STRATEGIC RELATIONSHIP AGREEMENT ("Agreement"), dated as of January 19, 2002
(the "Effective Date"), by and among Cetalon Corporation, a Nevada corporation
("Cetalon") and Logic Nutrition, Inc., a Nevada corporation, or its nominees
("Logic").
WITNESSETH
WHEREAS, Cetalon is in the business of retail sales of nutritional and
personal care products through licensed retail departments in Sears Canada,
Inc., and Sears, Xxxxxxx and Co. department stores in Canada and the United
States;
WHEREAS, Logic is in the business of supplying and distributing nutritional
and personal care products under its own label;
WHEREAS, Cetalon and Logic desire to enter into a strategic relationship
where Logic shall finance and supply Cetalon's nutritional and personal care
product requirements;
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed between the parties hereto as follows:
ARTICLE 1
OBLIGATIONS OF LOGIC
1.1 Credit Facility. Upon the completion of the Closing (as hereinafter
defined), including without limitation final transfer of control, Logic shall
advance such funds to appropriate third parties or Cetalon as are reasonably
required (as mutually determined by Logic and Cetalon in good faith) to:
-- procure Cetalon's inventory requirements for its existing Canadian and
U.S. facilities; and
-- meet Cetalon's daily operating overhead requirements for past, current
and future needs.
Logic also agrees to work with Cetalon in making payment arrangements to
Cetalon's US and Canadian trade vendors and service providers for past and
present amounts owing.
Funds advanced shall accrue no interest and are payable to Logic within 30 days
of Cetalon's receipt of a written demand by Logic.
In the event that funds are loaned directly to Cetalon for their operating
overhead, a written request for the funds will be prepared by Cetalon and
submitted to Logic for approval. Logic will either provide the funds to Cetalon
within one (1) week of Logic's receipt of the notice or if Logic does not
approve providing the funds requested by Cetalon, then Logic will provide in
writing Logic's reasons for such decision. Logic will forward the funds to a
bank account designated by Cetalon.
Logic represents that it has the ability to borrow on credit facilities and use
funds received from such credit facilities on a discretionary basis.
1.2 Supply of Products. Commencing with the Closing, Logic hereby agrees to
provide Cetalon's United States and Canadian operations with its nutritional and
personal care inventory requirements, including, but not limited to, Logic
branded product.
1.3 Transfer of Businesses to Cetalon. Commencing with the Closing, Logic
shall assign to Cetalon its rights to distribute Logic and other products to the
following retail facilities:
-- Sears Fitness Stores located within the United States;
-- Safeway stores located within the United States;
-- Kroeger;
-- GNC;
-- 7 Eleven;
-- Arco Mini Mart;
-- 24 Hour Fitness; and
-- Gold's Gyms
For purposes of this paragraph, it is the intention of the parties that Logic
shall assign to Cetalon the right to purchase such products from Logic, sell
directly to distributors or retail facilities the various products, pay Logic
its best-value base wholesale cost as set forth in its sales listings, and
obtain the gross margin from the sale of such products.
Logic represents that at the time of the Closing, Logic has agreements with, and
is not in default of such agreements, with regard to distribution of its
products and that to the best of Logic's knowledge there are currently no known
issues which would adversely effect or encumber the projected goals of the
distribution system referred to above.
Logic, in its sole discretion, agrees to transfer to Cetalon all other
complimentary distribution businesses.
1.4 Market Support and Education. Commencing with the Closing, Logic shall
provide all Cetalon retail facilities marketing and training support. Logic
shall also introduce Cetalon to a multi-level marketing program.
1.5 Management Support Facilities. Commencing with the Closing, Logic shall
provide or advance (at Logic's discretion) such funds reasonably required (as
determined by Logic and Cetalon in good faith) for office facilities for
Cetalon's necessary U.S. based management staff. Cetalon understands and agrees
that such management may be relocated to Logic's existing office facilities.
1.6 Banking and Additional Funding. Logic will use its best efforts in
utilizing its existing banking and investment fund relationships in arranging
additional future financing for Cetalon as needed (as mutually determined by
both Logic and Cetalon).
ARTICLE 2
CETALON'S OBLIGATIONS
2.1 Issuance of Stock. Upon the Closing, Cetalon shall issue to Logic or
Logic's designee approximately 6,889,736 shares of the common stock of Cetalon
(the "Shares"). Upon issuance, the Shares shall represent 51% of the issued and
outstanding shares of Cetalon's common stock.
2.2 Anti-Dilution Agreement. Cetalon agrees that, for a period of one (1)
year following the Closing, in the event any additional shares of the common
stock or any other common stock equivalent of Cetalon are issued to any other
entity or individual other than to Logic or its nominees, whether or not for
value, services or on exercise, conversion or redemption of any outstanding
options, warrants, convertible securities or other obligations, then Cetalon
shall issue to Logic or its nominees, that number of shares, without
consideration, so that the number of shares that Logic or its nominees owns
shall remain 51% of the fully-diluted issued and outstanding common stock of
Cetalon. Conversely, during the same period, in the event that shares
previously issued to a third party, other than Logic, is cancelled and returned
to Cetalon's treasury, then Logic shall return to Cetalon for cancellation an
equal number of shares. If Cetalon does not simultaneously issue such
antidilution shares to Logic or its nominees upon issuance of any such
securities to other parties, Logic shall be deemed to own the corresponding
antidilution shares without any further action by Cetalon. Cetalon acknowledges
that this provision is a key component of Logic's agreement hereunder which
cannot be reasonably compensated by damages and shall be subject to specific
performance upon any action brought by Logic.
2.3 Control of Cetalon's Board. Upon the Closing, Logic shall be
immediately entitled to obtain control of the board of directors of Cetalon,
which may be accomplished by increasing the size of the board, requesting
resignations of existing directors or removing directors if required.
Notwithstanding the above, however, Logic shall respect prior agreements between
Cetalon and shareholders with respect to previously agreed upon Board positions
provided that Logic's nominees comprise a majority of Cetalon's Board of
Directors.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Cetalon's Representations and Warranties. To induce Logic to enter into
this Agreement and to consummate the transactions contemplated hereby, Cetalon
represents and warrants, as of the date hereof and as of the Closing, as
follows:
3.1.1 Organization, Good Standing and Power. Cetalon is a corporation duly
incorporated validly existing and in good standing under the laws of Nevada and
has all requisite corporate authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted. Cetalon is duly
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary.
3.1.2 Authorization, Enforcement. Except for the written consent to the
transactions contemplated by this Agreement to be provided to Cetalon from each
of Sears Canada Inc. and Sears, Roebuck, & Company (i) Cetalon has the requisite
corporate power and corporate authority to enter into and perform its
obligations under this Agreement, (ii) the execution and delivery of the
Agreement and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of Cetalon or its Board of Directors or
stockholders is required, and (iii) the Agreement has been duly executed and
delivered by Cetalon and at the Closing shall constitute valid and binding
obligations of Cetalon enforceable against Cetalon in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
3.1.3 Capitalization. The authorized capital stock of Cetalon consists of
50,000,000 shares of Common Stock of which as of January 11, 2002, 6,754,643
shares are issued and outstanding and 50,000,000 preferred shares none of which
are issued and outstanding. All of the outstanding shares of Cetalon's Common
Stock have been duly and validly authorized and are fully paid and
non-assessable. Except as set forth in the SEC Documents (as hereinafter
defined) , no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of Cetalon. Furthermore, there are no contracts, commitments,
understandings, or arrangements by which Cetalon is or may become bound to issue
additional shares of the capital stock of Cetalon or options, securities or
rights convertible into shares of capital stock of Cetalon. Cetalon is not a
party to any agreement granting registration rights to any person with respect
to any of its equity or debt securities. Cetalon is not a party to, and it has
no knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of Cetalon. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of Cetalon issued prior to
the Closing complied in all material respects with all applicable federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a material adverse effect upon the
operations of Cetalon. Cetalon has made available to the Purchaser true and
correct copies of Cetalon's articles or certificate of incorporation as in
effect on the date hereof (the "Charter"), and Cetalon's bylaws as in effect on
the date hereof (the "Bylaws"). Cetalon has not received any notice from the
NASD Over-the-Counter Bulletin Board questioning or threatening the continued
inclusion of the Common Stock on such market.
3.1.4 Issuance of Shares. The Shares to be issued pursuant to this
Agreement have been duly authorized by all necessary corporate action and, when
paid for and issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and non-assessable, and Logic or
Logic's nominee shall be entitled to all rights accorded to a holder of Common
Stock.
3.1.5 No Conflicts. Except as provided for in the license agreements among
Cetalon, Sears Canada Inc. and Sears, Xxxxxxx & Company, the execution, delivery
and performance of this Agreement by Cetalon and the consummation by Cetalon of
the transactions contemplated herein do not and will not (i) violate any
provision of Cetalon's Charter or Bylaws, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which Cetalon is a party, (iii) create or impose a lien, charge or encumbrance
on any property of Cetalon under any agreement or any commitment to which
Cetalon is a party or by which Cetalon is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or other foreign statute, rule, regulation, order,
judgment or decree (including any federal or state securities laws and
regulations) applicable to Cetalon or any of its subsidiaries or by which any
property or asset of Cetalon or any of its subsidiaries are bound or affected,
except, in all cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a material adverse effect on Cetalon's operations. The business
of Cetalon and its subsidiaries is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a
material adverse effect on Cetalon's operations. Cetalon is not required under
any federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or issue and sell the Shares in accordance
with the terms hereof (other than any filings which may be required to be made
by Cetalon with the SEC or state securities administrators subsequent to the
Closing and any registration statement which may be filed pursuant hereto);
provided, however, that for purpose of the representations made in this
sentence, Cetalon is assuming and relying upon the accuracy of the relevant
representations and agreements of Logic herein.
3.1.6 SEC Documents, Financial Statements. The Common Stock of Cetalon is
registered pursuant to Section 12(g) of the Exchange Act, and Cetalon has, to
the best of its knowledge , timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act (the "SEC Documents").
Cetalon has delivered or made available to Logic, through the XXXXX system or
otherwise, true and complete copies of the SEC Documents filed with the SEC.
Cetalon has not provided to Logic any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by Cetalon but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Cetalon included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements under GAAP and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of Cetalon and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Cetalon common
stock is traded in the over-the-counter bulletin board under the symbol "CETA".
3.1.7 Subsidiaries. The SEC Documents sets forth each subsidiary of
Cetalon, showing the jurisdiction of its incorporation or organization and
showing the percentage of Cetalon's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by Cetalon and/or
any of its other subsidiaries. All of the issued and outstanding shares of
capital stock of each subsidiary have been duly authorized and validly issued,
and are fully paid and non-assessable. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon any subsidiary for the purchase or acquisition of any shares of
capital stock of any subsidiary or any other securities convertible into,
exchangeable for or evidencing the rights to subscribe for any shares of such
capital stock. Neither Cetalon nor any subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of the capital stock of any subsidiary or any convertible securities,
rights, warrants or options of the type described in the preceding sentence.
Neither Cetalon nor any subsidiary is a party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any subsidiary.
3.1.8 No Undisclosed Liabilities. Neither Cetalon nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) that would be required to be disclosed on a balance sheet of
Cetalon or any subsidiary (including the notes thereto) in conformity with GAAP
which are not disclosed in the SEC Documents, other than those incurred in the
ordinary course of Cetalon's or its subsidiaries' respective businesses since
such date and which, individually or in the aggregate, do not or would not have
a material adverse effect on Cetalon's operations or its subsidiaries.
3.1.9 No Undisclosed Events or Circumstances. Since the date of the
financial statement contained in the most recently filed 10-QSB or Form 10-KSB,
whichever is most current, and since the most recently issued press releases,
and the letter from Sears Canada Inc. to Cetalon, dated December 31, 2001, no
event or circumstance has occurred or exists with respect to Cetalon or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by Cetalon but which has not been so
publicly announced or disclosed in the SEC Documents.
3.1.10 Indebtedness. Except for outstanding payment obligations to certain
service providers, namely Natural Health Resources Inc. and Onsite Wellness
Medical Associates Inc.,, which shall be provided to Logic, the most recently
filed form 10-QSB sets forth all outstanding secured and unsecured
Indebtedness of Cetalon or any subsidiary, or for which Cetalon or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (A) any liabilities for borrowed money or amounts owed in excess of
$10,000 (other than trade accounts payable incurred in the ordinary course of
business), (B) all guaranties, endorsements and contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in Cetalon's balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (C) the present value of
any lease payments in excess of $10,000 due under leases required to be
capitalized in accordance with GAAP. Neither Cetalon nor any subsidiary is in
default with respect to any Indebtedness.
3.1.11 Title to Assets. Each of Cetalon and the subsidiaries has good and
marketable title to all of its real and personal property reflected in the SEC
Documents, free of any mortgages, pledges, charges, liens, security interests or
other encumbrances. All said leases of Cetalon and each of its subsidiaries are
valid and subsisting and in full force and effect.
3.1.12 Actions Pending. As of the date hereof, there is no action, suit,
claim, investigation or proceeding pending or, to the knowledge of Cetalon,
threatened against Cetalon or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. Except for several demand letters from
various US and Canadian creditor trade vendors, copies to be provided to
Logic,there is no action, suit, claim, investigation or proceeding pending or,
to the knowledge of Cetalon, threatened, against or involving Cetalon, any
subsidiary or any of their respective properties or assets, except as disclosed
in the SEC Documents. As of January 15, 2002, to the best of Cetalon's knowledge
none of these creditor trade vendors have commenced any legal proceeding against
Cetalon. To the best of Cetalon's knowledge there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against Cetalon or any subsidiary.
3.1.13 Compliance with Law. Cetalon and each of its subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their respective
businesses as now being conducted by them unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on Cetalon's
operations. As of January 15, 2002, Cetalon, to the best of Cetalon's
knowledge, is not delinquent in respect of any permits or licenses.
3.1.14 Taxes. Cetalon and each subsidiary has filed all material tax
returns which it is required to file under applicable laws; all such material
tax returns are true and accurate and have been prepared in compliance with all
applicable laws; Cetalon has paid all material taxes due and owing by it or any
subsidiary (whether or not such material taxes are required to be shown on a tax
return) and has withheld and paid over to the appropriate taxing authorities all
material taxes which it is required to withhold from amounts paid or owing to
any employee, stockholder, creditor or other third parties; and since December
31, 2001, the charges, accruals and reserves for material taxes with respect to
Cetalon (including any provisions for deferred income taxes) reflected on the
books of Cetalon are adequate to cover any tax liabilities of Cetalon if its
current tax year were treated as ending on the date hereof.
3.1.15 No material claim has been made by a taxing authority in a
jurisdiction where Cetalon does not file tax returns that Cetalon or any
subsidiary is or may be subject to taxation by that jurisdiction. Except as
would not have a material adverse effect on Cetalon's operations, there are no
foreign, federal, state or local tax audits or administrative or judicial
proceedings pending or being conducted with respect to Cetalon or any
subsidiary; no information related to tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other review
has been received by Cetalon or any subsidiary from any foreign, federal, state
or local taxing authority. There are no material unresolved questions or claims
concerning Cetalon's tax liability. Cetalon (A) has not executed or entered
into a closing agreement pursuant to Sec. 7121 of the Internal Revenue Code or
any predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to Sec. 481 (a) of the Internal Revenue Code or any similar provision
of state, local or foreign law by reason of a change in accounting method
initiated by Cetalon or any of its subsidiaries or has any knowledge that the
IRS has proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
Cetalon. Cetalon has not been a United States real property holding corporation
within the meaning of Sec. 897(c)(2) of the Internal Revenue Code during the
applicable period specified in Sec. 897(c)(1)(A)(ii) of the Internal Revenue
Code.
3.1.16 Cetalon has not made an election under Sec. 341(f) of the Internal
Revenue Code. Cetalon is not liable for the taxes of another person that is not
a subsidiary of Cetalon under (A) Treas. Reg. Sec. 1.1502-6 (or comparable
provisions of state, local or foreign law), (B) as a transferee or successor,
(C) by contract or indemnity or (D) otherwise. Cetalon is not a party to any
tax sharing agreement. Cetalon has not made any payments, is not obligated to
make payments nor is it a party to an agreement that could obligate it to make
any payments that would not be deductible under Sec. 280G of the Internal
Revenue Code.
3.1.17 Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by Cetalon or any subsidiary with respect to the
transactions contemplated by this Agreement.
3.1.18 Disclosure. To the best of Cetalon's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, issued press
releases, SEC Documents, certificates or instruments furnished to Logic by or on
behalf of Cetalon or any subsidiary in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
3.1.19 Operation of Business. Cetalon and each of the subsidiaries owns,
possesses or is authorized to use all material patents, trademarks, service
marks, trade names, copyrights, licenses and authorizations as set forth in the
SEC Documents hereto, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others.
3.1.20 Insurance. Cetalon carries or will have the benefit of insurance in
such amounts and covering such risks as is adequate in all material respects for
the conduct of its business and the value of its properties and as is customary
for companies engaging in similar businesses and similar industries.
3.1.21 Books and Records. The records and documents of Cetalon and its
subsidiaries accurately reflect in all material respects the information
relating to the business of Cetalon and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of Cetalon or any subsidiary.
3.1.22 Material Agreements. Neither Cetalon nor any subsidiary is a party
to any written or oral contract, instrument, agreement, commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the SEC
as an exhibit to a registration statement on Form S-1 or other applicable form
(collectively, "Material Agreements") if Cetalon or any subsidiary were
registering securities under the Securities Act. Cetalon and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, has received no
notice of default and, to the best of Cetalon's knowledge are not in default
under any material adverse effect on Cetalon's operations now in effect, the
result of which would cause a material adverse effect on Cetalon's operations.
Except as set forth in the SEC Documents, no written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of Cetalon or
of any subsidiary limits or shall limit the payment of dividends on Cetalon's
Common Stock.
3.1.23 Transactions with Affiliates. Except as provided for below and
otherwise described in the SEC Documents, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $5,000 between (A) Cetalon, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (B) on the other hand, any officer, employee, consultant or director of
Cetalon, or any of its subsidiaries, or any person owning 5% or more of the
capital stock of Cetalon or any subsidiary or any member of the immediate family
of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder.
Name of Consultant Expiry Date of Agreement
Xxxx Danylowich (Success Strategies) February 6, 2002
Xxxxxx Xxxxxxxxx January 31, 2002, month to month thereafter
Xxxxxxx Xxxxxx January 31, 2002
Xxxx Xxxxx As needed basis
Name of Employee Expiry Date of Agreement
Xxxxx Xxxxx Indefinite term
Agreement for Legal Expenses Expiry Date of Agreement
Xxxx Danylowich & Claydan Enterprises Ltd. Indefinite term
3.1.24 Securities Laws. Cetalon has complied and will comply in all
material aspects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder. Neither
Cetalon nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy the Shares or similar securities
to, or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other than the
Purchaser), so as to bring the issuance and sale of the Shares under the
registration provisions of the Securities Act and applicable state securities
laws. Neither Cetalon nor any of its affiliates, nor any person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
3.1.25 Employees. Except as disclosed in paragraph 3.1.23 of this Agreement
and as disclosed in the SEC Documents, neither Cetalon nor any subsidiary has
any collective bargaining arrangements or agreements covering any of its
employees. Neither Cetalon nor any subsidiary is in breach of any employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by Cetalon or such subsidiary.
3.1.26 Absence of Certain Developments. Except as would not have a material
adverse effect on Cetalon's operations, since the date of the financial
statement contained in the most recently filed Form 10-Q (or 10-QSB) or Form
10-K (or 10KSB), whichever is most current, neither Cetalon nor any subsidiary
has:
3.1.26.1 issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto (other than pursuant to equity
incentive plans or arrangements adopted by Cetalon);
3.1.26.2 borrowed any material amount or incurred or become subject to any
material liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable in nature and
amount to the current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted to reflect
the current nature and volume of Cetalon's or such subsidiary's business;
3.1.26.3 discharged or satisfied any lien or encumbrance or paid any
material obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
3.1.26.4 declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
3.1.26.5 sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;
3.1.26.6 sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchaser or its representatives or other parties has in connection with any
proposed debt or equity financing;
3.1.26.7 suffered any material losses (except for anticipated losses
consistent with prior quarters) or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of prospective business;
3.1.26.8 made any material changes in employee compensation except in the
ordinary course of business and consistent with past practices;
3.1.26.9 made capital expenditures or commitments therefor that aggregate in
excess of $50,000;
3.1.26.10 entered into any other material transaction, whether or not in the
ordinary course of business;
3.1.26.11 suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
3.1.26.12 experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
3.1.26.13 effected any two or more events of the foregoing kind which in the
aggregate would be material to Cetalon or its subsidiaries.
3.1.27 Governmental Approvals. Except for the filing of any required SEC
Documents that may be required under applicable federal or state securities laws
(which if required, shall be filed on a timely basis), including, but not
limited to, the filing of Current Report on Form 8-K and Schedule 14f-1, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the delivery of the Shares, or for the performance by Cetalon
of its obligations under this Agreement.
3.2 Logic's Representations and Warranties. To induce Cetalon to enter into
this Agreement and to consummate the transactions contemplated hereby, Logic
represents and warrants, as of the date hereof and as of the Closing, as
follows:
3.2.1 Organization, Good Standing and Power. Logic is a corporation duly
incorporated validly existing and in good standing under the laws of Nevada and
has all requisite corporate authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted. Logic is duly
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary.
3.2.1 Authorization, Enforcement. (i) Logic has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement, (ii) the execution and delivery of the Agreement and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of Logic or its Board of Directors or stockholders is required,
and (iii) the Agreement has been duly executed and delivered by Logic and at the
Closing shall constitute valid and binding obligations of Logic enforceable
against Logic in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
3.2.2 Logic acknowledges that the Shares will be "restricted securities" (as
such term is defined in Rule 144 promulgated under the Securities Act of 1933,
as amended ("Rule 144")), that the Shares will include an appropriate
restrictive legend, and, except as otherwise set forth in this Agreement, that
the Shares cannot be sold for a period of at least one year from the date of
issuance unless registered with the SEC and qualified by appropriate state
securities regulators, or unless Logic obtains written consent from Cetalon and
otherwise complies with an exemption from such registration and qualification
(including, without limitation, compliance with Rule 144).
3.2.3 Logic acknowledges that investment in the Shares involves substantial
risks and is suitable only for persons of adequate financial means who can bear
the economic risk of an investment in the Shares for an indefinite period of
time.
3.2.4 Logic further represents that it or any assignee receiving the shares
would be an "Accredited Investor" as that term is defined in Section 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act");
3.2.5 Logic acknowledges that it was provided with a copy of the letter by
Sears Canada Inc. to Cetalon, dated December 31, 2001.
3.2.6 Logic has all the necessary power and authority to transfer the Logic
Distribution business unit, as described in paragraph 1.3 of this Agreement, to
Cetalon
3.2.7 Logic has in all material respects performed all of the obligations
required to be performed by them to date under the agreements with each of the
businesses that it distributes Logic product. Logic has received no notice of
default and, to the best of Logic's knowledge, is not in default under any
agreement that it may have. Logic The execution, delivery and performance of
this Agreement by Logic and the consummation by Logic of the transactions
contemplated herein do not and will not (i) violate any provision of Logic's
Charter or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which Logic is a party,
(iii) create or impose a lien, charge or encumbrance on any property of Logic
under any agreement or any commitment to which Logic is a party or by which
Logic is bound or by which any of its respective properties or assets are bound,
or (iv) result in a violation of any federal, state, local or other foreign
statute, rule, regulation, order, judgment or decree (including any federal or
state securities laws and regulations) applicable to Logic or any of its
subsidiaries or by which any property or asset of Logic or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, termination, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material adverse effect
on Logic's operations. The business of Logic is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not and
will not have a material adverse effect on Logic's operations. Logic is not
required under any federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by Logic with the SEC or state securities administrators subsequent
to the Closing); provided, however, that for purpose of the representations made
in this sentence, Logic is assuming and relying upon the accuracy of the
relevant representations and agreements of Cetalon herein.
ARTICLE 4
CLOSING AND DELIVERY OF DOCUMENTS
4.1 Closing. This is a binding Agreement. Closing shall be deemed to have
occurred upon execution of this agreement by the parties. Delivery of the
Shares to Logic or its nominee and delivery of other appropriate documents shall
be within a reasonable time period but no later than January 31, 2002.
4.2 Delivery by Cetalon:
4.2.1 Cetalon shall deliver to Logic or its nominee, certificate(s)
representing the Shares subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any other party
whatsoever, except as required by State or Federal Securities Laws.
4.2.2 Cetalon shall deliver, or cause to be delivered, to Logic such
instruments, documents and certificates as are required to be delivered by
Cetalon or its representatives pursuant to the provisions of this Agreement.
4.3 Delivery by Logic:
Logic shall deliver, or cause to be delivered, to Cetalon such instruments,
documents and certificates as are required to be delivered by Logic pursuant to
the provisions of this Agreement.4.3.1
ARTICLE 5
TERMINATION, AMENDMENT AND WAIVER
5.1 Termination. Notwithstanding anything to the contrary contained in the
Agreement, this Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing by the mutual consent
of all of the parties;
5.2 Waiver and Amendment. Any term, provision, covenant, representation,
warranty or condition of this Agreement may be waived, but only by a written
instrument signed by the party entitled to the benefits thereof. The failure or
delay of any party at any time or times to require performance of any provision
hereof or to exercise its rights with respect to any provision hereof shall in
no manner operate as a waiver of or affect such party's right at a later time to
enforce the same. No waiver by any party of any condition, or of the breach of
any term, provision, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or waiver of any
other condition or of the breach of any other term, provision, representation or
warranty. No modification or amendment to this Agreement shall be valid and
binding unless it be in writing and signed by all parties hereto.
ARTICLE 6
COVENANTS
6.1 To induce Logic to enter into this Agreement and to consummate the
transactions contemplated hereby, and without limiting any covenant, agreement,
representation or warranty made the shareholders covenants and agrees as
follows:
6.1.1 Notices and Approvals. Cetalon agrees: (a) to give all notices to
third parties which may be necessary or deemed desirable by Logic in connection
with this Agreement and the consummation of the transactions contemplated
hereby; (b) to use its bet efforts to obtain all federal and state governmental
regulatory agency approvals, consents, permits, authorizations, and orders
necessary or deemed desirable by Logic in connection with this Agreement and the
consummation of the transaction contemplated hereby; and (c) to use its best
efforts to obtain all consents and authorizations of any third parties necessary
or deemed desirable by Logic in connection with this Agreement and the
consummation of the transactions contemplated hereby.
6.1.2 Information for Logic's Statements and Applications. Cetalon and its
subsidiaries, their employees, accountants and attorneys shall cooperate fully
with Logic in preparation of any statements or applications made by Logic to any
federal or state governmental regulatory agency in connection with this
Agreement and the transactions contemplated hereby and to furnish Logic with all
information concerning Cetalon and its subsidiaries necessary or deemed
desirable by Logic for inclusion in such statements and applications, including,
without limitation, all requisite financial statements and schedule.
6.1.3 Access to Information. Logic, together with its appropriate
attorneys, agents and representatives, shall be permitted to make the full and
complete investigation of Cetalon and its subsidiaries and have full access to
all of the books and records of Cetalon and its subsidiaries during reasonable
business hours. Notwithstanding the foregoing, such parties shall treat all
such information as confidential and shall not disclose such information without
the prior consent of the other.
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Except as otherwise specifically provided for herein, whether
or not the transactions contemplated hereby are consummated, each of the parties
hereto shall bear all taxes of any nature (including, without limitation,
income, franchise, transfer and sales taxes) and all fees and expenses relating
to or arising from its compliance with the various provisions of this Agreement
and such party's covenants to be performed hereunder, and except as otherwise
specifically provided for herein, each of the parties hereto agrees to pay all
of its own expenses (including, without limitation, attorneys and accountants'
fees and printing expenses) incurred in connection with this Agreement, the
transactions contemplated hereby, the negotiations leading to the same and the
preparations made to carrying the same into effect, and all such taxes, fees and
expense of the parties hereto shall be paid prior to Closing.
7.2 Notices. Any notice, request, instruction or other document required by
the terms of this Agreement, or deemed by any of the parties hereto to be
desirable, to be given to any other party hereto shall be in writing and shall
be given by prepaid telegram or delivered or mailed by registered or certified
mail, postage prepaid, with return receipt requested, to the following
addresses:
To Logic
Logic Nutrition, Inc.
00000 Xxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
With a copy to:
M. Xxxxxxx Xxxxxx
Xxxxxx Law Group
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Fax: 000-000-0000
To Cetalon:
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Fax: 000-000-0000
The persons and addresses set forth above may be changed from time to time by a
notice sent as aforesaid. If notice is given by delivery in accordance with the
provisions of this Section, said notice shall be conclusively deemed given at
the time of such deliver. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed given
forty-eight (48) hours after deposit thereof in the United States mail. If
notice is given by telegraph in accordance with the provisions of this Section,
such notice shall be conclusively deemed given at the time that the telegraphic
agency shall confirm delivery thereof to addressee.
7.3 Entire Agreement. This Agreement, together with any Schedules and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any party
hereto which is not embodied in this Agreement, or exhibits hereto or the
written statements, certificates, or other documents delivered pursuant hereto
or in connection with the transactions contemplated hereby, and no party hereto
shall be bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set forth.
7.4 Survival of Representation. All statements of fact, exhibits,
certificates or any other instrument delivered by or on behalf of the parties
hereto, or in connection with the transaction contemplated hereby, shall be
deemed representations and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall survive the
Closing and remain effective regardless of any investigation or audit or any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto, notwithstanding that such party knew or should have known at
the time of closing that such right or remedy existed.
7.5 Incorporated by Reference. All documents (including, without
limitation, all financial statements) delivered as part hereof or incident
hereto are incorporated as part of this Agreement by reference.
7.6 Remedies Cumulative. No remedy herein conferred upon Logic is intended
to be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
7.7 Execution of Additional Documents. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
7.8 Finder's and Related Fees. Each of the parties hereto is responsible
for, and shall indemnify the other against, any claim by any third party to a
fee, commission, bonus or other remuneration arising by reason of any services
alleged to have been rendered to or at the instance of said party to this
Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
7.9 Governing Law. This Agreement has been negotiated and executed in the
State of California and shall be construed and enforced in accordance with the
laws of such state.
7.10 Forum; Attorneys Fees. Each of the parties hereto agrees that any
action or suit which may be brought by any party hereto against any other party
hereto in connection with this Agreement or the transactions contemplated hereby
may be brought only in a federal or state court in Orange County, California.
In the event of a breach in any one or more of the provisions of this Agreement
by Logic or Cetalon, the prevailing party shall be entitled to recover the
reasonable costs and expenses incurred in enforcing the terms of this Agreement,
including reasonable attorney's fees, in addition to any damages or other relief
that may be awarded for such breach.
7.11 Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns.
7.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
7.13 Public Announcement. The parties shall make no public
announcement concerning this Agreement, their discussions or any other memos,
letters or agreements between the parties relating to this Agreement until such
time as they agree to the contents of a mutually satisfactory press release
which they intend to publicly-release on the date of this Agreement. Either of
the parties, but only after reasonable consultation with the other, may make
disclosure by press release if required under applicable law.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
date first written herein above.
Cetalon, Inc., a
Nevada corporation ("Cetalon")
/s/ Xxxx Xxxxxxxx
By: Xxxx Xxxxxxxx
Its: Chief Operating Officer and Chief Financial Officer
Logic Nutrition, Inc.,a
Nevada corporation ("Logic")
/s/ Xxxxxx Xxxxxxxx
By: Xxxxxx Xxxxxxxx
Its: Chief Executive Officer
