Exhibit 10.5
PRODUCT STRATEGIC ALLIANCE AGREEMENT
THIS
PRODUCT STRATEGIC ALLIANCE AGREEMENT ("Agreement") is made this
9th
day of March, 2005, by and among CustomQuest, Inc., an Ohio Corporation
("CustomQuest"), and Azonic
Corp., a Nevada corporation ("Azonic").
A. Azonic
has developed An AMPS
Cellular Telephone Product (hereafter
defined). Azonic also holds a
license in connection with the Product, and is the
owner of all rights, title,
and interest in the Product.
B.
CustomQuest
has expertise in the
areas of
manufacturing,
packaging,
distribution and
marketing.
C.
Azonic and CustomQuest desire to form a strategic alliance to
collaborate in the development, manufacturing, packaging, distribution and
marketing of the Product under the terms and conditions set forth in this
Agreement.
The
parties agree as follows:
Definitions.
The
following terms as used in this Agreement shall be defined as
follows:
"AFFILIATE." An
"Affiliate"
shall mean any Person
serving as the agent,
representative,
subcontractor, or employee of the parties in connection with
the
performance of any right or
obligation hereunder.
"FCC
LICENSE." FCC License
shall mean license number P4F1100A issued by
the Federal Communications Commission to Azonic and
designated as a
"licensed
non-broadcast transmitter
held to ear."
"ANALOG
PRODUCT." Current Product using analog technology.
"DIGITAL
PRODUCT."
New Product to be co-developed using digital
technology.
"PERSON."
Person shall mean an
individual and shall also include trusts,
corporations, partnerships,
limited liability companies, and other organizations
and entities.
"PRODUCT."
Product
shall mean the AMPS cellular telephone product
including the Cyclone Recyclable Cellular Phone, including all changes,
improvements, refinements and
derivations thereto.
"PRODUCT
INTELLECTUAL
PROPERTY." Product Intellectual Property shall mean
(i) any patents and licenses required to manufacture, use and operate the
Product; (ii) any software
required to use and operate the Product.
1.
Scope of Agreement. CustomQuest shall have the exclusive right to
manufacture, package, distribute, market, and
sell the Analog Product including
airtime minutes
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for the Product in North
America CustomQuest shall also have the exclusive right
to all potential sales
generated by John Pickard.
a.
CustomQuest shall
negotiate for the
services of John Pickard
as of March 31, 2005.
b.
CustomQuest shall
also have the exclusive right to all
potential sales generated by John Pickard.
c.
CustomQuest shall
acquire Azonic's inventory (including
finished products
and parts) and tooling
at Azonic's
cost.
CustomQuest will only
purchase Azonic's inventory for the
purpose of fulfilling CustomQuest's purchase orders.
d. Azonic
shall retain exclusive rights to sell its Analog
Products to financial
service providers.
CustomQuest
shall
have the right to sell Azonic's analog Products to all other
markets and industries.
e. All
International
markets outside of North America shall
be
negotiated in the future on a specific market basis. Azonic
maintains its right to
manufacture
the Analog
Product for
distribution outside North America.
2. Term.
This Agreement shall be effective on the date set forth above
and
shall continue for a period
of one (1) year (the "Initial Term"). This Agreement
shall thereafter automatically renew for additional successive one (1) year
periods unless, at least six (6) months prior to
the end of the Initial Term or
any renewal term, either
party gives the other party notice of non-renewal. This
Agreement may also be
terminated prior to end of the Initial Term or any
renewal
term pursuant to Section
12.
3. Duties
of Azonic. Azonic shall perform or cause to be performed
through
its Affiliates each of the
following duties during the term of this Agreement:
(a) Training and Specifications. Within fourteen (14) days after
the
execution
of this Agreement,
Azonic shall provide training to CustomQuest
with
respect to the
Product and shall make the plans, specifications,
operating
parameters and other
technological
information
regarding
the
Product
("Product Technical Information") available to
CustomQuest.
(b)
Consultation. Azonic
shall consult with CustomQuest
concerning
the manufacture of the Product, including introducing
CustomQuest to existing manufacturers of the Product and providing
Product
Technical
Information
to manufacturers selected by CustomQuest and
approved
by Azonic to manufacture the Product.
(c) Upgrades.
Azonic shall keep CustomQuest and manufacturers
approved
by Azonic informed as to changes and developments regarding the
Product,
Product Technical
Information and
Product Intellectual Property
(as
defined below) and shall provide CustomQuest upon request with
written
materials
or other information with
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<PAGE>
respect
thereto. CustomQuest acknowledges that Azonic may make changes
and
improvements to the Product, Product Technological Information and
Product
Intellectual Property
and that Azonic shall retain all right, title, and
interest
therein, without compensation to CustomQuest.
(d) Intellectual Property Development and Maintenance. Azonic shall
develop
and maintain the Product Intellectual Property (as defined
below)
as
provided in this Agreement.
(e) Referrals.
Azonic shall refer all Product
sales production,
parts and
distribution inquiries to CustomQuest, except as
follows:
(i) Azonic shall have the right to purchase units of the
Product from CustomQuest for sale per the terms set forth in
Exhibit
A, payable at net 30 upon demonstration of commercial
credit
worthiness of the order.
(f) Cooperation.
Azonic and CustomQuest shall communicate with each
other
regarding sales leads and contacts to prevent duplication of
efforts.
(g) Compliance.
Azonic shall maintain
the FCC License,
insure the
compliance
of the Product
Technical Information
with the FCC License and
shall
otherwise comply with
all applicable laws,
licenses and
contracts
with third
parties related to its performance under this Agreement.
4.
Duties of CustomQuest. CustomQuest shall perform or cause to be
performed through its
Affiliates each of the following duties during the term
of
this Agreement:
(a) Manufacturing,
Packaging and
Distribution.
CustomQuest
shall
arrange,
contract
for and direct the manufacture, packaging and
distribution of all
Product units sold
pursuant to this
Agreement.
In
anticipation of
substantial
orders of the
Product, CustomQuest shall
engage
multiple manufacturers
or create sufficient internal manufacturing
capabilities in order to fulfill orders for Product. Azonic shall
have the
right
to approve the manufacturer(s) of the Product selected by
CustomQuest. Such approval shall not be unreasonably withheld.
CustomQuest
agrees to
pay all travel related expenses for a representative of Azonic
to
accompany CustomQuest on its facility inspection at the time the
manufacturer has been selected, and again to inspect the first
order prior
to
shipment. Azonic shall have the right to demand an accounting and
proof
of payment
to insure that the selected and approved manufacturer(s) has
been
properly compensated by CustomQuest or otherwise.
(b) Upgrades.
CustomQuest
shall
implement Product, Product
Technological
Information and Product Intellectual Property developments
as soon as
commercially reasonable when and as they are made by
Azonic.
(c) Marketing and Promotion. CustomQuest shall arrange, contract
for
and direct
the marketing,
advertising, sales and promotion of the Product
in the
CustomQuest Market pursuant to this Agreement.
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<PAGE>
(d) Tech Support. CustomQuest shall arrange, contract for and
direct
any
technical support for
end-users of the Product to the extent required
under the
terms of any order for the Product or otherwise in accordance
with the
minimum requirements
established by
CustomQuest and approved by
Azonic.
CustomQuest
shall use its best efforts to respond to sales
inquiries
within twenty-four (24) hours and work with the sales
team of
Azonic and
the potential customers with which they have worked.
(e) Use of Marks.
CustomQuest shall ensure that all advertising and
promotional materials,
signs, decorations and other items bearing the
Azonic
Marks are done using the form, color, location, and manner
prescribed
by Azonic and in accordance with this Agreement. Azonic will
require
pre-approval,
in writing,
all uses of its Mark,
and any and all
Advertising,
Promotional Materials,
and marketing materials that include
or
reference the Product.
(f) Compliance.
CustomQuest
shall comply with all
applicable laws
and
contracts with third
parties related to its
performance
under this
Agreement.
5. Product
Intellectual Property.
(a) Azonic grants
CustomQuest
a non-exclusive, non-transferable
license to
use the Analog Product Intellectual Property in connection
with
this
Agreement.
(b) Azonic represents
that it has the right,
title and interest to
the
Product Intellectual Property, and may license others to use the
Product
Intellectual Property.
(c) Azonic shall maintain the Product Intellectual Property rights
and shall
file all necessary patent applications, registrations and other
documents
and shall take all other commercially reasonable actions
necessary
to preserve and
protect the Product
Intellectual Property
and
permit its
use in the manner contemplated by this Agreement.
(d) CustomQuest
shall only use the
Azonic Marks in connection with
this
Agreement and only in the manner authorized and permitted by
Azonic.
CustomQuest shall execute any documents reasonably requested by Azonic
to
ensure
protection
for the Azonic
Marks or to maintain
their continued
validity
and enforceability.
CustomQuest
acknowledges that Azonic is the
owner of
all right, title, and interest in and to the Azonic Marks and
the
goodwill
associated
with and symbolized by them and that any
use of the
Azonic
Marks by CustomQuest does not give CustomQuest any ownership,
title
or
interest in or to the Azonic Marks.
(e) Azonic reserves
the right to substitute different proprietary
marks for
use as the Azonic
Marks at Azonic's
sole discretion. Azonic
shall
bear the costs of
modifying CustomQuest's signs and advertising
materials,
if required by Azonic,
to conform to Azonic's
new Marks,
but
shall
otherwise have no obligation or liability to CustomQuest as a
result
of such
substitution.
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<PAGE>
(f) In the event Azonic sells or otherwise transfers the Product
or
the
Product Intellectual Property, such transfer shall not occur until
and
unless
Azonic assures that
the purchaser or transferee shall be bound by
the terms
of this Agreement.
(g) Payments to Azonic. CustomQuest shall pay Azonic a royalty
fee
with
respect to sales of
the Analog
Product of $1.00 US
Funds per phone
sold
(calculated
and paid in
accordance
with this Section the
"Royalty
Fee").
Payment of the
Royalty Fee will be no later than the 25th
of the
following
month in which such Royalty Fee is earned.
(h) CustomQuest
shall pay Azonic a
royalty fee of $.01 to $.03 per
minute of
airtime on Analog Products sold by CustomQuest. Airtime royalty
fee will
also be paid no later
than the 25th of the
following month in
which such
fee is earned. The
royalty value will be determined when a
separate
deal with CanQuest has been completed.
(i) Option.
CustomQuest
shall have the option to acquire up to
1,000,000
shares of Azonic
common stock at a
price of $0.10 per share on
or before
March 15, 2005
6.
Digital Products. Azonic and CustomQuest agree to jointly develop
Digital Technology Products with development costs equally shared by both
parties. A separate
reciprocal Royalty
Agreement between Azonic and CustomQuest
shall be drawn up along
similar lines to the royalties agreed to in this
Analog
Agreement
7. Reports
and Records.
(a) General.
CustomQuest shall
maintain all financial
records in
accordance
with generally
accepted accounting
principles,
consistently
applied
("GAAP"). CustomQuest shall prepare on a current basis, and
preserve
for not less than
three years, complete
and accurate records
concerning
Gross Sales and Net Sales and all financial, operating,
marketing
and other aspects of the business conducted under this
Agreement.
CustomQuest shall
maintain an accounting system that fully and
accurately
reflects all aspects of such business.
(b) Audit Rights. Azonic or its authorized agents may inspect
and/or
audit,
during business hours and upon not less than
(thirty) 30 days'
notice,
any or all of the
records CustomQuest is required to maintain
pursuant
to the terms of this
Agreement. In the
event the inspection
or
audit
discloses that the Royalty Fee has been understated for such
audited
period,
CustomQuest
shall immediately pay to Azonic the
amount by which
the payments due
Azonic have been understated. Further, if the amount by
which such
payments have been understated exceeds two percent (2%) of
the
full
amount due for the period (such period not to exceed one year), or
if
the audit
is required because
CustomQuest has not strictly complied with
the
provi
