<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
KNOLL, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
KNOLL, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
---------------------
2) Aggregate number of securities to which transaction applies:
---------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
---------------------
5) Total fee paid:
---------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------
2) Form, Schedule or Registration Statement No:
----------------
3) Filing Party:
----------------
4) Date Filed:
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<PAGE>
[LOGO OF KNOLL, INC. APPEARS HERE]
April 14, 1998
Dear Stockholder:
Knoll, Inc. will hold its 1998 annual meeting of stockholders at The Wyndham
Franklin Plaza Hotel, 17th and Race Streets, Philadelphia, PA 19103 on May 19,
1998 at 11:00 a.m. At the meeting, stockholders will elect the nine directors
of Knoll for one-year terms. Detailed information about the meeting and the
election of directors is included in the attached proxy statement.
On behalf of the Board of Directors and all of Knoll's associates, I cordially
invite all stockholders to attend the annual meeting and hope you will be able
to attend in person. Whether or not you plan to attend the meeting, please
take the time to vote by completing and mailing the enclosed proxy card to us.
As explained in the proxy statement, your proxy may be withdrawn at any time
before it is actually voted at the meeting.
If you plan to attend the meeting in person, please remember to bring a form
of personal identification with you and, if you are acting as a proxy for
another stockholder, please bring written confirmation from the record owner
that you are acting as proxy. If you will need special assistance at the
meeting, please contact Investor Relations at (215) 679-7991.
On behalf of the management and directors of Knoll, thank you for your support
and confidence during 1997.
Sincerely,
/s/ Burton B. Staniar
Burton B. Staniar
Chairman of the Board
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1998
TO THE STOCKHOLDERS OF KNOLL, INC.:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Knoll, Inc. (the "Company") will be held at The Wyndham Franklin
Plaza Hotel, 17th and Race Streets, Philadelphia, PA 19103 on May 19, 1998 at
11:00 a.m., local time, for the following purposes:
1. To elect nine directors of the Company to serve until the Company's 1999
annual meeting of stockholders or until their successors shall be
elected.
2. To approve an amendment to the Knoll, Inc. 1997 Stock Incentive Plan,
which would increase the number of authorized shares available
thereunder by 1,000,000 shares.
3. To approve the Knoll, Inc. Employee Stock Purchase Plan.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the 1998 fiscal year.
5. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting.
All stockholders of record at the close of business on April 2, 1998 are
entitled to notice of, and to vote at, the Annual Meeting. A list of such
holders will be open to the examination of any stockholder, for any purpose
germane to the meeting, at the offices of Knoll, Inc., 1235 Water Street, East
Greenville, Pennsylvania, for a period of ten days prior to the meeting.
It is important that your shares are represented at the meeting, whether or
not you attend the meeting and regardless of the number of shares you own. To
ensure that your shares are represented at the Annual Meeting, you are urged
to complete, sign, date and return the accompanying proxy card promptly in the
enclosed postage paid envelope. Please sign the accompanying proxy card
exactly as your name appears on your share certificate(s). You may revoke your
proxy at any time before it is voted at the Annual Meeting. If you attend the
Annual Meeting, you may vote your shares in person.
By order of the Board of Directors,
/s/ Burton B. Staniar
Burton B. Staniar
Chairman of the Board
April 14, 1998
<PAGE>
KNOLL, INC.
1235 WATER STREET
EAST GREENVILLE, PENNSYLVANIA 18041
----------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1998
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of Knoll, Inc. (the
"Company") to be voted at the Annual Meeting of Stockholders to be held at The
Wyndham Franklin Plaza Hotel, 17th and Race Streets, Philadelphia, PA 19103 on
May 19, 1998 at 11:00 a.m., local time, or any postponement or adjournment
thereof (the "Annual Meeting"). This Proxy Statement, the Notice of Annual
Meeting and the accompanying form of proxy are being first mailed to
stockholders on or about April 14, 1998.
As of April 2, 1998, the record date for the determination of persons
entitled to receive notice of, and to vote at, the Annual Meeting, there were
issued and outstanding 43,425,811 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"). Each share of Common Stock entitles
the holder to one vote.
The presence, in person or by proxy, of holders of at least a majority of
the shares of Common Stock issued and outstanding and entitled to vote on the
matters to be considered at the Annual Meeting is required to constitute a
quorum for the transaction of business at the Annual Meeting.
At the Annual Meeting, stockholders will be asked to take the following
actions:
1. To elect nine directors of the Company to serve until the Company's 1999
annual meeting of stockholders or until their successors shall be
elected (the "Board Proposal").
2. To approve an amendment to the Knoll, Inc. 1997 Stock Incentive Plan
(the "Incentive Plan Proposal"), which would increase the number of
authorized shares available thereunder by 1,000,000 shares.
3. To approve the Knoll, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan Proposal").
4. To ratify the appointment of the firm of Ernst & Young LLP ("Ernst &
Young"), independent auditors, to serve as the Company's independent
auditors for the 1998 fiscal year until the Company's 1999 annual
meeting of stockholders (the "Auditors Proposal").
5. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting.
All of the above Proposals will be decided by the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting. As of the Record Date, the executive officers and directors of
the Company and certain of their affiliates, including Warburg, Pincus
Ventures, L.P. ("Warburg") owned an aggregate of 26,745,062 shares of Common
Stock entitled to be voted for the approval of the proposals to be considered
at the Annual Meeting, representing approximately 64.1% of the shares entitled
to be voted. Accordingly, assuming these shares are voted as indicated,
approval of each of the proposals to be considered at the Annual Meeting is
assured.
<PAGE>
SOLICITATION AND REVOCATION
Proxies in the form enclosed are being solicited by, or on behalf of, the
Board of Directors of the Company (the "Board"). The persons named in the
accompanying form of proxy have been designated as proxies by the Board.
All shares of Common Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given thereon. If no instructions are provided in an
executed proxy, it will be voted (1) FOR the Board Proposal; (2) FOR the
Incentive Plan Proposal; (3) FOR the Stock Purchase Plan Proposal; (4) FOR the
Auditors Proposal; and in accordance with the proxyholder's best judgment as
to any other business as may properly come before the Annual Meeting. Shares
represented by proxies which are marked "withhold authority" with respect to
the election of one or more nominees for election as directors, proxies which
are marked "abstain" on other proposals, and proxies which are marked to deny
discretionary authority on other matters will not be counted in determining
the number of votes cast for such matters.
In instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned proxies to the brokers
(so-called "broker non-votes"), those shares will be counted for the purpose
of determining if a quorum is present but will not be included in the vote
totals for matters as to which discretionary authority is prohibited and,
therefore, will have no effect on such votes. Shares of restricted stock
granted under the Company's 1996 and 1997 Stock Incentive Plans (the "Stock
Incentive Plans") which have not yet vested are not entitled to be voted at
the Annual Meeting.
Any stockholder who executes a proxy may revoke it at any time before it is
voted by delivering to the Secretary of the Company a written statement
revoking such proxy, by executing and delivering a later dated proxy, or by
voting in person at the Annual Meeting. Attendance at the Annual Meeting by a
stockholder who has executed and delivered a proxy to the Company shall not in
and of itself constitute a revocation of such proxy.
The Company will bear its own cost of the solicitation of proxies. Proxies
will be solicited initially by mail. Further solicitation may be made by
directors, officers and employees of the Company personally, by telephone or
otherwise, but such persons will not be specifically compensated for such
services. Upon request, the Company will reimburse brokers, dealers, banks or
similar entities acting as nominees for reasonable expenses incurred in
forwarding copies of the proxy materials relating to the Annual Meeting to the
beneficial owners of shares of Common Stock which such persons hold of record.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED PROXY CARD PROMPTLY SO
YOUR SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE MEETING IN
PERSON.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
MANAGEMENT AND DIRECTORS
The following table sets forth information as of March 31, 1998 with respect
to the beneficial ownership of the Common Stock by: (i) each person known by
the Company to own beneficially 5% or more of the outstanding shares of Common
Stock; (ii) each director of the Company; (iii) the Company's Chief Executive
Officer and each of the four remaining most highly compensated executive
officers (collectively, the "Named Executive Officers"); and (iv) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIAL OWNER(1) COMMON STOCK(2) PERCENTAGE
- ------------------- ---------------- ----------
<S> <C> <C>
Warburg, Pincus & Co.(3)
466 Lexington Avenue
New York, New York 10017........................... 25,390,427 60.9%
Burton B. Staniar(4)............................... 999,561 2.4
John H. Lynch...................................... 697,730 1.7
Wolfgang Billstein................................. 82,223 *
Kathleen G. Bradley................................ 126,173 *
Andrew B. Cogan.................................... 269,020 *
John W. Amerman(5)................................. 10,000 *
Robert J. Dolan(5)................................. 10,000 *
Jeffrey A. Harris(6)............................... 25,394,702 60.9
Sidney Lapidus(6).................................. 25,399,427 60.9
Kewsong Lee(6)..................................... 25,391,327 60.9
John L. Vogelstein(6).............................. 25,422,377 61.0
All current directors and executive officers as a
group (16 persons)................................ 27,838,749 66.7
</TABLE>
- --------
*Less than 1%.
(1) Percentages are calculated pursuant to Rule 13d-3 under the Exchange Act.
Percentage calculations assume, for each person and group, that all shares
which may be acquired by such person or group pursuant to options
currently exercisable or which become exercisable within 60 days following
March 31, 1998 are outstanding for the purpose of computing the percentage
of Common Stock owned by such person or group. However, those unissued
shares of Common Stock described above are not deemed to be outstanding
for calculating the percentage of Common Stock owned by any other person.
Except as otherwise indicated, the persons in this table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and subject to the information contained in the footnotes to
this table. The number of shares outstanding for these purposes as of
March 31, 1998 consists of 41,711,676 shares of Common Stock (excluding
1,714,135 restricted shares which have not yet vested).
(2) Excludes 188,366, 188,366, 0, 150,693, 113,019 and 1,036,014 restricted
shares of Common Stock for Messrs. Staniar, Lynch, Billstein and Cogan,
Ms. Bradley and all current directors and executive officers as a group,
respectively, which have not yet vested, as well as options ("Options") to
purchase 15,000, 301,385, 35,000, 15,000 and 150,692 shares of Common
Stock held by Messrs. Amerman, Billstein, Cogan, Dolan and Ms. Bradley,
respectively, which have not yet vested.
(3) Warburg directly owns 25,217,788 shares of Common Stock and Warburg,
Pincus directly owns an additional 172,639 shares. The sole general
partner of Warburg is Warburg, Pincus. E.M. Warburg, Pincus & Co. LLC
("E.M. Warburg") manages Warburg. The members of E.M. Warburg are
substantially the
3
<PAGE>
same as the partners of Warburg, Pincus. Lionel I. Pincus is the managing
partner of Warburg, Pincus and the managing member of E.M. Warburg and may
be deemed to control both Warburg, Pincus and E.M. Warburg. Warburg, Pincus
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 E.M.
Warburg and general partners of Warburg, Pincus. 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 Exchange Act) in an
indeterminate portion of the shares beneficially owned by Warburg. See Note
6 below.
(4) Excludes 65,000 shares owned by The Burton Foundation, of which Mr.
Staniar is a Trustee. Mr. Staniar disclaims beneficial ownership of such
shares owned by The Burton Foundation.
(5) Upon consummation of the Initial Public Offering in May 1997, the Company
granted each of Messrs. Amerman and Dolan Options to purchase 25,000
shares of Common Stock. Twenty percent of these Options vested upon grant.
The remaining Options have and will continue to vest in four equal
installments on the next four anniversaries of the grant date.
(6) 25,217,788 and 172,639 of the shares indicated as owned by Messrs. Harris,
Lapidus, Lee and Vogelstein are owned directly by Warburg and Warburg,
Pincus, respectively and are included because of the affiliation of such
persons with Warburg and Warburg, Pincus. Messrs. Harris, Lapidus, Lee and
Vogelstein disclaim "beneficial ownership" of these shares within the
meaning of Rule 13d-3 under the Exchange Act. Messrs. Harris, Lapidus, Lee
and Vogelstein directly own of record 4,275; 9,000; 900 and 31,950 shares
of Common Stock, respectively. See Note 3 above.
4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The table below sets forth the names, ages and titles of the persons who
were directors of the Company and executive officers of the Company as of
March 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Burton B. Staniar....... 56 Chairman of the Board
John H. Lynch........... 45 President, Chief Executive Officer and Director
Wolfgang Billstein...... 48 Managing Director--Knoll Europe
Kathleen G. Bradley..... 48 Senior Vice President--Sales, Distribution and
Customer Service
Andrew B. Cogan......... 35 Senior Vice President--Marketing and
Product Development and Director
Carl G. Magnusson....... 58 Senior Vice President--Design
Douglas J. Purdom....... 39 Senior Vice President and Chief Financial Officer
Barbara E. Ellixson..... 44 Vice President--Human Resources
Barry L. McCabe......... 51 Vice President, Controller and Treasurer
Patrick A. Milberger.... 41 Vice President, General Counsel and Secretary
John W. Amerman......... 66 Director
Robert J. Dolan......... 50 Director
Jeffrey A. Harris....... 42 Director
Sidney Lapidus.......... 60 Director
Kewsong Lee............. 32 Director
John L. Vogelstein...... 63 Director
</TABLE>
Burton B. Staniar was appointed Chairman of the Board of the Company in
December 1993. Mr. Staniar served as Chief Executive Officer of the Company
from December 1993 to January 1997. Prior to that time, Mr. Staniar held a
number of assignments at Westinghouse Electric Corporation ("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 Vice Chairman of the Board in May 1994.
Mr. Lynch was subsequently elected President of the Company and in January
1997 was elected Chief Executive Officer. From 1990 to 1994, prior to joining
the Company, Mr. Lynch was a partner in BGI, a management firm. During that
time, Mr. Lynch led the restructuring of the Westinghouse Broadcasting
television and radio stations. From 1988 to 1990, Mr. Lynch was an associate
dean at the Harvard Business School.
Wolfgang Billstein joined the Company in November 1994 as Managing
Director--Knoll Europe. In addition, since 1991, Mr. Billstein has been owner
and Managing Director of Peill & Putzler, a German-based manufacturer and
distributor of glass products. 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.
5
<PAGE>
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.
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, an
Arizona-based copper mining 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 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 served as
an Assistant General Counsel and in a number of other positions in the
Westinghouse Law Department, which he joined in 1986. Prior to such time, Mr.
Milberger was in private practice at Buchanan Ingersoll, P.C.
John W. Amerman has been a director of the Company since May 1997. Until
October 1997, Mr. Amerman had served as Chairman of the Board, and until
January 1997 as Chief Executive Officer, of Mattel, Inc., positions in which
he served for ten years. Mr. Amerman is also a director of Unocal, Inc.,
Vanstar Corporation and Aegis Group, plc.
Robert J. Dolan has been a director of the Company since May 1997. Mr. Dolan
has been a Professor of Business Administration at Harvard University Graduate
School of Business Administration since 1980. From 1976 to 1980, Mr. Dolan was
a Professor at University of Chicago Graduate School of Business.
Jeffrey A. Harris, a director of the Company since February 1996, has been a
General Partner of Warburg, Pincus and a Member and Managing Director of E.M.
Warburg 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 and a Member and Managing Director of E.M.
Warburg and its predecessors since January 1982, where he has been employed
since 1967. Mr. Lapidus is a director of Lennar Corporation, Caribiner
International, Inc., Grubb & Ellis Company, Journal Register Company and
Panavision Inc., and several privately held companies.
Kewsong Lee, a director of the Company since February 1996, has been a
General Partner of Warburg, Pincus and a Member and Managing Director of E.M.
Warburg and its predecessors since January 1997, where he has been employed
since 1992. Mr. Lee is a director of RenaissanceRe Holdings Ltd., Eagle Family
Food Holdings, Inc. and several privately held companies.
John L. Vogelstein, a director of the Company since February 1996, is a
General Partner of Warburg, Pincus, and has served since 1982 as Vice
Chairman, and since 1994 as President, of E.M. Warburg and its predecessors,
where he has been employed since 1967. Mr. Vogelstein is a director of ADVO
Inc., Aegis Group plc., Golden Books Family Entertainment, Inc., Journal
Register Company, LCI International, Inc., Mattel, Inc., Vanstar Corporation
and several privately held companies.
6
<PAGE>
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Compensation Committee and Stock Option Committee Report on Executive
Compensation
The Compensation Committee and the Stock Option Committee, as presently
constituted, were formed on July 22, 1997, shortly after the completion of the
Company's initial public offering in May of 1997. At that time, the Board
adopted a charter for each committee. Prior to July 22, 1997, all grants of
Common Stock and Options under the Company's Stock Incentive Plans were made
at the discretion of a Stock Plan Committee of the Board comprised of Burton
B. Staniar and Jeffrey A. Harris.
Compensation Philosophy. The Company's compensation program is designed to
attract, reward and retain highly qualified executives and to encourage the
achievement of business objectives and superior corporate performance. The
program attempts to assure the Board and stockholders that (1) the achievement
of the overall goals and objectives of the Company can be supported by
adopting an appropriate executive compensation policy and implementing it
through an effective total compensation program and (2) the total compensation
program and practices of the Company are designed with full consideration of
all accounting, tax, securities law and other regulatory requirements and are
of the highest quality.
The Company's executive compensation program consists of three key elements:
(1) base salary, (2) a performance-based annual bonus, and (3) a long-term
compensation component composed of equity-based awards pursuant to the
Company's Stock Incentive Plans.
Base Salary. Base salaries are determined by evaluating the responsibilities
associated with the position and the individual's overall level of experience.
In addition, the compensation of Messrs. Staniar, Lynch and Cogan is subject
to the terms of the respective employment agreements of such persons and, in
the case of Mr. Billstein, a consulting agreement between Mr. Billstein and
the Company. Periodic salary adjustments will be determined by giving
consideration to the Company's performance, each executive's contribution to
that performance and the recommendation of the Chief Executive Officer.
Annual Bonus. Bonuses are paid annually pursuant to the Company's Annual
Incentive Compensation Program, in which the Named Executive Officers are
eligible to participate, as well as any other employees selected by the Chief
Executive Officer. The program establishes target bonus awards based on a
stated percentage of the base salary of program participants. The bonuses are
paid in part based on the achievement of targeted operating results and in
part based on achievement of individual goals established for the participant.
As to all of the Named Executive Officers except Ms. Bradley, the annual
bonuses are also subject to the terms of the employment agreements and
consulting agreement referenced above.
Long-Term Compensation. In order to align stockholder and executive officer
interests, the long-term component of the Company's executive compensation
program utilizes equity-based awards whose value is directly related to the
value of the Common Stock. These equity-based awards have and will be granted
by the Stock Option Committee pursuant to the Company's Stock Incentive Plans.
Individuals to whom equity-based awards are to be granted and the amount of
Common Stock related to equity-based awards will be determined solely at the
discretion of the Stock Option Committee. Because individual equity-based
award levels will be based on a subjective evaluation of each individual's
overall past and expected future contribution, no specific formula is used to
determine such awards for any executive.
The Compensation Committee and Stock Option Committee are each committed to
design, administer and develop executive compensation programs intended to
support the growth and profitability of the Company.
Compensation of the Chairman and the Chief Executive Officer. Except as
described below, the 1997 compensation of Burton B. Staniar, Chairman of the
Company's Board, and John H. Lynch, President and Chief Executive Officer of
the Company, was determined and reviewed by the Compensation Committee in
accordance with the Company's compensation philosophy, subject to the existing
employment agreements of Messrs. Staniar
7
<PAGE>
and Lynch. In determining the incentive portion of compensation, the
Compensation Committee considers the achievement of agreed-upon objectives,
the overall financial and operating performance of the Company and the
creation and enhancement of shareholder value. The Committee also considers
subjective factors such as leadership and motivational abilities in measuring
the performance of Messrs. Staniar and Lynch.
The Compensation Committee believes that the Company's outstanding 1997
performance was significantly impacted by Messrs. Staniar and Lynch and by the
other members of the Company's management team. Additionally, the Compensation
Committee believes that the beneficial ownership position of Messrs. Staniar
and Lynch in the Company cause their interests to be well aligned with the
long term interests of the Company and its stockholders.
Tax Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), limits the tax deductibility of
compensation in excess of $1 million paid to certain members of senior
management, unless the payments are made under a performance-based plan as
defined in Section 162(m). The Company's general policy is to structure its
compensation programs to preserve the tax deductibility of compensation paid
to its executive officers and other members of management. All compensation
paid pursuant to the Company's Stock Incentive Plans are exempt from the
application of Section 162(m) and will continue to be exempt therefrom until
after the Annual Meeting. Thereafter, assuming the amendment to the 1997 Stock
Incentive Plan is approved by the stockholders, it is designed to allow for
the grant of equity-based awards that will be performance-based and therefore
exempt from the application of Section 162(m). While the Company currently
intends to pursue a strategy of maximizing deductibility of senior management
compensation, it also believes it is important to maintain the flexibility to
take actions it considers to be in the best interests of the Company and its
stockholders, which are necessarily based on considerations in addition to
Section 162(m).
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
John W. Amerman John W. Amerman
Jeffrey A. Harris Robert J. Dolan
Sidney Lapidus
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, the compensation of Messrs.
Staniar, Lynch and Cogan was determined pursuant to employment agreements
between such officers and the Company. See "--Employment Agreements." Except
as otherwise described herein, the 1997 compensation of each of Messrs.
Staniar, Lynch, Cogan and the other Named Executive Officers was determined by
the Compensation Committee of the Board of Directors. The Compensation
Committee and the Stock Option Committee, as presently constituted, were
formed on July 22, 1997, shortly after the completion of the Company's initial
public offering in May of 1997. At that time, the Board adopted a charter for
each committee. Prior to July 22, 1997, all grants of Common Stock and Options
under the Company's 1996 and 1997 Stock Incentive Plans were made at the
discretion of a Stock Plan Committee of the Board comprised of Burton B.
Staniar and Jeffrey A. Harris. Except for Messrs. Staniar, Lynch and Cogan, no
member of the Board is or has been an officer or employee of the Company.
During the year ended December 31, 1997, 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 Board is affiliated.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended December 31, 1997, 1996
and 1995, individual compensation information for the Chief Executive Officer
of the Company and each of the other Named Executive Officers.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
----------------- ---------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS AWARDS(1) OPTIONS(2) COMPENSATION(3)
------------------ ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Burton B. Staniar....... 1997 $399,996 $750,000 $ -- -- $8,880
Chairman of the Board 1996 410,830 600,000 30,000 -- 5,595
1995 465,000 350,000 -- -- 4,500
John H. Lynch........... 1997 399,996 750,000 -- -- 8,880
President and Chief 1996 393,330 600,000 30,000 -- 6,300
Executive Officer 1995 360,000 360,000 -- -- 6,075
Andrew B. Cogan......... 1997 199,992 300,000 -- 35,000 --
Senior Vice President-- 1996 197,930 250,000 12,000 -- --
Marketing and 1995 187,620 187,000 -- -- --
Product Development
Kathleen G. Bradley..... 1997 199,992 300,000 -- 188,365 8,325
Senior Vice President-- 1996 197,050 250,000 6,000 -- 4,328
Sales, Distribution and 1995 163,668 256,740 -- -- 4,755
Customer Service
Wolfgang Billstein...... 1997 363,163 700,000 -- 376,731 --
Managing Director--Knoll 1996 396,000 572,836 -- -- --
Europe 1995 360,000 653,100 -- -- --
</TABLE>
- --------
(1) On February 29, 1996, Messrs. Staniar, Lynch and Cogan and Ms. Bradley
were granted, respectively, 941,829, 941,829, 376,731 and 188,365 shares
of vested and unvested restricted stock. Holders of shares of restricted
stock are not entitled to receive dividends until such shares vest and
become unrestricted. As of March 1, 1998, 80% of the shares granted to
each of Messrs. Staniar and Lynch had vested and an additional 10% will
vest on each of March 1, 1999 and 2000; 60% of the shares granted to Mr.
Cogan had vested and an additional 20% will vest on each of March 1, 1999
and 2000; and 40% of the shares granted to Ms. Bradley had vested and an
additional 20% will vest on each of March 1, 1999, 2000 and 2001. 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 of the Company from Westinghouse (the
"Acquisition"). At December 31, 1997 Messrs. Staniar, Lynch and Cogan and
Ms. Bradley held 188,366, 188,366, 150,693 and 113,019 shares of
restricted stock, respectively, having a value on December 31, 1997 of
$6,051,258, $6,051,258, $4,841,013 and $3,630,735, respectively.
(2) Represents the aggregate number of shares of Common Stock subject to
Options granted to the Named Executive Officers.
(3) Amounts in this column represent the Company's matching contributions to
the Knoll, Inc. Retirement Savings Plan.
9
<PAGE>
STOCK OPTION GRANTS TABLE
The following table sets forth information concerning individual grants of
Options made to Named Executive Officers during 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION TERM
-----------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE EXPIRATION
NAME GRANTED EMPLOYEES PRICE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Burton B. Staniar....... -- -- % $-- N/A $-- $--
John H. Lynch........... -- -- -- N/A -- --
Andrew B. Cogan......... 10,000(1) .46 28.500 10/29/07 179,265 454,290
25,000(2) 1.2 33.125 10/22/07 520,890 1,320,031
Kathleen G. Bradley..... 188,365(3) 8.8 15.930 3/7/07 1,887,411 4,783,043
Wolfgang Billstein...... 376,731(3) 17.5 15.930 3/7/07 3,774,833 9,566,112
</TABLE>
- --------
(1) These Options were granted on October 29, 1997 and vest in five equal
annual installments beginning on October 29, 1998.
(2) These Options were granted on October 22, 1997 and vest in five equal
annual installments beginning on October 22, 1998.
(3) These Options were granted on March 7, 1997 and began vesting in five
equal annual installments on March 7, 1998.
AGGREGATE STOCK OPTION EXERCISE TABLE
The following table sets forth information regarding the exercise of Options
by Named Executive Officers during 1997. The table also shows the number and
value of unexercised Options which were held by the Named Executive Officers
on December 31, 1997. The values of unexercised Options are based on a fair
market value of $32.125 per share on December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
NUMBER OF OPTIONS VALUE OF UNEXERCISED IN-
SHARES ACQUIRED ON VALUE EXERCISABLE/ THE-MONEY OPTIONS
NAME EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------ -------- ------------- -------------------------
<S> <C> <C> <C> <C>
Burton B. Staniar....... N/A N/A -0- / -0- -0- / $ -0-
John H. Lynch........... N/A N/A -0- / -0- -0- / $ -0-
Andrew B. Cogan......... N/A N/A -0- / 35,000 -0- / $ 36,250
Kathleen G. Bradley..... N/A N/A -0- / 188,365 -0- / $ 3,050,571
Wolfgang Billstein...... N/A N/A -0- / 376,731 -0- / $ 6,101,159
</TABLE>
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 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 five 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
10
<PAGE>
during the first and last years of employment. The estimated annual benefits
payable upon normal retirement under the Westinghouse Pension Plan for each of
the Named Executive Officers is as follows: Mr. Staniar ($0); Mr. Lynch
($4,712); Ms. Bradley ($24,648); and Mr. Cogan ($16,500). Mr. Billstein did
not participate in the Westinghouse Pension Plan.
Effective January 1, 1998, the multiplier in the career average compensation
formula in the Company Pension Plan was increased from 1.45% to 1.55%. This
amendment was made retroactive to March 1, 1996. The terms of the Company
Pension Plan are otherwise the same as those of the Westinghouse Pension Plan.
The estimated annual benefits payable upon normal retirement under the Company
Pension Plan (with the amended formula) for each of the Named Executive
Officers is as follows: Mr. Staniar ($4,418); Mr. Lynch ($4,418); Ms. Bradley
($4,418); and Mr. Cogan ($4,418). Mr. Billstein has not participated in the
Company Pension Plan.
Messrs. Staniar, Lynch and Cogan and Ms. Bradley also participated in the
Westinghouse Executive Pension Program (the "Westinghouse Excess Plan")
through 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 "Code"). 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: Mr. Staniar
($263,000); Mr. Lynch ($13,972); Ms. Bradley ($5,820); and Mr. 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 and Cogan and Ms. Bradley have the following years of credited
service, as of December 31, 1997: 0.00/1.84/15.44, 1.75/1.84/1.75,
7.14/1.84/5.498 and 16.64/1.84/5.498 years, respectively.
DIRECTOR COMPENSATION
Upon consummation of the Initial Public Offering, directors who were not
employees or officers of the Company or Warburg received options to purchase
25,000 shares of Common Stock at an exercise price equal to the initial public
offering price. Twenty percent of these options vested upon grant. The options
have and will continue to vest in four installments on the next four
anniversaries of the grant date. Such non-employee directors are also paid a
fee of $1,000 for each board meeting attended and are 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 or Warburg do 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 President
and Chief Executive Officer, and Andrew B. Cogan, the Company's Senior Vice
President--Marketing and Product Development, for terms which expired on March
1, 1998 and were each renewed pursuant to automatic one-year extensions. Such
employment agreements will continue to renew automatically each March 1 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 a target 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 a target annual bonus of 100% of base salary based on
the attainment of goals and objectives 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
11
<PAGE>
contain non-compete, 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, as amended, with Mr. Wolfgang Billstein. Pursuant to this
agreement, Mr. Billstein receives a monthly fee of 52,249 Deutsche Marks
(approximately $28,396 based on current exchange rates), and contingent
incentives based on the positive operating profit of Knoll Europe (subject to
certain conditions) and Knoll Europe's order volume. The agreement was amended
and renewed on November 30, 1997 for the first of two elective one-year
periods. Knoll has the right to terminate this agreement upon three months
notice and payment of 313,494 Deutsche Marks (approximately $576,829 based on
current exchange rates) plus a portion of Mr. Billstein's incentive
compensation.
CERTAIN TRANSACTIONS
STOCKHOLDERS AGREEMENT
Warburg, NationsBanc Investment Corp. ("NationsBanc") and 12 senior members
of management (each a "Holder" and collectively, the "Holders") and the
Company are parties to 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 Stock Incentive Plans).
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, 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. As of March 31, 1998, the registration
rights described above apply to 26,871,988 shares of Common Stock held by the
Holders.
12
<PAGE>
The Stockholders Agreement provides that the original Board of the Company
was to be composed of Messrs. Staniar, Lynch, Vogelstein, Lapidus, Harris and
Lee. Pursuant to the Stockholders Agreement, Warburg, NationsBanc and the
other stockholders who are a party thereto (who hold in the aggregate
approximately 65.8% of the outstanding shares of Common Stock) 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 4,144,030 restricted shares of Common
Stock pursuant to the Company's 1996 Stock Incentive 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,
persons deemed to be "insiders" within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") have agreed
not to transfer their shares except (i) to members of their immediate
families, donees and other related or controlled entities, (ii) to Warburg or
an affiliate thereof or (iii) to others upon five business days prior written
notice to the Board of Directors. The restrictions on transfer will terminate
when Warburg owns less than 10% of the outstanding shares of Common 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 Incentive Plan. In addition, 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.
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, Mr. Staniar received 941,829 restricted shares, Mr. Lynch received
941,829 restricted shares, Mr. Cogan received 376,731 restricted shares and
Ms. Bradley received 188,365 restricted shares. The agreements were dated
February 29, 1996. With respect to Messrs. Staniar and Lynch, 80% of the
shares granted have vested and the remaining unvested shares will vest at the
rate of 10% on each of March 1, 1999 and 2000. With respect to Mr. Cogan, 60%
of the shares granted have vested and the remaining unvested shares will vest
at the rate of 20% on each of March 1, 1999 and 2000. With respect to Ms.
Bradley, 40% of the shares granted have vested and the remaining unvested
shares will vest at the rate of 20% on each of March 1, 1999, 2000 and 2001.
The agreements provide that upon the voluntary termination of employment for
reasons other than death, disability or retirement at age 65, or (except in
the case of Messrs. Staniar and Lynch) if the grantee's employment was
terminated without cause, the nonvested restricted shares are to be
immediately forfeited to the Company. For all of such officers other than
Messrs. Staniar, Lynch and Cogan, upon termination of the employment of such
officers with cause, the agreements provide that the Company may repurchase
the shares of Common Stock at $0.10 per share.
OTHER
During the year ended December 31, 1997, the Company paid $191,250.24 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(R) product line. Emanuela Frattini Magnusson is the
wife of Carl G. Magnusson, the Company's Senior Vice President--Design.
In connection with the Initial Public Offering and pursuant to an agreement,
dated as of April 14, 1997, among the Company, Warburg, NationsBanc and
certain members of the Company's management, upon consummation of the Initial
Public Offering, 800,000 shares of the Company's Series A 12% Participating
13
<PAGE>
Convertible Preferred Stock were redeemed for $80.0 million and 11,749,361
shares of Common Stock, and the remaining 802,998 shares of Preferred Stock
were converted into 15,691,558 shares of Common Stock. Further pursuant to
such arrangement, (i) Warburg received $75.9 million and 25,024,481 shares of
Common Stock, (ii) NationsBanc received $4.1 million and 1,361,877 shares of
Common Stock, (iii) Messrs. Staniar, Lynch, Billstein, Cogan, Purdom, McCabe
and Milberger received 400,736, 400,736, 6,249, 78,116, 78,116, 9,374 and
18,748 shares of Common Stock, respectively, and (iv) Mmes. Bradley and
Ellixson received 12,499 and 9,374 shares of Common Stock, respectively.
BOARD OF DIRECTORS; BOARD COMMITTEES
Board of Directors
The business affairs of the Company are managed under the direction of the
Board. Members of the Board are kept informed through various reports and
documents sent to them each month, through operating and financial reports
routinely presented at Board and committee meetings by the Chief Executive
Officer and other officers, and through other means. During 1997, the standing
committees listed below assisted the Board in carrying out its duties. All of
the directors are non-employee directors except Messrs. Staniar, Lynch and
Cogan. Directors who are officers of the Company do not participate in any
action of the Board relating to any executive compensation plan described in
this Proxy Statement.
COMMITTEES OF THE BOARD
<TABLE>
<CAPTION>
AUDIT STOCK OPTION COMPENSATION
----- ------------ ------------
<S> <C> <C>
J.W. Amerman J.W. Amerman J.W. Amerman
R.J. Dolan R.J. Dolan J.A. Harris
S. Lapidus
</TABLE>
During 1997, the Board met six times, the Audit Committee met once, the
Stock Option Committee met two times, and the Compensation Committee met once.
Each of the Company's Directors attended at least 75% of the total number of
meetings of the Board and Committees on which he served during the period of
such director's service on the Board, except that Mr. Staniar and Mr.
Vogelstein did not attend two and three Board meetings conducted by
teleconference, respectively, and Mr. Lapidus did not attend the Compensation
Committee meeting.
Audit Committee
The Company's Audit Committee has general responsibility to review the
Company's financial controls, as well as the accounting and audit activities
of the Company. It is the responsibility of the Audit Committee to review
annually the qualifications of the Company's independent certified public
accountants, make recommendations to the Board as to their selection and
review the planning, fees and results of their audit. Additionally, the Audit
Committee meets periodically with the employees of the Company responsible for
financial and accounting matters to review the Company's internal procedures
and controls, monitors the business practices of the Company, and reports
regularly to the full Board on its activities. The Audit Committee presently
consists of Messrs. Amerman and Dolan. None of the members of the Audit
Committee are directly involved in the supervision of the financial affairs of
the Company.
Compensation Committee; Stock Option Committee
The Company has a Compensation Committee comprised of Messrs. Amerman,
Harris and Lapidus. The Compensation Committee has the authority to approve
the annual salary, bonus and other benefits paid to the Company's senior
executives, review and approve the Company's compensation programs and
establish, review and approve policies for management perquisites. A Stock
Option Committee of the Board, which presently
14
<PAGE>
consists of Messrs. Amerman and Dolan, has the authority to grant options and
restricted stock under the Company's existing stock incentive plans, and to
review and approve new stock incentive plans and similar programs, as
necessary and appropriate.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the Exchange Act, the Company's directors and executive officers, and
any persons holding more than 10% of the outstanding shares of Common Stock
are required to report their initial ownership of Common Stock and any
subsequent changes in that ownership to the Commission. Specific due dates for
these reports have been established by the Commission, and the Company is
required to disclose in this Proxy Statement any failure by such persons to
file these reports in a timely manner during the 1997 fiscal year. Based upon
the Company's review of copies of such reports furnished to it, except as set
forth herein, the Company believes that during the 1997 fiscal year its
executive officers and directors and the holders of more than 10% of the
outstanding shares of Common Stock complied with all reporting requirements of
Section 16(a) under the Exchange Act. The Statement of Changes in Beneficial
Ownership on Form 4 filed on March 9, 1998 for Mr. Lynch inadvertently omitted
a sale of 1,000 shares; such sale was reported on an amended Form 4 filed on
March 19, 1998.
Performance Graph
The following graph compares the cumulative return on the Common Stock to
such return for the Standard & Poor's ("S&P") 500 Composite Stock Price Index
and an industry peer group (the "Peer Group") for the period commencing with
the effective date of the Company's initial public offering of 8,480,000
shares of Common Stock on May 9, 1997 (the "Initial Public Offering") and
ending on December 31, 1997, assuming (i) $100 was invested on May 9, 1997
(the effective date of the Initial Public Offering for which the initial price
to the public was $17.00 per share of Common Stock) and (ii) reinvestment of
dividends. The Peer Group consists of Herman Miller, Inc. and Hon Industries,
Inc., each of which is engaged in the manufacture of office furniture and
believed by the Company to have similar industry characteristics as the
Company and to provide services similar to those provided by the Company. The
graph below represents the cumulative stockholder return as measured by the
last sale price at the end of the period from May 9, 1997 through December 31,
1997. As depicted in the graph below, during this period, the cumulative total
return (1) for the Common Stock was 89.0%, (2) for the S&P 500 Composite Stock
Price Index was 19.7% and (3) for the Peer Group Index was 42.0%.
[GRAPH DEPICTING COMPARISON OF CUMULATIVE TOTAL
RETURN AMONG KNOLL, INC. PEER GROUP AND IN S&P 500]
5/9/97 12/31/97
------ --------
Knoll, Inc............ $100 $189.00
S&P 500 Index......... $100 $119.70
Peer Group Index...... $100 $142.00
15
<PAGE>
PROPOSAL 1--THE BOARD PROPOSAL
The Board presently consists of nine directors who are elected to serve
until the next annual meeting of stockholders or until their successors are
duly elected and qualified. The Board has designated the Nominees listed below
for election as directors to the Board to serve until the 1999 Annual Meeting
or until their successors are duly elected and qualified. If any Nominee
shall, prior to the Annual Meeting, become unavailable for election as a
director, the persons named in the accompanying proxy card will vote for such
other nominee, if any, in their discretion as may be recommended by the
Nominating Committee.
NOMINEES
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Burton B. Staniar....... 56 Chairman of the Board of Directors
John H. Lynch........... 45 President, Chief Executive Officer and Director
Andrew B. Cogan......... 35 Senior Vice President--Marketing and Product Development
and Director
John W. Amerman......... 66 Director
Robert J. Dolan......... 50 Director
Jeffrey A. Harris....... 42 Director
Sidney Lapidus.......... 60 Director
Kewsong Lee............. 32 Director
John L. Vogelstein...... 63 Director
</TABLE>
RECOMMENDATION AND VOTE
Approval of the election of the Nominees to the Board requires the
affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, and entitled to vote at the Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES TO
THE BOARD.
PROPOSAL 2--THE INCENTIVE PLAN PROPOSAL
On February 14, 1997, the Board adopted the Knoll, Inc. 1997 Stock Incentive
Plan (the "Incentive Plan"), under which 400,000 shares of Common Stock were
reserved for issuance pursuant to grants of restricted stock or upon the
exercise of Options granted under the Incentive Plan. On May 6, 1997, the
Company implemented a 3.13943-for-1 stock split which automatically increased
the number of shares of Common Stock available for issuance under the
Incentive Plan from 400,000 to 1,255,772 shares and in connection therewith
the Board amended the Incentive Plan to reflect this increase. On October 22,
1997, the Board amended and restated the Incentive Plan (as amended and
restated, the "Amended Incentive Plan"), subject to stockholder approval, in
order (i) to increase the number of shares of Common Stock available for
issuance under the Incentive Plan by 1,000,000 shares from 1,255,772 to
2,255,772 and (ii) to make such other technical changes to the Incentive Plan
so as to bring it into compliance with Rule 16b-3 promulgated pursuant to the
Exchange Act and Section 162(m) of the Code.
The Company is seeking stockholder approval of the Amended Incentive Plan in
order to comply with the requirements of Sections 162(m) and 422 of the Code
and the requirements of The New York Stock Exchange, Inc. (the "NYSE"). The
following summary of the Amended Incentive Plan is qualified in its entirety
by express reference to the text of the Amended Incentive Plan, a copy of
which is attached to this Proxy Statement as Appendix A. Under the Amended
Incentive Plan, restricted shares of Common Stock ("Restricted Stock") may be
granted. In addition, Options may be granted which are qualified as "incentive
stock options" within the meaning of Section 422 of the Code ("ISOs") and
which are not so qualified ("NQSOs").
16
<PAGE>
PURPOSE AND ELIGIBILITY
The purpose of the Amended Incentive Plan is to promote the long-term
financial success of the Company by enhancing the ability of the Company to
attract, retain and reward individuals who can and do contribute to such
success and to further align the interests of the Company's key personnel with
its stockholders. Officers, key employees, directors and consultants of the
Company are eligible to receive Restricted Stock and NQSOs under, and
participate in, the Amended Incentive Plan. Officers and key employees are
also eligible to receive ISOs under the Amended Incentive Plan. The
approximate number of officers, key employees, directors, and consultants
eligible to participate in the Amended Incentive Plan is 3,550.
ADMINISTRATION
The Amended Incentive Plan is administered by a Committee (the "Committee")
appointed by the Board. The Committee, in its sole discretion, determines
which individuals may participate in the Amended Incentive Plan and the type,
extent and terms of the equity-based awards to be granted. In addition, the
Committee interprets the Amended Incentive Plan and makes all other
determinations with respect to the administration of the Amended Incentive
Plan.
AWARDS
The terms and conditions of Options and Restricted Stock granted under the
Amended Incentive Plan are set out from time to time in agreements between the
Company and the individuals receiving such awards. Such terms include vesting
conditions and the expiration dates for the Options. The exercise price of the
Options is determined by the Committee at the time of grant. In the case of
ISOs, the exercise price determined must be at least the Fair Market Value (as
defined in the Amended Incentive Plan) of the Common Stock on the date of
grant. ISOs may not be granted to an individual who, at the date of grant,
owns directly or indirectly stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any parent
or subsidiary of the Company, unless the ISO (i) has an exercise price of at
least 110 percent of the Fair Market Value of the Common Stock on the date of
grant of the Option, and (ii) cannot be exercised more than five years after
the date of grant. To the extent that the aggregate Fair Market Value Per
Share (as defined in the Amended Incentive Plan) with respect to which ISOs
become exercisable for the first time in any calendar year exceeds $100,000,
such Options will be NQSOs. The Option exercise price may be paid by certified
or bank cashier's check, or at the Committee's discretion, by having the
Company withhold shares of Common Stock being purchased having an aggregate
Fair Market Value per share equal to the amount of the exercise price, or by
any other means acceptable to the Company.
Grants of Restricted Stock vest in accordance with periods set by the
Committee. Certificates in respect of Restricted Stock are not issued to the
recipient at the time of grant; instead, the certificates are held by the
Company during the restricted period. In addition, during the applicable
restricted period, shares of Restricted Stock are subject to transfer
restrictions and forfeiture in the event of termination of employment with the
Company. The Committee may impose other conditions at the time the award is
granted.
ADJUSTMENTS FOR RECAPITALIZATION, MERGER, ETC. OF THE COMPANY
In the event of any change in the outstanding shares of Common Stock
resulting from any recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate change, the Committee
will make such substitution or adjustment, if any, as it deems equitable, as
to (i) the number or kind of shares of Common Stock or other securities issued
or reserved for issuance pursuant to the Amended Incentive Plan, (ii) the
number or kind of shares of Common Stock or other securities covered by
outstanding Options, and (iii) the Option price thereof.
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SHARES SUBJECT TO THE 1997 STOCK INCENTIVE PLAN
As noted above, the Company has amended the Incentive Plan to reserve an
additional 1,000,000 shares of Common Stock. The total number of shares of
Common Stock reserved for issuance under the Amended Incentive Plan is
2,255,772. No more than 2,255,772 shares of Common Stock may be issued to any
one person pursuant to awards of Options during any one year.
MARKET VALUE
The closing price of the Common Stock on the NYSE on April 8, 1998 was
$40.00 per share.
AMENDMENT AND TERMINATION
The Amended Incentive Plan can be amended or terminated by the Board at any
time, but no such action may adversely affect Restricted Stock or Options
previously granted without the consent of those affected.
FEDERAL TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions under the Amended Incentive Plan based on the Code, as in
effect as of the date of this summary. This discussion is not intended to be
exhaustive and does not describe any state or local tax consequences. Holders
of Common Stock or Options should consult with their own tax advisors.
ISOS. No taxable income is realized by the optionee upon the grant or
exercise of an ISO. If Common Stock is issued to an optionee pursuant to the
exercise of an ISO, and if no disqualifying disposition of such shares is made
by such optionee within two years after the date of grant or within one year
after the transfer of such shares to such optionee, then (1) upon the sale of
such shares, any amount realized in excess of the Option price will be taxed
to such optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss, and (2) no deduction will be allowed to the Company
for Federal income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally,
(1) the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the Fair Market Value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (2) the Company will be
entitled to deduct such amount for Federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the optionee upon the sale of the Common Stock will be taxed
as short-term or long-term capital gain (or loss), depending on how long the
shares have been held, and will not result in any deduction by the Company.
If an ISO is exercised more than three months following termination of
employment (subject to certain exceptions for disability or death), the
exercise of the Option will generally be taxed as the exercise of a NQSO, as
described below.
For purposes of determining whether an optionee is subject to an alternative
minimum tax liability, an optionee who exercises an ISO generally would be
required to increase his or her alternative minimum taxable income, and
compute the tax basis in the stock so acquired, in the same manner as if the
optionee had exercised a NQSO. Each optionee is potentially subject to the
alternative minimum tax. In substance, a taxpayer is required to pay the
higher of his/her alternative minimum tax liability or his/her "regular"
income tax liability. As a result, a taxpayer has to determine his/her
potential liability under the alternative minimum tax.
NQSOS. With respect to NQSOs: (1) no income is realized by the optionee at
the time the Option is granted; (2) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the excess, if any, of the Fair
Market Value of the shares on such date over the exercise price, and the
Company is generally entitled to a tax deduction in the same amount, subject
to applicable tax withholding requirements; and (3) at
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sale, appreciation (or depreciation) after the date of exercise is treated as
either short-term or long-term capital gain (or loss) depending on how long
the shares have been held.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Exchange Act ("Section
16(b)"), and depending upon the particular exemption from the provisions of
Section 16(b) utilized, officers and directors of the Company and persons
owning more than 10 percent of the outstanding shares of stock of the Company
("Insiders") may not receive the same tax treatment as set forth above with
respect to the grant and/or exercise of Options. Generally, Insiders will not
be subject to taxation until the expiration of any period during which they
are subject to the liability provisions of Section 16(b) with respect to any
particular Option. Insiders should check with their own tax advisers to
ascertain the appropriate tax treatment for any particular Option.
NEW PLAN BENEFITS
The grant of Options and Restricted Stock under the Amended Incentive Plan
is entirely within the discretion of the Committee. The Company cannot
forecast the extent of Option and Restricted Stock grants that will be made in
the future. Therefore, the Company has omitted the tabular disclosure of the
benefits or amounts allocated under the Amended Incentive Plan. Information
with respect to compensation paid and other benefits, including Options and
Restricted Stock, granted in respect of the 1997 fiscal year to the Named
Executive Officers is set forth in the Summary Compensation Table.
RECOMMENDATION AND VOTE
Approval of the Incentive Plan Proposal requires the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting, and entitled to vote thereon. Until such approval is obtained,
the Amended Incentive Plan and any Option and Restricted Stock granted
thereunder shall not be effective. If the Amended Incentive Plan is not
approved, the Incentive Plan will continue in operation and Options and
Restricted Stock may continue to be granted thereunder.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE INCENTIVE
PLAN PROPOSAL.
PROPOSAL 3--THE STOCK PURCHASE PLAN PROPOSAL
Subject to the requisite affirmative stockholder vote at the Annual Meeting,
the Board has adopted the Knoll, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan"), under which 300,000 shares of Common Stock are reserved for
issuance.
PURPOSE AND ELIGIBILITY
The Stock Purchase Plan, which is intended to qualify under Section 423 of
the Code, is designed to encourage stock ownership by employees of the Company
and the Company's subsidiaries which have been designated by the Board (each,
a "Designated Subsidiary"). The Stock Purchase Plan is also drafted broadly
enough to allow for the inclusion of any future subsidiaries. The following
summary of the Stock Purchase Plan is qualified in its entirety by express
reference to the text of the Stock Purchase Plan, a copy of which is attached
to this Proxy Statement as Appendix B. Generally, individuals employed by the
Company or a Designated Subsidiary on the Enrollment Date (as defined below)
with respect to an Offering Period (as defined below) and who timely file a
subscription agreement with the Company are eligible to participate in the
Stock Purchase Plan for that Offering Period. No person is eligible to
participate who, after the grant of options under the Stock Purchase Plan,
owns (including all shares which may be purchased under any outstanding
options) 5% or more of the total combined voting power or value of all classes
of shares of the Company or of any parent or subsidiary company. Approximately
3,550 individuals are eligible to participate in the Stock Purchase Plan.
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ADMINISTRATION
The Stock Purchase Plan is administered by a committee appointed by the
Board (the "ESPP Committee"). The ESPP Committee has full and exclusive
discretionary authority to construe, interpret and apply the terms of the
Stock Purchase Plan, to determine eligibility, and to adjudicate all disputed
claims filed under the Stock Purchase Plan.
PARTICIPATION
Each eligible employee electing to participate in the Stock Purchase Plan
must execute and deliver to the Company a subscription agreement which
indicates the amount to be deducted from the participant's paychecks. Such
deduction may not be greater than 10% of the participant's compensation (which
includes overtime, bonus and commissions). Deductions are accumulated for each
calendar quarter ("Offering Periods") which begins on the first business day
after January 1, April 1, July 1 and October 1 of each year (each, an
"Enrollment Date"), respectively, and end on the last business day which falls
on or prior to March 31, June 30, September 30 and December 31 of each year
(each, an "Exercise Date"), respectively. The first Offering Period commenced
on August 1, 1997 and ended on September 30, 1997.
PURCHASE OF COMMON STOCK
For each Offering Period, on the Enrollment Date the Company will grant to
each participant an option to purchase on the Exercise Date at a price
determined as described below (the "Purchase Price") that number of full
shares of Common Stock which his or her accumulated payroll deductions on the
Exercise Date will purchase at the Purchase Price. The Purchase Price for each
Offering Period will be the lesser of (i) 85% of the Fair Market Value (as
defined in the Stock Purchase Plan) of the Common Stock on the Enrollment
Date, or (ii) 85% of the Fair Market Value of the Common Stock on the Exercise
Date. As promptly as practicable after each Exercise Date, the full and
fractional shares of Common Stock purchased for a participant will generally
be deposited by the Company at a brokerage house designated by the ESPP
Committee and held for the benefit of the participant until such time as the
participant requests delivery of such shares or requests that any shares be
sold and the proceeds therefrom be distributed to the participant. The closing
price of the Common Stock on the NYSE on April 8, 1998 was $40.00 per share.
WITHDRAWAL
A participant may withdraw from participation in the Stock Purchase Plan by
written notice to the ESPP Committee at any time prior to the last business
day of an Offering Period, in which event the Company will promptly refund
without interest the entire balance of the payroll deductions not previously
used to purchase Common Stock under the Stock Purchase Plan. After such
withdrawal, a participant's option for the Offering Period is automatically
terminated and no further payroll deductions may be made during the course of
such Offering Period. If a participant withdraws from the Stock Purchase Plan
during an Offering Period, he or she may not resume participation until the
next Offering Period. A participant may resume participation for any
subsequent Offering Period by delivering to the Company a new subscription
agreement no later than the 20th day of the month immediately prior to the
Enrollment Date for such Offering Period. Termination of employment cancels
the participant's right to continue in the Stock Purchase Plan.
LIMITATION
No person shall be granted options which permit his or her right to purchase
Common Stock under the Stock Purchase Plan and any other similar stock
purchase plans of the Company to accrue at a rate which exceeds $25,000 worth
of Common Stock (determined at the Fair Market Value of such stock at date of
grant) for each calendar year in which such options are at any time
outstanding.
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AMENDMENT AND TERMINATION
The Stock Purchase Plan can be amended or terminated by the Board at any
time, but no such termination may adversely affect rights previously granted.
The Board must seek stockholder approval for amendments to the Stock Purchase
Plan which require such approval pursuant to Section 423 of the Code.
FEDERAL TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions under the Stock Purchase Plan based on the Code. The Stock
Purchase Plan is not qualified under Section 401(a) of the Code, which
provides certain protections to participants in qualified retirement plans.
This discussion does not address all aspects of Federal income taxation and
does not describe state or local tax consequences. Participants in the Stock
Purchase Plan should consult their own tax advisors.
The Stock Purchase Plan is intended to qualify under Section 423(a) of the
Code, which would entitle participants to certain benefits with respect to
transfers of Common Stock under Section 421(a) of the Code. Under Section
421(a), a participant will not be required to recognize income on an
Enrollment Date or on an Exercise Date. Section 423(c) of the Code requires
that, provided the holding periods described below are met, when the shares of
Common Stock acquired during an Offering Period pursuant to the Stock Purchase
Plan are sold or otherwise disposed of in a taxable transaction (or in the
event of the death of the participant while owning such shares whether or not
the holding period requirements are met), the participant will recognize
income subject to Federal income tax as "ordinary income", for the taxable
year in which disposition or death occurs, in an amount equal to the lesser of
(i) the excess of the Fair Market Value (as defined in the Stock Purchase
Plan) of the Common Stock at the time of such disposition or death over the
amount paid for such shares, and (ii) the excess of the Fair Market Value of
the Common Stock on the Enrollment Date of the applicable Offering Period over
the option price, determined on the Enrollment Date (under the Stock Purchase
Plan, this excess will be 15% of the Fair Market Value of Common Stock on the
Enrollment Date). Such recognition of income upon disposition shall have the
effect of increasing the taxable basis of the shares in the participant's
possession by an amount equal to the income subject to Federal income tax. Any
additional gain or loss resulting from the disposition (provided it is not a
disqualifying disposition), measured by the difference between the amount paid
for the shares and the amount realized (less the amount recognized as income
as described above), will be recognized by the participant as long-term
capital gain or loss. No portion of the amount received pursuant to such a
disposition will be subject to withholding for federal income taxes or be
subject to FICA or FUTA taxes.
The Company will not be entitled to any deduction in the determination of
its taxable income with respect to the Stock Purchase Plan, except in
connection with a disqualifying disposition as discussed below.
In order for a participant to receive the favorable tax treatment provided
in Section 421(a) of the Code, Section 423(a) requires that the participant
make no disposition of the shares acquired during an Offering Period within
two years from the Enrollment Date nor within one year from the Exercise Date
of the Offering Period.
If a Participant disposes of Common Stock acquired pursuant to the Stock
Purchase Plan before the expiration of the holding period requirements set
forth above (a "disqualifying disposition"), the participant will realize, at
the time of the disposition, "ordinary income" to the extent the Fair Market
Value of the Common Stock on the Exercise Date exceeds the amount paid for the
shares. The difference between the Fair Market Value of the Common Stock on
the Exercise Date and the amount realized on disposition is treated as long-
term or short-term capital gain or loss, depending on the participant's
holding period in the Common Stock. The amount treated as "ordinary income"
may be subject to the income tax withholding requirements of the Code and FICA
withholding requirements. At the time of such disqualifying disposition, the
Company will be entitled to deduct an amount in the determination of its
taxable income equal to the amount taken into "ordinary income" by the
participant.
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NEW PLAN BENEFITS
The number of shares of Common Stock purchased under the Stock Purchase Plan
is entirely dependent on each participant's contribution to the Stock Purchase
Plan and the value of Common Stock on the Exercise Date. The Company cannot
forecast the number of shares that will be purchased in the future by any
individual. Therefore, the Company has omitted the tabular disclosure of the
benefits or amounts allocated under the Stock Purchase Plan. Information with
respect to compensation paid and other benefits, including Options, granted
with respect to the 1997 fiscal year to the Named Executive Officers is set
forth in the Summary Compensation Table.
RECOMMENDATION AND VOTE
Approval of the Stock Purchase Plan Proposal requires the affirmative vote
of a majority of the shares of Common Stock present, in person or by proxy, at
the Annual Meeting, and entitled to vote thereon.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE STOCK
PURCHASE PLAN PROPOSAL.
PROPOSAL 4--THE AUDITORS PROPOSAL
Upon recommendation of the Audit Committee, the Board proposes that the
stockholders ratify the appointment of the firm of Ernst & Young to serve as
the independent auditors of the Company for the 1998 fiscal year until the
1999 Annual Meeting. Ernst & Young served as the Company's independent
auditors for the 1997 fiscal year. A representative of Ernst & Young will
attend the Annual Meeting, and will be available to respond to questions and
may make a statement if he or she so desires.
RECOMMENDATION AND VOTE
Approval of the Auditors Proposal requires the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting, and entitled to vote thereon.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AUDITORS
PROPOSAL.
ADDITIONAL INFORMATION
Other Action at the Annual Meeting
As of the date of this Proxy Statement, the Company has no knowledge of any
business, other than that described herein, which will be presented for
consideration at the Annual Meeting. In the event any other business is
properly presented at the Annual Meeting, it is intended that the persons
named in the accompanying proxy will have authority to vote such proxy in
accordance with their judgment on such business.
Stockholder Proposals for 1999 Annual General Meeting of Stockholders
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings consistent with regulations adopted by
the Commission and the Company's By-Laws. Proposals intended for inclusion in
the proxy statement for the 1999 annual meeting of stockholders must be
received by the Company not later than December 15, 1998. Proposals should be
directed to the attention of the Secretary, Knoll, Inc., P.O. Box 157, East
Greenville, Pennsylvania 18041.
Knoll(R), The Knoll Group(R) and Propeller(R) are trademarks of the Company.
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APPENDIX A
KNOLL, INC.
1997 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF OCTOBER 22, 1997)
ARTICLE I
PURPOSE
The Knoll, Inc. 1997 Stock Incentive Plan (Amended and Restated as of
October 22, 1997) (the "Plan") is intended as an incentive to encourage stock
ownership by officers, certain other key employees, directors and consultants
of Knoll, Inc. (the "Company") in order to increase their proprietary interest
in the Company's success and to encourage them to remain in the employ of the
Company.
The term "Company," when used in the Plan or a related Restricted Share
agreement or option agreement with reference to eligibility and employment,
shall include the Company and its subsidiaries. The word "subsidiary," when
used in the Plan, shall mean any subsidiary of the Company within the meaning
of Section 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code").
It is intended that certain options granted under this Plan will qualify as
"incentive stock options" under Section 422 of the Code.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board") and shall consist of not
less than two members, each of whom shall be a "Non-Employee Director" within
the meaning of the rules promulgated under Section 16(b) and an "outside
director" within the meaning of Section 162(m) of the Code. Subject to the
provisions of the Plan, the Committee shall have sole authority, in its
absolute discretion: (a) to determine which individuals shall be granted
shares of restricted stock ("Restricted Shares") and which shall be granted
options; (b) to make grants of Restricted Shares, incentive stock options and
nonqualified options to acquire Common Stock; (c) to determine the times when
Restricted Shares and options shall be granted and the number of shares to be
granted or optioned; (d) to determine the option price of the shares subject
to each option; (e) to determine the nature of any rights and restrictions to
be imposed on Restricted Shares granted under the Plan; (f) to determine the
time or times when each option becomes exercisable, the duration of the
exercise period and any other restrictions on the exercise of options issued
hereunder; (g) to determine the time or times at which options shall be
repriced and the terms and conditions of such repriced options; (h) to
prescribe the form or forms of agreements for Restricted Shares granted under
the Plan and the form or forms of the option agreements for options granted
under the Plan (which forms shall be consistent with the terms of the Plan but
need not be identical); (i) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan; and (j) to construe and interpret the Plan, the rules and regulations,
the Restricted Share agreements and the option agreements under the Plan and
to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations
of the Committee shall be final and binding on all grantees and optionees.
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ARTICLE III
STOCK
The stock to be granted or optioned under the Plan shall be shares of
authorized but unissued Common Stock of the Company, par value $.01 per share,
or previously issued shares of Common Stock reacquired by the Company (the
"Stock"). Under the Plan, the total number of shares of Stock which may be
granted or purchased pursuant to options granted hereunder shall not exceed,
in the aggregate, 2,255,772 shares, except as such number of shares shall be
adjusted in accordance with the provisions of ARTICLE XII hereof.
The number of shares of Stock available for issuance or grant of options
under the Plan shall be decreased by the sum of (i) the number of Restricted
Shares which are granted and then outstanding, (ii) the number of shares with
respect to which options have been issued and are then outstanding and (iii)
the number of shares issued upon exercise of options. In the event that any
Restricted Shares are forfeited or that any outstanding option under the Plan
for any reason expires, is terminated or is canceled without exercise prior to
the end of the period during which options may be granted, the Restricted
Shares so forfeited and the shares of Stock called for by the unexercised
portion of such option shall again be available for grant or issuance under
the Plan.
ARTICLE IV
ELIGIBILITY OF PARTICIPANTS
Subject to ARTICLE IX in the case of incentive stock options, officers and
other key employees of the Company shall be eligible to receive Restricted
Shares and options under the Plan. In addition, Restricted Shares and options
which are not incentive stock options may be granted to directors, consultants
(including employees of consultants) or other key persons who the Committee
determines shall receive options under the Plan. Notwithstanding anything to
the contrary herein, the maximum number of shares of Stock with respect to
which options may be granted to any individual in any one year shall not
exceed the maximum number of shares of Stock available for issue hereunder, as
such number may change from time to time.
ARTICLE V
FAIR MARKET VALUE
"Fair Market Value Per Share" means, as of any date when the Stock is quoted
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") National Market System ("NMS") or listed on one or more national
securities exchanges, the closing price reported on NASDAQ-NMS or the
principal national securities exchange on which such Stock is listed and
traded on the date of determination. If the Stock is not quoted on NASDAQ-NMS
or listed on an exchange, or representative quotes are not otherwise
available, the Fair Market Value Per Share shall mean the amount determined by
the Board in good faith to be the fair market value per share of Stock.
ARTICLE VI
TERMS AND CONDITIONS OF RESTRICTED SHARES
Restricted Shares will become unrestricted and vest only in accordance with
a vesting period set by the Committee with respect to each grant of Restricted
Shares (the "Restriction Period"). The Committee may provide in the Restricted
Share Agreement for acceleration of the Restriction Period and accelerated
vesting upon termination of the grantee's employment by reason of death or
disability, or by the Company without Cause, or
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upon any other event for which the Committee determines, in its discretion,
that such acceleration is appropriate. With respect to each grant of
Restricted Shares, "Cause" shall have the meaning given such term in a
grantee's Restricted Share Agreement.
During the Restriction Period, Restricted Shares shall constitute issued and
outstanding shares of Stock for all corporate purposes but unless and until
such Restricted Shares shall have become vested (i.e., the date at which such
shares shall not be subject to forfeiture) (a) the Company shall retain
custody of the stock certificate or certificates representing such shares, (b)
the Company will retain custody of all dividends anddistributions ("Retained
Distributions") made or declared thereon (and such Retained Distributions
shall be subject to the same restrictions, terms and vesting and other
conditions as are applicable to the Restricted Shares) until such time, if
ever, as the Restricted Shares with respect to which such Retained
Distributions shall have been made, paid or declared shall have become vested,
and such Retained Distributions shall not bear interest or be segregated in a
separate account; provided, however, that in the event such retained dividends
or distributions are taxable to the grantee in the year of payment,
notwithstanding their failure to have become vested by the date of payment,
the Company shall arrange for the release to the grantee of such part of the
retained dividends or distributions as are sufficient to cover the taxes
payable by the grantee with respect thereto; (c) the grantee of such
Restricted Shares shall not be entitled to vote such shares, and (d) except as
otherwise permitted by the Stockholders Agreement, the grantee of such
Restricted Shares may not, whether voluntarily or involuntarily, sell, assign,
transfer, pledge, exchange, encumber or dispose of the Restricted Shares or
any Retained Distributions thereon or his interest in any of them (it being
understood that, except to the extent so permitted, any sale, assignment,
transfer, pledge, exchange, or disposition (i) before the shares shall have
become vested shall be null and void and of no effect and (ii) after the
shares shall have become vested shall only be as permitted under the terms of
the Stockholders Agreement). Any Restricted Shares which have not vested as
of, or by reason of, a grantee's termination of employment shall be
immediately forfeited to the Company and the grantee and any permitted
transferee shall have no further rights in respect of such forfeited shares.
With respect to Restricted Shares which have become vested pursuant to the
provisions of the Restricted Share Agreement, the Company shall promptly
deliver the Stock certificate or certificates representing such shares to the
grantee, registered in the name of the grantee. The Company may endorse such
legends on such certificates as may be required by law or under the terms of
this Agreement, the Restricted Share Agreement or the Stockholders Agreement.
ARTICLE VII
OPTION EXERCISE PRICE
The option price per share of Stock for each option shall be set by the
Committee at the time of grant, subject to the ability of the Committee to
reprice options pursuant to ARTICLE VIII; provided, however, that the option
price per share of Stock for incentive stock options, subject to ARTICLE IX,
shall not be less than the Fair Market Value Per Share at the time the option
was granted.
ARTICLE VIII
EXERCISE AND TERMS OF OPTIONS
The Committee shall determine the dates after which options may be
exercised, in whole or in part. If an option is exercisable in installments,
installments or portions thereof which are exercisable and not exercised shall
remain exercisable.
Any other provision of the Plan to the contrary notwithstanding, but subject
to ARTICLE IX in the case of incentive stock options, no option shall be
exercised after the date ten years from the date of grant of such option (the
"Termination Date").
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Options shall become exercisable only in accordance with the exercise
schedule set forth in the option agreement entered into with respect to each
grant of options (the "Option Agreement"). The Committee may provide in the
Option Agreement for acceleration of exercisability upon termination of the
optionee's employment by reason of death, disability, or by the Company
without Cause, or upon any other event for which the Committee determines, in
its discretion, that such acceleration is appropriate. With respect to each
grant of options, "Cause" shall have the meaning given such term in the
optionee's Option Agreement.
Notwithstanding the foregoing provisions of this ARTICLE VIII or the terms
of any option agreement, the Committee may in its sole discretion (i)
accelerate the exercisability of any option granted hereunder and(ii) reprice
any option to a lower exercise price. Any such acceleration shall not affect
the terms and conditions of any such option other than with respect to
exercisability.
ARTICLE IX
SPECIAL PROVISIONS APPLICABLE
TO INCENTIVE STOCK OPTIONS ONLY
To the extent the aggregate Fair Market Value Per Share (determined as of
the time the option is granted in accordance with Article V) with respect to
which any options granted hereunder which are intended to be incentive stock
options may be exercisable for the first time by the optionee in any calendar
year (under this Plan or any other stock option plan of the Company or any
parent or subsidiary thereof) exceeds $100,000, such options shall not be
considered incentive stock options but rather shall be nonqualified options.
No incentive stock option may be granted to an individual who, at the time
the option is granted, owns directly, or indirectly within the meaning of
Section 424(d) of the Code, stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any parent
or subsidiary thereof, unless such option (i) has an option price of at least
110 percent of the Fair Market Value Per Share on the date of the grant of
such option; and (ii) cannot be exercised more than five years after the date
it is granted.
Each optionee who receives an incentive stock option must agree to notify
the Company in writing immediately after the optionee makes a disqualifying
disposition of any Stock acquired pursuant to the exercise of an incentive
stock option. A disqualifying disposition is any disposition (including any
sale) of such Stock made within the period which is (a) two years after the
date the optionee was granted the incentive stock option or (b) one year after
the date the optionee acquired Stock by exercising the incentive stock option.
ARTICLE X
PAYMENT FOR SHARES
Payment for shares of Stock purchased under an option granted hereunder
shall be made in full upon exercise of the option, by certified or bank
cashier's check payable to the order of the Company or by any other means
acceptable to the Company. The Committee, in its discretion, may allow an
optionee to pay such exercise price by having the Company withhold shares of
Stock being purchased having an aggregate Fair Market Value Per Share equal to
the amount of such exercise price.
ARTICLE XI
NON-TRANSFERABILITY OF OPTION RIGHTS
No option shall be transferable except by will or the laws of descent and
distribution. During the lifetime of the optionee, the option shall be
exercisable only by him. The Committee may, however, in its sole discretion,
allow for transfer of options which are not incentive stock options to other
persons or entities, subject to such conditions or limitations as it may
establish.
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ARTICLE XII
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate number of shares of Stock which may be granted or purchased
pursuant to options granted hereunder, the number of shares of Stock which may
be subject to options granted to any one person in any one year, the number of
shares of Stock covered by each outstanding option and the price per share
thereof in each such option shall be appropriately adjusted for any increase
or decrease in the number of outstanding shares of stock resulting from a
stock split or other subdivision or consolidation of shares of Stock or for
other capital adjustments or payments of stock dividends or distributions or
other increases or decreases in the outstanding shares of Stock without
receipt of consideration by the Company. No adjustments shall be made upon any
conversion of the Company's Series A Preferred Stock. Any adjustment shall be
conclusively determined by the Committee.
In the event of any change in the outstanding shares of Stock by reason of
any recapitalization, merger, consolidation, spin-off, combination or exchange
of shares or other corporate change, or any distributions to common
shareholders other than cash dividends, the Committee shall make such
substitution or adjustment, if any, as it deems to be equitable, as to the
number or kind of shares of Stock or other securities issued or reserved for
issuance pursuant to the Plan, the number or kind of shares of Stock which may
be subject to options granted to any one person in any one year, and the
number or kind of shares of Stock or other securities covered by outstanding
options, and the option price thereof. In instances where another corporation
or other business entity is being acquired by the Company, and the Company has
assumed outstanding employee option grants and/or the obligation to make
future or potential grants under a prior existing plan of the acquired entity,
similar adjustments are permitted at the discretion of the Committee. The
Committee shall notify optionees of any intended sale of all or substantially
all of the Company's assets within a reasonable time prior to such sale.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an option.
ARTICLE XIII
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation on the recipient to
exercise such option.
ARTICLE XIV
USE OF PROCEEDS
The proceeds received from the sale of Stock pursuant to the Plan shall be
used for general corporate purposes.
ARTICLE XV
RIGHTS AS A STOCKHOLDER
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any share covered by his option until he shall
have become the holder of record of such share, and he shall not be entitled
to any dividends or distributions or other rights in respect of such share for
which the record date is prior to the date on which he shall have become the
holder of record thereof.
Notwithstanding anything herein to the contrary, the Committee, in its sole
discretion, may restrict the transferability of all or any number of shares
issued under the Plan upon the exercise of an option by legending the stock
certificate as it deems appropriate.
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ARTICLE XVI
EMPLOYMENT RIGHTS
Nothing in the Plan or in any agreement related to options or Restricted
Shares granted hereunder shall confer on any optionee or grantee any right to
continue in the employ of the Company or any of its subsidiaries, or to be
evidence of any agreement or understanding, express or implied, that the
Company or any if its subsidiaries will employ the optionee or grantee in any
particular position or at any particular rate of remuneration, or for any
particular period of time, or to interfere in any way with the right of the
Company or any of its subsidiaries to terminate the optionee's employment at
any time.
ARTICLE XVII
COMPLIANCE WITH THE LAW
The Company is relieved from any liability for the nonissuance or non-
transfer or any delay in issuance or transfer of any shares of Stock subject
to options under the Plan which results from the inability of the Company to
obtain or any delay in obtaining from any regulatory body having jurisdiction,
all requisite authority to issue or transfer shares of Stock of the Company
either upon exercise of the options under the Plan or shares of Stock issued
as a result of such exercise, if counsel for the Company deems such authority
necessary for lawful issuance or transfer of any such shares. Appropriate
legends may be placed on the stock certificates evidencing shares issued upon
exercise of options to reflect such transfer restrictions.
Each option granted under the Plan is subject to the requirement that if at
any time the Committee determines, in its discretion, that the listing,
registration or qualification of shares of Stock issuable upon exercise of
options is required by any securities exchange or under any state or Federal
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the grant of
options or the issuance of shares of Stock, no shares of Stock shall be
issued, in whole or in part, unless such listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions or
with such conditions as are acceptable to the Committee.
ARTICLE XVIII
CANCELLATION OF OPTIONS
The Committee, in its discretion, may, with the consent of any optionee,
cancel any outstanding option hereunder.
ARTICLE XIX
EFFECTIVE DATE AND EXPIRATION DATE OF PLAN
The Plan is effective as of February 14, 1997, the date of adoption of the
Plan by the Company's Board, subject to approval by the stockholders of the
Company in a manner which complies with Section 422(b)(1) of the Code and the
Treasury Regulations thereunder. The expiration date of the Plan, after which
no option may be granted hereunder, shall be February 13, 2007.
ARTICLE XX
AMENDMENT OR DISCONTINUANCE OF PLAN
The Board may, without the consent of the Company's stockholders or
optionees under the Plan, at any time terminate the Plan entirely and at any
time or from time to time amend or modify the Plan, provided that no such
action shall adversely affect Restricted Shares or options theretofore granted
hereunder without the grantee's or optionee's consent.
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ARTICLE XXI
REPURCHASE OF OPTIONS
In granting options hereunder, the Committee may in its discretion, and on
terms it considers appropriate, require an optionee, or the executors or
administrators of an optionee's estate, to sell back to the Company such
options in the event such optionee's employment with the Company is
terminated.
ARTICLE XXII
MISCELLANEOUS
Grants of options and Restricted Shares shall be evidenced by agreements
(which need not be identical) in such forms as the Committee may from time to
time approve. Such agreements shall conform to the terms and conditions of the
Plan and may provide that the grant of any Restricted Share or option under
the Plan and Stock acquired upon the exercise of options shall also be subject
to such other conditions (whether or not applicable to any other grantee or
optionee) as the Committee determines appropriate, including, without
limitation, provisions to assist the Optionee in financing the purchase of
Stock through the exercise of options, provisions for the forfeiture of, or
restrictions on, resale or other disposition of shares under the Plan,
provisions giving the Company the right to repurchase shares acquired under
the Plan in the event the participant elects to dispose of such shares, and
provisions to comply with Federal and state securities laws and Federal and
state income tax withholding requirements.
At such time that the delivery of shares of Stock to a grantee or optionee
becomes subject to tax withholding requirements, the Company may require that
the grantee or optionee pay to the Company such amount as the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes. The Committee, in its discretion, may allow the grantee or
optionee to pay such amount by having the Company withhold shares of Stock
which would otherwise be delivered to such grantee or optionee having an
aggregate fair market value equal to such amount.
If the Committee shall find that any person to whom any amount is payable
under the Plan is unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or
his estate (unless a prior claim therefor has been made by a duly appointed
legal representative) may, if the Committee so directs the Company, be paid to
his spouse, child, relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and
the Company therefor.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his behalf in his
capacity as a member of the Committee nor for any mistake of judgment made in
good faith, and the Company shall indemnify and hold harmless each member of
the Committee and each other employee, officer or director of the Company to
whom any duty or power relating to the administration or interpretation of the
Plan may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim)
arising out of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith; provided, however, that
approval of the Company's Board shall be required for the payment of any
amount in settlement of a claim against any such person. The foregoing right
of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.
The Plan shall be governed by and construed in accordance with the internal
laws of the State of New York without reference to the principles of conflicts
of law thereof.
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No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Optionees shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
Each member of the Committee and each member of the Company's Board shall be
fully justified in relying, acting or failing to act, and shall not be liable
for having so relied, acted or failed to act in good faith, upon any report
made by the independent public accountant of the Company and upon any other
information furnished in connection with the Plan by any person or persons
other than such member.
Except as otherwise specifically provided in the relevant plan document, no
payment under the Plan shall be taken into account in determining any benefits
under any pension, retirement, profit-sharing, group insurance or other
benefit plan of the Company.
The expenses of administering the Plan shall be borne by the Company.
Masculine pronouns and other words of masculine gender shall refer to both
men and women.
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APPENDIX B
KNOLL, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide employees of the Company and
its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Compensation Committee of the Board, or such
other committee as may be appointed by the Board, which shall be the
administrative committee for the Plan.
(d) "Common Stock" shall mean the Common Stock of the Company, $0.01 par
value per share.
(e) "Company" shall mean Knoll, Inc., a Delaware corporation.
(f) "Compensation" shall mean an employee's total taxable wages, salaries,
bonuses, commissions, overtime, severance pay, or payment separation
allowance.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible
to participate in the Plan.
(h) "Employee" shall mean any individual who is an employee of the Company
or a Designated Subsidiary for purposes of tax withholding under the Code. For
purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or
by contract, the employment relationship will be deemed to have terminated on
the 91st day of such leave.
(i) "Enrollment Date" shall mean the first Trading Day of each Offering
Period.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exercise Date" shall mean the last Trading Day of each Offering Period.
(l) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), its Fair Market Value shall be the average of
the high and low sale price for the Common Stock (or the average of the
closing bid and asked prices, if no sales were reported), as quoted on such
exchange (or the exchange with the greatest volume of trading in Common
Stock) or system on the date of such determination, if such date is a
Trading Day, or if such date is not a Trading Day, then on the Trading Day
immediately preceding such date, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
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(2) If the Common Stock is quoted on NASDAQ (but not on the National
Market System thereof) or is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be
the average of the closing bid and asked prices for the Common Stock on the
date of such determination, if such date is a Trading Day, or if such date
is not a Trading Day, then on the Trading Day immediately preceding such
date, as reported in The Wall Street Journal or such other source as the
Board deems reliable; or
(3) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
(m) "Offering Period" shall mean, subject to the second sentence of Section
4 hereof, each quarter commencing on the first Trading Day on or after January
1, April 1, July 1, and October 1 ending on or prior to the following March
31, June 30, September 30, and December 31, respectively; provided, however
that the first Offering Period shall commence on July 1, 1997 and shall end on
September 31, 1997.
(n) "Parent" shall mean a corporation which is a "parent corporation" of the
Company within the meaning of section 424(e) of the Code.
(o) "Plan" shall mean this Knoll, Inc. Employee Stock Purchase Plan.
(p) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise
Date, whichever is lower.
(q) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act or
any successor provision.
(s) "Subsidiary" shall mean a corporation which is a "subsidiary
corporation" of the Company within the meaning of section 424(f) of the Code.
(t) "Trading Day" shall mean a day on which national stock exchanges and
NASDAQ are open for trading.
3. ELIGIBILITY.
(a) Each person who is an Employee, on a given Enrollment Date, shall be
eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee would own Common Stock (together with stock owned by any other
person or entity that would be attributed to such Employee pursuant to section
424(d) of the Code) of the Company (including, for this purpose, all shares of
stock subject to any outstanding options to purchase such stock, whether or
not currently exercisable and irrespective of whether such options are subject
to the favorable tax treatment of section 421(a) of the Code) possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any Parent or Subsidiary, or (ii) which
permits his or her rights to purchase stock under all employee stock purchase
plans (within the meaning of section 423 of the Code) of the Company and its
Parents and Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of Common Stock (determined at the Fair
Market Value of the Common Stock at the time such option is granted) for each
calendar year in which such option is outstanding at any time. The limitation
described in clause (ii) of the preceding sentence shall be applied in a
manner consistent with Section 423(b)(8) of the Code.
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4. OFFERING PERIODS. The Plan shall be implemented by consecutive Offering
Periods continuing from the first Offering Period until terminated in
accordance with Section 19 hereof. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof)
with respect to future offerings without stockholder approval if such change
is announced at least twenty-five (25) days prior to the scheduled beginning
of the first Offering Period to be affected thereafter.
5. PARTICIPATION.
(a) An Employee may become a participant in the Plan for an Offering Period
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Committee no later than
the 20th day of the month immediately prior to the applicable Enrollment Date,
unless a later time for filing the subscription agreement is set by the Board
for all Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence on the first payroll
date on or following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement, he or
she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount (expressed as a whole number percentage) not
exceeding ten percent (10%) of the Compensation which he or she receives on
each pay day during the Offering Period; provided, however, that the maximum
number of shares which may be purchased by any participant during any Offering
Period is the number of shares equal to $25,000 minus the fair market value of
the number of shares of Common Stock previously purchased during such calendar
year, such fair market value determined as of each such prior Enrollment Date
during the calendar year with respect to which the shares were previously
purchased, divided by the fair market value of the Common Stock on the
Enrollment Date for the current Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole percentages only.
A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan, as
provided in Section 10 hereof, at any time during the Offering Period prior to
the Exercise Date. Once an Offering Period has commenced, a participant may
not increase or decrease the rate of his or her payroll deductions for that
Offering Period, but may, during that Offering Period, increase or decrease
the rate of his or her payroll deductions for the next succeeding Offering
Period, by completing or filing with the Committee a new subscription
agreement, no later than the 20th day of the month immediately prior to the
end of that Offering Period, authorizing a change in payroll deduction rate. A
participant's subscription agreement shall remain in effect for successive
Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, a participant's payroll deductions may be
decreased to 0% (i) at any time, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, and (ii) for each
Offering Period, at such time during such Offering Period that the aggregate
fair market value of the Common Stock (measured as of the date of each
respective Enrollment Date) previously purchased when added to the fair market
value of the shares of Common Stock to be purchased with respect to such then
current Offering Period equals or would exceed $25,000 in such calendar year.
Subject to the preceding sentence, payrolldeductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning of
the next succeeding Offering Period, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the time
some or all of the Common Stock issued under the Plan is disposed of, the
participant must make adequate provisions for the Company's federal,
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state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable
withholding obligations, including any withholding required to make available
to the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such Employee's payroll deductions accumulated prior to
such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price; provided, however, that the
maximum number of shares which may be purchased by any participant during any
Offering Period is the number of shares equal to $25,000 minus the fair market
value of the number of shares of Common Stock previously purchased during such
calendar year, such fair market value determined as of each such prior
Enrollment Date during the calendar year with respect to which the shares were
previously purchased, divided by the fair market value of the Common Stock on
the Enrollment Date for the current Offering Period, and provided, further,
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section
8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof,
and shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and, subject to the
limitations set forth in Sections 3(b), 7 and 12 hereof, the maximum number of
full and fractional shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by the
participant.
9. CREDITING OF SHARES AND DELIVERY OR SALE OF SHARES. As promptly as
practicable after each Exercise Date on which a purchase of shares occurs, the
Company shall arrange for the full and fractional shares of Common Stock to be
deposited in the brokerage account of each participant at a brokerage house
designated by the Committee. The shares shall be held in such brokerage
account until such time as the participant, or his or her designated
beneficiary or estate in the event of a participant's death, requests delivery
of a stock certificate representing any full shares of Common Stock or
requests that any shares be sold and the proceeds therefrom be distributed to
such participant. Upon the request of a participant, or his or her designated
beneficiary or estate in the event of a participant's death, any fractional
shares of Common Stock will be distributed in cash in the form of a check
having a value equal to the value of such fractional shares.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time prior to the Exercise Date of an
Offering Period by giving written notice to the Committee in the form of
Exhibit B to this Plan. All of the participant's payroll deductions credited
to his or her account will be paid to such participant promptly after receipt
of notice of withdrawal and such participant's option for the Offering Period
will be automatically terminated, and no further payroll deductions for the
purchase of shares will be made during the Offering Period. If a participant
withdraws from the Plan during an Offering Period, he or she may not resume
participation until the next Offering Period. He or she may resume
participation for any other Offering Period by delivering to the Company a new
subscription agreement no later than the 20th day of the month immediately
prior to the Enrollment Date for such Offering Period.
(b) Upon a participant's ceasing to be an Employee, for any reason, he or
she will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period
but not yet used to exercise the option will be distributed to such
participant or, in the case of his or her
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death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option will be automatically terminated. Any full or
fractional shares of Common Stock held in the brokerage account of such
participant shall remain in such account until such participant or, in the
case of his or her death, the person or persons designated under Section 14
hereof, request that a certificate representing the full shares be distributed
or that such shares be sold and the proceeds from the sale distributed to the
participant, or such other person. Upon a participant's request, any
fractional shares of Common Stock will be distributed in cash in the form of a
check having a value equal to the value of such fractional shares.
(c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company.
11. INTEREST.
No interest or other increment shall accrue or be payable with respect to
any of the payroll deductions of a participant in the Plan.
12. STOCK.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 300,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in
Section 18 hereof. If on a given Exercise Date the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Committee shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) No participant will have an interest or voting right in shares covered
by his or her option until such option has been exercised. All shares of
Common Stock held in a participant's brokerage account on behalf of a
participant shall be voted by such participant. Dividends accruing on shares
of Common Stock, if any, held in a participant's brokerage account shall be
reinvested in shares of Common Stock at the full market value of such shares
at the time of purchase and deposited in such brokerage account until such
time as the participant requests delivery or sale of shares of Common Stock as
set forth in Section 9 herein.
(c) Shares to be deposited into a participant's brokerage account under the
Plan will be registered in the name of the participant.
13. ADMINISTRATION.
(a) Administrative Body. The Plan shall be administered by the Committee.
The Committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. The Committee
shall also have authority to develop, amend and terminate rules governing the
operation of the Plan in conformity with the terms of the Plan. Every finding,
decision and determination made by the Committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection (a)
of this Section 13, in the event that Rule 16b-3 provides specific
requirements for the administrators of plans of this type, the Plan shall be
only administered by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive the rights to any full or fractional shares of Common Stock in the
participant's brokerage account under the Plan in the event of such
participant's death subsequent to an Exercise Date on which the option is
exercised but prior to distribution of such shares to such participant. In
addition, a participant may file a written designation of a beneficiary who is
to
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receive any cash from the participant's account under the Plan in the event of
such participant's death prior to exercise of the option.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the executor or administrator of the
estate of the participant shall have all the rights to the cash and or shares
of Common Stock attributable to such participant or his or her brokerage
account under the Plan.
15. TRANSFERABILITY. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, within such time as the Committee may reasonably determine,
which statements will set forth the amounts of payroll deductions, the
Purchase Price, and the number of full and fractional shares purchased and
held in the participant's brokerage account.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided
by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed
or an equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for his or her option has been changed
to the new Exercise Date and that his or her option will be exercised
automatically on the new Exercise Date, unless prior to such date he or she
has withdrawn from the Offering Period as provided in Section 10
B-6
<PAGE>
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of Common Stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock
held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such consideration received in the sale of assets or merger
was not solely common stock of the successor corporation or its parent (as
defined in Section 424(e) of the Code), the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to be
received upon exercise of the option to be solely common stock of the
successor corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the sale of assets
or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination may
adversely affect options previously granted; provided, that an Offering Period
may be terminated by the Board on any Exercise Date if the Board determines
that the termination of the Plan is in the best interests of the Company and
its stockholders. Except as provided in Section 18 hereof, no amendment may
make any change in any option theretofore granted which adversely affects the
rights of any participant. To the extent necessary to comply with Section 423
of the Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or the Committee) shall be entitled to change the Offering Periods,
limit the frequency or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll withholding in excess of
the amount designated by a participant in order to adjust for delays or
mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld
from the participant's Compensation, and establish such other limitations or
procedures as the Board (or the Committee) finds, in its sole discretion,
advisable and consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or
by the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment
B-7
<PAGE>
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to occur of
its adoption by the Board of Directors or its approval by the stockholders of
the Company. It shall continue in effect for a term of ten (10) years
thereafter unless sooner terminated under Section 19 hereof.
B-8
<PAGE>
DEFINITIVE PROXY CARD
KNOLL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF KNOLL, INC. IN CONNECTION
WITH ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1998.
The undersigned stockholder of Knoll, Inc. (the "Company") hereby appoints
Douglas J. Purdom and Patrick A. Milberger, and each of them, as proxies, each
with the power to appoint his substitute, and authorizes them to represent and
vote as designated in this Proxy, all of the shares of common stock, $0.01 par
value each per share (the "Common Stock"), of the Company held of record by the
undersigned stockholder on April 2, 1998 at the Annual Meeting of Stockholders
of the Company to be held on May 19, 1998, and at any adjournment or
postponement thereof, with all powers which the undersigned would possess if
personally present, with respect to the matters listed on this Proxy. In their
discretion, the proxies are authorized to vote such shares of Common Stock upon
such other business as may properly come before the Annual Meeting.
THE SUBMISSION OF THIS PROXY IF PROPERLY EXECUTED REVOKES ALL PRIOR PROXIES.
IF THIS PROXY IS EXECUTED AND RETURNED BUT NO INDICATION IS MADE AS TO WHAT
ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A VOTE IN FAVOR OF EACH
OF THE PROPOSALS SET FORTH ON THIS PROXY.
[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
For With- For
hold All
Except
1. To elect the 9 nominees (the [_] [_] [_]
"Nominees") listed below to the
Board of Directors of the
Company (the "Board") to serve
until the Company's 1999 Annual
Meeting of stockholders or until
their successors are duly elected.
If you do not wish your shares voted "FOR" a particular Nominee, mark the "For
All Except" box and strike a line through the Nominee(s) name. Your shares
will be voted for the remaining Nominee(s).
BURTON B. STANIAR
JOHN H. LYNCH
ANDREW B. COGAN
JOHN W. AMERMAN
ROBERT J. DOLAN
JEFFREY A. HARRIS
SIDNEY LAPIDUS
KEWSONG LEE
JOHN L. VOGELSTEIN
For Against Abstain
2. To approve an amendment to the
Knoll, Inc. 1997 Stock Incentive [_] [_] [_]
Plan which would increase the
number of authorized shares
available thereunder by 1,000,000
shares and to make certain
technical changes.
<PAGE>
For Against Abstain
3. To approve the Knoll, Inc. Employee [_] [_] [_]
Stock Purchase Plan.
For Against Abstain
4. To ratify the firm of Ernst &
Young to serve as the independent [_] [_] [_]
auditors of the Company for the 1998
fiscal year until the Company's 1999
Annual Meeting of stockholders.
THE BOARD OF DIRECTORS OF KNOLL, INC. RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE NOMINEES AND THE PROPOSALS LISTED ABOVE.
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PLEASE VOTE, DATE AND SIGN THIS PROXY BELOW AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Please sign your name or names exactly as it appears on your share
certificate(s). When signing as attorney, executor, administrator, trustee,
guardian or corporate executor, please give your full title as such. For
joint accounts, all co-owners should sign.
- --------------------------------------------------------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------
Shareholder sign here Co-owner sign here
- --------------------------------------------------------------------------------
