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 ss.240.14a-11(c) or ss.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 02451
December 11, 1998
Dear Stockholder:
We cordially invite you to attend our 1999 annual meeting of stockholders,
which will be held at 10:00 a.m. on january 29, 1999 at the offices of the
Company, 400 Fifth Avenue, Waltham, Massachusetts 02451.
At this meeting you are being asked to elect two Class I Directors and
ratify the selection of Ernst & Young LLP as independent auditors for the
Company for the 1999 fiscal year. Please read the enclosed Proxy Statement,
which describes the nominees 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 29 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 02451
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
JANUARY 29, 1999
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 02451, on January 29, 1999 at 10:00 a.m.
for the following purposes:
1. To elect two Class I Directors for the ensuing three years.
2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the 1999 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 3, 1998
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 11, 1998
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 02451
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1999
The enclosed form of proxy is solicited on behalf of the Board of Directors
of Kronos Incorporated ("Kronos" or 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 02451, on January 29, 1999 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 $3,500 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,
1998, is being mailed to the Company's stockholders with this Notice and Proxy
Statement on or about December 11, 1998.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1998, 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 02451.
<PAGE>
VOTING SECURITIES AND VOTES REQUIRED
On December 3, 1998, 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 8,354,735 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 shares of
Common Stock present or represented and properly cast on a matter is required
for the ratification of the selection of Ernst & Young LLP ("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, 1998
(except as otherwise indicated) 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
<PAGE>
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, 1998 (except as otherwise indicated)
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.
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock Common Stock
Beneficially Owned Outstanding
Name and Address
<C> <S> <S>
Wanger Asset Management, L.P. and
Wanger Asset Management, Ltd.
227 W. Monroe Street, Suite 3000
Chicago, Illinois 60606.......... 1,292,400(1)(3) 15.6%
Fidelity Entities
82 Devonshire Street
Boston, Massachusetts 02109-3614. 674,800(2) 8.1%
Acorn Fund, a Series of the Acorn Investment Trust
227 W. Monroe Street, Suite 3000
Chicago, Illinois 60606.......... 650,000(3)(1) 7.9%
Palisade Capital Management, L.L.C.
One Bridge Plaza
Fort Lee, NJ 07024................ 565,950(4) 6.8%
Wellington Management Company, LLP
75 State Street
Boston, MA 02109................. 524,200(5) 6.3%
Mark S. Ain*...................... 540,814(6)(8) 6.4%
W. Patrick Decker*................ 45,801(8) ^
Richard J. Dumler*................ 138,016(7)(8) 1.7%
D. Bradley McWilliams*............ 128,585(8) 1.6%
Lawrence Portner*................. 3,800(8) ^
Samuel Rubinovitz*................ 6,200(8) ^
Aron J. Ain....................... 46,744(8) ^
Paul A. Lacy...................... 38,077(8) ^
Laura L. Woodburn................. 14,818(8) ^
All Directors and executive officers as a group (13
persons).......................... 1,058,661(9) 12.3%
</TABLE>
* Director of the Company
^ Less than 1% of the shares of Common Stock outstanding
<PAGE>
(1) Represents an aggregate of 1,292,400 shares of Common Stock owned by
entities (including 650,000 shares owned by The Acorn Fund) - as to which
Wanger Asset Management, L.P. ("WAM") acts as investment advisor. WAM has
voting authority and investment discretion with respect to these shares of
Common Stock in its capacity as investment advisor to these entities. Also
reflects beneficial ownership of Wanger Asset Management, LTD., the general
partner of WAM. See also footnote (3) below.
(2) Represents an aggregate of 674,800 Shares of Common Stock which are
beneficially owned by FMR Corp. and as to which FMR Corp. has sole
dispositve power, but not sole voting power. These 674,800 shares are also
beneficially owned by Fidelity Management and Research Company, as result
of its serving as an investment advisor. Of these 674,800 shares, 651,000
shares are owned by one investment company, Fidelity Low Priced Stock Fund.
(3) Acorn Fund, a Series of the Acorn Investment Trust, shares voting power
over these shares of Common Stock with WAM, its investment advisor. See
also footnote (1) above.
(4) Represents 565,950 shares over which Palisades Capital Management, L.L.C.
has voting and investment power. Represents ownership information as of
October 2, 1998.
(5) Represents 524,200 shares of Common Stock owned by the investment advisory
clients of Wellington Management Company, LLP ("WMC"), with respect to
which WMC has shared dispositive power. In addition, WMC has shared voting
power for 280,150 shares of such 524,200 shares. Represents ownership
information as of June 30, 1998.
(6) Mr. Mark Ain's address is c/o Kronos Incorporated, 400 Fifth Avenue,
Waltham, Ma, 02451.
(7) Includes 130,626 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.
(8) 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, 1998: Mr. Mark Ain: 125,900; Mr. Decker: 39,800; Mr. Dumler:
1,640; Mr. McWilliams: 3,800; Mr. Portner: 200; Mr. Rubinovitz: 200; Mr.
Aron Ain: 45,100; Mr. Lacy: 35,550; Ms. Woodburn: 14,000.
(9) Includes 307,590 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, 1998.
also includes shares of Common Stock held by affiliates of Directors (See
footnote (7)).
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 are currently serving until the annual meeting of stockholders to
be held in 1999, 2000, 2001, respectively, and until their respective successors
are duly elected and qualified. At each annual meeting of stockholders,
Directors are generally elected for a full term of three years to succeed those
whose terms are expiring.
<PAGE>
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. There are currently two
Class I Directors, one Class II Director and three Class III 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.
Unless otherwise instructed, the enclosed proxy will be voted to elect the
persons named below as Class I Directors for a term of three years expiring at
the 2002 annual meeting of stockholders and until their respective successors
are duly elected and qualified.
All nominees are currently serving as Directors of the Company. If any
nominee 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 any of
the nominees will become unavailable. The Company has no nominating committee
and all nominations are made by the Board of Directors.
The following table sets forth the name, age, length of service as a
Director of each member of the Board of Directors, including the nominees for
Class I Directors, 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,
1998, appears above under the heading "Security Ownership of Certain Beneficial
Owners and Management."
<PAGE>
NOMINEES FOR CLASS I DIRECTORS
TERMS EXPIRING IN 2002
D. Bradley McWilliams, 57
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. In 1995, Mr. McWilliams was named Senior Vice President and Chief
Financial Officer of Cooper Industries, Inc.
Lawrence Portner, 62
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 Vice President and General Manager of Research and Development 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 II DIRECTOR
TERM EXPIRING IN 2000
W. Patrick Decker, 51
PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR
W. Patrick Decker has served as President and Chief Operating Officer of
the Company since October 1996, and as a Director since 1997. 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.
<PAGE>
CLASS III DIRECTORS
TERMS EXPIRING IN 2001
Mark S. Ain, 55
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.M.M. from the University of Rochester. Mr. Ain is a Director
of KVH Industries, Inc., a manufacturer of navigation and satellite
communications equipment and Park Electrochemical Corporation, a manufacturer of
electronic materials used to fabricate printed circuit boards and semiconductor
packages. Mr. Ain is the brother of Aron J. Ain, Vice President, Worldwide Sales
and Service of the Company.
Richard J. Dumler, 56
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., a venture capital
investment company, 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.
Samuel Rubinovitz, 68
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 two companies: Richardson Electronics, Inc., a manufacturer and
distributor of electron tubes and semiconductors; and KLA-Tencor Corporation, a
manufacturer of high performance instrumentation used in the processing and
inspection of semiconductors. Mr. Rubinovitz is also Chairman of the Board of
Directors and a Director of LTX Corporation, a manufacturer of instruments used
to test semiconductor devices.
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The Audit Committee of the Board of Directors, which held two meetings
during fiscal year 1998, 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 and Dumler, neither 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 six meetings during fiscal year 1998, 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, Dumler and Portner, none 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, 1998, 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
Effective May 1, 1997, the compensation paid to non-employee members of the
Board of Directors was revised. Each Director who is not a full-time employee of
the Company currently receives a quarterly retainer of $1,000 for his services
as a Director, $2,000 for each Board meeting attended, and $1,000 for each
committee meeting not held on the same day as a Board meeting. In addition, each
Director who serves as a Committee Chairman receives a quarterly retainer of
$500. Expenses incurred by non-employee Directors to attend Board meetings are
paid by the Company. It is also expected that each non-employee Director will
receive annually a stock option grant to purchase 1,000 shares of Common Stock
at a price equal to fair market value on the date of grant, so long as that
Director owns a minimum of 2,000 shares of Common Stock of the Company. On
january 30, 1998, each of messrs. dumler, rubinovitz, mcwilliams and portner was
awarded a stock option to purchase 1,000 shares of Common Stock at an exercise
price of $31.125 per share.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION. The following table sets forth certain information
with respect to the annual and long-term compensation of the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers during the three fiscal years ended September 30, 1996, 1997 and 1998
who were serving as executive officers on September 30, 1998 (the "Named
Executive Officers").
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
----------------------------------------- -----------------------------
Other Annual All Other
Name and Salary Bonus Compensation Options/SARs Compensation
Position Year ($) ($) ($) (#) ($)(1)
------------- ------- -------- ------------- ------- -------------
<C> <S> <S> <S> <S> <S> <S>
Mark S. Ain ...... 1998 $331,269 $115,500 $ -- 30,000 $1,500
Chief Executive 1997 311,192 -- -- 35,000 1,500
Officer 1996 276,058 110,423 -- 27,000 1,200
W. Patrick Decker 1998 245,942 85,750 -- 27,000 1,500
President & Chief 1997 230,885 -- 47,699(2) 35,000 1,500
Operating Officer 1996 172,862 69,144 -- 7,500 1,200
Aron J. Ain ...... 1998 185,712 64,750 -- 12,000 1,500
Vice President 1997 175,673 -- -- 16,000 1,500
Worldwide Sales 1996 147,565 59,026 -- 7,500 1,200
and Service
Paul A. Lacy ..... 1998 185,712 64,750 -- 12,000 1,500
Vice President 1997 175,673 -- -- 14,000 1,500
Finance & 1996 147,565 59,026 -- 7,500 1,200
Administration
Laura L. Woodburn 1998 190,731 66,500 -- 20,000 1,500
Vice President 1997 151,442 30,000 -- 25,000 1,500
Engineering(3)
</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) Includes $43,729 which represents reimbursement of Mr. Decker's
relocation expenses grossed-up for associated tax liabilities.
(3) Ms. Woodburn joined the Company as Vice President for Engineering on
November 20, 1996.
Option Grants and Exercises
The following tables summarize option grants and exercises during
fiscal year 1998 to or by the Named Executive Officers and the value of the
options held by such persons at the end of fiscal year 1998.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(2)
-------------------------------------------------------- -----------------------
Percent of
Total Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#)(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- -------- ----------- ---------- ---------- ----- -----
<C> <S> <S> <S> <S> <S> <S>
Mark S. Ain ...... 30,000 8.67%$ 26.50 04/01/02 $195,486 $427,157
W. Patrick Decker. 27,000 7.79% 26.50 04/01/02 175,937 384,442
Aron J. Ain ...... 12,000 3.46% 26.50 04/01/02 78,194 170,863
Paul A. Lacy ..... 12,000 3.46% 26.50 04/01/02 78,194 170,863
Laura L. Woodburn. 20,000 5.77% 26.50 04/01/02 130,324 284,772
</TABLE>
(1) Each option was granted on October 1, 1997 and vests in four equal annual
installments commencing one year from the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. Actual gains, if any, on stock option exercises
will depend on the future performance of the Common Stock and the date on
which the options are exercised.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Unexercised Options In-The-Money Options at
at Fiscal Year-End Fiscal Year-End
(#) ($)(2)
---------------------- -----------------------
Value
Name Shares Acquired Realized Exercisable/ Exercisable/
---- on Exercise(#) ($)(1) Unexercisable Unexercisable
------------------- --------------- ---------------------- -----------------------
<C> <S> <S> <S> <S>
Mark S. Ain ...... 31,500 $735,812 100,600/90,400 $2,576,425/1,203,700
W. Patrick Decker. 7,500 136,375 23,050/64,300 449,275/778,300
Aron J. Ain ...... 7,500 135,300 35,900/34,100 937,950/440,300
Paul A. Lacy ..... 16,500 436,125 26,750/32,500 652,478/421,300
Laura L. Woodburn. 0 0 5,000/40,000 67,000/478,000
</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,
1998 ($37.00),the last day of the Company's 1998 fiscal year, less the
option exercise price.
<PAGE>
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 three
non-employee Directors, Messrs. Rubinovitz, Dumler 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.
<PAGE>
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.
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.
<PAGE>
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 1998 ranged between 10 to 50% 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.
<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, the success of which 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 Chief Executive Officer, and their
contributions to the Company.
In the past, Kronos has annually granted options to purchase between 2%
and 5% of the Company's outstanding shares on a fully-diluted basis. Of this
amount, approximately half have been granted to the Company's executive officers
and key managers, 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.
<PAGE>
Summary of Compensation of Chief Executive Officer
In fiscal year 1998, Mark S. Ain, the Company's Chief Executive
Officer, received a salary of $331,269 and bonus compensation of $115,500. In
deciding whether or not bonus compensation would be paid for fiscal year 1998,
the Compensation Committee reviewed whether certain of the Company's financial
goals established at the beginning of fiscal year 1998 had been attained. On
October 14, 1998, Mr. Ain was granted stock options to purchase 30,000 shares of
Common Stock at a price of $27.625 per share, the fair market value on the date
of the grant, based on Mr. Ain's performance in fiscal year 1998. These options
vest at the rate of 7,500 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.
The Company does not believe that Section 162(m) of the Internal
Revenue Code, as amended (the "Code"), which disallows a tax deduction for
certain compensation in excess of $1 million, will generally have an effect on
the Company.
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.
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") during the five-year period ended
September 30, 1998. The graph assumes the investment of $100 in the Company's
Common Stock, the Nasdaq Composite Index and the Industry Index and assumes
dividends are reinvested. Measurement points are the last days of the Company's
fiscal years ended September 30, 1994, 1995, 1996, 1997 and 1998, and the last
trading days of each of the other months in the Company's 1994, 1995, 1996, 1997
and 1998 fiscal years.
<PAGE>
<TABLE>
<CAPTION>
Kronos Hanbrecht & Quist Nasdaq Stock
DATES Incorporated Technology Index Market -U.S. Index
<C> <S> <S> <S>
Sep-93 100.00 100.00 100.00
Oct-93 93.42 101.71 102.25
Nov-93 82.89 103.21 99.20
Dec-93 89.47 105.52 101.97
Jan-94 77.63 112.03 105.06
Feb-94 86.84 115.73 104.08
Mar-94 81.58 109.41 97.68
Apr-94 85.53 106.59 96.41
May-94 86.84 106.90 96.65
Jun-94 82.24 100.09 93.11
Jul-94 92.11 103.82 95.02
Aug-94 94.74 114.50 101.08
Sep-94 102.63 114.13 100.83
Oct-94 119.74 124.59 102.81
Nov-94 123.03 123.52 99.40
Dec-94 136.84 126.75 99.67
Jan-95 136.84 124.90 100.24
Feb-95 143.42 135.72 105.54
Mar-95 151.97 141.94 108.67
Apr-95 160.53 152.57 112.10
May-95 171.05 158.03 114.99
Jun-95 195.39 177.06 124.31
Jul-95 239.47 193.23 133.45
Aug-95 243.42 195.44 136.15
Sep-95 243.42 200.10 139.28
Oct-95 242.11 202.91 138.48
Nov-95 228.95 200.42 141.73
Dec-95 250.00 189.52 140.97
Jan-96 268.42 192.32 141.67
Feb-96 245.11 201.96 147.06
Mar-96 201.32 193.17 147.54
Apr-96 234.87 219.87 159.78
May-96 254.61 223.19 167.12
Jun-96 280.26 206.93 159.59
Jul-96 218.09 185.66 145.35
Aug-96 234.87 196.90 153.50
Sep-96 242.76 219.66 165.24
Oct-96 229.93 216.52 163.41
Nov-96 225.00 242.05 173.51
Dec-96 252.63 235.55 173.36
Jan-97 260.53 260.77 185.68
Feb-97 215.13 239.48 175.41
Mar-97 138.16 224.52 163.96
Apr-97 169.74 232.83 169.08
May-97 205.26 267.87 188.24
Jun-97 217.11 270.24 194.01
Jul-97 193.42 313.72 214.48
Aug-97 214.14 314.61 214.16
Sep-97 204.28 327.51 226.81
Oct-97 228.95 292.53 215.07
Nov-97 246.71 289.48 216.15
Dec-97 243.25 276.16 212.69
Jan-98 245.72 293.86 219.36
Feb-98 272.37 328.81 239.96
Mar-98 277.30 334.37 248.81
Apr-98 284.21 347.39 253.03
May-98 282.24 322.04 239.14
Jun-98 286.18 342.32 256.00
Jul-98 274.34 338.00 253.23
Aug-98 293.09 265.83 203.73
Sep-98 292.11 304.30 231.84
</TABLE>
<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 pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and intended
to be presented for consideration at the Company's 2000 Annual Meeting of
Stockholders must be received by the Company not later than August 13, 1999 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 2000 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 2000 Annual Meeting must be received by the Company within ten
days of this mailing.
Proposals of stockholders intended to be presented at the Company's 2000 Annual
Meeting of Stockholders that are not submitted pursuant to Exchange Act Rule
14a-8 or are not stockholder nominations of candidates for election as Directors
must be received by the Company not later than October 27, 1999.
<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 11, 1998
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.
<PAGE>
<TABLE>
<CAPTION>
- --------
| X |PLEASE MARK VOTES AS IN THIS EXAMPLE
- --------
<C> <S> For Both With- For Both
- ------------------------------------- Nominees hold Except
KRONOS INCORPORATED 1. To elect the following persons [_] [_] [_]
- ------------------------------------- as Class I Directors
(except as marked below):
D. Bradley McWilliams
Lawrence Portner
Mark box at right if an address change or comment
has been noted on the reverse side of this card [_] If you do not wish your shares voted
"For" a particular nominee, mark the
"For Both Except" box and strike a
line through the name of that nominee.
Your shares will be voted for the
remaining nominee.
RECORD DATE SHARES: For Against Abstain
2. To ratify the selection of Ernst & [_] [_] [_]
Young LLP as the Company's
independent auditors for the
1999 fiscal year.
For Against Abstain
3. To transact such other business as may [_] [_] [_]
properly come before the meeting or any
and all adjourned sessions of the meeting.
---------------------
Please be sure to sign and date this Proxy | Date |
---------------------
- ---------------------------------------------------------------------
| |
| |
- ---------------------------------------------------------------------
Stockholder sign here Co-owner sign here
</TABLE>
DETACH CARD 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 Company 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 29, 1999. 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 29, 1999
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 29, 1999 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.
- --------------------------------------------------------------------------------
|PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED |
|ENVELOPE. |
- --------------------------------------------------------------------------------
|Please sign this proxy exactly as your name(s) appear(s) 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. |
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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