1
EXHIBIT 10.24
FIFTH REVISION TO MANUFACTURING SHELTER AGREEMENT
Effective November 1, 1998, Lancer Orthodontics, Inc., ("LANCER") and ▇▇▇▇▇▇▇▇
Industries, Inc., ("▇▇▇▇▇▇▇▇") agree to revise and amend the Manufacturing
Shelter Agreement ("Agreement") entered into on May 11, 1990, revised on June
20, 1991, December 2, 1992, July 1, 1994 and April 1, 1996, between and amongst
said parties, as follows:
The Agreement is extended until October 31, 2000 and may not be canceled by
either party for any reason other than gross negligence, with ninety (90) days
following notification to rectify, prior to that date.
▇▇▇▇▇▇▇▇ will continue providing the existing level of Mexican political and
business administration service in Mexico to Lancer and to Lancer de Mexico S.A.
de C.V., Lancer's Mexican distribution subsidiary (LANSA), under the ▇▇▇▇▇▇▇▇ de
California shelter.
▇▇▇▇▇▇▇▇ de California S.A de CM, ▇▇▇▇▇▇▇▇'▇ Mexican subsidiary ("ECSA") and
LANCER will enter into a five-year sublease effective November 1, 1998 in the
form and content specified in exhibit "A" hereto, on the portion of ECSA's main
facility in Mexicali presently occupied by LANCER and LANSA. In consideration of
the lease rate, LANCER will not be required to sign a corporate guarantee or put
up substantial cash to secure the lease.
▇▇▇▇▇▇▇▇ will continue to prepare the U.S. customs cost submission form for the
year ending December 31, 1998 and prepare the template and provide one time
training to Lancer's personnel for the 1999 reconciliation report, all from
information provided from ▇▇▇▇▇▇▇▇'▇ records and from records maintained by
LANCER's personnel.
ECSA will continue to prepare the payroll and related tax returns and tax
returns required by Hacienda (Mexican IRS) for ECSA and for LANSA as required.
ECSA will continue to oversee ▇▇▇▇▇▇'▇ import/export function. ECSA will
continue to oversee ▇▇▇▇▇▇'▇ human resources function.
▇▇▇▇▇▇▇▇ will continue to report directly to LANCER's President any irregularity
discovered that ▇▇▇▇▇▇▇▇ believes violates LANCER's policies or that may cause
LANCER significant financial harm or loss of credibility.
▇▇▇▇▇▇▇▇ will continue to retain an independent auditor/tax assessor for it's
consolidated group and maintain it's consolidated membership in the Maquiladora
association.
▇▇▇▇▇▇▇▇ will continue to pay and report LANCER's expenses on a pass through
basis.
2
▇▇▇▇▇▇▇▇ will continue to reimburse Lancer for 95% of the IVA related to LANCER
pass through expenses that ▇▇▇▇▇▇▇▇ is able to use as an offset for Mexican
payroll taxes.
To the extent Mexican income tax and profit sharing is paid as a result of the
activity of LANCER's accounts, such tax and profit sharing will be treated as a
pass through expense. LANCER may increase the minimum amount of profit sharing
required by law as a discretionary benefit for its assigned employees if it so
chooses.
During the first year of this revision ▇▇▇▇▇▇▇▇ will work with LANCER's
facilities personnel to verify the accuracy of the listing of assets on the
Bailment Agreement between ▇▇▇▇▇▇▇▇ and LANCER.
With respect to LANSA.
▇▇▇▇▇▇▇▇ will apply for a Maquiladora permit on behalf of LANSA using
information provided by ▇▇▇▇▇▇ and LANSA.
▇▇▇▇▇▇▇▇ will do the basic Spanish language general ledger accounting and
periodic federal and state governmental financial and employee reporting on
behalf of LANSA.
▇▇▇▇▇▇▇▇ will accumulate invoices and pay payables of LANSA as they become due
from funds made available, either from LANSA receivable collections or
contributions from ▇▇▇▇▇▇.
During the second year of this REVISION, if directed by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ will:
Activate the Maquiladora permit for LANSA. Assist LANCER in transferring
▇▇▇▇▇▇'▇ interest in the sub-lease on the Mexican facility to LANSA. Once the
lease is transferred, Mexican value added tax (IVA) will be added to the weekly
lease cost inasmuch as LANSA will be able to apply for its refund directly from
the Mexican government.
Convert the Lancer-designated work force to LANSA. The out of pocked expenses of
hiring Mexican labor counsel will be born by LANCER.
Prepare the necessary paperwork and work with Mexican and U.S. customs to
transfer the existing fixed assets, supplies, raw materials and inventory to
LANSA. LANCER will pay the out of pocket expenses incurred by ▇▇▇▇▇▇▇▇ in this
endeavor.
Assist in establishing the Mexican and U.S. Bank accounts necessary to run
LANSA's business.
3
Assist LANSA in seeking the following personnel for training and ultimate
placement into positions available in LANSA.
- Administrative (General)manager
- Controller
- Accounts payable/receivable clerks
- Payroll clerks.
As these positions are trained and filled, ▇▇▇▇▇▇▇▇ will reduce its
weekly billing by the allocated cost of the positions ( $250, $100, $75, $75
respectively), to partially offset the added expense of the employees. The
reduced rate (not to be less than $1,000 per week) will be in effect until the
end on year two as a stand-by-consulting fee.
During the second year transition period, ▇▇▇▇▇▇▇▇'▇ personnel will continue to
be responsible for the day to day administrative activity of LANSA (excluding
the invoicing and collection of sales to countries other than the U.S.) until
the respective personnel are in position.
This fifth revision is entered into as of this 1st day of November 1998 by and
between the undersigned parties in their respective capacities.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
President, ▇▇▇▇▇▇▇▇ Industries, Inc. President, Lancer Orthodontics, Inc.