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Transition Services Agreement

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Sectors: Health Products and Services
Governing Law: Minnesota, View Minnesota State Laws
Effective Date: February 29, 2008
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Exhibit 10.1

TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this " Agreement" ) is made effective February 29, 2008 among PDG, P.A., a Minnesota professional corporation (" PDG" ), Dentist Specialists of Minnesota, P.A., a Minnesota professional corporation, (" Dental Specialists" and collectively with PDG, the " PDG Parties" ), American Dental Partners, Inc., a Delaware corporation (" ADPI" ), and PDHC, LTD., a Minnesota corporation (" PDHC" and collectively with ADPI, the " ADPI Parties" ). The PDG Parties and the ADPI Parties are hereinafter referred to as the " Parties" ). Background Information

A. The Parties, together with Northland Dental Partners, PLLC, fka James Ludke, D.D.S., PLLC, a Minnesota Professional limited liability company (" Northland" ), are the parties to a Settlement Agreement dated December 26, 2007 (the " Settlement Agreement" ). Pursuant to the Settlement Agreement, the Parties and Northland (the " Settlement Parties" ) settled various claims among the Settlement Parties, including those related to the Action, as defined in the Definitive Settlement Agreement having the same date as this Agreement among the Settlement Parties (the " Definitive Agreement" ). B. The PDG Parties and PDHC are also the parties to an Amended and Restated Service Agreement dated January 1, 1999, as amended in writing (the " Service Agreement" ), pursuant to which PDHC had been providing certain services necessary for the day-to-day administration of the non-dental aspects of the PDG Parties' dental practices. The Service Agreement has been terminated effective December 31, 2007. However, pursuant to the Settlement Agreement, PDHC has continued to provide certain of the same services it had provided under the Service Agreement, and PDG Parties have agreed to pay fees to PDHC and reimburse certain of PDHC' s expenses for such continued services. Although the terms related to those services and payments are in effect pursuant to the Settlement Agreement, the Parties are entering into this Agreement as contemplated by the Settlement Agreement to set forth more definitive terms related thereto. The Parties, together with Northland, intend that this Agreement, together with the Definitive Agreement, shall, as provided in Section 5(b) of this Agreement, supersede the Settlement Agreement.

Statement of Agreement The Parties hereby acknowledge the accuracy of the foregoing Background Information and agree as follows: Section 1. Definitions . As used in this Agreement, the terms identified below in this Section 1 shall have the respective meanings given to them in this section. Other capitalized terms are defined in other provisions of this Agreement and shall have the respective meanings given those terms in such other provisions. Any other capitalized terms used, but not otherwise defined, in this Agreement shall have the respective meanings given those terms in the Definitive Agreement.

" Clinics" shall mean: (a) the PDG Offices; and (b) each PDHC Office in which a PDG Doctor is currently practicing until, with respect to each such PDHC Office, the earlier of the Doctor Transition Date or the date on which no PDG Doctor is still practicing in that PDHC Office. " Clinic Expenses" shall mean any of the following reasonable (with " reasonable" for purposes of this definition being determined with reference to historical practices and current market conditions) operating or non-operating expenses incurred by PDHC in the provision of Clinic Services to the PDG Parties or their Doctors, without any mark-up and net of any discounts, rebates and allowances historically allocated:

(a) The salaries, benefits, and other regular direct costs of all employees of PDHC performing Clinic Services at a Clinic, but excluding costs of any Resource Services indicated on Exhibit A , including the cost of services historically allocated as Clinic Expense and listed but not checked on Exhibit A , including without limitation the cost of group practice managers;

(b) Dental malpractice liability insurance expenses for PDHC employees, as applicable (but only if PDG Parties fail to provide such coverage for such PDHC employees); workers' compensation premiums for PDHC employees at each Clinic; and comprehensive general liability insurance expenses covering each Clinic and employees of PDHC at each Clinic;

(c) The cost of laboratory services; (d) The cost of dental supplies (including but not limited to products, substances, items, or dental devices), and office supplies; (e) The expense of obtaining, leasing or using Clinics and related equipment, including without limitation utilities, depreciation, and repairs and maintenance;

(f) Personal property and intangible taxes assessed against PDHC' s assets which are provided or otherwise employed by PDHC for the benefit of the PDG Parties;

(g) Any tax assessed against PDHC (other than income taxes) in connection with the services provided by PDHC hereunder; and

(h) Any other cost or expense designated as a Clinic Expense pursuant to this Agreement or incurred by PDHC in connection with the provision of Clinic Services to the PDG Parties or their Doctors, but excluding any costs and expenses expressly excluded above.

" Clinic Services" shall mean the business, administrative, and management services, other than Resource Services, reasonably necessary for the operation of the Clinics on a basis generally consistent with the past practices of Parties prior to January 1, 2008, including without limitation the provision of supplies, support services, non-dentist personnel and office space, but subject to modifications resulting from the implementation of the Settlement Agreement, the Definitive Agreement, and this Agreement; provided that PDHC shall not be obligated to advance funds to PDG Parties for any purpose or provide additional equipment to the PDG Parties.

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" Mixed Office" shall mean any PDHC Office in which a PDG Doctor is practicing or any PDG Office in which a Non-PDG Doctor is practicing. Such Offices of each Party and the other Party' s doctors practicing in those Offices as of the date of this Agreement are identified on the attached Exhibit B . An Office shall no longer be deemed to be a Mixed Office on the date that, in the case of a PDHC Office, no PDG Doctors are practicing in that office, and in the case of a PDG Office, no Non-PDG Doctors are practicing in that Office. " Resource Services" shall mean those services identified on the attached Exhibit A . The items identified on such Exhibit A shall be generally understood as being those services associated with each topic on such exhibit as the same were provided by PDHC while the Service Agreement was in effect, subject to modifications resulting from the implementation of the Settlement Agreement, the Definitive Agreement, and this Agreement.

" Services" shall mean the Clinic Services and the Resource Services.

Section 2. PDHC Services . (a) Clinic Services . ADPI Parties shall provide Clinic Services to the PDG Offices through the Closing Date, and, with respect to each PDG Doctor practicing in a PDHC Office, ADPI Parties shall provide Clinic Services until the earlier of Doctor Transition Date or the date on which such PDG Doctor is no longer practicing in that PDHC Office. Effective as of the Closing Date, the PDG Parties shall employ all of their own Clinic-based staff within the PDG Offices, and ADPI Parties will no longer provide any Clinic Services with respect to the PDG Offices. However, ADPI Parties will continue to provide Clinic Service to each PDG Doctor in each Clinic which is a PDHC Office until the earlier of the Doctor Transition Date or the date on which that PDG Doctor is no longer practicing in that Clinic.

(b) Resource Services .

(i) During the period of January and February 2008 (the " Initial Period" ), ADPI Parties will provide to the PDG Parties those Resource Services identified on the attached Exhibit A as the " Initial Period Services" . For the balance of the Transition Period, ADPI Parties will provide to the PDG Parties at the PDG Offices the Resource Services identified on the attached Exhibit A as the " Full Transition Period Services" . For each Mixed Office, ADPI Parties shall provide the Full Transition Period Services identified on the attached Exhibit A through the earlier of the Doctor Transition Date or the date on which PDG Doctors are no longer practicing in that Clinic. As to any specific Resource Service ( e.g. , financial reporting, HR, payroll), PDG may, upon sixty (60) days' advance written notice, terminate such service prior to September 30, 2008. Without limiting the specific Resource Services to be provided, ADPI Parties shall provide PDG Parties on a weekly basis with updated backup tapes, containing all PDG Party patient data and billing information; provided that PDG shall provide the tapes to be used for back-up. (ii) As part of the Full Transition Period Services, APDI Parties shall reasonably cooperate with PDG Parties to allow PDG Parties to reasonable access all electronic information regarding their business and their patient information stored on PDHC' s own electronic information systems (the " PDG Business and Patient Data" ).

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(iii) As part of the Full Transition Period Services, ADPI Parties will provide PDG Parties with a full and complete copy of all of the PDG Business and Patient Data which is included in industry-standard electronic reports (the " Standard Reports" ), both from time-to-time during the Full Transition Period Services period upon request by the PDG Parties (no more than once per week) and one final copy intended for cutover to the PDG Parties' new systems. The copy shall be created under the process and standards described in subsection (iv) below. The ADPI Parties shall respond to a request for a copy during the Full Transition Services Period wi
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