SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
KRONOS INCORPORATED
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
KRONOS INCORPORATED
400 Fifth Avenue
Waltham, Massachusetts 02154
December 13, 1996
Dear Stockholder:
We cordially invite you to attend our 1997 Annual Meeting of Stockholders,
which will be held at 10:00 a.m. on January 31, 1997 at the offices of the
Company, 400 Fifth Avenue, Waltham, Massachusetts 02154.
At this meeting you are being asked to elect one Class II Director and
ratify the selection of Ernst & Young LLP as independent auditors for the
Company for the 1997 fiscal year. Please read the enclosed Proxy Statement,
which describes the nominee for Director and presents other important
information, and complete, sign and return your proxy promptly in the enclosed
envelope.
We hope you will join us on January 31st for our Annual Meeting, but we
know that every stockholder will not be able to do so. Whether or not you plan
to attend, please return your signed proxy as soon as possible.
Sincerely,
MARK S. AIN
Chairman and Chief Executive Officer
<PAGE>
KRONOS INCORPORATED
400 Fifth Avenue
Waltham, Massachusetts 02154
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
JANUARY 31, 1997
Notice is hereby given that the Annual Meeting of Stockholders of Kronos
Incorporated (the ''Company'') will be held at the offices of the Company, 400
Fifth Avenue, Waltham, Massachusetts 02154, on January 31, 1997 at 10:00 a.m.
for the following purposes:
1. To elect one Class II Director for the ensuing three years.
2. To ratify the selection of Ernst & Young LLP (''Ernst & Young'') as
the Company's independent auditors for the 1997 fiscal year.
3. To transact such other business as may properly come before the
meeting and any and all adjourned sessions thereof.
Only stockholders of record at the close of business on December 6, 1996
will be entitled to notice of and to vote at the Annual Meeting and any and all
adjourned sessions thereof. The stock transfer books of the Company will remain
open.
By Order of the Board of Directors,
PAUL A. LACY, Clerk
Waltham, Massachusetts
December 13, 1996
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED
IN THE UNITED STATES.
<PAGE>
KRONOS INCORPORATED
400 Fifth Avenue
Waltham, Massachusetts 02154
Proxy Statement for the Annual Meeting of Stockholders
To Be Held on January 31, 1997
The enclosed form of proxy is solicited on behalf of the Board of Directors
of Kronos Incorporated (the ''Company'') for use at the Annual Meeting of
Stockholders (the ''Meeting'') to be held at the offices of the Company, 400
Fifth Avenue, Waltham, Massachusetts 02154, on January 31, 1997 at 10:00 a.m.
and at any and all adjourned sessions thereof. A proxy may be revoked by a
stockholder, at any time before it is voted, (i) by returning to the Company
another properly signed proxy bearing a later date, (ii) by otherwise delivering
a written revocation to the Clerk of the Company, or (iii) by attending the
Meeting or any adjourned session thereof and voting the shares covered by the
proxy in person. Shares represented by the enclosed form of proxy properly
executed and returned, and not revoked, will be voted at the Meeting in
accordance with the instructions contained therein. If no choice is specified,
the proxies will be voted in favor of the matters set forth in the accompanying
Notice of Meeting.
The expense of soliciting proxies will be borne by the Company. In addition
to solicitations by mail, officers and regular employees of the Company, without
additional remuneration, may solicit proxies by telephone, telegram and personal
interviews from brokerage houses and other shareholders. The Company has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies and will pay that firm a fee of $2,700 plus expenses. The Company
will also reimburse brokers and other persons for their reasonable charges and
expenses incurred in forwarding soliciting materials to their principals.
The Annual Report of the Company for the fiscal year ended September 30,
1996, is being mailed to the Company's stockholders with this Notice and Proxy
Statement on or about December 13, 1996.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996, as filed with the Securities and Exchange Commission,
except for exhibits, will be furnished without charge to any stockholder upon
written request to the Treasurer, Kronos Incorporated, 400 Fifth Avenue,
Waltham, Massachusetts 02154.
Voting Securities and Votes Required
On December 6, 1996, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 8,134,029 shares of Common Stock of the
Company, $.01 par value per share (''Common Stock''). Each share is entitled to
one vote.
The holders of a majority of the number of shares of Common Stock issued,
outstanding and entitled to vote on any matter shall constitute a quorum with
respect to that matter at the Annual Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum is present.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of Directors. The affirmative vote of the holders of a majority of the
<PAGE>
shares of Common Stock present or represented and properly cast on a matter is
required for the ratification of the selection of Ernst & Young as the Company's
independent auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in ''street name'' by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and ''broker non-votes'' will have no effect on the voting on a
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on a matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of September 30, 1996
by (i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each Director and nominee for Director;
(iii) each executive officer named in the Summary Compensation Table under the
heading ''Executive Compensation'' below and (iv) all Directors and executive
officers of the Company as a group.
The number of shares beneficially owned by each Director or executive
officer is determined under rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has sole or shared voting power or investment power and
also any shares which the individual has the right to acquire within 60 days
after September 30, 1996 through the exercise of any stock option or other
right. Unless otherwise indicated, each person has sole investment and voting
power (or shares such power with his or her spouse) with respect to the shares
set forth in the following table. The inclusion herein of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership of
those shares.
Shares of
Common Stock Percentage of
Beneficially Common Stock
Name and Address Owned Outstanding
- ---------------- ------------ -------------
Fidelity Entities
82 Devonshire Street
Boston, Massachusetts 02109-3614.... 1,010,800(1) 12.44%
Wanger Asset Management, L.P.
227 W. Monroe Street, Suite 3000
Chicago, Illinois 60606............. 585,200(2) 7.2%
The Kaufmann Fund, Inc.
140 East 45th Street
New York, NY 10017.................. 400,000 4.9%
Acorn Investment Trust, Series
Designated Acorn Fund
227 W. Monroe Street, Suite 3000
Chicago, Illinois 60606................ 423,000(3) 5.2%
Mark S. Ain*........................... 575,149(4)(7) 7.0%
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock Percentage of
Beneficially Common Stock
Name and Address Owned Outstanding
- ---------------- ------------ -------------
<S> <C> <C>
Richard J. Dumler*.............................................. 231,581(5) 2.85%
Theodore G. Johnson*............................................ 90,217(6)(7) 1.1%
David B. Kiser*................................................. 880(7) ^
Donald S. Levy*................................................. 77,000(8) ^
D. Bradley McWilliams*.......................................... 129,945(7) 1.6%
Lawrence Portner*............................................... 2,160(7) ^
Samuel Rubinovitz*.............................................. 8,880(7) ^
W. Patrick Decker............................................... 19,951(7) ^
Verne S. Kayser................................................. 25,500(7) ^
Paul A. Lacy.................................................... 37,914(7) ^
Aron J. Ain..................................................... 41,244(7) ^
All Directors and executive officers as a group (15 persons).... 1,287,935(9) 15.42%
</TABLE>
- ------------
* Director of the Company
^ Less than 1% of the shares of Common Stock outstanding
(1) Includes 761,500 shares of Common Stock which are beneficially owned by
Fidelity Contrafund, and 1,010,800 shares of Common Stock with respect to which
FMR Corp. has sole dispositive power, and which are beneficially owned by
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp.
and the investment advisor to various Fidelity funds. Edward C. Johnson 3d, is
the Chairman and a significant shareholder of FMR Corp. Abigail P. Johnson is a
Director and a significant shareholder of FMR Corp.
(2) Represents 423,000 shares of Common Stock beneficially owned by Acorn
Investment Trust, Series Designated Acorn Fund, 44,000 shares of Common Stock
beneficially owned by Wanger U.S. Small Cap Advisor Fund, and 118,200 shares of
Common Stock beneficially owned by the State of Oregon Retirement Fund. Wanger
Asset Management, L.P. shares voting and dispositive power with respect to these
shares of Common Stock in its capacity as an investment advisor to those
entities.
(3) The Acorn Investment Trust, Series Designated Acorn Fund shares voting and
dispositive power over these shares of Common Stock with Wanger Asset
Management, L.P., its investment advisor.
(4) Mr. Mark Ain's address is c/o Kronos Incorporated, 400 Fifth Avenue,
Waltham, MA, 02154.
(5) Includes 224,831 shares of Common Stock held by Lambda CFD 1987, L.P. and
Lambda III, L.P. of which Lambda Management, L.P. is the sole general partner.
Mr. Dumler is a general partner of Lambda Management, L.P.
(6) Includes 88,057 shares of Common Stock held by the Wolverine Trust, of which
Mr. Johnson is the settlor and sole beneficiary.
(7) Includes the following shares of Common Stock issuable upon the exercise of
outstanding stock options which may be exercised within 60 days after September
30, 1996: Mr. Mark Ain: 94,500; Mr. Johnson: 2,160; Mr. Kiser: 880; Mr.
McWilliams: 2,160; Mr. Portner: 2,160; Mr. Rubinovitz: 2,880; Mr. Decker:
13,950; Mr. Kayser: 2,944; Mr. Lacy: 35,850; Mr. Aron Ain: 39,600.
(8) Includes 77,000 shares of Common Stock held by Eltico Time Inc., a
corporation of which Mr. Levy is a controlling stockholder.
(9) Includes 228,509 shares of Common Stock issuable upon the exercise of
outstanding stock options held by executive officers and Directors of the
Company which may be exercised within 60 days after September 30, 1996. Also
includes shares of Common Stock held by affiliates of Directors (See footnotes
(5), (6) and (8)).
3
<PAGE>
ELECTION OF DIRECTORS
The Company's Restated Articles of Organization and Amended and Restated
By-Laws provide for the classification of the Board of Directors into three
classes, as nearly equal in number as possible. The Class I, Class II and Class
III Directors will serve until the annual meeting of stockholders to be held in
1999, 2000 and 1998, respectively, and until their respective successors are
duly elected and qualified. At each annual meeting of stockholders, Directors
are elected for a full term of three years to succeed those whose terms are
expiring.
There are currently two Class I Directors, three Class II Directors and
three Class III Directors. Messrs. Theodore G. Johnson, David B. Kiser and
Donald S. Levy, the Class II Directors whose terms expire in 1997, will not
stand for reelection as Directors of the Company.
The Board of Directors has voted to fix the number of Directors at seven
and to fix the number of Class II Directors at two. Unless otherwise instructed,
the enclosed proxy will be voted to elect W. Patrick Decker as a Class II
Director for a term of three years expiring at the 2000 annual meeting of
stockholders and until his successor is duly elected and qualified. Mr. Decker
is currently serving as President and Chief Operating Officer of the Company. If
Mr. Decker should become unavailable, the enclosed proxy may be voted for a
substitute nominee designated by the Board of Directors, unless instructions are
given to the contrary. The Board of Directors does not anticipate that the
nominee will become unavailable. The Company has no nominating committee and all
nominations are made by the Board of Directors.
The Company is in the process of identifying a candidate to fill the Class
II vacancy, but does not expect that such candidate will be identified prior to
the Annual Meeting. The Company's Restated Articles of Organization and Amended
and Restated By-laws permit the Board of Directors to fill any vacancy on the
Board without the approval of the Company's stockholders. It is currently
expected that the Board will identify a suitable candidate and fill the Class II
vacancy at some time after the Annual Meeting.
The following table sets forth the name, age, length of service as a
Director of each member of the Board of Directors, including the nominee for
Class II Director, information given by each concerning all positions he holds
with the Company, his principal occupation and business experience for the past
five years and the names of other publicly-held companies of which he serves as
a Director. Information with respect to the number of shares of Common Stock
beneficially owned by each Director, directly or indirectly, as of September 30,
1996, appears above under the heading ''Security Ownership of Certain Beneficial
Owners and Management.''
Nominee for Class II Director
Term Expiring in 2000
W. Patrick Decker, 49
President, Chief Operating Officer
W. Patrick Decker has served as President and Chief Operating Officer of
the Company since October, 1996. Previously, he served as Vice President,
Marketing and Field Operations of the Company from 1982 until October 1996. From
1981 to 1982, Mr. Decker was General Manager at Commodore Business Machines,
Inc.--New England Division, a personal computer manufacturer. From 1979 to 1980,
Mr. Decker was a National Sales Manager for the General Distribution Division of
Data General Corporation, a computer company.
4
<PAGE>
Class I Directors
Terms Expiring in 1999
D. Bradley McWilliams, 55
Director
D. Bradley McWilliams has served as a Director of the Company since 1993.
From 1982 to 1995, Mr. McWilliams held the position of Vice President of Cooper
Industries, Inc., a worldwide manufacturer of electrical products, tools and
hardware and automotive products. In 1995, Mr. McWilliams was named Senior Vice
President and Chief Financial Officer of Cooper Industries, Inc.
Lawrence Portner, 60
Director
Lawrence Portner has served as a Director of the Company since 1993. Mr.
Portner held the position of Vice President of Software Engineering for Data
General Corporation from June 1992 to December 1994 and served as a consultant
to Data General from 1988 to June 1992. Prior to that time, Mr. Portner held the
position of Research and Development Vice President and General Manager of
Apollo Computer from 1983 to 1986. From 1963 to 1983, Mr. Portner served in
various capacities at Digital Equipment Corporation, most recently as Vice
President of Strategic Planning.
Class III Directors
Terms Expiring in 1998
Mark S. Ain, 53
Chief Executive Officer, Chairman of the Board and Director
Mark S. Ain, a founder of the Company, has served as Chief Executive
Officer, Chairman of the Board and a Director of the Company since its
organization in 1977. He also served as President from 1977 through September
1996. From 1974 to 1977, Mr. Ain operated his own consulting company, providing
strategic planning, product development and market research services. From 1971
to 1974, he was associated with a consulting firm. From 1969 to 1971, Mr. Ain
was employed by Digital Equipment Corporation both in product development and as
Sales Training Director. He received a B.S. from the Massachusetts Institute of
Technology and an M.B.A. from the University of Rochester. Mr. Ain is the
brother of Aron J. Ain, Vice President, Marketing and Worldwide Field Operations
of the Company.
Richard J. Dumler, 54
Director
Richard J. Dumler has served as a Director of the Company since 1982. Mr.
Dumler has been general partner of Lambda Management, L.P. since 1983 and Vice
President of Lambda Fund Management Inc., an investment management company,
since 1990. He served as First Vice President of Drexel, Burnham, Lambert, Inc.
from 1983 to 1990. Mr. Dumler is a Director of Enscor, Incorporated, a Toronto
based automobile parts manufacturer.
5
<PAGE>
Samuel Rubinovitz, 66
Director
Samuel Rubinovitz has served as a Director of the Company since 1985. From
1989 until April 1996, he was a Director of EG&G, Inc., a diversified
manufacturer of scientific instruments and electronic, optical and mechanical
equipment. In January 1994, Mr. Rubinovitz retired from his position as
Executive Vice President of EG&G, a position he had held since 1989. From 1986
to 1989, he was Senior Vice President of EG&G. Mr. Rubinovitz is a Director of
the following three companies: Richardson Electronics, Inc., a manufacturer and
distributor of electron tubes and semiconductors; KLA Instruments Corp., a
manufacturer of high performance instrumentation used in the processing and
inspection of semiconductors; and LTX Corporation, a manufacturer of instruments
used to test semiconductor devices.
Board of Directors and Committees
The Audit Committee of the Board of Directors, which held two meetings
during fiscal year 1996, reviews with management and the independent auditors
the Company's annual financial statements, the scope of the audit, any comments
made by the independent auditors and such other matters that the Committee deems
appropriate. In addition, the Committee reviews the performance and retention of
the Company's independent auditors and reviews with management such matters
relating to compliance with corporate policies as the Committee deems
appropriate. Messrs. McWilliams, Johnson and Levy, none of whom is an executive
officer or employee of the Company, currently serve on the Audit Committee.
The Compensation and Stock Option Committee of the Board of Directors,
which held four meetings during fiscal year 1996, administers the Company's
stock option plans, recommends to the Board of Directors the annual salaries and
bonuses of the Company's executive officers and makes recommendations to the
Board of Directors with regard to the adoption of any new employee stock benefit
plans. Messrs. Rubinovitz and Portner, neither of whom is an executive officer
or an employee of the Company, currently serve on the Compensation and Stock
Option Committee. See ''Report of the Compensation Committee'' below.
During the Company's fiscal year ended September 30, 1996, the Board of
Directors of the Company held a total of four meetings. Each Director attended
at least 75% of the total number of meetings of the Board of Directors and all
committees on which he served.
Director Compensation
Each Director who is not a full time employee of the Company receives a
quarterly retainer of $500 for his services as a Director, plus $1,000 for each
Board meeting attended and $500 for each committee meeting not held on the same
day as a Board meeting. On May 10, 1996, Mr. Dumler was granted a stock option
to purchase 3,600 shares of Common Stock at an exercise price of $32.50 per
share.
Executive Compensation
Summary Compensation. The following table sets forth certain information
with respect to the annual and long-term compensation of the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers during the three fiscal years ended September 30, 1994, 1995 and 1996
who were serving as executive officers on September 30, 1996 (the ''Named
Executive Officers'').
6
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compensation Awards
------------------------ ---------------------
All
Name and Options/ Other
Principal Salary Bonus SARs Compensation
Position Year ($) ($) (#) ($)(1)
-------- ---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Mark S. Ain........................ 1996 $276,058 $110,423 27,000 $1,200
Chief Executive 1995 250,000 87,500 27,000 800
Officer 1994 215,888 75,271 27,000 800
W. Patrick Decker.................. 1996 172,862 69,144 7,500 1,200
President and Chief 1995 164,000 57,400 7,500 800
Operating Officer 1994 157,510 54,917 9,000 800
Verne S. Kayser.................... 1996 144,755 57,902 5,000 1,200
Vice President- 1995 140,000 49,000 7,500 800
Engineering(2) 1994 134,380 46,853 9,000 800
Paul A. Lacy....................... 1996 147,565 59,026 7,500 1,200
Vice President- 1995 140,000 49,000 7,500 800
Finance and Administration 1994 133,278 46,468 9,000 800
Aron J. Ain........................ 1996 147,565 59,026 7,500 1,200
Vice President-Marketing and 1995 140,000 49,000 7,500 800
Worldwide Field Operations 1994 133,278 46,468 9,000 800
</TABLE>
- ---------
(1) Amounts shown represent matching contributions made by the Company to its
401(k) Savings Plan on behalf of the Named Executive Officers.
(2) Mr. Kayser resigned from his position as Vice President, Engineering,
effective on November 20, 1996.
7
<PAGE>
Option Grants and Exercises
The following tables summarize option grants and exercises during fiscal
year 1996 to or by the Named Executive Officers and the value of the options
held by such persons at the end of fiscal year 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(2)
---------------------------------- ---------------------
Percent of
Total
Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration
Name (#)(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark S. Ain........... 27,000 14.18% $27.00 12/12/00 $208,853 $463,847
W. Patrick Decker..... 7,500 3.93% 27.00 12/12/00 58,015 128,846
Verne S. Kayser....... 3,000 1.57% 27.00 12/12/00 23,206 51,538
2,000(3) 1.05% 32.50 07/09/01 18,622 41,358
Paul A. Lacy.......... 7,500 3.93% 27.00 12/12/00 58,015 128,846
Aron J. Ain........... 7,500 3.93% 27.00 12/12/00 58,015 128,846
</TABLE>
- -----------
(1) Unless otherwise noted, each option was granted on October 13, 1995 and
vests in five equal annual installments commencing one year from the date of
grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date.
Actual gains, if any, on stock option exercises will depend on the future
performance of the Common Stock and the date on which the options are exercised.
(3) Option was granted on May 10, 1996 and vests in five equal annual
installments commencing one year from the date of grant.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Number of Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Year-End Fiscal Year-End
(#) ($)(2)
Shares Acquired Value --------------- ---------------
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable
---- --------------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Mark S. Ain........... 0 0 82,950/74,550 $1,912,262/$966,862
W. Patrick Decker..... 18,900 $511,499 10,762/22,088 203,771/294,366
Verne S. Kayser....... 6,674 141,343 656/19,588 16,892/277,491
Paul A. Lacy.......... 10,500 301,541 32,568/22,182 767,109/296,786
Aron J. Ain........... 0 0 36,225/22,275 861,443/299,181
</TABLE>
- -----------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Based on the fair market value of the Common Stock on September 30, 1996
($30.75), the last day of the Company's 1996 fiscal year, less the option
exercise price.
REPORT OF COMPENSATION COMMITTEE
Introduction
The Company's compensation program for executive officers is administered
by the Compensation and Stock Option Committee of the Board of Directors (the
''Compensation Committee''), which is composed of two non-employee Directors,
Messrs. Rubinovitz and Portner. The Committee is responsible for establishing
and administering the policies which govern both annual compensation and equity
ownership.
The Company's executive compensation program reflects input from the
Company's Chief Executive Officer. The Compensation Committee reviews his
proposals concerning executive compensation and makes a final determination
concerning the scope and nature of compensation arrangements. The actions of the
Compensation Committee are reported to the Company's entire Board of Directors.
Kronos believes it is important that its stockholders understand the
Company's philosophy regarding executive compensation, and how this philosophy
manifests itself in the Company's various compensation plans.
Philosophy
All of Kronos' compensation programs are aimed at attracting and retaining
key employees, motivating them to achieve, and rewarding them for above average
Company performance. Different programs are geared to short and longer term
performance with the goal of increasing stockholder value over the long term.
Executive compensation programs impact all employees by setting general
levels of compensation and helping to create an environment of goals, rewards,
and expectations. Since Kronos believes the performance of every employee is
important to the success of the Company, it is mindful of the effect of its
executive compensation and incentive programs on all employees.
9
<PAGE>
The Compensation Committee of Kronos believes that the compensation of
Kronos' executives should reflect their success in attaining key operating
objectives, such as growth of sales, growth of operating earnings and earnings
per share, and growth or maintenance of market share and long term competitive
advantage, and ultimately, in attaining an increased price for the Company's
stock. The Compensation Committee believes that the performance of Kronos'
executives in the management of the Company, considered in the light of general
economic and specific company, industry, and competitive conditions, should be
the basis for the determination of executive compensation, bonuses, and stock
option awards. It believes executive compensation should not be based on the
short term performance of the Company's stock, whether favorable or unfavorable,
but rather that the price of the Company's stock will, in the long term, reflect
the operating performance of the Company, and ultimately, the management of the
Company by its executives. The Company seeks to have the long term performance
of the Company's stock reflected in executive compensation through the Company's
stock option and other equity incentive programs.
Programs
Kronos currently has three major components to its executive compensation
plans: salary, bonus and stock option and other equity incentive programs.
Salary
In determining appropriate salary levels for executives, the Compensation
Committee primarily takes into account salary compensation at comparably sized
companies in the electronics and software industries. To track this, the
Committee relies on salary surveys conducted by third parties and its own
knowledge of compensation at companies in the Boston, Massachusetts area.
The Committee's goal is to establish base salary compensation in the upper
half of the range of salaries for executive officers with comparable
qualifications, experience and responsibilities at other companies in the same
or similar businesses and of comparable size and success, but not at the highest
levels. The Company believes this gives it the opportunity to attract and retain
talented managerial employees both at the level of Vice President and below. At
the same time, this level of salary allows the Company to have a bonus plan
based on performance without raising executive compensation beyond levels which
the Company believes are appropriate.
Bonus
Kronos' cash bonus plan is aimed at rewarding its executives for the
achievement of shorter term Company financial goals, primarily increases in the
Company's pre-tax income. The Company's philosophy is to reward its senior
executives as a group if the goals are achieved. The maximum bonus payable for
fiscal 1996 ranged between 10 to 40% of base salary, depending on the
achievement of financial goals, including the level of pre-tax income reached by
the Company. The Company believes this level of award strikes the right balance
between incentive and reward, without offering undue incentives to management to
make short term decisions that could be harmful in the long run. Early in the
Company's fiscal year, the Compensation Committee sets guidelines for the awards
based upon achievement of financial goals, including the level of pre-tax
income, and based upon its own assessment of the ability of the Company to
achieve the Company's annual financial plan, in light of economic conditions and
other factors. It is the general philosophy of the Board that management be
rewarded for their performance as a team in the attainment of these goals,
rather than individually.
While the cash bonus plan is based on the attainment of certain financial
goals, awards under the plan for any individual or the officers as a group are
entirely at the discretion of the Compensation Committee, who may choose to
award the bonus or not, in light of all relevant factors after completion of the
Company's fiscal year.
10
<PAGE>
Stock Option and Equity Incentive Programs
The Company intends that its stock option program be its primary vehicle
for offering long-term incentives and rewarding its executives and key
employees. Kronos believes that stock options are the compensation mechanism
which works most effectively to align the interests of the Company's management
and shareholders. The goal of the program has been to enable members of the
program to participate in the success of the Company in line with their
contributions. Kronos desires that senior executives achieve a meaningful equity
stake in the Company through their participation in the option program.
Much has been written about the value of stock options at the time they are
granted. In Kronos' case, in order to make their past options valuable, members
of management worked over an extended period of time to build the Company, whose
success at the time the options were granted was hardly assured. Given the price
earnings multiple of Kronos stock, management will have to achieve substantial
ongoing earnings growth for their options to have meaningful value. This also is
not assured and will require dedication and effort similar to that put forth in
the past. Kronos seeks to ensure this through continuing grants of stock
options.
Stock options are granted to key employees based upon prior performance,
the importance of retaining their services for the Company, and the potential
for their performance to help the Company attain its long term goals. There is
no set formula for the award of options to individual executives or employees.
The award of stock options is generally done annually in conjunction with the
Compensation Committee's formal review of the individual performance of its key
executives, including its CEO, and their contributions to the Company.
In the past, Kronos has annually granted options to purchase between 2% and
3% of the Company's outstanding shares on a fully-diluted basis. Of this amount,
approximately half have been granted to the Company's officers and the balance
to key employees. The Compensation Committee currently expects to continue this
general practice in the future.
In connection with its equity incentive plan, participants may use shares
to exercise their options or to pay taxes on nonstatutory options. In addition,
the Company has a cash loan program available to its officers under which, given
certain circumstances, up to $50,000 may be borrowed using Kronos shares as
collateral. The purpose of these programs is to encourage the officers to hold
rather than sell their Kronos shares.
The Employee Stock Purchase Plan is designed to appeal primarily to
non-executive Kronos employees and is not intended to be a meaningful element in
executive compensation.
Summary of Compensation of Chief Executive Officer
In fiscal year 1996, Mark S. Ain, the Company's Chief Executive Officer,
received a salary of $276,058 and bonus compensation of $110,423. In determining
whether or not bonus compensation would be paid for fiscal year 1996, the
Compensation Committee reviewed whether certain of the Company's financial goals
established at the beginning of fiscal year 1996 had been attained. On November
18, 1996, Mr. Ain was granted stock options to purchase 35,000 shares of Common
Stock at a price of $25.125 per share, the fair market value on the date of the
grant, based on Mr. Ain's performance in fiscal year 1996. These options vest at
the rate of 7,000 shares per year, beginning on the first anniversary date of
the grant. In determining the number of shares covered by the options granted to
Mr. Ain, the Compensation Committee evaluated Mr. Ain's prior performance, the
importance of retaining his services for the Company, and his potential to help
the Company attain its long-term goals.
11
<PAGE>
The Company does not believe that Section 162(m) of the Internal Revenue
Code, which disallows a tax deduction for certain compensation in excess of $1
million, will generally have an effect on the Company. The Compensation
Committee intends to review the potential effect of Section 162(m) periodically
and may decide, to the extent required in the future, to structure the
performance-based portion of its executive officer compensation to comply with
Section 162(m).
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was at any time during the past
fiscal year, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the Compensation Committee had
any relationship with the Company requiring disclosure under Item 404 of
Regulation S-K under the Securities Exchange Act of 1934, as amended. No
executive officer of the Company has served as a Director or member of the
Compensation Committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served as a Director of or
member of the Compensation Committee of the Company.
12
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative return of (i) the Nasdaq Stock
Market-U.S. Index (the ''Nasdaq Composite Index''), and (ii) the Hambrecht &
Quist Technology Index (the ''Industry Index''). The graph assumes the
investment of $100 in the Company's Common Stock, the Nasdaq Composite Index and
the Industry Index on June 5, 1992, the date on which the Company's Common Stock
was first publicly traded, and assumes dividends are reinvested. Measurement
points are June 5, 1992, the last days of the Company's fiscal years ended
September 30, 1993, 1994, 1995, and 1996, and the last trading days of each of
the other months in the Company's 1993, 1994, 1995, and 1996 fiscal years.
DATES Kronos Incorporated Industry Index Nasdaq Composite Index
------ ------------------- -------------- ----------------------
6/5/92 100 100 100
Jun-92 100.01 94.57 96.12
Jul-92 111.46 98.97 99.52
Aug-92 127.09 95.11 96.48
Sep-92 133.34 98.60 100.07
Oct-92 164.59 103.71 104.01
Nov-92 183.34 110.48 112.29
Dec-92 179.18 114.79 116.42
Jan-93 141.67 119.65 119.73
Feb-93 150.01 111.89 115.27
Mar-93 147.92 113.11 118.60
Apr-93 120.84 106.71 113.54
May-93 133.34 116.35 120.32
Jun-93 122.92 115.55 120.88
Jul-93 137.51 109.68 121.02
Aug-93 147.92 115.51 127.28
Sep-93 158.34 117.61 131.07
Oct-93 147.92 120.83 134.01
Nov-93 131.26 122.38 130.02
Dec-93 141.67 125.27 133.64
Jan-94 122.92 132.65 137.70
Feb-94 137.51 134.20 136.41
Mar-94 129.17 126.40 128.02
Apr-94 135.42 123.88 126.36
May-94 137.51 124.63 126.67
Jun-94 130.21 117.23 122.04
Jul-94 145.84 121.67 124.54
Aug-94 150.01 133.86 132.48
Sep-94 162.51 133.75 132.14
Oct-94 189.59 143.20 134.74
Nov-94 194.80 142.19 130.27
Dec-94 216.68 145.40 130.63
Jan-95 216.68 144.73 131.37
Feb-95 227.09 155.59 138.31
Mar-95 240.64 161.83 142.41
Apr-95 254.18 172.11 146.89
May-95 270.85 177.21 150.68
Jun-95 309.39 196.32 162.89
Jul-95 379.19 213.33 174.87
Aug-95 385.44 217.38 178.41
Sep-95 385.44 223.57 182.51
Oct-95 383.35 226.44 181.47
Nov-95 362.52 225.16 185.73
Dec-95 395.85 218.32 184.74
Jan-96 425.00 223.17 185.66
Feb-96 388.09 231.68 192.73
Mar-96 318.75 222.67 193.37
Apr-96 371.88 246.97 209.41
May-96 403.13 250.40 219.01
Jun-96 443.75 232.90 209.14
Jul-96 345.31 210.75 190.48
Aug-96 371.88 223.25 201.19
Sep-96 384.38 248.00 216.58
13
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Ernst & Young as the Company's independent auditors for the
current fiscal year. Ernst & Young has served as the Company's independent
auditors since 1979. Although stockholder approval of the Board of Directors'
selection of Ernst & Young is not required by law, the Board of Directors
believes that it is advisable to give stockholders an opportunity to ratify this
selection. If this proposal is not approved at the Annual Meeting, the Board of
Directors will reconsider its selection of Ernst & Young.
A representative of Ernst & Young is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she desires and to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of stockholders submitted for consideration at the 1998 Annual
Meeting of Stockholders must be received by the Company not later than August
15, 1997 in order to be considered for inclusion in the Company's proxy material
for that meeting.
The Company's Amended and Restated By-Laws also establish an advance notice
procedure with respect to stockholder nomination of candidates for election as
Directors. A notice regarding stockholder nominations for Director must be
received by the Company not less than 60 days nor more than 90 days prior to the
applicable stockholder meeting, provided, however, that in the event the date of
the meeting is not publicly announced by the Company by mail, press release or
otherwise more than 70 days prior to the meeting, the notice must be received by
the Company not later than the tenth day following the day on which such
announcement of the date of the meeting is made. Any such notice must contain
certain specified information concerning the persons to be nominated and the
stockholder submitting the nomination, all as set forth in the By-Laws. The
presiding officer of the meeting may refuse to acknowledge any Director
nomination not made in compliance with such advance notice requirements. The
Company has not publicly announced the date of the 1998 Annual Meeting prior to
the mailing of this Notice and Proxy Statement. Accordingly, an appropriate
notice from a stockholder regarding nominations for Director to be acted on at
the 1998 Annual Meeting must be received by the Company within ten days of such
mailing.
14
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Annual
Meeting which is not referred to in the accompanying Notice of Annual Meeting.
However, if any other matters are properly presented to the Annual Meeting, it
is the intention of the persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
By Order of the Board of Directors,
PAUL A. LACY, Clerk
December 13, 1996
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
15
<PAGE>
<TABLE>
<CAPTION>
PLEASE MARK VOTES
[_X_] AS IN THIS EXAMPLE
With-
For held For Against Abstain
<C> <C>
1.)To elect the following person as a [__] [__] 2.)To ratify the selection of Ernst & Young LLP [__] [__] [__]
Class II Director: as the Company's independent auditors for
the 1997 fiscal year.
W. Patrick Decker
3.)To transact such other business as may For Against Abstain
properly come before the meeting or any [__] [__] [__]
adjourned sessions of the meeting.
</TABLE>
RECORD DATE SHARES:
Please be sure to sign and date this Proxy.
----------------
| Date: |
----------------
Mark box at right if comments or address changes [__]
have been noted on the reverse side of this card.
----------------------------------------------------------------------
| |
----------------------------------------------------------------------
Shareholder sign here Co-owner sign here
DETACH CARD
KRONOS INCORPORATED
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders of the
Company on Friday, January 31, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Kronos Incorporated
<PAGE>
KRONOS INCORPORATED
Proxy for the Annual Meeting of Stockholders
To Be Held on January 31, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) Mark S. Ain and
Paul A. Lacy, and each of them, with full power of substitution, as proxies to
represent and vote as designated herein, all shares of stock of Kronos
Incorporated (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held at the offices of the Company, 400 Fifth Avenue, Waltham, Massachusetts on
Friday, January 31, 1997 at 10:00 a.m., or any adjourned sessions thereof.
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is given, this proxy will be voted
for proposals 1,2, and 3. Attendance of the undersigned at the meeting or at any
adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing before it is exercised.
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|PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE |
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|Please sign this proxy exactly as your name appears on the reverse side|
|hereof. Joint owners should each sign personally. Trustees and other |
|fiduciaries should indicate the capacity in which they sign, and where more|
|than one name appears, a majority must sign. If a corporation, this signature|
|should be that of an authorized officer who should state his or her title.|
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