Document:

Exhibit 10.1

 

INTERACTIVE HEALTH

 

2003 STOCK
INCENTIVE PLAN

 

 

 

SECTION 1.  PURPOSE OF PLAN

 

The purpose of this 2003 Stock Incentive
Plan (this “Plan”) of Interactive Health, Inc., a Delaware corporation (the
“Company”), is to enable the Company and its subsidiaries to attract, retain
and motivate its directors, officers, employees, and consultants and to further
align the interests of such persons with those of the stockholders of the
Company by providing for or increasing the proprietary interests of such
persons in the Company.

 

SECTION 2.  ADMINISTRATION OF PLAN

 

2.1  Composition of Committee.  The Plan shall be administered by the Board
of Directors (the “Board”) or, in the discretion of the Board, a committee (in
either case, the “Committee”), consisting of two (2) or more members of the
Board to whom administration of the Plan, or a specified portion thereof, has
been duly delegated; provided, however, that if, at any time,
there will be only one director serving on the Board, the Committee may be composed
of the sole director.  If the Committee
is not the entire Board, the Committee shall be appointed by the Board and the
Board shall fill vacancies on, and from time to time may remove or add members
to, the Committee.  From and after such
time as the shares of the Company’s Common Stock, $.001 par value (the
“Shares”) become registered under Section 12 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), the Plan shall be administered only by
the Committee, which shall then consist solely of persons who are “non-employee
directors” (as defined in Rule 16b-3 promulgated under the Exchange Act, as
such Rule may be amended from time to time) and, with respect to any Awards
intended to qualify as qualifying performance based compensation under Code
Section 162(m), are “outside directors” within the meaning of Treasury
Regulations section 1.162-27(e)(3).  The
Committee may adopt its own rules of procedure consistent with the Company’s
Bylaws.

 

The Committee may employ attorneys,
consultants, accountants, appraisers, brokers or other persons.  The Committee, the Company, and the officers
of the Company shall be entitled to rely upon the advice, opinions or
valuations of any such persons.  All
actions taken and all interpretations and determinations made by the Committee
in good faith shall be final and binding upon all Participants (as defined in
Section 4 hereof), the Company and all other interested persons.  No member of the Committee will be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or the grants of Awards (as defined in Section 5.1 hereof),
and all members of the Committee will be fully indemnified by the Company in
accordance with Section 18 hereof with respect to any such action,
determination or interpretation.

 

The Committee may designate the
Secretary of the Company or other Company employees to assist the Committee in
the administration of the Plan, and may grant authority to such persons to
execute agreements or other documents evidencing Awards made under this Plan or
other documents entered into under this Plan on behalf of the Committee or the
Company.

 

 

2.2  Powers of the Committee.  Subject to the express provisions of this
Plan, the Committee shall be authorized and empowered to do all things
necessary or desirable, in its sole discretion, in connection with the
administration of this Plan, including, without limitation, the following:

 

(a)           to adopt, amend and rescind rules and regulations relating
to this Plan and to define terms not otherwise defined herein; provided that,
unless the Committee shall specify otherwise, for purposes of this Plan:

 

(i)            the term
“Fair Market Value” shall mean the fair market value of a Share as of a
particular date (the “Determination Date”). 
If on any such Determination Date such Shares are not listed or admitted
for trading on any national securities exchange or quoted on NASDAQ or a
similar service, the Fair Market Value for such Shares means the fair market
value of such Shares as of the Determination Date as determined in good faith
by the Committee.  However, subsequent to
an initial public offering by the Company of its Shares pursuant to a
registration statement (other than a registration statement relating solely to
an employee benefit plan or transaction covered by Rule 145 of the Securities
Act of 1933, as amended, (the “1933 Act”)) that has been filed under the 1933
Act and declared effective by the Securities and Exchange Commission, or any
other federal agency at the time administering the 1933 Act (an “Initial Public
Offering”), the Fair Market Value of a Share will be the closing price for a
Share reported for the last trading day prior to the Determination Date by the Nasdaq Stock Market (or such other stock exchange or
quotation system on which Shares are then listed or quoted) or, (y) the average
of the high and low prices for a Share reported for the last trading day prior
to the Determination Date by the Nasdaq Stock Market
(or such other stock exchange or quotation system on which Shares are then
listed or quoted) (the determination as to whether (x) or (y) is utilized in
any specific case shall be in the sole discretion of the Committee), or, in
either case of (x) or (y), if no Shares are traded on the Nasdaq
Stock Market (or such other stock exchange or quotation system) on the
Determination Date, then for the next preceding date for which Shares traded on
the Nasdaq Stock Market (or such other stock exchange
or quotation system); and

 

(ii)           the term
“Company” shall mean the Company and its subsidiaries and affiliates, unless
the context otherwise requires;

 

(b)           to determine which persons are Eligible Persons  (as defined in Section 4 hereof), to which of
such Eligible Persons, if any, Awards shall be granted hereunder and the timing
of any such Awards, and to grant Awards;

 

(c)           to
grant Awards to Eligible Persons and determine the terms and conditions
thereof, including the number of Shares subject to Awards and the exercise or
purchase price of such Shares and the circumstances under which Awards become
exercisable or vested or are forfeited or expire, which terms may but need not
be conditioned upon the passage of time, continued employment, the satisfaction
of performance criteria, the occurrence of certain events (including events
which the Board or the Committee determine constitute a change of control), or
other factors;

 

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(d)           to establish, verify the extent of satisfaction of, adjust,
reduce or waive any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or
ability to retain any Award;

 

(e)           to
adopt and amend the terms of the agreements or other documents evidencing
Awards made under this Plan (which need not be identical);

 

(f)            to determine whether, and the extent to which, adjustments
are required pursuant to Section 10;

 

(g)           to
interpret and construe this Plan, any rules and regulations under this Plan and
the terms and conditions of any Award granted hereunder, and to make exceptions
to any such provisions; and

 

(h)           to make all other determinations deemed necessary or
advisable for the administration of this Plan.

 

2.3  Determinations of the Committee.  All decisions, determinations and
interpretations by the Committee regarding this Plan shall be final and binding
on all Eligible Persons and Participants. 
The Committee shall consider such factors as it deems relevant to making
such decisions, determinations and interpretations including, without limitation,
the recommendations or advice of any director, officer or employee of the
Company and such attorneys, consultants and accountants as it may select.

 

SECTION 3.  STOCK SUBJECT TO PLAN

 

3.1          Aggregate Limits. 
The aggregate number of shares of the Company’s Common Stock, $.01 par
value (“Shares”) that may be subject to Awards (including all ISOs (as defined in Section 5.1(a) hereof)) granted
hereunder shall not exceed 1,013,716, subject to adjustment under Section 10
hereof.  At any time, the aggregate number
of Shares that may be issued pursuant to all ISOs
granted under this Plan shall not exceed 400,000, subject to adjustment under
Section 10 hereof only to the extent that such calculation or adjustment will
not affect the status of any Option intended to qualify as an ISO under Code
Section 422.  The Shares that may be
subject to Awards granted under the Plan may be authorized and unissued Shares or Shares reacquired by the Company and
held as treasury stock.  If any Award
granted under this Plan is canceled, terminated, forfeited, expires, or lapses
for any reason, any Shares subject to such Award again shall be available for
the grant of an Award under the Plan.

 

3.2          Tax
Code Limits.  From and after such
time as the Shares become registered under Section 12 of the Exchange Act, the
aggregate number of Shares subject to Options granted under this Plan during
any calendar year to any one Eligible Person shall not exceed 500,000 and the
aggregate number of Shares issued or issuable under
all Awards granted under this Plan, other than Options, during any calendar
year to any one Eligible Person shall not exceed 500,000.  Notwithstanding anything to the contrary in
this Plan, the foregoing limitations shall be subject to adjustment under
Section 10 only to the extent that such adjustment will not affect the status
of any Award intended to qualify as “performance based compensation” under Code
Section 162(m).  The foregoing
limitations shall not apply to the extent that they are no

 

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longer required in order
for compensation in connection with grants under this Plan to be treated as
“performance-based compensation” under Code Section 162(m).

 

SECTION 4.  PERSONS
ELIGIBLE UNDER PLAN

 

Any person, including any director of
the Company, who is an employee or prospective employee of, or consultant to,
the Company or any of its subsidiaries or affiliates shall be eligible to be
considered for the grant of Awards hereunder (an “Eligible Person”).  For purposes of the grant provisions under
Section 6.7, an “Eligible Person” shall also include a director of the Company
who is not also a salaried employee (a “Non-Employee Director”).  Unless provided otherwise by the Committee,
the term “employee” shall mean an “employee,” as such term is defined in
General Instruction A to Form S-8 under the 1933 Act and a “Participant” is any
current or former Eligible Person to whom an Award has been made and any person
(including any estate) to whom an Award has been assigned or transferred
pursuant to Section 9.1.  Options
intended to qualify as ISOs may be granted only to
employees of the Company or any “Parent Corporation” or “Subsidiary
Corporation” of the Company (as such terms are defined in Section 424(e) and
424(f) of the Code, respectively).

 

SECTION 5.  PLAN
AWARDS

 

5.1 
Award Types.  The Committee,
on behalf of the Company, is authorized under this Plan to enter into certain
types of arrangements with Eligible Persons and to confer certain benefits on
them.  The following arrangements or
benefits are authorized under this Plan if their terms and conditions are not
inconsistent with the provisions of this Plan: Options, Incentive Bonuses,
Incentive Stock and Other Stock-Based Awards (each as defined in this Section
5.1).  Such arrangements and benefits are
sometimes referred to herein as “Awards.” 
The authorized types of arrangements and benefits for which Awards may
be granted are defined as follows:

 

(a)           Options:
An Option is a right granted under Section 6 to purchase a number of Shares at
such exercise price, at such times, and on such other terms and conditions as
are specified in the agreement or terms and conditions or other document
evidencing the Award (the “Option Document”). 
Options intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Code and Options not
intended to qualify as ISOs (“Nonqualified Options”)
may be granted under Section 6.  Options
may be granted to Non-Employee Directors only pursuant to Section 6.7.

 

(b)           Incentive
Bonus: An Incentive Bonus is a bonus opportunity awarded under Section 7
pursuant to which a Participant may become entitled to receive an amount based
on satisfaction of such performance criteria as are specified in the agreement
or other document evidencing the Award (the “Incentive Bonus Document”).

 

(c)           Incentive
Stock: Incentive Stock is an award or issuance of Shares made under Section 8,
the grant, issuance, retention, vesting and/or transferability of which is
subject during specified periods of time to such conditions (including
continued employment or performance conditions) and terms as are expressed in
the agreement or other document evidencing the Award (the “Incentive Stock
Document”).

 

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(d)           Other
Stock-Based Awards: The Committee shall have the right to grant other Awards
based upon the Shares having such terms and conditions as the Committee may
determine, including, without limitation, the grant of shares based upon
certain conditions, the grant of securities convertible into Shares and the
grant of stock appreciation rights, phantom stock awards, dividend equivalents
or stock units.

 

5.2 Grants of Awards.  An Award may consist of one such arrangement
or benefit or two or more of them in tandem or in the alternative.

 

SECTION 6.  OPTIONS

 

The Committee may grant an Option or
provide for the grant of an Option, either from time to time in the discretion
of the Committee or automatically upon the occurrence of specified events,
including, without limitation, the achievement of performance goals, the
satisfaction of an event or condition within the control of the recipient of
the Award or within the control of others.

 

6.1 
Option Document.  Each Option
Document shall contain provisions regarding (a) the number of Shares that may
be issued upon exercise of the Option, (b) the purchase price of the Shares and
the means of payment for the Shares, (c) the term of the Option, (d) such terms
and conditions on the vesting and/or exercisability
of an Option as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, (f)
whether the Option is intended to qualify as an ISO, and (g) such further terms
and conditions, in each case not inconsistent with this Plan as may be
determined from time to time by the Committee. 
Option Documents evidencing ISOs shall contain
such terms and conditions as may be necessary to qualify, to the extent
determined desirable by the Committee, with the applicable provisions of
Section 422 of the Code.

 

6.2 
Option Price.  Subject to
Section 9.7, the purchase price per share of the Shares subject to each Option
granted under this Plan shall be determined by the Committee, except that if an
Option is intended to qualify as an ISO or, from and after such time as the
Shares become registered under Section 12 of the Exchange Act, as qualifying
performance based compensation under Code Section 162(m), the exercise price
shall be not less than the Fair Market Value of a Share at the time such Option
is granted, and if an Option being granted to an individual who owns shares of
the Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Parent Corporation or Subsidiary Corporation
(a “10% Shareholder”) is intended to qualify as an ISO, the exercise price
shall be not less than 110% of the Fair Market Value of a Share at the time
such Option is granted.

 

6.3 
Option Term.  The “Term” of
each Option granted under this Plan, including any ISOs,
shall not exceed 10 years from the date of its grant.  The Term of any ISO granted to a 10%
Shareholder shall not exceed 5 years from the date of its grant.

 

6.4 
Option Vesting.  Options
granted under this Plan shall be exercisable at such time and in such
installments during the period prior to the expiration of the Option’s Term as
determined by the Committee.  The
Committee shall have the right to make the timing of the ability to exercise
any Option granted under this Plan subject to continued employment, the

 

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passage of time and/or
such performance requirements as deemed appropriate by the Committee.  At any time after the grant of an Option the
Committee may reduce or eliminate any restrictions surrounding any
Participant’s right to exercise all or part of the Option.

 

6.5 
Termination of Employment or Service.  Subject to Sections 6.7 and 11, upon a
termination of employment by an Eligible Person prior to the full exercise of
an Option, the unexercised portion of the Option shall be subject to such
procedures as the Committee may establish.

 

6.6          Payment of Exercise
Price.

 

(a)           Options shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised.  The exercise price of any Option (including,
but not limited to, Non-Employee Director Options) granted under this Plan and
the optionee’s tax withholding obligation, if any,
with respect to such Option shall be paid by any one or more of the following,
as determined by the Committee:

 

(i)            payment in full in cash, at or before
the time the Company delivers the Shares underlying such Option;

 

(ii)           the
delivery of previously owned Mature Shares of the Company (including
“pyramiding”) or other property, provided
that any such shares of capital stock assigned and delivered to the Company in
payment or partial payment of the exercise price shall be accompanied by an
assignment separate from certificate and any other document(s) reasonably
requested by the Company;

 

(iii)          payment in other property deemed acceptable by
the Committee, at or before the time the Company delivers the Shares underlying
such Option;

 

(iv)          a reduction in the amount of Shares or
other property otherwise issuable pursuant to such
Award (such reduction to be valued on the basis of the aggregate Fair Market
Value, on the date of exercise, of the additional Shares that would have been
delivered to the Participant upon exercise of the Award), provided that the
Company is not then prohibited from purchasing or acquiring Shares;

 

(v)           if subsequent to an Initial Public
Offering, the holder of the Option
irrevocably authorizing a broker approved in writing by the Company to sell to
third parties Shares to be acquired through exercise of the Option and
remitting to the Company a sufficient portion of the sale proceeds to pay the
entire exercise price and any federal and state withholding resulting from such
exercise (a “Cashless Exercise”); provided, however, that,
notwithstanding anything in this Plan to the contrary, (i) the Company shall
only deliver such Shares at or after the time the Company receives full payment
for such Shares, (ii) the exercise price for such Shares will be due and
payable to the Company no later than one business day following the date on
which the proceeds from the sale of the underlying Shares are received by the
authorized broker, (iii) in no event will the Company directly or indirectly
extend or maintain credit, arrange for the

 

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extension
of credit or renew any extension of credit, in the form of a personal loan or
otherwise, in connection with a Cashless Exercise and (iv) in no event shall
the holder of the Option enter into any agreement or arrangement with a
brokerage or similar firm in which the proceeds received in connection with a
Cashless Exercise will be received by or advanced to the holder of such Option
before the date the Shares underlying such Option are delivered or released by
the Company; or

 

(vi)                              a combination of any of the above.

 

Notwithstanding any
other provisions of this Plan to the contrary, no Option holder shall be
permitted to pay the purchase price of the Shares underlying such
Option, or other property issuable pursuant to such
Option, or such holder’s tax withholding obligation with respect to such
issuance, in whole or in part by the delivery of a promissory note.  The term “Mature Shares” shall mean Shares
acquired at least 181 days previously and fully paid by the Option holder.

 

(b)           Notwithstanding
any provision of this Plan to the contrary:

 

(i)            payment
of the exercise price for such Shares and the Option holder’s tax withholding
obligation, if any, with respect to such Shares shall be due the date the
Shares underlying the Option are delivered; and

 

(ii)           in
no event shall the Company issue or deliver the Shares underlying the Option
before the Company receives payment for such Shares pursuant to this
Section 6.6.

 

6.7 
Non-Employee Director Options.

 

(a)           The
Committee may elect to grant any Non-Employee Director a Nonqualified Option (a
“Non-Employee Director Option”) to purchase Shares.

 

(b)           The
purchase price per share of the Shares subject to each Non-Employee Director
Option granted under this Plan shall equal the Fair Market Value of a Share at
the time such Non-Employee Director Option is granted.

 

(c)           Each
Non-Employee Director Option granted under this Plan shall be exercisable in
full upon the date of grant of such Non-Employee Director Option.  All Options held by Non-Employee Directors as
of the date of cessation of service as a director may be exercised in
accordance with their terms by the Non-Employee Director or his heirs or legal
representatives  (or a permitted
transferee pursuant to paragraph (f) below) until the earlier of (i) one (1)
year after such termination and (ii) the expiration of the applicable Option
term.

 

(d)           Non-Employee
Director Options are not intended to qualify as Incentive Stock Options.

 

(e)           Each
Non-Employee Director Option shall be transferable or assignable, at the sole
discretion of the Committee, (a) in the case of a transfer without the payment
of any consideration, to any “family member” as such term is defined in Section
1(a)(5) of the General

 

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Instructions to Form S-8
under the 1933 Act, if such form is available to the Company, as such may be
amended from time to time, and (b) in any transfer described in clause (ii) of
Section 1(a)(5) of the General Instructions to Form S-8 under the 1933 Act, if
such form is available to the Company, as such may be amended from time to
time, provided that following any such transfer or assignment the Award will
remain subject to the same terms applicable to the Non-Employee Director Option
while held by the Non-Employee Director, and as a condition to such transfer
the transferee shall execute an agreement agreeing to be bound by such terms.

 

SECTION 7. 
INCENTIVE BONUSES

 

Each Incentive Bonus Award will confer
upon the Employee the opportunity to earn a future payment tied to the level of
achievement with respect to one or more performance criteria established for a
performance period of not less than one year.

 

7.1 
Incentive Bonus Document.  Each
Incentive Bonus Document shall contain provisions regarding (a) the target and
maximum amount payable to the Participant as an Incentive Bonus, (b) the
performance criteria and level of achievement versus these criteria that shall
determine the amount of such payment, (c) the term of the performance period as
to which performance shall be measured for determining the amount of any
payment, which term shall not be less than one year, (d) the timing of any
payment earned by virtue of performance, (e) restrictions on the alienation or
transfer of the Incentive Bonus prior to actual payment, (f) forfeiture
provisions and (g) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Committee.  The maximum amount payable as
an Incentive Bonus may be a multiple of the target amount payable, but from and
after such time as the Shares become registered under Section 12 of the
Exchange Act, the maximum amount payable pursuant to that portion of an
Incentive Bonus Award granted under this Plan for any fiscal year to any
Eligible Person that is intended to satisfy the requirements for “performance
based compensation” under Code Section 162(m) shall not exceed $1,000,000.

 

7.2 
Performance Criteria.  The
Committee shall establish the performance criteria and level of achievement
versus these criteria that shall determine the target and maximum amount
payable under an Incentive Bonus Award, which criteria may be based on
financial performance and/or personal performance evaluations.  From and after such time as the Shares become
registered under Section 12 of the Exchange Act, the Committee may specify the
percentage of the target Incentive Bonus that is intended to satisfy the
requirements for “performance-based compensation” under Code Section
162(m).  Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Bonus
that is intended by the Committee to satisfy the requirements for
“performance-based compensation” under Code Section 162(m) shall be a measure
based on one or more Qualifying Performance Criteria (as defined in Section
9.2) selected by the Committee and specified at the time the Incentive Bonus
Award is granted.  The Committee shall
certify the extent to which any Qualifying Performance Criteria has been
satisfied, and the amount payable as a result thereof, prior to payment of any
Incentive Bonus that is intended to satisfy the requirements for
“performance-based compensation” under Code Section 162(m).

 

7.3 
Timing and Form of Payment. 
The Committee shall determine the timing of payment of any Incentive
Bonus.  The Committee may provide for or,
subject to such terms and

 

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conditions as the Committee
may specify, may permit a Participant to elect for the payment of any Incentive
Bonus to be deferred to a specified date or event.  An Incentive Bonus may be payable in Shares
or in cash or other property.  Any
Incentive Bonus that is paid in cash or other property (except if paid in
Shares) shall not affect the number of Shares otherwise available for issuance
under this Plan.

 

7.4 
Discretionary Adjustments. 
Notwithstanding satisfaction of any performance goals, to the extent the
Committee provides in the Incentive Bonus Document, the amount paid under an
Incentive Bonus Award on account of either financial performance or personal
performance evaluations may be reduced, but not increased, by the Committee on
the basis of such further considerations as the Committee shall determine.

 

SECTION 8. 
INCENTIVE STOCK

 

Incentive Stock is an award or issuance
of Shares the grant, issuance, retention, vesting and/or transferability of
which is subject during specified periods of time to such conditions (including
continued employment or performance conditions) and terms as the Committee
deems appropriate.

 

8.1 
Incentive Stock Document. 
Each Incentive Stock Document shall contain provisions regarding (a) the
number of Shares subject to such Award or a formula for determining such, (b)
the purchase price of the Shares, if any, and the means of payment for the
Shares, (c) the performance criteria, if any, and level of achievement versus
these criteria that shall determine the number of Shares granted, issued, retainable
and/or vested, (d) such terms and conditions on the grant, issuance, vesting
and/or forfeiture of the Shares as may be determined from time to time by the
Committee, (e) restrictions on the transferability of the Shares and (f) such
further terms and conditions in each case not inconsistent with this Plan as
may be determined from time to time by the Committee.

 

8.2 
Sale Price.  Subject to the
requirements of applicable law, the Committee shall determine the price, if
any, at which Shares of Incentive Stock shall be sold or awarded to an Eligible
Person, which may vary from time to time and among Eligible Persons.

 

8.3 
Share Vesting.  The grant,
issuance, retention and/or vesting of Shares of Incentive Stock shall be at
such time and in such installments as determined by the Committee or under
criteria established by the Committee. 
The Committee shall have the right to make the timing of the grant
and/or the issuance, ability to retain and/or vesting of Shares of Incentive
Stock subject to continued employment, passage of time and/or such performance
criteria and level of achievement versus these criteria as deemed appropriate
by the Committee, which criteria may be based on financial performance and/or
personal performance evaluations. 
Notwithstanding anything to the contrary herein, the performance
criteria for any Incentive Stock that is intended to satisfy the requirements
for “performance-based compensation” under Code Section 162(m) shall be a
measure based on one or more Qualifying Performance Criteria (as defined in
Section 9.2 hereof) selected by the Committee and specified at the time the
Incentive Stock Award is granted.

 

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8.4 
Discretionary Adjustments. 
Notwithstanding satisfaction of any performance goals, to the extent
provided at the time of grant, the number of Shares granted, issued, retainable
and/or vested under an Incentive Stock Award on account of either financial
performance or personal performance evaluations may be reduced by the Committee
on the basis of such further considerations as the Committee shall determine.

 

8.5 
Termination of Employment. 
Subject to Section 11, upon a termination of employment by an Eligible
Person prior to the vesting of or the lapsing of restrictions on Incentive
Stock, the Incentive Stock Awards granted to such Eligible Person shall be
subject to such procedures as determined by the Committee.

 

SECTION 9.  OTHER
PROVISIONS APPLICABLE TO AWARDS

 

9.1          Transferability.  Unless
the agreement or other document evidencing an Award (or an amendment thereto
authorized by the Committee) expressly states that the Award is transferable as
provided hereunder, no Award granted under this Plan, nor any interest in such
Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner other than by will or the laws of descent
and distribution.  Further, all ISOs granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant, and, except as
otherwise provided in a Participant’s Option Document, all Nonqualified Options
granted to a Participant under this Agreement shall be exercisable during his
or her lifetime only by such Participant. 
The Committee may grant an Award or amend an outstanding Award to
provide that the Award is transferable or assignable (a) in the case of a
transfer without the payment of any consideration, to any “family member” as
such term is defined in Section 1(a)(5) of the General Instructions to Form S-8
under the 1933 Act, if such form is available to the Company, as such may be
amended from time to time, and (b) in any transfer described in clause (ii) of
Section 1(a)(5) of the General Instructions to Form S-8 under the 1933 Act, if
such form is available to the Company, as such may be amended from time to
time, provided that following any such transfer or assignment the Award will
remain subject to substantially the same terms applicable to the Award while
held by the Participant to whom the Award was originally granted, as modified
as the Committee shall determine appropriate, and as a condition to such
transfer the transferee shall execute an agreement agreeing to be bound by such
terms.

 

9.2 
Qualifying Performance Criteria. 
For purposes of this Plan, the term “Qualifying Performance Criteria”
shall mean any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the
Company as a whole or to a business unit or subsidiary, either individually,
alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years’ results or to a designated
comparison group, in each case as specified by the Committee in the Award: (a)
cash flow, (b) earnings per share, (c) earnings before interest, taxes and
amortization, (d) return on equity, (e) total stockholder return, (f) share
price performance, (g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or net operating
income, (l) operating profit or net operating profit, (m) operating margin or
profit margin, (n) return on operating revenue, (o) market share, (p) overhead
or other expense reduction and (q) such other objective performance criteria as
the Committee shall determine under the circumstances.  The Committee shall

 

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appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to exclude
any of the following events that occurs during a performance period: (i) asset
write-downs, (ii) litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs and (v) any extraordinary non-recurring items as
described in Accounting Principles Board Opinion No. 30 and/or in management’s
discussion and analysis of financial condition and results of operations
appearing in the Company’s annual report to stockholders for the applicable
year.

 

9.3 
Dividends.  Unless otherwise
provided by the Committee, no adjustment shall be made in Shares issuable under Awards on account of cash dividends that may
be paid or other rights that may be issued to the holders of Shares prior to
their issuance under any Award.  The
Committee shall specify whether dividends or dividend equivalent amounts shall
be paid to any Participant with respect to the Shares subject to any Award that
have not vested or been issued or that are subject to any restrictions or
conditions on the record date for dividends.

 

9.4 
Documents Evidencing Awards. 
The Committee shall, subject to applicable law, determine the date an
Award is deemed to be granted.  The
Committee or, except to the extent prohibited under applicable law, its
delegate(s) may establish the terms of agreements or other documents evidencing
Awards under this Plan and may, but need not, require as a condition to any
such agreement’s or document’s effectiveness that such agreement or document be
executed by the Participant and that such Participant agree to such further
terms and conditions as specified in such agreement or document.  The grant of an Award under this Plan shall
not confer any rights upon the Participant holding such Award other than such
terms, and subject to such conditions, as are specified in this Plan as being
applicable to such type of Award (or to all Awards) or as are expressly set
forth in the agreement or other document evidencing such Award.

 

9.5 
Tandem Stock or Cash Rights. 
Either at the time an Award is granted or by subsequent action, the
Committee may, but need not, provide that an Award shall contain as a term
thereof, a right, either in tandem with the other rights under the Award or as
an alternative thereto, of the Participant to receive, without payment to the
Company, a number of Shares, cash or a combination thereof, the amount of which
is determined by reference to the value of the Award.

 

9.6 
Additional Restrictions on Awards. 
Either at the time an Award is granted or by subsequent action, the
Committee may, but need not, impose such restrictions, conditions or
limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by a
Participant of any Shares issued under an Award, including without limitation
(a) restrictions under an insider trading policy, (b) restrictions designed to
delay and/or coordinate the timing and manner of sales by Participants, and (c)
restrictions as to the use of a specified brokerage firm for such resales or other transfers.

 

9.7 
Exercise Price of Awards. 
Notwithstanding any other provision of this Plan (other than Section
11.3), the exercise price per share of any Award granted under this Plan shall
not be less than the Fair Market Value of a Share at the time the Award is
granted; provided, however that the exercise price per share in
connection with the grant of an Award (other than Options

 

11

 

intended to qualify as ISOs or, from and after such time as the Shares become
registered under Section 12 of the Exchange Act, as qualifying performance
based compensation under Code Section 162(m)) for a number of Shares in an
aggregate amount up to 10% of the aggregate number of Shares authorized for
grant under this Plan may be less than the Fair Market Value of a Share at the
time the Award is granted, as determined by the Committee.

 

SECTION 10. 
CHANGES IN CAPITAL STRUCTURE

 

10.1 
Corporate Actions Unimpaired. 
The existence of outstanding Awards (including any Options) shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations,
reorganizations, exchanges, or other changes in the Company’s capital structure
or its business, or any merger or consolidation of the Company, or any issuance
of Shares or other securities or subscription rights thereto, or any issuance
of bonds, debentures, preferred or prior preference stock ahead of or affecting
the Shares or other securities of the Company or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise. 
Further, except as expressly provided herein or by the Committee, (a)
the issuance by the Company of shares of stock of any class of securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefore, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, (b) the payment of a dividend
in property other than Shares, or (c) the occurrence of any similar
transaction, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
of Shares subject to Options or other Awards theretofore granted or the
purchase price per Share, unless the Committee shall determine in its sole
discretion that an adjustment is necessary to provide equitable treatment to a
Participant.

 

10.2 
Adjustments Upon Certain Events. 
If the outstanding Shares or other securities of the Company, or both,
for which the Award is then exercisable or as to which the Award is to be
settled shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares, recapitalization,
or reorganization, the Committee may, but need not, appropriately and equitably
adjust the number and kind of Shares or other securities which are subject to
the Plan or subject to any Awards theretofore granted, and the exercise or
settlement prices of such Awards, so as to maintain the proportionate number of
Shares or other securities without changing the aggregate exercise or settlement
price, provided, however, that such adjustment shall be made so as to not
affect the status of any Award intended to qualify as an ISO or, from and after
such time as the Shares become registered under Section 12 of the Exchange Act,
as qualifying performance based compensation under Code Section 162(m).

 

SECTION 11. 
CORPORATE TRANSACTIONS

 

11.1 
Assumption or Replacement of awards by Successor.  In the event of (a) a dissolution or
liquidation of the Company, (b) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the
Company in a different jurisdiction, or other transaction in which there is not
substantial change in the stockholders of the Company or their relative stock

 

12

 

holdings and the Awards
granted under this Plan as assumed, converted or replaced by the successor
corporation or its parent (“Successor”), which assumption will be binding on
all Participants), (c) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior
to such merger (other than any stockholder that merges, or which owns or
controls another corporation that merges, with the Company in such merger)
cease to own their shares or other equity interest in the Company, (d) the sale
of substantially all of the assets of the Company, or (e) the acquisition, sale
or transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, any or all outstanding Awards may be assumed,
converted or replaced by the Successor (if any), which assumption, conversion
or replacement will be binding on all Participants.  In the alternative, the Successor may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards).  The
Successor may also issue, in place of outstanding Shares of the Company held by
the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant.  In the event such Successor (if any) refuses
to assume or substitute Awards, as provided above, pursuant to a transaction
described in this Subsection 11.1, such Awards (in the case of Options, to the
extent not exercised prior to the date of such transaction and in the case of
all other Awards, to the extent not fully vested and free from any restriction
prior to the date of such transaction) will expire on such transaction at such
time and on such conditions as the Committee determines.  Notwithstanding anything in this Plan to the
contrary, the Committee may, in its sole discretion, but need not, provide in
the terms of an Award for alternative treatment in connection with a
transaction described in this Section 11 and/or provide that the vesting of any
or all Awards granted pursuant to this Plan will accelerate in connection with
a transaction described in this Section 11.

 

11.2 
Other Treatment of Awards. 
Subject to any greater rights granted to Participants under the
foregoing provisions of this Section 11, in the event of the occurrence of any
transaction described in Section 11.1, any outstanding Awards will be treated
as provided in the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, or sale of assets.

 

11.3 
Assumption of Awards by the Company. 
The Company, from time to time, also may substitute or assume
outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either; (a) granting an
Award under this Plan in substitution of such other company’s award; or (b)
assuming such award as if it had been granted under this Plan if the terms of
such assumed award could be applied to an Award granted under this Plan.  Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant. 
In the event the Company assumes an award granted by another company,
the terms and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code).  In the
event the Company elects to grant a new Option rather than assuming an existing
option, such new Option may be granted with a similarly adjusted exercise
price, which may be less than Fair Market Value.

 

13

 

SECTION 12.  TAXES

 

12.1 
Withholding Requirements.  The
Committee may make such provisions or impose such conditions as it may deem
appropriate for the withholding or payment by a Participant of any taxes that
the Committee determines are required in connection with any Award granted
under this Plan, and a Participant’s rights in any Award are subject to
satisfaction of such conditions.

 

12.2 
Payment of Withholding Taxes. 
Notwithstanding the terms of Section 12.1, but subject to the provisions
of Section 6.6(a), the Committee may provide in the agreement or other document
evidencing an Award or otherwise that all or any portion of the taxes required
to be withheld by the Company or, if permitted by the Committee, desired to be
paid by the Participant, in connection with the exercise, vesting, settlement
or transfer of any other Award shall be paid or, at the election of the
Participant, may be paid by the Company by withholding shares of the Company’s
capital stock otherwise issuable or subject to such
Award, or by the Participant delivering previously owned shares of the
Company’s capital stock, in each case having a Fair Market Value equal to the
amount required or elected to be withheld or paid, or, subsequent to an Initial
Public Offering, by a broker selected or approved by the Company paying such
amount pursuant to an irrevocable commitment by the broker to deliver to the
Company proceeds from the sale of the Shares issuable
under the Award.  Any such election is
subject to such conditions or procedures as may be established by the Committee
and may be subject to approval by the Committee.

 

SECTION 13. 
AMENDMENTS OR TERMINATION

 

The Board may amend or terminate this
Plan or any agreement or other document evidencing an Award made under this
Plan at any time and in any manner; provided, however, that no
such amendment or termination shall deprive the recipient of any Award
theretofore granted under this Plan, without the consent of such recipient, of
any of his or her rights thereunder or with respect
thereto.

 

SECTION 14. 
COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

 

This Plan, the grant and exercise of
Awards thereunder, and the obligation of the Company
to sell, issue or deliver Shares under such Awards, shall be subject to all
applicable federal, state and foreign laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be required.  The Company shall not be required to register
in a Participant’s name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or foreign
law or any ruling or regulation of any government body which the Committee
shall determine to be necessary or advisable. 
This Plan is intended to constitute an unfunded
arrangement for a select group of management or other key employees, directors
and consultants.

 

No Option shall be exercisable unless a
registration statement with respect to the Option is effective or the Company
has determined that such registration is unnecessary.  Unless the Awards and Shares covered by this
Plan have been registered under the 1933 Act or the Company has determined that
such registration is unnecessary, each person receiving an Award

 

14

 

and/or Shares pursuant
to any Award may be required by the Company to give a representation in writing
that such person is acquiring such Shares for his or her own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.

 

SECTION 15.  OPTION
GRANTS BY SUBSIDIARIES

 

In the case of a grant of an option
to any eligible employee employed by a subsidiary, such grant may, if the
committee so directs, be implemented by the company issuing any subject shares
to the subsidiary, for such lawful consideration as the committee may determine,
upon the condition or understanding that the subsidiary will transfer the
shares to the optionholder in accordance with the
terms of the option specified by the committee pursuant to the provisions of
the plan.  Notwithstanding any other
provision hereof, such option may be issued by and in the name of the
subsidiary and shall be deemed granted on such date as the committee shall
determine.

 

SECTION 16.  NO
RIGHT TO COMPANY EMPLOYMENT

 

Nothing in this Plan or as a result
of any Award granted pursuant to this Plan shall confer on any individual any
right to continue in the employ of the Company or interfere in any way with the
right of the Company to terminate an individual’s employment at any time.  The agreements or other documents evidencing
Awards may contain such provisions as the Committee may approve with reference
to the effect of approved leaves of absence.

 

SECTION 17. 
LIABILITY OF COMPANY

 

The Company and any affiliate which is
in existence or hereafter comes into existence shall not be liable to a
Participant, an Eligible Person or other persons as to:

 

(a)           The Non-Issuance of Shares.  The non-issuance or sale of shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company’s counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and

 

(b)           Tax Consequences. 
Any tax consequence expected, but not realized, by any Participant,
Eligible Person or other person due to the receipt, exercise or settlement of
any Option or other Award granted hereunder.

 

SECTION 18.  INDEMNIFICATION

 

Each person who is or shall have been a
member of the Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from all expenses (including attorneys’
fees), judgments, and fines that may be imposed upon or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she

 

15

 

undertakes to handle and
defend it on his or her own behalf.  The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power
that the Company may have to indemnify them or hold them harmless.

 

SECTION 19. 
EFFECTIVENESS AND EXPIRATION OF PLAN

 

This Plan shall be effective on the date
the Company’s stockholders adopt this Plan. 
All Awards granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the stockholders prior to the
first anniversary date of the effective date of this Plan, by the affirmative
vote of the holders of a majority of the outstanding shares of the Company present,
or represented by proxy, and entitled to vote, at a meeting of the Company’s
stockholders or by written consent in accordance with the laws of the State of
Delaware; provided that if such approval by the stockholders of the Company is
not forthcoming, all Awards previously granted under this Plan shall be
void.  No Awards shall be granted
pursuant to this Plan more than 10 years after the effective date of this Plan.

 

SECTION 20. 
NON-EXCLUSIVITY OF PLAN

 

Neither the adoption of this Plan by the
Board nor the submission of this Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or the Committee to adopt such other incentive arrangements as either may
deem desirable, including without limitation, the granting of restricted stock
or stock options otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.

 

SECTION 21. 
GOVERNING LAW

 

This Plan and any agreements or other
documents hereunder shall be interpreted and construed in accordance with the
laws of the State of Delaware and applicable federal law.  The Committee may provide that any dispute as
to any Award shall be presented and determined in such forum as the Committee
may specify, including through binding arbitration.  Any reference in this Plan or in the
agreement or other document evidencing any Award to a provision of law or to a
rule or regulation shall be deemed to include any successor law, rule or regulation
of similar effect or applicability.

 

16Exhibit
10.2

 

EMPLOYMENT
AGREEMENT

 

This Agreement, dated as of August 22, 2003, is
between Interactive Health, Inc., a Delaware corporation, (together with its
subsidiaries whether currently existing or hereafter acquired or formed, “IH”),
and Craig Womack (“Executive”). 
IH and Executive agree to the following terms and conditions of
employment.

 

1.                                       PERIOD OF EMPLOYMENT.  IH shall continue to employ Executive to
render services to IH in the position and with the duties and responsibilities
described in Section 2 for the period commencing on the date of this
Agreement and ending on the date three (3) years after the date hereof (such
period, the “Period of Employment”); provided that the Period of
Employment shall automatically be renewed on the same terms and conditions set
forth herein as modified from time to time by the parties hereto for additional
one (1) year periods beginning on the date three years after the date hereof,
unless either party shall have given the other party written notice of the election
not to renew the Period of Employment at least ninety (90) days prior to any
such renewal date (the “Non-Renewal Notice”), such procedure to be
followed in each successive period; provided further that the Period of
Employment is subject to early termination as provided in Section 4
hereof.

 

2.                                       POSITION AND
RESPONSIBILITIES.

 

(a)                                  Position.  During the Period of Employment, Executive
shall serve as Chief Executive Officer of IH, and in such other executive
capacities as may be requested from time to time by the Board of Directors of
IH (the “Board”) or a duly authorized committee thereof.  Executive shall perform such duties as are
customarily associated with his position, consistent with the Bylaws of IH and
as reasonably required by the Board. 
Executive shall render such other services for IH and its Affiliates as
IH may from time to time reasonably request and as shall be consistent with the
duties Executive is to perform for IH and with Executive’s experience.  An “Affiliate” shall include any
person or entity that directly or indirectly controls, is controlled by, or is
under common control with IH, any successor entity, and any assignees of IH
(but, for the avoidance of doubt, the term “Affiliate” as used herein shall
specifically exclude any so-called “portfolio companies” of Whitney & Co.,
LLC other than IH and its subsidiaries).

 

(b)                                 Full Time and Best Efforts.  During the Period of Employment, Executive
shall devote his best efforts and full-time attention to the performance of his
duties.  Executive shall be subject to
the direction of IH, which shall retain full control of the means and methods
by which he performs the above services and of the place(s) at which all
services are rendered.  Executive shall be
expected to travel if necessary or advisable in order to meet the obligations
of his position.

 

(c)                                  Other Activity.  Except with the prior written consent of IH,
during the Period of Employment Executive shall not (i) accept any other
employment; or (ii) engage, directly or indirectly, in any other business,
commercial, or professional activity (whether or not pursued for pecuniary
advantage) that is or may be competitive with IH, that might create a conflict
of interest with IH, or that otherwise might interfere with the business of IH,
or any Affiliate or that might interfere with the performance of Executive’s
duties hereunder.

 

 

(d)                                 Company Policies.  The employment relationship between the
parties shall be governed by the general employment policies and practices of
IH, including but not limited to those relating to protection of confidential
information and assignment of inventions, except that when the terms of this
Agreement differ from or are in conflict with IH’s general employment policies
or practices, this Agreement shall control.

 

3.                                       COMPENSATION AND
BENEFITS.

 

(a)                                  Base Salary.  In consideration of the services to be
rendered under this Agreement, IH shall pay Executive Two Hundred Fifty
Thousand Dollars ($250,000) per year (“Base Salary”), payable bi-weekly
(i.e., once every two weeks), pursuant to the procedures regularly established,
and as they may be amended, by IH in its sole discretion, during the Period of
Employment.  All compensation and
comparable payments to be paid to Executive under this Agreement shall be less
withholdings required by law.  The Base
Salary will be reviewed by and shall be subject to upward adjustment at the
sole discretion of the Board each year during the term of this Agreement.

 

(b)                                 Bonus.  After each fiscal year of IH during the
Period of Employment, Executive shall be eligible to receive a cash bonus
(each, a “Bonus”), based upon the attainment by IH of IH’s applicable
performance targets as determined by the Board (after consultation with
Executive) in advance of each fiscal year (the “Performance Targets”)
for such fiscal year, as follows:

 

(1)                                  if IH
achieves less than 90% of the Performance Targets, taken as a whole and as
reasonably determined by the Board, for an applicable fiscal year, then
Executive shall not be entitled to receive a Bonus for such fiscal year;

 

(2)                                  if IH
achieves at least 90% but less than 100% of the Performance Targets, taken as a
whole and as reasonably determined by the Board, for an applicable fiscal year,
then Executive’s Bonus for such fiscal year shall be 40% of Executive’s Base
Salary in effect for such fiscal year;

 

(3)                                  if IH
achieves at least 100% but less than 125% of the Performance Targets, taken as
a whole and as reasonably determined by the Board, for an applicable fiscal
year, then Executive’s Bonus for such fiscal year shall be 80% of Executive’s
Base Salary in effect for such fiscal year;

 

(4)                                  if IH
achieves at least 125% but less than 150% of the Performance Targets, taken as
a whole and as reasonably determined by the Board, for an applicable fiscal
year, then Executive’s Bonus for such fiscal year shall be 120% of Executive’s
Base Salary in effect for such fiscal year;

 

(5)                                  if IH
achieves 150% or more of the Performance Targets, taken as a whole and as
reasonably determined by the Board, for an applicable fiscal year, then
Executive’s Bonus for such fiscal year shall be 160% of Executive’s Base Salary
in effect for such fiscal year.

 

2

 

The
Performance Targets for each fiscal year of IH shall be based upon an EBITDA
target and/or any other matrix as shall be determined by the Board (after
consultation with Executive), with the Performance Targets being determined in
advance of each fiscal year. 
Notwithstanding anything to the contrary herein, the parties hereto
agree that this Section 3(b) shall apply only to Executive’s Bonus for
fiscal years commencing with the fiscal year 2004 until termination or
expiration of the Period of Employment; provided that for any period
ending prior to commencement of the fiscal year 2004, Executive’s Bonus shall
be determined in accordance with  the employment agreement between
Executive and Interactive Health LLC, dated July 24, 2002 as if the
provisions therein were still in effect. 
The Bonus, if any, for any such fiscal year shall be payable on the
earlier of (i) the April 15th immediately following such fiscal
year and (ii) twenty (20) business days after the Board has received and
approved IH’s audited financial statements for such fiscal year.  Except as specifically provided in
Section 4 hereof, if Executive’s employment with IH shall terminate for
any reason whatsoever prior to the end of any fiscal year, Executive shall not
be entitled to a Bonus for such fiscal year.

 

(c)                                  Benefits.  Executive shall be entitled to vacation leave
in accordance with IH’s standard policies. 
As Executive becomes eligible, he shall have the right to participate in
and to receive benefits from all present and future benefit plans specified in
IH’s policies and generally made available to similarly situated employees of
IH.  Executive’s eligibility to receive
benefits under any such benefit plan, and the amount and extent of benefits to
which Executive is entitled under such benefit plan, shall be governed by the
specific benefit plan, as amended by the IH from time to time.  Executive also shall be entitled to any
benefits or compensation tied to termination of employment as described in
Section 4.  IH reserves the right,
in its sole discretion, to adjust Executive’s benefits provided under this
Agreement.  No statement concerning
benefits or compensation to which Executive is entitled shall alter in any way
the term of this Agreement, any renewal thereof, or its termination.

 

(d)                                 Expenses.  IH shall reimburse Executive for reasonable
travel and other business expenses incurred by Executive in the performance of
his duties, in accordance with IH’s policies, as they may be amended in IH’s
sole discretion and subject to IH’s requirements with respect to reporting and
documentation of such expenses.

 

(e)                                  Direct Investment.                                              Concurrent with
the execution of this Agreement, IH shall issue and sell, and Executive shall
purchase, such number of shares (“Preferred Shares”) of IH’s Series A
Convertible Preferred Stock, $.001 par value per share (“Convertible
Preferred Stock”) as shall have an aggregate purchase price of Five Hundred
Thousand Dollars ($500,000), on the terms and conditions set forth in that
certain Securities Purchase Agreement of even date herewith (the “Securities
Purchase Agreement”) among IH, Interactive Health LLC, J.H. Whitney
Mezzanine fund, L.P., J.H. Whitney Private Debt Fund, L.P., GreenLeaf Capital,
L.P., Whitney V, L.P. and certain other executives of IH.

 

(f)                                    Nonqualified Stock
Options.

 

(1)                                                          As
additional compensation for his services hereunder, promptly after the date of
Closing but no later than November 1, 2003, IH shall grant to Executive
pursuant to a Stock Option Plan to be adopted by IH (the “Plan”) the
following stock options (each, an “Option”)
to purchase shares (“Option Shares”) of Common Stock, $.01 par value per
share, of

 

3

 

IH
(the “Common Stock”) at the exercise price per share
set forth herein (the “Exercise Price”), subject to the terms,
definitions and provisions of this Agreement and the Plan:

 

(A)                              an Option to purchase 168,953
shares of Common Stock at an Exercise Price equal to $10.00 per share;

 

(B)                                an Option to purchase 84,476
shares of Common Stock at  an Exercise
Price equal to $20.00 per share;

 

(C)                                an Option to purchase 84,476
shares of Common Stock at  an Exercise
Price equal to $30.00 per share.

 

(2)                                                          The Options are not intended to qualify as Incentive Stock
Options as defined in Section 422 of the Code (as defined in the
Plan).  So long as the Period of Employment
has not terminated, each Option shall vest in accordance with the following
schedule:  20% of the number of Option
Shares issuable upon the exercise thereof shall vest on the one-year
anniversary of the date of grant of such Option (the “Vesting Commencement Date”) and the remaining Option Shares issuable upon the exercise of such
Option shall vest in 16 equal quarterly installments commencing on the date
that is fifteen months after the Vesting Commencement Date and continuing and
the end of each three month period thereafter. 
Vesting of all Options shall cease at such time as the Period of
Employment terminates or expires for any reason whatsoever.  One half of each unvested installment of each
Option shall automatically vest on the date that an Organic Transaction
shall occur (provided that Executive remains employed by IH on such date of
occurrence of the Organic Transaction), and the balance of each such
installment shall remain subject to the vesting schedule set forth above.  For purposes of this Agreement, “Organic
Transaction” means (x) the sale, lease, exchange, transfer or other
disposition (including, without limitation, by merger, consolidation or
otherwise) of assets constituting all or substantially all of the assets of IH,
taken as a whole, (y) any merger, consolidation or other business combination
or refinancing or recapitalization (other than by reason of a sale by the
Company of its Common Stock pursuant to a registration statement on Form S-l or
otherwise under the Securities Act of 1933, as amended) that results in the
holders of the issued and outstanding voting securities of IH immediately prior
to such transaction beneficially owning or controlling less than a majority of
the outstanding voting securities of the continuing or surviving entity
immediately following such transaction, and/or (z) any person or persons acting
together or which would constitute a “group” for the purposes of
Section 13(d) of the Exchange Act, together or with any Affiliates
thereof, other than any of the holders of the Common Stock and the holders of
the Convertible Preferred Stock, as of the date on which the first share of
Convertible Preferred Stock is issued, and their respective Affiliates,
“beneficially owning” (as defined in Rule 13d-3 of the Exchange Act) or
controlling, directly or indirectly, at least 50% of the total voting power of
all classes of capital stock entitled to vote generally in the election of the
members of the Board of IH.

 

(3)                                  Upon termination or
expiration of the Period of Employment pursuant to Section 4, all vesting
of the Options shall cease and Executive (or, in the case of termination
pursuant to Section 4(d), his estate or a person who acquired the right to
exercise the Options by bequest or inheritance) may, but only within ninety
(90) days after such date of termination or expiration (and in no event later
than the expiration date of an Option), exercise any or all of Executive’s
Options to the extent Executive was entitled to exercise any or all such
Options at

 

4

 

such date of
termination or expiration, but only as to the number of Option Shares of any
such Option that have become vested on such date in excess of the number of
Option Shares for which any such Option has theretofore been exercised.  To the extent that Executive was not entitled
to exercise any Option on the date of termination, or does not exercise such an
Option to the extent so entitled within the time specified in this
Section 3(f)(3), the Option shall terminate.  All Options not exercised prior to the tenth
(10th) anniversary of the date of grant thereof shall then expire.

 

(4)                                  Executive may exercise an
Option to the extent that it has vested by delivering written notice to IH
approved for such purpose by IH, which shall state the election to exercise the
Option, the number of Option Shares in respect of which the Option is being
exercised, and such other representations and agreements as to Executive’s
investment intent with respect to the Option Shares as may be required by IH
pursuant to the provisions of the Plan or otherwise.  Such written notice shall be signed by
Executive (and, if Executive is married, Executive’s spouse) and shall be
delivered in person or by certified mail to the Secretary of IH.  The written notice shall be accompanied by
payment of the Exercise Price and any applicable withholding tax
obligation.  No Option Shares will be
issued pursuant to the exercise of an Option unless such issuance and exercise
shall comply with all relevant provisions of applicable law, including the
requirements of any stock exchange upon which the Options Shares may then be
listed.

 

(5)                                  The Options to be granted
pursuant hereto will be subject to, and Executive agrees to be bound by, all of
the terms and provisions of the Plan as the same may be adopted by the Company
or may be amended from time to time in accordance with the terms thereof, and
shall in all respects be interpreted in accordance therewith.  In the event of any conflict between the
terms of this Agreement and the terms of the Plan, the terms of the Plan shall
be controlling.  The Committee (as
defined in the Plan) shall interpret and construe the Plan and this Agreement
with respect to Options granted hereunder, and any action, decision, interpretation
or determination made in good faith by the Committee shall be final and binding
on IH and Executive.  In addition, such
Options will be subject to terms as determined by the Committee.

 

(6)                                  Except as set forth above in
paragraph 3(f)(5), unless required to comply with applicable law or exchange
requirements, no amendment of the Plan adopted after the date of grant of the
Options shall be effective as to the Options without Executive’s consent
insofar as it may adversely affect his rights hereunder.  The Committee in its discretion may amend
this Section 3(f) only with Executive’s consent, except that no consent
shall be required to the extent any such amendment is not materially adverse to
Executive.

 

4.                                       TERMINATION OF
EMPLOYMENT.

 

(a)                                  By Employer Not For Cause.

 

(1)                                  At any time, IH may
terminate Executive without Cause (as defined below), effective as of the date
specified in a written notice from IH to Executive.  IH may discipline Executive with or without
Cause and with or without prior notice. 
IH may discipline or dismiss Executive as provided in this
Section 4 notwithstanding anything to the contrary

 

5

 

contained in or
arising from any statements, policies or practices of IH relating to the employment,
discipline or termination of its employees. 
If Executive’s employment with IH is terminated by IH without Cause,
Executive shall be entitled to receive all Base Salary through the date of
termination and any accrued and unpaid Bonus for any fiscal year of IH which
ended prior to the date of termination, subject to withholding deductions and
any other amounts IH is required to withhold or deduct by applicable law.  In addition, Executive shall be entitled to
the following severance payments (the “Severance Package”):

 

(A)                              a portion
of the Bonus that would accrue at the end of the fiscal year of IH in which
such termination occurs, determined pro rata by the percentage of the
year worked (the percentage represented by the number of full months employed
in the current year divided by twelve) multiplied by the amount of Bonus
determined as provided in Section 3(b) at the end of the fiscal year in
which such termination occurs (based upon IH’s actual performance and
applicable Performance Targets for the entire fiscal year in which such
termination occurs);

 

(B)                                equal
monthly installments of his Base Salary, payable in accordance with normal
payroll practices, commencing on the date of termination for a period of twelve
(12) months thereafter, or until Executive obtains other employment (but with
it being understood that Executive shall be under no duty to seek alternative
employment during the Severance Period), whichever first occurs (the “Severance
Period”);

 

(C)                                the
continuation of health benefits, to the extent that the same are available
under policies held by the Company, during the Severance Period; and

 

(D)                               reimbursement
of outstanding business related expenses through date of termination.

 

(2)                                  Provided that if IH shall
pay to Executive the Severance Package at the times and to the extent as herein
provided, Executive agrees that he will provide, from such location or
locations and times as Executive may select, up to 10 hours of consulting
services per month to IH for a period of twenty-four (24) months after the date
of termination (the “Consulting Period”).  Executive agrees that, during the
Consulting Period, he will not, without the prior consent of IH, directly or
indirectly, have an interest in, be employed by, or be connected with, as an employee,
consultant, officer, director, partner, stockholder or joint venturer, in any
person or entity owning, managing, controlling, operating or otherwise
participating or assisting in any business which is in competition with the
business of IH in any jurisdiction identified in Exhibit B attached
hereto; provided, however, that the foregoing shall not prevent
Executive from being a stockholder of less than 1% of the issued and
outstanding securities of any class of a corporation listed on a national securities
exchange or designated as national market system securities on an interdealer
quotation system by the National Association of Securities Dealers, Inc.  Notwithstanding anything herein to the
contrary, this Section 4(a)(2) shall be governed by the law of the
jurisdiction in which the alleged prohibited activity occurred.  For the avoidance of doubt, the parties
acknowledge that the applicability of the immediately

 

6

 

preceding sentence
may result in the application of a different law for each jurisdiction in which
the alleged violations of this Section 4(a)(2) occurred.

 

(3)                                                          IH
shall not be obligated to pay any termination payments under Section 4(a)
above if Executive breaches the provisions of this Section 4 or Sections
5, 6 or 7 below.

 

(b)                                 By Employer For Cause.  At any time, and without prior notice (except
as otherwise provided in the definition of Cause set forth below), IH may
terminate Executive for Cause and the Period of Employment shall be deemed to
have ended as of the date Executive ceases to be employed by IH.  IH shall pay Executive all compensation then
due and owing; thereafter, all of IH’s obligations under this Agreement shall
cease.  IH shall have no further
obligation to pay severance of any kind whether under this Agreement or
otherwise nor to make any payment in lieu of notice.  For purposes of this Agreement, “Cause”
shall mean the occurrence or existence of any of the following with respect to
Executive, as determined by a majority of the disinterested directors of the
Board:  (i) unsatisfactory
performance of Executive’s duties or responsibilities as determined by the
Board, provided that IH has given Executive written notice specifying the
unsatisfactory performance of his duties and responsibilities; (ii) a
material breach by Executive of any of his material obligations hereunder which
remains uncured after the lapse of thirty (30) days following the date that IH
has given Executive written notice thereof; (iii) a material breach by
Executive of his duty not to engage in any transaction that represents,
directly or indirectly, self-dealing with IH or any of its Affiliates which has
not been approved by a majority of the disinterested directors of the Board or
of the terms of his employment; (iv) any act of misappropriation,
embezzlement, intentional fraud or similar conduct involving IH or any of its
Affiliates; (v) the conviction or the plea of nolo  contendere or the
equivalent in respect of a felony involving moral turpitude; (vi) intentional
infliction of any damage of a material nature to any property of IH or any of
its Affiliates; or (vii) the repeated non-prescription abuse of any
controlled substance or the repeated abuse of alcohol or any other
non-controlled substance which, in any case described in this clause, the Board
reasonably determines renders Executive unfit to serve in his capacity as an
officer or employee of IH or its Affiliates.

 

(c)                                  By Employee.  At any time, Executive may terminate his
employment for any reason, with or without cause, by providing IH fourteen (14)
days’ advance written notice.  IH shall
have the option, in its complete discretion, to make Executive’s termination
effective at any time prior to the end of such notice period.  IH shall pay Executive all compensation then
due and owing; thereafter, all of IH’s obligations under this Agreement shall
cease.  IH shall have no further
obligation to pay severance of any kind whether under this Agreement or otherwise.

 

(d)                                 Termination Upon Death or
Permanent Disability.  Executive’s
employment with IH shall also terminate upon Executive’s death or permanent
mental or physical disability or other incapacity (as determined by the Board
in its good faith judgment).  The Period
of Employment shall be deemed to have ended as of the date Executive ceases to
be employed by IH.  Upon any such
termination, IH shall pay Executive (or Executive’s estate or legal
representative or guardian) all compensation then due and owing; thereafter,
all of IH’s obligations under this Agreement shall cease.  IH shall have no further obligation to pay

 

7

 

severance of any kind
whether under this Agreement or otherwise nor to make any payment in lieu of
notice.

 

(e)                                  Non-Renewal Notice.  If pursuant to Section 1 hereof IH
provides Executive with a Non-Renewal Notice (i) the Period of Employment shall
expire pursuant to the terms of Section 1 hereof, and (ii) all of IH’s
obligations under this Agreement shall cease and IH shall have no further
obligation to pay severance of any kind whether under this Agreement or
otherwise.

 

(f)                                    Termination of
Compensation.  Except as otherwise
expressly provided herein or under any specific written policy or benefit plan
of IH or as expressly required under applicable law (such as COBRA), upon
termination or expiration of the Period of Employment (i) all of Executive’s
rights to salary, bonuses, employee and other benefits and other compensation
hereunder which would have accrued or become payable shall cease and (ii) no
other severance compensation or retirement benefits shall be payable by IH to
Executive.

 

(g)                                 General Release and
Absence of Breach.  Executive shall
not be entitled to receive any payments, benefits or other compensation under
this Section 4 unless and until Executive has executed and delivered to IH
the General Release substantially in form and substance as set forth in Exhibit
A attached hereto, and then only for so long as Executive has not revoked
or breached the provisions of the General Release or breached the provisions of
Sections 5, 6 and 7 hereof or breached the provisions of any other agreement
between Executive and IH or any of its Affiliates and does not apply for
unemployment compensation chargeable to IH during the Severance Period.

 

(h)                                 No Mitigation.  Except as specifically set forth herein, the
payments required to be paid to Executive by IH pursuant to this Section 4
shall not be reduced by or mitigated by amounts which Executive earns or is
capable of earning during any period following termination of Executive’s
employment.

 

(i)                                     Termination
Obligations.

 

(1)                                  Executive
agrees that all property, including, without limitation, all equipment,
tangible Proprietary Information (as defined below), documents, books, records,
reports, notes, contracts, lists, computer disks (and other computer-generated
files and data), and copies thereof, created on any medium and furnished to,
obtained by, or prepared by Executive in the course of or incident to his
employment, belongs to IH and shall be returned promptly to IH upon termination
of the Period of Employment.

 

(2)                                  Upon
termination of the Period of Employment, Executive shall be deemed to have
resigned from all offices and directorships then held with IH or any Affiliate.

 

(3)                                  The representations
and warranties contained in this Agreement and Executive’s obligations under
this Section 4(i) shall survive the termination of the Period of
Employment and the expiration of this Agreement.

 

8

 

(j)                                     For sixty (60) days
following any termination of the Period of Employment, Executive shall
cooperate in a reasonable manner with IH in all matters relating to the winding
up of pending work on behalf of IH and the orderly transfer of work to other employees
of IH.  Executive shall also cooperate
from time to time during and after the expiration of such 60-day period in the
defense of any action brought by any third party against IH that relates in any
way to Executive’s acts or omissions while employed by IH.  This specifically excludes claims for
indemnification for all necessary expenditures and losses arising out of or
resulting from third party actions relating to Executive’s performance or
discharge of employment duties by Executive. 
The above required time by Executive will be a reasonable amount of
time, at reasonable times, subject to Executive’s other commitments.

 

5.                                       PROPRIETARY
INFORMATION OBLIGATIONS.  During the
term of employment under this Agreement, Executive will have access to and become
acquainted with IH’s and its Affiliates’ confidential and proprietary
information, including, but not limited to, information or plans regarding IH’s
and its Affiliates’ customer relationships, personnel, or sales, marketing, and
financial operations and methods; trade secrets; formulas; devices; secret
inventions; processes; and other compilations of information, records, and
specifications (collectively “Proprietary Information”).  Executive shall not disclose any of IH’s or
its Affiliates’ Proprietary Information directly or indirectly, or use it in
any way, either during the term of this Agreement or at any time thereafter,
except as required in the course of his employment for IH or as authorized in
writing by IH.  All memoranda, notes,
plans, files, records, reports, documents, computer-recorded information,
printouts, software, drawings, specifications, equipment and similar items
relating to the Proprietary Information, Work Product (as defined below) or the
business of IH or its Affiliates, whether prepared by Executive or otherwise
coming into his possession or under his control, shall remain the exclusive
property of IH or its Affiliates, as the case may be, and shall not be removed
from the premises of IH under any circumstances whatsoever without the prior
written consent of IH, except when (and only for the period) necessary to carry
out Executive’s duties hereunder, and if removed shall be immediately returned
to IH upon any termination of his employment; provided, however,
that Executive may retain copies of documents reasonably related to his
interest as a stockholder and any documents that were personally owned, which
copies and the information contained therein Executive agrees not to use for
any business purpose.  Notwithstanding
the foregoing, Proprietary Information shall not include (i) information
which is or becomes generally public knowledge or public other than as a result
of Executive’s acts or omissions in violation of this Agreement and
(ii) information that may be required to be disclosed by applicable law.

 

6.                                       INVENTIONS AND
PATENTS.  Executive acknowledges that
all inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which relate to any of IH’s actual or anticipated business,
research and development or existing or future products or services and which
are conceived, developed or made by Executive while employed by IH (“Work
Product”) belong to IH.  Executive
will promptly disclose such Work Product to IH and perform all actions
requested by IH (whether during or after employment) to establish and confirm
such ownership (including without limitation, assignments, consents, powers of
attorney and other instruments).

 

7.                                       NONINTERFERENCE;
NONCOMPETITION.

 

9

 

(a)                                  In
further consideration of the compensation to be paid to Executive hereunder and
IH’s repurchase of Executive’s Shares upon termination or expiration of the
Period of Employment (if applicable), Executive acknowledges that in the course
of his employment with IH he has and will continue to become familiar with IH’s
trade secrets and with other Proprietary Information concerning IH and that his
services shall be of special, unique and extraordinary value to IH.  Therefore, Executive agrees that, during the
Period of Employment and thereafter for the greater of (i) twenty-four (24)
months or (ii) the Severance Period:

 

(1)                                  Executive
will not directly or indirectly solicit any business involving or similar to
any existing or planned products marketed by IH from any person or organization
which is, or has been, a customer of IH;

 

(2)                                  Executive
will not request or advise any customer, bona fide prospective customer, supplier,
licensee, licensor, landlord or other business relation of IH or any Affiliate
to withdraw, curtail or cancel its business dealings with IH or any Affiliate
(including making any negative statements or communications about IH or any of
its Affiliates); and

 

(3)                                  Executive
will not directly or indirectly recruit, hire, solicit or attempt to solicit
(other than through advertisements or general solicitations) any person who was
an employee of IH or any of its Affiliates at any time during the six-month period
immediately prior to the date on which such hiring would take place, or
encourage or otherwise cause any employee of IH or any Affiliate to terminate
his or her employment in order to become an employee, consultant or independent
contractor to or for any other employer.

 

(b)                                 In
further consideration of the compensation to be paid to Executive hereunder and
IH’s repurchase of Executive’s Shares upon termination or expiration of the
Period of Employment (if applicable), Executive agrees that, during the Period
of Employment and for a period of twenty-four (24) months after the termination
of such Period of Employment, he will not, without the prior consent of IH,
directly or indirectly, have an interest in, be employed by, or be connected
with, as an employee, consultant, officer, director, partner, stockholder or
joint venturer, in any person or entity owning, managing, controlling,
operating or otherwise participating or assisting in any business which is in
competition with the business of IH (i) during the Period of Employment,
in any location, and (ii) for the twenty-four (24) month period following
the termination of the Period of Employment, in any jurisdiction identified in Exhibit B
attached hereto; provided, however, that the foregoing shall not
prevent Executive from being a stockholder of less than 1% of the issued and
outstanding securities of any class of a corporation listed on a national
securities exchange or designated as national market system securities on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.  Notwithstanding anything herein to
the contrary, this Section 7 shall be governed by the law of the
jurisdiction in which the alleged prohibited activity occurred.  For the avoidance of doubt, the parties
acknowledge that the applicability of the immediately preceding sentence may
result in the application of a different law for each jurisdiction in which the
alleged violations of this Section 7 occurred.

 

10

 

(c)                                  If Executive breaches, or
threatens to commit a breach of, any of the provisions of this Section 7,
IH shall be entitled, in addition to all other available rights and remedies,
to withhold any of the amounts agreed to be paid to Executive hereunder and IH
shall also be entitled to terminate his employment status hereunder and the
provision of any benefits and compensation conditioned upon such status.  If, at the time of enforcement of this
Section 7, a court shall hold that the duration or scope restrictions
stated herein are unenforceable under circumstances then existing, the parties
agree that the maximum duration or scope that is enforceable under such
circumstances shall be substituted for the stated duration or scope and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum period and scope permitted by law.

 

8.                                       ARBITRATION.

 

(a)                                  Arbitrable Claims.  To the fullest extent permitted by law, all
disputes between Executive (and his attorneys, successors, and assigns) and IH
(and its Affiliates, stockholders, directors, officers, employees, agents,
successors, attorneys, and assigns) of any kind whatsoever, including, without
limitation, all disputes relating in any manner to the employment or termination
of Executive, and all disputes arising under this Agreement (“Arbitrable
Claims”) shall be resolved by arbitration. 
All persons and entities specified in the preceding sentence (other than
IH and Executive) shall be considered third-party beneficiaries of the rights
and obligations created by this Section on Arbitration.  Arbitrable Claims shall include, but are not
limited to, contract (express or implied) and tort claims of all kinds, as well
as all claims based on any federal, state, or local law, statute, or
regulation, excepting only claims under applicable workers’ compensation law
and unemployment insurance claims.  By
way of example and not in limitation of the foregoing, Arbitrable Claims shall
include (to the fullest extent permitted by law) any claims arising under Title
VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act,
the Americans with Disabilities Act, and the California Fair Employment and
Housing Act, as well as any claims asserting wrongful termination, harassment,
breach of contract, breach of the covenant of good faith and fair dealing,
negligent or intentional infliction of emotional distress, negligent or
intentional misrepresentation, negligent or intentional interference with
contract or prospective economic advantage, defamation, invasion of privacy,
and claims related to disability.

 

(b)                                 Procedure.  Arbitration of Arbitrable Claims shall be in
accordance with the then-current National Rules for the Resolution of
Employment Disputes of the American Arbitration Association, as amended (“AAA
Employment Rules”), as augmented in this Agreement.  Arbitration shall be initiated as provided by
the AAA Employment Rules, although the written notice to the other party
initiating arbitration shall also include a statement of the claim(s) asserted
and the facts upon which the claim(s) are based.  Arbitration shall be final and binding upon
the parties and shall be the exclusive remedy for all Arbitrable Claims.  Judgment on the award may be entered in any
court having jurisdiction.  Either party
may bring an action in court to compel arbitration under this Agreement and to
enforce an arbitration award.  Otherwise,
neither party shall initiate or prosecute any lawsuit or administrative action
in any way related to any Arbitrable Claim. 
Notwithstanding the foregoing, either party may, at its option, seek
injunctive relief pursuant to section 1281.8 of the California Code of
Civil Procedure.  All arbitration
hearings under this Agreement shall be conducted in Los Angeles County.  The decision of the arbitrator shall be in
writing and shall include a statement of the essential

 

11

 

conclusions and
findings upon which the decision is based. 
THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN
REGARD TO ARBITRABLE CLAIMS, INCLUDING WITHOUT LIMITATION ANY RIGHT TO TRIAL BY
JURY AS TO THE MAKING, EXISTENCE, VALIDITY, OR ENFORCEABILITY OF THE AGREEMENT
TO ARBITRATE.

 

(c)                                  Arbitrator Selection and
Authority.  All disputes involving
Arbitrable Claims shall be decided by a single arbitrator.  The arbitrator shall be selected by mutual
agreement of the parties within thirty (30) days of the effective date of the
notice initiating the arbitration.  If
the parties cannot agree on an arbitrator, then the complaining party shall
notify the AAA and request selection of an arbitrator in accordance with the
AAA Employment Rules.  The arbitrator
shall have only such authority to award equitable relief, damages, costs, and
fees as a court would have for the particular claim(s) asserted.  The fees of the arbitrator and AAA shall be
paid by the non-prevailing party.  If the
allocation of responsibility for payment of the arbitrator’s fees would render
the obligation to arbitrate unenforceable, the parties authorize and agree to
instruct the arbitrator to modify the allocation as necessary to preserve
enforceability.  The arbitrator shall
have exclusive authority to resolve all Arbitrable Claims, including, but not
limited to, arbitrability and whether all or any part of this Agreement is void
or unenforceable.

 

(d)                                 Fees and Expenses.  Each party shall pay its own attorney fees
and costs including, without limitation, fees and costs of any experts.  However, attorney fees and costs incurred by
the party that prevails in any such arbitration commenced pursuant to this
Section 8 or any judicial action or proceeding seeking to enforce the
agreement to arbitrate disputes as set forth in this Section 8 or seeking
to enforce any order or award of any arbitration commenced pursuant to this
Section 8 may be assessed against the party or parties that do not prevail
in such arbitration in such manner as the arbitrator or the court in such
judicial action, as the case may be, may determine to be appropriate and lawful
under the circumstances.  If any party
prevails on a statutory claim that entitles the prevailing party to a
reasonable attorney fees (with or without expert fees) as part of the costs,
the arbitrator shall award reasonable attorney fees (with or without expert
fees) to the prevailing party in accord with such statute.  Any controversy over whether a dispute is an
arbitrable dispute or as to the interpretation or enforceability of this
paragraph with respect to such arbitration shall be determined by the
arbitrator.

 

(e)                                  Modification of This
Agreement.  In a contractual claim
under this Agreement, the arbitrator shall have no authority to add, delete or
modify any term of this Agreement

 

(f)                                    Confidentiality.  All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless
otherwise required by law, the subject matter thereof shall not be disclosed to
any person other than the parties to the proceedings, their counsel, witnesses
and experts, the arbitrator, and, if involved, the court and court staff.  All documents filed with the arbitrator or
with a court shall be filed under seal. 
The parties shall stipulate to all arbitration and court orders
necessary to effectuate fully the provisions of this subsection concerning
confidentiality.

 

(g)                                 Continuing Obligations.  The rights and obligations of Executive and
IH set forth in this Section on Arbitration shall survive the termination
of Executive’s employment and the expiration of this Agreement.

 

12

 

9.                                       EXECUTIVE’S
REPRESENTATIONS.  Executive hereby
represents and warrants to IH that (i) the execution, delivery and performance
of this Agreement by Executive does not and shall not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which Executive is a party or by which he is bound, (ii)
Executive is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity and
(iii) upon the execution and delivery of this Agreement by IH, this Agreement
shall be the valid and binding obligation of Executive, enforceable in
accordance with its terms.

 

10.                                 NOTICES.  Any notice or other communication under this
Agreement must be in writing and shall be effective upon delivery by hand, or
three (3) business days after deposit in the United States mail, postage
prepaid, certified or registered, and addressed to IH or to Executive at the
corresponding address below.  Executive
shall be obligated to notify IH in writing of any change in his address.  Notice of change of address shall be
effective only when done in accordance with this Section.

 

	
  If
  To IH:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Interactive
  Health, Inc.

  	
   

  	
   

  
	
  3030
  Walnut Avenue

  	
   

  	
   

  
	
  Long
  Beach, CA 90807

  	
   

  	
   

  
	
  Attn:
  Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Whitney
  & Co., LLC

  	
   

  	
   

  
	
  177
  Broad Street

  	
   

  	
   

  
	
  Stamford,
  CT 06901

  	
   

  	
   

  
	
  Attn:

  	
  Daniel
  J. O’Brien

  	
   

  	
   

  
	
   

  	
  Michael
  C. Salvator

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  And:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Gibson,
  Dunn & Crutcher LLP

  	
   

  	
   

  
	
  2029
  Century Park East

  	
   

  	
   

  
	
  Los
  Angeles, CA 90067-3026

  	
   

  	
   

  
	
  Attn:

  	
  Jonathan
  K. Layne

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  If
  To Executive:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Craig Womack

  	
   

  	
   

  
	
  850
  E. Ocean Blvd. #204

  	
   

  	
   

  
	
  Long
  Beach, CA 90802

  	
   

  	
   

  
	
  Telephone
  No.: (562) 435-6305

  	
   

  	
   

  

 

13

 

or
to such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party.

 

11.                                 ACTION BY IH.  All actions required or permitted to be taken
under this Agreement by IH, including, without limitation, exercise of
discretion, consents, waivers, and amendments to this Agreement, shall be made
and authorized only by a designee of Whitney & Co., LLC or by his or her
representative specifically authorized in writing to fulfill these obligations
under this Agreement.

 

12.                                 ENTIRE AGREEMENT.  This Agreement is intended to be the final,
complete, and exclusive statement of the terms of Executive’s employment by
IH.  This Agreement supersedes all other
prior and contemporaneous agreements and statements, whether written or oral,
express or implied, pertaining in any manner to the employment of Executive
(including, without limitation, the employment agreement between Executive and
Interactive Health LLC, dated July 24, 2002, which shall be terminated and
of no further force or effect as of the date of the execution and delivery of
this Agreement except as expressly provided in Section 3(b) hereof), and
it may not be contradicted by evidence of any prior or contemporaneous
statements or agreements.  To the extent
that the practices, policies, or procedures of IH, now or in the future, apply
to Executive and are inconsistent with the terms of this Agreement, the
provisions of this Agreement shall control.

 

13.                                 AMENDMENTS; WAIVERS.  This Agreement may not be amended except by
an instrument in writing, signed by each of the parties.  No amendment or waiver of this Agreement
requires the consent of any individual, partnership, corporation or other
entity not a party to this Agreement. 
Nothing in this Agreement, express or implied, is intended to confer
upon any third person any rights or remedies under or by reason of this
Agreement.  No failure to exercise and no
delay in exercising any right, remedy, or power under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power under this Agreement preclude any other or further
exercise thereof, or the exercise of any other right, remedy, or power provided
herein or by law or in equity.

 

14.                                 ASSIGNMENT; SUCCESSORS AND
ASSIGNS.  Executive agrees that he
will not assign, sell, transfer, delegate, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or obligations
under this Agreement.  Any such purported
assignment, transfer, or delegation shall be null and void.  Nothing in this Agreement shall prevent the
consolidation of IH with, or its merger into, any other entity, or the sale by
IH of all or substantially all of its assets, or the assignment by IH of any
rights or obligations under this Agreement. 
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any
person or entity other than those specifically enumerated in this Agreement

 

15.                                 SEVERABILITY.  If any provision of this Agreement, or its
application to any person, place, or circumstance, is held by an arbitrator or
a court of competent jurisdiction to be invalid, illegal, unenforceable, or
void, such provision shall be enforced to the greatest extent permitted by law,
and the remainder of this Agreement and such provision as applied to other
persons, places, and circumstances shall remain in full force and effect.  If any covenant should

 

14

 

be deemed invalid,
illegal or unenforceable because its scope is considered excessive, such
covenant shall be modified so that the scope of the covenant is reduced only to
the minimum extent necessary to render the modified covenant valid, legal and
enforceable.

 

16.                                 COUNTERPARTS.  This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.

 

17.                                 REMEDIES.  In addition and supplementary to other rights
and remedies existing in its favor, Executive may apply to the court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof, including Sections 5, 6 and 7 hereof.

 

18.                                 ATTORNEYS’ FEES.  In any legal action, arbitration, or other
proceeding brought to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys’ fees and
costs.

 

19.                                 CHOICE OF LAW.  Except as expressly provided in Sections
4(a)(2) and 7(b), all issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement will be governed by,
and construed in accordance with, the laws of the State of California, without
giving effect to principles of conflicts of law.

 

20.                                 INTERPRETATION.  This Agreement shall be construed as a whole,
according to its fair meaning, and not in favor of or against any party.  By way of example and not in limitation, this
Agreement shall not be construed in favor of the party receiving a benefit nor
against the party responsible for any particular language in this
Agreement.  Captions are used for
reference purposes only and should be ignored in the interpretation of the
Agreement.

 

21.                                 EMPLOYEE ACKNOWLEDGMENT.  Executive acknowledges that he has had the
opportunity to consult legal counsel in regard to this Agreement, that he has
read and understands this Agreement, that he is fully aware of its legal
effect, and that he has entered into it freely and voluntarily and based on his
own judgment and not on any representations or promises other than those
contained in this Agreement.

 

15

 

IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of the date it is last executed below by either party.

 

 

	
  INTERACTIVE
  HEALTH, INC.

  
	
   

  
	
   

  
	
  /s/
  Kevin A. Smith

  	
   

  
	
   

  
	
  By:
  Kevin Smith

  
	
  Its:  Vice President

  
	
   

  
	
   

  
	
  EXECUTIVE

  
	
   

  
	
   

  
	
  /s/
  Craig Womack

  	
   

  
	
   

  	
   

  
	
  Craig
  Womack

  

 

16

 

Exhibit A

 

GENERAL
RELEASE

 

I,
Craig Womack, in consideration of and subject to the performance by Interactive
Health, Inc., a Delaware corporation (together with its parent and
subsidiaries, the “Company”), of its obligations under the Employment
Agreement, dated as of [                     ]
(the “Employment Agreement”), do hereby release and forever discharge as
of the date hereof the Company and its affiliates and all present and former
directors, officers, agents, representatives, employees, successors and assigns
of the Company and its affiliates and the Company’s direct or indirect owners
(collectively, the “Released Parties”) to the extent provided below.

 

1.               I understand that any payments or benefits paid
or granted to me under Section 4(a) of the Employment Agreement represent,
in part, consideration for signing this General Release and are not salary,
wages or benefits to which I was already entitled.  I understand and agree that I will not
receive the payments and benefits specified in Section 4(a) of the
Employment Agreement unless I execute this General Release and do not revoke
this General Release within the time period permitted hereafter or breach this
General Release.  Such payments and
benefits will not be considered compensation for purposes of any employee benefit
plan, program, policy or arrangement maintained or hereafter established by the
Company or its affiliates.  I also
acknowledge and represent that I have received all payments and benefits that I
am entitled to receive (as of the date hereof) by virtue of any employment by
the Company.

 

2.               Except as provided in paragraphs 4 and 13 below
and except for the provisions of the Employment Agreement which expressly
survive the termination of my employment with the Company, I knowingly and
voluntarily (for myself, my heirs, executors, administrators and assigns)
release and forever discharge the Company and the other Released Parties from
any and all claims, suits, controversies, actions, causes of action,
cross-claims, counter-claims, demands, debts, compensatory damages, liquidated
damages, punitive or exemplary damages, other damages, claims for costs and
attorneys’ fees, or liabilities of any nature whatsoever in law and in equity,
both past and present (through the date this General Release becomes effective
and enforceable) and whether known or unknown, suspected or unsuspected, or
claimed against the Company or any of the Released Parties which I, my spouse,
or any of my heirs, executors, administrators or assigns, may have, including,
without limitation, those which arise out of or are connected with my
employment with, or my separation or termination from, the Company (including,
but not limited to, any allegation, claim or violation, arising under: Title
VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991;
the Age Discrimination in Employment Act of 1967, as amended (including the
Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended;
the Americans with Disabilities Act of 1990; the Family and Medical Leave Act
of 1993; the Worker Adjustment Retraining and Notification Act; the Employee
Retirement Income Security Act of 1974; any applicable Executive Order
Programs; the Fair Labor Standards Act; or their state or local counterparts;
or under any other federal, state or local civil or human rights law, or under
any other local, state, or federal law, regulation or ordinance; or under any
public policy, contract or tort, or under common law; or arising under any
policies, practices or procedures of the Company; or any claim for wrongful

 

A-1

 

discharge, breach of contract, infliction
of emotional distress, defamation; or any claim for costs, fees, or other
expenses, including attorneys’ fees incurred in these matters) (all of the
foregoing collectively referred to herein as the “Claims”).  The terms and provisions of the foregoing
paragraph mutually bind the Company.

 

3.               I represent that I have made no assignment or
transfer of any right, claim, demand, cause of action, or other matter covered
by paragraph 2 above.

 

4.               I agree that this General Release does not
waive or release any rights or claims that I may have under the Age
Discrimination in Employment Act of 1967 which arise after the date I execute
this General Release.  I acknowledge and
agree that my separation from employment with the Company in compliance with
the terms of the Employment Agreement shall not serve as the basis for any
claim or action (including, without limitation, any claim under the Age
Discrimination in Employment Act of 1967).

 

5.               In signing this General Release, I acknowledge
and intend that it shall be effective as a bar to each and every one of the
Claims hereinabove mentioned or implied. 
I expressly consent that this General Release shall be given full force
and effect according to each and all of its express terms and provisions,
including those relating to unknown and unsuspected Claims (notwithstanding any
state statute that expressly limits the effectiveness of a general release of
unknown, unsuspected and unanticipated Claims), if any, as well as those
relating to any other Claims hereinabove mentioned or implied.  I acknowledge and agree that this waiver is
an essential and material term of this General Release and that without such
waiver the Company would not have agreed to the terms of the Employment
Agreement.  I further agree that in the
event I should bring a Claim seeking damages against the Company, or in the
event I should seek to recover against the Company in any Claim brought by a
governmental agency on my behalf, this General Release shall serve as a
complete defense to such Claims.  I
further agree that I am not aware of any pending charge or complaint of the
type described in paragraph 2 as of the execution of this General Release.

 

6.               I represent that I am not aware of any claim by
me other than the claims that are released by this Agreement.  I acknowledge that I am familiar with the
provisions of California Civil Code Section 1542, which provides as
follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.”

 

Being aware of such provisions of law, I agree to expressly waive any
rights I may have thereunder, as well as under any other statute or common law
principles of similar effect.

 

7.               I agree that neither this General Release, nor
the furnishing of the consideration for this General Release, shall be deemed
or construed at any time to be an admission by the Company, any Released Party
or myself of any improper or unlawful conduct.

 

8.               I agree that I will forfeit all amounts payable
by the Company pursuant to the Employment Agreement if I challenge the validity
of this General Release.  I also agree
that if I violate

 

A-2

 

this General Release by suing the Company
or the other Released Parties, I will pay all costs and expenses of defending
against the suit incurred by the Released Parties, including reasonable
attorneys’ fees, and return all payments received by me pursuant to the
Employment Agreement.

 

9.               I agree that this General Release is
confidential and agree not to disclose any information regarding the terms of
this General Release, except to my immediate family and any tax, legal or other
counsel I have consulted regarding the meaning or effect hereof or as required
by law, and I will instruct each of the foregoing not to disclose the same to
anyone.

 

10.         Any non-disclosure provision in this General Release
does not prohibit or restrict me (or my attorney) from responding to any
inquiry about this General Release or its underlying facts and circumstances by
the Securities and Exchange Commission (SEC), the National Association of
Securities Dealers, Inc. (NASD), any other self-regulatory organization or
governmental entity.

 

11.         I agree to reasonably cooperate with the Company in
any internal investigation or administrative, regulatory, or judicial
proceeding.  I understand and agree that
my cooperation may include, but not be limited to, making myself available to
the Company upon reasonable notice for interviews and factual investigations;
appearing at the Company’s request to give testimony without requiring service
of a subpoena or other legal process; volunteering to the Company pertinent
information; and turning over to the Company all relevant documents which are
or may come into my possession all at times and on schedules that are
reasonably consistent with my other permitted activities and commitments.  I understand that in the event the Company
asks for my cooperation in accordance with this provision, the Company will
reimburse me solely for reasonable travel expenses, including lodging and
meals, upon my submission of receipts.

 

12.         I agree not to disparage the Company, its past and
present investors, officers, directors or employees or its affiliates and to
keep all confidential and proprietary information about the past or present
business affairs of the Company and its affiliates confidential unless a prior
written release from the Company is obtained. 
I further agree that as of the date hereof, I have returned to the
Company any and all property, tangible or intangible, relating to its business,
which I possessed or had control over at any time (including, but not limited
to, company-provided credit cards, building or office access cards, keys,
computer equipment, manuals, files, documents, records, software, customer data
base and other data) and that I shall not retain any copies, compilations,
extracts, excerpts, summaries or other notes of any such manuals, files,
documents, records, software, customer data base or other data.   The terms and provisions of the foregoing
paragraph mutually bind the Company.

 

13.         Notwithstanding
anything in this General Release to the contrary, this General Release shall
not relinquish, diminish, or in any way affect any rights or claims (i) arising
out of any breach by the Company or by any Released Party of the Employment
Agreement after the date hereof, (ii) arising out of any breach by the Company
or by any Released Party of the Securities Purchase Agreement (as defined in
the Employment Agreement) or any of the documents executed by me at the Closing
(as defined in the Securities Purchase Agreement) or the transactions
contemplated thereby (other than the Employment Agreement) after the

 

A-3

 

date
hereof, (iii) to which I would otherwise be entitled pursuant to any employee
benefit plan, including any 401(k) plan, of the Company or (iv) to
indemnification for which I may be entitled as a former officer or director of
the Company under its charter and/or bylaws and/or other constituent documents
so long as I am otherwise entitled to be indemnified as authorized thereunder.

 

14.         Whenever possible, each provision of this General
Release shall be interpreted in, such manner as to be effective and valid under
applicable law, but if any provision of this General Release is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this General
Release shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.

 

BY
SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:

 

(i)                                     I HAVE READ IT CAREFULLY;

 

(ii)                                  I UNDERSTAND ALL OF ITS
TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED
TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED,
TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF
1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED;

 

(iii)                               I VOLUNTARILY CONSENT TO
EVERYTHING IN IT;

 

(iv)                              I HAVE BEEN ADVISED TO CONSULT
WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL
READING AND CONSIDERATION I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

 

(v)                                 I HAVE HAD AT LEAST 21 DAYS
FROM THE DATE OF MY RECEIPT OF THIS RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON
                              
      ,
             TO
CONSIDER IT AND THE CHANGES MADE SINCE THE                             
         ,
               
VERSION OF THIS RELEASE ARE NOT MATERIAL AND WILL NOT RESTART THE REQUIRED
21-DAY PERIOD;

 

(vi)                              THE CHANGES TO THE AGREEMENT
SINCE
                             
      ,               
EITHER ARE NOT MATERIAL OR WERE MADE AT MY REQUEST.

 

(vii)                           I UNDERSTAND THAT I HAVE SEVEN DAYS
AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL
NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

 

A-4

 

(viii)                        I HAVE SIGNED THIS GENERAL RELEASE
KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE
ME WITH RESPECT TO IT; AND

 

(ix)                                I AGREE THAT THE PROVISIONS OF
THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY
AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY
AND BY ME.

 

	
  DATE:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Craig
  Womack

  

 

A-5

 

Exhibit B

 

 

Anywhere in the world.

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