<PAGE>

                                                                   EXHIBIT 10.14

                              PHAMIS INCORPORATED

                              INTERNAL MEMORANDUM


TO:

FROM:

DATE:

RE:  Memo of Understanding
     1996 Executive Bonus Program

You are eligible to participate in the 1996 Executive Bonus Program, as
described below.  Your 1996 target compensation is established at $ ________.
This is comprised of $ _____ in annual base salary and a target bonus of $ _____
or __ % of annual base salary for attaining 100% of your business objectives.

1.   Purpose:  To grant significant individual incentive awards for members of
     --------
     the executive team whose judgments and decisions impact overall business
     results.  These awards are designed to incent executives to attain specific
     annual business results, targets, and to reward them for exceptional
     individual accomplishment.

2.   Eligibility:  Vice Presidents and Senior Directors reporting to the
     ------------
     President/CEO are eligible to participate in the program.

3.   Target Compensation:  Target compensation is comprised of an annual base
     --------------------
     salary and a target bonus defined below as a % of annual salary for
     attaining 100% of business objectives.

4.   Distribution of Bonus:  Subject to paragraph 5 below, the target bonus will
     ----------------------
     be distributed based on achieving the results outlined in an attachment of
     the senior manager's individual goals.  Each goal has a target value, as
     defined as a % of base salary, and the goals will be evaluated and paid out
     according to the performance criteria noted.  The maximum bonus payout for
     each goal will not exceed the maximum potential bonus amount.  This will be
     calculated at year end and paid no later than March 15, 1997.

5.   Funding of Program and Minimum Threshold for Payment: Funding of this bonus
     ----------------------------------------------------
     program is contingent on the Company attaining its profit objectives as
     agreed to by the Board of Directors of PHAMIS Inc., and the individual
     position.  For purposes of this bonus program, annual profits are defined
     as "annual profits before taxes and bonuses, not including one time
     charges."

<PAGE>

1996 Executive Bonus Program
May 1996
Page 2

     a.   If annual profits are 100% of goal, or $7,900,000, then 100% of the
          earned bonus shall be funded.  Actual payment shall be subject to the
          manager's achievement of individual goals.

     b.   If annual profits are equal to or greater than $7,650,000 but less
          than $7,900,000, 75% of the earned bonus shall be funded. Actual
          payment shall be subject to the manager's achievement of individual
          goals.

     c.   If annual profits are equal to or greater than $7,400,000 but less
          than $7,650,000, 50% of the earned bonus shall be funded. Actual
          payment shall be subject to the manager's achievement of individual
          goals.

     d.   If annual profits are greater than 100% of goal, or $7,900,000,
          payment shall be made according to the following schedule:

          (salary x bonus %)  x  % completion  x  % profit factor

          % profit factor =  100% plus 1% for every $79,000 of profit over
                              $7,900,000, up to a maximum profit factor of 150%

          Example:  Net Profit Before Taxes & Bonuses = $8,295,000

                    ($8,295,000 - $7,900,000)/ $7,900,000 = 5%
                    100% + 5% = 105%

                    ($60,000 salary x 10% bonus) x 85% completion x 105% profit
                    factor =  $5,100 x 105%  =  $5,355

     e.   If annual profits are less than $7,400,000, the earned bonus will not
          be paid to the participant and PHAMIS, Inc. shall not have any future
          obligation to make such payment.

6.   Executives Newly Eligible to Participate in 1996:  Executive managers who
     -------------------------------------------------
     become eligible to participate in the plan after the start of the plan year
     due to new employment or a promotion shall receive a prorated bonus based
     on the number of months employed in the position in the plan year,
     attainment of individual written goals, and plan funding as described
     above.  Executives who are promoted or employed on or after October 1, 1996
     shall not be eligible to participate in the 1996 Executive Bonus Plan.
     Individuals who are promoted to a position receiving a higher bonus level
     during the year shall receive a prorated bonus based on the number of
     months employed in each position at the corresponding salary in the plan
     year, attainment of individual written goals, and plan funding as described
     above.

7.   Ineligible Participants:  Individuals who are promoted or employed on or
     -----------------------
     after October 1, 1996, shall not be eligible to participate in the 1996
     Executive Bonus Plan.  Individuals
<PAGE>

1996 Executive Bonus Program
May 1996
Page 3

     who during the year are removed from a position eligible to receive a bonus
     due to reasons of poor performance or misconduct shall not be eligible for
     payment of any bonus.

8.   Termination of Employment:  In the event that the executive's employment
     --------------------------
     with PHAMIS Inc. is voluntarily or involuntarily terminated for any reason
     during the term of the plan, he/she will cease to be a participant of the
     plan and will no longer be eligible for payment of any bonus.

9.   Participation in this bonus program does not constitute an employment
     agreement, and the company may terminate the executive's employment at any
     time, with or without cause or advance notice.

10.  This plan supersedes all previous bonus program agreements and contains all
     the terms of the plan.  It will become effective January 1, 1996, and
     subject to PHAMIS Inc. rights as described below to prospectively amend,
     modify or discontinue the plan at any time during the plan year, the plan
     will remain in effect through December 31, 1996.

11.  PHAMIS Inc. has developed the terms and goals of this plan based upon
     existing products, territorial, customer, and personnel assignments;
     existing business, market and economic conditions.  In the event that
     material changes occur in PHAMIS Inc. its products, its territorial,
     customer or personnel arrangements, or business market or economic
     conditions, or the forecasts are inaccurate, PHAMIS Inc. reserves the right
     to prospectively add to, amend, modify or discontinue any of the terms or
     goals of the plan at any time during the plan for legitimate business
     reasons.  Any addition, amendment, modification or discontinuance of the
     plan shall not be effective unless set forth in a written document signed
     by the President and Chief Executive Officer of PHAMIS Inc.

Approved:


__________________________________        __________________________________
Senior Staff                              Date

__________________________________        __________________________________
President and CEO                         Date

__________________________________        __________________________________
Senior Director, Human Resources          Date