UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

Kronos Incorporated
297 Billerica Road
Chelmsford, Massachusetts 01824

May 4, 2007

MERGER PROPOSED—YOUR VOTE IS IMPORTANT

Dear Shareholder:

You are cordially invited to attend a special meeting of the shareholders of Kronos Incorporated, which will be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Friday, June 8, 2007, at 9:00 a.m., local time.

At the special meeting, we will ask you to consider and vote on a proposal to approve a merger agreement that we entered into on March 22, 2007 with Seahawk Acquisition Corporation and its wholly-owned subsidiary, Seahawk Merger Sub Corporation. Seahawk Acquisition Corporation and Seahawk Merger Sub Corporation are currently owned by private equity funds sponsored by Hellman & Friedman LLC and JMI Equity. If shareholders representing at least two-thirds of the outstanding shares of our common stock as of the record date approve the merger agreement and the merger is completed, we will become a wholly-owned subsidiary of Seahawk Acquisition Corporation, and you will be entitled to receive $55.00 in cash, without interest, for each share of our common stock that you own. We are also asking that you grant the authority to vote your shares to adjourn or postpone the special meeting, if necessary, to solicit additional proxies.

After careful consideration, an independent committee of our board of directors has by unanimous vote determined that the merger agreement and the merger are fair to and in the best interests of our shareholders. In addition, after careful consideration, our board of directors has by unanimous vote adopted the merger agreement and determined that the merger and the merger agreement are advisable, fair to and in the best interests of our company and our shareholders. The independent committee and our board of directors recommend that you vote “FOR” the approval of the merger agreement and recommend that you vote “FOR” the approval of any proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes in favor of approval of the merger agreement at the time of the special meeting.

The accompanying proxy statement provides a detailed description of the proposed merger, the merger agreement and related matters. We urge you to read these materials carefully. You may also obtain more information about us from documents that we have filed with the Securities and Exchange Commission.

Your vote is very important.   We are seeking approval of the merger agreement by the affirmative vote of the holders of two-thirds of the outstanding shares of our common stock as of the record date. A failure to vote will have the same effect as a vote against the approval of the merger agreement.

Whether or not you are able to attend the special meeting in person, please complete, sign and date the enclosed proxy card and return it in the envelope provided as soon as possible, or submit your proxy by telephone or over the Internet. This action will not limit your right to vote in person at the special meeting.

If you have any questions or need assistance voting your shares, please call Georgeson Inc., who is assisting us in the solicitation of proxies, toll-free at 1-866-541-3553. Banks and brokers call collect at (212) 440-9800.

Thank you for your cooperation and your continued support of Kronos Incorporated.

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

This proxy statement is dated May 4, 2007 and is first being mailed to shareholders on or about May 7, 2007.

Kronos Incorporated
297 Billerica Road
Chelmsford, Massachusetts 01824

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On June 8, 2007

To Our Shareholders:

We will hold a special meeting of the shareholders of Kronos Incorporated at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Friday, June 8, 2007, at 9:00 a.m., local time, to consider and act upon the following matters:

1.                To approve the Agreement and Plan of Merger, dated as of March 22, 2007, by and among Kronos Incorporated, Seahawk Acquisition Corporation and Seahawk Merger Sub Corporation, a wholly-owned subsidiary of Seahawk Acquisition Corporation, as such agreement may be amended from time to time;

2.                To approve a proposal to adjourn the special meeting, if necessary, to solicit additional proxies in favor of approval of the merger agreement; and

3.                To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof, including to consider any procedural matters incident to the conduct of the special meeting.

A copy of the merger agreement is attached as Annex A to the accompanying proxy statement.

Only holders of record of our common stock as of the close of business on April 30, 2007 are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. We are seeking approval of the merger agreement by the affirmative vote of the holders of two-thirds of the outstanding shares of our common stock as of the record date.

If you fail to vote by proxy or in person, it will have the same effect as a vote against the approval of the merger agreement. If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval of the merger agreement and any adjournment or postponement of the special meeting.

The independent committee and our board of directors recommend that shareholders vote “FOR” approval of the merger agreement.

We do not believe that holders of our common stock are entitled to appraisal rights in connection with the merger because shareholders will receive only cash for their shares and no director, officer, or controlling shareholder has a direct or indirect material financial interest in the merger other than in his, her or its capacity as a shareholder of Kronos or as a director, officer, employee or consultant of Kronos pursuant to a bona fide arrangement with Kronos. However, Section 13.02 of the Massachusetts Business Corporation Act has not yet been the subject of judicial interpretation and, accordingly, if such a determination were made, Kronos shareholders may be entitled to appraisal rights under Massachusetts law. Any shareholder seeking to assert appraisal rights will be required to give written notice, before our shareholders vote on whether to approve the merger agreement, of the shareholder’s intent to demand payment pursuant to statutory appraisal rights, and to comply with the requirement to not vote to approve the merger agreement.

Chelmsford, Massachusetts
May 4, 2007

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU ARE ABLE TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES. YOU MAY ALSO SUBMIT A PROXY BY CALLING THE TOLL-FREE NUMBER LISTED ON THE PROXY CARD OR ACCESSING THE INTERNET AS INSTRUCTED ON THE PROXY CARD. SUCH ACTION WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON AT THE SPECIAL MEETING.

SUMMARY TERM SHEET

The following summary briefly describes the principal terms of the acquisition of Kronos Incorporated by Seahawk Acquisition Corporation through the merger of Seahawk Merger Sub Corporation, a wholly-owned subsidiary of Seahawk Acquisition Corporation, with and into Kronos. While this summary describes the principal terms of the merger, the proxy statement contains a more detailed description of these terms. We encourage you to read this summary together with the enclosed proxy statement, which includes as Annex A a copy of the merger agreement, before voting. We have included in this summary section references to the proxy statement to direct you to a more complete description of the topics described in this summary.

·       Seahawk Acquisition Corporation, a Delaware corporation, and Seahawk Merger Sub Corporation, a Massachusetts corporation and a wholly-owned subsidiary of Seahawk Acquisition Corporation, were each formed for the purpose of participating in the merger. Seahawk Acquisition Corporation and Seahawk Merger Sub Corporation are currently owned by private equity funds sponsored by Hellman & Friedman LLC and JMI Equity. Please read “Summary—Parties to the Merger” beginning on page 6.

·       If the merger is completed:

·        we will be wholly-owned by Seahawk Acquisition Corporation;

·        you will be entitled to receive a cash payment of $55.00, without interest, for each share of Kronos common stock that you hold;

·        you will no longer participate in our growth or in any synergies resulting from the merger; and

·        we will no longer be a public company, and our common stock will no longer be listed on The NASDAQ Global Select Market.

Please read “Questions and Answers About the Special Meeting and the Merger” beginning on page 1, “The Merger—Reasons for the Merger and Recommendation of the Independent Committee and our Board of Directors” beginning on page 27, and “The Merger—Delisting and Deregistration of Kronos Common Stock” beginning on page 38.

·       For the merger to occur, holders of two-thirds of the outstanding shares of our common stock as of the record date must approve the merger agreement. Please read “The Special Meeting of Shareholders—Vote Required” beginning on page 19.

·       If the merger agreement is terminated, we will, under certain circumstances, be required to pay a termination fee to Seahawk Acquisition Corporation in the amount of $55.0 million and Seahawk Acquisition Corporation will, under certain circumstances, be required to pay a termination fee to us in the amount of $55.0 million. Please read “The Merger Agreement—Termination Fees” beginning on page 63.

·       For U.S. federal income tax purposes, you will be treated as if you sold your Kronos common stock for the cash received pursuant to the merger. You generally will recognize capital gain or loss equal to the difference between the amount of cash received and your adjusted tax basis in the shares of Kronos common stock exchanged. Please read “Material U.S. Federal Income Tax Consequences” beginning on page 44.

TABLE OF CONTENTS

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers briefly address some commonly asked questions about the special meeting of shareholders and the merger. These questions and answers may not address all questions that may be important to you as a shareholder. You should carefully read this entire proxy statement, including each of the annexes.

In this proxy statement, the terms “we,” “us,” “our,” “our company” and “Kronos” refer to Kronos Incorporated, the term “Seahawk Acquisition” refers to Seahawk Acquisition Corporation and the term “Merger Sub” refers to Seahawk Merger Sub Corporation.

The Special Meeting

Q.              When and where will the special meeting be held?

A.              The special meeting will be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Friday, June 8, 2007, at 9:00 a.m. local time.

Q.              Who is soliciting my proxy?

A.              This proxy is being solicited by our board of directors.

Q.              What will I be asked to vote upon at the special meeting?

A.              You will be asked to vote on the approval of the merger agreement that we have entered into with Seahawk Acquisition, pursuant to which a wholly-owned subsidiary of Seahawk Acquisition will be merged with and into us and we will become a wholly-owned subsidiary of Seahawk Acquisition. We will also be asking you to vote on the adjournment, if necessary, of the special meeting to solicit additional proxies in favor of approval of the merger agreement.

Q.              What vote is required for Kronos’ shareholders to approve the merger agreement?

A.              In order to approve the merger agreement, holders of two-thirds of the outstanding shares of our common stock as of the record date must vote “FOR” approval of the merger agreement.

Q.              What vote is required for Kronos’ shareholders to approve an adjournment of the meeting?

A.              The proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement requires the affirmative vote of a majority of votes cast at the special meeting.

Q.              Who is entitled to vote at the special meeting?

A.              Holders of record of our common stock as of the close of business on April 30, 2007, the record date for the special meeting, are entitled to vote at the special meeting. On the record date, 32,302,712 shares of our common stock, held by approximately 238 holders of record, were outstanding and entitled to vote. You may vote all shares you owned as of the record date. You are entitled to one vote per share.

Q.              How do I vote?

A.              If you are a record holder, meaning your shares are registered in your name, you may:

(1)         Submit a Proxy Over the Internet: If you have Internet access, you may authorize the voting of your shares from any location in the world by following the “Vote by Internet” instructions set forth on the enclosed proxy card.

(2)         Submit a Proxy By Telephone: You may authorize the voting of your shares by following the “Vote by telephone” instructions set forth on the enclosed proxy card.

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(3)         Submit a Proxy By Mail: Complete, date and sign the proxy card that accompanies this proxy statement and promptly mail it in the enclosed postage-prepaid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States. The persons named in the proxy card will vote the shares you own in accordance with your instructions on the proxy card you mail. If you do not specify how you want your shares voted, they will be voted as recommended by our board of directors.

(4)         Vote In Person at the Meeting: If you attend the special meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which we will provide to you at the special meeting.

If your shares are held in “street name,” meaning they are held for your account by a broker or other nominee, you may:

(1)         Provide Voting Instructions Over the Internet or by Telephone: You will receive instructions from your broker or other nominee if they permit providing voting instructions by Internet or telephone. You should follow those instructions.

(2)         Provide Voting Instructions By Mail: You will receive instructions from your broker or other nominee explaining how you can provide voting instructions for your shares by mail. You should follow those instructions.

(3)         Vote In Person at the Special Meeting: Contact your broker or other nominee who holds your shares to obtain a brokers’ proxy card and bring it with you to the special meeting. You will not be able to vote in person at the special meeting unless you have a proxy from your broker issued in your name giving you the right to vote your shares.

Q.              What should I do now?

A.              After carefully reading and considering the information contained in this proxy statement, including the annexes hereto, please submit a proxy for your shares by returning the enclosed proxy card or over the Internet or by telephone. You can also attend the special meeting and vote in person. Do NOT enclose or return your stock certificate(s) with your proxy card.

Q.              If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A.              Your broker will only be permitted to vote your shares if you instruct your broker how to vote. You should follow the procedures provided by your broker regarding providing voting instructions for your shares.

Q.              What if I do not vote?

A.              If you fail to vote by proxy or in person, it will have the same effect as a vote “AGAINST” approval of the merger agreement. Failure to vote will have no effect on the proposal to adjourn the special meeting, if necessary, to solicit additional proxies in favor of approval of the merger agreement.

If you return a properly signed proxy card but do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval of the merger agreement and “FOR” approval of the adjournment proposal.

If you submit your properly signed proxy and affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum but will have the same effect as a vote “AGAINST” the approval of the merger agreement. With respect to the proposal to approve one or more adjournments of the special meeting, an abstention will have no effect, and the proposal will be decided by the shareholders who cast votes “FOR” and “AGAINST” that proposal.

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Q.              When should I send in my proxy card?

A.              You should send in your proxy card, or grant your proxy over the Internet or by telephone, as soon as possible so that your shares will be voted at the special meeting.

Q.              May I vote in person?

A.              Yes. You may attend the special meeting of shareholders and vote your shares of common stock in person. If you hold shares in “street name,” you must provide a legal proxy executed by your bank or broker in order to vote your shares at the special meeting.

Q.              May I change my vote after I have mailed my signed proxy card?

A.              Yes. You can change your vote and revoke your proxy at any time before the polls close at the special meeting by doing any one of the following:

·       signing and submitting another proxy with a later date;

·       accessing the Internet and following the instructions for Internet proxy authorization that appear on the enclosed proxy card;

·       following the instructions that appear on the enclosed proxy card for proxy authorization by telephone; or

·       voting in person at the special meeting.

Your attendance alone at the special meeting will not revoke your proxy. If you wish to revoke your previously submitted proxy at the special meeting, you must deliver a completed proxy card with a later date in person or complete a ballot to be made available at the special meeting. If you are not the record holder of your shares, you must follow the instructions of your bank or brokerage firm in order to change your vote.

The Merger

Q.              What is the proposed transaction?

A.              Seahawk Acquisition will acquire us by merging a subsidiary of Seahawk Acquisition into us. We will cease to be a publicly-traded company and will instead become a wholly-owned subsidiary of Seahawk Acquisition.

Q.              If the merger is completed, what will I be entitled to receive for my shares of common stock and when will I receive it?

A.              Upon completion of the merger, you will be entitled to receive $55.00 in cash, without interest, for each share of our common stock that you own.

After the merger closes, Seahawk Acquisition will arrange for a letter of transmittal to be sent to each holder of Kronos common stock. The $55.00 per share merger consideration will be paid to a holder of Kronos common stock once that shareholder submits a properly completed letter of transmittal, accompanied by that shareholder’s stock certificate(s) and any other required documentation.

Q.              Am I entitled to dissenters’ or appraisal rights?

A.              We do not believe that holders of our common stock are entitled to appraisal rights in connection with the merger. Under Massachusetts law, appraisal rights are not available in respect of an all-cash merger unless a director, officer or controlling shareholder has a direct or indirect material financial interest in the merger other than in his capacity as (i) a shareholder; (ii) a director, officer, employee or consultant if his financial interest is pursuant to bona fide arrangements; or (iii) in any other capacity so long as the shareholder owns not more than 5% of the voting shares of all classes and

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series of the corporation in the aggregate. We are not aware of any material financial interest of a type that would cause appraisal rights to be available in connection with the merger. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the merger.

However, Section 13.02 of the Massachusetts Business Corporation Act, which we refer to as the MBCA, has not yet been the subject of judicial interpretation and, accordingly, if such a determination were made, Kronos shareholders may be entitled to appraisal rights under Massachusetts law. If you believe you are entitled to appraisal rights under Massachusetts law, in order to exercise these rights you must:  (i) deliver to us, before the vote to approve the merger agreement is taken, written notice of your intent to demand payment for your shares in an amount to be determined pursuant to the statutory appraisal procedure; (ii) not vote your shares in favor of the proposal to approve the merger agreement; and (iii) comply with the other procedures specified in Part 13 of the MBCA. Because a submitted proxy not marked “against” or “abstain” will be voted FOR the approval of the merger agreement and FOR the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies, the submission of a proxy card not marked “against” or “abstain” will result in the waiver of appraisal rights, to the extent such rights are available. If you hold shares in the name of a broker or other nominee and you want to attempt to assert appraisal rights, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal (to the extent such right otherwise would be available).

Any shareholder who believes he, she or it is entitled to appraisal rights and who wishes to preserve those rights should carefully review Sections 13.01 through 13.31 of Part 13 of the MBCA attached as Annex C to this proxy statement, which sets forth the procedures to be complied with in perfecting any such rights.

For additional information about appraisal rights, see “Appraisal Rights” beginning on page 66 of this proxy statement.

Q.              Why are the independent committee and our board of directors recommending that shareholders approve the merger agreement?

A.              The independent committee and our board of directors believe that the merger and the merger agreement are advisable, fair to and in the best interests of Kronos and its shareholders and recommend that you approve the merger agreement. For a more detailed explanation of the factors that the independent committee and our board of directors considered in determining whether to recommend the merger, see “The Merger—Reasons for the Merger and Recommendation of the Independent Committee and our Board of Directors” beginning on page 27 of this proxy statement.

Q.              Will the merger be a taxable transaction to me?

A.              Yes. The receipt of cash for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, you will recognize capital gain or loss equal to the difference between the amount of cash you receive and the adjusted tax basis of your shares of our common stock. For a more detailed explanation of the tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences” beginning on page 44 of this proxy statement. You should consult your tax advisor regarding the specific tax consequences of the merger to you.

Q.              When is the merger expected to be completed?

A.              We expect the merger to be completed as soon as possible following the special meeting of shareholders and the satisfaction of all other conditions, including approval of the merger agreement by our shareholders. We and Seahawk Acquisition have filed pre-merger notifications with the U.S. antitrust authorities pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as

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amended, which we refer to as the HSR Act, and have been notified by such authorities that we have received “early termination” of the waiting period thereunder.

Q.              What will happen to my shares of Kronos common stock after the merger?

A.              Following the effectiveness of the merger, your shares of our common stock will represent solely the right to receive the $55.00 per share merger consideration, without interest, and trading in our common stock on The NASDAQ Global Select Market will cease. Price quotations for our common stock will no longer be available and we will cease filing periodic reports under the Securities Exchange Act of 1934, as amended.

Q.              Should I send in my stock certificate(s) now?

A.              No. After the merger closes, Seahawk Acquisition will arrange for a letter of transmittal containing detailed instructions to be sent to each holder of Kronos common stock. The $55.00 per share merger consideration will be paid to a shareholder once that shareholder submits a properly completed letter of transmittal accompanied by that shareholder’s stock certificate(s) and any other required documentation. PLEASE DO NOT SEND YOUR KRONOS STOCK CERTIFICATE(S) NOW.

Q.              What should I do if I have questions?

A.              If you have more questions about the special meeting, the merger or this proxy statement, or would like additional copies of this proxy statement or the proxy card, you should contact Georgeson Inc., our proxy solicitor, at:

17 State Street
10th Floor
New York, NY 10004
Call Toll-Free: 1-866-541-3553

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SUMMARY

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. Accordingly, we urge you to read carefully this entire proxy statement and the annexes to this proxy statement. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

Parties to the Merger

Kronos Incorporated
297 Billerica Road
Chelmsford, Massachusetts 01824
Telephone: (978) 250-9800
www.kronos.com

Kronos Incorporated, a Massachusetts corporation, provides a suite of solutions that automate employee-centric processes and provide tools to optimize the workforce. Our solutions, which include time and labor, scheduling, talent management, human resources, payroll, absence management, labor activity tracking, data collection, self-service and workforce analytics are designed for a wide range of businesses and organizations from single-site to large multi-site enterprises. Our common stock is listed on The NASDAQ Global Select Market under the symbol “KRON.”

Seahawk Acquisition Corporation
c/o   Hellman & Friedman LLC
One Maritime Plaza, 12th Floor
San Francisco, California 94111
Telephone: (415) 788-5111

Seahawk Acquisition Corporation, which we refer to as Seahawk Acquisition, is a Delaware corporation that was formed for the sole purpose of completing the merger with Kronos and arranging the related financing transactions. Seahawk Acquisition will be owned by private equity funds affiliated with Hellman & Friedman LLC and JMI Equity, which we refer to as the sponsor group. Each of Hellman & Friedman LLC and JMI Equity is engaged in the business of making private equity and related investments. Seahawk Acquisition has not engaged in any business except in anticipation of the merger.

Seahawk Merger Sub Corporation
c/o   Hellman & Friedman LLC
One Maritime Plaza, 12th Floor
San Francisco, California 94111
Telephone:  (415) 788-5111

Seahawk Merger Sub Corporation, which we refer to as Merger Sub, is a Massachusetts corporation and a direct wholly-owned subsidiary of Seahawk Acquisition. Merger Sub was formed exclusively for the purpose of effecting the merger. Merger Sub has not engaged in any business except in anticipation of the merger.

The Merger (page 22)

Upon the terms and subject to the conditions of the merger agreement, Merger Sub will be merged with and into us, and each holder of shares of our common stock will be entitled to receive merger consideration of $55.00 in cash, without interest, for each share of our common stock held by such holder immediately prior to the merger upon surrender of his, her or its stock certificate(s). As a result of the merger, we will cease to be a publicly-traded company and will instead become a wholly-owned subsidiary

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of Seahawk Acquisition. The merger agreement is attached as Annex A to this proxy statement. Please read it carefully.

The Special Meeting (page 18)

The special meeting will be held on Friday, June 8, 2007, at 9:00 a.m., local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109. At the special meeting, you will be asked to consider and vote upon a proposal to approve the merger agreement that we have entered into with Seahawk Acquisition. We will also be asking our shareholders to approve the adjournment, if necessary, of the special meeting to solicit additional proxies in favor of the approval of the merger agreement.

Record Date and Voting (page 18)

Our board of directors has fixed the close of business on April 30, 2007 as the record date for determining shareholders entitled to notice of and to vote at the special meeting. On the record date, we had 32,302,712 outstanding shares of common stock held by approximately 238 shareholders of record. We have no other class of voting securities outstanding.

Shareholders of record on the record date will be entitled to one vote per share of our common stock with respect to the proposal to approve the merger agreement, the proposal to adjourn the special meeting, if necessary, to solicit additional proxies in favor of approval of the merger agreement or any other matter that may properly come before the special meeting and any adjournment of that meeting.

Vote Required (page 19)

Approval of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of our common stock as of the record date.

The affirmative vote of the holders of a majority of the shares of our common stock present in person or by proxy and voting at the special meeting will be required to approve the adjournment, if necessary, of the special meeting to solicit additional proxies in favor of the approval of the merger agreement. Failure to vote, in person or by proxy, will have no effect on the approval of the adjournment proposal.

Quorum (page 18)

A quorum of our shareholders is necessary to have a valid meeting of shareholders. The required quorum for the transaction of business at the special meeting is the presence (in person or represented by proxy) of holders representing a majority of the shares of our common stock issued, outstanding and entitled to vote at the special meeting. Both abstentions and “broker non-votes” will be counted as present for purposes of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn or postpone the special meeting to solicit additional proxies.

Revocability of Proxies (page 19)

You can change your vote and revoke your proxy at any time before the polls close at the special meeting by doing any one of the following:

·       signing and submitting another proxy with a later date;

·       accessing the Internet and following the instructions for Internet proxy authorization that appear on the enclosed proxy card;

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·       following the instructions that appear on the enclosed proxy card for proxy authorization by telephone; or

·       voting in person at the meeting.

Your attendance alone at the special meeting will not revoke your proxy. If you wish to revoke your previously submitted proxy at the special meeting, you must deliver a completed proxy card with a later date in person or complete a ballot to be made available at the special meeting. If you are not the record holder of your shares, you must follow the instructions of your bank or brokerage firm in order to change your vote.

The Independent Committee’s Recommendation to Our Board of Directors (page 27)

Our board of directors established an independent committee consisting of Lawrence J. Portner, Samuel Rubinovitz and Bruce J. Ryan. The independent committee was given the full powers of the board of directors to the extent permitted by Massachusetts law in connection with any business combination involving Kronos, except that any decision to authorize a business combination involving Kronos was retained by our board of directors. No such authorization by our board of directors was to be made except following the unanimous recommendation of the independent committee. The powers of the independent committee included the authority to, among other things, consider, evaluate, negotiate, solicit or reject any offer to purchase all of our outstanding stock or substantially all of our assets on such terms and conditions as the independent committee deemed to be in the best interests of us and our shareholders.

The independent committee has unanimously determined that the merger and the merger agreement are fair to, and in the best interests of, our shareholders, and recommended that our board of directors adopt the merger agreement and approve the transactions contemplated thereby, including the merger and the related agreements, and that our board of directors recommend that our shareholders vote to approve the merger agreement. The independent committee has also recommended that our shareholders vote to approve the merger agreement.

Reasons for the Merger and Recommendation of the Independent Committee and our Board of Directors (page 27)

In the course of reaching its decision to adopt the merger agreement and in making its recommendation, our board of directors considered the recommendation of the independent committee and consulted with senior management and our outside financial and legal advisors, reviewed a significant amount of information and considered a number of factors, including the following:

·       the value of the consideration to be received by our shareholders pursuant to the merger agreement, as well as the fact that shareholders will receive the consideration in cash, which provides certainty of value to our shareholders;

·       the fact that the $55.00 per share to be paid as the consideration in the merger represents a premium of approximately 34% over the closing price of our common stock twenty trading days prior to the announcement of the execution of the merger agreement;

·       the process to solicit third party interest (including the interest of specified potential strategic buyers) in a business combination with Kronos; and

·       our board of director’s conclusion that the merger was more favorable to our shareholders than any other alternative reasonably available to us and our shareholders.

Opinion of Jefferies Broadview (page 31)

In connection with the merger, the independent committee received an opinion from our financial advisor, Jefferies Broadview, a division of Jefferies & Company, Inc., upon which the Kronos board of

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directors may also rely, as to the fairness, from a financial point of view, of the consideration of $55.00 per share in cash to be received by holders of Kronos common stock pursuant to the merger agreement, other than Seahawk Acquisition, Merger Sub and their respective affiliates and other than any members of Kronos’ management who may be given the opportunity to obtain equity interests in Seahawk Acquisition after consummation of the merger. The full text of Jefferies Broadview’s opinion, which sets forth the assumptions made, matters considered and limitations on the scope of review undertaken by Jefferies Broadview in rendering its opinion, is attached as Annex B to this proxy statement.

Kronos encourages shareholders to read this opinion carefully and in its entirety. Jefferies Broadview’s opinion was provided to the independent committee in connection with its consideration of the merger and addresses only the fairness, from a financial point of view and as of the date of Jefferies Broadview’s opinion, of the consideration to be received by the holders of Kronos common stock pursuant to the merger agreement and does not address any other aspect of the merger. Jefferies Broadview’s opinion does not constitute a recommendation as to how any holder of shares of Kronos common stock should vote on the merger or any matter related thereto.

Conditions to the Merger (page 60)

Neither we nor Seahawk Acquisition is required to complete the merger unless a number of conditions are satisfied or waived. These conditions include:

·       the approval of the merger agreement by our shareholders;

·       the waiting periods applicable to the consummation of the merger under the HSR Act and applicable foreign antitrust or trade regulation laws must have expired or been terminated, except in certain circumstances;

·       all approvals and consents of and filings with governmental entities in connection with the merger, the failure of which to file, obtain or occur is reasonably likely to have a material adverse effect on Seahawk Acquisition or us, must have been filed, been obtained or occurred on terms and conditions which would not reasonably be likely to have a material adverse effect on Seahawk Acquisition or us;

·       the absence of any applicable law or legal ruling that would make the merger illegal or would otherwise prohibit consummation of the merger; and

·       other customary closing conditions specified in the merger agreement.

Financing (page 43)

Seahawk Acquisition and Merger Sub estimate that the total amount of funds necessary to consummate the merger and related transactions will be approximately $1.8 billion, which is expected to be funded by the proceeds of equity and debt financing commitments and the available cash of the surviving corporation. See “The Merger—Financing of the Merger” beginning on page 43. The following arrangements are in place for the financing of the merger, including the payment of related transaction costs, charges, fees and expenses:

Equity Financing.   Seahawk Acquisition has received an equity commitment letter from Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P., pursuant to which, and subject to the conditions contained therein, such equity lenders have committed to provide equity financing in the aggregate amount of $752.9 million solely for the purpose of funding the merger consideration and to pay related expenses.

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Debt Financing.   Seahawk Acquisition has received a debt commitment letter from Credit Suisse, Credit Suisse Securities (USA) LLC, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Wachovia Bank, N.A., and Wachovia Capital Markets LLC to provide (1) up to $665.0 million of senior secured loans under a first-lien secured term loan facility, (2) up to $60.0 million of senior secured loans under a first-lien secured revolving credit facility and (3) up to $400.0 million of senior secured loans under a second-lien secured term loan facility.

There is no financing condition to the consummation of the merger.

No Solicitation (page 55)

We have agreed that we will not solicit, initiate, propose or knowingly encourage any inquiries or any proposal or offer that is, or could reasonably be expected to lead to, an acquisition proposal or to participate in discussions or negotiations or furnish non-public information for the purpose of encouraging or facilitating an acquisition proposal. However, prior to the approval of the merger agreement by our shareholders and in response to proposals meeting specified conditions in the merger agreement, we may, to the extent failure to do so would be inconsistent with the fiduciary obligations of our board of directors, furnish information to and participate in discussions or negotiations with the person making such proposals, subject to certain conditions.

We have further agreed that our board of directors will not:

·       withhold, withdraw or modify, in a manner adverse to Seahawk Acquisition, its approval of the merger agreement or its recommendation with respect to the approval of the merger agreement by our shareholders;

·       cause or permit us to enter into any agreement providing for the consummation of an acquisition proposal; or

·       approve or recommend any acquisition proposal.

However, prior to the approval of the merger agreement by our shareholders, our board of directors may:

·       withhold, withdraw or modify its recommendation that our shareholders approve the merger agreement if our board of directors determines in good faith, after consultation with outside counsel, that failure to do so would be inconsistent with its fiduciary obligations under applicable law; or

·       approve or recommend any acquisition proposal if:

o       the acquisition proposal was not solicited in violation of the terms of the merger agreement; and

o       our board of directors determines in good faith, after consultation with outside counsel, that the acquisition proposal constitutes a superior proposal and that failure to recommend it would be inconsistent with the board of director’s fiduciary obligations under applicable law.

In addition, we have agreed to:

·       immediately cease all discussions and negotiations that commenced prior to March 22, 2007 regarding any proposal that constitutes, or could reasonably be expected to lead to, an acquisition proposal;

·       use reasonable best efforts to cause the return or destruction of our confidential information furnished to third parties;

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·       promptly (within 24 hours) advise Seahawk Acquisition of receipt by us of any acquisition proposal or any request for nonpublic information in connection with any acquisition proposal; and

·       provide Seahawk Acquisition written notice five days prior to our board of directors holding a meeting to consider, or the execution by our board of directors of any written action, withholding, withdrawing or modifying its recommendation that our shareholders vote to approve the merger agreement or approving or recommending an acquisition proposal.

We have also agreed that our board of directors will (1) consider in good faith any revised proposal to acquire our common stock that Seahawk Acquisition may make during or prior to the expiration of the five-day period and (2) provide Seahawk Acquisition with a new five-day period prior to holding a meeting to consider, or the execution of any written action with respect to, any new acquisition proposal or any material modification to any previous acquisition proposal.

Termination of the Merger Agreement (page 62)

We, Seahawk Acquisition and Merger Sub may agree in writing to terminate the merger agreement at any time prior to completing the merger.

Either we or Seahawk Acquisition can terminate the merger agreement if:

·       the merger has not been consummated by October 31, 2007, subject to specified conditions. We refer to any termination of the merger agreement on the basis described in this bullet as an outside date termination;

·       a governmental entity has issued a nonappealable final order or taken any other nonappealable final action that permanently restrains or otherwise prohibits the merger; or

·       our shareholders fail to approve the merger agreement at the special meeting. We refer to any termination of the merger agreement on the basis described in this bullet as a special meeting termination.

Seahawk Acquisition can terminate the merger agreement if:

·       our board of directors fails to recommend in this proxy statement that our shareholders approve the merger agreement or withdraws or modifies in a manner adverse to Seahawk Acquisition its recommendation that our shareholders approve the merger agreement;

·       our board of directors approves or recommends to our shareholders an acquisition proposal or within ten business days after receipt of an acquisition proposal takes no position with respect to, or fails to recommend against acceptance of, such acquisition proposal;

·       a tender offer or exchange offer for outstanding shares of our common stock has been commenced and our board of directors recommends that our shareholders tender their shares in such tender or exchange offer or, within ten business days after the commencement of such tender or exchange offer, our board of directors fails to recommend against acceptance of such offer;

·       we breach or fail to perform any representation, warranty, covenant or agreement that results in the failure of a condition to Seahawk Acquisition’s obligation to effect the merger being satisfied and which is not cured within 20 days after our receipt of written notice of such breach or failure to perform, so long as neither Seahawk Acquisition nor Merger Sub is in material breach of its representations, warranties or covenants. We refer to any termination of the merger agreement on the basis described in this bullet as a company material breach termination; or

·       we willfully and materially breach the no solicitation provisions contained in the merger agreement.

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We can terminate the merger agreement if:

·       prior to the approval of the merger agreement by our shareholders, our board of directors, in compliance with the provisions contained in the merger agreement, approves or recommends to our shareholders a superior proposal;

·       Seahawk Acquisition or Merger Sub breaches or fails to perform any representation, warranty, covenant or agreement (except in the circumstances described in the following bullet) that would result in the failure of a condition to our obligation to effect the merger being satisfied and which is not cured within 20 days after its receipt of written notice of such breach or failure to perform, so long as we are not in material breach of our representations, warranties or covenants. We refer to any termination of the merger agreement on the basis described in this bullet as a buyer material breach termination; or

·       (1) all conditions except for conditions to our obligation to effect the merger have been satisfied, (2) on the closing date of the merger, none of Seahawk Acquisition, Merger Sub or the surviving corporation has received the proceeds of the financings contemplated by the debt and equity commitment letters or any substitute financing for a similar amount and (3) Seahawk Acquisition fails to notify us in writing with supporting evidence reasonably satisfactory to us that it will still be able to deposit the requisite funds with the exchange agent on the closing date of the merger. We refer to any termination of the merger agreement on the basis described in this bullet as a financing termination.

Termination Fees (page 63)

The merger agreement obligates us to pay a termination fee to Seahawk Acquisition of $55.0 million if any of the following occurs in connection with the termination of the merger agreement:

·       the merger agreement is terminated by Seahawk Acquisition because:

o       our board of directors fails to recommend in this proxy statement that our shareholders approve the merger agreement, or withdraws or modifies in a manner adverse to Seahawk Acquisition its recommendation that our shareholders approve the merger agreement;

o       our board of directors approves or recommends to our shareholders an acquisition proposal or within ten business days after receipt of an acquisition proposal takes no position with respect to, or fails to recommend against acceptance of, such acquisition proposal; or

o       a tender offer or exchange offer for outstanding shares of our common stock has been commenced and our board of directors recommends that our shareholders tender their shares in such tender or exchange offer or, within ten business days after commencement of a tender offer or exchange offer, fails to recommend against acceptance of the offer;

·       the merger agreement is terminated by us prior to its approval by our shareholders because our board of directors, in compliance with the provisions contained in the merger agreement, approves or recommends to our shareholders a superior proposal;

·       the merger agreement is terminated by Seahawk Acquisition because we willfully and materially breach the no solicitation provisions of the merger agreement; or

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·       if (1) prior to the termination date, a bona fide acquisition proposal is publicly announced or is otherwise communicated, made or proposed in writing to our board of directors, and (2) within 12 months after the termination date, we enter into a definitive agreement with respect to, or we close, an acquisition proposal, provided that for this purpose the reference in the definition of acquisition proposal to 20% will be replaced by 50%, and:

o       an outside date termination shall have occurred;

o       a special meeting termination shall have occurred; or

o       a company material breach termination shall have occurred.

We have also agreed to pay to Seahawk Acquisition or its designee up to $5.0 million as reimbursement for expenses under certain circumstances specified in the merger agreement.

Seahawk Acquisition will be required to pay us a termination fee of $55.0 million in the event of a financing termination, provided that, at the time of such termination, all of the conditions to Seahawk Acquisition’s obligation to effect the merger have been satisfied. If Seahawk Acquisition’s termination fee is paid, and Seahawk Acquisition and Merger Sub are not in willful breach of the merger agreement, other than any breach arising from the failure by Seahawk Acquisition to obtain the debt financing, then our termination of the merger agreement and receipt of Seahawk Acquisition’s termination fee will be the sole and exclusive remedy against Seahawk Acquisition, Merger Sub, and entities affiliated therewith, each of which we refer to as a buyer party, for any loss or damage suffered as a result of the breach of the merger agreement or any representation, warranty, covenant or agreement contained therein by Seahawk Acquisition or Merger Sub or the failure of the merger to be consummated or otherwise in connection with the merger agreement or the transactions contemplated thereby, which we refer to collectively as the company damages.  The maximum aggregate liability of all the buyer parties for all company damages is limited to $137.0 million.

Seahawk Acquisition also agreed to pay to us up to $5.0 million as reimbursement for our expenses under certain circumstances specified in the merger agreement.

Guarantees (page 43)

We have received an absolute, unconditional and irrevocable guarantee from each of Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P., which together guarantee the due and punctual observance, payment, performance and discharge of 100% of any payment obligation of Seahawk Acquisition and Merger Sub pursuant to certain sections of the merger agreement, subject to the limitations set forth in the merger agreement and provided that in no event will such guarantors’ aggregate liability under the guarantees exceed $137.0 million.

Regulatory Matters (page 44)

The merger agreement provides that we and Seahawk Acquisition may not complete the merger until we have made certain filings with the Federal Trade Commission and the United States Department of Justice and the applicable waiting periods have expired or been terminated. We and Seahawk Acquisition each have filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act and have received “early termination” of the waiting period thereunder. We have been informed that Seahawk Acquisition has made a pre-merger notification filing with the German antitrust authorities. We cannot assure you that a challenge to the merger on antitrust grounds will not be made or, if a challenge is made, of the result.

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Appraisal Rights (page 66)

Section 13.02(a)(1) of the MBCA generally provides that shareholders of a Massachusetts corporation are entitled to appraisal rights in the event of a merger. An exemption set forth in Section 13.02(a)(1)(A) of the MBCA provides that appraisal rights will not arise in transactions similar to the merger where cash is the sole consideration received by the shareholders. However, this exemption does not apply if controlling shareholders, directors or officers are determined to have a direct or indirect material financial interest, other than in their capacity as shareholders or as directors, officers, employees or consultants pursuant to a bona fide arrangement with the corporation, in the merger for purposes of the MBCA.

We do not believe that holders of our common stock are entitled to appraisal rights in connection with the merger. Under Massachusetts law, appraisal rights are not available in respect of an all-cash merger unless a director, officer or controlling shareholder has a direct or indirect material financial interest in the merger other than in his capacity as (i) a shareholder; (ii) a director, officer, employee or consultant if his financial interest is pursuant to bona fide arrangements; or (iii) in any other capacity so long as the shareholder owns not more than 5% of the voting shares of all classes and series of the corporation in the aggregate. We are not aware of any material financial interest of a type that would cause appraisal rights to be available in connection with the merger. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the merger. However, Section 13.02 of the MBCA has not yet been the subject of judicial interpretation and, accordingly, if such a determination were made, Kronos shareholders may be entitled to appraisal rights under Massachusetts law. Any shareholder who believes he, she or it is entitled to appraisal rights and who wishes to preserve those rights should carefully review Sections 13.01 through 13.31 of Part 13 of the MBCA, attached as Annex C to this proxy statement, which sets forth the procedures to be complied with in perfecting any such rights. Failure to strictly comply with the procedures specified in Part 13 of the MBCA would result in the loss of any appraisal rights to which such shareholder may be entitled.

Federal Income Tax Consequences (page 44)

If the merger is completed, the exchange of common stock by our shareholders for the cash merger consideration will be treated as a taxable transaction for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, which we refer to as the Code. Because of the complexities of the tax laws, we advise you to consult your own personal tax advisors concerning the applicable federal, state, local, foreign and other tax consequences of the merger.

Stock Options, Restricted Stock Units and Employee Stock Purchase Plan (page 48)

Pursuant to the merger agreement, each outstanding stock option of Kronos, whether or not exercisable, will be accelerated and become exercisable in full immediately prior to the effective time of the merger. At the effective time of the merger, except as may otherwise be agreed by Seahawk Acquisition and any holder of an outstanding stock option, each such outstanding stock option will be cancelled in consideration for a cash payment, without interest and less any applicable taxes, equal to the product of (1) the excess, if any, of $55.00 over the per share exercise price of the option multiplied by (2) the number of shares of our common stock that the option holder could have purchased (assuming full vesting) upon full exercise of such option immediately prior to completion of the merger.

In addition, each outstanding restricted stock unit will vest in full immediately prior to the effective time of the merger and, except as may otherwise be agreed between Seahawk Acquisition and any holder of a restricted stock unit, each holder of a restricted stock unit will be entitled to receive an amount in cash equal to the product of (1) the number of shares of Kronos common stock previously subject to such restricted stock unit and (2) $54.99 ($55.00 minus $0.01 par value per unit payable by the restricted stock

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unit holder), plus the value of any deemed dividend equivalents accrued but unpaid with respect to such restricted stock units, less any amounts required to be withheld under any applicable law.

We have also agreed to terminate our 2003 employee stock purchase plan, which we refer to as the ESPP, as of or prior to the effective time of the merger and take any required action to suspend the current offering period under the ESPP and provide that no further offering period or purchase period shall commence under the ESPP at any time after March 22, 2007.

Interests of Our Directors and Executive Officers in the Merger (page 38)

In considering the recommendation of the independent committee and our board of directors with respect to the merger agreement, you should be aware that our directors and executive officers have interests in the merger that may be different from, or in addition to, those of our shareholders generally. The independent committee and our board of directors were aware of these interests, which include those summarized below, and considered them, among other matters, in adopting the merger agreement:

·       the merger agreement provides for (1) the accelerated vesting and cash settlement of all outstanding stock options and restricted stock units, as described above, (2) the continued indemnification of our current and former directors and officers following the merger, (3) the purchase of directors’, officers’ and fiduciaries’ liability insurance at no cost to the beneficiaries for a period of six years following the merger, and (4) Seahawk Acquisition’s commitment to preserve provisions in our articles of organization and bylaws for a period of six years following the merger that are no less favorable with respect to indemnification, expense advancement and exculpation of present and former directors and officers of ours and our subsidiaries than are presently in our articles of organization and bylaws;

·       under the terms of existing senior executive retention agreements with us, each of Mark S. Ain, Aron J. Ain, Mark V. Julien, Paul A. Lacy, Joseph R. DeMartino, Peter C. George, James Kizielewicz, Stuart M. Itkin and Lloyd Bussell is entitled to receive the following:

o       if within 12 months following the merger the executive officer’s employment is terminated for (1) reasons other than for cause, disability or death (as defined in the retention agreement) or (2) by the executive for good reason (as defined in the retention agreement), a cash payment equal to three times the sum of the executive officer’s highest base salary and highest bonus, received in any year for the five-year period prior to the merger; or

o       if the executive officer’s employment is terminated following 12 months after and within 36 months of the merger for (1) reasons other than for cause, disability, or death (as defined in the retention agreement) or (2) by the executive for good reason (as defined in the retention agreement), which includes a termination by the executive during the 30-day period beginning on the first anniversary of the merger, a cash payment equal to two times the sum of the executive’s highest base salary and highest bonus, received in any year for the five-year period prior to the merger.

Under the senior executive retention agreements, in such circumstances, the executive is also entitled to receive a pro-rata bonus payment equal to the product of (1) the annual bonus paid or payable for the most recently completed fiscal year and (2) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination and the denominator of which is 365.  Our board of directors has approved an amendment to the senior executive retention agreements, and it is expected that such agreements will be amended in a timely manner.  Pursuant to such amendment, the above cash payments will be made as follows. If the executive’s termination occurs in 2007, the cash payments will be paid in one lump sum within 30 days after the executive’s termination. If the executive’s termination occurs after 2007, then the cash payments will be paid in one lump sum or in 36 equal monthly installments, with

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an annual interest rate on the unpaid principal balance equal to the minimum applicable federal rate in effect on the date of termination, in accordance with an irrevocable, written election made by the executive. If no such election is made, then the cash payments will be paid in one lump sum within 30 days after the executive’s termination.

The senior executive retention agreements also require that we continue to provide benefits to each executive for a period of one year after the date of his or her termination. In addition, we will provide outplacement services through one or more outside firms chosen by the executive officer up to an aggregate of $12,000.

In addition, the members of our independent committee will be entitled to receive fees for their services as members of such committee as follows: Messrs. Portner and Rubinovitz will each be entitled to receive $25,000 and Mr. Ryan, as chair of the independent committee, will be entitled to receive $50,000.

For additional information, see “The Merger—Interests of Our Directors and Executive Officers in the Merger.”

New Management Arrangements

As of the date of this proxy statement, no member of our management has entered into any amendments or modifications to existing employment or retention agreements with us or Seahawk Acquisition in connection with the merger. Seahawk Acquisition has informed us that it currently intends to retain certain members of our existing management team with the surviving corporation after the merger is completed, and that it anticipates that Aron J. Ain, our Chief Executive Officer, will continue as chief executive officer of the surviving corporation. Seahawk Acquisition has informed us that it may offer Mr. Ain and a limited number of other members of management the opportunity to convert a portion of their current equity interests in Kronos into, or otherwise invest in, equity in the surviving corporation, and that it also intends to set up equity-based incentive compensation plans for management of the surviving corporation. As of the date of this proxy statement, neither Mr. Ain nor any other member of our management has entered into any agreement, arrangement or understanding with Seahawk Acquisition, Merger Sub or any of their affiliates (including Hellman & Friedman LLC and JMI Equity) regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation. Although we believe certain members of our management team are likely to enter into new arrangements with Seahawk Acquisition, Merger Sub or their affiliates regarding employment with, and the right to purchase or participate in the equity of, the surviving corporation, these matters are subject to further negotiations and discussion and no terms or conditions have been finalized. The new arrangements are currently expected to be entered into at or prior to the completion of the merger. In addition, it is possible that one or more of our executive officers could be invited to join the board of directors of the surviving corporation and/or Seahawk Acquisition following the merger.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements about our plans, objectives, expectations and intentions. You can identify these statements by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “may,” “will” and “continue” or similar words. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information, and may involve known and unknown risks over which we have no control, including, without limitation:

·       the requirement that our shareholders approve the merger agreement with Seahawk Acquisition;

·       failure to satisfy other conditions to the merger;

·       the effect of the announcement of the merger on our customer relationships, operating results and business generally, including our ability to retain key employees; and

·       other risks detailed in our current filings with the Securities and Exchange Commission, or SEC, including our Quarterly Report on Form 10-Q for the period ended December 30, 2006.

See “Where You Can Find More Information” on page 77. You should not place undue reliance on forward-looking statements. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and you should not assume that the statements made herein remain accurate as of any future date. Moreover, except as required by law, we assume no obligation to update forward-looking statements or update the reasons actual results could differ materially from those anticipated in forward-looking statements.

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THE SPECIAL MEETING OF SHAREHOLDERS

We are furnishing this proxy statement to you, as a holder of our common stock, as part of the solicitation of proxies by our board of directors for use at the special meeting of shareholders.

Date, Time and Place of the Special Meeting

The special meeting of shareholders of Kronos will be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Friday, June 8, 2007, at 9:00 a.m., local time.

Purpose of the Special Meeting

The purpose of the special meeting is:

·       to consider and vote on the proposal to approve the Agreement and Plan of Merger, dated as of March 22, 2007, by and among Kronos, Seahawk Acquisition and Merger Sub, as such agreement may be amended from time to time, a copy of which is attached as Annex A to this proxy statement;

·       to consider and vote on a proposal to adjourn the special meeting, if necessary, to solicit additional proxies in favor of approval of the merger agreement; and

·       to transact such other business as may properly come before the meeting or any adjournment or postponement thereof, including to consider any procedural matters incident to the conduct of the special meeting.

Recommendation to Shareholders

The independent committee has by unanimous vote determined that the merger agreement and the merger are fair to and in the best interests of our shareholders. In addition, our board of directors by unanimous vote has adopted the merger agreement and determined that the merger and the merger agreement are advisable, fair to and in the best interests of our company and our shareholders. Accordingly, the independent committee and our board of directors recommend that our shareholders vote “FOR” approval of the merger agreement at the special meeting.

Record Date; Stock Entitled to Vote

The holders of record of shares of our common stock as of the close of business on April 30, 2007, which is the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. On the record date, there were approximately 32,302,712 shares of our common stock outstanding held by approximately 238 shareholders of record.

Quorum

A quorum of our shareholders is necessary to have a valid meeting of shareholders. The required quorum for the transaction of business at the special meeting is the presence (in person or represented by proxy) of holders representing a majority of the shares of our common stock issued, outstanding and entitled to vote at the special meeting. Both abstentions and “broker non-votes” will be counted as present for purposes of determining the existence of a quorum. In the event that a quorum is not present at the special meeting, we currently expect that we will adjourn or postpone the special meeting to solicit additional proxies.

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Vote Required

Pursuant to the requirements of the MBCA and the merger agreement, we are seeking the approval of the merger agreement by the affirmative vote of holders of two-thirds of the outstanding shares of our common stock as of the record date.

Each holder of record on the record date will be entitled to one vote per share of our common stock on any matter that may properly come before the special meeting and any adjournment of that meeting. Failure to vote your proxy or to vote in person will have the same effect as a vote “AGAINST” approval of the merger agreement. Abstentions will not be counted as votes cast or shares voting on the proposal to approve the merger agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as if you vote “AGAINST” the approval of the merger agreement.

Brokers or other nominees who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares of our common stock will not be counted as votes cast or shares voting and will have the same effect as votes “AGAINST” approval of the merger agreement.

Voting

Holders of record of our common stock may vote their shares by attending the special meeting and voting their shares of our common stock in person, by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage-prepaid envelope, or by submitting a proxy over the Internet or by telephone. All shares of our common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holder. If a written proxy card is signed by a shareholder and returned without instructions, the shares of our common stock represented by the proxy will be voted “FOR” approval of the merger agreement and “FOR” approval of any proposal to adjourn the special meeting to solicit additional proxies in favor of approval of the merger agreement.

Shareholders who have questions or requests for assistance in completing and submitting proxy cards should contact Georgeson Inc., our proxy solicitor, at:

17 State Street
10th Floor
New York, NY 10004
Call Toll-Free: 1-866-541-3553

Shareholders who hold their shares of our common stock in “street name,” meaning in the name of a bank, broker or other person who is the record holder, must either direct the record holder of their shares of our common stock how to vote their shares or obtain a proxy from the record holder to vote their shares at the special meeting.

Revocability of Proxies

You can change your vote and revoke your proxy at any time before the polls close at the special meeting by doing any one of the following:

·       signing and submitting another proxy with a later date;

·       accessing the Internet and following the instructions for Internet proxy authorization that appear on the enclosed proxy card;

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·       following the instructions that appear on the enclosed proxy card for proxy authorization by telephone; or

·       voting in person at the meeting.

Your attendance alone at the special meeting will not revoke your proxy. If you wish to revoke your previously submitted proxy at the special meeting, you must deliver a completed proxy card with a later date in person or complete a ballot to be made available at the special meeting. If you are not the record holder of your shares, you must follow the instructions of your bank or brokerage firm in order to change your vote.

Solicitation of Proxies

In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. Our directors, officers and employees will not receive any additional compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners of shares of our common stock and in obtaining voting instructions from those owners. We will pay all expenses of filing, printing and mailing this proxy statement.

We have retained Georgeson Inc. to assist in the solicitation of proxies by mail, telephone or other electronic means, or in person, for a fee of approximately $25,000 plus expenses relating to the solicitation.

Proposal to Approve Adjournment of the Special Meeting

We are submitting a proposal for consideration at the special meeting to authorize the named proxies to approve one or more adjournments of the special meeting if there are not sufficient votes to approve the merger agreement at the time of the special meeting. Even though a quorum may be present at the special meeting, it is possible that we may not have received sufficient votes to approve the merger agreement by the time of the special meeting. In that event, we would need to adjourn the special meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the special meeting for purposes of soliciting additional proxies to obtain the requisite shareholder approval to approve the merger agreement. Our board of directors retains full authority to adjourn the special meeting for any other purpose, including the absence of a quorum, or to postpone the special meeting before it is convened, without the consent of any of our shareholders. Under Section 7.05(b) of the MBCA, notice of the adjourned meeting is not required as long as the date, time and place of the adjourned meeting are announced at the meeting prior to adjournment.

The approval of a proposal to adjourn the special meeting would require the affirmative vote of the holders of a majority of the shares of our common stock present in person or by proxy and voting at the special meeting. The failure to vote shares of our common stock would have no effect on the approval of the adjournment proposal.

The independent committee and our board of directors recommend that you vote “FOR” the adjournment proposal so that proxies may be used for that purpose, should it become necessary.

Properly executed proxies will be voted “FOR” the adjournment proposal, unless otherwise noted on the proxies. If the special meeting is adjourned, we are not required to give notice of the time and place of the adjourned meeting unless our board of directors fixes a new record date for the special meeting.

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Other Business

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under the MBCA, business transacted at the special meeting is limited to matters within the purpose or purposes described in the notice of special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. In addition, the grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on procedural matters incident to the conduct of the special meeting.

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THE MERGER

Background of the Merger

From time to time, our board of directors has reviewed and assessed various strategic alternatives for Kronos, including remaining a stand-alone, independent company and the relative advantages and disadvantages of engaging in a business combination with a potential acquirer. In the first part of 2006, Kronos received general inquiries from third parties, including an investment bank, a private equity group and a potential strategic acquirer relating to Kronos’ strategic plans. Management reported these inquiries to our board of directors in due course at its regularly scheduled meetings where they were discussed in general terms by our board of directors.

In mid-August, 2006, a potential strategic acquirer contacted members of senior management of Kronos to determine Kronos’ willingness to consider a business combination. On August 15, 2006, Mr. Mark Ain, Executive Chairman of our board of directors, and Aron Ain, our Chief Executive Officer, met with senior management of this third party to discuss a potential business combination. In late August this third party sent an unsolicited expression of interest to Mark Ain and Aron Ain indicating an interest in acquiring Kronos at a price range substantially below the price to be paid by Hellman & Friedman in the merger agreement. This expression of interest was discussed at a special meeting of our board of directors held on August 21, 2006. Following this discussion, our board of directors determined that it was not in the best interests of Kronos’ shareholders to pursue this expression of interest but that Kronos would remain open to further discussions with this third party and directed Aron Ain to communicate this conclusion to the third party. In addition, our board of directors requested management to conduct informal and confidential discussions with investment banks and private equity sponsor groups to explore Kronos’ strategic alternatives.

On August 29, 2006, in response to an unsolicited expression of interest from a private equity sponsor group, our senior management met with representatives of such private equity sponsor group. The discussion was preliminary in nature and focused primarily on potential transaction structures and valuation ranges. Management reported the results of this meeting to our board of directors.

On September 22, 2006, a standing subcommittee of our board of directors met, together with other members of the board of directors and management to discuss, among other things, a summary of management’s discussions with investment banks and a private equity sponsor group relating to various strategic alternatives. It was the consensus of those members of our board of directors to continue to informally explore strategic alternatives, including those that related to a transaction involving a private equity sponsor group and report back to the full board of directors.

During late September and October 2006, management met with several investment banking firms, including Jefferies Broadview, and a private equity sponsor group, to determine the potential level of interest in a business combination with Kronos and the potential valuation ranges that might be associated with such a transaction. Management’s discussions with the private equity sponsor group were general and exploratory in nature and involved only publicly-available information concerning Kronos and its operations.

On November 9, 2006, members of our senior management met with two representatives of Hellman & Friedman to discuss a potential business combination. The discussion was general in nature and involved only publicly-available information concerning Kronos and its operations.

On November 16, 2006, at its regularly scheduled meeting, our board of directors met with a representative of Wilmer Cutler Pickering Hale and Dorr LLP, or WilmerHale, outside legal counsel to Kronos, to discuss, among other things, an overview of third party inquiries and the salient legal issues surrounding our board of director’s assessment of our strategic alternatives, including a potential business combination with a third party, whether a strategic party or private equity sponsor group, and remaining a

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stand-alone, independent company. At this meeting, counsel noted the role of our board of directors in such a transaction and outlined the board of director’s fiduciary duties in such context. At this meeting, the non-management members of the board of directors met in executive session and continued their discussion with outside legal counsel regarding the fiduciary duties of the board of directors in the context of a transaction with a private equity sponsor group, the benefits of forming an independent committee and authorizing such a committee to retain its own financial and legal advisors in discharging its duties with respect thereto.

Following this discussion, the non-management members of our board of directors discussed the business and operational challenges that Kronos would be required to address and the opportunities presented as a stand-alone, independent company in the future. In light of this discussion, the non-management members of our board of directors concluded that it would be appropriate for members of management to conduct confidential discussions with several qualified private equity sponsor groups and to summarize and present management’s findings and recommendations at a meeting of the board of directors to be held in early January 2007.

On January 2, 2007, our board of directors met to hear a report of management with respect to (i) the operational and strategic challenges facing Kronos and (ii) a summary of management’s preliminary discussions with certain private equity sponsor groups. At this meeting, management presented its summary of the interaction with several interested third parties and the potential valuation ranges discussed with such parties, noting that such valuations were preliminary in nature and based entirely on publicly-available information concerning Kronos.

Following this discussion, the non-management members of our board of directors met in executive session and conferred with representatives of WilmerHale. During this discussion, representatives of WilmerHale discussed the importance of each member of the board of directors avoiding actual and apparent conflicts of interest with any of the identified private equity sponsor groups and management and reviewed the board of director’s fiduciary duties in connection with evaluating a business combination. In addition, counsel suggested that our board of directors consider forming a committee of entirely disinterested and independent members to manage the day-to-day aspects of considering our strategic alternatives, including engaging in a business combination and remaining a stand-alone, independent company and recommended that such committee be authorized to retain independent financial and legal advisors to assist this committee. Following this discussion, it was the consensus of the board of directors to consider the formation of an independent committee as described by counsel at a meeting to be held on January 5, 2007.

On January 5, 2007, the non-management members of our board of directors met to consider whether to (i) authorize management to continue discussions with certain interested third parties regarding a potential business combination with Kronos, (ii) create an independent committee and establish the mandate of any such committee and (iii) authorize such independent committee to engage independent professional advisors in connection with its assessment of Kronos’ strategic alternatives. Following discussion, the non-management members of our board of directors formed an independent committee comprised of Lawrence J. Portner, Samuel Rubinovitz and Bruce J. Ryan, with Mr. Ryan serving as committee chair, each of whom is an independent director under applicable listing exchange rules and federal securities laws, and disinterested for Massachusetts corporate law purposes. The independent committee was granted the full powers of our board of directors under Massachusetts law, except that any decision to authorize a business combination transaction was to be made by the full board of directors, but no such board authorization would be made without the unanimous recommendation of the independent committee. In addition, the independent committee was authorized to engage its own legal and financial advisor. At this meeting, non-management members of our board of directors discussed the benefits of utilizing Jefferies Broadview as financial advisor to the independent committee.

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Following the January 5, 2007 meeting, the independent committee authorized us to retain Jefferies Broadview as the independent committee’s independent financial advisor and Choate, Hall & Stewart LLP as its independent legal advisor. Jefferies Broadview had not received any compensation from us in connection with investment banking services within the past five years, and Choate Hall had not in the past been engaged by us to provide legal services.

On January 10, 2007, the independent committee met by conference call with representatives of Jefferies Broadview, Choate, Hall & Stewart and WilmerHale, together with Mark V. Julien, our Chief Financial Officer, and Alyce T. Moore, our General Counsel. The purpose of the meeting was to discuss with outside counsel and Jefferies Broadview the process the independent committee should follow in considering our strategic alternatives, including a potential business combination. Following the presentations and discussion it was the consensus of the independent committee that Jefferies Broadview be directed to conduct a discreet, targeted and controlled marketing effort directed toward private equity sponsor groups and strategic buyers designed to balance the need for a meaningful canvassing of interest (to promote healthy price competition) with preserving the confidentiality of any potential transaction. The independent committee directed Jefferies Broadview to contact six private equity sponsor groups, including Hellman & Friedman, and, assuming they executed an acceptable confidentiality agreement, that each be afforded access to an electronic data room containing certain non-public due diligence information concerning Kronos. In addition, after considering the input of its financial and legal advisors, the independent committee identified several other private equity sponsor groups that would be contacted if any of the six private equity sponsor groups declined to execute a confidentiality agreement.

The independent committee selected these private equity sponsor groups based on industry expertise in software and financial capability. In addition, the independent committee identified three strategic parties with businesses closely aligned with Kronos and with the perceived ability to pay a significant premium for Kronos and the ability to execute a transaction of this magnitude. It was concluded that those parties should be approached as well, but because they were our competitors, only after first assessing potential valuation ranges from the private equity sponsor groups so that the independent committee could ascertain what would constitute a competitive offer.

During mid-January 2007, Kronos negotiated and executed confidentiality agreements with each of the six private equity sponsor groups and one co-investor that contained customary provisions, including “standstill” restrictions. On January 22, 2007, the independent committee executed a written engagement letter dated January 19, 2007 retaining Jefferies Broadview. On February 8, 2007, Kronos provided due diligence materials via access to an electronic data room to each party that executed a confidentiality agreement.

On February 12, 2007, the chairman of the independent committee met by conference call with representatives of Jefferies Broadview and Choate Hall to discuss various aspects of the bid process, including the terms of the bid procedures letter to be presented to prospective bidders. Mr. Ryan then conferred with the other members of the independent committee by telephone.

On February 13, 2007, following a meeting with the independent committee, Jefferies Broadview circulated a first round bid procedures letter to each of the six private equity sponsor groups requesting that a written expression of interest be returned no later than February 23, 2007.

On February 15, 2007, Jefferies Broadview provided a process update to the independent committee summarizing follow up due diligence discussions with several of the private equity sponsor groups and Kronos.

On or about February 16, 2007, at the independent committee’s request, Jefferies Broadview approached three strategic parties, including the party that had made the unsolicited expression of interest in August 2006.

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Throughout late January and February 2007, management participated in various in-person and telephonic meetings and due diligence sessions with each of the private equity sponsor groups.

On February 23, 2007, preliminary proposals were received from the six private equity sponsor groups, with bids ranging from $45.00 per share to $50.00 per share. Later that day, Jefferies Broadview updated the independent committee as to these developments. The independent committee learned that two strategic parties declined to participate in the process, in one instance because the party indicated that it was not prepared to proceed at anticipated levels of valuation, and in the second because the party was not currently positioned or interested in pursuing a transaction presenting the complexity and operational overlap of an acquisition involving Kronos.

On February 26, 2007, the independent committee met by conference call with representatives of Jefferies Broadview, Choate Hall, WilmerHale and members of senior management to discuss the communication received from the two strategic parties and the status of the first round bids submitted by the private equity sponsor groups. Following this session, the independent committee met without representatives of management, and based on price, the independent committee decided to narrow the participants to four private equity sponsor groups.

On February 27, 2007, the third strategic party indicated to Jefferies Broadview that it would not proceed in the process because it was unwilling to execute a confidentiality agreement with customary provisions, including “standstill” restrictions that would terminate in the event that we entered into an acquisition agreement with a third party or a third party commenced a tender offer.

On March 4, 2007, as authorized by the independent committee, Jefferies Broadview circulated a second round bid procedures letter to each of the remaining private equity sponsor groups, together with a draft merger agreement and disclosure schedules, requiring that a final written expression of interest be returned no later than March 19, 2007.

During the first two weeks of March 2007, management participated in continuing in-person and telephonic meetings and due diligence sessions with each of the four remaining private equity sponsor groups.

On March 13, 2007, Mark Ain received a letter from the chairman and chief executive officer of a software company, the financial sponsor of which is a significant private equity sponsor group, indicating that party’s interest in acquiring Kronos. We refer to this third party as Party X.

On March 14, 2007, Mr. Ryan, chairman of the independent committee, discussed the correspondence from Party X with representatives of Jefferies Broadview, Choate Hall and WilmerHale along with Mark Ain, Aron Ain and Mr. Paul Lacy, our President. Mr. Ryan then conferred with the other members of the independent committee by telephone.

On March 15, 2007, Party X sent a letter to Mark Ain indicating that it was willing to offer $55.00 per share in cash based on what Party X believed to be the number of shares outstanding (or $54.36 calculated using the most recent fully-diluted share capitalization available at that time), noting that the offer would expire at 8:00 p.m. Pacific Time on March 16, 2007 unless otherwise extended or terminated prior to that time. Party X indicated that it would be willing to engage in a rapid and intensive due diligence review of Kronos provided it was afforded reasonable access.

On March 16, 2007, the independent committee met with Messrs. Aron Ain and Lacy of Kronos and representatives of Jefferies Broadview, Choate Hall and WilmerHale to consider Kronos’ reaction to the proposal submitted by Party X. Following a discussion, it was the consensus of the independent committee to allow Party X full access to the electronic data room and to direct management to meet with Party X as soon as practicable, provided Party X execute a suitable form of confidentiality agreement. WilmerHale and counsel to Party X negotiated a form of confidentiality agreement containing “standstill” restrictions

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that would terminate in the event that we entered into an acquisition agreement with a third party or a third party commenced a tender offer. Later that evening, representatives from Party X and their financial and legal due diligence teams were permitted access to the electronic data room. In addition, on March 16, 2007, Party X and its counsel were provided with a copy of the same draft merger agreement and disclosure schedules provided to the other bidders in the process.

On March 19, 2007, Jefferies Broadview received three complete bid packages including mark-ups of the draft merger agreements from three of the private equity sponsor groups with price ranges from $50.00 per share to $53.00 per share. In addition, WilmerHale received a revised merger agreement from counsel to Party X. Later that day, the independent committee convened to conduct a preliminary analysis of the bid packages noting that the final private equity sponsor group had indicated that it would complete its submission on March 20, 2007, which was later submitted on such date at a price range substantially below the bids received on March 19, 2007.

During the week of March 19th, management conducted due diligence meetings with and provided supplemental due diligence materials to Party X.

On March 20, 2007, at a meeting of the independent committee, after considering the results of the bids received at that time, including the expression of interest provided by Party X, the independent committee decided to extend the final bidding deadline to the morning of March 22, 2007. The independent committee then requested Jefferies Broadview to instruct the two highest bidders, Hellman & Friedman and Party X, to submit their last and final bids on March 22, 2007.

On March 19, 20 and 21, 2007, representatives of WilmerHale negotiated drafts of the merger agreements and related documentation with counsel to Party X and Hellman & Friedman and reviewed debt financing commitment documentation from such parties.

During the late morning and early afternoon of March 22, 2007, the independent committee met to discuss the relative merits of the proposals received from Party X and Hellman & Friedman. Party X resubmitted its bid of $55.00 and Hellman & Friedman submitted a revised bid of $54.00. The independent committee concluded, after considering the input of counsel and Jefferies Broadview, that if the bids were equal in price, it would favor the Hellman & Friedman proposal due to (i) the fact that Hellman & Friedman’s debt financing, which represented a smaller percentage of its proposed purchase price than that of Party X, was based solely upon Kronos’ financial performance and not dependent on that of the bidding party, (ii) its preferable proposed merger agreement terms, including Hellman & Friedman’s agreement to be liable for up to $137.0 million (approximately 7.5% of our equity value) for willful breach of the merger agreement, (iii) somewhat more flexible deal protection terms and (iv) its reasonable belief based, in part, upon Hellman & Friedman’s general reputation as an acquirer of software companies, that an acquisition of us by Hellman & Friedman was in the best interests of our employees, suppliers, creditors and customers and other constituencies as contemplated by the provisions of Section 8.30 of the MBCA. Accordingly, after deliberation and consideration of these factors, the independent committee directed representatives of Jefferies Broadview to determine whether Hellman & Friedman would increase its bid to $55.00 per share. Following the meeting and at the independent committee’s request, Jefferies Broadview contacted Hellman & Friedman, which agreed to increase its bid to $55.00 per share provided that Kronos agree to negotiate on an exclusive basis until 9:00 p.m. on that day and that a definitive merger agreement be signed by that time.

During the afternoon of March 22, 2007, the independent committee met again and authorized exclusive negotiations with Hellman & Friedman until 9:00 p.m. on March 22, 2007. Thereafter, in exchange for the increase of its bid to $55.00, the independent committee directed us to execute an exclusivity agreement with Hellman & Friedman. Jefferies Broadview then reviewed with the independent committee its analysis of the financial terms of the merger and delivered to the independent committee its opinion, upon which our board of directors may also rely, to the effect that, as of that date and based upon

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and subject to the various considerations and assumptions set forth in its opinion, the consideration of $55.00 per share in cash to be received by holders of Kronos common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders, other than Seahawk Acquisition, Merger Sub and their respective affiliates and other than any members of Kronos’ management who may be given the opportunity to obtain equity interests in Seahawk Acquisition after consummation of the merger. Following a discussion, the independent committee recommended the transaction to our board of directors.

During the afternoon and evening of March 22, 2007, our board of directors met twice to consider the revised terms of the Hellman & Friedman proposal and the revised terms of the merger agreement. At the first of these two meetings, Jefferies Broadview reviewed with our board of directors its analysis of the financial terms of the merger and reviewed the opinion summarized in the immediately preceding paragraph that Jefferies Broadview had delivered to the independent committee. Representatives of WilmerHale reviewed the board of director’s fiduciary duties and certain significant provisions contained in the revised merger agreement, a copy of which was circulated to the board of directors prior to the meeting. Following a discussion, our board of directors unanimously approved the transaction and authorized the execution of the merger agreement.

Following the meeting of the board of directors, Kronos and Hellman & Friedman executed the merger agreement and the guarantees. On March 23, 2007, prior to the opening of trading, Kronos issued its press release announcing the transaction.

Reasons for the Merger and Recommendation of the Independent Committee and our Board of Directors

In the course of reaching its decision to adopt the merger agreement and in making its recommendation, our board of directors considered the recommendation of the independent committee and consulted with senior management and our outside financial and legal advisors, reviewed a significant amount of information and considered a number of factors, including the following:

·       the value of the consideration to be received by our shareholders pursuant to the merger agreement, as well as the fact that shareholders will receive the consideration in cash, which provides certainty of value to our shareholders;

·       the fact that the $55.00 per share to be paid as the consideration in the merger represents an approximately 34% premium over the closing price of our common stock twenty trading days prior to the announcement of the execution of the merger agreement;

·       the process to solicit third party interest (including the interest of specified potential strategic buyers) in a business combination with Kronos;

·       our board of director’s conclusion that the merger was more favorable to our shareholders than any other alternative reasonably available to us and our shareholders, after considering:

o       the risks and benefits of remaining a stand-alone, independent company, and

o       the indications of interest made by the other third parties in Kronos’ canvassing process, including the risks and uncertainties associated with the ability of any such third parties to enter into or consummate any transaction;

·       our board of director’s assessment of the operational and strategic challenges facing Kronos as a stand-alone, independent company, including competing with other companies with greater resources, better global capabilities and broader product offerings that may be viewed more favorably by customers in the human capital management software industry;

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·       historical and current information concerning our business, financial performance and condition, operations, technology, management and competitive position, and current industry, economic and market conditions;

·       the internal estimates of our future financial performance provided confidentially to third parties, including Hellman & Friedman, as well as the potential impact of identified challenges and risks on such future financial performance, including:

o       increased risks relating to the execution of our organic growth strategy, such as execution variability and associated pressure on margins,

o       costs and resources related to Sarbanes-Oxley compliance and current, quarterly and annual reporting requirements, and

o       pricing pressure typically experienced by public software companies at the end of quarters;

·       the then current financial market conditions, and historical market prices, volatility and trading information with respect to our common stock, including the possibility that if we remained as a publicly-owned corporation, in the event of a decline in the market price of our common stock or the stock market in general, the price that might be received by holders of our common stock in the open market or in a future transaction might be less than the $55.00 per share cash price to be paid pursuant to the merger;

·       the terms and conditions of the merger agreement, including:

o       the ability of the board of directors, under certain circumstances, to furnish information to and conduct negotiations with a third party and, upon the payment to Hellman & Friedman of a termination fee of $55.0 million (approximately 3.0% of our equity value), to terminate the merger agreement to accept a superior proposal;

o       the board of director’s belief that the $55.0 million termination fee payable to Hellman & Friedman was reasonable in the context of termination fees that were payable in other comparable transactions and would not be likely to preclude another party from making a competing proposal;

o       the board of director’s belief that the $55.0 million termination fee payable by Hellman & Friedman to Kronos in the event of a termination of the merger agreement under certain circumstances was reasonable in the context of termination fees that were payable in other comparable transactions;

o       the terms and conditions of the limited guarantees, including Hellman & Friedman’s agreement to be liable for up to $137.0 million for willful breach of the merger agreement; and

o       the financial presentation of Jefferies Broadview, including its opinion, dated March 22, 2007, to our independent committee to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth in its opinion, the consideration of $55.00 per share in cash to be received by holders of Kronos common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders, other than Seahawk Acquisition, Merger Sub and their respective affiliates and other than any members of Kronos’ management who may be given the opportunity to obtain equity interests in Seahawk Acquisition after consummation of the merger, as more fully described below under the caption “Opinion of Jefferies Broadview”;

·       the terms and conditions of Hellman & Friedman’s financing, including the fact that its financing was based solely upon Kronos’ financial performance and our ability to terminate the merger

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agreement prior to the outside date of October 31, 2007, if such financing is not available and we are otherwise available to close;

·       the fact that one of our major customers held a teleconference with Hellman & Friedman, at Hellman & Friedman’s request, and expressed no objection to the acquisition of our company by Hellman & Friedman; and

·       its reasonable belief that an acquisition of us by Hellman & Friedman was in the best interests of our employees, suppliers, creditors and customers and other constituencies as contemplated by the provisions of Section 8.30 of the MBCA.

In the course of its deliberations, our independent committee and our board of directors also considered a variety of risks and other countervailing factors, including:

·       the risks and costs to us if the merger does not close, including the diversion of management and employee attention, employee attrition and the effect on customer and vendor relationships;

·       the restrictions that the merger agreement imposes on soliciting competing bids, and the fact that we would be obligated to pay the $55.0 million termination fee to Hellman & Friedman under certain circumstances;

·       the fact that we will no longer exist as an independent, publicly-traded company and our current shareholders will no longer participate in any of our future earnings or growth and will not benefit from any appreciation in the value of our company;

·       the fact that gains from an all-cash transaction would be taxable to our shareholders for U.S. federal income tax purposes;

·       the restrictions on the conduct of our business prior to the completion of the merger, requiring us to conduct our business only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the merger; and

·       the interests of our officers and directors in the merger described below under “The Merger—Interests of Our Directors and Executive Officers in the Merger.”

The foregoing discussion of the factors considered by our independent committee and our board of directors is not intended to be exhaustive, but does set forth all of the material factors considered by them. Each of our independent committee and our board of directors collectively reached the unanimous conclusion to recommend and adopt the merger agreement, as applicable, in light of the various factors described above and other appropriate factors. In view of the wide variety of factors considered by our independent committee and our board of directors in connection with their evaluation of the merger and the complexity of these matters, neither considered it practical, nor did either attempt, to quantify, rank or otherwise assign relative weights to the specific factors they considered in reaching their respective decisions. Moreover neither our independent committee nor our board of directors undertook to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the independent committee or the board of directors. Rather, each of our independent committee and our board of directors made their respective recommendations based on the totality of information presented to and the evaluation conducted by them. In considering the factors discussed above, individual directors may have given different weights to different factors.

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Financial Projections

Kronos made available to all potential acquirers who signed confidentiality agreements, including Hellman & Friedman, and to Jefferies Broadview, certain non-public business and financial information about Kronos, including financial projections through the fiscal year ending September 30, 2011. These projections included the following estimates of Kronos’ future financial performance:

Principal assumptions:

·       Net Income includes the effect of stock-based compensation expense and amortization of intangibles.

·       Tax rate assumed to be approximately 34.5%.

·       EBITDA means earnings before interest, taxes, depreciation and amortization.

·       Adjusted EBITDA reflects additions to EBITDA relating to:

o       stock based compensation,

o       deferred revenue (FY2007—$4.8 million; FY2008—$1.7 million; FY 2009—$0.5 million; FY2010—$94,000; and FY 2011—$12,000),

o       public company expenses of approximately $2.1 million for all periods presented, and

o       certain one time expenses for FY 2007 of approximately $0.7 million.

Kronos’ non-public business and financial information and projections through fiscal 2011 that Kronos provided to Hellman & Friedman during the course of Hellman & Friedman’s due diligence investigation of Kronos was provided solely in connection with such due diligence investigation and not expressly for inclusion or incorporation by reference in any proxy statement.  There is no guarantee that any projections will be realized or that the assumptions on which they are based will prove to be correct.

Kronos does not as a matter of course make public any projections as to future performance or earnings beyond limited guidance for periods no longer than one year, and the projections set forth above are included in this proxy statement only because this information was provided to Hellman & Friedman.  The projections were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The projections do not purport to present operations in accordance with U.S. generally accepted accounting principles, and Kronos’ independent registered public accounting firm has not examined, compiled or otherwise applied procedures to the projections and accordingly assumes no responsibility for them.  Kronos’ internal financial forecasts (upon which the projections were based in part) are, in general, prepared solely for internal use such as budgeting and other management decisions and are subjective in many respects and thus susceptible to interpretations and periodic revision based on actual experience and business developments.  The projections reflect numerous assumptions made by the management of Kronos, including those listed above, and general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many

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of which are beyond Kronos’ control. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate or that any of the projections will be realized.

Kronos expects that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in the projections due to numerous risks and uncertainties, including but not limited to: the risk that Kronos will face increased competition; Kronos’ dependence on its time and labor product line; the operational and strategic challenges facing Kronos as a stand-alone, independent company; and the other risks and uncertainties described in reports filed by Kronos with the SEC under the Securities Exchange Act of 1934, as amended, including without limitation under the heading “Risk Factors” in Kronos’ Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2006, or the “Kronos Form 10-K,” and subsequent periodic reports filed with the SEC.  All projections are forward-looking statements; these and other forward-looking statements are expressly qualified in their entirety by the risks and uncertainties identified above and the cautionary statements contained in the Kronos Form 10-K filed with the SEC.

The inclusion of the projections herein should not be regarded as an indication that either Kronos or Hellman & Friedman considered or consider the projections to be a prediction of actual future events, and the projections should not be relied upon as such.  Except as required by law, neither Kronos nor Hellman & Friedman intend to update or otherwise revise the projections to reflect circumstances existing after the date such projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error.

Kronos’ shareholders are cautioned not to place undue reliance on the projections included in this proxy statement.

Opinion of Jefferies Broadview

Jefferies Broadview served as the independent committee’s financial advisor in connection with the merger. On March 22, 2007, Jefferies Broadview delivered to the independent committee its opinion, upon which the Kronos board of directors may also rely, to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth in its opinion, the consideration of $55.00 per share in cash to be received by holders of Kronos common stock pursuant to the merger agreement was fair, from a financial point of view, to those holders, other than Seahawk Acquisition, Merger Sub and their respective affiliates and other than any members of Kronos’ management who may be given the opportunity to obtain equity interests in Seahawk Acquisition after consummation of the merger.

The full text of Jefferies Broadview’s opinion, which sets forth the assumptions made, matters considered and limitations on the scope of review undertaken by Jefferies Broadview in rendering its opinion, is attached hereto as Annex B. Kronos encourages shareholders to read the Jefferies Broadview opinion carefully and in its entirety. Jefferies Broadview’s opinion was provided to the independent committee in connection with its consideration of the merger and addresses only the fairness, from a financial point of view and as of the date of Jefferies Broadview’s opinion, of the consideration to be received by the holders of Kronos common stock pursuant to the merger agreement and does not address any other aspect of the merger. Jefferies Broadview’s opinion does not constitute a recommendation as to how any holder of shares of Kronos common stock should vote on the merger or any matter related thereto.

In connection with its opinion, Jefferies Broadview, among other things:

·       reviewed a draft dated as of March 22, 2007 of the merger agreement;

·       reviewed certain publicly-available financial and other information about Kronos;

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·       reviewed certain information furnished to it by Kronos’ management, including financial forecasts and analyses, relating to the business, operations and prospects of Kronos;

·       held discussions with members of senior management of Kronos concerning the matters described in the prior two bullet points;

·       reviewed the share trading price history and valuation multiples for Kronos common stock and compared them with those of certain publicly traded companies that Jefferies Broadview deemed relevant;

·       compared the proposed financial terms of the merger with the financial terms of certain other transactions that Jefferies Broadview deemed relevant; and

·       conducted such other financial studies, analyses and investigations as Jefferies Broadview deemed appropriate.

In Jefferies Broadview’s review and analysis and in rendering its opinion, Jefferies Broadview assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available to it by Kronos or that was publicly available (including, without limitation, the information described above), or that was otherwise reviewed by it. In its review, Jefferies Broadview did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did Jefferies Broadview conduct a physical inspection of any of the properties or facilities of, Kronos, nor was Jefferies Broadview furnished with any such evaluations or appraisals of such physical inspections, nor did Jefferies Broadview assume any responsibility to obtain any such evaluations or appraisals.

With respect to the financial forecasts provided to and examined by it, Jefferies Broadview’s opinion noted that projecting future results of any company is inherently subject to uncertainty. Kronos informed Jefferies Broadview, however, and Jefferies Broadview assumed, that such financial forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Kronos as to the future financial performance of Kronos. Jefferies Broadview expressed no opinion as to Kronos’ financial forecasts or the assumptions on which they are made.

Jefferies Broadview’s opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of its opinion. Jefferies Broadview expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting Jefferies Broadview’s opinion of which Jefferies Broadview became aware after the date of its opinion.

Jefferies Broadview made no independent investigation of any legal or accounting matters affecting Kronos, and Jefferies Broadview assumed the correctness in all respects material to Jefferies Broadview’s analysis of all legal and accounting advice given to Kronos, the independent committee and the board of directors, including, without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by, the merger agreement to Kronos and its shareholders. In addition, in preparing its opinion, Jefferies Broadview did not take into account any tax consequences of the merger to any holder of shares of Kronos common stock. Jefferies Broadview assumed that the final form of the merger agreement would be substantially similar to the last draft reviewed by it. Jefferies Broadview also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Kronos, Seahawk Acquisition, Merger Sub or the contemplated benefits of the merger.

Jefferies Broadview’s opinion was for the use and benefit of the independent committee and the board of directors in their consideration of the merger, and Jefferies Broadview’s opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to any

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alternative transaction or opportunity that might be available to Kronos, nor did it address the underlying business decision by Kronos to engage in the merger or the terms of the merger agreement or the documents referred to therein. In addition, Jefferies Broadview was not asked to address, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of Kronos, other than the holders of shares of Kronos common stock. Jefferies Broadview expressed no opinion as to the price at which shares of Kronos common stock will trade at any time.

In preparing its opinion, Jefferies Broadview performed a variety of financial and comparative analyses. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. Jefferies Broadview believes that its analyses must be considered as a whole. Considering any portion of Jefferies Broadview’s analyses or the factors considered by Jefferies Broadview, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the conclusion expressed in Jefferies Broadview’s opinion. In addition, Jefferies Broadview may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuation resulting from any particular analysis described below should not be taken to be Jefferies Broadview’s view of Kronos’ actual value. Accordingly, the conclusions reached by Jefferies Broadview are based on all analyses and factors taken as a whole and also on the application of Jefferies Broadview’s own experience and judgment.

In performing its analyses, Jefferies Broadview made numerous assumptions with respect to industry performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond Kronos’ and Jefferies Broadview’s control. The analyses performed by Jefferies Broadview are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the per share value of Kronos common stock do not purport to be appraisals or to reflect the prices at which shares of Kronos common stock may actually be sold. The analyses performed were prepared solely as part of Jefferies Broadview’s analysis of the fairness, from a financial point of view, of the consideration to be received by holders of Kronos common stock pursuant to the merger, and were provided to the independent committee and the board of directors in connection with the delivery of Jefferies Broadview’s opinion.

The following is a summary of the material financial and comparative analyses performed by Jefferies Broadview in connection with Jefferies Broadview’s delivery of its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies Broadview’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies Broadview’s financial analyses. For purposes of the analyses summarized below, Jefferies Broadview used the revenue and EBITDA forecasts provided by Kronos management and described above under the caption “Financial Projections”, except that the revenue forecasts were adjusted to include deferred revenue items and the EBITDA forecasts did not include adjustments for public company and certain one time expenses.

Transaction Overview.   Based upon the approximately 33.2 million shares of Kronos common stock that were outstanding as of March 14, 2007 on a fully diluted basis (calculated using the treasury stock method), Jefferies Broadview noted that the merger consideration of $55.00 per share implied an equity market value of approximately $1.824 billion. Net of approximately $54.7 million of indebtedness and

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approximately $95.4 million of cash and cash equivalents, Jefferies Broadview noted that the merger consideration implied a net enterprise value of approximately $1.784 billion. Jefferies Broadview also noted that the merger consideration of $55.00 per share of Kronos common stock represented:

·       a premium of 21.8% over the closing price per share of Kronos common stock on March 21, 2007; and

·       a premium of 34.8% over the closing price per share of Kronos common stock on February 22, 2007.

Historical Trading Analysis.   Jefferies Broadview reviewed the share price trading history of the Kronos common stock for the one-year period ending March 21, 2007 on a stand-alone basis and also in relation to the NASDAQ Composite and to a composite index consisting of the following horizontal application software vendors:

·       Aspen Technology, Inc.;

·       Business Objects S.A.;

·       Cognos Incorporated;

·       Epicor Software Corporation;

·       MicroStrategy Incorporated; and

·       Micros Systems, Inc.

Comparable Public Company Analysis.   Using publicly available information and information provided by Kronos’ management, Jefferies Broadview analyzed the trading multiples of Kronos and the corresponding trading multiples of the group of companies listed above under “Historical Trading Analysis.” In its analysis, Jefferies Broadview derived and compared multiples for Kronos and the selected companies, calculated as follows:

·       the enterprise value divided by trailing twelve month, or TTM, revenue, which is referred to as “Enterprise Value/TTM Revenue,”

·       the enterprise value divided by estimated revenue for fiscal year 2007, which is referred to as “Enterprise Value/2007E Revenue,”

·       the enterprise value divided by estimated revenue for fiscal year 2008, which is referred to as “Enterprise Value/2008E Revenue,”

·       the enterprise value divided by TTM EBITDA, which is referred to as “Enterprise Value/TTM EBITDA,”

·       the enterprise value divided by estimated EBITDA for fiscal year 2007, which is referred to as “Enterprise Value/2007E EBITDA,”

·       the enterprise value divided by estimated EBITDA for fiscal year 2008, which is referred to as “Enterprise Value/2008E EBITDA,”

·       the price per share divided by TTM earnings per share, or EPS, which is referred to as “TTM P/E,”

·       the price per share divided by estimated EPS for fiscal year 2007, which is referred to as “2007 P/E,” and

·       the price per share divided by estimated EPS for fiscal year 2008, which is referred to as “2008 P/E.”

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This analysis indicated the following:

Comparable Public Company Multiples

Using a reference range of 2.5x to 3.25x Kronos’ TTM revenues, 2.25x to 3.0x Kronos’ 2007E Revenue and 2.0x to 2.75x Kronos’ 2008E Revenue, Jefferies Broadview determined an implied enterprise value for Kronos, then subtracted debt and added cash to determine an implied equity value. After accounting for the vesting of in-the-money stock options, this analysis indicated a range of implied values per share of Kronos common stock of approximately $47.67 to $60.50 using TTM revenues, $47.32 to $61.47 using 2007E Revenue and $46.88 to $62.66 using 2008E Revenue, in each case compared to the merger consideration of $55.00 per share of Kronos common stock.

Using a reference range of 11.0x to 17.0x Kronos’ TTM EBITDA, 10.0x to 16.0x Kronos’ 2007E EBITDA, and 8.0x to 14.0x Kronos’ 2008E EBITDA, Jefferies Broadview determined an implied enterprise value for Kronos, then subtracted debt and added cash to determine an implied equity value. After accounting for the vesting of in-the-money stock options, this analysis indicated a range of implied values per share of Kronos common stock of approximately $42.81 to $63.85 using TTM EBITDA, $42.95 to $66.13 using 2007E EBITDA, and $39.68 to $66.44 using 2008E EBITDA, in each case compared to the merger consideration of $55.00 per share of Kronos common stock.

Using a reference range of 22.0x to 27.0x Kronos’ TTM EPS, 19.0x to 24.0x Kronos’ 2007E EPS, and 16.0x to 21.0x Kronos’ 2008E EPS, Jefferies Broadview determined an implied equity value. This analysis indicated a range of implied values per share of Kronos common stock of approximately $43.31 to $53.15 using TTM EPS, $38.20 to $48.25 using 2007E EPS, and $39.78 to $52.20 using 2008E EPS, in each case compared to the merger consideration of $55.00 per share of Kronos common stock.

No company utilized in the comparable company analysis is identical to Kronos. In evaluating the selected companies, Jefferies Broadview made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Kronos’ and Jefferies Broadview’s control. Mathematical analysis, such as determining the median, is not in itself a meaningful method of using comparable company data.

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Comparable Transaction Analysis.   Using publicly available and other information, Jefferies Broadview examined the following eleven transactions involving horizontal application software vendors. The transactions considered and the month and year each transaction was announced were as follows:

Using publicly-available estimates and other information for each of these transactions, Jefferies Broadview reviewed the transaction value as a multiple of the target company’s TTM Revenue immediately preceding announcement of the transaction, which is referred to below as “Transaction Value/TTM Revenue,” and as a multiple of the target company’s TTM EBITDA immediately preceding announcement of the transaction, which is referred to below as “Transaction Value/TTM EBITDA.” In each case, the price paid in the transaction was adjusted for the target’s cash and debt at the time of acquisition, if known. This analysis indicated the following:

Selected Comparable Transaction Multiples

Using a reference range of 2.0x to 2.75x Kronos’ TTM Revenue and 10.0x to 16.0x Kronos’ TTM EBITDA, Jefferies Broadview determined an implied enterprise value for Kronos, then subtracted debt and added cash to determine an implied equity value. After accounting for the vesting of in-the-money stock options, this analysis indicated a range of implied values per share of Kronos common stock of approximately $38.68 to $51.96 using TTM Revenue and $39.17 to $60.39 using TTM EBITDA, in each case compared to the merger consideration of $55.00 per share of Kronos common stock.

No transaction utilized as a comparison in the comparable transaction analysis is identical to the merger. In evaluating the merger, Jefferies Broadview made numerous judgments and assumptions with regard to industry performance, general business, economic, market, and financial conditions and other matters, many of which are beyond Kronos’ and Jefferies Broadview’s control. Mathematical analysis, such as determining the average or the median, is not in itself a meaningful method of using comparable transaction data.

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Premiums Paid Analysis.   Using publicly-available information, Jefferies Broadview analyzed the premiums offered in selected North American software transactions with equity consideration between $250.0 million and $3.0 billion announced since January 1, 2005. For each of these transactions, Jefferies Broadview calculated the premium represented by the offer price over the target company’s closing share price one trading day and twenty trading days prior to the transaction’s announcement. This analysis indicated the following median premiums for those time periods prior to announcement:

Using these premiums, this analysis indicated a range of implied value per share of Kronos common stock of approximately $42.78 to $82.76 using the high and low premiums 1-trading day prior to announcement, and approximately $44.92 to $95.67 using the high and low premiums 20-trading days prior to announcement, compared to the merger consideration of $55.00 per share of Kronos common stock.

Using publicly-available information, Jefferies Broadview also analyzed the premiums offered in selected North American software transactions with equity consideration between $250.0 million and $3.0 billion announced since January 1, 2005 where the target company was acquired by a financial buyer. For each of these transactions, Jefferies Broadview calculated the premium represented by the offer price over the target company’s closing share price one trading day and twenty trading days prior to the transaction’s announcement. This analysis indicated the following median premiums for those time periods prior to announcement:

Using these premiums, this analysis indicated a range of implied value per share of Kronos common stock of approximately $44.77 to $68.96 using the high and low premiums 1-trading day prior to announcement, and approximately $44.92 to $71.73 using the high and low premiums 20-trading days prior to announcement, compared to the merger consideration of $55.00 per share of Kronos common stock.

Discounted Cash Flow Analysis.   Jefferies Broadview performed a discounted cash flow analysis to estimate the present value of the free cash flows of Kronos through the fiscal year ending September 30, 2011 using Kronos management’s financial projections, discount rates ranging from 14.0% to 18.0%, and perpetual growth rates of free cash flow after fiscal year 2011 ranging from 4.0% to 6.0%. To determine the implied total equity value for Kronos, Jefferies Broadview subtracted total indebtedness and added cash and cash equivalents to the implied enterprise value for Kronos. After accounting for the vesting of in-the-money stock options, this analysis indicated a range of implied values per share of Kronos common stock of approximately $30.09 to $49.28, compared to the merger consideration of $55.00 per share of Kronos common stock.

Jefferies Broadview’s opinion was one of many factors taken into consideration by the independent committee in making its determination to recommend the merger to the board of directors and should not be considered determinative of the views of the independent committee or the board of directors with respect to the merger.

Jefferies Broadview was selected by the independent committee based on Jefferies Broadview’s qualifications, expertise and reputation. Jefferies Broadview, a division of Jefferies & Company, Inc., is an internationally recognized investment banking and advisory firm. Jefferies Broadview, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in

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connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.

Pursuant to an engagement letter between Kronos and Jefferies Broadview dated January 19, 2007, Kronos agreed to pay Jefferies Broadview a fee for its services based on a percentage of the total value of the merger, which fee is estimated to be approximately $13.7 million. Of this amount, $2.0 million was payable upon delivery of Jefferies Broadview’s opinion, and the balance is payable upon consummation of the merger. In addition, Kronos has agreed to reimburse Jefferies Broadview for reasonable expenses incurred, including reasonable fees and disbursements of Jefferies Broadview’s legal counsel. Kronos also has agreed to indemnify Jefferies Broadview and certain related parties against liabilities, including liabilities under federal securities laws, arising out of or in connection with the services rendered and to be rendered by it under its engagement. Jefferies Broadview has, in the past, provided financial advisory and financing services to Kronos and may continue to do so, and has received, and may receive, fees for the rendering of such services. Jefferies Broadview maintains a market in the securities of Kronos, and in the ordinary course of Jefferies Broadview’s business, Jefferies Broadview and its affiliates may trade or hold securities of Kronos and/or affiliates of Seahawk Acquisition for Jefferies Broadview’s own account and for the accounts of Jefferies Broadview’s customers and, accordingly, may at any time hold long or short positions in those securities. In addition, Jefferies Broadview may seek to, in the future, provide financial advisory and financing services to Kronos or entities that are affiliated with Kronos or Seahawk Acquisition, for which Jefferies Broadview would expect to receive compensation.

Delisting and Deregistration of Kronos Common Stock

If the merger is completed, our common stock will be removed from listing on The NASDAQ Global Select Market and deregistered under the Securities Exchange Act of 1934, as amended, and we will no longer file periodic reports with the SEC.

Interests of Our Directors and Executive Officers in the Merger

In considering the recommendation of the independent committee and our board of directors with respect to the merger agreement, holders of shares of our common stock should be aware that our directors and executive officers have interests in the merger that may be different from, or in addition to, those of our shareholders generally. These interests may create potential conflicts of interest. The independent committee and our board of directors were aware of these interests, which include those described below, and considered them, among other matters, in reaching their decision to adopt the merger agreement and approve the merger and to recommend that our shareholders vote in favor of approving the merger agreement.

Stock Options and Restricted Stock Units

Pursuant to the merger agreement, each outstanding stock option of Kronos, whether or not exercisable, will be accelerated and become exercisable in full immediately prior to the effective time of the merger. At the effective time of the merger, except as may otherwise be agreed by Seahawk Acquisition and any holder of an outstanding option, each such outstanding stock option will be cancelled in consideration for a cash payment, without interest and less any applicable taxes, equal to the product of (1) the excess, if any, of $55.00 over the per share exercise price of the option multiplied by (2) the number of shares of our common stock that the option holder could have purchased (assuming full vesting) upon full exercise of such option immediately prior to completion of the merger.

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In addition, each outstanding restricted stock unit will vest in full immediately prior to the effective time of the merger and, except as may otherwise be agreed between Seahawk Acquisition and any holder of a restricted stock unit, each holder of a restricted stock unit will be entitled to receive an amount in cash equal to the product of (1) the number of shares of Kronos common stock previously subject to such restricted stock unit and (2) $54.99 ($55.00 minus $0.01 par value per unit payable by the restricted stock unit holder), plus the value of any deemed dividend equivalents accrued but unpaid with respect to such restricted stock units, less any amounts required to be withheld under any applicable law.

Our directors and executive officers, and any individual who served as a director or executive officer of Kronos in the fiscal year ended September 30, 2006, holding in-the-money options will receive cash payments at the closing of the merger in the approximate amounts (before withholding) indicated in the following table:

(1)             Former executive officer of Kronos.

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Our directors and executive officers, and any individual who served as a director or executive officer of Kronos in the fiscal year ended September 30, 2006, holding unvested restricted stock units, with respect to which the forfeiture provisions will lapse in accordance with the merger agreement, will receive the approximate dollar amounts (before withholding) indicated in the following table:

(1)             Value is calculated by multiplying $54.99 ($55.00 minus $0.01 par value per unit payable by the director/executive officer) by the number of shares previously subject to the restricted stock unit, plus the value of any deemed dividend equivalents accrued but unpaid with respect to such restricted stock units.

(2)             Former executive officer of Kronos.

Senior Executive Retention Agreements

We have entered into senior executive retention agreements with Mark S. Ain, Aron J. Ain, Paul A. Lacy, Lloyd Bussell, James Kizielewicz, Peter C. George, Joseph R. DeMartino, Mark V. Julien and Stuart M. Itkin. Generally, under the terms of existing senior executive retention agreements with us, each of Mark S. Ain, Aron J. Ain, Paul A. Lacy, Lloyd Bussell, James Kizielewicz, Peter C. George, Joseph R. DeMartino, Mark V. Julien and Stuart M. Itkin is entitled to receive the following:

·       if within 12 months following the merger the executive officer’s employment is terminated for (1) reasons other than for cause, disability or death (as defined in the retention agreement) or (2) by the executive for good reason (as defined in the retention agreement), a cash payment equal to three times the sum of the executive officer’s highest base salary and highest bonus, received in any year for the five-year period prior to the merger; or

·       if the executive officer’s employment is terminated following 12 months after and within 36 months of the merger for (1) reasons other than for cause, disability, or death (as defined in the retention agreement) or (2) by the executive for good reason (as defined in the retention agreement), which includes a termination by the executive during the 30-day period beginning on the first anniversary of the merger, a cash payment equal to two times the sum of the executive’s highest base salary and highest bonus, received in any year for the five-year period prior to the merger.

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Under the senior executive retention agreements, in such circumstances, the executive is also entitled to receive a pro-rata bonus payment equal to the product of (1) the annual bonus paid or payable for the most recently completed fiscal year and (2) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination and the denominator of which is 365. Our board of directors has approved an amendment to the senior executive retention agreements, and it is expected that such agreements will be amended in a timely manner. Pursuant to such amendment, the above cash payments will be made as follows. If the executive’s termination occurs in 2007, the cash payments will be paid in one lump sum within 30 days after the executive’s termination. If the executive’s termination occurs after 2007, then the cash payments will be paid in one lump sum or in 36 equal monthly installments, with an annual interest rate on the unpaid principal balance equal to the minimum applicable federal rate in effect on the date of termination, in accordance with an irrevocable, written election made by the executive. If no such election is made, then the cash payments will be paid in one lump sum within 30 days after the executive’s termination.

The senior executive retention agreements also require that we continue to provide benefits to each executive for a period of one year after the date of his or her termination. In addition, we will provide outplacement services through one or more outside firms chosen by the executive officer up to an aggregate of $12,000.

Change in Control and Severance Payments

The following table shows the total potential amount of all change in control and severance payments for our executive officers that are entitled to receive such payments under their existing senior executive retention agreements with us assuming a change of control has occurred and that each executive’s employment is terminated without cause or by the executive for good reason. The amounts listed in the table do not include the cash payments for in-the-money options or restricted stock units, which is described in the tables above, or the value of continued benefits in the event of termination of the executive officer’s employment with us, but does include the maximum cost of outplacement services that we will provide (through one or more outside firms) to each executive officer, which is $12,000. The table assumes that the pro-rata bonus payment to which each executive is entitled equals the executive’s bonus for the 2006 fiscal year.

Independent Committee Fees

The members of our independent committee will be entitled to receive fees for their services as members of such committee as follows: Messrs. Portner and Rubinovitz will each be entitled to receive $25,000 and Mr. Ryan, as chair of the independent committee, will be entitled to receive $50,000. Such fees will be payable immediately prior to the closing of the merger.

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New Management Arrangements

As of the date of this proxy statement, no member of our management has entered into any amendments or modifications to existing employment or retention agreements with us or Seahawk Acquisition in connection with the merger. Seahawk Acquisition has informed us that it currently intends to retain certain members of our existing management team with the surviving corporation after the merger is completed, and that it anticipates that Aron J. Ain, our Chief Executive Officer, will continue as chief executive officer of the surviving corporation. Seahawk Acquisition has informed us that it may offer Mr. Ain and a limited number of other members of management the opportunity to convert a portion of their current equity interests in Kronos into, or otherwise invest in, equity in the surviving corporation, and that it also intends to set up equity-based incentive compensation plans for management of the surviving corporation. As of the date of this proxy statement, neither Mr. Ain nor any other member of our management has entered into any agreement, arrangement or understanding with Seahawk Acquisition, Merger Sub or any of their affiliates (including Hellman & Friedman LLC and JMI Equity) regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation. Although we believe certain members of our management team are likely to enter into new arrangements with Seahawk Acquisition, Merger Sub or their affiliates regarding employment with, and the right to purchase or participate in the equity of, the surviving corporation, these matters are subject to further negotiations and discussion and no terms or conditions have been finalized. The new arrangements are currently expected to be entered into at or prior to the completion of the merger. In addition, it is possible that one or more of our executive officers could be invited to join the board of directors of the surviving corporation and/or Seahawk Acquisition following the merger.

Indemnification of Officers and Directors

The merger agreement provides for director and officer indemnification for six years following the effective time of the merger. We describe these provisions below under the caption “The Merger Agreement—Indemnification and Insurance.”

Benefit Arrangements

For a twelve month period following the closing of the merger, Seahawk Acquisition has agreed to maintain the severance plan established by Kronos for its employees and will use all commercially reasonable efforts to provide generally to those of its employees and employees of the surviving corporation or their respective subsidiaries who were employees of Kronos or any of its subsidiaries immediately prior to the closing of the merger, a total compensation package, including benefits other than equity-based compensation, that, in the aggregate, is substantially comparable to the total compensation package, including benefits other than equity-based compensation, provided to those employees immediately prior to the execution of the merger agreement.

Following the closing of the merger, Seahawk Acquisition has agreed to give each employee of Kronos or its subsidiaries who continues to be employed by Seahawk Acquisition or the surviving corporation or their respective subsidiaries following the closing of the merger, which we refer to as a continuing employee, full credit for prior service with Kronos or its subsidiaries for purposes of eligibility and vesting under any Seahawk Acquisition employee plan, determination of benefit levels under any Seahawk Acquisition employee plan or policy relating to vacation or severance and determination of retiree status under any Seahawk Acquisition employee plan, except where such credit would result in duplication of benefits. In addition, Seahawk Acquisition has agreed to waive any limitations on benefits relating to pre-existing conditions to the same extent such limitations are waived under any comparable plan of Seahawk Acquisition and recognize for purposes of annual deductible and out-of pocket limits under its medical and dental plans, deductible and out-of-pocket expenses paid by the continuing employees in the calendar year in which the closing of the merger occurs.

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Financing of the Merger

The merger is not conditioned on Seahawk Acquisition’s ability to obtain financing.

Seahawk Acquisition and Merger Sub estimate that the total amount of funds necessary to consummate the merger and related transactions will be approximately $1.8 billion, consisting of approximately $1.79 billion to pay our shareholders, optionholders and holders of restricted stock units the amounts due to them under the merger agreement, net of indebtedness and cash and cash equivalents, and approximately $1.3 million to pay related fees and expenses in connection with the merger.

These payments are expected to be funded by the proceeds of equity and debt financing commitments and the available cash of the surviving corporation. The following arrangements are in place for the financing for the merger, including the payment of related transaction costs, charges, fees and expenses:

Equity Financing.   Seahawk Acquisition has received an equity commitment letter from Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P., pursuant to which, and subject to the conditions contained therein, such equity lenders have committed to provide equity financing in the aggregate amount of $752.9 million, solely for the purpose of funding the merger consideration and to pay related expenses. The obligations of such equity lenders to fund the equity commitment is subject to (1) the terms of the equity commitment letter and (2) all of the conditions precedent to Seahawk Acquisition’s and Merger Sub’s obligation to effect the closing of the merger having been satisfied or waived. Such equity lenders’ obligation to fund the equity commitment will terminate upon the earliest to occur of the termination of the merger agreement, the effective time of the merger and our asserting any claim under the limited guarantee with Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P., which is described below under “—Guarantees.”

Debt Financing.   Seahawk Acquisition has received a debt commitment letter from Credit Suisse, Credit Suisse Securities (USA) LLC, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Wachovia Bank, N.A., and Wachovia Capital Markets LLC to provide (1) up to $665.0 million of senior secured loans under a first-lien secured term loan facility, (2) up to $60.0 million of senior secured loans under a first-lien secured revolving credit facility, and (3) up to $400.0 million of senior secured loans under a second-lien secured term loan facility.

The obligations of such debt lenders under the debt commitment letter are subject to, among other things, (1) there not having occurred a Kronos material adverse effect, (2) the negotiation, execution and delivery of definitive documentation for the facilities and (3) the satisfaction of conditions precedent set forth in the debt commitment letter, including the consummation of the merger, the consummation of the equity financing and the receipt by such debt lenders of certain Kronos financial statements, financial data and pro forma financial statements.

Guarantees

We have received an absolute, unconditional and irrevocable guarantee from each of Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P., which together guarantee the due and punctual observance, payment, performance and discharge of 100% of any payment obligation of Seahawk Acquisition and Merger Sub pursuant to certain sections of the merger agreement, subject to the limitations set forth in the merger agreement and provided that in no event will the guarantors’ aggregate liability under such guarantees exceed $137.0 million.

Certain Relationships Between Seahawk Acquisition and Kronos

There are no material relationships between Seahawk Acquisition and Merger Sub or any of their respective affiliates, on the one hand, and Kronos or any of our affiliates, on the other hand, other than in respect of the merger agreement.

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REGULATORY MATTERS

Under the HSR Act, mergers and acquisitions that meet certain jurisdictional thresholds, such as the present transaction, may not be completed until the expiration of a waiting period that follows the filing of notification forms by both parties to the transaction with the Department of Justice and the Federal Trade Commission. The initial waiting period is 30 days, but this period may be shortened if the reviewing agency grants “early termination” of the waiting period, or it may be lengthened if the reviewing agency determines that an in-depth investigation is required and issues a formal request for additional information and documentary material. We and Seahawk Acquisition each have filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act and have received “early termination” of the waiting period thereunder.

Kronos and Seahawk Acquisition conduct operations in a number of jurisdictions where other regulatory filings or approvals may be required or advisable in connection with the completion of the merger. We have been informed that Seahawk Acquisition has made a pre-merger notification filing with the German antitrust authorities. It is possible that any of the regulatory authorities with which filings are made may seek regulatory concessions as conditions for granting approval of the merger. There can be no assurance that we will obtain the regulatory approvals necessary to complete the merger or that the granting of these approvals will not involve the imposition of conditions on completion of the merger or require changes to the terms of the merger. These conditions or changes could result in conditions to the merger not being satisfied. See “The Merger Agreement—Conditions to the Merger.”

We are not aware of any state regulatory requirements that remain to be complied with in order to complete the merger, other than the filing of the articles of merger with the Secretary of the Commonwealth of the Commonwealth of Massachusetts.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes the material U.S. federal income tax consequences of the merger. This discussion is based upon the provisions of the Code, the U.S. Treasury Regulations promulgated under the Code and judicial and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of Kronos common stock in light of the shareholder’s particular circumstances, nor does it discuss the special considerations applicable to those holders of Kronos common stock subject to special rules, such as shareholders whose functional currency is not the U.S. dollar, shareholders who are financial institutions or broker-dealers, mutual funds, partnerships or other pass-through entities for U.S. federal income tax purposes, tax-exempt organizations, insurance companies, dealers in securities or foreign currencies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, expatriates, shareholders who acquired their common stock through the exercise of options or other compensation arrangements or shareholders who hold their common stock as part of a straddle, constructive sale or conversion transaction. This discussion assumes that holders of Kronos common stock hold their shares as capital assets within the meaning of Section 1221 of the Code (generally property held for investment). No party to the merger will seek an opinion of counsel or a ruling from the Internal Revenue Service with respect to the U.S. federal income tax consequences discussed herein and accordingly the Internal Revenue Service may not agree with the positions described in this proxy statement.

We intend this discussion to provide only a general summary of the material U.S. federal income tax consequences of the merger. We do not intend it to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. We also do not address foreign, state, local,

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alternative minimum or other tax consequences of the merger. We urge you to consult your own tax advisor to determine the particular tax consequences to you (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of Kronos common stock pursuant to the merger, in light of your individual circumstances.

If a partnership holds Kronos common stock, the tax treatment of a partner generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Kronos common stock, you should consult your own tax advisor.

For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of Kronos common stock that is:

·       an individual citizen or resident of the United States for U.S. federal income tax purposes;

·       a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

·       a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

·       an estate that is subject to U.S. federal income tax on all of its income regardless of source.

A “non-U.S. holder” is a beneficial owner (other than a partnership) of Kronos common stock that is not a U.S. holder.

U.S. Holders

The receipt of cash for shares of common stock pursuant to the merger will be a taxable transaction to U.S. holders for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares surrendered. This gain or loss will be capital gain or loss and will be determined separately for each block of shares (i.e., shares with the same basis acquired in a single transaction) that are surrendered for cash pursuant to, or in connection with, the merger.

Capital gain recognized from the disposition of common stock held for more than one year will be long-term capital gain and will be subject (in the case of U.S. holders who are individuals) to tax at a maximum U.S. federal income tax rate of 15%. Capital gain recognized from the disposition of common stock held for one year or less will be short-term capital gain subject to tax at ordinary income tax rates. Generally, capital losses are deductible only against capital gains and are not available to offset ordinary income. However, individual taxpayers are permitted to offset a limited amount of net capital losses annually against ordinary income, and unused net capital losses may be carried forward to subsequent tax years.

A U.S. holder, other than a corporation or other exempt recipient, will be subject to information reporting on the cash received pursuant to the merger. In addition, under the backup withholding rules of the Code, the exchange agent generally is required to withhold 28% of all payments to which a shareholder or other payee is entitled, unless the shareholder or other payee (1) is a corporation or comes within other exempt categories and demonstrates this fact or (2) provides its correct tax identification number (social security number, in the case of an individual, or employer identification number in the case of other shareholders), certifies under penalties of perjury that the number is correct, certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Generally, any amounts withheld

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under the backup withholding rules described above can be refunded or credited against a payee’s U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner. You should consult your own tax advisor as to the qualifications for exemption from backup withholding and the procedures for obtaining such exemption.

Non-U.S. Holders

Any gain realized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

·       the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if an applicable income tax treaty so provides, is also attributable to a permanent establishment or a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be taxed at the graduated U.S. federal income tax rates applicable to United States persons (as defined under the Code) and, if the non-U.S. holder is a foreign corporation, the additional branch profits tax may apply to its effectively connected earnings and profits for the taxable year at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty);

·       the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder may be subject to a 30% tax on the non-U.S. holder’s net gain realized in the merger, which may be offset by U.S. source capital losses of the non-U.S. holder, if any; or

·       we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the merger or the period that the non-U.S. holder held Kronos common stock, and the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of Kronos common stock at any time during the applicable period, in which case the purchaser of our common stock may withhold 10% of the cash payable to the non-U.S. holder in connection with the merger and the non-U.S. holder generally will be taxed on the holder’s net gain realized in the merger at the graduated U.S. federal income tax rates applicable to United States persons (as defined under the Code). We do not believe that we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes, although there can be no assurance in this regard.

A non-U.S. holder will be subject to information reporting and, in circumstances, backup withholding (currently at a rate of 28%) will apply to the cash received pursuant to the merger, unless the non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an exemption. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any. You should consult your own tax advisor as to the qualifications for exemption from backup withholding and the procedures for obtaining such exemption.

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THE MERGER AGREEMENT

This section of the proxy statement describes the material provisions of the merger agreement but does not purport to describe all the provisions of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger. The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the other public filings we make with the SEC, which are available without charge at www.sec.gov.

Structure of the Merger

If all of the conditions to the merger are satisfied or waived in accordance with the merger agreement, Merger Sub, a wholly-owned subsidiary of Seahawk Acquisition, will merge with and into us. The separate corporate existence of Merger Sub will cease, and we will continue as the surviving corporation and will become a wholly-owned subsidiary of Seahawk Acquisition.

Effective Time of the Merger

The merger will become effective upon the filing of articles of merger with the Secretary of the Commonwealth of the Commonwealth of Massachusetts or such later time as set forth in the articles of merger and established by Seahawk Acquisition and us. The closing of the merger will occur on a date specified by us and Seahawk Acquisition, which shall be no later than the second business day after the conditions to effect the merger set forth in the merger agreement have been satisfied or waived, or such other date as Seahawk Acquisition and we may agree in writing.

Although we expect to complete the merger during the third calendar quarter of 2007, we cannot specify when, or assure you that, we, Seahawk Acquisition and Merger Sub will satisfy or waive all conditions to the merger.

Articles of Organization and Bylaws

At the effective time of the merger, each of our articles of organization and bylaws will be amended in their entirety to be as set forth in exhibits to the merger agreement.

Board of Directors and Officers of the Surviving Corporation

The directors of Merger Sub immediately prior to the effective time of the merger will be the initial directors of the surviving corporation and our officers immediately prior to the effective time of the merger will be the initial officers of the surviving corporation.

Consideration to Be Received in the Merger

Upon completion of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger will automatically be cancelled and converted into the right to receive $55.00 in cash, without interest, other than shares of common stock:

·       owned by us as treasury stock immediately prior to the effective time of the merger, all of which will be cancelled without any payment;

·       owned by Seahawk Acquisition or Merger Sub or any other wholly-owned subsidiary of Seahawk Acquisition immediately prior to the effective time of the merger, all of which will be cancelled without any payment;

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·       owned by any of our wholly-owned subsidiaries immediately prior to the effective time of the merger, all of which will remain outstanding; and

·       held by a shareholder who, in the event that our shareholders are entitled to appraisal rights, which we do not believe to be the case as further described in the section of this proxy statement entitled “Appraisal Rights,” is entitled to demand and has made a demand for appraisal of such shares in accordance with the MBCA and has not voted in favor of approval of the merger agreement, until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under the MBCA.

Each of Seahawk Acquisition and the surviving corporation, as described below, will be entitled to deduct and withhold from the consideration otherwise payable to any holder of shares of our common stock any amounts that it is required to deduct and withhold with respect to making such payment under the Code, or any other applicable state, local or foreign tax law.

Payment Procedures

At or prior to the effective time of the merger, Seahawk Acquisition will deposit with a mutually acceptable bank or trust company, which we refer to as the exchange agent, for the benefit of our shareholders, cash in an amount sufficient to pay the merger consideration payable to holders of our common stock. Promptly, and in any event within five business days, after the effective time of the merger, Seahawk Acquisition will cause the exchange agent to mail to each holder of record of a certificate that immediately prior to the effective time of the merger represented outstanding shares of our common stock, a letter of transmittal and instructions for effecting the surrender of his, her or its stock certificates in exchange for the merger consideration payable with respect to such certificates. Upon surrender of a certificate(s) to the exchange agent, together with such letter of transmittal, duly executed, the holder of such certificate(s) will be entitled to receive in exchange therefor the merger consideration that such holder has the right to receive pursuant to the merger agreement and the certificate will immediately be cancelled. Seahawk Acquisition is entitled to require that the exchange agent deliver to it any funds that have not been distributed for one year after the effective time of the merger. After that date, holders of certificates who have not previously complied with the instructions to exchange their certificates will be entitled to look only to Seahawk Acquisition for payment of their claim for merger consideration.

You should not send your Kronos stock certificate(s) to the exchange agent until you have received transmittal materials from the exchange agent. Do not return your Kronos stock certificate(s) with the enclosed proxy, and do not forward your stock certificate(s) to the exchange agent without a completed and executed letter of transmittal.

If any of your certificates, which, immediately prior to the effective time represented outstanding shares of our common stock, have been lost, stolen or destroyed, you will be entitled to obtain the merger consideration payable in respect of the shares formerly represented by those certificates after you make an affidavit of that fact and post a bond.

Stock Options, Restricted Stock Units and Employee Stock Purchase Plan

Pursuant to the merger agreement, each outstanding stock option of Kronos, whether or not exercisable, will be accelerated and become exercisable in full immediately prior to the effective time of the merger. At the effective time of the merger, except as may otherwise be agreed by Seahawk Acquisition and any holder of an outstanding stock option, each such outstanding stock option will be cancelled in consideration for a cash payment, without interest and less any applicable taxes, equal to the product of (1) the excess, if any, of $55.00 over the per share exercise price of the option multiplied by (2) the number of shares of our common stock that the option holder could have purchased (assuming full vesting) upon full exercise of such option immediately prior to completion of the merger.

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In addition, each outstanding restricted stock unit will vest in full immediately prior to the effective time of the merger and, except as may otherwise be agreed between Seahawk Acquisition and any holder of a restricted stock unit, each holder of a restricted stock unit will be entitled to receive an amount in cash equal to the product of (1) the number of shares of Kronos common stock previously subject to such restricted stock unit and (2) $54.99 ($55.00 minus $0.01 par value per unit payable by the restricted stock unit holder), plus the value of any deemed dividend equivalents accrued but unpaid with respect to such restricted stock units, less any amounts required to be withheld under any applicable law.

We have also agreed to terminate our ESPP as of or prior to the effective time of the merger and take any required action to suspend the current offering period under the ESPP and provide that no further offering or purchase period shall commence under the ESPP at any time after March 22, 2007.

Dissenting Shares

We do not believe that holders of our common stock are entitled to appraisal rights in connection with the merger. Under Massachusetts law, appraisal rights are not available in respect of an all-cash merger unless a director, officer or controlling shareholder has a direct or indirect material financial interest in the merger other than in his capacity as (i) a shareholder; (ii) a director, officer, employee or consultant if his financial interest is pursuant to bona fide arrangements; or (iii) in any other capacity so long as the shareholder owns not more than 5% of the voting shares of all classes and series of the corporation in the aggregate.  We are not aware of any material financial interest of a type that would cause appraisal rights to be available in connection with the merger. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the merger.

However, Section 13.02 of the MBCA has not yet been the subject of judicial interpretation and, accordingly, if such a determination were made, Kronos shareholders may be entitled to appraisal rights under Massachusetts law. If you believe you are entitled to appraisal rights under Massachusetts law, in order to exercise these rights you must:  (i) deliver to us, before the vote to approve the merger agreement is taken, written notice of your intent to demand payment for your shares in an amount to be determined pursuant to the statutory appraisal procedure; (ii) not vote your shares in favor of the proposal to approve the merger agreement; and (iii) comply with the other procedures specified in Part 13 of the MBCA. Because a submitted proxy not marked “against” or “abstain” will be voted FOR the approval of the merger agreement and FOR the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies, the submission of a proxy card not marked “against” or “abstain” will result in the waiver of appraisal rights, to the extent such rights are available. If you hold shares in the name of a broker or other nominee and you want to attempt to assert appraisal rights, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal (to the extent such right otherwise would be available). See “Appraisal Rights.”

Pursuant to the terms of the merger agreement and in the event that our shareholders are entitled to appraisal rights under Part 13 of the MBCA, shares of our common stock held by a shareholder who is entitled to and has made a demand for appraisal of his, her or its shares in accordance with the MBCA and has not voted in favor of the approval of the merger agreement, which we refer to as dissenting shares, will not be converted into or represent the right to receive the merger consideration, but will be entitled only to the rights that are granted by the MBCA to a holder of dissenting shares.

If any dissenting shares lose their status as dissenting shares, through failure to perfect or otherwise, then, as of the later of the effective time of the merger or the date of the loss of such status, the dissenting shares will automatically be converted into and will represent only the right to receive the merger consideration, without interest, upon surrender of the certificate(s) representing such dissenting shares.

We have agreed to give Seahawk Acquisition (1) prompt notice of any written demand for appraisal that we receive prior to the effective time of the merger pursuant to the MBCA, any withdrawal of any

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demand for appraisal and any other demand, notice or instrument delivered to us prior to the effective time of the merger that relate to a demand for appraisal and (2) the opportunity to participate in all negotiations and proceedings with respect to any demand for appraisal, notice or instrument. We have agreed not to make any payment or settlement offer prior to the effective time of the merger in connection with any demand for appraisal, notice or instrument without Seahawk Acquisition’s written consent.

Representations and Warranties

The merger agreement contains representations and warranties made by us to Seahawk Acquisition and Merger Sub and representations and warranties made by Seahawk Acquisition and Merger Sub to us. The statements embodied in those representations and warranties were made solely for purposes of the merger agreement between Seahawk Acquisition and Merger Sub, on the one hand, and us, on the other hand. Moreover, some of those representations and warranties were made as of a specified date or may have been used for the purpose of allocating risk between the parties to the merger agreement.

Our representations and warranties in the merger agreement include representations and warranties relating to, among other things:

·       corporate matters, including due organization, standing, power to conduct our business and qualification to do business;

·       our capitalization;

·       our subsidiaries;

·       the authorization, execution, delivery, performance and enforceability of the merger agreement;

·       the absence of conflicts with, or violations of, our or our subsidiaries’ organizational documents, certain contracts, applicable law or judgments, orders or decrees or other obligations as a result of the consummation of the transactions contemplated by the merger agreement;

·       required consents and approvals in connection with the execution, delivery and performance by us of the merger agreement and the consummation of the transactions contemplated in the merger agreement;

·       the vote of our shareholders required to approve the merger agreement and the transactions contemplated in the merger agreement;

·       the filing of all registration statements, forms, reports and other documents required to be filed by us with the SEC since October 1, 2003, the accuracy of the information contained in those filings and the compliance of those filings with applicable requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and, with respect to financial statements contained therein, preparation in accordance with generally accepted accounting principles applied on a consistent basis;

·       the accuracy of information contained in this proxy statement;

·       the maintenance and effectiveness of disclosure controls and procedures, and effectiveness of, and other matters related to, internal controls over financial reporting;

·       our material compliance with applicable listing and other rules and regulations of The NASDAQ Global Select Market;

·       matters related to the Patriot Act, anti-terrorism and money laundering;

·       the absence of undisclosed material liabilities;

·       the conduct of our business between December 31, 2006 and March 22, 2007, and the absence of certain changes related thereto;

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·       the filing of tax returns, status of unpaid taxes and other tax matters;

·       our owned and leased real property;

·       our intellectual property;

·       our material contracts, including the validity and enforceability of our material contracts;

·       investigations and litigation or other proceedings against us or our directors or officers;

·       environmental matters;

·       our employee benefits plans;

·       compliance with laws;

·       permits;

·       labor matters;

·       insurance;

·       our receipt of an opinion from Jefferies Broadview as to the fairness of the merger consideration to our shareholders;

·       the inapplicability of state anti-takeover statutes;

·       the absence of undisclosed brokers’ fees; and

·       transactions with our affiliates.

Some of our representations and warranties are qualified by a material adverse effect standard. A “company material adverse effect” means any changes, effects, events or circumstances that are, individually or in the aggregate, materially adverse to the business, assets, condition (financial or otherwise) or results of operations of Kronos and our subsidiaries, taken as a whole, provided that none of the following will constitute, or will be considered in determining whether there has occurred, a material adverse effect:

·       changes that are the result of economic factors affecting the national or world economy or acts of war or terrorism, only to the extent that such changes do not have a disproportionate adverse effect on Kronos and our subsidiaries relative to the other participants in the industries or markets in which we operate;

·       changes that are the result of factors generally affecting the industries or markets in which we operate, only to the extent that such changes do not have a disproportionate adverse effect on Kronos and our subsidiaries relative to the other participants in the industries or markets in which we operate;

·       any adverse change, effect, event or circumstance resulting from the pendency or announcement of the transactions contemplated by the merger agreement;

·       changes in law, rule or regulations or generally accepted accounting principles or the interpretation thereof, only to the extent that such changes do not have a disproportionate adverse effect on Kronos and our subsidiaries relative to the other participants in the industries or markets in which we operate;

·       any action taken that is required by the merger agreement (other than the consummation of the merger) or at the written request of Seahawk Acquisition;

·       any fees or expenses incurred in connection with the transactions contemplated by the merger agreement;

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·       any failure by us to meet any published estimates of revenues or earnings for any period ending on or after the date of the merger agreement and prior to the closing of the merger. Any change, effect, event, circumstance or development causing or contributing to such decline may be taken into account in determining whether a company material adverse effect has occurred;

·       a decline in the trading price of Kronos common stock on The NASDAQ Global Select Market. Any change, effect, event, circumstance or development causing or contributing to such decline may be taken into account in determining whether a company material adverse effect has occurred; and

·       any shareholder litigation to the extent arising from or relating to the merger based on allegations that either our entry into the merger agreement or the terms and conditions of the merger agreement constituted a breach of the fiduciary duties of our board of directors or that the disclosures in this proxy statement were inadequate.

In addition, a “company material adverse effect” means any material adverse change, effect, event, circumstance or development with respect to, or any material adverse effect on, the ability of us to consummate the transactions contemplated by the merger agreement.

The merger agreement also contains representations and warranties made by Seahawk Acquisition and Merger Sub to us, including representations and warranties regarding, among other things:

·       corporate matters, including their due organization, standing, power to conduct their business and qualification to do business;

·       the authorization, execution, delivery, performance and enforceability of the merger agreement;

·       the absence of conflicts with, or violations of, Seahawk Acquisition’s or Merger Sub’s organizational documents, certain contracts, applicable law or judgments, orders or decrees or other obligations as a result of the consummation of the transactions contemplated by the merger agreement;

·       required consents and approvals as a result of their execution, delivery and performance of the merger agreement;

·       the information provided by Seahawk Acquisition for inclusion in this proxy statement;

·       the purpose and operations of Merger Sub;

·       investigations and litigation or other proceedings against Seahawk Acquisition or Merger Sub;

·       the delivery and effectiveness of the debt commitment letter, equity commitment letter and the guarantees of Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P.;

·       contracts or arrangements between Seahawk Acquisition or Merger Sub, on the one hand, and our officers or directors, on the other hand, that would become effective upon consummation of the merger; and

·       ownership of our common stock.

Some of Seahawk Acquisition’s or Merger Sub’s representations and warranties are qualified by a material adverse effect standard. A “buyer material adverse effect” means any material adverse change, effect, event, circumstance or development with respect to, or any material adverse effect on, the ability of Seahawk Acquisition or Merger Sub to consummate the transactions contemplated by the merger agreement.

The representations and warranties contained in the merger agreement will not survive the completion of the merger.

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Covenants Relating to the Conduct of Our Business

From March 22, 2007 through the effective time of the merger or the earlier termination of the merger agreement, we have agreed that, except for specified exceptions, as expressly provided or permitted in the merger agreement or as consented to in writing by Seahawk Acquisition (which consent may not be unreasonably withheld, conditioned or delayed), we will, and will cause our subsidiaries to, act and carry on our business in the ordinary course of business consistent with past practice and use reasonable best efforts to maintain and preserve our and each of our subsidiaries’ business, including its organization, assets, properties, goodwill and insurance coverage, keep available the services of our and each of our subsidiary’s current officers, employees and consultants, and preserve our business relationships with customers, strategic partners, suppliers, distributors and others having business dealings with us.

We have also agreed that during the same period, subject to certain exceptions or as expressly provided or permitted in the merger agreement, we will not, and will not permit or cause any of our subsidiaries to, do any of the following without the prior written consent of Seahawk Acquisition:

·       declare, set aside, accrue or pay any dividend on, or make any other distribution in respect of, our capital stock or other equity interests, including restricted stock units, except for dividends or distributions by a wholly-owned subsidiary to its parent;

·       split, combine or reclassify any of our capital stock, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock or other securities;

·       purchase, redeem or otherwise acquire any shares of our capital stock or other securities, or any rights, warrants or options to acquire any such shares or other securities, except for the acquisition of shares of our common stock from former employees, directors and consultants in accordance with agreements providing for the repurchase of shares at their original issuance price in connection with a termination of services;

·       except as contemplated by the merger agreement, issue, deliver, sell, grant, pledge or otherwise dispose of or encumber any shares of our capital stock or other securities, other than the issuance of shares of our common stock pursuant to the exercise of options outstanding on March 22, 2007;

·       amend our or our subsidiaries’ articles of organization or bylaws or other organizational documents;

·       acquire by merging or consolidating with, or by purchasing all or a substantial portion of the assets or any stock of, any business, entity or any business organization or division;

·       acquire any assets that are material, in the aggregate, to us and our subsidiaries, taken as a whole;

·       sell, lease, license, abandon, pledge or otherwise dispose of or encumber any material properties or material assets of us or any of our subsidiaries, other than in the ordinary course of business;

·       sell, lease, license, assign, pledge, subject to a material lien or otherwise dispose of or encumber any of the intellectual property of Kronos or any of our subsidiaries, except pursuant to existing contracts as in effect on March 22, 2007, and licenses extended to customers or clients in the ordinary course of business and consistent with past practice;

·       adopt or implement any shareholder rights plan;

·       subject to limited exceptions, incur or assume indebtedness;

·       issue, sell or amend any debt securities, warrants or other rights to acquire debt securities of our company or any of our subsidiaries, guarantee any debt securities of another person, or enter into any agreement to maintain any financial statement condition of another person or enter into any arrangement having the same economic effect;

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·       subject to limited exceptions, make any loans, advances or capital contributions to, or investment in, any other person, other than our company or our wholly-owned subsidiaries;

·       other than in the ordinary course of business, enter into any hedging agreement or other financial agreement or arrangement designed to protect us or our subsidiaries against fluctuations in commodities prices or exchange rates;

·       make any material changes in accounting methods, principles or practices, except insofar as may have been required by a change in U.S. generally accepted accounting principles or, except as so required, change any assumption underlying, or method of calculating, any bad debt, contingency or other reserve;

·       other than as required to comply with applicable law or agreements, plans or arrangements existing on March 22, 2007:

o      adopt, enter into, terminate or amend in any material respect any employment, severance or similar agreement or material benefit plan for the benefit or welfare of any current or former director, officer, employee or consultant or any collective bargaining agreement;

o      increase the compensation or fringe benefits of, or pay any bonus to, our directors or officers;

o      increase the compensation or fringe benefits of any of our or our subsidiaries’ other employees, except for across the board yearly salary increases to employees or other changes, in each case made in the ordinary course of business consistent with past practice;

o      accelerate the payment, right to payment or vesting of any compensation or benefits, including any outstanding options or restricted stock awards, other than as contemplated by the merger agreement;

o      grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or benefit plan, including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock; or

o      take any action other than in the ordinary course of business consistent with past practice to fund or in any other way secure the payment of compensation or benefits under any material employee benefit plan;

·       make or rescind any material tax election, settle or compromise any material tax liability or materially amend any tax return;

·       initiate, compromise or settle any material litigation or arbitration proceeding, other than in connection with the enforcement of our rights under the merger agreement;

·       enter into any joint venture, partnership or any other similar arrangements;

·       cancel any material debts or waive any material claims or rights, including the cancellation, compromise, release or assignment of any indebtedness owed to, or claims held by, Kronos or any of our subsidiaries, except for cancellations made or waivers granted in the ordinary course of business consistent with past practice which, in the aggregate, are not material; or

·       authorize or agree to take any of the foregoing actions.

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No Solicitation

The merger agreement provides that, until the effective time of the merger or the earlier termination of the merger agreement, neither we nor any of our subsidiaries will, and we will not authorize or permit our directors, officers, employees, investment bankers, attorneys, accountants and other advisors and representatives to, directly or indirectly:

·       solicit, initiate, propose or knowingly encourage any inquiries or the making of any proposal or offer that constitutes, or that could reasonably be expected to lead to, any acquisition proposal; or

·       enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any non-public information for the purpose of encouraging or facilitating, any acquisition proposal.

However, prior to the approval of the merger agreement by our shareholders and in response to a superior proposal or a bona fide, unsolicited written acquisition proposal received by us after March 22, 2007 that our board of directors determines in good faith, after consultation with outside counsel and its financial advisor, is reasonably likely to lead to a superior proposal, we may furnish information to the person making such acquisition proposal and its representatives pursuant to a customary confidentiality agreement not materially less restrictive of the other party than our confidentiality agreement with Seahawk Acquisition, and participate in discussions or negotiations with such person and its representatives regarding any acquisition proposal. We may take these actions only:

·       to the extent failure to do so would be inconsistent with the fiduciary obligations of our board of directors under applicable law, as determined in good faith by our board of directors after consultation with outside counsel;

·       if we have provided Seahawk Acquisition with notice, as described below; and

·       if we have complied with the no solicitation provisions of the merger agreement.

We have further agreed that, until the effective time of the merger or the earlier termination of the merger agreement, our board of directors will not:

·       withhold, withdraw or modify, in a manner adverse to Seahawk Acquisition, its approval of the merger agreement or its recommendation with respect to the approval of the merger agreement by our shareholders;

·       cause or permit us to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or similar agreement providing for the consummation of a transaction contemplated by an acquisition proposal (other than a confidentiality agreement referred to above); or

·       approve or recommend any acquisition proposal.

However, prior to the approval of the merger agreement by our shareholders, our board of directors may:

·       withhold, withdraw or modify its recommendation that our shareholders approve the merger agreement, if our board of directors determines in good faith, after consultation with outside counsel, that failure to do so would be inconsistent with its fiduciary obligations under applicable law; or

·       approve or recommend any acquisition proposal if:

o       the acquisition proposal was not solicited in violation of the no solicitation provisions of the merger agreement; and

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o       our board of directors determines in good faith, after consultation with outside counsel, that the acquisition proposal constitutes a superior proposal and our board of directors determines in good faith, after consultation with outside counsel, that failure to do so would be inconsistent with its fiduciary obligations under applicable law.

We have agreed to immediately cease, and to direct our representatives to immediately cease, all discussions and negotiations that commenced prior to March 22, 2007 regarding any proposal that constitutes, or could reasonably be expected to lead to, an acquisition proposal. We have further agreed to use reasonable best efforts to cause the return or destruction of any confidential information about us that was furnished by or on behalf of us to third parties.

We have agreed to promptly (within 24 hours) advise Seahawk Acquisition of our receipt of any acquisition proposal or any request for nonpublic information in connection with any acquisition proposal, the material terms and conditions of any such acquisition proposal or request and the identity of the person making any such acquisition proposal or request, and will promptly (within 24 hours) advise Seahawk Acquisition of any material amendments to any such request, acquisition proposal or inquiry. At least 24 hours prior to furnishing information to or participating in discussions or negotiations with a person making a superior proposal or acquisition proposal in accordance with the no solicitation provisions of the merger agreement, we will notify Seahawk Acquisition orally and in writing that we propose to furnish information and/or enter into discussions or negotiations as provided in the merger agreement. At least five days, which we refer to as the five-day period, prior to our board of directors holding a meeting to consider, or the execution by our board of directors of any written action, withholding, withdrawing or modifying its recommendation that our shareholders vote to approve the merger agreement or approving or recommending an acquisition proposal, we will notify Seahawk Acquisition of the meeting or written action and that such action may be considered or taken. Our board of directors will (1) consider in good faith any revised proposal to acquire our common stock that Seahawk Acquisition may make during or prior to the expiration of the five-day period in any binding written proposal, prior to taking any of the actions referred to in preceding sentence and (2) provide Seahawk Acquisition with a new five-day period prior to holding a meeting to consider, or the execution of any written action with respect to, any new acquisition proposal or any material modification to any previous acquisition proposal.

Nothing in the merger agreement prohibits our board of directors from taking and disclosing a position to our shareholders with respect to a tender offer contemplated by Rule 14d-9 or 14e-2 under the Securities Exchange Act of 1934, as amended, or from making any required disclosure to our shareholders, so long as any disclosure in connection with the commencement of a tender offer or exchange offer with respect to our common stock, other than a recommendation against acceptance of such offer or a “stop-look-and-listen” communication to our shareholders which is limited to the statements described in Rule 14d-9(f) of the Securities Exchange Act of 1934, as amended, will be deemed to constitute an approval or recommendation of an acquisition proposal for purposes of certain provisions of the merger agreement regarding a change in our board of director’s recommendation and termination of the merger agreement by Seahawk Acquisition.

An acquisition proposal means any proposal or offer:

·       relating to a merger, reorganization, consolidation, sale of substantial assets, tender offer, exchange offer, recapitalization, liquidation, dissolution, joint venture, share exchange or other business combination involving us or any of our subsidiaries;

·       for the issuance by us of 20% or more of our equity securities; or

·       to acquire in any manner, directly or indirectly, 20% or more of the capital stock or assets of our company or any of our subsidiaries (on a consolidated basis),

in each case other than the transactions contemplated by the merger agreement.

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A superior proposal means any unsolicited, bona fide written proposal made by a third party to acquire, directly or indirectly, over 50% of our equity securities or assets, pursuant to a tender or exchange offer, a merger, a consolidation or a sale of our assets, that our board of directors determines in its good faith judgment to be:

·       on terms more favorable to our shareholders from a financial point of view than the transactions contemplated by the merger agreement, after consultation with our financial advisor and outside counsel, taking into account all the terms and conditions of the proposal and the merger agreement, including any proposal by Seahawk Acquisition to amend the terms of the merger agreement; and

·       reasonably likely to be completed on the terms proposed, taking into account all financial, regulatory, legal and other aspects of the proposal.

Shareholders Meeting

The merger agreement requires us to promptly and duly call, give notice of, convene and hold as promptly as reasonably practicable a meeting of our shareholders to approve the merger agreement. Subject to the provisions described above under “—No Solicitation,” our board of directors is required to recommend approval of the merger agreement by our shareholders and include such recommendation in this proxy statement and may not withhold, withdraw or modify, or publicly propose or resolve to withhold, withdraw or modify in a manner adverse to Seahawk Acquisition, its recommendation that our shareholders vote in favor of the approval of the merger agreement. Subject to the provisions described above under “—No Solicitation,” we are required to take all reasonable and lawful action to solicit from our shareholders proxies in favor of approval of the merger agreement and take all other action reasonably necessary or advisable to secure the vote or consent of our shareholders required by the rules of The NASDAQ Global Select Market or the MBCA to obtain such approvals.

We have also agreed that, after consultation with Seahawk Acquisition, we may adjourn or postpone the special meeting of our shareholders if as of the time of the meeting there are insufficient shares of our common stock represented to constitute a quorum necessary to conduct the business of the meeting.

Indemnification and Insurance

The merger agreement provides that from the effective time of the merger through the sixth anniversary of the date on which the effective time occurs, the surviving corporation will indemnify and hold harmless each person who is, or has been at any time prior to the effective time of the merger, a director or officer of our company or one of our subsidiaries against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was a director or officer of our company or one of our subsidiaries, to the fullest extent permitted under the MBCA for officers and directors of Massachusetts corporations.

In addition, the articles of organization and bylaws of the surviving corporation will contain, and Seahawk Acquisition will cause the articles of organization and bylaws of the surviving corporation to contain, provisions no less favorable with respect to indemnification, expense advancement and exculpation of present and former directors and officers of ours and our subsidiaries than are presently in our articles of organization and bylaws, which provisions will not be amended, modified or repealed for a period of six years from the effective time in a manner that would adversely affect the rights thereunder of individuals who, at or prior to the effective time, were officers or directors of our company.

Seahawk Acquisition has also agreed that the surviving corporation will maintain in effect, at no expense to the beneficiaries, for six years after the merger, insurance “tail” or other insurance policies

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maintained by us with respect to directors’, officers’ and fiduciaries’ liability insurance with respect to matters existing or occurring at or prior to the effective time of the merger in an amount and scope at least as favorable as the coverage applicable to directors and officers as of March 22, 2007 under our directors’ and officers’ liability insurance policy. If such “tail” or other policies are not available at a cost not greater than 200% of the annual premiums paid as of March 22, 2007 under such policy, which we refer to as the insurance cap, then the surviving corporation will be required to obtain as much coverage as is possible under substantially similar policies for such annual premiums as do not exceed the insurance cap.

Financing

Seahawk Acquisition agreed to use its reasonable best efforts to satisfy all terms, conditions, representations and warranties set forth in the equity and debt commitment letters and to enter into definitive agreements with respect to the financings contemplated by the equity and debt commitment letters as soon as practicable after the date of the merger agreement and prior to the closing.

Seahawk Acquisition has agreed to keep us informed with respect to all material activity concerning the status of the financings contemplated by the equity and debt commitment letters and give us prompt notice of any material adverse change with respect to such financings, including providing notice within two business days if (1) a commitment letter expires or is terminated, (2) any financing source that is a party to a commitment letter notifies Seahawk Acquisition that it no longer intends to provide financing to Seahawk Acquisition on the terms set forth in the commitment letter or (3) Seahawk Acquisition no longer believes in good faith that it will be able to obtain all or any portion of the financing contemplated by the equity and debt commitment letters on substantially the terms described in the equity and debt commitment letters.

Seahawk Acquisition has agreed that, without our prior written consent, it will not, and will not permit any of its affiliates to, take any action or enter into any transaction, including any merger, acquisition, joint venture, disposition, lease, contract or debt or equity financing, that would reasonably be expected to impair, delay or prevent Seahawk Acquisition from obtaining the financing contemplated by the commitment letters and will not amend or alter, or agree to amend or alter, the equity and debt commitment letters in any manner that would reasonably be expected to impair, delay or prevent the transactions contemplated by the merger agreement.

If any commitment letter is terminated or modified in a manner materially adverse to Seahawk Acquisition for any reason, Seahawk Acquisition will use its reasonable best efforts to obtain a new financing commitment that provides for at least the same amount of financing as such commitment letter as originally issued, provided that Seahawk Acquisition will be under no obligation to obtain or seek to obtain any financing on terms and conditions less favorable, in the aggregate, to Seahawk Acquisition or Merger Sub than those included in the debt commitment letter, as determined in the good faith reasonable discretion of Seahawk Acquisition.

Subject to certain limitations, we are obligated to cooperate, and to cause our subsidiaries and our and their representatives to cooperate, with Seahawk Acquisition and Merger Sub in connection with the arrangement of the financings contemplated by the debt commitment letter as reasonably requested by Seahawk Acquisition and Merger Sub, including by:

·       participating in meetings, drafting sessions, due diligence sessions, management presentation sessions, “road shows” and sessions with rating agencies;

·       furnishing Seahawk Acquisition, Merger Sub and their financing sources with financial and other pertinent information regarding Kronos as may be reasonably requested by Seahawk Acquisition to consummate the financings contemplated by the debt commitment letter;

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·       assisting Seahawk Acquisition in preparing materials for rating agency presentations, bank information memoranda, offering memoranda, private placement memoranda and similar documents;

·       providing and executing documents as may reasonably be requested by Seahawk Acquisition;

·       using commercially reasonable efforts to obtain surveys and title insurance as may be reasonably requested by Seahawk Acquisition; and

·       reasonably facilitating the pledge of collateral.

We have agreed to use reasonable best efforts to cause legal counsel to provide customary legal opinions and an independent auditor of Kronos to provide any unqualified opinions, consents or customary comfort letters with respect to our financial statements. We further agreed to allow Seahawk Acquisition’s representatives the opportunity to review and comment upon any such financial statements in draft form and to allow such representatives access to Kronos and supporting documentation with respect to the preparation of such financial statements and the independent auditors’ work papers relating to such financial statements.

Seahawk Acquisition has agreed to promptly, upon our request, reimburse us for all reasonable out-of-pocket costs we and our subsidiaries incur in connection with such cooperation in the event that the merger agreement is terminated prior to the effective time of the merger. Seahawk Acquisition and Merger Sub have agreed, jointly and severally, to indemnify and hold harmless us and our representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by us or our representatives in connection with the arrangement of the financings contemplated by the equity and debt commitment letters and any information used in connection with the equity and debt commitment letters (other than historical information relating to Kronos that we have provided for such use) in the event that the merger agreement is terminated prior to the effective time of the merger.

We have agreed that, not less than three business days prior to the closing date of the merger, we will deliver to Seahawk Acquisition payoff letters from third-party lenders or trustees, as applicable, in form and substance reasonably satisfactory to Seahawk Acquisition, with respect to all indebtedness of Kronos and our subsidiaries identified in the disclosure schedule to the merger agreement or entered into after March 22, 2007.

Agreement to Take Further Action and to Use Commercially Reasonable Efforts

Subject to the terms and conditions of the merger agreement, we and Seahawk Acquisition have agreed to use commercially reasonable efforts to take, or cause to be taken, all actions and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by the merger agreement as promptly as practicable. Among other things, each party has committed to use commercially reasonable efforts to make necessary filings and to obtain government clearances or approvals required under the Securities Exchange Act of 1934, as amended, the HSR Act and any other applicable law. We have also agreed to give, or cause our subsidiaries to give, any required notices to third parties and to use, or cause our subsidiaries to use, commercially reasonable efforts to obtain required third party consents. However, neither we nor Seahawk Acquisition is required to make any materially burdensome payments in connection with fulfilling such obligations.

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Additional Agreements

The merger agreement contains additional agreements between us and Seahawk Acquisition relating to, among other things:

·       our agreement to use commercially reasonable efforts to continue the listing of our common stock on The NASDAQ Global Select Market during the term of the merger agreement;

·       Seahawk Acquisition’s reasonable access, upon reasonable notice, during normal business hours and in a manner that does not unreasonably disrupt or interfere with our business operations, to information regarding us and our subsidiaries, and the confidentiality of such information;

·       delivery by us to Seahawk Acquisition of reports and other documents filed or received by us pursuant to the requirements of federal or state securities laws and other information about us, our business, properties, assets and personnel as Seahawk Acquisition may reasonably request;

·       public announcements with respect to the merger and the merger agreement;

·       notice of (1) the occurrence, or failure to occur, of any event, which is reasonably likely to cause any representation or warranty of either party contained in the merger agreement to be untrue or inaccurate in any material respect and (2) any material failure by us, Seahawk Acquisition or Merger Sub, or any of our respective officers, directors, employees or agents, to comply with or satisfy any covenant, condition or agreement required to be complied with under the merger agreement;

·       our agreement to take all steps as may be required to cause to be exempt under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, any dispositions of our common stock, including derivative securities with respect to our common stock, under such rule and result from the transactions contemplated by certain sections of the merger agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, with respect to our company;

·       benefits and employee compensation matters for the employees of the surviving corporation after the effective time of the merger;

·       the resignation of our directors; and

·       our agreement to use reasonable best efforts, at Seahawk Acquisition’s request, to liquidate marketable securities and to transfer such cash to us or into the exchange fund.

Conditions to the Merger

Each party’s obligations to effect the merger are subject to the satisfaction (or waiver, if permissible under applicable law) of the following conditions:

·       our shareholders must have approved the merger agreement;

·       the waiting period applicable to consummation of the merger under the HSR Act and applicable foreign antitrust or trade regulation laws must have expired or otherwise been terminated, except, in the case of foreign antitrust or trade regulation laws, where the consummation of the merger before the expiration or other termination of any applicable waiting period would not reasonably be expected to result in a company material adverse effect or a material adverse effect on our ability to consummate the merger;

·       other than the filing of the articles of merger, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any governmental entity in connection with the merger and the consummation of the other transactions contemplated by the

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merger agreement, the failure of which to file, obtain or occur is reasonably likely to have a material adverse effect on Kronos or a buyer material adverse effect, shall have been filed, been obtained or have occurred on terms and conditions which would not reasonably be likely to have a material adverse effect on Kronos or a buyer material adverse effect; and

·       no governmental entity shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (preliminary or permanent), statute, law, rule or regulation that is in effect and has the effect of making the merger illegal or otherwise prohibiting consummation of the merger or the other transactions contemplated by the merger agreement.

In addition, our obligation to effect the merger is subject to the satisfaction or waiver of the following conditions:

·       the representations and warranties of Seahawk Acquisition and Merger Sub in the merger agreement must be true and correct as of the closing date, except (1) to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties must be true and correct as of such date, and (2) where the failure to be true and correct (without regard to any materiality or buyer material adverse effect qualifications contained in the merger agreement), individually or in the aggregate, has not had and would not be reasonably likely to result in a buyer material adverse effect, and we must have received a certificate signed on behalf of Seahawk Acquisition by the chief executive officer or chief financial officer of Seahawk Acquisition to such effect;

·       Seahawk Acquisition and Merger Sub must have performed, in all material respects, all obligations required to be performed by them under the merger agreement and we must have received a certificate signed on behalf of Seahawk Acquisition by the chief executive officer or chief financial officer of Seahawk Acquisition to such effect;

·       since March 22, 2007, there shall not have occurred any change, effect, event or circumstance that, individually or in the aggregate, has had or is reasonably likely to result in a buyer material adverse effect; and

·       if a solvency opinion is delivered to the lenders pursuant to the terms of any of the commitment letters, we shall have received a copy of such opinion addressed to our board of directors.

In addition, the obligations of Seahawk Acquisition and Merger Sub to effect the merger are subject to the satisfaction or waiver of the following conditions:

·       our representations and warranties in the merger agreement, other than certain representations and warranties, which we refer to as the identified company representations, must be true and correct as of the closing date, except (1) to the extent such representations and warranties are specifically made as of a particular date, in which case such representations and warranties must be true and correct as of such date, and (2) where the failure to be true and correct (without regard to any materiality or company material adverse effect qualifications contained in the merger agreement), individually or in the aggregate, has not had and would not be reasonably likely to result in a company material adverse effect. The identified company representations must be true and correct in all material respects as of the closing date of the merger as though made on and as of the closing date, except to the extent the identified company representations are specifically made as of a particular date, in which case such representations must be true and correct as of such date. Seahawk Acquisition must have received a certificate signed on behalf of Kronos by our chief executive officer or chief financial officer to the effect of the preceding two sentences;

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·       we must have performed, in all material respects, all obligations required to be performed by us under the merger agreement and Seahawk Acquisition must have received a certificate signed on our behalf by our chief executive officer or our chief financial officer to such effect;

·       there shall not be instituted or pending any action or proceeding in which a governmental entity is:

o       challenging or seeking to restrain or prohibit the consummation of the merger or the other transactions contemplated by the merger agreement; or

o       seeking to prohibit or limit in any material respect Seahawk Acquisition’s ability to vote, transfer, receive dividends with respect to or otherwise exercise ownership rights with respect to the stock of the surviving corporation or any of its subsidiaries;

·       since March 22, 2007, there shall not have occurred any change, effect, event or circumstance that, individually or in the aggregate, has had or is reasonably likely to result in a company material adverse effect.

Termination of the Merger Agreement

We, Seahawk Acquisition and Merger Sub may agree in writing to terminate the merger agreement at any time prior to completing the merger.

Either we or Seahawk Acquisition can terminate the merger agreement if:

·       the merger has not been consummated by October 31, 2007, unless the terminating party’s failure to fulfill any obligation under the merger agreement was a principal cause of or resulted in the failure of the merger to occur by that date. We refer to any termination of the merger agreement on the basis described in this bullet as an outside date termination;

·       a governmental entity has issued a nonappealable final order or ruling or taken any other nonappealable final action that has the effect of permanently restraining or otherwise prohibiting the merger; or

·       our shareholders fail to approve the merger agreement at the special meeting or at any adjournment or postponement of the special meeting. We refer to any termination of the merger agreement on the basis described in this bullet as a special meeting termination.

Seahawk Acquisition can terminate the merger agreement if:

·       our board of directors fails to recommend in this proxy statement that our shareholders approve the merger agreement or withdraws or modifies in a manner adverse to Seahawk Acquisition its recommendation that our shareholders approve the merger agreement;

·       our board of directors approves or recommends to our shareholders an acquisition proposal or within ten business days after receipt of an acquisition proposal takes no position with respect to, or fails to recommend against acceptance of, such acquisition proposal;

·       a tender offer or exchange offer for outstanding shares of our common stock has been commenced and our board of directors recommends that our shareholders tender their shares in such tender or exchange offer or, within ten business days after the commencement of such tender or exchange offer, our board of directors fails to recommend against acceptance of such offer;

·       we breach or fail to perform any representation, warranty, covenant or agreement that results in the failure of a condition to Seahawk Acquisition’s obligation to effect the merger being satisfied and which is not cured within 20 days after receipt of written notice of such breach or failure to perform, so long as neither Seahawk Acquisition nor Merger Sub is in material breach of its representations,

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warranties or covenants. We refer to any termination of the merger agreement on the basis described in this bullet as a company material breach termination; or

·       we willfully and materially breach the no solicitation provisions contained in the merger agreement.

We can terminate the merger agreement if:

·       prior to the approval of the merger agreement by our shareholders, our board of directors, pursuant to and in compliance with the no solicitation provisions contained in the merger agreement, approves or recommends to our shareholders a superior proposal;

·       Seahawk Acquisition or Merger Sub breaches or fails to perform any representation, warranty, covenant or agreement (except in the circumstances described in the following bullet) that would result in the failure of a condition to our obligation to effect the merger being satisfied and which is not cured within 20 days after its receipt of written notice of such breach or failure to perform, so long as we are not in material breach of our representations, warranties or covenants. We refer to any termination of the merger agreement on the basis described in this bullet as a buyer material breach termination; or

·       (1) all conditions except for conditions to our obligation to effect the merger have been satisfied, (2) on the closing date of the merger, none of Seahawk Acquisition, Merger Sub or the surviving corporation has received the proceeds of the financings contemplated by the equity or debt commitment letters or any substitute financing for a similar amount and (3) Seahawk Acquisition fails to notify us in writing with supporting evidence reasonably satisfactory to us that it will still be able to deposit the requisite funds with the exchange agent on the closing date of the merger. We refer to any termination of the merger agreement on the basis described in this bullet as a financing termination.

Termination Fees

The merger agreement obligates us to pay a termination fee to Seahawk Acquisition of $55.0 million (approximately 3% of our equity value), if any of the following occurs in connection with the termination of the merger agreement:

·       the merger agreement is terminated by Seahawk Acquisition because:

o       our board of directors fails to recommend in this proxy statement that our shareholders approve the merger agreement, or withdraws or modifies in a manner adverse to Seahawk Acquisition its recommendation that our shareholders approve the merger agreement;

o       our board of directors approves or recommends to our shareholders an acquisition proposal or within ten business days after receipt of an acquisition proposal takes no position with respect to, or fails to recommend against acceptance of, such acquisition proposal;

o       a tender offer or exchange offer for outstanding shares of our common stock has been commenced and our board of directors recommends that our shareholders tender their shares in such tender or exchange offer or, within ten business days after commencement of a tender offer or exchange offer, fails to recommend against acceptance of the offer;

·       the merger agreement is terminated by us prior to the approval of the merger agreement by our shareholders because our board of directors, pursuant to and in compliance with the no solicitation provisions contained in the merger agreement, approves or recommends to our shareholders a superior proposal;

·       the merger agreement is terminated by Seahawk Acquisition because we willfully and materially breach the no solicitation provisions of the merger agreement; or

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·       if (1) prior to the termination date, a bona fide acquisition proposal is publicly announced or is otherwise communicated, made or proposed in writing to our board of directors, and (2) within 12 months after the termination date, we enter into a definitive agreement with respect to, or we close, an acquisition proposal, provided that for this purpose the reference in the definition of acquisition proposal to 20% will be replaced by 50%, and:

o       an outside date termination shall have occurred;

o       a special meeting termination shall have occurred; or

o       a company material breach termination shall have occurred.

We have also agreed to pay to Seahawk Acquisition or its designee up to $5.0 million as reimbursement for expenses of Seahawk Acquisition actually incurred relating to the transactions contemplated by the merger agreement prior to termination, including, but not limited to, reasonable fees and expenses of Seahawk Acquisition’s counsel, accountants and financial advisors, but excluding any discretionary fees paid to such financial advisors, in the event of termination of the merger agreement:

·       by us or Seahawk Acquisition, pursuant to an outside date termination if the failure to satisfy certain conditions to Seahawk Acquisition’s obligation to effect the merger by October 31, 2007 results in the closing of the merger not occurring;

·       by us or Seahawk Acquisition pursuant to a special meeting termination; or

·       by Seahawk Acquisition pursuant to a company material breach termination.

Seahawk Acquisition will be required to pay us a termination fee of $55.0 million (approximately 3% of our equity value) in the event of a financing termination, provided that, at the time of such termination, all of the conditions to Seahawk Acquisition’s obligation to effect the merger have been satisfied. If Seahawk Acquisition’s termination fee is paid, and Seahawk Acquisition and Merger Sub are not in willful breach of the merger agreement, other than any breach arising from the failure by Seahawk Acquisition to obtain the debt financing, then our termination of the merger agreement and receipt of Seahawk Acquisition’s termination fee will be the sole and exclusive remedy against Seahawk Acquisition, Merger Sub, Hellman & Friedman Capital Partners VI, L.P. and JMI Equity Fund V, L.P. and any of their respective representatives, affiliates, directors, officers, employees, partners, managers, members, or stockholders, each of which we refer to as a buyer party, for any loss or damage suffered as a result of the breach of the merger agreement or any representation, warranty, covenant or agreement contained therein by Seahawk Acquisition or Merger Sub or the failure of the merger to be consummated or otherwise in connection with the merger agreement or the transactions contemplated thereby, which we refer to collectively as the company damages.  The maximum aggregate liability of all the buyer parties for all company damages is limited to $137.0 million (approximately 7.5% of our equity value). For all purposes of determining whether the aggregate amount of company damages paid by the buyer parties has reached $137.0 million, the amount paid in respect of the Seahawk Acquisition’s termination fee or termination expenses paid will be included in such computation as company damages paid.

Seahawk Acquisition also agreed to pay to us up to $5.0 million as reimbursement for our expenses actually incurred relating to the transactions contemplated by the merger agreement prior to termination, including, but not limited to, reasonable fees and expenses of our counsel, accountants and financial advisors, but excluding any discretionary fees paid to such financial advisors, in the event of termination of the merger agreement:

·       by us or Seahawk Acquisition pursuant to an outside date termination if the failure to satisfy certain conditions to our obligation to effect the merger by October 31, 2007 results in the closing of the merger not occurring; or

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·       by us pursuant to a buyer material breach termination.

Amendment and Waiver

We, Seahawk Acquisition and Merger Sub may amend the merger agreement at any time before or after approval of the merger agreement by our shareholders. However, after we have obtained shareholder approval, the parties may not amend the merger agreement in a manner that by law requires further approval by our shareholders without obtaining such further approval. The merger agreement also provides that, at any time prior to the effective time of the merger, we, Seahawk Acquisition and Merger Sub may, to the extent permitted by law, extend the time for the performance of any obligations or other acts of the other parties, waive any inaccuracies in the representations and warranties in the merger agreement or any document delivered pursuant to the merger agreement, and waive compliance with any of the agreements or conditions contained in the merger agreement.

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APPRAISAL RIGHTS

The MBCA generally provides that shareholders of a Massachusetts corporation are entitled to appraisal rights in the event of a merger. However, under Section 13.02 of the MBCA, appraisal rights are not available in respect of an all-cash merger unless a director, officer, or controlling shareholder has a direct or indirect material financial interest in the merger other than in his capacity as:

·       a shareholder;

·       a director, officer, employee or consultant if his financial interest is pursuant to bona fide arrangements; or

·       in any other capacity so long as the shareholder owns not more than 5% of the voting shares of all classes and series of the corporation in the aggregate.

We are not aware of any material financial interest of a type that would cause appraisal rights to be available in connection with the merger. For this reason, we reserve the right to challenge any purported exercise of appraisal rights in respect of the merger. As of the date of this proxy statement, neither we nor Seahawk Acquisition have entered into any employment agreements with our management in connection with the merger, nor have we amended or modified any existing employment agreements. Seahawk Acquisition has informed us that it currently intends to retain members of our management team following the merger. Seahawk Acquisition has informed us that it may offer Mr. Ain and a limited number of other members of management the opportunity to convert a portion of their current equity interests in Kronos into, or otherwise invest in, equity in the surviving corporation, and that it also intends to set up equity-based incentive compensation plans for management of the surviving corporation. As of the date of this proxy statement, neither Mr. Ain nor any other member of our management has entered into any agreement, arrangement or understanding with Seahawk Acquisition, Merger Sub or any of their affiliates (including Hellman & Friedman LLC and JMI Equity) regarding the right to purchase or participate in the equity of the surviving corporation. Although we believe certain members of our management team are likely to enter into new arrangements with Seahawk Acquisition, Merger Sub or their affiliates regarding the right to purchase or participate in the equity of the surviving corporation, these matters are subject to further negotiations and discussion and no terms or conditions have been finalized. The new arrangements are currently expected to be entered into at or prior to the completion of the merger.

We do not believe that holders of our common stock are entitled to appraisal rights in connection with the merger. However, Section 13.02 of the MBCA has not yet been the subject of judicial interpretation and, accordingly, depending on the nature of any such judicial interpretation, Kronos shareholders may be entitled to appraisal rights under Massachusetts law. If you believe you are entitled to appraisal rights under Massachusetts law, in order to exercise these rights you must:  (i) deliver to us, before the vote to approve the merger agreement is taken, written notice of your intent to demand payment for your shares in an amount to be determined pursuant to the statutory appraisal procedure; (ii) not vote your shares in favor of the proposal to approve the merger agreement; and (iii) comply with the other procedures specified in Part 13 of the MBCA. Because a submitted proxy not marked “against” or “abstain” will be voted FOR the approval of the merger agreement and FOR the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies, the submission of a proxy card not marked “against” or “abstain” will result in the waiver of appraisal rights, to the extent such rights are available. If you hold shares in the name of a broker or other nominee and you want to attempt to assert appraisal rights, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal (to the extent such right otherwise would be available).

Any shareholder who believes he, she or it is entitled to appraisal rights and who wishes to preserve those rights should carefully review Sections 13.01 through 13.31 of Part 13 of the MBCA, attached as

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Annex C to this proxy statement, which sets forth the procedures to be complied with in perfecting any such rights. Failure to strictly comply with the procedures specified in Part 13 of the MBCA would result in the loss of any appraisal rights to which such shareholder may be entitled.

The remainder of this section entitled “Appraisal Rights” is for informational purposes in the event our shareholders are entitled to appraisal rights under the MBCA.

Appraisal rights may offer shareholders the ability to demand payment for their shares of Kronos common stock in the event they are dissatisfied with the consideration that they are to receive in connection with the merger. Shareholders who perfect any appraisal rights that they may have and follow certain procedures in the manner prescribed by the MBCA may be entitled to have their shares converted into the right to receive from Kronos such cash consideration as may be determined to be due pursuant to Part 13 of the MBCA.

Shareholders who approve the merger agreement will not be entitled to any appraisal rights.

Only a holder of record of shares of Kronos common stock may exercise appraisal rights, and if a holder exercises appraisal rights, he, she or it must exercise such rights with respect to all classes of shares. The following discussion is not a complete statement of the law pertaining to appraisal rights under the MBCA and is qualified in its entirety by the full text of Part 13 of the MBCA, which is attached to this proxy statement as Annex C. Please read Part 13 carefully, because exercising appraisal rights involves several procedural steps, and failure to follow appraisal procedures could result in the loss of such rights. Shareholders should consult with their advisors, including legal counsel, in connection with any demand for appraisal.

Under the MBCA, shareholders who perfect their rights to appraisal, if any, in accordance with Part 13 and do not thereafter withdraw their demands for appraisal or otherwise lose their appraisal rights, in each case in accordance with the MBCA, will be entitled to appraisal rights and to obtain payment of the fair value of their shares of Kronos common stock, together with a fair rate of interest. Shareholders should be aware that the fair value of their shares of Kronos common stock as determined by Part 13 could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares. Shareholders who wish to exercise appraisal rights, if any, or to preserve their right to do so, should review the following discussion and Part 13 carefully. Shareholders who fail to timely and properly comply with the procedures specified could lose their appraisal rights.

Notice of Shareholder Intent to Exercise Appraisal Rights

As an initial step, a shareholder who intends to demand appraisal rights must:

·       deliver to Kronos, before the vote to approve the merger agreement is taken (approximately 9:00 a.m. on Friday, June 8, 2007), written notice of such shareholder’s intent to demand payment for his, her or its Kronos shares if the merger is effectuated; and

·       not vote, or cause or permit to be voted, any of his, her or its shares of Kronos common stock in favor of the merger agreement.

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A shareholder intending to demand appraisal rights must deliver a written notice (including fax or e-mail) to Kronos’ principal offices at the address noted below, either by mail, by hand, messenger or delivery service or by electronic transmission (including fax and e-mail):

Kronos Incorporated
297 Billerica Road
Chelmsford, Massachusetts 01824
Facsimile:  (978) 367-5900
E-mail:  invest@kronos.com

If Kronos does not receive a shareholder’s written intent to demand appraisal prior to the vote at the special meeting of shareholders, or if such shareholder votes, or causes to be voted, his, her or its shares of Kronos common stock in favor of the merger agreement, such shareholder will not be entitled to payment for his, her or its shares under the appraisal provisions of the MBCA.

Notification of Appraisal Rights Following Merger; Shareholder Certification

If the proposed merger becomes effective, Part 13 requires Kronos to deliver a written appraisal notice to all shareholders who satisfied the requirements described above. The appraisal notice must be sent by Kronos no earlier than the date the merger became effective and no later than 10 days after such date. The appraisal notice must contain a form to be completed by the shareholder, which we refer to as the shareholder certification, in which the shareholder certifies (1) whether or not beneficial ownership of those shares for which appraisal rights are asserted was acquired before the date of the first announcement to shareholders of the principal terms of the merger (i.e., March 23, 2007), which we refer to as the merger announcement date, and (2) that the shareholder did not vote for the merger agreement. If the shareholder does not return the completed form within the specified time period, he, she or it will be deemed to have accepted payment in full satisfaction of our company’s obligations under Section 13.24(b)(3) of the MBCA. The appraisal notice must also include a copy of Part 13 and must state certain information, including the following:

·       a date, which we refer to as the shareholder certification due date, by which Kronos must receive the shareholder certification, which may not be fewer than 40 or more than 60 days after the date the appraisal notice and shareholder certification are sent, and that the shareholder waives the right to demand appraisal with respect to the shares unless Kronos receives the shareholder certification by the shareholder certification due date;

·       where the shareholder certification must be sent and where certificates for certificated shares must be deposited and the date by which the certificates must be deposited, which date may not be earlier than the shareholder certification due date;

·       Kronos’ estimate of the fair value of the shares;

·       notification that, if requested by the shareholder in writing, Kronos will provide, within 10 days after the shareholder certification due date, the number of shareholders who return shareholder certifications by such date and the total number of shares owned by them; and

·       the date by which the notice to withdraw appraisal rights (discussed below) must be received, which must be within 20 days after the shareholder certification due date, which we refer to as the withdrawal deadline.

A shareholder who wishes to exercise appraisal rights must certify on the shareholder certification whether the beneficial owner of the shares acquired beneficial ownership before the merger announcement date. If a shareholder fails to make this certification, Kronos may elect to treat the

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shareholder’s shares as after-acquired shares (discussed below and defined herein). In addition, a shareholder who wishes to exercise appraisal rights must execute and return the shareholder certification and, in the case of certified shares, deposit the certificates in accordance with the terms of the appraisal notice. Once a shareholder deposits his, her or its certificates or, in the case of uncertificated shares, returns the executed shareholder certifications, the shareholder loses all rights as a shareholder unless it withdraws from the appraisal process by notifying Kronos in writing by the withdrawal deadline. A shareholder who does not withdraw from the appraisal process in this manner may not later withdraw without Kronos’ written consent. A shareholder who does not execute and return the shareholder certification and deposit the share certificates by the applicable dates set forth in the appraisal notice is not entitled to payment under Part 13.

Assertion of Rights by Nominees and Beneficial Owners

A record shareholder may assert appraisal rights as to fewer than all the shares registered in his, her or its name but owned by a beneficial shareholder only if the record shareholder objects with respect to all shares of the class or series owned by the beneficial shareholder and notifies Kronos in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted. The rights of a record shareholder who asserts appraisal rights for only part of the shares held of record in the record shareholder’s name shall be determined as if the shares as to which the record shareholder objects and the record shareholder’s other shares were registered in the names of different record shareholders. A beneficial shareholder may assert appraisal rights as to shares of any class or series held on behalf of the shareholder only if the shareholder submits to Kronos the record shareholder’s written consent to the assertion of such rights with respect to all shares of the class or series that are beneficially owned by the beneficial shareholder no later than the shareholder certification due date.

Payment for Shares Acquired Before Merger Announcement Date

Except with respect to after-acquired shares, within 30 days after the shareholder certification due date, Kronos must pay in cash to those shareholders who complied with the procedural requirements the amount Kronos estimates to be the fair value of their shares, plus interest. The fair value of the shares is the value of the shares immediately before the effective date of the merger, excluding any element of value arising from the expectation or accomplishment of the merger, unless exclusion would be inequitable. Interest accrues from the effective date of the merger until the date of payment, at the average rate currently paid by Kronos on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.

The foregoing payment to each shareholder must be accompanied by (1) recent financial statements of Kronos, (2) a statement of Kronos’ estimate of the fair value of the shares, which estimate must equal or exceed Kronos’ estimate given in the appraisal notice, and (3) a statement that shareholders who complied with the procedural requirements have the right to demand further payment. A shareholder who has been paid and is dissatisfied with the amount of the payment must notify Kronos in writing of his, her or its estimate of the fair value of the shares and demand payment of that estimate plus interest, less the payment already made. A shareholder who fails to notify Kronos in writing of his, her or its demand to be paid such shareholder’s stated estimate of the fair value plus interest within 30 days after receiving Kronos’ payment waives the right to demand payment and will be entitled only to the payment made by Kronos based on Kronos’ estimate of the fair value of the shares.

Offer to Pay for After-Acquired Shares

Kronos may withhold payment from any shareholder who did not certify that beneficial ownership of all of such shareholder’s shares for which appraisal rights are asserted was acquired before the merger announcement date, which we refer to as the after-acquired shares. If Kronos elects to withhold payment,

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within 30 days after the shareholder certification due date, it must provide such shareholders notice of certain information, including its estimate of fair value and their right to accept its estimate of fair value, plus interest, in full satisfaction of their demands. Those shareholders who wish to accept the offer must notify Kronos of their acceptance within 30 days after receiving the offer. Within 10 days after receiving a shareholder’s acceptance, Kronos must pay in cash the amount it offered in full satisfaction of the accepting shareholder’s demand. A shareholder offered payment who is dissatisfied with that offer must reject the offer and demand payment of his, her or its stated estimate of the fair value of the shares plus interest. A shareholder who fails to notify Kronos in writing of his, her or its demand to be paid his, her or its stated estimate of the fair value plus interest within 30 days after receiving Kronos’ offer of payment waives the right to demand payment and will be entitled only to the payment offered by Kronos based on Kronos’ estimate of the fair value of the shares. Those shareholders who do not reject Kronos’ offer in a timely manner will be deemed to have accepted Kronos’ offer, and Kronos must pay to them in cash the amount it offered to pay within 40 days after sending the payment offer.

Procedures if Shareholder is Dissatisfied with Payment or Offer

If a shareholder makes a demand for payment which remains unsettled, Kronos must commence an equitable proceeding in Middlesex Superior Court, Commonwealth of Massachusetts within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If Kronos does not commence the proceeding within the 60-day period, it must pay in cash to each shareholder the amount the shareholder demanded plus interest. Kronos must make all shareholders whose demands remain unsettled parties to the proceeding as an action against their shares, and all parties must be served with a copy of the petition. Each shareholder made a party to the proceeding is entitled to judgment (1) for the amount, if any, by which the court finds the fair value of the shareholder’s shares, plus interest, exceeds the amount paid by Kronos to the shareholder for such shares or (2) for the fair value, plus interest, of the shareholder’s shares for which Kronos elected to withhold payment.

The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it, and the shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings.

Court Costs and Counsel Fees

The court in an appraisal proceeding must determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court must assess any costs against Kronos, except that the court may assess cost against all or some of the shareholders demanding appraisal, in amounts the court finds equitable, to the extent the court finds such shareholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by Part 13.

The court in an appraisal proceeding may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:

·       against Kronos and in favor of any or all shareholders demanding appraisal if the court finds Kronos did not substantially comply with its requirements under Part 13; or

·       against either Kronos or a shareholder demanding appraisal, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by Part 13.

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If the court in an appraisal proceeding finds that the services of counsel for any shareholder were of substantial benefit to other shareholders similarly situated, and that the fees for those services should not be assessed against Kronos, the court may award to such counsel reasonable fees to be paid out of the amounts awarded the shareholders who were benefited. To the extent Kronos fails to make a required payment pursuant to Part 13, the shareholder may sue directly for the amount owed and, to the extent successful, shall be entitled to recover from Kronos all costs and expenses of the suit, including counsel fees.

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MARKET PRICE AND DIVIDEND DATA

Our common stock is traded on The NASDAQ Global Select Market under the symbol “KRON.”  The table below shows, for the periods indicated, the high and low sale prices for shares of our common stock as reported by The NASDAQ Global Select Market.

The following table sets forth the closing sales prices per share of our common stock, as reported on The NASDAQ Global Select Market on March 22, 2007, the last full trading day before the public announcement of the proposed merger, and on April 30, 2007, the latest practicable date before the printing of this proxy statement:

If the merger is consummated, each share of our common stock will be converted into the right to receive $55.00 in cash, without interest, and our common stock will be removed from listing on The NASDAQ Global Select Market and there will be no further public market for shares of our common stock.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table contains information as of February 28, 2007 about the beneficial ownership of shares of our common stock by:

·       each person who we know to own beneficially more than 5% of the outstanding shares of our common stock;

·       our directors;

·       Mark S. Ain, who served as our chief executive officer during part of the fiscal year ended September 30, 2006;

·       Aron J. Ain, who served as our chief executive officer during part of the fiscal year ended September 30, 2006;

·       Paul A. Lacy, who became our principal executive officer on May 1, 2006 and who served as our chief financial officer during part of the fiscal year ended September 30, 2006;

·       Mark V. Julien, who became our chief financial officer on May 1, 2006;

·       our three other most highly compensated executive officers who were serving as executive officers on September 30, 2006; and

·       all of our directors and executive officers as a group.