KNOLL INC, S-1, 1997-03-14

KNOLL INC
S-1, 1997-03-14
MISCELLANEOUS FURNITURE & FIXTURES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
KNOLL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2522 13-3873847
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTIONOF INDUSTRIALCLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION) ---------------
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.
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. VALERIE FORD JACOB, ESQ.
WILLKIE FARR & GALLAGHER FRIED, FRANK, HARRIS, SHRIVER &
ONE CITICORP CENTER JACOBSON
153 EAST 53RD STREET ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10004
(212) 821-8000 (212) 859-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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, 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, please 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(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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------
CALCULATION OF REGISTRATION FEE

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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.... $184,000,000 $55,758
</TABLE>
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(1) Includes shares issuable upon exercise of the Underwriters' over-allotment
options.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
---------------
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 THAT 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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>

EXPLANATORY NOTE

This registration statement contains two forms of prospectus: one to be used
in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent offering
outside of the United States and Canada (the "International Prospectus"). The
two prospectuses are identical except for the front and back cover pages and
the section entitled "Underwriting." Each of the alternate pages for the
International Prospectus included herein is labeled "Alternate Page for
International Prospectus."
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 14, 1997
PROSPECTUS
SHARES
[LOGO]
KNOLL, INC.
COMMON STOCK

-----------

All of the shares of Common Stock offered hereby are being sold by
Knoll, Inc. ("Knoll" or the "Company"). Of the shares of Common Stock
offered hereby, shares are being offered for sale initially in the United
States and Canada by the U.S. Underwriters and shares are being offered for
sale initially in a concurrent offering outside the United States and Canada by
the International Managers. The initial public offering price and the aggregate
underwriting discount per share will be identical for both Offerings. See
"Underwriting."

Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. For a discussion relating to factors to be
considered in determining the initial public offering price, see
"Underwriting."

Application will be made for approval for listing of the Common Stock on the
New York Stock Exchange under the symbol "KNL."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share....................... $ $ $
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Total(3)........................ $ $ $
</TABLE>
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(1) The Company and a certain selling stockholder (the "Selling Stockholder")
have agreed to indemnify the several Underwriters against certain
liabilities, including certain liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the U.S. Underwriters and the International
Managers options to purchase up to an additional shares and
shares of Common Stock, respectively, and the Selling Stockholder has
granted the U.S. Underwriters and the International Managers options to
purchase up to an additional shares and shares of Common Stock,
respectively, in each case exercisable within 30 days after the date
hereof, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount,
Proceeds to Company and Proceeds to Selling Stockholder will be $ , $ ,
$ and $ , respectively. See "Underwriting."

-----------

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in New York,
New York, on or about , 1997.

-----------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED

-----------

The date of this Prospectus is , 1997.
<PAGE>

[PICTURES OF FURNITURE]

Knoll(R), The Knoll Group(R), KnollStudio(R), KnollExtra(R), Reff(TM),
Bulldog(R), Calibre(R), Equity(R), Parachute(R), Spinneybeck(R), Good Design
is Good Business(R), Propeller(TM) and SoHo(TM) are trademarks of the Company.

----------------

The Company intends to furnish its stockholders annual reports containing
audited financial statements and will make available copies of quarterly
reports containing unaudited interim financial information for the first three
fiscal quarters of each fiscal year of the Company.

----------------

Certain persons participating in the Offerings may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Such transactions may include stabilizing, the purchase of Common Stock to
cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, see "Underwriting."

2
<PAGE>

SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the notes thereto, appearing elsewhere in this Prospectus. Unless the context
otherwise requires, the terms "Knoll" and the "Company" refer to Knoll, Inc.
and its subsidiaries and predecessor entities as a combined entity. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in "Risk
Factors."

THE COMPANY

Knoll designs, manufactures and distributes office systems and business
furniture noted for its high quality, innovative design and sophisticated
image. Knoll's products are designed to provide enduring value rooted in
timeless aesthetics, functionality, flexibility and reliable performance. For
nearly sixty years, Knoll has been widely recognized as a design leader, with
products represented in major art museums around the world, including more than
30 Knoll pieces housed in the permanent Design Collection of the Museum of
Modern Art in New York. Since 1994 alone, Knoll has won more than 20 design
awards for new products and enhancements across all of its product categories.

Knoll's customers are typically Fortune 1000 companies. The Company's direct
sales force of approximately 290 professionals and its network of approximately
200 independent dealers in North America work in close partnership with
customers and design professionals to create distinctive work environments
using Knoll products. Knoll's products and knowledgeable sales organization
have generated strong brand recognition and loyalty among architects, designers
and corporate facility managers, who are key influences in the purchasing
process for business furnishings. Knoll's strong customer relationships allow
the Company to adapt and customize its products to meet evolving customer
needs, technology practices and ergonomic standards.

The Company offers a broad range of office furniture and accessories in five
basic categories: (i) office systems (typically modular and moveable workspaces
with integrated work surfaces, space dividers and lighting), comprised mainly
of the Reff, Morrison and Equity product lines; (ii) seating, including the
Sapper, Bulldog, Parachute and SoHo chairs; (iii) storage solutions and filing
cabinets, including the Calibre collection; (iv) desks and casegoods, including
bookcases and credenzas; and (v) tables. The Company's KnollStudio collection
features its signature design classics, including high image side chairs,
sofas, desks and tables for both office and home use. The Company also carries
its own lines of textiles and leather products and a line of desk, office
and computer accessories, which complement its furniture products and are also
sold in conjunction with the seating and systems products of other
manufacturers. In 1996, the Company had revenues of $651.8 million.

INDUSTRY DYNAMICS

The Company believes that fundamental shifts in the nature of corporate
organizational structures, technology and work processes are driving new
opportunities for growth in the office furniture industry, especially in the
middle to high-end segments where Knoll believes it has competitive advantages.
The need for redesigned space has accelerated as large corporations continue to
focus on the benefits of reengineering, restructuring and reorganizing, placing
greater emphasis on teamwork, flatter organizational structures and direct
communication among employees. In addition, the proliferation of technology
throughout the organization has created increasingly complex wire and cable
requirements and placed new demands on office furniture. Furthermore,
companies, workers and regulatory entities have become more sensitive to
ergonomic concerns and the need for designs that increase worker productivity.

The U.S. office furniture market generated sales of approximately $10.0
billion in 1996. The dollar value of U.S. office furniture industry shipments
has increased in each of the past 25 years, with the exception of 1975 and
1991, and according to BIFMA (as defined) estimates, has grown at a compound
annual rate of approximately 7.2% over the three-year period ended December 31,
1996.

3
<PAGE>

GROWTH STRATEGY

Knoll focuses on the middle to high-end office furniture market which, as a
result of evolving workplace trends and industry dynamics, management expects
to grow faster than the industry as a whole. Management believes Knoll is well-
positioned to drive further growth in revenues, profitability and market share.
Key elements of the Company's growth strategy are as follows:

. LEVERAGE OFFICE SYSTEMS STRENGTH IN OTHER CATEGORIES. The Company
believes it has the opportunity to increase sales and market share in
seating, tables, desks and storage solutions. For example, the Company's
U.S. market share of seating and tables was 2.1% and 1.8%, respectively,
in 1996 while its office systems market share was 11.2% during this same
period. Since these products are often sold in conjunction with the
initial specification of an office system, the Company believes that it
can increase its market share in these categories by leveraging its
market share strength in office systems.

. EXPAND SCOPE OF SELLING EFFORTS. The Company intends to increase the
number of direct selling professionals over the next two years to
increase sales by (i) developing new corporate relationships, (ii)
further penetrating existing corporate accounts and (iii) expanding its
selling efforts into secondary markets. Secondary markets account for
approximately $800 million in annual industry sales, but to date have
received limited or no coverage by the Company's direct sales force or
dealers. Management believes expanded selling efforts will present an
opportunity to increase total revenues and market share.

. EXPAND THE RANGE AND QUANTITY OF PRODUCTS OFFERED THROUGH THE EXISTING
DEALER NETWORK. The Company intends to leverage its dealers' estimated
900-person sales force to capture a larger share of business with medium
to smaller-size companies and independent business purchasers. In order
to stimulate sales in this segment, the Company has introduced marketing
programs such as QuickShip and PrimeTime! which make it easier and more
profitable for its dealers to market the Company's products.
Additionally, the Company is developing new products designed and
targeted for sale through the dealer distribution channel.

. CONTINUE TO USE SPECIALTY BUSINESSES TO ENHANCE REPUTATION AND DRIVE
INCREMENTAL GROWTH. The Company intends to expand its KnollStudio line,
which includes specially commissioned pieces by major architects and
designers. By relaunching KnollStudio classic products and introducing
new products, the Company expects to generate significant publicity and
goodwill in the design community and the media. Further, Knoll's textile,
leather and accessories lines offer the opportunity to achieve
incremental growth and attractive margins both when sold as part of Knoll
offerings and when sold in conjunction with products of other
manufacturers.

. IMPROVE INFORMATION SYSTEMS TO MAXIMIZE MANUFACTURING EFFICIENCY. The
Company is implementing integrated, comprehensive management information
systems for its operations. Management believes that new information
systems will enable it to enhance its order response time and accuracy,
improve manufacturing processes, reduce delivery times, improve shipping
accuracy and reduce fixed costs.

4
<PAGE>

PLATFORM FOR GROWTH

The Company has created a platform to execute its growth strategy through the
successful completion of its turnaround program. As part of the restructuring
efforts initiated by current management in 1994, the Company evaluated all
major business activities and significantly reduced operating costs. Since then
(i) virtually every product line has been modified and improved; (ii) the lead
time required to bring new and enhanced products to market has decreased
significantly; (iii) average lead times between order entry and delivery of
products to customers have been reduced from seven weeks to five weeks; and
(iv) on-time shipments have improved to the current 95% level. In addition,
management refocused and retrained the Company's sales force, instituted
product line profitability measures and aligned management incentives with
Company growth and profitability.

As a result of management's restructuring efforts, Knoll experienced strong
growth in sales, gross margins and operating margins from 1994 to 1996. Sales
increased from $562.9 million in 1994 to $651.8 million in 1996, despite the
discontinuance of several product lines. Gross margins were 35.6% on a pro
forma basis in 1996 and 27.1% in 1994. The operating margin was 12.0% on a pro
forma basis in 1996, which the Company believes is among the highest of its
major competitors. The Company's improved financial and operating results
allowed it in 1996 to prepay $72.0 million of its senior credit facilities and
refinance such facilities on more favorable terms.

COMPETITIVE STRENGTHS

Knoll's business philosophy is to pursue growth and profitability by
maintaining and enhancing the Knoll brand image and reputation for quality and
by working closely with its customers. The Company's growth strategy is
designed to leverage its competitive strengths, which include:

TRADITION OF SUPERIOR DESIGN. The Company's greatest business strength lies
in the history and depth of its commitment to create furniture of enduring
design value, known for innovative performance and quality. This design
heritage has enabled the Company to build over time strong relationships
with some of the world's preeminent designers. The Company engages
prominent outside architects and designers to create new products and
product enhancements. By combining the creative vision of architects and
designers with a commitment to developing products which address changing
business needs, the Company seeks to launch new offerings which achieve
recognition in the architect and design community and generate strong
demand among corporate customers.

REPUTATION FOR SUPERIOR PRODUCT QUALITY. Knoll's quality serves as an
important marketing tool with design professionals and with new and
existing customers. Knoll's products are constructed of high quality
materials, and Knoll believes its products are differentiated from those of
its competitors in workmanship and attention to detail. The Company
believes this results in products with superior aesthetics, durability and
performance.

STRONG DIRECT SELLING ORGANIZATION AND DEALER NETWORK. The Company believes
that its direct sales force provides a strategic advantage relative to many
of its competitors. The direct sales force, in conjunction with the
Company's independent dealer network, has close relationships with
architects,
designers and corporate facility managers, who have a significant influence
on product selection on large orders.

LEAN ORGANIZATION FOCUSED ON COSTS. As a result of the turnaround program,
the Company has developed an organization focused on expense control and
operating efficiency.

5
<PAGE>

BACKGROUND

Knoll, Inc. is a Delaware corporation which is the successor by merger to the
business and operations of The Knoll Group, Inc. and its subsidiaries, which
were acquired in February 1996 (the "Acquisition") from Westinghouse Electric
Corporation ("Westinghouse") by a majority-owned subsidiary of Warburg, Pincus
Ventures, L.P. ("Warburg"). As part of the Acquisition, Warburg, NationsBanc
Investment Corp. and senior management (collectively the "Initial Investors")
invested $160 million in the Common Stock and Series A Preferred Stock of the
Company. Knoll International, Inc. ("Knoll International"), which was founded
in 1938, and other predecessors of the Company have been engaged in the design
and manufacture of office furniture since before the turn of the century. The
Company's principal executive offices are located at 1235 Water Street, East
Greenville, Pennsylvania 18041, and its telephone number is (215) 679-7991.

THE OFFERINGS

The offering of shares of the Common Stock in the United States and
Canada (the "U.S. Offering") and the offering of shares of the Common
Stock outside the United States and Canada (the "International Offering") are
collectively referred to herein as the "Offerings."

<TABLE>
<C> <S>
Common Stock offered................ shares

Common Stock to be outstanding after
the Offerings...................... shares(1)

Use of Proceeds..................... The net proceeds will be used (i) to
redeem that portion of the Series A
Preferred Stock (as defined below) held
by the Initial Investors not converted
into Common Stock, (ii) to redeem a
portion of the Company's outstanding
subordinated debt, (iii) to repay other
indebtedness of the Company and (iv)
for working capital and general
corporate purposes or additional debt
retirement. See "Use of Proceeds."

NYSE Symbol......................... "KNL"
</TABLE>
- --------
/(1)/Includes restricted shares issued under the Company's 1996 Stock Plan which
have vested. Excludes shares of Common Stock issued but not yet
vested, or reserved for issuance, under the Company's Stock Plans (as
defined), of which have been granted or will be issued upon completion
of the Offerings. See "Management--Stock Incentive Plans." Assumes the
Underwriters' over-allotment options are not exercised. If such over-
allotment options are exercised in full, an additional shares will be
issued and sold by the Company and shares will be sold by the Selling
Stockholder.

RISK FACTORS

Purchasers of Common Stock in the Offerings should carefully consider the
matters set forth under the caption "Risk Factors" and the other information
included in this Prospectus prior to making an investment decision. See "Risk
Factors."

------------------

Except as otherwise indicated herein, the information contained in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment options,
(ii) assumes the redemption or conversion to Common Stock of the Company's
outstanding Series A 12% Participating Convertible Preferred Stock, $1.00 par
value ("Series A Preferred Stock"), and (iii) gives effect to an amendment and
restatement of the Company's Certificate of Incorporation and a :1 stock
split of the Company's Common Stock, $.01 par value ("Common Stock") to be
effected prior to the closing of the Offerings. Except as otherwise indicated,
the market and Company market share data contained in this Prospectus are based
on information from The Business and Institutional Furniture Manufacturer's
Association ("BIFMA"), the United States office furniture trade association.
The Company believes that such data are considered within the industry to be
the best available and generally are indicative of the Company's relative
market share and competitive position.

6
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table presents (i) summary historical consolidated financial
information of the Company's predecessor ("Predecessor"), as of the dates and
for the periods indicated, (ii) summary pro forma consolidated financial
information of the Company, as of the dates and for the periods indicated,
after giving effect to the events described in the notes below and in the
Unaudited Pro Forma Financial Information and notes thereto included elsewhere
in this Prospectus and (iii) summary pro forma as adjusted information of the
Company, as of the date and for the period indicated, after giving effect to
the Offerings, the application of the estimated net proceeds therefrom and the
events described in the Unaudited Pro Forma Financial Information and notes
thereto included elsewhere in this Prospectus. The historical consolidated
financial information for each of the two years in the period ended December
31, 1995 has been derived from the Predecessor's financial statements, which
have been audited by Price Waterhouse LLP. The summary pro forma and pro forma
as adjusted information does not purport to represent what the Company's
results actually would have been if such events had occurred at the dates
indicated, nor does such information purport to project the results of the
Company for any future period. The summary financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Financial Statements and notes
thereto and the Unaudited Pro Forma Financial Information and notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------ -------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------ ------------------ ------------
1994 1995 1995(1) 1996(1) 1996 (1)(2)
-------- -------- -------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total sales............. $562,869 $620,892 $620,892 $651,766 $651,766
Cost of sales(3)........ 410,104 417,632 425,327 419,908 419,908
-------- -------- -------- -------- --------
Gross profit............ 152,765 203,260 195,565 231,858 231,858
Provision for restruc-
turing................. 29,180 -- -- -- --
Selling, general and
administrative
expenses(4)............ 167,238 138,527 142,582 153,388 153,388
Allocated corporate ex-
penses(3)(4)........... 5,881 9,528 4,000 -- --
-------- -------- -------- -------- --------
Operating income
(loss)................. (49,534) 55,205 48,983 78,470 78,470
Interest expense........ 3,225 1,430 40,945 40,030 32,934
Other income (expense),
net.................... 699 (1,597) (1,597) 151 151
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary item..... (52,060) 52,178 6,441 38,591 45,687
Income tax expense...... 7,713 22,846 2,705 16,848 19,658
-------- -------- -------- -------- --------
Income (loss) before
extraordinary item(5).. $(59,773) $ 29,332 $ 3,736 $ 21,743 $ 26,029
======== ======== ======== ======== ========
Income before extraordi-
nary item per share of
Common Stock(5)........
Weighted average shares
of Common Stock out-
standing...............

<CAPTION>
PREDECESSOR THE COMPANY
----------------- ---------------------------------
PRO FORMA
DECEMBER 31, DECEMBER 31, AS ADJUSTED
1994 1995 1996 DECEMBER 31, 1996(2)
-------- -------- ------------ --------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END): (IN THOUSANDS)
Working capital......... $ 22,898 $ 82,698 $ 64,754 $ 65,016
Total assets............ 705,316 656,710 675,712 675,875
Total long-term debt,
including current
portion................ 12,451 3,538 354,154 290,791
Total liabilities....... 247,310 176,259 497,908 434,283
Stockholders' equity.... 458,006 480,451 177,804 241,592
</TABLE>
(footnotes on following page)

7
<PAGE>

- --------
(1) Reflects summary pro forma financial information of the Company derived
from the Financial Statements and notes thereto included elsewhere in this
Prospectus, adjusted for the completion of the Acquisition and the
application of the net proceeds of $160,000 from the sale of capital stock
of the Company and borrowings of $260,000 and $165,000 under the Credit
Facilities (as defined) and the Notes (as defined), respectively.
(2) Adjusted to reflect the sale of Common Stock offered hereby and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
(3) Cost of sales has been increased by (i) $4,158 in pro forma 1995 and $801
in pro forma 1996 to reflect an increase in amortization and depreciation
resulting from the Acquisition, (ii) $450 in pro forma 1995 to reflect the
sale of inventory acquired as part of the Acquisition and (iii) $3,087 in
pro forma 1995 and $552 in pro forma 1996 in order to reflect the
reclassification of a portion of allocated corporate expenses. The
reclassified allocated corporate expenses approximate the replacement cost
to the Company for services formerly provided by Westinghouse to the
Predecessor, including (i) benefit expense related to the adoption of
various independent benefit plans comparable to Westinghouse benefit plans
and (ii) the cost of services required to replace specific activities
formerly provided by Westinghouse to the Predecessor, including audit, tax,
general ledger, accounts receivable, human resources, legal, insurance and
data communications.
(4) Selling, general and administrative expenses have been increased by (i)
$2,441 in pro forma 1995 and $369 in pro forma 1996 to reflect the
reclassification of allocated corporate expenses which approximate the
replacement cost to the Company (described above in note 3) and (ii) $1,614
in pro forma 1995 and $414 in pro forma 1996 to reflect an increase in
amortization and depreciation resulting from the Acquisition.
(5) The pro forma 1996 and the pro forma as adjusted 1996 income statement data
presented do not include the $5,159 extraordinary loss on early
extinguishment of debt, net of taxes. In addition, the pro forma as
adjusted 1996 income statement also does not include an anticipated
extraordinary loss of $5,612 net of taxes associated with the redemption of
a portion of the Notes in connection with the Offerings.

8
<PAGE>

RISK FACTORS

Prospective purchasers of the Common Stock offered hereby should consider
carefully all of the information set forth in this Prospectus, and, in
particular, should evaluate the following risks in connection with an
investment in the Common Stock.

COMPETITION

The office furniture industry is highly competitive, with a significant
number of competitors offering similar products. Many of the Company's
competitors, especially those in North America, are large and have
significantly greater financial, marketing, manufacturing and technical
resources than those of the Company. The Company's most significant
competitors in its primary markets are Steelcase, Inc. ("Steelcase"), Herman
Miller, Inc. ("Herman Miller"), Haworth, Inc. ("Haworth") and HON Industries,
Inc. ("HON"). 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, and such
competitors could develop alternative product designs which could give them a
competitive advantage over the Company. The Company also faces significant
price competition from its competitors and may encounter competition from new
market entrants. Although the Company believes that it has been able to
compete successfully in its markets to date, there can be no assurance that it
will be able to continue to do so in the future. See "Business--Competition."

RISKS ASSOCIATED WITH ACHIEVING AND MANAGING GROWTH

As a result of its growth strategy, the Company will seek to increase its
sales and market share by the introduction of innovative new products and
products for new category segments where the Company's current market share is
relatively low. There can be no assurance that the Company's new products will
achieve the same degree of success as that achieved by the Company's products
historically or that the Company will be able to replicate its success in the
office systems market in markets for other furniture products, such as tables,
seating and storage. In addition, the introduction of new products in part
requires the Company to align itself with independent architects and designers
who are able to design in a timely manner high quality products consistent
with the Company's 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 the Company's control.
Accordingly, the launch of any particular product may be later than originally
anticipated by the Company.

In addition, part of the Company's growth strategy will also depend on its
ability to increase its sales to existing customers with a broader range of
products, develop new customers in its existing markets and expand into new
secondary markets. Factors beyond the Company's control, including general
economic factors and business conditions in such markets or affecting such
customers, may affect the Company's ability to achieve such objectives.
Furthermore, the ability to effectuate and manage any growth will depend on
the Company's ability to hire or develop successful sales personnel and
dealers and to continue to develop its management information systems. There
is no assurance that the Company will be able to successfully implement its
growth strategy.

SIGNIFICANT LEVERAGE AND DEBT SERVICE

At December 31, 1996, on a pro forma basis taking into account the
application of the estimated net proceeds of the Offerings as described in
"Use of Proceeds," the Company would have had total consolidated outstanding
debt of approximately $290.8 million. Subject to the restrictions contained in
the Company's existing bank credit facilities (the "Credit Facilities") and
the indenture (the "Indenture") related to the Company's 10 7/8% Senior
Subordinated Notes (the "Notes"), the Company and its subsidiaries may incur
additional indebtedness from time to time to finance acquisitions or capital
expenditures or for other purposes. The high level of the Company's
indebtedness could have important consequences to holders of the Common Stock,
given

9
<PAGE>

that: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to fund scheduled payments of principal and debt service and
will not be available for other purposes; (ii) the Company's ability to obtain
additional debt financing in the future for working capital, capital
expenditures, research and development or acquisitions may be limited; and
(iii) the Company's level of indebtedness could limit its flexibility in
reacting to changes in its industry or in economic conditions generally. See
"Description of Certain Indebtedness."

RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS

The terms of the Credit Facilities and the Notes impose operating and
financial restrictions on the Company. As a result, the ability of the Company
to respond to changing business and economic conditions and to secure
additional financing, if needed, may be significantly restricted, and the
Company may be prevented from engaging in transactions that might further its
growth strategy or otherwise be considered beneficial to the Company. A breach
of any of these covenants could result in a default under the Credit
Facilities or the Indenture. If payments to the lenders under the Credit
Facilities or payments to the holders of the Notes were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient
to repay in full such indebtedness and the other indebtedness of the Company.
See "Description of Certain Indebtedness."

DEPENDENCE ON KEY PERSONNEL

The Company's operations are dependent, to a significant extent, on the
continued efforts of Burton B. Staniar, its Chairman, and John H. Lynch, its
Vice Chairman, President and Chief Executive Officer, with whom the Company
has entered into one-year employment agreements containing one-year non-
competition provisions, as well as certain other executive officers. If these
officers become unable to continue in their present role, or if the Company is
unable to attract and retain other skilled employees, the Company's business
could be materially adversely affected. See "Management."

SHORT-TERM DEALERSHIP COMMITMENTS

The Company relies, to some extent, on a network of independent dealers for
the marketing of its products to end-users. The Company's dealers currently
operate primarily under one-year non-exclusive agreements. Although the
Company has not experienced substantial turnover in its distribution channels
in the past (except as initiated by itself), there can be no assurance that
its dealers will not choose to end their relationships with the Company, or,
if dealers choose to do so, that any replacements in areas covered by such
persons will be satisfactory. In addition, consolidation of the office
furniture distribution industry has caused and may in the future cause the
Company to end relationships with dealers that have been purchased by a
consolidator, as the Company continues to have a preference for locally owned
entrepreneurial dealers. The loss of certain dealers or the termination of
dealer relationships could cause disputes with the Company or difficulties for
the Company in marketing and distributing its products.

CONTROL BY EXISTING STOCKHOLDERS

Upon completion of the Offerings, the Company's existing stockholders,
including Warburg and its executive officers, will beneficially own
approximately % of the outstanding shares of the Company's Common Stock
(approximately % if the Underwriters' over-allotment options are exercised
in full). As a result, existing stockholders will be able to continue to elect
the Company's Board of Directors and take other corporate actions requiring
stockholder approval, as well as to dictate the direction and policies of the
Company. In addition, pursuant to a stockholders agreement, upon consummation
of the Offerings the stockholders who are a party thereto (comprising % of
the outstanding shares of Common Stock of the Company upon completion of the
Offerings) have agreed to vote their shares of Common Stock for four directors
designated by Warburg if Warburg owns 50% or more of the Company's outstanding
shares of Common Stock, three directors if it owns 25% or more, two directors
if it owns 15% or more and one director if it owns 5% or more. At the time of
the completion of the Offerings, the Board of Directors of the Company will
consist of eight members.

10
<PAGE>

So long as Warburg has the right to designate four nominees and the Board of
Directors is composed of eight or fewer members, Warburg will have the ability
to block any corporate action requiring Board approval. In addition, Messrs.
Staniar and Lynch have employment agreements which provide that they will be
appointed to the Board of Directors during the duration of their employment.
There can be no assurance that Warburg and members of management will not
decide to sell all or a portion of their respective holdings at a future date.
In addition, there can be no assurance that in any transfer of a controlling
interest in the Company any other holders of Common Stock will be allowed to
participate in any such transaction or will realize any premium with respect
to their shares. The foregoing may have the effect of discouraging or
preventing certain types of transactions involving an actual or potential
change of control. See "Principal and Selling Stockholders" and "Certain
Transactions."

RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY

The Company owns numerous United States and foreign patents and trademarks
in order to protect certain of its innovations and designs. In addition, the
Company possesses a wide array of unpatented proprietary know-how and common
law trademarks and service marks. The Company's ability to compete effectively
with other companies depends, to a significant extent, on its ability to
maintain the proprietary nature of its intellectual property. There can be no
assurance as to the degree of protection offered by the claims of the various
patents, trademarks and service marks or the likelihood that patents,
trademarks or service marks will be issued on pending or contemplated
applications. If the Company were unable to maintain the proprietary nature of
its intellectual property with respect to its significant current or proposed
products, the Company's business could be materially adversely affected. See
"Business--Patents and Trademarks."

There can be no assurance that any patents, trademarks or service marks
issued to the Company will not be challenged, invalidated, cancelled, narrowed
or circumvented, or that the rights granted thereunder will provide
significant proprietary protection or competitive advantages to the Company.
There can be no assurance that, if challenged, the Company's patents,
trademarks or service marks would be held valid by a court of competent
jurisdiction. In addition, the Company's competitors may have filed for patent
protection which is not as yet a matter of public knowledge. Moreover, a court
could interpret a third party's patents broadly so as to cover some of the
Company's products.

In the past, certain products of the Company have been copied and sold by
others. The Company vigorously tries to enforce its intellectual property
rights. However, there can be no assurance that the sale of the Company's
products copied by others would not materially adversely impact the sale of
the Company's products.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

The past and present business operations of the Company and the past and
present ownership and operation of manufacturing plants on real property by
the Company 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, the Company is involved from time to time in
administrative and judicial proceedings and inquiries relating to
environmental matters. The Company 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 the Company, some of which may be material. The
Company has been identified as a potentially responsible party pursuant to the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
for remediation costs associated with waste disposal sites previously used by
the Company. CERCLA imposes liability without regard to fault or the legality
of the disposal. The remediation costs at these CERCLA sites are unknown, but
the Company does not expect any liability it may have under CERCLA to be
material, based on the information currently known to the Company. In
addition, under the stock purchase agreement entered into with Westinghouse in
connection with the Acquisition (the "Stock Purchase Agreement"), Westinghouse
has agreed to indemnify the Company for certain costs associated with
currently known CERCLA liabilities. See "Business--Environmental Matters."

11
<PAGE>

LABOR RELATIONS

Certain of the Company's employees in Grand Rapids, Michigan and in Italy
are represented by unions. In addition, the Company has experienced brief work
stoppages from time to time at the Company's facilities in Italy as a result
of national and local issues. Although management believes that relations with
its employees are good, there can be no assurance that the Company will not
experience work stoppages or other labor problems in the future or that the
Company will be able to successfully negotiate new contracts with such unions.

EXCHANGE RATE FLUCTUATION

The Company's foreign sales and certain expenses are transacted in foreign
currencies. In 1996, approximately 12% of the Company's revenues and 24% of
the Company's expenses were denominated in currencies other than U.S. dollars.
The production costs, profit margins and competitive position of the Company
are affected by the strength of the currencies in countries where it
manufactures or purchases goods relative to the strength of the currencies in
countries where its products are sold. The Company reviews from time to time
its foreign currency exposure and evaluates whether it should enter into
hedging transactions. As the Company does not currently hedge its foreign
currency exposure and may determine not to do so in the future, it is and in
the future may be vulnerable to the effects of currency exchange rate
fluctuations.

ECONOMIC FACTORS AFFECTING THE OFFICE FURNITURE INDUSTRY; QUARTERLY
FLUCTUATIONS

Fluctuations in industry revenues may be driven by a variety of
macroeconomic factors, such as white collar employment levels, corporate cash
flows, or non-residential commercial construction, as well as industry factors
such as corporate reengineering and restructuring, technology demands,
ergonomic, health and safety concerns and corporate relocations. There can be
no assurance that current or future economic or industry trends will not
adversely affect the business of the Company. See "Business--Industry
Overview." In addition, in certain years the Company has experienced
variability in its sales from quarter to quarter. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL FOR ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS

Sales of a substantial number of shares of Common Stock in the public market
or the perception that such sales could occur could adversely affect
prevailing market prices for the Common Stock. Upon completion of the
Offerings, the Company will have outstanding shares of Common Stock. Of
these shares, the shares of Common Stock to be sold in the Offerings will be
freely tradable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), except for any such shares which may be
acquired by an "affiliate" of the Company. In connection with the Offerings,
existing stockholders (holding an aggregate of shares of Common Stock upon
consummation of the Offerings) have agreed not to dispose of any shares of
Common Stock for a period of 180 days from the date of this Prospectus without
the consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") on behalf of the Underwriters. Upon expiration of the lockup
period, shares will be eligible for sale in the public market subject to
compliance with the volume limitations and other restrictions of Rule 144
under the Securities Act and shares will be eligible for sale in the public
market without such restrictions under Rule 144 under the Securities Act on
March 1, 1998. In addition, promptly after the closing of the Offerings, the
Company intends to file a registration statement under the Securities Act
covering the sale of shares of Common Stock reserved for issuance under the
Stock Option Plans. Upon completion of the Offerings, there will be
outstanding options to purchase a total of shares of Common Stock. See
"Management--Stock Incentive Plans." The Company has granted all existing
stockholders registration rights with respect to approximately shares of
Common Stock. See "Certain Transactions." The sale of such shares could have
an adverse effect on the Company's ability to raise equity capital in the
public markets. See "Shares Eligible for Future Sale."

DILUTION

Investors purchasing shares of Common Stock in the Offerings will incur
substantial and immediate dilution of $ per share in the pro forma net
tangible book value of the Common Stock from the initial public offering
price. In addition, these investors will incur additional dilution upon the
exercise of outstanding stock options. See "Dilution."

12
<PAGE>

FORWARD-LOOKING STATEMENTS

This Prospectus includes forward-looking statements, including statements
regarding, among other items, (i) the Company's anticipated growth strategies,
(ii) the Company's intention to introduce new products, (iii) anticipated
trends in the Company's businesses, including trends in the market for office
furniture and corporate concerns for worker health and safety, (iv) future
expenditures for capital projects and (v) the Company's ability to continue to
control costs and maintain quality. These forward-looking statements are based
largely on the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of the factors described in "Risk Factors" including, among others, (i)
changes in the competitive marketplace, including the introduction of new
products or pricing changes by the Company's competitors, and (ii) changes in
the trends in the market for office furniture, including changes in the trend
of increased white collar employment. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this Prospectus will in fact transpire.

ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock. Although application will be made for approval for listing of the
Common Stock on the NYSE, there can be no assurance that an active trading
market for the Common Stock will develop or be sustained following the
Offerings or that the market price of the Common Stock will not decline below
the initial public offering price. The initial public offering price will be
determined by negotiation between the Company, the Selling Stockholder and the
Underwriters based upon several factors and may not be indicative of future
market prices. The price at which the Common Stock will trade will depend upon
a number of factors, including, but not limited to, the Company's historical
and anticipated operating results and general market and economic conditions,
some of which factors are beyond the Company's control. Factors such as
quarterly fluctuations in the Company's financial and operating results,
announcements by the Company or others and developments affecting the Company,
its products, its clients, the markets in which it competes or the industry
generally, also could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market has from time to time experienced
extreme price and volume fluctuations. These broad market fluctuations may
adversely affect the market price of the Common Stock. See "Underwriting."

13
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
Stock offered in the Offerings, based upon an assumed initial public offering
price of $ per share (the midpoint of the estimated range of the initial
public offering price), are estimated to be $ ($ if the Underwriters'
over-allotment options are exercised in full), after deducting the
underwriting discount and estimated offering expenses. The Company will not
receive any of the proceeds of any sale of shares by the Selling Stockholder
upon exercise of the Underwriters' over-allotment options. The estimated net
proceeds of the Offerings will be used (i) to redeem that portion of the
shares of Series A Preferred Stock held by the Initial Investors not converted
into Common Stock for an aggregate redemption price of $80.0 million, (ii) to
redeem an aggregate principal amount of $57.8 million of the Notes at a price
of 110% of the principal amount thereof plus $ million of accrued and unpaid
interest thereon (assuming a redemption date of , 1997), (iii) to repay
indebtedness of $ million under the Credit Facilities and (iv) for working
capital and general corporate purposes or additional debt retirement.

The Notes bear interest at a rate of 10 7/8% per annum and will mature on
March 15, 2006. Indebtedness under Credit Facilities bears interest at a
floating rate based, at the Company's option, upon (i) LIBOR plus 0.875% or
(ii) the prime rate. Certain portions of the term loan portion of the Credit
Facilities mature annually from 1997 through 2002, while the revolving portion
of the Credit Facilities mature in 2002. The Notes were originally issued, and
the Credit Facilities were originally entered into, in order to finance a
portion of the Acquisition. See "Description of Certain Indebtedness."

DIVIDEND POLICY

The Company has not paid a cash dividend on its Common Stock since the
Acquisition, and does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future. The current policy of the Company's Board of
Directors is to retain earnings to finance the operations and expansion of the
Company's business. In addition, the Company's Credit Facilities and Indenture
restrict the Company's ability to pay dividends to its stockholders. Any
future determination to pay dividends will depend on the Company's results of
operations, financial condition, capital requirements, contractual
restrictions and other factors deemed relevant by the Board of Directors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain
Indebtedness."

14
<PAGE>

CAPITALIZATION

The following table sets forth: (i) the long-term debt (including current
portion) and the capitalization of the Company as of December 31, 1996 and
(ii) the long-term debt and capitalization as adjusted to reflect the
conversion, concurrent with the Offerings, of shares of Series A Preferred
Stock into shares of Common Stock and the sale by the Company of the
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share (the midpoint of the estimated range of the initial
public offering price) and application of the estimated net proceeds therefrom
as described in "Use of Proceeds." This table should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Prospectus. See "Selected Financial Information" and the Unaudited Pro Forma
Financial Information and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Long-term debt (including current portion):
Revolving Credit Facility (1).......................... $ 88,000 $ 82,387
Term Loan Facilities................................... 100,000 100,000
Notes.................................................. 165,000 107,250
Other.................................................. 1,154 1,154
-------- --------
Total long-term debt................................. 354,154 290,791
-------- --------
Stockholders' equity:
Series A 12% Participating Convertible Preferred Stock,
$1.00 par value, 1,920,000 shares authorized;
1,602,997 shares issued and outstanding actual, no
shares issued and outstanding pro forma as adjusted
(2)................................................... 1,603 --
Common Stock, $0.01 par value, shares autho-
rized(3);
shares issued and outstanding actual and
shares issued and outstanding as adjusted (4)......... 23
Additional paid-in capital............................. 158,906
Unearned stock grant compensation...................... (96) (96)
Retained earnings (5).................................. 16,836 11,224
Cumulative foreign currency translation adjustment..... 532 532
-------- --------
Total stockholders' equity........................... 177,804 241,592
-------- --------
Total capitalization............................... $531,958 $532,383
======== ========
</TABLE>
- --------
(1) At December 31, 1996 the Company had $42,000 (actual) and $47,613 (pro
forma as adjusted) of unused credit availability under the Credit
Facilities.
(2) Gives effect to the redemption of shares of Series A Preferred Stock
from the estimated net proceeds of the Offerings and the conversion of the
remaining shares to Common Stock.
(3) Gives effect to an amendment and restatement to the Company's Certificate
of Incorporation.
(4) Actual and pro forma as adjusted include restricted shares which have
been issued under the Company's 1996 Stock Plan.
(5) The reduction of retained earnings reflects the extraordinary loss, net of
related tax benefit, of $5,612 to be recognized on the redemption of Notes
with a portion of the estimated net proceeds of the Offerings.

15
<PAGE>

DILUTION

The pro forma net tangible book value of the Company at December 31, 1996
was $ or approximately $ per share. Pro forma net tangible book value
per share represents the amount of total assets, excluding intangibles
(goodwill, patents and trademarks and deferred financing fees), less total
liabilities, divided by the aggregate number of shares of Common Stock
outstanding as of December 31, 1996 (on a pro forma basis after giving effect
to the conversion of outstanding shares of Series A Preferred Stock into an
aggregate of shares of Common Stock) and the redemption of 800,000 shares
of Series A Preferred Stock with a portion of the proceeds of the Offerings.
Without taking into account any changes in the Company's net tangible book
value after December 31, 1996, other than to give effect to the receipt of the
estimated net proceeds from the sale of the shares of Common Stock offered
hereby, assuming an initial public offering price of $ per share (the
midpoint of the estimated range of the initial public offering price) and
after deducting the underwriting discount and estimated offering expenses to
be paid by the Company, the pro forma net tangible book value of the Company
at December 31, 1996 would have been $ , or $ per share. This represents
an immediate increase in net tangible book value of $ per share of Common
Stock to existing stockholders and an immediate dilution of approximately $
per share to new investors purchasing shares in the Offerings. The following
table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $
Net tangible book value before the Offerings............... $
Conversion of Series A Pre-ferred Stock into
Common Stock.............................................
Pro forma net tangible book deficit per share before
the Offerings..........................................
Increase per share attributable to new investors.........
----
Pro forma net tangible book value per share after the
Offerings................................................
----
Dilution per share to new investors........................ $
====
</TABLE>

The following table sets forth, on a pro forma basis as of December 31,
1996, the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per share paid
by existing stockholders and by the new investors purchasing shares of Common
Stock from the Company in the Offerings (before deducting underwriting
discount and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- -------- --------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Existing stockholders........ % $ % $
New investors................
------- -------- --------- --------- ----
Total...................... 100% $ 100% $
======= ======== ========= ========= ====
</TABLE>

The foregoing tables assume no exercise of the Underwriters' over-allotment
options. There were no options outstanding at December 31, 1996. Between
December 31, 1996 and March , 1997, the Company granted options to purchase
an aggregate of shares of Common Stock at a weighted average exercise
price of $ per share. See "Management--Stock Incentive Plans." To the
extent that outstanding options are exercised in the future, there will be
further dilution to new investors.

16
<PAGE>

SELECTED FINANCIAL INFORMATION

The following table presents (i) selected historical consolidated financial
information of the Predecessor, as of the dates and for the periods indicated,
(ii) selected historical consolidated financial information of the Company, as
of the date and for the period indicated, (iii) summary pro forma consolidated
financial information of the Company, as of the dates and for the periods
indicated, after giving effect to the events described in the notes below and
in Unaudited Pro Forma Financial Information and notes thereto included
elsewhere in this Prospectus and (iv) summary pro forma as adjusted
information of the Company, as of the date and for the period indicated, after
giving effect to the Offerings, the application of the estimated net proceeds
therefrom and the events described in the Unaudited Pro Forma Financial
Information and notes thereto included elsewhere in this Prospectus. The
historical consolidated financial information for each of the three years in
the period ended December 31, 1995 has been derived from the Predecessor's
financial statements, which have been audited by Price Waterhouse LLP. The
historical consolidated financial information for the two month period ended
February 29, 1996 and the ten month period ended December 31, 1996 has been
derived from the Predecessor's and the Company's financial statements,
respectively, which have been audited by Ernst & Young LLP. The historical
consolidated financial information for the year ended December 31, 1992 has
been derived from unaudited financial statements and, in the opinion of
management, includes all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of financial position and results of
operations as of the date and for the period indicated. The summary pro forma
and pro forma as adjusted information does not purport to represent what the
Company's results actually would have been if such events had occurred at the
dates indicated, nor does such information purport to project the results of
the Company for any future period. The selected financial information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Financial Statements and notes
thereto and the Unaudited Pro Forma Financial Information and notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------------------------------

TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ FEBRUARY 29,
1992 1993 1994 1995 1996
--------- --------- --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total sales...... $ 576,621 $ 508,383 $ 562,869 $ 620,892 $ 90,232
Cost of
sales(3)........ 417,213 376,875 410,104 417,632 59,714
--------- --------- --------- --------- ---------
Gross profit..... 159,408 131,508 152,765 203,260 30,518
Provision for
restructuring... 26,000 6,165 29,180 -- --
Selling, general
and
administrative expenses(4).. 165,913 163,015 167,238 138,527 21,256
Westinghouse
long-term
incentive
compensation.... -- -- -- -- 47,900
Allocated
corporate
expenses(3)(4).. 5,036 4,899 5,881 9,528 921
--------- --------- --------- --------- ---------
Operating income
(loss).......... (37,541) (42,571) (49,534) 55,205 (39,559)
Interest
expense......... 3,866 3,301 3,225 1,430 340
Other income
(expense), net.. (929) 2,082 699 (1,597) (296)
--------- --------- --------- --------- ---------
Income (loss)
before income
taxes and
cumulative
effect of
changes in
accounting
principles and
extraordinary
item............ (42,336) (43,790) (52,060) 52,178 (40,195)
Income tax expense (benefit).. (4,795) (3,571) 7,713 22,846 (16,107)
--------- --------- --------- --------- ---------
Income (loss)
before
cumulative
effect of
changes in
accounting
principles and
extraordinary
item............ (37,541) (40,219) (59,773) 29,332 (24,088)
Cumulative effect
of changes in
accounting
principles...... 11,202 1,118 -- -- --
--------- --------- --------- --------- ---------
Income (loss)
before
extraordinary
item............ (48,743) (41,337) (59,773) 29,332 (24,088)
Extraordinary
loss on early
extinguishment
of debt,
net of taxes.... -- -- -- -- --
--------- --------- --------- --------- ---------
Net income
(loss)(5)....... $ (48,743) $ (41,337) $ (59,773) $ 29,332 $ (24,088)
========= ========= ========= ========= =========
Net income per
share of Common
Stock(5)........
Weighted average
shares of
Common Stock outstanding..
</TABLE>

<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
TEN MONTHS YEAR ENDED DECEMBER YEAR ENDED
ENDED 31, DECEMBER 31,
DECEMBER 31, -------------------- ------------
1996 1995(1) 1996(1) 1996(1)(2)
------------ --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Total sales...... $ 561,534 $ 620,892 $ 651,766 $651,766
Cost of
sales(3)........ 358,841 425,327 419,908 419,908
--------- --------- --------- --------
Gross profit..... 202,693 195,565 231,858 231,858
Provision for
restructuring... -- -- -- --
Selling, general
and
administrative expenses(4).. 131,349 142,582 153,388 153,388
Westinghouse
long-term
incentive
compensation.... -- -- -- --
Allocated
corporate
expenses(3)(4).. -- 4,000 -- --
--------- --------- --------- --------
Operating income
(loss).......... 71,344 48,983 78,470 78,470
Interest
expense......... 32,952 40,945 40,030 32,934
Other income
(expense), net.. 447 (1,597) 151 151
--------- --------- --------- --------
Income (loss)
before income
taxes and
cumulative
effect of
changes in
accounting
principles and
extraordinary
item............ 38,839 6,441 38,591 45,687
Income tax expense (benefit).. 16,844 2,705 16,848 19,658
--------- --------- --------- --------
Income (loss)
before
cumulative
effect of
changes in
accounting
principles and
extraordinary
item............ 21,995 3,736 21,743 26,029
Cumulative effect
of changes in
accounting
principles...... -- -- -- --
--------- --------- --------- --------
Income (loss)
before
extraordinary
item............ 21,995 3,736 21,743 26,029
Extraordinary
loss on early
extinguishment
of debt,
net of taxes.... 5,159 -- -- --
--------- --------- --------- --------
Net income
(loss)(5)....... $ 16,836 $ 3,736 $ 21,743 $ 26,029
========= ========= ========= ========
Net income per
share of Common
Stock(5)........
Weighted average
shares of
Common Stock outstanding..
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------------------------------- -------------------------
PRO FORMA
DECEMBER 31, AS ADJUSTED
----------------------------------- DECEMBER 31, DECEMBER 31,
1992 1993 1994 1995 1996 1996(2)
-------- -------- -------- -------- ------------ ------------
BALANCE SHEET DATA (AT
PERIOD END): (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Working capital......... $ 67,063 $ 41,933 $ 22,898 $ 82,698 $ 64,754 $ 65,016
Total assets............ 726,469 691,043 705,316 656,710 675,712 675,875
Total long-term debt,
including current por-
tion................... 16,623 12,215 12,451 3,538 354,154 290,791
Total liabilities....... 186,347 205,104 247,310 176,259 497,908 434,283
Stockholders' equity.... 540,122 485,939 458,006 480,451 177,804 241,592
</TABLE>
- --------
(1) Reflects summary pro forma financial information of the Company derived
from the Financial Statements and notes thereto included elsewhere in this
Prospectus, adjusted for the completion of the Acquisition and the
application of the net proceeds of $160,000 from the sale of capital stock
of the Company and borrowings of $260,000 and $165,000 under the Credit
Facilities and the Notes, respectively.
(2) Adjusted to reflect the sale of Common Stock offered hereby and the
application of the estimated net proceeds therefrom.
(3) Cost of sales has been increased by (i) $4,158 in pro forma 1995 and $801
in pro forma 1996 to reflect an increase in amortization and depreciation
resulting from the Acquisition, (ii) $450 in pro forma 1995 to reflect the
sale of inventory acquired as part of the Acquisition and (iii) $3,087 in
pro forma 1995 and $552 in pro forma 1996 in order to reflect the
reclassification of a portion of allocated corporate expenses. The
reclassified allocated corporate expenses approximate the replacement cost
to the Company for services formerly provided by Westinghouse to the
Predecessor, including (i) benefit expense related to the adoption of
various independent benefit plans comparable to Westinghouse benefit plans
and (ii) the cost of services required to replace specific activities
formerly provided by Westinghouse to the Predecessor, including audit,
tax, general ledger, accounts receivable, human resources, legal,
insurance and data communications.
(4) Selling, general and administrative expenses have been increased by (i)
$2,441 in pro forma 1995 and $369 in pro forma 1996 to reflect the
reclassification of allocated corporate expenses which approximate the
replacement cost to the Company (described above in note 3) and (ii)
$1,614 in pro forma 1995 and $414 in pro forma 1996 to reflect an increase
in amortization and depreciation resulting from the Acquisition.
(5) The pro forma 1996 and the pro forma as adjusted 1996 income statement
data presented do not include the $5,159 extraordinary loss on early
extinguishment of debt, net of taxes. In addition, the pro forma as
adjusted 1996 income statement also does not include an anticipated
extraordinary loss of $5,612 net of taxes associated with the redemption
of a portion of the Notes in connection with the Offerings.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion of the Company's historical and pro forma results
of operations and of its liquidity and capital resources should be read in
conjunction with the Selected Financial Information of the Company, the
Consolidated Financial Statements of the Company and notes thereto and the
Unaudited Financial Information and notes thereto included elsewhere in this
Prospectus.

Prior to the Acquisition, the Predecessor's results of domestic operations
were included in the consolidated U.S. federal income tax return of
Westinghouse and the results of the Canadian and European operations were
reported separately in their respective taxing jurisdictions. For the purposes
of the Prospectus, the income tax expense and other tax-related items included
in the financial statements is presented as if the Predecessor had been a
stand-alone taxpayer.

BACKGROUND

Westinghouse created The Knoll Group, Inc. by acquiring The Shaw-Walker
Company, Reff Inc. and Knoll International in 1989 and 1990 and combining them
with Westinghouse Furniture Systems, a division of Westinghouse. By joining
these four separate companies under the Knoll name, Westinghouse created a
business with a full line of office furnishings, a reputation for high quality
and superior design, and an internationally-recognized brand name.

For various reasons, the combined entities did not perform well. The Company
continued to be run as four separate entities, with essentially separate
operations with independent factories and administrative support personnel. In
addition, the Company believes that former management's steps to rationalize
the Company's U.S. dealer network and consolidate its sales forces may have
impaired Knoll's distribution and sales capabilities. A decline in revenues in
the U.S. office furniture industry in 1991, followed in 1992 by Westinghouse's
announcement of its intention to sell Knoll, exacerbated the difficult
operating environment within Knoll. As a result, under previous management
from 1991 to 1993, sales and net income deteriorated. In December 1993,
Westinghouse appointed Burton B. Staniar, then Chairman and Chief Executive
Officer of Westinghouse Broadcasting, as Knoll's Chairman and Chief Executive
Officer, and ended its efforts to sell Knoll. Mr. Staniar promptly recruited
John H. Lynch as Vice Chairman, and in 1994 they initiated a major turnaround
and restructuring program which led to significantly improved financial
performance. Management's turnaround efforts had a dramatic impact on the
Company's competitive position and financial performance and positioned the
Company for growth.

OVERVIEW

Operating performance improved from 1994 to 1996, primarily due to the
turnaround program and the restructuring efforts undertaken by the Company.
Sales increased from $562.9 million in 1994 to $651.8 million in 1996. Gross
margins increased from 27.1% in 1994 to 32.7% in 1995 and, on a pro forma
basis, from 31.5% in 1995 to 35.6% in 1996. Operating income improved by
$104.7 million from a loss of $49.5 million in 1994 to a profit of $55.2
million in 1995; pro forma operating income improved by $29.5 million from
$49.0 million in 1995 to $78.5 million in 1996. Operating margins increased
from (8.8)% in 1994 to 8.9% in 1995 and, on a pro forma basis, from 7.9% in
1995 to 12.0% in 1996. The most significant cost reductions, which improved
operating performance, were in 1995, when the Company eliminated approximately
$25.0 million in variable operating costs and approximately $45.0 million in
fixed operating costs and general expenses. The Company's improved financial
and operating results allowed it in 1996 to prepay $72.0 million under its
Credit Facilities and refinance such facilities on more favorable terms.
Periods prior to the Acquisition are not comparable to periods after the
Acquisition on a non-pro forma basis.

Since 1994, virtually every product line has been modified and improved, and
the lead time required to bring new and enhanced products to the market has
been decreased significantly through the use of computer-aided design
techniques and other process improvements; average lead times between order
entry and delivery of products to customers have been reduced from seven weeks
to five weeks; and on-time shipments, a measure of customer service, improved
to approximately 95% in the fourth quarter of 1996. Management renewed sales

19
<PAGE>

growth by refocusing and retraining the Company's sales force, and instituted
product line profitability measures and management incentive programs.
Finally, management accelerated the development of new and enhanced products
and restructured the European business.

The Company believes that its recent sales growth exceeded industry growth
as a whole. According to BIFMA, U.S. furniture industry shipments have
increased at a compound annual growth rate of 4.3% over the ten-year period
ended December 31, 1996. In addition, BIFMA estimates that the U.S. office
furniture industry will grow approximately 5% in 1997. The Company's sales
increased 10.7% in 1994 and 10.3% in 1995. Sales increases of 5.0% in 1996
were negatively affected by management initiatives undertaken in the
turnaround to increase the profitability of the Company's sales, including (i)
the discontinuation of several products that were sold to customers in 1995
and (ii) an intentional decrease in heavily discounted, lower profit sales to
selected customers. During this transitional period, orders for new products
increased at a faster rate than sales, with 1996 orders of $686.8 million, up
$87.3 million, or 14.6%, over 1995 orders of $599.5 million.

The Company believes that it is well-positioned for growth in sales and
profitability. The Company intends to pursue growth by introducing new
products in the office systems category, where the Company is already a
recognized leader, and in other product categories where the Company's market
share could be increased by leveraging the Company's design expertise and
brand awareness. The Company estimates that its share of the 1996 U.S. office
furniture market was 11.2% for office systems, 2.1% for seating, 2.1% for
storage, 1.2% for desks and casegoods and 1.8% for tables. Such percentages do
not include sales of KnollStudio, KnollExtra, textiles and leather products.
The following table describes the estimated 1996 U.S. office furniture market
sales by category.

<TABLE>
<CAPTION>
U.S. MARKET % OF U.S.
PRODUCT TYPE SIZE MARKET
------------ ------------- ---------
(IN BILLIONS)
<S> <C> <C>
Office systems................................... $3.4 34.1%
Seating.......................................... 2.6 25.4
Storage.......................................... 1.4 14.1
Desks and casegoods.............................. 1.6 16.4
Tables........................................... 0.7 6.6
</TABLE>

In addition, the Company had 1996 sales of approximately $79.5 million in
Canada and Europe. European sales are primarily in the United Kingdom,
Germany, France, Belgium and Italy.

RESULTS OF OPERATIONS

The following table summarizes the Company's results of operations on a pro
forma basis for both 1995 and 1996 and as a percentage of net sales as if the
Acquisition had been consummated at the beginning of each period.

<TABLE>
<CAPTION>
PRO FORMA
---------------------------------
YEAR ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31, 1995 1996
------------------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Total sales.................................. $ 620.9 100.0% $651.8 100.0%
Cost of sales................................ 425.3 68.5 419.9 64.4
--------- -------- ------ -----
Gross profit................................. 195.6 31.5 231.9 35.6
Selling, general and administrative
expenses.................................... 142.6 23.0 153.4 23.6
Allocated corporate expenses................. 4.0 0.6 -- --
--------- -------- ------ -----
Operating income............................. 49.0 7.9 78.5 12.0
Interest expense............................. 41.0 6.6 40.0 6.1
Other income (expense), net.................. (1.6) (0.3) 0.1 --
--------- -------- ------ -----
Income before income taxes and
extraordinary item.......................... 6.4 1.0 38.6 5.9
Income tax expense........................... 2.7 0.4 16.9 2.6
--------- -------- ------ -----
Income before extraordinary item............. $ 3.7 0.6% $ 21.7 3.3%
========= ======== ====== =====
</TABLE>

20
<PAGE>

COMPARISON OF PRO FORMA YEAR ENDED DECEMBER 31, 1996 TO PRO FORMA YEAR ENDED
DECEMBER 31, 1995

Total sales. Total sales were $651.8 million for the year ended December 31,
1996, an increase of $30.9 million, or 5.0%, from $620.9 million for the year
ended December 31, 1995. The sales growth resulted from price increases (an
average of 2.4% over 1995) and increased volume across all North American
product segments, and was partially offset by the elimination of certain lower
profit product lines and contracts during 1995. Sales of office systems grew
$27.8 million, or 6.0%, while sales of the Company's specialty products
(KnollStudio, KnollExtra, KnollTextiles and Spinneybeck) and seating grew
$10.4 million (10.8%) and $3.1 million (5.7%), respectively. This growth is
attributable to product enhancements in all segments as well as continued
growth from new product introductions. The 1996 sales increase of continued
product was $41.3 million (6.8%), as 1995 sales included lower profit
discontinued product sales of $10.4 million.

Gross profit. Gross profit was $231.9 million for the year ended December
31, 1996, increasing $36.3 million, or 18.6%, from gross profit of $195.6
million for the year ended December 31, 1995. Gross profit as a percentage of
sales increased to 35.6% for the year ended December 31, 1996 from 31.5% for
the previous year. These increases were principally due to the higher sales
volume in North America, better pricing, discontinuance of unprofitable
products, continued factory operating cost improvements, consolidation of
European operations and other fixed cost reductions.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $153.4 million for the year ended December 31,
1996, up $10.8 million (7.6%) from the year ended December 31, 1995. The
increase was primarily due to increased sales incentive compensation and
employee benefits related to higher sales volumes in North America, and
expenses related to new product and technology initiatives, partially offset
by savings resulting from showroom consolidations in Germany, Italy and
Belgium along with the centralization of administrative functions in Europe.
As a percentage of sales, the Company's selling, general and administrative
expenses were 23.6% for the year ended December 31, 1996 and 23.0% for the
year ended December 31, 1995.

Allocated corporate expenses. Allocated corporate expenses of $4.0 million
in 1995 represents incentive compensation payable to Knoll executives under
Westinghouse long-term incentive plans.

Operating income. Operating income increased to $78.5 million for the year
ended December 31, 1996 from $49.0 million for the year ended December 31,
1995. As a percentage of sales, operating income increased to 12.0% for the
year ended December 31, 1996 from 7.9% for the same period in 1995. As noted
above, these improvements were driven by higher sales volume, better pricing,
discontinuance of lower profit product lines, factory cost improvements and
efficiencies gained from consolidation and centralization of administrative
functions.

Interest expense. Interest expense decreased for the year ended December 31,
1996 from 1995 due to the prepayment of $72.0 million of indebtedness under
the Credit Facilities.

Income tax expense. Income tax expense for the year ended December 31, 1996
was 43.8% of pre-tax income as compared to 42.2% in 1995. The increase in the
effective tax rate is primarily the result of increased earnings for 1996 in
foreign countries with effective tax rates higher than those present in the
United States.

Extraordinary item. For the year ended December 31, 1996, there was an
extraordinary charge of $5.2 million net of a tax benefit of $3.3 million
relating to the write-off of unamortized financing costs following the
refinancing of the Company's previous credit agreement.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994

Total sales. Total sales were $620.9 million for the year ended December 31,
1995, an increase of $58.0 million, or 10.3%, from $562.9 million for the year
ended December 31, 1994. Sales growth resulted from price increases (an
average increase of 1.6% over 1994) and increased volume across all major
North American

21
<PAGE>

product segments (an average increase of 8.7% over 1994). Sales of office
systems grew $50.7 million, or 15.1%, as sales of the Equity, Morrison and
Reff product lines increased due to product enhancements and sales incentives
at both the dealer and sales division level. Sales from the Company's
specialty products (KnollStudio, KnollExtra, Spinneybeck and KnollTextiles)
and seating products grew $4.9 million and $2.4 million, respectively, a
combined increase of 6.3% over 1994, due in part to continued growth from new
product introductions such as the Propeller table and the Parachute and SoHo
chairs.

Gross profit. Gross profit was $203.3 million for the year ended December
31, 1995, an increase of $50.5 million, or 33.0%, from $152.8 million for the
year ended December 31, 1994. This increase was principally due to the higher
sales volume, better pricing, discontinuance of lower profit product lines,
factory operating cost improvements, and cost reductions realized from closing
the Company's Legnano, Italy factory and consolidating its Muskegon, Michigan
operations. As a result, gross profit as a percentage of sales increased to
32.7% for the year ended December 31, 1995 from 27.1% for the year ended
December 31, 1994.

Restructuring provision. The Company's restructuring provision of $29.2
million for the year ended December 31, 1994 includes costs associated with
the factory closing and consolidation referred to above, lease cancellations,
product discontinuations and employee separation costs associated with
initiatives implemented by management in the turnaround program that commenced
in early 1994.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $138.5 million for the year ended December 31,
1995, representing a decrease of $28.7 million, or 17.2%, from $167.2 million
for the year ended December 31, 1994. This decrease is primarily attributable
to the cost reductions and improved operating efficiencies derived from
consolidating and centralizing human resources, finance, purchasing and
logistics, order entry and customer service, and management information
systems operations at one facility, as well as from reducing marketing and
selling expenses associated with showroom and sales office consolidations and
eliminations. As a percentage of sales, selling, general and administrative
expenses improved to 22.3% for the year ended December 31, 1995 from 29.7% for
the year ended December 31, 1994.

Allocated corporate expenses. Allocated corporate expenses, which include
Westinghouse overhead charges for Westinghouse executive management and
corporate legal, environmental, audit, tax, treasury, and other related
services, were $9.5 million for the year ended December 31, 1995, an increase
of $3.6 million, or 61.0%, from $5.9 million for the year ended December 31,
1994. Allocated corporate expenses for 1995 include approximately $4.0 million
of long-term incentive compensation payable to Knoll executives. These
allocated corporate expenses, which are payable by Westinghouse and "pushed
down" to Knoll from Westinghouse, are allocated primarily based on sales, with
the exception of the incentive compensation, and are not necessarily
indicative of actual or future costs.

Operating income (loss). Operating income increased to $55.2 million for the
year ended December 31, 1995, representing an increase of $104.7 million, as
compared to a loss of $49.5 million for the year ended December 31, 1994. As a
percentage of total sales, operating income (loss) increased to 8.9% for the
year ended December 31, 1995 from (8.8)% for the same period in 1994. This
improvement was driven by higher sales volume, better pricing, cost reductions
and improved operating efficiencies, decreased depreciation and amortization
expense and the restructuring provision charged in 1994 as described above.

Interest expense. Interest expense decreased to $1.4 million for the year
ended December 31, 1995, a decrease of $1.8 million, or 56.3%, as compared to
$3.2 million for the year ended December 31, 1994. This decrease was due
primarily to the reduction of debt in the Company's European subsidiaries.

Other income (expense). The Company incurred other expenses of $1.6 million
for the year ended December 31, 1995, primarily due to the one-time write-off
of certain tooling that was purchased but not used, as compared to $0.7
million in other income for the year ended December 31, 1994.

22
<PAGE>

Income tax expense. Income tax expense of $22.8 million was recorded for the
Company as a stand-alone entity for the year ended December 31, 1995, an
increase of $15.1 million from $7.7 million for the year ended December 31,
1994. The deferred income tax liability increased from $3.3 million at
December 31, 1994 to $11.3 million at December 31, 1995. This increase
resulted in deferred income tax expense of $8.0 million for the year ended
December 31, 1995, an increase of $2.2 million from $5.8 million for the year
ended December 31, 1994. The increase in the deferred income tax liability is
due primarily to the reversal of temporary differences arising from
restructuring charges recorded in 1994 partially offset by temporary
differences arising from certain charges recorded in 1995. The effective tax
rate increased to 43.8% in 1995 from an effective rate of 14.8% in 1994,
reflecting the impact of positive income from operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company's free cash flow has historically been used to fund capital
expenditures, working capital requirements and debt service. Following the
Acquisition, interest expense associated with borrowings under the Credit
Facilities and the issuance of the Notes, as well as scheduled principal
payments of term loans under the Credit Facilities, significantly increased
interest expense and cash requirements compared to previous years. Following
completion of the Offerings, outstanding indebtedness will be reduced, which
will partly reduce the Company's interest expense. See "Use of Proceeds."

The Credit Facilities provide for a $100 million term loan and a $130
million revolving credit facility. The term loan is subject to quarterly
amortization of principal commencing on March 31, 1997, in an aggregate amount
of $15 million in 1997, $15 million in 1998, $15 million in 1999, $15 million
in 2000, $20 million in 2001 and $20 million in 2002. Loans made pursuant to
the revolving credit facility may be borrowed, repaid and reborrowed from time
to time until December 17, 2002. Indebtedness under the Credit Facilities
bears interest at a floating rate based, at the Company's option, upon (i)
LIBOR plus 0.875% or (ii) the prime rate. These rates are subject to change
based on the Company's ratio of funded debt to EBITDA. The Credit Facilities
contain restrictive covenants, financial covenants and events of default. See
"Description of Certain Indebtedness--Description of Credit Facilities."

In addition to the Credit Facilities, in connection with the Acquisition the
Company also issued $165 million aggregate principal amount of 10 7/8% Senior
Subordinated Notes due 2006. The Notes are subordinated to all existing and
future senior indebtedness of the Company, including all indebtedness under
the Credit Facilities. The Indenture governing the terms of the Notes imposes
certain restrictions on the Company and its subsidiaries, including
restrictions on its ability to incur indebtedness, pay dividends, make
investments, grant liens and engage in certain other activities. The Notes may
be required to be purchased by the Company upon a change of control (as
defined) and in certain circumstances with the proceeds of asset sales. The
Notes are redeemable at the option of the Company at any time after March 15,
2001, initially at 105.438% of their principal amount at maturity, plus
accrued interest, declining to 100% of their principal amount at maturity,
plus accrued interest, on or after March 15, 2004. At any time on or before
March 15, 1999 the Company may redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption price of 110% of their principal
amount with the net proceeds of a public equity offering by the Company. The
Company intends to redeem approximately $57.8 million aggregate principal
amount of the Notes with the net proceeds of the Offerings. See "Description
of Certain Indebtedness--Description of the Notes."

The Company's foreign subsidiaries from time to time maintain local credit
facilities to provide credit for overdraft, working capital and other
purposes. The Credit Facilities restrict such indebtedness to $10.0 million at
any one time. As of December 31, 1996, the Company's total credit available
under such facilities was approximately $9.7 million, of which none had been
utilized. The Company believes that it is currently in compliance with all
terms of its indebtedness and that it has been in such compliance since the
Acquisition.

Cash provided by (used in) operating activities totaled $89.5 million for
the ten months ended December 31, 1996, $(54.0) million for the two months
ended February 29, 1996, $51.9 million in 1995 and $(3.8) million

23
<PAGE>

in 1994. Cash provided by operations resulted primarily from net earnings,
depreciation and amortization, as well as increases in accounts payable and
other current liabilities and decreases in inventory.

Cash used in investing activities totaled $15.0 million for the ten months
ended December 31, 1996, $2.3 million for the two months ended February 29,
1996, $19.0 million in 1995 and $19.8 million in 1994 and primarily was
comprised of capital expenditures by the Company. The Company's capital
expenditures totaled $15.3 million for the ten months ended December 31, 1996,
$2.3 million for the two months ended February 29, 1996, $19.3 million in 1995
and $20.2 million in 1994. Capital expenditures have primarily been for new
manufacturing equipment and information systems. The Company expects to
increase its capital expenditures over the next few years as part of its
growth strategy and efforts to provide superior service and products to its
customers. The Company estimates that capital expenditures will be
approximately $30 million in 1997. The Credit Facilities restrict the
Company's capital expenditures to $36 million annually (plus up to $10 million
carried forward from a previous year).

Cash provided by (used in) financing activities totaled $(73.2) million for
the ten months ended December 31, 1996, $57.0 million for the two months ended
February 29, 1996 and $(36.8) million and $28.3 million for the years ended
December 31, 1995 and 1994, respectively. The $73.2 million used by the
Company in its financing activities during the ten months ended December 31,
1996 included $72.0 million for the prepayment of indebtedness under the
Credit Facilities.

The Company uses interest rate collar agreements in order to manage its
exposure to fluctuations in interest rates on its floating rate debt. At
December 31, 1996, the Company had five outstanding interest rate collar
agreements with a total notional principal amount of $185 million and maximum
and minimum rates ranging from 7.5% to 7.99% and 5.00% to 5.5%, respectively.
These agreements mature over the next two years. Aggregate maturities of the
total notional principal amount are $70 million in 1998 and $115 million in
1999.

The past and present business operations of the Company and the past and
present ownership and operation of manufacturing plants on real property by
the Company are subject to extensive and changing federal, state, local and
foreign environmental laws and regulations. As a result, the Company is
involved from time to time in administrative and judicial proceedings and
inquiries relating to environmental matters. The Company 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 the Company, some of which may be
material. The Company has been identified as a potentially responsible party
pursuant to CERCLA for remediation costs associated with waste disposal sites
previously used by the Company. The remediation costs at these CERCLA sites
are unknown, but the Company does not expect any liability it may have under
CERCLA to be material, based on the information presently known to the
Company. Under the Stock Purchase Agreement, Westinghouse has agreed to
indemnify the Company for certain costs associated with currently known CERCLA
liabilities. See "Business--Environmental Matters."

The Company continues to have significant liquidity requirements. In
addition to working capital needs and capital expenditures, the Company has
cash requirements for debt service. The Company believes that existing cash
balances and cash flow from operating activities, together with borrowings
available under the Credit Facilities, will be sufficient to fund working
capital needs, capital spending requirements and debt service requirements of
the Company for at least the next 12 months.

INFLATION

There was no significant impact on Knoll's operations as a result of
inflation during the three years ended December 31, 1996.

24
<PAGE>

BACKLOG

As of December 31, 1996, the Company's backlog of unfilled orders was $94.1
million. At December 31, 1995, the backlog totaled $70.8 million. The Company
expects to fill all such orders within the next twelve months. The Company
manufactures substantially all of its products to order and its average
manufacturing lead time is approximately five weeks. As a result, backlog is
not a significant factor used to predict the Company's long term business
prospects.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited summary pro forma and
historical information on a quarterly basis for the Company.

<TABLE>
<CAPTION>
PRO HISTORICAL
FORMA ----------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1996
Net sales.......................... $ 138,312 $166,520 $ 167,184 $179,750
Gross profit....................... 44,702 58,574 61,046 67,536
Income before extraordinary item... 197 7,527 7,685 6,334
<CAPTION>
PRO FORMA
---------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1995
Net sales.......................... $147,410 $159,352 $155,055 $159,075
Gross profit....................... 39,299 48,920 53,473 53,873
Net income (loss).................. (4,883) (484) 5,559 3,544
</TABLE>

The pro forma 1996 information presented above does not include the
extraordinary loss on the early extinguishment of debt amounting to $8,542
pre-tax, $5,159 after-tax, recognized during the fourth quarter.

In certain years, the Company has experienced variability in its sales from
quarter to quarter.

25
<PAGE>

BUSINESS

GENERAL

Knoll designs, manufactures and distributes office systems and business
furniture noted for its high quality, innovative design and sophisticated
image. Knoll's products are designed to provide enduring value rooted in
timeless aesthetics, functionality, flexibility and reliable performance. For
nearly sixty years, Knoll has been widely recognized as a design leader, with
products represented in major art museums around the world, including more
than 30 Knoll pieces housed in the permanent Design Collection of the Museum
of Modern Art in New York. Knoll's heritage of design excellence has enabled
the Company to win hundreds of awards, with special recognition across all of
its product categories, including office systems, seating, desks and
credenzas, tables, files and storage, technology accessories and textiles.
Since 1994 alone, Knoll has won more than 20 design awards for new products
and enhancements across all of its product categories.

Knoll's customers are typically Fortune 1000 companies. The Company's direct
sales force of approximately 290 professionals and its network of
approximately 200 independent dealers in North America work in close
partnership with customers and design professionals to create distinctive work
environments using Knoll products. Knoll's products and knowledgeable sales
organization have generated strong brand recognition and loyalty among
architects, designers and corporate facility managers, who are key influences
in the purchasing process for business furnishings. Knoll's strong customer
relationships allow the Company to adapt and customize its products to meet
evolving customer needs, technology practices and ergonomic standards.

The Company offers a broad range of office furniture and accessories in five
basic categories: (i) office systems (typically modular and moveable
workspaces with integrated work surfaces, space dividers and lighting),
comprised mainly of the Reff, Morrison and Equity product lines; (ii) seating,
including the Sapper, Bulldog, Parachute and SoHo chairs; (iii) storage
solutions and filing cabinets, including the Calibre collection; (iv) desks
and casegoods, including bookcases and credenzas; and (v) tables. The
Company's KnollStudio collection features its signature design classics,
including high image side chairs, sofas, desks and tables for both office and
home use. The Company also carries its own lines of textiles and leather
products and a line of desk, office and computer accessories, which complement
its furniture products and are also sold in conjunction with the seating and
systems products of other manufacturers. In 1996, the Company had revenues of
$651.8 million. The combination of its strong product offerings, experienced
dealer network and a sales force which management believes to be one of the
most effective in the industry has enabled the Company to capture an
increasing share of the U.S. business furniture market over the last three
years.

INDUSTRY DYNAMICS

. Continued corporate reengineering, restructuring and reorganizing. In
today's ever changing workplace, customers are more often experimenting
with workplace design with a goal of increasing worker productivity and
reducing facility costs. As large corporations have continued to focus on
the benefits of reengineering, restructuring and reorganizing, the nature
of the corporate work environment has changed. An emphasis on teams,
flatter organizational structures, and more direct communication among
employees at varying levels, have accelerated the need for redesigned
space. Office furniture systems that are simple, flexible and easy to
install are popular with large businesses that are reengineering,
restructuring and reorganizing their operations and offer significant
advantages over traditional drywall offices. The Company has experienced
increased demand for systems able to accommodate new work arrangements
such as team workspaces and workspaces shared by several employees who
are frequently out of the office, an arrangement known as "hoteling."

26
<PAGE>

. Corporate relocations. As companies redesign existing or relocate to new
facilities to take advantage of more sophisticated building services or
to reduce real estate costs, they often take the opportunity to install
furniture that is better adapted to their technological, ergonomic,
organizational and facility needs.

. New office technology and the resulting necessity for improved wire and
data management. Technology proliferation in the workplace has placed,
and the Company believes will continue to place, new demands on furniture
performance. Increasingly, office furniture must have the capability to
support the use of multiple monitors, video conferencing, local area
network and wide area network communications, fiber optics and portable
technologies. As businesses become more dependent upon these
technological systems, facility managers demand furniture that can easily
accommodate increasingly complex wire and cable requirements. In
response, the Company recently redesigned each of its office systems
lines in accordance with anticipated Electronic Industry Association/
Telecommunications Industry Association (EIA/TIA) guidelines.

. Heightened sensitivity to concerns about ergonomic standards. Concerns
about ergonomics, health and safety in the office have intensified in
recent years, prompting some states, such as California, Washington,
Maine and Kentucky, to institute ergonomic standards and guidelines for
all workers. These standards and guidelines have a direct effect on the
demand for ergonomically designed office furniture products. As a result,
the Company believes that corporations will increasingly seek furniture
like that offered by the Company to enhance employee comfort and
productivity through ergonomic design.

In addition, other factors such as white collar employment levels, corporate
cash flow and non-residential construction reflect certain macroeconomic
conditions which management believes influence industry growth.

The U.S. office furniture market generated sales of approximately $10.0
billion in 1996. The dollar value of U.S. office furniture industry shipments
has increased in each of the past 25 years, with the exception of 1975 and
1991 and, according to BIFMA estimates, has grown at a compound annual rate of
approximately 7.2% over the three-year period ended December 31, 1996.

The U.S. office furniture market consists of five major segments: office
systems, seating, storage, desks and casegoods, and tables. The following
table indicates the percentage of sales that each product category contributed
to the estimated U.S. office furniture industry in 1996.

<TABLE>
<CAPTION>
U.S. % OF U.S.
PRODUCT TYPE MARKET SIZE MARKET
------------ ----------- ---------
(IN
BILLIONS)
<S> <C> <C>
Office systems...................................... $3.4 34.1%
Seating............................................. 2.6 25.4
Storage............................................. 1.4 14.1
Desks and casegoods................................. 1.6 16.4
Tables.............................................. 0.7 6.6
</TABLE>

Office systems consist of movable panels, work surfaces and storage units,
electrical distribution, lighting, organizing tools and freestanding
components. These modular systems are popular with customers who require
flexible space configurations, or where many people share open floor space as
is common in modern office buildings. Both seating, ranging from executive
desk chairs to task chairs and side chairs, and storage products, such as
overhead shelving, file cabinets and desk pedestals (file cabinets that serve
to support desks), are sold to users of office systems and also are sold
separately to non-systems users. Desks and tables range from classic writing
desks in private offices to conference and meeting room tables which can
accommodate sophisticated technological demands.

27
<PAGE>

The Company intends to pursue growth by introducing new products in the
office systems category, where the Company is already a recognized leader, and
in other product categories where the Company will seek to increase its market
share by leveraging the Company's design expertise and brand awareness. The
Company estimates that its share of the 1996 U.S. office furniture market is
11.2% for office systems, 2.1% for seating, 2.1% for storage, 1.2% for desks
and casegoods and 1.8% for tables. Such percentages do not include sales of
KnollStudio, KnollExtra, textiles and leather products.

GROWTH STRATEGY

Knoll focuses on the middle to high-end office furniture market which, as a
result of evolving workplace trends and industry dynamics, management expects
to grow faster than the industry as a whole. Management believes Knoll is
well-positioned to drive further growth in revenues, profitability and market
share. Key elements of the Company's growth strategy are as follows:

. CREATE INNOVATIVE NEW PRODUCTS TO INCREASE SALES AND MARKET SHARE. The
Company believes its brand identity, superior design and complementary
product offerings give it a competitive advantage in launching new
products. The Company intends to (i) expand its offerings in the $3.4
billion U.S. office systems category, where it is a recognized leader,
and (ii) expand the breadth of product offerings in other growing office
furniture categories, such as seating, tables, desks and storage
solutions, where the Company's market share is relatively low. For
example, the Company is developing new office systems products and line
extensions that address new price points and category segments, such as
the "teamwork" segment, where the Company's current product offerings
may be limited and management believes demand for quality products is
underserved. Leadership in office systems is critical to achieving
significant market share in the industry. Office systems are often the
first design component that the customer specifies and typically
represent the largest part of a customer's furniture purchase. Utilizing
extensive market research and direct customer feedback, the Company has
developed new products in other categories such as tables and seating,
including the Propeller table line and the Parachute chair line, which
expand the breadth of the Company's offerings in these growing
categories.

. EXPAND SCOPE OF SELLING EFFORTS. The Company intends to increase the
number of direct selling professionals over the next two years to
increase office furniture sales by (i) developing new corporate
relationships, (ii) further penetrating existing corporate accounts and
(iii) expanding its selling efforts into secondary markets. Secondary
markets account for approximately $800 million in annual industry sales,
but to date have received limited or no coverage by the Company's direct
sales force or dealers. Management believes expanded selling efforts
will present an opportunity to increase total revenues and market share.

. EXPAND THE RANGE AND QUANTITY OF PRODUCTS OFFERED THROUGH THE EXISTING
DEALER NETWORK. The Company intends to leverage its dealers' estimated
900-person sales force to capture a larger share of the business with
medium to smaller-size companies and independent business purchasers. In
order to stimulate sales in this segment, the Company has introduced
marketing programs such as QuickShip and PrimeTime! which make it easier
and more profitable for its dealers to market the Company's products.
Additionally, the Company is developing new products designed and
targeted for sale through the dealer distribution channel.

. CONTINUE TO USE SPECIALTY BUSINESSES TO ENHANCE REPUTATION AND DRIVE
INCREMENTAL GROWTH. The Company intends to expand its KnollStudio line,
which includes specially commissioned pieces by

28
<PAGE>

major architects and designers. By relaunching KnollStudio classic
products and introducing new products, the Company expects to generate
significant publicity and goodwill in the design community and the
media. Further, Knoll's textile, leather and accessories lines offer the
opportunity to achieve incremental growth and attractive margins both
when sold as part of Knoll offerings and when sold in conjunction with
products of other manufacturers.

COMPETITIVE STRENGTHS

TRADITION OF SUPERIOR DESIGN. The Company's greatest business strength lies
in the history and depth of its commitment to create furniture of enduring
design value, known for innovative performance and quality. This design
heritage has enabled the Company to build over time strong relationships
with some of the world's preeminent designers. The Company's 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 and Frank Gehry.
Today, the Company continues to engage prominent outside architects and
designers to create new products and product enhancements. By combining the
creative vision of architects and designers with a commitment to developing
products which address changing business needs, the Company seeks to launch
new offerings which achieve recognition in the architect and design
community and generate strong demand among corporate customers.

REPUTATION FOR SUPERIOR PRODUCT QUALITY. Knoll's quality serves as an
important marketing tool with design professionals and with new and
existing customers. The Company believes its manufacturing employees take
pride in the Company's heritage and the quality of their execution of the
Company's designs. Knoll's products are constructed of high quality
materials, and Knoll believes its products are differentiated from those of
its competitors in workmanship and attention to detail. The Company
believes this results in products with superior aesthetics, durability and
performance.

PREMIER BRAND IDENTITY IN OFFICE SYSTEMS, FURNITURE AND SPECIALTY
PRODUCTS. Knoll's high-end image is an important factor in its customers'
initial selection and purchasing decision and provides credibility and
confidence as businesses seek to upgrade and enhance their installed
systems and purchase other business furnishings. The Company believes its
brand identity reflects its strong brand heritage, its commitment to
quality, its strong links with the architect and design community and the
customized design solutions it offers its corporate clients. The Company
believes that this has made it a leader in the middle and high-end office
systems market, in the premium office furniture market and in its specialty
businesses, including textiles, leathers and accessories.

STRONG DIRECT SELLING ORGANIZATION AND DEALER NETWORK. The Company believes
that its direct sales force provides a strategic advantage relative to its
competitors. The direct sales force, in conjunction with the Company's
independent dealer network, has close relationships with architects,
designers and corporate facility managers, who have a significant influence
on product selection on large orders. The Company's tradition of working
closely with companies to design spaces that elevate the appearance and
productivity of the workplace dates back to the Company's co-founder,
Florence Knoll, and her work with major American corporations in the
1950's.

LEAN ORGANIZATION FOCUSED ON COSTS. In 1994, Knoll's new management
instituted a series of initiatives designed to increase profitability.
Certain lower margin lines and products were discontinued, administrative
functions were centralized and manufacturing processes were significantly
rationalized and reorganized.

29
<PAGE>

Management also implemented an incentive program under which the sales
force and managers receive significant performance bonuses if sales and
profitability goals are achieved. As a result of the turnaround program,
the Company has developed an organization focused on expense control and
operating efficiency.

PREVIOUSLY IMPLEMENTED TURNAROUND PROGRAM

Westinghouse created The Knoll Group, Inc. by acquiring The Shaw-Walker
Company, Reff Inc. and Knoll International in 1989 and 1990 and combining them
with Westinghouse Furniture Systems, a division of Westinghouse. For various
reasons, the combined entities did not perform well. The Company continued to
be run as four separate entities, with essentially separate operations with
independent factories and administrative support personnel. In addition, the
Company believes that former management's steps to rationalize the Company's
U.S. dealer network and consolidate its sales forces may have impaired Knoll's
distribution and sales capabilities. A decline in revenues in the U.S. office
furniture industry in 1991, followed in 1992 by Westinghouse's announcement of
its intention to sell Knoll, exacerbated the difficult operating environment
within the Company. As a result, under previous management from 1991 to 1993,
sales and net income deteriorated. In December 1993, Westinghouse appointed
Burton B. Staniar, then Chairman and Chief Executive Officer of Westinghouse
Broadcasting, as Knoll's Chairman and Chief Executive Officer, and ended its
efforts to sell Knoll. Mr. Staniar promptly recruited John H. Lynch as Vice
Chairman, and in 1994 they initiated a major turnaround and restructuring
program which led to significantly improved financial performance.
Management's turnaround efforts had a dramatic impact on the Company's
competitive position and financial performance and positioned the Company for
growth.

The Company has created a platform to execute its growth strategy through
the successful completion of its turnaround program. As part of these
restructuring efforts initiated by current management in 1994, the Company
evaluated all major business activities and significantly reduced operating
costs. Since then, (i) virtually every product line has been modified and
improved; (ii) the lead time required to bring new and enhanced products to
market has been decreased significantly through the use of computer-aided
design techniques and other process improvements; (iii) average lead times
between order entry and delivery of products to customers have been reduced
from seven weeks to five weeks; and (iv) on-time shipments, a measure of
customer service, have improved to the current 95% level. The turnaround
program initiatives also included:

. Significantly reduced operating costs. Management evaluated all major
business activities and subsequently centralized administrative
functions eliminating duplicative overhead, simplified and automated
certain manufacturing processes, sold and consolidated certain
manufacturing facilities and consolidated purchasing activities. In
1995, the Company eliminated approximately $25.0 million in variable
operating costs and approximately $45.0 million in fixed operating costs
and general expenses.

. Instituted product line management. The Company enhanced its marketing
department by hiring and training professional managers who evaluated
each product for its profitability and market potential.

. Focused on sales growth. Management renewed sales growth by refocusing
and retraining the Company's sales force, aggressively pursuing
competitively held accounts and targeting the Company's large installed
base. Sales commissions were redefined to reward only profitable sales
growth.

. Improved the competitive position of its products. Management
accelerated the development of new and enhanced products and placed
product development under the direction of the Company's marketing
department in order to respond better to customer needs.

. Realigned management incentives. Management realigned incentive programs
to reward plant and product line managers and department heads with
substantial cash bonuses when specific cost and gross margin targets are
attained.

30
<PAGE>

. Restructured the European business. Management hired a managing director
for Europe and pared Knoll's European infrastructure to a level
commensurate with its sales volume, greatly reducing costs through plant
and showroom closings, elimination of excess personnel and manufacturing
cost improvements.

As a result of management's restructuring efforts, Knoll experienced strong
growth in sales, gross margins and operating margins from 1994 to 1996. Sales
increased from $562.9 million in 1994 to $651.8 million in 1996, despite the
discontinuance of several product lines. Gross margins were 35.6% on a pro
forma basis in 1996 and 27.1% in 1994. The operating margin was 12.0% on a pro
forma basis in 1996, which the Company believes is among the highest of its
major competitors. The Company's improved financial and operating results
allowed it in 1996 to prepay $72.0 million under its Credit Facilities and
refinance such facilities on more favorable terms.

In February 1996, a majority-owned subsidiary of Warburg acquired from
Westinghouse all of the capital stock of The Knoll Group, Inc., which was the
holding company that owned, directly or indirectly, the capital stock of each
of the companies that comprised the Knoll businesses. Since the Acquisition,
the Company has enjoyed strong growth, building on the success of the
turnaround program initiated by Messrs. Staniar and Lynch.

PRODUCTS

The Company offers a broad range of office furniture and accessories in five
basic categories: (i) office systems, comprised mainly of the Reff, Morrison
and Equity product lines; (ii) seating, including the Sapper, Bulldog,
Parachute and SoHo chairs; (iii) storage solutions and filing cabinets,
including the Calibre collection; (iv) desks and casegoods, including bookcases
and credenzas; and (v) tables. The Company's KnollStudio collection features
its signature design classics, including high image side chairs, sofas, desks
and tables for both office and home use. The Company also carries its own lines
of textiles sold under the KnollTextiles brand and leather products sold under
the Spinneybeck name and a line of desk, office and computer accessories under
the KnollExtra brand that complement its furniture products and are also sold
to other manufacturers or with products manufactured by others.

With the Company's strength in office systems, which typically represent the
largest part of a customer's furniture purchase, the Company believes it has a
significant opportunity to increase its share in seating, storage, desks and
tables by leveraging its direct sales force and independent dealers to create
incremental sales with new and existing customers.

Since 1994, nearly every product line, including each office system, has been
put under the individual management of an experienced product line manager who
carefully considers its market, competitive and strategic positioning,
marketing plan, costs, pricing, gross margin and gross profit objective. A
significant portion of the compensation of each product line manager is based
on achievement of product line-specific revenue and gross profit targets. The
Company's product line managers have conducted extensive market studies and, in
coordination with the product development team that was brought under their
control, used the results of the studies to re-design portions of every major
product line in an effort to respond to customer needs and reduce manufacturing
costs. The broad responsibility awarded to each manager and the incentive-
weighted compensation structure create a strong sense of ownership of each
product line.

The following is a description of the Company's major product lines:

Office Systems

The Company offers a complete line of systems products in order to meet the
needs of a variety of organizations. Systems may be used for teamwork settings,
private offices and open floor plans and are composed of adjustable partitions,
work surfaces, storage cabinets and electrical and lighting systems which can
be moved, re-configured and re-used within the office. Systems therefore offer
a cost effective and flexible alternative to traditional drywall office
construction. The Company has focused on this area of the office furniture
industry because it is the largest segment, typically provides attractive gross
margins and often leads to repeat and add-on sales of additional systems,
complementary furniture and furniture accessories.

31
<PAGE>

Reff. The Reff system is the Company's flagship product for high-image
corporate customers, offering high-quality, sophisticated all-wood
construction with natural veneers and durable laminate and metal options that
can be used interchangeably in private offices, as freestanding casegoods, and
in panel-supported applications. The Reff system offers customers the choice
of a variety of panel types, making the system easy to transform into hundreds
of customized configurations, and has extensive power management capabilities
for data and communications technology. Desk-height wire management
enhancements support high-speed data transmission and fiber optics, and
circuits are arranged to separate data and power cabling while accommodating
the electrical needs of large clusters of workstations and providing easy
access to outlets.

Morrison. The Company believes that the Morrison system offers the broadest
range of performance of any individual system line in the industry. Morrison
creates high-performance furniture options for team environments, private
offices and open floor plans, and offers the customer completely
interchangeable options from its Morrison Network, Morrison Access and
Morrison Options lines. These products allow the customer to choose from
premium wood surfaces or standard laminate finishes, fully powered desk
systems or panels with accessible wire management, or lower cost alternatives.
Morrison products include partitions, work surfaces, file storage and wire
management solutions which benefit new and existing customers by integrating
fully into existing Morrison platforms. Morrison products also carry a
lifetime warranty that is among very few of its kind in the industry. In
addition, the Company's Calibre desks, pedestals, files and overhead cabinets
(described below) may be integrated with the Morrison system to provide
compatible, cost-effective freestanding work surfaces and storage.

Equity. The Equity system, with its unique centerline design, simplifies
planning and maximizes the efficient use of space for growing companies and
high-density workplaces. Using a small inventory of parts, Equity offers a
wide variety of panel-based and freestanding applications that are easy to
reconfigure on-site. This flexibility minimizes inventory needs and
facilitates in-house management of expansion and rapid change. Equity's wire
management enhancements also support the latest in power, data and
communications technology. Freestanding products can easily be integrated with
the Equity panel system to reduce the cost of a typical workstation and
increase planning options. The Company finds Equity products to be popular
among government agencies, utilities and high tech and engineering
organizations. Equity products also carry a lifetime warranty that is among
very few of its kind in the industry.

The Company's innovative Reuter overhead storage and its height-adjustable
Interaction tables complement these system product lines by providing storage
and worktable products that address the ease, convenience and ergonomic
concerns of the customer.

The Company is developing new office systems products and line extensions
that address price points and new category segments, such as the "teamwork"
segment, where the Company's current product offerings may be limited and
demand for quality products is underserved. The Company believes its brand
identity, superior design and complementary product offerings give it a
competitive advantage in launching new products.

Seating

The Company's predecessors focused on the highest end of the seating market.
This focus provided the Company with excellent brand name awareness among
seating customers and in the architect and design community despite the fact
that its seating selection has not been broad enough to allow the Company to
penetrate the seating market to the same extent that it has penetrated the
office systems market. The Company believes that the office seating market
includes three major segments: the "appearance" segment, that appeals to more
hierarchical businesses; the "comfort" segment; and the "basic" segment. The
Company estimates that U.S. sales from these three segments in 1996 were
approximately $836 million, $632 million and $572 million, respectively.

The Company competes in the appearance segment with its Bulldog and Sapper
chairs. The Company's Bulldog chair, which is offered in eight separate models
that target every level of large corporations, has won the

32
<PAGE>

gold award from the International Facilities Management Association (IFMA) and
numerous Institute of Business Designers (IBD) citations for its synchronized
tilt mechanism that improves comfort by enabling the seat to tilt more slowly
than the backrest. The Sapper chair, designed by renowned industrial designer
Richard Sapper, is targeted for use in executive offices and conference rooms.
In 1995, the Company enhanced the comfort of the Sapper chair with a unique
adjustable lumbar support. The Company competes in the comfort segment with
its Parachute and SoHo models. The Parachute chair, introduced in 1994, was
designed for the less hierarchical organizations typically found in small to
mid-sized businesses and is available in several models targeted to these more
cost-conscious customers. SoHo is an affordable task chair with a distinctive,
contemporary look and easy adjustability. The Company does not have product
offerings in the basic seating segment.

Key customer criteria in seating include superior ergonomics, aesthetics,
comfort and quality, all of which the Company believes to be consistent with
its strengths and reputation. With the introduction in 1994 of its Parachute
and SoHo chairs and recent ergonomic enhancements to its Sapper and Bulldog
chairs, the Company has focused on product development to give it a
competitive advantage in this market. In order to capitalize on these
introductions, the Company will also increase sales incentives and has
recently added seating specialists in each sales region who will continue to
expand access to the Company's systems customers in order to further penetrate
the seating market. The majority of sales in the U.S. office seating market
are conducted through the same distribution channels and to the same customers
as are office system sales. The Company will seek to leverage its presence in
the office systems product line to increase sales in its other product lines,
such as seating.

The Company has conducted extensive research to improve the seating product
line. Based on this research, the Company is developing a new state-of-the-art
seating product as well as enhancing its existing seating lines with new
ergonomic options that improve comfort and performance.

Storage Solutions and Filing Cabinets

The Company offers a variety of storage options designed to be integrated
with its office systems as well as with its and others' stand-alone furniture.
The Company's Calibre collection consists of stand-alone metal filing, storage
and desk products that integrate into and support the Company's Morrison and
Equity system sales. These products also function as free-standing furniture
in private offices or open-plan environments. This product line is part of the
Company's strategy of providing its customers with a one-stop source for
office furniture and permits the Company to sell products to businesses whose
office furniture systems are provided by its competitors. Additionally, the
Company relies upon its dealers for the promotion of Calibre products to
independent business purchasers and has instituted the QuickShip marketing
program to serve the dealer-promoted product segment. See "--Sales, Marketing
and Distribution."

Desks and Casegoods

The Company's collections of stand-alone wood furniture items, such as
desks, bookshelves and credenzas, are available in a range of designs and
price points. These products combine contemporary styling with sophisticated
workplace solutions and attract a wide variety of customers, from those
conducting large office reconfigurations to small retail purchasers. Casegoods
are part of the Company's strategy of being a one-stop source of quality
office furniture.

Tables

The Company recently has expanded its offerings in the table segment of the
market with its innovative line of adjustable Interaction tables. Interaction
tables are designed to be integrated into the Company's systems lines and to
provide customers with ergonomically superior work surfaces. Additionally,
these tables are often sold as stand-alone products to non-systems customers.
In 1995, the Company introduced an award winning line of Propeller meeting and
conference tables that provide advanced wire management and technology support
while offering sufficient flexibility to allow end users to reconfigure a
meeting room quickly and easily to accommodate their specific needs.

33
<PAGE>

KnollStudio

The Company's historically significant KnollStudio collection serves the
design-conscious segment of the fine furniture contract market, providing the
architect and design community and customers with sophisticated furniture for
high-profile office and home uses. KnollStudio provides a marketing umbrella
for the full range of the Company's office products and is recognized as the
"design engine" of the Company. KnollStudio products, including a wide variety
of chairs and sofas, as well as conference, training, side and dining tables,
were created by many of this century's most prominent architects and
designers, such as Ludwig Mies van der Rohe, Marcel Breuer, Eero Saarinen and
Frank Gehry, for prestigious corporate and residential interiors. This line
includes complete collections by individual designers as well as distinctive
single items.

Complementary Products

The Company offers product lines that complement its primary office systems
and seating business and permit it to sell a complete package of office
interiors, generate high gross margins by supplying many of its own component
products, and maintain the Company's unique design image by incorporating
elements developed by its own team of designers.

KnollExtra. KnollExtra is a rapidly growing line of desk and office
accessories, including letter trays, sorters, binder bins, file holders,
calendars, desk pads, planters, wastebaskets and book ends. In addition,
KnollExtra offers a number of computer accessories and ergonomic office
products. Besides serving as an attractive supplement to the Company's other
product lines in sales to its furniture customers, these products are also
sold to customers for use in connection with other manufacturers' products.

KnollTextiles. KnollTextiles offers a wide range of coverings for walls,
panels and seating. KnollTextiles was established in 1947 to develop high
quality fabrics for Knoll furniture. These products allow the Company to
distinguish its systems offerings by providing specialty fabric options and
flexibility in fabric selection and application. As it does with its furniture
lines, the Company uses many independent designers to create its fabrics which
has helped it establish what management believes to be a unique reputation for
textile design. During 1996, approximately 43% of the KnollTextiles coverings
were applied to Knoll furniture and 57% were sold to customers for use on
other manufacturers' products, thereby allowing the Company to benefit from
its competitors' sales.

Leather. Spinneybeck supplies quality upholstery leather to the Company, to
other furniture manufacturers and to aviation, custom coach and boating
manufacturers. Spinneybeck was the first to introduce quality aniline-dyed
Italian leathers to the North American design community. Besides using the
leather in its own product offerings, the Company has also established itself
as the largest seller of leather to third parties in the "customer's own
material" segment of the contract furniture market.

European Products

Knoll Europe has a broad product offering which allows customers to single-
source a complete office environment, including certain products designed
specifically for the European market. Knoll Europe's core product categories
include: (i) office systems, including the Hannah Desking System which is
targeted to Northern Europe, the Allesandri System which is targeted to the
French market and the SoHo Desking System, which has broad market appeal; (ii)
KnollStudio, which serves the image- and design-oriented segment of the fine
furniture market; (iii) seating, including a comprehensive range of chairs
such as Sapper, Bulldog, and Parachute; and (iv) cabinets, which are designed
to complement its systems products. The Company also sells its products
designed and manufactured in North America to the international operations of
its core North American customers.

PRODUCT DESIGN AND DEVELOPMENT

Knoll's design philosophy is linked to its commitment to working with the
world's preeminent designers to develop products that delight and inspire. The
Company's collection of classic and current designs includes

34
<PAGE>

works by such internationally recognized architects and designers as Ludwig
Mies van der Rohe, Marcel Breuer, Eero Saarinen, Harry Bertoia, Massimo
Vignelli and Frank Gehry. Today, the Company continues to engage prominent
outside architects and designers to create new products and product
enhancements. By combining the creative vision of architects and designers
with a corporate commitment to products which address changing business needs,
the Company seeks to launch new offerings which achieve recognition in the
architect and design community and generate strong demand among corporate
customers.

Since 1994, under the leadership of Carl G. Magnusson, the Company's Senior
Vice President-Design, the Company has won over 20 design awards for its
recent product introductions. An important part of the Company's product
development capabilities is its responsiveness to customer needs and
flexibility to handle customized manufacturing requests. In order to develop
products across its product range, the Company works closely with independent
designers from a number of industries. By utilizing these long-standing design
relationships and listening to customers to analyze their needs, since 1994
the Company has redesigned or enhanced virtually every product line in order
to better meet customer preferences. Examples of recent product introductions
and enhancements include:

. An adjustable lumbar support for the Sapper chair.

. Freestanding desks in the Equity system.

. Propeller meeting and conference tables which provide for easy storage
and transportability and have extensive wire management capabilities.

. Morrison Access wire management capabilities.

. A belt-way panel and new edge detail for the Reff system, which offer
easier access to wire and data management and improved design options,
respectively.

. Upgrades to all systems products to accommodate high-speed data
transmission cable requirements.

. Calibre desks and pedestals, which provide lower priced desk and storage
options.

. New Interaction table models.

The Company has also made a significant investment in computer-aided design
tools to reduce product design and development lead time and improve upon what
management believes to be an industry leading position in quick response to
special customer requests. The Company believes this capability to be
particularly important in the middle to high-end of the contract furniture
market where the demand for custom solutions is the greatest. Approximately
10% of the Company's U.S. sales in 1996 involved custom product solutions, the
majority of these consisting of modifications to the Company's standard
product offerings.

SALES, MARKETING AND DISTRIBUTION

The Company believes that its direct sales force provides a strategic
advantage relative to its competition. The Company employs approximately 290
direct sales representatives, who work closely with its approximately 200
independent dealers in North America to present the Company's products to
prospective customers. The sales force, in conjunction with the dealer
network, has close relationships with architects, designers and corporate
facility managers, who often have a significant influence on product selection
on large orders.

The Company believes that its sales representatives are particularly
effective and productive due to realigned incentives and more focused
management. The commission based incentive system importantly rewards both
order growth and profitability of the sale. The sales representatives employ
personalized sales techniques to maintain close contact with the Company's
current customers and develop new customers, often utilizing their close
relationships with architects and designers. The Company's sales force
receives extensive training including annual seminars focused on the Company's
products. The Company's sales representatives are supplemented by the
estimated 900-member sales force employed by the Company's dealers who make
separate sales calls, primarily on small to mid-sized business purchasers. A
component of the Company's growth strategy is to leverage its dealers' sales
force in order to capture a larger share of business with medium to smaller-
sized companies and independent business purchasers.

35
<PAGE>

In addition to coordinating sales efforts with the Company's sales
representatives, the Company's dealers generally handle project management,
installation and maintenance for the account after the initial product
selection and sale. Although many of these dealers also carry products of
other manufacturers, none of them acts as a dealer for the Company's principal
direct competitors. The Company has not experienced significant turnover in
its dealer network except at its own initiation, as the dealer's economic
investment in learning all aspects of a particular manufacturer's product
offerings and the value of the relationships the dealer forms with the Company
and with customers discourage dealers from changing their vendor affiliations.
The Company is not dependent on any one of its dealers, the largest of them
accounting for less than 5% of the Company's 1996 North American sales. No
customer represents more than 10% of the Company's 1996 North American sales.
However, a number of U.S. government agencies purchase the Company's products
through multiple contracts with the General Services Administration ("GSA").
Sales to the GSA aggregated approximately 10% in 1996.

The Company estimates that it has sold in excess of $4 billion in office
furniture systems resulting in an installed base which management believes
generates significant annual sales through repeat and add-on orders.
Management believes that as the Company's existing office systems customers
expand and reconfigure their workplaces, their need for supplemental Company
products will increase. These customers tend to purchase the Company's
products rather than switch manufacturers, as switching sacrifices
compatibility, wastes inventory and makes reconfiguration more complex.

Knoll's customers are typically Fortune 1000 companies. The Company has
increased its efforts to penetrate the growing market of medium-sized
businesses by expanding its offerings of affordable free-standing products and
by establishing marketing programs such as QuickShip and PrimeTime!, which are
targeted for sale through dealer channels. These quick shipment programs help
dealers to access customers with Company products directly by providing a
direct mail catalog and price list along with a dependable delivery program
and firm delivery commitments. Sales of dealer-promoted products are a fast-
growing segment of the Company's business, benefiting from improved customer
access resulting from the QuickShip and PrimeTime! programs and increased
promotions due to dealer incentive programs such as the Company's Frequent
Seller Club. Sales via the QuickShip program increased from $7.0 million in
1992 to $27.9 million in 1996, and sales via the PrimeTime! program increased
from $6.7 million in 1993 to $15.7 million in 1996. Since the Company's sales
force is not required to generate such sales and since the Company grants
lower discounts to individual purchasers, it generates gross margins higher
than its average gross margins from dealer-promoted sales.

In Europe, the Company sells its products in largely the same manner as it
does in North America, through a direct sales force and a network of dealers,
though each major European market has its own distinct characteristics. In the
Latin American and Asia-Pacific markets, the Company uses both dealers and
independent licensees.

MANUFACTURING AND OPERATIONS

The Company operates four manufacturing sites in North America, with plants
located in East Greenville, Pennsylvania; Grand Rapids and Muskegon, Michigan;
and Toronto, Canada. The Morrison system and the Bulldog, Parachute and Sapper
chairs are manufactured at the East Greenville plant, while the Equity product
line is produced primarily at the Grand Rapids plant. The Muskegon plant
produces metal products, including Calibre files and desks. The Company's
Toronto facilities encompass three buildings, which manufacture wood products,
panels, and metal products for the Company's Reff product line. In addition,
the Company has two plants in Italy: in Foligno, where wood products are
manufactured, and in Graffignana, where metal components and cabinets are
produced. In 1994, all of the Company's plants were awarded registration to
ISO 9000, an internationally developed set of manufacturing facility quality
criteria.

"Just-in-time" inventory practices have been implemented at all plant
locations, and all plants "build to order" rather than to "forecast," which
directly reduces finished goods inventory levels and stresses continuous
improvement in set-up and delivery time. As a result of these and other order
processing and customer service

36
<PAGE>

improvements, the Company's average lead times have been reduced to five weeks
from seven weeks before the restructuring, and the Company currently delivers
approximately 95% of its orders on time in North America.

RAW MATERIALS AND SUPPLIERS

Based on management's initiatives, the Company has centralized purchasing in
its East Greenville facility and has formed close working relationships with
its main suppliers. This effort focuses on achieving purchasing economies and
"just-in-time" inventory practices. The Company utilizes steel, lumber, paper,
paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers,
and upholstery filling material. Management currently maintains no long-term
supply contracts and believes that the supply sources for these materials are
adequate. The Company does not rely on any sole source suppliers for any of
its raw materials (other than certain electrical products).

COMPETITION

The office furniture market is highly competitive. Office furniture
companies compete on the basis of (i) product design, including ergonomic and
aesthetic factors, (ii) product quality and durability, (iii) price (primarily
in the middle and budget segments), (iv) on-time delivery and (v) service and
technical support. In the United States, where the Company had a 5.8% market
share and derived approximately 86% of its sales in 1996, five companies
(including the Company) represent approximately 59% of the market.

Many of the Company's competitors, especially those in North America, are
large and have significantly greater financial, marketing, manufacturing and
technical resources than those of the Company. The Company's most significant
competitors in its primary markets are Steelcase, Herman Miller, Haworth and
HON. 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. Although the Company believes that it has
been able to compete successfully in its markets to date, there can be no
assurance that it will be able to continue to do so in the future. See "Risk
Factors--Competition."

The European market accounted for approximately 8% of the Company's sales in
1996. This market is highly fragmented, as the combined sales of the estimated
top 20 manufacturers represent less than 40% of the market. The Company
believes that no single company holds more than a 5% share of the European
market.

PATENTS AND TRADEMARKS

The Company has approximately 87 active United States utility patents on
various components used in its products and systems and approximately 115
active United States design patents. The Company also has approximately 200
patents in various foreign countries. Knoll(R), The Knoll Group(R),
KnollStudio(R), KnollExtra(R), Reff(TM), Bulldog(R), Calibre(R), Equity(R),
Parachute(R), Good Design Is Good Business(R), Propeller(TM) and SoHo(TM) are
trademarks of the Company. The Company considers securing and protecting its
intellectual property rights to be important to its business.

ENVIRONMENTAL MATTERS

The Company believes that it is substantially in compliance with all
applicable laws and regulations for the protection of the environment and the
health and safety of its employees based upon existing facts known to
management. Compliance with federal, state, local and foreign environmental
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 the operations of the Company, but has, since
the formation of Knoll in 1990, been accomplished without having a material
adverse effect on the operations of the Company. There can be no assurance
that such regulations will not change in the future or that the Company will
not incur material costs as a result of such regulations. 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, management
presently has no

37
<PAGE>

planned expenditures of significant amounts for future environmental
compliance. The Company has trained staff responsible for monitoring
compliance with environmental, health and safety requirements. The Company's
ultimate goal is to reduce and, wherever possible, eliminate the creation of
hazardous waste in its manufacturing processes.

The Company has been identified as a potentially responsible party pursuant
to CERCLA for remediation costs associated with waste disposal sites
previously used by the Company. CERCLA imposes liability without regard to
fault or the legality of the disposal. The remediation costs at the CERCLA
sites are unknown; however, the Company does not expect its liability to be
material. At each of the sites, the Company is one of many potentially
responsible parties and expects to have only a small percentage of liability.
At some of the sites, the Company expects to qualify as a de minimis or de
micromis contributor, eligible for a cash-out settlement. In addition, under
the Stock Purchase Agreement, Westinghouse has agreed to indemnify the Company
for certain costs associated with currently known CERCLA liabilities.

EMPLOYEES

Management believes that relations with its employees are good. As of
February 1, 1997, the Company employed a total of 3,550 people, including
2,266 hourly and 1,284 salaried employees. The Grand Rapids, Michigan plant is
the only unionized Company plant within the United States, with the Carpenters
and Joiners of America-Local 1615 having a four-year contract expiring August
30, 1998. While management believes that relations with this union are
positive, management cannot assure that it will be successful in reaching a
new contract. Certain workers in the Company's facilities in Italy are
represented by unions. The Company has experienced brief work stoppages from
time to time at the Company's plants in Italy, certain of which related to
national or local issues. Such work stoppages have not materially affected the
Company.

PROPERTIES

The Company operates over 2,947,000 square feet of facilities, including
manufacturing plants, warehouses and sales offices. Of these facilities, the
Company owns approximately 2,372,000 square feet and leases approximately
575,000 square feet. The Company's manufacturing plants are located in East
Greenville, Pennsylvania; Grand Rapids and Muskegon, Michigan; Toronto,
Canada; and Foligno and Graffignana, Italy.

The Company's corporate headquarters is located in East Greenville,
Pennsylvania, where the Company owns two manufacturing facilities aggregating
approximately 547,000 square feet and leases three warehouses aggregating
approximately 142,000 square feet. The Morrison system and seating for the
Bulldog, Sapper and Parachute product lines are manufactured at the East
Greenville facility, which is also the distribution center for KnollStudio,
KnollExtra and KnollTextiles.

The Company owns one approximately 500,000 square foot manufacturing
facility in Grand Rapids, Michigan, which produces most of the Equity product
line and the Interaction table. The Company also owns an approximately 274,000
square foot plant in Muskegon, Michigan, which produces Calibre files and
desks and Reuter overhead storage units. The Company's plants in Toronto,
Canada consist of one approximately 375,000 square foot owned building and two
leased properties aggregating approximately 230,000 square feet. The Reff
product line is manufactured at these facilities. The Company's owned
facilities in East Greenville, Grand Rapids and Muskegon are encumbered by
mortgages securing an original aggregate principal amount of $230 million that
were entered into in connection with the Credit Facilities.

The Company owns two manufacturing facilities in Italy: an approximately
258,000 square foot building in Foligno, which houses the Knoll Europe
headquarters and where all of the Company's wood products are manufactured for
Europe, and an approximately 110,000 square foot building in Graffignana,
where metal components and cabinets are manufactured.

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<PAGE>

The Company believes that its plants and other facilities are sufficient for
its needs for the foreseeable future.

LEGAL PROCEEDINGS

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

The Company, for a number of years, has sold various products to the United
States Government under GSA multiple award schedule contracts. The GSA is
permitted to audit the Company's compliance with the terms of the GSA
contracts. As a result of one such audit, the GSA has asserted refund claims
under 1985-88 and 1987-90 contracts between GSA and The Shaw-Walker Company,
which has been merged into the Company, for approximately $2.15 million
("Shaw-Walker GSA Claims") and has other contracts under audit review. GSA has
referred both of these Shaw-Walker contracts to the Justice Department for
consideration of potential civil False Claims Act cases. Under the civil False
Claims Act, the Company is potentially liable for treble damages plus
penalties of up to $10,000 for each "false" invoice submitted to the
Government. The former shareholders of The Shaw-Walker Company have agreed to
indemnify the Company for the Shaw-Walker GSA Claims. Based upon information
presently known, management disputes the audit results and does not expect
resolution of the Shaw-Walker GSA Claims to have a material adverse effect on
the Company's consolidated financial statements. Management does not have
information which would indicate a substantive basis for a civil False Claims
Act case under the contracts.

39
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Set forth below are the names, ages and positions of the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Burton B. Staniar....... 55 Chairman of the Board
John H. Lynch........... 44 Vice Chairman of the Board, President and Chief Executive Officer
Wolfgang Billstein...... 48 Managing Director--Knoll Europe
Kathleen G. Bradley..... 47 Senior Vice President--Sales, Distribution and Customer Service
Andrew B. Cogan......... 34 Senior Vice President--Marketing and Product Development and Director
Carl G. Magnusson....... 57 Senior Vice President--Design
Douglas J. Purdom....... 38 Senior Vice President and Chief Financial Officer
Barbara E. Ellixson..... 43 Vice President--Human Resources
Barry L. McCabe......... 50 Vice President, Controller and Treasurer
Patrick A. Milberger.... 40 Vice President, General Counsel and Secretary
Jeffrey A. Harris....... 41 Director
Sidney Lapidus.......... 59 Director
Kewsong Lee............. 31 Director
John L. Vogelstein...... 62 Director
</TABLE>

The Company expects to add one additional director after completion of the
Offerings.

Burton B. Staniar was appointed Chairman of the Board of the Company in
December 1993 to effect the restructuring of the Company and restore it to
profitability. Mr. Staniar served as Chief Executive Officer of the Company
from December 1993 to January 1997. Prior to that time, Mr. Staniar had held a
number of assignments at Westinghouse, including President of Group W Cable
and Chairman and Chief Executive Officer of Westinghouse Broadcasting. Prior
to joining Westinghouse in 1980, he held a number of marketing and general
management positions at Colgate Palmolive and Church and Dwight Co., Inc.

John H. Lynch joined the Company as President and Vice Chairman of the Board
in April 1994 and was elected Chief Executive Officer in January 1997. Prior
to joining the Company, Mr. Lynch was a partner in BGI, a consulting company,
and an associate dean at the Harvard Business School. Mr. Lynch is a director
of Renaissance Cosmetics, Inc.

Wolfgang Billstein was recruited in November 1994 to lead the restructuring
of the Company's European operations as Managing Director--Knoll Europe. A
German citizen, Mr. Billstein previously worked in Europe for The Procter &
Gamble Company and Benckiser GmbH, a consumer products company.

Kathleen G. Bradley was named Senior Vice President--Sales, Distribution and
Customer Service in January 1996, after serving as Divisional Vice President
for Knoll's southeast region since 1988. Prior to that time, Ms. Bradley was
regional manager for the Company's Atlanta territory, a position to which she
was promoted in 1983. She began her career with Knoll in 1979.

Andrew B. Cogan has been a director of the Company since February 1996. He
has held the position of Senior Vice President--Marketing and Product
Development since May 1994. Mr. Cogan has held several positions in the design
and marketing group since joining the Company in 1989.

Carl G. Magnusson has held the position of Senior Vice President--Design
since February 1993. Mr. Magnusson has been involved in design, product
development, quality and communications since joining the Company in 1976.

40
<PAGE>

Douglas J. Purdom joined the Company as Senior Vice President and Chief
Financial Officer in August 1996. Prior to that time, Mr. Purdom served as
Vice President and Chief Financial Officer of Magma Copper Company since 1992,
and as Corporate Controller of that company from 1989 to 1991.

Barbara E. Ellixson was promoted to her current position as Vice President--
Human Resources in August 1994, after serving as Manager of Human Resources
for the Company's East Greenville site. Ms. Ellixson began her career with
Westinghouse in 1971 and has held a variety of human resources positions in
several different business units.

Barry L. McCabe joined the Company in August 1990 as Controller. Mr. McCabe
worked with a number of Westinghouse business units after joining Westinghouse
in 1974 in the Auditing Department.

Patrick A. Milberger joined the Company as Vice President and General
Counsel in April 1994. Prior to joining the Company, Mr. Milberger was an
Assistant General Counsel at Westinghouse and was in private practice at
Buchanan Ingersoll, P.C.

Jeffrey A. Harris, a director of the Company since February 1996, has been a
General Partner of Warburg, Pincus & Co. and a Member and Managing Director of
E.M. Warburg, Pincus & Co., LLC and its predecessors since 1988, where he has
been employed since 1983. Mr. Harris is a director of Newfield Exploration
Company, Comcast UK Cable Partners Limited, Industri-Matematik International
Corp., ECsoft Group plc and several privately held companies.

Sidney Lapidus, a director of the Company since February 1996, has been a
General Partner of Warburg, Pincus & Co. and a Member and Managing Director of
E.M. Warburg, Pincus & Co., LLC and its predecessors since January 1982, where
he has been employed since 1967. Mr. Lapidus is currently a director of
Renaissance Communications Corp., Pacific Greystone Corporation, Caribiner
International, Inc., Grubb and Ellis Company and Panavision Inc., as well as
several privately held companies.

Kewsong Lee, a director of the Company since February 1996, has been a
General Partner of Warburg, Pincus & Co. and a Member and Managing Director of
E.M. Warburg, Pincus & Co., LLC and its predecessors since January 1997. From
January 1995 to January 1997, Mr. Lee was Vice President of Warburg, Pincus
Ventures, Inc. From 1992 to 1995, Mr. Lee was an associate at E.M. Warburg,
Pincus & Co., Inc. and prior to that had been a consultant at McKinsey &
Company, Inc. since 1990. Mr. Lee is currently a director of RenaissanceRe
Holdings Ltd. and several privately held companies.

John L. Vogelstein has been a director of the Company since February 1996.
Mr. Vogelstein is a General Partner of Warburg, Pincus & Co., and a Member,
Vice Chairman and President of E. M. Warburg, Pincus & Co., LLC, where he has
been employed since 1967. Mr. Vogelstein is currently a director of ADVO Inc.,
Aegis Group plc., Golden Books Family Entertainment, Inc., LCI International,
Inc., Mattel, Inc., Value Health, Inc., Vanstar Corporation and several
privately held companies.

The employment agreements of Messrs. Staniar and Lynch provide that the
Company will nominate them to the board of directors during the term of their
employment pursuant to their employment agreements. In addition, the Company's
Stockholders Agreement, dated February 29, 1996, entitles Warburg to designate
between one and four directors depending on its percentage ownership of the
Company's outstanding shares of Common Stock or preferred stock. Following the
Offerings, Warburg will own more than 50% of the Common Stock of the Company
and will therefore be entitled pursuant to the Stockholders Agreement to
nominate four members of the board of directors.

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<PAGE>

SUMMARY COMPENSATION TABLE

The following table sets forth, for the years ended December 31, 1996 and
December 31, 1995, individual compensation information for the Chief Executive
Officer of the Company and each of the four other most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 1996 (the "named executive officers").

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ----------------
NAME AND PRINCIPAL RESTRICTED STOCK ALL OTHER
POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) COMPENSATION($)(2)
------------------ ---- ---------- --------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Burton B. Staniar....... 1996 410,830 600,000 30,000 5,595
Chairman of the Board 1995 465,000 350,000 -- 4,500
John H. Lynch........... 1996 393,330 600,000 30,000 9,449
Vice Chairman of the 1995 360,000 360,000 -- 6,075
Board, President and
Chief Executive Officer
Andrew B. Cogan......... 1996 197,930 250,000 12,000 --
Senior Vice President-- 1995 187,620 187,000 -- --
Marketing and Product
Development
Kathleen G. Bradley..... 1996 197,050 250,000 6,000 4,328
Senior Vice President-- 1995 163,668 156,740 -- 4,755
Sales, Distribution and
Customer Service
Wolfgang Billstein...... --
Managing Director-- 1996 396,000 572,836 -- --
Knoll Europe 1995 360,000 653,100 --
</TABLE>

- --------
(1) On February 29, 1996, Messrs. Staniar, Lynch and Cogan and Ms. Bradley
were granted , , and shares of restricted stock,
respectively (as adjusted for the stock split). Holders of shares of
restricted stock will not be entitled to receive dividends until such
shares vest and become unrestricted. As of March 1, 1997, 40% of the
grants of restricted stock to each of Messrs. Staniar, Lynch and Cogan had
vested and an additional 20% will vest on each of the next three
anniversaries thereof. As to Ms. Bradley, 20% of the grants of restricted
stock vested on March 1, 1997 and an additional 20% will vest on each of
the next four anniversaries thereof. The value of the shares listed above
is based on the fair value thereof on the date of grant, based on the
price of the shares of Common Stock sold in conjunction with the
Acquisition.

(2) Amounts in this column represent the Company's matching contributions to
the Knoll, Inc. Retirement Savings Plan.

PENSION PLANS

Retirement benefits are provided to employees through two pension plans.
Prior to the purchase of the Company from Westinghouse, benefits were provided
under The Knoll Group Pension Plan which was retained by Westinghouse (the
"Westinghouse Pension Plan"). Effective March 1, 1996, the Company established
the Knoll, Inc. Pension Plan (the "Company Pension Plan"). The Westinghouse
Pension Plan provides eligible employees with retirement benefits based on a
career average compensation formula. The formula for computing normal
retirement benefits under this plan is 1.45% of career compensation divided by
twelve. Once a participant accumulates 5 years of vesting service, he or she
can take early retirement anytime after reaching age 55. Accrued normal
retirement benefit is reduced 6% per year prior to normal retirement age. The
minimum benefit earned for any year of participation in the plan is $300 ($25
per month), prorated for the partial years worked during the first and last
years of employment. The estimated annual benefits payable upon normal
retirement under this plan for each of the named executive officers is as
follows: Staniar ($0); Lynch ($4,712); Bradley ($24,648); and Cogan ($16,500).
Mr. Billstein has never participated in the Westinghouse Pension Plan.

42
<PAGE>

The terms of the Company Pension Plan are the same as those of the
Westinghouse Pension Plan. The estimated annual benefits payable upon normal
retirement under this plan for each of the named executive officers is as
follows: Staniar ($1,812); Lynch ($1,812); Bradley ($1,812); and Cogan
($1,812). Mr. Billstein never participated in the Company Pension Plan.

Messrs. Staniar, Lynch, Cogan and Ms. Bradley also participated in the
Westinghouse Executive Pension Program (the "Westinghouse Excess Plan") during
the first two months of fiscal 1996, which provides for benefits not payable
by the Westinghouse Pension Plan because of limitations imposed by the
Internal Revenue Code of 1986, as amended. The benefit formula for this plan
is average total compensation and years of eligibility service multiplied by
1.47% minus amounts payable under the Westinghouse Pension Plan. The estimated
annual benefits payable under this plan upon normal retirement for each of the
named executive officers is as follows: Staniar ($263,000); Lynch ($13,972);
Bradley ($5,820); and Cogan ($14,089). Mr. Billstein has never participated in
the Westinghouse Excess Plan.

Remuneration covered by the Westinghouse Pension Plan, the Company Pension
Plan and the Westinghouse Excess Plan primarily includes salary and bonus, as
set forth in the Summary Compensation Table. Under the Westinghouse Pension
Plan, the Company Pension Plan and the Westinghouse Excess Plan, Messrs.
Staniar, Lynch, Cogan and Ms. Bradley have the following years of credited
service, as of December 31, 1996: 0.00/0.84/15.44, 1.75/0.84/1.75,
7.14/0.84/5.498 and 16.64/0.84/5.498 years, respectively.

DIRECTOR COMPENSATION

Directors who are not employees or officers of the Company or Warburg will
receive cash compensation of $ per annum payable quarterly. Directors will
also be reimbursed for certain expenses in connection with attendance at board
and committee meetings. Other than with respect to reimbursement of expenses,
directors who are employees or officers of the Company will not receive
additional compensation for services as a director.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Burton B. Staniar,
the Company's Chairman of the Board, John H. Lynch, the Company's Vice
Chairman, Chief Executive Officer and President, and Andrew B. Cogan, the
Company's Senior Vice President--Marketing and Product Development, for a term
expiring on the first anniversary of the Acquisition closing, subject to
automatic one-year extensions unless either party gives 60 days notice not to
renew. The agreements with Messrs. Staniar and Lynch provide for a base salary
of $400,000, with a service bonus of 25% of base salary at the end of each
calendar year, and an annual bonus of up to 125% of base salary based on the
attainment of targets set by the Board of Directors. The agreement with Mr.
Cogan provides for a base salary of $200,000 and an annual bonus of up to 100%
of base salary based on the attainment of targets set by the Board of
Directors. The agreements may be terminated at any time by the Company, but if
so terminated without "cause," or if the Company fails to renew the
agreements, the Company must pay the employee 125% of one year's base salary
(100% of base salary in the case of Mr. Cogan). The agreements also contain
non-compete and non-solicitation (during the term of the agreement and for one
year thereafter) and confidentiality provisions.

In addition, the Company has entered into a Consulting Agreement, dated as
of December 1, 1996, with Mr. Wolfgang Billstein. Pursuant to this agreement,
Mr. Billstein receives a monthly fee of 52,249 Deutsche Marks, and contingent
incentives based on the positive operating profit of Knoll Europe (subject to
certain conditions) and Knoll Europe's order volume. The agreement terminates
on November 30, 1997 but is automatically renewed for two one-year periods
unless either party elects not to renew. Knoll has the right to terminate this
agreement upon three months notice and payment of 313,494 Deutsche Marks plus
a portion of Mr. Billstein's incentive compensation.

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<PAGE>

STOCK INCENTIVE PLANS

At the Acquisition closing, Knoll adopted its 1996 Stock Incentive Plan (the
"1996 Stock Plan") pursuant to which up to shares of Knoll common
stock (the "Stock") were reserved for issuance pursuant to grants of
restricted Stock or options to purchase such Stock to officers, key employees,
directors and consultants of Knoll and its subsidiaries selected for
participation in the 1996 Stock Plan. The Company has issued shares
of restricted Stock and options to acquire shares of Stock pursuant to
the 1996 Stock Plan. On February 14, 1997 Knoll adopted its 1997 Stock
Incentive Plan (the "1997 Stock Plan", and together with the 1996 Stock Plan,
the "Stock Plans"). The 1997 Stock Plan contains terms substantially similar
to the 1996 Stock Plan, except that pursuant to the 1997 Stock Plan (i) an
aggregate of only shares of Stock are reserved for issuance
thereunder, (ii) discounted options may be granted, (iii) options may be
repriced, and (iv) the Board of Directors has greater flexibility to amend the
1997 Plan. The Company has issued options to acquire shares pursuant
to the 1997 Stock Plan. The Stock Plans are intended as an incentive to
encourage stock ownership by such individuals in order to increase their
proprietary interest in Knoll's success and to encourage them to remain in the
employ of Knoll or its subsidiaries, as the case may be.

The Stock Plans provide for the grant of restricted Stock ("Restricted
Stock"), non-qualified stock options ("NQSOs") and incentive stock options as
defined in Section 422 of the Code ("ISOs").

The Stock Plans are administered by a Committee of at least two directors,
appointed by the Board of Directors of Knoll (the "Committee"). The Committee
determines the eligible individuals who are to receive shares of Restricted
Stock, the number of shares to be granted, the terms of the restrictions and
period of time that the restrictions will be effective. The Committee will
also determine the eligible individuals who are to receive options and the
terms of each option grant, including (1) the option prices of shares subject
to options, (2) the dates on which options become exercisable, and (3) the
expiration date of each option. The Committee has the power to accelerate the
exercisability of outstanding options and to reprice any option at any time.

The purchase price of the shares of Stock subject to options will be fixed
by the Committee, in its discretion, at the time options are granted;
provided, that in no event shall the per share purchase price of an option
granted under the 1996 Stock Plan or any ISO granted under the 1997 Stock Plan
be less than the Fair Market Value Per Share (as defined in the Stock Plans)
on the date of grant.

Optionees and holders of Restricted Stock will have no voting, dividend, or
other rights as stockholders prior to the lapse of all restrictions or the
receipt of unrestricted Stock upon the exercise of options. The exercise price
for options may be paid in cash or, at the discretion of the Committee,
satisfied by tendering Stock having a value equal to the exercise price. The
number of shares covered by options will be appropriately adjusted in the
event of any stock split, merger, recapitalization or similar corporate event.
No adjustments will be made upon conversion of the Company's Series A
Preferred Stock.

The Board of Directors of Knoll may at any time terminate either or both of
the Stock Plans or from time to time make such modifications or amendments to
the Stock Plans as it may deem advisable; provided that, with respect to the
1997 Stock Plan, the Board may not, without the approval of the Knoll
stockholders, (i) increase the maximum number of shares of Stock for which
options may be granted under the Stock Plans, (ii) expand the class of
employees eligible to participate therein, (iii) reduce the minimum purchase
price at which options may be granted under the Stock Plans, (iv) extend the
maximum term of options, or (v) extend the term of the 1997 Stock Plan.

Options and Restricted Stock granted under the Stock Plans will be evidenced
by written agreements between the recipient and Knoll. Subject to limitations
set forth in the Stock Plans, the terms of option and Restricted Stock
agreements will be determined by the Committee, and need not be uniform among
recipients.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was formed in 1997 and currently consists
of , and . None of the members of the Compensation Committee is or has
been an officer or employee of the

44
<PAGE>

Company. No executive officer of the Company served on any board of directors
or compensation committee of any entity (other than the Company) with which
any member of the Compensation Committee is affiliated. Prior to 1997 the
Company did not have a Compensation Committee. During the fiscal year ended
December 31, 1996 the compensation of Messrs. Staniar, Lynch and Cogan was
determined pursuant to employment agreements which each of them has with the
Company. See "--Employment Agreements." The incentive portion of the
compensation of each of Messrs. Staniar and Lynch was determined by Messrs.
Lapidus, Harris, and Lee and confirmed by the entire Board of Directors,
including Messrs. Staniar and Lynch. Both Messrs. Staniar and Lynch are
officers of the Company. For the fiscal year ended December 31, 1996 the
incentive compensation of Mr. Cogan and the compensation for all other
executive officers was determined by Messrs. Staniar and Lynch.

45
<PAGE>

CERTAIN TRANSACTIONS

THE ACQUISITION

On February 29, 1996, pursuant to a Stock Purchase Agreement, the Company
acquired all of the outstanding capital stock of the companies that constitute
the Knoll business for an aggregate purchase price of $579,801,000. The
Company was formed by Warburg and certain members of the Company's management
to consummate the Acquisition. The Acquisition and related fees and expenses
were financed through a $260 million term loan, issuance of the Notes and with
a $160 million equity contribution by the Initial Investors. Of the $160
million of Company capital stock sold in connection with the Acquisition,
certain members of the Company's management (including the named executive
officers) purchased $5 million, NationsBanc Investment Corp. purchased $8
million and Warburg purchased $147 million. The equity consisted of 1,000,000
shares of common stock, sold for $100,000, and 1,599,000 shares of Series A
Preferred Stock, sold for $159,900,000.

STOCKHOLDERS AGREEMENT

In connection with the acquisition of the Company in 1996, Warburg Pincus
Ventures, L.P., NationsBanc Investment Corp. and 12 senior members of
management (each a "Holder" and collectively, the "Holders") and the Company
entered into a Stockholders Agreement (the "Stockholders Agreement"), dated as
of February 29, 1996, which governs certain matters related to corporate
governance and registration of shares of Common Stock and preferred stock
("Registrable Securities") held by such Holders (other than shares acquired
pursuant to the 1996 and 1997 stock incentive plans). The following
description of the Stockholders Agreement is qualified in its entirety by
reference to the Stockholders Agreement, which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

Pursuant to the Stockholders Agreement, Warburg is entitled to request on up
to two occasions that the Company file a registration statement under the
Securities Act covering the sale of at least $25 million of shares of Common
Stock or preferred stock, subject to certain conditions. If officers or
directors of the Company holding other securities of the Company request
inclusion of their securities in any such registration, or if holders of
securities of the Company other than Registrable Securities who are entitled,
by contract with the Company or otherwise, to have securities included in such
a registration (the "Other Stockholders"), request such inclusion, the Holders
shall 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 included in the registration. The Company may defer the
registration for 120 days if it believes that it would be seriously
detrimental to the Company for such registration statement to be filed.

The Stockholders Agreement further provides that, if the Company proposes to
register any of its 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 its own account or for the account
of other security holders, holders of Registrable Securities may require the
Company 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 the Company
becomes 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 at least $5 million of such shares, subject to certain conditions,
provided that the Company 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.

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 the Company. The registration rights described above
apply to shares of Common Stock held by the Holders (including shares of
Common Stock to be received by the Holders upon the conversion of their shares
of preferred stock). In connection with the Offerings, each of the Holders
waived all registration, subscription and other similar rights that they may
have.

46
<PAGE>

The Stockholders Agreement provides that the original Board of Directors of
the Company was to be composed of Messrs. Staniar, Lynch, Vogelstein, Lapidus,
Harris and Lee. Pursuant to the Stockholders Agreement, the stockholders who
are a party thereto (comprising % of the outstanding shares of Common Stock
of the Company upon completion of the Offerings) have agreed to vote their
shares of Common Stock for four directors nominated by Warburg if Warburg owns
50% or more of the Company's outstanding shares of Common Stock and Series A
Preferred Stock, three directors if it owns 25% or more, two directors if it
owns 15% or more and one director if it owns 5% or more.

ISSUANCE OF RESTRICTED SHARES OF COMMON STOCK

In connection with the issuance of restricted shares of Common
Stock pursuant to the Company's 1996 Stock Plan established in connection with
the Acquisition, Warburg and the Company also entered into separate
Stockholders Agreements with all of the Company's executive officers and other
members of the Company's management. Pursuant to these agreements, members of
management agreed not to transfer their shares except (i) to members of their
immediate families and other related or controlled entities, (ii) to Warburg
or an affiliate thereof or (iii) after the Offerings, upon 30 days prior
written notice to the Board of Directors. The restrictions on transfer
terminate after the Offerings when Warburg owns less than 10% of the
outstanding shares of Common Stock and less than 10% of the outstanding shares
of preferred stock. In addition, pursuant to these agreements, the Company
agreed that, if the Company determined to register any shares of Common Stock
for its own account or for the account of security holders, the Company would
include in such registration all of the vested shares of Common Stock received
by management pursuant to the 1996 Stock Plan. In addition, after the Company
qualifies for Form S-3, management may request unlimited registrations of at
least $5,000,000 of securities on Form S-3, provided that the Company is not
required to effect a registration pursuant to this provision within 180 days
of the effective date of the most recent registration pursuant to this
provision. In connection with the Offerings, each recipient of shares of
Common Stock under the 1996 Stock Plan waived all registration and other
similar rights that they may have.

Pursuant to the 1996 Stock Incentive Plan, the Company also entered into
Restricted Share Agreements with each recipient of restricted shares of Common
Stock, including each of the Company's executive officers. Pursuant to these
agreements, Burton Staniar received restricted shares, John Lynch received
restricted shares, Andrew Cogan received restricted shares and Kathleen
Bradley received restricted shares. The agreements were dated February 29,
1996 and the shares vested at a rate of 20% per year, commencing on the date
of grant (in the case of Messrs. Staniar, Lynch and Cogan) or on the first
anniversary of the date of grant. The agreements provide that upon the
voluntary termination of employment for reasons other than death, disability
or retirement at age 65, or if the grantee's employment was terminated without
cause, the nonvested restricted shares were to be immediately forfeited to the
Company. Upon termination with cause, the agreements provide (i) in the case
of Messrs. Staniar and Lynch, for the immediate forfeiture of all restricted
shares, regardless of whether vested prior to termination, and (ii) that the
Company may repurchase the shares of Common Stock at $0.10 per share.

OTHER

NationsBanc Investment Corp., which is a beneficial owner of approximately
five percent of the outstanding capital stock of the Company, is an affiliate
of (i) NationsBank N.A., which is a party to the Credit Agreements, and (ii)
NationsBanc Capital Markets, Inc., the initial purchaser of the Company's
Notes. See "Principal and Selling Stockholders" and "Description of Certain
Indebtedness."

During 1996, the Company paid $137,337 to Emanuela Frattini Magnusson for
design services and product royalties, the bulk of which was payable pursuant
to the terms of a July 1993 Design Development Agreement between Emanuela
Frattini and the Company pertaining to the Company's Propeller product line.
Emanuela Frattini Magnusson is the wife of Carl G. Magnusson, the Company's
Senior Vice President--Design.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with regard to the
beneficial ownership of the Common Stock as of March , 1997 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) the Selling Stockholder, (iii) each
director and named executive officer of the Company and (iv) all current
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
-------------------------- --------------------
NAME AND ADDRESS OF
BENEFICIAL OWNER SHARES(1)(2) PERCENT SHARES(1)(2) PERCENT
- ------------------- ------------- ---------- ------------ -------
<S> <C> <C> <C> <C>
Warburg, Pincus Ventures,
L.P.(3)...................
466 Lexington Avenue
New York, NY 10017
NationsBanc Investment
Corp.(4)..................
100 Tryon Street, 10th
Floor
Charlotte, NC 28255
Burton B. Staniar..........
John H. Lynch..............
Wolfgang Billstein.........
Kathleen G. Bradley........
Andrew B. Cogan............
Jeffrey A. Harris(5).......
Sidney Lapidus(5)..........
Kewsong Lee(5).............
John L. Vogelstein(5)......
All current directors and
executive officers as a
group
(14 persons)..............
</TABLE>
- --------
* Less than 1%.
(1) 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. Amounts shown for each stockholder include all shares of
Common Stock obtainable upon conversion of shares of Series A Preferred
Stock together with shares subject to stock options exercisable within 60
days of the date of this Prospectus. Shares not outstanding but deemed
beneficially owned by virtue of the right of a person or group to acquire
them within 60 days are treated as outstanding only for purposes of
determining the number of and percent owned by such person or group.

(2) The number of shares of Common Stock deemed outstanding prior to these
Offerings consists of shares of Common Stock outstanding as of March
, 1997, and shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock. The number of shares of Common Stock
deemed outstanding after the Offerings includes an additional shares
of Common Stock being offered for sale by the Company in the Offerings and
assumes the redemption of shares of Series A Preferred Stock with
proceeds of the Offerings.

(3) The sole general partner of Warburg, Pincus Ventures, L.P. ("Warburg"), is
Warburg, Pincus & Co., a New York general partnership ("WP"). E.M.
Warburg, Pincus & Co., LLC, a New York limited liability company ("EMW
LLC"), manages Warburg. The members of EMW LLC are substantially the same
as the partners of WP. Lionel I. Pincus is the managing partner of WP and
the managing member of EMW LLC and may be deemed to control both WP and
EMW LLC. WP has a 15% interest in the profits of Warburg as the general
partner. Jeffrey A. Harris, Sidney Lapidus, Kewsong Lee and John L.
Vogelstein, directors of the Company, are Managing Directors and members
of EMW LLC and general partners of WP. As such, Messrs. Harris, Lapidus,
Lee and Vogelstein may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Securities Exchange Act of
1934) in an indeterminate portion of the shares beneficially owned by
Warburg. See Note 5 below.

(4) If the Underwriters exercise their overallotment options in full,
NationsBanc Investment Corp. will own shares of Common Stock, or %
of the shares of Common Stock outstanding.

(5) All of the shares indicated as owned by Messrs. Harris, Lapidus, Lee and
Vogelstein are owned directly by Warburg and are included because of the
affiliation of such persons with Warburg. Messrs. Harris, Lapidus, Lee and
Vogelstein disclaim "beneficial ownership" of these shares within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934. See Note
3 above.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company and certain
provisions of the Company's Amended and Restated Certificate of Incorporation
(the "Certificate") and Restated By-laws (the "By-laws") is a summary and is
qualified in its entirety by the provisions of the Certificate and By-laws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.

Upon completion of the Offerings, the authorized capital stock of the
Company will consist of (i) shares of Common Stock, par value $.01 per
share, of which shares will be outstanding and (ii) shares of preferred
stock, par value $1.00 per share ("Preferred Stock"), of which no shares will
be outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share in all matters to
be voted on by the stockholders of the Company 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. Subject to preferences that may be
applicable to any Preferred Stock outstanding at the time, 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 a liquidation, dissolution or winding up
of the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of the Company's 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 the Common Stock. All of the outstanding shares of Common Stock
are, and the shares offered by the Company in the Offerings will be, when
issued and paid for, 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 the Company may designate and issue in the future.

At present, there is no established trading market for the Common Stock.
Application will be made for the listing of the Common Stock on the NYSE.

PREFERRED STOCK

As of March , 1997, there were outstanding shares of Series A Preferred
Stock held of record by Warburg and NationsBanc Investment Corp. and certain
members of management. With a portion of the net proceeds of the Offerings,
the Company will redeem shares of Series A Preferred Stock; the remaining
shares of Series A Preferred Stock will be converted into shares of Common
Stock. The Board of Directors is authorized to issue Preferred Stock without
stockholder approval and upon such terms as the Board of Directors may
determine. The issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring or making a proposal to acquire, a majority of the outstanding
stock of the Company. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of holders of
Preferred Stock that may be issued in the future. For example, the issuance of
Preferred Stock could result in a class of securities outstanding that would
have preferences over the Common Stock with respect to dividends and in
liquidation and that could (upon conversion or otherwise) enjoy all of the
rights appurtenant to Common Stock. The Company has no present plans to issue
any shares of Preferred Stock.

LIMITATIONS ON DIRECTORS' LIABILITY

The Certificate and By-laws limit the liability of directors and officers to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, including gross negligence,
except liability for (i) breach of the directors' and officers' duty of
loyalty, (ii) acts or omissions not in good faith or which involve intentional

49
<PAGE>

misconduct or a knowing violation of the law, (iii) the unlawful payment of a
dividend or unlawful stock purchase or redemption and (iv) any transaction
from which the director or officer derives an improper personal benefit.
Delaware law does not permit a corporation to eliminate a director's or an
officer's duty of care, and this provision of the Company's Certificate has no
effect on the availability of equitable remedies, such as injunction or
rescission, based upon a director's breach of the duty of care. The Company
does not believe that these provisions will limit liability under state or
federal securities laws. However, the Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that
such a stockholder became an interested stockholder, unless (i) the
corporation has elected in its original certificate of incorporation not to be
governed by Section 203 (the Company did not make such an election), (ii) the
business combination was approved by the Board of Directors of the corporation
before the other party to the business combination became an interested
stockholder, (iii) upon consummation of the transaction that made it an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers
or held in employee benefit plans in which the employees do not have a
confidential right to tender or vote stock held by the plan) or (iv) the
business combination was approved by the Board of Directors of the corporation
and ratified by two-thirds of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the majority of the corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with affiliates and associates, owns (or, within three years prior, did own)
15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar of the Common Stock is .

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<PAGE>

DESCRIPTION OF CERTAIN INDEBTEDNESS

Set forth below are summary descriptions of the Company's Credit Facilities
and Notes. The summaries do not purport to be complete and are qualified in
their entirety by reference to such agreements. Copies of such agreements have
been filed as exhibits to the Registration Statement of which this Prospectus
is a part.

DESCRIPTION OF CREDIT FACILITIES

General. The Company has entered into a credit agreement with various
lenders (the "Lenders") and NationsBank, N.A., as Administrative Agent,
permitting the Company to borrow an aggregate principal amount of up to $230
million, consisting of a $130 million revolving credit facility (the
"Revolving Credit Facility") and $100 million term loan facility (the "Term
Loan Facility," and together with the Revolving Credit Facility, the "Credit
Facilities"). The Credit Facilities are guaranteed by all existing and future
domestic wholly owned subsidiaries of the Company (in this context, the
"Guarantors"). The Revolving Credit Facility includes a $20 million sub-limit
for standby and commercial letters of credit.

Security. Indebtedness of the Company under the Credit Facilities is secured
by, among other things, (i) 100% of the capital stock of the Company and each
of its domestic subsidiaries and (ii) 65% of the capital stock of each of its
foreign subsidiaries that are directly owned by the Company or by a wholly
owned domestic subsidiary of the Company. In addition, the Lenders hold a
first priority security interest in substantially all of the assets and
properties of the Company and the Guarantors. The Lenders will release all of
the collateral securing the Credit Facilities (i) if the Company's debt
ratings reach specified levels or (ii) if the Company receives at least $100
million net cash proceeds of an initial public offering and reaches and
maintains specified ratios of funded debt to EBITDA (as defined in the Credit
Facilities). The Company believes that the Lenders will release all of the
Collateral in connection with the Offerings.

Interest. Indebtedness under the Credit Facilities bears interest at a
floating rate based, at the Company's option, upon (i) LIBOR (the London
Interbank Offered Rate) for one, two, three or six months plus .875% or (ii)
the greater of the federal funds rate plus 0.5% or the prime rate. These rates
are subject to change based on the Company's 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 December 17, 2002,
subject to satisfaction of certain conditions on the date of any such
borrowing. No letter of credit shall have an expiration date that is more than
one year after the issuance date thereof or that is after the termination date
of the Revolving Credit Facility. The loan made under the Term Loan Facility
was made in a single drawing on December 17, 1996 and will mature on December
17, 2002. The Term Loan Facilities will be subject to quarterly amortization
of principal commencing on March 31, 1997, in an aggregate amount of $15
million in 1997, $15 million in 1998, $15 million in 1999, $15 million in
2000, $20 million in 2001 and $20 million in 2002. The Credit Facilities will
be permanently reduced with specified portions of the proceeds of asset sales.

Certain Fees. The Company is also required to pay to the Banks a commitment
fee equal to .25% per annum on the committed undrawn amount of the Revolving
Credit Facility, subject to adjustment based upon the Company's ratio of
funded debt to EBITDA and letter of credit fees equal to .875% per annum based
on the average daily maximum amount available to be drawn on letters of credit
from the date of issuance to the date of expiration, subject to adjustment
under similar circumstances.

Covenants. The Credit Facilities require the Company to meet two financial
tests quarterly, a Funded Debt to EBITDA Ratio and an EBITDA to Interest
Ratio, which tests become increasingly restrictive during the term of the
Credit Facilities. The Credit Facilities also contain covenants which limit,
subject to certain exceptions, (i) the incurrence of additional indebtedness;
(ii) capital expenditures in excess of an aggregate of $36 million in any
fiscal year with a $10 million one-year carry-over; (iii) sale/leaseback
transactions other than those for personal property in an amount of up to $5
million during the term of the Credit Facilities; (iv) declaration or

51
<PAGE>

payment of dividends and stock repurchases, provided that (A) subsequent to
the Company's initial public offering the Company may pay dividends in an
amount of $10 million so long as the Company's leverage ratio is less than or
equal to 2.5 to 1 and (B) net cash proceeds from a public equity offering of
the Company may be used to pay dividends or redeem stock within 60 days of
such public equity offering in such amounts as the Company and the Guarantors
may choose in their sole discretion; (v) loans to and investments in third
parties; (vi) changes to the character of the business of the Company or
Guarantors; (vii) most transactions with affiliates other than on terms
substantially as favorable as would be obtainable in a comparable arm's length
transaction; (viii) sales or leases of assets; (ix) acquisitions; (x) mergers
and consolidations, provided that any of the subsidiaries of the Company may
be merged into one another or into the Company; (xi) prepayments of
subordinated indebtedness; and (xii) liens and encumbrances and other matters
customarily restricted in such agreements. The Credit Facilities also require
the Company 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 in an amount equal to 40% or more of the outstanding
principal amount under the Credit Facilities; and to maintain insurance.

Events of Default. The Credit Facilities contain standard events of default,
including (i) defaults in the payment of principal or interest, (ii) defaults
in the observance of covenants contained in the Credit Facilities and related
documentation, (iii) events which cause the guarantees to cease to be in full
force and effect, (iv) certain bankruptcy events with respect to the Company
and certain of its subsidiaries, (v) cross defaults on at least $5 million of
other indebtedness of the Company or any of its subsidiaries, (vi) judgments,
orders or decrees involving $5 million or more, (vii) certain events related
to ERISA, (viii) events which cause the subordination provisions of certain
subordinated debt to cease to be in full force and effect, and (ix) a change
of control of the Company. After an initial public equity offering of the
Company, a change of control is deemed to occur if, among other events, any
person or group becomes the beneficial owner of 35% or more of the voting
power of the voting stock of the Company on a fully diluted basis and such
person or group is the beneficial owner of a greater percentage of the voting
power of the voting stock than the percentage beneficially owned by Warburg,
NationsBanc Investment Corp. and the Company's senior management.

DESCRIPTION OF THE NOTES

General. The Company issued $165,000,000 of 10-7/8% Senior Subordinated
Notes Due 2006 in connection with the Acquisition pursuant to an Indenture
among the Company, The Knoll Group, Inc., Knoll North America, Inc.,
Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as Guarantors, and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"). On July 15, 1996,
the Company consummated an offer (the "Exchange Offer") to exchange such notes
for the Notes registered under the Securities Act.

Principal, Maturity and Interest. The Notes are limited in aggregate
principal amount to $165 million and will mature on March 15, 2006. Interest
on the Notes accrues at 10-7/8% per annum and is payable semiannually in
arrears on March 15 and September 15 of each year. Interest is computed on the
basis of a 360-day year comprised of twelve 30-day months.

Note Guarantees. The Notes are unsecured senior subordinated general
obligations of the Company and are unconditionally guaranteed on a senior
subordinated and unsecured basis by each existing and future Domestic
Subsidiary of the Company (the existing and future Domestic Subsidiaries of
the Company are referred to collectively as the "Guarantors").

Subordination. The payment of principal of, premium, if any, and interest on
the Notes and the guarantees thereon are subordinated in right of payment, as
set forth in the Indenture, to the prior payment in full in cash of Senior
Indebtedness of the Company, including borrowings under the Credit Facilities,
whether outstanding on the date of the Indenture or thereafter incurred.

Redemption. The Notes are not redeemable at the Company's option prior to
March 15, 2001. Thereafter, the Notes are subject to redemption at the option
of the Company, in whole or in part, at the redemption prices

52
<PAGE>

(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on March 15 of the years indicated
below:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001......................................................... 105.438%
2002......................................................... 103.625%
2003......................................................... 101.812%
2004 and thereafter.......................................... 100.000%
</TABLE>

In addition, at any time on or before March 15, 1999, the Company may redeem
up to 35% of the original aggregate principal amount of the Notes with the net
proceeds of a public equity offering at a redemption price equal to 110% of
the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the date of redemption, provided that at least 65% of the original
aggregate principal amount of the Notes remains outstanding immediately after
such redemption. The Company intends to use a portion of the net proceeds of
the Offerings to redeem Notes in the aggregate principal amount of $57.8
million. See "Use of Proceeds." The Company is not required to make mandatory
redemption or sinking fund payments with respect to the Notes.

Repurchase at the Option of Holders. Each holder of Notes has the right to
require the Company to repurchase all or any part of such holder's Notes at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest thereon upon a change of control of the
Company. After consummation of the Offerings, a change of control for this
purpose means, among other things, (i) a person or group has become the
beneficial owner of 35% or more of the voting power of the voting stock of the
Company, or of such percentage of the voting power than that owned by the
Initial Stockholders (as defined in the Indenture), or (ii) during any period
of two consecutive calendar years, individuals elected to the Board of
Directors of the Company by the Initial Stockholders cease to be a majority of
the directors of the Company then in office.

Covenants. The Indenture restricts, among other things, the Company's
ability to incur additional indebtedness, pay dividends or make certain other
restricted payments, incur liens to secure pari passu or subordinated
indebtedness, engage in any sale and leaseback transaction, sell stock of
subsidiaries, sell assets, merge or consolidate with any other person, sell,
assign, transfer, lease, convey or otherwise dispose of substantially all of
the assets of the Company, enter into certain transactions with affiliates, or
incur indebtedness that is subordinate in right of payment to any senior
indebtedness (including indebtedness incurred under the Credit Facilities and
any other indebtedness permitted to be incurred under the Indenture) and
senior in right of payment to the Notes. The Indenture permits, under certain
circumstances, the Company's subsidiaries to be deemed unrestricted
subsidiaries and thus not subject to the restrictions of the Indenture.

Events of Default. The Indenture contains standard events of default,
including (i) defaults in the payment of principal, premium or interest, (ii)
defaults in the compliance with covenants contained in the Indenture, (iii)
cross defaults on more than $10 million of other indebtedness, (iv) failure to
pay more than $10 million of judgments, and (v) certain events of bankruptcy
with respect to the Company and certain of its subsidiaries.

53
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings there has been no market for the shares of the Common
Stock. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales
may occur, could adversely affect prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale; Potential for Adverse Effect on
Stock Price; Registration Rights."

Upon completion of the Offerings, the Company expects to have shares of
Common Stock outstanding, assuming no exercise of the Underwriters' over-
allotment options. Of these shares, the shares of Common Stock sold in the
Offerings will be freely tradable without restriction under the Securities
Act, except for any such shares which may be acquired by an "affiliate" of the
Company (an "Affiliate") as that term is defined in Rule 144 under the
Securities Act, which shares will be subject to the resale limitations of Rule
144.

An aggregate of approximately shares of 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. 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, on April 29, 1997, and an additional
shares will be eligible for sale under Rule 144 without restriction on
March 1, 1998.

In general, under Rule 144, if a period of at least one year has elapsed
since the later of the date the "restricted securities" were acquired from the
Company and the date they were acquired from an Affiliate, then the holder of
such restricted securities (including an Affiliate) is entitled to sell a
number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the Common Stock
(approximately shares immediately after the Offerings) or the average
weekly reported volume of trading of the Common Stock on the NYSE during the
four calendar weeks preceding such sale. The holder may only sell such shares
through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting restricted
shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one year holding period. Under Rule
144(k), if a period of at least two years has elapsed between the later of the
date restricted securities were acquired from the Company and the date they
were acquired from an Affiliate, as applicable, a holder of such restricted
securities who is not an Affiliate at the time of the sale and has not been an
Affiliate for at least three months prior to the sale would be entitled to
sell the shares immediately without regard to the volume limitations and other
conditions described above.

Subject to the lock-up agreements described below, any employee of the
Company who purchased his or her shares of Common Stock pursuant to a written
compensation plan or contract may be entitled to rely on the resale provisions
of Rule 701 under the Securities Act, which permits nonaffiliates to sell
their Rule 701 shares after 90 days after the initial public offering without
having to comply with the current public information, holding period, volume
limitation or notice provision of Rule 144 and permits affiliates to sell
their Rule 701 shares after 90 days after the initial public offering without
having to comply with Rule 144's holding period restrictions.

The Company intends to file as soon as practicable after the closing of this
offering a registration statement on Form S-8 under the Securities Act to
register approximately and shares of Common Stock reserved for issuance
under the 1996 Stock Incentive Plan and the 1997 Stock Incentive Plan,
respectively, including, in some cases, shares for which an exemption under
Rule 144 or Rule 701 would also be available, thus permitting the resale of
shares issued under the Stock Incentive Plans by non-affiliates in the public
market without

54
<PAGE>

restriction under the Securities Act. Such registration statement is expected
to become effective immediately upon filing, whereupon shares registered
thereunder will become eligible for sale in the public market, subject to
vesting and, in certain cases, subject to the lock-up agreements described
below. At the date of this Prospectus, options to purchase an aggregate of
shares of Common Stock are outstanding under the Stock Incentive Plans.

Notwithstanding the foregoing, in connection with the Offerings, the
Company, its executive officers and directors and all existing stockholders
have agreed, subject to certain exceptions, not to directly or indirectly (i)
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 for the sale of or otherwise dispose of or transfer any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock, whether now owned or thereafter acquired by the person executing
the agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition, or file a registration statement
under the Securities Act with respect to the foregoing or (ii) enter into any
swap or other agreement that transfers, in whole or in part, the economic
consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus, other than (i) the sale to the Underwriters of the shares of
Common Stock under the Underwriting Agreement, (ii) upon the exercise of
outstanding stock options or (iii) the issuance of options pursuant to the
Stock Option Plan.

The holders of approximately shares are entitled to certain registration
rights with respect to their shares. See "Certain Transactions--Stockholders
Agreement."

55
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is any
holder other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state, (iii) an estate, the income of
which is includable in gross income for United States federal income tax
purposes regardless of its source, or (iv) a trust if (a) a court within the
United States is able to exercise primary supervision over the administration
of the trust, and (b) one or more United States fiduciaries have the authority
to control all substantial decisions of the trust. This discussion is based on
current law and is for general information only. This discussion does not
address aspects of United States federal taxation other than income and estate
taxation and does not address all aspects of income and estate taxation, nor
does it consider any specific facts or circumstances that may apply to a
particular Non-U.S. Holder (including certain U.S. expatriates). ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE
UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX
CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). In addition to the
"substantial presence test" described in the immediately preceding sentence,
an alien may be treated as a resident alien if he (i) meets a lawful permanent
residence test (a so-called "green card" test) or (ii) elects to be treated as
a U.S. resident and meets the "substantial presence test" in the immediately
following year. Resident aliens are subject to U.S. federal tax as if they
were U.S. citizens.

DIVIDENDS

In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate (or a lower rate prescribed by an
applicable tax treaty) unless the dividends are either (i) effectively
connected with a trade or business carried on by the Non-U.S. Holder within
the United States, or (ii) if certain income tax treaties apply, attributable
to a permanent establishment in the United States maintained by the Non-U.S.
Holder. Dividends effectively connected with such a United States trade or
business or attributable to such a United States permanent establishment
generally will not be subject to United States withholding tax (if the Non-
U.S. Holder files certain forms, including Internal Revenue Service Form 4224,
with the payor of the dividend) and generally will be subject to United States
federal income tax on a net income basis, in the same manner as if the Non-
U.S. Holder were a resident of the United States. A Non-U.S. Holder that is a
corporation may be subject to an additional branch profits tax at a rate of
30% (or such lower rate as may be specified by an applicable treaty) on the
repatriation from the United States of its "effectively connected earnings and
profits," subject to certain adjustments. To determine the applicability of a
tax treaty providing for a lower rate of withholding, dividends paid to an
address in a foreign country are presumed under current Treasury regulations
to be paid to a resident of that country absent knowledge to the contrary.
Proposed Treasury regulations, which are proposed to be effective for payments
made after December 31, 1997, however, generally would require Non-U.S.
Holders to file an I.R.S. Form W-8 to obtain the benefit of any applicable tax
treaty providing for a lower rate of withholding tax on dividends. A Non-U.S.
Holder that is eligible for a reduced rate of U.S. withholding tax pursuant to
a tax treaty may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the Internal Revenue Service.

56
<PAGE>

SALE OF COMMON STOCK

In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares
of Common Stock unless (i) the gain either is effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United States
or, alternatively, if certain tax treaties apply, is attributable to a
permanent establishment in the United States maintained by the Non-U.S. Holder
(and, in either case, the branch profits tax discussed above may also apply if
the Non-U.S. Holder is a corporation); (ii) the Non-U.S. Holder is an
individual who holds shares of Common Stock as a capital asset and is present
in the United States for 183 days more in the taxable year of disposition, and
either (a) such individual has a "tax home" (as defined for United States
federal income tax purposes) in the United States (unless the gain from the
disposition is attributable to an office or other fixed place of business
maintained by such Non-U.S. Holder in a foreign country and such gain has been
subject to a foreign income tax equal to at least 10% of the gain derived from
such disposition), or (b) the gain is attributable to an office or other fixed
place of business maintained by such individual in the United States; or (iii)
the Company is or has been a United States real property holding corporation
(a "USRPHC") for United States federal income tax purposes (which the Company
does not believe that it is or is likely to become) at any time within the
shorter of the five year period preceding such disposition or such Non-U.S.
Holder's holding period. If the Company were or were to become a USRPHC at any
time during this period, gains realized upon a disposition of Common Stock by
a Non-U.S. Holder which did not directly or indirectly own more than 5% of the
Common Stock during this period generally would not be subject to United
States federal income tax, provided that the Common Stock is regularly traded
on an established securities market.

ESTATE TAX

Common Stock owned or treated as owned by an individual who is not a citizen
or resident (as defined for United States federal estate tax purposes) of the
United States at the time of death will be includable in the individual's
gross estate for United States federal estate tax purposes (unless an
applicable estate tax treaty provides otherwise), and therefore may be subject
to United States federal estate tax.

BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS

The Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of this information also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides or is established.

United States backup withholding tax (which generally is imposed at the rate
of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting requirements (other than those discussed above under
"Dividends") generally will not apply to dividends paid on Common Stock to a
Non-U.S. Holder at an address outside the United States. Backup withholding
and information reporting generally will apply, however, to dividends paid on
shares of Common Stock to a Non-U.S. Holder at an address in the United
States, if such holder fails to establish an exemption or to provide certain
other information to the payor.

The payment of proceeds from the disposition of Common Stock or through a
United States office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder or otherwise establishes
an exemption. The payment of proceeds from the disposition of Common Stock to
or through a non-U.S. office of a non-U.S. broker generally will not be
subject to backup withholding and information reporting except as noted below.
In the case of proceeds from a disposition of Common Stock paid to or through
a non-U.S. office of a broker that is (i) a United States person, (ii) a
"controlled foreign corporation" for United States federal income tax purposes
or (iii) a foreign person 50% or more of whose gross income from certain
periods is effectively connected with a

57
<PAGE>

United States trade or business, information reporting (but not backup
withholding) will apply unless the broker has documentary evidence in its
files that the owner is a Non-U.S. Holder (and the broker has not actual
knowledge to the contrary). Proposed regulations state that backup withholding
will not apply to such payments unless the broker has actual knowledge that
the payee is a U.S. person.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded
or credited against the Non-U.S. Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service.

58
<PAGE>

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Credit
Suisse First Boston Corporation, Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated are acting as representatives (the "U.S. Representatives") of
each of the Underwriters named below (the "U.S. Underwriters"). Subject to the
terms and conditions set forth in a U.S. purchase agreement (the "U.S.
Purchase Agreement") among the Company, the Selling Stockholder and the U.S.
Underwriters, and concurrently with the sale of shares of Common Stock to
the International Managers (as defined below), the Company has agreed to sell
to the U.S. Underwriters, and each of the U.S. Underwriters severally has
agreed to purchase from the Company, the number of shares of Common Stock set
forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
OF
U.S. UNDERWRITER SHARES
---------------- ------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................
Credit Suisse First Boston Corporation................................
Goldman, Sachs & Co. .................................................
Morgan Stanley & Co. Incorporated.....................................
----
Total............................................................
====
</TABLE>

The Company and the Selling Stockholder have also entered into an
international purchase agreement (the "International Purchase Agreement") with
certain underwriters outside the United States and Canada (the "International
Managers" and, together with the U.S. Underwriters, the "Underwriters") for
whom Merrill Lynch International, Credit Suisse First Boston (Europe) Limited,
Goldman Sachs International and Morgan Stanley & Co. International Limited are
acting as lead managers (the "Lead Managers"). Subject to the terms and
conditions set forth in the International Purchase Agreement, and concurrently
with the sale of shares of Common Stock to the U.S. Underwriters pursuant
to the U.S. Purchase Agreement, the Company has agreed to sell to the
International Managers, and the International Managers severally have agreed
to purchase from the Company, an aggregate of shares of Common Stock. The
initial public offering price per share and the total underwriting discount
per share of Common Stock are identical under the U.S. Purchase Agreement and
the International Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. The closings with respect to the sale of
shares of Common Stock to be purchased by the U.S. Underwriters and the
International Managers are conditioned upon one another.

The U.S. Representatives have advised the Company and the Selling
Stockholder that the U.S. Underwriters propose initially to offer the shares
of Common Stock to the public at the initial public offering price set forth
on the cover page of this Prospectus, and to certain dealers at such price
less a concession not in excess of $ per share of Common Stock. The U.S.
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.

The Company and the Selling Stockholder have granted an option to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. If the overallotment option is exercised in
full, the Selling Stockholder will sell an aggregate of additional shares
of Common Stock. The U.S. Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby.
To the extent that the U.S.

59
<PAGE>

Underwriters exercise this option, each U.S. Underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares of
Common Stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. The Company and the Selling Stockholder also have
granted an option to the International Managers, exercisable for 30 days after
the date of this Prospectus, to purchase up to an aggregate of additional
shares of Common Stock to cover over-allotments, if any, on terms similar to
those granted to the U.S. Underwriters.

At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to 5% of the shares to be sold and
offered hereby by the Company to certain dealers of the Company. The number of
shares of Common Stock available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares which are not orally confirmed for purchase within one day of the
pricing of the Offerings will be offered by the Underwriters to the general
public on the same terms as the other shares offered hereby.

The Company, its executive officers and directors and all existing
stockholders have agreed, subject to certain exceptions, not to directly or
indirectly (i) 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 for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing
the agreement thereafter acquires the power of disposition, or file a
registration statement under the Securities Act with respect to the foregoing
or (ii) enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of the Common Stock whether any
such swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch on behalf of the Underwriters for a period of 180 days after the date of
this Prospectus. See "Shares Eligible for Future Sale."

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the U.S. Underwriters and the International Managers are permitted
to sell shares of Common Stock to each other for purposes of resale at the
initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. or Canadian persons, except in
the case of transactions pursuant to the Intersyndicate Agreement.

Prior to the Offerings, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company, the Selling Stockholder and the U.S.
Representatives and the Lead Managers. Among the factors considered in
determining the initial public offering price, in addition to prevailing
market conditions, are price-earnings ratios of publicly traded companies that
the U.S. Representatives believe to be comparable to the Company, certain
financial information of the Company, the history of, and the prospects for,
the Company and the industry in which it competes, and an assessment of the
Company's management, its past and present operations, the prospects for, and
timing of, future revenues of the Company, the present state of the Company's
development, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offerings at or above the initial public offering price.

Application will be made for listing of the Common Stock on the New York
Stock Exchange, subject to notice of official issuance, under the symbol
"KNL." In order to meet the requirements for listing of the Common Stock on
that exchange, the U.S. Underwriters and International Managers have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial
owners.

60
<PAGE>

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

The Company and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including certain liabilities under the Securities Act.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in
the open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.

The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce
the Underwriters' short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offerings.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Willkie Farr &
Gallagher, New York, New York. Certain legal matters relating to the Offerings
will be passed upon for the Underwriters by Fried, Frank, Harris, Shriver &
Jacobson (a partnership including professional corporations), New York, New
York.

EXPERTS

The consolidated financial statements of Knoll, Inc. at December 31, 1996
and for the ten month period then ended and the consolidated financial
statements of the Predecessor for the two month period ended February 29,
1996, appearing in this Prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent accountants, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing. The consolidated financial statements of Predecessor at December 31,
1995 and for each of the two years in the period then ended appearing in this
Prospectus and Registration Statement have been audited by Price Waterhouse
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon
authority of such firm as experts in accounting and auditing.

61
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement in accordance with the rules and regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto and the financial statements, notes and
schedule filed as a part thereof. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and, in each instance, reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's Regional Offices in New York (Seven World Trade
Center, New York, New York 10007) and Chicago (Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661). Copies of such material can
be obtained from the public reference section of the Commission at prescribed
rates by writing to the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Such materials can also be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005 or on the Commission's site on the Internet
at http://www.sec.gov.

62
<PAGE>

KNOLL, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
HISTORICAL PAGE
----
Reports of Independent Auditors........................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995 (Predecessor)... F-4
Consolidated Statements of Operations for the Ten Months Ended December
31, 1996, the Two Months Ended February 29, 1996 (Predecessor) and the
Years Ended December 31, 1995 and 1994 (Predecessor)..................... F-5
Consolidated Statements of Cash Flows for the Ten Months Ended December
31, 1996, the Two Months Ended February 29, 1996 (Predecessor) and the
Years Ended December 31, 1995 and 1994 (Predecessor)..................... F-6
Consolidated Statements of Changes in Stockholders' Equity for the Ten
Months Ended December 31, 1996, the Two Months Ended February 29, 1996
(Predecessor) and the Years Ended December 31, 1995 and 1994
(Predecessor)............................................................ F-7
Notes to the Consolidated Financial Statements............................ F-8
PRO FORMA
Unaudited Pro Forma Financial Information................................. P-1
Unaudited Pro Forma Consolidated Income Statement for the Year Ended
December 31, 1996........................................................ P-2
Notes to Unaudited Pro Forma Consolidated Income Statement................ P-3
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Knoll, Inc.

We have audited the accompanying consolidated balance sheet of Knoll, Inc.
as of December 31, 1996 and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the ten month period ended
December 31, 1996 (post-acquisition period), and the consolidated statements
of operations, changes in stockholders' equity and cash flows of The Knoll
Group, Inc. (Predecessor) for the two month period ended February 29, 1996
(pre-acquisition period). Our audits also included the financial statement
schedule (as it pertains to 1996) as listed in the Index at Item 16(b). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 1996 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Knoll, Inc. at December 31, 1996, and the consolidated results of its
operations and its cash flows for the post-acquisition period in conformity
with generally accepted accounting principles. Further, in our opinion, the
aforementioned Predecessor consolidated financial statements present fairly,
in all material respects, the consolidated results of operations and cash
flows of the Knoll Group, Inc. for the pre-acquisition period in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
1996 financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 14, 1997

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Knoll, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, cash flows and changes in stockholders'
equity present fairly, in all material respects, the financial position of The
Knoll Group, Inc., an organizational unit of Westinghouse Electric Corporation
(Westinghouse), at December 31, 1995, and the results of their operations,
cash flows and changes in stockholders' equity for each of the two years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Westinghouse's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance that 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

The Knoll Group, Inc. is a business unit of Westinghouse for each of the two
years ended December 31, 1995 and, as disclosed in Note 4 to the accompanying
financial statements, engaged in various transactions and relationships with
other Westinghouse entities.

/s/ Price Waterhouse LLP

Pittsburgh, Pennsylvania
January 15, 1996

F-3
<PAGE>

KNOLL, INC.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
THE KNOLL GROUP, INC.
(PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ---------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 8,804 $ 1,569
Customer receivables, net................. 111,166 114,592
Inventories............................... 57,811 59,643
Deferred income taxes..................... 17,474 18,273
Prepaid and other current assets.......... 7,424 8,465
-------- --------
Total current assets.................... 202,679 202,542
Property, plant, and equipment.............. 176,218 164,633
Intangible assets........................... 286,940 240,772
Prepaid pension cost........................ -- 45,161
Other noncurrent assets..................... 9,875 3,602
-------- --------
Total Assets............................ $675,712 $656,710
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt........................... $ -- $ 1,496
Current maturities of long-term debt...... 23,265 3,287
Accounts payable--trade................... 50,250 45,850
Accounts payable--related parties......... -- 413
Income taxes payable...................... 388 13,973
Accrued restructuring costs............... 1,979 10,868
Other current liabilities................. 62,043 43,957
-------- --------
Total current liabilities............... 137,925 119,844
Long-term debt.............................. 330,889 251
Deferred income taxes....................... 1,931 29,574
Postretirement benefits obligation.......... 15,873 20,593
Other noncurrent liabilities................ 11,290 5,997
-------- --------
Total liabilities....................... 497,908 176,259
-------- --------
Stockholders' equity:
Preferred stock; $1.00 par value;
authorized 3,000,000 shares, issued and
outstanding 1,602,997 shares of Series A
12% Participating Convertible Preferred
Stock (liquidation preference of
$160,299,700)............................ 1,603 --
Common stock, $.01 par value; authorized
24,000,000 shares; issued and outstanding
2,322,500 shares......................... 23 --
Additional paid-in-capital................ 158,906 --
Unearned stock grant compensation......... (96) --
Retained earnings......................... 16,836 --
Parent company investment................. -- 503,317
Cumulative foreign currency translation
adjustment............................... 532 (22,866)
-------- --------
Total stockholders' equity.............. 177,804 480,451
-------- --------
Total Liabilities and Stockholders'
Equity................................. $675,712 $656,710
======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE>

KNOLL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>

KNOLL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THE KNOLL
GROUP, INC.
(PREDECESSOR) THE KNOLL GROUP, INC.
TEN MONTHS TWO MONTHS (PREDECESSOR)
ENDED ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, FEBRUARY 29, -------------------------
1996 1996 1995 1994
------------ ------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss)....... $ 16,836 $ (24,088) $ 29,332 $ (59,773)
Noncash items included
in income:
Depreciation.......... 19,251 3,150 19,006 21,478
Amortization of
intangible assets.... 7,881 1,167 6,993 7,006
Loss on disposal of
assets............... 87 -- -- --
Extraordinary loss.... 8,542 -- -- --
Noncash restructuring
charges.............. -- -- -- 9,367
Foreign currency
transaction loss..... 354 -- -- --
Changes in assets and
liabilities:
Customer
receivables........ (5,110) 8,798 (5,850) (11,269)
Inventories......... 1,416 671 (76) (9,619)
Accounts payable.... 15,870 (15,292) (7,005) 18,533
Current and deferred
income taxes....... (3,961) (16,627) 13,185 2,186
Other current
assets............. 747 2,283 453 (1,186)
Other current
liabilities........ 18,372 (7,190) (23,177) 16,951
Other noncurrent
assets and
liabilities........ 9,217 (6,911) 19,003 2,542
--------- --------- ----------- ------------
Cash provided by (used
in) operating
activities............. 89,502 (54,039) 51,864 (3,784)
--------- --------- ----------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Capital expenditures.... (15,255) (2,296) (19,334) (20,157)
Proceeds from sale of
assets................. 218 -- 316 332
--------- --------- ----------- ------------
Cash used in investing
activities............. (15,037) (2,296) (19,018) (19,825)
--------- --------- ----------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of short-term
debt, net.............. (1,483) (3,805) (20,961) (2,758)
Proceeds from long-term
debt................... 190,000 -- -- --
Repayment of long-term
debt................... (262,130) -- (8,913) (2,753)
Additional equity
contribution........... 400 -- -- --
Net receipts from
(payments to) parent
company................ -- 60,848 (6,900) 33,836
--------- --------- ----------- ------------
Cash provided by (used
in) financing
activities............. (73,213) 57,043 (36,774) 28,325
--------- --------- ----------- ------------
Effect of exchange rate
changes on cash and
cash equivalents....... 18 58 13 (1,996)
--------- --------- ----------- ------------
Increase (decrease) in
cash and cash
equivalents............ 1,270 766 (3,915) 2,720
Cash and cash
equivalents at
beginning of period.... 7,534 1,569 5,484 2,764
--------- --------- ----------- ------------
Cash and cash
equivalents at end of
period................. $ 8,804 $ 2,335 $ 1,569 $ 5,484
========= ========= =========== ============
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE>

KNOLL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
THE KNOLL
GROUP, INC.
(PREDECESSOR) THE KNOLL GROUP, INC.
TEN MONTHS TWO MONTHS (PREDECESSOR)
ENDED ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, FEBRUARY 29, ------------------------
1996 1996 1995 1994
------------ ------------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
PREFERRED STOCK
Balance at beginning of
period
(1,599,000 shares)...... $ 1,599 $ -- $ -- $ --
Shares issued (3,997
shares)................. 4 -- -- --
--------- --------- ----------- -----------
Balance at end of
period.................. 1,603 -- -- --
--------- --------- ----------- -----------
COMMON STOCK
Balance at beginning of
period
(1,000,000 shares)...... 10 -- -- --
Shares issued under the
Stock Incentive Plan
(1,320,000)............. 13 -- -- --
--------- --------- ----------- -----------
Balance at end of
period.................. 23 -- -- --
--------- --------- ----------- -----------
ADDITIONAL PAID-IN-
CAPITAL
Balance at beginning of
period.................. 158,391 -- -- --
Shares issued............ 396 -- -- --
Shares issued under the
Stock Incentive Plan.... 119 -- -- --
--------- --------- ----------- -----------
Balance at end of
period.................. 158,906 -- -- --
--------- --------- ----------- -----------
UNEARNED STOCK GRANT
COMPENSATION
Balance at beginning of
period.................. -- -- -- --
Shares issued under the
Stock Incentive Plan.... (132) -- -- --
Earned stock grant
compensation............ 36 -- -- --
--------- --------- ----------- -----------
Balance at end of
period.................. (96) -- -- --
--------- --------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of
period.................. -- -- -- --
Net income............... 16,836 -- -- --
--------- --------- ----------- -----------
Balance at end of
period.................. 16,836 -- -- --
--------- --------- ----------- -----------
PARENT COMPANY INVESTMENT
Balance at beginning of
period.................. -- 503,317 480,885 506,822
Net income (loss)........ -- (24,088) 29,332 (59,773)
Capital expenditures..... -- 2,296 19,334 20,157
Proceeds from asset
sales................... -- -- (316) (332)
Net interunit
transactions............ -- 58,552 (25,918) 14,011
--------- --------- ----------- -----------
Balance at end of
period.................. -- 540,077 503,317 480,885
--------- --------- ----------- -----------
CUMULATIVE FOREIGN
CURRENCY TRANSLATION
ADJUSTMENT
Balance at beginning of
period.................. -- (22,866) (22,879) (20,883)
Translation adjustment... 532 58 13 (1,996)
--------- --------- ----------- -----------
Balance at end of
period.................. 532 (22,808) (22,866) (22,879)
--------- --------- ----------- -----------
TOTAL STOCKHOLDERS'
EQUITY.................. $ 177,804 $ 517,269 $ 480,451 $ 458,006
========= ========= =========== ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-7
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

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.

The Company was formed on February 29, 1996 as a result of the acquisition
of the office furniture business unit (The Knoll Group, Inc. and related
entities) of Westinghouse Electric Corporation (Westinghouse). See Note 3
for further discussion of the acquisition.

The accompanying consolidated financial statements present the financial
position of the Company as of December 31, 1996 and of the Predecessor as
of December 31, 1995, the results of operations, cash flows, and changes in
stockholders' equity of the Company for the ten month period ended December
31, 1996, and the results of operations, cash flows, and changes in
stockholders' equity of the Predecessor for the two month period ended
February 29, 1996 and the years ended December 31, 1995 and 1994.

Since the Predecessor was a business unit of Westinghouse, the accompanying
financial statements of the Predecessor include estimates for certain
expenses incurred by the parent on its behalf. These expenses generally
include, but are not limited to, officer and employee salaries, rent,
depreciation, accounting and legal services, other selling, general and
administrative expenses, and other such expenses.

The results of the Predecessor's domestic operations were included in the
consolidated United States federal income tax return of Westinghouse, while
the results of its operations in Canada and Europe were reported separately
to their respective taxing jurisdictions. The income tax information in the
accompanying financial statements of the Predecessor is presented as if the
Predecessor had not been included in the consolidated tax returns of
Westinghouse or other affiliates (i.e. on a stand-alone basis). The
recognition and measurement of income tax expense and deferred income taxes
required certain assumptions, allocations, and significant estimates that
management believes are reasonable to measure the tax consequences as if
the Predecessor were a stand-alone taxpayer.

The operating 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.

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 consolidated financial statements of the Predecessor include the
accounts of The Knoll Group, Inc. and related entities after elimination of
intercompany transactions and balances except for those with other units of
Westinghouse as described in Note 4.

Revenue Recognition

Sales are recognized as products are shipped and services are rendered.

F-8
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand and investments with
original maturities of three months or less.

Inventories

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

Property, Plant, Equipment, and Depreciation

Property, plant, and equipment are recorded at cost. Depreciation of plant
and equipment 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, patents and 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. Goodwill and patents and trademarks are amortized under
the straight-line method over 40 years, while deferred financing fees are
amortized over the life of the respective debt.

Management reviews the carrying value of goodwill and other intangibles on
an ongoing basis. When factors indicate that an intangible asset may be
impaired, management uses an estimate of the undiscounted future cash flows
over the remaining life of the asset in measuring whether the intangible
asset is recoverable. If such an analysis indicates that impairment has in
fact occurred, the book value of the intangible asset is written down to
its estimated fair value.

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.

As discussed in Note 1, the U.S. operations of the Predecessor for the
first two months of 1996 and for the years ended December 31, 1995 and 1994
were included in a consolidated U.S. income tax return of Westinghouse and
its subsidiaries. Income taxes are provided in the accompanying financial
statements as if the Predecessor had filed a separate tax return.

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 current rates. The resulting translation
adjustments are accumulated as a separate component of stockholders'
equity.

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

F-9
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock-Based Compensation

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," encourages entities to record compensation
expense for stock-based employee compensation plans at fair value but
provides the option of measuring compensation expense using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," the former standard. The
Company has elected to account for stock-based compensation under the
former standard. Accordingly, compensation expense for restricted stock
awards and stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock. For those entities which
choose to measure compensation expense under the former standard, SFAS No.
123 requires supplemental disclosure to show the effects on operations as
if the new measurement criteria had been used. If the new measurement
criteria under SFAS No. 123 had been adopted, the Company's results of
operations would not differ from those reflected in the historical
financial statements.

Use of Estimates

The preparation of the consolidated financial statements in conformity with
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 future results may differ from
such estimates.

Reclassifications

Certain amounts in the accompanying financial statements of the Predecessor
have been reclassified to conform with the Company's 1996 classifications.

3. ACQUISITION

On December 20, 1995, Westinghouse entered into a Stock Purchase Agreement
(the Agreement) with T.K.G. Acquisition Corp. (TKG), a subsidiary of
Warburg, Pincus Ventures, L.P. Under the terms of the Agreement, TKG
acquired all of the outstanding capital stock of The Knoll Group, Inc. and
related entities on February 29, 1996 through its wholly owned subsidiary
T.K.G. Acquisition Sub, Inc. Immediately following this transaction, T.K.G.
Acquisition Sub, Inc. and The Knoll Group, Inc. merged with and into Knoll
North America, Inc., the principal U.S. operating company of The Knoll
Group, Inc. Knoll North America, Inc. changed its name to Knoll, Inc. at
the time of the merger.

The cost of the acquisition was $579,801,000. TKG funded the acquisition
through proceeds of $160,000,000 received from the sale of TKG capital
stock, $165,000,000 received from an offering of 10.875% senior
subordinated notes due 2006, and $260,000,000 in borrowings under senior
bank credit facilities. T.K.G. Acquisition Sub, Inc. executed the offering
of the senior notes and borrowings under the credit facilities. As such,
upon the acquisition and subsequent merger, the senior notes and credit
facility borrowings became obligations of Knoll, Inc. On March 14, 1997,
Knoll, Inc. merged with and into TKG. TKG then changed its name to Knoll,
Inc.

The acquisition was accounted for using the purchase method of accounting.
Accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based upon fair market value at the date of
acquisition. The excess of the consideration paid over the estimated fair
value of the net assets

F-10
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

acquired, totaling $66,850,000, has been recorded as goodwill and is being
amortized on a straight-line basis over 40 years. The purchase price
allocation is summarized as follows (in thousands):

<TABLE>
<S> <C>
Net working capital............................................. $101,446
Property, plant and equipment................................... 180,074
Goodwill........................................................ 66,850
Other intangible assets......................................... 239,557
Other noncurrent liabilities, net............................... (8,126)
--------
$579,801
========
</TABLE>

The following table sets forth unaudited pro forma consolidated results of
operations assuming that the acquisition had taken place at the beginning
of the years presented:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Sales.......................................... $ 651,766 $ 620,892
Cost of sales.................................. 419,908 425,327
----------- -----------
Gross profit................................... 231,858 195,565
Selling, general and administrative expenses... 153,388 142,582
Allocated corporate expenses................... -- 4,000
----------- -----------
Operating income............................... 78,470 48,983
Interest expense............................... 40,030 40,945
Other income (expense), net.................... 151 (1,597)
----------- -----------
Income before income taxes and extraordinary
item.......................................... 38,591 6,441
Income taxes................................... 16,848 2,705
----------- -----------
Income before extraordinary item............... 21,743 3,736
Extraordinary loss on early extinguishment of
debt, net of taxes............................ 5,159 --
----------- -----------
Net income..................................... $ 16,584 $ 3,736
=========== ===========
</TABLE>

These pro forma results of operations have been prepared for comparative
purposes only and include certain adjustments, such as additional
depreciation expense as a result of a step-up in the basis of fixed assets,
additional selling, general and administrative costs for services
previously provided by Westinghouse, additional amortization expense as a
result of goodwill and other intangible assets, increased interest expense
as a result of the debt assumed to finance the acquisition, elimination of
incentive compensation under Westinghouse's long-term incentive plans which
became payable, and for which amounts payable were established, as a result
of the acquisition, and related income tax effects. Such results do not
purport to be indicative of the actual results which would have occurred
had the acquisition been consummated at the beginning of each year
presented, nor do they purport to be indicative of results that will be
obtained in the future.

4. RELATED PARTY TRANSACTIONS OF THE PREDECESSOR

The Predecessor purchased products from and sold products to other
Westinghouse operations. The Predecessor also purchased certain services
from Westinghouse, including liability, property, and workers' compensation
insurance. These transactions are discussed in further detail below.

F-11
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cash and Cash Equivalents

The Predecessor utilized Westinghouse's centralized cash management
services in North America. Accounts receivable were collected and cash was
invested at a central location. Additionally, disbursements were funded
centrally on demand. As a result, the Predecessor maintained a low cash
balance on its books, and received charges and credits against the parent
company's investment for cash used and collected through a central
clearinghouse arrangement.

Intercompany Purchases and Payables

The Predecessor purchased products and services from other Westinghouse
operations. For intercompany purchases in the U.S., the Predecessor used
the central clearinghouse arrangement through which intercompany
transactions were settled at the transfer date.

Accounts payable to related parties at December 31, 1995 represents
balances payable for purchases from units of Westinghouse that do not
participate in the central clearinghouse arrangement.

Intercompany Sales and Receivables

The Predecessor sold products to various Westinghouse operations. These
transactions were settled immediately through the central clearinghouse or
the internal customer was invoiced and an intercompany receivable was
established.

Corporate Services

The Predecessor used, and was charged directly for, certain services that
Westinghouse provided to its business units. These services generally
included information systems support, certain accounting functions such as
transaction processing, legal, environmental affairs and human resources
consulting and compliance support.

Westinghouse centrally developed, negotiated, and administered the
Predecessor's insurance programs. The insurance included broad all-risk
coverage for real and personal property and third-party liability coverage,
employer's liability coverage, automobile liability, general and product
liability, and other standard liability coverage. The Predecessor also
maintained a program of self-insurance for workers' compensation in the
United States through Westinghouse. Westinghouse charged its business units
for all of the centrally administered insurance programs based in part on
claims history. Specific liabilities for general and product liability,
automobile liability and workers' compensation claims are presented in the
Predecessor's consolidated financial statements.

All of the charges for the corporate services described above are included
in the costs of the Predecessor's operations in the consolidated statements
of operations. Such charges were based on costs which directly related to
the Predecessor or on a pro rata portion of Westinghouse's total costs for
the services provided. These costs were allocated to the Predecessor on a
basis that management believes is reasonable. However, management believes
that it is possible that the costs of these transactions may differ from
those that would result from transactions among unrelated parties. For the
two month period ended February 29, 1996 and the years ended December 31,
1995, and 1994, charges related to corporate services above totaled
$510,000, $3,304,000, and $4,172,000, respectively.

The Predecessor also purchased other Westinghouse internally-provided
services as necessary including telecommunications, printing, productivity
and quality consulting, and other services.

F-12
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Allocated Corporate Expenses

Westinghouse allocated a certain portion of its corporate expenses to its
business units. These allocated costs include Westinghouse executive
management and corporate overhead; corporate legal, environmental, audit,
treasury and tax services, pension charges related to corporate functions,
and other corporate support and executive costs. For the year ended
December 31, 1995, allocated corporate expenses also include $4,000,000 of
incentive compensation payable to the Predecessor's executives under
Westinghouse long-term incentive plans.

These corporate expenses were allocated primarily based on sales with the
exception of the incentive compensation allocation. This methodology of
allocating corporate expenses to business units is reasonable and
consistent, but such allocations are not necessarily indicative of actual
costs. On an annual basis, it was not practical for Westinghouse management
to estimate the level of expenses that might have been incurred had the
Predecessor operated as a separate stand-alone entity.

Westinghouse did not charge its business units for the carrying costs
related to its investment in such units (parent company investment).
Therefore, the Predecessor's results of operations for each of the periods
presented do not include any allocated interest charges from Westinghouse.

Westinghouse Long-Term Incentive Compensation

Certain key executives of the Predecessor were participants in a long-term
incentive compensation plan established by Westinghouse. The plan provided
for payment of awards at the end of a five year period based on the
achievement of certain performance goals set by Westinghouse's Board of
Directors. As a result of the consummation of the acquisition discussed in
Note 3, the payment of awards was accelerated pursuant to the terms of the
plan, resulting in a charge to operations of $47,900,000 for the two months
ended February 29, 1996.

Parent Company Investment

Since the Predecessor was an operating unit of Westinghouse and was not a
distinct legal entity, there were no customary equity and capital accounts
recorded on the consolidated balance sheet. Instead, parent company
investment was maintained by the Predecessor and Westinghouse to account
for interunit transactions described above.

5. CUSTOMER RECEIVABLES

Customer receivables are presented net of an allowance for doubtful
accounts of $5,713,000 and $5,782,000 at December 31, 1996 and 1995,
respectively. Management performs ongoing credit evaluations of its
customers and generally does not require collateral. As of December 31,
1996 and 1995, the U.S. government represented approximately 17.3% and
16.4%, respectively, of gross customer receivables.

F-13
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. INVENTORIES

<TABLE>
<CAPTION>
THE KNOLL GROUP,
INC. (PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................. $34,147 $34,857
Work in process........................... 7,508 9,829
Finished goods............................ 16,156 14,957
------- -------
Inventories............................... $57,811 $59,643
======= =======
</TABLE>

7. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
THE KNOLL GROUP,
INC. (PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Land and buildings....................... $ 61,844 $ 100,197
Machinery and equipment.................. 122,573 180,057
Construction in progress................. 11,066 10,473
-------- ---------
Property, plant and equipment, at cost... 195,483 290,727
Accumulated depreciation................. (19,265) (126,094)
-------- ---------
Property, plant and equipment, net....... $176,218 $ 164,633
======== =========
</TABLE>

8. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
THE KNOLL GROUP,
INC. (PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.................................. $ 62,627 $277,833
Patents and trademarks.................... 219,900 623
Deferred financing fees................... 11,226 --
-------- --------
293,753 278,456
Accumulated amortization.................. (6,813) (37,684)
-------- --------
Intangible assets, net.................... $286,940 $240,772
======== ========
</TABLE>

9. OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
THE KNOLL GROUP,
INC. (PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Accrued employee compensation............. $27,881 $19,486
Accrued product warranty.................. 7,173 6,763
Other..................................... 26,989 17,708
------- -------
Other current liabilities................. $62,043 $43,957
======= =======
</TABLE>

F-14
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. INDEBTEDNESS

The Company did not have any short-term borrowings outstanding as of
December 31, 1996. As of December 31, 1995, the Predecessor had outstanding
short-term European bank loans totaling $1,496,000. The composite and
weighted average interest rates on these borrowings was 11.00% and 10.356%,
respectively.

The Company's and the Predecessor's long-term debt is summarized as
follows:

<TABLE>
<CAPTION>
THE KNOLL GROUP, INC.
(PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ---------------------
(IN THOUSANDS)
<S> <C> <C>
10.875% Senior subordinated notes,
due 2006............................ $165,000 $ --
Term loans, variable rate (6.515% at
December 31, 1996) due through
2002................................ 100,000 --
Revolving loans, variable rate
(6.515% at December 31, 1996) due
2002................................ 88,000 --
7.00% Urban Redevelopment Authority
Grant, due 1996..................... -- 2,055
Other................................ 1,154 1,483
-------- ------
354,154 3,538
Less current maturities.............. (23,265) (3,287)
-------- ------
Long-term debt....................... $330,889 $ 251
======== ======
</TABLE>

Senior Subordinated Notes

The Company assumed the obligations under the 10.875% senior subordinated
notes as a direct result of the acquisition and merger which occurred on
February 29, 1996, as discussed in Note 3. The notes are unsecured and are
guaranteed by each existing and future wholly owned domestic subsidiary of
Knoll, Inc. However, if the Company is unable to satisfy all or any portion
of its obligations with respect to the notes, it is unlikely that the
guarantors will be able to pay all or any portion of such unsatisfied
obligations. There are no sinking fund requirements related to these notes,
and they are not redeemable at the Company's option prior to March 15,
2001. At such date, the notes are redeemable at 105.438% of principal
amount, and thereafter at an annually declining premium over par until
March 15, 2004 when they are redeemable at par. Notwithstanding the
foregoing, at any time on or before March 15, 1999, the Company may, under
certain conditions, redeem up to 35% of the original aggregate principal
amount of the notes at a redemption price of 110% of principal amount plus
interest with net proceeds from a public equity offering made by the
Company. The indenture limits the payment of dividends and incurrence of
indebtedness and includes certain other restrictions and limitations that
are customary with subordinated indebtedness of this type.

Term and Revolving Loans

On December 17, 1996, the Company entered into a $230,000,000 credit
agreement with a group of financial institutions that provides for a six
year term loan facility in the aggregate principal amount of $100,000,000
and a six year revolving credit facility in an aggregate amount of up to
$130,000,000. In addition, the revolving credit facility contains a letter
of credit subfacility which allows for the issuance of

F-15
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

up to $20,000,000 in letters of credit. The amount available for borrowing
under the revolving credit facility is reduced by the total outstanding
letters of credit. This credit agreement expires in December 2002.

The proceeds of the facilities were used to refinance the Company's debt
under the previously existing senior bank credit facilities that was
assumed as a result of the acquisition, as discussed in Note 3, and for
working capital and general corporate purposes. The refinancing resulted in
an extraordinary charge of $8,542,000 on a pre-tax basis, $5,159,000 on an
after-tax basis, to operations for the ten months ended December 31, 1996.
This extraordinary charge consisted of the write-off of unamortized
financing costs related to the refinanced debt.

Borrowings under the existing credit agreement bear interest at rates based
on a bank base rate, or the Eurodollar rate, adjusted by a certain
percentage which depends on the Company's leverage ratio, as defined by the
agreement. The Company is required to make quarterly principal payments on
the term loans through December 2002, commencing on March 31, 1997. All
loans under the agreement are secured by substantially all of the Company's
assets, 100% of the capital stock of the Company's domestic operations, and
65% of the capital stock of the Company's foreign operations. All
borrowings are also unconditionally guaranteed by the Company's existing
and future wholly owned 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
make capital expenditures; require the Company to maintain certain
financial ratios with respect to interest coverage and funded debt
leverage; and require the Company to maintain interest rate protection
agreements in a notional amount of at least 40% of the outstanding
principal amount. See note 12 for further discussion of interest rate
protection agreements.

At December 31, 1996, the Company had outstanding borrowings totaling
$88,000,000, of which $8,000,000 has been classified as current at December
31, 1996, and total letters of credit of approximately $1,406,000, under
the revolving credit facility. There were no borrowings under the letters
of credit. The Company pays a commitment fee ranging from 0.175% to 0.375%,
depending on the Company's leverage ratio, on the unused portion of the
revolving credit facility. In addition, a letter of credit fee ranging from
0.50% to 1.50%, depending on the Company's leverage ratio, is required to
be paid on the amount available to be drawn under letters of credit.

The Company also has a revolving credit agreement with various European
financial institutions that allows for borrowings up to an aggregate amount
of $9,685,000 or the European equivalent. There is currently no expiration
date on this agreement. The interest rate on borrowings varies by bank. The
majority of the banks involved assess a fixed rate ranging from 6.0% to
11.0%, while others charge a floating rate equal to the monetary market
rate plus 0.6% to 1.1%. Any borrowings would be collateralized by certain
real property and receivables of the Company's European operations. As of
December 31, 1996, the Company did not have any outstanding borrowings
under this European credit facility.

Interest Paid

For the ten months ended December 31, 1996, the Company made interest
payments totaling $25,775,000.

F-16
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Maturities

Aggregate maturities of the Company's indebtedness are as follows (in
thousands):

<TABLE>
<S> <C>
1997............................................................. $ 23,265
1998............................................................. 15,000
1999............................................................. 15,000
2000............................................................. 15,000
2001............................................................. 20,000
Thereafter....................................................... 265,889
--------
$354,154
========
</TABLE>

11. PREFERRED STOCK

Dividends on the Series A 12% Participating Convertible Preferred Stock are
fully cumulative, accrue on a quarterly basis at a rate of $12 per annum,
and are payable only at the discretion of the Board of Directors. Upon
conversion, the holders of the outstanding Series A Preferred Stock lose
their right to any dividends, including dividends in arrears. As of
December 31, 1996, the aggregate and per share amounts of cumulative
dividends in arrears were $16.6 million and $10.36, respectively. Each
share of Series A Preferred Stock is convertible into a certain number of
shares of the Company's common stock based on the fair market equity value
of the Company at the time of conversion. Only the holder or holders of a
majority of the outstanding Series A Preferred Stock can cause all or a
portion of such stock to be converted. The Company may not redeem any of
the Series A Preferred Stock at its option. Holders are not granted the
benefit of any sinking fund. Upon involuntary liquidation, holders are
entitled to receive $100 per share plus any unpaid dividends. For each
share of Series A Preferred Stock, the holder is entitled to one thousand
votes on matters generally submitted to the stockholders of the Company and
certain matters on which a majority vote of holders of the Series A
Preferred Stock is required by the Company's Articles of Incorporation.

12. DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses interest rate collar agreements for other than trading
purposes to manage its exposure to fluctuations in interest rates on its
floating 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 floating rate reference. The notional
amounts are utilized to measure the amount of interest to be paid or
received and do not represent the amount of exposure to credit loss. These
interest rate collar agreements provide that, at specified intervals, when
the floating rate is less than the minimum rate, the Company will pay the
counterparty the differential computed on the notional principal amount,
and when the floating rate exceeds the maximum rate, the counterparty will
pay the Company the differential computed on the notional principal amount.
The net amount paid or received on the interest rate collar agreements is
recognized as an adjustment to interest expense. During the ten months
ended December 31, 1996, the Company was not required to make nor was it
entitled to receive any payments as a result of these hedging activities.

At December 31, 1996, the Company had five outstanding interest rate collar
agreements with a total notional principal amount of $185,000,000 and
maximum and minimum rates ranging from 7.50% to 7.99% and 5.00% to 5.50%,
respectively. These agreements mature over the next two years. Aggregate
maturities of the total notional principal amount are as follows:
$70,000,000 in 1998 and $115,000,000 in 1999.

The counterparties to the interest rate collar agreements are major
financial institutions. The Company continually monitors its positions and
the credit ratings of the counterparties and does not anticipate
nonperformance by them. The Company has not been required to provide nor
has it received any collateral related to its hedging activities.

F-17
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. CONTINGENT LIABILITIES AND COMMITMENTS

There are various claims and lawsuits pending against the Company, all of
which management believes, based upon information presently known, either
to be without merit or subject to adequate defenses. The resolution of
these claims and lawsuits is not expected to have a material adverse effect
on the Company.

14. 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, Accounts Payable, and Short-
Term Debt

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 variable rate long-term debt instruments approximate
their carrying amounts. The fair value of other long-term debt was
estimated using quoted market values or discounted cash flow analyses based
on current incremental borrowing rates for similar types of borrowing
arrangements. The fair value of the Company's long-term debt, including the
current portion, is approximately $371,892,000 at December 31, 1996 while
the carrying amount is $354,154,000. The fair value of the Predecessor's
long-term debt, including the current portion, approximates its carrying
amount at December 31, 1995.

Interest Rate Collar Agreements

The fair value of the Company's interest rate collar agreements
approximates cost as of December 31, 1996.

15.INCOME TAXES

Income (loss) before income taxes and extraordinary item consists of the
following:

F-18
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income tax expense (benefit), excluding extraordinary items, is comprised
of the following:

Income taxes paid by the Company for the ten months ended December 31, 1996
totaled $13,137,000.

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

<TABLE>
<CAPTION>
THE KNOLL GROUP,
INC. (PREDECESSOR)
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts....... $ 1,659 $ 1,753
Inventories............................ 2,603 4,856
Net operating loss carryforwards....... 28,253 37,339
Accrued restructuring costs............ 966 3,367
Postretirement benefit obligation...... 6,880 8,925
Accrued liabilities and other items.... 20,669 9,344
-------- --------
Gross deferred tax assets................ 61,030 65,584
Valuation allowance...................... (33,161) (37,990)
-------- --------
Net deferred tax assets.................. 27,869 27,594
-------- --------
Deferred tax liabilities:
Intangibles, principally due to
differences in amortization........... 3,338 --
Plant and equipment, principally due to
differences in depreciation and
assigned values....................... 1,930 22,369
Prepaid pension cost................... -- 16,526
-------- --------
Gross deferred tax liabilities........... 5,268 38,895
-------- --------
Net deferred tax asset (liability)....... $ 22,601 $(11,301)
======== ========
</TABLE>

F-19
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

As discussed in Notes 1 and 2, the recognition and measurement of income
tax expense and deferred taxes for the Predecessor required certain
assumptions, allocations, and significant estimates in order to measure the
tax consequences as if the Predecessor were a stand-alone taxpayer.

As of December 31, 1996, the Company has pre-acquisition net operating loss
carryforwards totaling approximately $76,000,000 in various foreign tax
jurisdictions which generally expire between 1997 and 2001 or may be
carried forward for an unlimited time.

At February 29, 1996 and December 31, 1994 and 1993, the Predecessor had
recorded a valuation allowance of $38,446,000, $43,066,000, and
$24,881,000, respectively.

For the ten months ended December 31, 1996, tax benefits recognized through
reductions of the valuation allowance had the effect of reducing goodwill
by $4,246,000. If additional tax benefits are recognized in the future
through further reduction of the valuation allowance, such benefits will
reduce goodwill.

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

<TABLE>
<CAPTION>
THE KNOLL THE KNOLL
GROUP, INC. GROUP, INC.
(PREDECESSOR) (PREDECESSOR)
TEN MONTHS TWO MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31,
DECEMBER 31, FEBRUARY 29, ---------------
1996 1996 1995 1994
------------ ------------- ------ -------
<S> <C> <C> <C> <C>
Federal statutory tax rate.. 35.0% (35.0%) 35.0% (35.0%)
Increase (decrease) in the
tax rate resulting from:
State taxes, net of
federal effect........... 3.9 (4.5) 4.9 2.5
Higher effective income
taxes of other countries,
net of change in
valuation allowance...... 3.2 (0.2) (1.4) 41.8
Non-deductible goodwill
amortization............. 1.0 1.1 4.7 4.7
Other..................... 0.3 (1.4) 0.6 0.8
---- ----- ------ -------
Effective tax rate.......... 43.4% (40.0%) 43.8% 14.8%
==== ===== ====== =======
</TABLE>

At December 31, 1996, the Company has not made provision for U.S. federal
and state income taxes on approximately $9,194,000 of foreign earnings
which 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. 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-20
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16. RESTRUCTURING

In 1994, the Predecessor adopted a $61,345,000 restructuring program that
included the separation of approximately 500 employees, the closing of
various facilities, and the exiting of several product lines. The total
cost of this program was offset by accruals previously established for
actions that were deferred and subsequently included in this program,
resulting in a net charge to operations in 1994 of $29,180,000. A summary
of the program's costs is shown below.

<TABLE>
<CAPTION>
FACILITY
EMPLOYEE CLOSURE AND
SEPARATION ASSET RATIONALIZATION
COSTS WRITEDOWN COSTS TOTAL
---------- --------- --------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
North America................ $10,559 $19,104 $ 7,982 $37,645
Europe....................... 7,526 9,264 6,910 23,700
------- ------- ------- -------
Total.................... $18,085 $28,368 $14,892 $61,345
======= ======= ======= =======
</TABLE>

At December 31, 1995, the restructuring actions were essentially complete.
The remaining accrued costs totaling $10,868,000 at December 31, 1995
consist primarily of employee separation costs, lease costs related to
properties that are no longer being utilized, and product guarantees. The
remaining accrued costs of $1,979,000 at December 31, 1996 consist of
employee separation costs and product guarantees. The Company expects to
pay the remaining accrued restructuring costs during 1997.

17. STOCK INCENTIVE PLANS

In connection with the acquisition discussed in Note 3, the Company
established the 1996 Stock Incentive Plan (the 1996 Plan). Under the 1996
Plan, awards denominated or payable in shares or options to purchase shares
of the Company's common stock may be granted to officers and other key
employees of the Company. A combined maximum of 1,500,000 shares or options
may be granted under the 1996 Plan. A Stock Plan Committee of the Company's
Board of Directors has sole discretion concerning administration of the
1996 Plan, including selection of individuals to receive awards, types of
awards, the terms and conditions of the awards, and the time at which
awards will be granted. The Board of Directors may terminate the 1996 Plan
at its discretion at any time.

For the ten months ended December 31, 1996, the Company granted 1,320,000
restricted common shares, with a fair market value of $.10 per share, to
key employees. Of such amount, 720,000 of these restricted common shares
vest ratably over five years beginning on the grant date, while the other
600,000 shares vest over five years commencing one year subsequent to the
grant date. The fair market value of the shares on the date of the grant
has been recorded as unearned stock grant compensation and is presented as
a separate component of stockholders' equity. Compensation expense is
recognized ratably over the vesting period. No options were granted during
the ten month period ended December 31, 1996. The remaining 180,000 shares
available under the 1996 Plan were granted in the form of options on March
7, 1997.

Under the Knoll, Inc. 1997 Stock Incentive Plan adopted in 1997 (the 1997
Plan), a combined maximum of 400,000 shares or options to purchase shares
of the Company's common stock may be granted. A Stock Plan Committee of the
Company's Board of Directors has sole discretion concerning administration
of the 1997 Plan, including selection of individuals to receive awards,
types of awards, the terms and conditions of the awards, and the time at
which awards will be granted. The Board of Directors may terminate the 1997
Plan at its discretion at any time. On March 7, 1997, 240,000 options to
purchase shares under the 1997 Plan were granted.

F-21
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

18. LEASES

The Company has commitments under operating leases for certain machinery
and equipment and facilities used in its operations. Total rental expense
for the ten months ended December 31, 1996 was $7,787,000. 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):

<TABLE>
<S> <C>
1997............................................................. $ 5,270
1998............................................................. 4,731
1999............................................................. 3,550
2000............................................................. 2,390
2001............................................................. 1,907
Subsequent years................................................. 3,241
-------
Total minimum rental payments.................................... $21,089
=======
</TABLE>

The Predecessor also had operating leases for certain machinery and
equipment and facilities. Total rental expense charged to operations was
$1,668,000 for the two months ended February 29, 1996 and $10,149,000 and
$10,917,000 for the years ended December 31, 1995 and 1994, respectively.

19. PENSION PLANS

On March 1, 1996, the Company established two defined benefit pension
plans: The Knoll Pension Plan and The Knoll Pension Plan for Bargaining
Unit Employees. The first plan covers all eligible U.S. employees who are
not members of a collective bargaining unit (i.e. union), while the second
plan pertains to all U.S. employees who are covered by a collective
bargaining agreement. Benefits for these plans are based primarily on years
of credited service, annual compensation for each year of participation,
and age when payments begin. In order to accrue benefits under The Knoll
Pension Plan for Bargaining Unit Employees, participants are required to
make certain contributions to the plan. The Company makes contributions to
both plans as determined by an actuarial funding method. This funding
policy is consistent with the minimum funding requirements set forth by the
Employee Retirement Income Security Act of 1974, as amended, and other
governmental laws and regulations.

The Company's net periodic pension cost, which consists entirely of service
cost, for the ten months ended December 31, 1996 was $3,953,000.

The funded status of the Company's pension plans is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
Actuarial present value of benefit obligation:
Vested................................................. $(2,784)
Nonvested.............................................. (273)
-------
Accumulated benefit obligation......................... (3,057)
Additional obligation for projected compensation
increases on accumulated years of service............. (896)
-------
Projected benefit obligation............................. (3,953)
Plan assets at fair value................................ 30
-------
Plan assets less than projected benefit obligation and
accrued pension cost.................................... $(3,923)
=======
</TABLE>

F-22
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The projected benefit obligation was measured using a discount rate of
7.25%. The assumed rate of compensation increase was 4.5%.

Prior to March 1, 1996, the Predecessor sponsored a defined benefit pension
plan, The Knoll Group Pension Plan, for all eligible U.S. nonunion
employees. The plan provisions were substantially the same as the current
pension plan for nonunion employees offered by Knoll, Inc. As a result of
the sale of the Predecessor by Westinghouse, benefits earned through
February 29, 1996 under The Knoll Group Pension Plan were frozen and
participants were fully vested in their benefits. The plan was subsequently
merged into a Westinghouse pension plan.

The following table sets forth the Predecessor's net periodic pension cost
(income) for The Knoll Group Pension Plan:

<TABLE>
<CAPTION>
TWO MONTHS
ENDED YEAR ENDED DECEMBER 31,
FEBRUARY 29, -------------------------
1996 1995 1994
------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................... $ 522 $ 2,278 $ 2,955
Interest cost on projected
benefit obligation............. 933 5,212 5,016
Amortization of unrecognized
prior service cost............. 68 385 385
Amortization of unrecognized net
loss........................... 197 -- 468
------ ------------ -----------
1,720 7,875 8,824
Return on plan assets........... (1,543) (8,993) (8,846)
------ ------------ -----------
Net periodic pension cost
(income)....................... $ 177 $ (1,118) $ (22)
====== ============ ===========
</TABLE>

The return on plan assets was determined based on a weighted-average
expected long-term rate of return on plan assets of 9.75% for each period
presented.

The following table sets forth the funded status of The Knoll Group Pension
Plan:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Actuarial present value of benefit obligation:
Vested................................................. $ (68,081)
Nonvested.............................................. (3,363)
---------
Accumulated benefit obligation......................... (71,444)
Additional obligation for projected compensation
increases on accumulated years of service............. (12,491)
---------
Projected benefit obligation............................. (83,935)
Plan assets at fair value................................ 95,940
---------
Plan assets in excess of projected benefit obligation.... 12,005
Unrecognized prior service cost.......................... 4,458
Unrecognized net loss.................................... 28,698
---------
Prepaid pension cost..................................... $ 45,161
=========
</TABLE>

F-23
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The projected benefit obligation was measured using a discount rate of
6.75%. The assumed rate of compensation increase was 4.0%. As of December
31, 1995, plan assets consisted primarily of listed stocks, fixed income
securities, and real estate investments.

The Predecessor also participated in two single-employer defined benefit
pension plans sponsored by Westinghouse. These plans covered all U.S. union
employees of the Predecessor, certain domestic Westinghouse employees, and
certain domestic executives of the Predecessor and Westinghouse.

For purposes of these financial statements, the Predecessor's participation
in the plans sponsored by Westinghouse is accounted for as though such
plans were multiemployer plans. For multiemployer plans, employers are
required to recognize total contributions for the period as net pension
expense. For the two months ended February 29, 1996 and the years ended
December 31, 1995 and 1994, the Predecessor's contributions to Westinghouse
for these defined benefit pension plans totaled $212,000, $1,076,000, and
$1,223,000, respectively.

Employees of the Canadian and United Kingdom (U.K.) operations participate
in defined contribution plans. The Company's expense related to the
Canadian plan for the ten months ended December 31, 1996 was $607,000. The
Predecessor's expense for the two months ended February 29, 1996 and years
ended December 31, 1995, and 1994 totaled $114,000; $398,000; and $398,000;
respectively. Expense for the U.K. plan during each of the four
aforementioned periods was not significant.

The Company also sponsors a retirement savings plan, which is an employee
savings plan that qualifies as a deferred salary arrangement under Section
401(k) of the Internal Revenue Code, for all U.S. nonunion employees and
U.S. hourly union employees. Under this plan, participants may defer a
portion of their pretax earnings up to the annual contribution limit
established by the Internal Revenue Service. The Company matches 40% of
employee contributions on up to 6% of employee compensation. The plan also
provides for additional employer matching based on the achievement of
certain profitability goals. The Company's total expense under this plan
was $2,957,000 for the ten months ended December 31, 1996. The Predecessor
administered a similar retirement savings plan and incurred related expense
totaling $406,000; $2,675,000; and $1,592,000 for the two months ended
February 29, 1996 and the years ended December 31, 1995 and 1994,
respectively.

20. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides postretirement medical and life insurance coverage for
certain retired U.S. nonunion and union employees and their eligible
dependents. The amount of benefits provided to retired nonunion employees
varies according to the age of the retiree as of a predetermined date,
while benefits provided to retired union employees are based on annual
compensation. The Company does not currently fund its obligation related to
postretirement medical and life insurance benefits.

Net periodic postretirement benefit cost for the Company includes the
following components:

<TABLE>
<CAPTION>
TEN MONTHS
ENDED
DECEMBER 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
Service cost............................................... $ 440
Interest cost on projected benefit obligation.............. 1,000
------
Net periodic postretirement benefit cost................... $1,440
======
</TABLE>

F-24
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company's liability related to the postretirement medical and life
insurance benefits is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ (7,329)
Fully eligible active participants....................... (1,593)
Other active participants................................ (8,235)
--------
Total accumulated postretirement benefit obligation........ (17,157)
Unrecognized net gain...................................... (217)
--------
Accrued postretirement benefit cost........................ $(17,374)
========
</TABLE>

The accumulated postretirement benefit obligation was measured using the
following assumptions: discount rate of 7.25%, rate of compensation
increase of 4.5%, and health care cost trend rate of 9.5% in 1996,
decreasing by 1.0% per year to 5.5% in 2000, and remaining at that level
thereafter. Increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated postretirement
benefit obligation by approximately $1,450,000 and increase the aggregate
of the service and interest cost by approximately $151,000.

The Predecessor provided postretirement medical and life insurance benefits
to U.S. retired nonunion employees. The current postretirement medical and
life insurance benefits which the Company provides to retired nonunion
employees remain essentially unchanged from those which the Predecessor had
provided.

Net periodic postretirement benefit cost incurred by the Predecessor
includes the following:

<TABLE>
<CAPTION>
TWO MONTHS
ENDED YEAR ENDED DECEMBER 31,
FEBRUARY 29, ------------------------
1996 1995 1994
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................... $103 $ 449 $ 556
Interest cost on projected benefit
obligation....................... 207 1,509 1,509
Amortization of unrecognized prior
service cost..................... (56) (12) --
Amortization of unrecognized net
(gain) loss...................... 10 (25) 18
---- ----------- -----------
Net periodic postretirement
benefit cost..................... $264 $ 1,921 $ 2,083
==== =========== ===========
</TABLE>

The Predecessor's liability related to the postretirement medical and life
insurance benefits which it provided to U.S. retired nonunion employees is
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ (7,581)
Fully eligible active participants....................... (1,680)
Other active participants................................ (8,480)
---------
Total accumulated postretirement benefit obligation........ (17,741)
Unrecognized prior service cost............................ (4,155)
Unrecognized net loss...................................... 1,303
---------
Accrued postretirement benefit cost........................ $ (20,593)
=========
</TABLE>

F-25
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The accumulated postretirement benefit obligation was measured using the
following assumptions: discount rate of 7.25%, rate of compensation
increase of 4.0%, and health care cost trend rate of 11.5% in 1995,
decreasing by 0.5% per year to 7.0% in 2004, and remaining at that level
thereafter.

The Predecessor also participated in a single-employer postretirement
benefit arrangement maintained by Westinghouse. Westinghouse provided
medical and life insurance benefits to all retired U.S. union employees and
certain Westinghouse employees. For purposes of these financial statements,
the Predecessor's participation in this postretirement benefit arrangement
is accounted for as though it was a multiemployer postretirement benefit
plan. For multiemployer plans, employers are required to recognize total
contributions for the period as net periodic postretirement benefit
expense. The Predecessor's contributions for the postretirement benefit
arrangements sponsored by Westinghouse totaled $82,500 for the two months
ended February 29, 1996, $151,000 for the year ended December 31, 1995 and
$122,000 for the year ended December 31, 1994.

21. BUSINESS SEGMENT AND GEOGRAPHICAL REGION INFORMATION

The Company conducts business predominantly in the office furniture
industry through its operations in the United States, Canada, and Europe.
Summarized financial information regarding the Company's operations in
these geographic areas is presented below:

<TABLE>
<CAPTION>
TEN MONTHS ENDED UNITED
DECEMBER 31, 1996 STATES CANADA EUROPE ELIMINATIONS TOTALS
----------------- -------- ------- ------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to customers....... $493,653 $24,456 $43,425 $ -- $561,534
Sales between geographic
areas................... 13,637 60,866 1,714 (76,217) --
-------- ------- ------- --------- --------
Net sales................ $507,290 $85,322 $45,139 $ (76,217) $561,534
======== ======= ======= ========= ========
Operating profit......... $ 54,381 $10,681 $ 6,282 -- $ 71,344
======== ======= ======= ========= ========
Identifiable assets...... $648,868 $52,690 $39,725 $ (65,571) $675,712
======== ======= ======= ========= ========
</TABLE>

F-26
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Predecessor also operated primarily in the office furniture industry in
the United States, Canada, and Europe. Summarized financial data regarding
the Predecessor's operations according to geographic area is as follows:

<TABLE>
<CAPTION>
TWO MONTHS ENDED UNITED
FEBRUARY 29, 1996 STATES CANADA EUROPE ELIMINATIONS TOTALS
----------------- -------- ------- -------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to customers...... $ 78,267 $ 4,415 $ 7,251 $ -- $ 89,933
Sales to related
parties................ 299 -- -- -- 299
Sales between geographic
areas.................. 1,377 6,708 227 (8,312) --
-------- ------- -------- -------- ---------
Net sales............... $ 79,943 $11,123 $ 7,478 $ (8,312) $ 90,232
======== ======= ======== ======== =========
Operating profit........ $(39,010) $ (734) $ 185 -- $ (39,559)
======== ======= ======== ======== =========
<CAPTION>
YEAR ENDED UNITED
DECEMBER 31, 1995 STATES CANADA EUROPE ELIMINATIONS TOTALS
----------------- -------- ------- -------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to customers...... $517,314 $31,132 $ 62,277 $ -- $ 610,723
Sales to related
parties................ 10,169 -- -- -- 10,169
Sales between geographic
areas.................. 17,349 61,262 1,882 (80,493) --
-------- ------- -------- -------- ---------
Net sales............... $544,832 $92,394 $ 64,159 $(80,493) $ 620,892
======== ======= ======== ======== =========
Operating profit........ $ 54,043 $ 483 $ 679 -- $ 55,205
======== ======= ======== ======== =========
Identifiable assets..... $455,784 $98,953 $ 72,265 $(32,698) $ 594,304
======== ======= ======== ========
General corporate
assets................. 62,406
Total assets............ $ 656,710
=========

<CAPTION>
YEAR ENDED UNITED
DECEMBER 31, 1994 STATES CANADA EUROPE ELIMINATIONS TOTALS
----------------- -------- ------- -------- ------------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to customers...... $471,662 $30,294 $ 60,642 $ -- $ 562,598
Sales to related par-
ties................... 271 -- -- 271
Sales between geographic
areas.................. 20,994 43,541 2,445 (66,980) --
-------- ------- -------- -------- ---------
Net sales............... $492,927 $73,835 $ 63,087 $(66,980) $ 562,869
======== ======= ======== ======== =========
Operating profit........ $(11,378) $(7,292) $(30,864) -- $ (49,534)
======== ======= ======== ======== =========
Operating profit without
restructuring.......... $ 7,134 $(7,292) $(20,196) -- $ (20,354)
======== ======= ======== ======== =========
</TABLE>

For the two months ended February 29, 1996 and the years ended December 31,
1995 and 1994, allocated corporate expenses from Westinghouse were prorated
to the geographic segments based on sales. In addition, general corporate
assets at December 31, 1995 include cash and cash equivalents, prepaid
pension assets, and current and deferred tax assets that were maintained by
Westinghouse.

The Predecessor typically derived more than 10% of net sales from the U.S.
federal government. The Predecessor's sales to the U.S. federal government
totaled $9,925,000 for the two months ended

F-27
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

February 29, 1996 and $58,090,000 and $56,142,000 for the years ended
December 31, 1995 and 1994, respectively. The Company's total sales to the
U.S. federal government were $51,046,000 for the ten months ended December
31, 1996. Neither the Company nor the Predecessor engaged in export sales
from the U.S. to unaffiliated customers in foreign countries.

Sales between geographic areas are made at a transfer price that includes
an appropriate mark- up.

22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth summary information on a quarterly basis for
the Company and Predecessor for the respective periods presented below.

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- -------------------------------------
TWO MONTHS ONE MONTH
ENDED ENDED SECOND THIRD FOURTH
FEBRUARY 29 MARCH 31 QUARTER QUARTER QUARTER
----------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996
Net sales................. $ 90,232 $ 48,080 $166,520 $ 167,184 $179,750
Gross profit.............. 30,518 15,537 58,574 61,046 67,536
Income (loss) before ex-
traordinary item......... (24,088) 449 7,527 7,685 6,334
Net income (loss)......... (24,088) 449 7,527 7,685 1,175
<CAPTION>
PREDECESSOR
----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995
Net sales................. $147,410 $159,352 $155,055 $159,075
Gross profit.............. 42,919 50,279 54,829 55,233
Net income................ 1,216 5,945 12,174 9,997
</TABLE>

Results for 1996 and 1995 have been restated to reflect the
reclassification of certain expenses, principally product development, from
cost of sales to selling, general and administrative expenses as compared
to previously reported results.

During the quarter ended December 31, 1996, the Company recorded a loss on
the early extinguishment of debt amounting to $8,542,000 pre-tax,
$5,159,000 after-tax. The loss consisted of the write-off of unamortized
deferred financing fees.

23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT

As discussed in Note 10, certain debt of the Company is guaranteed by all
existing and future directly or indirectly wholly owned domestic
subsidiaries of the Company (the "Guarantors"). The Guarantors are Knoll
Overseas, Inc., a holding company for the entities that conduct the
Company's European business, and Spinneybeck Enterprises, Inc., which
directly and through a Canadian subsidiary operates the Company's leather
business.

These Guarantors will irrevocably and unconditionally, jointly and
severally, guarantee the performance and payment in full when due of all
obligations under the 10.875% Senior Subordinated Notes and credit
agreement outstanding as of December 31, 1996, limited to the largest
amount that would not render such

F-28
<PAGE>

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Guarantor's obligations under the guarantees subject to avoidance under any
applicable federal or state fraudulent conveyance or similar law.

The condensed consolidating information which follows presents:

. Condensed financial statements as of December 31, 1996 and 1995, and for
the ten months ended December 31, 1996, two months ended February 29,
1996, and the years ended December 31, 1995 and 1994 of (a) Knoll, Inc.
(as the Issuer), (b) the Guarantors, (c) the combined non-Guarantors,
(d) elimination entries and (e) the Company on a consolidated basis.

. The Issuer and the Guarantors are shown with their investments in their
wholly owned subsidiaries accounted for on the equity method.

The condensed consolidating financial statements should be read in
connection with the consolidated financial statements of the Company.
Separate financial statements of the Guarantors are not presented because
the Guarantors are jointly, severally and unconditionally liable under the
guarantees, and the Company believes the condensed consolidating financial
statements presented are more meaningful in understanding the financial
position of the Guarantors.

F-29
<PAGE>

KNOLL, INC.

BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
GUARANTORS
---------------------------
SPINNEYBECK
ENTERPRISES, KNOLL NON-
KNOLL, INC. INC. OVERSEAS, INC. GUARANTORS ELIMINATIONS TOTAL
----------- ------------ -------------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 41 $ 267 $ -- $ 8,496 $ -- $ 8,804
Customer receivables.. 85,959 1,398 -- 23,809 -- 111,166
Inventories........... 39,951 6,747 -- 11,113 -- 57,811
Deferred income
taxes................ 17,079 -- -- 395 -- 17,474
Prepaid and other
current assets....... 9,769 50 (586) 2,817 (4,626) 7,424
-------- ------ ------- ------- -------- --------
Total current assets.... 152,799 8,462 (586) 46,630 (4,626) 202,679
Property, plant, and
equipment.............. 141,357 368 -- 34,493 -- 176,218
Intangible assets....... 278,389 -- -- 8,551 -- 286,940
Equity investments...... 75,571 550 12,789 -- (88,910) --
Other noncurrent
assets................. 9,976 13 97 2,289 (2,500) 9,875
-------- ------ ------- ------- -------- --------
Total assets............ $658,092 $9,393 $12,300 $91,963 $(96,036) $675,712
======== ====== ======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt....... $ 23,000 $ -- $ -- $ 265 $ -- $ 23,265
Accounts payable--
trade................ 34,076 350 -- 15,824 -- 50,250
Accounts payable--
related parties...... 1,543 -- (5,169) 8,252 (4,626) --
Income taxes payable.. 11 19 (1) 359 -- 388
Accrued restructuring
costs................ 1,598 -- -- 381 -- 1,979
Other current
liabilities.......... 54,649 288 1,668 5,438 -- 62,043
-------- ------ ------- ------- -------- --------
Total current
liabilities............ 114,877 657 (3,502) 30,519 (4,626) 137,925
Long-term debt.......... 330,000 2,500 -- 889 (2,500) 330,889
Deferred income taxes... -- -- -- 1,931 -- 1,931
Postretirement benefits
obligation............. 15,873 -- -- -- -- 15,873
Other noncurrent
liabilities............ 6,391 -- -- 4,899 -- 11,290
-------- ------ ------- ------- -------- --------
Total liabilities....... 467,141 3,157 (3,502) 38,238 (7,126) 497,908
Stockholders' equity:
Preferred stock....... 1,603 -- -- -- -- 1,603
Common stock.......... 23 -- -- -- -- 23
Additional paid-in-
capital.............. 172,585 4,033 14,034 43,999 (75,745) 158,906
Unearned stock grant
compensation......... (96) -- -- -- -- (96)
Retained earnings..... 16,836 2,203 1,768 9,194 (13,165) 16,836
Cumulative foreign
currency translation
adjustment........... -- -- -- 532 -- 532
-------- ------ ------- ------- -------- --------
Total stockholders'
equity................. 190,951 6,236 15,802 53,725 (88,910) 177,804
-------- ------ ------- ------- -------- --------
Total liabilities and
stockholders' equity... $658,092 $9,393 $12,300 $91,963 $(96,036) $675,712
======== ====== ======= ======= ======== ========
</TABLE>

F-30
<PAGE>

KNOLL, INC.

BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
GUARANTORS
---------------------------
SPINNEYBECK
ENTERPRISES, KNOLL NON-
KNOLL, INC. INC. OVERSEAS, INC. GUARANTORS ELIMINATIONS TOTAL
----------- ------------ -------------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ (182) $ 182 $ -- $ 1,569 $ -- $ 1,569
Customer receivables.. 88,656 1,173 135 24,628 -- 114,592
Inventories........... 38,570 6,436 -- 14,637 -- 59,643
Deferred income
taxes................ 17,024 528 411 310 -- 18,273
Prepaid and other
current assets....... 2,093 6 4,554 26,377 (24,565) 8,465
-------- ------- ------- -------- -------- --------
Total current assets.... 146,161 8,325 5,100 67,521 (24,565) 202,542
Property, plant, and
equipment.............. 121,144 310 -- 43,179 -- 164,633
Intangible assets....... 160,072 4,430 626 75,644 -- 240,772
Prepaid pension cost.... 45,161 -- -- -- -- 45,161
Equity investments...... 32,050 2,140 26,152 -- (60,342) --
Other noncurrent
assets................. 2,568 30 97 3,151 (2,244) 3,602
-------- ------- ------- -------- -------- --------
Total assets............ $507,156 $15,235 $31,975 $189,495 $(87,151) $656,710
======== ======= ======= ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt....... $ -- $ -- $ -- $ 1,496 $ -- $ 1,496
Current maturities of
long-term debt....... 2,055 -- -- 1,232 -- 3,287
Accounts payable--
trade................ 27,534 910 123 17,283 -- 45,850
Accounts payable--
related parties...... 633 117 -- 6,591 (6,928) 413
Income taxes payable.. 13,760 984 (771) -- -- 13,973
Accrued restructuring
costs................ 5,893 -- -- 4,975 -- 10,868
Other current
liabilities.......... 36,726 861 1,778 4,592 -- 43,957
-------- ------- ------- -------- -------- --------
Total current
liabilities............ 86,601 2,872 1,130 36,169 (6,928) 119,844
Long-term debt.......... -- -- -- 251 -- 251
Deferred income taxes... 27,566 (56) 56 2,008 -- 29,574
Postretirement benefits
obligation............. 20,593 -- -- -- -- 20,593
Other noncurrent
liabilities............ 2,256 -- -- 3,741 -- 5,997
-------- ------- ------- -------- -------- --------
Total liabilities....... 137,016 2,816 1,186 42,169 (6,928) 176,259
Stockholders' equity:
Parent company
investment........... 370,140 12,419 30,789 170,192 (80,223) 503,317
Cumulative foreign
currency translation
adjustment........... -- -- -- (22,866) -- (22,866)
-------- ------- ------- -------- -------- --------
Total stockholders'
equity................. 370,140 12,419 30,789 147,326 (80,223) 480,451
-------- ------- ------- -------- -------- --------
Total liabilities and
stockholders' equity... $507,156 $15,235 $31,975 $189,495 $(87,151) $656,710
======== ======= ======= ======== ======== ========
</TABLE>

F-31
<PAGE>

KNOLL, INC.

STATEMENT OF OPERATIONS
TEN MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

F-32
<PAGE>

KNOLL, INC.

STATEMENT OF OPERATIONS
TWO MONTHS ENDED FEBRUARY 29, 1996
(IN THOUSANDS)

F-33
<PAGE>

KNOLL, INC.

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

F-34
<PAGE>

KNOLL, INC.

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

F-35
<PAGE>

KNOLL, INC.

STATEMENT OF CASH FLOWS
TEN MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

F-36
<PAGE>

KNOLL, INC.

STATEMENT OF CASH FLOWS
TWO MONTHS ENDED FEBRUARY 29, 1996
(IN THOUSANDS)

F-37
<PAGE>

KNOLL, INC.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

F-38
<PAGE>

KNOLL, INC.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

F-39
<PAGE>

KNOLL, INC.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma consolidated income statement for the year
ended December 31, 1996 gives effect to the acquisition by merger (the
"Acquisition") of the business and operations of The Knoll Group, Inc. and its
subsidiaries in February 1996 by Knoll, Inc. (the "Company"), the borrowings
under the Company's bank credit facilities (the "Credit Facilities") and the
issuance of 10- 7/8% Senior Subordinated Notes (the "Notes") and the
application of the net proceeds therefrom as though they had occurred as of
the beginning of the year. The pro forma income statement has been further
adjusted to reflect the sale of the Common Stock offered hereby and the
application of the estimated net proceeds therefrom to repurchase a portion of
the Notes and pay down a portion of the indebtedness outstanding under Credit
Facilities as if such transactions had occurred on January 1, 1996.

The Acquisition has been accounted for by the purchase method of accounting,
and accordingly, the purchase price of $579.8 million (including estimated
fees and expenses) has been allocated to the assets acquired and liabilities
assumed based upon the estimated fair value at the date of Acquisition. The
excess of such purchase price over the estimated fair values at the date of
Acquisition has been recognized as goodwill, which is amortized over 40 years.

The unaudited pro forma consolidated income statement does not purport to
represent what the Company's results of operations actually would have been if
the events described above had occurred as of the date indicated or what
results will be for any future periods. The unaudited pro forma financial
information is based upon the assumptions that the Company believes are
reasonable and should be read in conjunction with the Financial Statements and
accompanying Notes thereto included elsewhere in this Prospectus.

P-1
<PAGE>

KNOLL, INC.

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
THE KNOLL GROUP,
INC.
(PREDECESSOR)
2 MONTHS ENDED 10 MONTHS ENDED IPO PRO FORMA
FEBRUARY 29, 1996 DECEMBER 31, 1996 ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------------- ----------------- ----------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Total sales............. $ 90,232 $561,534 $651,766 $651,766
Cost of sales........... 59,714 358,841 $ 552 (a)
801 (b) 419,908 419,908
-------- -------- -------- -------- ------ --------
Gross profit............ 30,518 202,693 (1,353) 231,858 -- 231,858
Selling, general and
administrative
expenses............... 21,256 131,349 369 (a)
414 (b) 153,388 153,388
Westinghouse long-term
incentive
compensation........... 47,900 -- (47,900)(c) -- --
Allocated corporate
expenses............... 921 -- (921)(a) -- --
-------- -------- -------- -------- ------ --------
Operating income
(loss)................. (39,559) 71,344 46,685 78,470 -- 78,470
Interest expense........ 340 32,952 6,738 (d) 40,030 (7,096)(f) 32,934
Other income (expense),
net.................... (296) 447 -- 151 151
-------- -------- -------- -------- ------ --------
Income (loss) before
income taxes and
extraordinary item..... (40,195) 38,839 39,947 38,591 7,096 45,687
Income tax expense
(benefit).............. (16,107) 16,844 16,111 (e) 16,848 2,810 (h) 19,658
-------- -------- -------- -------- ------ --------
Income (loss) before
extraordinary item..... (24,088) 21,995 23,836 21,743 4,286 26,029
Extraordinary loss on
early extinguishment of
debt, net of taxes..... -- 5,159 (5,159)(g) -- -- --
-------- -------- -------- -------- ------ --------
Net income (loss)....... $(24,088) $ 16,836 $ 28,995 $ 21,743 (g) $4,286 $ 26,029 (g)
======== ======== ======== ======== ====== ========
Net income per share of
Common Stock...........
Weighted average shares
of Common Stock
outstanding............
</TABLE>

P-2
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT

(a) Represents the reclassification of allocated corporate expenses from
Westinghouse. The reclassified allocated corporate expenses approximate the
replacement cost to the Company for services formerly provided by Westinghouse
to the Predecessor, including (i) benefit expense related to the adoption of
various independent benefit plans comparable to Westinghouse benefit plans and
(ii) the cost of services required to replace specific activities formerly
provided by Westinghouse to the Predecessor, including audit, tax, general
ledger, accounts receivable, human resources, legal, insurance and data
communications.

(b) Represents the increase in amortization and depreciation resulting from
the Acquisition.

(c) Represents the elimination of incentive compensation under
Westinghouse's Long-Term Incentive Plans, which became payable, and for which
the amounts payable were established, as a result of consummation of the
Acquisition.

(d) To reflect interest expense (and amortization of deferred financing
fees) on a pro forma basis as if the Acquisition had been completed on January
1, 1996. Interest expense assumes a weighted average interest rate of 9.2%,
which approximates the actual interest rate on the date of the Acquisition, on
$424,125 in average outstanding borrowings and amortization of deferred
financing charges. If interest rates changed 1/8%, the pro forma adjustment
for interest costs would change by approximately $88.

(e) Adjustment to reflect the assumed effective tax rate applied to the pro
forma income.

(f) To reflect interest expense (and amortization of deferred financing
fees) on a pro forma basis as if the net proceeds from the offerings had been
utilized to repurchase the Notes and pay down the Credit Facilities on January
1, 1996. Interest expense assumes 10.875% for the Notes which is the actual
interest expense for the ten month period ended December 31, 1996 and 8.25%
for the Credit Facilities which approximates the actual interest expense for
the ten month period ended December 31, 1996.

(g) The pro forma 1996 and the pro forma as adjusted 1996 income statement
data presented do not include the $5,159 extraordinary loss on early
extinguishment of debt, net of taxes. In addition, the pro forma as adjusted
1996 income statement also does not include an anticipated extraordinary loss
of $5,612, net of taxes associated with the redemption of a portion of the
Notes in connection with the Offerings.

(h) Income tax expense applied at the United States effective tax rate
during 1996 (39.6%).

P-3
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPEC-
TUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HERE-
OF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ...................................................... 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Information........................................... 17
Management's Discussion and Analysis
of Financial Condition and Results of Operations........................ 19
Business................................................................. 26
Management............................................................... 40
Certain Transactions..................................................... 46
Principal and Selling Stockholders....................................... 48
Description of Capital Stock............................................. 49
Description of Certain Indebtedness...................................... 51
Shares Eligible for Future Sale ......................................... 54
Certain United States Federal Tax Considerations For Non-United States
Holders................................................................. 56
Underwriting............................................................. 59
Legal Matters............................................................ 61
Experts.................................................................. 61
Additional Information................................................... 62
Index to Financial Statements............................................ F-1
Unaudited Pro Forma Financial Information................................ P-1
</TABLE>

KNOLL, INC.

COMMON STOCK

----------------

PROSPECTUS

----------------

MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED

, 1997

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 14, 1997
PROSPECTUS
SHARES
[LOGO]
KNOLL, INC.
COMMON STOCK

-----------

All of the shares of Common Stock offered hereby are being sold by
Knoll, Inc. ("Knoll" or the "Company"). Of the shares of Common Stock
offered hereby, shares are being offered for sale initially outside the
United States and Canada by the International Managers and shares are being
offered for sale initially in the United States and Canada by the U.S.
Underwriters in a concurrent offering. The initial public offering price and
the aggregate underwriting discount per share will be identical for both
Offerings. See "Underwriting."

Application will be made for approval for listing of the Common Stock on the
New York Stock Exchange under the symbol "KNL."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share....................... $ $ $
- -----------------------------------------------------------------------------
Total(3)........................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and a certain selling stockholder (the "Selling Stockholder")
have agreed to indemnify the several Underwriters against certain
liabilities, including certain liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the International Managers and the U.S.
Underwriters options to purchase up to an additional shares and
shares of Common Stock, respectively, and the Selling Stockholder has
granted the International Managers and the U.S. Underwriters options to
purchase up to an additional shares and shares of Common Stock,
respectively, in each case exercisable within 30 days after the date
hereof, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount,
Proceeds to Company and Proceeds to Selling Stockholder will be $ , $ ,
$ and $ , respectively. See "Underwriting."

-----------

-----------
MERRILL LYNCH INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL

-----------

The date of this Prospectus is , 1997.
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING

Merrill Lynch International, Credit Suisse First Boston (Europe) Limited,
Goldman Sachs International and Morgan Stanley & Co. International Limited are
acting as lead managers (the "Lead Managers") for each of the International
Managers named below (the "International Managers"). Subject to the terms and
conditions set forth in an international purchase agreement (the
"International Purchase Agreement") among the Company, the Selling Stockholder
and the International Managers, and concurrently with the sale of shares
of Common Stock to the U.S. Underwriters (as defined below), the Company has
agreed to sell to the International Managers, and each of the International
Managers severally has agreed to purchase from the Company the number of
shares of Common Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
OF
INTERNATIONAL MANAGER SHARES
--------------------- ------
<S> <C>
Merrill Lynch International...........................................
Credit Suisse First Boston (Europe) Limited...........................
Goldman Sachs International...........................................
Morgan Stanley & Co. International Limited............................
----
Total............................................................
====
</TABLE>

The Company and the Selling Stockholder have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain underwriters
in the United States and Canada (the "U.S. Underwriters" and, together with
the International Managers, the "Underwriters") for whom Merrill Lynch Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Credit Suisse First Boston
Corporation, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated are
acting as representatives (the "U.S. Representatives"). Subject to the terms
and conditions set forth in the U.S. Purchase Agreement, and concurrently with
the sale of shares of Common Stock to the International Managers pursuant
to the International Purchase Agreement, the Company has agreed to sell to the
U.S. Underwriters, and the U.S. Underwriters severally have agreed to purchase
from the Company, an aggregate of shares of Common Stock. The initial
public offering price per share and the total underwriting discount per share
of Common Stock are identical under the International Purchase Agreement and
the U.S. Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement, the
several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant
to such agreement are purchased. The closings with respect to the sale of
shares of Common Stock to be purchased by the International Managers and the
U.S. Underwriters are conditioned upon one another.

The Lead Managers have advised the Company and the Selling Stockholder that
the International Managers propose initially to offer the shares of Common
Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share of Common Stock. The International
Managers may allow, and such dealers may reallow, a discount not in excess of
$ per share of Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.

The Company and the Selling Shareholder have granted an option to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of additional shares of

2
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

Common Stock at the initial public offering price set forth on the cover page
of this Prospectus, less the underwriting discount. If the overallotment
option is exercised in full, the Selling Stockholder will sell an aggregate of
additional shares of Common Stock. The International Managers may exercise
this option only to cover over-allotments, if any, made on the sale of the
Common Stock offered hereby. To the extent that the International Managers
exercise this option, each International Manager will be obligated, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Company and the Selling Stockholder have also granted an
option to the U.S. Underwriters, exercisable for 30 days after the date of
this Prospectus, to purchase up to an aggregate of additional shares of
Common Stock to cover over-allotments, if any, on terms similar to those
granted to the International Managers.

The Company, the Company's executive officers and directors and all existing
stockholders have agreed, subject to certain exceptions, not to directly or
indirectly (i) 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 for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing
the agreement thereafter acquires the power of disposition, or file a
registration statement under the Securities Act with respect to the foregoing
or (ii) enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of the Common Stock whether any
such swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch on behalf of the Underwriters for a period of 180 days after the date of
this Prospectus. See "Shares Eligible for Future Sale."

The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. Pursuant to the Intersyndicate
Agreement, the International Managers and the U.S. Underwriters are permitted
to sell shares of Common Stock to each other for purposes of resale at the
initial public offering price, less an amount not greater than the selling
concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons
who are non-U.S. or non-Canadian persons, and the International Managers and
any dealer to whom they sell shares of Common Stock will not offer to sell or
sell shares of Common Stock to U.S. persons or to Canadian persons or to
persons they believe intend to resell to U.S. or Canadian persons, except in
the case of transactions pursuant to the Intersyndicate Agreement.

3
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

and various valuation measures of other companies engaged in activities
similar to the Company. There can be no assurance that an active trading
market will develop for the Common Stock or that the Common Stock will trade
in the public market subsequent to the Offerings at or above the initial
public offering price.

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

The Company and the Selling Stockholder have agreed to indemnify the
International Managers and the U.S. Underwriters against certain liabilities,
including certain liabilities under the Securities Act.

Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any shares of Common Stock 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 do not constitute an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Common Stock in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on in the

4
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

United Kingdom any document received by it in connection with the issuance of
Common Stock to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued or
passed on.

No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or
any other material relating to the Company, the Selling Stockholder or shares
of Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly
or indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be
distributed or published, in or from any country or jurisdiction except in
compliance with any applicable rules and regulations of any such country or
jurisdiction.

Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.

LEGAL MATTERS

EXPERTS

ADDITIONAL INFORMATION

5
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES DOL-
LARS.

---------------

TABLE OF CONTENTS

KNOLL, INC.

COMMON STOCK

---------------

PROSPECTUS

---------------

MERRILL LYNCH INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company. All amounts shown are estimates, except the SEC
registration fee, the NASD filing fee and the NYSE listing fee:

<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fee........................................... $ 55,758
NASD filing fee................................................ 18,900
NYSE listing fee............................................... *
Transfer agent and registrar fees and expenses................. *
Printing and engraving expenses................................ *
Legal fees and expenses........................................ *
Accounting fees and expenses................................... *
Miscellaneous expenses......................................... *
---------
Total........................................................ $ *
=========
</TABLE>
- --------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company, which is a Delaware corporation, is empowered by the Delaware
General Corporation Law, subject to the procedures and limitations stated
therein, to indemnify any person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or completed
action, suit or proceeding in which such person is made a party by reason of
his being or having been a director, officer, employee or agent of the
Company. The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The Certificate of Incorporation and By-Laws of the
Company provide for indemnification of the directors and officers of such
entities to the full extent permitted by the Delaware General Corporation Law.

Article Seven of the Company's Certificate of Incorporation provides as
follows:

SEVENTH: 1. Indemnification. The Corporation shall indemnify to the fullest
extent permitted under and in accordance with the laws of the State of
Delaware any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, incorporator, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
trustee, employee or agent of or in any other similar capacity with another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, shall
not, of itself, create a presumption that the person had reasonable cause to
believe that his conduct was unlawful.

II-1
<PAGE>

2. Payment of Expenses. Expenses (including attorneys' fees) incurred in
defending any civil, criminal, administrative or investigative action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article SEVENTH.

3. Nonexclusivity of Provision. The indemnification and other rights set
forth in this Article SEVENTH shall not be exclusive of any provisions with
respect thereto in the by-laws or any other contract or agreement between the
Corporation and any officer, director, employee or agent of the Corporation.

4. Effect of Repeal. Neither the amendment nor repeal of this Article
SEVENTH, subparagraph 1, 2, or 3, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article SEVENTH,
subparagraph 1, 2, or 3, shall eliminate or reduce the effect of this Article
SEVENTH, subparagraphs 1, 2, and 3, in respect of any matter occurring before
such amendment, repeal or adoption of an inconsistent provision or in respect
of any cause of action, suit or claim relating to any such matter which would
have given rise to a right of indemnification or right to receive expenses
pursuant to this Article SEVENTH, subparagraph 1, 2, or 3, if such provision
had not been so amended or repealed or if a provision inconsistent therewith
had not been so adopted.

5. Limitation on Liability. No director or officer shall be personally
liable to the Corporation or any stockholder for monetary damages for breach
of fiduciary duty as a director or officer, except for any matter in respect
of which such director or officer (A) shall be liable under Section 174 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (B) shall be liable by reason that, in
addition to any and all other requirements for liability, he:

(i) shall have breached his duty of loyalty to the Corporation or its
stockholders;

(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;

(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of
law; or

(iv) shall have derived an improper personal benefit.

If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.

The Company maintains an insurance policy providing for indemnification of
its 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, the Company's employment agreements
with Burton B. Staniar, John H. Lynch and Andrew B. Cogan 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 the Company, the executive will be
indemnified by the Company to the fullest extent permitted by Delaware general
corporation law or authorized by the Company's Certificate of Incorporation or
Bylaws or resolutions.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On February 29, 1996, in connection with the Acquisition, Warburg, the
Selling Stockholder and certain members of management purchased an aggregate
of shares of Common Stock and shares of Class A Preferred Stock for an
aggregate purchase price of $160 million. Such sales were made in reliance on
the exemption from registration pursuant to Section 4(2) of the Securities Act
and Regulation D promulgated thereunder.

II-2
<PAGE>

On February 29, 1996, in connection with the Acquisition, the Company sold
$165 million aggregate principal amount of its Notes to NationsBanc Capital
Markets, Inc. at a price of 96.75% of its face value. Such sale was made in
reliance on the exemption from registration pursuant to Section 4(2) of the
Securities Act and Rule 144A and Regulation D promulgated thereunder.

On February 29, 1996 and August 7, 1996, certain members of management were
granted a total of and shares of Common Stock, respectively, pursuant
to the 1996 Stock Plan. These shares vest over periods determined at their
date of grant. See "Management--Stock Incentive Plans." The grants on February
29, 1996 were made in reliance on the exemption from registration pursuant to
Section 4(2) of the Securities Act and Rule 701 promulgated thereunder. The
grant made on August 7, 1996 was made in reliance on the exemption from
registration pursuant to Section 4(2) of the Securities Act.

On October 21, 1996 Douglas J. Purdom, Senior Vice President and Chief
Financial Officer of the Company, purchased shares of Common Stock and
Series A Preferred Stock for an aggregate purchase price of $400,000. Such
sale was made in reliance on the exemption from registration pursuant to
Section 4(2) of the Securities Act.

Options to purchase shares of Common Stock were granted to certain
employees of the Company on March 7, 1997 pursuant to the 1996 Stock Plan.
These options vest over periods determined at their date of grant. See
"Management--Stock Incentive Plans." Such grants were made in reliance on the
exemption from registration pursuant to Section 4(2) of the Securities Act.

Options to purchase shares of Common Stock were granted to certain
employees of the Company on March 7, 1997 pursuant to the 1997 Stock Plan.
These options vest over periods determined at their date of grant. See
"Management--Stock Incentive Plans." Such grants were made in reliance on the
exemption from registration pursuant to Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<C> <S>
*1.1 --Form of U.S. Underwriting Agreement.
*1.2 --Form of International Underwriting Agreement.
*3.1 --Amended and Restated Certificate of Incorporation of the Company.
*3.2 --Restated By-Laws of the Company.
*4.1 --Specimen of the Company's Common Stock Certificate.
*5 --Opinion of Willkie Farr & Gallagher.
**10.1 --Stock Purchase Agreement, dated as of December 20, 1995, by and
between Westinghouse and TKG.
**10.2 --TKG 1996 Stock Incentive Plan.
**10.3 --Indenture, dated as of February 29, 1996, by and among the Company,
T.K.G. Acquisition Corp., T.K.G. Acquisition Sub, Inc., The Knoll
Group, Inc., Knoll North America, Inc., Spinneybeck Enterprises, Inc.
and Knoll Overseas, Inc., as guarantors, and IBJ Schroder Bank &
Trust Company, as trustee, relating to $165,000,000 principal amount
of 10-7/8% Senior Subordinated Notes due 2006, including form of
Initial Global Note.
**10.4 --Supplemental Indenture, dated as of February 29, 1996, by and among
the Company, as successor to T.K.G. Acquisition Sub, Inc., the
Guarantors (as defined therein), and IBJ Schroder Bank & Trust
Company, as trustee, relating to $165,000,000 principal amount of 10-
7/8% Senior Subordinated Notes due 2006, including form of Initial
Global Note.
**10.5 --Credit Agreement, dated as of February 29, 1996, by and among T.K.G.
Acquisition Sub, Inc., the Guarantors (as defined therein),
NationsBank, N.A., Chemical Bank and other lending institutions.
**10.6 --Security Agreement dated February 29, 1996, by and among T.K.G.
Acquisition Sub, Inc., the Guarantors (as defined therein), Knoll
North America, Inc., The Knoll Group, Inc., and NationsBank, N.A. and
other lending institutions.
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
*10.7 --Employment Agreement, dated as of February 29, 1996, between T.K.G.
Acquisition Corp. and Burton B. Staniar.
*10.8 --Employment Agreement, dated as of February 29, 1996, between T.K.G.
Acquisition Corp. and John H. Lynch.
*10.9 --Employment Agreement, dated as of February 29, 1996, between T.K.G.
Acquisition Corp. and Andrew B. Cogan.
*10.10 --Stockholders Agreement (Common Stock and Preferred Stock), dated as
of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Pincus
Ventures, L.P., and the signatories thereto.
*10.11 --Form of Stockholders Agreement (Restricted Shares), dated as of
February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Pincus
Ventures, L.P. and the signatories thereto.
*10.12 --TKG 1997 Stock Incentive Plan.
*10.13 --Consulting Agreement, dated as of December 1, 1996, between Wolfgang
Bilstein and Knoll, Inc.
**10.14 --Supplemental Indenture No. 2, dated as of March 14, 1997, by and
among the Company, the Guarantors (as defined therein), and IBJ
Schroder Bank & Trust Company, as trustee, relating to $165,000,000
principal amount of 10-7/8% Senior Subordinated Notes due 2006,
including form of Initial Global Note.
*21 --Subsidiaries of the Registrant.
23.1 --Independent Accountants' Consent of Price Waterhouse LLP.
23.2 --Independent Accountants' Consent of Ernst & Young LLP.
*23.3 --Consent of Willkie Farr & Gallagher (included in their opinion filed
as Exhibit 5).
24 --Powers of Attorney (included on signature pages).
27 --Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Filed as an exhibit to the Company's Form S-4 dated March 29, 1996.

(b) Financial Statement Schedules:

Schedule II--Valuation and Qualifying Accounts

All other schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements
or notes thereto.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions, described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such 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 such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the option of their 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 such issue.

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; and

(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-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on March 14, 1997.

KNOLL, INC.

/s/ Burton B. Staniar
-------------------------------------
BY: BURTON B. STANIAR
TITLE:
CHAIRMAN OF THE BOARD

POWER OF ATTORNEY

We, the undersigned directors and officers of Knoll, Inc., do hereby
severally constitute and appoint Burton B. Staniar, John H. Lynch, Douglas J.
Purdom and Patrick A. Milberger, and each of them, our true and lawful
attorneys and agents, to do any and all acts and things in our name and behalf
in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or any of them, may deem necessary or advisable to
enable said Corporation to comply with the Securities Act of 1933, as amended,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement on Form S-1,
including specifically, but without limitation, power and authority to sign
for us or any of us, in our names in the capacities indicated below, any and
all amendments (including post-effective amendments and including any
subsequent registration statement for the same offering which may be filed
under Rule 462(b) pursuant to the Securities Act of 1933, as amended) hereto;
and we do each hereby ratify and confirm all that said attorneys and agents,
or any one of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

SIGNATURES TITLE DATE

/s/ Burton B. Staniar Chairman of the March 14, 1997
- ------------------------------------- Board
BURTON B. STANIAR

/s/ John H. Lynch President, Chief March 14, 1997
- ------------------------------------- Executive Officer
JOHN H. LYNCH and Director
(Principal
Executive Officer)

/s/ Douglas J. Purdom Chief Financial March 14, 1997
- ------------------------------------- Officer (Principal
DOUGLAS J. PURDOM Financial Officer)

II-5
<PAGE>

/s/ Barry L. McCabe Controller March 14, 1997
- ------------------------------------- (Principal
BARRY L. MCCABE Accounting Officer)

/s/ Andrew B. Cogan Director March 14, 1997
- -------------------------------------
ANDREW B. COGAN

/s/ Jeffrey A. Harris Director March 14, 1997
- -------------------------------------
JEFFREY A. HARRIS

Director March , 1997
- -------------------------------------
SIDNEY LAPIDUS

/s/ Kewsong Lee Director March 14, 1997
- -------------------------------------
KEWSONG LEE

Director March , 1997
- -------------------------------------
JOHN L. VOGELSTEIN

II-6
<PAGE>

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ------------- --------
ADDITIONS BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COSTS AND OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
----------- ---------- ---------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
VALUATION ACCOUNTS DEDUCTED IN
THE CONSOLIDATED BALANCE SHEET
FROM THE ASSETS TO WHICH
THEY APPLY:
TEN MONTHS ENDED DECEMBER 31,
1996:
Allowance for doubtful
accounts...................... $5,838 $2,098 $2,223 $5,713
TWO MONTHS ENDED FEBRUARY 29,
1996:
Allowance for doubtful
accounts...................... 5,790 159 210 5,739
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful
accounts...................... 4,700 2,720 1,630 5,790
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful
accounts...................... 2,162 3,636 1,098 4,700
</TABLE>
- --------
(1) Uncollectible accounts written off.
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
*1.1 --Form of U.S. Underwriting Agreement.
*1.2 --Form of International Underwriting Agreement.
*3.1 --Amended and Restated Certificate of Incorporation of the
Company.
*3.2 --Restated By-Laws of the Company.
*4.1 --Specimen of the Company's Common Stock Certificate.
*5 --Opinion of Willkie Farr & Gallagher.
**10.1 --Stock Purchase Agreement, dated as of December 20, 1995, by
and between Westinghouse and TKG.
**10.2 --TKG 1996 Stock Incentive Plan.
**10.3 --Indenture, dated as of February 29, 1996, by and among the
Company, T.K.G. Acquisition Corp., T.K.G. Acquisition Sub,
Inc., The Knoll Group, Inc., Knoll North America, Inc.,
Spinneybeck Enterprises, Inc. and Knoll Overseas, Inc., as
guarantors, and IBJ Schroder Bank & Trust Company, as trustee,
relating to $165,000,000 principal amount of 10-7/8% Senior
Subordinated Notes due 2006, including form of Initial Global
Note.
**10.4 --Supplemental Indenture, dated as of February 29, 1996, by and
among the Company, as successor to T.K.G. Acquisition Sub,
Inc., the Guarantors (as defined therein), and IBJ Schroder
Bank & Trust Company, as trustee, relating to $165,000,000
principal amount of 10-7/8% Senior Subordinated Notes due
2006, including form of Initial Global Note.
**10.5 --Credit Agreement, dated as of February 29, 1996, by and among
T.K.G. Acquisition Sub, Inc., the Guarantors (as defined
therein), NationsBank, N.A., Chemical Bank and other lending
institutions.
**10.6 --Security Agreement dated February 29, 1996, by and among
T.K.G. Acquisition Sub, Inc., the Guarantors (as defined
therein), Knoll North America, Inc., The Knoll Group, Inc.,
and NationsBank, N.A. and other lending institutions.
*10.7 --Employment Agreement, dated as of February 29, 1996, between
T.K.G. Acquisition Corp. and Burton B. Staniar.
*10.8 --Employment Agreement, dated as of February 29, 1996, between
T.K.G. Acquisition Corp. and John H. Lynch.
*10.9 --Employment Agreement, dated as of February 29, 1996, between
T.K.G. Acquisition Corp. and Andrew B. Cogan.
*10.10 --Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp.,
Warburg, Pincus Ventures, L.P., and the signatories thereto.
*10.11 --Form of Stockholders Agreement (Restricted Shares), dated as
of February 29, 1996, among T.K.G. Acquisition Corp., Warburg,
Pincus Ventures, L.P. and the signatories thereto.
*10.12 --TKG 1997 Stock Incentive Plan.
*10.13 --Consulting Agreement, dated as of December 1, 1996, between
Wolfgang Bilstein and Knoll, Inc.
**10.14 --Supplemental Indenture No. 2, dated as of March 14, 1997, by
and among the Company, the Guarantors (as defined therein),
and IBJ Schroder Bank & Trust Company, as trustee, relating to
$165,000,000 principal amount of 10-7/8% Senior Subordinated
Notes due 2006, including form of Initial Global Note.
*21 --Subsidiaries of the Registrant.
23.1 --Independent Accountants' Consent of Price Waterhouse LLP.
23.2 --Independent Accountants' Consent of Ernst & Young LLP.
* 23.3 --Consent of Willkie Farr & Gallagher (included in their
opinion filed as Exhibit 5).
24 --Powers of Attorney (included on signature pages).
27 --Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Filed as an exhibit to the Company's Form S-4 dated March 29, 1996.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated January 15, 1996 relating
to the consolidated financial statements of the Knoll Group, Inc. which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the two years ended December 31, 1995 listed
under Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the consolidated financial statements referred to in our
report. The audits referred to in such report also included this schedule. We
also consent to the references to us under the headings "Experts," and "Selected
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Financial Data."

/s/ Price Waterhouse LLP

Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219
March 14, 1997

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the references to our firm under the captions "Selected
Financial Information" and "Experts" and to the use of our report dated March
14, 1997 in the Registration Statement (Form S-1 No. 333- ) and related
Prospectus of Knoll, Inc. dated March 14, 1997.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 14, 1997

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,804
<SECURITIES> 0
<RECEIVABLES> 116,879
<ALLOWANCES> 5,713
<INVENTORY> 57,811
<CURRENT-ASSETS> 202,679
<PP&E> 195,483
<DEPRECIATION> 19,265
<TOTAL-ASSETS> 675,712
<CURRENT-LIABILITIES> 137,925
<BONDS> 330,889
0
1,603
<COMMON> 23
<OTHER-SE> 176,178
<TOTAL-LIABILITY-AND-EQUITY> 675,712
<SALES> 561,534
<TOTAL-REVENUES> 561,534
<CGS> 358,841
<TOTAL-COSTS> 358,841
<OTHER-EXPENSES> 131,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,952
<INCOME-PRETAX> 38,839
<INCOME-TAX> 16,844
<INCOME-CONTINUING> 21,995
<DISCONTINUED> 0
<EXTRAORDINARY> (5,159)
<CHANGES> 0
<NET-INCOME> 16,836
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>