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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 11, 1999
DAOU SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22073 330284454
(Commission File Number) (IRS Employer Identification No.)
5120 Shoreham Place, San Diego, California 92122
(Address of principal executive offices, including zip code)
(619) 452-2221
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On January 11, 1999, DAOU Systems, Inc. (the "Registrant") announced
that it had entered into a five-year contract to provide information
technology services to Saint Mary's Health Network of Reno, Nevada.
The registrant incorporates by reference herein (i) the Information
Management Agreement, dated as of January 1, 1999, between Saint Mary's
Health Network and DAOU Systems, Inc., attached hereto as Exhibit 10.1, and
(ii) press release dated January 11, 1999, attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
(i) Exhibit 10.1
Information Management Agreement, dated as of January 1, 1999, between
Saint Mary's Health Network and Registrant.
(ii) Exhibit 99.1
Press Release dated January 11, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 15, 1999 DAOU SYSTEMS, INC.
By: /s/ Fred C. McGee
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Fred C. McGee,
Chief Financial Officer
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CONFIDENTIAL TREATMENT REQUESTED
INFORMATION MANAGEMENT AGREEMENT
BETWEEN
SAINT MARY'S HEALTH NETWORK
AND
DAOU SYSTEMS, INC.
CONFIDENTIAL
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
TABLE OF CONTENTS
1. SERVICE
1.1 SCOPE OF SERVICE
1.2 SUPPLEMENTAL SERVICES
1.3 THIRD PARTY VENDORS
2. PERSONNEL
2.1 EXECUTIVE ADMINISTRATOR
2.2 CONTRACT ADMINISTRATOR
2.3 EXECUTIVE ADMINISTRATOR AND CHIEF INFORMATION OFFICER
2.4 CLIENT MEETINGS
2.5 STATUS OF DAOU AND DAOU EMPLOYEES
2.6 EMPLOYEES
2.7 ***
2.8 ACCEPTANCE OF DAOU EMPLOYEES
2.9 REPLACEMENT OF DAOU EMPLOYEES
3. TERM
3.1 TERM OF AGREEMENT
4. TERMINATION
4.1 TERMINATION OF AGREEMENT
5. SPECIFIC REQUIREMENTS
5.1 SITE VISITS
5.2 ADVERTISING
5.3 EXECUTIVE ADMINISTRATOR VISITS
5.4 OTHER PROJECTS
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
6. FEES
6.1 INFORMATION MANAGEMENT SERVICES
6.2 ANNUAL ADJUSTMENTS
6.3 OUT OF POCKET EXPENSES
6.4 CURRENT WORKLOAD
6.5 PERFORMANCE INCENTIVES
6.6 SUPPLEMENTAL SERVICES
6.7 LONG RANGE PLANNING
6.8 CAPITAL EXPENDITURE FEES
6.9 TAX EXEMPT CERTIFICATE
7. ADDITIONAL CONDITIONS AND PROVISIONS
7.1 NOTICES
7.2 CONFIDENTIALITY OF ENTIRE AGREEMENT
7.3 MISCELLANEOUS
7.4 REMEDIES, WARRANTY, INDEMNITY AND LIMITATION OF LIABILITY
7.5 ENTIRE AGREEMENT
EXHIBIT A INFORMATION MANAGEMENT SERVICES
EXHIBIT B LEVEL OF SERVICE
EXHIBIT C PERFORMANCE CRITERIA
EXHIBIT D INDEMNITY
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
INFORMATION MANAGEMENT AGREEMENT
Agreement made and entered into as of January 1, 1999 by and between
Saint Mary's Health Care Corporation, doing business as Saint Mary's Health
Network (SMHN), a not-for-profit corporation organized and existing under
the laws of the State of Nevada, hereinafter referred to as "Client," and
DAOU Systems, Inc., a Delaware corporation qualified to transact business in
the State of Nevada, hereinafter referred to as "DAOU."
WITNESSETH
WHEREAS, Client presently operates a Healthcare System including acute
health care facilities and physician clinics in Nevada, which are in need of
the services of a company that can manage, maintain, modify and enhance a
sophisticated Corporate Information Services Department and a
Telecommunications Department (not to include the PBX Operators) on a 24
hours a day, seven days a week, 365 days a year basis; and
WHEREAS, DAOU represents itself as being duly qualified to provide such
services to Client.
NOW, THEREFORE, Client and DAOU, in consideration of the mutual
promises and covenants contained herein, mutually agree as follows:
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1. SERVICE
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1.1 SCOPE OF SERVICE
DAOU agrees to furnish Client Information Management Services for both
the CIS Department and the Telecommunications Department (not to include the
PBX Operators), as specifically described in EXHIBIT A which represents the
current services being performed. DAOU and Client may expand Services
provided by DAOU only by execution of amended exhibits signed by both
parties. The level of service, as described in EXHIBIT B, represents the
current level of services being performed and is the basis for the monthly
fees provided for in Section 6.1 If during the term of this Agreement Client
requests a change to the level of service, upward or downward, the total
monthly fee shall change as mutually agreed by the parties.
1.2 SUPPLEMENTAL SERVICES
Upon the mutual agreement of Client and DAOU, DAOU shall provide
supplemental services, in addition to those listed in the attached exhibits,
at the supplemental rates set in Section 6.6. Any such supplemental services
shall be in accordance with all terms and conditions of this
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
Agreement. Nothing in this Agreement shall require that either Client or
DAOU agree to any supplemental services.
1.3 THIRD PARTY VENDORS
DAOU acknowledges that many of Clients installed hardware, software and
phone systems are governed by existing agreements between Client and other
vendors. DAOU will act on behalf of Client when working with these vendors and
honor in a timely manner all pre-existing contractual conditions and agreements
entered into by Client. Client confirms that all of the cost increases in these
agreements are reflected in the Client's current operating or capital budget, as
applicable, and will be reflected by Client in future budgets.
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2. PERSONNEL
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2.1 EXECUTIVE ADMINISTRATOR
DAOU designates *** as the current Special Projects Administrator and
Executive Administrator for this project, who shall be responsible for
oversight of DAOU's performance and for coordinating with DAOU's Chief
Information Officer (***) with regard to the proper execution of this
Agreement and obligations and duties hereunder. In the event that either the
person identified as the Executive Administrator or CIO does not continue to
serve in his respective position, Client may terminate the Agreement for
cause. Any replacement of either person requires the prior approval of
Client.
2.2 CONTRACT ADMINISTRATOR
Client shall designate the Chief Financial Officer, or his designee,
as its Contract Administrator for this project. The Contract Administrator
shall be responsible for communicating with DAOU's Executive Administrator,
or his designee, with regard to the proper performance of this Agreement and
the obligations and duties thereunder.
2.3 EXECUTIVE ADMINISTRATOR AND CHIEF INFORMATION OFFICER
DAOU will designate, with prior approval of Client, an Executive
Administrator and CIO. The Executive Administrator will have those duties
set forth in Section 2.1 and the CIO shall be responsible for coordinating
DAOU's efforts hereunder and for communicating with Client's Contract
Administrator with regard to the proper performance of its duties and
obligations under this Agreement.
2.4 CLIENT MEETINGS
DAOU shall host semi-annual meetings, which will include Client
Contract Administrator. The purpose of these meetings is to monitor DAOU's
performance at Client's site.
2.5 STATUS OF DAOU AND DAOU EMPLOYEES
It is understood that DAOU and its employees and agents will act
hereunder as independent contractors, and DAOU and its employees and agents
agree that they shall not have
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
any claim under this Agreement or otherwise against Client for vacation pay,
sick leave, retirement benefits, social security, workers compensation,
disability or unemployment insurance benefits of any kind. All tax and other
payments required by government bodies and all other benefits shall be the
sole responsibility of DAOU. DAOU and its employees and agents, hereby agree
to perform their work and functions at all times in strict accordance with
currently approved methods and practices and that the sole interest of DAOU
is to ensure that the Client's CIS and Telecommunications Departments shall
be managed in a competent, efficient and satisfactory manner. During the term
of this Agreement or any renewal term, DAOU agrees that its employees and
agents shall abide by Client standards of conduct.
2.6 EMPLOYEES
Subject to the exceptions set forth herein, Client shall not hire DAOU
employees during the term or any extension of this Agreement for a period of
*** following the termination of the Agreement. The following exceptions
shall permit Client to hire DAOU employees with the payments noted (as
applicable): ***
2.7 *** In the event that *** Client may terminate this Agreement upon
thirty (30) days written notice to DAOU ***.
2.8 ACCEPTANCE OF DAOU EMPLOYEES
Prior to DAOU placing any employee at Client site, Client's Contract
Administrator shall have the right to review candidate's employment record
and qualifications.
2.9 REPLACEMENT OF DAOU EMPLOYEES
Subject to the provisions of Sections 2.1 and 2.3, DAOU may
temporarily or permanently replace its employees provided it gives prior
notice to Client of its intention to replace such employee.
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3. TERM
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3.1 TERM OF AGREEMENT
The initial term of this Agreement shall be for a period of five (5)
years commencing on January 1, 1999 and continuing through December 31, 2003
with an option, by mutual agreement, to extend for an additional one (1) year
thereafter.
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4. TERMINATION
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4.1 TERMINATION OF AGREEMENT
This Agreement may be terminated without cause upon either party serving
upon the other a written notice of its intent to terminate; such termination
shall be effective ninety (90) days following receipt of such notice. In the
event that either party commits a material breach of this
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
Agreement and fails to cure such breach within thirty days of receipt of
notice of the breach, the Agreement shall be terminated for cause. If DAOU
terminates the Agreement for cause and such termination is disputed by
Client, DAOU will continue to provide to Client the services set-forth in
EXHIBIT A and Client shall continue to pay DAOU its fees and expenses
pursuant to this Agreement in a timely manner; the obligation to provide
these services and make such payments shall last only until conclusion of the
dispute resolution proceeding described in Section 7.3, but in no event shall
it exceed ninety (90) days from the date of notice.
The parties agree that upon termination of this Agreement for any
reason DAOU will assign and the Client will accept assignment of and assume
all rights and obligations under existing agreements and contracts which DAOU
entered into and are contemplated by this Agreement or otherwise approved by
Client related to (i) the Information Management Services as set forth in
EXHIBIT A, or (ii) Client's capital expenditure purchases from or through
DAOU, referenced in Section 6.8 of this Agreement. In the case of such
termination, Client will be charged and/or credited, as applicable, for
products/services which have been prepaid or with deferred billings,
respectively, in order to insure that Client incurs the appropriate
benefit/cost of each such products/services. For example, if DAOU has
prepaid a software maintenance fee on an annual basis, Client shall assume
the software maintenance agreement and receive the benefit of the balance of
the software maintenance for the year but shall pay to DAOU the prorated
portion of the maintenance fee for the period after termination of this
Agreement for which Client receives these maintenance services. Similarly, in
the case of a software maintenance agreement with deferred annual billing for
which DAOU may have already been paid by Client as part of the operating
budget pursuant to Section 6.1 of this Agreement, DAOU will credit to Client
an amount reflecting the amounts paid to DAOU for which DAOU has not been
billed and Client will assume responsibility for payment in full of the
software maintenance fee.
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5. SPECIFIC REQUIREMENTS
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5.1 SITE VISITS
DAOU shall have the right to six (6) visits per year by potential DAOU
clients. The timing of such visits shall be agreed to in advance by client.
DAOU agrees that such visits shall not interfere with Client's normal
operation and DAOU's performance under this Agreement. Client agrees to use
its best efforts in accommodating DAOU's needs in scheduling such visits.
5.2 ADVERTISING:
DAOU agrees that it will not use Clients name in advertising without
prior approval from Client.
5.3 EXECUTIVE ADMINISTRATOR VISITS
DAOU's Executive Administrator will visit Client at least monthly to
ensure Client's satisfaction with DAOU's performance hereunder
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
5.4 OTHER PROJECTS
DAOU will not accept any new business within the Reno Sparks area without
prior approval of Client Contract Administrator during the term of this
Agreement.
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6. FEES
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6.1 INFORMATION MANAGEMENT SERVICES
The annual fee for the services to be performed pursuant to Section
1.1 of this Agreement shall be Seven Million, Four Hundred and Seventy-Five
Thousand, Seven Hundred and Eighty-Two Dollars ($7,475,782) and will be paid
in twelve (12) equal monthly installments. The base management fee is equal
to Client's current 1999 operating budget for the services provided herein
less depreciation. The base management fee for subsequent years shall be
adjusted for the addition or deletion of systems (including any new hardware
and/or software applications), as determined by Client. The monthly payments
shall be paid in advance on the first day of each month, with payment to be
received by the fifth (5th) day, PROVIDED, HOWEVER, that the payment for
January, 1999 shall be paid within two (2) days of execution of this
Agreement. If services are paid for by Client, but are not performed, Client
shall be entitled to a credit or return of fees paid related thereto. If
during the term of this Agreement Client requests a change to the level of
service, upward or downward, the total monthly fee shall change as mutually
agreed by the parties.
6.2 ANNUAL ADJUSTMENTS
Beginning January 1, 2001, and then each January 1 thereafter, for the
term of this Agreement, an annual increase of ***% will be added to the then
current Base Fee for all salaries and wages. In addition, beginning January
1, 2001, and then each January 1 thereafter, for the term of this Agreement,
for all other components of the base fee other than salaries and wages, an
increase to Base Fee will be made based on the then current Consumer Price
Index.
6.3 OUT OF POCKET EXPENSES
Except as otherwise provided herein, out-of-pocket expenses incurred
by representatives of DAOU in connection with this Agreement, including
recruitment and relocation costs, shall be reimbursed by Client.
Out-of-pocket expenses shall not exceed $*** per year unless agreed to in
writing by Client in advance. DAOU shall use best efforts to contain such
expenses and Client reserves the right, after discussion with DAOU's
Executive Administrator to disallow expenses if deemed unreasonable.
6.4 CURRENT WORKLOAD
Compensation for services rendered is based on current workload and
number of devices. The number of devices is currently ***. As numbers of
devices (nodes) increase or decrease by increments of ***, contract fees will
be adjusted upward and downward by $*** per month for the remainder of the
Agreement.
6.5 PERFORMANCE INCENTIVES
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
The annual incentive fee, based upon successful achievement of the
performance criteria set-forth in EXHIBIT C, may be paid to DAOU on or before
March 1 of the year following DAOU's performance. This fee shall not exceed
$***. The incentive fee may only be used by DAOU to make bonus payments to
the DAOU employees working at Client's site as determined by DAOU's Executive
Administrator based upon the employee's contribution to the achievement of
the performance criteria.
In addition, a long term incentive may be paid to DAOU at the end of
the initial Agreement period based upon DAOU's successful implementation of
the long range plan. Determination of the amount paid to DAOU shall be at
Client's sole discretion but shall not exceed $500,000.
6.6 SUPPLEMENTAL SERVICES
In the event Client requires and agrees to supplemental services, DAOU
shall be paid at a rate of $*** per person per day, for supplemental services,
as agreed to by Client, plus out of pocket expenses.
6.7 LONG RANGE PLANNING
DAOU shall conduct the process to prepare a Long Range Information
Systems Plan covering the initial term of this Agreement. This plan shall
involve key Client personnel, as defined by Client. DAOU will revise this plan
annually in concert with Client, and will provide written status reports
covering progress on the plan together with any major revisions.
6.8 CAPITAL EXPENDITURE FEES
In addition to the Base Fee set forth in Section 6.1, above, Client
will purchase from or through DAOU all computer hardware, software,
consulting assistance, and provide manpower required for the installation or
maintenance of computer or network systems which historically were recorded
as capital expenditures by Client. The prices to be paid to DAOU will be
mutually agreed to in advance of the contract year in question, with the
first year contract prices being agreed upon by March 1, 1999. All title to
hardware or software shall be in Client's name. DAOU shall be entitled to a
security interest in the hardware and/or software purchased, only to the
extent DAOU has made payment for such hardware and/or software and for which
Client has not paid DAOU. Client shall execute such documentation as DAOU
shall reasonably request to perfect its security interest. All necessary
software and licenses will be executed on behalf of Client by DAOU utilizing
a power of attorney provided to it by Client. Client reserves the right to
cancel any purchase during the contract year as dictated by changes in
business conditions, provided that DAOU is held harmless from and does not
incur any loss as a result of cancellation. Similarly, Client may add
purchases during the contract year at prices and payment terms mutually
agreed with DAOU. All cancellations and additions will be reflected in a
revised capital budget for the year in question.
The parties acknowledge that certain salaries and expenses related to
the implementation of upgrades to software systems or projects of similar
scope have been and will be included in the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
annual base fee set forth in Section 6.1. Such salaries and expenses will be
deducted in computing the capital expenditure fee(s).
Capital expenditure fees will be paid to DAOU on or before the date
DAOU is required to make payment to the respective vendors. DAOU agrees to
use reasonable commercial efforts to schedule products and systems for
delivery as close to the planned installation schedule as practicable under
all facts and circumstances.
6.9 TAX EXEMPT CERTIFICATE
Client will provide DAOU with a tax exempt certificate with respect to
the fees to be paid for products and services under this Agreement. DAOU
shall itemize separately items of software and hardware purchased on behalf
of Client.
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7. ADDITIONAL CONDITIONS AND PROVISIONS
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7.1 NOTICES
All notices, consents, approvals, waivers and elections which any
party shall be required or shall desire to make or give under this Agreement
shall be in writing and shall be sufficiently made or given only when mailed
by U.S. mail, certified, return receipt requested, addressed:
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TO CLIENT AT: TO DAOU SYSTEMS, INC. AT:
SMHN DAOU SYSTEMS, INC.
1155 West Fourth Street, Suite 216 5120 Shoreham Place
Reno, NV 89503 San Diego, CA 92122
ATTN: RONALD R. LONG ATTN: DAN L. PORTER
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or to such other address as any party hereto shall designate by like notice
given to the other parties hereto. Notices, Consents, Approvals, Waivers and
Elections given or made as aforesaid shall be deemed to have been given and
received on the next business day following the date of the mailing thereof
as aforesaid.
7.2 CONFIDENTIALITY OF ENTIRE AGREEMENT
DAOU and Client agree that, except as set forth below, the terms of
this Agreement inclusive of dollar amounts, shall remain confidential and
shall not be disclosed directly or indirectly by the parties, their counsel,
agents or employees or so long as they are employed with the party, except as
required to accomplish the matters set forth above, or where such disclosure
is required by law. The parties acknowledge that, as a public corporation,
DAOU is required to disclose publicly the existence of the Agreement and its
material terms and conditions and that the Agreement must be filed with the
Securities and Exchange Commission (the "Commission"). DAOU intends to apply
for confidential treatment of those portions of the Agreement which qualify
for confidential treatment under the rules of the Commission, but cannot
guarantee concurrence of the Commission with DAOU's request.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
7.3 MISCELLANEOUS
A. Confidentiality of Information: DAOU shall not disclose
information relating to Client operations to persons other than members of
the Medical Staff, State Licensing Boards, or Joint Commission on
Accreditation of Healthcare Organizations without written consent of Client,
or duly issued Court Process or Orders.
B. Confidentiality of Data: All data on the Client network shall
remain confidential. This provision shall survive the term(s) of this
Agreement.
C. Assignability: Neither party may assign or transfer its rights,
interests, obligations, and/or duties under this Agreement without the prior
approval of the other party, which approval shall not be unreasonably withheld.
D. Headings: The headings of the various sections of this Agreement
are inserted merely for the purpose of convenience and do not expressly or by
implication limit or define or extend the specific terms of the section so
designated.
E. Governing Law: This Agreement shall be deemed to have been made and
shall be constructed and interpreted in accordance with the laws of the State of
Nevada, without regard to the application of conflict of laws principles.
F. No Right to Rely: Nothing stated herein shall give any person other
than Client and it's affiliates and Clients receiving services hereunder any
right to rely on any of the rights or obligations hereunder and likewise no
other person shall be a third-party beneficiary hereof.
G. Existing Laws: This Agreement shall be constructed to be in
accordance with Federal and State Statues.
H. Severability: If any provision of provisions of this Agreement are
held to be illegal, invalid or unenforceable in any respect, such provisions
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provisions never comprised a part
hereof, and the remaining provisions hereof shall remain in full force and
effect and shall not be affected by the illegal, invalid or enforceable
provision or by their severance from this Agreement. In the event of any such
holding, the parties will immediately commence negotiations to remedy such
illegality or invalidity.
I. Construction: This Agreement shall be construed in its entirety
according to its plain meaning and shall not be construed against the party who
provided or drafted it.
J. Notification of Adverse Action: Each party shall notify the other
party in a timely manner of any action or situation that might or will
materially affect the party's ability to carry out its responsibilities under
this contract.
K. Waiver: The Waiver by either party of any breach of any provision
of this Agreement or warranty or representation herein set forth shall not be
constructed as a waiver of any subsequent breach of the same or any other
provision.
L. Medicare Books and Records: DAOU agrees to make available, upon
request, to the Secretary of Health and Human Services and the Comptroller
General of the United States, or their authorized representatives, successors or
assigns, this Agreement, and all books, documents and records related to the
nature and extent of the costs hereunder for a period of four (4) years after
the furnishing of goods and the costs hereunder for a period of four (4) years
after the furnishing of goods and services. In addition, DAOU hereby agrees
that if services under this Agreement are to be provided by a subcontract with a
related organization not contracting
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
directly with Client, DAOU shall require in writing that the subcontractor
make available, upon request, to the Secretary of Health and Human Services
and the Comptroller General of the United States, or their authorized
representatives, successors or assigns, this Agreement, and all books,
documents and records related to the nature and extent of the costs hereunder
for a period of four (4) years after the furnishing of goods and services.
If DAOU is requested to disclose this Agreement or any books or documents or
records pursuant to this paragraph, DAOU shall immediately notify SMHN of the
nature and scope of this request.
M. ADA Compliance: DAOU agrees to uphold and abide by all laws
pertaining to equal access and employment opportunities. These laws include
Title VI & VII of the Civil Rights Act of 1964 as amended, the Age
Discrimination in Employment Act of 1967, as amended, the Age Discrimination in
Employment Act of 1975, the Equal Pay Act of 1963, Section 501 & 504 of the
Rehabilitation Act of 1973, the Civil Rights Act of 1991 and the Americans With
Disabilities Act of 1990. DAOU agrees to offer reasonable accommodation, as
required by the law, except where such accommodation poses an undue hardship to
the organization.
N. Dispute Resolution: Any problem or dispute arising under this
Agreement and/or concerning the terms of this Agreement, including those
provisions requiring decisions with the agreement of both parties, shall be
submitted to mediation prior to any action at law or in equity. Such mediation
shall be initiated by either party making a written demand for mediation on the
other party, which demand shall set out the nature and basis of the dispute and
relief sought. The cost of mediation shall be shared equally by the parties, and
the mediation shall be facilitated by a neutral mediator (e.g. JAMS). The
parties will use their best efforts to conclude any such mediation within sixty
(60) days of commencement. If the dispute cannot be resolved by the mediation
process described above, either party may commence an action in the ***
O. Ownership: All equipment purchased by DAOU for Client shall be the
sole property of Client.
P. Project Delays: If DAOU's ability to perform its obligations
hereunder are materially delayed by virtue of Client's conduct or demands,
DAOU's Executive Administrator and Client's Contract Administrator shall meet to
discuss reasonable additional fees which Client might be required to pay DAOU
based on the actual cost of the delay.
7.4 REMEDIES, WARRANTY, INDEMNITY AND LIMITATION OF LIABILITY
Remedies, warranty terms, indemnity obligations and limitations of
liability shall be as set forth on EXHIBIT D.
7.5 ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto and supersedes all prior agreements to include the Network Management
Services Contracts executed on May 15, 1995, November 18, 1996, and November
17, 1997, and including amendments executed on July 15, 1995, April 15, 1996,
May 19, 1997 and September 1, 1997. This Agreement may be amended at any time
by mutual agreement of the parties, provided that before amendment shall be
operative and valid, it shall be reduced to writing and signed by an
executive officer of each of the respective parties.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first herein above written.
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SAINT MARY'S HEALTH NETWORK DAOU SYSTEMS, INC.
By: ______________________________ By: _______________________________
Jeff K. Bills Georges J. Daou
President and Chief Executive Chief Executive Officer Officer
WITNESSES:
_________________________________ ___________________________________
(Name and Title) (Name and Title)
_________________________________ ___________________________________
Signature Signature
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
INFORMATION MANAGEMENT SERVICES
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
LEVEL OF SERVICE
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
PERFORMANCE CRITERIA
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT D
Remedies, Warranties, Indemnity and Limitation of Liability
Additional Terms and Conditions
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Contact:
Aruna Lalwaney
800/578-3268
[email protected]
www.daou.com
DAOU SYSTEMS, INC. ANNOUNCES $100 MILLION, FIVE-YEAR INFORMATION TECHNOLOGY
CONTRACT WITH SAINT MARY'S HEALTH NETWORK, RENO, NEVADA
SAN DIEGO--(BW HealthWire)--Jan. 11, 1999--DAOU Systems, Inc. (Nasdaq:DAOU
- -news) announced today an approximately $100 million Information Systems
Outsourcing contract with Saint Mary's Health Network, Reno, Nevada.
The contract, which spans over five years, encompasses DAOU Systems, Inc.
providing a complete range of Information Technology (IT) outsourcing
solutions to Saint Mary's Health Network.
Georges Daou, chief executive officer of DAOU Systems, Inc., stated, "We
have successfully completed a comprehensive acquisition strategy, and now
provide a full complement of IT outsourcing services including, Application
Implementation, Communications Infrastructure, including voice, video, the
network and the desktop, Consulting and Data Integration.
"DAOU will leverage its relationships with the leading Healthcare
Information Services (HIS) vendors, hardware vendors and apply our expertise
to improve the effectiveness of Saint Mary's IT operations. Our partnering
with Saint Mary's represents the first major fulfillment of our ability to
provide a full range of, single source, value-added solutions."
Jeff Bills, president and CEO of Saint Mary's Health Network, stated, "We
are very pleased to have DAOU handle all of our Information Technology needs.
They have demonstrated to us over the years that they can enhance our
productivity and efficiency, and ultimately help us deliver better
healthcare. That is why we have entered into this strategic partnership."
Saint Mary's has allocated the approximately $100 million agreement across
professional services, vendor support contracts and capital expenditures to
execute their IT strategy under DAOU management. DAOU management will be
responsible for the entire IT budget and currently plans to have about 60
employees on site and leverage its industry relationships to enhance support
contracts where possible.
DAOU also plans to utilize its own nearly 800 person workforce to deliver on
portions of the operating budget that DAOU services can handle productively
and economically for Saint Mary's. The contract, which spans five years, has
a renewal option for a sixth year.
DAOU Systems, Inc. is a provider of integrated Information Technology (IT)
solutions and services to the U.S. healthcare industry. DAOU's capabilities
range from up-front strategic consulting to IT system design, implementation
and long-term tactical support. DAOU's IT offerings include data,
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voice and video networking, applications consulting and implementation, as
well as operational and Internet solutions.
DAOU has nearly 800 employees, and has provided services to more than 1,300
healthcare organizations, including many of the nation's top 100 integrated
delivery systems. DAOU's clients include organizations such as Catholic
Health Care West, The Cleveland Clinic, Mercy Health Services, Saint Barnabas
Health Care, and Humana Healthcare. More information about DAOU Systems can
be found at www.daou.com on the World Wide Web.
Except for the historical information contained herein, the matters discussed
in this press release are forward-looking statements that involve numerous
risks and uncertainties. The company's actual results could differ materially
from those projected in such forward-looking statements and will depend upon
a number of factors, including those discussed in the company's filings with
the Securities Exchange Commission and other press releases of the company.
