Exhibit 10.4

 

ADMINISTRATIVE SERVICES AGREEMENT

 

This ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”) is dated as of May 10,
2019, by and between NETWORK MEDICAL MANAGEMENT, INC., a California corporation,
whose address is 1668 S. Garfield Ave., 2nd Floor, Alhambra, CA 91801
("Manager”), and AP-AMH MEDICAL CORPORATION, a California professional medical
corporation, whose address is 1668 S. Garfield Ave., 2nd Floor, Alhambra, CA
91801 (“AP-AMH”), with reference to the following facts:

 

Recitals:

 

A.          AP-AMH is a professional corporation and is the sole shareholder of
all of the issued and outstanding shares of Series A Preferred Stock (the
“Preferred Shares”) of Allied Physicians of California, A Professional Medical
Corporation (“Allied”).

 

B.           The rights, preferences, privileges and restrictions of Allied and
AP-AMH with respect to the Preferred Shares are set forth in (i) that certain
Certificate of Determination of Preferences of Series A Preferred Stock of
Allied Physicians of California, A Professional Medical Corporation (the
“Certificate of Determination”), as filed with the California Secretary of
State; and (ii) that certain Special Purpose Shareholder Agreement of Allied
Physicians of California, A Professional Medical Corporation between Allied and
AP-AMH as the holder of the Preferred Shares (the “Shareholder Agreement”).

 

C.           AP-AMH has an interest as the owner of the Preferred Shares in
protecting the “Healthcare Services Assets” (as defined in the Certificate of
Determination). In furtherance thereof, AP-AMH desires to engage and Manager
desires to provide certain administrative services to AP-AMH in connection with
its interests in the Preferred Shares and the Healthcare Services Assets.

 

Agreement:

 

NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises set forth herein, and for such other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.           Duties And Responsibilities of Manager.

 

1.1           Oversight Duties Regarding the Preferred Shares and the Healthcare
Services Assets. Manager or its affiliates, designees, employees or agents shall
be responsible for overseeing, monitoring, inspecting and auditing, as
applicable, Allied’s compliance with its obligations under the Certificate of
Determination and the Shareholder Agreement for the purpose of safeguarding and
preserving AP-AMH’s interests in the Preferred Shares and the Healthcare
Services Assets. In furtherance of the foregoing, Manager shall be responsible
for the following:

 

  

 

 

(a)       Dividend Receivable Processing. Reviewing, processing, auditing and
collection of the “Series A Dividend” (as defined in the Certificate of
Determination).

 

(b)       Documentation and Collection. AP-AMH agrees to keep and provide to
Manager all documents, opinions, diagnoses, recommendations, and other evidence
and records necessary for the oversight, inspection, accounting and auditing of
the Series A Dividend payments.

 

(c)       Quarterly Report. On or before the tenth (10th) day after each
calendar quarter during the term of this Agreement until the expiration of this
Agreement, Manager shall furnish AP-AMH with a statement of all Series A
Dividend payments for the previous calendar quarter.

 

1.2           Administrative Services. AP-AMH hereby appoints Manager and
Manager shall serve as the exclusive administrator of all daily business
functions of AP-AMH. AP-AMH agrees that the purpose and intent of this Agreement
is to relieve AP-AMH to the maximum extent possible of the administrative,
accounting, and other business aspects of its business, with Manager assuming
responsibility and being given all necessary authority to perform these
functions. Manager shall have the sole authority to perform the administrative,
accounting and business aspects of AP-AMH as set forth herein. AP-AMH hereby
appoints Manager to be its true and lawful attorney-in-fact to incur and pay all
expenses in connection with the operation of its business, including but not
limited to, payment of Manager’s Administrative Fee and to perform all functions
in the name and on behalf of AP-AMH. Manager will have no authority, directly or
indirectly, to perform, and will not perform, any medical function. Manager may,
however, advise AP-AMH as to the relationship between AP-AMH’s performance of
medical functions and the overall administrative and business functioning of
AP-AMH. In furtherance of the foregoing, Manager shall be responsible for the
following:

 

(a)       Records Maintenance. Maintenance, custody and supervision of business
records, papers, documents, ledgers, journals and reports relating to the
business operations of AP-AMH. At all times during and after the term of this
Agreement, including any extensions or renewals hereof, all records relating in
any way to the business operations of AP-AMH shall at all times be the property
of Manager, including, without limitation, business records, business
agreements, books of account, general administrative records and all information
generated under or contained in the management information system pertaining to
Manager’s obligations hereunder, and other business information of any kind or
nature.

 

(b)       Accounting. Administration of accounting procedures, controls, forms
and systems.

 

(c)       Financial Reporting. Preparation of financial reports, as appropriate
or reasonably requested by AP-AMH, reflecting the business operations of AP-AMH.

 

(d)       Financial Planning. Financial planning for the business operations of
AP-AMH.

 

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(e)       Annual Budgets. Preparing on an annual basis, and presenting to AP-AMH
in January of each year subsequent to the date of this Agreement for AP-AMH’s
approval, an annual operating and capital budget for AP-AMH.

 

2.            Administrative Fee. AP-AMH and Manager hereby acknowledge that
Manager will incur substantial costs and expenses in fulfilling Manager’s
obligations to AP-AMH. In connection therewith, the following provisions shall
apply:

 

2.1           Administrative Fee. As a fee for the administrative services
furnished by Manager to AP-AMH hereunder, AP-AMH shall pay to Manager a fee (the
“Administrative Fee”) in United States dollars equal to the “Administrative Fee
Percentage,” multiplied by the gross revenues received by AP-AMH on an accrual
basis during each calendar quarter during the term hereof (or portion thereof if
the “Commencement Date,” as defined below, falls on a day other than the first
day of a calendar quarter). The Administrative Fee applicable to each calendar
quarter (or portion thereof) shall be paid on the first day of each calendar
quarter immediately succeeding the calendar quarter in which the Administrative
Fee is measured; provided that the payment of any and all Tradename License Fees
shall be subject to the receipt by AP-AMH of the “Series A Dividend.” As used
herein:

 

(a)       “Administrative Fee Percentage” means the percentage specified on
Schedule 1 attached hereto.

 

(b)       “Series A Dividend” shall have the meaning set forth in the
Certificate of Determination.

 

2.2            Annual Review of Administrative Fee. The Administrative Fee
Percentage set forth above will be reviewed annually (commencing one year from
the Commencement Date) to ensure that (i) the intended underlying economic
arrangements between AP-AMH and Manager are preserved, and (ii) the
Administrative Fee accurately compensates Manager for the value of the
administrative services provided by Manager hereunder. If changes in state or
federal laws or regulations, or changes in the amount or method of reimbursing
healthcare services, result in a material adverse change in the economic
benefits of this Agreement to AP-AMH or Manager, the fee set forth above shall
be equitably adjusted on or before December 31 of the year such change takes
place. If the parties agree to a modification of the Administrative Fee, the
parties shall make that modification by mutual written consent. Such adjustment
of the Administrative Fee may apply retroactively if the Parties agree in
writing to the retroactive effective date.

 

3.           Conduct of Medical Practice. AP-AMH shall be solely and exclusively
in control of all aspects of the practice of medicine and the provision of
professional medical services to their patients, including all medical training
and medical supervision of licensed personnel, and Manager shall neither have
nor exercise any control or discretion over the methods by which AP-AMH shall
practice. Manager’s sole function is to render to AP-AMH in a competent,
efficient and reasonably satisfactory manner, all administrative services
necessary to operate the business of AP-AMH. The rendition of all professional
medical services including, but not limited to, diagnosis, treatment and the
prescription of medicine and drugs, and the supervision and preparation of
medical records and reports shall be the sole responsibility of AP-AMH.

 

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4.           Insurance. Manager shall obtain and maintain, in full force and
effect during the term of this Agreement, at its sole cost and expense,
comprehensive general liability insurance coverage, including and errors and
omissions insurance coverage, with an insurance carrier reasonably acceptable to
AP-AMH, under which Manager shall be named as the insured and AP-AMH as an
additional insured, to protect against any liability incident to the rendering
of services under this Agreement. Such insurance coverage shall not be less than
One Million Dollars ($1,000,000) for any one person and Three Million Dollars
($3,000,000) in the annual aggregate. Such policies of insurance shall provide
that AP-AMH shall receive written notice not less than thirty (30) days prior to
the cancellation or material change in coverage. At AP-AMH’s request, Manager
shall furnish certificates, endorsements and copies of all insurance policies to
AP-AMH.

 

5.           Indemnification. Each party shall indemnify, defend and hold
harmless the other party from any and all liability, loss, claim, lawsuit,
injury, cost, damage or expense whatsoever (including reasonable attorneys’ fees
and court costs) arising out of, incident to, or in any manner occasioned by the
performance or non-performance of any duty or responsibility under this
Agreement by such indemnifying party, or any of their employees, agents,
contractors or subcontractors; provided, however, that neither party shall be
liable to the other party hereunder for any claim covered by third party
insurance, except to the extent that the liability of such party exceeds the
amount of such insurance coverage.

 

6.           Term and Termination.

 

6.1           Term. Unless sooner terminated pursuant to the terms of this
Agreement, the term of this Agreement shall commence upon the closing of the
acquisition by AP-AMH of the Preferred Shares (the “Commencement Date”), and
shall end on the date on which AP-AMH no longer owns any Preferred Shares.

 

6.2           Termination by AP-AMH. At the election of AP-AMH, AP-AMH may
terminate this Agreement immediately by written notice to Manager as follows:

 

(a)       In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by Manager, or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or state law for
the benefit of debtors by Manager, except for the filing of a petition in
involuntary bankruptcy against Manager which is dismissed within ninety (90)
days thereafter.

 

(b)       In the event Manager shall materially default in the performance of
any duty or obligation imposed upon it by this Agreement, and such default shall
remain uncured for a period of ninety (90) days after written notice thereof has
been given to Manager by AP-AMH or such longer period of time as may be
reasonably needed to effectuate a cure of such default.

 

6.3           Termination by Manager. At the election of Manager, Manager may
terminate this Agreement immediately by written notice to AP-AMH as follows:

 

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(a)       In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by AP-AMH, or upon other action taken or
suffered, voluntarily or involuntarily, under any federal or state law for the
benefit of debtors by AP-AMH, except for the filing of a petition in involuntary
bankruptcy against AP-AMH which is dismissed within ninety (90) days thereafter.

 

(b)       In the event AP-AMH shall materially default in the performance of any
duty or obligation imposed upon AP-AMH by this Agreement, and such default shall
continue for a period of ninety (90) days after written notice thereof has been
given to AP-AMH by Manager or such longer period of time as may be reasonably
needed to effectuate a cure of such default.

 

6.4           Effect of Termination. Upon termination, this Agreement shall be
of no further force or effect and the parties shall be relieved and discharged
of any future or continuing obligation, debt or liability arising hereunder,
except for (a) the satisfaction of any covenant or performance of any obligation
which shall have previously accrued and remain outstanding as of the date of
termination, including, without limitation, the payment of the Administrative
Fee, or (b) the satisfaction or performance of any covenant or obligation which
by its terms extends beyond the termination of this Agreement, including,
without limitation, indemnification for acts or omissions arising prior to the
date of termination.

 

7.           Exclusive Arrangement. During the term of this Agreement, Manager
shall be AP-AMH’s sole provider of the administrative services described in this
Agreement. During the term of this Agreement, AP-AMH shall not enter into any
similar agreement with any administrative services provider or any other entity.

 

8.           Confidential Information And Trade Secrets.

 

8.1           Proprietary Information. Manager and AP-AMH recognize that due to
the nature of this Agreement, Manager and AP-AMH will have access to information
of a proprietary nature owned by the other party, including, but not limited to,
any and all computer programs (whether or not completed or in use), any and all
operating manuals or similar materials that constitute the medical and/or
non-medical systems, policies and procedures, methods of doing business
developed by such other party, administrative, advertising or marketing
techniques, financial affairs, and other information utilized by such other
party. Consequently, Manager and AP-AMH acknowledge and agree that the other
party has a proprietary interest in all such information and that all such
information constitutes confidential and proprietary information and the trade
secret property of such other party. Manager and AP-AMH hereby expressly and
knowingly waive any and all rights, title and interest in and to such trade
secrets and confidential information and agrees to return all copies, including
in any electronic medium, of such trade secrets and confidential information
related thereto to the other party at the returning party’s expense upon the
expiration or earlier termination of this Agreement.

 

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8.2           Non-Disclosure. Manager and AP-AMH further acknowledge and agree
that the other party is entitled to prevent such other party’s competitors from
obtaining and utilizing its trade secrets and confidential information.
Therefore, Manager and AP-AMH agree to hold the other party’s trade secrets and
confidential information in strictest confidence and to not disclose them or
allow them to be disclosed, directly or indirectly, to any person or entity
other than those persons or entities who are employed by or affiliated with
Manager or AP-AMH, without the prior written consent of the other party. During
the term of this Agreement, neither Manager nor AP-AMH shall disclose to anyone,
other than persons or entities who are employed by or affiliated with them
(which affiliates shall be designated in writing), any confidential or
proprietary information or trade secret information obtained by Manager or
AP-AMH from the other party, except as otherwise required by law. After the
expiration or earlier termination of this Agreement, Manager and AP-AMH shall
not disclose to anyone any confidential or proprietary information or trade
secret information obtained from the other party, except as otherwise required
by law or upon the prior written consent of such other party.

 

8.3           Equitable Relief. Manager and AP-AMH acknowledge and agree that a
breach of this Section will result in irreparable harm to the other party and
that the other party cannot be reasonably or adequately compensated in damages,
and therefore, the other party shall be entitled to equitable remedies,
including, but not limited to, injunctive relief, to prevent a breach and to
secure enforcement thereof in addition to any other relief or award to which the
other party may be entitled.

 

9.           Miscellaneous.

 

9.1           Entire Agreement; Amendment. This Agreement constitutes the full
and complete agreement and understanding between the parties hereto and shall
supersede any and all prior written and oral agreements concerning the subject
matter contained herein. This Agreement may be modified or amended only by a
written instrument executed by all of the parties hereto.

 

9.2           Assignment. Except as otherwise provided in this Agreement,
neither party shall assign any rights or delegate any duties under this
Agreement without the prior written consent of the other party. Any unauthorized
attempted assignment by either party shall be null and void and of no force or
effect.

 

9.3           Confidentiality. No party to this Agreement shall disclose this
Agreement or the terms thereof to a third party, except as provided herein or as
otherwise required by law, without the prior written consent of the other
parties.

 

9.4           Force Majeure. Notwithstanding any provision contained herein to
the contrary, Manager shall not be deemed to be in default hereunder for failing
to perform or provide any of the administrative services or other obligations to
be performed or provided by Manager pursuant to this Agreement if such failure
is the result of any labor dispute, act of God, inability to obtain labor or
materials, governmental restrictions or any other event which is beyond
Manager’s reasonable control.

 

9.5           No Third Party Beneficiary. None of the provisions contained in
this Agreement are intended by the parties nor shall they be deemed to confer
any benefit on any person not a party to this Agreement.

 

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9.6           Changes In Law And Severability. In the event any state or federal
laws or regulations, now existing or enacted or promulgated after the effective
date of this Agreement, are interpreted by judicial decision, a regulatory
agency or legal counsel in such a manner as to indicate that the structure of
this Agreement may be in violation of such laws or regulations, the parties
shall amend this Agreement as necessary. To the maximum extent possible, any
such amendment shall preserve the underlying economic and financial arrangements
between the parties. If the parties are unable to agree to any amendments
required by this Section, the matter shall be submitted to dispute resolution in
accordance with Section 9.8 below. Further, if any provision of this Agreement
is determined to be illegal, invalid, or otherwise unenforceable by court,
arbitrator, or other tribunal of competent jurisdiction, then to the extent not
covered by the preceding paragraph and to the extent necessary to make such
provision and/or this Agreement legal, valid, or otherwise enforceable, such
provisions shall be limited, construed, or severed and deleted from this
Agreement, and the remaining portion of such provision and the remaining other
provisions hereof, shall survive, remain in full force and effect, and continue
to be binding, and shall be interpreted to give effect to the intention of the
parties insofar as that is possible.

 

9.7           Referrals. The parties hereby acknowledge that none of the
benefits to Manager, AP-AMH or any of their respective affiliates, is
conditioned on any requirement that Manager, AP-AMH or any of their respective
affiliates make referrals to, be in a position to make or influence referrals
to, or otherwise generate business for Manager, AP-AMH or any of their
respective affiliates.

 

9.8           Dispute Resolution. In the event of any controversy or dispute
related to or arising out of this Agreement, the parties agree to meet and
confer in good faith to attempt to resolve the controversy or dispute without an
adversary proceeding. If the controversy or dispute is not resolved to the
mutual satisfaction of the parties within five (5) business days of notice of
the controversy or dispute, the parties agree to waive their rights, if any, to
a jury trial, and to submit the controversy or dispute as a general reference to
a retired judge or justice pursuant to Section 638 et seq. of the California
Code of Civil Procedure, or any successor provision, for resolution in
accordance with Chapter 6 (References and Trials by Referees), of Title 8 of
Part 2 of the California Code of Civil Procedure, or any successor chapter. The
parties agree that the only proper venue for the submission of claims is the
County of Los Angeles, California, and that the hearing before the referee shall
be concluded within nine (9) months of the filing and service of the complaint.
The parties reserve the right to contest the referee’s decision and to appeal
from any award or order of any court. The provisions of this Section shall not
limit, require the postponement of implementation, or in any other way preclude
the exercise of any rights otherwise enjoyed by any party to this Agreement
under the provisions hereof.

 

9.9           Governing Law. This Agreement shall be governed by and interpreted
under the internal laws of the State of California without regard to its
conflicts of interest laws.

 

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9.10          Independent Contractors. In the performance of this Agreement, it
is mutually understood and agreed that AP-AMH is at all times acting and
performing as independent contractors with, and not as employees, joint ventures
or lessees of, Manager. AP-AMH shall have no claim under this Agreement or
otherwise against Manager for workers’ compensation, unemployment compensation,
sick leave, vacation pay, pension or retirement benefits, Social Security
benefits, or any other employee benefits, all of which shall be the sole
responsibility of AP-AMH. Except as specifically requested in writing by AP-AMH,
Manager shall not withhold on behalf of AP-AMH any sums for income tax,
unemployment insurance, Social Security or otherwise pursuant to any law or
requirement of any government agency, and all such withholding, if any is
required, shall be the sole responsibility of AP-AMH. AP-AMH shall indemnify and
hold harmless Manager from any and all loss or liability, if any, arising out of
or with respect to any non-payment of such taxes or withholdings by AP-AMH.

 

9.11         Headings. The headings set forth herein are for the purpose of
convenient reference only, and shall have no bearing whatsoever on the
interpretation of this Agreement.

 

9.12          Notices. Any notice or other communication hereunder shall be
given in writing and either (i) delivered in person, (ii) transmitted by
facsimile, (iii) delivered by overnight FedEx or similar overnight commercial
delivery service or (iv) mailed by certified mail, postage prepaid, return
receipt requested, to the party to which such notice or communication is to be
given at the address set forth below or at such other address as may be given
from time to time under the terms of this Section. Each such notice or other
communication shall be effective (i) if given by facsimile, when transmitted,
(ii) if given by mail, five (5) days after such communication is deposited in
the mail and addressed as aforesaid, (iii) if given by overnight FedEx or
similar overnight commercial delivery service, one (1) business day after such
communication is deposited with such service and addressed as aforesaid, and
(iv) if given by any other means, when actually received.

 

To Manager: To AP-AMH:     Network Medical Management, Inc. AP-AMH Medical
Corporation 1668 S. Garfield Ave., 2nd Floor 1668 S. Garfield Ave., 2nd Floor
Alhambra, CA 91801 Alhambra, CA 91801 Attn: CEO Attn: CEO

 

9.13         Waiver. Any waiver of any provision hereof shall not be effective
unless expressly made in writing executed by the party to be charged. The
failure of any party to insist on performance of any of the terms or conditions
of this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term, covenant
or condition, and the obligations of the parties with respect thereto shall
continue in full force and effect.

 

9.14         Successors And Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.

 

9.15         Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall, in the aggregate, be considered one and the
same instrument.

 

9.16         Additional Documents. Each of the parties hereto agrees to execute
any document or documents that may be requested from time to time by the other
party to implement or complete such party’s obligations pursuant to this
Agreement and to otherwise cooperate fully with such other party in connection
with the performance of such party’s obligations under this Agreement.

 

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[Signatures continued on next page]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first written above.

 

 

“Manager” “AP-AMH”     NETWORK MEDICAL MANAGEMENT, INC. AP-AMH MEDICAL
CORPORATION

 

By: /s/ Mitchell Kitayama   By: /s/ Thomas Lam, M.D. Name: Mitchell Kitayama  
Name: Thomas Lam, M.D. Title: Independent Committee Director   Title: Chief
Executive Officer

 

By: /s/ Eric Chin     Name: Eric Chin     Title: Chief Financial Officer    

 

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