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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K405/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 001-12907
KNOLL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3873847
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1235 Water Street
East Greenville, Pennsylvania 18041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 679-7991
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ----------------------
Common Stock, Par Value $0.01 Per Share New York Stock Exchange, Inc.
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 24, 1999, the aggregate market value of the voting stock held by
non-affiliates of the Registrant, based on the closing price of these shares on
the New York Stock Exchange, Inc., was $396,318,744. Directors, executive
officers and beneficial owners of 5% or more of the Registrant's stock are
considered affiliates of the Registrant.
As of March 24, 1999, there were 40,618,778 shares of the Registrant's common
stock, par value $0.01 per share, outstanding.
Documents Incorporated By Reference
Document Part of this Form 10-K/A into which document is incorporated
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None NA
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Knoll, Inc. (the "Company"), in accordance with Rule 12b-15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and General
Instruction G(3) to Form 10-K under the Exchange Act, hereby amends and modifies
its Annual Report on Form 10-K for the year ended December 31, 1998 (the
"Original Form 10-K"), in order to restate Part III of the Original Form 10-K in
its entirety in order to set forth in full the information required by Part III
instead of incorporating such information by reference to the Company's
definitive Proxy Statement for its 1999 Annual Shareholders' Meeting. The
Company has determined to postpone its 1999 Annual Shareholders' Meeting
because, as disclosed in the Original Form 10-K, on March 23, 1999, the Company
received an offer from Warburg, Pincus Ventures, L.P. ("Warburg"), and certain
members of the Company's management (collectively, the "Buy-out Group") to
acquire all outstanding shares of the Company's common stock, par value $.01 per
share (the "Common Stock") not owned by the Buy-out Group for a cash price of
$25.00 per share, representing an approximate 64% premium over the closing
market price of the Common Stock prior to announcement of the offer (the
"Proposed Purchase"). The Company's Board of Directors has authorized the
appointment of a special committee, consisting of independent members of the
Board of Directors (the "Special Committee"), to consider the proposal.
Consummation of the Proposed Purchase would be subject to approval by the Board
of Directors and stockholders of the Company, as well as to the receipt of
financing, the execution of a definitive merger agreement and other conditions
customary in a transaction of this type. If the Proposed Purchase is
consummated, the Common Stock will cease to be listed on the New York Stock
Exchange (the "NYSE") and will be deregistered under the Exchange Act and the
Company will no longer be required to solicit proxies for its stockholder
meetings under the Exchange Act or the rules of the NYSE.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers of the Company
The table below sets forth the names, ages and titles of the persons
who were directors and executive officers of the Company as of April 30, 1999.
Name Age Position
Burton B. Staniar............. 57 Chairman of the Board
John H. Lynch................. 46 President, Chief Executive Officer and
Director
Kathleen G. Bradley........... 49 Executive Vice President--Sales,
Distribution and Customer Service
Andrew B. Cogan............... 36 Executive Vice President--Marketing and
Product Development and
Director
Carl G. Magnusson............. 59 Senior Vice President--Design
Douglas J. Purdom............. 40 Senior Vice President and Chief
Financial Officer
Wolfgang Billstein............ 49 Managing Director--Knoll Europe
Barbara E. Ellixson........... 45 Vice President--Human Resources
Barry L. McCabe............... 52 Vice President, Controller and Treasurer
Patrick A. Milberger.......... 42 Vice President, General Counsel and
Secretary
John W. Amerman............... 67 Director
Robert J. Dolan............... 51 Director
Jeffrey A. Harris............. 43 Director
Sidney Lapidus................ 61 Director
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Kewsong Lee................... 33 Director
Henry B. Schacht.............. 64 Director
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 had held a number
of assignments at Westinghouse Electric Corporation, currently known as CBS
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. Mr. Staniar is
also a director of 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.
Kathleen G. Bradley was named Executive Vice President--Sales, Distribution
and Customer Service in August 1998, after serving as Senior Vice President
since 1996 and Divisional Vice President for Knoll's southeast division since
1988. Prior to that time, Ms. Bradley was regional manager for the Company's
Atlanta region, 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
was elected to the position of Executive Vice President--Marketing and Product
Development in August 1998, after serving as Senior Vice President since May
1994. Mr. Cogan has held several positions in the design and marketing group
since joining the Company in 1989.
Carl G. Magnusson has held the position of Senior Vice President--Design
since February 1993. Mr. Magnusson has been involved in design, product
development, quality and communications since joining the Company in 1976.
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.
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.
Barbara E. Ellixson was promoted to her current position as Vice
President--Human Resources in August 1994, after serving as Manager of Human
Resources for the Company's East Greenville site. Ms. Ellixson began her career
with Westinghouse in 1971 and has held a variety of human resources positions in
several different business units.
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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 also was a director of Vanstar Corporation from 1996
until early 1999. Mr. Amerman currently is a director of Unocal Corporation and
has been a director of the Aegis Group, plc since 1997.
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 & Co. ("Warburg, Pincus") and a Member and
Managing Director of E.M. Warburg, Pincus & Co., LLC ("E.M. Warburg"), and its
predecessors since 1988, where he has been employed since 1983. Mr. Harris is a
director of 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, Information Holdings, Inc., Journal
Register Company, Four Media Company, Radio Unica Holdng Corp. 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.
Henry B. Schacht, a director of the Company since December 2, 1998, has
served as a Director and Senior Advisor of E.M. Warburg since March 1, 1999.
Prior thereto, Mr. Schacht served as Chairman of the Board of Lucent
Technologies Inc. ("Lucent") from 1996 to February 1998 and as Chief Executive
Officer of Lucent from 1996 to October 1997. Prior thereto, Mr. Schacht served
as Chairman (1977-1995) and Chief Executive Officer (1973-1994) of Cummins
Engine Company, Inc. Mr. Schacht is a director of Lucent, The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A., Aluminum Company of America
(Alcoa), Cummins Engine Company, Inc., Johnson & Johnson Corp. and The New York
Times Co.
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
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Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission (the "Commission"). Specific due dates for these reports
have been established by the Commission, and the Company is required to disclose
any failure by such persons to file these reports in a timely manner during the
1998 fiscal year. Based upon the Company's review of copies of such reports
furnished to it, the Company believes that during the 1998 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.
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for the years ended December 31, 1998,
1997 and 1996, individual compensation information for the Chief Executive
Officer of the Company and each of the four other most highly compensated
executive officers of the Company during 1998 (the "Named Executive Officers").
<TABLE>
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.......................... 1998 $399,996 $900,000 - - $ 8,019
Chairman of the Board 1997 399,996 750,000 - - 8,979
1996 410,830 600,000 $ 30,000 - 5,694
John H. Lynch.............................. 1998 399,996 900,000 - - 8,019
President and Chief Executive 1997 399,996 750,000 - - 8,979
Officer 1996 393,330 600,000 30,000 - 6,399
Andrew B. Cogan............................ 1998 222,502 400,000 - - 99
Executive Vice President--Marketing and 1997 199,992 300,000 - 35,000 99
Product Development 1996 197,930 250,000 12,000 - 99
Kathleen G. Bradley........................ 1998 222,502 400,000 - - 8,019
Executive Vice President--Sales, 1997 199,992 300,000 - 188,365 8,424
Distribution and Customer Service 1996 197,050 250,000 6,000 - 4,427
Douglas J. Purdom.......................... 1998 209,167 200,000 - - 8,019
Senior Vice President and 1997 200,004 200,000 - - 8,979
Chief Financial Officer 1996 73,591 83,300 1,300,000 - 2,199
- ----------------------------
(1) On February 29, 1996, Messrs. Staniar, Lynch and Cogan and Ms. Bradley
were granted 941,829, 941,829, 376,731 and 188,365 shares of vested and
unvested restricted stock, respectively. On August 20, 1996, Mr. Purdom
was granted 282,548 shares of 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, 1999, 90% of
the shares granted to each of Messrs. Staniar and Lynch had vested and an
additional 10% will vest on March 1, 2000; 80% of the shares granted to
</TABLE>
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Mr. Cogan had vested and an additional 20% will vest on March 1, 2000;
60% of the shares granted to Ms. Bradley had vested and an additional
20% will vest on March 1, 2000 and 2001; and 40% of the shares granted
to Mr. Purdom had vested and an additional 20% will vest on August 20,
1999, 2000 and 2001. At March 1, 1999, Messrs. Staniar, Lynch, Cogan
and Purdom and Ms. Bradley held 94,183, 94,183, 75,347, 169,530 and
75,346 shares of unvested restricted stock, respectively, having a
value (based on the December 31, 1998 closing price) of $2,790,171,
$2,790,171, $2,232,155, $5,022,326 and $2,232,125, 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 and the payment by the
Company of premiums in respect of term life insurance.
Stock Option Grants Table
The following table sets forth information concerning individual grants of
options to purchase Common Stock ("Options") made to Named Executive Officers
during 1998.
<TABLE>
<CAPTION>
Number of Potential Realizable
Securities % of Total Value at Assumed
Underlying Options Exercise or Annual Rates of
Options Granted to or Base Expiration Stock Price Appreciation
Name Granted Employees Price Date for Option Term
- ---------------------- ---------- --------- ----------- ---------- ------------------------
5% 10%
------- -------
<S> <C> <C> <C> <C> <C> <C>
Burton B. Staniar.... -- --% $ -- N/A $ -- $ --
John H. Lynch........ -- -- -- N/A -- --
Andrew B. Cogan...... -- -- -- N/A -- --
Kathleen G. Bradley.. -- -- -- N/A -- --
Douglas J. Purdom.... -- -- -- N/A -- --
</TABLE>
_____________________
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Aggregate Stock Option Exercise Table
The following table sets forth information regarding the exercise of
Options by the Named Executive Officers during 1998. The table also shows the
number and value of unexercised Options which were held by the Named Executive
Officers on December 31, 1998. The values of unexercised Options are based on a
fair market value of $29.625 per share on December 31, 1998.
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Number of Unexercised Options Value of Unexercised
Shares Acquired Value Exercisable/ In-the-Money Options
Name on 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 7,000/28,000 $ 2,250/9,000
Kathleen G. Bradley.. N/A N/A 37,673/150,692 $ 515,932/2,063,727
Douglas J. Purdom.... N/A N/A -0-/-0- $ -0-/-0-
</TABLE>
Pension Plans
Retirement benefits are provided to employees through two pension plans.
Prior to the purchase of the Company in February 1996 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 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); Mr. Cogan ($16,500); and Mr. Purdom ($0). Mr. Purdom did not
participate in the Westinghouse Pension Plan.
Effective January 1, 1998, the career average compensation formula in
the Company Pension Plan was increased from 1.45% to 1.55% of career
compensation. 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. As of December 31, 1998, the estimated annual benefits payable
upon normal retirement under the Company Pension Plan (with the amended formula)
for each of the Named Executive
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Officers is as follows: Mr. Staniar ($6,898); Mr. Lynch ($6,898); Ms. Bradley
($6,898); Mr. Cogan ($6,898); and Mr. Purdom ($6,101).
Through the first two months of fiscal 1996, Messrs. Staniar, Lynch and
Cogan and Ms. Bradley also participated in the Westinghouse Executive Pension
Program (the "Westinghouse Excess Plan") 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); Mr. Cogan ($14,089); and Mr. Pudom ($0). Mr.
Purdom has never participated in the Westinghouse Excess Plan.
Remuneration covered by the Westinghouse Pension Plan, the Company Pension
Plan and the Westinghouse Excess Plan primarily includes salary and bonus, as
set forth in the Summary Compensation Table. Under the Westinghouse Pension
Plan, the Company Pension Plan and the Westinghouse Excess Plan, Messrs.
Staniar, Lynch, Cogan and Purdom and Ms. Bradley have the following years of
credited service, as of December 31, 1998: 0.00/2.83/15.44, 1.75/2.83/1.75,
7.14/2.83/5.498, 0.00/2.36/0.00 and 16.64/2.83/5.498 years, respectively.
Director Compensation
Directors who are not employees or officers of the Company are 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.
The Company's Board of Directors has appointed the Special Committee,
consisting of Messrs. Amerman and Dolan, to determine the advisability and
fairness to the Company's stockholders of the Proposed Purchase. The Board of
Directors has also determined to pay to the members of the Special Committee, in
lieu of the standard fee paid to directors for serving on a committee of the
Board of Directors, a one-time fee of $75,000 for serving on the Special
Committee, the fees and expenses of its financial and legal advisors, and to
reimburse the members of the Special Committee for all of their out-of pocket
travel and other expenses incurred in connection with each member's service on
the Special Committee. The Board of Directors has also determined that the
Company shall, in consideration of the service of the members of the Special
Committee thereon, indemnify and hold harmless each member of the Special
Committee against any and all liabilities and expenses (including without
limitation reasonable legal fees and expenses) arising in connection with such
service, to the fullest extent permitted by the Corporation's Certificate of
Incorporation and Bylaws, as currently in effect.
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 Executive Vice
President--Marketing and Product Development, for terms which expired on March
1, 1999 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
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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 $250,000 and a target annual bonus of up to 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 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 Letter Agreement, dated August 13,
1996, with Mr. Douglas J. Purdom. This agreement sets forth the initial starting
salary, target bonus and stock grants to Mr. Purdom. Mr. Purdom's agreement
provides that upon a "change of control" of the Company during the term of the
agreement, following which Mr. Purdom is terminated for reasons unrelated to his
performance, Mr. Purdom shall receive one year of base salary as severance in
satisfaction of any claims he may have against the Company. For purposes of Mr.
Purdom's agreement, "change of control" means the sale of all or substantially
all of the stock or assets of the Company to a party unrelated with Warburg and
shall not mean the public offering of the stock of the Company or any related
entity.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1998, the compensation of Messrs.
Staniar, Lynch, Cogan and Purdom was determined pursuant to employment
agreements between such officers and the Company. See "--Employment Agreements."
Except as otherwise described herein, the 1998 compensation of each of Messrs.
Staniar, Lynch, Cogan, Purdom and Ms. Bradley was determined by the Compensation
Committee of the Board of Directors, which is comprised of Messrs. Amerman,
Harris and Lapidus. The Compensation Committee and the Stock Option Committee,
which is comprised of Messrs. Amerman and Dolan, 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 of Directors 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 of Directors comprised of Burton B. Staniar
and Jeffrey A. Harris. Except for Messrs. Staniar, Lynch and Cogan, no member of
the Board of Directors is or has been an officer or employee of the Company.
During the year ended December 31, 1998, 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 of Directors is affiliated.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of April 30, 1999, by (i) each person known by
the Company to own beneficially more than 5% of the outstanding Common Stock,
(ii) each of the Company's directors, (iii) each of the Named Executive Officers
of the Company, and (iv) all directors and executive officers of the Company, as
a group (16 persons). Except as set forth in the table, the business address of
each person is 1235 Water Street, East Greenville, PA 18041. The information set
forth in the table and the notes thereto is based solely upon information
provided to the Company directly by such stockholders. As described in the notes
to the table, voting and/or dispositive power with respect to certain Common
Stock is shared by the named individuals or entities. In these cases, such
shares are shown as beneficially owned by each of those sharing voting and/or
dispositive power.
9
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<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........................... 20,981,956 53.0%
Burton B. Staniar(4)............................... 1,093,744 2.8
John H. Lynch...................................... 720,896 1.8
Kathleen G. Bradley................................ 200,919 *
Andrew B. Cogan.................................... 307,584 *
Douglas J. Purdom.................................. 163,982 *
John W. Amerman(5)................................. 15,000 *
Robert J. Dolan(5)................................. 15,000 *
Jeffrey A. Harris(6)............................... 20,995,731 53.1
Sidney Lapidus(6).................................. 21,010,956 53.1
Kewsong Lee(6)..................................... 20,984,856 53.0
Henry B. Schacht(7)................................ 5,000 *
All current directors and executive officers
as a group (16 persons)......................... 23,852,935 60.0
</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 April 30, 1999 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 April 30, 1999 consists of
39,571,660 shares of Common Stock (excluding 1,073,703 restricted
shares which have not yet vested).
(2) Excludes 94,183, 94,183, 75,347, 169,530, 75,346 and 621,612 restricted
shares of Common Stock for Messrs. Staniar, Lynch, Cogan and Purdom,
Ms. Bradley and all current directors and executive officers as a
group, respectively, which have not yet vested, as well as Options to
purchase 10,000, 28,000, 10,000, 20,000, and 113,019 shares of Common
Stock held by Messrs. Amerman, Cogan, Dolan, Schacht and Ms. Bradley,
respectively, which have not yet vested.
(3) Warburg directly owns 20,709,922 shares of Common Stock and Warburg,
Pincus directly owns an additional 272,034 shares. The sole general
partner of Warburg is Warburg, Pincus. E.M. Warburg manages Warburg.
Additionally, as of March 31, 1999, Warburg, Pincus may be deemed to
beneficially own 674,304 shares of Common Stock held by its asset
management affiliate, Warburg Pincus Asset Management, Inc., which
Warburg, Pincus may be deemed to
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control. Warburg, Pincus disclaims beneficial ownership of such
shares, for purposes of the Exchange Act or otherwise. The members of
E.M. Warburg are substantially the 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 and Kewsong Lee, directors of the Company, are
Managing Directors and members of E.M. Warburg and general partners of
Warburg, Pincus. As such, Messrs. Harris, Lapidus and Lee 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. Additionally,
Mr. Schacht is a Director of and Senior Advisor to E.M. Warburg.
(4) Excludes 62,500 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 succeeding four anniversaries of the
grant date.
(6) 20,709,922 and 272,034 of the shares indicated as owned by Messrs.
Harris, Lapidus and Lee 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
and Lee disclaim "beneficial ownership" of these shares within the
meaning of Rule 13d-3 under the Exchange Act. Messrs. Harris, Lapidus
and Lee directly own of record 13,775, 29,000 and 2,900 shares of
Common Stock, respectively. See Note 3 above.
(7) Upon his appointment to the Board of Directors on December 2, 1998, the
Company granted Mr. Schacht options to purchase 25,000 shares of Common
Stock. Twenty percent of these Options vested upon grant. The remaining
Options will vest in four equal installments on the succeeding four
anniversaries of the grant date.
The Proposed Purchase
As previously discussed, on March 23, 1999, Warburg and certain members of
the Company's management offered to purchase all outstanding shares of Common
Stock not owned by them for a cash price of $25.00 per share. Upon completion of
the Proposed Purchase, the Common Stock would cease to be listed on the New York
Stock Exchange and will be deregistered under the Exchange Act. The consummation
of the Proposed Purchase is subject to approval by the Board of Directors and
stockholders of the Company, as well as to the receipt of financing, the
execution of a definitive merger agreement and other conditions customary in a
transaction of this type. The Company has appointed the Special Committee,
comprised of independent directors, to consider the Proposed Purchase.
11
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Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement and Voting 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 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.
The Stockholders Agreement provides that the original Board of Directors of
the Company was to be composed of Messrs. Staniar, Lynch, Lapidus, Harris, Lee
and John L. Vogelstein, an officer of E.M. Warburg. Pursuant to the Stockholders
Agreement, Warburg, NationsBanc and the other stockholders who are a party
thereto (who hold in the aggregate a majority 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 12% Participating Preferred
Stock ("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.
12
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Warburg, Warburg, Pincus and the Company entered into a Voting Agreement
dated September 11, 1998 pursuant to which Warburg and Warburg, Pincus agreed
that if, as the result of share repurchases by the Company, their aggregate
holdings of voting Common Stock exceed 49.9% of the then outstanding voting
Common Stock of the Company, then Warburg and Warburg, Pincus will not cast a
vote on any proposal as to which a vote is taken in excess of 49.9% of the total
number of votes that may be cast on such proposal.
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 Plan established in connection with
the acquisition of the Company from Westinghouse, 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 Exchange Act have agreed not to transfer their shares except (i) to
members of their immediate families and other related or controlled entities,
(ii) to Warburg or an affiliate thereof or (iii) 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 certain vested shares of Common Stock received by
management pursuant to the 1996 Stock Plan, subject to certain limited
exceptions. 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 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, Ms.
Bradley received 188,365 restricted shares and Mr. Purdom received 282,548
restricted shares. The agreements for each recipient other than Mr. Purdom were
dated February 29, 1996, and Mr. Purdom's agreement was dated August 20, 1996.
With respect to Messrs. Staniar and Lynch, 90% of the shares granted have vested
and the remaining unvested shares will vest on March 1, 2000. With respect to
Mr. Cogan, 80% of the shares granted have vested and the remaining unvested
shares will vest on March 1, 2000. With respect to Ms. Bradley, 60% of the
shares granted have vested and the remaining unvested shares will vest at the
rate of 20% on each of March 1, 2000 and 2001. With respect to Mr. Purdom, 40%
of the shares granted have vested and the remaining unvested shares will vest at
the rate of 20% on each of August 20, 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.
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Other
During the year ended December 31, 1998, the Company paid $274,237.67 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 Convertible Preferred Stock were redeemed for $80.0 million and
11,749,361 shares of Common Stock, and the remaining 802,998 shares of Series A
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.
As previously discussed, on March 23, 1999, Warburg and certain members of
the Company's management offered to purchase all outstanding shares of Common
Stock not owned by them for a cash price of $25.00 per share. Upon completion of
the Proposed Purchase, the Common Stock would cease to be listed on the New York
Stock Exchange and will be deregistered under the Exchange Act. The consummation
of the Proposed Purchase is subject to approval by the Board of Directors and
stockholders of the Company, as well as to the receipt of financing, the
execution of a definitive merger agreement and other conditions customary in a
transaction of this type. The Company has appointed the Special Committee,
comprised of independent directors, to consider the Proposed Purchase.
14
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized, this 30th day of April, 1999.
KNOLL, INC.
(Registrant)
By: /s/ Burton B. Staniar
----------------------
Burton B. Staniar
Chairman of the Board
15
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EXHIBIT INDEX
Exhibit
No.
10.17. Letter Agreement between the Company and Douglas J. Purdom, dated August
13, 1996.
16
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[LETTERHEAD OF KNOLL, INC.]
August 13, 1996
Mr. Douglas Purdom
5349 N. Fort Yuma Trail
Tucson, Arizona 85750
Dear Doug:
I am pleased to extend to you an offer of employment as Senior Vice President
and Chief Financial Officer of Knoll, Inc. ("Knoll"). In this capacity, you will
function as a key member of the Company's senior management team.
Your annual salary will be $200,000 paid on a bi-monthly basis.
You will be eligible to participate in the Knoll annual incentive program. Under
the current program you will have a target bonus opportunity to earn 100% of
your base salary for performance during the balance of 1996. Payout under this
program is based on achieving company and individual objectives as determined by
John Lynch and myself. Your bonus will be pro-rated for 1996. This incentive
program would be outlined in a separate letter to you upon your acceptance of
this offer.
You will receive a grant of 90,000 shares of common stock of T.K.G. Acquisition
Corp. (Knoll, Inc.'s parent). These shares will be subject to vesting (20% per
year for each of the next five anniversaries of your employment date), transfer,
forfeiture and repurchase restrictions as more fully set forth in a Grant
Agreement and Stockholders Agreement ("Grant Agreements") which you must sign.
In addition, as to these grant shares, you will have an opportunity to make an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended.
In addition, you will be eligible to invest in the common and preferred stock of
T.K.G. Acquisition Corp. in an amount between $32,000 (minimum investment) and
$400,000 (maximum investment). This investment would be in accordance with and
subject to the terms of a Subscription Agreement and Stockholders Agreement
which you must sign ("Investment Agreements"). Your investment must be made by
September 15, 1996. This time is intended to permit you to evaluate the
investment opportunity and to review the related documents.
You will be eligible for Knoll's existing benefit package, including medical and
dental insurance, life insurance, 401K and pension plan. You will qualify for
three weeks vacation per year. You will be entitled to Knoll's relocation plan
to assist
<PAGE>
Douglas Purdom
August 13, 1996
Page 2
you with your move to East Greenville. A copy of Barb Ellixson's August 9, 1996
letter explaining the relocation plan is attached.
In the event that there is a "change in control" in Knoll during the next five
(5) years and you are terminated as a result thereof for reasons unrelated to
your performance, you will receive one year of base salary as severance in
complete satisfaction of any and all claims you have or may have against Knoll.
This severance agreement shall not affect the terms of the Grant Agreements or
the Investment Agreements which would speak for themselves and be enforced as
written relative to your leaving the employ of Knoll. For purposes of this
agreement, "change in control" shall mean the sale or all or substantially all
of the assets of Knoll to a party unrelated to Warburg Pincus Ventures, L.P. or
the sale of all of the stock of Knoll or T.K.G. Acquisition Corp. to a party
unrelated to Warburg Pincus Ventures, L.P. and shall not mean any public
offering of the stock of Knoll, T.K.G. Acquisition Corp. or any related entity.
The terms of your employment will be governed by the internal laws of
Pennsylvania and exclusive jurisdiction will lie in the courts sitting in
Pennsylvania.
If this offer meets with your approval, please indicate your agreement by
signing and returning one copy of this letter to Barbara Ellixson. The second
copy is for your records.
Doug, I am very enthusiastic about the prospect of you joining the senior
management team at Knoll. I believe that you can make a significant contribution
to Knoll and that this experience can be both profitable and fun.
Sincerely,
/s/ Burton B. Staniar
Burton B. Staniar
cc: J. Lynch
AGREED:
/s/ Douglas Purdom 8/20/96
-----------------------------------------
Douglas Purdom Date
