securities, whether or not such transferee is entitled to the registration rights provided hereunder.”

3. Waiver of Piggyback Registration Rights. Any and all rights any Holder may have pursuant to Section 4(b) (“Company Registration”) of the Agreement in connection with the IPO are hereby waived, and the Company shall have no obligations under said Section 4(b) in connection with the IPO.

4. Agreement in Full Force and Effect. Except as expressly amended hereby, the Agreement remains in full force and effect.

5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

6. Section Headings. The headings of the sections and subsections of this Amendment are inserted for convenience only and shall not be deemed to constitute a part thereof.

7. Successors and Assigns. This Amendment shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.

8. Severability. In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not effect the remaining provisions of this Amendment which shall remain in full force and effect.

9. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Waiver to the Amended and Restated Stockholders Agreement as of the date first above written.

WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:	/s/ Jeffrey A. Harris
Name:	Jeffrey A. Harris
Title:	Managing Director
CERTAIN MANAGEMENT STOCKHOLDERS:
/s/    Burton B. Staniar
Burton B. Staniar
/s/    John H. Lynch
John H. Lynch
/s/    Kathleen G. Bradley
Kathleen G. Bradley
/s/    Andrew B. Cogan
Andrew B. Cogan
/s/    Arthur C. Graves
Arthur C. Graves
/s/    Stephen A. Grover
Stephen A. Grover
/s/    Barry L. McCabe
Barry L. McCabe
/s/    Patrick A. Milberger
Patrick A. Milberger
/s/    S. David Wolfe
S. David Wolfe

Acknowledged, Accepted and Agreed to:

KNOLL, INC.
By:	/s/    Barry L. McCabe
	Name: Barry L. McCabe
	Title: Senior Vice President and Chief Financial Officer

EX-10.22

Exhibit 10.22

AGREEMENT

BETWEEN

KNOLL, INC.

GRAND RAPIDS

AND

UNITED BROTHERHOOD OF CARPENTERS

AND JOINERS OF AMERICA

MIDWESTERN COUNCIL OF INDUSTRIAL WORKERS

LOCAL 1615

AUGUST 25, 2002

TABLE OF CONTENTS

Agreement Article			Page Number
	Introduction		1
I.	Recognition		1
II.	Considerations and Cooperation		2
III.	Discrimination		3
IV.	Strikes, Stoppages and Lockouts		3
V.	Union Security		5
	1.	Agency Shop	5
	2.	Hires, Rehires and Recalled Employees	7
	3.	Procedure for Termination of Employment	7
	4.	Definitions	8
	5.	Summer Students	9
	6.	Non-Bargaining Unit Personnel	10
VI.	Checkoff		10
	1.	Dues/Service Fees Deduction Authorizations	10
	2.	Starting Deductions	11
	3.	Delinquencies	12
	4.	Adjustment of Errors	12
	5.	Reinstatements	12
	6.	Transfers	13

i

TABLE OF CONTENTS

(Continued)

Agreement Article			Page Number
	7.	Reports and Remittances to the
		Union	13
	8.	Notice of Change in Dues	14
	9.	State Laws	15
VII.	Wages		15
	1.	Wage and Salary Adjustments	15
	2.	Cost of Living	16
	3.	Night-Turn Adjustment	20
	4.	Probation Period	20
		a.      New Employees	20
		b.      Promoted/Transferred
		Employees	21
		c.      Training	23
	5.	Four Hours of Work	24
	6.	Injury	24
VIII.	Hours of Work		25
IX.	Overtime		27
X.	Holiday, Vacations and Leaves		31
	1.	Holidays	31
	2.	Vacations	33
	3.	Reporting of Absence	37
	4.	Sickness and Personal Business	38
	5.	Leaves	41

ii

TABLE OF CONTENTS

(Continued)

Agreement Article			Page Number
		a.      Death in Immediate Family	41
		b.      Military	44
		c.      Voluntary Leave of Absence	47
		d.      Family and Medical Leave Act
		(FMLA)	50
		e.      Union Leave of Absence	50
	6.	Jury Duty - Court Appearances	51
XI.	Seniority		53
	1.	Probation	53
	2.	Seniority Credit	54
	3.	Inactive Seniority List	54
	4.	Return of Employee to Bargaining Unit	56
	5.	Increase in Work Force - Hiring,
		Transfer and Upgrade	57
		a.      Job Openings	57
		b.      Group Hiring	59
		c.      Job Posting Procedures	59
	6.	Decrease/Realignment in Work Force	62
	7.	Shift Preference	64
	8.	Special Situations	65
	9.	Work Assignments	65
		a.      Key Skills and Training	65
		b.      Graduate Student, Professional
		and Managerial Trainees	66
		c.      Shift Assignments	67
	10.	Special Job Assignments	68

iii

TABLE OF CONTENTS

(Continued)

Agreement Article		Page Number
XII.	Label	69
XIII.	Job Descriptions and Evaluations	69
XIV.	Stewards and Grievance Officers	71
XV.	Settlement of Grievances	73
	Section 1 - Grievance Procedure	73
	Section II - Arbitration	77
XVI.	Modification and Termination	82
	Letters of Agreement
	#1    Special Hours of Work	86
	#2a  Subcontracting	88
	#2b  Subcontracting	89
	#3    Labor Pool	91
	Pension and Insurance Agreement	93

iv

AGREEMENT

between

Knoll, Inc., 4300 - 36th Street, Southeast, Grand Rapids, Michigan (hereinafter referred to as the “Company”),

and

Carpenters Union, Local 1615 of the United Brotherhood of Carpenters and Joiners of America, affiliate of the Midwestern Council of Industrial Workers (hereinafter referred to as the “Union”), entered into as of the 25th day of August, 2002, starting at 10:00 p.m.

ARTICLE I.

RECOGNITION

The Company agrees to recognize the Union as the exclusive bargaining agent for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment or other conditions of employment for all its hourly paid Production, Shipping, Receiving and Maintenance employees. The term “employees”, as used in this Agreement, shall be deemed to cover all employees in the Bargaining Unit, as outlined in this Article.

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ARTICLE II.

CONSIDERATIONS AND COOPERATION

1. This Agreement is entered into in consideration of the mutual performance thereof, in good faith, by both parties. The intention of this Agreement is to maintain harmonious relations between the Company and the Union and its membership and to promote the general welfare of the Company and the employee. The parties to this Agreement agree to cooperate in every reasonable way in carrying out the provisions hereof and to exchange such information with respect hereto as is mutually deemed essential for the furtherance of harmonious relations.

2. The Union recognizes that it is the responsibility of the Company to maintain efficiency, establish reasonable Company work rules and require employees to observe same. The Union further agrees that Management shall have the freedom of action necessary to discharge its responsibility for the successful operation of the Company. This responsibility includes, among other things, the determination of the number and location of its plants, the selection of those with whom it will do business and the determination of the products to be manufactured and the product schedules. This Article does not limit or modify the rights of the parties under any other provisions of this Agreement.

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ARTICLE III.

DISCRIMINATION

1. There will be no discrimination by supervisory or other employees of the Company not included in the Unit against any employee because of membership or activities in the Union.

2. The Union agrees that neither it nor the respective Officers, members or persons employed directly or indirectly by the Union will discriminate against any employee.

3. The Union and the Company agree that the provisions of this Agreement will be applied without discrimination because of race, sex, age, creed, color, national origin, physical or mental handicap or because an employee is a disabled veteran of the Vietnam era.

ARTICLE IV.

STRIKES, STOPPAGES AND LOCKOUTS

1. The Union will not cause or officially sanction their members to cause or take part in any strike (including sit-downs, stay-ins, slow-downs, picketing or any other stoppage of work) during the life of this Agreement. This includes disputes which are within the proper scope of the Grievance Procedure, provided in this Agreement, until such Grievance Procedure has been fully exhausted,

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a. and written notice has been given that the Company’s reply at the final step of the Grievance Procedure is unsatisfactory, and the Union’s notification to hold a strike vote;

b. and such written, advance notice, of not less than seven (7) days prior to a strike vote meeting being held; the notice will identify to the Company the Grievance(s) over which a strike vote has been authorized;

c. and written, advance notice, of not less than three (3) days prior to the strike, has been given the Company by the Union, stating that the strike is sanctioned by the Union, identifying the Grievance(s) over which the strike has been sanctioned.

2. The Company agrees to waive its right to collect damages against the Union in the event of a wildcat strike only if the following conditions are met. The Union will:

a. Notify all employees immediately, in the event of a strike, that the strike is unauthorized and in violation of the contract.

b. Publicly announce, through the local newspaper and on local radio, that the strike is unauthorized and not condoned by the Union.

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c. State, in writing, to employees, that the strike is in violation of the Agreement.

d. Make every reasonable effort possible to induce employees to cease such acts.

e. The Company will supply the Union with an up-to-date list of employees names and addresses, upon Union request, to assist the Union in carrying out the provisions of this paragraph. The Company will maintain this list as accurately as possible but assumes no responsibility for errors.

3. The Company will not lock out any employee because of a dispute which is within the proper scope of the Grievance Procedure until such procedure has been fully exhausted.

ARTICLE V.

UNION SECURITY

1. Agency Shop.

a. Employees Who are Union Members.

All employees, in any job covered by this Agreement, who were members of the Union on July 21, 1985, shall,

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as a condition of employment, remain members of the Union, in good standing, insofar as the payment of periodic dues is concerned, or if thereafter, at any time, such members resign or otherwise fail to remain members of the Union, in good standing, insofar as the payment of periodic dues, uniformly required, is concerned, they shall, as a condition of employment, pay to the Union a service fee.

b. Employees Who Are Not Union Members.

(1) All new hires, rehires or transfers will be required, as a condition of employment, beginning on the ninety-first (91) calendar day following their date of hire, rehire or transfer, to either become and/or remain members of the Union, in good standing, insofar as the payment of periodic dues and initiation fees, uniformly required, is concerned, or, in lieu of such membership, pay to the Union a service fee.

(2) All other employees, in any job covered by this Agreement, who, on July 21, 1985, are not members of the Union, will be required, beginning on August 21, 1985, to become and/or remain members of the Union, in good standing, insofar as the payment of periodic dues

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and initiation fees, uniformly required, is concerned, or, in lieu of such membership, pay to the Union a service fee.

2. Hires, Rehires and Recalled Employees.

The Union may participate in the orientation of newly hired/rehired hourly employees, conducted on Company premises, to consummate such business as is necessary to enroll the employee into the Union upon satisfactory completion of the probationary period.

The Union further agrees that there will be no unauthorized solicitation of members, dues or funds during the working hours of employees.

3. Procedure for Termination of Employment.

a. The Company shall be obligated under this Article to terminate the employment of any employee by reason of their failure to obtain or to maintain membership in the Union as required by this Article, and for employees who fail to obtain and/or maintain membership, their failure to pay service fees, upon receipt of written request for such termination from the Union, except that the Company shall have the right to refuse such request if it has reasonable grounds for believing (1) that such membership is not available to the employee on the same terms and

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conditions generally applicable to other members or (2) that membership has been denied or terminated for reasons other than the failure of the employee’s to tender the periodic dues and initiation fees uniformly required as a condition of acquiring or retaining membership.

b. The Union agrees to indemnify and save harmless the Company from any payment the Company may be required to make in favor of any employee whose employment is terminated pursuant to any such request.

4. Definitions.

a. For the purpose of this Article, the term “employee” means any hourly-paid employee on the active payroll or the disability pay roll of the Company or on leave of absence from the Company. It does not include any persons who have been laid off, whether or not they are on any seniority list.

b. The term “initiation fee” means such amount as may be uniformly charged by the Union as a condition of granting membership in the Union.

c. The term “dues” shall not be deemed to include any fine, assessment, contribution, tax or other form of payment required from the Union members, except the payment

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required in equal amounts from every member once during each month and the weekly per capita tax.

d. For purposes of this Article and Article VI the term “service fee” shall mean that portion of dues that is equal to each employee’s proportional share of the actual cost of representation which includes the cost of negotiating and administering this agreement and an initial processing fee.

5. Summer Students.

The desirability of providing employment for summer students under a limited employment relationship is recognized. The Union will be notified of intent to hire such employees, and the proposed length of service will be stated. The employment of summer students will not exceed 89 calendar days. On a case by case basis, extensions of up to 30 calendar days may be granted by mutual agreement between the Company and the Union. The Company further agrees that these students would not be utilized while Bargaining Unit employees are on the inactive seniority list, as set forth in Article XI., Paragraph 3.

The seniority provisions and the checkoff provisions of this Agreement will not apply to summer students under this limited employment relationship. Should former summer students be hired

9

as full-time, hourly employees, seniority credit for summer student work periods will be granted for the purpose of pension and insurance calculations but will not apply to Bargaining Unit seniority.

6. Non-Bargaining Unit Personnel.

Persons not in the Bargaining Unit shall not perform Bargaining Unit work except for the purposes of occasional assistance, instructing, demonstrating or learning proper methods and procedures of performing work operations or in the event of an emergency as long as sufficient Bargaining Unit employees are not reasonably available.

ARTICLE VI.

CHECKOFF

1. Dues/Service Fees Deduction Authorizations.

a. For the duration of this Agreement, the Company shall deduct, from the first scheduled paycheck of each month, Union dues, or service fee, and promptly remit same to the Union for those employees in the Bargaining Unit whose written and signed authorizations - on the official form furnished and submitted by the Union, with all blank spaces properly filled in - are received by the Company.

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b. For the duration of this Agreement, the Company shall deduct a weekly per capita tax, or service fee, and promptly remit same to the Union for those employees in the Bargaining Unit whose written and signed authorizations - on the official form furnished and submitted by the Union, with all blank spaces properly filled in - are received by the Company.

c. On or before July 22 of each year, the Company will furnish the Union with a list of employees who have authorized a service fee deduction.

2. Starting Deductions.

a. Deductions for employees whose authorizations are received after the effective date of this Agreement will commence with the first month after receipt of the authorizations. The date of receipt will be recorded on the authorization by the Company, and such record, by the last Thursday in the calendar month, will be included in the deductions for the following month.

b. Dues deductions will be made from the first scheduled pay check of the month and per capita tax will be made weekly.

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3. Delinquencies.

Dues or service fees unpaid, because the employee was not working during the first pay period of the month, will be deducted from the first pay period worked in that month.

4. Adjustment of Errors.

Except where the Company has made a clerical error in the deduction for dues or service fees, which will be adjusted promptly by the Company, any question as to the correctness of the amount deducted shall be settled between the employee and the Union, and the Union shall indemnify the Company and save it harmless against any and all suits, claims, demands and liabilities that shall arise out of, or by reason of, any action that shall be taken by the Company for the purpose of complying with the provisions of this Article VI., in reliance on any authorization form or information furnished to the Company under such provisions.

5. Reinstatements.

a. Employees who return to the active roll from sickness or leave of absence shall have dues or service fee deductions automatically reinstated upon return to work. When an employee is rehired in the Bargaining Unit after layoff, employee’s

12

dues or service fee deduction authorization (if in effect at the time of separation) shall be reinstated.

b. When any hourly employee returns to the active roll owing back dues or service fees, the Company will deduct one month’s back dues or service fees from each week’s pay (each deduction to begin with their first pay period after return). All such deductions shall be remitted to the Union, as are other dues, service fees, etc. The Union shall furnish a list of employees who owe back dues to the Company for processing each month. The list shall be signed by an authorized Union representative. Any discrepancies in the deduction of back dues will be resolved between the Union and the employee.

6. Transfers.

Deductions will automatically be discontinued when an employee is transferred outside the Bargaining Unit covered by this Agreement.

7. Reports and Remittances to the Union.

a. Within fifteen (15) days after the first pay period in the month, a check for the total deductions (including authorized back dues or service fees) made in that pay period shall be sent to the Union with substantiating list attached.

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The remittance will include dues and service fees deducted from pay periods after the first week of the previous month from employees who are not working the first pay period.

b. Each list of deductions sent to the Union shall show, for all employees on the active roll, from whom deductions have been made:

(1) Name,

(2) Social Security Number,

(3) Amount of the deduction from each individual employee and

(4) Reasons for nondeductions, if known.

c. Attached to the list accompanying remittance will be a summary, indicating the total amount deducted and the number of employees from whom dues or service fee deductions were made.

8. Notice of Change in Dues.

The Union shall notify the Company, by certified mail, of any change in the sum of money to be deducted as dues, per capita tax, or service fee, pursuant to the authorizations set forth in paragraph 1., above.

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9. State Laws.

This Article shall apply only to the extent that its provisions are consistent with applicable state laws.

ARTICLE VII.

WAGES

1. Wage and Salary Adjustments.

a. The guaranteed keysheet rates and pay of hourly paid employees will be increased according to the schedule below and applied to the rates indicated:

		Applied to Rates In Effect On
Increase	Effective Date
One-and-one	August 26, 2002	August 23,2002
quarter percent
(1.25%)
One-and-three	August 25,2003	August 22,2003
quarters percent
(1.75%)

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One-and-three	August 30,2004	August 27,2004
quarters percent
(1.75%)
Two-and-three	August 29,2005	August 26,2005
quarters percent
(2.75%)

(1) The guaranteed keysheet rates and pay of hourly-paid employees will be rounded to the nearest one-half cent.

2. Cost-of-Living.

a. Adjustments will be made to the guaranteed keysheets rates and pay of hourly paid employees.

(1) The term “Consumer Price Index” as used herein shall mean the National Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W; Base 1982-84 = 100) as published monthly by the Bureau of Labor Statistics of the U.S. Department of Labor.

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(2) Cost-of-Living Adjustments effective on the date shown below in the amount of one (1) cent per hour (forty cents ($.40)) per week, rounded to the nearest cent if necessary. The formula used to calculate COLAs will be 0.125 percent increased in the CPI-W equals 1 cent per hour pay increase.

Effective Date	Measurement Period
November 25, 2002	March 2002 - September 2002
May 26, 2003	March 2002 - March 2003
November 24, 2003	March 2003 - September 2003
May 31, 2004	March 2003 - March 2004
November 29, 2004	March 2004 - September 2004
May 30, 2005	March 2004 - March 2005
November 28, 2005	March 2005 - September 2005
May 29, 2006	March 2005 - March 2006

17

(3) While the measurement period for the Cost-of-Living Adjustment effective May 26, 2003 includes the entire measurement period from March, 2002 to March, 2003 the adjustment will be the difference between the full amount calculated for the period and the amount of the Cost-of-Living Adjustment paid on November 25, 2002.

(4) While the measurement period for the Cost-of-Living Adjustment effective May 31, 2004 includes the entire measurement period from March, 2003 to March, 2004 the adjustment will be the difference between the full amount calculated for the period and the amount of the Cost-of-Living Adjustment paid on November 24, 2003.

(5) While the measurement period for the Cost-of-Living Adjustment effective May 30, 2005 includes the entire measurement period from March, 2004 to March, 2005 the adjustment will be the difference between the full amount calculated for the period and the amount of the Cost-of-Living Adjustment paid on November 29, 2004.

(6) While the measurement period for the Cost-of-Living Adjustment effective May 29, 2006 includes the entire measurement period from March, 2005 to March, 2006 the adjustment will be the difference between the full

18

amount calculated for the period and the amount of the Cost-of-Living Adjustment paid on November 28, 2005.

(7) In the event the Customer Price Index, defined in 2.1.(1), above, shall be discontinued, changed or otherwise becomes unavailable during the term of this Agreement, and if the Bureau of Labor Statistics issues a conversion table by which changes in the present Index can still be determined, the parties agree to accept such conversion table. If no such table is issued, the parties will promptly undertake negotiations solely with respect to agreeing upon a substitute formula for determining a comparable Cost-of-Living Adjustment. If, after such negotiations, the parties fail to reach agreement, the Union shall, upon giving ten (10) days written notice, have the right to strike solely with respect to such issue.

c. The wage increase referred to in paragraphs a. and b. above establish the amount and manner by which hourly keysheets shall be increased, and will be applied for purposes of overtime and vacations.

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3. Night-Turn Adjustment.

a. Employees working night-turn will receive a flat rate of extra compensation per hour. The extra compensation will be based on ten percent (10%) of the guaranteed rate for each classification which was in force on August 25, 2002. Employees will be eligible for the extra compensation when the regular quitting time is after nine o’clock in the evening (9:00 p.m.) and up to and including nine o’clock (9:00 a.m.) of the following day.

b. Employees hired after August 28, 1994 who have no record of prior Westinghouse service will receive an extra compensation of sixty cents (60¢) paid hourly, for all work performed on such shifts until they have accumulated three years of continuous service, after which they will receive the extra compensation described in paragraph (a).

4. Probation Period.

a. New Employees.

Newly hired employees shall be on probation for a period of 90 calendar days, during which time their seniority shall remain suspended. After satisfactorily completing 90 calendar days of

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employment, seniority credit will be granted retroactive to their original hire date.

Newly hired employees shall be paid 25% below the standard rate of the job classification to which assigned. They shall receive the standard rate after 90 calendar days of employment, provided the employee demonstrates the ability to satisfactorily perform the work within the job assigned. If employees are unable to satisfactorily perform the work within the job assigned, their employment shall be terminated by the Company without recourse of any kind by the Union.

b. Promoted/Transferred Employees.

(1) Grades 3-5 - Any employees who are in training for a job in the labor grade classifications 3-5 will receive the full monetary increase of the new job within thirty (30) days from the first day worked. Employees upgraded to classifications 3-5 will have a thirty-(30)-calendar day trial period during which they may be disqualified for demonstrated unsatisfactory performance. Disqualified employees will be returned to their job/shift as soon as possible after disqualification, if their performance does not merit increase as scheduled.

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(2) Grades 6-9 - The same terms as (1), above, except employees will receive one-half the difference between their present hourly rate and the standard rate of the new job within thirty (30) calendar days from the first day worked in the new position. Employees will receive the standard rate of the new job within sixty (60) calendar days from the first day worked. Employees upgraded to classifications 6-9 will have a sixty-(60)-calendar-day trial period during which they may be disqualified for demonstrated unsatisfactory performance.

(3) Grades 10-14 - The same terms as (1), above, except employees will receive one-half the difference between their present hourly rate and the standard rate of the new job within forty-five (45) calendar days from the first day worked in the new position. Employees will receive the standard rate of the new job within ninety (90) calendar days from the first day worked. Employees upgraded to classifications 10-14 will have a ninety-(90)-calendar-day trial period during which they may be disqualified for demonstrated unsatisfactory performance.

(4) Lateral/Lower Transfers - Employees making lateral or lower job classification moves through our job posting procedure shall receive the standard rate of pay for the new job classification.

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They shall have a trial period of 30, 60 or 90 calendar days in accordance with the job classification and shall be returned to their former job/shift per Article XI., paragraph 6., if they do not demonstrate the ability to satisfactorily perform the work within the job assigned within the specific trial period.

c. Training.

(1) It is the responsibility of the Company to ensure that the most senior, qualified employee, who meets the minimum requirements of the job, receives the training necessary to perform the Bargaining Unit work. This responsibility includes providing formal training, should it be required.

(2) When a need to train backup operators is determined by the Company, employees within the department will be offered the training by seniority, and the most senior employee(s) will be trained as the backup operator(s).

When employees accept the training as a backup operator, they will accept upgrades to that position when the need arises.

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5. Four Hours of Work.

Employees reporting to work at their regular starting time and who have not been advised at least two (2) hours beforehand not to report, and those who report to work at other times at Company’s request, will be guaranteed four hours’ work or four hours’ pay at their hourly rate of pay.

The foregoing provision will not apply in the case of an emergency such as fire, flood, power failure or work stoppage by employees in the plant.

6. Injury.

If employees are injured arising out of, and during, the course of their employment so that, at the direction of the Company, or the Company’s physician, the employees are relieved from duty on the date of the injury or the day immediately following (provided injury was reported on the day of the injury, and the employee worked the remainder of the shift and reported for work the next day), they will receive their regular straight-time hourly rate for that portion of their regularly-scheduled working day that they are relieved from duty on the day of injury, not to exceed a total of eight (8) hours.

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If second and subsequent follow-up visits to a doctor, at the direction of the Company, occur during an employee’s working hours, the employee will receive pay for the time spent, not to exceed a total of eight (8) hours.

In all cases, the above payments shall be calculated on straight-time hours and night-turn adjustment, if applicable, and shall not include any overtime premium payments, unless the employee’s shift was scheduled for posted overtime at the time the injury occurred.

ARTICLE VIII.

HOURS OF WORK

1. The basic workweek will be forty (40) hours, based on eight (8) hours per day, five (5) days per week, Monday to Friday, inclusive. First shift hours shall be from 6:30 a.m. to 3:00 p.m.; second shift hours shall be from 3:00 p.m. to 11:30 p.m.; third shift hours shall be from 10:00 p.m., beginning on Sunday night, which shall be considered as regular time until 6:30 a.m.

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a. All employees in the Bargaining Unit shall be assigned to the basic workweek of the basic shifts listed below:

Shift	Starting Time	Stopping Time
1	6:30 a.m.	3:00 p.m.
2	3:00 p.m.	11:30 p.m.
3	10:00 p.m.	6:30 a.m.

A regular thirty-(30)-minute unpaid lunch period will be provided as conducive to efficient plant operations.

2. At the end of each shift, employees will be permitted five (5) minutes for personal cleanup. Following personal cleanup, employees will return to their workstations until the sounding of the end-of-shift signal.

3. Regular Breaks.

There shall be one regular break in any eight-hour shift. The break shall be of ten (10) minutes duration.

4. Overtime Break.

There shall be an overtime break for any employee working two (2) or more hours’ overtime. This break shall be of ten (10) minutes duration, for each two hours of overtime to be worked.

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For hours of overtime worked before normal shift hours, the break shall be the last ten (10) minutes of the overtime hours.

For hours of overtime worked after the normal shift hours, the break shall be the ten (10) minutes preceding the overtime hours.

ARTICLE IX.

OVERTIME

1. It is recognized that overtime will, at times, be required. All employees are expected to perform a reasonable amount of overtime. The Company does recognize that it may be occasionally inconvenient for individual employees to work overtime and will give due consideration to advance, individual, reasonable requests for relief from over time hours.

2. The Company will notify employees scheduled for Saturday overtime as soon as possible, but prior to the end of their shift on Thursday. The Company will make every effort to notify employees scheduled for weekday overtime as soon as possible, but not later than the end of their shift the day before the scheduled overtime. Employees may request to work overtime either before or after their regular shift and be granted their request, whenever possible.

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3. The Company may post a maximum of any two (2) eight (8) hour Saturdays a month and a maximum of four (4) ten (10) hour days, Monday through Thursday, a week of mandatory overtime. Should customer demands require additional overtime needs, the Company will first address these needs by asking for voluntary overtime. If insufficient volunteer response is received, the need for additional mandatory overtime will be discussed with the Union in accordance with the Special Situations Clause in Article XI., paragraph 8.

4. Employees absent from either weekly or Saturday mandatory or voluntary overtime shall be charged as absent under the attendance program.

5. Overtime work will be equalized, as practicable, among nonprobationary employees, assigned the same job number, within the department, on the same shift. The employee excused from over time work shall be charged the amount of time as actually worked by the employee(s) who accept(s) the assignment for the purpose of balancing overtime.

6. Only those employees who have completed their probationary period, on the same shift on which overtime is required, may work over time, unless the entire shift has been offered the overtime opportunity, and production needs still cannot be met.

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7. If overtime needs cannot be met within a job number, the overtime in labor grades 1-4 will be offered to employees, by seniority, in the same department, on the same shift. In labor grades 5-14, the overtime will be offered to the senior, qualified employees in the same department, on the same shift.

8. If overtime needs cannot be met within a department, an overtime sheet will be posted within the first five hours of the shift. The posting will list needs by job, department, labor grade and shift. Selections will be made as outlined in paragraph 7., above (Labor Grades 1-4 by seniority; Labor Grades 5-14 by most senior qualified).

9. For the purpose of equalization of overtime, an employee who transfers to another job will assume the highest number of overtime hours worked for that job number and shift.

10. Time-and-a-half shall be paid for:

a. All hours worked in excess of eight (8) but less than twelve (12) in any day (Monday to Friday, inclusive).

b. All hours worked less than twelve (12) on Saturday.

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c. All hours worked less than eight (8) on observed holidays for which the employee received additional payment under Article X.

11. Double time shall be paid for:

a. All hours worked on Sunday.

b. All hours worked on calendar Sunday outside of the employee’s established shift.

c. All hours worked after twelve (12) hours in any day (Monday to Saturday, inclusive).

d. All hours worked on observed holidays for which the employee is not eligible for payment under Article X.

e. All hours worked on observed holidays after eight (8) hours for which the employee received additional payment under Article X.

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ARTICLE X.

HOLIDAY, VACATIONS AND LEAVES

1. Holidays.

a. Holidays observed by the Company will be New Year’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, the day after Thanksgiving, the day before Christmas, Christmas and a tenth holiday which will be announced by January 1 of each year. Holidays falling on Sunday will be observed on the following Monday.

b. In any calendar year in which one or more of such holidays fall on Saturday, such holiday or holidays will not be an observed holiday in such year within the meaning of this Agreement, but another day during such year in place of the Saturday holiday or holidays. The Company shall be required to designate such alternative day or days before January 1 of such calendar year, after the matter has been discussed with the Union, and the Union’s preferences for such day or days have been presented.

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c. Employees will be paid for their established shift hours at their regular hourly rate of pay on the above holidays, subject to the following:

(1) The employee has thirty (30) days’ continuous service from his/her most recent hire date preceding the holiday.

(2) The employee works the entire shift on the workday immediately preceding and immediately following the holiday, unless excused by the Manufacturing and the Second Shift Manager.

d. The above payment will be made only to employees who are on the active roll on the last working day before the observed holiday and who earned some wages during the week in which such holiday falls or any of the four preceding weeks. Employees who are separated at any time during the week of December 31, in any year, shall not be entitled to holiday pay for New Year’s Day in the following year.

e. Holiday pay will be paid at the employee’s basic rate in effect during the week in which the observed holiday falls.

f. Employees who were laid off for lack of work and are recalled in accordance with Article XI., who completed thirty (30) days’ continuous service prior to their layoff, will receive the above holiday payment.

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2. Vacations.

a. The Company shall permit vacations to be taken as desired by employees as far as practical and consistent with efficient operations. At the time of vacation scheduling, whole-week vacation requests will take precedence over single-day requests. Six (6) of the employee’s vacation days may be taken in one-half (1/2) day increments, provided it is taken for the first four (4) hours or the last four (4) hours of the employee’s shift.

b. When the vacation period of an hourly-paid employee includes one of the ten (10) paid holidays, an additional day of vacation will be granted with pay in lieu of the holiday.

c. The Company may shut down for vacation purposes, and the time of year of the shutdowns will be a matter of negotiations. In such cases, the vacations will run concurrently with the shutdown periods. Employees who become eligible for vacations subsequent to the shutdowns, but before the end of the year, will be granted vacation pay, when they become eligible, if they were absent during the shutdown periods without additional time off.

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(1) It is recognized that some employees will be requested to work during the shutdown periods. The Company shall make such a request by polling employees in the same job number, by seniority, on all shifts. If the need cannot be filled within the job number, it shall be posted plant wide for all shifts, and offered to the senior, qualified employee. If volunteers are needed for all shifts, employees will work their regular shifts. Shift premium shall be paid to any employee whose regular shift pays a premium.

(2) The shutdown periods for the duration of this Agreement shall be as follows:

(a) 2003 - June 30, July 1,2, 3.

(b) 2004 - July 6, 7, 8, 9.

(c) 2005 - July 5, 6, 7, 8.

(d) 2006 - July 3, 5, 6, 7.

Note: The floating holiday shall be December 31, 2003; December 31, 2004; December 27, 2005; December 26, 2006.

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d. Where an employee is removed from the active roll for any reason, payment for vacation not taken for the current year will be made if the employee has qualified for vacation.

e. The right to vacation with pay shall vest as follows:

(1) Employees who are on the active roll and who have completed at least thirty (30) days’ continuous employment immediately preceding the close of business of the calendar year immediately prior to the beginning of the vacation year shall be entitled to that vacation in the vacation year for which they have qualified at such close of business.

(2) Employees who are on the active roll and who have completed at least thirty (30) days’ continuous employment at the close of business on their last working day immediately preceding the time of starting their vacation shall be entitled to such additional (or initial) vacation for which they have qualified at such close of business.

f. For vacation purposes only, continuous employment is interrupted only when an employee’s name is removed from the active roll, except that in case the removal does not interrupt

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continuous employment unless, and until, the employee’s name has been removed from the active roll for one year.

g. Total Employment is defined as the accumulated length of service in the employ of the Company, plus half of the accumulated length of service in the employ of Architectural Systems, prior to May 1, 1961.

h. The Company will grant vacations to hourly-rated employees meeting the requirement of thirty (30) days’ continuous employment, as described in subparagraph e., above, as follows:

(1) One (1) year of accumulated length of serves but less than two (2) years — one (1) week.

(2) Two (2) years’ accumulated length of service but less than six (6) years — two (2) weeks.

(3) Six (6) years’ accumulated length of service but less than seven (7) years — two (2) weeks plus one __ day.

(4) Seven (7) years’ accumulated length of Services but less than fifteen (15) years — three (3) weeks

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(5) Fifteen (15) years’ accumulated length of service but less than twenty (20) years — four (4) weeks.

(6) Twenty (20) years’ accumulated length of service but less than thirty (30) years — five (5) weeks.

(7) Thirty (30) years or more of accumulated length of ser vice — six (6) weeks.

i. Vacations shall be paid at the employee’s basic rate in effect at the time the vacation is taken, and vacation hours will be based on the number of hours regularly scheduled in each employee’s workweek, Monday to Friday, inclusive. Vacations must be taken within the calendar year in which the employee becomes eligible thereto, and they are not cumulative. It is the responsibility of both the Company and employee to assure that all employees take their allotted vacations.

3. Reporting of Absence.

a. An employee is expected to notify the Company in advance of the absence, whenever possible, in order that the Company may have an opportunity to arrange for a replacement or to reschedule the work. Employees must call within one (1) hour of the start of their shift.

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b. Any employees who are absent without permission for a period of three (3) working days, without having, during that time, reported the reason for the absence to the Company, shall be considered as having “quit without notice,” unless, at the time of the return, they can show extenuating circumstances which made it impossible to so report.

4. Sickness and Personal Business.

a. An hourly paid employee with one (1) or more year(s) of credited service, who is:

(1) Absent from work because of personal illness or business for which weekly disability benefits are not payable under the Knoll Insurance Plan or under Worker’s Compensation;

or

(2) Absent from work because of Management’s decision to furlough, other than disciplinary suspension, or furlough resulting from disciplinary action to other employees, or slowdowns, or any other form of work stoppage in the plant, may receive pay for each full day of such absence, up to the number of days set forth as follows:

(a) One (1) year’s credited service but less than ten (10) years — two (2) days in each calendar year.

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(b) Ten (10) years’ credited service but less than fifteen (15) years — three (3) days in each calendar year.

(c) Fifteen (15) years’ credited service but less than twenty-five (25) years — four (4) days in each calendar year.

(d) Twenty-five (25) years’ or more credited service — five (5) days in each calendar year.

b. All hourly-paid employees who are otherwise eligible to receive such pay and who have completed thirty (30) days’ continuous employment immediately preceding the day or days of absence will be paid:

(1) If the absence is of the type described in paragraphs a.(1), or a.(2), above.

Employees who have Sickness and Personal Business days available will be required to use them when absent for any reason.

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Hourly paid employees, otherwise eligible to receive Sickness and Personal Business day pay, and who were laid off for lack of work and are recalled in accordance with Article XI., who completed thirty (30) days of continuous employment immediately preceding their most recent layoff, will be eligible for Sickness and Personal Business day pay.

c. Hourly paid employees will be paid for such hours on the basis of their rate of record and, in addition, night-turn bonus, where applicable, on the date immediately preceding the day or days for which Sickness and Personal Business day pay is requested. In all cases, Sickness and Personal day pay shall be calculated on straight-time hours and shall not include any over time premium payments.

d. An employee who has any unused benefits under this Section remaining at the end of the year may have such unused benefits, up to a maximum of thirty (30) days, carried forward to the following calendar year for use in the event of absences of the type described in paragraph a., above.

e. Sickness and Personal Business day pay will not be made for any day or days for which the employee receives any other type of monetary benefits from the Company.

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f. Sickness and Personal Business day pay will not be made for any day or days of disciplinary furlough or any day or days not worked because of strikes or stoppages.

5. Leaves.

a. Death in Immediate Family.

Any employees with thirty (30) days’ continuous service who is absent from work because of the death of a:

(1) foster child residing in the home,

(2) employee’s parent,

(3) employee’s brother,

(4) employee’s sister,

(5) employee’s child,

(6) employee’s spouse,

(7) employee’s mother-in-law (includes step-mother-in-law)

(8) employee’s father-in-law (includes step-father-in-law)

(9) employee’s brother-in-law (which includes the employee’s sister’s husband, and the employee’s spouse’s brother and the husband of the employee’s spouse’s sister).

(10) employee’s sister-in-law (which includes the employee’s brother’s wife, the employee’s spouse’s sister and the wife of the employee’s spouse’s brother),

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(11) employee’s son-in-law,

(12) employee’s daughter-in-law,

(13) employee’s grandparent, (includes great-grandparent),

(14) employee’s grandparent-in-law, (includes great-grandparent),

(15) employee’s stepparent,

(16) employee’s stepbrother,

(17) employee’s stepsister,

(18) employee’s stepchild,

or

(19) employee’s grandchild (includes great-grandchild) will be compensated for time lost by reason of such absence from their regularly scheduled, straight-time shift hours during Monday to Friday of their workweek, up to a maximum of three (3) days for each such absence.

If an employee has a scheduled vacation during the period in which they would be granted bereavement leave per this section, those vacation days shall be reinstated to the employee and they shall receive bereavement pay for the said days. Bereavement pay does not apply to employees on furlough.

Such paid leave will be limited to three (3) consecutive, regular workdays within a period of five (5) days, starting on the day

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of, or immediately following the day of, death. In no case shall payment be made for more than three (3) days, as described above; provided, however, that in the event an employee meeting the requirements listed above is absent from work because of the death of a foster child residing in the home, child, spouse, or stepchild, they will be compensated for an additional two (2) consecutive workdays for time lost by reason of each such absence within a period of seven (7) days starting on the day immediately following the day of death.

When the death in the immediate family and the leave includes a holiday(s), the employee will be paid for bereavement (as stated above) and the holiday(s).

In case of any employee whose regular days of work vary from the basic workweek, as defined in Article VIII., paragraph 1., the above payment will be made for the time lost during the employee’s established five-day week.

The in-law relationship will terminate for purposes of this paragraph upon divorce or annulment (i.e., legal dissolution) of the connecting marriage which creates the in-law relationship to the employee; and the in-law relationship will terminate upon death and remarriage — that is, in the event of the death of the party with the connecting in-law relationship to the

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employee, the in-law relationship will not terminate until the remarriage of the surviving spouse.

b. Military.

(1) Employees entering military service will be granted a military leave of absence. The leave of absence will cover the period of military service up to a maximum equal to that period of time during which reemployment is required under applicable Federal status. A military leave of absence will be considered as continuous employment.

(2) The employee must apply for reemployment within ninety (90) days from the date of honorable discharge (or termination of the required period of military service). Any employees so applying will be reinstated in their former position, or a position in the Bargaining Unit which they left, on the basis of their seniority under the provisions of this Agreement, providing the employee complies with the following conditions:

(a) Application for reinstatement is made within the time period provided above.

(b) Official discharge papers are presented.

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(3) Employees reporting, as provided for in the above provision, who are not qualified to perform the duties of their former position, will be given special consideration, and the Company will endeavor to place them in suitable jobs.

(4) An employee so reinstated will be entitled to participate in insurance and other benefits on the same basis as other employees returning from leave of absence.

(5) Vacation eligibility for employees returning from military leave of absence will be reestablished on the basis of the Credited Service of the employee on the date the employee returns to the active roll; however, vacation payment will not be granted until the employee has been on the active roll thirty (30) days following the employee’s return from military leave of absence. In any event, the employee will receive the vacation for which eligible in that calendar year.

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(6) Annual Military Field Encampment. Employees required to attend annual military encampments to discharge their National Guard or Reserve obligations will be reimbursed in accordance with the following conditions:

(a) Reimbursement will be limited to a maximum period of seventeen (17) calendar days (not to exceed thirteen (13) working days, excluding holidays for which the employee receives payment) during a calendar year.

(b) Reimbursement, if any, will be the difference between the employee’s normal, straight-time earnings and total amount the employee would receive for service pay from the Federal or State Government. In calculating the amount of difference to be paid by the Company, the employee’s regularly scheduled workdays will be used. Travel, quarters and subsistence allowances will not be included in determining the amount of compensation received by the employee from the Federal or State Government.

(c) The basis for establishing normal earnings will be the rate of record in effect immediately preceding the encampment period, including night-turn bonus, where applicable.

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(d) No reimbursement shall be made for annual encampment during furlough days or on days that would have been furlough days.

(7) Ready Reserve or National Guard Alerts.

Employees required to participate in National Guard or Ready Reserve “alerts,” taking place during their regular working hours, shall be reimbursed for the difference, if any, between their regular, straight-time earnings and their military earnings (both calculated as provided in paragraph (6), above) for such time lost from work during their regularly scheduled working hours, up to a maximum of one hundred sixty (160) hours in any calendar year.

No reimbursement shall be made for such Ready Reserve or National Guard alert duty during furlough days or on days that would have been furlough days.

c. Voluntary Leave of Absence.

A voluntary leave of absence is a convenience for employees who find it necessary to absent themselves from active employment, where reason for such absence and employees’

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service record justify continuing themselves on the employment roll. Satisfactory work performance and attendance will be considered in reviewing request.

(1) Reasons for such request will be stated in writing and should be of sufficient importance to warrant granting a leave of absence; illness of employee (other than disabling illness) verified by employee’s personal physician, illness in employee’s immediate family or other conditions, based on their individual merits, may be considered as justifying approval.

(2) If reasonably adequate replacement is not available, and compliance with request would seriously interfere with work on hand, such request should not be granted until that condition is no longer a factor.

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(3) Total length of time for which voluntary leave of absence will be granted depends on employee’s length of credited service and will be as follows:

LENGTH OF CREDITED SERVICE	MAXIMUM TOTAL LEAVE (CALENDAR DAYS)
Less than one (1) year	No leave of absence granted
One (1) year but less than two (2) years	Ten (10) days
Two (2) years but less than three (3) years	Twenty (20) days
Three (3) years but less than four (4) years	Thirty (30) days
Four (4) years but less than five (5) years	Forty-five (45) days
Five (5) years and over	Three (3) months

(4) A voluntary leave of absence shall not be granted to an employee to accept employment with another employer or to enter into business for themselves.

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(5) If employee is eligible for vacation and Sickness and Personal Business days, and vacation and Sickness and Personal Business days have not been taken, the vacation and Sickness and Personal Business Days will be used to the maximum extent in fulfillment of request for leave.

(6) Employee will be expected to return from voluntary leave of absence on the date agreed upon. An employee on voluntary leave accumulates no seniority for pension or any other purpose, except Bargaining Unit Seniority.

d. Family Medical Leave Act (FMLA).

The Company, the Union and employees will comply with the Family Medical Leave Act (FMLA) and its regulations in accordance with the Bargaining Unit Policy.

e. Union Leave of Absence.

(1) Upon written request from the Union to the Human Resources Manager, an employee selected for a position with the Union, as a full-time Union Representative, will be granted a leave of absence without loss of seniority.

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(2) A leave of absence for Union business shall not be less than one (1) month, nor more than three (3) years. The leave may be renewed for an additional three (3) years by the Union’s written request.

(3) At the end of this service, such employee who has been granted a leave of absence, will be restored on the basis of seniority to the former position or similar position, at the going rate, at the time of return. Bargaining Unit seniority will be given for time spent on Union leave of absence. Credited Service shall be calculated as per the Pension and Insurance Agreement.

6. Jury Duty - Court Appearances.

a. When called for jury duty, employees will be reimbursed for the difference between the amount paid for such service, not including transportation allowance, and an amount equal to the basic scheduled hours in the period times the rate of record, including night-turn bonus, where applicable, on the date immediately preceding such absence. No reimbursement will be made for jury service during furloughs or days that would have been furloughs.

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b. When time is lost because of attendance at a proceeding of a Court or Governmental Agency at the request of the Company or in response to a subpoena served on the employee, employees will be reimbursed in the manner set forth in paragraph a., above. However, when subpoenaed by other than the Company, the employee will not be reimbursed, if the employee, the Company, or the Union is a party in that case, or the employee has any direct or indirect interest in the case.

c. First shift employees released from jury duty by 10:00 a.m. will report to work by 11:00 a.m., and be paid for a half-day of jury duty. Employees released after 10:00 a.m. will report the following work day and will receive a full day of jury duty pay.

Second shift employees released from jury duty by 10:00 a.m. will report to work for the first half of second shift, unless arrangements are made with the Supervisor to report for the second half of the shift and will be paid for a half-day of jury duty. Employees released after 10:00 a.m. will report on the following day and will be paid a full day of jury duty.

Third shift employees will be given the night off, with pay, prior to the day in which jury duty is to be served.

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Release times will be given to the employee’s Supervisor by the employee for appropriate payment. The Court may be used for verification.

d. An employee, to be eligible to receive the payments set forth in this Section, shall have completed thirty (30) days’ continuous employment immediately preceding the absence.

Employees who were laid off for lack of work and are recalled, in accordance with Article XI., who completed thirty (30) days’ continuous employment immediately preceding their most recent layoff, shall be eligible to receive such payment.

ARTICLE XI.

SENIORITY

1. Probation.

All new employees shall be considered as probationary employees for a period of ninety (90) calendar days. During the probationary period, the Company retains the right to lay off, terminate, transfer or discipline employees without recourse by them to the Grievance Procedure.

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2. Seniority Credit.

Upon completion of the probationary period, the employee shall be placed on the seniority list as a regular employee and immediately credited with the time which has accumulated during the probationary period. Seniority shall be defined as the cumulative length of service of the employee in the Bargaining Unit of Knoll, Inc. and Westinghouse Electric Corporation, Grand Rapids, plus half of the accumulated length of service in the employ of Architectural Systems, Inc., prior to May 1, 1961. Once the order of seniority has been determined, no change of employee’s last name shall change the order of the seniority list. The Company furthermore agrees to change any errors in the seniority list that may have occurred using prior methods.

3. Inactive Seniority List.

a. Employee placed on layoff shall have their names placed on the inactive seniority list. An employee on layoff shall continue to accumulate Bargaining Unit seniority until they are removed from the inactive seniority list per section c., below. All employees returned to the Bargaining Unit, that had previously been removed from the inactive seniority list, shall receive Bargaining Unit seniority for former Bargaining Unit service, plus Bargaining Unit seniority for time spent on the inactive

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seniority list. Credited service shall be calculated as per the Pension and Insurance Agreement.

b. An employee’s name will not be placed on the inactive seniority list when an employee is discharged or voluntarily quits.

c. An employee’s name will be removed from the inactive seniority list:

(1) When an employee fails or refuses to report for work within two (2) days after receiving notice of recall to work, sent by registered mail to the employee’s last known address on file with the Company, unless an extension of time is agreed upon between the Company and the employee. The employee is responsible for maintaining a current address on file with the Company.

(2) When an employee refuses to accept work with equal pay to the job from which employee was laid off when recalled by the Company.

(3) When the employee has been on the inactive seniority list for a period shown in the following table:

(a) Less than one (1) year’s accumulated length of service - length of accumulated service.

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(b) One (1) year’s accumulated length of service but less than two (2) years — one (1) year.

(c) Two (2) years’ accumulated length of service but less than five (5) years — two (2) years.

(d) Five (5) or more years’ accumulated length of service but less than ten (10) years — three (3) years.

(e) Ten (10) or more years’ accumulated length of service — four (4) years.

4. Return of Employee to Bargaining Unit.

a. The Union will not oppose the return of salaried employees to the Bargaining Unit, provided that, at the time of promotion, they worked on a job which was in the Bargaining Unit. Seniority credit of such employees will not include the period the employee spent as a salaried employee. The employee will be returned to a job in the Bargaining Unit in line with the individual’s seniority and qualifications.

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Management shall have the right to return a promoted employee to the Bargaining Unit any time during a three- (3) year period from the effective date of promotion.

b. An employee returning from leave of absence or disability or returning to the Bargaining Unit pursuant to paragraph a., above, will be placed by agreement with the Union or will return to the position they held before leaving the active roll, unless such position no longer exists or is held by a more senior employee. If the returning employee was in their trial period, they shall not displace a least senior employee upon their return, unless that employee is also in a trial period. If it is not possible to place employees in accordance with the above, they will be placed in accordance with the disposition procedures set forth in paragraph 6. of this Section XI., as if they had been replaced in the most recent position in the Bargaining Unit.

5. Increase in Work Force - Hiring, Transfer and Upgrade.

a. Job openings will be filled in the following sequence:

     (1) (a) The open job will first be offered to employees on the active roll, in order of seniority, who have completed the probationary/trial period on the open job, and have been displaced from that specific job number within the last one (1) year period.

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(b) Recall rights apply only for a one (1) year period from the time of the displacement and only to the specific job number from which the employee was displaced.

(c) Employees who refuse recall to the specific job number held at the time of displacement, forfeit recall rights to that position.

(d) Recall rights do not apply to an employee who has been disqualified.

(2) The job will be posted for forty-eight (48) hours and filled by the most senior, qualified employee who bids on the job. After the postings have been filled, the Company will provide the Chief Stewards with a duplicate copy of all posting sheets and change of status sheets weekly.

(3) The most senior, qualified employee will be recalled from the inactive seniority list.

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(4) Jobs not filled by the above procedure will be filled by hiring a new, qualified employee.

b. In the event of a group hiring, the following procedure will be used to assign jobs for the newly-hired employees:

(1) All newly-created positions will be posted per paragraph c, below.

(2) Positions that become open as a result of employees accepting the newly-created positions will be posted the following week per paragraph c., below.

(3) All subsequent labor grade three (3) positions that are vacated for a period mutually agreed upon by the Company and the Union will not be posted.

(4) Newly-hired employees will be placed in positions not filled through the Job Posting Procedure.

c. Job Posting Procedure.

(1) Jobs shall be posted when they operate over fifteen (15) working days per month. Jobs shall also be posted if they operate ten (10) days for three (3) months in a six

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(6) month period. Special short-term jobs over fifteen (15) working days shall be filled by agreement between Manufacturing Management and Union Chief Stewards.

(2) Jobs will be posted for forty-eight (48) consecutive hours and will contain the job title and number, shift, wage rate, qualifications and a brief description of, and reason for, the job opening.

(3) Any employee who has completed the probationary period may bid on a posted job per Article XI., paragraph 5.b.(5).

(4) The most senior, qualified employee will be interviewed by the Supervisor for the sole purpose of reviewing the job description, the job requirements and meeting department employees. Within twenty-four (24) hours after this interview, the selected employee may decline or accept the posted job. In case of employee refusal, the next senior, qualified employee on the posting shall be offered the job, contingent upon this paragraph.

(5) Once an employee is awarded the job, the employee may not bid on another job for six (6) months.

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(6) When more than one job is posted within the same forty-eight (48) hour period, employees may sign any number of such postings. Employee who is the most senior, qualified bidder on more than one posting will be inter viewed for the job of their choice.

(7) An employee who is disqualified by the Company within the trial period, outlined in Article VII., will be returned to their previous job/shift, per Article XI., paragraph 6., as soon as possible after disqualification. An employee disqualified by the Company will be eligible to bid on other jobs immediately. However, the employee shall not be able to bid on the same job from which disqualified for a period of one (1) year. Job openings occurring because of disqualification by the Company will be posted again.

(8) Employees on vacation will be allowed to bid on jobs, however, the Company’s only obligation is to post the job on the job posting bulletin board for forty-eight (48) consecutive hours. Delays encountered in placing vacationing employees on the awarded job will be overcome by

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the Company placing a qualified employee on the job and assigning a temporary rate, as appropriate.

6. Decrease/Realignment in Work Force.

When it is necessary to decrease/realign the work force, the following procedure will apply:

a. Employees on the affected job in the following order of consideration:

(1) Probationary,

(2) Job posted trial period (regardless of seniority),

(3) Least-senior, nonprobationary/nontrial employee, will be up for disposition.

b. Employee(s) up for disposition will maintain their shift and displace (seniority permitting) an employee in their previous job number in accordance with the procedures set forth in 6.a., above.

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c. Employee(s) unable to maintain their shift will displace (seniority permitting) an employee in their previous job number on any shift in accordance with the procedures set forth in 6.a., above.

d. Employees not placed in previous job, as provided in b. and c., above, shall fill open positions not filled through the job posting procedure, being polled by seniority. Such employees shall have 30-, 60- or 90-day trial periods, as outlined in Article VII., paragraph 4.b.

e. If no open positions exist, employees up for disposition will displace the least-senior employee plant wide, provided they are qualified to perform the job held by the least-senior employee. Such employees shall have 30-, 60- or 90-day trial periods, as outlined in Article VII., paragraph 4.

f. No employees placed in a job, per paragraph 6. of this Article, shall lose their bidding rights. Any employee who loses their job or shift through the disposition procedure, who, at that time, does not have bidding rights, shall have bidding rights restored.

g. Employees affected by this decrease procedure, who refuse a job in a lower, equal, or higher labor grade than that from which displaced, will be considered voluntary quits.

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h. Employees not placed under provisions b., c. and d., above, will be laid off and placed on the inactive seniority list.

i. Employees selected for layoff shall be advised as soon as possible of the reasons therefore, but at least five (5) days before such layoff becomes effective, unless there are extenuating circumstances.

7. Shift Preference.

a. Employees on the active roll who have one (1) year or more of continuous service may exercise their seniority in shift preference once every twelve (12) months.

b. Employees who exercise shift preference will be transferred on the second Monday from the time of such request.

c. Shift preference can be exercised upon employees in their probationary/trial period. However, employees in their probationary/trial period cannot exercise shift preference.

d. Employees displaced will have their shift preference reinstated. If any employees who do not have bidding rights are bumped to another shift by an employee exercising their shift preference, they shall have their bidding rights restored.

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e. Once a shift preference has been turned into the Supervisor, it cannot be canceled, unless that employee bids into another job before their designated date. In such cases, employees being bumped shall not be required to change shifts and the employee who had submitted the shift preference shall have the shift preference restored.

f. Employee’s request to exercise shift preference will be made in writing to their immediate Supervisor.

g. Employees up for disposition can use a shift preference to displace less senior up for disposition employees on other shifts. The shift preference will be processed as outlined in section 7 (a-f).

8. Special Situations.

Notwithstanding the provisions of the established seniority procedure, designated Union and Management representatives may, in special situations, work out, by negotiation, individual cases where the designated Union and Management representatives agree that such special situations exist.

9. Work Assignments.

a. Key Skills and Training.

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A group of employees, not to exceed three percent (3%) of the active Bargaining Unit, will be given preference, as necessary in the event of a layoff, as set forth below, due to special skills in key jobs or because of unusual ability for training purposes to fill key jobs, either in the plant or field. The jobs requiring special skill for which employees are to be given seniority preference, as differentiated from jobs for training purposes, will be determined by the Company. The jobs for which employees are to be trained, the list of employees to be given such seniority preference and the reasons therefore will be given to the Union at the beginning of each contract term and will be kept up to date by Human Resources.

b. Graduate Student, Professional and Managerial Trainees.

Work assignments for graduate students and other trainees in the Company’s various professional or managerial training programs will be made in line with the following provisions:

(1) During such assignments, such students and trainees will not be in the Bargaining Unit and will not replace regular employees. They will cooperate with regular employees in the performance of work.

(2) Each assignment will not exceed six (6) weeks.

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(3) Advance, written notice of trainees assigned under this provision will be given to the Chief Steward of the affected shift. At the earliest opportunity, a list will also be provided, which includes the trainees names and the area in which they will be trained.

c. Shift Assignments.

The Company may make shift assignments for operating or training purposes under the following conditions:

(1) Affected employees will be given reasonable, advance notice, but not less than forty-eight (48) hours’ notice, before the transfer.

(2) Assignments will be made by polling employees, on all shifts, by seniority, in the same job number in which the work is required.

(3) If needs cannot be met through volunteers within the job number, it shall be posted, plant wide, on all shifts, with the assignments being given to the senior, qualified bidder.

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(4) The assignment may not extend beyond thirty (30) working days, unless extended by mutual agreement between the Company and the Union.

(5) Assignments will not be made to fill a vacant job, except for vacation or emergency coverage.

(6) An individual employee may not be required, but may volunteer, to accept such assignment more than once in a given six (6) months.

(7) Employees are returned to their job/shift at the end of thirty (30) working days, or when the training/operating need is satisfied, whichever is sooner.

(8) An employee, whose regular shift pays a premium, shall not lose this premium when transferred to a shift not paying premium.

10. Special Job Assignments.

When the Company assigns employees from their job to work another job, the selection shall be made by polling qualified employees in order of seniority. If the job of employees so selected subsequently needs to be filled, they will have the option of returning

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to their job, unless they are the only qualified operator, per Article VII., paragraph 4.c.

ARTICLE XII.

LABEL

1. It is hereby understood and agreed by the Company and the Union that an application shall be made for the Union Label to the First General Vice President of the United Brotherhood of Carpenters and Joiners of America. If the application is approved and the Union Label is issued by the United Brotherhood of Carpenters and Joiners of America, to be placed upon the Company’s products, it is understood and agreed that the Label shall remain the property of the United Brotherhood of Carpenters and Joiners of America and shall be, at all times, in the possession of a member of the United Brotherhood. Use of said Label may be withdrawn from the mill, shop, factory or manufacturing establishment of the Company, at any time, at the discretion of the International Union.

ARTICLE XIII.

JOB DESCRIPTIONS AND EVALUATIONS

1. The establishment of job descriptions and classifications are the responsibility of the Company. Established job descriptions and classifications will be reviewed and changed as necessary to take

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into consideration changes in methods, equipment and working conditions.

2. The Company will present the Union Chief Steward with any new or changed job descriptions and/or classifications and their evaluation at least five (5) working days prior to making them effective.

3. During the period prior to the effective date of any new or changed job description/classification, and at the request of the Union, the Company will meet to discuss (a) the description of the job and classification, and (b) its evaluation.

4. If the Company and Union fail to agree on the job description/classification, or its evaluation, or both, in the period prior to the effective date, the Company shall have the right to make effective its most recent proposal, and the Union shall have the right to process a Grievance or Grievances per the provisions of Article XV., paragraph 7.

5. Any employees affected by a change in their job description and does not at that time have bidding rights, shall have their bidding rights restored. However, the employee would not be eligible to bid on this position for six (6) months.

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ARTICLE XIV.

STEWARDS AND GRIEVANCE OFFICERS

1. a.     It is agreed that the Union may elect or appoint the following number of Stewards:

b. First Shift - Four (Includes Chief Steward).

Second Shift - Three (Includes Chief Steward).

Third Shift - Two (Includes Chief Steward).

c. The Steward’s area of responsibility should be consistent with their normal working area and shall be subject to mutual agreement of Management and Union.

2. There shall be two persons from the Bargaining Unit appointed by the Union to serve as Grievance Officers. Grievance Officers will serve on the Grievance Committee for the purpose of resolving Grievances at the Human Resources step of the Grievance Procedure.

3. The Union agrees to notify the Company promptly and, in writing, of changes in Stewards and Grievance Officers.

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4. At the written request of the Union, the Grievance Officers shall be given superseniority to retain employment in the event of a layoff.

5. At the written request of the Union, the Stewards will be given superseniority within their area of responsibility. If the disposition procedure does not allow the Steward to remain in their area of responsibility, then they shall displace the least senior employee within their area of responsibility provided they meet the minimum requirements of that job. Superseniority cannot be used to displace an employee from a higher labor grade.

6. Shop Stewards and Grievance Officers shall not have the right to call strikes, slowdowns or work stoppages of any sort.

7. The Union Steward will be notified of accidents occurring on their shift which affect any employee in the Bargaining Unit who is required to leave the plant because of the accident.

8. No Union business may be conducted on Company time unless prior approval has been received from Management.

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ARTICLE XV.

SETTLEMENT OF GRIEVANCES

Section I - Grievance Procedure

1.	a.	The Union agrees to furnish the Company with a list of its Officers, Negotiating Committee Members and Stewards and shall furnish the Company with notice, in writing, of any new appointments or changes in Stewards, Officers, Local Union Grievance Committee Members or Negotiating Committee Members, prior to the date they are to be recognized as representatives.
	b.	The Local Union Grievance Committee shall consist of the two (2) Grievance Committee Members, the Chief Steward of the shift involved and the Steward of the department involved.

2. The term “Grievance” shall apply and be limited to (a) questions concerning the application and interpretation of alleged violations of this Agreement by the Company, (b) any subject that this Agreement provides may become a Grievance or (c) questions involving discipline, release or discharge of Bargaining Unit employees who have completed their probationary period.

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3. The parties recognize that the prompt settlement of Grievances is important to a sound relationship between the Union and the Company and, therefore, no Grievance will be honored unless presented, as per step (1), below, within seven (7) calendar days of the date of the incident causing a complaint.

4. Before leaving the place of work to conduct Union business, as described below, the Shop Steward will secure permission from the steward’s Supervisor or, in the Supervisor’s absence, the appropriate Unit Manager. Such permission will be granted unless it is inconsistent with production demands. The Shop Steward will notify their Supervisor when Union business has been completed.

For the purpose of this Agreement, Union business is defined to mean attendance at a meeting with representatives of Management for handling or adjusting of Grievances, for the purpose of collective bargaining and for the investigation of Grievances.

5. The following Grievance Procedure will apply to the settlement of Grievances.

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Step 1

The aggrieved employee and the area Steward shall first make an attempt to orally settle the Grievance with the department Supervisor. The Supervisor shall respond within two (2) working days subsequent to the discussion.

Step 2

If the Grievance is not resolved in Step 1, the Chief Steward may submit the Grievance to the Unit Manager within five (5) working days. Upon receipt of the Grievance, the Unit Manager will arrange a conference within seven (7) working days with the Supervisor, Chief Steward and the aggrieved employee in an attempt to adjust the Grievance. The Unit Manager will present a written answer to the Grievance within five (5) working days after the conference or the Grievance will be automatically advanced to the next step on the sixth (6) working day. The Union shall have five (5) working days after the receipt of the Company’s written answer to appeal the Company’s decision to the third step.

Step 3

If the Grievance is not satisfactorily adjusted by the Unit Manager, the Union may submit the Grievance to Human Resources, with a

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written statement outlining the reasons for considering the Unit Manager’s answer to the Grievance as unsatisfactory.

A meeting will be scheduled within ten (10) working days from the date Human Resources receives the Union’s request.

The meeting will consist of representatives of Management, the Union Business Agent and the Union Grievance Committee. Upon request of either the Company or the Union, the aggrieved employee may be present at the meeting. Human Resources will answer the Grievance within seven (7) working days subsequent to the meeting, which will include the Company’s willingness to arbitrate the Grievance. (Failure by the Company to indicate their willingness to arbitrate will be considered a refusal of the Company to arbitrate the Grievance.)

6. The time limits at each step of the above Grievance Procedure may be extended by mutual agreement between the Company and the Union.

7. At the request of the Grievance Committee, and with the concurrence of the Human Resources Manager, a Grievance may be initiated at the Human Resources level of the procedure when the facts and circumstances so warrant.

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Section II - Arbitration.

1. Any Grievance which clearly protests a disciplinary penalty or a discharge of an employee covered by this Agreement, who was not a probationary employee at the time of such action, and which remains unsettled after the procedures outlined in the preceding section of this Article XV. have been exhausted, shall be submitted to arbitration upon written request of the Union or the Company, subject, however, to the following terms, conditions and exceptions:

a. Such request shall be made within thirty (30) calendar days after the date of the Company’s answer at the final level of the Grievance Procedure. If no request for arbitration is made by either the Union or the Company during such thirty-day (30) period, both parties shall be deemed to have waived their right to make such request, and the Grievance will thereupon be closed for all purposes. Employees in the Bargaining Unit covered by this Agreement cannot, except through the Union, initiate or invoke the arbitration procedures set forth in this Section II.

b. In the arbitration of a Grievance protesting the discipline or discharge of an employee within the Bargaining Unit, the

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Grievance must allege that the discipline or discharge was imposed without just cause, and the arbitrator’s authority will be limited to determining such.

2. The Union and the Company agree that all other Grievance issues are excluded from demand arbitration and may be arbitrated only upon the mutual consent of the parties. If the Human Resources response is unsatisfactory, and the Company indicates they are willing to arbitrate, the Union will respond within thirty (30) calendar days after the Company’s answer at the final level of the Grievance Procedure. Failure to do so will be considered a waiver of the Union’s right to arbitrate the Grievance, and the Grievance will be considered closed for all purposes.

3. The American Arbitration Association will be requested to submit a list of names of thirty-five (35) arbitrators of national recognition. The Union and the Company will each be permitted to alternately strike fourteen (14) names until seven (7) names remain. These seven (7) individuals will then be permanent panel of neutral arbitrators. These names shall be arranged in alphabetical order, and cases will be assigned to arbitrators in that order.

The permanent panel of seven (7) neutral arbitrators shall remain in effect until either the Company or Union requests a replacement of one or more of them. Such replacement request shall be made in

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September of each year by notifying the other party, in writing. The American Arbitration Association will then be requested to submit five (5) additional names for each neutral arbitrator to be replaced, and each party shall strike two (2) names alternately so that the last name on the list will be the new arbitrator on the permanent panel for the succeeding twelve (12) months.

4. The American Arbitration Association shall have no authority to process a request for arbitration or appoint an arbitrator if either party advises the other party and the Association that the Grievance desired to be arbitrated does not raise an arbitrable issue under the terms of this Agreement. Upon such notice that a Grievance is not arbitrable, which will be given within fifteen (15) calendar days from receipt of a request to arbitrate, the Union will have the right to strike and the Company the right to lock out, per Article IV.

5. In the selection of an arbitrator, except as provided in this Agreement, and the conduct of any arbitration proceeding, the Voluntary Labor Arbitration Rules of the American Arbitration Association, as amended and in effect on January 1, 1979, shall control and include any subsequent modification of such rules.

6. No more than one (1) dispute may be submitted to any one arbitrator at any one time, except by mutual agreement of the parties.

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7. A transcript shall be made of the proceedings at every arbitration hearing, with the original to be furnished to the arbitrator and the cost thereof to be divided equally between the parties. The cost of additional copies of the record shall be paid by the party ordering them. The expenses of the arbitration shall be shared equally by both parties, except that each party shall bear the cost of presenting its own case.

8. It is the intention of the parties that only those disputes which clearly come within these arbitration provisions shall be arbitrable. No other subjects, direct or collateral, shall be arbitrable except by a mutual written agreement, signed by the Company and the Union. No arbitrator shall have the authority to hear any case or to review, revoke, modify or enter any award with respect to any matter involving the interpretation or application of any pension, insurance or other bene fits plan, or with respect to the establishment, change or administration of any benefit plan. Further, no arbitrator shall have any authority to make any award requiring payment to any employee for any period more than thirty (30) calendar days prior to the date of the filing of the Grievance. The award of any arbitrator shall be in writing and, if within the scope of the Arbitrator’s authority, shall be final and binding upon the parties to this Agreement and the employee or employees involved in the Grievance. The arbitrator

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shall not, in any manner or form whatsoever, directly or indirectly, add to, detract from or in any way alter the provisions of this Agreement.

9. The arbitrator shall not, by virtue of this Agreement or the Rules of the American Arbitration Association or otherwise, compel either party to produce new evidence (not already presented during processing of the Grievance in the Grievance Procedure) considered by such party to be confidential, irrelevant or immaterial to the proceeding or which is not available.

10. No persons or parties not a party to this labor Agreement shall be permitted to attend or participate in any arbitration proceeding held hereunder except by agreement, in advance of the hearing date, between the Company and the Union, with the exception of the Grievant, witnesses and duly-authorized agents and representatives of the Company and the Union.

11. The time limits, as stated in the above arbitration procedure, may be extended by mutual agreement.

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ARTICLE XVI.

MODIFICATION AND TERMINATION

1. This Agreement expresses the understanding of the parties, and it will not be changed, modified or varied except; by a written instrument, signed by duly-authorized agents of the parties hereto, and any negotiations relating to proposed changes in such provisions will be carried on between the representatives of the parties.

2. The parties acknowledge that all agreements arrived at by them during the negotiations, concluded by this Agreement, are set forth herein (except to the extent they are set forth in the Pension and Insurance Agreement between the Company and the Union). Therefore, except as hereinafter specifically provided in Article XV, the Company and the Union, for the life of the Agreement, each voluntarily and unqualifiedly waive the right, and each agrees that the other shall not be obligated to bargain collectively with respect to any subject or matter referred to or covered in this Agreement or with respect to any subject or matters not specifically referred to or covered in this Agreement which were discussed during the negotiation of this Agreement.

3. The Company and the Union agree that neither of them will request consideration of any proposed changes in, or additions to, this Agreement, including any general wage adjustments, before June 25, 2006.

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If this Agreement continues in effect for any subsequent contract term or terms, beginning on, or after, August 27, 2006, the provisions of the last sentence, above, shall apply (substituting the year to which this Agreement is renewed for the figures “2006” wherever they appear). When any such request is received, a conference will take place within fifteen (15) days for the purpose of considering it.

4. If the parties do not reach agreement prior to August 27, 2006, with respect to any requested contractual changes or additions or wage adjustment submitted on or after June 25, 2006, or if the parties do not reach agreement prior to the end of any subsequent contract term, with respect to any requested contractual changes or additions or wage adjustments, submitted on or after June 25, 2006, of such subsequent contract term, the Union may strike after the beginning of the next succeeding contract term in support of any such request made by it.

Such strike shall not be a violation of Article IV. or any other provision of this Agreement, but either party may, upon not less than one (1) day’s written notice, given to the other during such strike, thereupon terminate this Agreement and all of the supplements thereto.

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5. This Agreement shall remain in full force and effect until August 27, 2006, and shall continue and remain in full force and effect from year-to-year thereafter (such period ending August 27, 2006, and such succeeding periods of one year being referred to herein as a “contract term”), provided that either party may terminate this Agreement as of midnight, August 27, 2006, or at the end of any succeeding contract term by giving the other party written notice of such termination at least sixty (60) days before the termination date.

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LOCAL 1615	KNOLL, INC.
UNITED BROTHERHOOD OF	GRAND RAPIDS, MICHIGAN
CARPENTERS AND JOINERS OF
AMERICA MIDWESTERN COUNCIL
OF INDUSTRIAL WORKERS
	/s/ J. Todd
M. Ulrich	J. Todd
Business Representative	Site Manager

/s/ S. Barton	/s/ K. Varady
S. Barton	K. Varady
Business Representative	Human Resources Manager

/s/ G. Schultz	/s/ K. McCann
G. Schultz	K. McCann
President, Local 1615	Controller

/s/ C. Bartnick	/s/ T. Campbell
C. Bartnick	T. Campbell
Committee Member	Shift Manager

/s/ B. Drent	/s/ D. Gordon
B. Drent	D. Gordon
Committee Member	Facilities Manager

/s/ B. Hinkley	/s/ L. Chaffin
B. Hinkley	L. Chaffin
Committee Member	Human Resources Rep.

/s/ B. Minnema

B. Minnema

Committee Member

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Letter of Agreement #1

Special Hours of Work

In reference to Article VIII., Hours of Work, the following exceptions to the basic workweek are hereby agreed to by the Union and the Company, with the understanding that they are to be filled by seniority on a voluntary basis. In the event that an insufficient number of employees volunteer for these special hours, the least-senior employee or employees on the job and shift of the special hours will be required to work the special hours.

Job	Starting Time
Coating Line Operator	5:30 a.m.
Line Loader, Lay-up	5:30 a.m.
Group Leader, Lay-up	5:30 a.m.
Line Loader, Steel Panels/Post Covers	5:30 a.m.
Dividends Line Coordinator	5:30 a.m.
Material Expeditor, 7/8”	5:30 a.m.
Hazardous Materials, Maintenance	5:30 a.m.
Line Loader, Panels	6:00 a.m.
Line Loader, Curved Panels	6:00 a.m.

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When the establishment of shifts other than those listed in Article VIII are placed into effect, the Manufacturing Manager will notify the Union in writing prior to placing such shift(s) into effect. If the Union does not agree, the Union shall have the right to process a grievance or grievances per the provisions of Article XV, paragraph 7.

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Letter of Agreement #2a

Subcontracting

The Company hereby agrees, for the duration of the 2002-2006 Union/Company Agreement, to notify the Union, in writing, within five (5) days before any outside maintenance personnel are contracted to perform any work on Company premises, or any other work that may be considered maintenance work. Should extenuating circumstances exist, making it impossible for the Company to so notify the Union, then the Company will notify the Union as soon as possible after the contracting takes place. Such written notification shall include what work is to be performed and the reasons why such work cannot be performed by Bargaining Unit personnel. A copy of the attached form will suffice to meet these requirements. Letter of Agreement #2b

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Letter of Agreement #2b

Subcontracting

Date:

Subcontractor:

Number of Employees:

Approximate Length of Contract:

Purpose:

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Reason for Use of Nonbargaining Unit Personnel:

Signature of Manager

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Letter of Agreement #3

Labor Pool

The Company and the Union hereby agree to establish a Labor Pool, not to exceed twenty (20) employees on first shift, and ten (10) on second shift. This position will be evaluated at Labor Grade #8, and will be filled through the job posting procedure.

Employees within this classification will be assigned to any job labor grade 8 or below, in any department, on their own shift. On a weekly basis, the Supervisor(s) of the Labor Pool will provide a sheet that reflects what jobs and departments that employees in this pool were assigned in the previous week. Exceptions to the fifteen (15) day requirement in Article XI, paragraph 5.b.(1) can be made by mutual agreement between the Manufacturing Manager, and the shift’s Chief Steward.

Labor Pool employees can be assigned on a hourly, daily and weekly basis.

The Labor Pool employees will be used to fill in for vacations, sick and personal business days, death-in-family, jury duty, court appearances, call-ins and volume increases.

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Employees in the Labor Pool assigned to a department where overtime is required, shall be considered employees of that department, for the purpose of voluntary daily overtime distribution. Employees assigned to a department for the entire workweek shall be considered employees of that department for the purpose of voluntary Saturday overtime.

Trained back-up operators shall take precedence over Labor Pool personnel when back-filling on the job they were trained to perform.

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SUPPLEMENT

PENSION AND INSURANCE AGREEMENT

between

KNOLL, INC.

and

THE UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF

AMERICA, MIDWESTERN COUNCIL OF INDUSTRIAL WORKERS

LOCAL 1615

AGREEMENT made and entered into as of the twenty-fifth day of August, 2002, by and between KNOLL, INC., GRAND RAPIDS, hereinafter called the “COMPANY”, and THE UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, MIDWESTERN COUNCIL OF INDUSTRIAL WORKERS, LOCAL 1615, hereinafter called the “UNION”, pursuant to certification duly issued by the National Labor Relations Board, as exclusive collective bargaining representative of Company employees.

ARTICLE I

Section 1

The term “employees” as used herein means, unless otherwise clearly indicated, all employees of the Company so long as they are and continue to be within the Union are covered by this Agreement, as herein provided.

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Section 2

(a) The Company and the Union agree that the Knoll Benefits Plan which is summarized in Health Care Coverage for Employees & Dependents annexed hereto and made a part hereof, hereinafter called the “Benefits Plan”, shall be put into force and effect by the Company for the employees in the bargaining unit covered by this Agreement, subject to the variations in the Benefits Plan because of State laws as described in Section 2 of Article II, and further subject to all other provisions of this Agreement.

(b) The Benefits Plan will be made effective August 25, 2002.

(c) Subject to the approval of its Board of Directors and of the Commissioner of Internal Revenue, the Company agrees to make avail able to the employees a Pension Plan (hereinafter called the “Pension Plan”), the provisions of which, subject to the provisions of Section 4(b) of Article I hereof, shall, to the extent applicable to the employees, be as set out in the Pension Plan, annexed hereto and made a part hereof. The Pension Plan contains a Summary of changes in the Knoll Pension Plan (hereinafter called the “Pension Plan”) which becomes effective prior to January 1, 2003, and an amended and restated Pension Plan which becomes effective on January 1, 2003. The Company and the Union agree that the changes described in the Summary set forth in the Pension Plan, to the extent applicable to employees, shall become effective on the dates indicated therein and that the Pension Plan as amended and restated shall become effective January 1, 2003, provided the Pension Plan is approved:

(i) by the Board of Directors of the Company as referred to in the Pension Plan, and

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(ii) by the Commissioner of Internal Revenue as referred to in the Pension Plan. The nature of such approvals is more fully set forth in the Pension Plan.

(d) Said Pension Plan will be submitted to the Board of Directors of the Company within thirty (30) days from the date hereof and, if approved by the Board, it will be submitted to the Commissioner of Internal Revenue for approval as provided in the Pension Plan. Provided such approvals are received, the Pension Plan shall forthwith be made effective on the dates indicated above.

(e) In the event that the Board of Directors fail to approve the Pension Plan this Agreement, to the extent applicable to the Pension Plan, shall there upon have no force or effect. Within ten (10) days, after any such failure on the part of its Board of Directors to approve the Pension Plan, the Company will give written notice thereof to the Union; within twenty (20) days following the giving of such notice, the Company and the Union shall be obligated to meet to negotiate solely with respect to the subject matter of the Pension Plan, notwithstanding the provisions of Section 4 of this Article.

(f) Subject to the approval of its Board of Directors and the Commissioner of Internal Revenue, and subject to compliance with such laws and other governmental regulations as the Company deems applicable, and receipt

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of such rulings and approvals of other commissions, and agencies as the Company deems necessary or advisable, the Company agrees to make available to the employees the Knoll Retirement Savings Plan (hereinafter called the “Savings Plan”), the provisions of which, subject to both the provisions of Article I, Section 4(c) and the conditions set forth in Article IV, shall, to the extent applicable to the employees, be as set out in the Knoll Retirement Savings Plan, annexed hereto and made a part hereof. The approval of the Commissioner of Internal Revenue shall be such approval as may be necessary to establish: (1) the deductibility for income tax purposes of any and all contributions hereunder, other than employee contributions; (2) the exemption under Section 501 (a) of the Internal Revenue Code of any trust established hereunder; and (3) that an employee who elects to participate in the Savings Plan is not in constructive receipt of any amounts in his accounts prior to distribution of such amounts to him. Provided such approvals and rulings are received, and such laws and regulations are complied with, the Savings Plan shall be made effective as of January 1, 2003.

(g) In the event that the Board of Directors fails to approve the Savings Plan, this Agreement, to the extent applicable to the Savings Plan, shall thereupon have no force or effect, and within ten (10) days thereafter the Company and the Union shall be obligated to meet to negotiate solely with respect to the subject matter of the Savings Plan, notwithstanding the provisions of Section 4 of this Article.

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(h) The Company and the Union agree that the Knoll Personal Accident Insurance Plan which is summarized in the Knoll Personal Accident Insurance Plan, annexed hereto and made a part hereof (hereinafter called the “Personal Accident Insurance Plan”), the Knoll Long-Term Disability Benefit Plan which is summarized in the Knoll Long-Term Disability Benefit Plan, annexed hereto and made a part hereof (hereinafter called the “Disability Benefit Plan”), the Knoll Dependent Life Insurance Plan which is summarized in the Knoll Dependent Life Insurance Plan, annexed hereto and made a part hereof (hereinafter called the “Dependent Life Insurance Plan”), the Knoll In-Hospital Indemnity Plan, annexed hereto and made a part hereof (hereinafter called the “In-Hospital Indemnity Plan”), the Knoll Dental Care Coverage for Employees & Dependents, annexed hereto and made a part hereof (hereinafter called the “Dental Assistance Plan”), and the Knoll Employee Security and Protection Plan which is summarized in the Knoll Employee Security and Protection Plan, annexed hereto and made a part hereof (hereinafter called the “Employee Security and Protection Plan”), shall be put into force and effect by the Company for the employees in the bargaining unit covered by this Agreement, subject to all applicable provisions of this Agreement.

(i) The Personal Accident Insurance Plan will be made effective August 25, 2002.

(j) The Disability Benefit Plan will be made effective August 25, 2002.

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(k) The Dependent Life Insurance Plan will be made effective August 25, 2002.

(l) The In-Hospital Indemnity Plan will be made effective August 25, 2002.

(m) The Dental Assistance Plan will be made effective August 25, 2002.

(n) The Employee Security and Protection Plan will be made effective August 25, 2002.

Section 3

(a) It is agreed that the Benefits Plan, the Pension Plan, the Savings Plan, the Personal Accident Insurance Plan, the Disability Benefit Plan, the Dependent Life Insurance Plan, the In-Hospital Indemnity Plan, the Dental Assistance Plan, and the Employee Security and Protection Plan are accepted by the Union, for the duration of this Agreement, as a complete insurance, pension employment security and savings program. It is further agreed that both parties have had the unlimited right and opportunity to make demands and proposals, and otherwise bargain collectively with reference to all matters pertaining directly or indirectly to insurance, pension, savings and employment security, and, subject to the provisions of Sections 2(e) and 2(g) of Article I, Sections 2(b) of Article II, Section 2(b) of Article VI and Section 3 of Article VII of this Agreement, the parties unqualifiedly waive any rights they may now have, or hereafter acquire, to bargain collectively with respect to anything covered by any of the Plans

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referred to herein or with respect to any benefits, the payment of which could or might be insured by the Company, whether or not such matters were within the knowledge or contemplation of either of the parties at the time of negotiation or execution of this Agreement. The Union also agrees that, during the term of this Agreement, there shall be no strike, slowdown, sit down, or other form of stoppage of work arising out of or conducted in connection with any effort to induce modifications of or amendments or additions to the insurance, pension, employment security and savings programs or of other benefits provided for by this Agreement, or the terms or conditions under which such benefits and programs are provided.

(b) It is further understood that no matter respecting any Plan provided by this Agreement or any differences arising under any such Plan, or arising concerning any benefits payable by the Company under any such Plan or any benefits the payment of which could or might be insured by the Company, shall be subject to any grievance or arbitration procedure which may be established by agreement between the Company and the Union.

(c) Claims of employees concerning their rights under any Plan provided by this Agreement may be presented in writing in accordance with the applicable claims review procedures of the various Plans. Nothing herein shall be construed to deny an employee the assistance of the Union in the presentation of such claims. Payment for time spent for the above purpose by Local representatives (who are in the active employ of the Company) within the Plant during their regular working hours while meeting with the representative designated by Management shall be made in

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the same manner, and such time shall for all purposes be considered in the same category, as time spent in the handling or adjustment of grievances. Neither the Union, nor the Company shall have the right to strike or lock out with respect to any claims of employees under any of the Plans provided by this Agreement.

Section 4

The Company agrees that, during the term of this Agreement, as to employees covered by this Agreement:

(a) Subject to Section 2 of Article II, it will not amend or terminate the Benefits Plan and the Dental Assistance Plan; and

(b) Subject to Section 2 of this Article and to the provision of the Pension Plan, it will not discontinue the Pension Plan or make any amendment which would adversely affect the rights thereunder of the employees, nor suspend or reduce the payment of Company contributions to the Pension Plan below the basis set forth as its intention in the Pension Plan.

(c) Subject to Section 2 of this Article, it will not discontinue to the Savings Plan or make any amendment to the Plan which would adversely affect the rights of employees under the Plan; provided, however, that such amendments of the Savings Plan may be made by the Company as it deems necessary or advisable to secure the approval of the Commissioner of Internal Revenue and to obtain the rulings and approvals of other governmental departments, commissions and agencies and to

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comply with laws and regulations as referred to in Article I, Section 2(f) above.

(d) While Knoll reserves the right during the term of this Agreement, as to the employees covered by this Agreement, to modify, amend, discontinue, change, add to or terminate the Personal Accident Insurance Plan and/or the Disability Benefit Plan and/or the Dependent Life Insurance Plan and/or the In-Hospital Indemnity Plan, at any time, any such action does not discriminate against employees covered by this Agreement. In the event of any such action affecting benefits of employees under any of these Plans, an appropriate adjustment shall be made in the rate of employee contributions.

ARTICLE II

Section 1

Nothing in this Agreement shall be construed to prevent the Company from making the Benefits Plan and the Dental Assistance Plan available in whole or in part to others than the employees covered by this Agreement.

Section 2

(a) It is agreed that benefits under the Benefits Plan and the Dental Assistance Plan shall not duplicate any benefits provided or required under state or federal laws, regardless of whether the benefits under such

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laws are larger or smaller than those provided under the Benefits Plan and the Dental Assistance Plan.

(b) If any state or federal legislation is hereafter adopted which will provide benefits of the same type (although not necessarily of the same name or in the same amount) as one or more of the benefits provided under the Benefits Plan, or if any presently existing or future state or federal legislation providing such benefits may be hereafter amended, any benefit or benefits under the Benefits Plan which are similar or related to the benefits provided or affected by such legislation shall, at the written request of either the Company or the Union, become a subject for collective bargaining, which shall be carried on, and completed if possible, sufficiently in advance of the effective date of the new or amendatory legislation to permit the working out in good time of the administrative details which may be involved. If either party requests collective bargaining, but no agreement is reached during negotiations, prior to the effective date of such legislation, the Company may terminate or modify any such benefits provided under the Benefits Plan with respect to employees in the state involved (or employees in the United States in the case of federal legislation). Written notice of such termination or modification of benefits shall be given to the Union before it is announced generally to the affected employees. In the event of such termination or modification of benefits, an appropriate adjustment shall be made in the employees’ contributions under the Benefits Plan.

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Section 3

(a) The Company shall have the sole responsibility for the administration of the Benefits Plan and the Dental Assistance Plan and for the payment of all administrative expenses thereof. The benefits of the Benefits Plan and the Dental Assistance Plan may be provided under a group insurance policy or policies issued by an insurance company or companies selected by the Company, which policy or policies shall not be inconsistent with the terms of this Agreement and shall be in the general form of such policies customarily issued by the insurance company or companies; provided, however, that the Company may at its discretion at any time and from time to time cancel any such policy or policies and become a self-insurer of any or all of the benefits of the Benefits Plan for all or any group or class of active or former employees.

(b) The employees shall make the contributions to the Plan which are appropriate for their coverage. The Company shall pay the balance of the net cost. It will also pay any increases in such net cost and shall apply all dividends or rate credits or refunds under whatever name made under any insurance policy or policies toward reducing its part of the cost.

(c) By payment of its contributions to the premiums on any such insurance policy or policies, the Company shall discharge its full obligation hereunder, and shall be relieved of any and all liability to employees or their representatives hereunder, with respect to such insured benefits of the Benefits Plan and the Dental Assistance Plan.

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(d) The Company agrees to furnish the Union with the following information for each full calendar year in which this Agreement is in effect, such information to be furnished by May 15 of the following year:

(i) premiums, if any, and paid claims for each of the following coverages; Life Insurance; Accidental Death or Dismemberment Insurance; Accident and Sickness Insurance; Personal Hospital Expense Insurance; Personal Surgical Operation Insurance; Personal Major Medical Protection; Dependent Hospital Expense Insurance; Dependent Surgical Operation Insurance; and Dependent Major Medical Protection.

(ii) a copy of all information which becomes a matter of public record concerning the Benefits Plan and the Dental Assistance Plan which is filed by the Company in accordance with Public Law 93-406, the Employee Retirement Income Security Act of 1974.

(iii) approximate number of individual claims paid.

(iv) average amount of life insurance on all active employees covered by the Benefits Plan.

The Union agrees that by furnishing it with the information listed in this subsection (d) the Company will fully comply with any statutory or other obligation to supply the Union with information concerning the operation of

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the Benefits Plan and the Dental Assistance Plan, and the Union hereby expressly waives any right to receive further information concerning the operation of the Benefits Plan and the Dental Assistance Plan for any purpose whatsoever, provided, however, that such waiver shall not apply to requests that further information be furnished not more than one hundred and twenty (120) days prior to August 28, 2006, or August 28 of any subsequent contract year, for purposes of collective bargaining with respect to modification, extension or renewal of this Agreement.

ARTICLE III

Section 1

(a) Nothing in this Agreement shall be deemed to prevent the Company from making the Pension Plan, in whole or in part, available to others than the employees covered by this Agreement. The Company agrees to furnish the Union with the following information for each full calendar year in which this Agreement is in effect, such information to be furnished by May 15 of the following year:

(i) the number of persons retiring during the year, with their average age at retirement and the average pension of such persons who retired at their Normal Retirement Date during the year.

(ii) a summary of the most recent Actuarial Valuation of the Pension Plan showing total assets of the trust, including the present value of prospective

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contributions for both prior and future service, the present value of prospective pensions earned under the Pension Plan by all present active employees covered by the Pension Plan, and total liabilities of the Pension Plan.

(iii) a copy of all information which becomes a matter of public record concerning the Pension Plan which is filed by the Company in accordance with Public Law 93-406, the Employee Retirement Income Security Act of 1974.

The Union agrees that by furnishing it with the information listed in this subsection (a) the Company will fully comply with any statutory or other obligation to supply the Union with information concerning the operation of the Pension Plan, and the Union hereby expressly waives any right to receive further information concerning the operation of the Pension Plan for any purpose whatsoever, provided, however, that such waiver shall not apply to requests that further information be furnished not more than one hundred and twenty (120) days prior to August 28, 2006, or August 28 of any subsequent contract year, for purposes of collective bargaining with respect to modification, extension or renewal of this Agreement.

(b) Subject to the provisions of Sections 3(c) of Article I of this Agreement, the Company shall have the sole responsibility for the administration of the Pension Plan, in accordance with its provisions. By payment of its contributions to the designated trustee or trustees and/or insurance company or companies, the Company shall be relieved of any further liability under the

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Pension Plan, and benefits shall be payable only from the trust fund or funds and/or insured contract or contracts; provided however; that any trust agreement and/or insurance contract under which such payments are made shall not be inconsistent with any provision of this Agreement.

ARTICLE IV

Section 1

Nothing in this Agreement shall be deemed to prevent the Company from making the Savings Plan available in whole or in part to others than the employees covered by this Agreement.

(a) The Company shall have the sole responsibility for the administration of the Savings Plan and for the payment of all administrative expenses there of.

(b) The Company, making payments as required by the Savings Plan to the designated trustee or trustees, shall be relieved of any further liability under the Savings Plan, and distributions shall be payable only from the trust fund or funds; provided, however, that any trust agreement under which such distributions are made shall not be inconsistent with any provisions of this Agreement.

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(c) The Company agrees to furnish the Union for each calendar year in which this Agreement is in effect, such information to be furnished by May 15 of following year. A copy of all information which becomes a matter of public record concerning the Savings Plan which is filed by the Company in accordance with Public Law 93-406, the Employee Retirement Income Security Act of 1974. The Union agrees that by furnishing such information the Company will fully comply with any statutory or other obligation to supply the Union with information concerning the operation of the Savings Plan, and the Union hereby expressly waives any right to receive further information concerning the operation of the Savings Plan for any purpose whatsoever; provided, however, that such waiver shall not apply to requests that further information be furnished not more than one hundred and twenty (120) days prior to August 28, 2006, or August 28 of any subsequent contract year, for purposes of collective bargaining with respect to modification, extension or renewal of this Agreement.

ARTICLE V

Section 1

Nothing in this Agreement shall be deemed to prevent the Company from making the Personal Accident Insurance Plan, the Disability Benefit Plan, the Dependent Life Insurance Plan, or the In-Hospital Indemnity Plan available in whole or in part to others than the employees covered by this Agreement.

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Section 2

(a) The Company shall have the sole responsibility for the administration of the Personal Accident Insurance Plan, the Disability Benefit Plan, the Dependent Life Insurance Plan, and the In-Hospital Indemnity Plan. The benefits of these plans may be provided under a group insurance policy or policies issued by an insurance company or companies selected by the Company, which policy or policies shall not be inconsistent with the terms of this Agreement and shall be in the general form of such policies customarily issued by the insurance company or companies; provided, however, that the Company may at its discretion at any time and from time to time cancel any such policy or policies and become a self-insurer of any or all of the benefits of these plans for all or any group or class of active or former employees.

(b) The employees shall make the contributions to the Personal Accident Insurance Plan, the Disability Benefit Plan, the Dependent Life Insurance Plan, and the In-Hospital Indemnity Plan which are appropriate for their coverage.

(c) By the collection of contributions and transmittal thereof to the insurance company or companies providing the policy or policies, the Company shall discharge its full obligation hereunder, and shall be relieved of any and all liability to employees or their representatives hereunder, with respect to such insured benefits of the Personal Accident Insurance Plan,

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the Disability Benefit Plan, the Dependent Life Insurance Plan, and the In-Hospital Indemnity Plan.

(d) The Company agrees to furnish the Union for each calendar year in which this Agreement is in effect, such information to be furnished by May 15 of the following year. A copy of all information which becomes a matter of public record concerning the Personal Accident Insurance Plan, the Disability Benefit Plan, the Dependent Life Insurance Plan, and the In-Hospital Indemnity Plan which is filed by the Company in accordance with Public Law 93-406, the Employee Retirement Income Security Act of 1974. The Union agrees that by furnishing such information the Company will fully comply with any statutory or other obligation to supply the Union with information concerning the operation of these plans, and the Union hereby expressly waives any right to receive further information concerning the operation of these plans for any purpose whatsoever; provided, however, that such waiver shall not apply to requests that further information be furnished not more than one hundred twenty (120) days prior to August 28, 2006, or August 28 of any subsequent contract year, for purposes of collective bargaining with respect to modification, extension or renewal of this Agreement.

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ARTICLE VI

EMPLOYEE SECURITY AND PROTECTION PLAN

Nothing in this Agreement shall be deemed to prevent the Company from making the Employee Security and Protection Plan (hereinafter “ES&PP”), available in whole or in part to others than the employees covered by this agreement.

Section 1 - Definitions

Whenever used in this Plan for the purposes of this Plan:

(a) Automated Manufacturing Machine means a device for doing production which has programmable controllers (PC), numerical controls (NC), computer numerical controls (CNC) or direct numerical controls (DNC).

(b) Company means Knoll, Inc.

(c) Decrease in Work Force means a reduction in the number of Employees in the Union through Layoff or Permanent Job Separation.

(d) Eligible Employee means an Employee who has two (2) or more full years of service.

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(e) Employee means a person who is in the service of an Employer (except part-time or casual employees) who is represented by the Union (hereinafter referred to as the Union) which has entered into a written agreement (hereinafter referred to as the Agreement) with the Employer providing for participation in this Plan, provided such person is not employed in an Excluded Unit.

(f) Employer means Knoll, Inc., Grand Rapids.

(g) Excluded Unit means a group of employees who have been designated by the Company as not eligible to participate in this Plan.

(h) Increase in Work Force means the recall, rehire or hire of an Employee to fill an open job in the Union.

(i) Job Movement or Product-Line Relocation means the permanent discontinuance of the manufacturing of a product at the Employer location provided that the product continues to be produced by an Employer but at a different Employer location. Layoffs due to adjustments in the work force caused by changes in production requirements, manufacturing processes, sales volume, inventory levels, make or buy decisions, decisions to discontinue a product line, or any other reasons associated with the business shall not be a Job Movement or Product-Line Relocation.

(j) Layoff means the termination of the employment of an Employee with the Employer through no fault of the employee for lack of work for reasons

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associated with the business where the Employer determines there is a reasonable expectation of recall within one year.

(k) Location Close Down means the permanent cessation of all activities and operations by the Employer (except for that work necessary to protect the property, i.e., plant guard service, power house operations) at Grand Rapids.

(l) Location Close Down Date means the date on which the permanent cessation of all activities and operations by the Employer occurs.

(m) Permanent Job Separation means the termination of the Employment of an Employee with the Employer through no fault of the employee for lack of work for Reasons Associated With the Business for whom the Employer determines there is no reasonable expectation of recall. In no event does a Permanent Job Separation occur if the Employee is offered continued employment by a successor Employer. An Employee who is on Layoff status shall not be deemed a Permanent Job Separation provided, however, that if such an Employee continues on Layoff for one year, without an offer of employment by the Employer a Permanent Job Separation shall be deemed to occur one year from the original date of Layoff.

(n) Plan means the Knoll Employee Security and Protection Plan, as herein set forth.

(o) Plan Administrator means Knoll, Inc.

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(p) Reasons Associated With the Business means reasons such as changed customer ability and willingness to buy as reflected in adjusted production requirements, changed manufacturing processes, product discontinuance or plant closing.

(q) Robot means a programmable, multifunction manipulator designed to move materials, parts, tools or specialized devices through variable programmed motions for the performance of a variety of tasks.

(r) Transfer of Work means the discontinuance of ongoing work at the Employer location coupled with the assignment of the same work to another employer, if such assignment of work would directly cause a decrease in the number of employees performing the same work at the Employer location.

(s) A Week’s Pay for a hourly paid Employee shall be calculated by multiplying the employee’s hourly rate including any applicable night-turn bonuses and group leader remuneration at the time of Layoff or Permanent Job Separation by the number of hours regularly scheduled in the employee’s basic workweek, up to forty (40) hours.

Section 2 - Location Close Down or Sale

(a) The Company will not announce or engage in a Close Down during the term of this Agreement unless all Employees affected by such Close Down

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who are eligible for such benefits, are offered Permanent Job Separation Benefits set forth in Section 5 of this Plan.

(b) The Company will not sell this facility during the term of this Agreement unless the successor employer:

1. Recognizes the Union as the representative of the Employees in the unit which is included in the sale; and

2. Agrees to provide comparable wages and benefits to all Employees in the unit who are offered continued employment by the successor; and

3. Agrees to offer continued employment by bargaining unit seniority.

Section 3 - Notice Provisions

(a) Close Down

1. The Company will give the Union notice of a Close Down as soon after such a decision as practical.

2. Such notice shall be given at least six (6) months in advance of the Close Down Date unless, because of conditions over which the Company has no control, it is unable to do so.

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3. Such notice shall include:

(i) The anticipated Location Close Down Date; and

(ii) The date when termination of represented Employees is expected to begin because of the Close Down.

(b) Job Movement or Product-Line Relocation.

1. The Company will give the Union notice of a decision to effect a Job Movement or Product Line Relocation as soon after such decision as practical.

2. Such notice shall be given at least six (6) months in advance of the date on which the Job Movement or Product Line Relocation will be completed, unless because of conditions over which the Company has no control, it is unable to do so.

3. Such notice shall include:

(i) Identification of the Job Movement or Product-Line Relocation that is to be made; and

(ii) The anticipated date on which the Job Movement or Product-Line Relocation will begin.

(c) Transfer of Work or Installation of Robots, or Automated Manufacturing Machines.

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1. The Company will give the Union notice of a decision to Transfer Work or to begin use of a Robot, or an Automated Manufacturing Machine in a work area as soon after such decision as practical.

2. Such notice shall be given at least sixty (60) days before a Transfer of Work or before use of a Robot, or an Automated Manufacturing Machine begins, unless because of conditions over which the Company has no control, it is unable to do so.

3. Such notice shall include:

(i) A description of the work to be transferred or the function of the device;

(ii) The expected decrease in the number of represented Employees as a direct consequence of the Transfer of Work or use of the device; and

(iii) The anticipated date of the Transfer of Work and use of the device for production.

Section 4 - Layoff Income and Benefits

(a) Eligibility

1. An Eligible Employee will receive layoff income and benefits in accordance with Option 1 or 2 listed in Subsection 4(c) from a total maximum sum available to the employee which is defined in Subsection

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4(b). An Eligible Employee will receive layoff income and benefits if the employee

(i) is not on disability or leave of absence;

(ii) is laid off;

(iii) has not been recalled to work; and

(iv) is determined by the Employer not to be eligible for Permanent Job Separation benefits because a reasonable expectation of recall exists.

2. Notwithstanding Subsection 4(a)1, above, when an Eligible Employee who in accordance with the applicable Decrease in Work Force procedure would be placed in a labor grade the maximum keysheet rate for which is more than ten percent (10%) lower than the maximum keysheet rate for the labor grade of record in which the Employee was assigned on the day six (6) months prior to the placement in question, the Employee may elect to be laid off. Such employee who otherwise qualifies as an Eligible Employee will not affect the employee’s eligibility by the election of Layoff.

3. Notwithstanding Subsection 4(a)1, above, a laid-off Eligible Employee who in accordance with the Increase in Work Force procedure is recalled to work, for placement in a labor grade the maximum keysheet rate for which is more than ten percent (10%) lower than the maximum keysheet rate for the labor grade in which the Employee was assigned on the day

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six (6) months prior to the employee’s Layoff, the Employee may waive recall. Such waiver shall not affect the employee’s status on the inactive seniority list nor any eligibility the employee may have to benefits under this Plan.

4. In making the percentage determination in Subsections 4(a)2 and 4(a)3, above:

(i) If there has been an intervening pay schedule rate adjustment, such increase shall be added to the prior maximum pay schedule for purposes of making the above percentage determinations, and

(ii) If the Employee was not on active rolls as of the prior six (6) months’ date, the labor grade applicable when the Employee first subsequently returned to the active roll shall be used.

(b) Total Maximum Sum

The total maximum sum available to an Eligible Employee shall be equal to one (1) Week’s Pay for each of the Employee’s full years of service except to the extent that such sum shall be affected by prior layoffs and rehires in accordance with the Subsections 4(d) hereof. However, in no event shall the total maximum sum available to an Eligible Employee equal less than four (4) Weeks’ Pay.

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(c) Options

1. Lump Sum Payment up to Sixty (60) Days

Within sixty (60) days after a layoff which, in management’s opinion, will exceed six (6) months in duration, an Eligible Employee may request payment of and receive the total maximum sum in a lump sum payment, in which case the employee will permanently sever the relationship with the Employer and relinquish recall rights and service credits for any purpose (except such rights as may exist under the Knoll Pension Plan and the Knoll Personal Savings Plan) including the calculation of any Permanent Job Separation benefits. Vacation pay and any other sums due will also be paid in a lump sum payment.

2. Income Extension

An Eligible Employee who has not elected Option 1 above will be eligible to apply for weekly benefits in such amounts and upon such conditions as set forth in this subsection 4(c)2.

(i) Prior to the exhaustion of entitlement to federal and state unemployment compensation benefits, the employee will be paid a weekly benefit in an amount (if any) which, when added to the total federal and state unemployment compensation benefits received for that week, equals sixty percent (60%) of the employee’s Week’s Pay, provided, however, that payment shall be made only if the Employee has applied for and received

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unemployment compensation benefits for that week and only if the Employee has provided the Employer with satisfactory proof of the total of such benefits received for the week.

(ii) After exhaustion of Employee’s entitlement to federal and state unemployment compensation benefits, the Employee will be paid a weekly benefit in an amount equal to sixty percent (60%) of the employee’s Week’s Pay.

(iii) Weekly benefits as defined in this Subsection will be paid upon application by an Eligible Employee until the total maximum sum available to the employee has been exhausted in accordance with the provisions of the Plan, or until twelve (12) months have elapsed from the date of the employee’s lay-off, subject to the following provisions:

a. No payment will be made for any week which would have been a waiting week under any applicable state or federal unemployment compensation law or similar legislation.

b. If an Eligible Employee becomes eligible for additional unemployment compensation benefits after weekly payments have commenced, payments will be adjusted in accordance with Subsection 4(c)2(l) above.

c. No payment will be made for any week in which an Employee is entitled to receive weekly accident and sickness benefits under the Knoll Benefits Plan for Employees, or to receive benefits under any state or federal

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worker’s compensation law, occupational disease law, or similar legislation, or to receive benefits under any state or federal temporary disability benefits law or similar legislation. If any such benefits are awarded retroactively, the Employee will reimburse the Employer for all weekly benefits received for the same time period under the Plan.

d. No payment will be made for any week in which an Employee is entitled to receive weekly retraining allowances under any applicable state or federal legislation. If any such benefits are awarded retroactively, the Employee will reimburse the Employer for all weekly benefits received for the same time period under the Plan.

e. Payments made under this Option 2 will not affect service credit or recall rights.

f. If an Eligible Employee who satisfies the requirements for an Early Retirement Pension or a Normal Retirement Pension under the Knoll Pension Plan at the time of Layoff or while on Layoff, retires prior to exhaustion of the total maximum sum available to the Employee, no further payments from the total maximum sum will be thereafter paid.

g. Payments under this option are also subject to the provision that while receiving such payments the Employee must in fact be still unemployed and certify to this fact in writing on a form provided by the Employer.

(d) Repayment and Rebuilding

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1. If the Employee elects to receive a lump sum payment pursuant to the option described in Subsection 4(c)1 above, service credits and recall rights which were lost may be restored upon subsequent rehire only if the Employee repays in full the lump sum payment received under such option. Arrangements to make repayment must be made within sixty (60) days of rehire, at which time the Employee may either make repayment in full, or arrange with local management for repayment in installments which will extend no longer than one (1) year after rehire.

2. Repayment is not required upon subsequent rehire by an Employee who elects Option 2 described in Subsection 4(c)2 above. If the total maximum sum available to an Employee under Option 2 has been reduced by payments received under Option 2, then, upon the Employee’s return to work following a Layoff, the total maximum sum available will be fully restored at the time the Employee is placed on the payroll.

Section 5 - Permanent Job Separation Benefits

(a) General

1. Whenever the Company decides that a Permanent Job Separation will occur, the Company shall give notice of its decision to the Union and the Employees affected.

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2. Each Employee whose employment is terminated as a result of a Permanent Job Separation shall be given at least two (2) weeks advance notice of the specific date of the separation.

(b) Eligibility

1. An Eligible Employee at the time of a Permanent Job Separation shall be eligible for those Permanent Job Separation benefits in effect on the date of separation.

2. An Eligible Employee who at the time of termination of employment was classified as a Layoff, shall be eligible for Permanent Job Separation benefits effective one year after Layoff if the Employee has not been recalled to employment or employed by an Employer.

(c) Special Conditions

1. An Employee who is eligible for Permanent Job Separation benefits shall be entitled to the benefits for which the Employee is eligible as set forth in this Section 5 as well as the full vacation allowance for which the Employee might have qualified in the calendar year in which the Employee is separated, provided that the Employee, after being given notice of a Permanent Job Separation, continues regularly at work for the Employer until the specific date of the Employee’s separation. If the Employee fails to continue regularly at work until the specific date of the Employee’s scheduled separation due to verified personal illness or leave of absence,

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no Permanent Job Separation benefits will be paid to such an Employee unless and until the Employee is available to return to work. An Employee on the disability roll is automatically separated from the Employer after two (2) continuous years on disability roll from the Employee’s last day worked and is not eligible for Permanent Job Separation benefits. An Employee separated while on the disability roll is not eligible for Permanent Job Separation benefits unless the Employee is available to return to work within two (2) years from the Employee’s last day worked.

2. An Employee eligible for Permanent Job Separation benefits may request that the date of scheduled separation be advanced so that the Employee can accept other employment. Management will attempt to honor this request.

3. An Employee, otherwise eligible for Permanent Job Separation Benefits, will not affect the Employee’s eligibility for such benefits by electing not to accept a job placement, if such election is exercised in accordance with the same limitations set forth for layoff income and benefits in Section 4(a)2 and 4(a)3.

(d) Permanent Separation Amount

A total permanent separation amount available to an Employee eligible for Permanent Job Separation benefits will be computed in the following manner, subject to the reductions set forth in Subsection 5(d)2 below:

(i) One week’s pay for each full year of service up to and including five (5) years of service, with a minimum of four (4) weeks’ pay; plus

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(ii) One-and-one-half (1-1/2) weeks’ pay for each full year of service over five (5) years of service up to and including fifteen (15) years of service; plus

(iii) Two (2) weeks’ pay for each full year of service over fifteen (15) years of service; less

(iv) Any amounts paid to the Employee under Section 4, Layoff Income and Benefits, of this Plan during the preceding twelve (12) month period.

(e) Payment of Permanent Separation Amount

The permanent separation amount available computed in Subsection 5(d) above, for an employee eligible for permanent job separation benefits will be provided to the Employee in monthly payments equal to fifty percent (50%) of employee’s monthly pay immediately preceding separation. Such payments will start at the end of the first full month of separation and continue until the permanent separation amount available to the employee is exhausted.

(f) Recall or Reemployment

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1. Any Employees who are receiving or have already received Permanent Job Separation benefits will retain any recall rights to which they may be entitled.

2. In the event an Employee who is receiving Permanent Job Separation benefits is reemployed, all Permanent Job Separation benefits will cease; however, at the time of reemployment, eligibility for full Permanent Job Separation benefits, if available, will be reestablished.

3. In the event Employees who have received all Permanent Job Separation benefits to which they may be entitled are reemployed, all Permanent Job Separation benefits if available will be reestablished in full one year after reemployment.

(g) Training and Outplacement Assistance

To assist Employees who are eligible for Permanent Job Separation benefits to find new jobs and learn new skills, Management will establish a training and outplacement assistance program following notice of a Permanent Job Separation. The training and outplacement assistance program will include education, retraining and job placement assistance.

1. Education and Retraining

(i) An Employee who is eligible for Permanent Job Separation benefits may receive education and retraining aid for courses approved by the

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Employer which contribute to or enhance the Employee’s ability to obtain other employment provided that the Employee begins the approved course within one year following the Permanent Job Separation. Approved courses will normally be given at schools which are accredited by recognized regional or state accrediting agencies and may include:

• Occupational or vocational skill development;

• Fundamental reading or numerical skill improvement;

• High school diploma or equivalency achievement; and

• College level career oriented courses.

(ii) An Employee will be reimbursed up to a maximum of five thousand dollars ($5,000) for authorized expenses which are incurred within four (4) years following a permanent Job Separation provided a passing grade is received in the course. However, if an Employee is employed by another employer at 75% or more of his hourly rate at the time of the Permanent Job Separation, no further authorization will be made by the administrator on or after the date of such employment.

(iii) Authorized expenses include verified tuition, registration and other compulsory fees, costs of necessary books, and other required supplies but excluding computer hardware and software. However, if tuition or other authorized expenses are covered by government benefits, other employers or scholarships, the reimbursement by the Employer will not apply to that portion covered by such other plan. For courses which are

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not accredited by a recognized regional or state accredited agency, reimbursement will be made based upon similar courses offered that are locally accredited or credited as determined by the administrator.

(iv) An Employee who elects to receive benefits under the Knoll Educational Assistance Program in lieu of benefits under this Subsection 5(g) will not be eligible for education and retraining aid.

2. Outplacement Assistance

(i) Job Placement Assistance will include job counseling as well as job information services. Examples of such services are counseling in job search and interviewing techniques, identification and assessment of skills, and employment application and resume preparation as well as providing Employees information on placement opportunities.

(ii) Management may also use the expertise and resources of public and private agencies in providing these services.

(h) Other

1. An Employee who is eligible for Permanent Job Separation benefits will receive a lump sum payment for any sickness and personal business days not used at the time of separation.

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2. An Employee who is eligible for Permanent Job Separation benefits will receive pay in lieu of vacation for any vacation days not used on the day of separation.

Section 6 - Transfer of Work; Robotics; Automated Manufacturing Machines

An hourly-paid Employee whose job is directly eliminated by a Transfer of Work, the introduction of a Robot or the introduction of an Automated Manufacturing Machine and who is entitled to transfer or displace to another job shall be paid on any job to which transferred in the facility at a rate not less than the regular hourly rate received on the job eliminated for up to 52 weeks immediately following the transfer.

Section 7 - Special Retirement Bonus

An employee age fifty-eight (58) or over with thirty (30) or more years of credited service or age sixty (60) or over with ten (10) or more years of credited service who satisfies the following conditions and retires will receive a special seven thousand five hundred dollars ($7,500) retirement bonus:

1. Available only to hourly-paid Employees;

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2. Employee must be in a job classification in which a Permanent Job Separation occurs;

3. Bonus is not available in case of a Location Close Down;

4. Employee must be replaced by qualified active employee;

5. Number of Employees accepted for bonus arrangement will not exceed number of Employees affected by Permanent Job Separation. Selection will be made based upon seniority;

6. Application for participation must be made within 15 days of the announcement of the permanent Job Separation;

7. Available for period from September 1, 2002 through August 27, 2006.

Section 8 - Limitations

(a) The provisions of this Plan shall not be applicable where an Employer decides to close a plant, relocate product lines, move work or lay off an Employee because of the Employer’s inability to secure production, or carry on its operations, as a consequence of a strike, slowdown or other interference with or interruption of work participated in by employees in the Employer’s plant, service shop or other facility. However, the operation of this Section 8 shall not affect the rights or benefits already provided here-under to an Employee Laid Off or Permanently Separated for lack of work,

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prior to and not in anticipation of the commencement of such strike, interference or interruption.

(b) An Employee shall not be eligible for any benefits under the provisions of this Plan where the Employer has sold or transferred operations to a successor employer and such successor employer offers continued employment to the Employee. Continued employment means employment continued from the Employer to the successor employer without a break in employment. However, in the event a successor employer does not provide its employees a sickness and personal business day plan or its equivalent, or does not agree to carry-over of accrued days of sickness and personal business days by an employee, the employee will receive a lump sum payment for any sickness and personal business days not used at the time Employee’s employment ceases with the Employer.

(c) The Company reserves the right to amend or terminate the Plan at any time. There is not consideration paid by the Employee for benefits, and the benefits provided by the Plan are not vested.

Section 9 - Review Procedure

(a) An Employee or former Employee whose application for benefits under this Plan is denied, in whole or in part, will be notified in writing. The notification will include the specific reasons for denial, the Plan provisions involved, and the procedure for requesting a review of the denied claim.

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(b) A request for a review of a denied claim shall be made in writing to the Knoll Plan Administrator. The request must be submitted within 60 days of the date the application for benefits was denied. It must include any documents, records, questions or comments necessary for a complete review.

(c) The Plan Administrator, having the discretionary authority to operate and administer the Plan, including, but not limited to, determining eligibility for benefits, will review the application for benefits and notify the Employee in writing of the Plan Administrator’s final decision and the reasons for such decision, as well as specific references to Plan provisions. This decision will be made within 60 days of the date the request for review is received, unless there are special circumstances, in which case the time may be extended to one hundred twenty (120) days.

(d) The Plan Administrator and those persons acting on the Administrator’s behalf are vested with the full power and sole discretion to interpret all of the terms of the Plan. This includes, but is not limited to, applying the Plan terms to facts involving those covered by the Plan or those claiming to be covered by the Plan or those asserting entitlement to a different level of benefits under the Plan, and making credibility findings and interpreting all facts involved in administering the Plan. The intent of this paragraph is to provide the Plan Administrator and those persons acting on the Administrator’s behalf with the sole and final authority to exercise the fullest scope of discretion with respect to all terms of the Plan, including, but not limited to: participation, coverage, level of benefits, eligibility and all facts that are involved in any fashion with the Plan or those

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claiming a benefit under the Plan. The Plan Administrator and those persons acting on the Administrator’s behalf will make all final determinations based solely on the evidence and facts before them at the time of the determination.

(e) All decisions of the Plan Administrator will be final and binding.

ARTICLE VII

Section 1

(a) This Agreement shall become effective as of August 25, 2002, between the Company and the Union.

Section 2

This Agreement shall, subject to its terms, continue in full force and effect as to the Company and the Union recognized and continuing to be recognized by the Company, as provided in the first paragraph of this Agreement, until August 28, 2006, and from year to year thereafter, unless and until either party shall give notice in writing to the other party of its intention to terminate this Agreement upon such date or subsequent anniversary thereof, said notice to be given at least sixty (60) days prior to such date or subsequent anniversary thereof.

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Section 3

In at least sixty (60) days prior to August 28, 2006, or any anniversary date thereafter, until the Company or the Union may present to the other written notice of proposed modifications or additions to the provisions of this Agreement and/or the Pension Plan or the Insurance Plan. Within fifteen (15) days after such notice is given, collective bargaining negotiations shall commence between a committee of the Union and a committee of the Company, each committee to have not more than twelve (12) members, for the purpose of considering such modifications or additions. If the parties fail to agree thereon by August 28, 2006, or any anniversary date thereafter, as the case may be, the Union shall, after August 27, 2006, or such subsequent anniversary date, as the case may be, have the right to strike in support of any proposal submitted by the Union as above provided, but this Agreement shall continue in effect as renewed if no notice of termination has been given by either party in accordance with Section 2 of this Article VII. However, in the event of such a strike, the Company shall have the right to terminate this Agreement upon ten (10) days prior written notice to the Union given during such strike.

This Pension and Insurance Agreement dated August 25, 2002, is subject to ratification by members of the Union. This Supplement shall be null and void if written notice of such ratification is not received by the Company from the Union on or before September 21, 2002.

135

LOCAL 1615 UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA MIDWESTERN COUNCIL OF INDUSTRIAL WORKERS	KNOLL, INC. GRAND RAPIDS, MICHIGAN
	/s/ J. Todd
M. Ulrich Business Representative	J. Todd Site Manager
/s/ S. Barton	/s/ K. Varady
S. Barton Business Representative	K. Varady Human Resources Manager
/s/ G. Schultz	/s/ K. McCann
G. Schultz President, Local 1615	K. McCann Controller
/s/ C. Bartnick	/s/ T. Campbell
C. Bartnick Committee Member	T. Campbell Shift Manager
/s/ B. Drent	/s/ D. Gordon
B. Drent Committee Member	D. Gordon Manufacturing Supervisor
/s/ B. Hinkley	/s/ L. Chaffin
B. Hinkley Committee Member	L. Chaffin Human Resources Rep.
/s/ B. Minnema
B. Minnema Committee Member

136

137

138

139

140

NIGHT-TURN PREMIUM

2002-2006 Contract duration

Hourly rate based upon 10% night-turn

premium rate in affect 8/25/02

Labor Grade	Hourly Night-Turn Rate
1	$	1.71
2	$	1.72
3	$	1.74
4	$	1.75
5	$	1.77
6	$	1.79
7	$	1.81
8	$	1.83
9	$	1.86
10	$	1.91
11	$	1.97
12	$	2.09
13	$	2.24
14	$	2.47

141

EX-21

EXHIBIT 21

LIST OF SUBSIDIARIES

WHOLLY OWNED SUBSIDIARIES OF KNOLL, INC.	JURISDICTION OF INCORPORATION
T.K.G. Canada, Inc.	New Brunswick, Canada
Knoll North America Corp. (wholly owned by T.K.G. Canada, Inc.)	Ontario, Canada
Spinneybeck Enterprises, Inc.	New York
Spinneybeck, LTD. (wholly owned subsidiary of Spinneybeck Enterprises, Inc.)	Ontario, Canada
Knoll Overseas, Inc.	Delaware
Knoll Europe B.V. (wholly owned subsidiary of Knoll Overseas, Inc.)	Netherlands
Knoll Italy, Ltd. (wholly owned subsidiary of Knoll Europe B.V.)	England & Wales
Knoll International S.p.A. (wholly owned subsidiary of Knoll Europe B.V.)	Italy
Knoll International, Ltd. (wholly owned subsidiary of Knoll Europe B.V.)	England & Wales
Knoll International S.A. (wholly owned subsidiary of Knoll Europe B.V.)	France
Knoll International Deutschland GmBH (wholly owned subsidiary of Knoll Europe B.V.)	Germany
Knoll International Belgium S.A. (wholly owned subsidiary of Knoll Europe B.V.)	Belgium
Knoll Muebles y Sistemas S.A.	Columbia

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated January 30, 2004, except Note 22, as to which the date is March 30, 2004, in the Registration Statement (Form S-1 No. 333-00000) and related Prospectus of Knoll, Inc. dated September 10, 2004.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

September 10, 2004

COVER

WILLKIE FARR & GALLAGHER LLP 787 Seventh Avenue New York, NY 10019-6099 Tel: 212 728 8000 Fax: 212 728 8111