<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SUNQUEST INFORMATION SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[LOGO of SUNQUEST INFORMATION SYSTEMS]
Dear Fellow Shareholder:
I am pleased to invite you to attend the 1997 annual meeting of the
shareholders of Sunquest Information Systems, Inc. which will be held at the
Hilton East Hotel, 7600 East Broadway Blvd., Tucson, Arizona, on Wednesday, May
14, 1997, at 9:00 A.M., local time. The formal Notice of Annual Meeting, the
Proxy Statement and a form of proxy accompany this letter. A copy of the
Company's annual report for 1996 also accompanies this letter.
This is the first annual meeting of the shareholders since the Company
completed its initial public offering of Common Stock in June of 1996. The
annual meeting is open to all shareholders or their authorized representatives.
We hope that you will be present.
At the meeting, we will report on the operations, progress and plans of the
Company and give you an opportunity to ask questions. Your Board of Directors
and the executive officers of the Company look forward to personally greeting
those shareholders who are able to attend.
It is important that your shares are represented at this meeting, whether or
not you attend the meeting in person, and regardless of the number of shares
you own. To be sure your shares are represented, we urge you to complete and
mail the enclosed proxy card as soon as possible.
I hope to see you on May 14th.
/s/ Sidney A. Goldblatt
Sidney A. Goldblatt
Chairman, President and
Chief Executive Officer
Tucson, Arizona
March 28, 1997
<PAGE>
SUNQUEST INFORMATION SYSTEMS, INC.
4801 EAST BROADWAY BOULEVARD
TUCSON, ARIZONA 85711
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD MAY 14, 1997
To: The Shareholders of Sunquest
Notice is hereby given that the annual meeting of the
shareholders of Sunquest Information Systems, Inc. will be held
at the Hilton East Hotel, 7600 East Broadway Blvd., Tucson,
Arizona, on Wednesday, May 14, 1997, at 9:00 A.M., local time,
for the purpose of:
(a) Electing a board of five directors.
(b) Approving the appointment of independent auditors for the
year 1997.
(c) Transacting such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March
21, 1997 as the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting.
The Company's annual report to shareholders for the fiscal year
ended December 31, 1996, a form of proxy and a return envelope
are enclosed.
PLEASE SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. YOUR PROMPT COMPLIANCE WITH THIS REQUEST WILL BE
APPRECIATED AND WILL ASSIST IN OBTAINING A QUORUM. YOUR PROXY MAY
BE WITHDRAWN AT ANY TIME PRIOR TO ITS EXERCISE BY GIVING NOTICE
TO THE UNDERSIGNED.
Nina M. Dmetruk
Secretary
March 28, 1997
<PAGE>
PROXY STATEMENT
SUNQUEST INFORMATION SYSTEMS, INC.
4801 EAST BROADWAY BOULEVARD
TUCSON, ARIZONA 85711
March 28, 1997
This statement is furnished in connection with the solicitation of proxies
to be used at the annual meeting of shareholders of Sunquest Information
Systems, Inc. (the "Company"), to be held May 14, 1997 at the place and time
and for the purposes set forth in the foregoing Notice of Annual Meeting, and
at any adjournment thereof. This Proxy Statement and the enclosed form of
proxy and annual report for 1996 were mailed to shareholders on or about March
28, 1997.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
Notice of Annual Meeting, Proxy Statement and form of proxy is to be borne by
the Company. In addition to the solicitation of proxies by use of the mails,
directors, officers or other employees of the Company may solicit proxies
personally or by telephone or telegraph, and the Company may request certain
persons holding stock in their names or in the names of their nominees to
obtain proxies from and send proxy material to the principals and will
reimburse such persons for their expenses in so doing.
The accompanying proxy may be revoked by the shareholder at any time prior
to its use by giving notice of such revocation either personally or in writing
to Nina M. Dmetruk, Secretary of the Company, c/o Sunquest Information
Systems, Inc., 1407 Eisenhower Boulevard, Suite 200, Johnstown, Pennsylvania
15904. Unless the proxy shall have been properly revoked, the shares
represented by proxies in the enclosed form will be voted. Each such proxy
will be voted as directed, but if no direction is indicated, it will be voted
FOR the election of the Board of Directors' nominees named herein and FOR
approval of the appointment of independent auditors for the year 1997.
Only holders of record of the Company's Common Stock at the close of
business on March 21, 1997 (the "Record Date") will be entitled to vote at the
meeting. Such holders will be entitled to one vote per share on all matters
presented at the meeting. There is no cumulative voting in the election of
directors. As of the Record Date there were 15,362,587 shares of Common Stock
outstanding.
A quorum for the transaction of business at the annual meeting will require
the presence, in person or by proxy, of shareholders entitled to cast at least
a majority of the total number of votes entitled to be cast on a particular
matter to be acted upon at the meeting. Directors will be elected at the
meeting by a majority of the votes cast. Abstentions and broker non-votes are
counted as shares present for determination of a quorum but are not counted as
affirmative or negative votes and are not counted in determining the number of
votes cast on any matter.
1
<PAGE>
ELECTION OF DIRECTORS
A purpose of the meeting is the election of a board of five directors to
serve for a term of one year and until their respective successors are elected
and qualified. Information concerning the persons nominated by the Board of
Directors, each of whom is currently a director of the Company, is set forth
below.
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<C> <C> <S> <C>
Sidney A. Goldblatt 62 President and Chief Executive Officer of 1979
the Company
Nina M. Dmetruk 44 Executive Vice President-Chief Financial 1991
Officer and Secretary of the Company
Bradley L. Goldblatt 33 Treasurer of the Company 1992
Stanley J. Lehman 43 Shareholder in the law firm of Klett 1989
Lieber Rooney & Schorling, a Professional
Corporation
Richard W. Barker 48 Senior Vice President of Chiron 1996
Corporation and President and Chief
Executive of Chiron Diagnostics
</TABLE>
Sidney A. Goldblatt, M.D., a co-founder of the Company, has been President
of the Company since 1986, Chief Executive Officer since December 1994 and a
director of the Company since its formation in 1979. Dr. Goldblatt also served
as Chief Operating Officer of the Company from December 1992 to August 1994.
Dr. Goldblatt has served as President and sole shareholder of S. Goldblatt
Pathology Associates, P.C. since 1971.
Nina M. Dmetruk has been Executive Vice President-Chief Financial Officer of
the Company since September 1991 and a director of the Company since December
1991. She has served as Secretary of the Company since August 1996. Effective
May 26, 1996, Ms. Dmetruk entered into an employment agreement with the
Company under which she agreed to serve as the Executive Vice President-Chief
Financial Officer of the Company on a full-time basis. See "Compensation of
Executive Officers -- Employment Agreements." During her earlier service as
Executive Vice President-Chief Financial Officer, Ms. Dmetruk was not an
employee of the Company and devoted approximately 60% to 80% of her time to
the Company's business. Ms. Dmetruk is a CPA and a CFP and until May 1996 was
the sole owner of a public accounting firm for more than five years.
Bradley L. Goldblatt has been Treasurer and a director of the Company since
December 1992. From June 1991 to February 1993, he was a Research Laboratory
Technician at the Eye and Ear Institute of Pittsburgh. Bradley Goldblatt is
the son of Dr. Goldblatt.
2
<PAGE>
Stanley J. Lehman has been a director of the Company since October 1989 and
served as Secretary of the Company from October 1989 to August 1996. He has
been a shareholder in the law firm of Klett Lieber Rooney & Schorling, a
professional corporation that serves as general counsel to the Company, for
more than five years.
Richard W. Barker, Ph.D., was elected to the Board of Directors of the
Company by the members of the board in August 1996. Dr. Barker has been Senior
Vice President of Chiron Corporation, a biotechnology company, and President
and Chief Executive of Chiron Diagnostics, the diagnostic products division of
Chiron Corporation, since June 1996. He was employed by IBM Corporation as
General Manager, Worldwide Healthcare Solutions from June 1995 to June 1996
and as General Manager, North American Healthcare Solutions from April 1994 to
June 1995. Prior to that date, Dr. Barker was with McKinsey & Company as
Partner and Leader, European Healthcare Practice.
REQUIRED VOTE
The election of directors requires a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
BOARD MEETINGS
The Board of Directors held six meetings during the year 1996. Each meeting
was attended by all of the directors then in office. The board also took
action by unanimous written consent on a number of occasions during the year.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Company has no nominating committee. The Compensation Committee, which was
established in November 1996 and which currently comprises all members of the
board, is responsible for determining the compensation of the executive
officers of the Company and for administering the Company's Stock Incentive
Plan of 1996 and Employee Stock Purchase Plan. The Compensation Committee is
also responsible for such related matters as may be delegated to it by the
board. The Compensation Committee held two meetings during the year 1996.
Prior to November 1996, the Stock Incentive Plan of 1996 was administered by
the Stock Option Committee composed of Dr. Sidney A. Goldblatt and Bradley L.
Goldblatt. The Stock Option Committee held one meeting during the year 1996.
Nina M. Dmetruk, Stanley J. Lehman and Dr. Richard W. Barker serve as the
Audit Committee of the board. The Audit Committee discusses with the Company's
independent auditors and approves in advance the scope of the annual audit,
reviews with the independent auditors the annual financial statements and the
audit report, consults with the Company's internal compliance staff, reviews
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<PAGE>
management's administration of the internal accounting controls and reviews
the Company's procedures relating to business ethics and compliance with the
securities laws and Nasdaq requirements. The Audit Committee also recommends
to the board the appointment of the independent auditors. During the year
1996, the Audit Committee held one meeting.
DIRECTOR COMPENSATION
Non-employee directors of the Company are reimbursed, upon request, for
expenses incurred in attending meetings of the Board of Directors, but there
are no standard arrangements for compensating them for their service as
directors. Dr. Barker has been granted an option for 15,000 shares of Common
Stock under the Company's Stock Incentive Plan of 1996 and Mr. Lehman's law
firm receives fees at his regular professional hourly rate for time devoted to
board meetings. Dr. Barker is also to be granted an option for 3,000 shares of
Common Stock on each occasion that he is reelected as a director. Until she
became an employee of the Company in May 1996, Ms. Dmetruk was also
compensated at her regular hourly professional rate for time devoted to board
meetings. Directors who are employees of the Company are not paid any separate
fees for serving as directors.
CERTAIN TRANSACTIONS
Ms. Dmetruk, Bradley L. Goldblatt and Jodi Beth Gottlieb are directors and
executive officers of Any Travel, Inc., a travel agency located in Tucson,
Arizona ("Any Travel"), and LabFUSION, Inc., which was a provider of health
care information systems to small hospitals, clinics and other facilities
("LabFUSION"). The outstanding shares of Any Travel and LabFUSION are held
one-third by Bradley L. Goldblatt, Dr. Goldblatt and Ms. Dmetruk as trustees
for the benefit of Bradley L. Goldblatt (the "BLG Trust"); one-third by
Bradley L. Goldblatt, Dr. Goldblatt and Ms. Dmetruk as trustees for the
benefit of Curtis S. Goldblatt (the "CSG Trust"); and one-third by Jodi Beth
Gottlieb, Dr. Goldblatt and Ms. Dmetruk as trustees for the benefit of Jodi
Beth Gottlieb (the "JBG Trust"). The BLG Trust, the CSG Trust and the JBG
Trust are collectively referred to herein as the "Trusts." Dr. Goldblatt is
the father of Bradley L. Goldblatt, Curtis S. Goldblatt and Jodi Beth
Gottlieb. Dr. Goldblatt, Ms. Dmetruk and Bradley L. Goldblatt are directors of
Sunquest Europa Limited ("Sunquest Europa"), a United Kingdom corporation
through which the Company markets its products in the United Kingdom and
Europe, and managing directors of Sunquest Germany GmbH ("Sunquest Germany"),
a German corporation formed to market the Company's products in Germany. Mr.
Lehman is a director of Sunquest Europa and served as the sole executive
officer of Sunquest Europa and as a managing director of Sunquest Germany
through July 1996.
The Company's principal administrative, sales and marketing, customer
services and product development facilities are located in two buildings in
Tucson, Arizona which are owned by Any Travel (the "Broadway Property" and the
"El Dorado Property"). The Company leases the Broadway Property from Any
Travel under a lease which provides for a triple-net annual rent of
$1,020,760, subject to adjustment based on the consumer price index. Such
annual rental was determined in accordance with an
4
<PAGE>
independent appraisal of the fair rental value of the property. The lease
expires in September 2001. During 1996 the Company paid Any Travel rent of
$1,105,537. In June 1992, Any Travel issued to the Company a ten-year
promissory note in a transaction related to the initial financing of the
Broadway Property in 1991. The promissory note required monthly principal and
interest payments of $18,743. The note was paid in full in July 1996. In
connection with a refinancing of the Broadway Property in June 1992, Any
Travel borrowed $3,450,000 from a bank, the repayment of which is secured by a
mortgage on the property, a mortgage note in the principal amount of
$3,450,000 and a guaranty by the Company of all payments required under the
mortgage note. The mortgage note requires monthly principal payments of
$11,500 with interest at an annual rate equal to 3.25% over the one-year
Treasury rate and matures July 1, 1997. Any Travel may extend the maturity
date to July 1, 2002 upon payment of a $34,500 fee. The unpaid principal
balance of the mortgage note at December 31, 1996 was $3,241,000.
Any Travel purchased the El Dorado Property in 1994 with funds borrowed from
the Company. At the time of closing, Any Travel issued to the Company a seven-
year promissory note in the principal amount of $3,116,813 and bearing
interest at 8.5% per year, leased the El Dorado Property to the Company under
a ten-year, triple net lease and assigned to the Company the existing tenant
leases. Monthly rentals under the Company's lease are currently $70,940 and
are subject to future adjustment in accordance with a formula based on the
consumer price index. The monthly rentals were determined in accordance with
an independent appraisal of the fair rental value of the property. The
promissory note required monthly principal and interest payments of $49,012.
The note was paid in full in July 1996.
The Company uses Any Travel as its travel agent on an on-going basis. Any
Travel has advised the Company that in 1996 it received gross commissions of
$198,713 from hotels, airlines and car rental agencies with respect to its
travel services for the Company.
During 1996, the Company provided management services to LabFUSION for fees
totalling $240,000 and also marketed and licensed LabFUSION's products.
LabFUSION sold its assets and discontinued business in December 1996. As of
May 29, 1996, Sunquest Europa owed the Company $874,712 in unpaid license
fees, and the Company had loaned Sunquest Germany $110,041 to cover start-up
costs. Sunquest Europa and Sunquest Germany were owned by the Trusts until May
30, 1996 when ownership of those companies was transferred to the Company as a
capital contribution.
In August 1995, Dr. Goldblatt loaned the Trusts $380,000 to purchase an
office building. Subsequently, the Company purchased the building from the
Trusts. As consideration for the purchase, the Company assumed the Trust's
obligation to repay the loan by issuing to Dr. Goldblatt a promissory note for
$380,000 bearing interest at the rate of 7.0% per year. The promissory note
was paid in full in March 1996.
In April 1996, Dr. Goldblatt and the Trusts entered into a Tax
Indemnification Agreement with the Company whereby they agreed, among other
things, to indemnify the Company for any federal or state income taxes
(including interest) incurred by the Company if for any reason the Company is
deemed to
5
<PAGE>
have been a C corporation during any period for which it reported its taxable
income as an S corporation. The Tax Indemnification Agreement also provides
for cross-indemnification for any losses or liabilities with respect to
certain additional taxes (including interest and, in the case of Dr. Goldblatt
and the Trusts, penalties) resulting from the Company's operations during the
period in which it reported its taxable income as an S corporation. The
Company changed from an S corporation to a C corporation in May 1996 in
connection with its initial public offering of Common Stock (the "IPO").
APPROVAL OF AUDITORS
Another purpose of the annual meeting is to approve the appointment of Ernst
& Young LLP as the Company's independent auditors for the year 1997. Ernst &
Young was first appointed as the Company's independent auditors in February
1996 and, on the recommendation of the Audit Committee, has been appointed by
the Board of Directors as the Company's independent auditors for the year
1997. The board has also directed that such appointment be submitted for
shareholder approval at the annual meeting, although shareholder approval is
not legally required. If the appointment of auditors is not approved at the
meeting, the board will review its future selection of auditors.
REQUIRED VOTE
Approval of the appointment of independent auditors will require the
affirmative vote of a majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ERNST & YOUNG LLP.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each
director of the Company, (ii) the Chief Executive Officer of the Company and
the Company's other four most highly compensated executive officers for 1996
who were serving as executive officers at the end of the year (the "Named
Executive Officers"), (iii) each person or affiliated group of persons known
by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, and (iv) all of the Company's directors and
executive officers as a group. Beneficial ownership for purposes of the table
means sole or shared voting or investment power with respect to the shares.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES
BENEFICIAL OWNER OF SHARES OUTSTANDING
---------------- ---------- -----------
<S> <C> <C>
Sidney A. Goldblatt 11,904,000(1) 77.5%
Nina M. Dmetruk 4,909,140(2) 32.0
Bradley L. Goldblatt 3,272,760(3) 21.3
Stanley J. Lehman 2,000 --
Richard W. Barker -- --
Richard A. Wesson 169 --
James F. Garliepp 245 --
T. Paul Thomas -- --
Jodi Beth Gottlieb(4) 1,636,380(5) 10.7
All directors and executive
officers as a group (11 persons) 11,906,414(6) 77.5%
</TABLE>
- - --------
(1) Includes 1,636,380 shares held by each of the BLG Trust, the CSG Trust and
the JBG Trust. Dr. Goldblatt is a trustee of the Trusts with shared
investment power but no voting power with respect to the shares held by
the Trusts.
(2) These are the shares held by the BLG Trust, the CSG Trust and the JBG
Trust. Ms. Dmetruk is a trustee of the Trusts with shared investment and
voting power with respect to all of such shares.
(3) These are the shares held by the BLG Trust and the CSG Trust. Bradley L.
Goldblatt is a trustee of the Trusts with shared investment and voting
power with respect to all of such shares.
(4) Address is c/o Any Travel, 1181 North El Dorado Place, Tucson, Arizona
85715.
(5) These are the shares held by the JBG Trust. Ms. Gottlieb is a trustee of
the Trust with shared investment and voting power with respect to all of
such shares.
(6) See Notes 1, 2 and 3 above.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows all compensation paid to each of the Named
Executive Officers for all services rendered to the Company and its
subsidiaries for each of the last two completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ------------
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED(SHS) COMPENSATION
- - --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sidney A. Goldblatt 1996 $208,000 $135,200 -- $ --
President and Chief 1995 208,000 -- -- --
Executive Officer
Richard A. Wesson 1996 195,000 84,094 108,718 7,954(1)
Chief Operating Officer 1995 195,000 26,000 -- 1,186(2)
Nina M. Dmetruk 1996 126,077(3) 126,500 126,050 --
Executive Vice President- 1995 -- -- -- --
Chief Financial Officer
and Secretary
James F. Garliepp 1996 141,075 65,634 52,521 5,492(2)
Executive Vice President- 1995 141,075 18,516 -- 2,636(2)
Chief Technology Officer
T. Paul Thomas 1996 101,539(4) 71,440 20,000 69,419(5)
Senior Vice President- 1995 -- -- -- --
Marketing
</TABLE>
- - --------
(1) Includes Company contributions to the Profit Sharing Plan and also
relocation expenses and tax reimbursements paid by the Company.
(2) Company contributions to the Profit Sharing Plan for the account of the
Named Executive Officer.
(3) Ms. Dmetruk became a full-time employee of the Company in May 1996. See
"--Employment Agreements."
(4) Mr. Thomas joined the Company as an executive officer in May 1996.
(5) Includes relocation expenses of $57,419 and tax reimbursements of $12,000
paid by the Company.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted to the Named
Executive Officers in 1996 under the Company's Stock Incentive Plan of 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
TOTAL OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
GRANTED EMPLOYEES PRICE EXPIRATION ----------------------------
NAME (SHS)(1) IN 1996 PER SHARE DATE 5% 10%
---- -------- ------------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sidney A. Goldblatt -- -- % $ -- -- $ -- $ --
Richard A. Wesson 108,718 13.48 16.00 5/31/06 1,093,703 2,772,309
Nina M. Dmetruk 126,050 15.63 16.00 5/31/06 1,268,063 3,214,275
James F. Garliepp 52,521 6.51 16.00 5/31/06 528,361 1,339,285
T. Paul Thomas 7,878 .98 16.00 5/31/06 79,253 200,889
12,122 1.50 14.875 11/8/06 113,341 287,413
</TABLE>
- - --------
(1) Options granted under the Stock Incentive Plan of 1996 typically have a
ten year term and vest over a three year period in increments of 33 1/3%,
commencing two years after the date of grant. Dr. Wesson's option,
however, begins vesting one year after the date of grant. Options under
the plan may be granted as incentive stock options ("ISOs") or
nonstatutory stock options ("NSOs"). Options are granted with an exercise
price equal to at least the fair market value of the Company's Common
Stock on the date of grant. All options heretofore granted are NSOs and
have an exercise price equal to the fair market value of the Common Stock
on the date of grant.
(2) Potential realizable value is based on the assumption that the market
price of the Common Stock appreciates at the annual rates shown
(compounded annually) from the date of grant until the end of the ten year
option term. Potential realizable value is shown net of exercise price.
These numbers are calculated based on the regulations promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth.
PROFIT SHARING PLAN
The Company maintains the Sunquest Information Systems, Inc. Profit Sharing
Plan (the "Plan"), a tax-qualified plan under the Internal Revenue Code of
1986, as amended (the "Code"). The Plan covers all employees of the Company
(and affiliates of the Company that have adopted the Plan) who have both
attained the age of 21 and completed at least 1,000 hours of service (as
defined), but excludes employees covered by a collective bargaining agreement
unless that agreement provides for their participation. Participation in the
Plan begins on the first day of the month following the employee's
eligibility. Each participant may elect to contribute to the Plan, on a pre-
tax basis, a percentage of his or her compensation (up to a statutorily
prescribed limit). The Company, in its discretion, may elect to make qualified
non-
9
<PAGE>
elective contributions, matching contributions or profit sharing contributions
to the Plan. Qualified non-elective contributions for a Plan year are
allocated among the participants in proportion to their compensation for the
Plan year, matching contributions are allocated to participants in proportion
to their contributions in a manner that does not discriminate against or favor
highly compensated employees, and profit sharing contributions for a Plan year
are allocated among the participants who are employed at the end of the Plan
year and who have completed at least 1,000 hours of service in the Plan year
in proportion to their compensation for the Plan year. Participants direct the
investment of their contributions in various investment funds designated by
the Company. The contributions made by a participant, the qualified non-
elective contributions allocated to the participant and the earnings thereon
are fully vested at all times. The matching and profit sharing contributions
allocated to a participant are invested by the Company on the participant's
behalf in a trust fund, and such contributions and the earnings thereon become
fully vested after five years of service with the Company, or upon attainment
of age 65, disability or death while employed by the Company. The vested
contributions and the earnings thereon are generally distributed in a single
sum to the participant upon the participant's retirement, disability or
termination of employment with the Company, or to the participant's
beneficiary upon the participant's death. Prior to age 59 1/2, a participant
may withdraw his or her contributions in certain prescribed cases of financial
hardship. Upon attaining age 59 1/2, a participant may withdraw his or her
contributions and the earnings thereon at any time.
STOCK INCENTIVE PLAN
The Company's Stock Incentive Plan of 1996 (the "Incentive Plan") authorizes
the issuance of up to 2,500,000 shares of Common Stock pursuant to stock
options or other awards granted to employees and independent contractors of
the Company and its subsidiaries. The Incentive Plan is administered by the
Compensation Committee of the board (the "Committee") which selects the
optionees and other participants and determines the terms and provisions of
each option grant or other award within the parameters set forth in the
Incentive Plan. Each option granted under the Incentive Plan may qualify as an
"incentive stock option" within the meaning of the Code or may not so qualify,
as determined by the Committee. The exercise price of the options must be at
least the fair market value of the Common Stock on the date the option is
granted, and each option must expire no later than ten years from the date of
grant. The Committee is authorized to grant stock appreciation rights ("SARs")
separate from or in tandem with any stock option granted under the Incentive
Plan. Upon exercise of a SAR, the holder will be entitled to receive an amount
equal to the difference between the price per share assigned to the SAR, or
the exercise price per share of any related stock option, and the fair market
value of the Common Stock on the day preceding the date of exercise. Such
amount may be paid in cash or Common Stock, or both. The exercise of a tandem
SAR will result in a pro rata surrender of the related stock option, and the
exercise of a related stock option will result in a pro rata surrender of the
tandem SAR. The Committee is also authorized to grant shares of Common Stock
under the Incentive Plan with such terms, conditions and restrictions,
consistent with the purposes of the Incentive Plan, as it may determine.
During 1996, stock options were granted to 517 of the Company's employees.
No SARs or shares of Common Stock have been granted under the Incentive Plan.
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<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") authorizes
the sale of up to 450,000 shares of Common Stock to participating employees of
the Company and its subsidiaries. The Purchase Plan is open to all employees
who are regularly scheduled to work more than 20 hours per week and have
completed at least one year of service, except those who own shares possessing
5% or more of the total combined voting power or value of all outstanding
shares of all classes of equity securities of the Company. Offerings commence
on the first day of each calendar quarter and end on the last day of the same
calendar quarter. The Purchase Plan will expire in March 2016 unless earlier
terminated by the Board of Directors. Employees who wish to participate in an
offering must elect to have deductions made from their pay for each pay period
of between 1% to 10% of their base pay (but not less than $10). On the last
day of the offering period, the participant is deemed to have purchased from
the Company such number of shares of Common Stock as his or her accumulated
payroll deductions would buy at a price equal to 90% of the fair market value
of the Common Stock on the first business day of the offering period. No
employee may participate in an offering if such participation would permit his
or her rights to purchase Common Stock under the Purchase Plan and any similar
employee stock purchase plans of the Company to accrue at a rate which exceeds
$25,000 of fair market value of Common Stock for the calendar year in which
the offering is made.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Dr. Richard A. Wesson under
which he agreed to serve as Chief Operating Officer of the Company at a base
annual salary of $195,000. The agreement is terminable by either party upon 30
days written notice and by the Company immediately for cause or for Dr.
Wesson's breach of his agreement not to compete with the Company. Dr. Wesson
is entitled to participate in any discretionary bonuses paid to officers in
general and was also entitled to a long term incentive bonus if the sum of the
net income and net loss of the Company and LabFUSION for 1995, 1996, 1997 or
1998 exceeded the Net Profit for 1993. Dr. Wesson was not entitled to a long-
term incentive bonus for 1995. In May 1996 the Company and Dr. Wesson entered
into an agreement under which Dr. Wesson relinquished his right to collect any
long term incentive bonus under his employment agreement upon the grant to him
of an option under the Stock Incentive Plan to purchase 108,718 shares of
Common Stock at the IPO price. If the Company terminates Dr. Wesson's
employment without cause, the agreement entitles Dr. Wesson to receive
severance payments equal to four months of his salary and benefits.
Effective May 26, 1996, the Company entered into an employment agreement
with Nina M. Dmetruk under which she agreed to serve as the Company's
Executive Vice President-Chief Financial Officer at a base annual salary of
$220,000. The agreement is terminable by either party upon 90 days written
notice and by the Company immediately for cause, including any breach by Ms.
Dmetruk of her agreement not to compete with the Company. Ms. Dmetruk is
entitled to participate in any discretionary bonuses paid to officers in
general. Under the terms of the employment agreement, Ms. Dmetruk received on
May 30, 1996 an option under the Stock Incentive Plan to purchase 126,050
shares of Common Stock at the IPO price.
11
<PAGE>
Ms. Dmetruk will be entitled to $1.2 million in severance pay in the event
that the employment agreement is terminated: (i) by the Company at any time
for other than cause; (ii) by Ms. Dmetruk within 90 days of such time as
Sidney A. Goldblatt, Bradley L. Goldblatt, Curtis S. Goldblatt and Jodi Beth
Gottlieb, and trusts created for their benefit, cease to own, directly or
indirectly, fifty percent or more of the outstanding stock of the Company; or
(iii) by Ms. Dmetruk because of a material breach of the agreement by the
Company which has not been corrected by the Company within ten days written
notice of such breach or because of certain gross negligence, willful
misconduct or malfeasance by the Company which is determined to be detrimental
to Ms. Dmetruk.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as contemplated by employment agreements, the compensation of the
officers of the Company for the year ended December 31, 1996 was determined by
the Board of Directors, composed of Dr. Sidney A. Goldblatt, Nina M. Dmetruk,
Stanley J. Lehman and Bradley L. Goldblatt. Dr. Goldblatt, Ms. Dmetruk and
Bradley L. Goldblatt are executive officers of the Company; none of these
individuals, however, participated in deliberations concerning his or her own
compensation. Certain interlocking relationships existed between the directors
and executive officers of the Company and the directors and executive officers
of four other corporations: Any Travel, LabFUSION, Sunquest Europa and
Sunquest Germany. See "Election of Directors--Certain Transactions."
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation of Executive Officers
The executive officer compensation programs utilized by the Company include
cash compensation paid as salary and discretionary bonuses, stock options
granted under the Company's Stock Incentive Plan and Company contributions to
the Profit Sharing Plan for the accounts of executive officers. Executive
officers, except those who own more than 5% of the outstanding Common Stock,
are also eligible to participate in the Stock Purchase Plan. These programs
are designed to attract, retain and reward highly qualified executive officers
who are important to the Company's success and to provide incentives relating
directly to the financial performance and long-term growth of the Company.
Except as contemplated by employment agreements, salaries, as well as the
number of shares covered by stock options, for the year 1996 were established
primarily upon an evaluation of the executive officer's position with and
contributions to the Company, including individual performance, level of
responsibility, technical expertise and length of service; Company
performance; and industry compensation levels. No particular weight was given
to any single factor.
Under the Company's discretionary bonus program, annual bonuses may be paid
to the eligible officers of the Company only if the Company attains or exceeds
a predetermined percentage of its budgeted pre-tax income for the year (after
giving effect to the potential bonuses). Each officer's bonus for the year
1996 was based on a predetermined formula which took into account the
officer's base salary, the officer's
12
<PAGE>
level within the Company and the Company's pre-tax income for the year. The
payment of bonuses in any given year is within the discretion of the
Compensation Committee, and bonuses determined under the formula are subject
to adjustment in individual cases.
Compensation of the Chief Executive Officer
The Board of Directors concluded that there should be no increase in Dr.
Sidney A. Goldblatt's salary for the year 1996, primarily because Dr.
Goldblatt became eligible to participate in the discretionary bonus program
for the first time in 1996. Dr. Goldblatt's bonus of $135,200 for the year
1996 was based on the predetermined formula for the computation of bonuses
under that program.
This report has been prepared by the Board of Directors of the Company. Dr.
Barker, who became a member of the board in August 1996, did not participate
in the preparation of this report.
The Board of Directors,
Sidney A. Goldblatt, Chairman Nina M. Dmetruk
Stanley J. Lehman Bradley L. Goldblatt
13
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total shareholder
returns ("Total Return") for the Company as compared with the Center for
Research in Security Prices ("CRSP") Total Return Index for The Nasdaq Stock
Market (U.S. Companies) ("Nasdaq U.S.") and the CRSP Total Return Index for
the Nasdaq Computer and Data Processing Services Stocks ("Nasdaq Computer").
This graph covers the period May 31, 1996, when Sunquest's Common Stock
began trading on the Nasdaq National Market System, through December 31, 1996.
1996 MEASUREMENT PERIOD (1)(2)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period SUNQUEST NASDAQ U.S. NASDAQ COMPUTER
-------- ----------- ---------------
<S> <C> <C> <C>
Measurement PT -
5/31/96 $100.00 $100.00 $100.00
6/28/96 $ 83.92 $ 95.49 $ 96.34
9/30/96 $103.50 $ 98.89 $ 98.26
12/31/96 $ 79.72 $103.75 $102.24
</TABLE>
(1) Assumes $100 invested on May 31, 1996 in Sunquest Common Stock, Nasdaq
U.S. and Nasdaq Computer.
(2) Total Return assumes reinvestment of dividends. Except for S Corporation
distributions, no dividends have been declared or paid on the Company's
Common Stock.
14
<PAGE>
DISCRETIONARY AUTHORITY
At the time of mailing copies of this proxy statement to shareholders, the
election of directors and approval of the appointment of independent auditors
are the only matters known by management that will be presented for action at
the annual meeting of shareholders. Should any other matters come before the
meeting, action may be taken thereon pursuant to proxies in the form enclosed,
which confer discretionary authority upon the persons named therein or their
substitutes with respect to any such business which may properly come before
the meeting.
OTHER INFORMATION
Representatives of Ernst & Young LLP are expected to be in attendance at the
annual meeting and will have the opportunity to make a statement if they
desire to do so, and they are expected to be available to respond to
appropriate questions.
Shareholder proposals intended to be presented at the 1998 annual meeting
must be received by the Company by December 5, 1997 to be considered for
inclusion in the Company's proxy statement and form of proxy for that meeting.
Nina M. Dmetruk
Secretary
15
<PAGE>
Please mark
your vote as
indicated in
this example
1. Election of Directors:
For
all nominees
listed to the
right (except
as marked to
the contrary
Withhold
authority
to vote for all
nominees listed
to the right
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Dr. Sidney A. Goldblatt
Nina M. Dmetruk
Bradley L. Goldblatt
Stanley J. Lehman
Dr. Richard W. Barker
2. Proposal to approve the appointment of Ernst & Young LLP as the independent
auditors for the year 1997.
For
Against
Abstain
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournments thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. HOWEVER, IN THE ABSENCE OF DIRECTION TO
THE CONTRARY, THE ATTORNEYS NAMED HEREIN INTEND TO VOTE THIS PROXY "FOR"
PROPOSALS 1 AND 2 HEREON, AND FOR MATTERS WHICH MAY BE PRESENTED AT THE MEETING
IN ACCORDANCE WITH RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF NOTICE OF THE AFORESAID ANNUAL MEETING
OF SHAREHOLDERS.
Signature(s) Signature(s) Date
NOTE: Please sign exactly as name appears hereon. Joint holders should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please indicate the capacity in which you are signing. If a corporation or other
entity, please sign in full corporate or entity name by authorized person.
FOLD AND DETACH HERE
<PAGE>
PROXY
SUNQUEST INFORMATION SYSTEMS, INC.
4801 East Broadway Boulevard
Tucson, Arizona 85711
The undersigned hereby appoints Dr. Sidney A. Goldblatt and Nina M. Dmetruk, and
each of them, as Proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the shares
of Common Stock of Sunquest Information Systems, Inc. held of record by the
undersigned on March 21, 1997, at the annual meeting of shareholders to be held
on May 14, 1997, or any adjournment thereof.
(Please sign on reverse side and return immediately)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOLD AND DETACH HERE
