<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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S U N Q U E S T
- -------------------
INFORMATION SYSTEMS
Dear Fellow Shareholder:
I am pleased to invite you to attend the 1999 Annual Meeting of the
Shareholders of Sunquest Information Systems, Inc. which will be held at the
Viscount Suite Hotel, 4855 East Broadway Blvd., Tucson, Arizona, on Thursday,
April 29, 1999, at 9:00 A.M., local time. The formal Notice of Annual Meeting,
the Proxy Statement, a proxy card and a copy of the Company's Annual Report for
1998 accompany this letter. The Annual Meeting is open to all shareholders or
their authorized representatives. We hope that you will be able to attend.
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 April 29th.
/s/Sidney A. Goldblatt
----------------------
Sidney A. Goldblatt
Chairman, President and
Chief Executive Officer
Tucson, Arizona
March 29, 1999
<PAGE>
SUNQUEST INFORMATION SYSTEMS, INC.
4801 EAST BROADWAY BOULEVARD
TUCSON, ARIZONA 85711-3609
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 29, 1999
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 Viscount Suite Hotel,
4855 East Broadway Blvd., Tucson, Arizona, on Thursday, April 29, 1999, at 9:00
A.M., local time, for the following purposes:
(a) To elect a board of seven directors to serve for a term of one year
and until their respective successors are duly elected and
qualified.
(b) To ratify the selection of Ernst & Young LLP to audit the books and
accounts of the Company for the year ending December 31, 1999.
(c) To transact such other business as may properly come before the
meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on March 19, 1999
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting and any adjournments or postponements thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOU ARE CORDIALLY
INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THE RETURN OF THE ENCLOSED PROXY
CARD WILL NOT AFFECT YOUR RIGHT TO REVOKE YOUR PROXY OR TO VOTE IN PERSON IF YOU
DO ATTEND THE ANNUAL MEETING.
By Order of the Board of Directors,
NINA M. DMETRUK
Secretary
Tucson, Arizona
March 29, 1999
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES
YOU OWNED ON THE RECORD DATE.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE IT,
SIGN IT AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY.
<PAGE>
PROXY STATEMENT
SUNQUEST INFORMATION SYSTEMS, INC.
4801 EAST BROADWAY BOULEVARD
TUCSON, ARIZONA 85711-3609
March 29, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Sunquest Information Systems,
Inc. (the "Company"), for use at the Company's 1999 Annual Meeting of
Shareholders (together with any adjournments thereof, the "Annual Meeting") to
be held on Thursday, April 29, 1999, at 9:00 A.M., local time, at the Viscount
Suite Hotel, 4855 East Broadway Blvd., Tucson, Arizona, for the purposes set
forth in the accompanying Notice of Annual Meeting, and at any adjournment
thereof. This Proxy Statement and the enclosed form of proxy and Annual Report
for 1998 are first being sent to shareholders on or about March 29, 1999.
The Board has fixed the close of business on March 19, 1999 as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting (the "Record Date"). As of the Record Date there were
15,394,460 shares of Common Stock outstanding. Each share of Common Stock of the
Company is entitled to one vote per share on each matter properly brought before
the Annual Meeting. There is no cumulative voting in the election of directors.
Shares can be voted at the Annual Meeting only if the shareholder is
present in person or represented by proxy. If the enclosed proxy is properly
executed and returned prior to voting at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. In the absence of instructions, shares represented by executed proxies
will be voted as recommended by the Board. The accompanying proxy may be revoked
by the shareholder at any time prior to its use by giving notice of such
revocation in writing to the Secretary of the Company, c/o Sunquest Information
Systems, Inc., 1407 Eisenhower Boulevard, Suite 200, Johnstown, Pennsylvania
15904, or by delivering a duly executed proxy bearing a later date, provided
such notice or proxy is actually received by the Company prior to the taking of
any vote at the Annual Meeting.
Brokers, banks and other nominee holders will be requested to obtain voting
instructions of beneficial owners of stock registered in their names, and shares
represented by a duly executed proxy submitted by such a nominee holder on
behalf of such a beneficial owner will be voted to the extent instructed by the
nominee holder on the proxy card. Rules applicable to nominee holders may
preclude them from voting shares held by them in nominee capacity on certain
kinds of proposals unless they receive voting instructions from the beneficial
owners of the shares (the failure to vote in such circumstances is referred to
as a "broker non-vote").
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The Board knows of no matters which are to be brought before the Annual
Meeting other than those set forth in the accompanying notice. If any other
matters properly come before the Annual Meeting, the persons named in the
enclosed proxy card, or their duly appointed substitutes, will be authorized to
vote or otherwise act thereon in accordance with their judgment on such matters.
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. 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.
Proxies in the form enclosed are solicited on behalf of the Board. 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. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares of record held by such custodians, nominees and fiduciaries, and the
Company will, upon request, reimburse such custodians, nominees and fiduciaries
for reasonable expenses incurred in connection therewith.
ELECTION OF DIRECTORS
A purpose of the meeting is to elect a board of seven directors to serve
for a term of one year and until their respective successors are elected and
qualified. In the election, the seven persons who receive the highest number of
votes actually cast will be elected. The proxies named in the proxy card intend
to vote for the election of the nominees listed below unless otherwise so
instructed. If a holder does not wish his or her shares to be voted for a
particular nominee, the holder must strike through the name of the nominee on
his proxy card, in which event his shares will be voted for the other listed
nominees. If any nominee becomes unable to serve, the proxies may vote for
another person designated by the Board or the Board may reduce the number of
directors. The Company has no reason to believe that any nominee will be unable
to serve.
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Information concerning the persons nominated by the Board, all of whom, are
currently directors of the Company, is set forth below.
NOMINEES FOR ELECTION AS DIRECTORS
NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------ --------------------------------------
Sidney A. Goldblatt Sidney A. Goldblatt, M.D., a co-founder of the
Age 64 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 Nina M. Dmetruk has served as Executive Vice
Age 46 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
and Treasurer of the Company since April 1998.
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 "Executive Compensation and Related
Information -- Employment Contracts and
Termination of Employment." 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 proprietor
of an accounting firm for more than five years.
Stanley J. Lehman Stanley J. Lehman has been a director of the
Age 45 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 has served as
general counsel to the Company, for more than
five years.
3
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NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------ --------------------------------------
Richard W. Barker Richard W. Barker, Ph.D., was elected to the
Age 50 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 since June
1996, and was President and Chief Executive of
Chiron Diagnostics, the diagnostic products
division of Chiron Corporation, from June 1996
to September 1998. 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.
Larry R. Ferguson Larry R. Ferguson was elected to the Board of
Age 49 Directors of the Company by the members of the
Board in December 1997. Mr. Ferguson has been
President and Chief Executive Officer of Avio
Corporation, a health care information systems
company, since December 1998. He was President
of The Ferguson Group, a management consulting
company, from January 1996 to December 1998. He
was employed by First Data Health Systems
Corporation, a provider of information systems
and related services to health care providers,
from May 1980 to June 1995, serving as its
President from August 1986 to June 1995.
4
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NAME AND AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ------------ --------------------------------------
Peter P. Gombrich Peter P. Gombrich was elected to the Board of
Age 61 Directors of the Company by the members of the
Board in March 1998. Mr. Gombrich has been
Chairman and Chief Executive Officer of
Ampersand Medical Inc., a diagnostic disease
management point of care systems provider
company, since February 1998. Mr. Gombrich has
been Vice Chairman and a director of AccuMed
International, Inc., a provider of health care
instrumentation, since January 1998. From
December 1995 until January 1998, Mr. Gombrich
served as Chairman of the Board of Directors,
Chief Executive Officer and President of
AccuMed International, Inc. From April 1995
until December 1995, Mr. Gombrich served as
Acting Chief Executive Officer and a director
of AccuMed International, Inc. Mr. Gombrich
founded AccuMed, Inc. in February 1994. From
February 1994 until December 1995, Mr. Gombrich
served as Chairman, President and Chief
Executive Officer of AccuMed, Inc. From August
1990 until founding AccuMed, Inc., Mr. Gombrich
was a consultant in the cytology and
microbiology industries, serving companies
including Accuron Corporation, a designer of
automated Pap smear screening systems. From
July 1985 until September 1989, Mr. Gombrich
was the President and Chief Executive Officer,
and from July 1985 until November 1990 was
Chairman of the Board, of CliniCom
Incorporated, a bedside clinical information
systems company which he founded.
Curtis S. Goldblatt Curtis S. Goldblatt, M.D., was elected to the
Age 33 Board of Directors of the Company by the
shareholders in April 1998. Curtis S. Goldblatt
has been an Associate Pathologist of S.
Goldblatt Pathology Associates, P.C. and
Medical Advisor/Medical Director of the
Histologic Technician-Certificate Program at
Conemaugh Health System since July 1997. He was
employed as Chief Resident of S. Goldblatt
Pathology Associates, P.C. from July 1996 to
June 1997. Prior to July 1996, Curtis S.
Goldblatt was a Pathology Resident at the
University of Pittsburgh Medical Center from
July 1993 to June 1996. Curtis S. Goldblatt is
the son of Dr. Sidney A. Goldblatt.
5
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REQUIRED VOTE
There is no cumulative voting in the election of directors. The seven
nominees for election as directors who receive the highest number of votes
actually cast will be elected. Broker non-votes will be treated as shares that
neither are capable of being voted nor have been voted and, accordingly, will
have no effect on the outcome of the election of directors.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
BOARD OF DIRECTORS AND COMMITTEES
The Board held fourteen meetings during the year 1998. The Board also
took action by unanimous written consent on one (1) occasion during the year.
The Board has a Compensation Committee and an Audit Committee. The
Company has no nominating committee. The Compensation Committee, which is
currently comprised of Dr. Richard W. Barker, Larry R. Ferguson and Peter P.
Gombrich, as voting members, and Stanley J. Lehman, as a non-voting advisory
member, is responsible for determining the compensation of the executive
officers of the Company and for administering the Company's Stock Incentive Plan
of 1996, as amended ("Incentive Plan"), and Employee Stock Purchase Plan. Dr.
Goldblatt and Ms. Dmetruk, who were members of the Compensation Committee until
April 9, 1998, are executive officers of the Company; neither of these
individuals, however, participated in deliberations concerning his or her own
compensation during the year 1998. The Compensation Committee is also
responsible for such related matters as may be delegated to it by the Board. The
Compensation Committee held twelve meetings during the year 1998.
Nina M. Dmetruk, Stanley J. Lehman, Dr. Richard W. Barker Larry R.
Ferguson and Peter P. Gombrich currently 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 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 the rules of the
Nasdaq Stock Market. The Audit Committee also recommends to the Board the
appointment of the independent auditors. During the year 1998, the Audit
Committee held two meetings.
No director attended fewer than 75% of the total number of meetings of
the Board and the meetings of any committee of the Board on which he or she
served during the year ended December 31, 1998, with the exception of Dr. Barker
who attended 50% of the Audit Committee meetings.
DIRECTOR COMPENSATION
Non-employee directors of the Company are reimbursed, upon request, for
expenses
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incurred in attending meetings of the Board, but there are no standard
arrangements for compensating them for their service as directors. Dr. Barker
has been granted options to purchase 21,000 shares of Common Stock under the
Company's Incentive Plan. Of these options, 15,000 shares were granted upon his
nomination as director, 3,000 shares upon his election by the shareholders and
3,000 shares upon his reelection by the shareholders. Mr. Ferguson has been
granted options to purchase 18,000 shares of Common Stock under the Company's
Incentive Plan. Of these options, 15,000 shares were granted upon his nomination
as director and 3,000 shares upon his election by the shareholders. Mr. Gombrich
has been granted an option to purchase 15,000 shares of Common Stock under the
Company's Incentive Plan. Mr. Lehman's law firm receives fees at his regular
professional hourly rate for time devoted to Board meetings. Dr. Barker, Mr.
Ferguson and Mr. Gombrich are also to be granted options for shares of Common
Stock, as determined by the Board, on each occasion that they are reelected as
directors. Directors who are employees of the Company are not paid any separate
fees for serving as directors.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Ms. Dmetruk, a director and executive officer of the Company, Curtis S.
Goldblatt, a director of the Company and Jodi Beth Gottlieb are directors and
executive officers of Any Travel, Inc., a travel agency located in Tucson,
Arizona ("Any Travel"). The outstanding shares of Any Travel 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.
The Company's principal administrative, sales and marketing, customer
service 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 independent appraisal of the fair rental value
of the property. The lease expires in September 2001. During 1998, the Company
paid Any Travel rent of $1,169,729.
The Company leases the El Dorado Property from Any Travel under a ten-
year, triple net lease. The existing tenant leases were assigned to the Company.
During 1998, the Company paid Any Travel rent of $881,562 under the lease. The
monthly rentals were determined in accordance with an independent appraisal of
the fair rental value of the property and are subject to future adjustment in
accordance with a formula based on the consumer price index.
The Company uses Any Travel as its travel agent on an on-going basis. Any
Travel has
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advised the Company that in 1998 it received gross commissions of $261,441 from
hotels, airlines and car rental agencies with respect to its travel services for
the Company.
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 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").
Stanley J. Lehman, a director of the Company, is a shareholder in the law
firm of Klett Lieber Rooney & Schorling, a professional corporation, that serves
as the Company's general counsel.
RATIFICATION OF SELECTION OF AUDITORS
The Board has selected Ernst & Young LLP to serve as the Company's
auditors for the year ending December 31, 1999. A representative of Ernst &
Young LLP will be present at the Annual Meeting and will have the opportunity to
make a statement, if such person desires to do so, and to respond to appropriate
questions.
REQUIRED VOTE
The proposal to ratify the selection of Ernst & Young LLP will be
approved by the shareholders if it receives the affirmative vote of a majority
of the votes cast by all shareholders entitled to vote thereon. Abstentions and
broker non-votes are not counted as affirmative or negative votes and are not
counted in determining the number of votes cast on the proposal. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of voting on
the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION
OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS.
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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 1998
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.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES SHARES OUTSTANDING
---------------- ---------------- ------------------
<S> <C> <C>
Sidney A. Goldblatt 11,904,000(1) 77.3%
4801 East Broadway Blvd.
Tucson, AZ 85711
Nina M. Dmetruk 4,951,156(2) 32.2
4801 East Broadway Blvd.
Tucson, AZ 85711
Stanley J. Lehman 2,000 *
Richard W. Barker 21,000(3) *
Larry R. Ferguson 18,000(3) *
Peter P. Gombrich 15,000(3) *
Curtis S. Goldblatt - -
Richard A. Wesson 72,648(4) *
Ivan G. Boyd 33,334(5) *
Joanna S. Broder 6,667(5) *
Bradley L. Goldblatt 3,272,760(6) 21.3
4801 East Broadway Blvd.
Tucson, AZ 85711
Jodi Beth Gottlieb 1,636,380(7) 10.6
c/o Any Travel
1181 North El Dorado Place
Tucson, AZ 85715
All directors and executive
officers as a group (12 persons) 12,132,881(8) 78.8%
</TABLE>
- ----------
* Less than 1.0%.
(1) Includes an aggregate of 4,909,140 shares held by 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.
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(2) Consists of the shares held by the BLG Trust, the CSG Trust and the JBG
Trust and 42,016 shares that may be acquired through the exercise of
presently exerciseable stock options. Ms. Dmetruk is a trustee of the
Trusts with shared investment and voting power with respect to all of such
shares.
(3) Consists of shares that may be acquired through the exercise of presently
exerciseable stock options or shares that may be acquired through the
exercise of stock options that become exerciseable within 60 days of March
19, 1999.
(4) Includes 72,479 shares that may be acquired through the exercise of
presently exerciseable stock options.
(5) Consists of shares that may be acquired through the exercise of presently
exerciseable stock options.
(6) Consists of 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.
(7) Consists of 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.
(8) See Notes 1, 2 and 3 above.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
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 three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(SHS) COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
1998 $208,000 $ - - $ -
Sidney A. Goldblatt 1997 208,000 - - -
President and Chief Executive Officer 1996 208,000 135,200 - -
1998 219,135 - - 1,920(1)
Richard A. Wesson 1997 210,159 - 108,718 (2) 4,800(1)
Chief Operating Officer (3) 1996 195,000 84,094 108,718 7,954(4)
Nina M. Dmetruk 1998 239,458 - 75,000 1,599(1)
Executive Vice President-Chief 1997 227,996 - 126,050 (2) 3,998(1)
Financial Officer, Secretary and 1996 126,077 126,500 126,050 -
Treasurer
Ivan G. Boyd 1998 243,700 - - 78,586(5)
Senior Vice President-Sales and 1997 7,692 25,000 100,000 -
Marketing (6) 1996 - - - -
Joanna S. Broder 1998 157,705 - - 48,983(5)
Senior Vice President-Client Services 1997 146,460 - 40,000 (7) 26,961(5)
1996 - - - -
</TABLE>
____________
(1) Company contributions to the Profit Sharing Plan for the account of the
Named Executive Officer.
(2) Consists of shares subject to options repriced from grants made in calendar
year 1996. See "-- Report on Fiscal Year 1997 Repricing of Options."
(3) Mr. Wesson served as the Company's Chief Operating Officer until December
1998. He now serves as an Engineering Consultant.
(4) Includes Company contributions to the Profit Sharing Plan for the account
of the Named Executive Officer and also relocation expenses and tax
reimbursements paid by the Company.
(5) Includes relocation expenses and tax reimbursements paid by the Company.
(6) Mr. Boyd was elected to his position as Senior Vice President-Sales and
Marketing in November 1997.
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(7) Consists of an option granted on March 17, 1997 to acquire 20,000 shares of
Common Stock that was repriced on April 3, 1997. See "-- Report on Fiscal
Year 1997 Repricing of Options."
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on options granted to the
Named Executive Officers in 1998 under the Company's Incentive Plan:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS EXERCISE AT ASSUMED ANNUAL RATES
OPTIONS GRANTED TO PRICE OF STOCK PRICE APPRECIATION
GRANTED EMPLOYEES IN PER EXPIRATION FOR OPTION TERM (2)
NAME (SHS)(1) 1998 SHARE DATE 5% 10%
---- -------- ---- ----- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sidney A. Goldblatt - - % $ - - $ - $ -
Richard A. Wesson - - - - - -
Nina M. Dmetruk 75,000 26.52 12.625 12/10/08 595,485 1,509,075
Ivan G. Boyd - - - - - -
Joanna S. Broder - - - - - -
</TABLE>
______________
(1) Options granted under the Incentive Plan typically have a ten-year term and
vest as specified in the stock option agreements. 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. The
option heretofore granted is a NSO and has 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.
12
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the value of
unexercised options held by each of the Named Executive Officers, as of December
31, 1998. No options were exercised by such persons during 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
-------------------------- ------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE (1) UNEXERCISABLE (1)
---- ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Sidney A. Goldblatt - - $ - $ -
Richard A. Wesson 72,479 36,239 262,736 131,366
Nina M. Dmetruk 42,016 159,034 152,308 417,123
Ivan G. Boyd 33,334 66,666 208,338 416,663
Joanna S. Broder - 20,000 - 72,500
</TABLE>
__________
(1) The last sale price of a share of the Company's Common Stock on December
31, 1998 as reported by the Nasdaq National Market System was $14.125.
13
<PAGE>
TEN-YEAR OPTION REPRICINGS
The following table sets forth information with respect to the repricing of
those options held by any executive officer of the Company since May 31, 1996
when the Company became a reporting company pursuant to the Exchange Act.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
NUMBER OF MARKET PRICE OF EXERCISE PRICE TERM REMAINING
OPTIONS/SARS STOCK AT TIME AT TIME OF NEW AT DATE OF
REPRICED OR OF REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---------------------- ------ ------------- ---------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sidney A. Goldblatt - - $ - $ - $ - -
Richard A. Wesson 4/3/97 108,718 10.50 16.00 10.50 9 years, 58 days
Nina M. Dmetruk 4/3/97 126,050 10.50 16.00 10.50 9 years, 58 days
Samuel A. Miller (1) 4/3/97 5,000 10.50 16.00 10.50 9 years, 58 days
4/3/97 15,000 10.50 15.625 10.50 9 years, 286 days
Joanna S. Broder 4/3/97 20,000 10.50 12.00 10.50 9 years, 348 days
James F. Garliepp 4/3/97 52,521 10.50 16.00 10.50 9 years, 58 days
T. Paul Thomas (2) 4/3/97 7,878 10.50 16.00 10.50 9 years, 58 days
4/3/97 12,122 10.50 14.875 10.50 9 years, 219 days
</TABLE>
- ----------
(1) Served as the Company's Senior Vice President-Technology through September
1998. These Options were forfeited upon his termination from the Company.
(2) Served as the Company's Senior Vice President-Marketing through June 1997.
These Options were forfeited upon his termination from the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
Effective May 26, 1996, the Company entered into an employment agreement
with Nina M. Dmetruk under which she was to be paid to serve as the Company's
Executive Vice President-Chief Financial Officer at a base annual salary of
$220,000. Effective January 21, 1998, Ms. Dmetruk's at base annual salary was
increased to $240,240. 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 agreed
to devote her full working time to the Company's business, except that during
the first six months of her employment she was permitted to devote a reasonable
amount of time to winding down her accounting practice, with an appropriate
reduction of her base
14
<PAGE>
compensation for time devoted to that activity. 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 Incentive Plan to purchase 126,050 shares of Common Stock at
the IPO price. On April 3, 1997, this option to purchase 126,050 shares of
Common Stock was modified to reduce the exercise price to $10.50. 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.
Effective December 14, 1998, the Company entered into an employment
agreement with Mark J. Emkjer under which he is to be paid to serve as Chief
Operating Officer of the Company at a base annual salary of $250,000. The
agreement is terminable by either party upon 90 days written notice and by the
Company immediately for cause, including Mr. Emkjer's breach of his agreement
not to compete with the Company. Mr. Emkjer is entitled to participate in any
discretionary bonuses paid to officers in general. Under the terms of the
employment agreement, Mr. Emkjer received on January 4, 1999 an option under the
Incentive Plan to purchase 125,000 shares of Common Stock at $13.125 per share
(the fair market value of the Common Stock on the date of grant). In addition,
if Mr. Emkjer meets or exceeds the July 1, 1999 and the December 31, 1999
written performance goals he will receive additional options to purchase 50,000
and 125,000 shares of Common Stock, respectively.
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, 1998 was determined by
the Compensation Committee, then composed of Dr. Sidney A. Goldblatt, Nina M.
Dmetruk, Stanley J. Lehman, Bradley L. Goldblatt, Dr. Richard W. Barker and
Larry R. Ferguson. Dr. Goldblatt and Ms. Dmetruk are executive officers of the
Company; none of these individuals, however, participated in deliberations
concerning his or her own compensation. Dr. Goldblatt and Ms. Dmetruk are
trustees of various trusts which own all of the shares of Any Travel Inc., which
leases two buildings to the Company in Tucson, Arizona, and provides certain
travel agency services to the Company on an ongoing basis. Stanley J. Lehman is
a shareholder in the law firm of Klett Lieber Rooney & Schorling, the Company's
general counsel. Ms. Dmetruk is a director and officer of Any Travel, Inc. See
"Election of Directors Certain Transactions and Business Relationships."
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
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 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 1998 were established
primarily upon an evaluation of the executive officer's, including the chief
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) and takes into account the officer's
base salary, the officer's 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. No bonuses were paid for
the year 1998 since the Company did not attain the predetermined percentage of
its budgeted pre-tax income for the year.
The Compensation Committee of the Board concluded that there should be no
increase in Dr. Sidney A. Goldblatt's salary for the year 1998, primarily
because Dr. Goldblatt became eligible to participate in the discretionary bonus
program for the first time in 1996. Based on the Company's performance, Dr.
Goldblatt did not receive a bonus for the year 1998.
16
<PAGE>
The Compensation Committee of the Board has considered the potential impact
of Section 162(m) of the Internal Revenue Code of 1986, as amended, which
imposes a limit on tax deductions for annual compensation in excess of
$1,000,000 paid to its chief executive officer and its four most highly
compensated executive officers in any fiscal year. The Committee does not
believe that this limitation will apply in the foreseeable future. The Stock
Incentive Plan of 1996, as amended, is structured to qualify options and stock
appreciation rights granted thereunder as "performance based" compensation that
is excluded from the calculation of the $1,000,000 limitation.
The Compensation Committee of the Board of Directors,
Richard W. Barker Peter P. Gombrich
Larry R. Ferguson Stanley J. Lehman
17
<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) and the CRSP Total Return Index for the Nasdaq Computer
and Data Processing Services Stocks.
This graph covers the period May 31, 1996, when Sunquest's Common Stock
began trading on the Nasdaq National Market System, through December 31, 1998.
[Graph Appears Here]
1998 MEASUREMENT PERIOD (1) (2)
<TABLE>
<CAPTION>
5/31/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
------- ------- ------- -------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sunquest $100.00 $83.92 $103.50 $ 79.72 $54.55 $ 83.92 $ 84.62 $ 54.55 $ 54.20 $ 51.05 $ 50.35 $ 79.02
Nasdaq U.S. $100.00 $95.49 $ 98.87 $103.73 $98.11 $116.09 $135.72 $127.26 $148.91 $153.22 $138.71 $178.90
Nasdaq Computer $100.00 $96.34 $ 98.26 $102.18 $94.84 $121.61 $133.00 $125.52 $165.82 $184.02 $173.46 $224.62
</TABLE>
(1) Assumes $100 invested on May 31, 1996 in Sunquest Common Stock, The Nasdaq
Stock Market (U.S. Companies) and the Nasdaq Computer and Data Processing
Services Stocks.
(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.
18
<PAGE>
PROPOSALS FOR NEXT YEAR'S MEETING
Shareholder proposals intended to be presented at the 2000 Annual Meeting
must be received by the Company by November 30, 1999 to be considered for
inclusion in the Company's Proxy Statement and form of proxy for that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors, officers, and persons who are directly or indirectly the
beneficial owners of more than 10% of the Common Stock of the Company are
required to file with the Commission, within specified monthly and annual due
dates, a statement of their initial beneficial ownership and all subsequent
changes in ownership of common stock. Rules of the Commission require such
persons to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of such forms, the Company believes that, during the
year ended December 31, 1998, all such persons complied with all applicable
filing requirements.
19
<PAGE>
PROXY
SUNQUEST INFORMATION SYSTEMS, INC.
4801 East Broadway Boulevard
Tucson, Arizona 85711
The undersigned shareholder of Sunquest Information Systems, Inc. (the
"Company") hereby appoints Dr. Sidney A. Goldblatt and Nina M. Dmetruk, and each
of them, as the attorneys and proxies of the undersigned, with full power of
substitution, to represent and to vote, as designated on the reverse side, all
the shares of Common Stock, no par value, of the Company which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company, to be held at the Viscount Suite Hotel, 4855 East
Broadway Blvd., Tucson, Arizona, on Thursday, April 29, 1999, commencing at 9:00
a.m., local time, and at any adjournment or postponement thereof.
(Please sign on reverse side and return immediately)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark
your votes as
indicated in [ X ]
this example
(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 Stanley J. Lehman
Nina M. Dmetruk Dr. Richard W. Barker
Dr. Curtis S. Goldblatt Peter P. Gombrich
Larry R. Ferguson
1. Election of Directors:
FOR WITHHOLD
all nominees AUTHORITY
listed to the to vote for all
right (except nominees listed
as marked to to the right
the contrary)
[ ] [ ]
2. Proposal to ratify the selection of Ernst & Young LLP to audit the books
and accounts of the Company for the year ending December 31, 1999.
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" THE
ELECTION AS DIRECTORS OF ALL THE NOMINEES LISTED, "FOR" PROPOSAL 2 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 /\
