This Strategic Alliance Agreement involves
Title: PRODUCT STRATEGIC ALLIANCE AGREEMENT
Governing Law: Ohio Date: 6/29/2005
Law Firm: Wuersch Gering LLP
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
The parties agree as follows:
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
"PERSON." Person shall mean an individual and shall also include trusts,
corporations, partnerships, limited liability companies, and other organizations
"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
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
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
(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
(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.
(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
5. Product Intellectual Property.
(a) Azonic grants CustomQuest a non-exclusive, non-transferable
license to use the Analog Product Intellectual Property in connection with
(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.
(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
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 provisions of this Section, CustomQuest shall pay Azonic, in addition
to all amounts due, the reasonable cost of the audit and inspection.
Azonic may require that the documents which CustomQuest is required to
prepare and deliver to Azonic be examined and reported on (in a form
satisfactory to Azonic) by an independent Certified Public Accountant
approved by Azonic.
(a) Insurance Coverage. Each party shall maintain, at its own
expense, insurance with a reputable carrier of amounts and type that are
commercially reasonable for businesses of the type of the party, including
(i) Property and casualty insurance, including business
(ii) Comprehensive general liability and automobile insurance,
with limits of not less than $1,000,000 combined for bodily injury
or death and property damage with umbrella liability coverage of
$2,000,000 naming the other party, its affiliates and their
respective officers, directors and employees as additional insureds.
(iii) Workers Compensation or similar insurance in amounts
required by law.
(iv) Product liability insurance, with limits of not less than
$1,000,000 combined for bodily injury or death and property damage
with umbrella liability coverage of $2,000,000 naming the other
party, its affiliates and their respective officers, directors and
employees as additional insureds.
(b) Insurance Certificates. Contemporaneously with the execution of
this Agreement, annually during the term of this Agreement and at any time
when any change in the coverage required hereby is made by any party, as
to those insurance policies where