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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                to


Commission File No. 001-12907

KNOLL, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

13-3873847(I.R.S. Employer
Identification Number)


1235 Water Street
East Greenville, PA 18041
(215) 679-7991(Address, including zip code, and telephone number
including area code of principal executive offices)

SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class

Name of exchange on which registeredCommon Stock, par value $0.01 per share

New York Stock Exchange


SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:NONE

Indicate
by check mark if the issuer is a well-known seasoned issuer (as defined in Rule 405 of the Securities
Act.) Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes o    No ý

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 ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No o

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. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o,

Accelerated filer ý,

Non-accelerated filer o, (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.) Yes o    No ý

As of June 30, 2010, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately
$590,623,000 based on the closing sale price as reported on the New York Stock Exchange.

As
of February 25, 2011 there were 47,915,652 shares (including 1,612,219 shares of non-voting restricted shares) of the Registrant's common stock, par value $0.01 per
share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement for its 2011 Annual Meeting of Stockholders are incorporated by reference into Part III of this
report on Form 10-K to the extent stated therein.



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TABLE OF CONTENTS



Item



PagePART I1.

Business


11A.

Risk Factors


131B.

Unresolved Staff Comments


212.

Properties


213.

Legal Proceedings


214.

(Removed and Reserved)


21PART II5.

Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


226.

Selected Financial Data


247.

Management's Discussion and Analysis of Financial Condition and Results of Operations


267A.

Quantitative and Qualitative Disclosures about Market Risk


378.

Financial Statements and Supplementary Data


409.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


749A.

Controls and Procedures


749B.

Other Information


76PART III10.

Directors, Executive Officers and Corporate Governance


7611.

Executive Compensation


7612.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


7613.

Certain Relationships and Related Transactions, and Director Independence


7714.

Principal Accounting Fees and Services


77PART IV15.

Exhibits and Financial Statement Schedules


78Signatures


83


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PART I

ITEM 1.    BUSINESS

General

We are a leading designer and manufacturer of workplace furnishings, textiles and fine leathers. For over a decade now we have been
building a diversified design-driven
product portfolio and flexible business model that can perform in various business cycles. Our commitment to innovation and modern design has yielded a comprehensive portfolio of products designed to
provide enduring value and help clients shape their workplaces with imagination and vision. Our products are recognized for high quality and a sophisticated image and are targeted at the middle to
upper end of the market. We sell our products primarily in North America through a direct sales force of approximately 243 professionals and a broad network of approximately 208 independent dealers.
Our distinctive operating approach has driven industry leading operating income margins among our primary publicly-held competitors.

Since
our founding in 1938, we have been recognized worldwide as a design leader within our industry. Our products are exhibited in major art museums worldwide, including more than 40
pieces in the permanent Design Collection of The Museum of Modern Art in New York. This legacy continues to flourish today and is embodied in an ambitious series of new products that reflect forward
thinking ideas about design and workplace performance, among them:Generation by Knoll®,highly innovative task seating;MultiGeneration by Knoll, multipurpose seating for collaborative environments; Reff Profiles,furnishings for
the contemporary private office; andAntenna
Workspaces, a new approach for individual and group work spaces. Our design excellence is complemented by a management philosophy that fosters a strong collaborative culture,
client-driven processes and a lean, agile operating structure. Our employees are performance-driven and motivated by a variable incentive compensation system and broad-based equity ownership in the
company. Together, these core attributes have enabled us to achieve strong financial performance.

Our
management evaluates the company as one reporting segment in the office furniture industry. For further information on segment reporting, see note 16 in the accompanying
financial statements.

All
trademarks used in this annual report on Form 10-K that are not owned by us or our affiliates are the property of their respective owners.

Products

We offer a comprehensive and expanding portfolio of high quality office furniture, textiles and leathers across five product
categories: (i) office systems, which are typically modular and moveable workspaces with functionally integrated panels or table desks, worksurfaces, pedestals and other storage units, power
and data systems and lighting; (ii) specialty products, including high image side chairs, sofas, desks and tables for the office and home, textiles, accessories, leathers and related products;
(iii) seating; (iv) files and storage; and (v) desks, casegoods and tables. Historically, we have derived most of our revenues from office systems and from specialty products,
including ourKnollStudio® collection of signature design classics furnishings, KnollTextiles® fabrics,Spinneybeck® leathers, Edelman® leathers, andKnollExtra® accessories. However, in recent years, we
have significantly
expanded our product offerings in seating, files and storage, casegoods and tables and have reduced our dependence on office systems by further growing our specialty businesses.

Our
products and knowledgeable sales force have generated strong brand recognition and loyalty among architects, designers and corporate facility managers, all of whom are key decision
makers in the office furniture purchasing process. Our clients are typically Fortune 1000 companies, governmental agencies and other medium to large sized organizations in a variety of industries. We
have an approximately $7.9 billion installed base of office systems, which provides a strong platform for

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recurring
and add-on sales of products across all our categories. Installed base refers to the amount of office systems product we have sold in North America during the previous fifteen
years.

Major product categories and lines include:

Systems Furniture

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

Systems
furniture consists principally of functionally integrated panels or table desks, worksurfaces, pedestal and other storage units, power and data systems and lighting. These
components are combined to create flexible, space-efficient work environments that can be moved, re-configured and re-used. Clients, often working with architects and
designers, have the opportunity to select from a wide selection of laminates, paints, veneers and textiles to design workspaces appropriate to their organization's personality. Our systems furniture
product development strategy aims to insure that product line enhancements can be added to clients' existing installations and integrate with other Knoll product lines, maximizing the value of the
clients' investments in Knoll systems products over the long-term.

Office
systems furniture accounted for approximately 43.7% of our sales in 2010, 48.4% of our sales in 2009 and 48.6% of our sales in 2008.

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



Introduced in 2010,Antenna Workspacesby Masamichi Udagawa and Sigi
Moeslinger, principals of Antenna Design, is a new approach to workplace design that reflects the freedom and mobility people seek in today's office.Antenna
Workspacesconsiders the growing variety of settings where work takes place and blends desks, tables, storage units and screens to create intuitive solutions for individuals
and groups. In the process,Antenna Workspacessuggests connections and boundaries between diverse work areas and establishes a new way to shape space,
simplifying transitions between individual and group work.Antenna Workspaceshas received recognition for its novel approach to office planning,
including a 2010Best of NeoCon® innovation award.



In 2010,Reff ProfilesTMdebuted, building on the Reff®
flagship wood systems platform. Through its history,Reffhas combined the high performance capabilities of panel-based systems furniture with the
refined elegance of wood casegoods, showcasing sophisticated all-wood construction and precisely crafted detail.Reff Profilesextends those
capabilities, with new aesthetic options, enhanced storage for materials and technology, and simple user access to power and data needs.Reff Profilesis available in an extensive range of veneers, laminates, glass, and metal options that can be used interchangeably in private offices and as freestanding or panel-based furnishings for the open
office.



Introduced in 2004,AutoStrada®is one of the most comprehensive office
concepts that we have developed.AutoStradaprovides aesthetic and functional alternatives to traditional panel-based and desk-based systems
furniture with four planning models that combine high-performance furniture with

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the
look of custom millwork. TheAutoStradaspine-based, storage-based, wall-based and collaborative/open table planning models leverage a
consistent design aesthetic to create a distinctively modern aesthetic in both open plan and private office environments. Whether an office requires a high performance open plan system, architectural
casegoods, progressive private office furniture or a collaborative "big table" concept,AutoStradaprovides a solution. In 2004, at
NeoCon®, our national industry tradeshow,AutoStradareceived a silver Best of NeoCon®award.



Dividends Horizon®, introduced in 2007, extends the Dividendsportfolio of workplace
solutions introduced in 1998 with new planning opportunities for the individual workstation, focusing on new materials
and furniture that evolve the office landscape with a layered approach to furniture design. Focusing on exceptionally light and transparent materials and practical, personalized storage solutions, Dividends
Horizoncreates rich spatial environments for the contemporary workspace.Dividends Horizonreceived a silver 2007Best of NeoCon®award. The system's enduring success is based on a straightforward, versatile
frame-and-tile construction, featuring a universal panel frame. Removable panel inserts, which can be ordered in fabric, steel, glass or as marker boards, meet a range of
clients' design and budgetary needs. TheDividends Horizonpanel frame enables clients to utilize either monolithic, tiled or beltway panel type for
applications throughout the workplace, and power and data access may be located virtually anywhere on the panel.



OurMorrisonfurniture system was introduced in 1986 and continues to be one of our
most proven product offerings.Morrisonmeets essential power and data requirements for panel and desk-based planning and private offices,
and offers one of the broadest ranges
of systems performance in the industry.Morrisonhas been upgraded continually with interchangeable enhancements from its Morrison Network, Morrison AccessandMorrison Optionslines. In addition, Morrisonintegrates withCurrents(described below) to provide
advanced wire management capabilities, as
well as with ourCalibreandSeries 2desks, pedestals, lateral files, overhead storage cabinets
and architectural towers to provide compatible, cost-effective panel and desk-based solutions.



The distinguishing feature of ourEquityproduct is its unique centerline modularity,
which maximizes the efficient use of space for high-density workplaces with a minimal inventory of parts.Equityincorporates power and data
capabilities, including desktop features, and integrates withCurrents(described below) to provide advanced wire management capabilities. Equitycomponents also create modular freestanding desks, andEquity120-degree planning
enables clients to create sleek, hexagonal configurations that are well suited for call and data centers. For both 90- and 120-degree Equityplanning, a variety of components, including add-on screens,
bi-fold doors and side-door components,
accommodate clients' needs for privacy and storage.Equitycontinues to be an industry leader in terms of sustainable design.



Our award-winning and innovativeCurrentssystem provides advanced power and data
capabilities to organizations that require maximum space-planning freedom, advanced technology support and the mobility of freestanding furniture. The groundbreaking Currentsservice wall divides space
and manages technology. A sister product,Fence,provides comparable
performance for low horizon settings.CurrentsandFencemay be used in tandem with existing Knoll
systems furniture, removing the constraints imposed by conventional panel system, along with competitors' systems and freestanding furniture.

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Seating

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

Key
client criteria in work chair selection include superior ergonomics, aesthetics, comfort, quality and affordability, all of which are consistent with our strengths and reputation. We
believe that we offer an excellent and fully competitive line-up of chairs at a range of price points and performance levels and constructed from varying materials, including mesh,
polymers, and upholstery. During 2010, we again expanded our range of seating withMultiGeneration by Knoll,companion side chairs to the
award-winningGeneration by Knoll®task chair.MultiGenerationoffers two multipurpose chair
options: stacking and a novel "hybrid" version, both offering a level of comfort and unrestrained movement unusual in the side seating category.

Principal
task seating lines include:

Generation by Knoll®, our flagship task chair, reflects Knoll's commitment to materials innovation and forward thinking
ergonomic research that has found there is no one right way to sit.Generationoffers a new standard of unrestrained movement, supporting the range of
postures and workstyles typical of today's workplace through elastic design, where the chair rearranges itself in response to the user.Generationhas
received a series of accolades from the national press, includingThe Wall Street Journal? Business Week, Time, Fast Company?and CBS Sunday Morning.Additionally, the chair has been honored with many awards, includingInterior Designmagazine's2009 Best of Year Product Awardin the contact/task seating category, theChicago Athenaeum GOOD DESIGN
Award,and aBest of NeoCon Gold Awardfor office seating.

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

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

Chadwick, introduced in 2005, is an innovative hybrid seating design that accommodates the changing needs of today's
workplace and home office.

The
family ofEssentials Work Chairs, introduced in 2005-07, offers the ergonomic comfort and appeal of fully upholstered task
chairs at a significant value. Essentials Work Chairs'Pro,Tech, and Sportmodels offer
a comprehensive range of four task and two side chairs suitable to any office style from the traditional to the
progressive.

Seating
accounted for approximately 13.9% of our sales in 2010, 11.1% of our sales in 2009 and 9.8% of our sales in 2008.

Files and Storage

Our files and storage products, featuring the Template®, Calibre® and Series 2product lines, are designed with unique features to maximize storage capabilities throughout the workplace. Our core files
and storage products consist of lateral files, mobile pedestals and other storage units, bookcases and overhead storage cabinets.

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

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



In 2009, we introduced theTemplate®Storage
System,offering an economical approach to workplace planning, using vertical storage units to divide and define workspaces. In doing so, the product's compact 15 inch deep
footprint consolidates storage while reducing the overall size of an individual workspace, saving clients both money and space. Template can be combined withDividends
Horizon,Antenna Workspaces,and other Knoll systems to expand its planning capabilities.

Files
and storage accounted for approximately 9.0% of sales in 2010, 8.0% of sales in 2009, and 7.7% in 2008.

Desks, Casegoods, and Tables

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

OurInteractionandUpstart product lines include adjustable,
work, meeting, conference and training tables. These product lines range from independent tables to tables suitable for workstations that support individual preferences for computer and writing
heights to plannable desks that can be linked together to build and reshape larger work areas. Additionally,Interactiontables are designed to be
compatible withDividend Horizons,Equity,Morrisonand Reff Profilesoffice systems.

Our
principal desk product lines, detailed to meet the needs of the contemporary office, offer traditional wood casegoods construction synonymous with the Knoll standard of quality.
These desk product lines includeMagnusson® andThe Graham Collection®
(introduced in 2007) and are designed especially to serve the day-to-day wood casegoods requirements of Knoll dealers.

Desks,
Casegoods, and Tables accounted for approximately 0.6% of our sales in 2010, 0.9% of our sales in 2009 and 1.4% of our sales in 2008.

Specialty Products

OurKnollStudio®, KnollTextiles®,KnollExtra®, Spinneybeck®, andEdelman® businesses serve as a marketing and distribution
umbrella for our portfolio of specialty product lines. For the past decade we have focused on growing and developing our specialty product offerings in order to lesson or overall dependence on office
systems. These businesses are our highest margin product lines and enhance our design and quality reputation.

KnollStudiois a renowned source for classic modern furniture and spirited new designs of unparalleled quality for the workplace, home,
hotels, restaurants and government and educational institutions. TheKnollStudioportfolio includes a range of lounge seating; side, café
and dining chairs; barstools; and conference, dining and occasional tables.KnollStudiohas a long history of working with celebrated architects and
designers from around the world, including Ludwig Mies van der Rohe, Marcel Breuer, Eero Saarinen, Isamu Noguchi, Warren Platner, Frank Gehry, Maya Lin, Jens Risom,

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Kazuhide
Takahama, and Ross Lovegrove. In addition,KnollStudiomanufactures a collection of original furniture designs by Florence Knoll. In 2008, KnollStudiocollaborated with Milanese architect Cini Boeri on an eponymous collection of lounge furnishings and with New York interior designer Joseph
Paul D'Urso on a lounge collection. Both designers were renewing relationships with Knoll that had begun with signature collections decades ago. In 2009, KnollStudio introduced the Jehs & Laub
Lounge Collection, sculpted seating reflecting contemporary lifestyles.

In
2004,KnollStudioestablishedKnoll Spaceas a formalized sales program for the retail
market, making it easier for consumers to bring the best of Knoll furnishings into their home and home office. The program consists of independent specialty retailers and e-tailers
nationwide that sell our iconic modern classics and selected contemporary designs as well as selected products with crossover home office appeal. Through this program we sell our KnollStudioand
selected other products through approximately 55 retailers, with an aggregate of over 100 locations.

KnollTextiles®, established in 1947 to create high-quality textiles for Knoll furniture, offers upholstery, panel
fabrics, wallcoverings and drapery that harmonize color, pattern and texture.KnollTextiles® offers products for corporate, hospitality,
healthcare and residential interiors.KnollTextiles® products are used in the manufacture of Knoll furniture and are sold to clients for use
in other manufacturers' products. In 2008,KnollTextiles® introducedKnoll
Luxe®, a new brand of fashion forward textiles created byKnollTextiles® creative director Dorothy
Cosonas. In 2010, along with the ongoing contributions of designer Suzanne Tick, the division launched aKnoll Luxe® collection by the
celebrated fashion designers Rodarte. For each of the past eight years, KnollTextiles® has receivedBest of Neocon®gold awards, including 2010 for
the
Rodarte Collection. In order to open new distribution channels and reach new customers, KnollTextiles recently opened a residential showroom in the D&D building in New York City. KnollTextiles®
also transformed their website into a true e-commerce platform where customers can request samples and purchase
products on-line.

KnollExtraoffers accessories that complement Knoll office furniture products, including technology support accessories, desktop
organizational tools, lighting and storage.KnollExtraintegrates technology comfortably into the workplace, meeting the increased demand for flat panel
monitor supports and central processing unit holders, which deliver adjustability and space savings. During 2009, KnollExtra introduced the Sapper Monitor Arm Collection, designed by renowned
industrial designer Richard Sapper. The collection provides a clean, modern solution to
technology challenges in the modern workplace and has been accepted into the permanent collection of New York's Museum of Modern Art.

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

Edelman Leather LLC, our wholly owned subsidiary, supplies fine leathers to residential, hospitality, aviation and contract office
furniture markets.Edelman Leather LLC,offers a broad residential showroom network where designers, and retail consumers can sample our products.

Specialty
products accounted for approximately 22.9% of our sales in 2010, 23.9% of our sales in 2009 and 22.7% of our sales in 2008.

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European Sales

Knoll Europe has a product offering that allows clients to purchase a complete office environment from a single source. In addition, we
offer certain products designed specifically for the European market. In 2006, we introduced theWa desking system. Wa reinvents desks and
storage through its design and construction in a linear and well proportioned modern vernacular. Our presence in the
European market provides strategic positioning with clients that have international offices where they would like to maintain their Knoll facility standard. In addition to working with North American
clients' international offices, we also have a local European client base.

In
Europe, the core product categories include: (i) desk systems, including theWa desking system, the KnollScope®, and thePL1 system;
(ii)KnollStudio; (iii) seating, including a comprehensive range of chairs; and (iv) storage units, which are designed to
complement Knoll desk products.

Knoll
Europe accounted for approximately 9.9% of our sales in 2010, 7.7% of our sales in 2009 and 9.9% in 2008.

Product Design and Development

Our design philosophy reflects our historical commitment to working with the preeminent industrial designers and architects to develop
products that delight and inspire. By combining the designers' creative vision with our commitment to developing products that address changing business needs, we continue to generate strong demand
for our product offerings while cultivating brand loyalty among target clients. Our enviable history of nurturing design partner relationships continues to attract the world's leading designers. In
addition, these types of collaborations are consistent with our commitment to a lean organizational structure and incentive-based compensation, by utilizing a variable royalty-based fee as opposed to
the fixed costs typically associated with a larger in-house design staff.

Product
initiatives rely upon a New Product Commercialization Process to ensure quality and repeatability of the development process. This helps to reduce product development cycle time
and improves the quality of output. We use Pro/ENGINEER® design tools and rapid prototyping technology to reduce product design and development lead times and to improve responsiveness to
special requests for customized solutions. Working very closely with the designers during the early phase of development helps to ensure the most viable products that balance innovative, modern design
with practical, functional style. Cross-functional teams are formed for all major development efforts with dedicated leaders to facilitate a seamless flow into manufacture and accountability on cost
and schedule. Increasingly, a major emphasis on total environmental impact is factored in to material selection and manufacturing process decisions.

Research
and development expenses, which are expensed as incurred, were $14.6 million for 2010, $14.4 million for 2009, and $16.3 million for 2008.

Sales and Distribution

We generate sales with our direct sales force and a network of independent dealers, who jointly market and sell our products. We
generally rely on these independent dealers to also provide a variety of important specification, installation and after-market services to our clients. Our dealers generally operate under
one-year, non-exclusive agreements.

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

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seamless
sales support and client service. We have an over $7.9 billion installed base of office systems, which provides a strong platform for recurring and add-on sales.

Our
products and knowledgeable sales force have generated strong brand recognition and loyalty among architects, designers and corporate facility managers, all of whom are key decision
makers in the office furniture purchasing process. Our strong relationships with architects and design professionals help us stay abreast of key workplace trends and position us to better meet the
changing needs of clients. For example, we have invested in training all of our architect and designer specialists as Leadership in Energy and Environmental Design ("LEED®") accredited
professionals to help clients better address environmental issues that arise in the design of the workplace.

We
have aligned our sales force to target strategic areas of opportunity. For example, our healthcare division was created to target healthcare related businesses. We have also placed
sales representatives and technical specialists into certain dealerships to support programs such asKnoll Essentials,which is described below.

In
addition to coordinating sales efforts with the sales representatives, the dealers generally handle project management, installation and maintenance for client accounts after the
initial product selection and sale. Although many of these dealerships also carry products of other manufacturers, they have agreed not to act as dealers for our principal direct competitors. We have
not experienced significant dealer turnover. Our dealers' substantial commitment to understanding our product lines, and their strong relationships with us, serve to discourage dealers from changing
vendor affiliations. We are not significantly dependent on any one dealer, the largest of which accounted for approximately 6.2%, 11.0% and 6.4% of our North American sales in 2010, 2009 and 2008,
respectively.

We
provide product training for our sales force and dealer sales representatives, who make sales calls primarily to small to medium sized businesses. As part of our commitment to
building relationships with our dealer sales representatives, we introduced theKnoll Essentialsprogram in January 2004.Knoll
Essentialsis a catalog program developed in response to dealer requests for a consolidated, user-friendly selling tool for day-to-day
systems, seating, storage and accessory products. TheKnoll Essentialsprogram includes dealer incentives to sell our products. We also employ a
dedicated team of dealer sales representatives to work with our dealerships.

Excluding
sales to governmental agencies, no single end user or customer represented more than 3.6% of our North American sales during 2010. Sales to U.S. government entities and related
agencies aggregated approximately 18.5% of our consolidated sales in 2010, with no single U.S. government order accounting for more than 4.1% of consolidated sales. The U.S. government typically can
terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform under the terms of the applicable contract. Sales to state and local governmental
agencies aggregated approximately 4.9% of our consolidated sales in 2010.

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

Manufacturing and Operations

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

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American
plants are ISO 14001 certified, which reflects our commitment to environmentally responsible practices.

In
2010, we initiated a plan to better utilize our manufacturing capacity, eliminate duplication of capabilities and reduce associated costs. We expect this plan to be generally complete
in 2011 and to make our operating processes more efficient and effective.

In
2009, our East Greenville location recertified its "Star" rating under the Occupational Safety and Health Administration's (OSHA) Voluntary Protection Program (VPP). A Star rating is
the highest a company can obtain in OSHA's premier partnership program and to achieve this rating our East Greenville site had to demonstrate a comprehensive safety and health process with strong
management leadership, include all employees as active participants and ensure an injury rate substantially below the average for the industry. The Star rating allows us to join an elite and exclusive
group of less than 2,500 companies nationwide that have demonstrated the dedication and commitment to safety.

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

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

Raw Materials and Suppliers

The purchasing function in North America is centralized at the East Greenville facility. This centralization, and the close
relationships with our primary suppliers, has enhanced our ability to realize purchasing economies of scale and implement "just-in-time" inventory practices. Steel, lumber,
paper, paint, plastics, laminates, particleboard, veneers, glass, fabrics, leathers and upholstery filling material are used in our manufacturing process. Both domestic and overseas suppliers of these
materials are selected based upon a variety of factors, with the price and quality of the materials and the supplier's ability to meet delivery requirements being primary factors in such selection. We
do not generally enter into long-term supply contracts and, as a result, we can be vulnerable to fluctuations in the prices for these materials. No supplier is the only available source
for a particular component or raw material. However, because of the specialization involved with some of our components, it can take a significant amount of time, money and effort to move to an
alternate source.

Competition

The office furniture market is highly competitive. Office furniture companies compete on the basis of (i) product design,
including performance, ergonomic and aesthetic features, (ii) product quality and durability, (iii) relationships with clients, architects and designers, (iv) strength of dealer
and distributor network, (v) on-time delivery and service performance, (vi) commitment to environmental standards by offering products that help clients achieve
LEED® certified facilities and minimize environment impact, and (vii) price. We estimate that we had an approximate 8.7% market share in the U.S. office furniture market in 2010.

Some
of our competitors, especially those in North America, are larger and have significantly greater financial, marketing, manufacturing and technical resources than we have. Our most
significant

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competitors
in primary markets are Herman Miller, Inc., Steelcase, Inc., Haworth, Inc. and, to a lesser extent, Allsteel, Inc., an operating unit of HNI Corporation, and
Teknion Corporation. These competitors have a substantial volume of furniture installed at businesses throughout North America, providing a continual source of demand for further products and
enhancements. Moreover, the products of these competitors have strong acceptance in the marketplace. Although we believe that we have been able to compete successfully in the markets to date, there
can be no assurance that we will be able to continue to do so in the future.

Patents and Trademarks

We consider securing and protecting our intellectual property rights to be important to the business. We own approximately 58 active
U.S. utility patents on various components used in our products and systems and approximately 50 active U.S. design patents. We also own approximately 170 patents in various foreign countries.
The scope and duration of our patent protection varies throughout the world by jurisdiction and by individual product. In particular, patents for individual products extend for varying periods of time
according to the date a patent application is filed, the date a patent is granted and the term of patent protection available in the jurisdiction granting the patent (generally twenty years from the
date of filing in the U.S, for example). We believe that the duration of the applicable patents we are granted is adequate relative to the expected lives of our products. We own approximately 56
trademark registrations in the U.S., including registrations to the following trademarks, as well as related stylized depictions of the Knoll word mark: Knoll®, KnollStudio®,
KnollExtra®, Good Design Is Good Business®, A3®, Autostrada®, Bulldog®, Calibre®, Currents®, Dividends®,
Equity®, Parachute®, Propeller®, Reff®, RPM®, Spinneybeck®, Upstart®, Generation by Knoll®,
KnollTextiles®, and Knoll Luxe®. We also own approximately 167 trademarks registered in foreign countries including the LIFE® trademark which was purchased in
December 2006. The scope and duration of our trademark protection varies throughout the world, with some countries protecting trademarks only as long as the mark is used, and others requiring
registration of the mark and the payment of registration (generally ten years from the date of filing in the U.S., for example). In order to protect the indefinite duration, we make filings to
continue registration of our trademarks.

In
October 2004, we received registered trademark protection in the United States for five of our world-famous furniture designs created by Ludwig Mies van der Rohethe
Barcelona Chair, the Barcelona Stool, the Barcelona Couch, the Barcelona Table and the Flat Bar Brno Chair.
This protection recognizes the renown of these designs and reflects our commitment to ensuring that when architects, furniture retailers, businesses and the public purchase a Ludwig Mies van der Rohe
design, they will be purchasing the authentic product, manufactured to the designer's historic specifications. Barcelona® is a registered trademark in the U.S., Canada and European
Community owned by Knoll, Inc.

Backlog

Sales backlog represents orders we have accepted but which have not yet shipped. Our sales backlog was $196.6 million at
December 31, 2010, $153.0 million at December 31, 2009 and $201.7 million at December 31, 2008. We manufacture substantially all of our products to order and expect
to fill substantially all outstanding unfilled orders within the next twelve months. As such, backlog is not a significant factor used to predict our long-term business prospects.

Foreign and Domestic Operations

Our principal manufacturing operations and markets are in North America, and we also have manufacturing operations and markets in
Europe. Our sales to clients and net property, plant and

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equipment
are summarized by geographic areas below. Sales to clients are attributed to the geographic areas based on the point of sale.

United
States

Canada

Europe

Consolidated(in thousands)2010Sales to clients

$
688,914

$
34,267

$
86,286

$
809,467Property, plant and equipment, net


75,228


31,435


15,556


122,2192009Sales to clients

$
688,664

$
26,831

$
64,538

$
780,033Property, plant and equipment, net


83,291


33,112


18,642


135,0452008Sales to clients

$
964,875

$
40,229

$
115,043

$
1,120,147Property, plant and equipment, net


85,680


31,225


15,263


132,168


Environmental Matters

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

We
have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response Compensation and Liability Act, or "CERCLA", for remediation costs
associated with waste disposal sites previously used by us. CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or the legality of disposal and,
under certain circumstances, liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. Liability may also include damages for harm to
natural resources. The remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA
sites. We reserve amounts for such matters when expenditures are probable and reasonably estimable.

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Employees

As of December 31, 2010, we employed a total of 3,006 people, consisting of 1,988 hourly and 1,018 salaried employees.
The Grand Rapids, Michigan plant is the only unionized plant within the U.S. and has an agreement with the Carpenters Union, Local 1615, of the United Brotherhood of Carpenters and Joiners of America,
Affiliate of the Carpenters Industrial Council (the Union), covering approximately 226 hourly employees. The Collective Bargaining Agreement expires August 27, 2011. From time to time,
there have been unsuccessful efforts to unionize at our other North American locations. We believe that relations with our employees are good. Nonetheless, it is possible that our employees may
continue attempts to unionize. Certain workers in the facilities in Italy are also represented by unions. We have experienced brief work stoppages from time to time at our plants in Italy, none of
which have exceeded eight hours. Work stoppages are relatively common occurrences at many Italian manufacturing plants and are usually related to national or local issues, not necessarily related
specifically to Knoll. We had five such work stoppages in 2010, with duration of 28 hours in total. None of these work stoppages were unique to us, and these work stoppages have not materially
affected our performance.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and all amendments to those reports are made available free of charge through the "Investors Relations" section of our website at www.knoll.com, as soon as practicable
after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission.

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ITEM 1A.    RISK FACTORS

RISK FACTORS

Risks Related to our Business

Our product sales are tied to corporate spending and service-sector employment, which are outside of our control. Our sales and/or growth in sales would be adversely
affected by a recessionary economy characterized by decreased corporate spending and service-sector employment.

Our sales are significantly impacted by the level of corporate spending primarily in North America, which, in turn, is a function of
the general economic environment. In a recessionary economy like we have experienced in recent history, business confidence, service-sector employment, corporate cash flows and
non-residential commercial construction decrease, which typically leads to a decrease in demand for office furniture. In addition, a recessionary economy may also result in saturation of
the market by "just new" used office systems, leading to a decrease in demand. Sales of office systems, which have historically accounted for more than half of our revenues, represent longer term and
higher cost investments for our clients. As a result, sales of office systems are more severely impacted by decreases in corporate spending than sales of seating, files and storage and casegoods, and
demand for office systems typically takes longer to respond to an economic recovery.

Geopolitical
uncertainties, terrorist attacks, acts of war, natural disasters, increases in energy and other costs or combinations of such and other factors that are outside of our
control could at any time have a significant effect on the North American economy, and, therefore, our business. The occurrence of any of these or similar events in the future could result in downward
pressure on the economy, which we would expect to cause demand for our products to decline and competitive pricing pressures to increase.

Weakness in the economy or uncertainty in the financial markets may adversely affect our results of operations and financial condition, as well as the financial soundness of
our customers and suppliers.

In recent history, the global capital and credit markets have experienced a period of unprecedented turmoil and upheaval, characterized
by the bankruptcy, failure, collapse or sale of various financial institutions. Our ability to access capital may be restricted at a time when we would like, or need, to access financial markets. In
addition, interest rate fluctuations, financial market volatility or credit market disruptions may negatively affect our customers' and our suppliers' ability to obtain credit to finance their
businesses on acceptable terms. As a result, our customers' needs and ability to purchase our products or services may decrease, and our suppliers may increase their prices, reduce their output or
change their terms of sale. If our customers' or suppliers' operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, our customers may not
be able to pay, or may delay payment of, accounts receivable owed to us, and our suppliers may restrict credit or impose different payment terms on us. Any inability of customers to pay us for our
products and services, or any demands by suppliers for different payment terms, may adversely affect our earnings and cash flow.

We may have difficulty increasing or maintaining our prices as a result of price competition, which could lower our profit margins. Our competitors may develop new product
designs that give them an advantage over us in making future sales.

Office furniture companies compete on the basis of, among other things, price and product design. Since our competitors offer products
that are similar to ours, we face significant price competition from our competitors. This price competition impacts our ability to implement price increases or, in some cases, maintain prices, which
could lower our profit margins. Additionally, our competitors may develop

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new
product designs that achieve a high level of customer acceptance, which could give them a competitive advantage over us in making future sales.

Our efforts to introduce new products that meet customer and workplace requirements may not be successful, which could limit our sales growth or cause our sales to decline.

To keep pace with workplace trends, such as changes in workplace design and increases in the use of technology, and with evolving
regulatory and industry requirements, including environmental, health, safety and similar standards for the workplace and for product performance, we must periodically introduce new products. The
introduction of new products requires the coordination of the design, manufacturing and marketing of such products, which may be affected by factors beyond our control. The design and engineering of
certain of our new products can take up to a year or more and further time may be required to achieve client acceptance. In addition, we may face difficulties in introducing new products if we cannot
successfully align ourselves with independent architects and designers who are able to design, in a timely manner, high quality products consistent with our image. Accordingly, the launch of any
particular product may be later or less successful than originally anticipated by us. Difficulties or delays in introducing new products or lack of customer acceptance of new products could limit our
sales growth or cause our sales to decline.

We may not be able to manage our business effectively if we are unable to retain our experienced management team or recruit other key personnel.

The success of our operations is highly dependent upon our ability to attract and retain qualified employees and upon the ability of
our senior management and other key employees to implement our business strategy. We believe there are only a limited number of qualified executives in the industry in which we compete. We rely
substantially upon the services of Andrew B.
Cogan, our Chief Executive Officer. The loss of the services of Mr. Cogan or other key members of our management team could seriously harm our efforts to successfully implement our business
strategy.

While
we currently maintain a key person life insurance policy with respect to Mr. Cogan this insurance may not be sufficient to compensate us for any harm to our business
resulting from loss of his services. The inability to attract and retain other talented personnel could also affect our ability to successfully implement our business strategy.

We are dependent on the pricing and availability of raw materials and components, and price increases and unavailability of raw materials and components could lower sales,
increase our cost of goods sold and reduce our profits and margins.

We require substantial amounts of raw materials, which we purchase from outside sources. Steel, plastics, wood related materials, and
leather are the main raw materials used in the manufacturing of our products. The prices and availability of raw materials are subject to change or curtailment due to, among other things, the supply
of, and demand for, such raw materials, changes in laws or regulations, including duties and tariffs, suppliers' allocations to other purchasers, interruptions in production by raw materials or
component parts suppliers, changes in currency exchange rates and worldwide price levels. We can be significantly impacted by price increases in these raw materials.

Although
no supplier is the only available source for a particular component or raw material, some of our products and components are extremely specialized and, therefore, it can take a
significant amount of time and money to move from one supply source to another. Any failure to obtain raw materials and components on a timely basis, or any significant delays or interruptions in the
supply of raw materials or components, could prevent us from being able to manufacture products ordered by our clients in a timely fashion, which could have a negative impact on our reputation and our
dealership network, and could cause our sales to decline.

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We are affected by the cost of energy and increases in energy prices could reduce our margins and profits.

The profitability of our operations is sensitive to the cost of energy through our transportation costs, the cost of petroleum-based
materials, like plastics, and the cost of operating our manufacturing facilities. Energy costs have been volatile in recent years due to changes in global supply and demand. Although we have been
successful in countering energy price increases,
primarily through our global sourcing initiatives and continuous improvement programs, we have not been able to offset these costs entirely. The recent increases in energy prices have negatively
impacted our gross margins and profitability for 2010 and may continue in the future.

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

We rely on a network of independent dealers for the joint marketing of our products to small and mid-sized accounts, and to
assist us in the marketing of our products to large accounts. We also rely upon these dealers to provide a variety of important specification, installation and after-market services to our clients.
Our dealers operate, generally, under one-year, non-exclusive agreements. There is nothing to prevent our dealers from terminating their relationships with us. In addition,
individual dealers may not continue to be viable and profitable and may suffer from the lack of available credit. While we are not significantly dependent on any single dealer, one dealer accounted
for 6.2% of our North American sales in 2010. If dealers go out of business or are restructured, we may suffer losses because they may not be able to pay us for furniture previously delivered to them.
The loss of a dealer relationship could also negatively affect our ability to maintain market share in the affected geographic market and to compete for and service clients in that market until a new
dealer relationship is established. Establishing a viable dealer in a market can take a significant amount of time and resources. The loss or termination of a significant dealer or a significant
number of dealer relationships could cause significant difficulties for us in marketing and distributing our products, resulting in a decline in our sales.

Currently one of our largest clients is the U.S. government, a relationship which is subject to uncertain future funding levels and federal procurement laws and requires
restrictive contract terms; any of these factors could curtail current or future business.

For the year ended December 31, 2010, we derived approximately 18.5% of our revenue from sales to various agencies and
departments within the U.S. government. Our ability to compete successfully for and retain business with the U.S. government is highly dependent on cost-effective performance and
compliance with complex procurement laws. Until recently, federal procurement laws required government agencies to purchase furniture products from Federal Prison Industries, Incorporated. If these or
similar laws would be re-instituted, it would make it more difficult for us to sell our furniture to agencies and departments of the U.S. government. Our government business is also
sensitive to changes in national and international priorities and U.S. government budgets. The current budget deficits that exist for the United States and most state governments are likely to result
in decreased future furniture spending and may negatively impact our future governmental sales.

In
addition, the U.S. government typically can terminate or modify its contracts with us either for its convenience or if we default by failing to perform under the terms of the
applicable contract. A termination arising out of our default could expose us to liability and impede our ability to compete in the future for contracts and orders. Furthermore, if we were found to
have committed fraud or certain criminal offenses, we could be suspended or debarred from all further government contracting. Given the percentage of our revenues represented by sales to the U.S.
government in 2010, any factors that would negatively impact our relationship with the U.S. government would adversely impact our sales and results of operations.

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Our efforts to diversify our sources of revenue may not be effective and may expose us to new risks

Historically, the majority of our revenues were derived from the sales of office systems in North America. We have pursued a strategy
to diversify our sources of revenue and reduce our dependence on North American office system sales. While we believe that this strategy enables us to better maintain and grow our sales and
profitability during cyclical ups and downs in the industry, there can be no assurance that this diversification strategy will be effective in achieving these goals. Our diversification strategy
involves the expansion of our specialty and complementary businesses, and business growth internationally, which may expose us to business risks that we have not experienced. We also may incur
significant costs in pursuing our diversification strategy, and those costs may not be fully offset by increased revenues associated with new business lines.

We operate with leverage, and a significant amount of cash will be required to service our indebtedness. Restrictions imposed by the terms of our indebtedness may limit our
operating and financial flexibility.

As of December 31, 2010, we had total consolidated outstanding debt of approximately $245.1 million, which consisted of
$245.0 million under our revolving credit facility and $0.1 million under local credit facilities maintained by our foreign subsidiaries. We also had $3.0 million in outstanding
commitments under letters of credit.

Our
existing revolving credit facility permits us to borrow up to $500.0 million (subject to compliance with the financial covenants contained in the facility). We are permitted
to expand our revolving credit facility by an additional $200.0 million, subject to certain limitations and satisfaction of certain conditions, including compliance with certain financial
covenants.

As
of December 31, 2010, the total remaining credit available to us under our credit facility and those of our foreign subsidiaries was $262.4 million, subject to
compliance with the financial covenants contained in our facility as further described in "Liquidity and Capital Resources" below. If we were to borrow the maximum available to us under our credit
facility and those of our foreign subsidiaries, we would have total consolidated outstanding debt of approximately $507.5 million. The high level of our indebtedness could have important
consequences to holders of our common stock, given that:



Our
revolving credit facility prevents us and our subsidiaries from incurring any additional indebtedness other than (i) borrowings under our existing revolving credit facility;
(ii) certain types of indebtedness that may be incurred subject to aggregate dollar limitations identified in the credit facility, including, without limitation, purchase money indebtedness and
capital lease obligations, indebtedness incurred in connection with a permitted acquisition, and loans obtained through an expansion of the facility, all of which cannot exceed $250.0 million
at any time, and (iii) other types of indebtedness that are not limited to specific dollar limitations, such as indebtedness incurred in the ordinary course of business and unsecured,
subordinated indebtedness. The aggregate amount of indebtedness that we may incur pursuant to these exceptions is further limited by the financial covenants in our revolving credit facility and,
therefore, will depend on our future results of operations and cannot be determined at this time. Furthermore, although we may incur unlimited amounts of certain types of indebtedness, subject to
compliance with these financial covenants, the amount of indebtedness that we may actually be able

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to
incur will depend on the terms on which such types of debt financing are available to us, if available at all.

As
a result of the foregoing, we may be prevented from engaging in transactions that might further our growth strategy or otherwise be considered beneficial to us. A breach of any of the
covenants in our revolving credit facility could result in a default thereunder. If payments to the lenders under our revolving credit facility were to be accelerated, our assets could be insufficient
to repay in full the indebtedness under our credit facility and our other liabilities. Any such acceleration could also result in a foreclosure on all or substantially all of our subsidiaries' assets,
which would have a negative impact on the value of our common stock and jeopardize our ability to continue as a going concern.

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

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

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

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

In
the past, certain of our products have been copied and sold by others. We try to enforce our intellectual property rights, but we have to make choices about where and how we pursue
enforcement and where we seek and maintain patent protection. In many cases, the cost of enforcing our rights is substantial, and we may determine that the costs of enforcement outweigh the potential
benefits. If we
are unable to maintain the proprietary nature of our intellectual property with respect to our significant current or proposed products, our competitors may be able to sell copies of our products,
which could adversely affect our ability to sell our original products and could also result in competitive pricing pressures, which may negatively affect our profitability.

If third parties claim that we infringe upon their intellectual property rights, we may incur liability and costs and may have to redesign or discontinue an infringing
product.

We face the risk of claims that we have infringed third parties' intellectual property rights. Companies operating in our industry
routinely seek patent protection for their product designs, and

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many
of our principal competitors have large patent portfolios. Prior to launching major new products in our key markets, we normally evaluate existing intellectual property rights. However, our
competitors may have filed for patent protection which is not, at the time of our evaluation, a matter of public knowledge. Our efforts to identify and avoid infringing third parties' intellectual
property rights may not be successful. Any claims of patent or other intellectual property infringement, even those without merit, could (i) be expensive and time consuming to defend;
(ii) cause us to cease making, licensing or using products that incorporate the challenged intellectual property; (iii) require us to redesign, reengineer, or rebrand our products or
packaging, if feasible; or (iv) require us to enter into royalty or licensing agreements in order to obtain the right to use a third party's intellectual property.

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

Our past and present ownership and operation of manufacturing plants are subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected
by hazardous substances. As a result, we are involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters and could become subject to fines or
penalties related thereto. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted
or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some
of which may be material. We have been identified as a potentially responsible party pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, for
remediation costs associated with waste disposal sites previously used by us. In general, CERCLA can impose liability for costs to investigate and remediate contamination without regard to fault or
the legality of disposal and, under certain
circumstances, liability may be joint and several, resulting in one party being held responsible for the entire obligation. Liability may also include damages for harm to natural resources. The
remediation costs and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. We reserve amounts
for such matters when expenditures are probable and reasonably estimable.

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

Certain of our employees located in Grand Rapids, Michigan and Italy are represented by unions. The collective bargaining agreement for
our Grand Rapids location expires August 27, 2011. We have also had sporadic, to date unsuccessful, attempts to unionize our other North American manufacturing locations and have experienced a
number of brief work stoppages at our facilities in Italy as a result of national and local issues. While we believe that we have good relations with our workforce, we may experience work stoppages or
other labor problems in the future, and further unionization efforts may be successful. Any prolonged work stoppage could have an adverse effect on our reputation, our vendor relations and our
dealership network. Moreover, because substantially all of our products are manufactured to order, we do not carry finished goods inventory that could mitigate the effects of a prolonged work
stoppage.

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Product defects could adversely affect our results of operations.

Our customers may encounter product defects that could potentially arise in the course of our development of new products or due to
manufacturing problems. If product defects do arise, we could incur product warranty costs, product liability costs and costs associated with recalling and repairing defective products. While we
maintain a reserve for our product warranty costs based on estimates of the costs that may be incurred under the warranties on all of our products, our actual warranty costs may exceed this reserve,
resulting in a need to increase the amounts accrued for warranty costs. We also maintain product liability and other insurance coverage that we believe to be generally in accordance with industry
practices, but our insurance coverage does not extend to field visits to repair, retrofit or replace defective products, or to product recalls. As a result, our insurance coverage may not be adequate
to protect us fully against substantial claims and costs that may arise from product defects, particularly if we have a large number of defective products that we must repair, retrofit, replace or
recall. Sales of our products could be adversely affected by excessive warranty claims, product recalls and adverse perceptions of product quality. As a result of these factors, product defects could
have a material adverse effect on our results of operations.

We may be vulnerable to the effects of currency exchange rate fluctuations, which could increase our expenses.

We primarily sell our products and report our financial results in U.S. dollars, but we generate some of our revenues and pay some of
our expenses in other currencies. Paying our expenses in other currencies can result in a significant increase or decrease in the amount of those expenses in U.S. dollar terms, which affects our
profits.

In
the future, any foreign currency appreciation relative to the U.S. dollar would increase our expenses that are denominated in that currency. Additionally, as we report currency in the
U.S. dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in
which we conduct business are the Canadian dollar and the Euro. Approximately 14.9% of our revenues in 2010 and 34.8% of our cost of goods sold in 2010 were denominated in currencies other than the
U.S. dollar. From time to time we review our foreign currency exposure and evaluate whether we should hedge our exposure. We had no outstanding hedge transactions at December 31, 2010.

Pension costs or funding requirements could increase at a higher than anticipated rate.

We administer two defined benefit pension plans, which hold significant amounts of equity securities. Changes in interest rates or in
the market value of plan assets could affect the funded status of our pension plans. This could cause volatility in our benefits costs which could increase future funding requirements of our pension
plans and have a negative impact on our results of operations, financial condition and cash flows. Our future funding obligations also are affected by the Pension Protection Act of 2006 ("PPA"), which
established certain required funding targets. Volatility in the economic environment and/or a decline in the equity markets could cause the value of investment assets held by our pension plans to
decline. As a result, we may be required to increase the amount of our cash contributions to our pension plans in order to meet the funding level requirements of the PPA.

Risks Related to Our Common Stock

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

Provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition
involving us that our stockholders may consider favorable. For example, our amended and restated certificate of incorporation authorizes our board of directors to

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

We
are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Under these provisions, if anyone becomes an "interested
stockholder," we may not enter into a "business combination" with that person for three years without special approval, which could discourage a third party from making a takeover offer and could
delay or prevent a change of control. For purposes of Section 203, "interested stockholder" means, generally, someone owning 15% or more of our outstanding voting stock or an affiliate of ours
that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203. Upon any change in control, the lenders under our
revolving credit facility would have the right to require us to repay all of our outstanding obligations under the facility.

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

There has been significant volatility in the market price and trading volume of equity securities, which may be unrelated to the
financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. You may not be able to resell your shares at
or above the price at which you purchased them due to fluctuations in the market price of our common stock caused by changes in our operating performance or prospects and other factors. Some specific
factors that may have a significant effect on our common stock market price include:



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Table of Contents



ITEM 1B.    UNRESOLVED STAFF COMMENTS



ITEM 2.    PROPERTIES

We operate over 3,194,000 square feet of facilities, including manufacturing plants, warehouses and sales offices. Of these facilities,
we own approximately 2,424,000 square feet and lease approximately 770,000 square feet. Our manufacturing plants are located in East Greenville, Pennsylvania, Grand Rapids and Muskegon,
Michigan, Toronto, Canada, and Foligno and Graffignana, Italy. The location, square footage, and use of the facilities as of December 31, 2010 are shown below.

Owned Locations

Square Footage

UseEast Greenville, Pennsylvania


735,000
(1)
Corporate Headquarters, Manufacturing, Warehouses, and AdministrationGrand Rapids, Michigan


545,000
(1)
Manufacturing, Distribution, and AdministrationMuskegon, Michigan


368,000
(1)
Manufacturing and AdministrationToronto, Canada


408,000

Manufacturing, Distribution, Warehouses, and AdministrationFoligno, Italy


258,000

Manufacturing, Distribution, Warehouses, and AdministrationGraffignana, Italy


110,000

Manufacturing, Distribution, Warehouses, and Administration




Leased Locations

Square Footage

UseEast Greenville, Pennsylvania


142,000
(2)
Warehouses, DistributionMuskegon, Michigan


105,000

ManufacturingToronto, Canada


170,000

Manufacturing, Warehouses, and AdministrationKnoll, Europe


44,000

Administration, WarehousesEdelman Leather, Connecticut


55,000

Manufacturing and AdministrationSpinneybeck, New York


31,000

Manufacturing and AdministrationMiscellaneous Showrooms


223,000

Sales Offices


(1)Facilities
are encumbered by mortgages securing indebtedness under our revolving credit facility.(2)These
are three warehouses that have been subleased to a third party logistics provider and serve as our northeast distribution center.


We
believe that our plants and other facilities are sufficient for our needs for the foreseeable future.

ITEM 3.    LEGAL PROCEEDINGS

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

ITEM 4.    (REMOVED AND RESERVED)

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Dividend Policy

Our common stock has been listed on the New York Stock Exchange ("NYSE") since December 14, 2004, the date of our initial public
offering, under the symbol "KNL." As of February 25, 2011, there were approximately 93 stockholders of record of our common stock.

The
following table sets forth, for the periods indicated, high and low sales prices for the common stock as reported by the NYSE.

High

LowFiscal year ended December 31, 2010First quarter

$
13.09

$
9.95Second quarter

$
15.05

$
11.12Third quarter

$
15.95

$
11.73Fourth quarter

$
17.45

$
14.32




High

LowFiscal year ended December 31, 2009First quarter

$
9.42

$
5.33Second quarter

$
7.91

$
5.87Third quarter

$
11.00

$
7.15Fourth quarter

$
11.00

$
9.09


We
declared and paid cash dividends of $0.12 per share and $0.18 per share during the years ended December 31, 2010 and 2009, respectively. On February 3, 2011, our board
of directors declared a cash dividend of $0.06 per share on our common stock payable on March 31, 2011 to shareholders of record on March 15, 2011. The declaration and payment of future
dividends is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements and future prospects and other factors
deemed relevant by our board of directors. Our revolving credit facility imposes restrictions on our ability to pay dividends, and thus our ability to pay dividends on our common stock will depend
upon, among other things, our level of indebtedness at the time of the proposed dividend and whether we are in default under any of our debt obligations. Our ability to pay dividends will also depend
on the requirements of any future financing agreements to which we may be a party. Our board of directors intends to evaluate our dividend policy quarterly in reference to these factors.

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Performance Graph

The following line graph compares the cumulative total stockholder return on our common stock with the cumulative total return of the
Standard & Poors' 500 Stock Index and with the cumulative total return on a peer group of companies selected by us for the period commencing on December 31, 2005 and ending on
December 31, 2010. Our share price at the beginning of the measurement period is $17.11 per share. The graph and table assume that $100 was invested on December 31, 2005 in each of our
common stock, the stock of our peer group, and the S&P 500 Index, and that all dividends were reinvested. Cumulative total stockholder returns for our common stock, the S&P 500 Index,
and the stock of our peer group are based on our fiscal year. Our peer group is made up of two publicly-held manufacturers of office furniture, Herman Miller, Inc. and
Steelcase, Inc. The stock performance on the graph below does not necessarily indicate future price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*  Among Knoll, Inc., the S&P 500 Index  and a Peer Group

GRAPHIC

12/05

12/06

12/07

12/08

12/09

12/10Knoll, Inc.


100.00


131.32


100.33


57.25


67.21


109.75S&P 500


100.00


115.80


122.16


76.96


97.33


111.99Peer Group


100.00


125.89


118.13


46.75


56.85


92.53


*The
performance graph and the related chart should not be deemed filed for purposes of Section 18 of the Securities Exchange Exchange Act of 1934 or
incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, unless we specifically incorporate the performance graph by reference
therein.


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Table of Contents

Issuer Purchases of Equity Securities

The following is a summary of share repurchase activity during the three months ended December 31, 2010.

On
August 17, 2005, our board of directors approved a stock repurchase program (the "Options Proceeds Program"), whereby they authorized us to purchase shares of our common stock
in the open market using the cash proceeds received by us upon exercise of outstanding options.

On
February 2, 2006, our board of directors approved an additional stock repurchase program, pursuant to which we are authorized to purchase up to $50.0 million of our
common stock in the open market, through privately negotiated transactions, or otherwise. On February 4, 2008, our board of directors expanded this previously authorized $50.0 million
stock repurchase program by an additional $50.0 million.

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number of
Shares
Purchased as
part of publicly
Announced
Plans or
Programs

Maximum
Dollar Value of
Shares that may
yet be
Purchased
Under the Plans
or Programs(1)October 1, 2010 - October 31, 2010


77,329
(2)

14.74





32,352,413November 1, 2010 - November 30, 2010


10,004


15.87


10,004
(3)

32,352,413December 1, 2010 - December 31, 2010


317,210
(4)

16.41


193,059
(4)

32,352,413Total


404,543





203,063


(1)There
is no limit on the number or value of shares that may be purchased by us under the Options Proceeds Program. Under our $50.0 million stock
repurchase program, which was expanded by an additional $50.0 million in February of 2008, we are only authorized to spend an aggregate of $100.0 million on stock repurchases. Amounts in
this column represent the amounts that remain available under the $100.0 million stock repurchase program as of the end of the period indicated. There is no scheduled expiration date for the
Option Proceeds Program or the $100.0 million stock repurchase program, but our board of directors may terminate either program in the future.(2)On
October 21, 2010, 160,000 shares of outstanding restricted stock vested. Concurrently with the vesting, 60,092 shares were forfeited by the
holders of the vested restricted shares to cover applicable taxes paid on the holders' behalf by the Company. On October 22, 2010, 46,104 shares of outstanding restricted stock vested.
Concurrently with the vesting, 17,237 shares were forfeited by the holders of the vested restricted shares to cover applicable taxes paid on the holders' behalf by the Company.(3)These
shares were purchased under the Options Proceeds Program.(4)193,059
shares were purchased under the Options Proceeds Program. On December 14, 2010, 304,000 shares of outstanding restricted stock vested.
Concurrently with the vesting, 124,151 shares were forfeited by the holders of the vested restricted shares to cover applicable taxes paid on the holders' behalf by the Company.


ITEM 6.    SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our audited consolidated financial statements and the related notes included elsewhere in this Form 10-K. The selected
consolidated financial data for the years ended December 31, 2008, 2009 and 2010 and as

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of
December 31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this Form 10-K. The selected consolidated financial data for the years
ended December 31, 2006 and 2007 and as of December 31, 2006, 2007 and 2008 are derived from our audited financial statements not included in this Form 10-K.

Years Ended December 31,(dollars in thousands, except shares and per share data)2006

2007

2008

2009

2010Consolidated Statement of Operations Data:Sales

$
982,152

$
1,055,814

$
1,120,147

$
780,033

$
809,467Cost of sales


663,115


690,689


725,078


510,590


545,118Gross profit


319,037


365,125


395,069


269,443


264,349Selling, general and administrative expenses


202,097


222,937


245,032


193,995


192,122Restructuring and other changes








4,625


11,959


7,565Operating income


116,940


142,188


145,412


63,489


64,662Interest expense


23,717


24,598


16,289


13,862


17,436Other (expense) income, net


741


(4,651
)

3,679


(5,832
)

(6,379
)Income before income tax expense


93,964


112,939


132,802


43,795


40,847Income tax expense


35,331


41,496


47,890


16,442


12,823Net income

$
58,633

$
71,443

$
84,912

$
27,353

$
28,024Per Share Data:Earnings per share:Basic

$
1.18

$
1.48

$
1.82

$
0.60

$
0.61Diluted

$
1.14

$
1.45

$
1.82

$
0.60

$
0.61Cash dividends declared per share:

$
0.41

$
0.45

$
0.48

$
0.18

$
0.12Weighted average shares outstandingBasic


49,606,677


48,239,189


46,570,272


45,403,401


45,600,043Diluted


51,238,088


49,248,902


46,694,340


45,413,770


45,970,680




As of December 31,2006

2007

2008

2009

2010(in thousands)Consolidated Balance Sheet Data:Working capital

$
77,170

$
86,453

$
65,228

$
60,613

$
69,242Total assets


632,137


717,442


697,660


655,620


687,432Total long-term debt, including current portion


350,316


368,576


337,379


295,305


245,135Total liabilities


627,753


642,721


653,041


566,058


561,046Total Stockholders' equity


4,384


74,721


44,619


89,562


126,386


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Table of Contents

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of operations provides an account of
our financial performance and financial condition that should be read in conjunction with the accompanying audited consolidated financial statements.

Forward-looking Statements

This annual report on Form 10-K contains forward-looking statements, principally in the sections entitled
"Business," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk." Statements and
financial discussion and analysis contained in this
Form 10-K that are not historical facts are forward-looking statements. These statements discuss goals, intentions and expectations as to future trends, plans, events, results of
operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking
statements generally will be accompanied by words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "may," "possible," "potential," "predict," "project," or other
similar words, phrases or expressions. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry and our projections and estimates
with respect to our restructuring activities. Although we believe these forward-looking statements are reasonable, they are based upon a number of assumptions concerning future conditions, any or all
of which may ultimately prove to be inaccurate. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation: the risks
described in Item 1A and in Item 7A of this annual report on Form 10-K; changes in the financial stability of our clients or the overall economic environment,
resulting in decreased corporate spending and service sector employment; changes in relationships with clients; the mix of products sold and of clients purchasing our products; the success of new
technology initiatives; changes in business strategies and decisions; competition from our competitors; our ability to recruit and retain an experienced management team; changes in raw material prices
and availability; restrictions on government spending resulting in fewer sales to the U.S. government, one of our largest customers; our debt restrictions on spending; our ability to protect our
patents, copyrights and trademarks; our reliance on furniture dealers to produce sales; lawsuits arising from patents, copyrights and trademark infringements; violations of environment laws and
regulations; potential labor disruptions; adequacy of our insurance policies; the availability of future capital and the cost of borrowing; the overall strength and stability of our dealers,
suppliers, and customers; access to necessary capital; and currency rate fluctuations. The factors identified above are believed to be important factors (but not necessarily all of the important
factors) that could cause actual results to differ materially from those expressed in any forward-looking statement. Unpredictable or unknown factors could also have material adverse effects on us.
All forward-looking statements included in this Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements. Except as required under the Federal
securities laws and the rules and regulations of the SEC, we undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or
otherwise.

Overview

We are a designer and manufacturer of furnishings and accessories, textiles and fine leathers for the workplace and home. Our
commitment to innovation and modern design has yielded a comprehensive portfolio of products and a brand recognized for high quality and a sophisticated image. Our products are targeted at the middle
to upper end of the market and are sold primarily in North America through a direct sales force and a broad network of independent dealers.

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Table of Contents

Our
business structure and operating approach continue to deliver industry leading operating income margins among our primary publicly-held competitors. We operate under a
management philosophy that incorporates a collaborative culture, client-driven processes and a lean, agile operating structure. Our employees are performance-driven and motivated by a variable
incentive compensation system and broad-based equity ownership in the company.

During
2010, we faced many challenges as we focused on emerging from one of the worst downturns in the history of our industry. During 2009, our industry trade organization, the Business
and Institutional Furniture Manufacturers Association, or BIFMA, reported that industry sales declined 29.7% when compared to 2008. This is one of the steepest declines our industry has ever
experienced. Coming into 2010 we were uncertain as to when or if a recovery would begin. However, we maintained our focus on our core commitment to design and quality, managed our balance sheet,
protected our profitability and invested through the cycle in exciting innovative new designs so we would be well positioned to emerge from the downturn stronger than ever. As we began to see signs of
recovery during the second half of 2010 this is exactly what happened.

BIFMA
reported an industry sales increase of 5.8% for 2010 . Our sales for the year increased a modest 3.8% when compared with 2009. However, our fourth quarter sales increased 30.4%
when compared with the fourth quarter of 2009. Our seating sales experienced double digit growth during the year as sales of our award winning Generation by Knoll® work chair continued to
increase. Systems, which historically has represented a large percentage of our overall sales, experienced significant growth during the third and fourth quarters of this year when compared with the
prior year. Our high margin specialty businesses also began generating growth during the second half of the year. Growth in Europe outpaced North American during 2010.

Some
of the biggest challenges we faced during 2010 were price competition, rising material prices and the strengthening of the Canadian dollar. Price competition continued to pressure
our margins as did the rising cost of steel. Price deterioration cost us $22.0 million during 2010. During the second half of 2010, expedited freight costs to meet the rising customer demand
also negatively impacted our gross margin. During the full year 2010, gross margin decreased from 34.5% in 2009 to 32.7% in 2010. Operating profit was $64.7 million, or 8.0% of sales, for 2010
and includes restructuring charges of $7.6 million. These restructuring charges relate to the announced March 2010 plan to better utilize our manufacturing capacity, eliminate duplication of
capabilities and reduce associated costs. Our operating profit increased 1.9% in 2010 when compared with the prior year. During 2010, we generated net income of $28.0 million, or $0.61 diluted
earnings per share, compared to $27.4 million, or $0.60 diluted earnings per share, in 2009.

We
continued to aggressively manage our balance sheet during 2010. Over the past twelve months we have reduced our outstanding debt by $50.0 million and since the end of 2007 by
$123.4 million. At the end of this year our long term debt was $245.0 million. We remain in compliance with all of our bank covenants and our revolving credit facility extends until June
2013. In addition, during the year ended December 31, 2010, we used free cash to pay dividends to our shareholders totaling $5.5 million. During the fourth quarter of 2010, we increased
our quarterly dividend from $0.02 per share to $0.06 per share.

In
2011, we will continue to work to diversify our portfolio of products away from such a substantial reliance on office systems. We will continue to focus on increasing our market share
in seating and our high margin specialty businesses and are excited about the introduction ofReGeneration by Knollin 2011. In addition,
with new selling relationships in the Middle East, Brazil and India, we look forward to continued international growth in 2011 and beyond.

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Table of Contents

Results of Operations

Years ended December 31, 2009 and 2010

Three Months Ended



Three Months EndedTwelve
Months Ended
December 31,
2009

Twelve
Months Ended
December 31,
2010March 31,
2009

June 30,
2009

September 30,
2009

December 31,
2009

March 31,
2010

June 30,
2010

September 30,
2010

December 31,
2010(in thousands, except statistical data)
(unaudited)Consolidated Statement of Operations Data:Sales

$
212,609

$
202,197

$
181,282

$
183,945

$
780,033

$
175,259

$
192,275

$
202,149

$
239,784

$
809,467Gross profit


74,767


70,729


61,273


62,674


269,443


56,661


63,040


67,452


77,196


264,349Operating income


16,765


18,514


16,797


11,413


63,489


9,408


11,940


19,109


24,205


64,662Interest expense


2,771


2,856


4,054


4,181


13,862


4,153


4,410


4,877


3,996


17,436Other income (expense), net


1,324


(2,747
)

(3,112
)

(1,297
)

(5,832
)

(1,413
)

2,318


(4,274
)

(3,010
)

(6,379
)Income tax expense


5,793


4,837


3,905


1,907


16,442


1,627


1,172


3,618


6,406


12,823Net income

$
9,525

$
8,074

$
5,726

$
4,028

$
27,353

$
2,215

$
8,676

$
6,340

$
10,793

$
28,024Statistical and Other Data:Sales growth from comparable prior year


-20.6
%

-30.9
%

-36.1
%

-33.4
%

-30.4
%

-17.6
%

-4.9
%

11.5
%

30.4
%

3.8
%Gross profit margin


35.2
%

35.0
%

33.8
%

34.1
%

34.5
%

32.3
%

32.8
%

33.4
%

32.2
%

32.7
%Backlog

$
163,768

$
134,136

$
121,741

$
153,037

$
153,037

$
138,946

$
132,539

$
160,492

$
196,567

$
196,567




Sales for 2010 were $809.5 million, an increase of $29.5 million, or 3.8%, from sales of $780.0 million for 2009.
Seating experienced double digit growth during the year as our Generation by Knoll®chair continues to gain market share. For the year ended
December 31, 2010, systems sales declined on a year over basis but showed significant improvement during the third and fourth quarters of 2010. In 2010, systems continued to represent a large
percentage of our overall sales. Geographically our European sales increased at a greater pace than North America. At December 31, 2010, sales backlog was $196.6 million, an increase of
$43.6 million, or 28.5%, from sales backlog of $153.0 million as of December 31, 2009.

As
we went through 2010, it began to appear that signs were in place for a recovery to begin in the industry. Business confidence began to improve as did service sector employment. The
fourth quarter of 2010 was the first quarter since 2007 of positive office space absorption and, at the end of 2010, The Architectural Billings Index was at its highest point since November 2007. The
Architectural Billings Index is provided by the American Institute of Architects and shows the nine to twelve month lag between architecture billings and construction spending. All these signs led to
our sales increasing on a year over year basis during the third and fourth quarters of 2010.

Sales
to governmental entities and agencies remained strong in 2010. Approximately 23.4% of our 2010 sales were to federal, state and local governmental entities and related agencies.

Pricing
pressure continued to have a significant impact on 2010 sales. The recent industry decline has led to a very competitive pricing environment as the industry competes for a
smaller pool of business. We believe we have been able to offset some of this pressure through our cost reduction activities. However, pricing pressures had a negative impact on our gross margin
performance n 2010. We
recently implemented a price increase that should alleviate some of this pressure next year as we anticipate further recovery in the industry. BIFMA is forecasting an 14.0% increase in industry sales
for 2011.

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Gross profit for 2010 was $264.3 million, a decrease of $5.1 million, or 1.9%, from gross profit of $269.4 million
for 2009. Operating income for 2010 was $64.7 million, an increase of $1.2 million, or 1.8%, from operating income of $63.5 million for 2009.

As
a percentage of sales, gross profit decreased from 34.5% for 2009 to 32.7% for 2010. The largest contributors to this decline were price deterioration and material inflation,
particularly steel. The strengthening of the Canadian dollar during 2010 also negatively affected our gross margin. Operating income as a percentage of sales decreased from 8.1% in 2009 to 8.0% in
2010. Operating profit for 2010 includes restructuring charges of $7.6 million compared to $12.0 million in 2009.

Operating
expenses for 2010, excluding restructuring charges, were $192.1 million, or 23.7% of sales, compared to $194.0 million, or 24.9% of sales, for 2009. The modest
decrease in operating expenses during 2010 was in large part due to cost control measures that were put in place during the downturn in the industry and which more than offset by increased incentive
compensation this year.

During
2010, we incurred restructuring charges of approximately $7.6 million. These charges included $3.7 million of employee termination costs, $3.0 million of
costs associated with the write-off of fixed assets that we determined had no future benefit, and $0.9 million of costs related to facility realignment. During 2009, we incurred
restructuring charges of approximately $12.0 million. These charges included $10.6 million of employee termination costs, $0.6 million of costs associated with the exiting of
three leased showrooms, and $0.8 million of costs associated with the discontinuation of certain product lines.



Interest expense for 2010 was $17.4 million, an increase of $3.6 million from interest expense of $13.9 million
for 2009. The increase in interest expense is primarily due to the interest rate swap agreements that we entered into during 2008 that went into effect during the second quarter of 2009. These
agreements expire June 9, 2011. See Note 10 of our consolidated financial statements contained in this annual report on Form 10-K for further information regarding the
interest rate swaps. Taking into account the effect of the interest rate swap payments, the weighted average interest rate for 2010 was 5.8%. The weighted average interest rate for the same period in
2009 was 3.9%.



Other expense for 2010 was $6.4 million, comprised primarily of a $5.5 million loss due to foreign currency translation,
a $1.2 million non-cash expense related to the ineffective portion of our interest rate swaps, offset by $0.3 million of miscellaneous income. Other expense for 2009 was
$5.8 million, comprised primarily of a $6.6 million loss due to foreign currency translation and $0.8 million of miscellaneous income.



The mix of pretax income and the varying effective tax rates in the countries in which we operate directly affects our consolidated
effective tax rate. The effective tax rate was 31.4% for 2010 compared to 37.5% for 2009. The decrease in our effective tax rate was due to a $2.5 million tax benefit related to foreign tax
credits that was recognized as a discrete item due to amended tax returns being filed during the second quarter of 2010. Without this benefit, our tax rate for the year would have been 37.5%.

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Table of Contents

Years ended December 31, 2008 and 2009



Sales for 2009 were $780.0 million, a decrease of $340.1 million, or 30.4%, from sales of $1.12 billion for 2008.
For the year ended December 31, 2009, we experienced double digit declines across all product categories and geographies when compared to the prior year. At December 31, 2009, sales
backlog was $153.0 million, a decrease of $48.7 million, or 24.1%, from sales backlog of $201.7 million as of December 31, 2008.

In
2009, the global recession greatly impacted the office furniture industry. A widespread lack of business confidence and growing unemployment levels increased office vacancy rates and
lowered the demand for our products, especially office systems. Office systems as a product category were impacted the most by the decline in demand with sales declining 30.6% when compared to 2008.
Although we have diversified our sales over recent years by growing our seating and specialty businesses to make us less dependent on the office systems category, office systems still represent a
significant portion of our sales.

Sales
to the U.S. government remained strong in 2009 and became a larger portion of our overall revenue in 2009. Approximately 16.0% of our 2009 sales were to the U.S. government and
related agencies.

Although
the recent recession has been worldwide, geographically our European sales declined at a greater pace than North America in 2009.

The
substantial reduction in industry demand has resulted in a very competitive pricing environment as our industry competes for a smaller pool of business. This pricing pressure had a
significant impact on 2009 sales, but we believe we managed to stay competitive and offset some of this pricing pressure through our cost reduction activities.



Gross profit for 2009 was $269.4 million, a decrease of $125.7 million, or 31.8%, from gross profit of
$395.1 million for 2008. Operating income for 2009 was $63.5 million, a decrease of $81.9 million, or 56.3%, from operating income of $145.4 million for 2008. We are
relatively pleased with the profit levels we reported in 2009 given the significant deterioration in industry demand and a reduction of $340.1 million in our sales from 2008.

As
a percentage of sales, gross profit decreased from 35.3% for 2008 to 34.5% for 2009. The decrease in gross margin during 2009 was primarily due to price deterioration and lower
absorption of our fixed costs as a result of our lower sales volumes. Operating income as a percentage of sales decreased from 13.0% in 2008 to 8.1% in 2009. Operating profit for 2009 includes
restructuring charges of $12.0 million compared to $4.6 million in 2008.

Operating
expenses for 2009, excluding restructuring charges, were $194.0 million, or 24.9% of sales, compared to $245.0 million, or 21.9% of sales, for 2008. The decrease
in operating expenses during 2009 was in large part due to decreased spending in conjunction with our lower sales volumes. Decreased sales and incentive compensation accounted for $23.5 million
of the reduction. In addition, decreased bad debt expense and previously implemented cost reduction measures added to the decrease.

During
2009, we incurred restructuring charges of approximately $12.0 million. These charges included $10.6 million of employee termination costs, $0.6 million of
costs associated with the exiting of three leased showrooms, and $0.8 million of costs associated with the discontinuation of certain product lines. During 2008, we incurred restructuring
charges of approximately $4.6 million. These charges

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included
$3.3 million of employee termination costs and $1.3 million of costs associated with the discontinuation of certain product lines.



Interest expense for 2009 was $13.9 million, a decrease of $2.4 million from interest expense of $16.3 million for
2008. The decrease in interest expense was largely due to lower borrowing rates. Two interest rate swap agreements that we entered into during 2008 went into effect during the second quarter of 2009
and resulted in an increased rate for the second half of 2009. For the year ended December 31, 2009, additional interest expense of $5.2 million was incurred as a result of these swap
agreements. See Note 10 of our consolidated financial statements contained in this annual report on Form 10-K for further information regarding the interest rate swaps.
Taking into account the effect of the interest rate swap payments, the weighted average interest rate for 2009 was 3.9%. The weighted average interest rate for the same period in 2008 was 4.3%.



Other expense for 2009 was $5.8 million, comprised primarily of a $6.6 million loss due to foreign currency translation
and $0.8 million of miscellaneous income. Other income for 2008 was $3.7 million, comprised primarily of a $3.0 million gain due to foreign currency translation and a
$0.7 million of miscellaneous income.



The mix of pretax income and the varying effective tax rates in the countries in which we operate directly affects our consolidated
effective tax rate. The effective tax rate was 37.5% for 2009 compared to 36.1% for 2008.

Liquidity and Capital Resources

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

2010

2009

2008(in thousands)Cash provided by operating activities

$
89,632

$
52,853

$
112,224Capital expenditures


8,312


13,706


18,530Cash used in investing activities


9,037


14,519


18,530Purchase of common stock for treasury


12,073


1,587


40,871Repayment of debt, net


50,134


42,131


31,129Payment of dividends


5,496


8,171


22,380Proceeds from issuance of common stock


9,737


111


1,796Cash used in financing activities


57,487


51,778


92,381


Historically,
we have carried significant amounts of debt, and cash generated by operating activities has been used to fund working capital, capital expenditures, repurchase shares and
scheduled payments of principal and interest under our debt. Our capital expenditures are typically for new product tooling and manufacturing equipment. These capital expenditures support new products
and continuous improvements in our manufacturing processes. In addition, we are currently evaluating a new enterprise resource planning system with implementation to begin in 2011. Expenses associated
with this system implementation will increase spending over the next few years.

Cash
provided by operating activities was $89.6 million in 2010, $52.9 million in 2009 and $112.2 million in 2008. For the year ended December 31, 2010, cash
provided by operating activities

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consisted
of $70.0 million from net income plus various non-cash charges which included $1.2 million of non-cash expense related to the ineffective portion of the
interest rate swaps and a $3.0 million write-off of assets due to restructuring, and $19.6 million of favorable changes in assets and liabilities. For the year ended
December 31, 2009, cash provided by operating activities consisted of $67.6 million from net income, plus non-cash charges, offset by $14.7 million of unfavorable
changes in working capital.

For
the year ended December 31, 2010, we used available cash, including the $89.6 million of cash from operating activities to repay $50.1 million of debt, fund
$8.3 million in capital expenditures, fund dividend payments to shareholders totaling $5.5 million, and to fund working capital. In 2009, we used available cash, including the
$52.9 million of cash from operating activities to repay $42.1 million of debt, fund $13.7 million in capital expenditures, fund dividend payments to shareholders totaling
$8.2 million, and to fund working capital.

We
use our existing secured $500 million revolving credit facility in the ordinary course of business to fund our working capital needs, and at times make significant borrowings
and repayments under the facility depending on our cash needs and availability at such time. This facility matures in June 2013 and provides us with the option to increase the size of the facility by
up to an additional $200 million, subject to the satisfaction of certain terms and conditions. As of December 31, 2010, there was approximately $245 million outstanding under the
facility, compared to $295 million outstanding under the facility as of December 31, 2009. Borrowings under the revolving credit facility may be repaid at any time, but no later than
June 2013.

Our
revolving credit facility requires that we comply with two financial covenants: (i) our consolidated leverage ratio, defined as the ratio of total indebtedness to consolidated
EBITDA (as defined in our credit agreement) for a period of four fiscal quarters, cannot exceed 4 to 1, and (ii) our consolidated interest coverage ratio, defined as the ratio of our
consolidated EBITDA (as defined in our credit agreement) for a period of four fiscal quarters to our consolidated interest expense, must be a minimum of 3 to 1. We are also required to comply with
various other affirmative and negative covenants, including without limitation, covenants that prevent or restrict our ability to pay dividends, engage in certain mergers or acquisitions, make certain
investments or loans, incur future indebtedness, make significant capital expenditures, engage in sale-leaseback transactions, alter our capital structure or line of business, prepay
subordinated indebtedness, engage in certain transactions with affiliates and sell stock or assets.

We
are currently in compliance with all of the covenants and conditions under our credit facility. We believe that existing cash balances and internally generated cash flows, together
with borrowings available under our revolving credit facility, will be sufficient to fund normal working capital needs, capital spending requirements, debt service requirements and dividend payments
for at least the next twelve months. However, because of the financial covenants mentioned above, our capacity under our revolving credit facility could be reduced if our trailing consolidated EBITDA
(as defined by our credit agreement) would decline due to deteriorating market conditions. Future principal debt payments may be paid out of cash flows from operations, from future refinancing of our
debt or from equity issuances. However, our ability to make scheduled payments of principal, to pay interest on or to refinance our indebtedness, to satisfy our other debt obligations and to pay
dividends to stockholders will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors
beyond our control.

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Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2010 (in thousands):

Payments due by periodLess than
1 year

1 to 3
years

3 to 5
years

More than
5 years

TotalLong-term debt

$
3,937

$
250,691

$


$


$
254,628Operating leases


13,001


17,722


11,729


20,426


62,878Purchase commitments


1,743











1,743Pension plan contributions(a)


10,675











10,675Postretirement benefit plan obligations(a)


1,494











1,494Total

$
30,850

$
268,413

$
11,729

$
20,426

$
331,418


(a)Due
to the uncertainty of future cash outflows, contributions to the pension and other post-retirement benefit plans subsequent to 2011 have
been excluded from the table above.(b)Due
to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the table above.


Contractual
obligations for long-term debt include principal and interest payments. Interest has been included at either the fixed rate or the variable rate in effect as of
December 31, 2010, as applicable.

Environmental Matters

Our past and present business operations and the past and present ownership and operation of manufacturing plants on real property are
subject to extensive and changing federal, state, local and foreign environmental laws and regulations, including those relating to discharges to air, water and land, the handling and disposal of
solid and hazardous waste and the cleanup of properties affected by hazardous substances. As a result, we are involved from time-to-time in administrative and judicial
proceedings and inquiries relating to environmental matters and could become subject to fines or penalties related thereto. We cannot predict what environmental legislation or regulations will be
enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist. Compliance with more stringent laws or
regulations, or stricter interpretation of existing laws, may require additional expenditures by us, some of which may be material. We have been identified as a potentially responsible party pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") for remediation costs associated with waste disposal sites that we previously used. The remediation costs
and our allocated share at some of these CERCLA sites are unknown. We may also be subject to claims for personal injury or contribution relating to CERCLA sites. We reserve amounts for such matters
when expenditures are probable and reasonably estimable.

Off-Balance Sheet Arrangements

We do not currently have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to
as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited
purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As a result, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in these relationships.

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Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the U.S.
("GAAP") requires us to make estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of certain contingent assets and
liabilities. Actual results may differ from such estimates. We believe that the critical accounting policies that follow are those policies that require the most judgment, estimation and assumption in
preparing our consolidated financial statements.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our clients and dealers to make
required payments. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of
current and projected economic conditions. We evaluate the past-due status of our trade receivables based on contractual
terms of sale. If the financial condition of our clients and dealers were to deteriorate, additional allowances may be required. Accounts receivable are charged off against the allowance for doubtful
accounts when we determine that recovery is unlikely.

Inventory

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

Goodwill and Other Intangible Assets

Intangible assets consist of goodwill, trademarks and deferred financing fees. Goodwill is recorded at the amount by which cost exceeds
the net assets of acquired businesses, and all other intangible assets are recorded at cost. Goodwill and other indefinite lived intangible assets are tested for impairment annually unless indicators
of impairment exist.

Financing
costs that are incurred by us in connection with the issuance of debt are deferred and amortized to interest expense over the life of the underlying indebtedness. The period of
these costs may be shortened if the underlying indebtedness is modified or retired.

Product Warranty

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

Employee Benefits

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

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Pension and Other Postretirement Benefits

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

We
determine the expected long-term rate of return on plan assets based on aggregating the expected rates of return for each component of the plan's asset mix. We use
historic plan asset returns combined with current market conditions to estimate the rate of return. The expected rate of return on plan assets is a long-term assumption and generally does
not change annually. The discount rate reflects the market rate for high-quality fixed income debt instruments as of our annual measurement date and is subject to change each year. Holding
all other assumptions constant, a one percentage point increase or decrease in the assumed rate of return on plan assets would decrease or increase 2010 net periodic pension expense by approximately
$1.4 million. Likewise, a one percentage point increase or decrease in the discount rate would decrease or increase 2010 net periodic pension expense by approximately $2.7 million or
$4.7 million, respectively.

Unrecognized
actuarial gains and losses are recognized over the expected remaining service life of the employee group. Unrecognized actuarial gains and losses arise from several factors,
including experience and assumption changes with respect to the obligations and from the difference between
expected returns and actual returns on plan assets. These unrecognized gains and losses are systematically recognized as a change in future net periodic pension expense in accordance with the
appropriate accounting guidance relating to defined benefit pension and other postretirement plans.

Key
assumptions we use in determining the amount of the obligation and expense recorded for postretirement benefits other than pensions ("OPEB"), under the appropriate accounting
guidance, include the assumed discount rate and the assumed rate of increases in future health care costs. The discount rate we use to determine the obligation for these benefits matches the discount
rate used in determining our pension obligations in each year presented. In estimating the health care cost trend rate, we consider actual health care cost experience, future benefit structures,
industry trends and advice from our actuaries. We assume that the relative increase in health care costs will generally trend downward over the next several years, reflecting assumed increases in
efficiency and cost containment initiatives in the health care system. At December 31, 2010, the expected rate of increase in future health care costs was 8.00% in determining the benefit
obligation for 2010 and 8.00% in determining the net periodic benefit cost for 2010. The rate was then assumed to decrease to an ultimate rate of 5% for 2017 and thereafter for the benefit obligation.
Increasing the assumed health care cost trend by one percentage point in each year would increase the benefit obligation as of December 31, 2010 by $0.6 million and increase the
aggregate of the service and interest cost components of net periodic benefit cost for 2010 by approximately $0.1 million. Decreasing the assumed health care cost trend rate by one percentage
point in each year would decrease the benefit obligation as of December 31, 2010 by approximately $0.6 million and decrease the aggregate of the service and interest cost components of
net periodic benefit cost for 2010 by approximately $0.1 million.

In
accordance with the appropriate accounting guidance, we recognize in our consolidated balance sheet the funded status (i.e. the difference between the fair value of plan assets
and the projected benefit obligation) of our defined benefit pension and postretirement benefit plans. To record the unfunded status of our plans we recorded an additional liability and an adjustment
to accumulated other comprehensive income, net of tax.

The
actuarial assumptions we use in determining our pension and OPEB retirement benefits may differ materially from actual results due to changing market and economic conditions, higher
or lower

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withdrawal
rates, or longer or shorter life spans of participants. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may materially
affect our financial position or results of operations.

Commitments and Contingencies

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

Taxes

We account for income taxes in accordance with the appropriate accounting guidance relating to income taxes, which requires that
deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax bases of recorded assets and liabilities. The appropriate
accounting guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be recognized.

At
December 31, 2010, deferred tax liabilities of $93.9 million exceeded deferred tax assets of $51.0 million by $42.9 million. At December 31, 2009,
our deferred tax liabilities of $87.0 million exceeded deferred tax assets of $55.0 million by $32.0 million. Our deferred tax assets at December 31, 2010 and 2009 of
$51.0 million and $55.0 million, respectively, are net of valuation allowances of $9.4 million and $8.9 million, respectively. We have recorded the above valuation
allowance primarily for net operating loss carryforwards in foreign tax jurisdictions where we have incurred historical tax losses from operations or acquired tax losses through acquisition, and have
determined that it is more likely than not that these deferred tax assets will not be realized.

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

We
account for uncertain tax positions in accordance with the applicable accounting guidance relating to uncertainty in income taxes. Accordingly, we report a liability for unrecognized
tax benefits resulting
from uncertain tax positions taken, or expected to be taken, in an income tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Interest Rate Swap Agreements

On May 21, 2008, we entered into four interest rate swap agreements for purposes of managing our risk in interest rate
fluctuations. These agreements each hedge a notional amount of $150.0 million of our borrowings under the revolving credit facility. Two of the agreements were effective June 9, 2009 and
expired on June 9, 2010. On these two agreements, we paid a fixed rate of 3.51% and received a variable rate of interest equal to three-month London Interbank Offered Rate (LIBOR), as
determined on the last day of each quarterly settlement period. The other two agreements were effective on June 9, 2010 and expire on June 9, 2011. We pay a fixed rate of 4.10% on these
two agreements and receive a variable rate of interest equal to three-month LIBOR.

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The
Company has elected to apply hedge accounting to these swap agreements. Changes in the fair value of the effective portion of the interest rate swap agreements are recorded as a
component of accumulated other comprehensive income (loss) in the equity section of the balance sheet. The net amount paid or received upon quarterly settlements is recorded as an adjustment to
interest expense, with a corresponding reduction in other comprehensive income (loss).

Stock-Based Compensation

The Company accounts for stock-based compensation according to applicable accounting guidance, which requires the Company to expense
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite
service period following the date of grant.

The
fair value for stock options is estimated at the date of grant using a lattice option-pricing model, which requires management to make certain assumptions. The risk-free
interest rate is based on the U.S. Treasury spot rate with a remaining term equal to the expected life assumed at the
date of grant. Expected volatility is estimated based on the historical volatility of the Company's stock price. The model takes into consideration the historical dividends paid on common stock. The
weighted-average expected life is based on the contractual term of the stock option and expected employee exercise dates, which is based on the historical exercise behavior of the Company's employees.
Forfeitures are estimated at the date of grant based on historical experience.

There
were no stock options granted during 2010.

Recent Accounting Pronouncements

In December 2010, the FASB issued an amendment related to the accounting for business combinations to address diversity in practice
about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This standard will become effective for the Company on January 1, 2011 and may
have a material impact on the Company's consolidated financial statements if there are future acquisitions.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

We
also have risk in our exposure to certain material and transportation costs. Steel, leather, wood products and plastics are all used in the manufacture of our products. For the year
ended December 31, 2010, material inflation was approximately $6.8 million and transportation deflation was approximately $0.2 million. During 2009, material inflation was
approximately $0.9 million and transportation inflation was approximately $4.1 million. We continue to work to offset price increases in raw materials and transportation through our
global sourcing initiatives, cost improvements and price increases to our products.

Interest Rate Risk

We have variable rate debt obligations that are denominated in U.S. dollars. A change in interest rates impacts the interest incurred
and cash paid on the variable-rate debt.

We
use interest rate swap agreements for other than trading purposes in order to manage our exposure to fluctuations in interest rates on our variable-rate debt. In May of
2008, we entered into four interest rate swap agreements in order to manage our interest rate risk. Each agreement hedges a

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notional
amount of $150.0 million. Two of the agreements were effective from June 9, 2009 through June 9, 2010 and the other two were effective June 9, 2010 and expire
June 9, 2011. Fluctuations in LIBOR affect both our net financial instrument position and the amount of cash to be paid or received by us, if any, under these agreements. See Note 10 of
the consolidated financial statements included in this annual report for further information regarding the interest rate swap agreements.

Taking
into account payments on the above noted interest rate swap agreements, our weighted average rate for 2010 was 5.8%. The weighted average rate for the same period of 2009 was
3.9%.

The
following table summarizes our market risks associated with our debt obligations and interest rate hedge agreements as of December 31, 2010. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by year of maturity. Variable interest rates presented for variable-rate debt represent the weighted average
interest rates on our credit facility borrowings as of December 31, 2010. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates.

2011

2012

2013

2014

2015

Thereafter

Total

Fair Value(dollars in thousands)Rate Sensitive LiabilitiesLong-term Debt:Fixed Rate

$
135

$


$


$


$


$


$
135

$
135Fixed Interest Rate


4.11
%



















Variable Rate

$


$


$
245,000




$


$


$
245,000

$
245,000Variable Interest Rate








1.55
%













Rate Sensitive Derivative Financial InstrumentsInterest Rate swaps:Notional Amount

$
300,000

$


$


$


$


$


$
300,000

$
(5,138
)Pay Fixed Interest Rate


4.10
%.













Receive Variable Interest Rate


0.30
%
















An
increase in our effective interest rate of 1% would increase annual interest expense by approximately $2.5 million. We will continue to review our exposure to interest rate
fluctuations and evaluate whether we should manage such exposures through derivative transactions.

Foreign Currency Exchange Rate Risk

We manufacture our products in the United States, Canada and Italy, and sell our products primarily in those markets as well as in
other European countries. Our foreign sales and certain expenses are transacted in foreign currencies. Our production costs, profit margins and competitive position are affected by the strength of the
currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as our reporting currency is the U.S.
dollar, our financial position is affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in
which we conduct business are the Canadian dollar and the Euro. Approximately 14.9% and 11.7% of our revenues in 2010 and 2009, respectively, and 34.8% and 33.0% of our cost of goods sold in 2010 and
2009, respectively, were denominated in currencies other than the U.S. dollar. Foreign currency exchange rate fluctuations resulted in a $5.5 million translation loss in 2010 and a
$6.6 million translation loss in 2009. The translation gains/losses do not reflect the impact of the translation of our operating results which are transacted in foreign countries.

From
time to time, we enter into foreign currency forward exchange contracts and foreign currency option contracts for other than trading purposes in order to manage our exposure to
foreign exchange

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rates
associated with short-term operating receivables of a Canadian subsidiary that are payable by our U.S. operations. The terms of these contracts are generally less than a year.
Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the change in fair value of outstanding
contracts is recorded as a component of other income (expense). During 2010 and 2009, the Company did not enter into any outstanding foreign currency contracts. During 2008, we recognized a net loss
of $7.8 million related to various foreign currency option contracts initiated and settled during 2008.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Knoll, Inc.

We
have audited the accompanying consolidated balance sheets of Knoll, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule
based on our audits.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Knoll, Inc. at December 31, 2010
and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Knoll, Inc.'s internal control over financial reporting as
of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 1, 2011 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Philadelphia,
Pennsylvania
March 1, 2011

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KNOLL, INC.        CONSOLIDATED BALANCE SHEETS        DECEMBER 31, 2010 AND 2009        (in thousands, except share and per share data)

December 31,
2010

December 31,
2009ASSETSCurrent assets:Cash and cash equivalents

$
26,935

$
5,961Customer receivables, net


126,780


113,652Inventories


85,216


79,964Deferred income taxes


10,507


4,994Prepaid and other current assets


11,722


9,306Total current assets


261,160


213,877Property, plant, and equipment, net


122,219


135,045Goodwill, net


76,101


75,612Intangible assets, net


222,246


223,550Other non-trade receivables


4,507


5,605Other noncurrent assets


1,199


1,931Total Assets

$
687,432

$
655,620LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Current maturities of long-term debt

$
135

$
149Accounts payable


101,206


74,687Income taxes payable


5,523


Other current liabilities


85,054


78,428Total current liabilities


191,918


153,264Long-term debt


245,000


295,156Deferred income taxes


53,420


36,997Postretirement benefits other than pensions


25,289


23,435Pension liability


34,719


41,046International retirement obligation


3,482


4,444Other noncurrent liabilities


7,218


11,716Total liabilities


561,046


566,058Stockholders' equity:Common stock, $0.01 par value; 200,000,000 shares authorized; 46,901,511 issued and outstanding (net of 13,306,995 treasury shares) at December 31,
2010 and 46,934,683 shares issued and outstanding (net of 12,425,927 treasury shares) at December 31, 2009


470


470Additional paid-in-capital


14,087


6,736Retained earnings


114,990


92,583Accumulated other comprehensive loss


(3,161
)

(10,227
)Total stockholders' equity


126,386


89,562Total Liabilities and Stockholders' Equity

$
687,432

$
655,620


See accompanying notes to the consolidated financial statements

41

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Table of Contents

KNOLL, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008        (dollars in thousands, except
share and per share data)

2010

2009

2008Sales

$
809,467

$
780,033

$
1,120,147Cost of sales


545,118


510,590


725,078Gross profit


264,349


269,443


395,069Selling, general, and admistrative expenses


192,122


193,995


245,032Restructuring and other charges


7,565


11,959


4,625Operating income


64,662


63,489


145,412Interest expense


17,436


13,862


16,289Other (expense) income, net


(6,379
)

(5,832
)

3,679Income before income tax expense


40,847


43,795


132,802Income tax expense


12,823


16,442


47,890Net Income

$
28,024

$
27,353

$
84,912Net earnings per shareBasic

$
0.61

$
0.60

$
1.82Diluted

$
0.61

$
0.60

$
1.82Weighted-average shares outstanding:Basic


45,600,043


45,403,401


46,570,272Diluted


45,970,680


45,413,770


46,694,340


See
accompanying notes to the consolidated financial statements

42

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Table of Contents

KNOLL, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008        (dollars in thousands,
except share and per share data)

Common
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders'
EquityBalance at January 1, 2008

$
493

$


$
45,255

$
28,973

$
74,721Net income








84,912





84,912Foreign currency translation adjustment











(27,030
)

(27,030
)Unrealized loss on derivatives (net of income tax effect of $5,065)











(7,774
)

(7,774
)Pension and other post-retirement liabilities (net of income tax effect of $15,386)











(23,616
)

(23,616
)Total comprehensive income














26,492Shares issued for consideration:Exercise of stock options, including tax benefit of $203 (107,290 shares)


1


1,399








1,400Shares issued under stock incentive plan (992,117 shares)


10


(10
)







Shares issued under employee stock purchase plan (5,841 shares)





65








65Shares issued to Board of Directors in lieu of cash (5,465 shares)





79








79Stock-based compensation, net of forfeitures (183,462 shares)


(2
)

7,211








7,209Cash dividend ($.48 per share)








(22,845
)




(22,845
)Purchase of common stock (3,089,191 shares)


(31
)

(8,744
)

(32,096
)




(40,871
)Adjustment to apply FASB Statement No. 158 measurement date requirement (net of tax of $998)








(1,631
)




(1,631
)Balance at December 31, 2008

$
471

$


$
73,595

$
(29,447
)
$
44,619Net income








27,353





27,353Foreign currency translation adjustment











18,709


18,709Change in the fair value of interest rate swap contracts (net of income tax effect of $20)











30


30Pension and other post-retirement liabilities (net of income tax effect of $305)











481


481Total comprehensive income














46,573Shares issued for consideration:Shares issued under stock incentive plan (40,818 shares)














Shares issued under employee stock purchase plan (6,716 shares)





52








52Shares issued to Board of Directors in lieu of cash (7,314 shares)





60








60Stock-based compensation, net of forfeitures (65,735 shares)





8,210








8,210Cash dividend ($.18 per share)








(8,365
)




(8,365
)Purchase of common stock (180,833 shares)


(1
)

(1,586
)







(1,587
)Balance at December 31, 2009

$
470

$
6,736

$
92,583

$
(10,227
)
$
89,562Net income








28,024





28,024Foreign currency translation adjustment











(315
)

(315
)Change in the fair value of interest rate swap contracts (net of income tax effect of $3,471)











5,122


5,122Pension and other post-retirement liabilities (net of income tax effect of $2,056)











2,259


2,259Total comprehensive income














35,090Shares issued for consideration:Exercise of stock options, including tax benefit of $479 (790,596 shares)


8


10,114








10,122Shares issued under stock incentive plan (50,446 shares)














Shares issued under employee stock purchase plan (3,251 shares)





44








44Shares issued to Board of Directors in lieu of cash (3,603 shares)





50








50Stock-based compensation, net of forfeitures (12,000 shares)





9,208








9,208Cash dividend ($.12 per share)








(5,617
)




(5,617
)Purchase of common stock (869,065 shares)


(8
)

(12,065
)







(12,073
)Balance at December 31, 2010

$
470

$
14,087

$
114,990

$
(3,161
)
$
126,386


See accompanying notes to the consolidated financial statements

43

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Table of Contents

KNOLL, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008        (in thousands)

2010

2009

2008CASH FLOWS FROM OPERATING ACTIVITESNet income

$
28,024

$
27,353

$
84,912Adustments to reconcile net income to cash provided by operating activities:Depreciation


17,433


18,497


19,220Amortization of intangible assets


2,028


2,082


2,246Provision for deferred taxes


7,075


5,225


3,435Write-off of fixed assets due to restructuring


2,962





Unrealized foreign currency loss (gain)


2,050


5,517


(11,013
)Ineffective portion of interest rate swaps


1,177





Stock based compensation


9,208


8,209


7,208Other non-cash items


108


636


1,262Changes in assets and liabilites:Customer receivables


(14,676
)

14,807


5,971Inventories


(6,032
)

23,112


(11,520
)Accounts payable


28,051


(6,327
)

(582
)Current income taxes


9,340


(14,808
)

(10,115
)Other current assets


(2,768
)

2,470


(9,596
)Other current liabilities


8,735


(28,707
)

16,588Other noncurrent assets and liabilities


(3,083
)

(5,213
)

14,208Cash provided by operating activities


89,632


52,853


112,224CASH FLOWS FOR INVESTING ACTIVITIESCapital expenditures


(8,312
)

(13,706
)

(18,530
)Purchase of intangibles


(725
)

(813
)

Cash used in investing activites


(9,037
)

(14,519
)

(18,530
)CASH FLOWS FOR FINANCING ACTIVITIESRepayment of revolving credit facilites, net


(50,000
)

(42,000
)

(31,000
)Repayment of long-term debt


(134
)

(131
)

(129
)Payment of dividends


(5,496
)

(8,171
)

(22,380
)Proceeds from the issuance of common stock


9,737


111


1,796Purchase of common stock for treasury


(12,073
)

(1,587
)

(40,871
)Tax benefit from the exercise of stock options


479





203Cash used in financing activites


(57,487
)

(51,778
)

(92,381
)Effect of exchange rate changes on cash and cash equivalents


(2,134
)

4,502


(4,385
)Increase (Decrease) in cash and cash equivalents


20,974


(8,942
)

(3,072
)Cash and cash equivalents at beginning of period


5,961


14,903


17,975Cash and cash equivalents at end of period

$
26,935

$
5,961

$
14,903


See
accompanying notes to the consolidated financial statements

44

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Table of Contents

KNOLL, INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2010

1. NATURE OF OPERATIONS

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

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

Cash and Cash Equivalents

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

Revenue Recognition and Accounts Receivable

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

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

Inventories

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

Property, Plant, Equipment and Depreciation

Property, plant, and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. The useful lives are as follows: 45 years for buildings and 2 to 12 years for machinery and equipment.

45

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets

The Company accounts for its intangible assets in accordance with the applicable accounting guidance for intangible assets. Intangible
assets mainly consist of goodwill, trademarks and deferred financing fees. Goodwill is recorded at the amount by which cost exceeds the net assets of acquired businesses, and all other intangible
assets are recorded at fair value at the date of acquisition.

Goodwill
and trademarks are tested for impairment annually or more frequently if indicators of impairment exist. The Company has determined that there has been no impairment in these
assets.

Deferred
financing costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the life of the underlying
indebtedness.

Shipping and Handling

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

Research and Development Costs

Research and development expenses, which are expensed as incurred and included as a component of selling, general, and administrative
expenses on the statement of operations, were $14.6 million for 2010, $14.4 million for 2009, and $16.3 million for 2008.

Income Taxes

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

The
Company accounts for uncertain tax positions in accordance with the applicable accounting guidance for income taxes. Accordingly, the Company reports a liability for unrecognized tax
benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in
income tax expense.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, and accounts payable, approximate their carrying amounts due to
their immediate or short-term periods to maturity. The stated interest rates on the Company's long-term debt approximate market rates for debt instruments with similar terms
and maturities, and accordingly, the fair value of the Company's long-term debt, described in Note 8, approximates its carrying amount, as it is variable-rate debt.

46

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Financial Instruments

On May 21, 2008, the Company entered into four interest rate swap agreements for purposes of managing its risk in interest rate
fluctuations. These agreements each hedge a notional amount of $150.0 million of the Company's borrowings under the revolving credit facility. Two of the agreements were effective
June 9, 2009 and expired on June 9, 2010. On these two
agreements, the Company paid a fixed rate of 3.51% and received a variable rate of interest equal to three-month London Interbank Offered Rate (LIBOR), as determined on the last day of each quarterly
settlement period. The other two agreements were effective on June 9, 2010 and expire on June 9, 2011. The Company pays a fixed rate of 4.10% on these two agreements and receives a
variable rate of interest equal to three-month LIBOR as determined on the last day of each quarterly settlement period.

The
Company has elected to apply hedge accounting to these swap agreements. Changes in the fair value of the effective portion of the interest rate swap agreements are recorded as a
component of accumulated other comprehensive income (loss) in the equity section of the balance sheet. The net amount paid or received upon quarterly settlements is recorded as an adjustment to
interest expense, with a corresponding reduction in other comprehensive income (loss). See Note 10 of the consolidated financial statements included in this annual report for further
information regarding the interest rate swap agreements.

Foreign Currency Translation

Results of foreign operations are translated into U.S. dollars using average exchange rates during the period, while assets and
liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded in accumulated other comprehensive income. As
of December 31, 2010 and 2009, the accumulated foreign currency translation adjustments included in other comprehensive income amounted to $21.6 million and $21.9 million,
respectively. Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency are included in income in the period in
which the change occurs.

Stock-Based Compensation

The Company accounts for stock-based compensation according to applicable accounting guidance, which requires the Company to expense
the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite
service period following the date of grant.

The
fair value for stock options is estimated at the date of grant using a lattice option-pricing model, which requires management to make certain assumptions. The risk-free
interest rate is based on the U.S. Treasury spot rate with a remaining term equal to the expected life assumed at the date of grant. Expected volatility is estimated based on the historical volatility
of the Company's stock
price. The model takes into consideration the historical dividends paid on common stock. The weighted-average expected life is based on the contractual term of the stock option and expected employee
exercise dates, which is based on the historical exercise behavior of the Company's employees. Forfeitures are estimated at the date of grant based on historical experience.

47

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

There
were no stock options granted during 2010. The following are the weighted-average assumptions that were used in the lattice option-pricing model for grants made during the years
ended December 31, 2009 and 2008:

2009

2008Expected volatility


44
%

31
%Expected dividend yield


0.78
%

3.61
%Expected Term (in years)


6


8Risk-free rate


3.34
%

3.66
%Forfeiture Rate


5
%

4
%


Accumulated Other Comprehensive (Loss) Income

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

Beginning
Balance

Before-Tax
Amount

Tax Benefit
(Expense)

Net-of-Tax
Amount

Ending
BalanceTwelve months ended:December 31, 2008Pension Adjustment

$
(1,285
)
$
(39,002
)
$
15,386

$
(23,616
)
$
(24,901
)Foreign currency translation adjustment


30,258


(27,030
)




(27,030
)

3,228Unrealized loss on derivatives





(12,839
)

5,065


(7,774
)

(7,774
)Accumulated other comprehensive loss, net of tax

$
28,973

$
(78,871
)
$
20,451

$
(58,420
)
$
(29,447
)December 31, 2009Pension Adjustment

$
(24,901
)
$
786

$
(305
)

481

$
(24,420
)Foreign currency translation adjustment


3,228


18,709





18,709


21,937Unrealized loss on derivatives


(7,774
)

50


(20
)

30


(7,744
)Accumulated other comprehensive loss, net of tax

$
(29,447
)
$
19,545

$
(325
)
$
19,220

$
(10,227
)December 31, 2010Pension Adjustment

$
(24,420
)
$
4,315

$
(2,056
)
$
2,259

$
(22,161
)Foreign currency translation adjustment


21,937


(315
)




(315
)

21,622Unrealized loss on derivatives


(7,744
)

8,593


(3,471
)

5,122


(2,622
)Accumulated other comprehensive loss, net of tax

$
(10,227
)
$
12,593

$
(5,527
)
$
7,066

$
(3,161
)


Earnings per Share

Basic earnings per share excludes the dilutive effect of (i) common shares that could potentially be issued due to the exercise
of stock options, and (ii) unvested restricted shares and is computed by

48

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

dividing
net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share includes the effect of shares and potential shares issued under the stock
incentive plans.

Twelve Months Ended
December 31,2010

2009

2008(in thousands)Weighted average shares of common stock outstandingbasic


45,600


45,403


46,570Potentially dilutive shares resulting from stock plans


371


10


124Weighted average common sharesdiluted


45,971


45,413


46,694Antidilutive options not included in the weighted average common shares-diluted calculation


1,701


3,408


2,225


Use of Estimates

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

New Accounting Pronouncements

In December 2010, the FASB issued an amendment related to the accounting for business combinations to address diversity in practice
about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This standard will become effective for the Company on January 1, 2011 and may
have a material impact on the Company's consolidated financial statements if there are future acquisitions.

3. CUSTOMER RECEIVABLES

Customer receivables are presented net of an allowance for doubtful accounts of $3.6 million and $5.1 million at December 31, 2010 and 2009, respectively. Management
performs ongoing credit evaluations of its clients and generally does not require collateral. As of December 31, 2010 and 2009, the U.S. government and agencies thereof, represented
approximately 16.3% and 28.8%, respectively, of gross customer receivables.

49

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

4. INVENTORIES

December 31,
2010

December 31,
2009(in thousands)Raw materials

$
41,808

$
39,112Work in process


7,218


6,447Finished goods


36,190


34,405Inventories

$
85,216

$
79,964


Inventory
reserves for obsolescence and other estimated losses were $8.3 million and $8.4 million at December 31, 2010 and 2009, respectively.

5. PROPERTY, PLANT, AND EQUIPMENT

December 31,
2010

December 31,
2009(in thousands)Land and buildings

$
105,272

$
105,937Machinery and equipment


253,283


265,397Construction in progress


4,420


1,566Property, plant and equipment


362,975


372,900Accumulated depreciation


(240,756
)

(237,855
)Property, plant and equipment, net

$
122,219

$
135,045


6. INTANGIBLE ASSETS

Information regarding the Company's goodwill and other intangible assets follows (in thousands):

December 31, 2010

December 31, 2009Gross
Amount

Accumulated
Amortization

Net
Amount

Gross
Amount

Accumulated
Amortization

Net
AmountUnamortizable intangible assets:Goodwill

$
84,513

$
(8,412
)
$
76,101

$
84,024

$
(8,412
)
$
75,612Trademarks


219,900


(32,069
)

187,831


219,900


(32,069
)

187,831Edelman Trade Name


26,050





26,050


26,050





26,050Amortizable intangible assets:Deferred financing fees


4,241


(2,712
)

1,529


4,241


(2,100
)

2,141Trademarks


3,000


(2,257
)

743


3,000


(1,772
)

1,228Other


9,293


(3,200
)

6,093


8,569


(2,269
)

6,300$
346,997

$
(48,650
)
$
298,347

$
345,784

$
(46,622
)
$
299,162


50

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

6. INTANGIBLE ASSETS (Continued)

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

December 31,
2010

December 31,
2009(in thousands)Balance at beginning of year

$
75,612

$
74,301Foreign currency transaction gain


489


1,311Balance at end of year

$
76,101

$
75,612


The
Company recorded amortization of deferred financing fees of approximately $612 thousand $612 thousand, and $611 thousand for the years ended December 31,
2010, 2009 and 2008, respectively. This amortization was recorded as a component of interest expense.

Estimated
amortization expense for the deferred financing fees and other intangibles for each of the five succeeding years is as follows (in thousands):

2011

$
2,4712012


1,8512013


9672014


6052015


557


7. OTHER CURRENT LIABILITIES

December 31,
2010

December 31,
2009(in thousands)Accrued employee compensation

$
34,676

$
25,202Accrued pension costs


10,675


10,000Customer deposits


6,146


5,925Derivatives


5,138


9,025Accrued warranty


8,090


9,773Other


20,329


18,503Other current liabilities

$
85,054

$
78,428


51

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

8. INDEBTEDNESS

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

December 31,
2010

December 31,
2009(in thousands)Revolving loans, variable rate (1.55% at December 31, 2010 and 1.51% at December 31, 2009)

$
245,000

$
295,000Other


135


305Total


245,135


295,305Less current maturities


(135
)

(149
)Long-term debt

$
245,000

$
295,156


Term and Revolving Loans

On June 29, 2007, the Company completed the refinancing of its existing credit facility with a $500.0 million revolving
credit facility maturing on June 29, 2013. The Company may use its revolving line of credit for general corporate purposes, including strategic acquisitions, stock buy backs and cash dividends.
Under the Company's credit agreement, the Company can increase its revolving credit facility by up to $200.0 million subject to certain limitations and satisfaction of certain conditions,
including compliance with certain financial covenants.

Loans
made pursuant to the revolving credit facility may be borrowed, repaid and reborrowed from time to time until June 2013, subject to satisfaction of certain conditions on the date
of any such borrowing. Obligations under the credit facility are secured by a first priority security interest in (i) the
capital stock of each present and future subsidiary (with limitations on foreign subsidiaries) and (ii) all present and future property and assets of the Company (with various limitations and
exceptions). Borrowings under the credit agreement bear interest at a floating rate based, at the Company's option, upon (i) the LIBOR rate plus an applicable percentage or (ii) the
greater of the federal funds rate plus 0.50% or the prime rate as announced by the revolving credit facility's administrative agent, plus an applicable percentage.

The
credit agreement contains a letter of credit subfacility that allows for the issuance of letters of credit and swing-line loans. The sum of the outstanding revolver
balance plus any outstanding letters of credit and swing-line loans cannot exceed $500.0 million subject to the ability to increase the credit facility by up to
$200.0 million as mentioned above. The amount available for borrowing under the revolving credit facility is reduced by the total outstanding letters of credit and swing-line loans.
As of December 31, 2010 and 2009, the Company had letters of credit outstanding totaling $3.0 million and $3.7 million, respectively.

The
Company is required to pay a commitment fee equal to a rate per annum calculated as the product of the applicable rate based upon the Company's leverage ratio as set forth in the
credit agreement times the unused portion of the revolving credit facility. In addition, the Company is required to pay a letter of credit fee equal to the applicable rate as set forth in the credit
agreement times the daily maximum amount available to be drawn under such letter of credit.

52

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

8. INDEBTEDNESS (Continued)

In
addition, the credit agreement also contains various affirmative and negative covenants that among other things, limit, subject to certain exceptions, the incurrence of additional
indebtedness and capital expenditures in excess of a specified amount in any fiscal year. The Company was in compliance with the credit agreement covenants at December 31, 2010.

The
Company also has several revolving credit agreements with various European financial institutions. These credit agreements provide credit primarily for overdraft and working capital
purposes. As of December 31, 2010, total credit available under such agreements was approximately $10,347,000. There is currently no expiration date on these agreements. The interest rates on
borrowings are variable and are based on the monetary market rate that is linked to each country's prime rate. As of December 31, 2010, the Company had no outstanding borrowings under the
European credit facilities.

Interest Paid

During 2010, 2009 and 2008, the Company made interest payments including amounts related to the Company's interest rate swap agreements
totaling $17.0 million, $12.8 million and $16.6 million respectively.

Maturities

Aggregate maturities of the Company's indebtedness as of December 31, 2010 are as follows (in thousands):

2011

$
1352012


2013


245,0002014


2015


$
245,135


9. PREFERRED STOCK

The Company's Certificate of Incorporation authorizes the issuance of 10,000,000 shares of preferred stock with a par value of $1.00 per share. Subject to applicable laws, the Board of
Directors is authorized to provide for the issuance of preferred shares in one or more series, for such consideration and with designations, powers, preferences and relative, participating, optional
or other special rights and the qualifications, limitations or restrictions thereof, as shall be determined by the Board of Directors. There was no Preferred Stock outstanding as of
December 31, 2010 and 2009.

10. DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Swap

The Company uses derivative financial instruments to reduce its exposure to adverse fluctuations in interest rates.

53

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

10. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

On
May 21, 2008, the Company entered into four interest rate swap agreements for purposes of managing its risk in interest rate fluctuations. These agreements each hedge a
notional amount of $150.0 million of the Company's borrowings under the revolving credit facility. Two of the agreements were effective June 9, 2009 and expired on June 9, 2010.
On these two agreements, the Company paid a fixed rate of 3.51% and received a variable rate of interest equal to three-month London Interbank Offered Rate (LIBOR), as determined on the last day of
each quarterly settlement period. The other two agreements were effective on June 9, 2010 and expire on June 9, 2011. The Company pays a fixed rate of 4.10% on these two agreements and
receives a variable rate of interest equal to three-month LIBOR as determined on the last day of each quarterly settlement period.

The
Company has elected to apply hedge accounting to these swap agreements. During 2010, the Company recorded an expense of $1.2 million related to the ineffective portion of the
above noted swap agreements. Changes in the fair values of the effective portion of the interest rate swap agreements are recorded as a component of accumulated other comprehensive income (loss) in
the equity section of
the balance sheet. The net amount paid or received upon quarterly settlements is recorded as an adjustment to interest expense, with a corresponding reduction in accumulated other comprehensive income
(loss).

The
effect of derivative instruments on the consolidated statement of income for the twelve months ended December 31, 2010, 2009 and 2008 was as follows (in thousands):

Derivatives in
Cash Flow Hedge Relationship

BeforeTax Loss
Recognized in
OCI on Derivative
(Effective Portion)

Locations of Loss
Reclassified from
AOCI into Income
(Effective Portion)

BeforeTax Loss
Reclassified from
AOCI into Income
(Effective Portion)

Locations of Loss
Recognized in
Income on Derivative
(Ineffective Portion)

BeforeTax Loss
Recognized in
Income on Derivative
(Ineffective Portion)December 31, 2010Interest rate swap contracts

$
(2,868
)
Interest Expense

$
(10,284
)
Other Expense, net

$
(1,177
)Total

$
(2,868
)


$
(10,284
)


$
(1,177
)December 31, 2009Interest rate swap contracts

$
(5,176
)
Interest Expense

$
(5,226
)
Other Expense, net

$
Total

$
(5,176
)


$
(5,226
)


$
December 31, 2008Interest rate swap contracts

$
(12,839
)
Interest Expense

$


Other Expense, net

$
Total

$
(12,839
)


$




$



Assuming interest rates stay at current levels, in the remaining six months of the swap agreements, the Company anticipates that approximately
$4.2 million will be reclassified from other comprehensive income (loss), to interest expense in connection with quarterly settlements of the above-referenced swap agreements.

The
fair value of the Company's derivative instruments included in current liabilities is $5.1 million (of which $0.9 million is not designated as a hedging instrument) and
$9.0 million at December 31,

54

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

10. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

2010
and December 31, 2009, respectively. The fair value of the Company's derivative instruments included in non-current liabilities was $3.8 million at December 31,
2009.

The
Company will continue to review its exposure to interest rate fluctuations and evaluate whether it should manage such exposure through derivative transactions. See note 19 of
the consolidated financial statements for additional information regarding the fair value of the interest rate swaps.

Foreign Currency Contracts

From time to time, the Company enters into foreign currency forward exchange contracts and foreign currency option contracts to manage
its exposure to foreign exchange rates associated with short-term operating receivables of a Canadian subsidiary that are payable by the U.S. operations. The terms of these contracts are
generally less than a year. Changes in the fair value of such contracts are reported in earnings in the period the value of the contract changes. The net gain or loss upon settlement and the remaining
change in fair value is recorded as a component of other (expense) income.

During
2010 and 2009, the Company did not enter into any foreign currency contracts. During 2008, the Company recognized a net loss of $7.8 million related to various foreign
currency option contracts initiated and settled during 2008, which was recorded in other (expense) income.

11. CONTINGENT LIABILITIES AND COMMITMENTS

The Company is currently involved in claims and matters of litigation, including environmental contingencies, arising in the ordinary course of business. The Company accrues for such
matters when expenditures are probable and reasonably estimable. Based upon information presently known, management is of the opinion that such litigation, either individually or in the aggregate,
will not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

The
Company offers a warranty for all of its products. The specific terms and conditions of those warranties vary depending upon the product sold. The Company estimates the costs that
may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company's liability include historical
product-failure experience and estimated repair costs for identified matters for each specific product category. The
Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Adjustments to recorded reserves for pre-existing warranties are not
material for each period presented.

55

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

11. CONTINGENT LIABILITIES AND COMMITMENTS (Continued)

Changes in the Company's warranty reserve during the years ended December 31, 2010, 2009, and 2008
were as follows:

2010

2009

2008(in thousands)Balance, beginning of the year

$
9,773

$
11,528

$
10,078Provision for warranty claims


4,808


5,295


11,007Warranty claims paid


(6,478
)

(7,260
)

(9,327
)Exchange rate impact


(13
)

210


(230
)Balance, end of the year

$
8,090

$
9,773

$
11,528


At
December 31, 2010, the Company employed a total of 3,006 people. Approximately 13.8% of the employees were represented by unions at December 31, 2010. The Grand Rapids,
Michigan plant is the
only unionized plant within the U.S. and has an agreement with the Carpenters Union, Local 1615, of the United Brotherhood of Carpenters and Joiners of America, Affiliate of the Carpenters Industrial
Council (the Union), covering approximately 226 hourly employees. The Collective Bargaining Agreement expires August 27, 2011. Certain workers in the facilities in Italy are also
represented by unions.

12. INCOME TAXES

Income before income tax expense consists of the following:

2010

2009

2008(in thousands)U.S. operations

$
32,123

$
44,199

$
101,566Foreign operations


8,724


(404
)

31,236$
40,847

$
43,795

$
132,802


56

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

12. INCOME TAXES (Continued)

Income
tax expense is comprised of the following:

2010

2009

2008(in thousands)Current:Federal

$
1,488

$
9,151

$
30,140State


1,426


1,822


6,110Foreign


2,834


244


8,205Total current


5,748


11,217


44,455Deferred:Federal

$
7,044

$
5,593

$
2,385State


420


775


465Foreign


(389
)

(1,143
)

585Total deferred


7,075


5,225


3,435Income tax expense

$
12,823

$
16,442

$
47,890


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

December 31,
2010

December 31,
2009(in thousands)Deferred tax assets:Accounts receivable, principally due to allowance for doubtful accounts

$
1,365

$
1,295Inventories


3,344


3,189Net operating loss carryforwards


10,784


10,190Accrued pension


17,242


17,956Stock-based compensation


4,883


4,556Compensation-related accruals


3,429


3,052Warranty


2,884


3,469Obligation for postretirement benefits other than pension


10,270


9,682Interest Rate Swap Agreement


1,928


4,974Accrued liabilities and other items


4,218


5,512Gross deferred tax assets


60,347


63,875Valuation allowance


(9,378
)

(8,890
)Net deferred tax assets


50,969


54,985Deferred tax liabilities:Intangibles


80,439


73,703Plant and equipment


13,443


13,285Gross deferred tax liabilities


93,882


86,988Net deferred tax liabilities

$
(42,913
)
$
(32,003
)


57

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

12. INCOME TAXES (Continued)

Income
taxes paid, net of refunds received, by the Company during 2010, 2009, and 2008 totaled $539,000, $27,121,000, and $30,547,000 respectively.

As
of December 31, 2010, the Company had net operating loss carryforwards totaling approximately $39,436,000 in various foreign tax jurisdictions which may be carried forward
between five years and an
unlimited time. The Company provides a valuation allowance against certain net foreign deferred tax assets (principally the net operating loss carryforwards) due to the uncertainty that they can be
realized. Changes to this valuation allowance in any future period will be recorded as an income tax benefit in our statement of operations.

During
2010, the Company reduced the valuation allowance by $106,000 to recognize the benefits associated with net operating loss carry forwards that the Company concluded would be
realized. This entire amount was reflected as a foreign deferred income tax benefit in our statement of operations for the current year.

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

2010

2009

2008Federal statutory tax rate


35.0
%

35.0
%

35.0
%Increase (decrease) in the tax rate resulting from:State taxes, net of federal effect


2.1


3.8


3.2Effect of tax rates of other countries


(.7
)

(1.6
)

(1.5
)Foreign Tax Credit-Amended Returns


(6.9
)




Section 199 deduction


(.4
)

(0.7
)

(1.0
)Other


2.3


1.2


0.4Effective tax rate


31.4
%

37.7
%

36.1
%


During
the second quarter of 2010, the Company filed amended Federal Income Tax Returns in order to claim Foreign Tax Credits for the years 2004 through 2007. The Company realized a
$2.8 million benefit, including interest due and net of taxes, as a result of the filing.

The
Company has not made provisions for U.S. federal and state income taxes as of December 31, 2010 on approximately $91.0 million of foreign earnings that are
expected to be reinvested indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. federal and state income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. The Company is currently unable to determine the amount of unrecognized deferred tax liability.

As
of December 31, 2010, the Company had unrecognized tax benefits of approximately $2.0 million. The entire amount of the unrecognized tax benefits would reduce the
effective tax rate if recognized.

58

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

12. INCOME TAXES (Continued)

The following table summarizes the activity related to our unrecognized tax benefits during 2010 and
2009:

2010

2009(in thousands)

(in thousands)Balance, beginning of the year

$
1,821

$
1,673Additions for tax positions related to the current year


112


106Additions for tax positions related to the prior year


69


79Decreases for tax positions related to the prior year


(46
)Prior year reductionsSettlements with taxing authorities


(47
)

(17
)Lapse of statute of limitations


(119
)

(120
)Change in exchange rate


163


100Balance, end of the year

$
1,953

$
1,821


During
the years ended December 31, 2010 and 2009, the Company recognized approximately $0.1 million of interest and penalties, net of deferred taxes. The Company has
accrued approximately $0.6 million for the payment of interest and penalties at December 31, 2010. These accruals were included in noncurrent tax liabilities within the consolidated
balance sheet at December 31, 2010.

As
of December 31, 2010, the Company is subject to U.S. Federal Income Tax examination for the tax years 2007 through 2010, and to non-U.S. income tax examination for
the tax years 2002 to 2010. In addition, the Company is subject to state and local income tax examinations for the tax years 2005 through 2010.

There
are no tax positions included in unrecognized tax benefits at December 31, 2010 for which it is reasonably possible that the total amounts could significantly change during
the next twelve months.

13. LEASES

The Company has commitments under operating leases for certain machinery and equipment as well as manufacturing, warehousing, showroom and other facilities used in its operations. Some
of the leases contain renewal provisions and generally require the Company to pay certain operating expenses, including utilities, insurance and taxes, which are subject to escalation. At times the
Company enters into lease agreements which contain a provision for cash abatements related to certain leasehold improvements. These abatements are recognized on a straight-line basis as a
reduction to rent expense over the lease term. The unamortized portions as of December 31, 2010 and 2009 were $4,743,000 and $5,555,000, respectively. Total rental expense for 2010, 2009, and
2008 was $15,779,000, $15,146,000 and

59

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

13. LEASES (Continued)

$15,303,000,
respectively. Future minimum rental payments required under those operating leases are as follows (in thousands):

2011

$
13,0012012


10,0792013


7,6432014


6,1682015


5,561Subsequent years


20,426Total minimum rental payments

$
62,878


14. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has two domestic defined benefit pension plans and two plans providing for other postretirement benefits, including medical and life insurance coverage. One of the pension
plans and one of the other postretirement benefits plans cover eligible U.S. nonunion employees while the other pension plan and other postretirement benefits plan cover eligible U.S. union employees.
According to applicable accounting guidance, the Company uses a December 31 measurement date for both of these plans.

The
year-end status of these plans was as follows (in thousands):

Pension Benefits

Other Benefits2010

2009

2010

2009Change in projected benefit obligation:Projected benefit obligation at January 1

$
178,857

$
151,144

$
25,087

$
25,275Service cost


10,401


10,053


452


429Interest cost


10,811


9,981


1,481


1,477Participant contributions


280


170


565


Actuarial loss (gain)


130


10,759


1,450


(162
)Benefits paid


(3,272
)

(2,451
)

(1,879
)

(954
)Liability gain due to Curtailment


(387
)

(799
)

(373
)

(978
)Projected benefit obligation at December 31

$
196,820

$
178,857

$
26,783

$
25,087Accumulated benefit obligation, December 31

$
184,933

$
161,940

$


$
Change in plan assets:Fair value of plan assets at January 1

$
128,331

$
95,601

$


$
Actual return on plan assets


16,676


21,641





Employer contributions


10,000


13,371


1,314


956Participant contributions


280


170


565


Benefits paid


(3,272
)

(2,451
)

(1,879
)

(954
)Fair value of plan assets at December 31

$
152,015

$
128,332

$


$
Funded status

$
(44,805
)
$
(50,525
)
$
(26,783
)
$
(25,087
)


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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

14. PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)

Weighted-average
assumptions used (as of the end of the fiscal year) in computing the benefit obligation as of December 31, 2010 and 2009 were as follows:

Pension
Benefits

Other
Benefits2010

2009

2010

2009Discount rate


5.75
%

6.10
%

4.65
%

6.10
%Expected return on plan assets


8.20


8.15


N/A


N/ARate of compensation increase


2.50


4.00


2.50


4.00


The
following table presents Knoll Inc's pension plan investments measured at fair value as of December 31, 2010 and 2009 (in thousands).

Level 1

Level 2

Level 3

TotalEquity SecuritiesU.S. equity securities

$
83,050







$
83,050Non-U.S. equity securities


14,561








14,561Debt SecuritiesFixed income funds and cash investment funds


54,404








54,404December 31, 2010

$
152,015







$
152,015




Level 1

Level 2

Level 3

TotalEquity SecuritiesU.S. equity securities

$
65,886







$
65,886Non-U.S. equity securities


12,862








12,862Debt SecuritiesFixed income funds and cash investment funds


49,584








49,584December 31, 2009

$
128,332







$
128,332


See
Note 20 of the consolidated financial statements for the description of the levels of the fair value hierarchy.

Pension Benefits

Other Benefits2010

2009

2010

2009(in thousands)

(in thousands)Amounts recognized in the consolidated balance sheet consist of:Current Liabilities

$
(10,675
)
$
(10,000
)
$
(1,494
)
$
(1,652
)Noncurrent liabilities


(34,130
)

(40,525
)

(25,289
)

(23,435
)Net amount recognized

$
(44,805
)
$
(50,525
)
$
(26,783
)
$
(25,087
)


61

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

14. PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)



Pension Benefits

Other Benefits2010

2009

2010

2009(in thousands)

(in thousands)Amounts recognized in accumulated other comprehensive income:before taxes:Net actuarial loss

$
34,363

$
40,684

$
8,360

$
7,463Prior service cost (benefit)


140


201


(6,843
)

(8,013
)Net amount recognized

$
34,503

$
40,885

$
1,517

$
(550
)


The
estimated net actuarial loss, and prior service cost, for the defined benefit pension plans included in accumulated other comprehensive income and expected to be recognized in net
periodic pension cost during the fiscal year ended December 31, 2011 is $1,128,000 and $37,000 respectively.

The
following table sets forth the components of the net periodic benefit cost for the Company's pension and other postretirement benefits plans (in thousands):

Pension Benefits

Other Benefits2010

2009

2008

2010

2009

2008Service cost

$
10,401

$
10,053

$
9,633

$
452

$
429

$
410Interest cost


10,811


9,981


8,429


1,481


1,477


1,468Expected return on plan assets


(11,671
)

(10,644
)

(8,835
)







Amortization of prior service cost


61


74


77


(1,205
)

(1,295
)

(1,343
)Recognized actuarial loss


1,058


351


12


553


542


681Curtailment Expense





27




$
(338
)

(1,090
)

Net periodic benefit cost

$
10,660

$
9,842

$
9,316

$
943

$
63

$
1,216


Weighted-average
assumptions used (as of the beginning of the fiscal year) to determine net periodic benefit cost for the years ended December 31, 2010, 2009 and 2008 were as
follows:

Pension Benefits

Other Benefits2010

2009

2008

2010

2009

2008Discount Rate


6.10
%

6.50
%

6.00
%

6.10
%

6.50
%

6.00
%Expected return on plan assets


8.15


8.25


8.25


N/A


N/A


N/ARate of compensation increase


4.00


4.00


4.00


4.00


4.00


4.00


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

For
purposes of measuring the benefit obligation as of and for the year ended December 31, 2010, associated with the Company's other postretirement benefit plans, an 8.00% annual
rate of increase in the per capita cost of covered health care benefits was assumed for 2011. The rate was then assumed to

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

14. PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)

decrease
to an ultimate rate of 5% for 2017 and thereafter. For purposes of measuring the net periodic benefit cost as of and for the year ended December 31, 2010 associated with the Company's
other postretirement benefits plans, a 8.00% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2011. Increasing the assumed health care cost trend rate by
1.0% would increase the benefit obligation as of December 31, 2010 by $593,000 and increase the aggregate of the service and interest cost components of net periodic benefit cost for 2010 by
$50,000. Decreasing the assumed health care cost trend rate by 1.0% would decrease the benefit obligation as of December 31, 2010 by $632,000 and decrease the aggregate of the service and
interest cost components of net periodic benefit cost for 2010 by $53,000.

The
Company's pension plans' weighted-average asset allocations as of December 31, 2010 and 2009, by asset category were as follows:

Plan Assets
at
December 31Asset Category

2010

2009Temporary Investment Funds


2
%

5
%Equity Investment Funds


64


61Fixed Income Funds


34


34Total


100
%

100
%


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

63

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

14. PENSION AND OTHER POSTRETIREMENT BENEFITS (Continued)

The
Company expects to contribute $10,675,000 to its pension plans and $1,494,000 to its other postretirement benefit plans in 2011. Estimated future benefit payments under our pension
and other postretirement plans are as follows:

Pension Benefits

Other Benefits(in thousands)2011

$
4,262

$
1,4942012


5,062


1,5802013


5,986


1,7222014


6,968


2,0072015


8,091


2,2572016 - 2020


61,607


11,931


Employees
of the Canadian, Belgium and United Kingdom operations participate in defined contribution pension plans sponsored by the Company. The Company's expense related to these plans
for 2010, 2009, and 2008 was $1,142,000, $1,041,000, and $1,501,000 respectively.

The
Company also sponsors a 401(k) retirement savings plan for all U.S. employees. Under this plan, participants may defer a portion of their earnings up to the annual contribution
limits established by the Internal Revenue Service. The plan allows for the Company to make a discretionary payment up to 40.0% of participant contributions up to the first 6.0% of compensation for
nonunion employees and matches 50.0% of participant contributions up to the first 6.0% of compensation for union employees. Effective January 1, 2010 the Company suspended the fixed matched
contribution noted above for both union and nonunion employees. For participants who are nonunion employees, the plan provides for discretionary employer matching based on the Company's profits, as
determined by our board of directors. The plan also provides that the Company may make discretionary contributions of common stock to participant accounts on behalf of all actively employed U.S.
participants. Company contributions generally vest ratably over a five-year period. A Knoll common stock fund consisting of 1,000,000 shares of common stock into which participants may
invest the compensation they elect to defer was established on December 14, 2004. Participant contributions into the Knoll common stock fund are generally limited to no more than 10% of their
total account balance in the plan. Participant contributions in the Knoll common stock fund may be transferred into other investment alternatives or distributed in the form of shares of Knoll common
stock if so invested at the time of distribution.

In
2010, the Company did not match any 401(k) contributions. The Company's total expense under the 401(k) plan was $3,257,000, and $3,374,000 for 2009 and 2008, respectively.

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

15. STOCK PLANS

Stock Incentive Plans

As of December 31, 2010, the Company sponsored two stock incentive plans under which awards denominated or payable in shares or
options to purchase shares of Knoll common stock may be granted to officers, certain other employees, directors and consultants of the Company. In May 2007, the Company approved the 2007 Stock
Incentive Plan which authorized the issuance of 2,000,000 shares of common stock. As of December 31, 2010, 746,499 shares remained available for issuance under this plan. In May of 2010, the
Company approved the 2010 Stock Incentive Plan which authorized the issuance 2,000,000 shares of common stock. As of December 31, 2010, 2,000,000 shares remained available for issuance under
this plan.

A
Stock Option Committee currently consisting of the Compensation Committee of the Company's Board of Directors ("Stock Option Committee") has sole discretion concerning administration
of the plans, including selection of individuals to receive awards, types of awards, the terms and conditions of the awards and the time at which awards will be granted. Options that are granted have
a maximum contractual life of seven to ten years. Grants of stock options to employees generally become partially vested one year from the date of the award agreement. The options granted vest 25%
each year over a four year period. In addition, the options have accelerated vesting provisions upon a change of control of the Company. The Company is recognizing compensation expense using the
graded vesting attribution method which treats each option grant as multiple grants each with its own requisite service period.

In
2004 and 2005, under the Amended and Restated 1999 Stock Incentive Plan, the Company granted performance-based restricted stock awards to certain key employees aggregating 1,650,000
shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. The restricted stock awards will vest
as to one-sixth of the shares underlying each award to the extent that the average Knoll operating profit for any two-year period is equal to $100.0 million. An
additional one-sixth will vest based on additional increments to operating profit of $15.0 million over such a period, with full vesting upon the achievement of
$175.0 million in average operating profit over such a period. The 2004 awards cliff vested on December 14, 2010. The Company determined the fair value of the shares on the date of grant
and is recognizing compensation expense ratably over the vesting period.

In
2007, under the 2007 Stock Incentive Plan and the Amended and Restated 1999 Stock Incentive Plan, the Company granted restricted stock awards to certain key employees aggregating
514,654 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. 154,654 of these shares
granted in 2007 vest one-third over three years, without regard to operating profit targets. 360,000 of these shares will vest as to one-fifth of the shares underlying each
award to the extent that Knoll operating profit for a calendar year is equal to $141.0 million. An additional one-fifth will vest based on additional increments to operating profit
of $15.0 million with full vesting upon the achievement of $201.0 million in operating profit. In any event, the awards will fully vest on the fifth anniversary of the date of the grant.
The Company determined the fair value of
the shares on the date of grant and is recognizing compensation expense ratably over the vesting period. In certain conditions vesting may be accelerated as defined in the restricted share agreements.

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

15. STOCK PLANS (Continued)

In
2008, under the 2007 Stock Incentive Plan and the Amended and Restated 1999 Stock Incentive Plan, the Company granted restricted stock awards to certain key employees aggregating
992,117 shares of common stock. These awards provide for the delivery of shares of common stock to award recipients upon the satisfaction of certain vesting requirements. 900,000 of these shares will
vest as to one-fifth of the shares underlying each award on each grant date anniversary, without regard to operating profit targets. 26,117 of these shares granted in 2008 vest
one-third over each of the next three years, without regard to operating profit targets. 66,000 of these shares will vest as to one-fifth of the restricted shares underlying
each award to the extent that Knoll operating profit for the period is equal to $156.0 million. An additional one-fifth will vest based on additional increments to operating profit
of $15.0 million with full vesting upon the achievement of $216.0 million in operating profit. In any event, the awards will fully vest on the fifth anniversary of the date of the grant.
The Company determined the fair value of the shares on the date of grant and is recognizing compensation expense ratably over the vesting period. In certain conditions vesting may be accelerated as
defined in the restricted share agreements.

In
2009, under the 2007 Stock Incentive Plan, the Company granted restricted stock awards to the Company's Board of Directors aggregating 40,818 shares of common stock. These shares vest
one-third over each of the next three years, without regard to operating profit targets. The Company determined the fair value of the shares on the date of grant and is recognizing
compensation expense ratably over the vesting period.

In
2010, under the 2007 Stock Incentive Plan, the Company granted restricted stock awards to the Company's Board of Directors aggregating 25,446 shares of common stock. These shares vest
one-third over each of the next three years, without regard to operating profit targets. The Company determined the fair value of the shares on the date of grant and is recognizing
compensation expense ratably over the vesting period. In addition, the Company granted 25,000 restricted stock awards to a certain key employee. These shares vest on the third anniversary of the grant
date. In certain condition vesting may be accelerated as defined in the restricted share agreement. The Company determined the fair value of the shares on the date of grant and is recognizing
compensation expense ratably over the vesting period.

The
following table summarizes the Company's restricted stock activity during the year:

2010Number of
Restricted
Shares Granted

Weighted
Average
Fair ValueOutstanding at December 31, 2009


1,389,998

$
14.87Granted


50,446


12.44Forfeited


(12,000
)

23.47Vested


(549,924
)

14.34Outstanding at December 31, 2010


878,520

$
14.94


66

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

15. STOCK PLANS (Continued)

The
following table summarizes the Company's stock option activity during the year:

Number of
Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value(in thousands)Outstanding at December 31, 2009


3,407,761

$
13.75




$
Exercised


(790,596
)

12.20





905,051Forfeited


(112,064
)

14.20





35,192Outstanding at December 31, 2010


2,505,101

$
14.22


4.47

$
7,742,565Exercisable at December 31, 2010


1,683,101

$
15.67


3.72

$
2,961,443


The
following table summarizes information regarding stock options outstanding and exercisable at December 31, 2010:

Options Outstanding

Options ExercisableRange of Exercise Prices

Number
of Options

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

Number
of Options

Weighted
Average
Exercise
Price$10.24 - $15.00


1,643,885


5.13 years

$
12.13


865,635

$
13.52$15.01 - $18.77


661,216


2.31


16.86


661,216


16.86$18.78 - $23.47


200,000


6.18


22.62


156,250


22.52$10.24 - $23.47


2,505,101


4.47

$
14.22


1,683,101

$
15.67


There
were no options granted during 2010. The weighted-average grant-date fair value of options granted during the years 2009 and 2008 was $4.32 and $3.74 respectively.
790,596 options were exercised during 2010. The total intrinsic value of options exercised during 2010 was $0.9 million. There were no options exercised during 2009. During 2008 the total
intrinsic value of options exercised was $0.5 million. The total fair value of options vested during the years 2010, 2009, and 2008 was $1.5 million, $1.1 million, and
$0.9 million, respectively.

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

15. STOCK PLANS (Continued)

A
summary of the status of the Company's non-vested options as of December 31, 2010, and changes during the year ended December 31, 2010, is presented below.

Number of
Options

Weighted
Average
Grant-Date
Fair ValueNonvested at January 1, 2010


1,162,250

$
4.51Granted





Vested


(315,250
)

4.70Forfeited


(25,000
)

4.18Nonvested at December 31, 2010


822,000

$
4.43


Compensation
costs related to stock-based compensation for the years ended December 31, 2010, 2009, and 2008 totaled $9.2 million pre-tax ($5.6 million
after-tax), or $0.12 per diluted share, $8.2 million pre-tax ($5.0 million after-tax), or $0.11 per diluted share, and $7.2 million pretax
($4.4 million after-tax), or $0.09 per diluted share, respectively, and are included in the consolidated statements of income under selling, general, and administrative expenses.

At
December 31, 2010 and December 31, 2009, the total compensation cost related to nonvested awards not yet recognized equaled $10.9 million and
$19.8 million, respectively, including $1.6 million and $3.7 million for stock options, respectively, and $9.3 million and $16.1 million for restricted stock
respectively. The weighted average remaining period over which the cost is to be recognized is 1.7 years.

Other Stock-Based Compensation Plans

The Company maintains an Employee Stock Purchase Plan (ESPP) whereby employees of the Company may purchase shares of Knoll common stock
at a discounted rate. The discount rate is 5% off the average of the high and low sale price per share on the last trading day of the purchase period. Employees may contribute 1-10% of
their eligible gross pay up to a $25,000 annual stock value limit. In 2010, 2009, and 2008 employees purchased 3,251, 6,716, and 5,841 shares, respectively in accordance with the terms of the ESPP.

16. SEGMENT AND GEOGRAPHIC REGION INFORMATION

In accordance with the appropriate accounting guidance for disclosures about segments of an enterprise and related information, management evaluates the Company as one reporting segment
in the office furniture industry. The Company is engaged worldwide in the design, manufacture and sale of office furniture products and accessories through its wholly owned subsidiaries. Throughout
the world, the product offerings, the production processes, the methods of distribution, and the customers serviced are similar. The Company's product offerings consist primarily of office furniture
systems, seating, files and storage, and other specialty products. These product offerings are marketed, distributed, and managed primarily as a group of similar products on an overall portfolio
basis.

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

16. SEGMENT AND GEOGRAPHIC REGION INFORMATION (Continued)

The Company's net sales by product category were as follows:

Year Ended December 31,2010

2009

2008(in thousands)Office Systems

$
353,536

$
377,601

$
543,853Specialty Products


185,722


186,060


254,525Seating


112,305


86,966


109,222Files and Storage


72,475


62,153


86,138European Sales


80,425


60,345


110,576Other


5,004


6,908


15,833$
809,467

$
780,033

$
1,120,147


The
Company markets its products in the United States and internationally, with its principal international markets being Canada and Europe. The table below contains information about
the geographical areas in which the Company operates. Sales to clients are attributed to the geographic areas based on the origin of sale.

United
States

Canada

Europe

Consolidated(in thousands)2010Sales to clients

$
688,914

$
34,267

$
86,286

$
809,467Property, plant and equipment, net


75,228


31,435


15,556


122,2192009Sales to clients

$
688,664

$
26,831

$
64,538

$
780,033Property, plant and equipment, net


83,291


33,112


18,642


135,0452008Sales to clients

$
964,875

$
40,229

$
115,043

$
1,120,147Property, plant and equipment, net


85,680


31,225


15,263


132,168


A
number of U.S., state and local governmental agencies purchase the Company's products. Sales to these entities and agencies amounted to approximately $189.5 million in 2010,
$191.8 million in 2009, and $131.0 million in 2008.

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KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

17. OTHER (EXPENSE) INCOME, NET

The components of other (expense) income, net are as follows:

December 312010

2009

2008(in thousands)Foreign exchange transaction (loss) gain

$
(5,525
)
$
(6,598
)
$
2,944Unrealized loss on derivatives


(1,177
)




Other


323


766


735Other (expense) income, net

$
(6,379
)
$
(5,832
)
$
3,679


18. RESTRUCTURING CHARGES

On April 3, 2008 the Company initiated a restructuring plan in order to reduce costs. Similar plans were announced December 4, 2008, and February 3, 2009. The
restructuring plans consisted primarily of employee termination costs, costs associated with exiting leased showrooms, and costs associated with the discontinuation of certain product lines. On
March 18, 2010, the Company announced an additional restructuring plan to better align its manufacturing footprint with demand while further focusing the particular manufacturing activities of
each of its North American production facilities. The Company has elected to undergo this restructuring in order to better utilize its manufacturing capacity, eliminate duplication of capabilities and
reduce associated costs. The Company based its accounting and disclosures on the applicable accounting guidance. As a result, charges to operations were made in the periods in which restructuring plan
liabilities were incurred.

In
connection with the above plans, the Company incurred approximately $7.6 million of restructuring charges during 2010. These restructuring charges included $3.7 million
of employee termination costs, $3.0 million of costs associated with the write-off of fixed assets that had no future benefit, and $0.9 million of costs associated with
facility realignment. The Company incurred approximately $12.0 million of restructuring charges during 2009. These restructuring charges included $10.6 million of employee termination
costs, $0.6 million of costs associated with exiting three leased showrooms, and $0.8 million of costs associated with the discontinuation of certain product lines. The Company incurred
approximately $4.6 million of restructuring charges during 2008. These restructuring charges included $3.3 million of employee termination costs and $1.3 million of costs
associated with the discontinuation of certain product lines. The Company estimates that the remaining charges related to the plans mentioned above will not be significant.

Below
is the summary of the changes in the restructuring liability during 2010, 2009, and 2008:

2010

2009

2008Reserve balance as of January 1

$
1,774

$
1,445

$
Additions


4,603


11,186


3,284Payments


(4,674
)

(10,857
)

(1,630
)Adjustments


(74
)




(209
)Ending Reserve balance as of December 31

$
1,629

$
1,774

$
1,445


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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

18. RESTRUCTURING CHARGES (Continued)

Costs
associated with the write-off of fixed assets and the discontinuation of certain product lines were recorded as a direct reduction of the asset which had no further net
realizable value.

19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:

Cash and Cash Equivalents

The fair value of the Company's cash and cash equivalents approximates the carrying value of the Company's cash and cash equivalents,
due to the short maturity of the cash equivalents.

Long-term Debt

The fair value of the Company's $245.0 million revolving credit facility approximates its carrying value, as it is
variable-rate debt.

Interest Rate Swap Contracts

The fair value of the Company's interest rate swap contracts is measured as the present value of all expected future cash flows based
on the LIBOR-based swap yield curve as of the date of the valuation, subject to a credit adjustment to the LIBOR-based yield curve's implied discount rates. The fair value of the Company's interest
rate swap agreements approximates its carrying values.

20. FAIR VALUE MEASUREMENTS

Accounting Standards Codification 820, "Fair Value Measurements and Disclosures," establishes a hierarchy that prioritizes fair value measurements based on types of inputs used for the
various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:



The
Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their
placement within the

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

20. FAIR VALUE MEASUREMENTS (Continued)

fair
value hierarchy. The following table sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the consolidated balance sheet at December 31,
2010 (in thousands):

Quoted Prices in
Active Markets for
Identical Assets or
Liabilities (Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

TotalLiabilities:Interest rate swaps

$


$
5,138

$


$
5,138Total

$


$
5,138

$


$
5,138


The
interest rate swaps are included in current liabilities within the consolidated balance sheet at December 31, 2010.

The
following table sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the consolidated balance sheet at December 31, 2009 (in
thousands):

Quoted Prices in
Active Markets for
Identical Assets or
Liabilities (Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

TotalLiabilities:Interest rate swaps

$


$
12,789

$


$
12,789Total

$


$
12,789

$


$
12,789


The
interest rate swaps are included in current and non-current liabilities within the consolidated balance sheet at December 31, 2009.

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Table of Contents

KNOLL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010

21. QUARTERLY RESULTS (UNAUDITED)

The following tables contain selected unaudited Consolidated Statements of Operations data for each quarter for the years ended December 31, 2010 and 2009. The operating results
for any quarter are not necessarily indicative of results for any future period.

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Fiscal
Year(in thousands, except per share data)2010Sales

$
175,259

$
192,275

$
202,149

$
239,784

$
809,467Gross profit


56,661


63,040


67,452


77,196


264,349Net income


2,215


8,676


6,340


10,793


28,024Earnings per sharebasic

$
.05

$
.19

$
.14

$
.24

$
.61Earnings per sharediluted

$
.05

$
.19

$
.14

$
.23

$
.612009Sales

$
212,609

$
202,197

$
181,282

$
183,945

$
780,033Gross profit


74,767


70,729


61,273


62,674


269,443Net income


9,525


8,074


5,726


4,028


27,353Earnings per sharebasic

$
.21

$
.18

$
.13

$
.09

$
.60Earnings per sharediluted

$
.21

$
.18

$
.13

$
.09

$
.60


22. SUBSEQUENT EVENT

On February 3, 2011, our board of directors declared a cash dividend of $0.06 per share on our common stock payable on March 31, 2011 to shareholders of record on
March 15, 2011.

On
February 9, 2011, under the Company's 2007 Stock Incentive Plan and the Company's 2010 Stock Incentive Plan, the Company granted 748,000 restricted stock awards. These awards
cliff vest on the third anniversary of the grant date and have accelerated vesting provisions based upon attaining certain operating profit targets.

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Table of Contents

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.We, under the supervision and with the participation of our management, including our
principal
executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934 as of the end of the period covered by this report (December 31, 2010) ("Disclosure Controls"). Based upon the Disclosure Controls evaluation, our principal
executive officer and principal financial officer have concluded that the Disclosure Controls are effective in reaching a reasonable level of assurance that (i) information required to be
disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and
communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management's annual report on internal control over financial reporting.Our management is responsible for establishing and maintaining
adequate
internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, for the Company. Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America. Internal control over financial reporting includes without limitation, maintaining records that in reasonable detail
accurately and fairly reflect our transactions, providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements, providing reasonable assurance
that receipts and expenditures of company assets are made in accordance with management authorization, and providing reasonable assurance that unauthorized acquisition, use or disposition of company
assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is
not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Our
management assessed the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company's internal control over financial reporting was effective as of
December 31, 2010. Our independent registered public accounting firm, Ernst & Young LLP, has audited the
effectiveness of our internal control over financial reporting as of December 31, 2010; their report is included elsewhere in this Form 10-K filing.

Changes in internal control over financial reporting.There has been no change in our internal control over financial reporting during
the period
covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table of Contents

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of Knoll, Inc.

We
have audited Knoll Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Knoll Inc.'s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanyingManagement's annual report on
internal control over financial reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Knoll, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Knoll, Inc. as of
December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2010
of Knoll, Inc. and our report dated March 1, 2011 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Philadelphia,
Pennsylvania
March 1, 2011

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Table of Contents

ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 relating to directors, director nominees and executive officers of the registrant is
incorporated by reference from the information under the captions "Board of Directors," "Election of Directors," "Executive Officers," "Board Meetings and Committees," "Code of Ethics," and
"Section 16(a) Beneficial Ownership Reporting Compliance" contained in our Proxy Statement for our 2011 Annual Meeting of Stockholders (the "Proxy Statement").

The
information relating to the identification of the audit committee, audit committee financial expert and director nomination procedures of the registrant is incorporated by reference
from the information under the caption "Board Meetings and Committees" contained in our Proxy Statement.

Our
Board of Directors has adopted a code of ethics for all employees. This code is made available free of charge on our website at www.knoll.com. For further information see subsection
"Code of Ethics" in our Proxy Statement.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from the information under the caption "Executive
Compensation" contained in our Proxy Statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information
As of December 31, 2010Plan Category

Number of Securities
to be Issued upon
Exercise of
Outstanding Options
(a)

Weighted-Average
Exercise Price of
Outstanding Options
(b)

Number of Shares Remaining for
Future Issuance Under Equity
Compensation Plans (Excluding
Securities Reflected in Column (a))
(c)Equity compensation plans approved by security holders


2,505,101

$
14.22


2,746,499Equity compensation plans not approved by security holders








Total


2,505,101





2,746,499


If
there is an expiration, termination, or cancellation of any benefit granted under the plans without the issuance of shares, the shares subject to or reserved for that benefit may
again be used for new stock options, rights, or awards of any type authorized under the plans.

All
other information required by Item 12 is hereby incorporated by reference from the information under the caption "Security Ownership of Certain Beneficial Owners and
Management" contained in our Proxy Statement.

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ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is hereby incorporated by reference from the information under the captions "Transactions
with Related Persons" and "Director Independence" contained in our Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is hereby incorporated by reference from the information under the caption "Independent
Registered Public Accounting Firm" contained in our Proxy Statement.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibit Number

Description3.1
(a)
Amended and Restated Certificate of Incorporation of Knoll, Inc.3.2
(r)
Amended and Restated By-Laws of Knoll, Inc.4.1
(a)
Form of Stock Certificate.10.1
(b)
Amended and Restated Credit Agreement, dated as of June 29, 2007, by and among Knoll, Inc., the domestic subsidiaries of Knoll, Inc., Bank of America, N.A., as Administrative Agent, Swing Line Lender,
and L/C Issuer, Banc of America Securities LLC, as sole Lead Arranger and sole Book Manager, HSBC Bank USA, National Association, as Syndication Agent, Citizens Bank, as Documentation Agent, and the other lenders party thereto.10.2
(g)*
Amended and Restated Employment Agreement, executed March 14, 2006, effective as of January 1, 2006, between Knoll, Inc. and Burton B. Staniar.10.3
(t)
Amendment to Amended and Restated Employment Agreement, dated as of May 4, 2009, between Knoll, Inc. and Burton B. Staniar.10.4
(d)*
Employment Agreement, dated as of March 23, 2001, between Knoll, Inc. and Andrew B. Cogan.10.5
(a)*
Amendment No. 1 to Employment Agreement, dated as of August 25, 2004, between Knoll, Inc. and Andrew B. Cogan.


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Exhibit Number

Description10.6
(g)*
Amendment No. 2 to Employment Agreement, dated as of March 14, 2006, between Knoll, Inc. and Andrew B. Cogan.10.7
(i)*
Amendment No. 3 to Employment Agreement, dated as of December 11, 2006, between Knoll, Inc. and Andrew B. Cogan.10.8
(l)*
Amendment No. 4 to Employment Agreement, dated as of December 10, 2007, between Knoll, Inc. and Andrew B. Cogan.10.9
(q)*
Employment Agreement, dated as of March 3, 2008, between Knoll, Inc. and Lynn M. Utter.10.10
*
Summary of Barry L. McCabe 2011 Compensation.10.11
(a)*
Offer Letter, dated July 30, 1999, from Knoll, Inc. to Arthur C. Graves.10.12
*
Summary of Arthur C. Graves 2011 Compensation.10.13
*
Summary of Benjamin A. Pardo 2011 Compensation.10.14
(c)*
Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan.10.15
(c)*
Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan.10.16
(a)*
Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan.10.17
(m)*
Amended and Restated Knoll, Inc. 2007 Stock Incentive Plan.10.18
(v)*
Amended and Restated Knoll, Inc. 2010 Stock Incentive Plan.10.19
(n)*
Knoll, Inc. Non-Employee Director Compensation Plan.10.20
(e)*
Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1996 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.10.21
(e)*
Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1997 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.10.22
(c)*
Form of Non-Qualified Stock Option Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.10.23
(p)*
Form of Non-Qualified Stock Option Agreement under the 2007 Stock Incentive Plan, entered into by Knoll, Inc. and certain executive officers.10.24
(a)*
Form of Restricted Share Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan (time vesting with accelerated performance vesting).10.25
(g)*
Form of Amendment to Restricted Share Agreement under the Amended and Restated Knoll, Inc. 1999 Stock Incentive Plan (time vesting with accelerated performance vesting).10.26
(p)*
Form of Restricted Share Agreement under the 1999 Stock Incentive Plan (time vesting).10.27
(p)*
Form of Restricted Share Agreement under the 2007 Stock Incentive Plan (time vesting with accelerated performance vesting).10.28
(p)*
Form of Restricted Share Agreement under the 2007 Stock Incentive Plan (time vesting).


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Exhibit Number

Description10.29
(p)*
Form of Restricted Share Agreement under the Non-Employee Director Compensation Plan (time vesting).10.30
*
Form of Restricted Share Agreement under the 2010 Stock Incentive Plan (time vesting).10.31
*
Form of Restricted Share Agreement under the 2010 Stock Incentive Plan (time vesting with accelerated performance vesting).10.32
*
Form of Non-Qualified Stock Option Agreement under the 2010 Stock Incentive Plan.10.33
(o)
Asset Purchase Agreement, dated September 13, 2007, among El Leather Acquisition LLC, Teddy & Arthur Edelman, Limited, John Edelman, The Edelman Family Grantor Retained Annuity Trust and John
McPhee.10.34
(k)
Agreement between Knoll, Inc. Grand Rapids and United Brotherhood of Carpenters and Joiners of America Carpenters Industrial Council Local 1615, dated August 27, 2006.10.35
(u)
Letter of Agreement, dated October 8, 2009, between Knoll, Inc. Grand Rapids and United Brotherhood of Carpenters and Joiners of America Carpenters Industrial Council Local 1615.10.36
(a)*
Form of Director and Officer Indemnification Agreement.10.37
(a)*
Offer Letter, dated October 6, 2004, from Knoll, Inc. to John F. Maypole.10.38
(a)*
Form of Knoll Employee Stock Purchase Plan.10.39
(f)*
Offer Letter, dated November 23, 2005, from Knoll, Inc. to Stephen F. Fisher.10.40
(g)*
Summary of Informal Healthcare Severance Policy.10.41
(h)
Stock Purchase Agreement, dated August 1, 2006, between Knoll, Inc. and Warburg Pincus Ventures, L.P.10.42
(j)*
Offer Letter, dated September 25, 2006, from Knoll, Inc. to Sarah E. Nash.10.43
(s)*
Andrew B. Cogan 2011 Incentive Compensation Letter, dated December 1, 2010.10.44
(s)*
Lynn M. Utter 2011 Incentive Compensation Letter, dated December 1, 2010.10.45
(s)*
Barry L. McCabe 2011 Incentive Compensation Letter, dated December 1, 2010.10.46
(s)*
Arthur C. Graves 2011 Incentive Compensation Letter, dated December 1, 2010.10.47
(s)*
Benjamin A. Pardo 2011 Incentive Compensation Letter, dated December 1, 2010.21

Subsidiaries of Knoll, Inc.23.1

Consent of Independent Registered Public Accounting Firm.24.1

Power of Attorney [(included on signature page)].31.1

Certification for Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.31.2

Certification for Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.32.1

Certification for Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


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Exhibit Number

Description32.2

Certification for Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.


(a)Incorporated
by reference to Knoll, Inc.'s Registration Statement on Form S-1 (File No. 333-118901), which was
declared effective by the Commission on December 13, 2004.(b)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2010.(c)Incorporated
by reference to Knoll, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999.(d)Incorporated
by reference to Knoll, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000.(e)See
Exhibit 10.22. Exhibit is substantially identical to Exhibit 10.22.(f)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on December 7, 2005.(g)Incorporated
by reference to Knoll, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005.(h)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on August 3, 2006.(i)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on December 11, 2006.(j)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on September 27, 2006.(k)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on August 28, 2006.(l)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on December 10, 2007.(m)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2007.(n)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2007.(o)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on September 14, 2007.(p)Incorporated
by reference to Knoll, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2007.(q)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on May 12, 2008.(r)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on September 25, 2008.


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(s)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on December 3, 2010.(t)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on May 11, 2009.(u)Incorporated
by reference to Knoll, Inc.'s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2009.(v)Incorporated
by reference to Knoll, Inc.'s Current Report on Form 8-K filed with the Commission on May 11, 2010.*Management
Contract or Compensatory Plan or Arrangement required to be identified by Item 15(a) (3) of Form 10-K.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 1st day of March 2011.

KNOLL, INC.By:

/s/ ANDREW B. COGAN Andrew B. CoganChief Executive Officer


KNOW
ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Andrew B. Cogan and Barry L. McCabe, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this
Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.

/s/ BURTON B. STANIAR Burton B. Staniar

Chairman of the Board

March 1, 2011/s/ ANDREW B. COGAN Andrew B. Cogan

Chief Executive Officer, Knoll, Inc. and Director

March 1, 2011/s/ BARRY L. MCCABE Barry L. McCabe

Chief Financial Officer (Chief Accounting Officer and Controller)

March 1, 2011/s/ JEFFREY A. HARRIS Jeffrey A. Harris

Director

March 1, 2011/s/ SIDNEY LAPIDUS Sidney Lapidus

Director

March 1, 2011/s/ KATHLEEN G. BRADLEY Kathleen G. Bradley

Director

March 1, 2011


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/s/ JOHN F. MAYPOLE John F. Maypole

Director

March 1, 2011/s/ SARAH E. NASH Sarah E. Nash

Director

March 1, 2011/s/ STEPHEN F. FISHER Stephen F. Fisher

Director

March 1, 2011


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SCHEDULE II        KNOLL, INC.        VALUATION AND QUALIFYING ACCOUNTS        (In Thousands)

Description

Balance at
Beginning
of Year

Additions
Charged to
Expenses

Charge-Offs

Other(1)

Balance at
End of YearAllowance for doubtful accounts:Year ended December 31, 2008


4,185


6,011


983


4


9,217Year ended December 31, 2009


9,217


1,737


5,849


(11
)

5,094Year ended December 31, 2010


5,094


1,476


2,917


(8
)

3,645Allowance for other non-trade receivables:Year ended December 31, 2008


1,042





425





617Year ended December 31, 2009


617





499





118Year ended December 31, 2010


118





118





Reserve for inventory valuation:Year ended December 31, 2008


6,909


1,620


1,273


(422
)

6,834Year ended December 31, 2009


6,834


3,030


1,981


554


8,437Year ended December 31, 2010


8,437


2,210


1,911


(439
)

8,297Valuation allowance for deferred income tax assets:Year ended December 31, 2008


17,047


(1,679
)

846


(5,281
)

9,241Year ended December 31, 2009


9,241


(467
)




116


8,890Year ended December 31, 2010


8,890


(106
)




594


9,378


(1)Primarily
the impact of currency changes


S-1

---