<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SANCHEZ COMPUTER ASSOCIATES, 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)(1) 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
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 29, 1997
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Sanchez Computer Associates, Inc.
(the "Company") will be held at the Company's headquarters at Great Valley
Corporate Center, 40 Valley Stream Parkway, Malvern, Pennsylvania 19355 on
Thursday, May 29, 1997 at 2:00 p.m., local time, for the following purposes:
1. to elect eight directors; and
2. to transact such other business as may properly come
before the meeting or any adjournment or adjournments
thereof.
The Board of Directors has established the close of business on April
10, 1997 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, the meeting or any adjournments thereof. In
order that the meeting can be held and a maximum number of shares can be voted,
whether or not you plan to be present at the meeting in person, please complete,
date and sign, and promptly return the enclosed Proxy in the return envelope
provided for your use. No postage is required if mailed in the United States.
By order of the Board of Directors,
Christopher C. Carr
Secretary
40 Valley Stream Parkway
Malvern, PA 19355
April 28, 1997
<PAGE>
SANCHEZ COMPUTER ASSOCIATES, INC.
40 Valley Stream Parkway
Malvern, PA 19355
PROXY STATEMENT
The enclosed Proxy is solicited on behalf of the Board of Directors
(the "Board") of Sanchez Computer Associates, Inc. (the "Company") for use at
the Annual Meeting of Shareholders to be held on May 29, 1997 (such meeting and
any adjournment or adjournments thereof referred to as the "Annual Meeting") for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders and in this Proxy Statement. This Proxy Statement and the enclosed
Proxy are being mailed to shareholders on or about April 28, 1997.
Voting Securities
Only the holders of shares of common stock, no par value per share (the
"Common Stock"), of the Company of record at the close of business on April 10,
1997 (the "Shares") are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 10,886,125 Shares outstanding and
entitled to be voted at the Annual Meeting. It is the intention of the persons
named in the Proxy to vote as instructed by the shareholders or, if no
instructions are given, to vote as recommended by the Board. Each holder of
Shares entitled to vote will have the right to one vote for each Share standing
in his name on the books of the Company.
The eight nominees receiving the highest number of affirmative votes of
the Shares present or represented and entitled to be voted shall be elected as
directors. Votes withheld from any director, broker non-votes and abstentions
are counted for purposes of determining the presence of a quorum for the
transaction of business at the Annual Meeting. Only those votes that are cast as
affirmative or negative will be treated as voting on any matter presented at the
Annual Meeting.
Revocability of Proxy
Execution of the enclosed Proxy will not affect a shareholder's right
to attend the Annual Meeting and vote in person. A shareholder, in exercising
his right to vote in person at the Annual Meeting, effectively revokes all
previously executed Proxies. In addition, the Proxy is revocable at any time
prior to the effective exercise thereof by filing notice of revocation with the
Secretary of the Company or by filing a duly executed Proxy bearing a later
date.
Persons Making the Solicitation
The cost of soliciting Proxies, including the actual expenses incurred
by brokerage houses, nominees and fiduciaries in forwarding Proxy materials to
beneficial owners, will be borne by the Company. In addition to solicitation by
mail, certain officers and other employees of the Company may solicit Proxies in
person or by telephone.
Shareholder Proposals for 1998 Annual Meeting
Shareholders intending to present proposals at the next Annual Meeting
of Shareholders to be held in 1998 must notify the Company of the proposal no
later than December 29, 1997.
1
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 10, 1997, the Company's
Common Stock beneficially owned by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock. The Company's
Common Stock is the only class of equity securities outstanding. The table also
shows the number of Shares owned beneficially by each director or nominee, by
each named executive officer, and by all executive officers and directors as a
group.
<TABLE>
<CAPTION>
Number of Percent of
Shares Owned (1) Class
---------------- -----
<S> <C> <C>
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087(2)............................................ 2,958,654 26.3%
Radnor Venture Partners, L.P.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087............................................... 682,497 6.3%
Michael A. Sanchez
40 Valley Stream Parkway
Malvern, PA 19355(3).......................................... 1,879,271 17.2%
Frank R. Sanchez
40 Valley Stream Parkway
Malvern, PA 19355(4).......................................... 801,671 7.4%
Warren V. Musser................................................ 487,434 4.5%
Lawrence Chimerine.............................................. 73,000 *
Kailash C. Khanna............................................... 2,300 *
John D. Loewenberg.............................................. 1,860 *
Ira M Lubert.................................................... 90,760 *
Thomas C. Lynch................................................. 1,449 *
Richard H. Jefferson(4)......................................... 10,000 *
Thomas F. McAllister(4)......................................... 38,000 *
Joseph F. Waterman(5)........................................... 181,220 1.7%
Executive officers and directors as a group
(15 persons)(6).............................................. 3,807,601 34.4%
</TABLE>
* Less than 1% of the outstanding Common Stock.
(1) Except as otherwise disclosed, the nature of beneficial ownership is the
sole power to vote and to dispose of the shares (except for shares held
jointly with spouse).
(2) Includes a warrant exercisable for 360,000 shares. The shares and warrant
are held of record by Safeguard Scientifics (Delaware), Inc., a wholly
owned subsidiary of Safeguard Scientifics, Inc. ("Safeguard"). Excludes
shares beneficially owned by Radnor Venture Partners, L.P. SSI Management
Company, Inc., a wholly owned subsidiary of Safeguard, is a general partner
of Radnor Venture Management Company, the general partner of Radnor Venture
Partners, L.P.
(3) Includes 50,000 shares held in trust for Mr. Sanchez's spouse, an aggregate
of 99,000 shares held in trust for three minor children, and 11,400 shares
that may be acquired pursuant to stock options that are currently
exercisable or that will become exercisable by June 9, 1997.
(4) Includes for Messrs. Frank Sanchez, Jefferson and McAllister 11,400 shares,
9,000 shares and 36,000 shares that may be acquired pursuant to stock
options that are currently exercisable or that will become exercisable by
June 9, 1997.
(5) Includes 1,998 shares held by Mr. Waterman's spouse, 527 shares held in
trust for his spouse, and an aggregate of 1,200 shares held in trust for
four children.
(6) Includes 181,827 shares that may be acquired pursuant to stock options that
are currently exercisable or that will become exercisable by June 9, 1997.
2
<PAGE>
I. ELECTION OF DIRECTORS
It is intended that the persons named as Proxies for the Annual Meeting
will vote in favor of the election of the following eight nominees as directors
of the Company to hold office until the Annual Meeting of Shareholders in 1998
and until their successors are elected and have qualified. All of the nominees,
with the exception of Kailash C. Khanna, are presently serving as directors of
the Company. Each of the nominees has consented to serve if elected. However, if
any of the nominees should become unavailable prior to the election, the holders
of the Proxies may vote the Proxies for the election of such other persons as
the Board may recommend, unless the Board reduces the number of directors to be
elected.
The Board unanimously recommends that shareholders vote FOR the
election of the slate of nominees set forth in this Proposal. Proxies will be so
voted unless shareholders specify otherwise on their proxy cards. The eight
nominees receiving the highest number of affirmative votes of the Shares present
or represented and entitled to be voted shall be elected as directors.
<TABLE>
<CAPTION>
Has Been a
Principal Occupation and Business Director
Name Experience During Last Five Years Since Age
- -------------------------- --------------------------------- ----- ---
<S> <C> <C> <C>
Michael A. Sanchez Chairman of the Board and Chief
Executive Officer of the Company(1)(3)(11)........... 1979 39
Frank R. Sanchez President and Chief Operating Officer
of the Company(4)(11)................................ 1980 40
Warren V. Musser Chairman of the Board and Chief
Executive Officer of Safeguard
Scientifics, Inc., a strategic information
systems company(1)(5)................................ 1987 70
Lawrence Chimerine Managing Director and Chief Economist
of the Economic Strategy Institute and
President, Radnor Consulting Services, an
economic advisory firm(1)(2)(6)...................... 1987 56
Kailash C. Khanna Head of Technology, Operations and
Support of the Society for Worldwide
Interbank Financial Telecommunication s.c.,
a cooperatively owned provider of inter-bank
financial transfer services(7)....................... 58
John D. Loewenberg Managing Partner, JDL Enterprises, a
consulting firm(1)(2)(8)............................. 1996 56
Ira M. Lubert General Partner, Technology Leaders
Management L.P. and Technology Leaders
II Management L.P., and Managing Director,
Radnor Venture Management Company,
venture capital partnerships(9)...................... 1989 47
Thomas C. Lynch Senior Vice President of Safeguard
Scientifics, Inc., a strategic information
systems company(2)(10)............................... 1996 55
</TABLE>
(1) Member of the Compensation Committee (Michael A. Sanchez is a non-voting
member).
(2) Member of the Audit Committee.
(3) Mr. Michael Sanchez founded the Company in 1979 and has been its Chairman
and Chief Executive Officer since its inception. In addition to providing
strategic direction for the Company, Mr. Sanchez is currently responsible
for overseeing Sanchez's direct banking marketing activities.
3
<PAGE>
(4) Mr. Frank Sanchez has been the President and Chief Operating Officer of the
Company since 1994 and a director of the Company since his employment with
the Company began in 1980. In his capacity as Chief Operating Officer, Mr.
Sanchez is responsible for the daily operations of the Company, excluding
the direct banking marketing function. He is also responsible for
developing the Company's product and technical strategy. From 1980 until
1994, Mr. Sanchez was Executive Vice President in charge of Technology and
Product Development and was the principal architect of the PROFILE
integrated banking system.
(5) Mr. Musser has been Chairman of the Board and Chief Executive Officer of
Safeguard since 1953. Mr. Musser is also Chairman of the Board of Cambridge
Technology Partners (Massachusetts), Inc., a director of Coherent
Communications Systems Corporation, CompuCom Systems, Inc. and National
Media Corporation, and a trustee of Brandywine Realty Trust. Mr. Musser
also serves on a variety of civic, educational and charitable Boards of
Directors including The Franklin Institute and the Board of Overseers of
The Wharton School of the University of Pennsylvania and serves as Vice
President/Development, Cradle Liberty Council, Boy Scouts of America, as
Vice Chairman of The Eastern Technology Council, and as Chairman of the
Pennsylvania Council on Economic Education.
(6) Dr. Chimerine has served as Managing Director and Chief Economist of the
Economic Strategy Institute since August 1993 and as President of Radnor
Consulting Services since August 1991. From June 1991 to March 1994, Dr.
Chimerine was a Senior Economic Advisor of DRI-McGraw/Hill. Dr. Chimerine
is a director of Bank United Corp.
(7) Dr. Khanna joined the Society for Worldwide Interbank Financial
Telecommunication (S.W.I.F.T.) in September 1993, initially as Head of
Information Technology. In 1994, he was appointed the Head of Technology,
Operations and Support. Prior to joining S.W.I.F.T., Dr. Khanna served from
1988 until 1993 as Senior Vice President of Systems and Technology for the
CIT Group of Manufacturers Hanover Bank, an asset-based lending
institution. Dr. Khanna also serves on the International Advisory Committee
of Global One (a telecommunications joint venture of Sprint, Deutsche
Telekom and France Telecom) and the Information Systems & Technology
Council of the American Management Association.
(8) From May 1995 through March 1996, Mr. Loewenberg served as Executive Vice
President and Chief Administrative Officer of Connecticut Mutual, a life
insurance company. Prior to joining Connecticut Mutual, from March 1989 to
May 1995, Mr. Loewenberg served as Senior Vice President of Aetna Life and
Casualty, a multi-line insurer, and as Chief Executive Officer of Aetna
Information Technology, the information systems company of Aetna Life and
Casualty. Mr. Loewenberg is a director of CompuCom Systems, Inc. and
Diamond Technology Partners Incorporated.
(9) Mr. Lubert has served as a managing director of Radnor Venture Management
Company since 1988, a managing director since 1991 and a general partner
since 1995 of Technology Leaders Management L.P., and a managing director
and a general partner of Technology Leaders II Management L.P. since 1994.
Mr. Lubert is a director of CompuCom Systems, Inc., National Media
Corporation and The Score Board, Inc.
(10) Mr. Lynch has been a Senior Vice President of Safeguard since November
1995. Prior to that time, Mr. Lynch retired from the U.S. Navy as an
Admiral after 31 years, including serving as Superintendent of the U.S.
Naval Academy from 1991 through 1994 and the Director, Navy Roles and
Missions from 1994 through 1995. Mr. Lynch currently serves as director of
The Eastern Technology Council and is a member of the Cradle Liberty
Council, Boy Scouts of America and the U.S. Naval Academy Foundation.
(11) Michael A. Sanchez and Frank R. Sanchez are brothers.
Committees and Meetings of the Board of Directors
The Board held two meetings in 1996. The Company's Board of Directors
has appointed standing Audit, Compensation and Executive Committees. The Board
has not appointed a standing Nominating Committee. The Compensation Committee,
which met one time in 1996, fixes compensation levels, including incentive
compensation for all officers and other principal employees, and administers the
Company's stock option plans. The Audit Committee, which was constituted at the
September 11, 1996 Board Meeting, held its first meeting in February 1997. The
Audit Committee recommends the firm to be appointed as independent certified
public accountants to audit the Company's financial statements, discusses the
scope and results of the audit with the independent certified public
accountants, reviews with management and the independent certified public
accountants the Company's interim and
4
<PAGE>
year-end operating results, considers the adequacy of the internal accounting
controls of the Company, and reviews the non-audit services to be performed by
the independent certified public accountants. The Executive Committee, also
constituted at the September Board Meeting, did not meet during 1996. The
Executive Committee is empowered to exercise the powers granted in the by-laws
to the Board of Directors in respect to the routine management of the business
of the Company. All of the directors attended at least 75% of the total number
of Board and Committee meetings of which they were members during the period in
which they served as a director.
Directors' Compensation
Directors are elected annually and hold office until their successors
are elected and have qualified or until their earlier resignation or removal.
Directors are reimbursed for travel expenses incurred in connection with
attendance at meetings or other Company business, but directors are not
compensated for their services as directors.
Directors' Stock Options
Directors of the Company are eligible, in the discretion of the
Compensation Committee, to participate in the Company's 1995 Equity Compensation
Plan. In September 1996, John D. Loewenberg, received an option to purchase
15,000 shares at $4.75 per share, which option vests 100% on September 11, 2000,
subject to certain performance based acceleration provisions, and has a term of
ten years, and an option to purchase 18,400 shares at $4.75 per share, which
option vests 25% each year, commencing on September 11, 1997, and has a term of
ten years.
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board (the "Committee") reviews and
approves management recommendations for compensation levels, including incentive
compensation, for the executives of the Company, and administers the Company's
stock option plans.
The current voting members of the Committee are all outside directors
of the Company. Michael A. Sanchez, who is Chairman of the Board and Chief
Executive Officer of the Company, is a non-voting member of the Committee and
does not participate in decisions regarding his compensation.
Executive Compensation Policies
The Company is in a highly competitive industry. In order to succeed,
the Company believes that it must be able to attract and retain qualified
executives, promote among them the economic benefits of stock ownership in the
Company, and motivate and reward executives who, by their industry, loyalty and
exceptional service, make contributions of special importance to the success of
the business of the Company.
Base compensation levels are initially established for new executives
on the basis of subjective factors, with reference to the experience and
achievements of the individual and the level of responsibility to be assumed in
the Company. Any salary increases that are approved by the Committee also are
awarded based on subjective factors, including an executive's increased levels
of individual responsibility, maintaining an appropriate scale among Company
executives based on relative positions and responsibilities, the competitiveness
of the labor market in the technology sector, and on general levels of
inflation. Annual cash bonuses,
5
<PAGE>
which may be awarded following year-end at the discretion of the Committee, are
intended to motivate executives to achieve and exceed not only the targeted
tasks and objectives determined for each executive according to his or her
functional responsibilities within the organization but also the annual
corporate performance targets and strategic objectives as defined in the
Company's annual strategic plan.
The Company's Equity Compensation Plan is designed to attract, retain
and reward employees who make significant contributions toward achievement by
the Company of its financial and operational objectives. Grants under the Equity
Compensation Plan are intended to align the interests of executives and key
employees with the long-term interests of the Company's shareholders and to
encourage executives and key employees to remain in the Company's employ.
Generally, grants are not made every year, but are awarded subjectively, based
on a number of factors, including the Company's achievement of financial and
strategic objectives, the individual's contributions toward the achievement of
the Company's financial and operational objectives, and the amount and term of
options already held by the individual.
The Committee is aware that Internal Revenue Code section 162(m)
provides that publicly held companies may not deduct in any taxable year
compensation in excess of one million dollars paid to any of the individuals
named in the Summary Compensation Table that is not "performance based" as
defined in section 162(m). The Committee believes that annual levels of
executive compensation that are not performance based are not likely to exceed
one million dollars in the foreseeable future.
CEO Compensation
The Committee authorized an increase in Mr. Michael Sanchez's 1996 base
salary of approximately 18.5% over 1995; salary for Mr. Sanchez had not been
increased since 1994. The $20,000 bonus awarded to Michael Sanchez for 1996 was
based on a number of factors, including the success of the management team in
positioning the Company for, and successfully consummating, its initial public
offering; achieving significant progress in positioning the Company as a leader
in the direct banking market; and significantly increasing the pipeline for new
business in the emerging markets of Central Europe and the Asia Pacific Rim.
Other Executive Compensation
The Committee approved executive cash bonuses for 1996 based on the
reasons set forth above under discussion of the CEO's compensation. The
Committee granted options under the Company's 1995 Equity Compensation Plan to
certain of its new executives and employees and also granted options to certain
executives and employees for exceptional performance during 1996. The relative
number of options granted to new executives and employees was based on each such
individual's responsibilities assumed.
By the Compensation Committee:
Lawrence Chimerine John D. Loewenberg Warren V. Musser Michael A. Sanchez
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
Directors Chimerine, Loewenberg and Musser comprise the voting members
of the Compensation Committee. Mr. Sanchez, Chairman of the Board and Chief
Executive Officer of the Company, serves as a non-voting member of the
Compensation Committee. Mr. Sanchez did not participate in discussions regarding
his compensation.
EXECUTIVE COMPENSATION
Summary Compensation of Executive Officers
The following table sets forth information concerning compensation paid
during the last two fiscal years to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company whose
salary and bonus exceeded $100,000 in 1996 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Annual Compensation(1) Long Term Compensation
------------------------------------- ---------------------------
Awards
---------------------------
Other Securities
Annual Restricted Underlying All Other
Name and Principal Salary Bonus Compen- Stock Options/ Compen-
Position Year ($) ($) sation($)(2) Awards($) SARS (#) sation ($)(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael A. Sanchez, 1996 $ 190,000 $ 20,000 -- -- -- $ 5,700
Chairman and Chief
Executive Officer 1995 160,200 -- -- -- 24,000 7,956
- ---------------------------------------------------------------------------------------------------------------------
Frank R. Sanchez, 1996 $ 200,000 $ 30,000 -- -- -- $ 4,800
President and Chief
Operating Officer 1995 160,200 -- -- -- 24,000 5,797
- ---------------------------------------------------------------------------------------------------------------------
Richard H. Jefferson, 1996 $ 162,048 -- $ 112,246 -- -- --
Managing Director, Asia
Pacific Rim 1995 -- -- -- -- 18,000 --
- ---------------------------------------------------------------------------------------------------------------------
Thomas F. McAllister, 1996 $ 150,000 $ 20,000 -- -- -- $ 4,500
Senior Vice President,
Client Services 1995 137,738 20,000 -- -- -- 5,375
- ---------------------------------------------------------------------------------------------------------------------
Joseph F. Waterman, 1996 $ 140,000 $ 30,000 -- -- -- $ 4,200
Senior Vice President
and Chief Financial 1995 134,167 -- -- -- 31,200 5,607
Officer
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Officers which are
available generally to all salaried employees of the Company and certain
perquisites and other personal benefits, securities or property received by
the Named Officers which do not exceed the lesser of $50,000 or 10% of the
aggregate of any such Named Officer's salary and bonus in 1996.
(2) The amount stated for Mr. Jefferson includes payment of $71,417 for
expatriate housing as well as certain other overseas living expenses,
including, among other things, auto, travel and meal expenses.
(3) Represents a contribution under the Company's 401(k) plan.
7
<PAGE>
Stock Options
No options were granted to the Company's Named Officers during the last
fiscal year. The following table sets forth information with respect to options
exercised during fiscal year 1996 and the number of unexercised options and the
value of unexercised in-the-money options at December 31, 1996.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
- ----------------------------------------------------------------------------------------------------------------------
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired At Fiscal Year-End (#) At Fiscal Year-End ($)(1)
On Value
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Sanchez -- -- 9,600 19,800 $ 47,838 $ 87,669
- ---------------------------------------------------------------------------------------------------------------------------
Frank R. Sanchez -- -- 9,600 19,800 $ 47,838 $ 87,669
- ---------------------------------------------------------------------------------------------------------------------------
Richard H. Jefferson -- -- 9,000 9,000 $ 38,250 $ 38,250
- ---------------------------------------------------------------------------------------------------------------------------
Thomas F. McAllister -- -- 36,000 18,000 $ 221,220 $ 110,610
- ---------------------------------------------------------------------------------------------------------------------------
Joseph F. Waterman -- -- 11,400 25,200 $ 55,488 $ 110,619
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value of the stock at December 31, 1996, less the option
exercise price, multiplied by (ii) the number of shares subject to an
option. On December 31, 1996, the per share fair market value was $7.88.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company entered into a two-year employment contract effective
January 1, 1996 with Richard H. Jefferson, the Managing Director of the
Company's Asia-Pacific Rim activities. This agreement provides for the payment
of a base salary plus commissions, the reimbursement of relocation expenses to
Jakarta and the payment of certain living expenses. The Company has the option
to terminate this agreement at any time, subject to a severance payment equal to
three months base salary if such termination is for any reason other than
non-performance.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the
Company's Common Stock for the period beginning with the commencement of the
Company's initial public offering on November 13, 1996 through December 31, 1996
with the cumulative total return on the Nasdaq Index and the peer group index
for the same period. The peer group consists of SIC Code 737--Computer
Programming and Data Processing Services. The comparison assumes that $100 was
invested on November 13, 1996 in the Company's Common Stock and in each of the
comparison indices, and assumes reinvestment of dividends. The Company has
historically reinvested earnings in the growth of the business and has not paid
cash dividends on its Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURNS
160|------------------------------------------------------------------|
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| * |
140|------------------------------------------------------------------|
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| |
120|------------------------------------------------------------------|
| |
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100|*&#----------------------------------------------------------&#---|
| |
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80|------------------------------------------------------------------|
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60|------------------------------------------------------------------|
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40|------------------------------------------------------------------|
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20|------------------------------------------------------------------|
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0|----|--------------------------------------------------------|----|
Nov. 96 Dec. 96
*=Sanchez &=Nasdaq #=Peer Group
Nov-96 Dec-96
---------------------------
Sanchez 100 143
Nasdaq 100 100
Peer Group 100 97
CERTAIN TRANSACTIONS
The Company and Safeguard are parties to an Administrative Services
Agreement pursuant to which Safeguard provides the Company with administrative
support services. The administrative support services include consultation
regarding the Company's general management, investor relations, financial
management, certain legal services, insurance programs administration, audit
administration and tax research and planning. The annual administrative services
fee does not cover extraordinary services provided by Safeguard to the Company
or services that are contracted out. The agreement provides for automatic
quarterly renewals unless terminated by either party upon notice at least ninety
days prior to the end of any given quarter. The Company expensed $100,000 during
1996 for these services.
9
<PAGE>
On March 1, 1995, the Company made loans to Michael A. Sanchez and
Frank R. Sanchez in the amount of $114,000 each. The Company made these loans to
provide these executive officers with funding to exercise certain stock options
for the purchase of Common Stock as part of a Company-wide program enabling all
employees who had been granted options prior to December 31, 1993 to exercise
similar options. In consideration of these loans, Michael A. Sanchez and Frank
R. Sanchez executed full recourse notes to the Company. The notes have a 10 year
term and bear interest at the rate of 7.75% per annum. As of the date hereof,
the outstanding principal balance of the note delivered by Frank R. Sanchez was
$102,000. On December 27, 1996, Michael S. Sanchez delivered to the Company
$120,923 in full payment of the principal and accrued interest on the note.
During 1994, 1995 and January 1996, Safeguard and the Company entered
into certain arrangements whereby the Company would lend to Safeguard its excess
cash and receive a negotiated interest rate which was higher than the rate the
Company might realize by independently investing the funds, but which was less
than Safeguard's cost of funds. The applicable interest rates earned by the
Company during the periods covered by these arrangements ranged between five and
seven percent. The highest principal balance of these borrowings during 1996 was
$3,500,000. Full payment of all principal and accrued interest was delivered by
Safeguard to the Company on March 8, 1996. No further lending activity took
place subsequent to this date during 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
Since 1985, the Company has retained Coopers & Lybrand, L.L.P. as its
independent public accountants, and it intends to retain Coopers & Lybrand for
the current year ending December 31, 1997. A representative of Coopers & Lybrand
is expected to be present at the Annual Meeting, will have an opportunity at the
Annual Meeting to make a statement, if desired, and will be available to respond
to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities ("10%
Shareholders"), to file reports of ownership and changes in ownership of Common
Stock and other equity securities of the Company with the Securities and
Exchange Commission ("SEC") and the Nasdaq Stock Market. Officers, directors and
10% Shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it and written representations from certain
reporting persons that no other reports were required for those persons, the
Company believes that during the period from November 13, 1996 through December
31, 1996, its officers, directors and 10% Shareholders complied with all
applicable Section 16(a) filing requirements.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
Annual Meeting. If any other matter should properly come before the Annual
Meeting, however, the enclosed Proxy confers discretionary authority with
respect thereto.
The Company's Annual Report for 1996, including financial statements
and other information with respect to the Company and its subsidiaries, is being
mailed simultaneously to the shareholders but is not to be regarded as proxy
solicitation material.
Dated: April 28, 1997
10
<PAGE>
PROXY
SANCHEZ COMPUTER ASSOCIATES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby constitute and appoint Michael A. Sanchez, Frank R. Sanchez and Joseph
F. Waterman, and each of them, my true and lawful agents and proxies with full
power of substitution in each, to vote all shares held of record by me as
specified on the reverse side and, in their discretion, on all other matters
which may properly come before the 1997 Annual Meeting of Shareholders of
Sanchez Computer Associates, Inc. to be held on May 29, 1997, and at any
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS AND AS THE PROXIES MAY
DETERMINE IN THEIR DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THE PROXY CARD ON THE REVERSE SIDE AND
RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
* FOLD AND DETACH HERE *
Please mark [X]
your vote as
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 1.
1. ELECTION OF DIRECTORS WITHHOLD
Nominees: FOR FOR ALL
Michael A. Sanchez [ ] [ ] TO WITHHOLD AUTHORITY TO VOTE
Frank R. Sanchez FOR ANY INDIVIDUAL NOMINEE
Warren V. Musser WHILE VOTING FOR THE REMAINDER,
Lawrence Chimerine STRIKE A LINE THROUGH THE
Kailish C. Khanna NOMINEE'S NAME IN THE LIST.
John D. Loewenberg
Ira M. Lubert
Thomas C. Lynch
SIGNATURE(S)_______________________________________________DATE:______________
THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREIN. JOINT TENANTS MUST
BOTH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, OR FOR A CORPORATION OR PARTNERSHIP, PLEASE GIVE FULL TITLE.
* FOLD AND DETACH HERE *
Your Proxy vote is important,
regardless of the number of shares you own.
Whether or not you plan to attend the meeting in person,
please complete, date and sign the above Proxy card and
return it without delay in the enclosed envelope.
GRAPHIC
