S-1/A

As filed with the Securities and Exchange Commission on October 22, 2004

Registration No. 333-118901

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

TO

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 (3)
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.

(3) Previously paid.

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 October 22, 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 are applying 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
Selected Consolidated Financial Data	22
Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Business	39

Management	56
Certain Relationships and Related Party Transactions	66
Principal and Selling Stockholders	68
Description of Capital Stock	70
Description of Certain Indebtedness	71
Shares Eligible for Future Sale	73
Material U.S. Federal Tax Considerations for Non-U.S. Holders of Our Common Stock	75
Underwriting	78
Validity of Securities	81
Experts	81
Where You Can Find More Information	81
Index to Consolidated Financial Statements	F-1

You should rely only on the information contained in this prospectus. 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. 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.

i

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 September 30, 2004 were $692.6 million, $72.8 million and $29.3 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 36% 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 45%, more than in any other category in the three years from 2001 through 2003.

Industry Recovery. During the first eight months 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 6.0% and 4.0%, respectively. According to BIFMA, U.S. office furniture shipments are forecasted to grow 4.8% in 2004 and 8.1% 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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In October 2004, we received registered trademark protection in the United States for our Barcelona^® collection of furniture designs created by Mies van der Rohe. This protection recognizes the renown of these designs and reflects our commitment to ensuring that when architects, furniture retailers, businesses and the public purchase a Mies van der Rohe design, they will be purchasing the authentic product, manufactured to the designer’s historic specifications.

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.

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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.

The office furniture industry is highly competitive. See “Risk Factors—Because we face significant competition in the office furniture industry, we may have difficulty capturing sales and maintaining our profit margins.”

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 have begun 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 more than $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	30.5%	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 nine months 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

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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 have begun expanding 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 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 30, 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 $63.0 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 $355.2 million and to fund a cash dividend of $70.6 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 September 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:

• 5,902,586 shares of common stock issuable upon the exercise of options outstanding as of October 15, 2004, with exercise prices ranging from $12.23 to $32.67 per share and a weighted average exercise price of $22.18 per share; and

• 330,744 shares of common stock reserved for future grants under our stock option plans as of October 15, 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 nine months ended September 30, 2003 and 2004, and as of September 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 nine months ended September 30, 2004 should not be considered indicative of results for the full fiscal year.

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.

	Years Ended December 31,								Nine Months Ended September 30,
	2001			2002		2003			2003			2004
									(unaudited)
	(in thousands)
Consolidated Statement of Operations Data:
Sales	$	985,388		$	773,263	$	697,246		$	518,207		$	513,586
Cost of sales		594,446			492,902		460,911			343,241			341,349
Gross profit		390,942			280,361		236,335			174,966			172,237
Selling, general and administrative expenses		195,532			156,314		149,739			110,430			121,501
Restructuring charge		1,655			—		—			—			—
Operating income		193,755			124,047		86,596			64,536			50,736
Interest expense		42,101			26,541		20,229			15,225			13,233
Other (expense) income, net		(3,670	)		2,933		(2,473	)		(2,152	)		(2,185	)
Income before income tax expense		147,984			100,439		63,894			47,159			35,318
Income tax expense		60,794			40,667		27,545			20,088			15,328
Net income	$	87,190		$	59,772	$	36,349		$	27,071		$	19,990

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	Years Ended December 31,						Nine Months Ended September 30,
	2001		2002		2003		2003		2004
							(unaudited)
Per Share Data:
Earnings per share:
Basic	$	3.77	$	2.58	$	1.57	$	1.17	$	.86
Diluted	$	3.60	$	2.47	$	1.50	$	1.12	$	.83
Weighted average shares outstanding:
Basic		23,142,554		23,172,857		23,158,765		23,160,376		23,150,278
Diluted		24,197,537		24,237,324		24,207,187		24,211,863		23,982,273

	As of September 30, 2004
	(unaudited)
	(in thousands)
Consolidated Balance Sheet Data:
Working capital	$	56,100
Total assets		569,231
Total long-term debt, including current portion		425,781
Total liabilities		625,880
Stockholders’ deficit		(56,649	)

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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			September 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		$	181,441
Gross profit		55,751			59,291			59,924			61,369			47,061			62,174			63,002
Selling, general and administrative expenses		35,662			36,351			38,417			39,309			35,548			44,149			41,804
Operating income		20,089			22,940			21,507			22,060			11,513			18,025			21,198
Interest expense		5,084			5,075			5,066			5,004			3,732			4,635			4,866
Other (expense) income, net		(3,592	)		(1,819	)		3,259			(321	)		1,418			1,329			(4,932	)
Income before income tax expense		11,413			16,046			19,700			16,735			9,199			14,719			11,400
Income tax expense		5,114			6,998			7,976			7,457			3,973			5,920			5,435
Net income	$	6,299		$	9,048		$	11,724		$	9,278		$	5,226		$	8,799		$	5,965
Per Share Data:
Earnings per share:
Basic	$	.27		$	.39		$	.51		$	.40		$	.22		$	.38		$	.26
Diluted	$	.26		$	.37		$	.49		$	.38		$	.21		$	.37		$	.25
Weighted average shares outstanding:
Basic		23,170,153			23,159,510			23,156,393			23,153,988			23,157,118			23,150,254			23,148,815
Diluted		24,227,247			24,214,045			24,199,226			24,193,213			23,988,672			23,983,095			23,980,406
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	%		2.8	%
Gross profit margin		33.9	%		33.5	%		33.9	%		34.3	%		30.7	%		34.8	%		34.7	%

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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, and sales and/or growth in sales of our office furniture tend to decline in a recessionary economy.

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, which depends on introducing new products, selling a broader range of products to new and existing clients and capturing a greater percentage of our dealers’ sales, 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. Our products, particularly new products, may not achieve the same degree of success and client acceptance as that achieved by our products historically, and we may not 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 retain our experienced management team or recruit other 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 may not 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, this insurance may not 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, and price increases and unavailability of raw materials and components could lower sales, increase our cost of goods sold and reduce our profits and margins.

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 by an average of 11% during the first nine months of 2004, and as a result our costs for steel have increased by $3.8 million during this period. 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. To date, we have been successful in largely offsetting these recent price changes in raw materials through our global sourcing initiatives and our continuous improvement programs. However, if the prices of certain raw materials, in particular steel, continue to increase, we may be unable to continue to offset any further increased costs through our global sourcing initiatives and continuous improvement programs. 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.

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In addition, contracts with most of our suppliers are short-term contracts. These suppliers may not continue to provide raw materials to us at attractive prices, or, at all, and we may not 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.

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 federal procurement laws and requires restrictive contract terms; any of these factors could curtail current or future business with the U.S. government.

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. Restrictions imposed by the terms of our indebtedness may limit our operating and financial flexibility.

At September 30, 2004, we had total consolidated outstanding debt of approximately $425.8 million. 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 by the terms of our new credit facility (there

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were no outstanding borrowings as of September 30, 2004 under our revolving credit facility). Among other things, our new credit facility prevents us from incurring any other indebtedness other than pursuant to limited customary exceptions, including indebtedness incurred in the ordinary course of business, purchase money indebtedness and capital lease obligations not to exceed $30 million in the aggregate, unsecured indebtedness not to exceed $50 million in the aggregate and other unsecured, subordinated indebtedness. These exceptions are limited, however, by the financial covenants in our new credit facility; and

• the terms of our new credit facility also impose other operating and financial restrictions on us, which could limit our flexibility in reacting to changes in our industry or in economic conditions generally.

As a result of the foregoing factors, 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 could result in a foreclosure on all or substantially all of our subsidiaries’ assets and have a material adverse effect on the value of our common stock and our ability to continue as a going concern.

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. The degree of protection offered by the claims of the various patents, trademarks and service marks may not be broad enough to provide significant proprietary protection or competitive advantages to us, and patents, trademarks or service marks may not 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, we may incur liability and costs and may have to redesign or discontinue an infringing product.

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. Our efforts to identify and avoid infringing third parties’ intellectual property rights may not 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.

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We could be required to 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 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.

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 may be unsuccessful in negotiating and agreeing 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. In August 2004, a petition was filed with the National Labor Relations Board seeking to unionize employees at our Muskegon, Michigan, facility. In September 2004, our employees at this facility 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.

An 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.

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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 a material adverse effect on our financial condition or results of operations in the event of a large number of defective products.

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, which could increase our expenses.

We primarily sell our products in U.S. dollars and we also report our financial results in U.S. dollars, but we pay some of our expenses in other currencies. This can result in a significant increase or decrease in the amount of those expenses in U.S. dollar terms, which affects our profits. In the future, any foreign currency appreciation relative to the U.S. dollar would increase our expenses that are denominated in that currency. 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.

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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.

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 exempt from certain corporate governance requirements since we are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, you will not have the protections afforded by these 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 23,147,529 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.

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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.

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. 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. 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. 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;

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• 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.

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. 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 may not 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 September 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 September 30, 2004
	(unaudited)
	(in thousands)
Cash and cash equivalents	$	12,336
Debt:
Term loan	$	425,000
Revolving credit facility		—
Other		781
Total Debt	$	425,781
Stockholders’ equity:
Common Stock ($0.01 par value; 100,000,000 shares authorized as of September 30, 2004, 150,000,000 shares authorized as adjusted; 23,147,879 shares issued and outstanding net of 58,250 treasury shares)	$	231
Paid-in-capital		1,982
Accumulated deficit		(62,679	)
Accumulated other comprehensive income		3,817
Total stockholders’ deficit		(56,649	)
Total capitalization	$	369,132

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

• 5,902,586 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2004, with exercise prices ranging from $12.23 to $32.67 per share and a weighted average exercise price of $22.18 per share; and

• 330,744 shares of common stock reserved for future grants under our stock option plans as of September 30, 2004.

The number of shares of common stock issuable upon the exercise of options and the exercise price of such options presented as of September 30, 2004 give effect to an October 15, 2004 adjustment made, in accordance with the stock incentive plan provisions, in response to the special cash dividend that was paid to stockholders on September 30, 2004.

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DILUTION

Our tangible net book value (deficit) 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 (deficit) 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 (deficit) per share of our common stock immediately afterwards. Net tangible book value per share represents (1) our total net tangible assets (total net assets less intangible assets), divided by (2) the number of shares of our common stock outstanding.

Our tangible net book value (deficit) at September 30, 2004 was approximately $(293.5) million, or $(12.68) per share. 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	$
Net tangible book value (deficit) per share as of September 30, 2004	$	(12.68	)
Dilution per share to new investors	$

As of September 30, 2004, there were options outstanding to purchase 5,902,586 shares of common stock, with exercise prices ranging from $12.23 to $32.67 per share and a weighted average exercise price of $22.18 per share. The number of shares of common stock issuable upon the exercise of options and the exercise price of such options as of September 30, 2004 give effect to an October 15, 2004 adjustment made, in accordance with the stock incentive plan provisions, in response to the special cash dividend that was paid to stockholders on September 30, 2004. 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 September 30, 2004, there were options outstanding to purchase 5,902,586 shares of our common stock, with exercise prices ranging from $12.23 to $32.67 per share and a weighted average exercise price of $22.18 per share. The number of shares of common stock issuable upon the exercise of options and the exercise price of such options as of September 30, 2004 give effect to an October 15, 2004 adjustment made, in accordance with the stock incentive plan provisions, in response to the special cash dividend that was paid to stockholders on September 30, 2004.

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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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 nine months ended September 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 nine months ended September 30, 2004 should not be considered indicative of results for the full fiscal year.

	Years Ended December 31,													Nine Months Ended September 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		$	518,207		$	513,586
Cost of sales		593,442			682,421		594,446			492,902		460,911			343,241			341,349
Gross profit		391,069			481,056		390,942			280,361		236,335			174,966			172,237
Selling, general and administrative expenses		206,919			243,885		195,532			156,314		149,739			110,430			121,501
Restructuring charge		—			—		1,655			—		—			—			—
Operating income		184,150			237,171		193,755			124,047		86,596			64,536			50,736
Interest expense		21,611			44,437		42,101			26,541		20,229			15,225			13,233
Refinancing expense		6,356	(a)		—		—			—		—			—			—
Other (expense) income, net		(17,671	)(b)		3,026		(3,670	)		2,933		(2,473	)		(2,152	)		(2,185	)
Income before income tax expense		138,512			195,760		147,984			100,439		63,894			47,159			35,318
Income tax expense		60,151			79,472		60,794			40,667		27,545			20,088			15,328
Net income	$	78,361		$	116,288	$	87,190		$	59,772	$	36,349		$	27,071		$	19,990
Per Share Data:
Earnings per share:
Basic	$	2.12		$	5.10	$	3.77		$	2.58	$	1.57		$	1.17		$	0.86
Diluted	$	2.05		$	4.86	$	3.60		$	2.47	$	1.50		$	1.12		$	0.83
Cash dividends declared per share:	$	—		$	9.50	$	—		$	—	$	—		$	—		$	3.05
Weighted average shares outstanding:
Basic		36,880,509			22,786,326		23,142,554			23,172,857		23,158,765			23,160,376			23,150,278
Diluted		38,303,898			23,946,166		24,197,537			24,237,324		24,207,187			24,211,863			23,982,273

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	As of December 31,															As of September 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	)	$	(27,467	)	$	56,100
Total assets		742,306			695,130			639,003			590,351			561,001			559,338			569,231
Total long-term debt, including current portion		610,376			425,755			547,524			452,042			380,871			393,793			425,781
Total liabilities		836,500			899,505			761,321			653,474			569,120			582,270			625,880
Stockholders’ deficit		(94,194	)		(204,375	)		(122,318	)		(63,123	)		(8,119	)		(22,932	)		(56,649	)

(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.

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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 an expanding portfolio of high quality, branded office furniture products and textiles. Our products embody our commitment to innovation and are designed to provide enduring value and help clients shape their workplaces with imagination and vision. They are recognized for their high quality and sophisticated image and are targeted at the middle to upper end of the market.

Since 1997, the U.S. office furniture market has experienced periods of significant growth and contraction. In the four years from 1997 to 2000, the industry grew at an above-average compounded annual rate of 7.3%. In contrast, in 2001 through 2003, the industry experienced a sales decline of more than 36% due to a more challenging macroeconomic environment. Industry-wide shipments in the office systems category in particular declined by 45%, more than in any other category. During the first eight months of 2004, however, the U.S. office furniture market experienced positive period-over-period growth in orders and shipments of 6.0% and 4.0%, respectively. For a more detailed discussion of the trends in the U.S. office furniture market, see “Business— Industry Overview.”

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, who are Herman Miller, Inc. and Steelcase, Inc.

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 nine months of 2004, we experienced increases in sales of our seating, storage and specialty businesses. In addition, sales backlog has grown by 6.3% since December 31, 2003.

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	Three Months Ended
	March 31, 2003			June 30, 2003			September 30, 2003			December 31, 2003			March 31, 2004			June 30, 2004			September 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		$	181,441
Gross profit		55,751			59,291			59,924			61,369			47,061			62,174			63,002
Operating income		20,089			22,940			21,507			22,060			11,513			18,025			21,198
Interest expense		5,084			5,075			5,066			5,004			3,732			4,635			4,866
Other (expense) income, net		(3,592	)		(1,819	)		3,259			(321	)		1,418			1,329			(4,932	)
Income tax expense		5,114			6,998			7,976			7,457			3,973			5,920			5,435
Net income	$	6,299		$	9,048		$	11,724		$	9,278		$	5,226		$	8,799		$	5,965
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	%		2.8	%
Gross profit margin		33.9	%		33.5	%		33.9	%		34.3	%		30.7	%		34.8	%		34.7	%
Backlog	$	142,667		$	125,508		$	107,443		$	107,023		$	111,784		$	116,206		$	113,748

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 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

Goodwill represents the difference between the purchase price and the related underlying tangible and identifiable intangible net assets resulting from a business acquisition. We discontinued the amortization of

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goodwill and our indefinite lived intangible assets in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”. Annually, or if conditions indicate an earlier review is necessary, the estimated fair value of our defined reporting unit is compared to the recorded carrying amount of the reporting unit. As discussed in Note 2 to the consolidated financial statements, if the estimated fair value is less than the carrying value, goodwill may be impaired, and will be written down to its estimated fair value, if necessary.

In testing for potential impairment, we measure the estimated fair value using a combination of two methods based upon a discounted cash flow valuation and a market value approach.

The discounted cash flow method analysis is based on the present value of projected cash flows and a residual value and uses the following assumptions:

• A business is worth today what it can generate in future cash to its owners;

• Cash received today is worth more than an equal amount of cash received in the future; and

• Future cash flows can be reasonably estimated.

The market value approach uses a set of five comparable companies to derive a range of market multiples for the last twelve months’ revenue and earnings before interest, taxes, depreciation and amortization.

We also perform impairment analyses on our other intangible assets not subject to amortization in a manner consistent with our goodwill impairment analysis. These intangible assets consist of various trademarks. As of the most recent valuation date, the fair market value exceeded the carrying amount.

The key assumptions used to determine fair value of the reporting unit and trademarks include cash flows, terminal values and the discount rate based on our weighted average cost of capital adjusted for the risks associated with our operations.

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. The accrued warranty cost generally varies in direct relation to sales volume, as such costs tend to be a consistent percentage of revenue. 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 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.

Pension and Other Postretirement Benefits

We sponsor two defined benefit pension plans and two other postretirement benefit plans that cover substantially all of our U.S. employees. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans. Key factors include assumptions about the expected rates of return on plan assets, discount rates, and health care cost trend rates, as determined by us, within certain guidelines. We consider market conditions, including changes in investment returns and interest rates, in making these assumptions.

We determine the expected long-term rate of return on plan assets based on aggregating the expected rates of return for each component of the plan’s asset mix. We use historic plan asset returns combined with current

26

market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption and generally does not change annually. The discount rate reflects the market rate for high-quality fixed income debt instruments as of our annual measurement date and is subject to change each year. Holding all other assumptions constant, a one-percentage-point increase or decrease in the assumed rate of return on plan assets would decrease or increase, respectively, 2003 net periodic pension expense by approximately $0.4 million. Likewise, a one percentage point increase or decrease in the discount rate would decrease or increase, respectively, 2003 net periodic pension expense by approximately $3.2 million.

Unrecognized actuarial gains and losses are recognized over the expected remaining service life of the employee group. Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to the obligations and from the difference between expected returns and actual returns on plan assets. These unrecognized losses are systematically recognized as an increase in future net periodic pension expense in accordance with FASB Statement No. 87, Employers’ Accounting for Pensions.

Key assumptions we use in determining the amount of the obligation and expense recorded for postretirement benefits other than pensions (“OPEB”), under FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, include the assumed discount rate and the assumed rate of increases in future health care costs. The discount rate we use to determine the obligation for these benefits matches the discount rate used in determining our pension obligations in each year presented. In estimating the health care cost trend rate, we consider actual health care cost experience, future benefit structures, industry trends and advice from our actuaries. We assume that the relative increase in health care costs will generally trend downward over the next several years, reflecting assumed increases in efficiency in the health care system and industry-wide cost containment initiatives. At December 31, 2003, the expected rate of increase in future health care costs was 9% for 2004, declining to 5% in 2008 and thereafter. Increasing the assumed health care cost trend by one percentage point in each year would increase the benefit obligation as of December 31, 2003 by $2.4 million and increase the aggregate of the service and interest cost components of net periodic benefit cost for 2003 by approximately $0.3 million. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the benefit obligation as of December 31, 2003 by approximately $2.0 million and decrease the aggregate of the service and interest cost components of net periodic benefit cost for 2003 by approximately $0.2 million.

The actuarial assumptions we use in determining our pension and OPEB retirement benefits may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may materially affect our financial position or results of operations.

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.

Taxes

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” (“SFAS 109”) which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely that not that some portion or all of the deferred tax assets will not be recognized.

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At December 31, 2002, our deferred tax liabilities of $44.1 million exceeded our deferred tax assets of $30.7 million by $13.4 million. At December 31, 2003, our deferred tax liabilities of $53.6 million exceeded our deferred tax assets of $28.0 million by $25.6 million. Our deferred tax assets at December 31, 2002 and 2003 of $30.7 million and $28.0 million, respectively, are net of valuation allowances of $13.6 million and $17.0 million, respectively. We have recorded the above valuation allowance primarily for net operating loss carryforwards in foreign tax jurisdictions where we have incurred historical tax losses from operations, and have determined that it is more likely than not that these deferred tax assets will not be realized.

We evaluate on a quarterly basis the realizability of our deferred tax assets and adjust the amount of our allowance, if necessary. The factors we use to assess the likelihood of realization are our forecast of future taxable income and our assessment of available tax planning strategies that could be implemented to realize the net deferred tax assets.

Interest Rate Collar Agreements

We account for our interest rate collar agreements, which matured in March 2004, 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.

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Results of Operations

Nine months ended September 30, 2003 and 2004

	Three Months Ended									Nine Months Ended			Three Months Ended									Nine Months Ended
	March 31, 2003			June 30, 2003			September 30, 2003			September 30, 2003			March 31, 2004			June 30, 2004			September 30, 2004			September 30, 2004
	(unaudited)
	(in thousands, except statistical data)
Consolidated Statement of Operations Data:
Sales	$	164,630		$	177,014		$	176,563		$	518,207		$	153,324		$	178,821		$	181,441		$	513,586
Gross profit		55,751			59,291			59,924			174,966			47,061			62,174			63,002			172,237
Operating income		20,089			22,940			21,507			64,536			11,513			18,025			21,198			50,736
Interest expense		5,084			5,075			5,066			15,225			3,732			4,635			4,866			13,233
Other (expense) income, net		(3,592	)		(1,819	)		3,259			(2,152	)		1,418			1,329			(4,932	)		(2,185	)
Income tax expense		5,114			6,998			7,976			20,088			3,973			5,920			5,435			15,328
Net income	$	6,299		$	9,048		$	11,724		$	27,071		$	5,226		$	8,799		$	5,965		$	19,990
Statistical and Other Data:
Sales growth (decline) from comparable period of prior year		(16.8	)%		(12.7	)%		(5.9	)%		(12.0	)%		(6.9	)%		1.0	%		2.8	%		(0.9	)%
Gross profit margin		33.9	%		33.5	%		33.9	%		33.8	%		30.7	%		34.8	%		34.7	%		33.5	%

Sales

Sales for the nine months ended September 30, 2004 were $513.6 million, a decrease of $4.6 million, or 0.9%, from sales of $518.2 million for the same period of 2003, primarily due to lower shipment volumes in the first quarter of 2004. The decrease of $4.6 million in sales for the first nine months of 2004 consisted of a decrease of $11.3 million, or 6.9%, in the first quarter, an increase of $1.8 million, or 1.0%, for the second quarter and another increase of $4.9 million, or 2.8%, for the third quarter as compared to same periods of 2003. These 2004 second and third quarter-over-quarter increases were the first back-to-back quarter-over-quarter increases in the past 13 quarters. A price increase in May 2004 contributed $1.1 million to sales for the period ended September 30, 2004. Third quarter 2004 sales of $181.4 million represented the highest sales for any quarter thus far in 2004.

The 0.9% period-over-period decrease in sales for the nine months ended September 30, 2004 was directly attributable to an 8.9% decrease in sales of office systems, offset by a 12.2% increase in sales of our seating, storage and specialty products. The 2004 third quarter decline in office systems sales slowed to 3.1% from third quarter 2003, while sales of seating, storage and specialty products increased 11.0% during the same period. We believe that an industry recovery would start with growth in the shorter lead time and lower ticket products such as seating and storage and that the rebound of office systems sales will lag that of the rest of the industry due to the typically larger spending commitment that the purchase of these products represents.

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At September 30, 2004, sales backlog was $113.7 million, an increase of $6.3 million, or 5.9%, from sales backlog as of September 30, 2003.

Gross Profit and Operating Income

Gross profit for the nine months ended September 30, 2004 was $172.2 million, a decrease of 1.6% from gross profit of $175.0 million for the same period in 2003. Operating income for the nine months ended September 30, 2004 was $50.7 million, a decrease of 21.4% from operating income of $64.5 million for the same period in 2003.

As a percentage of sales, gross profit decreased from 33.8% in the nine months ended September 30, 2003 to 33.5% in the nine months ended September 30, 2004. Operating income as a percentage of sales declined from 12.5% to 9.9% over the same period. The decreases in gross profit and operating income margins from the first nine months of 2003 to the first nine months of 2004 were primarily due to lower sales volumes in the first quarter of 2004, allowing less absorption of fixed overhead costs, which adversely affected 2004 margins by 0.4%. Increasing materials costs, primarily for steel and plastic, increased our materials costs by 3.4% but were in large part offset by our recent global sourcing initiatives, continuous improvement programs and list price increases. The decrease in operating income margin from 2003 to 2004 also resulted from an increase of $2.2 million in product development expense and an increase of $4.5 million in employee related expenses in the nine month period of 2004 as compared to the same period of 2003.

Within the first nine months of 2004, gross profit margin increased from 30.7% in the first quarter to 34.8% and 34.7% in the second and third quarters, respectively, while operating margins increased from 7.5% in the first quarter to 10.1% and 11.7% for the second and third quarters, respectively. This sequential improvement in operating income margins was the result of increased overhead absorption on the higher sales volumes and increased returns from our continuous improvement programs and global sourcing initiatives, which helped to offset the rising cost of steel and plastic, as well as the favorable impact of recently implemented price increases. Within the first nine months of 2003, gross profit margin decreased from 33.9% in the first quarter to 33.5% in the second quarter and then rose to 33.9% in the third quarter. Operating margins in 2003 increased from 12.2% in the first quarter to 13.0% in the second quarter and then fell to 12.2% in the third quarter.

Interest Expense

Interest expense for the nine months ended September 30, 2004 decreased $2.0 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 nine-month period ended September 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 nine-month period ended September 30, 2003, were terminated on March 11, 2003.

Other Income (Expense), Net

Other expense for the nine months ended September 30, 2004 includes a foreign exchange transaction loss of $0.5 million, consisting of gains of $0.6 million and $1.3 million during the first and second quarter of 2004, respectively, and a loss of $2.4 million in the third quarter of 2004, and is due primarily to a 2% devaluation of the United States dollar to the Canadian dollar, offset in part by exchange rate hedge agreements; a gain of $0.8 million related to our interest rate collar agreement, which matured in February 2004; and the write off of $2.5 million in deferred financing fees associated with the termination of our prior credit agreement on September 30, 2004.

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Other expense for the nine months ended September 30, 2003 includes a foreign exchange transaction loss of $5.7 million due to a 17% deterioration of the United States dollar to the Canadian dollar; a gain of $4.5 million related to our interest rate swap and collar agreements; and a loss of $1.1 million on the early redemption of the remaining $57.3 million principal amount of our 10.875% senior subordinated notes due 2006.

Income Tax Expense

The mix of pretax income and the varying effective tax rates in the countries in which we operate directly affects our consolidated effective tax rate. Our mix of pretax income was primarily responsible for the increase in the effective tax rate from 42.6% in the nine month period ended September 30, 2003 to 43.4% for the same period in 2004. Our effective tax rate in the United States is consistently around 40.0% of pretax income. The effective tax rate in Canada is usually between 35.0% and 38.0%. Tax operating losses and related carry forwards in the countries in which we operate in Europe make the effective tax rate in Europe, for which we do not record a tax benefit, responsible for the differences in our consolidated effective tax rate.

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. 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 9.1% 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. Industry pricing pressures experienced in the first half of 2003 reversed during the second half of the year. As a result, industry pricing pressures did not have a significant impact on sales during 2003.

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. 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. The decreases in gross profit and operating income margins from 2002 to 2003 were primarily due to the decrease in year-over-year sales during 2003, allowing for less absorption of fixed overhead costs, which adversely affected gross profit margin by 1.7%, and the weakening of the U.S. dollar versus foreign currencies, which adversely affected gross profit margin by 1.7%.

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

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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 transaction loss of $7.7 million, a loss of $0.8 million related to the termination of our two interest rate swap agreements, and a $7.3 million net gain related to our interest rate collar agreements. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments. The net foreign exchange transaction loss consists primarily of the loss incurred with respect to unhedged short-term operating receivables of a Canadian subsidiary that are payable from our U.S. operations. 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 transaction loss of $0.4 million.

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. Non U.S. tax losses for which a tax benefit was not recorded increased the 2003 effective tax rate by approximately 3%.

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 industry pricing pressures, which resulted in lower prices for our products in 2002 as compared to 2001 and an approximately $24 million decrease in revenues. 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 19.0% from shipments in 2001 and that U.S. office systems shipments declined 23.3% 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. 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. The decreases in

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gross profit and operating income margins from 2001 to 2002 were primarily due to the decrease in year-over- year sales during 2002, allowing for less absorption of fixed overhead costs, which adversely affected gross profit margin by 1.6%, and industry pricing pressure, which adversely affected gross profit margin by approximately 1.9%.

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 transaction 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 transaction gain of $2.7 million. See Note 10 to the consolidated financial statements for further discussion of these derivative financial instruments. The net foreign currency transaction gain consists primarily of the gain recognized with respect to short-term operating receivables of a Canadian subsidiary that are payable from our U.S. operations.

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) 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.

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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 included $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.

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 30, 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 $70.6 million. As a result of the payment of the dividend, exercise prices for our outstanding options were adjusted on October 15, 2004 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 $488.0 million, consisting of a $63.0 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. As of September 30, 2004, we had no outstanding borrowings on our revolving credit facility.

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 September 30, 2004, total credit available under such facilities was approximately $10.4 million, or the foreign currency equivalent.

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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 are currently in compliance with all of the covenants and conditions under our new credit facility. For additional information on these covenants see “Description of Certain Indebtedness.” 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. In addition, we believe that we will have adequate funds available to meet long-term cash requirements and that we will be able to comply with the covenants under our credit agreements. Future principal debt payments may be paid out of cash flows from operations, from future refinancing of our debt or from equity offerings. 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. Restrictions imposed by the terms of our indebtedness may limit our operating and financial flexibility.”

Contractual Obligations

The following summarizes our fixed long-term contractual obligations as of September 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	$	25,417	$	50,314	$	49,494	$	442,845	$	568,070
Operating leases		9,136		19,024		11,987		6,605		46,752
Purchase commitments		1,303		120		—		—		1,423
Pension obligations		6,699		1,580		—		—		8,279
Total	$	119,348	$	291,826	$	12,357	$	6,773	$	430,304

Contractual obligations for long-term debt include principal and interest payments. Interest has been included at either the fixed rate or the variable rate in effect as of September 30, 2004, as applicable.

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

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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 short-term operating receivables of a Canadian subsidiary that are payable by our U.S. operations. The terms of these contracts are generally less than a year. Changes in the fair value of such contracts are reported in earnings

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in the period the value of the contract changes. The net gain or loss upon settlement and 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 did 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 11 quarters ended September 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		September 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	$	181,441
Cost of sales		123,675		126,666			120,649		121,912		108,879			117,723			116,639		117,670			106,263		116,647		118,439
Gross profit		74,132		75,996			67,047		63,186		55,751			59,291			59,924		61,369			47,061		62,174		63,002
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		41,804
Operating income		37,649		33,305			29,487		23,606		20,089			22,940			21,507		22,060			11,513		18,025		21,198
Interest expense		8,123		7,150			5,768		5,500		5,084			5,075			5,066		5,004			3,732		4,635		4,866
Other income (expense), net		2,289		(3,910	)		3,731		823		(3,592	)		(1,819	)		3,259		(321	)		1,418		1,329		(4,932	)
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		11,400
Income tax expense		13,232		9,007			11,174		7,254		5,114			6,998			7,976		7,457			3,973		5,920		5,435
Net income	$	18,583	$	13,238		$	16,276	$	11,675	$	6,299		$	9,048		$	11,724	$	9,278		$	5,226	$	8,799	$	5,965
Per Share Data:
Earnings per share:
Basic	$	.80	$	.57		$	.70	$	.51	$	.27		$	.39		$	.51	$	.40		$	.22	$	.38	$	.26
Diluted	$	.77	$	.55		$	.67	$	.48	$	.26		$	.37		$	.49	$	.38		$	.21	$	.37	$	.25
Weighted average shares outstanding:
Basic		23,179,123		23,173,194			23,170,703		23,168,551		23,170,153			23,159,510			23,156,393		23,153,988			23,157,118		23,150,254		23,148,815
Diluted		24,249,499		24,239,833			24,231,398		24,228,708		24,227,247			24,214,045			24,199,226		24,193,213			23,988,672		23,983,095		23,980,406

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BUSINESS

General

We are a leading designer and manufacturer of branded office furniture products and textiles. We offer a comprehensive portfolio of products which are recognized for high quality and a sophisticated image and are targeted at the middle to upper end of the market. We have a direct sales force and a broad network of independent dealers that sell our products throughout North America and internationally. Approximately 7% of our sales are outside North America, the majority of which are through our European operations.

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 design leadership is exemplified by 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 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. In addition to our design excellence, our management philosophy and culture have enabled us to achieve superior financial performance and have positioned us for profitable growth. Our management philosophy fosters a strong collaborative culture, client-driven processes and a lean, agile operating structure. Additionally, our employees participate in a variable incentive compensation system and have broad-based equity ownership in the company, which drives and motivates strong performance.

Industry Overview

The North American office furniture industry association, BIFMA, reported 2003 shipments of $8.5 billion for the U.S. office furniture market. These industry shipments are 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	30.5	%
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

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Industry demand is driven by several macroeconomic factors and workplace trends that have influenced the office furniture landscape. Corporate profitability, business confidence and service-sector employment are key macroeconomic factors that impact commercial construction, business expansion, absorption of vacant office space and, ultimately, demand for our products.

Workplace trends such as changes in work processes, increases in the use of technology and the number of knowledge workers also influence the demand for office furniture. 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 workplace trends affect the style, features and functionality of new products and 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. Historically, the U.S. office furniture industry has demonstrated positive growth characteristics including growth in 23 of the 25 years preceding 2001 and above-average compounded annual growth of 7.3% during the four years from 1997 to 2000. Industry growth during this period has been driven by strong corporate profitability, business expansion and investment in infrastructure during the Y2K and dot-com booms. However, the economic recession in 2001 through 2003 resulted in significant reductions in corporate profitability, business confidence, service-sector employment and commercial real estate occupancy rates. That period, 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, and ultimately resulted in an industry sales decline of more than 36%. 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 45%, more than any other category in the three years from 2001 to 2003.

Industry Recovery. During the first eight months of 2004, the U.S. office furniture market experienced positive period-over-period growth in orders and shipments of 6.0% and 4.0%, respectively. This growth is expected to continue according to BIFMA, which forecasts U.S. office furniture shipments growth of 4.8% in 2004 and 8.1% 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. During that period, 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. We 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.

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, and our managers throughout the 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 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. 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. 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 20% 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. 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. Office systems are long-lasting, are often the first furniture element a client specifies, and are, therefore, key to securing our long-term relationships. 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 20% 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 more than $5 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	30.5	%	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 revenues on specific orders. 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.

The opportunity available in non-systems categories is demonstrated by our recent sales in the seating category, which grew over 25% in the first nine months 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. In January 2004, to target this opportunity, we introduced the Knoll Essentials program, a collection of easy-to-order, best-selling products from our broad range of office furnishings. 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. In 2003, we purchased approximately $13 million of components and raw materials from overseas suppliers, and anticipate purchasing approximately $21 million of components and raw materials from such suppliers in 2004. 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 61.5% of our sales in 2003, 64.5% of sales in 2002 and 67.6% 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 6.8% of our sales in 2003, 6.9% of our sales in 2002 and 5.9% 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 0.4% of our sales in 2003, 0.7% of our sales in 2002 and 0.7% 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 5.5% of our North American sales in 2003 and the first nine months 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 nine months of 2004, increased dealer generated sales by $12.5 million as compared to the first nine months 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. Both domestic and overseas suppliers of these materials are selected by us based upon a variety of factors, with the price and quality of the materials and the supplier’s ability to meet our delivery requirements being primary factors in such selection. We currently do not have any long-term supply contracts and believe that the supply sources for these materials are adequate. As a result of not having any long-term supply contracts for these materials, we are vulnerable to fluctuations in the prices for these materials. See “Risk Factors—We are dependent on the pricing and availability of raw materials and components, and price increases and unavailability of raw materials and components could lower sales, increase our cost of goods sold and reduce our profits and margins.” 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.

In October 2004, we received registered trademark protection in the United States for five of our world-famous furniture designs created by Mies van der Rohe—the Barcelona Chair, the Barcelona Stool, the Barcelona Couch, the BarcelonaTable and the Flat Bar Brno Chair. This protection recognizes the renown of these designs and reflects our commitment to ensuring that when architects, furniture retailers, businesses and the public purchase a Mies van der Rohe design, they will be purchasing the authentic product, manufactured to the designer’s historic specifications.

Backlog

Our sales backlog was $113.7 million at September 30, 2004, $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 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 affect 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 September 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 September 30, 2004, we employed a total of 3,431 people, consisting of 2,191 hourly and 1,240 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, in August 2004, a petition was filed with the National Labor Relations Board seeking to unionize employees at our Muskegon, Michigan, facility. In September 2004, our employees at this facility 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, none of which have exceeded eight hours. Work stoppages are relatively common occurrences at many Italian manufacturing plants and are usually related to national or local issues. We have had 5 work stoppages in 2004, with an average duration of 4.4 hours. None of these work stoppages were unique to our company, and these work stoppages have not materially affected our performance.

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 October 22, 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	67	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., Polypore, 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.

Our compensation committee sets performance targets and evaluates performance against those targets, taking into consideration our performance and industry and general economic considerations affecting performance. For 2004, each member of our senior management team has a performance goal related to the achievement of operating profit, as well as goals tailored to reflect individual areas of primary responsibility, such as orders growth and budget thresholds.

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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. The information set forth in the following table gives effect to an October 15, 2004 adjustment to the number of shares of common stock issuable upon the exercise of options and the exercise price of such options, which was made in accordance with the stock incentive plan provisions, in response to the special cash dividend that was paid to stockholders on September 30, 2004. 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	212,014	38,564
Andrew B. Cogan	394,409	132,219
Kathleen G. Bradley	594,281	132,219
Stephen A. Grover	172,916	64,628
Arthur C. Graves	81,689	38,564

Stock Option Grants

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

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.

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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 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

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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 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;

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• 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 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 October 15, 2004, a total of 10,715,199 shares of common stock have been authorized for issuance under the plans, of which a total of 330,744 shares are eligible for grant. As of October 15, 2004, options to purchase 5,902,586 shares of common stock were outstanding at a weighted average exercise price of $22.18 per share and 4,933,878 were exercisable at a weighted average exercise price of $20.63 per share under the plans.

We intend to issue stock options and other awards to directors, officers and other eligible persons under the plans from time to time in the ordinary course of business. To permit the issuance of additional stock options and other awards, we intend to amend the 1999 plan to increase the number of shares of common stock authorized for issuance under that plan by 1,500,000 shares.

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.

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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 and September 2004, the number of notional units outstanding was adjusted, in accordance with the plan provisions, in response to special cash dividends that were 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 appraisal. 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 October 15, 2004, approximately 61,814 notional units were outstanding, of which approximately 61,590 units were vested.

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 October 1, 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 $179,278, $297,921 and $276,844, for the nine months ended September 30, 2004, for the years ended December 31, 2003 and 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. We believe that all of the transactions with Emanuela Frattini Magnusson are on terms that are fair to us and no less favorable to us than those that could have been obtained in a comparable transaction with an independent third party.

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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 October 15, 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 23,147,529 shares of our common stock outstanding on October 15, 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)	888,271	3.8
Andrew B. Cogan (3)	633,604	2.7
Kathleen G. Bradley (3)	713,700	3.0
Stephen A. Grover (3)	209,998	*
Arthur C. Graves (3)	120,963	*
John H. Lynch (4)	847,418	3.6
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)	24,762,074	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 October 15, 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 October 15, 2004 was 23,147,529 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 27,546, 88,146, 27,546, 27,546, 88,146 and 289,230 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 October 15, 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 October 15, 2004 and as adjusted to reflect the sale of              shares by the selling stockholders in this offering.

	Beneficial Ownership Prior to Offering			Shares Being Offered(1)		Beneficial Ownership After Offering
Name	Shares	Percent(5)				Shares	Percent(5)
Warburg, Pincus Ventures, L.P.	20,981,956	90.6	%		(2)
Burton B. Staniar	888,271	3.8		0	(3)	888,271	3.8
John H. Lynch	847,418	3.6		0	(4)	847,418	3.6
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.

(5) 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 October 15, 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 October 15, 2004 was 23,147,529 shares of common stock.

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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 October 15, 2004, there were 23,147,529 shares of common stock outstanding and no shares of preferred stock outstanding. As of October 15, 2004, we had 39 record holders of our common stock. Upon the closing of this offering, we will have 23,147,529 of shares of common stock and no shares of preferred stock outstanding. In addition, as of October 15, 2004, options to purchase 5,902,586 shares of our common stock were outstanding and 330,774 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.8 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 are applying 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. On September 30, 2004, we entered into a new credit facility. 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 $488.0 million, consisting of a $63.0 million revolving credit facility and $425.0 million term loan facility. Our revolving credit facility can be increased from $63.0 million to $75.0 million if we obtain additional commitments, which can be effected without the consent of the lenders. 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 used the proceeds of the term loan facility to repay our prior revolving and term loan credit facility, in the aggregate amount of $355.2 million, and to fund a cash dividend of $70.6 million to our existing stockholders.

Security. Our indebtedness under our new credit facility is secured by, among other things, (i) 100% of the capital stock of 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 the capital stock of each of our subsidiaries) securing our new credit facility if our debt ratings reach specified levels.

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 plus 3.0% in the case of term loans or (ii) the greater of the federal funds rate plus 0.5% or the prime rate plus 1.5% in the case of the revolving credit facility loans and plus 2.0% in the case of term loans. 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 30, 2009, subject to satisfaction of certain conditions on the date of any such borrowing. No letter of credit can 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 30, 2004 and will mature on September 30, 2011. The term loan facility is subject to quarterly amortization of principal, which will commence on December 31, 2004, equal to 0.25% of the original aggregate principal amount of the term loans. 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 contains two financial covenants. Compliance with these financial covenants is determined based on a calculation of adjusted EBITDA, in which certain types of income are excluded from EBITDA and certain non-recurring items are added back to EBITDA. The types of income excluded from EBITDA include income of any of our subsidiaries if such subsidiary is not able to pay dividends at that time, gains or losses attributable to sales of assets outside the ordinary course of business in excess of $2.5 million and gains and losses relating to fluctuations in currency values. The items added back to EBITDA include cash charges resulting from the refinancing that arise within six months of the closing of the refinancing,

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non-cash charges, impairments and expenses other than depreciation and amortization, restructuring and acquisition integration costs not to exceed $10 million, extraordinary losses and cash charges incurred in connection with equity or debt financings.

One financial covenant, tested quarterly, requires that we maintain a funded debt to adjusted EBITDA ratio of no greater than 5.25 to 1 for the first fiscal quarter of our new credit facility ending on December 31, 2004 and becomes increasingly restrictive in quarter-point increments during the term of our new credit facility, requiring us to maintain a funded debt to adjusted EBITDA ratio of no greater than 3.00 to 1 for each four-fiscal quarter period ending on and after September 30, 2007. The other financial covenant, tested quarterly, requires us to maintain an adjusted EBITDA to interest ratio of at least 2.25 to 1 for the first fiscal quarter of our new credit facility ending on December 31, 2004 and becomes increasingly restrictive in quarter point increments during the term of our new credit facility, requiring us to maintain an adjusted EBITDA to interest ratio of at least 3.00 to 1 for each four-fiscal quarter period ending on and after September 30, 2007.

In addition, 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; 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 a period of not less than two years in an amount equal to 50% 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. As of September 30, 2004, 23,054,029 shares of our common stock have registration rights under our stockholders agreements. 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, subject to certain exceptions, 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 are applying 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.

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

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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.

A prospectus in electronic format will be made available on the website maintained by one or more of the lead managers of this offering and may also be made available on websites maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead managers to underwriters that may make Internet distributions on the same basis as other allocations.

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. UBS Financial Services, Inc., an affiliate of UBS Securities LLC, will act as plan administrator for such plan.

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. Certain affiliates of the underwriters have acted as arrangers, agents and lenders in connection with our new credit facility.

80

VALIDITY OF SECURITIES

The validity of our common stock offered by this prospectus will be passed upon for us by Willkie Farr & Gallagher LLP, New York, New York. The validity of the common stock offered by this prospectus will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.

EXPERTS

The consolidated financial statements and schedule 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 reports thereon appearing elsewhere herein, and are included in reliance upon such reports 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 (File No. 333-118901), 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.

81

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 September 30, 2004	F-28
Consolidated Statements of Operations for the Nine Months Ended September 30, 2004 and 2003	F-29
Consolidated Statements of Cash Flows for the Nine Months Ended September 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
Goodwill, net		45,101			43,782
Intangible assets, net		190,365			191,861
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 agreements		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 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 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. The first step of the goodwill impairment test was performed, 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.

Research and Development Costs

Research and development expenses, which are expensed as incurred, were $9.3 million for 2003, $9.7 million for 2002, and $10.4 million for 2001.

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

F-9

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

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 gain related to the agreements of $720 thousand, of which $6.56 million was recorded as interest expense and $7.28 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 short-term operating receivables of a Canadian subsidiary that are payable by the U.S. operations. 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 and 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 currently involved in matters of litigation arising in the normal course of business. Management is of the opinion that such litigation either individually or in the aggregate will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Further, management is of the opinion that there are no other legal claims against the Company that are expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

F-16

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

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, which is the maximum potential liability under these guarantees. 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.

F-17

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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).

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	)

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

F-21

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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.

F-22

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

F-23

KNOLL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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 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 transaction (loss) gain	$	(7,733	)	$	(409	)	$	2,680
Loss on termination of interest rate swap agreements		(758	)		—			—
Unrealized gain (loss) on derivatives		7,278			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

SEPTEMBER 30, 2004 AND DECEMBER 31, 2003

(dollars in thousands, except per share data)

	September 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	12,336		$	11,517
Customer receivables, net		95,627			91,271
Inventories		46,344			38,354
Deferred income taxes		14,396			14,338
Other current assets		9,073			5,702
Total current assets		177,776			161,182
Property, plant, and equipment, net		146,651			154,653
Goodwill, net		45,121			45,101
Intangible assets, net		191,740			190,365
Other non-trade receivables		4,937			5,602
Other noncurrent assets		3,006			4,098
Total assets	$	569,231		$	561,001
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	4,348		$	81,340
Accounts payable		54,423			54,502
Income taxes payable		10,724			—
Other current liabilities		52,181			53,578
Total current liabilities		121,676			189,420
Long-term debt		421,433			299,531
Deferred income taxes		39,840			39,908
Postretirement benefits other than pensions		22,440			21,149
Pension liability		10,427			8,768
International retirement obligation		5,944			5,313
Other noncurrent liabilities		4,120			5,031
Total liabilities		625,880			569,120
Stockholders’ equity (deficit):
Common stock, $0.01 par value; authorized 100,000,000 shares; 23,147,879 and 23,153,429 shares issued and outstanding (net of 58,250 and 52,700 treasury shares) in 2004 and 2003, respectively		231			232
Additional paid-in capital		1,982			2,168
Accumulated deficit		(62,679	)		(12,068	)
Accumulated other comprehensive income		3,817			1,549
Total stockholders’ deficit		(56,649	)		(8,119	)
Total liabilities and stockholders’ deficit	$	569,231		$	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)

	Nine months ended
	September 30, 2004			September 30, 2003
Net sales	$	513,586		$	518,207
Cost of goods sold		341,349			343,241
Gross profit		172,237			174,966
Selling, general, and administrative expenses		121,501			110,430
Operating income		50,736			64,536
Interest expense		13,233			15,225
Other expense		(2,185	)		(2,152	)
Income before income tax expense		35,318			47,159
Income tax expense		15,328			20,088
Net income	$	19,990		$	27,071
Net earnings per share:
Basic	$	0.86		$	1.17
Diluted	$	0.83		$	1.12
Cash dividends declared per share:	$	3.05		$	—
Weighted-average shares of common stock outstanding:
Basic		23,150,278			23,160,376
Diluted		23,982,273			24,211,863

See accompanying notes to unaudited interim consolidated financial statements.

F-29

KNOLL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands)

	Nine months ended
	September 30, 2004			September 30, 2003
	(unaudited)
Cash flows from operating activities
Net earnings	$	19,990		$	27,071
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		15,921			21,721
Amortization of intangible assets		1,545			1,038
Loss on early extinguishment of debt		—			1,151
Write-off of deferred financing fees		2,517			—
Proceeds from settlement of foreign currency contracts		—			1,484
Foreign currency loss		996			4,821
Proceeds from termination of interest rate swap agreements		—			4,770
Other noncash items		(795	)		(4,610	)
Changes in assets and liabilities net of effects of acquisition:
Customer receivables		(4,058	)		6,931
Inventories		(7,662	)		11,690
Accounts payable		(270	)		(2,340	)
Current and deferred income taxes		10,605			6,953
Other current assets		(3,525	)		(513	)
Other current liabilities		(3,246	)		(23,263	)
Other noncurrent assets and liabilities		4,183			6,994
Net cash provided by operating activities		36,201			63,898
Cash flows from investing activities
Capital expenditures		(7,146	)		(5,967	)
Proceeds from disposal of property, plant, and equipment		1			223
Purchase of license agreement		—			(630	)
Net cash used in investing activities		(7,145	)		(6,374	)
Cash flows from financing activities
(Repayment) proceeds from revolving credit facility net		(223,750	)		44,000
Proceeds from issuance of long term debt		425,000			—
Repayment of long-term debt		(156,250	)		(102,336	)
Deferred financing fees		(5,431	)		—
Premium paid for early extinguishments of debt		—			(1,037	)
Payment of dividend		(68,183	)		—
Purchase of common stock		(186	)		(488	)
Net cash used for financing activities		(28,800	)		(59,861	)
Effect of exchange rate changes on cash		563			1,738
Net (increase) decrease in cash		819			(599	)
Cash and cash equivalents at beginning of period		11,517			12,873
Cash and cash equivalents at end of period	$	12,336		$	12,274

See accompanying notes to unaudited interim consolidated financial statements.

F-30

KNOLL, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 did 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, did not materially impact Knoll’s consolidated financial statements.

F-31

KNOLL, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 3: INVENTORIES

Inventories, net consist of:

	September 30, 2004		December 31, 2003
	(in thousands)
Raw Materials	$	23,312	$	20,125
Work-in-Process		5,123		5,893
Finished Goods		17,909		12,336
	$	46,344	$	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 nine months ended September 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 43% for the nine months ended September 30, 2004 and 2003. The Company’s effective tax rate is higher than federal, state and foreign statutory rates as a result of losses realized in certain non-U.S. jurisdictions for which no tax benefits have been recognized.

NOTE 5: INDEBTEDNESS

On September 30, 2004, the Company terminated its previously existing senior credit facility and entered into a new $488 million senior secured credit facility consisting of a $425 million term loan and a $63 million revolving credit line. The Company used the proceeds of the term loan to repay amounts outstanding under the previously existing senior credit facility plus accrued interest totalling of $355.2 million and to pay transaction costs associated with the new credit facility of $3.9 million. In addition, the proceeds from the borrowing funded a $70.6 million dividend to the Company’s stockholders (see Note 6). No amounts have been borrowed under the revolving credit line as of September 30, 2004.

The $425 million term loan is subject to a .25% quarterly principal amortization equal to $1.0625 million per quarter with the remaining principal payment of approximately $396.3 million due on September 30, 2011. Obligations under the credit facility are secured by substantially all of the Company’s assets, including the capital stock of the Company. Borrowings under the credit agreements bear interest at a floating rate based, at the Company’s option, upon (i) a libor rate plus an applicable percentage or (ii) the greater of the federal funds rate plus 0.5% or the prime rate, plus an applicable percentage. Under the terms of the credit facility, the Company is required to prepay certain principal in the event of any termination of all the Revolving Credit Commitments. The effective borrowing rate as of September 30, 2004 is 5.0%.

In October 2004, as required by the Company’s new credit facility, the Company entered into an interest rate swap agreement and an interest rate cap agreement for purposes of managing its risk in market interest rate fluctuations. These agreements hedge interest rate risk on a notional amount of approximately $212.5 million of the Company’s borrowings under the new credit facility.

NOTE 6: DIVIDENDS

On September 27, 2004, the Company’s Board of Directors declared a $3.05 per share cash dividend payable to stockholders of record as of that date resulting in total dividends of $70.6 million. On September 30, 2004, the Company paid $68.2 million of the declared dividends and recorded an accrual for the remaining $2.4 million to be paid to stockholders.

F-32

KNOLL, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 7: WARRANTY

The Company provides for estimated product warranty expenses when the related products are sold and are included in other current liabilities. 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:

	Nine months ended
	September 30, 2004			September 30, 2003
	(in thousands)
Balance at beginning of period	$	5,647		$	7,110
Provision for warranty claims		4,413			3,496
Warranty claims paid		(5,136	)		(4,613	)
Balance at end of period	$	4,924		$	5,993

NOTE 8: 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 nine months ended September 30, 2004 and 2003:

	Pension Benefits						Other Benefits
	Nine months ended						Nine months ended
	September 30, 2004			September 30, 2003			September 30, 2004			September 30, 2003
	(in thousands)
Service cost	$	6,742		$	6,547		$	653		$	626
Interest cost		3,413			2,975			1,215			1,150
Expected return on plan assets		(3,125	)		(3,761	)		—			—
Amortization of prior service cost		58			58			(168	)		(168	)
Recognized actuarial loss		267			103			202			121
Net periodic benefit cost	$	7,355		$	5,922		$	1,902		$	1,729

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

	Pension Benefits				Other Benefits
	Nine months ended				Nine months ended
	September 30, 2004		September 30, 2003		September 30, 2004		September 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 October 1, 2004 through December 31, 2004 of approximately $1,317 to its Pension Benefits plans and $0 to its Other Benefits plan.

F-33

KNOLL, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 9: STOCK PLANS

Under APB 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.

	Nine months ended
	September 30, 2004			September 30, 2003
	(in thousands, except per share data)
Net income – as reported	$	19,990		$	27,071
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(964	)		(1,264	)
Net	$	19,026		$	25,807
Net income per common share – basic – as reported	$	0.86		$	1.17
Net income per common share – basic – pro forma	$	0.82		$	1.11
Net income per common share – diluted – as reported	$	0.83		$	1.12
Net income per common share – diluted – pro forma	$	0.79		$	1.07
Weighted average fair value of options granted during the period	$	9.22		$	—

NOTE 10: 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).

	Nine months ended
	September 30, 2004		September 30, 2003
	(in thousands)
Net income	$	19,990	$	27,071
Other comprehensive income:
Foreign currency translation adjustments		2,268		13,605
Total comprehensive income	$	22,258	$	40,676

F-34

KNOLL, INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

NOTE 11: 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:

	Nine months ended
	September 30, 2004	September 30, 2003
Weighted average shares of common stock outstanding – basic	23,150,278	23,160,376
Assumed exercise of stock options, net of shares assumed reacquired	831,995	1,051,487
Weighted average common shares – diluted	23,982,273	24,211,863

During the nine months ended September 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 12: COMMITMENTS AND CONTINGENCIES

The Company is currently involved in matters of litigation arising in the normal course of business. Management is of the opinion that such litigation either individually or in the aggregate will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Further, management is of the opinion that there are no other legal claims against the Company that are expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

F-35

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 (amended and restated as of                     , 2004). As of October 15, 2004, options to purchase 5,902,586 shares of common stock were outstanding under the plans and 4,933,878 were exercisable.

From January 1, 2001 to October 15, 2004, we granted the following stock options to purchase an aggregate of 1,392,413 shares of common stock at exercise prices ranging from $29.04 to $32.67 per share to officers, employees and directors.

Option Grant Date	Total Number of Stock Options Granted	Exercise Price
2/6/01	220,366	$	31.31
2/5/02	549,527	$	32.67
6/7/04	622,520	$	29.04

As of October 15, 2004, 48,750 of the 598,277 options granted on February 5, 2002 have been cancelled. The number of shares of common stock issuable upon the exercise of options and the exercise price of such options presented above give effect to an October 15, 2004 adjustment made, in accordance with the stock incentive plan provisions, in response to the special cash dividend that was paid to stockholders on September 30, 2004. 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 September 30, 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 (h)	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 (h)	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Kathleen G. Bradley.
10.9 (h)	Offer Letter, dated March 11, 1999, from Knoll, Inc. to Stephen A. Grover.

II-2

Exhibit Number	Description
10.10 (h)	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 October 1, 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 (h)	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 (h)	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 (h)	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.

(h) Previously filed with this Registration Statement on Form S-1 (File No. 33-118901).

(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 Amendment No. 1 to its 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 22nd day of October, 2004.

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

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
* Burton B. Staniar	Chairman of the Board of Directors	October 22, 2004
/S/    ANDREW B. COGAN Andrew B. Cogan	Chief Executive Officer, Knoll, Inc. and Director (Principal Executive Officer)	October 22, 2004
* Kathleen G. Bradley	President and Chief Executive Officer, Knoll North America and Director	October 22, 2004
* Barry L. McCabe	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	October 22, 2004
* John H. Lynch	Director	October 22, 2004
* Jeffrey A. Harris	Director	October 22, 2004
* Sidney Lapidus	Director	October 22, 2004
* Kewsong Lee	Director	October 22, 2004
* Kevin Kruse	Director	October 22, 2004

*By: /S/    ANDREW B. COGAN Name:  Andrew B. Cogan Attorney-in-Fact October 22, 2004

II-7

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 September 30, 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 (h)	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 (h)	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Kathleen G. Bradley.
10.9 (h)	Offer Letter, dated March 11, 1999, from Knoll, Inc. to Stephen A. Grover.
10.10 (h)	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 October 1, 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 (h)	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 (h)	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 (h)	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.

(h) Previously filed with this Registration Statement on Form S-1 (File No. 33-118901).

EX-10.2

EXHIBIT 10.2

CREDIT AGREEMENT

among

KNOLL, INC.,

as Borrower,

The Several Lenders from Time to Time Parties Hereto,

UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Co-Documentation Agents,

GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Syndication Agent,

UBS AG, STAMFORD BRANCH,

as Administrative Agent,

and

UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Joint Lead Arrangers and Joint Bookrunners

Dated as of September 30, 2004

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		1
SECTION 1.1.	Defined Terms	1
SECTION 1.2.	Terms Generally	26
SECTION 1.3.	Pro Forma Calculations	26
SECTION 1.4.	Classification of Loans and Borrowings	26
SECTION 1.5.	Currency Equivalents Generally	26
ARTICLE II THE CREDITS		27
SECTION 2.1.	Commitments	27
SECTION 2.2.	Loans	27
SECTION 2.3.	Borrowing Procedure	28
SECTION 2.4.	Evidence of Debt; Repayment of Loans	28
SECTION 2.5.	Fees	29
SECTION 2.6.	Interest on Loans	30
SECTION 2.7.	Default Interest	30
SECTION 2.8.	Alternate Rate of Interest	30
SECTION 2.9.	Termination and Reduction of Commitments	31
SECTION 2.10.	Conversion and Continuation of Borrowings	31
SECTION 2.11.	Repayment of Term Loan Borrowings	33
SECTION 2.12.	Optional Prepayments	33
SECTION 2.13.	Mandatory Prepayments	34
SECTION 2.14.	Reserve Requirements; Change in Circumstances	35
SECTION 2.15.	Indemnity	36
SECTION 2.16.	Pro Rata Treatment	37
SECTION 2.17.	Sharing of Setoffs	37
SECTION 2.18.	Payments	37
SECTION 2.19.	Taxes	38
SECTION 2.20.	Assignment of Commitments Under Certain Circumstances; Duty to Mitigate	38
SECTION 2.21.	Swingline Loans	39
SECTION 2.22.	Letters of Credit	41
SECTION 2.23.	Increase in Term Loan Commitments	46
SECTION 2.24.	Increase in Revolving Credit Commitments	47
ARTICLE III REPRESENTATIONS AND WARRANTIES		48
SECTION 3.1.	Organization; Powers	48
SECTION 3.2.	Authorization	48
SECTION 3.3.	Enforceability	48
SECTION 3.4.	Governmental Approvals	48
SECTION 3.5.	Financial Statements	49
SECTION 3.6.	No Material Adverse Change	49
SECTION 3.7.	Title to Properties; Possession Under Leases	49
SECTION 3.8.	Subsidiaries	50
SECTION 3.9.	Litigation; Compliance with Laws	50
SECTION 3.10.	Agreements	51
SECTION 3.11.	Federal Reserve Regulations	51

i

SECTION 3.12.	Investment Company Act; Public Utility Holding Company Act	51
SECTION 3.13.	Use of Proceeds	51
SECTION 3.14.	Tax Returns	51
SECTION 3.15.	No Material Misstatements	51
SECTION 3.16.	Employee Benefit Plans	52
SECTION 3.17.	Environmental Matters	52
SECTION 3.18.	Insurance	52
SECTION 3.19.	Security Documents	52
SECTION 3.20.	Location of Real Property and Leased Premises	53
SECTION 3.21.	Labor Matters	53
SECTION 3.22.	Solvency	53
SECTION 3.23.	Certain Treasury Regulation Matters	53
SECTION 3.24.	Foreign Assets Control Regulations, Etc.	54
ARTICLE IV CONDITIONS OF LENDING		54
SECTION 4.1.	All Credit Events	54
SECTION 4.2.	First Credit Event	55
ARTICLE V AFFIRMATIVE COVENANTS		57
SECTION 5.1.	Existence; Businesses and Properties	57
SECTION 5.2.	Insurance	58
SECTION 5.3.	Taxes	59
SECTION 5.4.	Financial Statements, Reports, etc	60
SECTION 5.5.	Litigation and Other Notices	61
SECTION 5.6.	Information Regarding Collateral	61
SECTION 5.7.	Maintaining Records; Access to Properties and Inspections	62
SECTION 5.8.	Use of Proceeds	62
SECTION 5.9.	Further Assurances	62
SECTION 5.10.	Certain Treasury Regulation Matters	63
SECTION 5.11.	Hedging Agreements	63
SECTION 5.12.	Environmental Laws	63
ARTICLE VI NEGATIVE COVENANTS		64
SECTION 6.1.	Indebtedness	65
SECTION 6.2.	Liens	67
SECTION 6.3.	Sale and Lease-Back Transactions	68
SECTION 6.4.	Investments, Loans and Advances	69
SECTION 6.5.	Mergers, Consolidations, Sales of Assets and Acquisitions	71
SECTION 6.6.	Restricted Payments; Restrictive Agreements	71
SECTION 6.7.	Transactions with Affiliates	73
SECTION 6.8.	Business of Borrower and Subsidiaries	73
SECTION 6.9.	Amendments and Prepayments of Subordinated Indebtedness	73
SECTION 6.10.	Capital Expenditures	74
SECTION 6.11.	Interest Coverage Ratio	75
SECTION 6.12.	Maximum Leverage Ratio	75
SECTION 6.13.	Fiscal Year	75
SECTION 6.14.	Anti-Terrorism Law; Anti-Money Laundering	75
SECTION 6.15.	Embargoed Person	76

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ARTICLE VII EVENTS OF DEFAULT		76
ARTICLE VIII THE AGENTS		79
SECTION 8.1.	Appointment	79
SECTION 8.2.	Delegation of Duties	79
SECTION 8.3.	Exculpatory Provisions	79
SECTION 8.4.	Reliance by Administrative Agent	80
SECTION 8.5.	Notice of Default	80
SECTION 8.6.	Non-Reliance on Agents and Other Lenders	80
SECTION 8.7.	Indemnification	81
SECTION 8.8.	Agent in Its Individual Capacity	81
SECTION 8.9.	Successor Administrative Agent	81
SECTION 8.10.	Co-Documentation Agents and Syndication Agent	82
ARTICLE IX MISCELLANEOUS		82
SECTION 9.1.	Notices	82
SECTION 9.2.	Survival of Agreement	82
SECTION 9.3.	Binding Effect	83
SECTION 9.4.	Successors and Assigns	83
SECTION 9.5.	Expenses; Indemnity	85
SECTION 9.6.	Right of Setoff	87
SECTION 9.7.	Applicable Law	87
SECTION 9.8.	Waivers; Amendment	87
SECTION 9.9.	Interest Rate Limitation	88
SECTION 9.10.	Entire Agreement	89
SECTION 9.11.	WAIVER OF JURY TRIAL	89
SECTION 9.12.	Severability	89
SECTION 9.13.	Counterparts	89
SECTION 9.14.	Headings	89
SECTION 9.15.	Jurisdiction; Consent to Service of Process	89
SECTION 9.16.	Confidentiality	90
SECTION 9.17.	USA Patriot Act	90
SECTION 9.18.	Releases of Guarantees and Liens	91
Schedules
Schedule 1.1(a)	Guarantors
Schedule 1.1(b)	Mortgaged Properties
Schedule 1.1(c)	Asset Sale Dispositions
Schedule 2.1	Lenders and Commitments
Schedule 3.1	Good Standing of Certain Foreign Subsidiaries
Schedule 3.2	Authorizations
Schedule 3.4	Governmental Approvals
Schedule 3.5(a)	Material Liabilities Not Reflected in Balance Sheet
Schedule 3.8	Subsidiaries
Schedule 3.18	Insurance
Schedule 3.19(a)	Filing Offices
Schedule 3.19(c)	Mortgage Filing Offices
Schedule 3.20(a)	Owned Property
Schedule 3.20(b)	Leased Property
Schedule 4.2(a)	Other Local Counsel

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Schedule 6.1	Outstanding Indebtedness on Closing Date
Schedule 6.2	Liens Existing on Closing Date
Schedule 6.4	Existing Investments
Exhibits
EXHIBIT A	Form of Assignment and Assumption
EXHIBIT B	Form of Borrowing Request
EXHIBIT C	Form of Guarantee and Collateral Agreement
EXHIBIT D	Form of L/C Request
EXHIBIT E	Form of Interest Election Request
EXHIBIT F	Form of Mortgage
EXHIBIT G	Form of Opinion of Willkie Farr & Gallagher LLP

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CREDIT AGREEMENT (this “Agreement”), dated as of September 30, 2004, among KNOLL, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (the “Lenders”), UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P.,, as co-documentation agents (collectively, the “Co-Documentation Agents”), GOLDMAN SACHS CREDIT PARTNERS L.P., as syndication agent (in such capacity, the “Syndication Agent”), UBS AG, STAMFORD BRANCH, as administrative agent, and UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P., as joint lead arrangers and joint bookrunners (collectively, the “Arrangers”).

W I T N E S S E T H:

The parties hereto hereby agree as follows:

ARTICLE I

Definitions

SECTION 1.1. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:

“2004 Dividend” shall mean a dividend in an amount not to exceed $71,500,000 to be paid to the Permitted Investors with proceeds of the Term Loans within 45 days of the Closing Date (or within such longer period as may be agreed to by the Administrative Agent).

“ABR” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Acquired CapEx Amount” shall have the meaning assigned to such term in Section 6.10(a).

“Acquired Entity” shall have the meaning assigned to such term in Section 6.4(g).

“Administrative Agent” shall mean UBS AG, Stamford Branch, together with its affiliates, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.

“Advisors” shall have the meaning assigned to such term in Section 9.5(a).

“Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.

“Agents” shall mean the collective reference to the Syndication Agent, the Co-Documentation Agents and the Administrative Agent.

“Aggregate Revolving Credit Exposure” shall mean the aggregate amount of the Lenders’ Revolving Credit Exposures.

“Alternate Base Rate” shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. For purposes hereof: “Prime Rate” shall mean the rate of interest per annum publicly announced from time to time by UBS AG, Stamford

Branch, at its office in Stamford, Connecticut (the Prime Rate not being intended to be the lowest rate of interest charged by UBS AG, Stamford Branch, in connection with extensions of credit to debtors). Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Anti-Terrorism Laws” shall have the meaning assigned to such term in Section 6.14(a).

“Applicable Percentage” shall mean, for any day, with respect to any Eurodollar Loan or ABR Loan, as the case may be, the applicable percentage set forth below under the caption “Eurodollar Spread-Term Loans”, “ABR Spread-Term Loans”, “Eurodollar Spread-Revolving Loans and Swingline Loans” or “ABR Spread-Revolving Loans and Swingline Loans”, as the case may be:

Eurodollar Spread-Term Loans	ABR Spread- Term Loans	Eurodollar Spread- Revolving Loans and Swingline Loans	ABR Spread- Revolving Loans and Swingline Loans
3.00%	2.00%	2.50%	1.50%

; provided, that on and after the first Adjustment Date (as defined in the definition of “Pricing Grid”) occurring after March 31, 2005, the Applicable Percentage with respect to Revolving Loans and Swingline Loans will be determined pursuant to the Pricing Grid.

“Approved Fund” shall mean any person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Arrangers” shall have the meaning assigned to such term in the preamble hereto.

“Asset Sale” shall mean the sale, transfer or other disposition (by way of merger, casualty, condemnation or otherwise but excluding investments permitted by Section 6.4) by the Borrower or any of the Subsidiaries to any person other than the Borrower or any Guarantor of (a) any Equity Interests of any of the Subsidiaries (other than directors’ qualifying shares or the sale by any person of Equity Interests of such person) or (b) any other assets of the Borrower or any of the Subsidiaries (other than (i) inventory, damaged, obsolete or worn out assets, scrap and Permitted Investments, in each case disposed of in the ordinary course of business, (ii) dispositions between or among the Borrower and Domestic Subsidiaries, (iii) dispositions listed on Schedule 1.1(c) hereto; (iv) dispositions between or among Foreign Subsidiaries; and (v) dispositions of assets from any Loan Party to any Foreign Subsidiary if the disposition is treated as an Investment in the Foreign Subsidiary and such Investment is permitted by Section 6.4.

“Assignment and Assumption” shall mean an Assignment and Assumption, substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent.

“Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” shall have the meaning assigned to such term in the preamble hereto.

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“Borrowing” shall mean (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

“Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.3 and substantially in the form of Exhibit B, or such other form as shall be approved by the Administrative Agent.

“Breakage Event” shall have the meaning assigned to such term in Section 2.15.

“Business Day” shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Capital Expenditures” shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations or Synthetic Lease Obligations incurred by the Borrower and its consolidated Subsidiaries during such period, but excluding in each case (i) any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation, (ii) any such expenditure made as the purchase price of any Permitted Acquisition, (iii) capital expenditures relating to the construction or acquisition of any property that has been transferred to a person (other than the Borrower or any Subsidiary) pursuant to a sale-leaseback transaction permitted under Section 6.3, (iv) interest capitalized during such period, (v) the purchase price of equipment that is purchased during such period to the extent the consideration therefor consists of any combination of (x) used or surplus equipment traded in at the time of such purchase and (y) the proceeds of a concurrent sale of used or surplus equipment, in each case, in the ordinary course of business, (vi) the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment to the extent that the gross amount of the such price is reduced by the credit granted by the seller of such equipment for the equipment being traded at such time or (vii) any capital expenditures made with Net Cash Proceeds received from an Asset Sale.

“Capital Lease Obligations” of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Management Obligations” shall mean obligations owed by the Borrower or any of its Subsidiaries to any Lender or any Affiliate of a Lender in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.

“Change in Control” shall mean any of the following events:

(a) prior to the Initial Public Offering, the Permitted Investors shall fail to beneficially own, directly, Equity Interests in the Borrower representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower;

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(b) after the Initial Public Offering, any “person” or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) other than the Permitted Investors becomes, directly or indirectly, the beneficial owner of Equity Interests in the Borrower representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower and the percentage of aggregate voting power owned by such “person” or “group” exceeds the percentage of ordinary voting power owned by the Permitted Investors;

(c) at any time, occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by persons who were neither nominated by the board of directors of the Borrower nor appointed by directors so nominated; or

(d) the occurrence of any change in control or similar event (however denominated) with respect to the Borrower under and as defined in any indenture or agreement in respect of Material Indebtedness to which the Borrower or a Subsidiary is a party.

“Change in Law” shall mean (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.14, by any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Charges” shall have the meaning assigned to such term in Section 9.9.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans, Other Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment, an Incremental Revolving Credit Commitment, a Term Loan Commitment, an Incremental Term Loan Commitment or a Swingline Commitment.

“Closing Date” shall mean September 30, 2004.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“Co-Documentation Agents” shall have the meaning assigned to such term in the preamble hereto.

“Collateral” shall mean all the “Collateral” as defined in any Security Document, and shall include the Mortgaged Properties.

“Commitment” shall mean, with respect to any Lender, such Lender’s Revolving Credit Commitment and Term Loan Commitment.

“Commitment Fee” shall have the meaning assigned to such term in Section 2.5(a).

“Commitment Fee Rate” shall initially mean 0.50%; provided, that on and after the first Adjustment Date (as defined in the definition of “Pricing Grid”) occurring after March 31, 2005, the Commitment Fee Rate will be determined pursuant to the Pricing Grid.

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“Completion of the Primary Syndication” shall mean the date on which the Administrative Agent delivers notice to the Borrower that the primary syndication of the Loans and Commitments is complete (which notice shall be delivered upon such completion promptly after written request by the Borrower).

“Conduit Lender” shall mean any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.14, 2.15, 2.19 or 9.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.

“Confidential Information Memorandum” shall mean the Confidential Information Memorandum of the Borrower dated September, 2004.

“Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) Consolidated Interest Expense for such period, (ii) all income tax expense (including, without limitation, income tax expense of consolidated Foreign Subsidiaries) and foreign withholding tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any non-recurring fees, cash charges and other cash expenses made or incurred in connection with the Transactions that are paid or otherwise accounted for within 180 days of the consummation of the Transactions, (v) any extraordinary losses, (vi) (A) facilities relocation or closing costs, (B) non-recurring restructuring costs and (C) integration costs and fees, including cash severance costs, in connection with Permitted Acquisitions, in each case incurred during such period and payable in cash, in an aggregate amount under this clause (vi) not to exceed $10,000,000, (vii) amortization and impairment charges resulting from purchase accounting adjustments (including inventory step-up adjustments recognized in costs of sales and write-offs of in-process research and development costs), (viii) any non-cash compensation charges and deferred compensation charges, including arising from stock options, taken during such period, (ix) any other non-cash charges (other than the write-down of current assets), impairments and expenses for such period (including amortization of loan acquisition costs and unrealized gains and losses on Hedging Agreements and gains and losses on foreign exchange (including in respect of intercompany notes)) and (x) fees, cash charges and other cash expenses made or incurred in connection with equity or debt financings and amendments and waivers thereto, minus (b) without duplication (i) all cash payments made during such period on account of non-cash charges added to Consolidated Net Income pursuant to clauses (a)(viii) or (ix) above in such period or in a previous period and (ii) to the extent included in determining such Consolidated Net Income, any extraordinary gains and all non-cash items of income (other than normal accruals in the ordinary course of business) for such period, all determined on a consolidated basis in accordance with GAAP. Notwithstanding the foregoing, for purposes of this Agreement, Consolidated EBITDA for the Borrower and its Subsidiaries for the fiscal quarter ending March 31, 2004, shall be deemed to be $17,400,000 and for the fiscal quarter ending June 30, 2004, shall be deemed to be $24,700,000.

“Consolidated Interest Expense” shall mean, for any period, the sum of (a) the interest expense (including imputed interest expense in respect of Capital Lease Obligations and Synthetic Lease Obligations), net of cash interest income of the Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, plus (b) any interest accrued during such period in respect of Indebtedness of the Borrower or any Subsidiary that is required to be capitalized rather than

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included in consolidated interest expense for such period in accordance with GAAP. For purposes of the foregoing, interest expense shall be determined (a) by excluding non-cash interest expense and amortization of deferred financing costs and original issue discount and (b) after giving effect to any net payments made or received by the Borrower or any Subsidiary with respect to interest rate Hedging Agreements.

“Consolidated Net Income” shall mean, for any period, the net income or loss of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, that there shall be excluded (a) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (b) the income or loss of any person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary or the date that such person’s assets are acquired by the Borrower or any Subsidiary, (c) the income of any person in which any other person (other than the Borrower or a wholly owned Subsidiary or any director holding qualifying shares in accordance with applicable law) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or a wholly owned Subsidiary by such person during such period, (d) any gains or losses attributable to sales of assets out of the ordinary course of business in excess of $2,500,000 and (e) gains and losses, realized or unrealized, relating to fluctuations in currency values. Notwithstanding anything set forth in clause (a) above to the contrary, a Foreign Subsidiary may agree to restrict its ability to declare dividends or similar distributions without excluding the net income of such Foreign Subsidiary from Consolidated Net Income so long as (a) the agreement that restricts such ability relates to Indebtedness of such Foreign Subsidiary described in Section 6.1(l) or Section 6.1(o), (b) the proceeds thereof are used, directly or indirectly through intercompany transfers, to prepay the Loans and (c) the net income of such Foreign Subsidiary, together with the net income of each other Foreign Subsidiary subject to a similar restriction, does not exceed 10% of Consolidated Net Income.

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

“Copyrights” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

“Credit Event” shall have the meaning assigned to such term in Section 4.1.

“Cure Amount” shall have the meaning assigned to such term in Article VII.

“Cure Right” shall have the meaning assigned to such term in Article VII.

“Current Assets” shall mean, at any time, the consolidated current assets (other than cash, deferred income taxes and Permitted Investments) of the Borrower and the Subsidiaries.

“Current Liabilities” shall mean, at any time, the consolidated current liabilities of the Borrower and the Subsidiaries at such time, but excluding, without duplication, (a) the current portion of any long-term Indebtedness and (b) outstanding Revolving Loans and Swingline Loans.

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“De Minimis Holders” shall mean, with respect to any wholly owned Subsidiary, holders of directors’ qualifying shares and other de minimis ownership interests required to be owned under foreign law by local residents.

“Default” shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default.

“Defaulting Lender” shall mean any Lender that (a) has failed to fund any portion of the Term Loans, Revolving Loans, participations in L/C Exposure or participations in Swingline Loans required to be funded by it hereunder within one (1) Business Day of the date required to be funded by it hereunder, unless the subject of a good faith dispute, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“Disqualified Preferred Stock” shall have the meaning given to it in the definition of “Indebtedness”.

“Dollar Equivalent” shall mean on any date of determination, with respect to any amount hereunder denominated in any currency other than Dollars, the amount of Dollars that may be purchased with such amount of such currency at the exchange rate (determined in accordance with Section 1.5) with respect to such currency on such date.

“Dollars” and “$” shall mean dollars in lawful currency of the United States.

“Domestic Subsidiaries” shall mean all Subsidiaries incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia. If a Foreign Subsidiary becomes a Guarantor and complies with the provisions of Section 5.9 as to collateral, the Borrower may elect by written notice to the Administrative Agent to treat such Subsidiary as a Domestic Subsidiary for purposes of the Loan Documents; provided, that the Administrative Agent concludes, in its reasonable discretion, that the Lenders would have substantially the same rights against such Subsidiary pursuant to the Security Documents under the law of the relevant foreign jurisdiction as the Lenders would have if such Subsidiary were organized in the United States of America.

“Embargoed Person” shall have the meaning assigned to such term in Section 6.15.

“Environmental Laws” shall mean all Federal, state, provincial, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives having the force of law and orders (including consent orders), in each case, relating to protection of the environment, natural resources, human health and safety or the presence, Release of, or exposure to, Hazardous Materials, or the generation, manufacture, processing, distribution, use, treatment, storage, transport, recycling or handling of, or the arrangement for such activities with respect to, Hazardous Materials.

“Environmental Liability” shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed, or for which an indemnity is granted, with respect to any of the foregoing.

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“Environmental Permits” shall mean any and all permits, licenses, approvals, registrations, notifications, exemptions and any other authorization pursuant to any Environmental Law.

“Equity Interests” shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Borrower or any Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (e) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (g) the receipt by the Borrower or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the occurrence of a “prohibited transaction” with respect to which the Borrower, any of the Subsidiaries or any ERISA Affiliate is a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which the Borrower or any such Subsidiary or ERISA Affiliate could otherwise be liable; or (i) any other event or condition with respect to a Plan or Multiemployer Plan that could result in liability of the Borrower or any ERISA Affiliate.

“Eurocurrency Reserve Requirements” shall mean, for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.

“Eurodollar” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the Eurodollar Rate.

“Eurodollar Base Rate” shall mean with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on the

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relevant page of the Telerate screen as of 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on the Telerate screen, the “Eurodollar Base Rate” shall be determined by reference to such other comparable publicly available service for displaying Eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered deposits in Dollars at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank Eurodollar market where its relevant Eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

“Eurodollar Rate” shall mean, with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100^th of 1%):

Eurodollar Base Rate

1.00 – Eurocurrency Reserve Requirements

“Event of Default” shall have the meaning assigned to such term in Article VII.

“Excess Cash Flow” shall mean, for any fiscal year of the Borrower, the excess of (a) the sum, without duplication, of (i) Consolidated EBITDA for such fiscal year and (ii) reductions to noncash working capital of the Borrower and the Subsidiaries for such fiscal year (i.e., the decrease, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year) over (b) the sum, without duplication, of (i) all income tax expense (including, without limitation, income tax expense of consolidated Foreign Subsidiaries) and cash foreign withholding tax expense for such period, (ii) Consolidated Interest Expense for such fiscal year payable in cash, (iii) Capital Expenditures made in cash in accordance with Section 6.10 and cash expenditures in connection with Permitted Acquisitions during such fiscal year, in each case except to the extent financed with the proceeds of Indebtedness, equity issuances or other proceeds that would not be included in Consolidated EBITDA for such fiscal year, (iv) permanent repayments of Indebtedness (other than mandatory prepayments of Loans under Section 2.13), including the principal component of Capitalized Lease Obligations and Synthetic Lease Obligations, made by the Borrower and the Subsidiaries during such fiscal year, but only to the extent that such prepayments by their terms cannot be reborrowed or redrawn and do not occur in connection with a refinancing of all or any portion of such Indebtedness, (v) additions to noncash working capital for such fiscal year (i.e., the increase, if any, in Current Assets minus Current Liabilities from the beginning to the end of such fiscal year), (vi) proceeds received by the Loan Parties during such fiscal year from insurance claims with respect to casualty events, business interruption or product recalls which reimburse prior business expenses, (vii) management fees for such fiscal year permitted to be paid under Section 6.6(a)(iii), (viii) cash indemnity payments received during such fiscal year pursuant to indemnification provisions in any agreement in connection with any Permitted Acquisition or any other investment permitted hereunder (or in any similar agreement related to any other acquisition consummated prior to the Closing Date), (ix) Restricted Payments made in such fiscal year to persons other than the Borrower or any Subsidiary to the extent such Restricted Payments are permitted under Section 6.6(a)(ii), (iv), (v), (vii) and (viii), (x) letter of credit fees paid in such fiscal year, (xi) all extraordinary cash charges for such fiscal year, (xii) cash payments made in satisfaction of current liabilities during such fiscal year, (xiii) to the extent included in determining Consolidated EBITDA, non-recurring cash charges for such fiscal year, (xiv) to the extent added to Consolidated Net Income in determining Consolidated EBITDA, losses from discontinued operations for such fiscal year, (xv) cash expenditures made in respect of Hedging Agreements during such fiscal year to the extent not reflected in the computation of Consolidated EBITDA and (xvi) to the extent not deducted from Consolidated Net Income in determining Consolidated EBITDA, cash payments for employment benefits made during such fiscal year. For purposes of

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computation of Excess Cash Flow, Consolidated EBITDA shall be computed by excluding (A) items (iv), (v) and (vi) of clause (a) of the definition of Consolidated EBITDA to the extent such items are paid in cash during such fiscal year, (B) to the extent added to Consolidated Net Income in determining Consolidated EBITDA, reserves deemed appropriate by the Borrower for Environmental Liabilities for such fiscal year, (C) without duplication of clause (b)(xvi) above and to the extent added to Consolidated Net Income in determining Consolidated EBITDA, employment benefits for such fiscal year and (D) to the extent added to Consolidated Net Income in determining Consolidated EBITDA, working capital changes resulting from purchase accounting for such fiscal year.

“Excluded Taxes” shall mean, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.20(a)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.19(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.19(a) (it being understood and agreed, for the avoidance of doubt, that any withholding tax imposed on a Foreign Lender as a result of a Change in Law or regulation or interpretation thereof occurring after the time such Foreign Lender became a party to this Agreement shall not be an Excluded Tax).

“Executive Order” shall mean have the meaning assigned to such term in Section 3.24.

“Existing Credit Agreement” shall mean the Amended and Restated Credit Agreement, dated as of October 29, 1999, among the Borrower, each of the subsidiaries of the Borrower party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent, as such agreement may be amended, supplemented or otherwise modified from time to time prior to the date hereof.

“Facility” shall mean each of (a) the Initial Term Loan Commitments and the Term Loans made thereunder, (b) the Incremental Term Loan Commitments and the Incremental Term Loans made thereunder, (c) the Revolving Credit Commitments and the extensions of credit made thereunder and (d) Incremental Revolving Credit Commitments and the extensions of credit made thereunder.

“Facility Fees” shall have the meaning assigned to such term in Section 2.5(b).

“Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by UBS AG, Stamford Branch, from three federal funds brokers of recognized standing selected by it.

“Fee Payment Date” shall mean (a) the third Business Day following the last day of each March, June, September and December and (b) the Revolving Credit Maturity Date.

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“Fees” shall mean the Commitment Fees, the Facility Fees, the L/C Participation Fees, the Issuing Bank Fees and any other fees payable by a Loan Party pursuant to a fee agreement entered into with the Administrative Agent or any other Lender.

“Financial Officer” of any person shall mean the chief financial officer, principal accounting officer, Treasurer or Controller of such person.

“Financial Performance Covenant” shall have the meaning assigned to such term in Article VII.

“Foreign Asset Control Regulations” shall mean have the meaning assigned to such term in Section 3.24.

“Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

“Funded Debt” shall mean, as to any person, all Indebtedness of such person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans.

“Funding Office” shall mean the office of the Administrative Agent specified in Section 9.1 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.

“GAAP” shall mean generally accepted accounting principles in the United States as in effect from time to time.

“Governmental Authority” shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

“Group Members” shall mean the collective reference to the Borrower and the Subsidiaries.

“GSA Transaction” shall mean the transactions and legal arrangements included in (a) the Purchase and Assignment Agreement dated as of November 7, 1997 by and between General Electric Capital Corporation (d/b/a Potomac Federal) and the Borrower, as modified, supplemented and amended from time to time (with the reasonable consent of the Administrative Agent if such modification, supplement or amendment (i) changes the nature or character of the arrangement or (ii) contains any material increase in the burden of the Borrower or its Subsidiaries under the arrangement), and (b) any other agreement between the Borrower or its Subsidiaries and other parties approved by the Administrative Agent (such approval not to be unreasonably withheld) providing comparable arrangements with the United States government.

“Guarantee” of or by any person shall mean any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other person (the “primary obligor”) in any manner, whether directly or indirectly, and including

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any obligation of such person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligation, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment of such Indebtedness or other obligation or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Guarantor, substantially in the form of Exhibit C.

“Guarantor” shall mean each Subsidiary listed on Schedule 1.1(a), and each other Subsidiary that is or becomes a party to the Guarantee and Collateral Agreement.

“Hazardous Materials” shall mean (a) any petroleum products or byproducts and all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, mold, radioactive materials, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, contaminant, pollutant, substance or waste of any kind that is prohibited, limited or regulated by or pursuant to, or that could give rise to liability under, any Environmental Law.

“Hedging Agreement” shall mean any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

“Incremental Revolving Credit Commitment” shall mean the commitment of any Lender, established pursuant to Section 2.24, to make Incremental Revolving Loans to the Borrower.

“Incremental Revolving Credit Lender” shall mean a Lender with an Incremental Revolving Credit Commitment or an outstanding Incremental Revolving Loan.

“Incremental Revolving Loan Assumption Agreement” shall mean an Incremental Revolving Loan Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent, among the Borrower, the Administrative Agent and one or more Incremental Revolving Credit Lenders.

“Incremental Revolving Loans” shall mean Revolving Loans made by one or more Lenders to the Borrower pursuant to Section 2.24.

“Incremental Term Lender” shall mean a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan.

“Incremental Term Loan Amount” shall mean, at any time, the excess, if any, of (a) $100,000,000 over (b) the aggregate amount of all Incremental Term Loan Commitments established prior to such time pursuant to Section 2.23.

“Incremental Term Loan Assumption Agreement” shall mean an Incremental Term Loan Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent, among the Borrower, the Administrative Agent and one or more Incremental Term Lenders.

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“Incremental Term Loan Borrowing” shall mean a Borrowing comprised of Incremental Term Loans.

“Incremental Term Loan Commitment” shall mean the commitment of any Lender, established pursuant to Section 2.23, to make Incremental Term Loans to the Borrower.

“Incremental Term Loan Maturity Date” shall mean the final maturity date of the Incremental Term Loans, as set forth in the applicable Incremental Term Loan Assumption Agreement.

“Incremental Term Loan Repayment Dates” shall mean the dates scheduled for the repayment of principal of any Incremental Term Loan, as set forth in the applicable Incremental Term Loan Assumption Agreement.

“Incremental Term Loans” shall mean Term Loans made by one or more Lenders to the Borrower pursuant to Section 2.23. Incremental Term Loans may be made in the form of additional Term Loans or, to the extent permitted by Section 2.23 and provided for in the relevant Incremental Term Loan Assumption Agreement, Other Term Loans.

“Indebtedness” of any person shall mean, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed (it being understood that, unless such person shall have assumed such obligations, the amount of such Indebtedness shall be the lesser of (x) the fair market value of the property securing such Indebtedness and (y) the stated principal amount of such Indebtedness), (f) all Guarantees by such person of Indebtedness of others, (g) all Capital Lease Obligations and Synthetic Lease Obligations of such person, (h) all outstanding reimbursement obligations of such person as an account party in respect of letters of credit, (i) all obligations of such person in respect of bankers’ acceptances, (j) all obligations of such person under or in respect of Hedging Agreements and (k) the liquidation value of all redeemable preferred Equity Interests of such person, to the extent mandatorily redeemable in cash (other than as a result of a change of control if the documentation regarding such preferred Equity Interests provides for no payment unless, prior to any such payment, all Loans and other Obligations under this Agreement and the other Loan Documents are paid in full in cash or the Lenders consent to such payment) on or prior to the Term Loan Maturity Date (“Disqualified Preferred Stock”). For purposes of determining the amount of Indebtedness of any person under clause (j) of the preceding sentence, the amount of the obligations of such person in respect of any Hedging Agreement at any time shall be zero prior to the time any counterparty to such Hedging Agreement shall be entitled to terminate such Hedging Agreement and, thereafter, shall be the maximum aggregate amount (giving effect to any netting agreements) that such person would be required to pay if such Hedging Agreement were terminated at such time. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner only to the extent such person is liable therefor by contract, as a matter of law or otherwise, and shall not include any Indebtedness of such partnership that is expressly non-recourse to such person. For clarification purposes, the liability of the Borrower or any Guarantor to make any periodic payments to licensors in consideration for the license of Patents and technical information under license agreements and any amount payable in respect of a settlement of disputes with respect to such payments thereunder, shall not constitute Indebtedness. Notwithstanding any other provision of this Agreement to the contrary, (i) the term “Indebtedness” shall not be deemed to

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include (a) any earn-out obligation until such obligation becomes a liability on the balance sheet of the applicable person, (b) any deferred compensation arrangements, (c) any non compete or consulting obligations incurred in connection with Permitted Acquisitions, (d) “teaming agreements” pursuant to which the Borrower or any Subsidiary agrees with another supplier of services to provide services (including the sale of inventory) to a third person and pursuant to such agreement shall be responsible to the third person for the performance of the obligations of such other supplier, (e) warranty claims, (f) product guarantees, guarantees (including performance guarantees or bonds) by a person of obligations not constituting Indebtedness of the Borrower or any Subsidiary, (g) obligations under joint development agreements pursuant to which the Borrower or any Subsidiary agrees to develop a product and (ii) the amount of Indebtedness for which recourse is limited either to a specified amount or to an identified asset of such person shall be deemed to be equal to such specified amount or the fair market value of such identified asset, as the case may be, and (h) obligations under any GSA Transaction.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Initial Public Offering” shall mean an underwritten primary or secondary public offering of common stock of the Borrower pursuant to a registration statement filed with the SEC in accordance with the Securities Act of 1933, as amended.

“Initial Revolving Credit Commitment” shall mean, as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and participate in Swingline Loans and Letters of Credit in an aggregate principal and/or face amount not to exceed the amount set forth under the heading “Revolving Credit Commitment” opposite such Lender’s name on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof.

“Initial Term Loan Commitment” shall mean, with respect to each Lender, the commitment of such Lender to make Term Loans hereunder as set forth on Schedule 2.1, or in the Assignment and Assumption pursuant to which such Lender assumed its Initial Term Loan Commitment, as applicable, as the same may be (i) reduced from time to time pursuant to Section 2.9 and (ii) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.4. The original aggregate amount of the Initial Term Loan Commitments is $425,000,000.

“Intellectual Property” shall have the meaning assigned to such term in Section 3.7(d).

“Interest Coverage Ratio” shall mean, for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.

“Interest Election Request” shall mean a request by the Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.10(b), substantially in the form of Exhibit E.

“Interest Payment Date” shall mean (a) as to any ABR Loan (other than any Swingline Loan), the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period, (d) as to any Loan (other than any Revolving Loan that is an ABR Loan and any Swingline Loan), the date of any repayment or prepayment made in respect thereof and (e) as to any Swingline Loan, the day that such Loan is required to be repaid.

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“Interest Period” shall mean, as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its Borrowing Request or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, on the date that is three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;

(ii) the Borrower may not select an Interest Period under a particular Facility that would extend beyond the Revolving Credit Maturity Date or beyond the date final payment is due on the Term Loans, as the case may be; and

(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.

“Issuing Bank” shall mean, as the context may require, (a) UBS AG, Stamford Branch, in its capacity as the issuer of Letters of Credit hereunder, and (b) any other Lender that may become an Issuing Bank pursuant to Section 2.22(i) or 2.22(k), with respect to Letters of Credit issued by such Lender. The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“Issuing Bank Fees” shall have the meaning assigned to such term in Section 2.5(c).

“L/C Commitment” shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.22. The amount of the L/C Commitment shall initially be $15,000,000, but shall in no event exceed the Total Revolving Credit Commitment.

“L/C Disbursement” shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit.

“L/C Exposure” shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate L/C Exposure at such time.

“L/C Participation Fee” shall have the meaning assigned to such term in Section 2.5(c).

“L/C Request” shall mean a request by Borrower in accordance with the terms of Section 2.22(b) and substantially in the form of Exhibit D, or such other form as shall be approved by the Administrative Agent.

“L/C Sub-Account” shall have the meaning assigned to such term in Section 2.22(j).

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“Lenders” shall mean (a) the persons listed on Schedule 2.1 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Assumption) and (b) any person that has become a party hereto pursuant to an Assignment and Assumption. Unless the context clearly indicates otherwise, the term “Lenders” shall include the Swingline Lender.

“Letter of Credit” shall mean any letter of credit issued pursuant to Section 2.22.

“Letter of Credit Expiration Date” shall mean the date which is fifteen days prior to the Revolving Credit Maturity Date unless prior to such time the Borrower deposits in the L/C Sub-Account an amount equal to 105% of the face amount of all Letters of Credit expiring after the fifteenth day prior to the Revolving Credit Maturity Date, in which case the expiry date of such Letters of Credit shall be no later than the first anniversary of the Revolving Credit Maturity Date.

“Leverage Ratio” shall mean, on any date, the ratio of the total Indebtedness of the Borrower and the Subsidiaries on a consolidated basis on such date to Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date.

“Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Loan Documents” shall mean this Agreement, the Letters of Credit, the Security Documents, any Notes, the Syndication Letter and any fee letters entered into between any Loan Party and any Agent or any Lender and each Incremental Term Loan Assumption Agreement and Incremental Revolving Loan Assumption Agreement.

“Loan Parties” shall mean the Borrower and the Guarantors.

“Loans” shall mean the Revolving Loans, the Term Loans and the Swingline Loans.

“Margin Stock” shall have the meaning assigned to such term in Regulation U.

“Material Adverse Effect” shall mean (a) a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of the Borrower and the Subsidiaries, taken as a whole, (b) a material impairment of the ability of the Borrower or any other Loan Party to perform any of its obligations under any Loan Document to which it is or will be a party or (c) a material impairment of the rights of or benefits available to the Lenders under any Loan Document.

“Material Indebtedness” shall mean Indebtedness (other than the Loans and Letters of Credit) of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $10,000,000.

“Material Subsidiary” shall mean, at any time, any Subsidiary which at such time shall be a “significant subsidiary” of the Borrower within the meaning of Regulation S-X of the SEC as in effect on the date hereof; provided, that the Borrower agrees that the Borrower and its Material Subsidiaries shall at all times have assets during the term of this Agreement constituting at least 90% of the Borrower’s consolidated total assets; provided, further, that each Subsidiary which owns any Intellectual Property (other than Intellectual Property with an aggregate fair market value of less than $1,500,000) shall be deemed to be a Material Subsidiary hereunder.

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“Maximum Rate” shall have the meaning assigned to such term in Section 9.9.

“Mortgaged Properties” shall mean (i) the real properties owned in fee by the Loan Parties specified on Schedule 1.1(b) and (ii) each parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.9.

“Mortgages” shall mean the mortgages, deeds of trust, leasehold mortgages, assignments of leases and rents, modifications and other security documents delivered pursuant to clause (i) of Section 4.2(h) or pursuant to Section 5.9, substantially in the form of Exhibit F, with such modifications as the Administrative Agent deems appropriate.

“Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” shall mean (a) with respect to any Asset Sale or Recovery Event, the cash proceeds (including cash proceeds subsequently received (as and when received) in respect of noncash consideration initially received), net of (i) selling expenses (including reasonable broker’s and investment banking fees or commissions, legal, environmental assessment, appraisal and consultant’s fees, transfer and similar taxes and the Borrower’s good faith estimate of income taxes paid or payable in connection with such sale), (ii) amounts provided as a reserve, in accordance with GAAP, against (A) any liabilities under any indemnification obligations or purchase price adjustment associated with such Asset Sale and (B) any liabilities associated with such asset or assets and retained by the Borrower or any of its Subsidiaries after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities, Environmental Liabilities and liabilities related to or against any indemnification obligations associated with such transaction (provided, that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds) and (iii) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money which is secured by the asset sold in such Asset Sale or the asset relating to such Recovery Event, as applicable, and which is required to be repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such asset); and (b) with respect to any issuance or disposition of Indebtedness, the cash proceeds thereof, net of all taxes and fees (including investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses) incurred in connection therewith.

“Note” shall have the meaning assigned to such term in Section 2.4(e).

“Obligations” shall mean the unpaid principal of and interest on (including interest accruing after the maturity of the Loans (including the Incremental Term Loans) and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender (or, in the case of Specified Hedging Agreements, any affiliate of any Lender) or any other Secured Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedging Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.

“OID” shall have the meaning assigned to such term in Section 2.23(b).

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“Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Other Term Loans” shall have the meaning assigned to such term in Section 2.23(a).

“Participant” shall have the meaning assigned to such term in Section 9.4(f).

“Patents” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

“Patriot Act” shall have the meaning assigned to such term in Section 9.17.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

“Perfection Certificate” shall mean the Perfection Certificate in the form attached to the Guarantee and Collateral Agreement.

“Permitted Acquisition” shall have the meaning assigned to such term in Section 6.4(g).

“Permitted Cure Securities” shall have the meaning assigned to such term in Article VII.

“Permitted Investments” shall mean:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America) or, in the case of a Foreign Subsidiary, marketable direct obligations issued by or unconditionally guaranteed by the government of the country of such Foreign Subsidiary or backed by the full faith and credit of the government of the country of such Foreign Subsidiary, in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, one of the two highest credit ratings obtainable from Standard & Poor’s Ratings Service or from Moody’s Investors Service, Inc. or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of investments;

(c) investments in certificates of deposit, Eurodollar deposits, overnight bank deposits or banker’s acceptances, demand deposits and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any Lender or any other commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 or issued by or offered by a bank organized under the laws of any foreign country recognized by the United States the long-term debt of which is rated at least “A” or the equivalent by S&P or “A” or the equivalent thereof by Moody’s having at the date of acquisition thereof combined capital and surplus of not less than $500,000,000 or the foreign currency equivalent thereof;

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(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria of clause (c) above;

(e) investments in marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and having, at such date of acquisition, one of the two highest credit ratings obtainable from Standard & Poor’s Ratings Service or from Moody’s Investors Service, Inc.;

(f) investments in “money market funds” within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above;

(g) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing; and

(h) solely with respect to any Foreign Subsidiary, non-Dollar denominated (i) certificates of deposit of, bankers acceptances of, or time deposits with, any commercial bank which is organized and existing under the laws of the country in which such Foreign Subsidiary maintains its chief executive office and principal place of business provided such country is a member of the Organization for Economic Cooperation and Development, and whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Foreign Bank”) and maturing within twelve (12) months of the date of acquisition and (ii) equivalents of demand deposit accounts which are maintained with an Approved Foreign Bank.

“Permitted Investors” shall mean (a) the Sponsor, (b) the other holders of Equity Interests in the Borrower on the Closing Date and (c) the directors, executive officers and other management employees of the Borrower on the Closing Date.

“person” shall mean any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

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“Pricing Grid” shall mean the table set forth below.

Leverage Ratio	Eurodollar Spread- Revolving Loans and Swingline Loans	ABR Spread- Revolving Loans and Swingline Loans	Commitment Fee Rate
Category 1
Greater than 3.50 to 1.00	2.50%	1.50%	0.50%
Category 2
Greater than 3.00 to 1.00, but less than or equal to 3.50 to 1.00	2.25%	1.25%	0.50%
Category 3
Less than or equal to 3.00 to 1.00	2.00%	1.00%	0.375%

Each change in the Applicable Percentage or the Commitment Fee Rate resulting from a change in the Leverage Ratio shall be effective on and after the date (the “Adjustment Date”) of delivery to the Administrative Agent of the financial statements and certificates required by Section 5.4(a) or (b) and Section 5.4(c), respectively, indicating such change, and until the date immediately preceding the next date of delivery of such financial statements and certificates indicating another such change. Each change shall be effective with respect to all then outstanding Loans and Letters of Credit, subject to the provisions of Section 2.7. Notwithstanding the foregoing, until the Borrower shall have delivered the financial statements and certificates required by Section 5.4(b) and Section 5.4(d), respectively, for the fiscal period ended on or about March 31, 2005, the Leverage Ratio shall be deemed to be in Category 1 for purposes of determining the Applicable Percentage and the Commitment Fee Rate. In addition, (a) at any time during which the Borrower has failed to deliver the financial statements and certificates required by Section 5.4(a) or (b) and Section 5.4(c), respectively, or (b) at any time after the occurrence and during the continuance of an Event of Default, the Administrative Agent or the Required Lenders may require that the Leverage Ratio shall be deemed to be in Category 1 for purposes of determining the Applicable Percentage and the Commitment Fee Rate.

“Pro Forma Basis” shall mean, with respect to compliance with any test or covenant hereunder, compliance with such covenant or test after giving effect to any proposed Permitted Acquisition or Asset Sale (including pro forma adjustments arising out of events which are directly attributable to the proposed Permitted Acquisition or Asset Sale, are factually supportable and are expected to have a continuing impact, in each case as reasonably determined by the Borrower and as certified by a Financial Officer of the Borrower and approved by the Administrative Agent) using, for purposes of determining such compliance, the historical financial statements of all entities or assets so acquired or sold or to be acquired or sold and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Permitted Acquisitions or Asset Sale, and all other Permitted Acquisitions or Asset Sales that have been consummated during the period, and any Indebtedness or other liabilities incurred or repaid in connection with any such Permitted Acquisitions or Asset Sale had been consummated and incurred or repaid at the beginning of such period (and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination); provided, that, in connection with any Permitted

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Acquisition, the Borrower shall be permitted to assume cost savings certified by a Responsible Officer of the Borrower and expected to be achieved within a twelve-month period following the closing of such Permitted Acquisition if the consolidated balance sheet of such acquired person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such person and the related consolidated statements of income and stockholders’ equity and of cash flows for the period in respect of which Consolidated EBITDA is to be calculated (x) have been previously provided to the Administrative Agent and (y) either (1) have been reported on without a qualification arising out of the scope of the audit by independent certified public accountants of nationally recognized standing or (2) have been found acceptable by the Administrative Agent. For purposes of determining compliance with the covenants set forth in Sections 6.11 and 6.12 (and the computations made for purposes of determining the Applicable Percentage), all calculations shall be made on a Pro Forma Basis after giving effect to the Transactions, (subject, in the case of the Transactions, to the limitations contained in clause (a)(iv) of the definition of Consolidated EBITDA).

“Pro Forma Compliance” shall mean, at any date of determination, that the Borrower shall be in pro forma compliance with the covenants set forth in Sections 6.11 and 6.12 as of the date of such determination or the last day of the most recent fiscal quarter-end, as the case may be (computed on the basis of (a) balance sheet amounts as of such date and (b) income statement amounts for the most recently completed period of four consecutive fiscal quarters for which financial statements shall have been delivered to the Administrative Agent and calculated on a Pro Forma Basis in respect of the event giving rise to such determination).

“Pro Rata Percentage” shall mean, of any Revolving Credit Lender at any time, the percentage of the Total Revolving Credit Commitment represented by such Lender’s Revolving Credit Commitment. In the event the Revolving Credit Commitments shall have expired or been terminated, the Pro Rata Percentages shall be determined on the basis of the Revolving Credit Commitments most recently in effect.

“Recovery Event” shall mean any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Loan Party.

“Register” shall have the meaning assigned to such term in Section 9.4(d).

“Regulation T” shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation U” shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Reimbursement Obligation” shall mean the obligation of the Borrower to reimburse the Issuing Bank pursuant to Section 2.22(e) for amounts drawn under Letters of Credit.

“Reinvestment Deferred Amount”: shall mean, with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Loan Party in connection therewith that are not applied initially to prepay outstanding Term Loans pursuant to Section 2.13(b) as a result of the delivery of a Reinvestment Notice.

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“Reinvestment Event”: shall mean any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.

“Reinvestment Notice”: shall mean a written notice executed by an authorized officer of the Borrower stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to (a) acquire or repair productive assets used or useful in the business of the Borrower or any of its Subsidiaries or (b) make a Capital Expenditure.

“Reinvestment Prepayment Amount”: shall mean, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date (or committed to be expended prior to the relevant Reinvestment Prepayment Date so long as such amounts are actually expended within 90 days after such Reinvestment Prepayment Date) to (a) acquire or repair productive assets used or useful in the business of the Borrower or any of its Subsidiaries or (b) make a Capital Expenditure.

“Reinvestment Prepayment Date”: shall mean, with respect to any Reinvestment Event, the earlier of (a) the date occurring one year after such Reinvestment Event (unless, prior to such date, a binding contract has been entered into to make the related reinvestment in which case such date shall be extended until the completion or termination of such contract) and (b) the date on which the Borrower shall have delivered a notice to the Administrative Agent stating that it does not intend to (i) acquire or repair productive assets used or useful in the business of the Borrower or any of its Subsidiaries or (ii) make a Capital Expenditure, in each case, with all or any portion of the relevant Reinvestment Deferred Amount.

“Related Parties” shall mean, with respect to any specified person, such person’s Affiliates and the respective controlling persons, trustees, partners, directors, officers, employees, agents and advisors of such person and such person’s Affiliates.

“Release” shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within, under, from or upon any building, structure, facility or fixture.

“Release of Collateral Event” shall mean any time that the Borrower simultaneously maintains an investment grade rating on its senior unsecured (non-credit enhanced) debt of at least (a) BBB- from S&P or an equivalent rating from S&P in the event S&P changes its rating system and (b) Baa3 from Moody’s or an equivalent rating from Moody’s in the event Moody’s changes its rating system.

“Repayment Date” shall have the meaning assigned to such term in Section 2.11.

“Required Lenders” shall mean, at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments then in effect and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans then outstanding and (ii) the Total Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have been terminated, the total Revolving Credit Exposure of all Lenders at such time; provided, that the unused Term Loan Commitment, unused Revolving Credit Commitment of, and the portion of the Term Loans and Revolving Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

“Requirements of Law” shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, ordinances, rules, regulations or similar statutes or case law.

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“Responsible Officer” of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement.

“Restricted Indebtedness” shall mean Indebtedness of the Borrower or any Subsidiary, the payment, prepayment, repurchase or defeasance of which is restricted under Section 6.9(b).

“Restricted Payment” shall mean any dividend or other distribution (whether in cash, securities or other property, but excluding any payment in Equity Interests (other than Disqualified Preferred Stock) in the Borrower) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property, other than a payment in Equity Interests (other than Disqualified Preferred Stock) in the Borrower), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in the Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any Subsidiary.

“Revolving Credit Borrowing” shall mean a Borrowing comprised of Revolving Loans.

“Revolving Credit Commitment” shall mean, as to any Lender, such Lender’s (a) Initial Revolving Credit Commitment and (b) Incremental Revolving Credit Commitment.

“Revolving Credit Exposure” shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender’s L/C Exposure, plus the aggregate amount at such time of such Lender’s Swingline Exposure.

“Revolving Credit Lender” shall mean a Lender with a Revolving Credit Commitment or an outstanding Revolving Loan.

“Revolving Credit Maturity Date” shall mean September 30, 2009.

“Revolving Loans” shall mean Incremental Revolving Loans and the revolving loans made by the Lenders to the Borrower pursuant to clause (ii) of Section 2.1.

“SEC” shall mean the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

“Secured Parties” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

“Security Documents” shall mean the Mortgages, the Guarantee and Collateral Agreement and each of the security agreements, mortgages, control agreements, blocked account agreements and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 5.9.

“Specified Hedging Agreement” shall mean any Hedging Agreement entered into by the Borrower and any Lender or affiliate thereof in respect of interest rates, other than any such Hedging Agreement which states that it is not a Specified Hedging Agreement as defined in this Agreement.

“Sponsor” shall mean Warburg, Pincus Ventures, L.P., Warburg Pincus & Co. and their Affiliates.

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“subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, association or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent or one or more subsidiaries of the parent or a combination thereof.

“Subsidiary” shall mean any subsidiary of the Borrower.

“Swingline Commitment” shall mean the commitment of the Swingline Lender to make loans pursuant to Section 2.21, as the same may be reduced from time to time pursuant to Section 2.9 or Section 2.21.

“Swingline Exposure” shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time.

“Swingline Lender” shall mean UBS Loan Finance LLC, in its capacity as lender of Swingline Loans hereunder.

“Swingline Loan” shall mean any loan made by the Swingline Lender pursuant to Section 2.21.

“Syndication Agent” shall have the meaning assigned to such term in the preamble hereto.

“Syndication Letter” shall mean the Syndication Letter dated September 1, 2004, among the Borrower, UBS Loan Finance LLC, UBS Securities LLC and the Syndication Agent.

“Synthetic Lease” shall mean, as to any person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federal income tax purposes, other than any such lease under which such person is the lessor.

“Synthetic Lease Obligations” shall mean, as to any person, an amount equal to the sum of (a) the obligations of such person to pay rent or other amounts under any Synthetic Lease which are attributable to principal and, without duplication, (b) the amount of any purchase price payment under any Synthetic Lease assuming the lessee exercises the option to purchase the leased property at the end of the lease term.

“Synthetic Purchase Agreement” shall mean any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or any Subsidiary is or may become obligated to make (a) any payment in connection with a purchase by any third party from a person other than the Borrower or any Subsidiary of any Equity Interest or Restricted Indebtedness of the Borrower or a Subsidiary or (b) any payment (other than on account of a permitted purchase by it of any Equity Interest or Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness of the Borrower or a Subsidiary; provided, that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.

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“Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges, liabilities or withholdings (including interest, fines, penalties or additions to tax) imposed by any Governmental Authority.

“Term Loan Borrowing” shall mean a Borrowing comprised of Term Loans.

“Term Loan Commitment” shall mean, with respect to any Lender, such Lender’s (a) Initial Term Loan Commitment and (b) Incremental Term Loan Commitment. The original aggregate amount of the Term Loan Commitments is $425,000,000.

“Term Loan Maturity Date” shall mean September 30, 2011.

“Term Loans” shall mean the term loans made by the Lenders to the Borrower pursuant to clause (i) of Section 2.1 and, unless the context shall otherwise require, the term “Term Loans” shall include Incremental Term Loans.

“Term Percentage”: as to any Lender at any time, the percentage which such Lender’s Term Loan Commitment then constitutes of the aggregate Term Loan Commitments (or, at any time after the Closing Date, the percentage which the principal amount of such Lender’s Term Loan then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding).

“Total Revolving Credit Commitment” shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. The initial Total Revolving Credit Commitment is $75,000,000.

“Trademarks” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.

“Trading With the Enemy Act” shall have the meaning assigned to such term in Section 3.24.

“Transactions” shall mean, collectively, (a) the execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and, in the case of the Borrower, the making of the initial Borrowings hereunder, (b) the repayment of all amounts outstanding or due under, and the termination of, the Existing Credit Agreement, (c) the payment of the 2004 Dividend and (d) the payment of related fees and expenses.

“Type”, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall include the Eurodollar Rate and the Alternate Base Rate.

“Uniform Customs” shall have the meaning assigned to such term in Section 9.7.

“wholly owned Subsidiary” of any person shall mean a subsidiary of such person of which securities (except for directors’ qualifying shares and other de minimis ownership interests required to be owned under foreign law by local residents) or other ownership interests representing 100% of the Equity Interests are, at the time any determination is being made, owned, controlled or held by such person or one or more wholly owned Subsidiaries of such person or by such person and one or more wholly owned Subsidiaries of such person.

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“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.2. Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”; and the words “asset” and “property” shall be construed as having the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that if, before or after any change in GAAP occurs, the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI or any related definition to eliminate the effect of any such change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI or any related definition for such purpose), then the Borrower’s compliance with such covenant (and the computations made for purposes of determining the Applicable Percentage) shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. The Borrower shall not change any material accounting policies that results in a change in the method of calculation of financial covenants, definitions or standards or terms in this Agreement without the consent of the Administrative Agent (such consent not to be unreasonably withheld).

SECTION 1.3. Pro Forma Calculations. With respect to any period during which any Permitted Acquisition or Asset Sale occurs as permitted pursuant to the terms hereof, the Leverage Ratio and the Interest Coverage Ratio shall be calculated with respect to such period and such Permitted Acquisition or Asset Sale on a Pro Forma Basis.

SECTION 1.4. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

SECTION 1.5. Currency Equivalents Generally. Any amount specified in Dollars in this Agreement (other than in Articles II, VIII and IX) or any of the other Loan Documents shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount to be determined at the rate of exchange quoted by UBS AG, Stamford Branch, at the close of business on the Business Day immediately preceding any date of determination thereof, to prime banks in New York, New York, for the spot purchase in the New York foreign exchange market of such amount in Dollars with such other currency. The maximum amount of Indebtedness, investments and other threshold amounts that the Borrower and the Subsidiaries may incur under Article VI shall not be deemed to be exceeded, with respect to any outstanding Indebtedness, investments and other threshold amounts solely as a result of fluctuations in the exchange rate of currencies. When calculating capacity for the incurrence

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of additional Indebtedness, investments and other threshold amounts by the Borrower and any Subsidiary, the exchange rate of currencies shall be measured as of the date of such calculation.

ARTICLE II

The Credits

SECTION 2.1. Commitments. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly, (i) to make a term loan to the Borrower on the Closing Date in a principal amount not to exceed its Initial Term Loan Commitment, and (ii) to make Revolving Loans to the Borrower, at any time and from time to time on or after the date hereof, and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Credit Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Credit Commitment. Within the limits set forth in clause (ii) of the preceding sentence and subject to the terms, conditions and limitations set forth herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.

SECTION 2.2. Loans. (a) Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Swingline Loans and Loans deemed made pursuant to Section 2.22(e)(ii), the Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) (A) in the case of a Revolving Borrowing, an integral multiple of $1,000,000 and not less than $1,000,000, and (B) in the case of a Term Loan Borrowing or an Incremental Term Loan Borrowing, an integral multiple of $1,000,000 and not less than $5,000,000 (except with respect to any Incremental Term Loan Borrowing, to the extent otherwise provided in the related Incremental Term Loan Assumption Agreement) or (ii) in the case of any Borrowing, equal to the remaining available balance of the applicable Commitments.

(b) Subject to Section 2.8, each Borrowing shall be comprised entirely of Eurodollar Loans or ABR Loans, as the Borrower may request pursuant to Section 2.3. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided, that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

(c) Except with respect to Swingline Loans and Loans made pursuant to Section 2.22(e)(ii), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to the Funding Office not later than 12:00 noon, New York City time, and the Administrative Agent shall promptly transfer the amounts so received to the account designated by the Borrower in the applicable Borrowing Request or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such

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Lender’s portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.

(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request any Revolving Credit Borrowing if the Interest Period requested with respect thereto would end after the Revolving Credit Maturity Date.

SECTION 2.3. Borrowing Procedure. In order to request a Borrowing (other than a Swingline Loan or a deemed Borrowing pursuant to Section 2.22(e), as to which this Section 2.3 shall not apply), the Borrower shall hand deliver or fax to the Administrative Agent a duly completed Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the day of a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the Borrower and shall specify the following information: (i) whether the Borrowing then being requested is to be a Term Loan Borrowing, an Incremental Term Loan Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing (provided, that for the 30-day period immediately following the Closing Date, the Borrower shall not be permitted to request a Eurodollar Borrowing for any Eurodollar Loan having an Interest Period greater than one month); (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; and (vi) that the conditions set forth in Sections 4.1(b)-(c) are satisfied on the date of such Borrowing Request; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.2. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.3 (and the contents thereof), and of each Lender’s portion of the requested Borrowing.

SECTION 2.4. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender of Term Loans, the principal amount of each Term Loan of such Lender as provided in Section 2.11, (ii) to the Administrative Agent for the account of each Revolving Credit Lender, the then unpaid principal amount of each Revolving Loan of such Revolving Credit Lender on the Revolving Credit Maturity Date and (iii) to the Swingline Lender, the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Credit Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made;

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provided, that on each date that a Revolving Credit Borrowing is made, the Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

(c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Type and Class thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms.

(e) Any Lender may request that Loans made by it hereunder be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to such Lender and its registered assigns and in a form and substance reasonably acceptable to the Administrative Agent and the Borrower (each such promissory note, a “Note”). Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive a Note, the interests represented by such Note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.4) be represented by one or more Notes payable to the payee named therein or its registered assigns.

SECTION 2.5. Fees. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last Business Day of March, June, September and December in each year and on each date on which any Commitment of such Lender shall expire or be terminated as provided herein, a commitment fee (a “Commitment Fee”) equal to the Commitment Fee Rate on the daily unused amount of the Commitments of such Lender during the preceding quarter (or other period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which the Commitments of such Lender shall expire or be terminated); provided, that any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Borrower prior to such time; and provided, further, that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fee due to each Lender shall commence to accrue on the date hereof and shall cease to accrue on the date on which the Commitment of such Lender shall expire or be terminated as provided herein. For purposes of calculating Commitment Fees only, no portion of the Revolving Credit Commitments shall be deemed utilized as a result of outstanding Swingline Loans.

(b) The Borrower agrees to pay to the Agents and the Lenders, for their respective accounts, the fees set forth in the Syndication Letter at the times and in the amounts specified therein (the “Facility Fees”).

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(c) The Borrower agrees to pay (i) to each Revolving Credit Lender, through the Administrative Agent, on each Fee Payment Date a fee (an “L/C Participation Fee”) calculated on such Lender’s Pro Rata Percentage of the daily aggregate L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) during the preceding quarter (or shorter period commencing with the date hereof or ending with the Revolving Credit Maturity Date or the date on which all Letters of Credit have been canceled or have expired and the Revolving Credit Commitments of all Lenders shall have been terminated) at a rate per annum equal to the Applicable Percentage from time to time used to determine the interest rate on Revolving Credit Borrowings comprised of Eurodollar Loans pursuant to Section 2.6, and (ii) to the Issuing Bank, for its own account, a fronting fee of 0.25% per annum on the undrawn and unexpired amount of each Letter of Credit, payable quarterly in arrears on each Fee Payment Date after the issuance date (the “Issuing Bank Fees”). All L/C Participation Fees and Issuing Bank Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

(d) All Fees shall be paid in Dollars on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.

SECTION 2.6. Interest on Loans. (a) Subject to the provisions of Section 2.7, the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate is determined by reference to the Prime Rate and over a year of 360 days at all other times and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Percentage in effect from time to time.

(b) Subject to the provisions of Section 2.7, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Eurodollar Rate for the Interest Period in effect for such Borrowing plus the Applicable Percentage in effect from time to time.

(c) Interest on each Loan shall be payable to the applicable Lenders, through the Administrative Agent, on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Eurodollar Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.7. Default Interest. Any amount (whether of principal, interest, Fees or otherwise) not paid when due hereunder or under any other Loan Document shall bear interest, to the extent permitted by law (after as well as before judgment), payable on demand, (a) in the case of principal, at the rate otherwise applicable thereto pursuant to Section 2.6 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) equal to the rate that would be applicable to an ABR Term Loan plus 2.00% per annum.

SECTION 2.8. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates

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at which such dollar deposits are being offered will not adequately and fairly reflect the cost to a majority in interest of the Lenders participating or to participate in such Loan of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Eurodollar Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.3 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.8 shall be conclusive absent manifest error.

SECTION 2.9. Termination and Reduction of Commitments. (a) The Initial Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Closing Date. The Revolving Credit Commitments, the Swingline Commitment and the L/C Commitment shall automatically terminate on the Revolving Credit Maturity Date. Notwithstanding the foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New York City time, on October 31, 2004, if the initial Credit Event shall not have occurred by such time.

(b) Upon at least three Business Days’ prior irrevocable written or fax notice (or telephonic notice promptly confirmed by written notice) to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Term Loan Commitments or the Revolving Credit Commitments; provided, however, that (i) each partial reduction of the Term Loan Commitments or the Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time.

(c) Each reduction in the Term Loan Commitments or the Revolving Credit Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments. The Borrower shall pay to the Administrative Agent for the account of the applicable Lenders, on the date of termination of the Commitments of any Class, all accrued and unpaid Commitment Fees relating to such Class to but excluding the date of such termination.

SECTION 2.10. Conversion and Continuation of Borrowings. (a) Each Revolving Credit Borrowing and Borrowing of Term Loans initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.10. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding anything to the contrary, the Borrower shall not be entitled to request any conversion or continuation that, if made, would result in more than ten Eurodollar Borrowings outstanding hereunder at any one time. This Section 2.10 shall not apply to Borrowings of Swingline Loans, which may not be converted or continued.

(b) To make an election pursuant to this Section 2.10, the Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Interest Election Request to the Administrative Agent not later than the time that a Borrowing Request would be required under Section 2.3 if the Borrower were requesting a Revolving Borrowing or Borrowing of Term Loans of the Type resulting from such election to be made on the effective date of such election. Each Interest Election Request shall be irrevocable.

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(c) Each Interest Election Request shall specify the following information in compliance with Section 2.2:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, or if outstanding Borrowings are being combined, allocation to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”; provided, that for the 30-day period immediately following the Closing Date, no ABR Borrowing may be converted into a Eurodollar Borrowing with an Interest Period other than of one month’s duration.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If an Interest Election Request with respect to a Eurodollar Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.

(f) If any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15.

(g) No Borrowing may be converted to, or continued as, a Eurodollar Borrowing at any time that an Event of Default under paragraph (b) or (c) of Article VII shall be continuing.

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SECTION 2.11. Repayment of Term Loan Borrowings. (a) The Borrower shall pay to the applicable Lenders, through the Administrative Agent, on the dates set forth below, or if any such date is not a Business Day, on the next preceding Business Day (each such date being called a “Repayment Date”), a principal amount of the Term Loans (as adjusted from time to time pursuant to Sections 2.11(c), 2.12, 2.13(e) and 2.23(d)) equal to such Lender’s Term Percentage, multiplied by a percentage of the original aggregate principal amount of the Term Loans as set forth below (together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment):

Repayment Date	Amount
December 31, 2004	0.25	%
March 31, 2005	0.25	%
June 30, 2005	0.25	%
September 30, 2005	0.25	%
December 31, 2005	0.25	%
March 31, 2006	0.25	%
June 30, 2006	0.25	%
September 30, 2006	0.25	%
December 31, 2006	0.25	%
March 31, 2007	0.25	%
June 30, 2007	0.25	%
September 30, 2007	0.25	%
December 31, 2007	0.25	%
March 31, 2008	0.25	%
June 30, 2008	0.25	%
September 30, 2008	0.25	%
December 31, 2008	0.25	%
March 31, 2009	0.25	%
June 30, 2009	0.25	%
September 30, 2009	0.25	%
December 31, 2009	0.25	%
March 31, 2010	0.25	%
June 30, 2010	0.25	%
September 30, 2010	0.25	%
December 31, 2010	0.25	%
March 31, 2011	0.25	%
June 30, 2011	0.25	%
Term Loan Maturity Date	93.25	%

(b) The Borrower shall pay to the Administrative Agent, for the account of the Lenders, on each Incremental Term Loan Repayment Date, a principal amount of the Other Term Loans (as adjusted from time to time pursuant to Sections 2.11(c), 2.12 and 2.13(e)) equal to the amount set forth for such date in the applicable Incremental Term Loan Assumption Agreement, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.

(c) In the event and on each occasion that any Term Loan Commitment (other than any Incremental Term Loan Commitment) shall be reduced or shall expire or terminate other than as a result of the making of a Term Loan, the installments payable on each Repayment Date shall be reduced pro rata by an aggregate amount equal to the amount of such reduction, expiration or termination.

(d) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date and all Incremental Term Loans shall be due and payable on the applicable Incremental Term Loan Maturity Date, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of payment.

(e) All repayments pursuant to this Section 2.11 shall be subject to Section 2.15, but shall otherwise be without premium or penalty.

SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days’ prior written or fax notice (or telephonic notice promptly confirmed by written notice) in the case of Eurodollar Loans, or written or fax notice (or telephonic notice promptly confirmed by written notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative

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Agent before 12:00 (noon), New York City time; provided, however, that each partial prepayment of Loans shall be in an amount that is an integral multiple of $1,000,000.

(b) Optional prepayments of Term Loans shall be allocated ratably between the Term Loans and the Other Term Loans, if any, and shall be applied first, in chronological order to the installments of principal in respect of the Term Loans and Other Term Loans scheduled to be paid within 12 months after such optional prepayment and second, pro rata against the remaining scheduled installments of principal due in respect of the Term Loans and Other Term Loans.

(c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein. All prepayments under this Section 2.12 shall be subject to Section 2.15 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment; provided, however, that in the case of a prepayment of an ABR Revolving Loan or a Swingline Loan that is not made in connection with a termination of the Revolving Credit Commitments, the accrued and unpaid interest on the principal amount prepaid shall be payable on the next scheduled Interest Payment Date with respect to such ABR Revolving Loan or Swingline Loan.

(d) In the event that the Term Loans are prepaid pursuant to Section 2.12(a) on or prior to the first anniversary of the Closing Date with the proceeds of a substantially concurrent issuance or incurrence of term loans under this Agreement, as amended, amended and restated, supplemented, waived or otherwise modified from time to time (excluding a refinancing of the Facilities in connection with another transaction not permitted by this Agreement (as determined prior to giving effect to any amendment or waiver of this Agreement in connection with such transaction)), such prepayment shall be accompanied by a prepayment fee equal to 1.0% of the aggregate amount of such prepayment if any of the interest rates payable in respect of such term loans is less than the corresponding interest rate that would have been payable in respect of the Term Loans.

SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination of all the Revolving Credit Commitments, the Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Credit Borrowings and all outstanding Swingline Loans and replace all outstanding Letters of Credit. If as a result of any partial reduction of the Revolving Credit Commitments the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Credit Borrowings or Swingline Loans (or a combination thereof) and/or replace outstanding Letters of Credit in an amount sufficient to eliminate such excess.

(b) If on any date any Loan Party shall receive Net Cash Proceeds from any Asset Sales or Recovery Events in an aggregate amount greater than $2,000,000 in any fiscal year of the Borrower then, unless a Reinvestment Notice shall be delivered in respect thereof, all such Net Cash Proceeds shall be applied within five Business Days after such date to prepay outstanding Loans in accordance with Section 2.13(e); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales that may be excluded from the foregoing requirement pursuant to a Reinvestment Notice shall not exceed $25,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward such payment.

(c) No later than the earlier of (i) 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending on December 31, 2005, and (ii) the date on which the financial

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statements with respect to such period are delivered pursuant to Section 5.4(a), the Borrower shall prepay outstanding Loans in accordance with Section 2.13(e) in an aggregate principal amount equal to 50% of Excess Cash Flow for the fiscal year then ended; provided, however, that in the event the Leverage Ratio at the end of such fiscal year was less than 3.5 to 1.00 and greater than or equal to 3:00 to 1.00 then such amount shall be reduced to 25% of such Excess Cash Flow and in the event the Leverage Ratio at the end of such fiscal year was less than 3.00 to 1.00, no such prepayment shall be required.

(d) In the event that any Loan Party or any subsidiary of a Loan Party shall receive Net Cash Proceeds from the issuance of Disqualified Preferred Stock or the issuance or other disposition of Indebtedness for money borrowed (or any similar transaction evidenced by bonds, debentures, notes or similar instruments) of any Loan Party or any subsidiary of a Loan Party (other than Disqualified Preferred Stock or Indebtedness for money borrowed (or any similar transaction evidenced by bonds, debentures, notes or similar instruments) permitted pursuant to Section 6.1, except for Indebtedness incurred under Section 6.1(p) for which a mandatory prepayment shall be required to the extent such Indebtedness exceeds $25,000,000 at any time), the Borrower shall, substantially simultaneously with (and in any event not later than the third Business Day next following) the receipt of such Net Cash Proceeds by such Loan Party or such subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding Loans in accordance with Section 2.13(e).

(e) Mandatory prepayments of outstanding Term Loans under this Agreement shall be allocated ratably between the Term Loans and the Other Term Loans, if any, and shall be applied first, in chronological order to the installments of principal in respect of the Term Loans and Other Term Loans scheduled to be paid within 12 months after such mandatory prepayment and second, pro rata against the remaining scheduled installments of principal due in respect of the Term Loans and Other Term Loans under Section 2.11. Upon the prepayment in full of all Term Loans, mandatory prepayments shall be applied to prepay Revolving Loans to the full extent thereof and to permanently reduce the Revolving Credit Commitments by the amount of such prepayment.

(f) The Borrower shall deliver to the Administrative Agent, at the time of each prepayment required under this Section 2.13, (i) a certificate signed by a Financial Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (ii) to the extent practicable, at least three days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject to Section 2.15, but shall otherwise be without premium or penalty.

SECTION 2.14. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision of this Agreement, if any Change in Law shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by any Lender or the Issuing Bank (except any such reserve requirement which is reflected in the Eurodollar Rate) or shall impose on such Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender or the Issuing Bank of making or maintaining any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining any Letter of Credit or purchasing or maintaining a participation therein or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), in each case, by an amount deemed by such Lender or the Issuing Bank to be material, then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon demand such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

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(b) If any Lender or the Issuing Bank shall have determined that any Change in Law regarding capital adequacy has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made or participations in Letters of Credit purchased by such Lender pursuant hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy) by an amount deemed by such Lender or the Issuing Bank to be material, then from time to time the Borrower shall pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) above shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same.

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided, that the Borrower shall not be under any obligation to compensate any Lender or the Issuing Bank under paragraph (a) or (b) above with respect to increased costs or reductions with respect to any period ending prior to the date that is 180 days prior to such request if such Lender or the Issuing Bank knew or could reasonably have been expected to know of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would result in a claim for increased compensation by reason of such increased costs or reductions; provided, further, that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any Change in Law within such 180-day period. The protection of this Section shall be available to each Lender and the Issuing Bank regardless of any possible contention of the invalidity or inapplicability of the Change in Law that shall have occurred or been imposed.

SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of (a) any event, other than a default by such Lender in the performance of its obligations hereunder, which results in (i) such Lender receiving or being deemed to receive any amount on account of the principal of any Eurodollar Loan prior to the end of the Interest Period in effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period with respect to any Eurodollar Loan, in each case other than on the last day of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to be made pursuant to a conversion or continuation under Section 2.10) not being made after notice of such Loan shall have been given by the Borrower hereunder (any of the events referred to in this clause (a) being called a “Breakage Event”) or (b) any default in the making of any payment or prepayment required to be made hereunder. In the case of any Breakage Event, such loss shall include an amount equal to the excess, as reasonably determined by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the subject of such Breakage Event for the period from the date of such Breakage Event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (ii) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such Breakage Event for such period, but such loss shall not, in any event, include any lost profit or loss of applicable margin. A certificate of any Lender setting

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forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error.

SECTION 2.16. Pro Rata Treatment. Each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees or the L/C Participation Fees, each reduction of the Term Loan Commitments or the Revolving Credit Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans or participations in L/C Disbursements, as applicable). Each Lender agrees that in computing such Lender’s portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lender’s percentage of such Borrowing to the next higher or lower whole dollar amount.

SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker’s lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or L/C Disbursement as a result of which the unpaid portion of its Loans and participations in L/C Disbursements shall be proportionately less than the unpaid portion of the Loans and participations in L/C Disbursements of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans and L/C Exposure of such other Lender, so that the aggregate unpaid amount of the Loans and L/C Exposure and participations in Loans and L/C Exposure held by each Lender shall be in the same proportion to the aggregate unpaid amount of all Loans and L/C Exposure then outstanding as the amount of its Loans and L/C Exposure prior to such exercise of banker’s lien, setoff or counterclaim or other event was to the amount of all Loans and L/C Exposure outstanding prior to such exercise of banker’s lien, setoff or counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Loan or L/C Disbursement deemed to have been so purchased may exercise any and all rights of banker’s lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.

SECTION 2.18. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any L/C Disbursement or any Fees or other amounts) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date when due and in immediately available funds, without setoff, defense or counterclaim. Each such payment (other than (i) Issuing Bank Fees, which shall be paid directly to the Issuing Bank, and (ii) principal of and interest on Swingline Loans, which shall be paid directly to the Swingline Lender except as otherwise provided in Section 2.21(d)) shall be made to the Administrative Agent at the Funding Office, or at such other location as the Administrative Agent shall notify the Borrower from time to time in accordance with Section 9.1. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof.

(b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other

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Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.

SECTION 2.19. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower or any Loan Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or such Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party shall make such deductions and (iii) the Borrower or such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or any Loan Party hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto (other than penalties or interest attributable to (i) a failure or delay by the Administrative Agent or such Lender, as applicable, in making such written demand to the Borrower or (ii) the gross negligence or willful misconduct of the Administrative Agent or such Lender, as applicable), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes (and in any event within 30 days of any such payment being due) by the Borrower or any other Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law and reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate.

SECTION 2.20. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a certificate requesting compensation pursuant to Section 2.14, (ii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank

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pursuant to Section 2.19, (iii) any Lender becomes a Defaulting Lender or (iv) any Lender refuses to consent to any amendment, waiver or other modification of any Loan Document requested by the Borrower that requires the consent of all Lenders and such amendment, waiver or other modification is consented to by the Required Lenders, the Borrower may, at its sole expense and effort (including with respect to the processing and recordation fee referred to in Section 9.4(b)), upon notice to such Lender or the Issuing Bank and the Administrative Agent, require such Lender or the Issuing Bank to transfer and assign, without recourse, representation or warranty, except as to warranty as to its ownership of the assigned obligations (in accordance with and subject to the restrictions contained in Section 9.4), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such assigned obligations and, with respect to clause (iv) above, shall consent to such requested amendment, waiver or other modification of any Loan Document (which assignee may be another Lender, if a Lender accepts such assignment); provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, (y) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld, and (z) the Borrower or such assignee shall have paid to the affected Lender or the Issuing Bank in immediately available funds an amount equal to the sum of the principal of and interest accrued to the date of such payment on the outstanding Loans or L/C Disbursements of such Lender or the Issuing Bank plus all Fees and other amounts accrued for the account of such Lender or the Issuing Bank hereunder (including any amounts under Section 2.14 and Section 2.15); provided, further, that, if prior to any such transfer and assignment the circumstances or event that resulted in such Lender’s or the Issuing Bank’s claim for compensation under Section 2.14 or the amounts paid pursuant to Section 2.19, as the case may be, cease to cause such Lender or the Issuing Bank to suffer increased costs or reductions in amounts received or receivable or reduction in return on capital or cease to result in amounts being payable under Section 2.19, as the case may be (including as a result of any action taken by such Lender or the Issuing Bank pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall waive its right to claim further compensation under Section 2.14 in respect of such circumstances or event or shall waive its right to further payments under Section 2.19 in respect of such circumstances or event or shall consent to the proposed amendment, waiver, consent or other modification, as the case may be, then such Lender or the Issuing Bank shall not thereafter be required to make any such transfer and assignment hereunder.

(b) If (i) any Lender or the Issuing Bank shall request compensation under Section 2.14 or (ii) the Borrower is required to pay any additional amount to any Lender or the Issuing Bank or any Governmental Authority on account of any Lender or the Issuing Bank, pursuant to Section 2.19, then such Lender or the Issuing Bank shall use reasonable efforts (which shall not require such Lender or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden deemed by it to be significant) (x) to file any certificate or document reasonably requested in writing by the Borrower or (y) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or Affiliates, if such filing or assignment would reduce its claims for compensation under Section 2.14 or would reduce amounts payable pursuant to Section 2.19, as the case may be, in the future. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the Issuing Bank in connection with any such filing or assignment, delegation and transfer.

SECTION 2.21. Swingline Loans. (a) Swingline Commitment. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time prior to the termination of the Revolving Credit Commitments, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $10,000,000 or (ii) the Aggregate Revolving Credit Exposure exceeding the Total Revolving Credit Commitment; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to

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the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow Swingline Loans.

(b) Swingline Loan Borrowing Procedure. To request a Swingline Loan, the Borrower shall deliver, by hand delivery or telecopy, a duly completed and executed Borrowing Request to the Administrative Agent and the Swingline Lender, not later than 1:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested Swingline Loan. Each Swingline Loan shall be an ABR Loan. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an L/C Disbursement as provided in Section 2.22(e), by remittance to the Issuing Bank) by 2:00 p.m., New York City time, on the requested date of such Swingline Loan. The Borrower shall not request a Swingline Loan if at the time of or immediately after giving effect to the Borrowing contemplated by such request a Default has occurred and is continuing or would result therefrom. Swingline Loans shall be made in minimum amounts of $250,000 and integral multiples of $100,000 above such amount.

(c) Prepayment. The Borrower shall have the right at any time and from time to time to repay any Swingline Loan, in whole or in part, upon giving written notice to the Swingline Lender and the Administrative Agent before 12:00 (noon), New York City time, on the proposed date of repayment.

(d) Participations. The Swingline Lender may at any time in its discretion by written notice given to the Administrative Agent (provided, such notice requirement shall not apply if the Swingline Lender and the Administrative Agent are the same entity) not later than 11:00 A.M., New York City time, on the next succeeding Business Day following such notice require the Revolving Credit Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans then outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Credit Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Credit Lender, specifying in such notice such Revolving Credit Lender’s Pro Rata Percentage of such Swingline Loan or Swingline Loans. Each Revolving Credit Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Revolving Credit Lender’s Pro Rata Percentage of such Swingline Loan or Swingline Loans. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (so long as such payment shall not cause such Lender’s Revolving Credit Exposure to exceed such Lender’s Revolving Credit Commitment). Each Revolving Credit Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.2(c) with respect to Loans made by such Lender (and Section 2.2 shall apply, mutatis mutandis, to the payment obligations of the Revolving Credit Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Credit Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired by the Revolving Credit Lenders pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent. Any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made their payments pursuant to this paragraph, as their

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interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

SECTION 2.22. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the Issuing Bank to issue Letters of Credit for its own account or the account of a Subsidiary in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time while the Revolving Credit Commitments remain in effect (provided, that the Borrower shall be a co-applicant, and be jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary). The Issuing Bank shall have no obligation to issue, and the Borrower shall not request the issuance of, any Letter of Credit at any time if after giving effect to such issuance, the L/C Exposure would exceed the L/C Commitment or the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit or the amendment, renewal or extension of an outstanding Letter of Credit, the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) an L/C Request to the Issuing Bank and the Administrative Agent not later than 11:00 a.m. on the third Business Day preceding the requested date of issuance, amendment, renewal or extension (or such later date and time as is acceptable to the Issuing Bank).

A request for an initial issuance of a Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank:

(i) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day);

(ii) the amount thereof;

(iii) the expiry date thereof (which shall not be later than the close of business on the Letter of Credit Expiration Date);

(iv) the name and address of the beneficiary thereof;

(v) whether the Letter of Credit is to be issued for its own account or for the account of a Subsidiary (provided, that the Borrower shall be a co-applicant, and therefore jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary);

(vi) the documents to be presented by such beneficiary in connection with any drawing thereunder;

(vii) the full text of any certificate to be presented by such beneficiary in connection with any drawing thereunder; and

(viii) such other matters as the Issuing Bank may require.

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A request for an amendment, renewal or extension of any outstanding Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank:

(i) the Letter of Credit to be amended, renewed or extended;

(ix) the proposed date of amendment, renewal or extension thereof (which shall be a Business Day);

(x) the nature of the proposed amendment, renewal or extension; and

(xi) such other matters as the Issuing Bank may require.

Subject to the last sentence of Section 2.22(a), if requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and, upon issuance, amendment, renewal or extension of each Letter of Credit, the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the L/C Exposure shall not exceed the L/C Commitment and (ii) the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment. Unless the Issuing Bank shall agree otherwise, no Letter of Credit shall be in an initial amount less than $100,000.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date which is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the Letter of Credit Expiration Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby irrevocably grants to each Revolving Credit Lender, and each Revolving Credit Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Credit Lender’s Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Revolving Credit Lender’s Pro Rata Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in Section 2.22(e), or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement.

(i) If the Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such L/C Disbursement by paying to the Issuing Bank an amount equal to such L/C Disbursement not later than 2:00 p.m., New York City time, on the date that such L/C Disbursement is made if the Borrower shall have received notice of such L/C Disbursement prior to 11:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New

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York City time, on the Business Day immediately following the day that the Borrower receives such notice.

(ii) If the Borrower fails to make such payment when due, the Issuing Bank shall notify the Administrative Agent and the Administrative Agent shall notify each Revolving Credit Lender of the applicable L/C Disbursement, the payment then due from the Borrower in respect thereof and such Revolving Credit Lender’s Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately available funds to the Administrative Agent not later than 3:00 p.m., New York City time, on such date (or, if such Revolving Credit Lender shall have received such notice later than 12:00 noon, New York City time, on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Revolving Credit Lender’s Pro Rata Percentage of the unreimbursed L/C Disbursement in the same manner as provided in Section 2.2(c) with respect to Revolving Loans made by such Revolving Credit Lender, and the Administrative Agent will promptly pay to the Issuing Bank the amounts so received by it from the Revolving Credit Lenders. The Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from the Borrower pursuant to the above paragraph prior to the time that any Revolving Credit Lender makes any payment pursuant to the preceding sentence and any such amounts received by the Administrative Agent from the Borrower thereafter will be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to the Issuing Bank, as appropriate

(iii) If any Revolving Credit Lender shall not have made its Pro Rata Percentage of such L/C Disbursement available to the Administrative Agent as provided above, each of such Revolving Credit Lender and the Borrower severally agrees to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with the foregoing to but excluding the date such amount is paid, to the Administrative Agent for the account of the Issuing Bank at (i) in the case of the Borrower, the rate per annum set forth in Section 2.22(h) and (ii) in the case of such Lender, at a rate determined by the Administrative Agent in accordance with banking industry rules or practices on interbank compensation.

(f) Obligations Absolute. The Reimbursement Obligation of the Borrower as provided in Section 2.22(e) shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any draft or other document presented under a Letter of Credit being proved to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that fails to comply with the terms of such Letter of Credit; (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.22, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of the Borrower hereunder; (v) the fact that a Default shall have occurred and be continuing; or (vi) any material adverse change in the business, property, results of operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries. None of the Agents, the Lenders, the Issuing Bank or any of their Affiliates shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to

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consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly give written notice to the Administrative Agent and the Borrower of such demand for payment and whether the Issuing Bank has made or will make an L/C Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its Reimbursement Obligation to the Issuing Bank and the Revolving Credit Lenders with respect to any such L/C Disbursement (other than with respect to the timing of such Reimbursement Obligation set forth in Section 2.22(e)).

(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement, then, unless the Borrower shall reimburse such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest payable on demand, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrower reimburses such L/C Disbursement, at the rate per annum determined pursuant to Section 2.7. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Credit Lender pursuant to Section 2.22(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may resign as Issuing Bank hereunder at any time upon at least 30 days’ prior notice to the Lenders, the Administrative Agent and the Borrower. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such resignation or replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.5(c). From and after the effective date of any such resignation or replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, the Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit.

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(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Credit Lenders with L/C Exposure representing greater than 50% of the total L/C Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account (the “L/C Sub-Account”) established by the Administrative Agent and maintained in the name of the Administrative Agent and for the benefit of the Revolving Credit Lenders, an amount in cash equal to 105% of the L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in paragraph (g) or (h) of Article VII. Funds in the L/C Sub-Account shall be applied by the Administrative Agent to reimburse the Issuing Bank for L/C Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held as collateral security for the satisfaction of outstanding Reimbursement Obligations or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Credit Lenders with L/C Exposure representing greater than 50% of the total L/C Exposure), be applied to satisfy other Obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount plus any accrued interest or realized profits with respect to such amounts (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

(k) Additional Issuing Banks. The Borrower may, at any time and from time to time, designate one or more additional Revolving Credit Lenders to act as an Issuing Bank under the terms of this Agreement, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), the Issuing Bank and such Revolving Credit Lender(s). Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be deemed (in addition to being a Revolving Credit Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Revolving Credit Lender, and all references herein and in the other Loan Documents to the term “Issuing Bank” shall, with respect to such Letters of Credit, be deemed to refer to such Revolving Credit Lender in its capacity as Issuing Bank, as the context shall require.

(l) The Issuing Bank shall be under no obligation to issue any Letter of Credit if:

(i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; or

(ii) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank.

The Issuing Bank shall be under no obligation to amend any Letter of Credit if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

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SECTION 2.23. Increase in Term Loan Commitments. (a) The Borrower may, by written notice to the Administrative Agent, from time to time, request Incremental Term Loan Commitments in an amount not to exceed the Incremental Term Loan Amount from one or more Incremental Term Lenders (which may include any existing Lender) willing to provide such Incremental Term Loans in their own discretion; provided, that (i) before submitting any such request to a person that is not a Lender, the Borrower shall first give each existing Lender the opportunity to provide such Incremental Term Loan Commitments (in which case, existing Lenders shall have no more than two (2) Business Days from the date of such notice to indicate whether they are willing to provide such Incremental Term Loans) and (ii) each Incremental Term Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld). Such notice shall set forth (i) the amount of the Incremental Term Loan Commitments being requested (which shall be in minimum increments of $1,000,000 and a minimum amount of $5,000,000 or equal to the remaining Incremental Term Loan Amount), (ii) the date on which such Incremental Term Loan Commitments are requested to become effective (which shall not be less than 10 Business Days after the date of such notice) and (iii) whether such Incremental Term Loan Commitments are to be Term Loan Commitments or commitments to make term loans with terms different from the Term Loans (“Other Term Loans”).

(b) The Borrower and each Incremental Term Lender shall execute and deliver to the Administrative Agent an Incremental Term Loan Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Term Loan Commitment of such Incremental Term Lender. Each Incremental Term Loan Assumption Agreement shall specify the terms of the Incremental Term Loans to be made thereunder; provided, that, without the prior written consent of the Required Lenders, (i) the final maturity date of any Other Term Loans shall be no earlier than the Term Loan Maturity Date and (ii) the average life to maturity of any Other Term Loans shall be no shorter than the average life to maturity of the Term Loans; and provided, further, that, if the interest rate margin in respect of any Other Term Loan would exceed the Applicable Percentage for the Term Loans by more than 0.25% (it being understood that any such increase may take the form of original issue discount (“OID”), with OID being equated to the interest rates in a manner determined by the Administrative Agent based on an assumed four-year life to maturity), the Applicable Percentage for the Term Loans shall be increased so that the interest rate margin in respect of such Other Term Loan (giving effect to any OID issued in connection with such Other Term Loan) is no more than 0.25% higher than the Applicable Percentage for the Term Loans. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Term Loan Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Term Loan Assumption Agreement, this Agreement shall be amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Term Loan Commitment evidenced thereby as provided for in Section 9.8(b). Any such deemed amendment may be memorialized in writing by the Administrative Agent with the Borrower’s consent (not to be unreasonably withheld) and furnished to the other parties hereto.

(c) Notwithstanding the foregoing, no Incremental Term Loan Commitment shall become effective under this Section 2.23 unless (i) on the date of such effectiveness, the conditions set forth in paragraphs (b) and (c) of Section 4.1 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower, (ii) the Administrative Agent shall have received (with sufficient copies for each of the Incremental Term Lenders) legal opinions, board resolutions and other closing certificates and documentation consistent with those delivered on the Closing Date under Section 4.2, (iii) the Borrower would be in Pro Forma Compliance after giving effect to such Incremental Term Loan Commitment and the Loans to be made thereunder and the application of the proceeds therefrom as if made and applied on such date and (iv) the Leverage Ratio shall be less than 4:00 to 1:00 on a Pro Forma Basis after giving effect to such Incremental Term Loan Commitment and the Loans to be made thereunder and such additional

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Indebtedness (if any) as if such Loans and additional Indebtedness were outstanding, and the proceeds thereof applied as set forth in a notice from the Borrower to the Administrative Agent, on the last day of the most recently ended fiscal quarter of the Borrower; provided, that if such Loans are used along with additional Indebtedness permitted hereunder to finance a Permitted Acquisition pursuant to Section 6.4(g), the computation of the Leverage Ratio under this clause (iv) shall be made without regard to such additional Indebtedness. Notwithstanding anything to the contrary stated herein, the proceeds of Incremental Term Loans and Other Term Loans may not be used to pay cash dividends.

(d) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all action as may be reasonably necessary to ensure that all Incremental Term Loans (other than Other Term Loans), when originally made, are included in each Borrowing of outstanding Term Loans on a pro rata basis, and the Borrower agrees that Section 2.15 shall apply to any conversion of Eurodollar Term Loans to ABR Term Loans reasonably required by the Administrative Agent to effect the foregoing. In addition, to the extent any Incremental Term Loans are not Other Term Loans, the scheduled amortization payments under Sections 2.11(a) required to be made after the making of such Incremental Term Loans shall be ratably increased by the aggregate principal amount of such Incremental Term Loans.

SECTION 2.24. Increase in Revolving Credit Commitments. (a) The Borrower may, by written notice to the Administrative Agent, on one occasion only, request Incremental Revolving Credit Commitments in an amount not to exceed $12,000,000 from one or more Incremental Revolving Credit Lenders (which may include any existing Lender) willing to provide such Incremental Revolving Loans in their own discretion; provided, that each Incremental Revolving Credit Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld). Such notice shall set forth (i) the amount of the Incremental Revolving Credit Commitments being requested (which shall be in minimum increments of $1,000,000 and a minimum amount of $1,000,000) and (ii) the date on which such Incremental Revolving Credit Commitments are requested to become effective (which shall not be less than 10 Business Days after the date of such notice).

(b) The Borrower and each Incremental Revolving Credit Lender shall execute and deliver to the Administrative Agent an Incremental Revolving Loan Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Revolving Credit Commitment of such Incremental Revolving Credit Lender. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Revolving Loan Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Revolving Loan Assumption Agreement, this Agreement shall be amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Revolving Credit Commitment evidenced thereby as provided for in Section 9.8(b). Any such deemed amendment may be memorialized in writing by the Administrative Agent with the Borrower’s consent (not to be unreasonably withheld) and furnished to the other parties hereto.

(c) Notwithstanding the foregoing, no Incremental Revolving Credit Commitment shall become effective under this Section 2.24 unless (i) on the date of such effectiveness, the conditions set forth in paragraphs (b) and (c) of Section 4.1 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower, (ii) if such Incremental Revolving Credit Commitments are to become effective more than 30 days after the Closing Date, the Administrative Agent shall have received (with sufficient copies for each of the Incremental Revolving Credit Lenders) legal opinions, board resolutions and other closing certificates and documentation consistent with those delivered on the Closing Date under Section 4.2, and (iii) the Borrower would be in Pro Forma Compliance after giving effect to such Incremental Revolving Credit

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Commitment and the Loans to be made thereunder and the application of the proceeds therefrom as if made and applied on such date.

(d) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all action as may be reasonably necessary to ensure that all Incremental Revolving Loans, when originally made, are included in each Borrowing of outstanding Revolving Loans on a pro rata basis, and the Borrower agrees that Section 2.15 shall apply to any conversion of Eurodollar Revolving Loans to ABR Revolving Loans reasonably required by the Administrative Agent to effect the foregoing.

ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Administrative Agent, the Issuing Bank and each of the Lenders that:

SECTION 3.1. Organization; Powers. The Borrower and each of the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization except, solely with respect to certain Foreign Subsidiaries, as set forth on Schedule 3.1, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated hereby or thereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder.

SECTION 3.2. Authorization. The Transactions (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of the Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C) any provision of any indenture, material agreement or other material instrument to which the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) except as set forth on Schedule 3.2, be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, material agreement or other material instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary (other than any Lien created hereunder or under the Security Documents).

SECTION 3.3. Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms.

SECTION 3.4. Governmental Approvals. Except as set forth on Schedule 3.4, no action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) the filing of Uniform Commercial Code financing statements and filings with the United States Patent and Trademark Office and the United States Copyright Office, (b) the recordation of any Mortgages, (c) such as have been made or obtained and are in full force and effect or which are not material to the consummation of the Transactions and (d)

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those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.5. Financial Statements. (a) The Borrower has heretofore furnished to the Lenders (i) the consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of the Borrower and its consolidated subsidiaries as of and for the fiscal year ended December 31, 2003, audited by and accompanied by the unqualified opinion of Ernst & Young LLP, independent public accountants and (ii) the unaudited consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows of the Borrower and its consolidated subsidiaries as of the fiscal quarters ending March 31, 2004 and June 30, 2004. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Borrower and its consolidated subsidiaries as of such dates and for such periods. Except as set forth on Schedule 3.5(a), such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Borrower and its consolidated subsidiaries as of the dates thereof. Such financial statements were prepared in accordance with GAAP applied on a consistent basis, except that the unaudited financial statements are subject to normal year-end adjustments and do not contain notes thereto.

(b) The Borrower has heretofore delivered to the Lenders the unaudited pro forma consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of the Borrower and its consolidated subsidiaries as of and for the six months ending June 30, 2004, prepared giving effect to the Transactions as if they had occurred on such date. Such pro forma financial statements have been prepared in good faith by the Borrower, based on the assumptions used to prepare the pro forma financial information contained in the Confidential Information Memorandum (which assumptions are believed by the Borrower on the date hereof and on the Closing Date to be reasonable), are based on the best information available to the Borrower as of the date of delivery thereof, accurately reflect, in all material respects, all adjustments required to be made to give effect to the Transactions and present fairly, in all material respects, on a pro forma basis the estimated consolidated financial position of the Borrower and its consolidated subsidiaries as of such date and for such periods, assuming that the Transactions had actually occurred at such date or at the beginning of such period, as the case may be.

SECTION 3.6. No Material Adverse Change. No event, change or condition has occurred that has had, or could reasonably be expected to have, a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of the Borrower and the Subsidiaries, taken as a whole, since December 31, 2003.

SECTION 3.7. Title to Properties; Possession Under Leases. (a) The Borrower and each of the Subsidiaries has good and marketable title to, or valid leasehold interests in, all its material properties and material assets, except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 6.2 and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.2.

(b) The use by the Borrower and each of the Subsidiaries of such Collateral and all such rights with respect to the foregoing do not infringe on the rights of any person other than such infringement which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No claim has been made and remains outstanding that the Borrower’s or any Subsidiaries’ use of any Collateral does or may violate the rights of any third party that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

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(c) The Borrower and each of the Subsidiaries has complied with all material obligations due and payable or required to be performed under all material leases to which it is a party and all such material leases are in full force and effect. The Borrower and each of the Subsidiaries enjoys peaceful and undisturbed possession under all such leases, except where the failure to so enjoy could not reasonably be expected to have a Material Adverse Effect.

(d) The Borrower and each of the Subsidiaries owns, or is licensed to use, all Patents, patent applications, Trademarks, trade names, servicemarks, Copyrights, technology, trade secrets, proprietary information, domain names, know-how and processes necessary for the conduct of its business as currently conducted (the “Intellectual Property”), except for those the failure to own or license which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim has been asserted in writing and is pending by any person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower or any Subsidiary know of any valid basis for any such claim, which claim is reasonably likely to have a Material Adverse Effect. The use of such Intellectual Property by the Borrower and each Subsidiary does not infringe the rights of any person, except for such claims and infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(e) Except pursuant to licenses and other user agreements entered into by the Borrower or any Subsidiary in the ordinary course of business, on and as of the date hereof (i) the Borrower and each Subsidiary owns and possesses the right to use, and has done nothing to authorize or enable any other person to use, any of its Copyrights, Patents or Trademarks and (ii) all registrations listed in Schedule III to the Guarantee and Collateral Agreement are valid and in full force and effect, in each case, except for any failure which could not, individually or in the aggregate, be reasonably likely to result in a Material Adverse Effect.

(f) To the Borrower’s and each Subsidiary’s knowledge, on and as of the date hereof, (i) there is no violation by others of any right of the Borrower or such Subsidiary with respect to any of its Copyrights, Patents or Trademarks, respectively, pledged by it under the name of the Borrower or such Subsidiary, as the case may be, (ii) the Borrower or such Subsidiary is not infringing upon any Copyright, Patent or Trademark of any other person other than, in the case of clauses (i) and (ii), such violation or infringement that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (iii) no proceedings have been instituted or are pending against the Borrower or such Subsidiary or threatened, and no claim against such the Borrower or such Subsidiary has been received by the Borrower or such Subsidiary, as the case may be, alleging any such violation, except any violations which could not, individually or in the aggregate, be reasonably likely to result in a Material Adverse Effect.

SECTION 3.8. Subsidiaries. Schedule 3.8 sets forth as of the Closing Date a list of all Subsidiaries and the percentage ownership interest of the Borrower and any Subsidiary therein. The shares of Equity Interests so indicated on Schedule 3.8 are owned by the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Security Documents).

SECTION 3.9. Litigation; Compliance with Laws. (a) There are not any actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower, any Subsidiary or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

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(b) None of the Borrower or any of the Subsidiaries or any of their respective material properties or material assets is in violation of, nor will the continued operation of their material properties and material assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits), or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. Agreements. (a) None of the Borrower or any of the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(b) None of the Borrower or any of the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.11. Federal Reserve Regulations. (a) None of the Borrower or any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.

(b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.

SECTION 3.12. Investment Company Act; Public Utility Holding Company Act. None of the Borrower or any Subsidiary is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of the Loans (other than any Incremental Term Loans) and will request the issuance of Letters of Credit only for the purposes specified in Section 5.8. The Borrower will use the proceeds of any Incremental Term Loans solely as set forth in the applicable Incremental Term Loan Assumption Agreement.

SECTION 3.14. Tax Returns. Each of the Borrower and each of the Subsidiaries has filed or caused to be filed all Federal and all material state, local and foreign tax returns or materials required to have been filed by it and has paid or caused to be paid all material taxes due and payable by it and all assessments received by it, except taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, shall have set aside on its books adequate reserves and except for taxes the nonpayment of which could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.15. No Material Misstatements. None of (a) the Confidential Information Memorandum or (b) any other information, report, financial statement, exhibit or schedule furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto contained, which, in the case of clauses (a) and (b), when taken as a whole and together with the representations and warranties contained in this Agreement, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading; provided, that to the

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extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule and it is understood that actual results may differ from forecasts and projections.

SECTION 3.16. Employee Benefit Plans. With respect to any Plan, each of the Borrower and each of its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect. Neither the Borrower nor any Subsidiary has (a) failed to comply with any requirement of applicable law relating to any employee pension benefit plan primarily for the benefit of employees of the Borrower or any Subsidiary residing outside the United States that is not subject to ERISA or the Code or (b) incurred any other liability with respect to such plan (other than liabilities incurred in the ordinary course of business), except for any such noncompliance or incurrence which could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.17. Environmental Matters. Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of the Borrower or any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and correct description of all insurance maintained by the Borrower or by the Borrower for its Subsidiaries as of the date hereof and the Closing Date. As of each such date, such insurance is in full force and effect and all premiums have been duly paid if due. The Borrower and its Subsidiaries have insurance in such amounts and covering such risks and liabilities as are, when considered in its entirety, in the good faith judgment of the Borrower prudent in the ordinary course of business of the Borrower and its Subsidiaries.

SECTION 3.19. Security Documents. (a) The Guarantee and Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Guarantee and Collateral Agreement) and the proceeds thereof and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral Agreement) is delivered to the Administrative Agent, the Guarantee and Collateral Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Loan Parties in such Pledged Collateral, in each case prior and superior in right to any other person, and (ii) when financing statements in appropriate form are filed in the offices specified on Schedule 3.19(a), the Lien created under the Guarantee and Collateral Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in all such Collateral as to which a security interest may be perfected by such a filing (other than Intellectual Property, as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.2.

(b) Upon the recordation of the Guarantee and Collateral Agreement with the United States Patent and Trademark Office and the United States Copyright Office, together with the financing statements in appropriate form filed in the offices specified on Schedule 3.19(a), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Guarantee and Collateral

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Agreement) in which a security interest may be perfected by filing in the United States and its territories and possessions, in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered Trademarks, trademark applications, Patents, patent applications and Copyrights acquired by the Loan Parties after the date hereof).

(c) The Mortgages are effective to create in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, and when the Mortgages are recorded in the offices specified on Schedule 3.19(c), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.2.

SECTION 3.20. Location of Real Property and Leased Premises. Schedule 3.20(a) lists completely and correctly as of the Closing Date all domestic real property owned by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries, as the case may be, as of the Closing Date, own in fee all the real property set forth on Schedule 3.20(a). Schedule 3.20(b) lists completely and correctly as of the Closing Date all material domestic real property leased by the Borrower and the Subsidiaries and the addresses thereof. The Borrower and the Subsidiaries, as the case may be, as of the Closing Date, have valid leasehold interests in all the real property set forth on Schedule 3.20(b).

SECTION 3.21. Labor Matters. As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Subsidiary is bound. Except to the extent any of the following, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (a) the hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters and (b) all payments due from the Borrower or any Subsidiary, or for which any claim may be made against the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Subsidiary.

SECTION 3.22. Solvency. Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan (including the making of the 2004 Dividend), (a) the fair value of the assets of the Loan Parties taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Loan Parties taken as a whole will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Loan Parties taken as a whole will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties taken as a whole will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.

SECTION 3.23. Certain Treasury Regulation Matters. The Borrower does not intend to treat the Loans and related transactions as being a “reportable” transaction (within the meaning of Treasury

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Regulation 1.6011-4). The Borrower acknowledges that the Administrative Agent and one or more of the Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 301.6112-1 to the extent that the Borrower’s application of the proceeds of the Loans requires the same and the Administrative Agent and such Lender or Lenders, as applicable, may, in connection therewith, maintain such lists and other records as they may determine is required by such Treasury Regulation.

SECTION 3.24. Foreign Assets Control Regulations, Etc. None of the requesting or borrowing of the Loans, the requesting or issuance, extension or renewal of any Letters of Credit or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). To the knowledge of the Borrower, neither the Borrower nor any of its Subsidiaries (a) is a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages transactions with any such “blocked person” blocked by such order, law or regulation.

ARTICLE IV

Conditions of Lending

The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions:

SECTION 4.1. All Credit Events. On the date of each Borrowing, including each Borrowing of a Swingline Loan and on the date of each issuance, amendment, extension or renewal of a Letter of Credit (each such event being called a “Credit Event”):

(a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.3 (or such notice shall have been deemed given in accordance with Section 2.3) or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance, amendment, extension or renewal of such Letter of Credit as required by Section 2.22(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline Lender and the Administrative Agent shall have received a notice requesting such Swingline Loan as required by Section 2.21(b).

(b) The representations and warranties set forth in Article III hereof and in each other Loan Document shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects on and as of such earlier date.

(c) At the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing.

Each Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.1.

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SECTION 4.2. First Credit Event. On the Closing Date:

(a) The Administrative Agent shall have received, on behalf of itself, the Lenders and the Issuing Bank, a favorable written opinion of (i) Willkie Farr & Gallagher LLP, counsel for the Loan Parties, in the form attached as Exhibit G, and (ii) each local counsel listed on Schedule 4.2(a), in form and substance satisfactory to the Administrative Agent, in each case (A) dated the Closing Date, (B) addressed to the Issuing Bank, the Administrative Agent, the Lenders and the other Secured Parties and (C) covering such other matters relating to the Loan Documents and the Transactions as the Administrative Agent shall reasonably request, and the Borrower hereby requests such counsel to deliver such opinions.

(b) All legal matters incident to this Agreement, the Borrowings and extensions of credit hereunder and the other Loan Documents shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to the Administrative Agent.

(c) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Lenders, the Issuing Bank or the Administrative Agent may reasonably request.

(d) The Agents and Lenders shall have received a certificate, dated the Closing Date and signed by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.1 and the Borrower shall be in full compliance with the Syndication Letter.

(e) The Administrative Agent and the Syndication Agent shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document.

(f) The Security Documents shall have been duly executed by each Loan Party that is to be a party thereto and shall be in full force and effect on the Closing Date. The Administrative Agent on behalf of the Secured Parties shall have a security interest in the Collateral of the type and priority described in each Security Document, except to the extent otherwise provided herein or in such Security Documents.

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(g) The Administrative Agent shall have received a duly-completed and executed Perfection Certificate (in form and substance satisfactory to the Administrative Agent) with respect to the Loan Parties, and shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to the Loan Parties in the states (or other jurisdictions) of formation of such persons, in which the chief executive office of each such person is located and in the other jurisdictions in which such persons maintain property, in each case as indicated on such Perfection Certificate, together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to the Administrative Agent that the Liens indicated in any such financing statement (or similar document) would be permitted under Section 6.2 or have been or will be contemporaneously released or terminated.

(h) (i) Each of the Mortgages, in form and substance satisfactory to the Administrative Agent, relating to each of the Mortgaged Properties shall have been duly executed by the parties thereto and delivered to the Administrative Agent and shall be in full force and effect, (ii) each of such Mortgaged Properties shall not be subject to any Lien other than those permitted under Section 6.2, (iii) each of such Mortgages shall have been delivered to the title insurance company referred to in clause (iv) below in reasonable form for recording in the recording office as specified on Schedule 3.19(c) and a lender’s title insurance policy or a final marked commitment, in form and substance acceptable to the Administrative Agent, insuring such Mortgage as a first lien on such Mortgaged Property (subject to any Lien permitted by Section 6.2) shall have been received by the Administrative Agent, (iv) the Administrative Agent shall have received such other documents, including a policy or policies of title insurance issued by a nationally recognized title insurance company, together with such endorsements, coinsurance and reinsurance as may be reasonably requested by the Administrative Agent and the Lenders, insuring the Mortgages as valid first liens on the Mortgaged Properties, free of Liens other than those permitted under Section 6.2 and (v) the Administrative Agent shall have received, and the title insurance company issuing the policy referred to in clause (iv) above shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent and such insurance company in a manner satisfactory to them, dated a date satisfactory to the Administrative Agent and such insurance company by an independent professional licensed land surveyor satisfactory to the Administrative Agent and such insurance company.

(i) The Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.2 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a customary lender’s loss payable endorsement and to name the Secured Parties as additional insureds, in form and substance satisfactory to the Administrative Agent.

(j) All Indebtedness and other obligations under the Existing Credit Agreement shall have been repaid in full in cash to the satisfaction of the Lenders with all Liens in favor of the lenders under the Existing Credit Agreement being unconditionally released; the Administrative Agent shall have received a “pay-off” letter in form and substance reasonably satisfactory to the Administrative Agent with respect to all Indebtedness being repaid under the Existing Credit Agreement; and the Administrative Agent shall have received from any person holding any Lien securing any such debt, such UCC termination statements, mortgage releases, releases of assignments of leases and rents, releases of security interests in Intellectual Property and other instruments, in each case in proper form for recording, as the Administrative Agent shall have reasonably requested to release and terminate of record the Liens securing such debt.

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(k) The Lenders shall have received the financial statements and opinion referred to in Section 3.5 and the unaudited consolidated balance sheets and related statements of operations, stockholders’ equity and cash flows of the Borrower and its consolidated subsidiaries as of the fiscal months ending July 31, 2004 and August 31, 2004.

(l) All requisite Governmental Authorities shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required, all applicable appeal periods shall have expired and there shall not be any pending or threatened litigation, governmental, administrative or judicial action that could reasonably be expected to prevent or impose materially burdensome conditions on the Transactions or the other transactions contemplated hereby. All requisite third-party consents necessary for the consummation of the Transactions shall have been obtained except for those third-party consents where the failure to so obtain such consents would not have a Material Adverse Effect.

(m) The Lenders shall have received a certificate of the chief financial officer of the Borrower certifying that the pro forma Leverage Ratio as at June 30, 2004 for the 12-month period then ending is not greater than 4.5 to 1.0 and containing all information and calculations necessary for determining such ratio.

(n) The Administrative Agent shall have received a solvency certificate from the chief financial officer of the Borrower documenting the solvency of the Borrower and its Subsidiaries after giving effect to the Transactions and the payment of the 2004 Dividend, in form and substance reasonably satisfactory to the Administrative Agent.

ARTICLE V

Affirmative Covenants

The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:

SECTION 5.1. Existence; Businesses and Properties. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.5.

(b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect all rights, licenses, permits, franchises, authorizations, Patents, Copyrights, Trademarks and trade names used in or relating to the conduct of its business, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; maintain and operate such business in substantially the manner in which it is presently conducted and operated, including any reasonable extension, development or expansion thereof; comply with all applicable laws, rules, regulations and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all

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times, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.2. Insurance. (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by it; and maintain such other insurance as may be required by law.

(b) Cause all such policies covering any Collateral to be endorsed or otherwise amended to include a customary lender’s loss payable endorsement, in form and substance satisfactory to the Administrative Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Administrative Agent; cause all such policies to provide that neither the Borrower, the Administrative Agent nor any other party shall be a coinsurer thereunder and to contain a “Replacement Cost Endorsement”, without any deduction for depreciation, and such other provisions as the Administrative Agent may reasonably require from time to time to protect their interests; deliver insurance certificates evidencing all such policies to the Administrative Agent; upon the occurrence of an Event of Default, deliver original or certified copies of all such policies to the Administrative Agent upon its request; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent (giving the Administrative Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent; deliver to the Administrative Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, evidence of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent) together with evidence satisfactory to the Administrative Agent of payment of the premium therefor.

(c) If at any time the area in which any of the Premises (as defined in the Mortgages) are located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in an amount not less than the outstanding principal amount of the indebtedness secured by any Mortgage for Premises located in a “flood hazard area” and that is otherwise, if applicable, the minimum coverage necessary to comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a “Zone 1” area, obtain earthquake insurance in such total amount as is prudent in the good faith judgment of the Borrower, but in any event in an amount not less than the outstanding principal amount of the indebtedness secured by any Mortgage for Premises located in a “Zone 1” area.

(d) With respect to any Mortgaged Property, carry and maintain comprehensive general liability insurance including a “broad form” commercial general liability endorsement and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than $15,000,000, naming the Administrative Agent as an additional insured, on forms satisfactory to the Administrative Agent.

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(e) Notify the Administrative Agent immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.2 is taken out by the Borrower; and promptly deliver to the Administrative Agent a duplicate original copy of such policy or policies.

(f) In the event there occurs any material loss, damage to or destruction of any tangible property or assets of any Loan Party or any part thereof, cause such Loan Party to promptly give written notice thereof to the Administrative Agent generally describing the nature and extent of such loss, damage or destruction. Subsequent to any loss, damage to or destruction of the tangible property or assets of any Loan Party or any part thereof, Borrower shall, or shall cause such other Loan Party to, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Loan Party’s cost and expense, promptly repair or replace such property or assets so lost, damaged or destroyed or purchase other productive assets used or useful in the business of the Borrower or its Subsidiaries; provided, however, that such Loan Party need not repair or replace such property or assets so lost, damaged or destroyed to the extent the failure to make such repair or replacement is not necessary in the good faith judgment of the Borrower for the proper conduct of the business of such Loan Party in the ordinary course.

(g) Authorize the Administrative Agent, as the attorney-in-fact of each of the Loan Parties and for the benefit of the Lenders, upon the occurrence and during the continuance of an Event of Default, without the consent of the applicable Loan Party, (i) to adjust and compromise proceeds payable under such insurance policies, (ii) to collect, receive and give receipts for such insurance proceeds in the name of such Loan Party, the Administrative Agent and the Lenders and (iii) to endorse such Loan Party’s name upon any instrument in payment thereof

(h) In the event a Loan Party shall receive any insurance proceeds as a result of any loss, damage or destruction, or condemnation proceeds, in each case in a net amount in excess of $2,000,000, the Borrower shall, or shall cause such other Loan Party to, promptly pay over such proceeds to the Administrative Agent as cash collateral for the Obligations. The Administrative Agent agrees to release such proceeds to such Loan Party for replacement or restoration of the portion of the property or assets of such Loan Party lost, damaged or destroyed or condemned for the purchase of other assets used or useful in the business of the Borrower or its Subsidiaries if (A) within one year (or if binding contracts for the repair, replacement or purchase have been entered into within such period, within the term of such contracts) from the date of such loss, damage, destruction or condemnation, the Administrative Agent has received written application for such release from such Loan Party together with evidence reasonably satisfactory to it that the Borrower will use such proceeds to purchase productive assets used or useful in the business of the Borrower or its Subsidiaries and (B) on the date of such release no Default or Event of Default exists. If the conditions in the preceding sentence are not met, the Administrative Agent shall, on the first Business Day subsequent to the date one year (or such later date) after the date of such loss, damage, destruction or condemnation, apply such proceeds as a mandatory prepayment of the Loans in accordance with the terms of Section 2.13(b). All insurance and condemnation proceeds received by a Loan Party shall be subject to the security interest of the Administrative Agent under the Loan Documents.

SECTION 5.3. Taxes. Pay all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default; provided, however, that such payment and discharge shall not be required with respect to any such tax, assessment, charge or levy so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge and enforcement of a Lien and, in the

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case of a Mortgaged Property, there is no risk of forfeiture of such property or (b) the nonpayment thereof could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.4. Financial Statements, Reports, etc. In the case of the Borrower, furnish to the Administrative Agent (either physically or through electronic delivery reasonably acceptable to the Administrative Agent), which shall furnish to each Lender:

(a) within 90 days after the end of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal year and the results of its operations and the operations of such Subsidiaries during such year, together with comparative figures for the immediately preceding fiscal year, all audited by Ernst & Young LLP or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, its consolidated balance sheet and related statements of income, stockholders’ equity and cash flows showing the financial condition of the Borrower and its consolidated Subsidiaries as of the close of such fiscal quarter and the results of its operations and the operations of such Subsidiaries during such fiscal quarter and the then elapsed portion of the fiscal year, and comparative figures for the same periods in the immediately preceding fiscal year, all certified by one of its Financial Officers as fairly presenting the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments;

(c) concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of the accounting firm (in the case of paragraph (a)) or Financial Officer (in the case of paragraph (b)) opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations and which may be provided by a Financial Officer if accounting firms generally are not providing such certificates) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.6, 6.10, 6.11 and 6.12 and, in the case of a certificate delivered with the financial statements required by paragraph (a) above, (x) setting forth the Borrower’s calculation of Excess Cash Flow and (y) certifying that there has been no change in the business activities, assets or liabilities of the Borrower, or if there has been any such change, describing such change in reasonable detail and certifying that the Borrower is in compliance with Section 6.8;

(d) within 45 days after the commencement of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flows as of the end of and for such fiscal year);

(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with

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the SEC, or any Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, or, after the Initial Public Offering (disregarding for purposes of this Section 5.4(e) the Net Cash Proceeds dollar threshold contained in the definition of such term), distributed to its shareholders, as the case may be;

(f) promptly after the receipt thereof by the Borrower or any Subsidiary, a copy of any “management letter” received by any such person from its certified public accountants and the management’s response thereto; and

(g) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

Documents required to be delivered pursuant to Section 5.4(a), (b) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the Borrower’s website address; or (ii) on which such documents are posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).

SECTION 5.5. Litigation and Other Notices. Furnish to the Administrative Agent, the Issuing Bank and each Lender prompt (and, in any event, within 3 Business Days) written notice of the following:

(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

(b) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its ERISA Affiliates in an aggregate amount exceeding $2,500,000 or result in a Material Adverse Effect; and

(d) any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect.

SECTION 5.6. Information Regarding Collateral. (a) Furnish to the Administrative Agent prompt written notice of any change in (i) any Loan Party’s legal name, (ii) the jurisdiction of organization or formation of any Loan Party, (iii) any Loan Party’s identity or corporate structure or (iv) any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

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(b) In the case of the Borrower, each year, at the time of delivery of the annual financial statements with respect to the preceding fiscal year pursuant to Section 5.4(a), deliver to the Administrative Agent a certificate of a Financial Officer setting forth the information required pursuant to Sections 1 and 2 of the Perfection Certificate or confirming that there has been no change in such information since the Closing Date or the date of the most recent certificate delivered pursuant to this Section 5.6.

SECTION 5.7. Maintaining Records; Access to Properties and Inspections. Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law are made of all dealings and transactions in relation to its business and activities. Each Loan Party will, and will cause each of its subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of the Borrower or any Subsidiary at reasonable times and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agent or any Lender to discuss the affairs, finances and condition of the Borrower or any Subsidiary with the officers thereof and independent accountants therefor. Except following the occurrence and during the continuance of any Default, the Borrower shall be entitled to have a representative present at all such discussions and to obtain a copy of all written requests for information relating to any Loan Party made by the Administrative Agent or any Lender to any third party. Within 120 days after the close of each fiscal year of the Borrower, at the request of the Administrative Agent or the Required Lenders, the Borrower will hold a meeting (at a mutually agreeable location and time or, at the option of the Administrative Agent, by conference call) with all lenders who choose to attend such meeting at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Borrower and its Subsidiaries for the current fiscal year of the Borrower.

SECTION 5.8. Use of Proceeds. Use the proceeds of (a) the Term Loans (other than the Incremental Term Loans) to (i) repay all Indebtedness and other obligations outstanding under the Existing Credit Agreement, (ii) pay transaction costs incurred in connection with the Transactions and (iii) pay the 2004 Dividend, (b) the Revolving Loans and Swingline Loans for working capital and general corporate purposes after the Closing Date, (c) the Letters of Credit for general corporate purposes and (d) Incremental Term Loans for general corporate purposes (including Permitted Acquisitions).

SECTION 5.9. Further Assurances. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including (i) filing or recording, as applicable, Uniform Commercial Code and other financing statements and Mortgages, (ii) delivering duly executed deposit account control agreements as contemplated by, and within the time period referred to in, the Guarantee and Collateral Agreement and (iii) if all or substantially all of the Equity Interests of the Borrower are held or acquired by a holding company whose sole or primary purpose is holding such Equity Interests, causing such holding company to guarantee the Obligations, to pledge its Equity Interests in the Borrower pursuant to the Guarantee and Collateral Agreement and to become subject to the representations, warranties, covenants and other agreements of the Loan Parties hereunder, mutatis mutandis) that may be required under applicable law, or that the Required Lenders or the Administrative Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to Liens permitted under Section 6.2) of the security interests created or intended to be created by the Security Documents. Unless a Release of Collateral Event has occurred and is continuing and the Borrower has exercised its rights under Section 9.18, the Borrower will cause any subsequently acquired or organized Domestic Subsidiary to become a Loan Party by executing the Guarantee and Collateral Agreement and each other applicable Security Document in favor of the Administrative Agent. Notwithstanding anything to the contrary in the foregoing sentence, despite the occurrence and continuance of a Release of Collateral Event, the Borrower will cause the Equity Interests of (v) any

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subsequently acquired or organized Domestic Subsidiary, and (w) if the Equity Interests of the Borrower are held or acquired by any holding company whose sole or primary purpose is holding such Equity Interests, the Borrower, in each case, to be pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement. In addition, subject to the last sentence of this Section 5.9, from time to time, the Borrower will, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected security interests with respect to such of its assets and properties as the Administrative Agent or the Required Lenders shall designate (it being understood that it is the intent of the parties that the Obligations shall be secured by substantially all the assets of the Borrower and its Subsidiaries including real and other properties acquired subsequent to the Closing Date (but excluding real property with a value of less than $1,000,000, leasehold real property not used for manufacturing, the leased manufacturing facility located in Muskegon, Michigan, other immaterial leasehold property, and other Excluded Property (as defined in the Guarantee and Collateral Agreement))). Such security interests and Liens will be created under the Security Documents and other security agreements, mortgages, deeds of trust and other instruments and documents in form and substance satisfactory to the Administrative Agent, and the Borrower shall deliver or cause to be delivered to the Lenders all such instruments and documents (including legal opinions, title insurance policies and lien searches) as the Administrative Agent shall reasonably request to evidence compliance with this Section 5.9. The Borrower agrees to provide such evidence as the Administrative Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. In furtherance of the foregoing, the Borrower will give prompt notice to the Administrative Agent of the acquisition by it or any of the Domestic Subsidiaries of any real property (or any interest in real property) having a value in excess of $1,000,000. The actions required under this Section 5.9 shall be taken within 30 days (or such later time as may be acceptable to the Administrative Agent) after the event giving rise to the requirement to take such action. Notwithstanding the foregoing, (x) the Administrative Agent in its discretion may determine not to take a security interest in those assets as to which the Administrative Agent shall determine, in its reasonable discretion, that the cost of obtaining such Lien (including any mortgage, stamp, intangibles or other tax) are excessive in relation to the benefit to the Lenders of the security afforded thereby and (y) Liens required to be granted pursuant to this Section 5.9 shall be subject to exceptions and limitations consistent with those set forth in the Security Documents as in effect on the Closing Date (to the extent appropriate in the applicable jurisdiction).

SECTION 5.10. Certain Treasury Regulation Matters. In the event the Borrower determines to take any action inconsistent with its intention as set forth in the first sentence of Section 3.23, it will promptly notify the Administrative Agent thereof.

SECTION 5.11. Hedging Agreements. In the case of the Borrower, within 90 days after the Closing Date, enter into, and thereafter maintain, Hedging Agreements with one or more Lenders (or Affiliates thereof) to the extent necessary to provide that at least 50% of the aggregate principal amount of Funded Debt of the Borrower outstanding on the Closing Date is subject to either a fixed interest rate or interest rate protection for a period of not less than two years from the Closing Date, which Hedging Agreements shall have terms and conditions reasonably satisfactory to the Administrative Agent.

SECTION 5.12. Environmental Laws. Except, in each case, as would not, individually or in the aggregate, have a Material Adverse Effect:

(a) Comply in all material respects with, and use reasonable efforts to ensure compliance in all material respects by all contractors, tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and use reasonable efforts to ensure that all contractors, tenants and subtenants obtain and comply in all material respects with and maintain, any and all Environmental Permits required of them by any applicable Environmental Laws. For purposes of this Section 5.12(a), noncompliance with the foregoing shall be deemed not to constitute

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a breach of this covenant, provided, that upon learning of any actual or suspected noncompliance, Borrower shall promptly undertake reasonable efforts to achieve compliance.

(b) Conduct and complete in all material respects all investigations, studies, sampling and testing, and all remedial, removal and other actions required to be undertaken by any Group Member under Environmental Laws and promptly comply with all orders and directives applicable to any Group Member of all Governmental Authorities regarding Environmental Laws; provided, however, that this covenant shall be deemed not violated if the relevant Group Member promptly challenges in good faith any such order or directive in a manner consistent with all applicable Environmental Laws and other Requirements of Law and pursues such challenge or challenges diligently.

(c) Generate, use, treat, store, release, dispose of, and otherwise manage Hazardous Materials in a manner that would not reasonably be expected to result in a material Environmental Liability to any Group Member or to materially affect any real property owned or leased by any of them; and take reasonable efforts to prevent any other person from generating, using, treating, storing, releasing, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a material Environmental Liability to, or materially affect any real property owned or operated by, any Group Member. For purposes of this Section 5.12(c), noncompliance with the foregoing shall be deemed not to constitute a breach of this covenant, provided, that, upon learning of any actual or suspected noncompliance, the Borrower shall promptly undertake reasonable efforts to remove such Hazardous Materials, if required by applicable Environmental Law, or otherwise remediate them in a manner consistent with applicable Environmental Law.

(d) Maintain, update as appropriate, and implement in all material respects an ongoing program reasonably designed to ensure that all the properties and operations of the Group Members are regularly and reasonably reviewed by competent professionals to identify and promote compliance with, and to reasonably and prudently manage any Environmental Liabilities or potential Environmental Liabilities, under any Environmental Law that may affect any Group Member, including, without limitation, compliance and liabilities relating to: discharges to air and water; acquisition, transportation, storage and use of hazardous materials; waste disposal; repair, maintenance and improvement of properties; employee health and safety; species protection; and recordkeeping.

(e) If required by applicable law or prudent in the reasonable judgment of the Borrower, promptly take all commercially reasonable actions necessary to cure any material Environmental Liability, including the performance of any remediation as may be necessary.

(f) Deliver written notice to the Administrative Agent as soon as practicable following receipt of all environmental audits, investigations, analyses and reports of any kind or character, and all written communications, with respect to any Environmental Liability that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and, upon the request of the Administrative Agent, promptly deliver copies to the Administrative Agent of such environmental audits, investigations, analyses, reports and written communications.

ARTICLE VI

Negative Covenants

The Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been cancelled or have expired and all amounts drawn thereunder

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have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, nor will they cause or permit any of the Subsidiaries to:

SECTION 6.1. Indebtedness. Incur, create, assume or permit to exist any Indebtedness, except:

(a) Indebtedness existing on the date hereof and set forth in Schedule 6.1, including in the case of lines of credit the maximum amount of Indebtedness permitted to be incurred thereunder;

(b) Indebtedness created hereunder and under the other Loan Documents;

(c) intercompany Indebtedness of the Borrower and the Subsidiaries to the extent permitted by Section 6.4(c);

(d) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets; provided, that (i) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this Section 6.1(d), when combined with the aggregate principal amount of all Capital Lease Obligations and Synthetic Lease Obligations incurred pursuant to Section 6.1(e), shall not exceed $30,000,000 at any time outstanding;

(e) Purchase money Indebtedness (including Capital Lease Obligations) and Synthetic Lease Obligations in an aggregate principal amount, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 6.1(d), not in excess of $30,000,000 at any time outstanding;

(f) Indebtedness under completion guarantees, appeal bonds, performance or surety bonds or with respect to workers’ compensation claims, in each case incurred in the ordinary course of business;

(g) Indebtedness issued, acquired or assumed by the Borrower or any Subsidiary in connection with any Permitted Acquisition in an aggregate principal amount not in excess of $20,000,000 at any time outstanding;

(h) unsecured subordinated Indebtedness (which may be guaranteed by any Loan Party on a subordinated basis); provided, that such Indebtedness (i) matures after the six-month anniversary of the Term Loan Maturity Date, (ii) requires no scheduled payment of principal prior to its maturity, (iii) is subordinated to the Obligations on terms and conditions customary in the market for such Indebtedness at the time such Indebtedness is incurred and (iv) does not require the issuer thereof or any other obligor thereon to maintain any specified financial condition or performance (other than as a condition to the taking of certain actions);

(i) Indebtedness under or in respect of Hedging Agreements that are not speculative in nature;

(j) Indebtedness incurred to extend, renew or refinance any Indebtedness described in Section 6.1(a), (d), (g) or (h) (“Refinancing Indebtedness”); provided, that (i) such Refinancing Indebtedness is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being extended, renewed or refinanced, plus the amount of any interest,

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premiums or penalties required to be paid thereon plus fees and expenses associated therewith, (ii) such Refinancing Indebtedness has a later or equal final maturity and a longer or equal weighted average life to maturity than the Indebtedness being extended, renewed or refinanced, (iii) if the Indebtedness being extended, renewed or refinanced is subordinated to the Obligations, the Refinancing Indebtedness is subordinated to the Obligations on terms no less favorable to the Lenders than the Indebtedness being extended, renewed or refinanced, (iv) only the obligors in respect of the Indebtedness being extended, renewed or refinanced may become obligated with respect to such Refinancing Indebtedness, (v) the security interest(s) granted in connection with such Refinancing Indebtedness, if any, shall not cover more collateral, in any material respect, than the security interest(s), if any, granted in connection with the Indebtedness being refinanced and (vi) the non-economic covenants, events of default, remedies and other provisions of the Refinancing Indebtedness, when taken as a whole, shall be materially no less favorable to the Lenders than those contained in the Indebtedness being extended, renewed or refinanced;

(k) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness is extinguished within three Business Days of the incurrence thereof;

(l) Indebtedness of Foreign Subsidiaries to the Loan Parties not to exceed $50,000,000 in the aggregate at any one time;

(m) Cash Management Obligations and other Indebtedness in respect of netting services, overdraft protections and similar arrangements in each case in connection with deposit accounts;

(n) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(o) to the extent not included in Section 6.1(l), additional Indebtedness of Foreign Subsidiaries not to exceed $25,000,000 in the aggregate at any one time outstanding;

(p) other unsecured Indebtedness of the Borrower or the Domestic Subsidiaries in an aggregate principal amount not exceeding $50,000,000 at any time outstanding; and

(q) Indebtedness incurred by the Borrower or any Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation letters of credit in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided, that (i) upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence and (ii) such letters of credit are not provided to secure the repayment of other Indebtedness of the Borrower or any Subsidiary.

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SECTION 6.2. Liens. Create, incur, assume or permit to exist any Lien on any property or assets (including Equity Interests or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:

(a) Liens on property or assets of the Borrower and its Subsidiaries existing on the date hereof and set forth in Schedule 6.2; provided, that such Liens shall secure only those obligations which they secure on the date hereof and any extensions, renewals and replacements thereof permitted hereunder;

(b) any Lien created under the Loan Documents;

(c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary; provided, that (i) such Lien is not created in contemplation of or in connection with such acquisition, (ii) such Lien does not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien does not materially interfere with the use, occupancy and operation of any Mortgaged Property;

(d) Liens for taxes not yet due or which are being contested in compliance with Section 5.3;

(e) carriers’, landlords’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or which are being contested in compliance with Section 5.3 or for which appropriate reserves have been established;

(f) pledges and deposits made in the ordinary course of business in compliance with workmen’s compensation, unemployment insurance and other social security laws or regulations;

(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(h) zoning restrictions, easements, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries as currently operated;

(i) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary; provided, that (i) such security interests secure Indebtedness permitted by Section 6.1(d) or (e), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 120 days after such acquisition (or construction), and (iii) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary (it being agreed that transactions with the same vendor or any Affiliate of such vendor may be cross-collateralized);

(j) Liens arising out of judgments or awards in respect of which the Borrower or any of the Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; provided, that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $10,000,000 at any time outstanding;

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(k) licenses, leases or subleases granted by the Borrower or any Subsidiary to third persons in the ordinary course of business not interfering in any material respect with the business of the Borrower or any Subsidiary;

(l) Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(m) (i) Liens on the assets of a Foreign Subsidiary that is not a Guarantor securing Indebtedness permitted to be incurred by such Foreign Subsidiary pursuant to Section 6.1(l) and (ii) other Liens on the assets of a Foreign Subsidiary that is not a Guarantor securing Indebtedness by such Foreign Subsidiary not, in the case of this clause (ii), in excess of $1,000,000;

(n) any interest of a lessor under Liens arising from precautionary UCC financing statement filings regarding leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

(o) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

(p) Liens that are contractual or statutory setoff rights arising in the ordinary course of business with financial institutions, relating to pooled deposit accounts or sweep accounts of the Borrower and its Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business or relating to purchase orders or other agreements entered into with customers of the Borrower or any of its Subsidiaries in the ordinary course of business;

(q) Liens solely on any cash earnest money deposits by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted under this Agreement;

(r) other Liens on the assets of the Borrower or any Domestic Subsidiary that do not, individually or in the aggregate, secure obligations (or encumber property with a fair market value) in excess of $10,000,000 at any one time; and

(s) all Liens set forth in the survey and title policies delivered to the Administrative Agent pursuant to Section 4.2;

(t) any interest or title of a licensor, lessor or sublessor under any license or lease agreement pursuant to which rights are granted to the Borrower or any Subsidiary;

(u) Liens deemed to exist in connection with investments in repurchase agreements permitted under this Agreement; and

(v) Liens on any assets which are the subject of any GSA Transaction.

SECTION 6.3. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred unless (a) the sale of such property is permitted by Section 6.5 and (b) any Capital

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Lease Obligations, Synthetic Lease Obligations or Liens arising in connection therewith are permitted by Sections 6.1 and 6.2, as applicable.

SECTION 6.4. Investments, Loans and Advances. Purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except:

(a) (i) investments by the Borrower and the Subsidiaries existing on the date hereof in the Equity Interests of the Subsidiaries and (ii) additional investments by the Borrower and the Subsidiaries in the Equity Interests of the Subsidiaries; provided, that (A) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Guarantee and Collateral Agreement (subject to the limitations applicable to voting stock of a Foreign Subsidiary referred to therein), (B) any Loan Party must be wholly owned by the Borrower or another Loan Party and (C) the aggregate amount of investments by Loan Parties in, and loans and advances by Loan Parties to, Subsidiaries that are not Loan Parties (determined without regard to any write-downs or write-offs of such investments, loans and advances but taking into account repayments, redemptions, return of capital, etc.) under this clause (ii) shall not exceed $50,000,000 at any time outstanding;

(b) Permitted Investments;

(c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; provided, that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged to the Administrative Agent for the ratable benefit of the Secured Parties pursuant to the Guarantee and Collateral Agreement and (ii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (a) above;

(d) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(e) the Borrower and the Subsidiaries may make loans and advances in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $3,000,000 at any time and advances in the ordinary course of business of payroll payments to employees and for entertainment and travel expenses of employees;

(f) the Borrower may enter into Hedging Agreements in the ordinary course of business that are not speculative in nature;

(g) the Borrower or any Subsidiary may acquire all or substantially all the assets of a person or line of business of such person, or not less than 100% of the Equity Interests (except for directors’ qualifying shares) of a person (referred to herein as the “Acquired Entity”); provided, that (i) such acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, the Borrower or any Subsidiary; (ii) the Acquired Entity shall be a going concern and after giving effect to the acquisition the Borrower shall be in compliance with Section 6.8; (iii) at the time of such transaction, both before and after giving effect thereto, no Event of Default or Default shall have occurred and be continuing; and (iv) each Permitted

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Acquisition shall only consist of, or be financed with (I) cash and Permitted Investments of the Borrower and its Subsidiaries, (II) Incremental Term Loans, (III) Indebtedness incurred under Section 6.1(d), (e), (g), (h) and (p) (or any Refinancing Indebtedness thereof) and (IV) the proceeds of common or preferred equity (other than Disqualified Preferred Stock) investments in the Borrower after the Closing Date (it being understood that investments in Subsidiaries of proceeds of any of the foregoing to be used by such Subsidiaries must separately comply with the provisions of Section 6.4), and (v) the Borrower shall comply, and shall cause the Acquired Entity to comply, with the applicable provisions of Section 5.9 and the Security Documents (any acquisition of an Acquired Entity meeting all the criteria of this Section 6.4(g) being referred to herein as a “Permitted Acquisition”);

(h) the Borrower and its Subsidiaries may (i) acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (including the dating of receivables) of the Borrower or such Subsidiary and (ii) make loans to customers, dealers and suppliers in the ordinary course of business and consistent with past practices;

(i) the Borrower may acquire and hold obligations of one or more officers or other employees of the Borrower or its subsidiaries in connection with such officers’ or employees’ acquisition of Equity Interests of the Borrower;

(j) the Borrower and its Subsidiaries may acquire and hold non-cash consideration issued by the purchaser of assets in connection with a sale of such assets to the extent permitted by Section 6.5;

(k) investments, loans and advances existing on the date hereof and set forth in Schedule 6.4;

(l) investments by the Borrower or any Subsidiary in joint ventures or similar arrangements in an aggregate amount at any time outstanding not to exceed $10,000,000;

(m) investments by the Borrower or any Subsidiary to the extent funded with proceeds received by the Borrower from the sale after the Closing Date of common or preferred equity (other than Disqualified Preferred Stock);

(n) investments in Equity Interests of the Borrower permitted by Section 6.6(a)(ii);

(o) investments in fixed or capital assets from the proceeds of any Reinvestment Deferred Amount;

(p) purchases of inventory, raw materials and related assets in the ordinary course of business; and

(q) in addition to investments permitted by paragraphs (a) through (p) above, additional investments, loans and advances by the Borrower and the Subsidiaries so long as the aggregate amount invested, loaned or advanced pursuant to this paragraph (q) (determined without regard to any write-downs or write-offs of such investments, loans and advances but taking into account repayments, redemptions, return of capital etc.) does not exceed $20,000,000 in the aggregate at any one time outstanding.

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SECTION 6.5. Mergers, Consolidations, Sales of Assets and Acquisitions. (a) Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of the assets (whether now owned or hereafter acquired) of the Borrower or less than all the Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that (i) the Borrower and any Subsidiary may purchase and sell inventory, materials and equipment in the ordinary course of business and may license intellectual property in the ordinary course of business, (ii) the Borrower and any Subsidiary may sell obsolete, damaged or worn-out inventory and equipment in the ordinary course of business and (iii) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (u) any Subsidiary may change its form of organization in compliance with Section 5.6(a), if applicable, (v) any person may make investments and advances permitted by Section 6.4, (w) any wholly owned Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (x) any wholly owned Subsidiary may merge into or consolidate with any other wholly owned Subsidiary in a transaction in which the surviving entity is a wholly owned Subsidiary and no person other than the Borrower, a wholly owned Subsidiary or the De Minimis Holders receives any consideration (provided, that if any party to any such transaction is a Loan Party, the surviving entity of such transaction shall be a Loan Party), (y) the Borrower and any Subsidiary may make Permitted Acquisitions and (z) any Subsidiary of the Borrower may merge with another person in a transaction constituting an Asset Sale permitted hereunder.

(b) Engage in any Asset Sale otherwise permitted under paragraph (a) above unless (i) such Asset Sale is for consideration at least 75% of which is cash (other than in the case of a like-kind exchange or trade-in of one asset for another asset used or useful in the business of the Borrower and its Subsidiaries) and (ii) such consideration is at least equal to the fair market value of the assets being sold, transferred, leased or disposed of and the fair market value of all assets sold, transferred, leased or disposed of pursuant to this paragraph (b) shall not exceed $25,000,000 in any fiscal year. Upon a sale of assets or the sale of Equity Interests of a Subsidiary of a Loan Party permitted by this Section 6.5, the Administrative Agent shall deliver to the Borrower, upon the Borrower’s request and at the Borrower’s expense, such documentation as is reasonably necessary to evidence the release of the Adminstrative Agent’s security interest in such assets or Equity Interests, including, without limitation, amendments or terminations of UCC financing statements, the return of stock certificates and the release of a Guarantor (as applicable) from its obligations under the Loan Documents.

SECTION 6.6. Restricted Payments; Restrictive Agreements. (a) Declare or make, or agree to declare or make, directly or indirectly, any Restricted Payment (including pursuant to any Synthetic Purchase Agreement), or incur any obligation (contingent (unless the contingency is the repayment of the Obligations or receipt of consent from the requisite lenders under this Agreement) or otherwise) to do so; provided, however, that:

(i) any direct or indirect wholly owned Domestic Subsidiary of the Borrower and any Foreign Subsidiary may declare and pay dividends or make other distributions ratably to its equity holders;

(ii) so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom, the Borrower may repurchase Equity Interests of the Borrower owned by past or present officers, directors or employees of the Borrower or the Subsidiaries or make payments to employees of the Borrower or the Subsidiaries upon termination of employment of such employees (including as a result of retirement or severance) in connection with the exercise of stock options, stock appreciation rights or similar equity incentives or equity based incentives pursuant to management incentive plans or in connection with the death or disability of such

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employees in an aggregate amount not to exceed $5,000,000 in any fiscal year (it being agreed that any amount not utilized in any fiscal year may be carried forward and utilized in the immediately following fiscal year and that any amount spent in any fiscal year shall be deemed to utilize any such carried forward amount first);

(iii) so long as no Event of Default under clause (b) or (c) of Article VII shall have occurred and be continuing, the Borrower may pay management fees to the Sponsor in an aggregate amount not to exceed $2,000,000 per fiscal year;

(iv) subject to Section 6.9(b), after the Initial Public Offering, the Borrower may pay dividends to its shareholders each fiscal year in an amount not to exceed the greater of (A) $10,000,000 and (B) 6% of the gross equity proceeds of the Initial Public Offering (and any other offering of Equity Interests of the Borrower thereafter except to the extent such proceeds are used to make Restricted Payments under clause (vii) of this Section 6.6(a)) received by the Borrower, so long as the Borrower is in Pro Forma Compliance and at the time of such dividend and immediately after giving effect thereto no Default or Event of Default shall have occurred and be continuing;

(v) the Borrower may make Restricted Payments to fund amounts payable to any participant in any Plan of the Borrower or the Subsidiaries upon the termination of the employment of such participant in an amount not to exceed $1,000,000 in any fiscal year of the Borrower;

(vi) the Borrower may pay the 2004 Dividend;

(vii) subject to Section 6.9(b), the Borrower may make Restricted Payments in an amount equal to primary equity proceeds (other than proceeds from the Initial Public Offering) received by the Borrower so long as (A) such Restricted Payment is paid within 90 days of the receipt of such primary equity proceeds, (B) immediately after giving effect to such Restricted Payment no Default or Event of Default shall have occurred and be continuing and (C) the Borrower is in Pro Forma Compliance; provided, that any equity proceeds used to make Restricted Payments under this clause (vii) may not be used to make Restricted Payments made under clause (B) of clause (iv) of this Section 6.6(a); and

(viii) subject to Section 6.9(b), in addition to the Restricted Payments in clauses (i)-(vii) above, the Borrower and its Subsidiaries may make additional Restricted Payments in an amount not to exceed $10,000,000 in the aggregate in any fiscal year of the Borrower; provided, that no such dollar limitation shall apply so long as (A) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (B) the Borrower’s Leverage Ratio determined on a pro forma basis as if such Restricted Payment had been made on the first day of the most recently ended four-fiscal quarter period of the Borrower is less than 2.50 to 1.00 and (C) the Borrower is otherwise in Pro Forma Compliance.

Notwithstanding the foregoing, in the event that the failure to comply with any Financial Performance Covenant is cured through the exercise of the Cure Right set forth in Article VII, Sections 6.6(a)(iii), (iv), (v), (vi), (vii) and (viii) above shall only be available to the Loan Parties if (x) the Required Lenders consent to the relevant Restricted Payment pursuant to Section 6.6(a)(iii), (iv), (v), (vi), (vii) and (viii) or (y) the Borrower is in compliance with all Financial Performance Covenants as of the end of any two consecutive fiscal quarters following the fiscal quarter in which the Borrower exercised its Cure Right.

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(b) Enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets to secure the Obligations or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided, that (A) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document, (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of stock or assets of a Subsidiary pending such sale, provided, such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (C) clause (i) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (D) clause (i) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof and (E) clause (i) and (ii) of the foregoing shall not apply to restrictions and conditions imposed (1) under debt agreements of Foreign Subsidiaries incurred under Section 6.1(o) or (2) under contracts with customers entered into the ordinary course of business that contain restrictions on cash or other deposits or net worth.

SECTION 6.7. Transactions with Affiliates. Except for transactions by or among Loan Parties or by or among Foreign Subsidiaries, sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except that (a) the Borrower or any Subsidiary may engage in any of the foregoing transactions at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) Restricted Payments may be effected to the extent provided in Section 6.6, (c) reasonable fees and compensation may be paid to, and indemnities may be provided on behalf of, officers, directors and employees of, and consultants (other than the Sponsor) to, the Borrower and the Subsidiaries, as determined by the Board of Directors or appropriate officers of the Borrower in good faith, (d) securities may be issued and other payments, awards or grants (in cash, equity securities or otherwise) may be made pursuant to, or with respect to the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Borrower in good faith, (e) the Loan Parties may perform their respective obligations under the terms of any registration rights agreement, (f) loans, investments and advances may be made to the extent permitted by Sections 6.1 and 6.4, (g) fees may be paid to the Sponsor in respect of any Permitted Acquisition or disposition permitted hereunder with respect to which the Sponsor acts as an adviser to the Borrower or any Subsidiary in any amount not to exceed 1% of the value of such Permitted Acquisition or disposition and (h) transfers of property or assets from Loan Parties to Foreign Subsidiaries in the ordinary course of business not otherwise prohibited under this Agreement.

SECTION 6.8. Business of Borrower and Subsidiaries. Engage at any time in any business or business activity other than the business currently conducted by them and business activities that constitute a reasonable extension, development or expansion thereof reasonably incidental thereto.

SECTION 6.9. Amendments and Prepayments of Subordinated Indebtedness. (a) Permit any supplement, modification or amendment of any subordinated Indebtedness of the Borrower or any Subsidiary that would cause such Indebtedness to not be in compliance with the subordination provisions of Section 6.1(h) or that is reasonably likely to adversely affect the ability of the Borrower to repay the Obligations when due without the prior written consent of the Administrative Agent.

(b) Make any distribution, whether in cash, property, securities or a combination thereof in excess of $15,000,000 in the aggregate during the term of this Agreement plus any Additional Amount (as defined below), other than regularly scheduled payments of principal and interest as and when due (to

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the extent not prohibited by applicable subordination provisions), in respect of, or pay, or offer or commit to pay, or directly or indirectly (including pursuant to any Synthetic Purchase Agreement) redeem, repurchase, retire or otherwise acquire for consideration, or set apart any sum for the aforesaid purposes, any subordinated Indebtedness (provided, however, that the foregoing shall not prohibit any refinancings of Indebtedness in accordance with Section 6.1(j), the conversion of any such Indebtedness into Equity Interests (other than Disqualifed Preferred Stock) or any transaction otherwise prohibited by this clause (b) funded with the proceeds received by the Borrower of Equity Interests). The term “Additional Amount” shall mean the amount which may be paid as a Restricted Payment under Sections 6.6(a)(iv), (vii) or (viii); provided, that any such amount used as an Additional Amount shall reduce the amount available for Restricted Payments under Sections 6.6(a)(iv), (vii) or (viii), as applicable. The Borrower shall from time to time notify the Administrative of the computation and allocation of the Additional Amount among this Section 6.9(b) and such Sections 6.6(a)(iv), (vii) or (viii).

SECTION 6.10. Capital Expenditures. (a) Permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries in any fiscal year of the Borrower to exceed the sum of (i) the amount set forth below for such fiscal year as the “Capital Expenditure Base Amount” for such year, and (ii) the Acquired CapEx Amount:

Fiscal Year Ended	Capital Expenditure Base Amount
December 31, 2004	$	20,000,000
December 31, 2005	$	20,000,000
December 31, 2006	$	25,000,000
December 31, 2007	$	25,000,000
December 31, 2008	$	35,000,000
December 31, 2009 and each fiscal year ending thereafter	$	35,000,000

For purposes of this Section 6.10, the “Acquired CapEx Amount”, with respect to any Acquired Entity, shall equal the product of (x) the aggregate amount of Capital Expenditures made by the Acquired Entity in the two fiscal years prior to the date of the Permitted Acquisition and (y) 0.50.

(b) The amount of permitted Capital Expenditures set forth in paragraph (a) above (as adjusted in accordance with the terms thereof) in respect of any fiscal year commencing with the fiscal year ending on January 1, 2005, shall be increased (but not decreased) by the amount of unused permitted Capital Expenditures for the two immediately preceding fiscal years; provided, that Capital Expenditures made pursuant to this Section during any fiscal year shall be deemed made, first, in respect of amounts carried over from the fiscal year two years prior thereto pursuant to the preceding sentence, second, in respect of amounts carried over from the fiscal year immediately prior thereto pursuant to the preceding sentence and, third, in respect of amounts permitted for such fiscal year as provided above.

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SECTION 6.11. Interest Coverage Ratio. Permit the Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower, in each case taken as one accounting period, ending on a date or during any period set forth below to be less than the ratio set forth opposite such date or period below:

Date or Period	Ratio
December 31, 2004	2.25 to 1.00
March 31, 2005	2.25 to 1.00
June 30, 2005	2.25 to 1.00
September 30, 2005	2.25 to 1.00
December 31, 2005	2.25 to 1.00
March 31, 2006	2.50 to 1.00
June 30, 2006	2.50 to 1.00
September 30, 2006	2.75 to 1.00
December 31, 2006	2.75 to 1.00
March 31, 2007	2.75 to 1.00
June 30, 2007	2.75 to 1.00
September 30, 2007 and each four-fiscal quarter period ending thereafter	3.00 to 1.00

SECTION 6.12. Maximum Leverage Ratio. Permit the Leverage Ratio at the end of any fiscal quarter ending on a date or during a period set forth below to be greater than the ratio set forth opposite such date or period below.

Date or Period	Ratio
December 31, 2004	5.25 to 1.00
March 31, 2005	5.25 to 1.00
June 30, 2005	5.00 to 1.00
September 30, 2005	4.75 to 1.00
December 31, 2005	4.75 to 1.00
March 31, 2006	4.50 to 1.00
June 30, 2006	4.50 to 1.00
September 30, 2006	4.25 to 1.00
December 31, 2006	4.25 to 1.00
March 31, 2007	4.00 to 1.00
June 30, 2007	4.00 to 1.00
September 30, 2007	4.00 to 1.00
December 31, 2007	4.00 to 1.00
March 31, 2008	3.75 to 1.00
June 30, 2008	3.75 to 1.00
September 30, 2008	3.50 to 1.00
December 31, 2008	3.50 to 1.00
March 31, 2009	3.25 to 1.00
June 30, 2009	3.25 to 1.00
September 30, 2009 and each four-fiscal quarter period ending thereafter	3.00 to 1.00

SECTION 6.13. Fiscal Year. Change its fiscal year-end to a date other than December 31.

SECTION 6.14. Anti-Terrorism Law; Anti-Money Laundering. (a) Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or

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services to or for the benefit of any person described in Section 3.24, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other law relating to terrorism or money laundering (“Anti-Terrorism Laws”) or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties’ compliance with this Section 6.14).

(b) Cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of law.

SECTION 6.15. Embargoed Person. Cause or permit (a) any of the funds or properties of the Loan Parties that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law (each such person, an “Embargoed Person”) that is identified on (1) the “List of Specially Designated Nationals and Blocked Persons” and/or on any other similar list maintained by the U.S. Treasury Department Office of Foreign Assets Control pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive order or regulation promulgated thereunder, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law, or the Loans made by the Lenders would be in violation of law, or (2) the Executive Order, any related enabling legislation or any other similar executive orders, or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by law or the Loans are in violation of law.

ARTICLE VII

Events of Default

In case of the happening of any of the following events (“Events of Default”):

(a) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

(b) default shall be made in the payment of any principal of any Loan or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

(c) default shall be made in the payment of any interest on any Loan or L/C Disbursement or of any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

(d) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.1(a), 5.5(a), 5.8 or in Article VI;

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(e) default shall be made in the due observance or performance by the Borrower or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower;

(f) (i) the Borrower or any Material Subsidiary shall fail to pay any principal or interest due in respect of any Material Indebtedness, when and as the same shall become due and payable, or (ii) any other event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided, that this clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Material Subsidiary, or of a substantial part of the property or assets of the Borrower or a Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of the property or assets of the Borrower or a Material Subsidiary or (iii) the winding-up or liquidation of the Borrower or any Material Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(h) the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of the property or assets of the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

(i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 (net of amounts covered by independent third party insurance as to which the insurer has been notified of such judgment or order and does not deny coverage and of amounts covered by an indemnity from a person that, in the reasonable judgment of the Administrative Agent, is creditworthy) from a party shall be rendered against the Borrower, any Material Subsidiary or any combination thereof and the same shall remain unsatisfied and undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Material Subsidiary to enforce any such judgment;

(j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its ERISA Affiliates in an aggregate amount exceeding $10,000,000;

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(k) any Guarantee under the Guarantee and Collateral Agreement for any reason shall cease to be in full force and effect (other than in accordance with its terms), or any Guarantor shall deny in writing that it has any further liability under the Guarantee and Collateral Agreement (other than as a result of the discharge of such Guarantor in accordance with the terms of the Loan Documents);

(l) any security interest in any material item of Collateral purported to be created by any Security Document shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent to maintain possession of certificates representing securities pledged under the Pledge Agreement and except to the extent that such loss is covered by a lender’s title insurance policy and the related insurer shall not have denied or disclaimed in writing that such loss is covered by such title insurance policy; or

(m) there shall have occurred a Change in Control;

then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h)(i)-(v) above), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h)(i)-(v) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

Notwithstanding anything to the contrary contained in this Article VII, in the event that the Borrower would otherwise fail to comply with the requirements of Sections 6.11 or 6.12 (each, a “Financial Performance Covenant”) at the end of any fiscal quarter, at any time within ten days after the date on which a Compliance Certificate must be delivered for the end of such fiscal quarter or fiscal year, as applicable, the Borrower shall have the right, exercisable at any time during the term of this Agreement (provided that such right may not be exercised with respect to more than two fiscal quarters during any consecutive four fiscal quarter period), to issue Permitted Cure Securities (as defined below) for cash or otherwise receive cash contributions to the capital of the Borrower (in any case, not in excess of $25,000,000 in the aggregate in any consecutive four fiscal quarter period), and to contribute any such cash to the capital of Borrower (the “Cure Right”), and upon the receipt by the Borrower of such cash (the “Cure Amount”) pursuant to the exercise by the Borrower of such Cure Right, the Financial Performance Covenants shall be recalculated giving effect to the following pro forma adjustments:

(i) Consolidated EBITDA shall be increased solely for the purpose of measuring the Financial Performance Covenants and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

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(ii) if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with the requirements of all Financial Performance Covenants, the Borrower shall be deemed to have satisfied the requirements of the Financial Performance Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of any such Financial Performance Covenant that would have otherwise occurred on such date but for the application of the foregoing recalculations shall be deemed not to have occurred.

As used in this Article VII, the term “Permitted Cure Securities” shall mean an equity security of the Borrower having no mandatory redemption, repurchase, repayment or similar requirements prior to the six-month anniversary of the Term Loan Maturity Date and upon which all dividends or distributions, at the election of the Borrower, may be payable in additional shares of such equity security.

ARTICLE VIII

The Agents

SECTION 8.1. Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as an agent of such Lender under this Agreement and the other Loan Documents. Each Lender irrevocably authorizes the Administrative Agent, in such capacity, through its agents or employees, to take such actions on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.

SECTION 8.2. Delegation of Duties. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Affiliates of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Administrative Agent.

SECTION 8.3. Exculpatory Provisions. No Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.8), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose or shall be liable for the failure to disclose, any information relating to Borrower or any Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.8) or in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower or a Lender, and no Agent shall be

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responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document.

SECTION 8.4. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by a proper person. The Administrative Agent also may rely upon any statement made to it orally and believed by it to be made by a proper person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for Borrower), independent accountants and other advisors selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or advisors. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

SECTION 8.5. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

SECTION 8.6. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required

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to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

SECTION 8.7. Indemnification. The Lenders severally agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this Section 8.7 (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans and Reimbursement Obligations shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans and Reimbursement Obligations) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent’s gross negligence or willful misconduct. The agreements in this Section 8.7 shall survive the payment of the Loans and all other amounts payable hereunder.

SECTION 8.8. Agent in Its Individual Capacity. Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

SECTION 8.9. Successor Administrative Agent. The Administrative Agent may resign as such at any time upon at least 10 days’ prior notice to the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right upon approval of the Borrower (whose approval shall not be required during the continuance of an Event of Default and shall not, in any event, be unreasonably withheld or delayed), to appoint a successor from among the Lenders. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor, which successor shall be a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, in each case, having combined capital and surplus of at least $250 million; provided, that if such retiring Administrative Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor. Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and

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such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article VIII and Section 9.5 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as the Administrative Agent.

SECTION 8.10. Co-Documentation Agents and Syndication Agent. The parties hereto acknowledge that the Co-Documentation Agents and the Syndication Agent hold such titles in name only, and that such titles confer no additional rights or obligations relative to those conferred on any Lender hereunder.

ARTICLE IX

Miscellaneous

SECTION 9.1. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to the Borrower, to it at 1235 Water Street, East Greenville, Pennsylvania 18041, Attention: Barry McCabe and the Office of the General Counsel, Fax No.: (215) 679-1013;

(b) if to the Administrative Agent or the Swingline Lender, to 677 Washington Boulevard, Stamford, Connecticut 06901, Attention: Vladimira Holeckova, Fax No.: (203) 719-4176; and

(c) if to a Lender, to it at its address (or fax number) set forth on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender shall have become a party hereto.

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.1 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.1. As agreed to among the Borrower, the Administrative Agent, the Swingline Lender and the applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person.

SECTION 9.2. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Issuing Bank and shall survive the making by the Lenders of the Loans and the issuance of Letters of Credit by the Issuing Bank, regardless of any investigation made by the Lenders or the Issuing Bank or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. The provisions of Sections 2.14, 2.15, 2.19 and 9.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or

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unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Lender or the Issuing Bank.

SECTION 9.3. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.

SECTION 9.4. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Bank that issues any Letter of Credit), except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, express or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Any Lender shall have the right at any time to assign to one or more banks, insurance companies, investment companies or funds or other institutions (other than the Borrower or any Affiliate or Subsidiary thereof) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, that (A) except in the case of an assignment to an Approved Fund, a Lender or an Affiliate of a Lender or an assignment by UBS Loan Finance LLC or Goldman Sachs Credit Partners L.P. or any of their respective Affiliates, the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Credit Commitment or any Lender’s obligations in respect of its L/C Exposure or Swingline Exposure, the Issuing Bank, the Swingline Lender and the Borrower) must give its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (B) except in the case of an assignment to an Approved Fund, a Lender or an Affiliate of a Lender, any assignment made prior to Completion of the Primary Syndication of the Commitment and Loans by the Arrangers or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the Borrower and the Administrative Agent otherwise consent (such consent not to be unreasonably withheld or delayed), (C) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, except that this clause (C) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans, (D) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (E) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire; and provided, further, that any consent of the Borrower otherwise required under this paragraph shall not be required if a Default has occurred and is continuing.

(c) Subject to acceptance and recording thereof pursuant to Section 9.4(d), from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s

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rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.19 and 9.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.4 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.4(f).

(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and Reimbursement Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.

(e) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed administrative questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in Section 9.4(b) and any written consent to such assignment required by Section 9.4(b), the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(f) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided, that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided, that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to Section 9.8(b) and (2) directly affects such Participant. Subject to Section 9.4(f)(ii), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.19 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.4(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 2.17 as though it were a Lender, provided, such Participant shall be subject to Section 9.6 as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.19 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.19 unless such Participant complies with Section 2.19(e).

(g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or

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assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of Borrower or the Administrative Agent, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities.

(h) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent and without regard to the limitations set forth in Section 9.4(b). Each of the Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

SECTION 9.5. Expenses; Indemnity. (a) The Borrower agrees to pay, promptly upon demand:

(i) costs and expenses incurred by the Arrangers, the Administrative Agent, the Syndication Agent, the Swingline Lender and the Issuing Bank, including the fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the Swingline Lender and the Issuing Bank, in connection with the syndication of the Loans and Commitments, the preparation, execution and delivery of the Loan Documents, the administration of the Loans and Commitments, the perfection and maintenance of the Liens securing the Collateral and any actual or proposed amendment, supplement or waiver of any of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated);

(ii) all costs and expenses incurred by the Administrative Agent, including the fees, charges and disbursements of Advisors for the Administrative Agent, in connection with any action, suit or other proceeding affecting the Collateral or any part thereof, in which action, suit or proceeding the Administrative Agent is made a party or participates or in which the right to use the Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Administrative Agent to defend or uphold the Liens granted by the Security Documents (including any action, suit or proceeding to establish or uphold the compliance of the Collateral with any Requirements of Law);

(iii) all costs and expenses incurred by the Arrangers, the Administrative Agent, the Syndication Agent, the Swingline Lender, the Issuing Bank or any Lender, including the fees, charges and disbursements of Advisors for the Arrangers, the Administrative Agent, the Syndication Agent, the Swingline Lender, the Issuing Bank or any Lender, incurred in connection with the enforcement or protection of its rights under the Loan Documents, including its rights under this Section 9.5(a), or in connection with the Loans made or Letters of Credit issued hereunder and the collection of the Obligations, including all such costs and expenses incurred during any workout, restructuring or negotiations in respect of the Obligations; and

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(iv) all documentary and similar taxes and charges in respect of the Loan Documents.

For purposes of this Section 9.5(a), “Advisors” shall mean legal counsel (including local counsel), auditors, accountants, consultants, appraisers or other advisors; provided, that (x) in the case of clause (i), the engagement of any Advisors other than legal counsel (including local counsel) shall be subject to approval by the Borrower (which approval shall not be unreasonably withheld) and, in the case of clauses (i) and (ii), the term “Advisors” shall include one firm of legal counsel plus any local or special counsel, and (y) in the case of clause (iii), the engagement of any Advisors other than one firm of legal counsel by any Lender shall be subject to approval by the Administrative Agent.

(b) The Borrower agrees to indemnify the Agents, the Arrangers, each Lender, the Issuing Bank, the Swingline Lender and each Related Party of any of the foregoing persons (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, penalties, judgments, suits and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution, delivery, performance, administration or enforcement of the Loan Documents, (ii) any actual or proposed use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged presence or Release or threatened Release of Hazardous Materials, on, at, under or from any property owned, leased or operated by any Loan Party at any time, or any Environmental Liability directly or indirectly related in any way to any Loan Party; provided, that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

(c) To the extent that the Borrower fails to promptly pay any amount required to be paid by it to any Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Agents such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent in its capacity as such. For purposes of the immediately preceding sentence, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the Aggregate Revolving Credit Exposure, outstanding Term Loans and unused Commitments at the time. To the extent that the Borrower fails to promptly pay any amount required to be paid by it to the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Revolving Credit Lender severally agrees to pay to the Issuing Bank or the Swingline Lender, as the case may be, such Revolving Credit Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against any of the Issuing Bank or the Swingline Lender in its capacity as such. For purposes of the immediately preceding sentence, a Revolving Credit Lender’s “pro rata share” shall be determined based upon its share of the Aggregate Revolving Credit Exposure.

(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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(e) The provisions of this Section 9.5 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of the Loans and Reimbursement Obligations, the release of all or any portion of the Collateral, the expiration of the Commitments, the expiration of any Letter of Credit, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Agents, the Issuing Bank or any Lender. All amounts due under this Section 9.5 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.

SECTION 9.6. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, except to the extent prohibited by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement and other Loan Documents held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.6 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.7. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS MOST RECENTLY PUBLISHED AND IN EFFECT, ON THE DATE SUCH LETTER OF CREDIT WAS ISSUED, BY THE INTERNATIONAL CHAMBER OF COMMERCE (THE “UNIFORM CUSTOMS”) OR, IF AGREED TO BY THE ISSUING BANK AND THE ADMINISTRATIVE AGENT, THE INTERNATIONAL STANDBY PRACTICES, AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS OR THE INTERNATIONAL STANDBY PRACTICES, AS APPLICABLE, THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.8. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, any Lender or the Issuing Bank in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

(b) Except as provided in paragraph (c) below, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended, supplemented or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders (or the Administrative Agent, with the consent of the Required

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Lenders) (and, prior to the Completion of the Primary Syndication of the Commitments, the Arrangers) or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the written consent of the Required Lenders (and, prior to the Completion of the Primary Syndication of the Commitments, the Arrangers); provided, however, that (x) the Borrower and the Administrative Agent may enter into an amendment to effect the provisions of Section 2.23(b) or 2.24(b) upon the effectiveness of any Incremental Term Loan Assumption Agreement or Incremental Revolving Loan Assumption Agreement, as the case may be (and any such amendment shall in any event be deemed to have occurred upon such effectiveness), and (y) no such agreement under this Section 9.8(b) shall (i) decrease or forgive the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan or any date for reimbursement of an L/C Disbursement, or waive or excuse any such payment or any part thereof, or decrease the rate of interest on any Loan or L/C Disbursement, without the prior written consent of each Lender affected thereby, (ii) increase or extend the Commitment or decrease or extend the date for payment of any Fees of or any other amount actually due and payable hereunder to any Lender without the prior written consent of such Lender, (iii) amend or modify the pro rata requirements of Sections 2.16 and 2.17, the provisions of this Section, or release any Guarantor party to the Guarantee and Collateral Agreement (except as contemplated by this Agreement) or limit such Guarantor’s liability under the Guarantee and Collateral Agreement, without the prior written consent of each Lender, (iv) change the provisions (including Sections 2.12 and 2.13 of this Agreement) of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of one Class differently from the rights of Lenders holding Loans of any other Class without the prior written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, (v) release all or a substantial portion of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Obligations entitled to the Liens of the Security Documents (except in connection with securing additional Obligations equally and ratably with the other Obligations or as contemplated by Section 9.18), in each case without the written consent of each Lender, (vi) reduce the percentage contained in the definition of the term “Required Lenders” without the prior written consent of each Lender (it being understood that with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Term Loan Commitments and Revolving Credit Commitments on the date hereof) or (vii) without the prior written consent of each Lender directly affected thereby, amend the definition of the term “Interest Period” in any way which would permit Interest Periods to be in excess of six months; provided, further, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (it being understood that any Commitments or Loans held or deemed held by any Defaulting Lender shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).

SECTION 9.9. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any L/C Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or participation in such L/C Disbursement under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the

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operation of this Section 9.9 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.10. Entire Agreement. This Agreement, the Syndication Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 9.13. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 9.3. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

SECTION 9.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties

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hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or its properties in the courts of any jurisdiction.

(b) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) The Borrower irrevocably consents to service of process in the manner provided for notices in Section 9.1. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.16. Confidentiality. Each of the Administrative Agent, each other Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates’ officers, directors, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority or quasi-regulatory authority (such as the National Association of Insurance Commissioners), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (v) subject to an agreement containing provisions substantially the same as those of this Section 9.16, to (A) any actual or prospective assignee or pledgee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (vi) with the consent of the Borrower or (vii) to the extent such Information becomes publicly available other than as a result of a breach of this Section 9.16. For the purposes of this Section, “Information” shall mean all information received from the Borrower and related to the Borrower or its business, other than any such information that was available to the Administrative Agent, any other Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its disclosure by the Borrower; provided that, in the case of Information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Information as provided in this Section 9.16 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord its own confidential information.

SECTION 9.17. USA Patriot Act. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.

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SECTION 9.18. Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 9.8) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 9.8 or (ii) under the circumstances described in paragraph (b) below.

(b) At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents (other than obligations under or in respect of Hedging Agreements) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any person.

(c) Upon the occurrence of a Release of Collateral Event and provided that no Default or Event of Default shall have occurred and be continuing, the Lenders agree, upon the request of and at the expense of the Borrower, to take such action as is necessary to release all Collateral other than Collateral consisting of Equity Interests of the Borrower (if applicable) and its subsidiaries; provided, however, that if such Release of Collateral Event ceases to be continuing and in effect at any time, the Required Lenders or the Administrative Agent may require first priority security interests on the same categories of Collateral that was previously released, such security interests to be created and perfected within 30 days of notice from the Required Lenders or the Administrative Agent to the Borrower. The Lenders hereby authorize the Administrative Agent to execute and deliver such documentation or to take such other action as is necessary to give effect to this Section 9.18.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

KNOLL, INC.
by	/s/ Barry L. McCabe
	Name:	Barry L. McCabe
	Title:	Chief Financial Officer and Senior Vice-President
UBS AG, STAMFORD BRANCH, as Administrative Agent
by	/s/ Wilfred V. Saint
	Name:	Wilfred V. Saint
	Title:	Director Banking Products Services U.S.
by	/s/ Joselin Fernandes
	Name:	Joselin Fernandes
	Title:	Associate Director Banking Products Services, US
UBS SECURITIES LLC, as an Arranger and as a Co-Documentation Agent
by	/s/ David A. Juge
	Name:	David A. Juge
	Title:	Managing Director
by	/s/ Oliver O. Trumbo II
	Name:	Oliver O. Trumbo II
	Title:	Director
UBS LOAN FINANCE LLC, individually and as Swingline Lender
by	/s/ Wilfred V. Saint
	Name:	Wilfred V. Saint
	Title:	Director Banking Products Services U.S.
by	/s/ Joselin Fernandes
	Name:	Joselin Fernandes
	Title:	Associate Director Banking Products Services, US

GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, as Syndication Agent, as a Co- Documentation Agent and as an Arranger
by	/s/ William W. Archer
	Name:	William W. Archer
	Title:	Managing Director

AMALGAMATED BANK, as a Lender
by	/s/ J. Bruce Meredith
	Name:	J. Bruce Meredith
	Title:	Vice President

2

EXHIBIT A

FINAL

2650780v.3

[FORM OF]

ASSIGNMENT AND ASSUMPTION

Reference is made to the Credit Agreement dated as of September 30, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used but not defined herein shall have the meaning ascribed thereto in the Credit Agreement) among KNOLL, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties thereto, [            ], as documentation agent, GOLDMAN SACHS CREDIT PARTNERS L.P., as syndication agent, UBS AG, STAMFORD BRANCH, as administrative agent, and UBS SECURITIES LLC, and GOLDMAN SACHS CREDIT PARTNERS L.P., as joint lead arrangers and joint bookrunners.

1. The Assignor identified on the signature page hereto (the “Assignor”) hereby sells and assigns, without recourse, to the Assignee identified on the signature page hereto (the “Assignee”), and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date of Assignment set forth below (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.4(d) of the Credit Agreement), the interests set forth below (the “Assigned Interest”) in the Assignor’s rights and obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the Swingline Commitment, Revolving Commitment and the Term Loans, Other Term Loans, Swingline Loans, Revolving Loans and participations held by the Assignor in Letters of Credit which are outstanding on the Effective Date of Assignment. From and after the Effective Date of Assignment (i) the Assignee, if it is not already a party to the Credit Agreement, shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Assumption, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Assumption, relinquish its rights and be released from its obligations under the Credit Agreement.

2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim and that its Commitment, and the outstanding balances of its Revolving Loans, without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Assumption; (ii) except as set forth in (i) above, the Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto

3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Assumption; (b) confirms that it has received a copy of the Credit Agreement together with copies of the financial statements referred to in Section 5.4 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this

Assignment and Assumption; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.

4. This Assignment and Assumption is being delivered to the Administrative Agent together with (i) if the Assignee is a Foreign Lender, the documentation requested pursuant to Section 2.19(e) of the Credit Agreement, duly completed and executed by such Assignee; (ii) if the Assignee is not already a Lender under the Credit Agreement, an administrative questionnaire required under Section 9.4(b) of the Credit Agreement; and (iii) a processing and recordation fee of $3,500.

5. This Assignment and Assumption shall be construed in accordance with and governed by the law of the State of New York without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.

6. Date of Assignment:

7. Legal Name of Assignor:

8. Legal Name of Assignee:

9. Assignee’s Address for Notices:

10. Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment unless the Administrative Agent shall otherwise agree):

11. Percentage Assigned of Applicable Loan/Commitment:

Loan/Commitment	Principal Amount Assigned	Percentage Assigned of Applicable Loan/Commitment (set forth, to at least 8 decimals, as a percentage of the Loan and the aggregate Commitments of all Lenders thereunder)
Term Loans	$	%
Other Term Loans	$	%
Revolving Loans	$	%
Letters of Credit	$	%
Swingline Loans	$	%

[Signature Page Follows]

The terms set forth above are hereby agreed to:
[                                    ],
as Assignor
By:
	Name:
	Title:

[                                    ],
as Assignee
By:
	Name:
	Title:

Accepted:
[KNOLL, INC.
By:
	Name:
	Title:]*

UBS AG, STAMFORD BRANCH,
as Administrative Agent[, as Issuing Bank and as Swingline Lender]*
By:
	Name:
	Title:

By:
	Name:
	Title:

* To be included only to the extent the Issuing Bank, the Swingline Lender and the Borrower consent is required under Section 9.04(b) of the Credit Agreement.

2650815 EXHIBIT B

FORM OF BORROWING REQUEST

To:	UBS AG, Stamford Branch
	as Administrative Agent
	677 Washington Boulevard
	Stamford, CT 06901
	Attention: Vladimira Holeckova
	Telecopy: (203) 719-4176

Reference is made to the Credit Agreement dated as of September 30, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Knoll, Inc. a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties thereto, [            ], as documentation agent, Goldman Sachs Credit Partners L.P., as syndication agent, UBS AG, Stamford Branch, as administrative agent, and UBS Securities LLC, and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined.

The Borrower hereby gives notice to the Administrative Agent that Loans under the Facility, and of the type and amount, set forth below are requested to be made on the date indicated below:

[TERM] [OTHER TERM] [REVOLVING CREDIT] [SWINGLINE] LOANS¹

Type of Loans	Interest Period	Aggregate Amount	Date of Loans
ABR Loans	N/A	________	___________
	______	________	___________
Eurodollar Loans2	______	________
	______	________
	______	________

¹ Specify the Facility under which Loans are requested. The Borrower shall submit a separate Borrowing Request for requested Loans under each Facility.

² If more than one Interest Period is requested, the Borrower shall list duration of each requested Interest Period and amount of requested Loans allocated to each Interest Period.

The proceeds of the Loans are to be deposited in the following account of the Borrower:

Wire Instructions:
[                               ]
ABA:	[                    ]
A/C:	[                      ]
A/C#:	[                    ]
Ref:	[                       ]

The Borrower hereby certifies that as of the date hereof:

(i) the representations and warranties contained in each of the Loan Documents are true, correct and complete in all material respects on and as of the date hereof with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects on and as of such earlier date; and

(ii) no Event of Default or Default has occurred and is continuing.

KNOLL, INC.
By:
	Title:

DATE:                        

2

EXHIBIT C

GUARANTEE AND COLLATERAL AGREEMENT

dated as of

                            , 2004,

among

KNOLL, INC.,

the Subsidiaries of KNOLL, INC. identified herein,

and

UBS AG, STAMFORD BRANCH,

as

Administrative Agent

Table of Contents

		Page
ARTICLE I DEFINITIONS		1
SECTION 1.1.	Credit Agreement	1
ARTICLE II GUARANTEE		6
SECTION 2.1.	Guarantee	6
SECTION 2.2.	Guarantee of Payment	6
SECTION 2.3.	No Limitations, Etc.	7
SECTION 2.4.	Reinstatement	7
SECTION 2.5.	Agreement To Pay; Subrogation	8
SECTION 2.6.	Information	8
SECTION 2.7.	Instrument for the Payment of Money	8
SECTION 2.8.	Continuing Guarantee	8
SECTION 2.9.	General Limitation on Obligations	8
ARTICLE III PLEDGE OF SECURITIES		8
SECTION 3.1.	Pledge	8
SECTION 3.2.	Delivery of the Pledged Collateral	9
SECTION 3.3.	Representations, Warranties and Covenants	9
SECTION 3.4.	Certification of Limited Liability Company Interests and Limited Partnership Interests	10
SECTION 3.5.	Registration in Nominee Name; Denominations	10
SECTION 3.6.	Voting Rights; Dividends and Interest, etc.	11
ARTICLE IV SECURITY INTERESTS IN PERSONAL PROPERTY		12
SECTION 4.1.	Security Interest	12
SECTION 4.2.	Representations and Warranties	14
SECTION 4.3.	Covenants	16
SECTION 4.4.	Other Actions	19
SECTION 4.5.	Covenants regarding Patent, Trademark and Copyright Collateral	21
SECTION 4.6.	After-Acquired Intellectual Property	23
SECTION 4.7.	Covenants Regarding Accounts	23
ARTICLE V REMEDIES		24
SECTION 5.1.	Remedies upon Default	24
SECTION 5.2.	Application of Proceeds	26
SECTION 5.3.	Grant of License to Use Intellectual Property	26
SECTION 5.4.	Securities Act, etc.	26
SECTION 5.5.	Certain Matters Relating to Receivables	27
SECTION 5.6.	Communications with Obligors; Grantors Remain Liable	27
SECTION 5.7.	Proceeds to be Turned Over To Administrative Agent	28
SECTION 5.8.	Deficiency	28
ARTICLE VI INDEMNITY, SUBROGATION AND SUBORDINATION		28
SECTION 6.1.	Indemnity and Subrogation	28
SECTION 6.2.	Contribution and Subrogation	29

SECTION 6.3.	Subordination	29
ARTICLE VII MISCELLANEOUS		29
SECTION 7.1.	Notices	29
SECTION 7.2.	Security Interest Absolute	29
SECTION 7.3.	Survival of Agreement	30
SECTION 7.4.	Binding Effect; Several Agreement	30
SECTION 7.5.	Successors and Assigns	30
SECTION 7.6.	Administrative Agent’s Fees and Expenses; Indemnification	30
SECTION 7.7.	Administrative Agent Appointed Attorney-in-Fact	31
SECTION 7.8.	Applicable Law	31
SECTION 7.9.	Waivers; Amendment	32
SECTION 7.10.	WAIVER OF JURY TRIAL	32
SECTION 7.11.	Severability	32
SECTION 7.12.	Counterparts	32
SECTION 7.13.	Headings	33
SECTION 7.14.	Jurisdiction; Consent to Service of Process	33
SECTION 7.15.	Termination or Release	33
SECTION 7.16.	Additional Grantors	34
SECTION 7.17.	Right of Setoff	34
SECTION 7.18.	Duty of Administrative Agent	34
SECTION 7.19.	Authority of Administrative Agent	35
SECTION 7.20.	Acknowledgments	35

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Schedules
Schedule I	Guarantors
Schedule II	Capital Stock; Debt Securities
Exhibits
Exhibit A	Form of Supplement
Exhibit B	Form of Perfection Certificate

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GUARANTEE AND COLLATERAL AGREEMENT (this “Agreement”) dated as of                             , 2004, among KNOLL, INC., a Delaware corporation (the “Borrower”), the Subsidiaries of the Borrower identified herein and UBS AG, STAMFORD BRANCH, as administrative agent (the “Administrative Agent”) for (i) the banks and other financial institutions or entities (the “Lenders”) from time to time parties to the Credit Agreement (as hereinafter defined) and (ii) the other Secured Parties (as hereinafter defined).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, dated as of September 30, 2004 (the “Credit Agreement”), among the Borrower, the Lenders, Goldman Sachs Credit Partners L.P., as syndication agent, the Administrative Agent, and UBS Securities LLC and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners, the Lenders have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor;

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses;

WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and

WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Lenders;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees as follows:

ARTICLE I

Definitions

SECTION 1.1. Credit Agreement. Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in the Credit Agreement. All terms defined in the New York UCC (as such term is defined herein) and not defined in this Agreement have the meanings specified therein. All references to the Uniform Commercial Code shall mean the New York UCC (and if defined in more than one Article of the New York UCC, shall have the meaning given in Article 9 thereof). The rules of construction specified in Section 1.2 of the Credit Agreement also apply to this Agreement. As used in this Agreement, the following terms have the meanings specified below:

“Account” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Account Debtor” means any person who is or who may become obligated to any Grantor under, with respect to or on account of an Account.

“Accounts Receivable” shall mean all Accounts and all right, title and interest in any returned goods, together will all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired.

“Administrative Agent” has the meaning assigned to such term in the preamble of this Agreement.

“Article 9 Collateral” has the meaning assigned to such term in Section 4.1.

“Borrower” has the meaning assigned to such term in the preamble of this Agreement.

“Chattel Paper” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Claiming Guarantor” has the meaning assigned to such term in Section 6.2.

“Collateral” means the Article 9 Collateral and the Pledged Collateral.

“Collateral Account” means any collateral account established by the Administrative Agent as provided in Section 5.5 or 5.7.

“Commercial Tort Claim” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Commodity Intermediary” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Contracts” means all contracts and agreements between any Grantor and any other person (in each case, whether written or oral, or third party or intercompany) as the same may be amended, assigned, extended, restated, supplemented, replaced or otherwise modified from time to time including (i) all rights of any Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of any Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect thereto, (iii) all rights of any Grantor to damages arising thereunder and (iv) all rights of any Grantor to terminate and to perform and compel performance of, such Contracts and to exercise all remedies thereunder.

“Contributing Guarantor” has the meaning assigned to such term in Section 6.2.

“Copyright License” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now or hereafter owned by any Grantor or that such Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement.

- 2 -

“Copyrights” means all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office (or any successor office or any similar office in any other country), including those listed on Schedule III.

“Credit Agreement” has the meaning assigned to such term in the preliminary statement of this Agreement.

“Deposit Account” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Electronic Chattel Paper” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Entitlement Holder” has the meaning assigned to such term in Section 8-102 of the New York UCC.

“Entitlement Order” has the meaning assigned to such term in Section 8-102 of the New York UCC.

“Equipment” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any person, or any obligations convertible into or exchangeable for, or giving any person a right, option or warrant to acquire such equity interests or such convertible or exchangeable obligations.

“Federal Securities Laws” has the meaning assigned to such term in Section 5.4.

“Farm Products” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Financial Asset” has the meaning assigned to such term in Section 8-102 of the New York UCC.

“General Intangibles” means all choses in action and causes of action and all other intangible personal property of any Grantor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Grantor, including all rights and interests in partnerships, limited partnerships, limited liability companies and other unincorporated entities, corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts.

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“Government Contract” any contract or agreement between any Grantor and any Governmental Authority on which the obligor is a Governmental Authority.

“Grantors” means the Borrower and the Guarantors.

“Guarantors” means (a) the Subsidiaries identified on Schedule I and (b) each other Subsidiary that becomes a party to this Agreement as a Guarantor after the Closing Date.

“Instrument” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Intellectual Property” means all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

“Inventory” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Investment Property” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Issuers” means the collective reference to each issuer of any Investment Property.

“Lenders” has the meaning assigned to such term in the preamble of this Agreement.

“Letter-of-Credit Right” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“License” means any Patent License, Trademark License, Copyright License or other license or sublicense agreement to which any Grantor is a party.

“Merger” has the meaning assigned to such term in the recitals.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Obligations” means (a) the “Obligations” as defined in the Credit Agreement, (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to the Credit Agreement and each of the other Loan Documents, and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents.

“Patent License” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, is in

- 4 -

existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement.

“Patents” means all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States or the equivalent thereof in any other country, all design patents of the United States or the equivalent thereof, including industrial designs, in any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office (or any successor or any similar offices in any other country), including those listed on Schedule III, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

“Perfection Certificate” means a certificate substantially in the form of Exhibit B, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer.

“Pledged Collateral” has the meaning assigned to such term in Section 3.1.

“Pledged Debt Securities” has the meaning assigned to such term in Section 3.1.

“Pledged Securities” means any promissory notes, stock certificates or other securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

“Pledged Stock” has the meaning assigned to such term in Section 3.1.

“Proceeds” has the meaning assigned to such term in Section 9-102 of the New York UCC.

“Receivable” means any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account).

“Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) the Syndication Agent, (d) the Arrangers, (e) any Issuing Bank, (f) each counterparty to any Hedging Agreement with a Loan Party that either (i) is in effect on the Closing Date if such counterparty is a Lender or an Affiliate of a Lender as of the Closing Date or (ii) is entered into after the Closing Date if such counterparty is a Lender or an Affiliate of a Lender at the time such Hedging Agreement is entered into, (g) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (h) the successors and assigns of each of the foregoing.

“Securities Account” has the meaning assigned to such term in Section 8-501 of the New York UCC.

“Securities Intermediary” has the meaning assigned to such term in Section 8-102 of the New York UCC.

- 5 -

“Security” has the meaning assigned to such term in Section 8-102 of the New York UCC.

“Security Interest” has the meaning assigned to such term in Section 4.1.

“Supplement” has the meaning assigned to such term in Section 7.16.

“Trademark License” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now or hereafter owned by any Grantor or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement.

“Trademarks” means all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office (or any successor office) or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.

“Vehicles” means all cars, trucks, trailers, construction and earth moving equipment and other vehicles, in each case covered by a certificate of title law of any state.

ARTICLE II

Guarantee

SECTION 2.1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each of the Guarantors further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. Each of the Guarantors waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

SECTION 2.2. Guarantee of Payment. Each of the Guarantors further agrees that its guarantee hereunder constitutes a continuing, absolute, irrevocable and unconditional guarantee of payment when due and not of collection, without regard to any right of offset with respect to the Obligations at any time or from time to time held by the Secured Parties. Each of the Guarantors waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any Deposit Account or credit on the books of the Administrative Agent or any other Secured Party in favor of the Borrower or any other person and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against the Borrower or against any

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other person which may be or become liable in respect of all or any part of the Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto.

SECTION 2.3. No Limitations, Etc. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided in Section 7.15, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by (i) the failure of the Administrative Agent or any other Secured Party to assert any claim or demand or to enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement; (iii) the release of any security held by the Administrative Agent or any other Secured Party for the Obligations or any of them; (iv) any default, failure or delay, willful or otherwise, in the performance of the Obligations; (v) the failure to perfect any Lien or security interest granted to, or in favor of, any Secured Party as security for any of the Obligations; or (vi) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Each Guarantor expressly authorizes the Administrative Agent to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

(b) To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations. The Administrative Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully and indefeasibly paid in full in cash. To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Loan Party, as the case may be, or any security.

SECTION 2.4. Reinstatement. Each of the Guarantors agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower, any other Loan Party or otherwise.

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SECTION 2.5. Agreement To Pay; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Upon payment by any Guarantor of any sums to the Administrative Agent as provided above, all rights of such Guarantor against the Borrower or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

SECTION 2.6. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s and each other Loan Party’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

SECTION 2.7. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article II constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

SECTION 2.8. Continuing Guarantee. The guarantee in this Article II is a continuing guarantee of payment, and shall apply to all Obligations whenever arising.

SECTION 2.9. General Limitation on Obligations. In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 2.1 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 2.1, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

ARTICLE III

Pledge of Securities

SECTION 3.1. Pledge. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby pledges to the Administrative Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all of such Grantor’s right, title and interest in, to and under (a) Equity Interests owned by it and listed on Schedule II and any other Equity Interests obtained in the future by such

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Grantor and the certificates representing all such Equity Interests (the “Pledged Stock”); provided, however, that the Pledged Stock shall not include more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary; provided, further, that the Pledged Stock shall not include the Equity Interests of Knoll Muebles y Sistemas S.A. so long as all such Equity Interests are sold in compliance with the terms of the Credit Agreement; (b)(i) the debt securities listed opposite the name of such Grantor on Schedule II, (ii) any debt securities in the future issued to such Grantor and (iii) the promissory notes and any other instruments evidencing such debt securities (the “Pledged Debt Securities”); (c) all other property that may be delivered to and held by the Administrative Agent pursuant to the terms of this Section 3.1; (d) subject to Section 3.6, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other Proceeds received in respect of, the securities referred to in clauses (a) and (b) above; (e) subject to Section 3.6, all rights and privileges of such Grantor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (f) all Proceeds of any of the foregoing (the items referred to in clauses (a) through (f) above being collectively referred to as the “Pledged Collateral”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Administrative Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth.

SECTION 3.2. Delivery of the Pledged Collateral. (a) Each Grantor agrees promptly to deliver or cause to be delivered to the Administrative Agent any and all Pledged Securities.

(b) Upon delivery to the Administrative Agent, (i) any Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Administrative Agent and by such other instruments and documents as the Administrative Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Grantor and such other instruments or documents as the Administrative Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

SECTION 3.3. Representations, Warranties and Covenants. The Grantors jointly and severally represent, warrant and covenant to and with the Administrative Agent, for the benefit of the Secured Parties, that:

(a) Schedule II correctly sets forth the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock and includes all Equity Interests, debt securities and promissory notes required to be pledged hereunder;

(b) except for the security interests granted hereunder, each of the Grantors (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Grantor, (ii) holds the same free and clear of all Liens, (iii) will make no

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assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than Liens created by this Agreement or as permitted by the Credit Agreement and transfers made in compliance with the Credit Agreement, and (iv) subject to Section 3.6, will cause any and all Pledged Collateral, whether for value paid by the Grantor or otherwise, to be forthwith deposited with the Administrative Agent and pledged or assigned hereunder;

(c) except for restrictions and limitations imposed by the Loan Documents or securities laws generally, the Pledged Collateral (other than Pledged Collateral representing less than all of the Equity Interests of a person) is and will continue to be freely transferable and assignable, and none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Administrative Agent of rights and remedies hereunder;

(d) each of the Grantors (i) has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than Liens created by this Agreement or as permitted by the Credit Agreement), however arising, of all persons whomsoever;

(e) no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge of the Pledged Collateral effected hereby (other than such as have been obtained and are in full force and effect and except with respect to Pledged Collateral in the form of Equity Interests in joint ventures);

(f) by virtue of the execution and delivery by the Grantors of this Agreement, when any Pledged Securities are delivered to the Administrative Agent in accordance with this Agreement, the Administrative Agent will obtain a legal, valid and perfected first priority lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; and

(g) the pledge effected hereby is effective to vest in the Administrative Agent, for the benefit of the Secured Parties, the rights of the Administrative Agent in the Pledged Collateral as set forth herein.

SECTION 3.4. Certification of Limited Liability Company Interests and Limited Partnership Interests. Unless otherwise agreed by the Administrative Agent in writing, each interest in any limited liability company or limited partnership controlled by any Grantor and pledged hereunder shall be represented by a certificate, shall be a “security” within the meaning of Article 8 of the New York UCC and shall be governed by Article 8 of the New York UCC;

SECTION 3.5. Registration in Nominee Name; Denominations. The Administrative Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Administrative Agent. Each Grantor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Grantor. The Administrative Agent shall at all times have the right to

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exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

SECTION 3.6. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given the Grantors at least two Business Days’ notice of its intent to exercise its rights under this Agreement (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default with respect to the Borrower under paragraph (g) or (h) of Article VII of the Credit Agreement):

(i) Each Grantor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Securities or the rights and remedies of any of the Administrative Agent or the other Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii) The Administrative Agent shall execute and deliver to each Grantor, or cause to be executed and delivered to each Grantor, all such proxies, powers of attorney and other instruments as a Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Securities to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws; provided, however, that any noncash dividends, interest, principal or other distributions that would constitute Pledged Stock or Pledged Debt Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent and shall be forthwith delivered to the Administrative Agent in the same form as so received (with any necessary endorsement).

(b) Upon the occurrence and during the continuance of an Event of Default, after the Administrative Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under paragraph (a)(iii) of this Section 3.6, then all rights of any Grantor to dividends, interest, principal or other distributions that such Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.6 shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions. All dividends, interest, principal or other distributions received by any Grantor contrary to the

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provisions of this Section 3.6 shall be held in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of such Grantor and shall be forthwith delivered to the Administrative Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Administrative Agent pursuant to the provisions of this paragraph (b) shall be retained by the Administrative Agent in an account to be established by the Administrative Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.2. After all Events of Default have been cured or waived and the applicable Grantor or Grantors have delivered to the Administrative Agent certificates to that effect, the Administrative Agent shall, promptly after all such Events of Default have been cured or waived, repay to each Grantor (without interest) all dividends, interest, principal or other distributions that such Grantor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.6 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default, after the Administrative Agent shall have notified (or shall be deemed to have notified) the Grantors of the suspension of their rights under paragraph (a)(i) of this Section 3.6, then all rights of any Grantor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.6, and the obligations of the Administrative Agent under paragraph (a)(ii) of this Section 3.6, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Required Lenders, the Administrative Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Grantors to exercise such rights.

(d) Any notice given by the Administrative Agent to the Grantors exercising its rights under paragraph (a) of this Section 3.6 (i) may be given by telephone if promptly confirmed in writing, (ii) may be given to one or more of the Grantors at the same or different times and (iii) may suspend the rights of the Grantors under paragraph (a)(i) or paragraph (a)(iii) in part without suspending all such rights (as specified by the Administrative Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Administrative Agent’s rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.

ARTICLE IV

Security Interests in Personal Property

SECTION 4.1. Security Interest. (a) As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby assigns and pledges to the Administrative Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”), in all right, title or interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

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(iii) all Contracts;

(iv) all Deposit Accounts;

(v) all Documents;

(vi) all Equipment;

(vii) all Fixtures;

(viii) all General Intangibles;

(ix) all Instruments;

(x) all Intellectual Property;

(xi) all Inventory;

(xii) all Investment Property;

(xiii) all Letters-of-Credit and Letter-of-Credit Rights;

(xiv) all Money;

(xv) all Commercial Tort Claims including, without limitation, the Commercial Tort Claims specified in the Perfection Certificate;

(xvi) all Pledged Collateral, Goods, insurance and other property not otherwise described above;

(xvii) all books and records pertaining to the Article 9 Collateral; and

(xviii) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, supporting obligations and guarantees given by any person with respect to any of the foregoing.

Notwithstanding the foregoing, the Article 9 Collateral shall not include any of the following assets now owned or hereafter acquired which would otherwise be included in the Article 9 Collateral: (a) assets sold to a person which is not a Grantor in compliance with the Credit Agreement, (b) assets owned by a Guarantor after the release of the guarantee of such Guarantor pursuant to Section 7.15, (c) assets subject to a Lien permitted by Sections 6.2(a), (c) and (i) of the Credit Agreement (but only to the extent and for so long as the grant of a security interest thereon would violate the documentation governing such Lien), (d) licenses, contracts and agreements which contain a valid and enforceable prohibition on the creation of a security interest therein so long as such prohibition remains in effect and is valid notwithstanding Sections 9-406, 9-407, 9-408 and 9-409 of the applicable Uniform Commercial Code, (e) vehicles, (f) Investment Property solely to the extent excluded by the proviso in Section 3.1(a), (g) real estate leasehold interests in real estate that is not used for manufacturing and (h) any other asset, if any, specifically identified from time to time by the Administrative Agent and the Borrower in writing in connection with the determination by the Administrative Agent pursuant to the last sentence of Section 5.9 of the Credit Agreement.

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(b) Each Grantor hereby irrevocably authorizes the Administrative Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (i) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor and (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates. Each Grantor agrees to provide such information to the Administrative Agent promptly upon request. Each Grantor authorizes the Administrative Agent to use the collateral description “all personal property” or words of similar import in any such financing statements. Each Grantor also ratifies its authorization for the Administrative Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

The Administrative Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or to file such documents as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor, and naming any Grantor or the Grantors as debtors and the Administrative Agent as secured party.

(c) The Security Interest is granted as security only and shall not subject the Administrative Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Article 9 Collateral.

SECTION 4.2. Representations and Warranties. The Grantors jointly and severally represent and warrant to the Administrative Agent and the Secured Parties that:

(a) Each Grantor (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (iii) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (iv) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated hereby or thereby to which it is or will be a party.

(b) The transactions contemplated by the Loan Documents to which each Grantor is a party (i) have been duly authorized by all requisite corporate and, if required, stockholder action and (ii) will not (A) violate (1) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of such Grantor, (2) any order of any Governmental Authority or (3) any provision of any indenture, material agreement or other material instrument to which such Grantor is a party or by which any of them or any of their property is or may be bound, (B) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, material agreement or other material instrument or (C) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by such Grantor (other than any Lien created under the Loan Documents).

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(c) This Agreement has been duly executed and delivered by each Grantor and constitutes, and each other Loan Document to which it is a party, when executed and delivered by such Grantor, will constitute, a legal, valid and binding obligation of such Grantor enforceable against such Grantor in accordance with its terms.

(d) Each Grantor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Administrative Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained.

(e) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein (including (x) the exact legal name of each Grantor and (y) the jurisdiction of organization of each Grantor) is correct and complete as of the Closing Date. Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Administrative Agent based upon the information provided to the Administrative Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 2 to the Perfection Certificate (or specified by notice from the Borrower to the Administrative Agent after the Closing Date in the case of filings, recordings or registrations required by Sections 5.6 or 5.9 of the Credit Agreement, which are all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States Patents, Trademarks and Copyrights) that are necessary as of the Closing Date to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements. Each Grantor represents and warrants that a fully executed agreement in the form hereof and containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights have been delivered to the Administrative Agent for recording by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. §261, 15 U.S.C. §1060 or 17 U.S.C. §205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other necessary jurisdiction, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent (for the ratable benefit of the Secured Parties) in respect of all Article 9 Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, re-filing, recording, rerecording, registration or re-registration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof).

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(f) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.2(e), a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest that shall be perfected in all Article 9 Collateral in which a security interest may be perfected upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral, other than Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement.

(g) The Article 9 Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement. None of the Grantors has filed or authorized to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement. None of the Grantors hold any Commercial Tort Claim except as indicated on the Perfection Certificate.

SECTION 4.3. Covenants. (a) Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Article 9 Collateral as is prudent in the conduct of its business, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Article 9 Collateral, and, at such time or times as the Administrative Agent may request, to prepare and deliver as soon as reasonably practicable to the Administrative Agent a duly certified schedule or schedules in form and detail satisfactory to the Administrative Agent showing the identity, amount and location of any and all Article 9 Collateral.

(b) Each Grantor shall, at its own expense, take any and all actions necessary to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Administrative Agent in the Article 9 Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.2 of the Credit Agreement.

(c) Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Administrative Agent may from time to time request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and Taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any promissory note or other instrument in excess of $200,000 and the amount due and payable under such note or instrument shall be due and payable more than 90 days after the issuance of such note or instrument, such Grantor shall notify the Administrative Agent of the

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existence of such note or instrument no later than the date of delivery of the next quarterly officer’s certificate required to be delivered pursuant to Section 5.4(c) of the Credit Agreement, unless an Event of Default has occurred and is continuing, in which case it shall promptly notify the Administrative Agent of such note or instrument, and such note or instrument shall, upon the request of the Administrative Agent, be promptly pledged and delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent. Notwithstanding the foregoing, if any amount payable to any Grantor under or in connection with any of the Article 9 Collateral shall be or become evidenced by any promissory note or other instrument in excess of $1,500,000, such note or instrument shall be promptly pledged and delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent.

Without limiting the generality of the foregoing, each Grantor hereby authorizes the Administrative Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule III or adding additional schedules hereto to specifically identify any asset or item that may, in the Administrative Agent’s judgment, constitute Copyrights, Patents or Trademarks; provided that any Grantor shall have the right, exercisable within 10 days after it has been notified by the Administrative Agent of the specific identification of such Collateral, to advise the Administrative Agent in writing of any material inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct in all material respects with respect to such Collateral within 30 days after the date it has been notified by the Administrative Agent of the specific identification of such Collateral.

(d) The Administrative Agent and such persons as the Administrative Agent may designate shall have the right, at the Grantors’ own cost and expense, to inspect the Article 9 Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Article 9 Collateral is located, to discuss the Grantors’ affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures, in accordance with Section 5.7 of the Credit Agreement, the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third person, by contacting Account Debtors (only during the existence of a Default) or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Administrative Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party.

(e) At its option, the Administrative Agent may discharge past due Taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not expressly permitted pursuant to Section 6.2 of the Credit Agreement, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Administrative Agent on demand for any payment made or any expense incurred by the Administrative Agent pursuant to the foregoing authorization; provided, however, that nothing in this paragraph shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Administrative Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to Taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

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(f) As between each Grantor, the Administrative Agent and the Secured Parties, each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Administrative Agent and the Secured Parties from and against any and all liability for such performance.

(g) None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as expressly permitted by Section 6.2 of the Credit Agreement. None of the Grantors shall make or permit to be made any transfer of the Article 9 Collateral, except as expressly permitted by Sections 6.3 and 6.5 of the Credit Agreement.

(h) None of the Grantors will, without the Administrative Agent’s prior written consent, grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises, compoundings or settlements granted or made in good faith in the prudent conduct of the business of such Grantor.

(i) The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with the requirements set forth in Section 5.2 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents designated by the Administrative Agent) as such Grantor’s true and lawful agent (and attorney-in-fact) for the purpose, upon the occurrence and during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or under the Credit Agreement or to pay any premium in whole or part relating thereto, the Administrative Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Administrative Agent deems advisable. All sums disbursed by the Administrative Agent in connection with this paragraph, including attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Administrative Agent and shall be additional Obligations secured hereby.

(j) Each Grantor shall maintain, in form and manner reasonably satisfactory to the Administrative Agent, records of its Chattel Paper and its books, records and documents evidencing or pertaining thereto.

(k) Each Grantor agrees to notify the Administrative Agent promptly in writing upon learning that any of the Article 9 Collateral constitutes, or is the Proceeds of, Farm Products.

(l) With respect to each Government Contract subject to the Federal Assignment of Claims Act, 31 U.S.C. 3727, or the Federal Assignment of Contracts Act, 41 U.S.C. 15, each Grantor covenants and agrees that, during all times that no Event of Default has occurred and is continuing, it shall make commercially reasonable efforts to provide any information reasonably

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requested by the Administrative Agent with respect to such Grantor’s Government Contracts, and upon the occurrence and continuance of an Event of Default and upon the request of the Administrative Agent, it shall take all steps necessary to comply with the requirements of such act relating to the validity of the security interest of the Administrative Agent in such Government Contract including, without limitation, the giving of notice to the Governmental Authority of the security interest of the Administrative Agent therein and the filing of original and true copies of this Agreement with the appropriate governmental offices and any sureties as required by applicable law and regulations and, where required, obtaining consent of the Governmental Authority to the assignment to the Administrative Agent hereunder. Each Grantor shall also comply with any applicable state or foreign statutes of similar import.

(m) In the event that the Administrative Agent desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other person therefor, then, upon the reasonable request of the Administrative Agent, such Grantor agrees to use its best efforts to assist and aid the Administrative Agent to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.

SECTION 4.4. Other Actions. In order to further insure the attachment, perfection and priority of, and the ability of the Administrative Agent to enforce, the Administrative Agent’s security interest in the Article 9 Collateral, each Grantor agrees, in each case at such Grantor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

(a) Instruments. If any Grantor shall at any time hold or acquire any Instrument in excess of $200,000 and the amount due and payable under such Instrument shall be due and payable more than 90 days after the issuance of such Instrument, such Grantor shall notify the Administrative Agent of the existence of such Instrument no later than the date of delivery of the next quarterly officer’s certificate required to be delivered pursuant to Section 5.4(c) of the Credit Agreement, unless an Event of Default has occurred and is continuing, in which case it shall promptly notify the Administrative Agent of such Instrument, and such Instrument shall, upon the request of the Administrative Agent, forthwith be endorsed, assigned and delivered to the Administrative Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time specify. Notwithstanding the foregoing, if any amount payable to any Grantor under or in connection with any Instrument in excess of $1,500,000, such Instrument shall be promptly pledged and delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent.

(b) Deposit Accounts. For each Deposit Account that any Grantor currently maintains, such Grantor shall, on or prior to November 15, 2004 (or such later date not beyond January 15, 2004 as the Administrative Agent may agree in its sole discretion) with respect to Deposit Accounts in existence on the date hereof and within 60 days (or such time as the Administrative Agent may agree in its sole discretion) after opening any Deposit Account with respect to Deposit Accounts opened after the date hereof, either (i) cause the depositary bank to agree to comply at any time with instructions from the Administrative Agent to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Grantor or any other person, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, or (ii) arrange for the Administrative Agent to become the customer of the depositary bank with respect to the Deposit Account, with the Grantor being permitted, only with the consent of the Administrative Agent, to exercise rights to withdraw funds from such Deposit Account. The Administrative Agent agrees with each

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Grantor that the Administrative Agent shall not give any such instructions or withhold any withdrawal rights from any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal, would occur. The provisions of this paragraph shall not apply to (A) any Deposit Account for which any Grantor, the depositary bank and the Administrative Agent have entered into a cash collateral agreement specially negotiated among such Grantor, the depositary bank and the Administrative Agent for the specific purpose set forth therein, (B) Deposit Accounts for which the Administrative Agent is the depositary, (C) Deposit Accounts of which all or a substantial portion of the funds on deposit are used for funding (i) payroll, (ii) 401(k) and other retirement plans and employee benefits, including rabbi trusts for deferred compensation, (iii) health care benefits (e.g., imprest accounts) and (iv) escrow arrangements (e.g., environmental indemnity accounts) and (D) other Deposit Accounts (not already subject to the provisions of this paragraph) with an aggregate average daily balance during any calendar quarter of all funds in all such other Deposit Accounts for all Grantors not in excess of $1,000,000 at any time.

(c) Investment Property. Except to the extent otherwise provided in Article III, if any Grantor shall at any time hold or acquire any certificated securities with an aggregate value in excess of $50,000, such Grantor shall forthwith endorse, assign and deliver the same to the Administrative Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time specify. If any securities now or hereafter acquired by any Grantor are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such Grantor shall immediately notify the Administrative Agent thereof and, at the Administrative Agent’s request and option, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (a) cause the issuer to agree to comply with instructions from the Administrative Agent as to such securities, without further consent of any Grantor or such nominee, or (b) arrange for the Administrative Agent to become the registered owner of the securities. If any securities, whether certificated or uncertificated, or other Investment Property now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a Securities Intermediary or Commodity Intermediary, such Grantor shall immediately notify the Administrative Agent thereof and, at the Administrative Agent’s request and option, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (a) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders or other instructions from the Administrative Agent to such Securities Intermediary as to such securities or other Investment Property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Administrative Agent to such Commodity Intermediary, in each case without further consent of any Grantor or such nominee, or (b) in the case of Financial Assets (as governed by Article 8 of the New York UCC) or other Investment Property held through a Securities Intermediary, arrange for the Administrative Agent to become the Entitlement Holder with respect to such Investment Property, with the Grantor being permitted, only with the consent of the Administrative Agent, to exercise rights to withdraw or otherwise deal with such Investment Property. The Administrative Agent agrees with each of the Grantors that the Administrative Agent shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this paragraph shall not apply to any Financial Assets credited to a Securities Account for which the Administrative Agent is the Securities Intermediary.

(d) Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “transferable record” (as that

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term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Grantor shall promptly notify the Administrative Agent thereof and, at the request of the Administrative Agent, shall take such action as the Administrative Agent may request to vest in the Administrative Agent control under New York UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Administrative Agent agrees with such Grantor that the Administrative Agent will arrange, pursuant to procedures satisfactory to the Administrative Agent and so long as such procedures will not result in the Administrative Agent’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

(e) Letter-of-Credit Rights. If any Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of such Grantor, such Grantor shall promptly notify the Administrative Agent thereof and, at the request and option of the Administrative Agent, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Administrative Agent of the proceeds of any drawing under the letter of credit or (ii) arrange for the Administrative Agent to become the transferee beneficiary of the letter of credit, with the Administrative Agent agreeing, in each case, that the proceeds of any drawing under the letter of credit are to be paid to the applicable Grantor unless an Event of Default has occurred or is continuing.

(f) Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim and such claim is for more than $1,000,000, such Grantor shall notify the Administrative Agent no later than the date of delivery of the next quarterly officer’s certificate required to be delivered pursuant to Section 5.4(c) of the Credit Agreement (unless an Event of Default has occurred and is continuing, in which case such Grantor shall notify the Administrative Agent promptly) of such claim in a writing signed by such Grantor including a summary description of such claim and grant to the Administrative Agent in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Administrative Agent.

SECTION 4.5. Covenants regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, and will not permit any of its licensees to, do any act, or omit do to any act, whereby any Patent that is material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, may become invalidated or dedicated to the public, and agrees that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws.

(b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such

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Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights.

(c) Each Grantor (either itself or through its licensees or sublicensees) will, for each work covered by a Copyright that is material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws.

(d) Each Grantor shall notify the Administrative Agent immediately if it knows or has reason to know that any Patent, Trademark or Copyright that is material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor’s ownership of any such Patent, Trademark or Copyright, its right to register the same, or its right to keep and maintain the same.

(e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, with respect to any of the same which is material to the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, unless it informs the Administrative Agent of such application no later than the date of delivery of the next quarterly officer’s certificate required to be delivered pursuant to Section 5.4(c) of the Credit Agreement, unless an Event of Default has occurred and is continuing, in which case it shall promptly notify the Administrative Agent of such application, and, upon request of the Administrative Agent, executes and delivers any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent’s security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Administrative Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable.

(f) [Intentionally Omitted]

(g) [Intentionally Omitted]

(h) Upon the occurrence and during the continuance of an Event of Default, each Grantor shall, at the request of the Administrative Agent, use its best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all such Grantor’s right, title and interest thereunder to the Administrative Agent or its designee.

(i) In no event shall any Grantor license the Intellectual Property other than licenses entered into by such Grantor in, or incidental to, the ordinary course of business, or amend or permit the amendment of any of the licenses in a manner that materially and adversely affects the right to receive payments thereunder, or in any manner that would materially impair the value of

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the Intellectual Property or the Lien on and security interest in the Intellectual Property intended to be granted to the Administrative Agent for the benefit of the Secured Parties, without the consent of the Administrative Agent.

(j) Each Grantor shall, at its sole cost and expense, (i) diligently keep adequate records respecting the Intellectual Property and (ii) furnish to the Administrative Agent from time to time upon the Administrative Agent’s request therefor reasonably detailed statements and amended schedules further identifying and describing the Intellectual Property and such other materials evidencing or reports pertaining to the Intellectual Property as the Administrative Agent may from time to time request.

SECTION 4.6. After-Acquired Intellectual Property. If any Grantor shall, at any time before the Obligations have been paid in full (other than contingent indemnification obligations which, pursuant to the provisions of the Credit Agreement or the Security Documents, survive the termination thereof), (a) obtain any rights to any additional Intellectual Property or (b) become entitled to the benefit of any additional Intellectual Property or any renewal or extension thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property, or any improvement on any Intellectual Property, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (a) or (b) of this Section 4.6 with respect to such Grantor shall automatically constitute Intellectual Property if such would have constituted Intellectual Property at the time of execution hereof and be subject to the Lien and security interest created by this Agreement without further action by any party. Each Grantor shall promptly (i) provide to the Administrative Agent written notice of any of the foregoing and (ii) upon the written request of the Administrative Agent, confirm the attachment of the Lien and security interest created by this Agreement to any rights described in clauses (a) and (b) of the immediately preceding sentence of this Section 4.6 by execution of an instrument in form reasonably acceptable to the Administrative Agent and the filing of any instruments or statements as shall be reasonably necessary to preserve, protect or perfect the Administrative Agent’s security interest in such Intellectual Property. Further, each Grantor authorizes the Administrative Agent to modify this Agreement by amending Schedule 10A and Schedule 10B annexed to the Perfection Certificate to include any Intellectual Property acquired or arising after the date hereof of such Grantor.

SECTION 4.7. Covenants Regarding Accounts. (a) Each Grantor shall keep and maintain at its own cost and expense complete records of each Account, in a manner consistent with prudent business practice, including records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto. Each Grantor shall, at such Grantor’s sole cost and expense, upon the Administrative Agent’s demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible evidence of Accounts, including all documents evidencing Accounts and any books and records relating thereto to the Administrative Agent or to its representatives (copies of which evidence and books and records may be retained by such Grantor). Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent may transfer a full and complete copy of any Grantor’s books, records, credit information, reports, memoranda and all other writings relating to the Accounts to and for the use by any person that has acquired or is contemplating acquisition of an interest in the Accounts or the Administrative Agent’s security interest therein without the consent of any Grantor.

(b) Each Grantor shall legend, at the request of the Administrative Agent and in form and manner satisfactory to the Administrative Agent, the Accounts and the other books, records and documents of such Grantor evidencing or pertaining to the Accounts with an appropriate

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reference to the fact that the Accounts have been assigned to the Administrative Agent for the benefit of the Secured Parties and that the Administrative Agent has a security interest therein.

(c) No Grantor shall rescind or cancel any obligations evidenced by any Account or modify any term thereof or make any adjustment with respect thereto except modifications and adjustments that are consistent with prudent business practice, or extend or renew any such obligations except in accordance with prudent business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Account or interest therein except in accordance with prudent business practice without the prior written consent of the Administrative Agent.

(d) Each Grantor shall cause to be collected from the Account Debtor of each of the Accounts, as and when due and consistent with prudent business practice (including Accounts that are delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Account, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account, except that any Grantor may, with respect to an Account, in a manner consistent with prudent business practice allow (i) a refund or credit due as a result of returned or damaged or defective merchandise and (ii) such extensions of time to pay amounts due in respect of Accounts and such other modifications of payment terms or settlements in respect of Accounts as shall be commercially reasonable in the circumstances, all in accordance with such Grantor’s prudent business practice and consistent with its collection practices as in effect from time to time. The costs and expenses (including attorneys’ fees) of collection, in any case, whether incurred by any Grantor, the Administrative Agent or any Secured Party, shall be paid by the Grantors.

ARTICLE V

Remedies

SECTION 5.1. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Administrative Agent on demand, and it is agreed that the Administrative Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Grantors to the Administrative Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Administrative Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Administrative Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate. The Administrative Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are

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purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Administrative Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and the Grantors hereby waive (to the extent permitted by law) all rights of redemption, stay and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Administrative Agent shall give the applicable Grantors 10 days’ written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Administrative Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Administrative Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Administrative Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.1 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

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SECTION 5.2. Application of Proceeds. The Administrative Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, including any Collateral consisting of cash, as follows:

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent (in its capacity as such hereunder or under any other Loan Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document;

SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and

THIRD, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

The Administrative Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Administrative Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Administrative Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Administrative Agent or such officer or be answerable in any way for the misapplication thereof.

SECTION 5.3. Grant of License to Use Intellectual Property. For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Article at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Administrative Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to the Grantors) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Administrative Agent shall be exercised, at the option of the Administrative Agent, only upon the occurrence and during the continuation of an Event of Default.

SECTION 5.4. Securities Act, etc. In view of the position of the Grantors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Grantor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent

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transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable “blue sky” or other state securities laws or similar laws analogous in purpose or effect. Each Grantor recognizes that in light of such restrictions and limitations the Administrative Agent may, with respect to any sale of the Pledged Collateral, limit the purchasers to those who will agree, among other things, to acquire such Pledged Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that in light of such restrictions and limitations, the Administrative Agent, in its sole and absolute discretion (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with such number of purchasers as the Administrative Agent determines to be reasonable to effect such sale. Each Grantor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Administrative Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Administrative Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.4 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Administrative Agent sells.

SECTION 5.5. Certain Matters Relating to Receivables. (a) At any time during the continuance of an Event of Default, the Administrative Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may require in connection with such test verifications. At any time during the continuance of an Event of Default, upon the Administrative Agent’s request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables.

(b) The Administrative Agent hereby authorizes each Grantor to collect such Grantor’s Receivables, and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Secured Parties only as provided in Section 5.2, and (ii) until so turned over, shall be held by such Grantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

SECTION 5.6. Communications with Obligors; Grantors Remain Liable. (a) The Administrative Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under

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the Receivables to verify with them to the Administrative Agent’s satisfaction the existence, amount and terms of any Receivables.

(b) Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Administrative Agent for the ratable benefit of the Secured Parties and that payments in respect thereof shall be made directly to the Administrative Agent.

(c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Lender of any payment relating thereto, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

SECTION 5.7. Proceeds to be Turned Over To Administrative Agent. In addition to the rights of the Administrative Agent and the Secured Parties specified in Section 5.5 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Administrative Agent and the Secured Parties, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor in trust for the Administrative Agent and the Secured Parties) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 5.2.

SECTION 5.8. Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent or any Lender to collect such deficiency.

ARTICLE VI

Indemnity, Subrogation and Subordination

SECTION 6.1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.3), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of

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any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

SECTION 6.2. Contribution and Subrogation. Each Guarantor (a “Contributing Guarantor”) agrees (subject to Section 6.3) that, in the event a payment shall be made by any other Guarantor hereunder in respect of any Obligation or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 6.1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.2 shall be subrogated to the rights of such Claiming Guarantor under Section 6.1 to the extent of such payment.

SECTION 6.3. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.1 and 6.2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.1 and 6.2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder.

(b) Each of the Borrower and the Guarantors hereby agrees that all Indebtedness and other monetary obligations owed by it to the Borrower or any Subsidiary shall be fully subordinated to the indefeasible payment in full in cash of the Obligations.

ARTICLE VII

Miscellaneous

SECTION 7.1. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.1 of the Credit Agreement. All communications and notices hereunder to any Guarantor shall be given to it in care of the Borrower as provided in Section 9.1 of the Credit Agreement.

SECTION 7.2. Security Interest Absolute. All rights of the Administrative Agent hereunder, the Security Interest, the grant of a security interest in the Pledged Collateral and all obligations of each Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise

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constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement.

SECTION 7.3. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable or other Obligation (other than Obligations under Specified Hedge Agreements) under any Loan Document is outstanding and unpaid or the Aggregate L/C Exposure does not equal zero and so long as the Commitments have not expired or terminated.

SECTION 7.4. Binding Effect; Several Agreement. This Agreement shall become effective as to any Loan Party when a counterpart hereof executed on behalf of such Loan Party shall have been delivered to the Administrative Agent and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Loan Party and the Administrative Agent and their respective permitted successors and assigns, and shall inure to the benefit of such Loan Party, the Administrative Agent and the other Secured Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

SECTION 7.5. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Administrative Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.

SECTION 7.6. Administrative Agent’s Fees and Expenses; Indemnification. (a) The parties hereto agree that the Administrative Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.5 of the Credit Agreement.

(b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Administrative Agent and the other Indemnitees against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related out of pocket expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any agreement or instrument contemplated hereby or any claim, litigation, investigation or proceeding relating to any of the foregoing agreement or instrument contemplated hereby or thereby, or to the Collateral, whether or not any Indemnitee is a party thereto; provided, however, that such indemnity shall not, as to any Indemnitee, be available to

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the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

(c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.6 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent or any other Secured Party. All amounts due under this Section 7.6 shall be payable on written demand therefor and shall bear interest at the rate for ABR Borrowings specified in Section 2.6 of the Credit Agreement.

SECTION 7.7. Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby appoints the Administrative Agent as the attorney-in-fact of such Grantor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Administrative Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Administrative Agent’s name or in the name of such Grantor (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Administrative Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Administrative Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Administrative Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Administrative Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Administrative Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

SECTION 7.8. Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

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SECTION 7.9. Waivers; Amendment. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.8 of the Credit Agreement.

SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.

SECTION 7.11. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 7.12. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 7.4. Delivery of an executed signature page to this Agreement by

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facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

SECTION 7.13. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 7.14. Jurisdiction; Consent to Service of Process. (a) Each of the Loan Parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America, sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the Loan Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the Loan Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

(b) Each of the Loan Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section. Each of the Loan Parties hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each of the Loan Parties hereby irrevocably consents to service of process in the manner provided for notices in Section 7.1. Nothing in this Agreement or any other Loan Document will affect the right of the Administrative Agent to serve process in any other manner permitted by law.

SECTION 7.15. Termination or Release. (a) This Agreement, the Guarantees, the Security Interest and all other security interests granted hereby shall terminate when all the Obligations (other than Obligations under Specified Hedge Agreements) then due and owing have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the aggregate L/C Exposure has been reduced to zero and the Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement.

(b) A Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Guarantor shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Guarantor ceases to be a Subsidiary of the Borrower.

(c) Upon any sale or other transfer by any Grantor of any Collateral that is permitted under the Credit Agreement to any person that is not the Borrower or a Guarantor, or, upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.8 of the Credit Agreement, the security interest in such Collateral

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shall be automatically released and the Administrative Agent will confirm such release in writing promptly after written request therefor.

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) above, the Administrative Agent shall execute and deliver to any Grantor, at such Grantor’s expense, all documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or warranty by the Administrative Agent. Without limiting the provisions of Section 7.6, the Borrower shall reimburse the Administrative Agent upon demand for all costs and out of pocket expenses, including the fees, charges and disbursements of counsel, incurred by it in connection with any action contemplated by this Section 7.15.

SECTION 7.16. Additional Grantors. Pursuant to Section 5.9 of the Credit Agreement, each Domestic Subsidiary of a Loan Party that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter in this Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and delivery by the Administrative Agent and a Domestic Subsidiary of a supplement in the form of Exhibit A hereto (a “Supplement”), such Domestic Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other Loan Party hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Loan Party as a party to this Agreement.

SECTION 7.17. Right of Setoff. If an Event of Default shall have occurred and is continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Grantor against any and all of the obligations of such Grantor now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 7.18. Duty of Administrative Agent. The Administrative Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Administrative Agent and the Lenders hereunder are solely to protect the Administrative Agent’s and the Lenders’ interests in the Collateral and shall not impose any duty upon the Administrative Agent or any Lender to exercise any such powers. The Administrative Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

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SECTION 7.19. Authority of Administrative Agent. Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

SECTION 7.20. Acknowledgments. Each Grantor hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Administrative Agent and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Grantors and the Lenders.

[signature page follows]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

KNOLL, INC.

By:

Name:

Title:

SPINNEYBECK ENTERPRISES, INC.

By:

Name:

Title:

KNOLL OVERSEAS, INC.

By:

Name:

Title:

Accepted:

UBS AG, STAMFORD BRANCH,
as Administrative Agent

By:

Name:

Title:

By:

Name:

Title:

Schedule I to

the Guarantee and

Collateral Agreement

GUARANTORS

Name of Subsidiary Jurisdiction of
Organization Form of Organization

Schedule II to

the Guarantee and

Collateral Agreement

EQUITY INTERESTS

Issuer Number of
Certificate Registered
Owner Number and
Class of
Equity Interest
Percentage
Of Equity Interests

DEBT SECURITIES

Issuer Principal
Amount Date of Note Maturity Date

Schedule III to

the Guarantee and

Collateral Agreement

U.S. COPYRIGHTS OWNED BY BORROWER

U.S. Copyright Registrations

Pending U.S. Copyright Applications for Registration

.

Non-U.S. Copyright Registrations

Non-U.S. Pending Copyright Applications for Registration

1

Schedule III to

the Guarantee and

Collateral Agreement

PATENTS OWNED BY BORROWER

U.S. Patent Registrations

.

U.S. Patent Applications

.

Non-U.S. Patent Registrations

.

Non-U.S. Patent Applications

.

2

Schedule III to

the Guarantee and

Collateral Agreement

TRADEMARK/TRADE NAMES OWNED BY BORROWER

U.S. Trademark Registrations

.

U.S. Trademark Applications

.

State Trademark Registrations

.

Non-U.S. Trademark Registrations

.

Non-U.S. Trademark Applications

.

Trade Names

.

3

Schedule III to

the Guarantee and

Collateral Agreement

COPYRIGHTS OWNED BY [SUBSIDIARY]

U.S. Copyright Registrations

Pending U.S. Copyright Applications for Registration

Non-U.S. Copyright Registrations

Non-U.S. Pending Copyright Applications for Registration

TRADEMARK/TRADE NAMES OWNED BY [SUBSIDIARY]

U.S. Trademark Registrations

U.S. Trademark Applications

State Trademark Registrations

.

Non-U.S. Trademark Registrations

.

Non-U.S. Trademark Applications

.

Trade Names

4

Schedule III to

the Guarantee and

Collateral Agreement

PATENTS OWNED BY [SUBSIDIARY]

U.S. Patent Registrations

Patent Numbers Issue Date

U.S. Patent Applications

Application Numbers Filing Date

Non-U.S. Patent Registrations

Country Issue Date Patent No.

5

Schedule III to

the Guarantee and

Collateral Agreement

Non-U.S. Patent Applications

Country Filing Date Application No.

6

Exhibit A to the

Guarantee and

Collateral Agreement

SUPPLEMENT NO. [·] dated as of [·], to the Guarantee and Collateral Agreement dated as of September 30, 2004 (the “Guarantee and Collateral Agreement”), among KNOLL, INC., a Delaware corporation (the “Borrower”), each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a “Guarantor” and collectively, the “Guarantors”; the Guarantors and the Borrower are referred to collectively herein as the “Grantors”).

A. Reference is made to the Credit Agreement dated as of September 30, 2004 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders named therein (the “Lenders”), and UBS AG, Stamford Branch, as administrative agent (in such capacity, the “Administrative Agent”).

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement or the Guarantee and Collateral Agreement referred to therein, as applicable.

C. The Grantors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Section 7.16 of the Guarantee and Collateral Agreement provides that additional Domestic Subsidiaries of the Loan Parties may become Guarantors and Grantors under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor and a Grantor under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued.

Accordingly, the New Subsidiary agrees as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, the New Subsidiary by its signature below becomes a Grantor and Guarantor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Grantor and Guarantor and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Grantor and Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor and Guarantor thereunder are true and correct in all material respects on and as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Subsidiary’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of the New Subsidiary. Each reference to a “Grantor” or a “Guarantor” in the Guarantee and Collateral Agreement shall be deemed to include the New Subsidiary. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. The New Subsidiary represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and

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delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that bear the signature of the New Subsidiary. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Subsidiary and (b) set forth under its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.1 of the Guarantee and Collateral Agreement. All communications and notices hereunder to the New Subsidiary shall be given to it at the address set forth under its signature below.

SECTION 9. The New Subsidiary agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Administrative Agent.

[signature page follows]

2

IN WITNESS WHEREOF, the New Subsidiary has duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

[NAME OF NEW SUBSIDIARY],

by

Name:

Title:

Address:

Legal Name:

Jurisdiction
of Formation:

Location of Chief
Executive Office:

3

Schedule I to

Supplement No.         to the

Guarantee and

Collateral Agreement

LOCATION OF COLLATERAL

Description Location

JURISDICTION OF FORMATION

Schedule II to

Supplement No.        

to the Guarantee and

Collateral Agreement

Pledged Securities of the New Subsidiary

CAPITAL STOCK

Issuer Number of Certificate Registered Owner Number and Class of Equity Interests Percentage of Equity Interests

DEBT SECURITIES

Issuer Principal Amount Date of Note Maturity Date

INTELLECTUAL PROPERTY

Exhibit B to

Guarantee and

Collateral Agreement

FORM OF PERFECTION CERTIFICATE

Reference is made to (a) the Credit Agreement dated as of September 30, 2004, (as amended, supplemented, or otherwise modified from time to time, the “Credit Agreement”), among KNOLL, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to the Credit Agreement, [                                                     ], as documentation agent, GOLDMAN SACHS CREDIT PARTNERS L.P., as syndication agent and UBS AG, STAMFORD BRANCH, as administrative agent, and UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P., as joint lead arrangers and joint bookrunners, and (b) the Guarantee and Collateral Agreement dated as of September 30, 2004 (as amended, supplemented, or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), among the Borrower and the Subsidiaries identified therein (the “Guarantors”). Capitalized terms used but not defined herein have the meanings assigned thereto in the Credit Agreement or the Guarantee and Collateral Agreement, as applicable.

The undersigned, a Responsible Officer of the Borrower, hereby certifies to the Administrative Agent and each other Secured Party as follows:

1. Names. (a) The exact legal name of each Grantor, as such name appears in its respective certificate of formation, is as follows:

(b) Set forth below is each other legal name each Grantor has had in the past five years, together with the date of the relevant change:

(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature or jurisdiction of organization. If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation.

(d) The following is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years:

(e) Set forth below is the Federal Taxpayer Identification Number and Organizational Identification Number, if any, issued by the jurisdiction of formation of each Grantor that is a registered organization:

2. Current Locations. (a) The chief executive office of each Grantor is located at the address set forth opposite its name below:

Grantor Mailing Address County State

(b) Set forth below opposite the name of each Grantor are all locations where such Grantor maintains any books or records relating to any Accounts Receivable (with each location at which chattel paper, if any, is kept being indicated by an “*”):

Grantor Mailing Address County State

(c) The jurisdiction of formation of each Grantor that is a registered organization is set forth opposite its name below:

Grantor: Jurisdiction:

(d) Set forth below opposite the name of each Grantor are all the locations where such Grantor maintains any Equipment or other Collateral not identified above:

Grantor Mailing Address County State

(e) Set forth below opposite the name of each Grantor are all the places of business of such Grantor not identified in paragraph (a), (b), (c) or (d) above:

Grantor Mailing Address County State

(f) Set forth below opposite the name of each Grantor are the names and addresses of all Persons other than such Grantor that have possession of any of the Collateral of such Grantor:

Grantor Mailing Address County State

3. Unusual Transactions. All Accounts have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business.

4. File Search Reports. File search reports have been obtained from each Uniform Commercial Code filing office identified with respect to such Grantor in Section 2 hereof, and such search reports reflect no liens against any of the Collateral other than those permitted under the Credit Agreement.

5. UCC Filings. Financing statements in substantially the form of Schedule 5 hereto have been prepared for filing in the proper Uniform Commercial Code filing office in the jurisdiction in which each Grantor is located and, to the extent any of the collateral is comprised of fixtures, timber to be cut or as extracted collateral from the wellhead or minehead, in the proper local jurisdiction, in each case as set forth with respect to such Grantor in Section 2 hereof.

6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made.

7. Stock Ownership and other Equity Interests. Attached hereto as Schedule 7 is a true and correct list of all the domestic and first-tier foreign issued and outstanding stock, partnership

interests, limited liability company membership interests or other equity interest of the Borrower and each Subsidiary and the record and beneficial owners of such stock, partnership interests, membership interests or other equity interests.

8. Debt Instruments. Attached hereto as Schedule 8 is a true and correct list of all promissory notes (in excess of $200,000 and for which the amount due and payable thereunder is due and payable more than 90 days after the issuance of such note), tangible chattel paper, electronic chattel paper and other evidence of indebtedness held by the Borrower and each Subsidiary that are required to be pledged under the Guarantee and Collateral Agreement, including all applicable intercompany notes between Borrower and each Subsidiary of Borrower and between each Subsidiary of Borrower and each other such Subsidiary.

9. Advances. Attached hereto as Schedule 9 is (a) a true and correct list of all advances made by the Borrower to any Subsidiary of the Borrower or made by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the Borrower (other than those advances issued in the ordinary course), which advances are on the date hereof evidenced by one or more intercompany notes pledged to the Administrative Agent pursuant to the requirements of the Guarantee and Collateral Agreement and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to the Borrower or any Subsidiary of the Borrower.

10. Intellectual Property. Attached hereto as Schedule 10(A) in proper form for filing with the United States Patent and Trademark Office is a schedule setting forth all of each Grantor’s Patents and Trademark, including the name of the registered owner, the registration number and the expiration date of each Patent and Trademark owned by any Grantor. Attached hereto as Schedule 10(B) in proper form for filing with the United States Copyright Office is a schedule setting forth all of each Grantor’s Copyrights, including the name of the registered owner, the registration number and the expiration date of each Copyright owned by any Grantor.

11. Real Property. Attached hereto as Schedule 11 is a list of all real property owned or leased by each Grantor.

12. Accounts. Attached hereto as Schedule 12 is a list of all deposit accounts, securities accounts and commodity accounts maintained by the Borrower or any Subsidiary, including the name of each institution where each such account is held, the name of each such account and the name of each entity that holds each account.

13. Letter-of-Credit Rights. Attached hereto as Schedule 13 is a list of all Letters of Credit issued in favor of the Borrower or any Subsidiary, as beneficiary thereunder.

14. Motor Vehicles/Certificates of Title. Attached hereto is a schedule of all motor vehicles (covered by certificates of title or ownership) valued at over $50,000 and owned by the Borrower or any Subsidiary, and the owner and approximate value of such motor vehicles.

15. Material Contracts. Attached here to as Schedule 15 is a list of all supply, customer and other contracts deemed by the Borrower to be material to the business of the Borrower or any Subsidiary.

16. Commercial Tort Claims. Attached here as Schedule 16 is a list of all Commercial Tort Claims against the Borrower or any Subsidiary deemed by the Borrower to be material.

IN WITNESS WHEREOF, the undersigned has duly executed this certificate on this          day of September 2004.

KNOLL, INC.
	by
	Name: Title:

4

FINAL

2650816V.2 EXHIBIT D

[FORM OF]

L/C REQUEST

Dated: [date]

UBS AG, Stamford Branch, as Administrative Agent under the Credit Agreement (as amended, amended and restated, modified or supplemented from time to time, the “Credit Agreement”), dated as of September 30, 2004, among Knoll, Inc., a Delaware corporation (“Borrower”), the several banks and other financial institutions or entities from time to time parties thereto, [            ], as documentation agent, Goldman Sachs Credit Partners L.P., as syndication agent, UBS AG, Stamford Branch, as administrative agent, and UBS Securities LLC, and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners.

677 Washington Boulevard

Stamford, Connecticut 06901

Attention: Vladimira Holeckova

Telecopy: (203) 719-4176

[Name and Address of Issuing Bank

if different from Administrative Agent]

Ladies and Gentlemen:

We hereby request that [name of proposed Issuing Bank], as Issuing Bank under the Credit Agreement, [issue] [amend] [renew] [extend] [a] [an existing] Letter of Credit for the account of the undersigned¹ on [date]² (the “Date of [Issuance] [Amendment] [Renewal] [Extension]”) in the aggregate stated amount of $[            ]. [Such Letter of Credit was originally issued on [date].] The requested Letter of Credit [shall be] [is] denominated in [Dollars].

For purposes of this L/C Request, unless otherwise defined herein, all capitalized terms used herein which are defined in the Credit Agreement shall have the respective meaning provided therein.

The beneficiary of the requested Letter of Credit [will be] [is] [Insert name and address of beneficiary], and such Letter of Credit [will be] [is] in support of [³] and [will have]

¹ Note that if the L/C Request is for the account of a Subsidiary, Borrower shall be a co-applicant, and be jointly and severally liable, with respect to each Letter of Credit issued for the account or in favor of any Subsidiary.

² Date of Issuance [Amendment] [Renewal] [Extension] which shall be at least three Business Days after the date of this L/C Request, if this L/C Request is delivered to the Issuing Bank by 11:00 a.m., New York City time.

³ Insert description of the obligation/transaction which is being supported.

[has] a stated expiration date of [date]⁴. [Describe the nature of the amendment, renewal or extension.]

We hereby certify that:

(i) the representations and warranties contained in each of the Loan Documents are true, correct and complete in all material respects on and as of the date hereof with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects on and as of such earlier date; and

(ii) no Event of Default or Default has occurred and is continuing.

Copies of all relevant documentation with respect to the supported transaction are attached hereto.

⁴ Insert last date upon which drafts may be presented which may not be later than the Letter of Credit Expiration Date.

KNOLL, INC.
By:
	Name:
	Title:

[NAME OF SUBSIDIARY
By:
	Name:
	Title:]*

* Required if Letter of Credit is issued for the account of any Subsidiary.

FINAL

2650818V.2 EXHIBIT E

[FORM OF]

INTEREST ELECTION REQUEST

UBS AG, Stamford Branch,

as Administrative Agent

677 Washington Boulevard

Stamford, Connecticut 06901

Attention: Vladimira Holeckova

[Date]

Re: Knoll, Inc.

Ladies and Gentlemen:

This Interest Election Request is delivered to you pursuant to Section 2.10(b) of the Credit Agreement dated as of September 30, 2004 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used but not defined herein shall have the meaning ascribed thereto in the Credit Agreement) among KNOLL, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties thereto, [            ], as documentation agent, GOLDMAN SACHS CREDIT PARTNERS L.P., as syndication agent, UBS AG, STAMFORD BRANCH, as administrative agent, and UBS SECURITIES LLC, and GOLDMAN SACHS CREDIT PARTNERS L.P., as joint lead arrangers and joint bookrunners.

The Borrower hereby requests that on [                ]¹ (the “Interest Election Date”),

(i) $[            ] of the presently outstanding principal amount of the Loans originally made on [            ],

(ii) and all presently being maintained as [ABR Loans] [Eurodollar Loans],

¹ Shall be a Business Day that is (a) the date hereof in the case of a conversion into ABR Loans to the extent this Interest Election Request is delivered to the Administrative Agent prior to 10:00 a.m., New York City time on the date hereof, otherwise the Business Day following the date of delivery hereof and (b) three Business Days following the date hereof in the case of a conversion into/continuation of Eurodollar Loans to the extent this Interest Election Request is delivered to the Administrative Agent prior to 11:00 a.m. New York City time on the date hereof, otherwise the fourth Business Day following the date of delivery hereof.

(iii) be [converted into] [continued as],

(iv) [Eurodollar Loans having an Interest Period of [one/two/three/six months] [ABR Loans].

The undersigned hereby certifies that the following statement is true on the date hereof, and will be true on the proposed Interest Election Date, both before and after giving effect thereto and to the application of the proceeds therefrom:

(i) the foregoing [conversion] [continuation] complies with the terms and conditions of the Credit Agreement (including, without limitation, Section 2.10 of the Credit Agreement).

[Signature Page Follows]

The Borrower has caused this Interest Election Request to be executed and delivered by its duly authorized officer as of the date first written above.

KNOLL, INC.
By:
	Name: Title:

EXHIBIT F

MORTGAGE

(THIS MORTGAGE ALSO CONSTITUTES A FIXTURE FILING UNDER THE [INSERT STATE] UNIFORM COMMERCIAL CODE)

THIS MORTGAGE (this “Mortgage”) is made and entered into as of the          day of             , 200    , by and between

KNOLL, INC., a Delaware corporation whose address is 1235 Water St., P.O. Box 157, East Greenville, Pennsylvania 18041 (the “Borrower”); and

UBS AG, STAMFORD BRANCH, in its capacity as Administrative Agent (in such capacity, the “Administrative Agent”) for the lenders from time to time party to the Credit Agreement described herein (the “Lenders”) with a mailing address of 677 Washington Boulevard, Stamford, Connecticut 06901.

WHEREAS, the Borrower is the owner of the fee simple interest in the real property described on Exhibit A attached hereto and incorporated herein by reference;

WHEREAS, the Borrower has requested that the Lenders provide a $500,000,000 credit facility to the Borrower; and

WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower provided that, among other things, the Borrower executes and delivers this Mortgage.

W I T N E S S E T H:

The Borrower, in consideration of the Indebtedness (hereinafter defined) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, irrevocably grants, mortgages and warrants, remises, aliens, assigns and conveys to the Administrative Agent and the Administrative Agent’s successors and assigns, with power of sale, subject to the further terms of this Mortgage, all of the Borrower’s right, title and interest (thereunder or otherwise) in and to the following described land, real property interests, buildings, improvements, fixtures, furniture and appliances and other personal property including all accessions and additions thereto, all substitutions therefor and replacements and proceeds thereof and all reversions in and remainders of such property:

(a) All that tract or parcel of land and other real property interests in              County, [INSERT STATE] more particularly described in Exhibit A attached hereto and made a part hereof (the “Land”), and all rights, privileges, tenements, hereditaments, rights-of-way, easements, appendages and appurtenances appertaining to the foregoing, and all right, title and interest, if any, of Borrower in and to any streets, ways, alleys, strips or gores of land adjoining the Land or any part thereof; and

(b) All buildings and improvements of every kind and description now or hereafter erected or placed on the Land (collectively, the “Improvements”) and all materials intended for construction, reconstruction, alteration and repair of such Improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the premises hereby conveyed immediately upon the delivery thereof to the Land, and all fixtures and articles of personal property now or hereafter owned by the Borrower and attached to or contained in or used in connection with the Land and Improvements including, but not limited to, all furniture, furnishings, apparatus, machinery, equipment, motors, elevators, fittings, radiators, ranges, refrigerators, awnings, shades, screens, blinds, carpeting, office equipment and other furnishings and all plumbing, heating, lighting, cooking, laundry, ventilating, refrigerating, incinerating, air conditioning and sprinkler equipment and fixtures and appurtenances thereto and all renewals or replacements thereof or articles in substitution thereof, whether or not the same are or shall be attached to the Land and Improvements in any manner (the “Tangible Personalty”), and all proceeds of the Tangible Personalty (hereinafter, the Land, Improvements and Tangible Personalty may be collectively referred to as the “Premises”).

TO HAVE AND HOLD the same, together with all privileges, hereditaments, easements and appurtenances thereunto belonging, to the Administrative Agent and the Administrative Agent’s successors and assigns to secure the Indebtedness;

And, as additional security for the Indebtedness, the Borrower hereby conditionally assigns to the Administrative Agent all right, title and interest of the Borrower in and to the security deposits, rents, issues, profits, income and revenues of the Premises from time to time accruing (the “Rents and Profits”), including, but not limited to, all cash or securities deposited under any leases to secure performance by the tenants of their obligations thereunder, whether said cash or securities are to be held until the expiration of the terms of such leases or applied to one or more of the installments of rent coming due thereunder, reserving only the right to the Borrower to collect and enjoy the same as long as there shall exist no Event of Default (as defined in Article III).

As additional collateral and further security for the Indebtedness, the Borrower does hereby assign to the Administrative Agent and grants to the Administrative Agent a security interest in all of the right, title and interest of the Borrower in and to any and all insurance policies and proceeds thereof and any and all leases (including equipment leases), rental agreements, sales contracts, management contracts, franchise agreements, construction contracts, architects’ contracts, technical services agreements, or other contracts, licenses and permits now or hereafter affecting the Premises (the “Intangible Personalty”) or any part thereof, and the Borrower agrees to execute and deliver to the Administrative Agent such additional instruments, in form and substance reasonably satisfactory to the Administrative Agent, as may hereafter be reasonably requested by the Administrative Agent to evidence and confirm said assignment; provided, however, that acceptance of any such assignment shall not be construed as a consent by the Administrative Agent to any lease, rental agreement, management contract, franchise agreement, construction contract, technical services agreement or other contract, license or permit, or to impose upon the Administrative Agent any obligation with respect thereto. Notwithstanding the foregoing provisions, such assignment and grant of security interest contained herein shall not extend to, and the Intangible Personalty shall not include, any personalty which is now or hereafter held by the Borrower as licensee, lessee or otherwise, to the

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extent that (a) such personalty is not assignable or capable of being encumbered as a matter of law or under the terms of the license, lease or other agreement applicable thereto (but solely to the extent that any such restriction shall be enforceable under applicable law), without the consent of the licensor or lessor thereof or other applicable party thereto and (b) such consent has not been obtained; provided, however, that the foregoing assignment and grant of security interest shall extend to, and the Intangible Personalty shall include, any and all proceeds of such personalty to the extent that the assignment or encumbering of such proceeds is not so restricted under the terms of the license, lease or other agreement applicable thereto.

All the Tangible Personalty which comprises a part of the Premises shall, as far as permitted by law, be deemed to be affixed to the aforesaid Land and conveyed therewith. As to the balance of the Tangible Personalty and the Intangible Personalty, this Mortgage shall be considered to be a security agreement which creates a security interest in such items for the benefit of the Administrative Agent. In that regard, the Borrower grants to the Administrative Agent all of the rights and remedies of a secured party under the [INSERT STATE] Uniform Commercial Code. Borrower grants to Administrative Agent a security interest in all of the Tangible Personalty and Intangible Personalty.

The Borrower and the Administrative Agent covenant, represent and agree as follows:

ARTICLE I

Secured Obligations

1.1 Obligations Secured. The Administrative Agent and the Lenders have agreed to establish a $500,000,000 credit facility (hereinafter the loans and extensions of credit thereunder may be called the “Loans”) in favor of the Borrower pursuant to the terms of that certain Credit Agreement dated as of the date hereof among the Borrower, the Administrative Agent, GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent, [             ], as Documentation Agent, UBS SECURITIES LLC and GOLDMAN SACHS CREDIT PARTNERS L.P., as joint lead arrangers and joint bookrunners and the Lenders (as amended, modified, supplemented, extended, renewed or replaced from time to time, the “Credit Agreement”; terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement). This Mortgage is given to secure the payment of all indebtedness and other obligations now or hereafter owing under the Notes, the Letters of Credit, the Credit Agreement, this Mortgage, the Guarantee and Collateral Agreement and the other Loan Documents from the Borrower to any Lender or the Administrative Agent, howsoever evidenced, created, incurred or acquired, whether primary, secondary, direct, contingent, or joint and several, including without limitation, any liability arising under Hedging Agreements if and to the extent agreed to by a Loan Party in the documentation evidencing same and all obligations and liabilities incurred in connection with the collection and enforcement of the foregoing (collectively, the “Indebtedness”).

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ARTICLE II

The Borrower’s Covenants, Representations and Agreements

2.1 Title to Property. The Borrower represents and warrants to the Administrative Agent that (i) it is the owner of the Land, the Improvements, the Tangible Personalty, and has the right to convey the same, (ii) that as of the date hereof title to such property is free and clear of all encumbrances except for the matters shown on the title insurance policy accepted by the Administrative Agent in connection with this Mortgage (the “Permitted Encumbrances”) and the Liens permitted under Section 6.2 of the Credit Agreement (the “Permitted Liens”), and (iii) while any Indebtedness remains outstanding, it will warrant and defend the title to such property except for the Permitted Encumbrances and the Permitted Liens against the claims of all Persons. As to the balance of the Premises, the Rents and Profits and the Intangible Personalty, the Borrower represents and warrants that it has title to such property, that title as of the date hereof to such property is free and clear of all encumbrances except for the Permitted Encumbrances and the Permitted Liens, that it has the right, power and authority to convey such property and that, while any Indebtedness remains outstanding, it will warrant and defend such property except for the Permitted Encumbrances and the Permitted Liens against the claims of all Persons. This Mortgage creates a valid, enforceable first priority lien and security interest against the Premises, the Rents and Profits and the Intangible Personalty and all proceeds thereof, subject in all cases to Permitted Encumbrances, Permitted Liens and applicable bankruptcy and debtor-creditor law, as well as general principles of equity.

2.2 Taxes and Fees. The Borrower will pay all taxes, general and special assessments, insurance premiums, permit fees, inspection fees, license fees, water and sewer charges, franchise fees and equipment rents and any other charges or fees against it or the Premises (and the Borrower, upon request of the Administrative Agent, will submit to the Administrative Agent receipts evidencing said payments) in accordance with Section 5.3 of the Credit Agreement.

2.3 Reimbursement. Subject to the Borrower’s right to contest as set forth in, and the other terms of and exceptions contained in, the Credit Agreement, the Borrower agrees that if it shall fail to pay on or before the date that the same become delinquent any tax, assessment or charge levied or assessed against the Premises or any utility charge, whether public or private, or any insurance premium or if it shall fail to procure the insurance coverage and the delivery of the insurance certificates required hereunder, or if it shall fail, beyond any applicable notice and cure periods provided herein, to pay any other charge or fee described in Sections 2.2, 2.3 or 2.6 hereof, then the Administrative Agent, at its option, may pay or procure the same and will give the Borrower prompt notice of any such expenditures. The Borrower will reimburse the Administrative Agent upon demand for any sums of money paid by the Administrative Agent pursuant to this Section, together with interest on each such payment at the default rate of interest provided in Section 2.7 of the Credit Agreement, and all such sums and interest thereon shall be secured hereby.

2.4 Additional Documents. The Borrower agrees to execute and deliver to the Administrative Agent, concurrently with the execution of this Mortgage and upon the request of the Administrative Agent from time to time hereafter, all financing statements and other documents reasonably required to perfect and maintain the security interest created hereby. The

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Borrower hereby irrevocably (as long as any Loans or Letters of Credit remain outstanding or the Commitments have not been terminated) makes, constitutes and appoints the Administrative Agent as the true and lawful attorney of the Borrower to sign the name of the Borrower on any financing statement, continuation of financing statement or similar document required to perfect or continue such security interests upon the occurrence and during the continuation of an Event of Default.

2.5 Sale or Encumbrance. Except as permitted by the Credit Agreement, the Borrower covenants and agrees with the Administrative Agent that the Borrower shall not sell, transfer, convey, mortgage, encumber or otherwise dispose of the Premises, the Rents and Profits or the Intangible Personalty or any part thereof or any interest therein or engage in subordinate financing with respect thereto during the term of this Mortgage without the prior written consent of the Administrative Agent. In the event the Borrower sells, assigns, mortgages, gives or otherwise disposes of any of the Tangible Personalty in contravention of the foregoing sentence, the Administrative Agent’s security interest in the proceeds of the Tangible Personalty shall continue pursuant to this Mortgage.

2.6 Fees and Expenses. The Borrower will promptly pay upon demand any and all reasonable costs and expenses of the Administrative Agent, (a) as required under the provisions of the Credit Agreement and (b) as necessary to protect the Premises, the Rents and Profits or the Intangible Personalty or to exercise any rights or remedies under this Mortgage or with respect to the Premises, Rents and Profits or the Intangible Personalty. All of the foregoing costs and expenses shall be secured hereby.

2.7 Leases and Other Agreements. Without first obtaining on each occasion the written approval of the Administrative Agent, the Borrower shall not, except as permitted by the Credit Agreement, enter into, cancel, surrender or modify or permit the cancellation of any material lease (including any equipment lease), rental agreement, management contract, franchise agreement, construction contract, technical services agreement or other material contract, license or permit now or hereafter affecting the Premises, or modify any of said instruments, or accept or permit to be made, any prepayment (more than one month) of any installment of rent or fees thereunder. Certified copies of each such approved material lease or other material agreement shall be submitted to the Administrative Agent promptly upon request. The Borrower shall faithfully keep and perform, or cause to be kept and performed, in all material respects, all of the covenants, conditions, and agreements contained in each of said agreements, now or hereafter existing, on the part of the Borrower to be kept and performed (including performance of all covenants to be performed under any and all leases of the Premises or any part thereof) and shall at all times use commercially reasonable efforts to enforce, with respect to each other party to said agreements, all obligations, covenants and agreements by such other party to be performed thereunder.

2.8 Maintenance of Premises. Except as provided otherwise in the Credit Agreement, the Borrower will abstain from and will not permit the commission of waste in or about the Premises and will maintain, or cause to be maintained, the Premises in good condition and repair, reasonable wear and tear excepted. The failure of the Borrower to pay any taxes or assessments assessed against the Premises, or any installments thereof, or any premiums payable with respect to any insurance policy covering the Premises, shall constitute waste.

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2.9 Maintenance of Rights of Way, Easements and Licenses. Borrower shall maintain all rights of way, easements, grants, privileges, licenses, certificates, permits, entitlements and franchises necessary for the use of the Premises and will not, without the prior written consent of Administrative Agent, not to be unreasonably withheld or delayed, consent to any public restriction (including any zoning ordinance) or private restriction as to the use of the Premises which restriction is reasonably likely to materially and adversely effect the current use of the Premises. Borrower shall comply in all material respects with all restrictive covenants affecting the Premises, and all zoning ordinances and other public or private restrictions as to the use of the Premises. A default under this Section will not constitute an Event of Default unless such default would have a Material Adverse Effect.

2.10 Replacement of Fixtures and Personalty. Except as permitted by the Credit Agreement, Borrower shall not, without the prior written consent of Administrative Agent, not to be unreasonably withheld, permit any of the Tangible Personalty to be removed at any time from the Land or Improvements, unless the removed item is removed temporarily for maintenance and repair or, if removed permanently, is obsolete and in either case, is replaced by an article of equal or better suitability and value, owned by Borrower subject to the liens and security interests of this Mortgage and the other Loan Documents, and free and clear of any other lien or security interest except such as may be first approved in writing by Administrative Agent. A default under this Section will not constitute an Event of Default unless such default would have a Material Adverse Effect.

2.11 Insurance.

(a) Types Required. The Borrower shall maintain insurance for the Premises as set forth in Section 5.2 of the Credit Agreement. In addition to the requirements set forth in Section 5.2 of the Credit Agreement, if any part of the Improvements is located in an area having “special flood hazards” as defined in the Federal Flood Disaster Protection Act of 1973, a flood insurance policy as may be required by law naming the Administrative Agent as mortgagee must be submitted to the Administrative Agent. The policy must be in such amount, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice.

(b) Use of Proceeds. All insurance proceeds received by the Borrower shall be applied as set forth in Section 5.2 of the Credit Agreement.

2.12 Eminent Domain. All proceeds or awards which may become due by reason of any condemnation or other taking for public use of the whole or any part of the Premises or any rights appurtenant thereto to which the Borrower is entitled shall be applied in the same manner the insurance proceeds are applied pursuant to Section 5.2of the Credit Agreement. The Borrower agrees to execute such further assignments and agreements as may be reasonably required by the Administrative Agent to assure the effectiveness of this Section. In the event any Governmental Authority shall require or commence any proceedings for the demolition of any buildings or structures comprising a part of the Premises, or shall commence any proceedings to condemn or otherwise take pursuant to the power of eminent domain a material portion of the Premises, the Borrower shall promptly notify the Administrative Agent of such requirement or commencement of proceeding (for demolition, condemnation or other taking).

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2.13 Releases and Waivers. The Borrower agrees that no release by the Administrative Agent of any portion of the Premises, the Rents and Profits or the Intangible Personalty, no subordination of any Lien, no forbearance on the part of the Lenders or the Administrative Agent to collect on the Loans or Letters of Credit, or any part thereof, no waiver of any right granted or remedy available to the Administrative Agent and no action taken or not taken by the Administrative Agent shall in any way have the effect of releasing the Borrower from full responsibility to the Lenders and the Administrative Agent for the complete discharge of each and every of the Borrower’s obligations hereunder.

2.14 Compliance with Law. Except as otherwise permitted in the Credit Agreement, the Borrower will comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental authorities in respect of the ownership of the Premises (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls).

2.15 Inspection. Except as otherwise permitted in the Credit Agreement, the Borrower will permit the Administrative Agent, or its agents, at all reasonable times during regular business hours and with advance prior notice to enter and pass through or over the Premises for the purpose of inspecting same; provided, however, prior to an Event of Default inspections shall be at reasonable times during the Administrative Agent’s normal business hours.

ARTICLE III

Event of Default

An Event of Default shall exist under the terms of this Mortgage upon the existence of an Event of Default under the terms of the Credit Agreement.

ARTICLE IV

Foreclosure

4.1 Rights and Remedies of Administrative Agent. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent may, at its option and notwithstanding any contrary provisions in the Loan Documents, without further notice, presentment, protest, notice of intent to accelerate, notice of acceleration, demand or action of any nature whatsoever, do one or more of the following:

(a) Administrative Agent may declare the entire unpaid principal balance of the Indebtedness, together with all interest thereon, to be due and payable immediately.

(b) Administrative Agent may (i) institute and maintain an action of mortgage foreclosure against the Premises and the interests of Borrower therein, (ii) institute and maintain an action on any instruments evidencing the Indebtedness or any portion thereof, and (iii) take such other action at law or in equity for the enforcement of any of the Loan Documents as the law may allow, and in each such action Administrative Agent shall be entitled to all costs of suit and attorney fees.

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(c) Administrative Agent may, in its sole and absolute discretion, and without releasing Borrower or any other obligor or guarantor from any obligation under any of the Loan Documents and without waiving any Event of Default: (i) collect any or all of the Rents and Profits, including any Rents and Profits past due and unpaid, (ii) perform any obligation or exercise any right or remedy of Borrower under any lease, or (iii) enforce any obligation of any tenant of any of the Premises. Administrative Agent may exercise any right under this subsection (c) whether or not Administrative Agent shall have entered into possession of any of the Mortgaged Property, and nothing herein contained shall be construed as constituting Administrative Agent a “mortgagee in possession”, unless Administrative Agent shall have entered into and shall continue to be in actual possession of the Premises.

(d) Borrower hereby authorizes and directs each and every present and future tenant of any of the Premises to pay all Rents and Profits directly to Administrative Agent and to perform all other obligations of that tenant for the direct benefit of Administrative Agent, as if Administrative Agent were the landlord under the lease with that tenant, immediately upon receipt of a demand by Administrative Agent to make such payment or perform such obligations. Borrower hereby waives any right, claim or demand it may now or hereafter have against any such tenant by reason of such payment of Rents and Profits or performance of obligations to Administrative Agent, and any such payment or performance to Administrative Agent shall discharge the obligations of the tenant to make such payment or performance to Borrower. Borrower shall indemnify Administrative Agent and hold Administrative Agent harmless from and against any and all claims, liability, damage, cost and expense (including attorney’s fees) which may be asserted against or incurred by Administrative Agent by reason of any obligations of Borrower to perform any provision of any lease. Administrative Agent may apply the Rents and Profits received by Administrative Agent to the payment of any one or more of the following, in such order and amounts as Administrative Agent, in its sole discretion, may elect, whether or not the same be then due: the Indebtedness, liens on any of the Premises, impositions, claims, insurance premiums, other carrying charges, invoices of persons who at any time have supplied goods or services to or for the benefit of any of the Premises, and all other costs and expenses of maintenance, repair, restoration, management, operation, ownership, use, leasing, occupancy, protection, security, insurance, alteration or improvement of any of the Premises, costs of enforcing Administrative Agent’s rights under the Loan Documents, including any foreclosure sale hereunder, and including all attorneys fees and costs. Administrative Agent may, in its sole discretion, determine the method by which, and extent to which, the Rents and Profits will be collected and obligations of tenants enforced; and Administrative Agent may waive or fail to perform or enforce any provision of any lease. Administrative Agent shall not be accountable for any Rents and Profits or other sums it does not actually receive. Borrower hereby appoints Administrative Agent as its attorney-in-fact effective upon an Event of Default to perform all acts which Borrower is required or permitted to perform under any and all leases.

(e) Administrative Agent may, without releasing Borrower or any obligor or guarantor of any of the Indebtedness from any obligations under any of the Loan Documents and without waiving any Event of Default, enter upon and take possession of the Premises or any portion thereof, with or without legal action and by force if necessary, or have a receiver appointed without proof of depreciation or inadequacy of the value of the Premises, the insolvency of Borrower, or any other proof. Administrative Agent or said receiver may manage and operate the Premises, make, cancel, enforce or modify the leases or any of them, obtain and

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evict tenants, establish or change the amount of any Rents and Profits, and perform any acts and advance any sums which Administrative Agent deems proper to protect the security of this Mortgage, all such sums to be payable on demand, together with interest thereon at the default rate specified in Section 2.7 of the Credit Agreement, from the date of such demand, and such sums and interest to be secured by this Mortgage.

(f) Administrative Agent may take possession of the Premises or any portion thereof, and may use and deal with the same to the same extent as Borrower is entitled to so do and may sell the same pursuant to law and exercise such other rights and remedies with respect to the same as may be provided by law, and file such continuation statements which it deems desirable.

4.2 Application of Proceeds. Unless otherwise provided for in the Credit Agreement or required by applicable law, the proceeds of any sale of, and the Rents and Profits and other amounts generated by the holding, leasing, management, operation or other use of, the Premises, shall be applied by Administrative Agent (or the receiver if one is appointed) in the following order:

(a) to the payment of the costs and expenses actually incurred by Administrative Agent in taking possession of the Premises and of holding, using, leasing, repairing, improving and selling the same, including, without limitation: (1) receiver’s reasonable fees and expenses, (2) court costs, (3) reasonable attorneys’ and accountants’ fees and expenses, (4) costs of advertisement, and (5) the payment of all ground rent, real estate taxes and assessments, except any taxes, assessments or other charges subject to which the Premises shall have been sold;

(b) to the payment of all amounts (including interest), other than the unpaid principal balance of the Loans and accrued but unpaid interest, which may be due to Administrative Agent under the Loan Documents;

(c) to the payment of the Obligations and performance of the Covenants under the Loan Documents in such manner and order of preference as Administrative Agent in its sole discretion may determine; and

(d) the balance, if any, to such persons as are legally entitled thereto.

ARTICLE V

Additional Rights and Remedies of the Administrative Agent

5.1 Rights Upon Maturity or an Event of Default. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, immediately and without notice and without liability therefor to the Borrower and to the extent permitted by law, except for its own gross negligence or willful misconduct, may do or cause to be done any or all of the following: (a) take physical possession of the Premises; (b) exercise its right to collect the Rents and Profits; (c) enter into contracts for the completion, repair and maintenance of the Improvements thereon; (d) expend Loan funds and any rents, income and profits derived from the Premises for payment of any taxes, insurance premiums, assessments and charges for

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completion, repair and maintenance of the Improvements, preservation of the lien of this Mortgage and satisfaction and fulfillment of any liabilities or obligations of the Borrower arising out of or in any way connected with the construction of Improvements on the Premises whether or not such liabilities and obligations in any way affect, or may affect, the lien of this Mortgage; (e) enter into leases demising the Premises or any part thereof; (f) take such steps to protect and enforce the specific performance of any covenant, condition or agreement in the Notes, this Mortgage, the Credit Agreement, or the other Loan Documents, or to aid the execution of any power herein granted; and (g) generally, supervise, manage, and contract with reference to the Premises as if the Administrative Agent were equitable owner of the Premises. The Borrower also agrees that any of the foregoing rights and remedies of the Administrative Agent may be exercised at any time independently of the exercise of any other such rights and remedies, and the Administrative Agent may continue to exercise any or all such rights and remedies until the Event(s) of Default are cured or waived with the consent of the Required Lenders or the Lenders (as required by the Credit Agreement) or until foreclosure and the conveyance of the Premises or until the Loans and Letters of Credit and the other Indebtedness are otherwise satisfied or paid in full and the Commitments are terminated.

5.2 Appointment of Receiver. If upon the maturity of any of the Loans or Letters of Credit or any other amounts or obligations under the Loan Documents, the same remain unpaid, or upon the occurrence and during the continuance of an Event of Default, the Administrative Agent as a matter of right and without notice to Borrower shall be entitled to the appointment of a receiver or receivers for all or any part of the Premises, to take possession of and to operate the Premises, and to collect the rents, issues, profits, and income thereof, all expenses of which shall be added to the Indebtedness, whether such receivership be incident to a proposed sale (or sales) of such property or otherwise, and without regard to the value of the Premises or the solvency of any Person or Persons liable for the payment of the indebtedness secured hereby, and the Borrower does hereby irrevocably consent to the appointment of such receiver or receivers, waives any and all defenses to such appointment, and agrees not to oppose any application therefor by Administrative Agent. Nothing herein is to be construed to deprive the Administrative Agent of any other right, remedy or privilege it may have under the law to have a receiver appointed. Any money advanced by the Administrative Agent in connection with any such receivership shall be a demand obligation (which obligation the Borrower hereby promises to pay) owing by the Borrower to the Administrative Agent pursuant to this Mortgage.

5.3 Waivers. No waiver of any Event of Default shall at any time thereafter be held to be a waiver of any rights of the Administrative Agent stated anywhere in the Notes, this Mortgage, the Credit Agreement or any of the other Loan Documents, nor shall any waiver of a prior Event of Default operate to waive any subsequent Event(s) of Default. All remedies provided in this Mortgage, in the Notes, in the Credit Agreement and in the other Loan Documents are cumulative and may, at the election of the Administrative Agent, be exercised alternatively, successively, or in any manner and are in addition to any other rights provided by law.

5.4 Delivery of Possession After Foreclosure. In the event there is a foreclosure sale hereunder and at the time of such sale, the Borrower or the Borrower’s heirs, devises, representatives, successors or assigns are occupying or using the Premises, or any part thereof, each and all immediately shall become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day, terminable at the will of either landlord or tenant, at a

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reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser; and to the extent permitted by applicable law, the purchaser at such sale, notwithstanding any language herein apparently to the contrary, shall have the sole option to demand possession immediately following the sale or to permit the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession of the property (such as an action for forcible detainer) in any court having jurisdiction.

5.5 Marshaling. The Borrower hereby waives, in the event of foreclosure of this Mortgage or the enforcement by the Administrative Agent of any other rights and remedies hereunder, any right otherwise available in respect to marshaling of assets which secure the Loans and Letters of Credit and any other Indebtedness or to require the Administrative Agent to pursue its remedies against any other such assets.

ARTICLE VI

General Conditions

6.1 Terms. The singular used herein shall be deemed to include the plural; the masculine deemed to include the feminine and neuter; and the named parties deemed to include their heirs, successors and assigns. The term “Lender” shall include any of the Persons identified as a “Lender” on the signature pages to the Credit Agreement, and any Person which may become a Lender by way of assignment in accordance with the terms of the Credit Agreement, together with their successors and assigns.

6.2 Notices. All notices and other communications required to be given hereunder shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) to the number set out below, (iii) the Business Day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (iv) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address or telecopy numbers set forth below, or at such other address as such party may specify by written notice to the other parties hereto.

to the Borrower:

Knoll, Inc.

1235 Water Street

East Greenville, Pennsylvania 18041

Attention: Barry McCabe

Fax: (215) 679-1525

with copies to:

Warburg, Pincus Ventures, L.P.

Warburg Pincus Private Equity VIII, L.P.

Warburg Pincus International Partners, L.P.

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466 Lexington Avenue, 10^th Floor

New York, New York 10017

Attention: Jeffrey Harris, James Neary and James Chin

Fax: (212) 878-6139

and:

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, New York 10019

Attention: William E. Hiller, Esq.

Fax: (212) 728-8111

to the Administrative Agent:

UBS AG, STAMFORD BRANCH

677 Washington Boulevard

Stamford, Connecticut 06901

Attention: Vladimira Holeckova

Fax: (203) 719-4176

with a copy to:

Latham & Watkins LLP

885 Third Avenue

New York, New York 10022-4802

Attention: Christopher Plaut, Esq.

Fax: (212) 751-4864

6.3 Severability. If any provision of this Mortgage is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

6.4 Headings. The captions and headings herein are inserted only as a matter of convenience and for reference and in no way define, limit, or describe the scope of this Mortgage nor the intent of any provision hereof.

6.5 Conflicting Terms. In the event the terms and conditions of this Mortgage conflict with the terms and conditions of the Credit Agreement, the terms and conditions of the Credit Agreement shall control and supersede the provisions of this Mortgage with respect to such conflicts.

6.6 GOVERNING LAW. This Mortgage shall be governed by and construed in accordance with the internal law of the State of New York as provided in Section 9.7 of the Credit Agreement; provided, however, that the provisions of this Mortgage relating to the creation, perfection and enforcement of the lien and security interest created by this Mortgage in respect of the Premises and the exercise of each remedy provided hereby, including the power of

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foreclosure procedures set forth in this Mortgage, shall be governed by and construed in accordance with the internal law of the state where the Premises is located. In the event of a conflict between the laws of the State of New York and the internal law with respect to creation, perfection and enforcement of the lien and security interest created by this Mortgage, the laws of the state in which the Premises is located shall govern.

6.7 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT, OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF THEM IN RESPECT OF THIS INSTRUMENT OR ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BORROWER AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS MORTGAGE WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

6.8 WRITTEN AGREEMENT.

(a) THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND THE ADMINISTRATIVE AGENT SHALL BE DETERMINED SOLELY FROM THIS WRITTEN MORTGAGE AND THE OTHER LOAN DOCUMENTS, AND ANY PRIOR ORAL OR WRITTEN AGREEMENTS BETWEEN THE ADMINISTRATIVE AGENT AND THE BORROWER CONCERNING THE SUBJECT MATTER HEREOF AND OF THE OTHER LOAN DOCUMENTS ARE SUPERSEDED BY AND MERGED INTO THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS.

(b) THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS MAY NOT BE VARIED BY ANY ORAL AGREEMENTS OR DISCUSSIONS THAT OCCUR BEFORE, CONTEMPORANEOUSLY WITH, OR SUBSEQUENT TO THE EXECUTION OF THIS MORTGAGE OR THE OTHER LOAN DOCUMENTS.

(c) THIS WRITTEN MORTGAGE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Borrower has executed this Mortgage under seal as of the above written date.

KNOLL, INC., a Delaware corporation

By:

Name:

Title:

STATE OF                             

COUNTY OF                             

The foregoing instrument was acknowledged before me this      day of                     , 200   by                 , the                                  of Knoll, Inc., a Delaware corporation, on behalf of the corporation.

Name:

Notary Public

My Commission Expires:                         

Drafted By and Return To:

Dara Denberg

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4802

Exhibit A

EXHIBIT G

                            , 2004

UBS AG, Stamford Branch,

as Administrative Agent

677 Washington Boulevard

Stamford, Connecticut 06901

The Lenders, Agents and Arrangers

referred to herein

c/o UBS AG, Stamford Branch

Ladies and Gentlemen:

We have acted as counsel to:

(a) Knoll, Inc., a Delaware corporation (the “Borrower”),

(b) Knoll Overseas, Inc., a Delaware corporation (“Knoll Overseas”, and the Borrower and Knoll Overseas are collectively called the “Delaware Loan Parties”), and

(c) Spinneybeck Enterprises, Inc., a New York corporation (“Spinneybeck”, and Knoll Overseas and Spinneybeck are each herein called a “Guarantor”),

in connection with (i) the Credit Agreement dated as of September 30, 2004 (the “Credit Agreement”), among the Borrower, various financial institutions, as Lenders (the “Lenders”), UBS AG, Stamford Branch, as Administrative Agent (“UBS” and, in such capacity, the “Administrative Agent”), the other Agents named therein (each, an “Agent”), and the Arrangers named therein (each, an “Arranger”), (ii) the Guarantee and Collateral Agreement dated as of September 30, 2004 (the “Guarantee and Collateral Agreement”), by the Borrower and the Guarantors in favor of the Administrative Agent, (iii) the Mortgage dated as of the date hereof (the “Muskegon Mortgage”), executed by the Borrower in favor of the Administrative Agent relating to property in Muskegon County, Michigan, (iv) the Mortgage dated as of the date hereof (the “Kent Mortgage”), executed by the Borrower in favor of the Administrative Agent relating to property in Kent County, Michigan, and (v) the Mortgage and Security Agreement dated as of the date hereof (the “Pennsylvania Mortgage”, and the Pennsylvania Mortgage, the Muskegon Mortgage and the Kent Mortgage are collectively herein called the “Mortgages”), executed by the Borrower in favor of the Administrative Agent relating to property in the

September 30, 2004

Page 2

Commonwealth of Pennsylvania. This letter is being delivered to you pursuant to Section 4.2(a)(i) of the Credit Agreement.

Capitalized terms not otherwise defined in this letter are used as defined in the Credit Agreement. As used herein, “Loan Parties” refers to the Borrower and the Guarantors.

In connection with this letter, we have examined copies of:

1. the Credit Agreement,

2. the Guarantee and Collateral Agreement,

3. the Copyright Security Agreement dated as of September 30, 2004 (the “Knoll Copyright Security Agreement”), by the Borrower in favor of the Administrative Agent for the benefit of the Lenders,

4. the Trademark Security Agreement dated as of September 30, 2004 (the “Knoll Trademark Security Agreement”), by the Borrower in favor of the Administrative Agent for the benefit of the Lenders,

5. the Patent Security Agreement dated as of September 30, 2004 (the “Knoll Patent Security Agreement” and, together with the Knoll Copyright Security Agreement and the Knoll Trademark Security Agreement, the “Knoll IP Security Agreements”), by the Borrower in favor of the Administrative Agent for the benefit of the Lenders,

6. the Trademark Security Agreement dated as of September 30, 2004 (the “Spinneybeck Trademark Security Agreement” and, together with the Knoll IP Security Agreements, the “IP Security Agreements”), by Spinneybeck in favor of the Administrative Agent for the benefit of the Lenders,

7. the Deposit Account Control Agreement dated as of September 30, 2004, among Wachovia Bank, National Association, as depositary bank, the Borrower and the Administrative Agent,

8. the Syndication Letter, dated September 1, 2004, among Knoll, UBS Loan Finance LLC, UBS Securities LLC and Goldman Sachs Credit Partners L.P.,

9. the Mortgages,

10. the forms of promissory notes (the “Notes”) which may be issued by the Borrower pursuant to Section 2.4(e) of the Credit Agreement,

11. the respective certificates of incorporation or articles of incorporation (the “Charters”) of the Borrower and Knoll Overseas each certified by the Secretary of State of the State of

September 30, 2004

Page 3

Delaware and of Spinneybeck certified by the Secretary of State of the State of New York,

12. resolutions of the respective boards of directors of the Loan Parties (the “Resolutions”),

13. certificates of the Secretary of State of the State of Delaware as to the existence and good standing of the Borrower and Knoll Overseas (the “Delaware Good Standing Certificates”) and of the State of New York as to the existence of Spinneybeck (the “New York Good Standing Certificate”),

14. the UCC-1 financing statement (the “Spinneybeck Financing Statement”) naming the Spinneybeck as debtor and UBS, as administrative agent, as secured party to be filed with the Secretary of State of the State of New York,

15. the UCC-1 financing statement (the “Borrower Financing Statement”) naming the Borrower as debtor and UBS, as administrative agent, as secured party to be filed with the Secretary of State of the State of Delaware, and

16. the UCC-1 financing statement (the “Knoll Overseas Financing Statement”) naming Knoll Overseas as debtor and UBS, as administrative agent, as secured party to be filed with the Secretary of State of the State of Delaware.

The foregoing agreements referred to in clauses (1) through (7) above are hereinafter collectively referred to as the “Loan Documents” and the Loan Documents, the Notes and the Mortgages are collectively called the “Operative Documents”.

In our examination, we have assumed:

(i) the genuineness of all signatures of all parties other than the signatures of the Loan Parties,

(ii) the authenticity of all company and corporate records, agreements, documents, instruments and certificates submitted to us as originals, the conformity to original documents and agreements of all documents and agreements submitted to us as conformed, certified or photostatic copies thereof and the authenticity of the originals of such conformed, certified or photostatic copies,

(iii) the due authorization of all documents and agreements by all parties thereto other than the Loan Parties and the execution and delivery of all documents and agreements by all parties other than the Loan Parties,

(iv) the legal right and power of all such parties other than the Loan Parties under all applicable laws and regulations to enter into, execute and deliver such agreements and documents,

September 30, 2004

Page 4

(y) the legality, validity and enforceability of the Operative Documents against the parties thereto other than the Loan Parties, and

(z) that the Notes, when executed and delivered, will be in the form reviewed by us.

As to questions of fact material to the opinions expressed in this letter, we have, when relevant facts were not independently established by us, relied upon representations of the Loan Parties and their respective officers made in or pursuant to the Operative Documents and of public officials.

As used herein, the term “Applicable Laws” means the federal laws of the United States of America and the laws of the State of New York which, in our experience, are normally applicable to transactions of the type contemplated by the Operative Documents and the General Corporation Law of the State of Delaware. The term “Governmental Approval” means any consent, approval, license, authorization or validation of, or filing, recording or registration with, any Governmental Authority pursuant to the Applicable Laws.

Based upon the foregoing and subject to the assumptions, limitations, qualifications and exceptions set forth below, we are of the opinion that:

1. Each Delaware Loan Party is a corporation validly existing and in good standing under the laws of the State of Delaware, based on our review of the applicable Charters and the Delaware Good Standing Certificates. Spinneybeck is a corporation validly existing under the laws of the State of New York, based on our review of the applicable Charter and the New York Good Standing Certificate. Each Loan Party has all requisite corporate power and authority to own, operate and encumber its property and to conduct its business as presently conducted and as proposed to be conducted in connection with and following the consummation of the transactions contemplated by each of the Operative Documents to which it is a party.

2. Each Loan Party has the requisite corporate power and authority to execute and deliver the Operative Documents to which it is a party and to perform its respective obligations under each such Operative Document and, in the case of the Borrower, to borrow under the Credit Agreement. The execution and delivery by each Loan Party of the Operative Documents to which it is a party and the performance by each such person of its respective obligations under each Loan Document have been duly authorized by all necessary corporate action of such person.

3. Each of the Operative Documents (other than the Notes) to which any Loan Party is a party have been duly executed and delivered on behalf of such person. Each of the Loan Documents (other than the Notes) to which any Loan Party is a party constitutes a legal, valid and binding obligation of such person, enforceable against such person in accordance with its terms. The Notes, when executed and delivered by the Borrower,

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will constitute the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with their terms.

4. The execution, delivery and performance by each Loan Party of the Operative Documents to which such person is a party do not and will not (i) violate the Charter, bylaws or other constituent documents of such person, (ii) violate any provision of the Applicable Laws binding on such person or any order or decree thereunder of which we have knowledge of any court or government agency or instrumentality binding upon such person, (iii) result in a breach of, or give rise to a default under or to any right to require prepayment, repurchase or redemption of any obligation under any contractual obligation known to us that is material to the Borrower and its subsidiaries taken as a whole to which such Loan Party is a party or by which any of them or any of their property is or may be bound, (iv) result in or require the creation or imposition of any Lien upon any of the properties or assets of such Loan Party, other than Liens contemplated by the Loan Documents, or (v) require any approval of any stockholder of such Loan Party which has not been obtained.

5. The execution, delivery and performance by each Loan Party of the Operative Documents to which such person is a party and the grant of the security interests under the Guarantee and Collateral Agreement do not and will not require any Governmental Approval, except (i) filings necessary to perfect, or to continue the perfection of, security interests in the Collateral, (ii) routine corporate filings required to be made after the date hereof to maintain good standing and to maintain or renew licenses and permits required for any Loan Party to operate their respective businesses in the ordinary course of business, (iii) supplements to the Guarantee and Collateral Agreement required therein in respect of certain collateral, including commercial tort claims and registered Copyrights, and (iv) Governmental Approvals required for the exercise by the Administrative Agent and the Lenders of their rights and remedies under the Loan Documents.

6. Neither the Borrower nor any Guarantor is (i) an “investment company” within the meaning of the Investment Company Act of 1940, as amended or (ii) a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company”, within the meaning of, or is otherwise subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. The making of Loans under the Credit Agreement and the application of the proceeds thereof as provided in the Credit Agreement will not violate Regulations T, U or X of the Board of Governors of the Federal Reserve Board.

7. The Guarantee and Collateral Agreement creates valid and enforceable security interests, as security for the Obligations, in favor of the Administrative Agent for the benefit of the Secured Parties in those items and types of Collateral (as such term is defined in the Guarantee and Collateral Agreement) specified therein in which a security interest may be created under Article 9 of the New York Uniform Commercial Code, as in effect on

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the date hereof (the “NYUCC”) (such collateral being herein called the “Covered Collateral”).

8. The security interests created in favor of the Administrative Agent for the benefit of the Secured Parties in the shares of Equity Interests listed in Schedule II of the Guarantee and Collateral Agreement (the “Pledged Shares”) and in the promissory notes evidencing intercompany Indebtedness listed in Schedule II of the Guarantee and Collateral Agreement (the “Pledged Notes”) pursuant to the Guarantee and Collateral Agreement will be perfected by the Administrative Agent taking possession in the State of New York of the stock certificates evidencing such Pledged Shares, together with stock powers executed in blank, and the Pledged Notes, together with instruments of transfer endorsed in blank, and, if the Administrative Agent obtains such perfected security interest without “notice of an adverse claim” (as defined in Section 8-105 of the NYUCC) and, in the case of the Pledged Notes, if such notes constitute “securities” (as defined in Section 8-102 of the NYUCC), the Administrative Agent will obtain such security interest free of any such “adverse claim” (as defined in Section 8-102 of the NYUCC).

9. Upon the filing of the IP Security Agreements in the United States Patent and Trademark Office and the United States Copyright Office, the Administrative Agent for the benefit of the Secured Parties will have a valid and perfected security interest in the Copyright Collateral, Trademark Collateral or Patent Collateral (as applicable and as defined in the applicable IP Security Agreement) to the extent federal law is applicable thereto.

10. The Spinneybeck Financing Statement is in proper form for filing under the NYUCC. Upon the filing of the Spinneybeck Financing Statements in the office of the Secretary of State of the State of New York, the Administrative Agent for the benefit of the Lenders will have a perfected security interest in the Covered Collateral in which a security interest may be perfected through the filing of financing statements under Article 9 of the NYUCC. We note that subsequent filings or recordings under the NYUCC will be necessary to preserve and maintain the perfection of such security interest to the extent such security interest is perfected by the filing of the Spinneybeck Financing Statement, including, without limitation, filings required by Section 9-301, 9-315(d), 9-316, 9-507, 9-508 and 9-515 of the NYUCC.

11. The Borrower Financing Statement is in proper form for filing under the Delaware Uniform Commercial Code (the “Delaware UCC”). Upon the filing of the Borrower Financing Statement in the office of the Secretary of State of the State of Delaware, the Administrative Agent for the benefit of the Lenders will have a perfected security interest in the Covered Collateral in which a security interest may be perfected through the filing of financing statements under Article 9 of the Delaware UCC. The Knoll Overseas Financing Statement is in proper form for filing under the Delaware UCC. Upon the filing of the Knoll Overseas Financing Statement in the office of the Secretary of State of the State of Delaware, the Administrative Agent for the benefit of the Lenders

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will have a perfected security interest in the Covered Collateral in which a security interest may be perfected through the filing of financing statements under Article 9 of the Delaware UCC. We note that subsequent filings or recordings under the Delaware UCC will be necessary to preserve and maintain the perfection of such security interests to the extent such security interests are perfected by the filing of such Financing Statements, including, without limitation, filings required by Section 9-301, 9-315(d), 9-316, 9-507, 9-508 and 9-515 of the Delaware UCC.

12. To our knowledge, except as disclosed in the Credit Agreement, there are no actions, suits or proceedings at law or in equity by or before any arbitrator or Governmental Authority now pending or threatened against or affecting any Loan Party that involve or relate to any of the Operative Documents or the Transactions.

The foregoing opinions are subject to the following assumptions, qualifications and exceptions:

A. We wish to point out that Sections 9-301 through 9-307 of the NYUCC provide certain rules for the perfection of security interests in multiple state transactions. Such rules provide that the law of jurisdictions other than those covered in the opinions expressed herein may govern the perfection of the security interests created by the Loan Documents and the effect of perfection or non-perfection.

B. We note that the validity, perfection and enforceability of a security interest in after acquired property, money, or certain securities or instruments are subject to limitations under the Bankruptcy Code (including Section 552), and we express no opinion with respect thereto. We also note that the security interest in the proceeds of any Collateral may be subject to Section 9-315 of the NYUCC or the Delaware UCC. In addition, no opinion is expressed with respect to (i) security interests of the Administrative Agent in any insurance policy, other than “health-care-insurance receivables” (as defined in the NYUCC), (ii) security interests of the Administrative Agent in tort claims (other than commercial tort claims which are specifically identified in the Guarantee and Collateral Agreement), (iii) the perfection of any security interest, except as set forth in paragraphs 9, 10 and 11 above or (iv) any security interest in collateral described in Section 4.1(a)(xvi) of the Guarantee and Collateral Agreement as “property” generally. No opinion is expressed as to the enforceability of Section 2.7 of the Guarantee and Collateral Agreement.

C. We call to your attention that in many cases where the NYUCC renders anti-assignment provisions contained in agreements, instruments or other documentation creating or evidencing collateral ineffective for the purposes of the creation, attachment or perfection of a security interest, the security interest is not enforceable against the account debtor or other person obligated under such agreement, instrument or other documentation.

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D. The opinions set forth in paragraphs 3 and 4 above are subject to (i) provisions of Section 9-615 of the NYUCC which limit the ability of a secured party to collect a deficiency from a “debtor” or “obligor” (including guarantors) in the event a sale of collateral is not conducted in a commercially reasonable manner or in the event of certain dispositions to the secured party or a person related to a secured party, (ii) provisions of any Loan Document which purport to define whether any disposition constitutes a commercially reasonable disposition and (iii) provisions of any Loan Document which purport to waive any rights of the Borrower or any other obligor or duties of any Secured Party, in violation of Section 9-602 of the NYUCC. We note that sales by the Administrative Agent or any other Secured Party under the Loan Documents of Collateral constituting securities under applicable federal or state securities laws require compliance with such laws or an exemption therefrom.

E. The opinions expressed in paragraph 3 above are qualified (i) by the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, (ii) insofar as the remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and the discretion of the court before which any enforcement thereof may be brought and (iii) insofar as proceedings therefore may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity), including principles of commercial reasonableness and an implied covenant of good faith and fair dealing. Such principles of equity are of general application, and in applying such principles, a court, among other things, might not allow a creditor to accelerate the maturity of a debt, to realize upon any security for the payment of such debt upon the occurrence of a default deemed immaterial, or to exercise any right of set-off with respect to debt which is neither matured nor accelerated, or might decline to order the applicable Loan Party to specifically perform covenants. Insofar as provisions provide for indemnification, the enforcement thereof may be limited by public policy considerations. Such opinions are further subject to the qualification that certain remedial provisions of the Loan Documents are or may be unenforceable in whole or in part under the laws of the State of New York, but the inclusion of such provisions does not affect the validity of any Loan Document in which any such provision is included, and such Loan Documents contain adequate provisions for enforcing payment of the obligations thereunder and for the practical realization of the rights and benefits afforded thereby.

F. When used in this letter, the phrases “known to us” and “to our knowledge” mean the current actual knowledge of attorneys within our firm who are actively involved in representing the Loan Parties in connection with the matters referred to herein.

G. We express no opinion as to (i) whether any person has title to any Collateral, or, except as set forth in paragraph 8 above, as to the priority of any such security interest, (ii) any provisions of the Loan Documents insofar as they relate to (1) the subject matter

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jurisdiction of the federal courts to adjudicate any controversy relating to the Loan Documents, (2) the waiver of defenses and the waiver of inconvenient forum, (3) the waiver of the right to a jury trial, or (4) rights of set-off, (iii) any provisions of any Loan Document which purport to provide for a rate of interest after judgment, or (iv) the provisions of the last sentence of Section 5.1 of the Guarantee and Collateral Agreement and similar provisions in any other Loan Document. We have also assumed that none of the Covered Collateral consists of as-extracted collateral located in the State of Delaware or the State of New York or timber to be cut located in the State of Delaware or the State of New York or fixtures located in the State of Delaware or the State of New York or goods that are or are to become fixtures located in the State of Delaware or the State of New York.

H. In connection with our opinion expressed in paragraph 4 above, we have assumed that Borrower will repay all amounts owing under the Existing Credit Agreement simultaneously with or prior to the incurrence of Indebtedness under the Credit Agreement.

I. The opinions set forth in paragraphs 8, 10 and 11 above are limited to Articles 8 and 9 of the Delaware UCC or the NYUCC, as applicable. No opinion is given as to what law governs perfection or priority of the security interests granted in the Collateral covered by this letter.

This letter is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated. This letter may not be quoted, distributed or disclosed, except to your counsel, to participants or assignees or, to the extent necessary, to an applicable regulatory authority or pursuant to legal process, without our prior written consent.

This letter speaks only as of the date hereof and is limited to present statutes, regulations and administrative and judicial interpretations. We undertake no responsibility to update or supplement this letter after the date hereof, including without limitation with respect to any action which may be required in the future to create a valid lien on after acquired property or to perfect or continue the perfection of any security interest, including after a change in the name, identity, corporate structure or location of any Loan Party.

We are members of the bar of the State of New York and we express no opinion as to the laws of any jurisdiction other than the Applicable Laws and, as to paragraph 11 above, the Delaware UCC (but not any regulations thereunder or judicial interpretations thereof) based upon the most recent compilation of the Delaware UCC contained in the Commerce Clearing House Secured Transactions Guide.

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No person or entity may rely or claim reliance upon this letter other than you and your permitted successors and assigns and the Lenders from time to time party to the Credit Agreement.

Very truly yours,

EX-10.12

EXHIBIT 10.12

KNOLL, INC.

AMENDMENT AND WAIVER TO

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

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 October 1, 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 Investors,” and, together with Warburg, the “Investors”); 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 has filed 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, the Investors desire to amend and waive certain terms of the Agreement as set forth herein and in accordance with Section 9(d) of the Agreement; and

WHEREAS, the execution of this Amendment by the Investors is sufficient to effect the amendment and waiver contemplated hereby in accordance with Section 9(d) of the Agreement;

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

1. Elimination of Certain Obligations of Management Investors. Sections 1(b) (“Election of Directors”) and 1(c) (“Replacement Directors”) of the Agreement are hereby deleted in their entirety.

2. Waiver of Piggyback Registration Rights. Any and all rights any Holder may have pursuant to Section 6(c) (“Company Registration”) of the Agreement in connection with the IPO are hereby waived, and the Company shall have no obligations under said Section 6(c) in connection with the IPO.

3. Waiver of Tag-Along Rights. Each of the Management Investors hereby waives any and all rights such Management Investor may have pursuant to Section 3 (“Right of Co-Sale”) of the Agreement in connection with the IPO, and Warburg shall have no obligations under said Section 3 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, including the acknowledgement hereof, 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]

2

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 Harris
	Name: Jeffrey Harris Title:   Managing Director

MANAGEMENT INVESTORS:

/s/ Barbara E. Ellixson

Barbara E. Ellixson

/s/ Barry L. McCabe

Barry L. McCabe

/s/ Patrick A. Milberger

Patrick A. Milberger

/s/ Douglas J. Purdom

Douglas J. Purdom

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-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 Amendment No. 1 to the Registration Statement (Form S-1 No. 333-118901) and related Prospectus of Knoll, Inc. dated October 22, 2004.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania

October 22, 2004

CORRESP

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