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                                                                     EXHIBIT 1.1

                              EMPLOYMENT AGREEMENT


This Employment Agreement (this "Agreement") is made and entered into as of the
20th day of June, 2001 by and between Cetalon Corporation a Nevada Corporation
(the "Company"), and Neil T. Watanabe ("Executive").

         WHEREAS, the Company desires to employ Executive as Executive Vice
President Chief Operating Officer and Chief Financial Officer on the terms and
conditions as set forth herein and Executive desires to accept such employment
with the Company;

         NOW, THEREFORE, in consideration of the foregoing premise, the terms
and conditions set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to the following:

    1.   EMPLOYMENT AND DUTIES.

The Company hereby engages Executive in the capacity of Executive Vice President
Chief Operating Officer and Chief Financial Officer. Executive shall perform
such duties and functions as shall be specified from time to time by the
Company's Chief Executive Officer. Executive hereby accepts such employment and
agrees to perform such duties. During the term of the Agreement, Executive shall
not be required without Executive's consent to undertake responsibilities not at
least commensurate with Executive's position as the Company's Executive Vice
President Chief Operating Officer and Chief Financial Officer.

    2.   COMPENSATION.

         (a)      Base Salary. For all services to be rendered by Executive
                  hereunder, Executive shall be paid a base salary at the rate
                  of two hundred and fifty thousand dollars ($250,000.00) per
                  year. Executive base compensation shall be reviewed at least
                  annually and may be increased at the discretion of the Chief
                  Executive Officer or the Cetalon Compensation Committee, but
                  during the term of this Agreement may not be decreased below
                  the then-effective base salary. Executive's salary shall be
                  paid on such basis, as is the normal payment pattern for
                  executive officers of the Company. The base salary payable
                  under Section 2(a) shall be in addition to and exclusive of
                  any payments to Executive from time to time under formal or
                  informal bonus, incentive compensation or similar plans now in
                  effect or which hereafter may be adopted.


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         (b)      Performance Bonus. With respect to each full fiscal year
                  ("Bonus Year") of the Company beginning with fiscal year-ended
                  May 31, 2002, the Executive is entitled to participate in a
                  performance plan approved by the Cetalon Compensation
                  Committee. The target bonus percentage will be established at
                  a minimum of 50% of the then current base salary, which at the
                  option of the Company can be paid in either cash or
                  unrestricted stock of the Company. The calculation and payment
                  to Executive of a performance bonus contemplated by this
                  section 2(b), if any, shall be determined and paid by August
                  1st of each year immediately succeeding such Bonus Year, and
                  in any event, following the preparation of the Company's
                  annual audited financial statements for such Bonus Year. The
                  first bonus eligibility payment will be August 1, 2002 for the
                  fiscal year-ended May 31, 2002.

    3.   PAYMENT IN EVENT OF TERMINATION.

         In the event of the termination of Executive's employment hereunder
         pursuant to Section 8(d), the Company shall continue to make payments
         to Executive for a period of 365 days beginning at the end of the
         required notice period as defined in Section 8(d) at the rate then
         being paid to Executive as specified in 2(a) and shall pay Executive a
         cash lump sum payment representing vesting and acceleration of
         Executive's current annual target performance bonus, irrespective of
         eligibility or achievement requirements as outlined in 2(b). The
         payment will be calculated on a prorated basis for the number of months
         that Executive worked in the bonus eligible year. The Company shall
         provide Executive, his/her spouse and covered dependents with medical
         and dental insurance benefits at the same level and coverage terms,
         which existed prior to termination for three hundred sixty-five days
         (365) days from the date of such termination. The Company will be
         responsible to make all payments for medical care coverage including
         any supplementary coverage plan for medical claims, which the executive
         participated prior to termination on behalf of the Executive. Executive
         shall not be required or obligated to obtain other employment to
         mitigate the payments due hereunder; however, the Company's obligation
         to purchase medical and dental insurance benefits shall expire once the
         Executive has obtained new medical coverage which is equal to or better
         than the existing coverage for himself, Executive's spouse and
         Executive's covered dependents without material conditions or
         limitations (such as an applicable pre-existing condition exclusion).
         Executive may, at Executive's sole option, terminate this Agreement and
         receive the payments provided for in Section 3 following the occurrence
         of any of the following events (a "Company Breach"): (a) Executive's
         authority to function as Executive Vice President Chief Operating
         Officer and Chief Financial Officer (or such higher position to which
         the Executive may have been promoted during his/her term of this
         Agreement) shall be removed or limited in any material respect, unless
         such removal or limitation was a result of one or more events that
         would permit the termination of Executive's employment For Cause (as
         defined in Section 8(c), or (b) a relocation of Executive or the
         Company's offices to a


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         location more than twenty five (25) miles from the location at which
         the Executive previously performed his duties, or (c) the Company shall
         have breached in any material respect any of its covenants and
         agreements in this Agreement. Notwithstanding the foregoing, Executive
         shall not be entitled to terminate this Agreement unless Executive
         provides written notice to the Company specifying in reasonable detail
         the nature of the Company Breach, and the Company shall have failed to
         cure such Company Breach within 21 days thereafter.

    4.   OPTIONS

         Executive shall be entitled to participate in any performance stock
         option plan approved annually for other executive officers of the
         Company by the Compensation Committee of the Board of Directors. To the
         maximum extent permitted by the Internal Revenue Code of 1986, as
         amended the (the "IRC"), including the rules and regulations there
         under, all such options shall be incentive stock options, and the
         remainder of such options shall be non-qualified stock options. In the
         event of termination as defined in Section 8(d), the Executive's
         options will continue to vest for a period of 365 days during the
         severance period and Executive will have twelve (12) months after the
         end of this period to exercise any vested options. In addition, reload
         options will also continue to vest and become exercisable pursuant to
         the conditions outlined in the Cetalon Corp. stock option plan.

    5.   BENEFITS.

         (a)      Executive shall be entitled to become immediately eligible and
                  participate in such fringe benefit and perquisites as are
                  generally made available to executive officers of the Company,
                  and such other fringe benefits as may be approved by the Board
                  for Executive Officers of the Company during the term hereof,
                  including, without limitation, medical, dental, and disability
                  insurance, group term life insurance at least equal in face
                  amount to two times the base salary payable pursuant to
                  Section 2(a) at no cost to the Executive. The Executive will
                  also be provided with additional coverage up to $10,000 per
                  calendar year for medical and dental costs, which are not
                  covered under the base plan for Executive, spouse and
                  immediate family members. The executive will also be entitled
                  to receive annual paid vacation of four weeks per year
                  becoming effective as of the date of this agreement.

         (b)      During the term of Executive employment, the Company shall
                  furnish Executive with a car lease payment allowance of $900
                  per month and will provide additional reimbursement for all
                  costs associated with repair, maintenance, insurance and fuel
                  in maintaining of a leased vehicle.


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         (c)      Nothing contained herein is intended or shall be deemed to be
                  granted to Executive in lieu of any rights or privileges to
                  which Executive may currently be or become entitled as an
                  employee of the Company under any medical, dental, disability,
                  life insurance, retirement, stock option, stock bonus or
                  purchase, incentive compensation or other plan or arrangement
                  of the company which may now be in effect or which may
                  hereafter be adopted, it being understood that Executive shall
                  have the same rights and privileges to participate in such
                  plans as any other similarly situated Executive officer of the
                  Company.

    6.   REIMBURSEMENT OF EXPENSES.

         The Company shall reimburse Executive for all reasonable business
         expenses incurred by Executive in connection with the performance of
         Executive duties hereunder and consistent with Company policy and
         practice, provided that Executive furnishes to the Company receipts and
         other documentation reasonably acceptable to the Company evidencing
         such expenditures.

    7.   PERFORMANCE OF DUTIES.

         (a)      In consideration of the payments to be made hereunder,
                  Executive agrees to devote Executive's entire business time
                  and attention to the performance of Executive's duties
                  hereunder, to serve the Company diligently and to the best of
                  Executives abilities, and not to compete with the Company or
                  any of its Affiliates (as defined below) in any manner
                  whatsoever. Without limiting the generalities of the
                  foregoing, Executive shall not, during the term of Executive's
                  employment by the Company, directly or indirectly (whether for
                  compensation or otherwise), alone or as an agent, principal,
                  partner, officer, employee, trustee, director or in any other
                  capacity own, manage, operate, join, control or participate in
                  the ownership, management, operation or control of or furnish
                  any capital to or be connected in any manner with or provide
                  any services as a consultant for any of the business which
                  competes directly or indirectly with any of the businesses of
                  the Company or any of its Affiliates (as defined below) as
                  they may be conducted from time to time (including any
                  vitamin, supplement or herbal retail store business provided
                  however, that nothing contained in this Agreement shall be
                  deemed to preclude the Executive from owning not more than one
                  percent of the publicly-traded capital stock of entity which
                  is in competition with any of such businesses.

         (b)      Executive may conduct civic, educational and charitable
                  activities and may also serve on Boards of Directors of other
                  companies, if consistent with this Section 7 and if
                  Executive's service on the board of directors of other
                  companies is approved by the Board.

    8.   TERM AND TERMINATION.


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         (a)      The term of Executive's employment with the Company hereunder
                  shall commence on the date hereof and continue until Executive
                  resigns or is terminated under this Section 8 or under Section
                  9 of this agreement.

         (b)      In the event of Executive's death, this Agreement shall
                  terminate. In the event of the Executive's total disability
                  for any consecutive twelve-month period during the term of
                  this Agreement, the Company may at its sole option thereafter
                  (unless Executive shall have resumed Executive's duties in
                  full prior to such termination) terminate this Agreement. In
                  either event the sole right hereunder of Executive,
                  Executive's widow or Executive's legal representative. As the
                  case may be, shall be to (i) receive the base salary due
                  Executive for three hundred and sixty five (365) days
                  following the month in which Executive's death or disability;
                  (ii) have any and all previously granted stock bonuses, stock
                  options or other rights accelerate and fully vest in Executive
                  or in Executive's estate with exercisability allowed up to
                  three hundred and sixty five (365) days from date of
                  termination of the agreement and (iii) have the Company
                  continue to maintain in effect at its sole expense, medical
                  and dental insurance as described in Section 3 for three
                  hundred and sixty five (365) days following the date of any
                  such termination.

         (c)      The Company, upon 60 days prior written notice to Executive,
                  may terminate this Agreement For Cause (as defined herein).
                  For the purpose of this Agreement, the term "For Cause" shall
                  mean only (i) Executive's conviction by, or entry of a plea of
                  guilty in, a court of competent jurisdiction for any crime
                  involving any felony punishable by imprisonment in the
                  jurisdiction involved; or (ii) Executives commission of any
                  act of fraud or dishonesty in connection with, or related to,
                  his duties; or (iii) gross negligence defined as causing the
                  company material and significant damage or loss in an
                  intentional and reckless manner. Upon termination of Executive
                  for Cause, this Agreement shall immediately terminate, and
                  Executive shall not be entitled to any further rights or
                  payments hereunder (other than payments under Section 2(a) for
                  services rendered prior to the date of such termination).
                  Without limiting the generalities of the foregoing, Executive
                  shall have no rights on or after the date of such termination
                  to any of the benefits set forth in Section 5 hereof (Other
                  than payment for accrued vacation), any payment of base salary
                  pursuant to Section 2(a), any payment of performance bonus
                  pursuant to Section 2(b) for the Bonus Year in which such
                  termination occurs or any other benefit or payment of any kind
                  whatsoever.

         (d)      The Company shall be entitled to terminate Executive's
                  employment without cause at any time by providing 6 months
                  prior written notice to the Executive and following the end of
                  the notice period, begin making payments to Executive and
                  adhere in providing Executive with


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                  termination entitlements as outlined and specified in Section
                  3, 4, and 9(iv).

         (e)      The Executive is entitled to terminate his employment with the
                  Company under "Constructive Dismissal" and the Company is
                  required to make payments and adhere in providing Executive
                  with payments and entitlements outlined and specified in
                  Sections 3, 4, and 9(iv). Constructive Dismissal is defined
                  as:

                  1.       The assignment to the Executive of duties materially
                           inconsistent with the positions, duties,
                           responsibilities, title and status of the Executive
                           with the Company the date of this Agreement, in
                           effect immediately prior to the date of this
                           Agreement, or any removal of the Executive from, or
                           any failure to re-elect the Executive to any of such
                           positions, duties, responsibilities and status of the
                           Executive except changes which are in the nature of a
                           promotion;

                  2.       The alteration of the Executives hours of work or
                           days of work;

                  3.       A reduction by the Company in the annual salary or
                           benefits of the Executive in effect on the date of
                           this Agreement, or as the same may be increased from
                           time to time;

                  4.       A failure of the Company to continue any bonus plan
                           adopted by the Board after the date hereof in which
                           the Executive is entitled to participate, as the same
                           may be modified from time to time with the consent of
                           the Executive;

                  5.       The company requiring the Executive to provide the
                           Executive's services to the Company anywhere other
                           than within 25 miles of the present office location
                           of the Executive, except for requiring travel on
                           Company business, to the extent substantially
                           consistent with present business travel arrangements
                           employed by the Company with respect to the Executive
                           at the date of this Agreement.

    9.   CHANGE IN CONTROL.

If a Change of Control (as defined below) of the Company occurs during the term
of this Agreement, the provisions of this Section 9 shall become operative. For
purposes of this Agreement, a Change in Control of the Company shall be deemed
to have occurred if (i) any "person" (as defined in Section 13(d) of the
Security Exchange Act of 1934, as amended (the Exchange Act") becomes the
"beneficial owner" (as defined in Rule 13d-d under the Exchange Act) directly or
indirectly of securities of the Company representing


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more 35% of the combined voting power of the Company's then outstanding
securities, as a result of purchases which are not expressly approved by the
Board. For purposes of this Section 9, the Board expressly approving the 35% or
more voting power ownership must consist of individual who for the previous
consecutive twenty-four (24) month period, constituted at least a majority of
the Board; (ii) a dissolution or liquidation of the Company; (iii) a sale of
substantially all of the assets of the Company; (iv) a merger or consolidation
in which the Company is not the surviving Corporation and in which beneficial
ownership of securities of the Companies representing at least fifty (50%) of
the combined voting power entitled to vote in the election of directors has
changed; (v) a reverse merger in which the Company is the surviving corporation
but the shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, and in which the beneficial ownership of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in election of directors has changed;
(vi) an acquisition by any person entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or subsidiary of the Company or other entity controlled by the
Company).

For a period of 18 months after a Change in Control of the Company, Executive
shall have the right to terminate Executive's employment with the Company
pursuant to this Section 9, and the Company shall pay Executive the following
amounts no later than the 15th business day after the date of termination of
Executive's employment:

         (i)      A lump sum severance payment equal to 2.75 multiplied by the
                  sum of (A) Executive's base annual salary at the highest rate
                  in effect during the fiscal year of the Company immediately
                  preceding the date Executive's employment terminates, and (B)
                  the greater of the amount of any incentive, bonus or other
                  cash compensation that was paid to Executive during either (x)
                  the 12 months immediately preceding the date Executive's
                  employment terminates and (y) the 12 months immediately
                  preceding the Change in Control, and

         (ii)     All outstanding stock options including restricted stock
                  grants for the Executive will vest upon a Change in Control
                  with the Executive having three hundred and sixty five days
                  (365) to exercise such options or at the option of the
                  Executive to receive a cash payment equal to the amount by
                  which the greater of (A) the closing price of the Company's
                  Stock on the day before the date of the Executive's employment
                  terminates or (B) the highest price per share actually paid in
                  connection with the Change of Control of the Company, exceeds
                  the per share exercise price of all vested and accelerated
                  vested and exercisable stock options held by Executive on the
                  day before the Executive's employment terminates, multiplied
                  by the number of shares covered by each option. In exchange
                  for such payment, Executive will surrender all such options to
                  the Company without exercising them. Upon exercise of options,
                  any reload options will

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                  continue to be operative and will also vest immediately and
                  Executive will have three hundred and sixty five days to
                  exercise such options under the same conditions as listed in
                  (A) and (B) above.

         (iii)    The Executive will be entitled (but not obligated) to continue
                  health care coverage and life insurance coverage at the same
                  levels prior to termination with the Company for a period of 2
                  years at the Company's expense. If the Executive and
                  Executive's spouse and dependents cannot remain eligible to
                  receive benefits under the relevant Company sponsored plan,
                  then the Company will provide individual coverage at the above
                  levels for the remaining period. The Company's obligation to
                  provide benefits shall end at the time that the Executive
                  obtains coverage at the same level or greater from any other
                  source (such as a new employer's benefit plan).

         (iv)     The Executive will be entitled to select a career placement
                  firm or obtain office space and administrative support of his
                  choosing to assist in his transition to a new employer. The
                  Executive may select and negotiate the terms of services and
                  payment schedule in which the Company will pay up to $30,000
                  directly to the career placement firm or office landlord of
                  his choice and the Company will not consider this as
                  reportable compensation or income to the Executive.

         (v)      The executive will also be allowed to have voicemail and email
                  continued for a period of six months after the date of
                  termination.

    10.  TAX GROSS UP.

In the event that the Executive is subject to the "golden parachute" excise tax
based on the acceleration of income and additional payments as a result of
Change in Control, the Company will provide a gross up payment to offset the
impact of the tax. The gross-up will be made on the amount of payment assessed
(the "adjustment") and a separate gross-up on the amount of the payment for "the
adjustment." The calculations will be made by the independent accounting firm,
which is then serving at the Company's financial auditors at the Company's
expense.

    11.  CONFIDENTIALITY.

         (a)      The Company and Executive recognize that during the course of
                  Executive's employment with the Company he will accumulate
                  certain proprietary and confidential information and trade
                  secrets for use in the Company's business and will have
                  divulged to him certain crucial and confidential information
                  and proprietary information and trade secrets about the
                  business, operations and prospects of the Company, which


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                  constitutes valuable business assets providing the Company the
                  opportunity to obtain an advantage over competitors who do not
                  know or use such information or have access to it without the
                  investment of considerable resources. Executive hereby
                  acknowledges and agrees that such information (the
                  "Proprietary Information") is confidential and proprietary and
                  a trade secret and that such information shall include,
                  without limitation:

                           i.       The Company's customer and prospective
                                    customer list (including rolodex/address
                                    book information);

                           ii.      The Company's vendor and prospective vendor
                                    lists;

                           iii.     Confidential correspondence, notes, files,
                                    memoranda, notebooks, drawing, schematic,
                                    specifications, plans, forecasts, programs,
                                    price lists, inventory control lists,
                                    materials, data, devices, records, research
                                    and development information,
                                    computer-recorded information of any kind,
                                    and videotapes.

                           iv.      Confidential information regarding the
                                    company's operations, finances, methods,
                                    strategies, plans, forecasts, and results;

                           v.       The Companies confidential arrangements with
                                    suppliers and distributors;

                           vi.      The Company's confidential plans and
                                    strategies for research, development,
                                    expansion, store design, staffing and
                                    management systems, new product, purchasing,
                                    budgets, priorities, marketing and sales.

                           vii.     The Company's confidential financial
                                    statements and data regarding sales,
                                    profits, productivity, purchasing
                                    arrangements, price and cots;

                           viii.    Confidential information regarding the
                                    Company's computer system and programs;

                           ix.      Third party confidential information which
                                    the company has a duty to maintain in
                                    confidence;

                           x.       Confidential personnel information such as
                                    identities, capabilities, activities,
                                    compensation, performance, and rating of
                                    employees;

                           xi.      Confidential information regarding employee
                                    hiring, incentive, evaluation and discipline
                                    practices and programs;

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                           xii.     Confidential marketing and promotional
                                    plans, methods, budgets, and targets; and

                           xiii.    Confidential cost control methods and
                                    practices;

         (b)      Executive understands that this list is not all-inclusive and
                  that other information may quality as proprietary information.
                  In the event the Executive is not sure whether certain
                  information is proprietary information, Executive shall treat
                  it as confidential unless the Company informs him to the
                  contrary.

         (c)      Executive agrees that he shall not, at any time subsequent to
                  the execution of this Agreement, whether during or after the
                  term hereof, disclose, divulge or make known, directly or
                  indirectly, to any person or otherwise use or exploit, any
                  Proprietary Information obtained by Executive at any time
                  prior or subsequent to the execution of this Agreement, except
                  to the extent required by his performance of his duties her
                  under for the company. Executive shall not conceal from or
                  fail to disclose to the Company, or divert or exploit for his
                  own personal profit or that of others, any business
                  opportunities or other opportunities to acquire an interest in
                  or a contractual relationship with any person or entity where
                  such person or entity is in the Company's line of business or
                  where such contractual relationship involves the acquisition
                  of real estate and which would be considered a feasible and
                  advantageous opportunity or acquisition for the Company.

    12.  NON-SOLICITATION OF EMPLOYEES.

         (a)      Executive hereby agrees that for the one year (1) period
                  following the date of termination of this Agreement, he will
                  not (i) authorize his name to be used by any person,
                  partnership, corporation or other business entity or (ii)
                  engage in or carry on, directly or indirectly, whether as an
                  advisor, principal, agent, partner, officer, director,
                  employee, stockholder, associate or consultant of any person,
                  partnership, corporation or other business entity which in
                  which their revenues are primarily in the Vitamin and
                  supplement business.

         (b)      Executive further agrees that during the period from the date
                  of this Agreement until one years after termination of this
                  Agreement he shall not contact or recruit any employees of the
                  Company or any of its Affiliates without advising the Company
                  of such contact and he shall not participate in any endeavor
                  or activity which would disrupt the Company's or any of its
                  Affiliates good business relationships with its employees.

         (c)      During the term of Executive's employment by the Company and
                  continue for a period of one (1) year after the termination of
                  Executive's


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                  employment for any reason (whether by resignation, dismissal,
                  retirement or otherwise), Executive shall not compete with the
                  Company anywhere within the Company's sales territory as it
                  exists during the one (1) year period after Executive's
                  departure provided that during Executive's employment with the
                  Company, the Company distributes to announces such a plan; or
                  Executive or Executive's subsequent employer otherwise
                  acquires knowledge of such a plan. In view of the Company's
                  business style and character, its marketing methods, and its
                  strategy, Executive agrees that it is responsible to
                  reconsider that the Company's sales territory extends
                  throughout each stat in which it is doing business and
                  Executive shall not Compete within such area.

         (d)      Executive understands that while this Agreement allows
                  Executive to compete with the Company following the expiration
                  of the one (1) year period, it does not give the Executive
                  license to engage in acts, which would constitute unfair
                  competition in violation of the applicable law.

    13.  INDEMNIFICATION.

         (a)      Except as may be prohibited by applicable law, the Company
                  shall indemnify and hold harmless the Executive who served as
                  a director, officer, employee or consultant from and against
                  any and all losses, claims demands, costs, damages,
                  liabilities, expenses of any nature (including reasonable
                  attorney's fees and expenses), judgments, fines, settlements
                  and other amounts (collectively, the "Liabilities") arising
                  from, or related or incidental to, any and all claims,
                  demands, actions, suits or proceedings, civil, criminal,
                  threatened to be involved, as a party or otherwise, and
                  arising out of or related to this agreement, without
                  limitation, Liabilities under California law if such
                  Indemnified Executive interests of the Company, and, with
                  respect to any criminal proceeding, did not in good faith
                  believe its conduct was unlawful; provided, however, that such
                  Indemnified Executive repay all amounts previously advanced by
                  the Company pursuant hereto, that were caused by such
                  Indemnified Party's actual fraud, gross negligence or wanton
                  or willful misconduct, unless the court in which such
                  proceeding was brought shall determine the indemnification
                  shall be provided only to the extent permitted by such court.
                  Notwithstanding the foregoing, to the extent that an
                  Indemnified Executive has been successful on the merits or
                  otherwise in defense of any action, suit or proceeding
                  referred to in this paragraph, or in connection with any
                  appeal therein, or in defense of any claim, issue or matter
                  therein, the Company shall indemnify such Indemnified
                  Executive against the expenses, including, without limitation,
                  reasonable attorneys' and accountants' fees and expenses,
                  incurred by such Indemnified Executive in connection
                  therewith. The termination of any pending or threatened
                  action, suit or proceeding by judgment, order, settlement,
                  conviction, or upon a plea of nolo contendere or its
                  equivalent, shall not, in and of itself,


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                  create a presumption or otherwise constitute evidence that the
                  Indemnified Executive did not satisfy standards for
                  indemnification set fort in this paragraph.

         (b)      Liabilities incurred by any Indemnified Executive in defending
                  any pending or threatened claim, demand, action, suit or
                  proceeding shall, from time to time, be paid by the Company in
                  advance of the final disposition or settlement of such claim,
                  demand, action, suit or proceeding upon receipt of an
                  undertaking by or on behalf of the Executive to repay such
                  amounts (or a proportionate share of such amounts determined
                  in accordance with clause (c) of this paragraph if applicable)
                  if it is ultimately determined that the Executive is not to be
                  indemnified by the Company as provided in this agreement.

         (c)      If for any reason (other than gross negligence or the wanton
                  or willful misconduct or bad faith of the Executive), the
                  foregoing indemnification is unavailable to such Indemnified
                  Executive, then the Company shall contribute to the amount
                  paid or payable by such Executive as a result of such
                  Liabilities in such proportion as is appropriate to reflect
                  not only the relative benefits received by the Company, on the
                  one hand, and such Executive on the other hand, but also the
                  relative fault of the Company and such Executive as well as
                  any relevant equitable considerations.

         (d)      The indemnification (or contribution) and advancement of
                  amount provided by this agreement shall not be deemed
                  exclusive of, but shall be in addition to, any other rights to
                  which those persons seeking indemnification (or contribution)
                  or advancement of amounts may otherwise be entitled and shall
                  continue as to Executive notwithstanding the dissolution or
                  other cessation to exist of such Executive or the withdrawal,
                  adjudication of bankruptcy or insolvency of such Executive,
                  such Executive no longer serving in the capacity entitling it
                  to indemnification under the provisions of this agreement, or
                  the termination of the Company.

The advancement, indemnity and contribution obligations of the Company under
this agreement shall be in addition to any obligation which the Company may
otherwise have, shall be binding upon and inure to the benefit of any
successors, assigns heirs and personal representative of the Company and each of
the Executive and shall not be deemed to create any rights for the benefit of
any other party. The provisions of this paragraph shall survive any termination
of this Agreement.


    14.  MISCELLANEOUS.



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         (a)      Executive represents and warrants to the Company that
                  Executive is not now under any obligation of a contractual or
                  other nature to any person, firm or corporation which is
                  inconsistent or in conflict with this Agreement, or which
                  would prevent, limit or impair in any way the performance by
                  Executive of Executive's obligations hereunder.

         (b)      The waiver by either party of a breach of any provision of
                  this Agreement must be in writing and shall nor operate or be
                  construed as a waiver of any subsequent breach thereof.

         (c)      All amounts payable by the Corporation under this Agreement
                  shall be paid without notice or demand. The Corporation hereby
                  irrevocably guarantees such payments to the Executive and
                  accepts full liability for insufficient or otherwise improper
                  payment by the Corporation.

         (d)      Within 21 days after the end of the month in which the
                  effective date of termination occurs, or if the Executive
                  should cease to perform his duties hereunder under any other
                  circumstances, then within 21 days after the end of the month
                  in which cessation occurs, the internal auditors of the
                  Corporation for the time being shall report as to the amounts
                  of remuneration payable to the Executive as aforesaid, and the
                  amount shown to be payable (taking into account any prior
                  payments that have been made on account thereof) shall be paid
                  within 14 days of the making of such report. The report of the
                  internal auditors of the Corporation as to the amount of
                  remuneration payable to the Executive and their decision in
                  respect of all matters necessary to enable them to make such
                  report shall be conclusive and binding upon the parties
                  hereto.

         (e)      This Agreement constitutes the entire Agreement of Executive
                  and the Company and supersedes all prior and contemporaneous
                  written or oral agreements, understandings, promises,
                  representations and negotiations between the parties with
                  respect to the subject matter hereof.

         (f)      Any and all notices referred to herein shall be sufficiently
                  furnished if in writing, and sent by registered or certified
                  mail, postage prepaid, or by facsimile transmission (but only
                  if confirmation of receipt is subsequently received by the
                  sender either orally or in writing), or by overnight courier
                  (if such overnight courier guarantees next day delivery and
                  such notice is sent for delivery on a day on which such
                  courier guarantees such overnight delivery), to the respective
                  parties at the following addresses or such other address or
                  facsimile number as either party may from time to time
                  designate in writing in the manner set forth in this Section
                  13(d):

                           THE COMPANY:

                           CETALON CORP.
                           Attn: Chief Executive Officer
                           1801 Century Park East
                           Suite 1830
                           Los Angeles, CA 90067
                           Phone #: (310) 843-3600


<PAGE>

                           Facsimile #: (310) 277-0945


                           EXECUTIVE:

                           Neil T. Watanabe
                           30231 Cheret Place
                           Rancho Palos Verdes, CA  90275

         (g)      If any portion or provision of this Agreement shall be invalid
                  or unenforceable for any reason, there shall be deemed to be
                  made such minor changes (and only such minor changes) in such
                  provision or portion as are necessary to make it valid and
                  enforceable. The invalidity or unenforceability of any
                  provision or portion of this Agreement shall not affect
                  validity of enforceability of any provisions or portions of
                  this Agreement. If any such unenforceable or invalid provision
                  or provisions shall be rendered enforceable and valid changes
                  in applicable law, then such provisions shall be deemed to
                  read as they presently do in this Agreement without change.

         (h)      The rights and obligations of the parties hereto shall inure
                  to and be binding upon the parties hereto and their respective
                  heirs, successors and assigns. Notwithstanding the foregoing,
                  this Agreement shall not be assignable without the written
                  consent of all parties and each party hereby agree that this
                  agreement and all provisions of this agreement shall survive
                  any change of control of the Corporation or the Parent if
                  applicable.

         (i)      The waiver by either party of a breach of a provision of this
                  Agreement shall not operate or be construed as a waiver of a
                  subsequent breach thereof.

         (j)      This Agreement is intended to and shall be governed by, and
                  interpreted under and construed in accordance with the laws of
                  the State of California without reference to any conflict of
                  laws or principles.

         (k)      If any litigation, arbitration or any other proceedings is
                  instituted in connection with or related to this Agreement,
                  Executive and the Company agree that any and all disputes or
                  controversies of any nature whatsoever, regarding the
                  interpretation, performance, enforcement or breach of this
                  Agreement shall be resolved by confidential, final binding
                  arbitration (rather than trial by jury or court or resolution
                  in some other forum) under the then-existing rules of Judicial
                  Arbitration and Meditation Services ("JAMS").
<PAGE>

         (l)      The Company and Executive expressly agree that the provisions
                  of Sections 11, 12, 13, 14 and any action providing for the
                  payment of severance benefits shall survive the termination of
                  this Agreement.


This Agreement shall constitute the whole and entire agreement of the parties
hereto with respect to the matters set forth herein and shall not be modified or
amended in any respect.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


         THE COMPANY:        CETALON CORP.


                             By:__________________________
                                     Anthony J.A. Bryan
                      Chairman of the Board of Cetalon Corporation




         EXECUTIVE:          By:__________________________
                                      Neil T. Watanabe