Document:

Exhibit 10.18

 

 

 

INTERACTIVE
HEALTH LLC

 

INTERACTIVE
HEALTH FINANCE CORP.

 

 

and
each of the Guarantors party hereto

 

 

71⁄4%  SENIOR NOTES DUE 2011

 

 

 

 

INDENTURE

 

Dated
as of March 26, 2004

 

 

 

 

U.S.
Bank National Association

 

Trustee

 

 

 

 

 

 

CROSS-REFERENCE
TABLE*

 

	
  Trust
  Indenture

  Act Section

  	
   

  	
  Indenture Section

  
	
  310(a)(1)

  	
   

  	
  7.10

  
	
   

  	
  (a)(2)

  	
   

  	
  7.10

  
	
   

  	
  (a)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
   

  	
  7.10

  
	
   

  	
  (b)

  	
   

  	
  7.10

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  311(a)

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
  7.11

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  312(a)

  	
   

  	
  2.05

  
	
   

  	
  (b)

  	
   

  	
  12.03

  
	
   

  	
  (c)

  	
   

  	
  12.03

  
	
  313(a)

  	
   

  	
  7.06

  
	
   

  	
  (b)(1)

  	
   

  	
  N.A.

  
	
   

  	
  (b)(2)

  	
   

  	
  7.06;
  7.07

  
	
   

  	
  (c)

  	
   

  	
  7.06;
  12.02

  
	
   

  	
  (d)

  	
   

  	
  7.06

  
	
  314(a)

  	
   

  	
  4.03;12.02;
  12.05

  
	
   

  	
  (b)

  	
   

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
   

  	
  12.04

  
	
   

  	
  (c)(2)

  	
   

  	
  12.04

  
	
   

  	
  (c)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (d)

  	
   

  	
  N.A.

  
	
   

  	
  (e)

  	
   

  	
  12.05

  
	
   

  	
  (f)

  	
   

  	
  N.A.

  
	
  315(a)

  	
   

  	
  7.01

  
	
   

  	
  (b)

  	
   

  	
  7.05;
  12.02

  
	
   

  	
  (c)

  	
   

  	
  7.01

  
	
   

  	
  (d)

  	
   

  	
  7.01

  
	
   

  	
  (e)

  	
   

  	
  6.11

  
	
  316(a) (last sentence)

  	
   

  	
  2.09

  
	
   

  	
  (a)(1)(A)

  	
   

  	
  6.05

  
	
   

  	
  (a)(1)(B)

  	
   

  	
  6.04

  
	
   

  	
  (a)(2)

  	
   

  	
  N.A.

  
	
   

  	
  (b)

  	
   

  	
  6.07

  
	
   

  	
  (c)

  	
   

  	
  2.12

  
	
  317(a)(1)

  	
   

  	
  6.08

  
	
   

  	
  (a)(2)

  	
   

  	
  6.09

  
	
   

  	
  (b)

  	
   

  	
  2.04

  
	
  318(a)

  	
   

  	
  12.01

  
	
   

  	
  (b)

  	
   

  	
  N.A.

  
	
   

  	
  (c)

  	
   

  	
  12.01

  

 

N.A. means not applicable.

* 
This Cross Reference Table is not part of the Indenture.

 

 

TABLE
OF CONTENTS

 

 

	
  ARTICLE 1

  
	
  DEFINITIONS
  AND INCORPORATION

  BY REFERENCE

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions.

  	
   

  
	
  Section 1.02

  	
  Other Definitions.

  	
   

  
	
  Section 1.03

  	
  Incorporation
  by Reference of Trust Indenture Act.

  	
   

  
	
  Section 1.04

  	
  Rules of Construction.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  
	
  THE NOTES

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Form and Dating.

  	
   

  
	
  Section 2.02

  	
  Execution and Authentication.

  	
   

  
	
  Section 2.03

  	
  Registrar and Paying Agent.

  	
   

  
	
  Section 2.04

  	
  Paying Agent to
  Hold Money in Trust.

  	
   

  
	
  Section 2.05

  	
  Holder Lists.

  	
   

  
	
  Section 2.06

  	
  Transfer and Exchange.

  	
   

  
	
  Section 2.07

  	
  Replacement Notes.

  	
   

  
	
  Section 2.08

  	
  Outstanding Notes.

  	
   

  
	
  Section 2.09

  	
  Treasury Notes.

  	
   

  
	
  Section 2.10

  	
  Temporary Notes.

  	
   

  
	
  Section 2.11

  	
  Cancellation.

  	
   

  
	
  Section 2.12

  	
  Defaulted Interest.

  	
   

  
	
  Section 2.13

  	
  CUSIP Numbers.

  	
   

  
	
  Section 2.14

  	
  Issuance of Additional
  Notes.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  
	
  REDEMPTION AND PREPAYMENT

  
	
   

  
	
  Section 3.01

  	
  Notices to Trustee.

  	
   

  
	
  Section 3.02

  	
  Selection
  of Notes to Be Redeemed or Purchased.

  	
   

  
	
  Section 3.03

  	
  Notice of Redemption.

  	
   

  
	
  Section 3.04

  	
  Effect of Notice of
  Redemption.

  	
   

  
	
  Section 3.05

  	
  Deposit of
  Redemption or Purchase Price.

  	
   

  
	
  Section 3.06

  	
  Notes Redeemed or
  Purchased in Part.

  	
   

  
	
  Section 3.07

  	
  Optional Redemption.

  	
   

  
	
  Section 3.08

  	
  Mandatory Redemption.

  	
   

  
	
  Section 3.09

  	
  Offer
  to Purchase by Application of Excess Proceeds or Cash Flow.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  
	
  COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Payment of Notes.

  	
   

  
	
  Section 4.02

  	
  Maintenance of Office
  or Agency.

  	
   

  
	
  Section 4.03

  	
  Reports.

  	
   

  
	
  Section 4.04

  	
  Compliance Certificate.

  	
   

  
	
  Section 4.05

  	
  Taxes.

  	
   

  
	
  Section 4.06

  	
  Stay, Extension and
  Usury Laws.

  	
   

  
	
  Section 4.07

  	
  Restricted Payments.

  	
   

  
	
  Section 4.08

  	
  Dividend
  and Other Payment Restrictions Affecting Subsidiaries.

  	
   

  

 

i

 

	
  Section 4.09

  	
  Incurrence
  of Indebtedness and Issuance of Preferred Stock.

  	
   

  
	
  Section 4.10

  	
  Asset Sales.

  	
   

  
	
  Section 4.11

  	
  Transaction with
  Affiliates.

  	
   

  
	
  Section 4.12

  	
  Liens.

  	
   

  
	
  Section 4.13

  	
  Business Activities.

  	
   

  
	
  Section 4.14

  	
  Corporate Existence.

  	
   

  
	
  Section 4.15

  	
  Offer to
  Repurchase Upon Change of Control.

  	
   

  
	
  Section 4.16

  	
  Existence of
  Corporate Co-Issuer.

  	
   

  
	
  Section 4.17

  	
  Restrictions
  on Activities of Interactive Finance.

  	
   

  
	
  Section 4.18

  	
  Payments for Consent.

  	
   

  
	
  Section 4.19

  	
  Additional Note Guarantees.

  	
   

  
	
  Section 4.20

  	
  Designation
  of Restricted and Unrestricted Subsidiaries.

  	
   

  
	
  Section 4.21

  	
  Limitation on
  Capital Expenditures.

  	
   

  
	
  Section 4.22

  	
  Excess Cash Flow.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  
	
  SUCCESSORS

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Merger, Consolidation,
  or Sale of Assets.

  	
   

  
	
  Section 5.02

  	
  Successor
  Corporation Substituted.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  
	
  DEFAULTS
  AND REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Events of Default.

  	
   

  
	
  Section 6.02

  	
  Acceleration.

  	
   

  
	
  Section 6.03

  	
  Other Remedies.

  	
   

  
	
  Section 6.04

  	
  Waiver of Past Defaults.

  	
   

  
	
  Section 6.05

  	
  Control by Majority.

  	
   

  
	
  Section 6.06

  	
  Limitation on Suits.

  	
   

  
	
  Section 6.07

  	
  Rights
  of Holders of Notes to Receive Payment.

  	
   

  
	
  Section 6.08

  	
  Collection Suit by Trustee.

  	
   

  
	
  Section 6.09

  	
  Trustee May File
  Proofs of Claim.

  	
   

  
	
  Section 6.10

  	
  Priorities.

  	
   

  
	
  Section 6.11

  	
  Undertaking for Costs.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  
	
  TRUSTEE

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Duties of Trustee.

  	
   

  
	
  Section 7.02

  	
  Rights of Trustee.

  	
   

  
	
  Section 7.03

  	
  Individual Rights of
  Trustee.

  	
   

  
	
  Section 7.04

  	
  Trustee’s Disclaimer.

  	
   

  
	
  Section 7.05

  	
  Notice of Defaults.

  	
   

  
	
  Section 7.06

  	
  Reports by
  Trustee to Holders of the Notes.

  	
   

  
	
  Section 7.07

  	
  Compensation and Indemnity.

  	
   

  
	
  Section 7.08

  	
  Replacement of Trustee.

  	
   

  
	
  Section 7.09

  	
  Successor Trustee by
  Merger, etc.

  	
   

  
	
  Section 7.10

  	
  Eligibility;
  Disqualification.

  	
   

  
	
  Section 7.11

  	
  Preferential
  Collection of Claims Against Issuers.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  
	
  LEGAL
  DEFEASANCE AND COVENANT DEFEASANCE

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Option
  to Effect Legal Defeasance or Covenant Defeasance.

  	
   

  

 

ii

 

	
  Section 8.02

  	
  Legal Defeasance and
  Discharge.

  	
   

  
	
  Section 8.03

  	
  Covenant Defeasance.

  	
   

  
	
  Section 8.04

  	
  Conditions
  to Legal or Covenant Defeasance.

  	
   

  
	
  Section 8.05

  	
  Deposited
  Money and Government Securities to be Held in Trust; Other Miscellaneous
  Provisions.

  	
   

  
	
  Section 8.06

  	
  Repayment to the Issuers.

  	
   

  
	
  Section 8.07

  	
  Reinstatement.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  
	
  AMENDMENT, SUPPLEMENT
  AND WAIVER

  
	
   

  
	
  Section 9.01

  	
  Without Consent of
  Holders of Notes.

  	
   

  
	
  Section 9.02

  	
  With Consent of
  Holders of Notes.

  	
   

  
	
  Section 9.03

  	
  Compliance with
  Trust Indenture Act.

  	
   

  
	
  Section 9.04

  	
  Revocation and
  Effect of Consents.

  	
   

  
	
  Section 9.05

  	
  Notation on or
  Exchange of Notes.

  	
   

  
	
  Section 9.06

  	
  Trustee to Sign
  Amendments, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  
	
  NOTE
  GUARANTEES

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Guarantee.

  	
   

  
	
  Section 10.02

  	
  Limitation on
  Guarantor Liability.

  	
   

  
	
  Section 10.03

  	
  Execution and
  Delivery of Note Guarantee.

  	
   

  
	
  Section 10.04

  	
  Guarantors
  May Consolidate, etc., on Certain Terms.

  	
   

  
	
  Section 10.05

  	
  Releases.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  
	
  SATISFACTION AND DISCHARGE

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Satisfaction and Discharge.

  	
   

  
	
  Section 11.02

  	
  Application of Trust Money.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 12.01

  	
  Trust Indenture Act
  Controls.

  	
   

  
	
  Section 12.02

  	
  Notices.

  	
   

  
	
  Section 12.03

  	
  Communication
  by Holders of Notes with Other Holders of Notes.

  	
   

  
	
  Section 12.04

  	
  Certificate
  and Opinion as to Conditions Precedent.

  	
   

  
	
  Section 12.05

  	
  Statements
  Required in Certificate or Opinion.

  	
   

  
	
  Section 12.06

  	
  Rules by Trustee and
  Agents.

  	
   

  
	
  Section 12.07

  	
  No
  Personal Liability of Directors, Officers, Employees and Stockholders.

  	
   

  
	
  Section 12.08

  	
  Governing Law.

  	
   

  
	
  Section 12.09

  	
  No
  Adverse Interpretation of Other Agreements.

  	
   

  
	
  Section 12.10

  	
  Successors.

  	
   

  
	
  Section 12.11

  	
  Severability.

  	
   

  
	
  Section 12.12

  	
  Counterpart Originals.

  	
   

  
	
  Section 12.13

  	
  Table of Contents,
  Headings, etc.

  	
   

  

 

iii

 

	
  EXHIBITS

  
	
   

  
	
  Exhibit A1

  	
  FORM OF NOTE

  	
   

  
	
  Exhibit A2

  	
  FORM OF REGULATION S TEMPORARY
  GLOBAL NOTE

  	
   

  
	
  Exhibit
  B

  	
  FORM OF CERTIFICATE OF
  TRANSFER

  	
   

  
	
  Exhibit
  C

  	
  FORM OF CERTIFICATE OF
  EXCHANGE

  	
   

  
	
  Exhibit D

  	
  FORM OF CERTIFICATE OF
  ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

  	
   

  
	
  Exhibit E

  	
  FORM OF NOTATION OF
  GUARANTEE

  	
   

  
	
  Exhibit
  F

  	
  FORM OF SUPPLEMENTAL
  INDENTURE

  	
   

  

 

iv

 

INDENTURE dated
as of March 26, 2004, among Interactive Health LLC, a Delaware limited
liability company, Interactive Health Finance Corp., a Delaware corporation,
the Guarantors (as defined) and U.S. Bank National Association, as trustee.

 

Interactive
Health LLC, Interactive Health Finance Corp., the Guarantors and U.S. Bank
National Association agree as follows for the benefit of each other and for the
equal and ratable benefit of the Holders (as defined) of the 71/4% Series A
Senior Notes due 2011 (the “Series A
Notes”) and the 71/4% Series B Senior Notes due 2011 (the “Series B Notes” and, together with the
Additional Notes (as defined herein) and the Series A Notes, the “Notes”):

 

ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE

 

Section 1.01                                Definitions.

 

“144A Global Note” means a Global Note
substantially in the form of Exhibit A1 hereto bearing the Global Note Legend,
the Private Placement Legend and the OID Legend and deposited with or on behalf
of, and registered in the name of, the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount at maturity
of the Notes sold in reliance on Rule 144A.

 

“Accreted Value” means, as of any date
(the “Specified Date”), with respect
to each $1,000 principal amount at maturity of notes:

 

(1)
if the Specified Date is one of the following dates (each, a “Semi-Annual Accrual Date”), the amount
set forth opposite such date below:

 

	
  Semi-Annual
  Accrual Date

  	
   

  	
  Accreted Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Issue Date

  	
   

  	
  $

  	
  804.24

  	
   

  
	
  October 1, 2004

  	
   

  	
  814.80

  	
   

  
	
  April 1, 2005

  	
   

  	
  825.63

  	
   

  
	
  October 1, 2005

  	
   

  	
  837.08

  	
   

  
	
  April 1, 2006

  	
   

  	
  849.20

  	
   

  
	
  October 1, 2006

  	
   

  	
  862.02

  	
   

  
	
  April 1, 2007

  	
   

  	
  875.57

  	
   

  
	
  October 1, 2007

  	
   

  	
  889.91

  	
   

  
	
  April 1, 2008

  	
   

  	
  905.08

  	
   

  
	
  October 1, 2008

  	
   

  	
  921.13

  	
   

  
	
  April 1, 2009

  	
   

  	
  935.52

  	
   

  
	
  October 1, 2009

  	
   

  	
  950.92

  	
   

  
	
  April 1, 2010

  	
   

  	
  966.79

  	
   

  
	
  October 1, 2010

  	
   

  	
  983.14

  	
   

  
	
  April 1, 2011

  	
   

  	
  $

  	
  1,000.00

  	
   

  

 

(2)
if the Specified Date Occurs between two Semi-Annual Accrual Dates, the sum of
(A) the Accreted Value of the Semi-Annual Accrual Date immediately preceding
the Specified Date and (B) an amount equal to the product of (a) the difference
of (x) the Accreted Value for the immediately following Semi-Annual Accrual
Date and (y) the Accreted Value for the immediately preceding Semi-Annual
Accrual Date and (b) a fraction, the numerator of which is

 

1

 

the number of
days elapsed from the immediately preceding Semi-Annual Accrual Date to the
Specified Date, calculated on a basis of a 360-day year comprised of twelve
30-day months, and the denominator of which is 180 days, except for the period
from the date of issuance of the notes to the first Semi-Annual Accrual Date
immediately succeeding the date of issuance of the notes, which is 186 days.

 

“Acquired Debt” means, with respect to
any specified Person:

 

(1)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of, such
specified Person; and

 

(2)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.

 

“Additional Notes” means additional Notes
(other than the Initial Notes), if any, issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as
the Initial Notes.

 

“Affiliate” of any specified Person means
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.  For purposes of this definition, “control,”
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person will be
deemed to be control.  For purposes of
this definition, the terms “controlling,”
“controlled by” and “under common control with” have
correlative meanings.

 

“Agent” means any Registrar,
co-registrar, Paying Agent or additional paying agent.

 

“Applicable Premium” means, with respect
to any Note on any redemption date, the greater of:

 

(1)
1.0% of the Accreted Value of the note; or

 

(2)
the excess of:

 

the present value at such Early Redemption Date of (i) the redemption
price of the note at April 1, 2008 (such redemption price being set forth
appearing in Section 3.07(d) hereof) plus (ii) all required interest
payments due on the note through April 1, 2008 (excluding accrued but
unpaid interest to the redemption date), computed using a discount rate equal
to the Treasury Rate as of such redemption date plus 75 basis points; over

 

the Accreted Value of the note, if greater.

 

“Applicable Procedures” means, with
respect to any transfer or exchange of or for beneficial interests in any
Global Note, the rules and procedures of the Depositary, Euroclear and
Clearstream that apply to such transfer or exchange.

 

“Asset Sale” means, with respect to any
specified Person:

 

(1)
the sale, lease, conveyance or other disposition of any assets or rights;
provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of

 

2

 

Interactive
Health and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of Sections 4.15 and 5.01 of this Indenture and not by the
provisions of Section 4.10 of this Indenture; and

 

(2)
the issuance of Equity Interests in any Restricted Subsidiary of Interactive
Health or the sale of Equity Interests in any Subsidiary of Interactive Health.

 

Notwithstanding
the preceding, none of the following items will be deemed to be an Asset Sale:

 

(1)
any single transaction or series of related transactions that involves assets
having a Fair Market Value of less than $1.0 million;

 

(2)
a transfer of assets between or among Interactive Health and its Restricted
Subsidiaries;

 

(3)
an issuance of Equity Interests by a Restricted Subsidiary of Interactive
Health to Interactive Health or a Restricted Subsidiary of Interactive Health;

 

(4)
the sale or lease of products, services or accounts receivable in the ordinary
course of business and any sale or other disposition of damaged, worn-out or
obsolete assets in the ordinary course of business;

 

(5)
the sale or other disposition of cash or Cash Equivalents;

 

(6)
a Restricted Payment that does not violate Section 4.07 of this Indenture
or a Permitted Investment;

 

(7)
the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection of such accounts receivable;

 

(8)
any good faith surrender or waiver of contract rights or the settlement,
release or surrender of claims of any kind in the ordinary course of business;

 

(9)
the granting of Permitted Liens; and

 

(10)
grants of licenses to use intellectual property in the ordinary course of
business that do not materially interfere with the business of Interactive
Health and its Restricted Subsidiaries.

 

“Bankruptcy Law” means Title 11, U.S.
Code or any similar federal or state law for the relief of debtors.

 

“Beneficial Owner” has the meaning
assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that in calculating the beneficial ownership of any particular “person” (as
that term is used in Section 13(d)(3) of the Exchange Act), such “person”
will be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire by conversion or exercise of other
securities, whether such right is currently exercisable or is exercisable only
after the passage of time.  The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding
meaning.

 

“Board of Directors” means:

 

3

 

(1)
with respect to a corporation, the board of directors of the corporation or any
committee thereof duly authorized to act on behalf of such board;

 

(2)
with respect to a partnership, the board of directors of the general partner of
the partnership;

 

(3)
with respect to a limited liability company, the managing member or members or
any controlling committee of managing members thereof; and

 

(4)
with respect to any other Person, the board or committee of such Person serving
a similar function.

 

“Borrowing Base” means, as of any date,
an amount equal to:

 

(1)
85% of the face amount of all accounts receivable owned by Interactive Health
and its Restricted Subsidiaries as of the end of the most recent fiscal quarter
preceding such date that were not more than 90 days past due; plus

 

(2)
75% of the book value of all inventory, net of reserves, owned by Interactive
Health and its Restricted Subsidiaries as of the end of the most recent fiscal
quarter preceding such date; plus

 

(3)
$5.0 million.

 

“Broker-Dealer” has the meaning set forth
in the Registration Rights Agreement.

 

“Business Day” means any day other than a
Legal Holiday.

 

“Capital Expenditures” means for any
period all direct or indirect (by way of acquisition of securities of a Person
or the expenditure of cash or the transfer of property or the incurrence of
Indebtedness) expenditures in respect of the purchase or other acquisition of
fixed or capital assets determined in conformity with GAAP, excluding (i)
normal replacement and maintenance programs properly charged to current
operations, and (ii) the purchase price of equipment to the extent that the
consideration therefore consists of used, worn out, damaged, obsolete or
surplus equipment being traded in at such time or the proceeds of a concurrent
sale of such used, worn out, damaged, obsolete or surplus equipment.

 

“Capital Lease Obligation” means, at the
time any determination is to be made, the amount of the liability in respect of
a capital lease that would at that time be required to be capitalized on a
balance sheet prepared in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be prepaid by the
lessee without payment of a penalty.

 

“Capital Stock” means:

 

(1)
in the case of a corporation, corporate stock;

 

(2)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock;

 

4

 

(3)
in the case of a partnership or limited liability company, partnership
interests (whether general or limited) or membership interests; and

 

(4)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person, but excluding from all of the foregoing any debt securities
convertible into Capital Stock, whether or not such debt securities include any
right of participation with Capital Stock.

 

“Cash Equivalents” means:

 

(1)
United States dollars;

 

(2)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality of the United States
government (provided that the full faith and credit of the United States is
pledged in support of those securities) having maturities of not more than
twelve months from the date of acquisition;

 

(3)
certificates of deposit and eurodollar time deposits with maturities of twelve
months or less from the date of acquisition, bankers’ acceptances with
maturities not exceeding six months and overnight bank deposits, in each case,
with any domestic commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of “B” or better;

 

(4)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (2) and (3) above entered into
with any financial institution meeting the qualifications specified in clause
(3) above;

 

(5)
commercial paper having one of the two highest ratings obtainable from Moody’s
Investors Service, Inc. or Standard & Poor’s Rating Services and, in each
case, maturing within six months after the date of acquisition; and

 

(6)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.

 

“Change of Control” means the occurrence
of any of the following:

 

(1)
the direct or indirect sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of
Interactive Health and its Subsidiaries taken as a whole, or of any direct or
indirect parent of Interactive Health, to any “person” (as that term is used in
Section 13(d) of the Exchange Act), other than a Principal;

 

(2)
the adoption of a plan relating to the liquidation or dissolution of either of
the Issuers;

 

(3)
the consummation of any transaction (including, without limitation, any merger
or consolidation), the result of which is that any “person” (as defined above),
other than a Principal, becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the Voting Stock of Interactive Health, measured by voting
power rather than number of shares;

 

5

 

(4)
after an initial public offering of Interactive Health or any direct or
indirect parent of Interactive Health, the first day on which a majority of the
members of the Board of Directors of Interactive Health are not Continuing
Directors; or

 

(5)
the first day on which Interactive Health fails to own 100% of the issued and
outstanding Equity Interests of Interactive Finance.

 

“Clearstream” means Clearstream Banking,
S.A.

 

“Code” means the Internal Revenue Code of
1986, as amended.

 

“Consolidated Cash Flow” means, with
respect to any specified Person for any period, the Consolidated Net Income of
such Person for such period plus,
without duplication and to the extent included in calculating such Consolidated
Net Income:

 

(1)
an amount equal to any extraordinary loss plus any net loss realized by such
Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent such losses were deducted in computing such Consolidated Net
Income; plus

 

(2)
provision for taxes based on income or profits or the Tax Amount of such Person
and its Subsidiaries for such period, to the extent that such provision for
taxes or Tax Amount was included in computing such Consolidated Net Income; plus

 

(3)
the Fixed Charges of such Person and its Restricted Subsidiaries for such
period, to the extent that such Fixed Charges were deducted in computing such
Consolidated Net Income; plus

 

(4)
depreciation, amortization (including amortization of intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period
or amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus

 

(5)
non-cash items increasing such Consolidated Net Income for such period, other
than the accrual of revenue in the ordinary course of business,

 

in each case, on a consolidated
basis and determined in accordance with GAAP.

 

Notwithstanding
the preceding, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash expenses of, a Restricted
Subsidiary will be added to Consolidated Net Income to compute Consolidated
Cash Flow of Interactive Health only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to Interactive
Health by such Restricted Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.

 

6

 

“Consolidated Net Income” means, with
respect to any specified Person for any period, the aggregate of the Net Income
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided that:

 

(1)
the Net Income (but not loss) of any Person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting will be included
only to the extent of the amount of dividends or similar distributions paid in
cash to the specified Person or a Restricted Subsidiary of the Person;

 

(2)
the Net Income of any Restricted Subsidiary will be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders;

 

(3)
the cumulative effect of a change in accounting principles will be excluded;
and

 

(4)
notwithstanding clause (1) above, the Net Income of any Unrestricted Subsidiary
will be excluded, whether or not distributed to the specified Person or one of
its Subsidiaries.

 

“Continuing Directors” means, as of any
date of determination, any member of the Board of Directors of Interactive
Health or Interactive Finance, as applicable, who:

 

(1)
was a member of such Board of Directors on the date of this Indenture;

 

(2)
was nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election; or

 

(3)
in the case of Interactive Health, was appointed or nominated for appointment
to such Board of Directors by the sole member or managing member, as the case
may be, of Interactive Health.

 

“Corporate Trust Office of the Trustee”
will be at the address of the Trustee specified in Section 12.02 hereof or
such other address as to which the Trustee may give notice to the Company.

 

“Credit Agreement” means that certain
Credit Agreement, dated as of December 30, 2003, between Interactive Health
and Comerica Bank, as amended prior to the date of this Indenture, including
any related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, and, in each case, as amended, restated,
modified, renewed, refunded, replaced (whether upon or after termination or
otherwise) or refinanced (including by means of sales of debt securities to
institutional investors) in whole or in part from time to time.

 

“Credit Facilities” means, one or more
debt facilities (including, without limitation, the Credit Agreement) or
commercial paper facilities, in each case, with banks or other institutional
lenders (including sub-prime institutional lenders) providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables), letters of credit or bankers
acceptances, in each case, as amended, restated, modified, renewed, refunded, replaced
(whether upon or after termination or

 

7

 

otherwise) or refinanced
(including by means of sales of debt securities to institutional investors) in
whole or in part from time to time.

 

“Current Assets” means all amounts (other
than cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption “total current assets” (or any like caption) on a
consolidated balance sheet of the Issuers.

 

“Current Liabilities” means all amounts
that would, in conformity with GAAP, be set forth opposite the caption “total
current liabilities” (or any like caption) on a consolidated balance sheet of
the Issuers.

 

“Custodian” means the Trustee, as
custodian with respect to the Notes in global form, or any successor entity
thereto.

 

“Default” means any event that is, or
with the passage of time or the giving of notice or both would be, an Event of
Default.

 

“Definitive Note” means a certificated
Note registered in the name of the Holder thereof and issued in accordance with
Section 2.06 hereof, substantially in the form of Exhibit A1 hereto except
that such Note shall not bear the Global Note Legend and shall not have the
“Schedule of Exchanges of Interests in the Global Note” attached thereto.

 

“Depositary” means, with respect to the
Notes issuable or issued in whole or in part in global form, the Person
specified in Section 2.03 hereof as the Depositary with respect to the
Notes, and any and all successors thereto appointed as depositary hereunder and
having become such pursuant to the applicable provision of this Indenture.

 

“Disqualified Stock” means any Capital
Stock that, by its terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case, at the option of
the holder of the Capital Stock), or upon the happening of any event, matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days after the date on
which the notes mature.  Notwithstanding
the preceding sentence, any Capital Stock that would constitute Disqualified
Stock solely because the holders of the Capital Stock have the right to require
Interactive Health to repurchase such Capital Stock upon the occurrence of a
change of control or an asset sale will not constitute Disqualified Stock if
the terms of such Capital Stock provide that Interactive Health may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with Section 4.07 of this
Indenture.  The amount of Disqualified
Stock deemed to be outstanding at any time for purposes of this Indenture will
be the maximum amount that Interactive Health and its Restricted Subsidiaries
may become obligated to pay upon the maturity of, or pursuant to any mandatory
redemption provisions of, such Disqualified Stock, exclusive of accrued
dividends.

 

“Domestic Subsidiary” means any
Restricted Subsidiary of Interactive Health formed under the laws of the United
States or any state of the United States or the District of Columbia or that
guarantees or otherwise provides direct credit support for any Indebtedness of
Interactive Health.

 

“Equity Interests” means Capital Stock
and all warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).

 

“Euroclear” means Euroclear Bank,
S.A./N.V., as operator of the Euroclear system.

 

8

 

“Excess Cash Flow” means, with respect to
the Issuers for any Fiscal Period, the Consolidated Cash Flow of Interactive
Health and its Restricted Subsidiaries for such Fiscal Period, minus (i) cash interest expense
(including the portion of any payments associated with Capital Lease
Obligations, if any) of Interactive Health and its Restricted Subsidiaries that
is actually paid during such Fiscal Period, minus
(ii) up to $1.0 million in capital expenditures made during such Fiscal Period
by Interactive Health and its Restricted Subsidiaries, minus (iii) principal payments on term Indebtedness or on revolving
credit Indebtedness under a Credit Facility that effects a corresponding
permanent commitment reduction under such Credit Facility, in each case made
during such Fiscal Period, plus (iv)
decreases in Working Capital during such Fiscal Period, minus (v) increases in Working Capital during such Fiscal Period, plus (vi) all amounts paid during such
Fiscal Period or payable with respect to such Fiscal Period by Interactive
Health or any of its Affiliates pursuant to the terms of the Management
Agreement to a Principal or to an Affiliate of a Principal to the extent such
amounts have been deducted from the Net Income of the Issuers for such Fiscal
Period, less (vii) the aggregate
amount of all Tax Distributions during such Fiscal Period.

 

“Excess Cash Flow Offer Amount” means the
result of (1)(A) if the amount of unrestricted cash and Cash Equivalents
reflected on the Issuers’ consolidated balance sheet at the end of the
applicable Fiscal Period (other than any amounts in the segregated restricted
cash account established by the Issuers pursuant to the provisions described in
Section 4.22 hereof) is equal to or less than $15.0 million, 50% of the
Issuers’ Excess Cash Flow for such Fiscal Period or (B) if the amount of
unrestricted cash and Cash Equivalents reflected on the Issuers’ consolidated
balance sheet a the end of the applicable Fiscal Period (other than any amounts
in the segregated restricted cash account established by the Issuers pursuant
to the provisions described in Section 4.22 hereof) is greater than $15.0
million, 75% of the Issuers’ Excess Cash Flow for such Fiscal Period, plus (2) the amounts in the segregated
restricted cash account established by the Issuers pursuant to the provisions
described in Section 4.22 hereof, minus
(3) the aggregate Accreted Value of any notes purchased by the Issuers during
the applicable Fiscal Period other than pursuant to the provisions set forth in
Sections 3.07, 3.08, 3.09, 4.10, 4.15 and 4.22 hereof.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

“Exchange Notes” means the Notes issued
in the Exchange Offer pursuant to Section 2.06(f) hereof.

 

“Exchange Offer” has the meaning set
forth in the Registration Rights Agreement.

 

“Exchange Offer Registration Statement”
has the meaning set forth in the Registration Rights Agreement.

 

“Existing Indebtedness” means the
Indebtedness of Interactive Health and its Subsidiaries (excluding Indebtedness
under the Credit Facilities) in existence on the date of this Indenture,
reduced to the extent such amounts are repaid, refinanced or retired.

 

“Fair Market Value”  means the value that would be paid by a willing buyer to an
unaffiliated willing seller in a transaction not involving distress or
necessity of either party, determined in good faith by the Board of Directors
of Interactive Health (unless otherwise provided in this Indenture).

 

“Fiscal Period” means (i) for fiscal year
2004, the period from April 1, 2004 to December 31, 2004 and (ii) for
fiscal year 2005 and each fiscal year thereafter, the period from
January 1 to December 31 for such year.

 

“Fixed Charge Coverage Ratio” means with
respect to any specified Person for any period, the ratio of the Consolidated
Cash Flow of such Person

 

9

 

for such period to the Fixed
Charges of such Person for such period. 
In the event that the specified Person or any of the Restricted
Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems,
defeases or otherwise discharges any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
“Calculation Date”), then the Fixed
Charge Coverage Ratio will be calculated giving pro forma effect to such
incurrence, assumption, Guarantee, repayment, repurchase, redemption,
defeasance or other discharge of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom, as if the
same had occurred at the beginning of the applicable four-quarter reference
period.

 

In addition, for
purposes of calculating the Fixed Charge Coverage Ratio:

 

(1)
acquisitions that have been made by the specified Person or any of the
Restricted Subsidiaries, including through mergers or consolidations, or any
Person or any of the Restricted Subsidiaries acquired by the specified Person
or any of the Restricted Subsidiaries, and including any related financing
transactions and including increases in ownership of Restricted Subsidiaries,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date will be given pro forma effect (in
accordance with Regulation S-X under the Securities Act) as if they had
occurred on the first day of the four-quarter reference period;

 

(2)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses (and ownership
interests therein) disposed of prior to the Calculation Date, will be excluded;

 

(3)
the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses (and ownership interests
therein) disposed of prior to the Calculation Date, will be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges will not
be obligations of the specified Person or any of the Restricted Subsidiaries following
the Calculation Date;

 

(4)
any Person that is a Restricted Subsidiary on the Calculation Date will be
deemed to have been a Restricted Subsidiary at all times during such
four-quarter period;

 

(5)
any Person that is not a Restricted Subsidiary on the Calculation Date will be
deemed not to have been a Restricted Subsidiary at any time during such
four-quarter period; and

 

(6)
if any Indebtedness bears a floating rate of interest, the interest expense on
such Indebtedness will be calculated as if the rate in effect on the
Calculation Date had been the applicable rate for the entire period (taking
into account any Hedging Obligation applicable to such Indebtedness if such
Hedging Obligation has a remaining term as of the Calculation Date in excess of
12 months).

 

“Fixed Charges” means, with respect to
any specified Person for any period, the sum, without duplication, of:

 

(1)
the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital

 

10

 

Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers’ acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations in
respect of interest rates; plus

 

(2)
the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus

 

(3)
any interest on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus

 

(4)
the product of (a) all cash dividend payments or other distributions (and
non-cash dividend payments in the case of a Person that is a Subsidiary) on any
series of preferred equity of such Person, other than any dividend or
distribution paid on the date of this Indenture with the proceeds of the
issuance of the notes times, (b) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person (or, in the case of a Person that
is a partnership or a limited liability company, the combined federal, state
and local income tax rate that was or would have been utilized to calculate the
Tax Amount of such Person), expressed as a decimal,

 

in each case, on a consolidated
basis and in accordance with GAAP.

 

“Foreign Subsidiary”  means any Restricted Subsidiary of Interactive Health that is not
a Domestic Subsidiary.

 

“GAAP” means generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect from time to time.

 

“Global Note Legend” means the legend set
forth in Section 2.06(g)(2) hereof, which is required to be placed on all
Global Notes issued under this Indenture.

 

“Global Notes” means, individually and
collectively, each of the Restricted Global Notes and the Unrestricted Global
Notes deposited with or on behalf of and registered in the name of the
Depository or its nominee, substantially in the form of Exhibit A1 hereto and
that bears the Global Note Legend and that has the “Schedule of Exchanges
of Interests in the Global Note” attached thereto, issued in accordance with
Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.

 

“Government Securities” means direct
obligations of, or obligations guaranteed by, the United States of America, and
the payment for which the United States pledges its full faith and credit.

 

“Guarantee” means a guarantee other than
by endorsement of negotiable instruments for collection in the ordinary course
of business, direct or indirect, in any manner including, without limitation,
by way of a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any Indebtedness (whether
arising by virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take or pay or to
maintain financial statement conditions or otherwise).

 

“Guarantors” means each of:

 

11

 

(1)
Parent; and

 

(2)
any other Subsidiary of Interactive Health that executes a Note Guarantee in
accordance with the provisions of this Indenture,

 

and their respective successors
and assigns, in each case, until the Note Guarantee of such Person has been
released in accordance with the provisions of this Indenture.

 

“Hedging Obligations” means, with respect
to any specified Person, the obligations of such Person under:

 

(1)
interest rate swap agreements (whether from fixed to floating or from floating
to fixed), interest rate cap agreements and interest rate collar agreements;

 

(2)
other agreements or arrangements designed to manage interest rates or interest
rate risk; and

 

(3)
other agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates or commodity prices.

 

“Holder” means a Person in whose name a
Note is registered.

 

“IAI Global Note” means a Global Note
substantially in the form of Exhibit A1 hereto bearing the Global Note Legend,
the Private Placement Legend and the OID Legend and deposited with or on behalf
of and registered in the name of the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount at maturity
of the Notes sold to Institutional Accredited Investors.

 

“Immaterial Subsidiary” means, as of any
date, any Restricted Subsidiary whose total assets, as of that date, are less
than $100,000 and whose total revenues for the most recent 12-month period do
not exceed $100,000; provided that a Restricted Subsidiary will not be
considered to be an Immaterial Subsidiary if it, directly or indirectly,
guarantees or otherwise provides direct credit support for any Indebtedness of
either of the Issuers.

 

“Indebtedness” means, with respect to any
specified Person, any indebtedness of such Person (excluding accrued expenses
and trade payables), whether or not contingent:

 

(1)
in respect of borrowed money;

 

(2)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof);

 

(3)
in respect of banker’s acceptances;

 

(4)
representing Capital Lease Obligations;

 

(5)
representing the balance deferred and unpaid of the purchase price of any
property or services due more than six months after such property is acquired
or such services are completed; or

 

(6)
representing any Hedging Obligations,

 

12

 

if and to the extent any of the
preceding items (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of the specified Person prepared in
accordance with GAAP.  In addition, the
term “Indebtedness” includes all Indebtedness of others secured by a Lien on
any asset of the specified Person (whether or not such Indebtedness is assumed
by the specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any Indebtedness of any other Person.

 

“Indenture” means this Indenture, as
amended or supplemented from time to time.

 

“Indirect Participant” means a Person who
holds a beneficial interest in a Global Note through a Participant.

 

“Initial Notes” means the first $100.0
million aggregate principal amount at maturity of Notes issued under this
Indenture on the date hereof.

 

“Initial Purchasers” means Jefferies
& Company, Inc. and Imperial Capital LLC.

 

“Institutional Accredited Investor” means
an institution that is an “accredited investor” as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act, who are not also QIBs.

 

“Interactive Finance” means Interactive
Health Finance Corp., a Delaware corporation, and any and all successors
thereto.

 

“Interactive Health” means Interactive
Health LLC, a Delaware limited liability company, and any and all successors
thereto.

 

“Investments” means, with respect to any
Person, all direct or indirect investments by such Person in other Persons
(including Affiliates) in the forms of loans (including Guarantees or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP.  If Interactive Health or any
Subsidiary of Interactive Health sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Interactive Health such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Interactive Health, Interactive Health will be deemed to have
made an Investment on the date of any such sale or disposition equal to the
Fair Market Value of Interactive Health’s Investments in such Subsidiary that
were not sold or disposed of in an amount determined as provided in
Section 4.07(c) of this Indenture. 
The acquisition by Interactive Health or any Subsidiary of Interactive
Health of a Person that holds an Investment in a third Person will be deemed to
be an Investment by Interactive Health or such Subsidiary in such third Person
in an amount equal to the Fair Market Value of the Investments held by the
acquired Person in such third Person in an amount determined as provided in
Section 4.07(c) of this Indenture. 
Except as otherwise provided in this Indenture, the amount of an
Investment will be determined at the time the Investment is made and without
giving effect to subsequent changes in value.

 

“Issue Date” means the date of this
Indenture.

 

“Issuers” means Interactive Health and
Interactive Finance.

 

“Legal Holiday” means a Saturday, a
Sunday or a day on which banking institutions in the City of New York or at a
place of payment are authorized by law, regulation or executive order to remain
closed.

 

13

 

If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.

 

“Letter of Transmittal” means the letter
of transmittal to be prepared by Interactive Health and sent to all Holders of
the Notes for use by such Holders in connection with the Exchange Offer.

 

“Lien” means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction.

 

“Liquidated Damages” means all liquidated
damages then owing pursuant to the Registration Rights Agreement.

 

“Management Agreement” means the
Management Services Agreement dated as of August 22, 2003 among the
Parent, Interactive Health and the Affiliates of the Principals identified
therein, as amended, restated, supplemented or otherwise modified from time to
time.

 

“Moody’s” means Moody’s Investors
Service, Inc.

 

“Net Income” means, with respect to any
Person for any period, (i) the net income (loss) of such Person for such
period, determined in accordance with GAAP and before any reduction in respect
of dividends on preferred interests, less all amounts paid during such period
or payable with respect to such period by Interactive Health or any of its Affiliates
pursuant to the terms of the Management Agreement to Principal or an Affiliate
of Principal to the extent such amounts have not been deducted from the Net
Income of such Person in a prior period and such amounts are not deducted from
the Net Income of such Person in such period, excluding, however, (a) any gain
(but not loss), together with any related provision for taxes or Tax
Distributions on such gain (but not loss), realized in connection with (1) any
Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (2) the disposition of any securities by such Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries, (b) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes or Tax
Distributions on such extraordinary or nonrecurring gain (but not loss), (c)
any amortization expense attributable to the write-up of tangible and
intangible assets pursuant to the application of SFAS No. 141 to the
acquisition of Interactive Health by the Principals in August 2003, (d)
any non-recurring expenses and charges directly relating to the acquisition of
Interactive Health by the Principals in August 2003, (e) any charges,
premiums or expenses incurred as a direct result of the repayment of the 12.0%
Senior Subordinated Notes due 2008; and (f) any fees and expenses paid by
Interactive Health directly relating to the issuance of the Notes, less (ii) in
the case of any Person that is a partnership or a limited liability company,
the Tax Amount of such Person for such period.

 

“Net Proceeds” means the aggregate cash
proceeds received by Interactive Health or any of its Restricted Subsidiaries
in respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale), net of the direct costs relating to such Asset Sale,
including, without limitation, legal, accounting and investment banking fees,
and sales commissions, and any relocation expenses incurred as a result of the
Asset Sale, any taxes or Tax Distributions paid or payable as a result of the
Asset Sale, in each case, after taking into account any available tax credits
or deductions and any tax sharing arrangements, and amounts required to be

 

14

 

applied to the repayment of
Indebtedness, other than Indebtedness under a Credit Facility, secured by a
Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.

 

“Non-Recourse Debt” means Indebtedness:

 

(1)
as to which neither Interactive Health nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;

 

(2)
no default with respect to which (including any rights that the holders of the
Indebtedness may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness of Interactive Health or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment of the
Indebtedness to be accelerated or payable prior to its Stated Maturity; and

 

(3)
as to which the lenders have been notified in writing that they will not have
any recourse to the stock or assets of Interactive Health or any of its
Restricted Subsidiaries.

 

“Non-U.S. Person” means a Person who is
not a U.S. Person.

 

“Note Guarantee” means the Guarantee by
each Guarantor of the Issuers’ obligations under this Indenture and the Notes,
executed pursuant to the provisions of this Indenture.

 

“Notes” has the meaning assigned to it in
the preamble to this Indenture.  The
Initial Notes and the Additional Notes shall be treated as a single class for
all purposes under this Indenture, and unless the context otherwise requires,
all references to the Notes shall include the Initial Notes and any Additional
Notes.

 

“Obligations” means any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

 

“Officer” means, with respect to any
Person, the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Controller, the Secretary or any Vice-President of
such Person.

 

“Officers’ Certificate” means a
certificate signed on behalf of Interactive Health by two Officers of
Interactive Health, one of whom must be the principal executive officer, the
principal financial officer, the treasurer or the principal accounting officer
of Interactive Health, that meets the requirements of Section 12.05
hereof.

 

“Opinion of Counsel” means an opinion from
legal counsel who is reasonably acceptable to the Trustee, that meets the
requirements of Section 12.05 hereof. 
The counsel may be an employee of or counsel to Interactive Health, any
Subsidiary of Interactive Health or the Trustee.

 

“Parent” means Interactive Health, Inc.,
a Delaware corporation.

 

15

 

“Participant” means, with respect to the
Depositary, Euroclear or Clearstream, a Person who has an account with the
Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC,
shall include Euroclear and Clearstream).

 

“Permitted Business”  means the business conducted by Interactive Health as of the date
of this Indenture and any and all businesses that in the good faith judgment of
the Board of Directors of Interactive Health are materially related, ancillary
or complementary businesses.

 

“Permitted Investments” means:

 

(1)
any Investment in Interactive Health or in a Restricted Subsidiary of
Interactive Health that is a Guarantor;

 

(2)
any Investment in Cash Equivalents;

 

(3)
any Investment by Interactive Health or any of its Restricted Subsidiaries in a
Person, if as a result of such Investment:

 

such Person becomes a Restricted Subsidiary of Interactive Health and a
Guarantor; or

 

such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
an Issuer or a Restricted Subsidiary that is a Guarantor;

 

(4)
any Investment made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with
Section 4.10 hereof;

 

(5)
any acquisition of assets or Capital Stock solely in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of Interactive Health or
its direct or indirect parent;

 

(6)
any Investments received in compromise or resolution of (A) obligations of
trade creditors or customers that were incurred in the ordinary course of
business of Interactive Health or any of its Restricted Subsidiaries, including
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer; or (B) litigation,
arbitration or other disputes with Persons who are not Affiliates;

 

(7)
Investments represented by Hedging Obligations;

 

(8)
loans or advances to employees made in the ordinary course of business of
Interactive Health or any of its Restricted Subsidiaries in an aggregate
principal amount not to exceed $1.0 million at any one time outstanding;

 

(9)
repurchases of Notes; and

 

(10)
other Investments in any Person other than an Affiliate of Interactive Health
having an aggregate Fair Market Value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause
(10) that are at the time outstanding not to exceed $5.0 million.

 

16

 

“Permitted Liens” means:

 

(1)
Liens on assets of Interactive Health or any of its Restricted Subsidiaries
securing Indebtedness and other Obligations under Credit Facilities that was
permitted by the terms of this Indenture to be incurred and/or securing Hedging
Obligations related thereto;

 

(2)
Liens in favor of either of the Issuers or the Guarantors;

 

(3)
Liens on property of a Person existing at the time such Person is merged with
or into or consolidated with Interactive Health or any Subsidiary of
Interactive Health; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with Interactive
Health or the Subsidiary;

 

(4)
Liens on property (including Capital Stock) existing at the time of acquisition
of the property by Interactive Health or any Subsidiary of Interactive Health;
provided that such Liens were in existence prior to, such acquisition, and not
incurred in contemplation of, such acquisition;

 

(5)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business;

 

(6)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (4) of Section 4.09(b) hereof;

 

(7)
Liens existing on the date of this Indenture;

 

(8)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided that any reserve or
other appropriate provision as is required in conformity with GAAP has been
made therefor;

 

(9)
Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and
mechanics’ Liens, in each case, incurred in the ordinary course of business;

 

(10)
survey exceptions, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real property that were not incurred in connection with Indebtedness and that
do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person;

 

(11)
Liens created for the benefit of (or to secure) the Notes (or the Note
Guarantees);

 

(12)
Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred
under this Indenture; provided, however, that:

 

the new Lien shall be limited to all or part of the same property and
assets that secured or, under the written agreements pursuant to which the
original Lien arose, could secure the original Lien (plus improvements and
accessions to, such property or proceeds or distributions thereof); and

 

17

 

the Indebtedness secured by the new Lien is not increased to any amount
greater than the sum of (x) the outstanding principal amount, or, if greater,
committed amount, of the Permitted Refinancing Indebtedness and (y) an amount
necessary to pay any fees and expenses, including premiums, related to such
renewal, refunding, refinancing, replacement, defeasance or discharge;

 

(13)
Liens arising by reason of any judgment, decree or order not giving rise to an
Event of Default;

 

(14)
Liens on assets of Foreign Subsidiaries to secure Indebtedness permitted by
Section 4.09(b)(12);

 

(15)
Liens in favor of custom and revenue authorities arising as a matter of law
incurred in the ordinary course of business to secure payment of nondelinquent
customs duties in connection with the importation of goods;

 

(16)
banker’s Liens, rights of setoff and similar Liens with respect to cash and
Cash Equivalents on deposit in one or more bank accounts in the ordinary course
of business;

 

(17)
leases, subleases, licenses and sublicenses granted to others in the ordinary
course of business that do not materially interfere with business of
Interactive Health and its Restricted Subsidiaries;

 

(18)
rights of a licensor of intellectual property;

 

(19)
deposits made in the ordinary course of business to secure liability to
insurance carriers;

 

(20)
Liens arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by Interactive Health in the
ordinary course of business; and

 

(21)
Liens incurred in the ordinary course of business of Interactive Health or any
Subsidiary of Interactive Health with respect to obligations that do not exceed
$5.0 million at any one time outstanding.

 

“Permitted Payments to Parent” means,
without duplication as to amounts:

 

(1)
payments to the direct or indirect parent of Interactive Health to permit the
parent to pay (i) franchise and other taxes necessary to maintain the parent’s
corporate existence, (ii) reasonable directors’ fees and expenses and (iii)
reasonable accounting, legal and administrative expenses of the parent when due
in an aggregate amount not to exceed $250,000 per annum;

 

(2)
so long as Interactive Health is treated for income tax purposes as a
disregarded entity or a partnership, distributions to equity holders or
partners of Interactive Health in an amount not to exceed the Tax Amount for
such period; provided that a distribution of the Tax Amount shall be made no
earlier than 10 days prior to the due date of the tax payable by equity holders
or members of Interactive Health to which such Tax Amount relates; and

 

18

 

(3)
dividends or distributions to Parent solely to enable Parent to pay any amounts
due and payable under the Management Agreement as in effect on the date of this
Indenture.

 

“Permitted Refinancing Indebtedness”
means any Indebtedness of Interactive Health or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of which are used to
renew, refund, refinance, replace, defease or discharge other Indebtedness of
Interactive Health or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:

 

(1)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness renewed, refunded, refinanced,
replaced, defeased or discharged (plus all accrued interest on the Indebtedness
and the amount of all fees and expenses, including premiums, incurred in
connection therewith);

 

(2)
such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being renewed, refunded, refinanced, replaced, defeased or discharged;

 

(3)
if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or
discharged is subordinated in right of payment to the notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the notes on terms
at least as favorable to the holders of notes as those contained in the
documentation governing the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged; and

 

(4)
such Indebtedness is incurred either by Interactive Health or by its Restricted
Subsidiary who is the obligor on the Indebtedness being renewed, refunded,
refinanced, replaced, defeased or discharged.

 

“Person” means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or government or
other entity.

 

“Principals” means Whitney & Co.,
LLC, Whitney V, L.P. and any other investment funds or investment accounts over
which the foregoing Persons or their Affiliates have investment discretion.

 

“Private Placement Legend” means the
legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes
issued under this Indenture except where otherwise permitted by the provisions
of this Indenture.

 

“Qualified IPO” means either (i) in the
case of Interactive Health, an underwritten public offering of Capital Stock of
Interactive Health generating net proceeds to Interactive Health of at least
$25.0 million or (ii) in the case of Parent, an underwritten public offering of
Capital Stock of Parent; provided
that at least $25.0 million of the proceeds of such offering are contributed to
the common equity capital of Interactive Health.

 

“QIB” means a “qualified institutional
buyer” as defined in Rule 144A.

 

“Registration Rights Agreement” means the
Registration Rights Agreement, dated as of March 26, 2004, among the
Issuers, the Guarantors and the other parties named on the signature pages
thereof, as such agreement may be amended, modified or supplemented from time
to time and, with

 

19

 

respect to any Additional Notes,
one or more registration rights agreements among the Issuers, the Guarantors
and the other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Issuers to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.

 

“Regulation S” means Regulation S
promulgated under the Securities Act.

 

“Regulation S Global Note” means a
Regulation S Temporary Global Note or Regulation S Permanent Global Note, as
appropriate.

 

“Regulation S Permanent Global Note”
means a permanent Global Note in the form of Exhibit A1 hereto bearing the
Global Note Legend and the Private Placement Legend and deposited with or on
behalf of and registered in the name of the Depositary or its nominee, issued
in a denomination equal to the outstanding principal amount at maturity of the
Regulation S Temporary Global Note upon expiration of the Restricted Period.

 

“Regulation S Temporary Global Note”
means a temporary Global Note in the form of Exhibit A2 hereto deposited with
or on behalf of and registered in the name of the Depositary or its nominee,
issued in a denomination equal to the outstanding principal amount at maturity
of the Notes initially sold in reliance on Rule 903 of Regulation S.

 

“Responsible Officer,” when used with
respect to the Trustee, means any officer within the Corporate Trust
Administration of the Trustee (or any successor group of the Trustee) or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular
subject.

 

“Restricted Definitive Note” means a
Definitive Note bearing the Private Placement Legend.

 

“Restricted Global Note” means a Global
Note bearing the Private Placement Legend.

 

“Restricted Investment” means an
Investment other than a Permitted Investment.

 

“Restricted Period” means the 40-day
distribution compliance period as defined in Regulation S.

 

“Restricted Subsidiary” of a Person means
any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

 

“Rule 144” means Rule 144 promulgated
under the Securities Act.

 

“Rule 144A” means Rule 144A promulgated
under the Securities Act.

 

“Rule 903” means Rule 903 promulgated
under the Securities Act.

 

“Rule 904” means Rule 904 promulgated
under the Securities Act.

 

“SEC” means the Securities and Exchange
Commission.

 

“Securities Act” means the Securities Act
of 1933, as amended.

 

“Shelf Registration Statement” means the
Shelf Registration Statement as defined in the Registration Rights Agreement.

 

20

 

“Significant Subsidiary” means any
Subsidiary that would be a “significant subsidiary” as defined in
Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act, as such Regulation is in effect on the date of this Indenture.

 

“Stated Maturity” means, with respect to
any installment of interest or principal on any series of Indebtedness, the
date on which the payment of interest or principal was scheduled to be paid in
the documentation governing such Indebtedness as of the date of this Indenture,
and will not include any contingent obligations to repay, redeem or repurchase
any such interest or principal prior to the date originally scheduled for the
payment thereof.

 

“Subsidiary” means, with respect to any
specified Person:

 

(1)
any corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency and after giving effect to any voting
agreement or stockholders’ agreement that effectively transfers voting power)
to vote in the election of directors, managers or trustees of the corporation,
association or other business entity is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); and

 

(2)
any partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are that Person or one or more Subsidiaries of that Person
(or any combination thereof).

 

“Subsidiary Guarantor” means any
Subsidiary of Interactive Health (other than Interactive Finance) that executes
a Note Guarantee in accordance with the provisions of this Indenture and each
of their respective successors and assigns, in each case, until the Note
Guarantee of such Person has been released in accordance with the provisions of
this Indenture.

 

“Tax Amount” means, for any period, the
combined federal, state and local income taxes, including estimated taxes, that
would be payable by Interactive Health if it were a Delaware corporation filing
separate tax returns with respect to its Taxable Income for such period; provided, that in determining the Tax
Amount, the effect thereon of any net operating loss carryforwards or other
carryforwards or tax attributes, such as alternative minimum tax carryforwards,
that would have arisen if Interactive Health were a Delaware corporation shall
be taken into account; provided,
further, that (i) if there is an adjustment in the amount of the Taxable Income
for any period, an appropriate positive or negative adjustment shall be made in
the Tax Amount, and if the Tax Amount is negative, then the Tax Amount for
succeeding periods shall be reduced to take into account such negative amount
until such negative amount is reduced to zero and (ii) any Tax Amount other
than amounts relating to estimated taxes shall be computed by a nationally
recognized accounting firm. 
Notwithstanding anything to the contrary, Tax Amount shall not include
taxes resulting from Interactive Health’s reorganization as or change in the
status to a corporation for tax purposes.

 

“Tax Distribution” means a distribution
in respect of taxes to the members of Interactive Health pursuant to clause (8)
of Section 4.07(b) hereof.

 

“Taxable Income” means, for any period,
the taxable income or loss of Interactive Health for such period for federal
income tax purposes.

 

“TIA” means the Trust Indenture Act of
1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).

 

21

 

“Total Debt” means “total debt” as such
term is defined in GAAP.

 

“Trading Day” means, with respect to a
securities exchange or automated quotation system, a day on which such exchange
or system is open for a full day of trading.

 

“Treasury Rate” means, as of any
redemption date, the yield to maturity as of such redemption date of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) that has
become publicly available at least two business days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the period from
the redemption date to April 1, 2008; provided,
however, that if the period from the
redemption date to April 1, 2008, is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to
a constant maturity of one year will be used.

 

“Trustee” means U.S. Bank National
Association until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.

 

“Unrestricted Definitive Note” means a
Definitive Note that does not bear and is not required to bear the Private
Placement Legend.

 

“Unrestricted Global Note” means a Global
Note that does not bear and is not required to bear the Private Placement
Legend.

 

“Unrestricted Subsidiary” means any
Subsidiary of Interactive Health, other than Interactive Finance, that is
designated by the Board of Directors of Interactive Health as an Unrestricted
Subsidiary pursuant to a resolution of the Board of Directors, but only to the
extent that such Subsidiary:

 

(1)
has no Indebtedness other than Non-Recourse Debt;

 

(2)
except as permitted by Section 4.11 of this Indenture, is not party to any
agreement, contract, arrangement or understanding with an Issuer or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to such Issuer or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Issuers;

 

(3)
is a Person with respect to which neither the Issuers nor any of the Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person’s
financial condition or to cause such Person to achieve any specified levels of
operating results; and

 

(4)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of Interactive Health or any of its Restricted
Subsidiaries.

 

“U.S. Person” means a U.S. Person as
defined in Rule 902(k) promulgated under the Securities Act.

 

“Voting Stock” of any specified Person as
of any date means the Capital Stock of such Person that is at the time entitled
to vote in the election of the Board of Directors of such Person.

 

22

 

“Weighted Average Life to Maturity”
means, when applied to any Indebtedness at any date, the number of years
obtained by dividing:

 

(1)
the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect of the
Indebtedness, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment;
by

 

(2)
the then outstanding principal amount of such Indebtedness.

 

“Working Capital” means, on any date, the
excess of the Current Assets over Current Liabilities.

 

Section 1.02                                Other Definitions.

 

	
  Term

  	
   

  	
  Defined in

  Section

  
	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”

  	
   

  	
  4.11

  
	
  “Asset Sale Offer”

  	
   

  	
  3.09

  
	
  “Authentication Order”

  	
   

  	
  2.02

  
	
  “Change of Control Offer”

  	
   

  	
  4.15

  
	
  “Change of Control Payment”

  	
   

  	
  4.15

  
	
  “Change of Control Payment Date”

  	
   

  	
  4.15

  
	
  “Covenant Defeasance”

  	
   

  	
  8.03

  
	
  “DTC”

  	
   

  	
  2.03

  
	
  “Early Redemption Date”

  	
   

  	
  3.07

  
	
  “Event of Default”

  	
   

  	
  6.01

  
	
  “Excess Cash Flow Offer”

  	
   

  	
  3.09

  
	
  “Excess Cash Flow Payment Shortfall”

  	
   

  	
  4.22

  
	
  “Excess Cash Flow Purchase Date”

  	
   

  	
  3.09

  
	
  “Excess Cash Flow Purchase Price”

  	
   

  	
  4.22

  
	
  “Excess Proceeds”

  	
   

  	
  4.10

  
	
  “incur”

  	
   

  	
  4.09

  
	
  “Legal Defeasance”

  	
   

  	
  8.02

  
	
  “Offer Amount”

  	
   

  	
  3.09

  
	
  “Offer Period”

  	
   

  	
  3.09

  
	
  “Paying Agent”

  	
   

  	
  2.03

  
	
  “Permitted Debt”

  	
   

  	
  4.09

  
	
  “Payment Default”

  	
   

  	
  6.01

  
	
  “Permitted Excess Cash Flow Payment”

  	
   

  	
  1.02

  
	
  “Purchase Date”

  	
   

  	
  3.09

  
	
  “Registrar”

  	
   

  	
  2.03

  
	
  “Restricted Payments”

  	
   

  	
  4.07

  

 

Section 1.03                                Incorporation by Reference of Trust
Indenture Act.

 

Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.

 

The following
TIA terms used in this Indenture have the following meanings:

 

“indenture securities” means the Notes;

 

23

 

“indenture security Holder” means a
Holder of a Note;

 

“indenture to be qualified” means this
Indenture;

 

“indenture trustee” or “institutional trustee” means the
Trustee; and

 

“obligor” on the Notes and the Note
Guarantees means the Issuers and the Guarantors, respectively, and any
successor obligor upon the Notes and the Note Guarantees, respectively.

 

All other terms
used in this Indenture that are defined by the TIA, defined by TIA reference to
another statute or defined by SEC rule under the TIA have the meanings so
assigned to them.

 

Section 1.04                                Rules of Construction.

 

Unless the
context otherwise requires:

 

(1)
a term has the meaning assigned to it;

 

(2)
an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

(3)
“or” is not exclusive;

 

(4)
words in the singular include the plural, and in the plural include the
singular;

 

(5)
“will” shall be interpreted to express a command;

 

(6)
provisions apply to successive events and transactions; and

 

(7)
references to sections of or rules under the Securities Act will be deemed to
include substitute, replacement of successor sections or rules adopted by the
SEC from time to time.

 

ARTICLE 2

THE NOTES

 

Section 2.01                                Form and Dating.

 

(a)                                  General.  The Notes and the
Trustee’s certificate of authentication will be substantially in the form of
Exhibits A1 and A2 hereto.  The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage.  Each Note will be dated the date
of its authentication.  The Notes shall
be in denominations of $1,000 and integral multiples thereof.

 

The terms and
provisions contained in the Notes will constitute, and are hereby expressly
made, a part of this Indenture and the Issuers, the Guarantors and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby. 
However, to the extent any provision of any Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.

 

(b)                                 Global Notes.  Notes issued
in global form will be substantially in the form of Exhibits A1 or A2 hereto
(including the Global Note Legend thereon and the “Schedule of Exchanges
of Interests in the Global Note” attached thereto).  Notes issued in definitive form will be
substantially in the form of Exhibit A1 hereto (but without the Global Note
Legend thereon and without the “Schedule of Exchanges

 

24

 

of Interests in the Global Note” attached
thereto).  Each Global Note will
represent such of the outstanding Notes as will be specified therein and each
shall provide that it represents the aggregate principal amount at maturity of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount at maturity of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions.  Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the aggregate
principal amount at maturity of outstanding Notes represented thereby will be
made by the Trustee or the Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by
Section 2.06 hereof.

 

(c)                                  Temporary Global Notes. 
Notes offered and sold in reliance on Regulation S will be issued
initially in the form of the Regulation S Temporary Global Note, which will be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or
Clearstream, duly executed by the Issuers and authenticated by the Trustee as
hereinafter provided.  The Restricted
Period will be terminated upon the receipt by the Trustee of:

 

(1)
a written certificate from the Depositary, together with copies of certificates
from Euroclear and Clearstream certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount at maturity of the Regulation S Temporary Global Note (except to the
extent of any beneficial owners thereof who acquired an interest therein during
the Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note or an IAI Global Note bearing a Private Placement Legend,
all as contemplated by Section 2.06(b) hereof); and

 

(2)
an Officers’ Certificate from the Issuers.

 

Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note will be exchanged for beneficial interests in the
Regulation S Permanent Global Note pursuant to the Applicable Procedures.  Simultaneously with the authentication of the
Regulation S Permanent Global Note, the Trustee will cancel the Regulation S
Temporary Global Note.  The aggregate
principal amount at maturity of the Regulation S Temporary Global Note and the
Regulation S Permanent Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.

 

(3)
Euroclear and Clearstream Procedures
Applicable.  The provisions of the
“Operating Procedures of the Euroclear System” and “Terms and Conditions
Governing Use of Euroclear” and the “General Terms and Conditions of
Clearstream Banking” and “Customer Handbook” of Clearstream will be applicable
to transfers of beneficial interests in the Regulation S Temporary Global Note
and the Regulation S Permanent Global Note that are held by Participants
through Euroclear or Clearstream.

 

Section 2.02                                Execution and Authentication.

 

At least one
Officer must sign the Notes for the Issuers by manual or facsimile signature.

 

If an Officer
whose signature is on a Note no longer holds that office at the time a Note is
authenticated, the Note will nevertheless be valid.

 

25

 

A Note will not
be valid until authenticated by the manual signature of the Trustee.  The signature will be conclusive evidence
that the Note has been authenticated under this Indenture.

 

The Trustee
shall authenticate and deliver:  (i) on
the Issue Date, an aggregate principal amount at maturity of $100.0 million
71/4%  Senior Notes due 2011, (ii)
Additional Notes for an original issue in an aggregate principal amount at
maturity specified in the written order of the Issuers pursuant to this
Section 2.02, and (iii) Exchange Notes for issue only in an Exchange Offer
pursuant to a Registration Rights Agreement, for a like principal amount at
maturity of Initial Notes or Additional Notes, in each case upon a written
order of the Issuers signed by one Officer (an “Authentication Order”).  Such
Authentication Order shall specify the amount of the Notes to be authenticated
and the date on which the original issue of the Notes is to be authenticated.

 

The Trustee may
appoint an authenticating agent acceptable to the Issuers to authenticate
Notes.  An authenticating agent may
authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights
as an Agent to deal with Holders or an Affiliate of the Issuers.

 

Section 2.03                                Registrar and Paying Agent.

 

The Issuers will
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (“Registrar”)
and an office or agency where Notes may be presented for payment (“Paying Agent”).  The Registrar will keep a register of the
Notes and of their transfer and exchange. 
The Issuers may appoint one or more co-registrars and one or more
additional paying agents.  The term
“Registrar” includes any co-registrar and the term “Paying Agent” includes any
additional paying agent.  The Issuers may
change any Paying Agent or Registrar without notice to any Holder.  The Issuers will notify the Trustee in
writing of the name and address of any Agent not a party to this
Indenture.  If the Issuers fail to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such.  Interactive Health or
any of its Subsidiaries may act as Paying Agent or Registrar.

 

The Issuers
initially appoint The Depository Trust Issuers (“DTC”) to act as Depositary with respect to the Global Notes.

 

The Issuers
initially appoint the Trustee to act as the Registrar and Paying Agent and to
act as Custodian with respect to the Global Notes.

 

Section 2.04                                Paying Agent to Hold Money in Trust.

 

The Issuers will
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal, premium or
Liquidated Damages, if any, or interest on the Notes, and will notify the
Trustee of any default by the Issuers in making any such payment.  While any such default continues, the Trustee
may require a Paying Agent to pay all money held by it to the Trustee.  The Issuers at any time may require a Paying
Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying
Agent (if other than Interactive Health or a Subsidiary) will have no further
liability for the money.  If Interactive
Health or a Subsidiary acts as Paying Agent, it will segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent.  Upon any bankruptcy or
reorganization proceedings relating to the Issuers, the Trustee will serve as
Paying Agent for the Notes.

 

26

 

Section 2.05                                Holder Lists.

 

The Trustee will
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and addresses of all Holders and shall otherwise
comply with TIA § 312(a).  If the
Trustee is not the Registrar, the Issuers will furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses of the Holders
of Notes and the Issuers shall otherwise comply with TIA § 312(a).

 

Section 2.06                                Transfer and Exchange.

 

(a)                                  Transfer and Exchange of Global Notes.  A Global Note may not be transferred except
as a whole by the Depositary to a nominee of the Depositary, by a nominee of
the Depositary to the Depositary or to another nominee of the Depositary, or by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.  All Global
Notes will be exchanged by the Issuers for Definitive Notes if:

 

(1)
the Issuers deliver to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Issuers within 120 days after the
date of such notice from the Depositary;

 

(2)
the Issuers in their sole discretion determine that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and deliver a written
notice to such effect to the Trustee; provided
that in no event shall the Regulation S Temporary Global Note be exchanged by
the Issuers for Definitive Notes prior to (A) the expiration of the Restricted
Period and (B) the receipt by the Registrar of any certificates required
pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act; or

 

(3)
there has occurred and is continuing a Default or Event of Default with respect
to the Notes.

 

Upon the
occurrence of either of the preceding events in (1) or (2) above, Definitive
Notes shall be issued in such names as the Depositary shall instruct the
Trustee.  Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof.  Every Note authenticated
and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Note.  A Global Note may not be
exchanged for another Note other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f) hereof.

 

(b)                                 Transfer and Exchange of Beneficial Interests in the Global Notes.  The transfer and exchange of beneficial
interests in the Global Notes will be effected through the Depositary, in
accordance with the provisions of this Indenture and the Applicable
Procedures.  Beneficial interests in the
Restricted Global Notes will be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.  Transfers of beneficial interests in the
Global Notes also will require compliance with either subparagraph (1) or (2)
below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:

 

(1)
Transfer of Beneficial Interests in the
Same Global Note.  Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a

 

27

 

beneficial
interest in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Regulation S Temporary Global
Note may not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). 
Beneficial interests in any Unrestricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note.  No written
orders or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(1).

 

(2)
All Other Transfers and Exchanges of
Beneficial Interests in Global Notes. 
In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(1) above, the transferor of such
beneficial interest must deliver to the Registrar either:

 

(A)                              both:

 

(i)                                                                                     a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be transferred or
exchanged; and

 

(ii)                                                                                  instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase; or

 

(B)                                both:

 

(i)                                                                                     a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged; and

 

(ii)                                                                                  instructions
given by the Depositary to the Registrar containing information regarding the
Person in whose name such Definitive Note shall be registered to effect the
transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the
transfer or exchange of beneficial interests in the Regulation S Temporary
Global Note prior to (A) the expiration of the Restricted Period and (B) the
receipt by the Registrar of any certificates required pursuant to Rule 903
under the Securities Act.

 

Upon consummation of an Exchange
Offer by the Issuers in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(2) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes.  Upon
satisfaction of all of the requirements for transfer or exchange of beneficial
interests in Global Notes contained in this Indenture and the Notes or
otherwise applicable under the Securities Act, the Trustee shall adjust the
principal amount at maturity of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.

 

(3)
Transfer of Beneficial Interests to
Another Restricted Global Note.  A
beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof

 

28

 

in the form of a
beneficial interest in another Restricted Global Note if the transfer complies
with the requirements of Section 2.06(b)(2) above and the Registrar
receives the following:

 

(A)                              if the
transferee will take delivery in the form of a beneficial interest in the 144A
Global Note, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1) thereof;

 

(B)                                if the
transferee will take delivery in the form of a beneficial interest in the
Regulation S Temporary Global Note or the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and

 

(C)                                if the
transferee will take delivery in the form of a beneficial interest in the IAI
Global Note, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.

 

(4)
Transfer and Exchange of Beneficial
Interests in a Restricted Global Note for Beneficial Interests in an
Unrestricted Global Note.  A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or transfer complies
with the requirements of Section 2.06(b)(2) above and:

 

(A)                              such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the holder of the beneficial interest
to be transferred, in the case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of Transmittal that it is not
(i) a Broker-Dealer, (ii) a Person participating in the distribution of the
Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144)
of the Issuers;

 

(B)                                such
transfer is effected pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;

 

(C)                                such
transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or

 

(D)                               the
Registrar receives the following:

 

(i)                                     if
the holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial interest in an Unrestricted
Global Note, a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or

 

(ii)                                  if the
holder of such beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;

 

29

 

and, in each
such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.

 

If any such
transfer is effected pursuant to subparagraph (B) or (D) above at a time when
an Unrestricted Global Note has not yet been issued, Interactive Health shall
issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount at maturity equal to
the aggregate principal amount at maturity of beneficial interests transferred
pursuant to subparagraph (B) or (D) above.

 

Beneficial
interests in an Unrestricted Global Note cannot be exchanged for, or
transferred to Persons who take delivery thereof in the form of, a beneficial
interest in a Restricted Global Note.

 

(c)                                  Transfer or Exchange of Beneficial Interests for Definitive Notes.

 

(1)
Beneficial Interests in Restricted Global
Notes to Restricted Definitive Notes. 
If any holder of a beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a Restricted Definitive Note
or to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:

 

(A)                              if the
holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;

 

(B)                                if such
beneficial interest is being transferred to a QIB in accordance with Rule 144A,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;

 

(C)                                if such
beneficial interest is being transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item (2)
thereof;

 

(D)                               if such
beneficial interest is being transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144, a certificate
to the effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;

 

(E)                                 if such
beneficial interest is being transferred to an Institutional Accredited
Investor in reliance on an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B) through (D) above,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable;

 

(F)                                 if such
beneficial interest is being transferred to Interactive Health or any of its
Subsidiaries, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or

 

30

 

(G)                                if such
beneficial interest is being transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c) thereof,

 

the Trustee shall cause the
aggregate principal amount at maturity of the applicable Global Note to be
reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers
shall execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate principal
amount at maturity.  Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant.  The Trustee shall deliver such Definitive
Notes to the Persons in whose names such Notes are so registered.  Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(1) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.

 

(2)
Beneficial Interests in Regulation S
Temporary Global Note to Definitive Notes. 
Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (A) the expiration of the Restricted Period
and (B) the receipt by the Registrar of any certificates required pursuant to
Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.

 

(3)
Beneficial Interests in Restricted Global
Notes to Unrestricted Definitive Notes. 
A holder of a beneficial interest in a Restricted Global Note may
exchange such beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:

 

(A)                              such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is not (i)
a Broker-Dealer, (ii) a Person participating in the distribution of the
Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144)
of the Issuers;

 

(B)                                such
transfer is effected pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;

 

(C)                                such
transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or

 

(D)                               the
Registrar receives the following:

 

(i)                                     if
the holder of such beneficial interest in a Restricted Global Note proposes to
exchange such beneficial interest for an Unrestricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or

 

31

 

(ii)                                  if the
holder of such beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item (4)
thereof;

 

and, in each
such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

(4)
Beneficial Interests in Unrestricted
Global Notes to Unrestricted Definitive Notes.  If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for a
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will
cause the aggregate principal amount at maturity of the applicable Global Note
to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Issuers will execute and the Trustee will authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate principal
amount at maturity.  Any Definitive Note
issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(4) will be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial interest
requests through instructions to the Registrar from or through the Depositary
and the Participant or Indirect Participant. 
The Trustee will deliver such Definitive Notes to the Persons in whose
names such Notes are so registered.  Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(4) will not bear the Private Placement Legend.

 

(d)                                 Transfer and Exchange of Definitive Notes for Beneficial Interests.

 

(1)
Restricted Definitive Notes to Beneficial
Interests in Restricted Global Notes. 
If any Holder of a Restricted Definitive Note proposes to exchange such
Note for a beneficial interest in a Restricted Global Note or to transfer such
Restricted Definitive Notes to a Person who takes delivery thereof in the form
of a beneficial interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:

 

(A)                              if the
Holder of such Restricted Definitive Note proposes to exchange such Note for a
beneficial interest in a Restricted Global Note, a certificate from such Holder
in the form of Exhibit C hereto, including the certifications in item (2)(b)
thereof;

 

(B)                                if such
Restricted Definitive Note is being transferred to a QIB in accordance with
Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;

 

(C)                                if such
Restricted Definitive Note is being transferred to a Non-U.S. Person in an
offshore transaction in accordance with Rule 903 or Rule 904, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in item
(2) thereof;

 

(D)                               if such
Restricted Definitive Note is being transferred pursuant to an exemption from
the registration requirements of the Securities Act in accordance with

 

32

 

Rule 144, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;

 

(E)                                 if such
Restricted Definitive Note is being transferred to an Institutional Accredited Investor
in reliance on an exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B) through (D) above,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable;

 

(F)                                 if such
Restricted Definitive Note is being transferred to Interactive Health or any of
its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or

 

(G)                                if such
Restricted Definitive Note is being transferred pursuant to an effective
registration statement under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item (3)(c)
thereof,

 

the Trustee
will cancel the Restricted Definitive Note, increase or cause to be increased
the aggregate principal amount at maturity of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, in the case of clause (C) above, the Regulation S Global
Note, and in all other cases, the IAI Global Note.

 

(2)
Restricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. 
A Holder of a Restricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or transfer such Restricted
Definitive Note to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note only if:

 

(A)                              such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
Person participating in the distribution of the Exchange Notes or (iii) a
Person who is an affiliate (as defined in Rule 144) of the Issuers;

 

(B)                                such
transfer is effected pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;

 

(C)                                such
transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or

 

(D)                               the
Registrar receives the following:

 

(i)                                     if
the Holder of such Definitive Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit C hereto, including the certifications in item
(1)(c) thereof; or

 

(ii)                                  if the
Holder of such Definitive Notes proposes to transfer such Notes to a Person who
shall take delivery thereof in the form of a beneficial

 

33

 

interest
in the Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;

 

and, in each
such case set forth in this subparagraph (D), if the Registrar so requests or
if the Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

Upon
satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount at maturity of
the Unrestricted Global Note.

 

(3)
Unrestricted Definitive Notes to
Beneficial Interests in Unrestricted Global Notes.  A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.  Upon receipt of a request for such an
exchange or transfer, the Trustee will cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate principal
amount at maturity of one of the Unrestricted Global Notes.

 

If
any such exchange or transfer from a Definitive Note to a beneficial interest
is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time
when an Unrestricted Global Note has not yet been issued, Interactive Health
will issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee will authenticate one or more
Unrestricted Global Notes in an aggregate principal amount at maturity equal to
the principal amount at maturity of Definitive Notes so transferred.

 

(e)                                  Transfer and Exchange of Definitive Notes for Definitive Notes.  Upon request by a Holder of Definitive Notes
and such Holder’s compliance with the provisions of this Section 2.06(e),
the Registrar will register the transfer or exchange of Definitive Notes.  Prior to such registration of transfer or
exchange, the requesting Holder must present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. 
In addition, the requesting Holder must provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 2.06(e).

 

(1)
Restricted Definitive Notes to Restricted
Definitive Notes.  Any Restricted
Definitive Note may be transferred to and registered in the name of Persons who
take delivery thereof in the form of a Restricted Definitive Note if the
Registrar receives the following:

 

(A)                              if the
transfer will be made pursuant to Rule 144A, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications in
item (1) thereof;

 

(B)                                if the
transfer will be made pursuant to Rule 903 or Rule 904, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and

 

34

 

(C)                                if the
transfer will be made pursuant to any other exemption from the registration
requirements of the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable.

 

(2)
Restricted Definitive Notes to
Unrestricted Definitive Notes.  Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:

 

(A)                              such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
Person participating in the distribution of the Exchange Notes or (iii) a
Person who is an affiliate (as defined in Rule 144) of Interactive Health;

 

(B)                                any such
transfer is effected pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;

 

(C)                                any such
transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or

 

(D)                               the
Registrar receives the following:

 

(i)                                     if
the Holder of such Restricted Definitive Notes proposes to exchange such Notes
for an Unrestricted Definitive Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

 

(ii)                                  if the
Holder of such Restricted Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;

 

and, in each
such case set forth in this subparagraph (D), if the Registrar so requests, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the effect
that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.

 

(3)
Unrestricted Definitive Notes to
Unrestricted Definitive Notes.  A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note.  Upon receipt of a request to register such a
transfer, the Registrar shall register the Unrestricted Definitive Notes
pursuant to the instructions from the Holder thereof.

 

(f)                                    Exchange Offer.  Upon the
occurrence of the Exchange Offer in accordance with the Registration Rights
Agreement, the Issuers will issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee will authenticate:

 

35

 

(1)
one or more Unrestricted Global Notes in an aggregate principal amount at
maturity equal to the principal amount at maturity of the beneficial interests
in the Restricted Global Notes accepted for exchange in the Exchange Offer by
Persons that certify in the applicable Letters of Transmittal that (A) they are
not Broker-Dealers, (B) they are not participating in a distribution of the
Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the
Issuers; and

 

(2)
Unrestricted Definitive Notes in an aggregate principal amount at maturity
equal to the principal amount at maturity of the Restricted Definitive Notes
accepted for exchange in the Exchange Offer by Persons that certify in the
applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B)
they are not participating in a distribution of the Exchange Notes and (C) they
are not affiliates (as defined in Rule 144) of the Issuers.

 

Concurrently
with the issuance of such Notes, the Trustee will cause the aggregate principal
amount at maturity of the applicable Restricted Global Notes to be reduced
accordingly, and the Issuers will execute and the Trustee will authenticate and
deliver to the Persons designated by the Holders of Definitive Notes so
accepted Unrestricted Definitive Notes in the appropriate principal amount at
maturity.

 

(g)                                 Legends.  The following
legends will appear on the face of all Global Notes and Definitive Notes issued
under this Indenture unless specifically stated otherwise in the applicable
provisions of this Indenture.

 

(1)
Private Placement Legend.

 

(A)                              Except as
permitted by subparagraph (B) below, each Global Note and each Definitive Note
(and all Notes issued in exchange therefor or substitution thereof) shall bear
the legend in substantially the following form:

 

“THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
OTHER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE
SECURITIES ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES
WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH EITHER OF THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE “RESALE
RESTRICTION TERMINATION DATE”) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
“QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES
TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
904 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR”
WITHIN THE

 

36

 

MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER REGULATION D UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL “ACCREDITED INVESTOR”, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS’ AND
THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE AND
IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR
ANY OTHER APPLICABLE JURISDICTION. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.”

 

(B)                                Notwithstanding
the foregoing, any Global Note or Definitive Note issued pursuant to
subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of
this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) will not bear the Private Placement Legend.

 

(2)
Global Note Legend.  Each Global Note will bear a legend in
substantially the following form:

 

“THIS GLOBAL NOTE IS HELD BY THE
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN
CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06
OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11
OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.

 

UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY
OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. 
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE

 

37

 

HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.”

 

(3)
Regulation S Temporary Global Note
Legend.  The Regulation S Temporary
Global Note will bear a Legend in substantially the following form:

 

“PRIOR TO EXPIRATION OF THE
40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S (“REGULATION
S”) UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”)), THIS SECURITY MAY
NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S), EXCEPT
TO A PERSON REASONABLY BELIEVED TO BE A “QUALIFIED INSTITUTIONAL BUYER” (AS
DEFINED IN RULE 144A (“RULE 144A”) UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A AND THE INDENTURE REFERRED TO HEREIN OR
TO AN INSTITUTIONAL “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(a)(1), (2),
(3) or (7) OF REGULATION D UNDER THE SECURITIES ACT).”

 

(4)
Original Issue Discount Legend.  Each Note will bear a legend in substantially
the following form:

 

“THIS NOTE HAS BEEN ISSUED WITH
ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. FOR FURTHER
INFORMATION REGARDING THE ISSUE PRICE, ISSUE DATE AND THE YIELD TO MATURITY OF
THIS NOTE, THE HOLDER OF THIS NOTE SHOULD CONTACT THE OFFICE OF THE CHIEF
FINANCIAL OFFICER OF INTERACTIVE HEALTH LLC AT (562) 426-8700 AT ANY TIME
BEGINNING 10 DAYS AFTER THE CLOSING.”

 

(h)                                 Cancellation and/or Adjustment of Global Notes.  At such time as all beneficial interests in a
particular Global Note have been exchanged for Definitive Notes or a particular
Global Note has been redeemed, repurchased or canceled in whole and not in
part, each such Global Note will be returned to or retained and canceled by the
Trustee in accordance with Section 2.11 hereof.  At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount at maturity
of Notes represented by such Global Note will be reduced accordingly and an
endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note will be increased accordingly and an
endorsement will be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.

 

(i)                                     General Provisions Relating to Transfers and Exchanges.

 

(1)
To permit registrations of transfers and exchanges, the Issuers will execute
and the Trustee will authenticate Global Notes and Definitive Notes upon
receipt of an Authentication Order in accordance with Section 2.02 hereof
or at the Registrar’s request.

 

(2)
No service charge will be made to a Holder of a beneficial interest in a Global
Note or to a Holder of a Definitive Note for any registration of transfer or
exchange, but the Issuers may require payment of a sum sufficient to cover any
transfer tax or similar governmental

 

38

 

charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections
2.10, 3.06, 3.08, 3.09, 4.10, 4.15, 4.22 and 9.05 hereof).

 

(3)
The Registrar will not be required to register the transfer of or exchange of
any Note selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.

 

(4)
All Global Notes and Definitive Notes issued upon any registration of transfer
or exchange of Global Notes or Definitive Notes will be the valid obligations
of the Issuers, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Global Notes or Definitive Notes surrendered upon
such registration of transfer or exchange.

 

(5)
Neither the Registrar nor the Issuers will be required:

 

(A)                              to issue,
to register the transfer of or to exchange any Notes during a period beginning
at the opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection;

 

(B)                                to
register the transfer of or to exchange any Note selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part; or

 

(C)                                to register
the transfer of or to exchange a Note between a record date and the next
succeeding interest payment date.

 

(6)
Prior to due presentment for the registration of a transfer of any Note, the
Trustee, any Agent and the Issuers may deem and treat the Person in whose name
any Note is registered as the absolute owner of such Note for the purpose of
receiving payment of principal of and interest on such Notes and for all other
purposes, and none of the Trustee, any Agent or the Issuers shall be affected
by notice to the contrary.

 

(7)
The Trustee will authenticate Global Notes and Definitive Notes in accordance
with the provisions of Section 2.02 hereof.

 

(8)
All certifications, certificates and Opinions of Counsel required to be
submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.

 

Section 2.07                                Replacement Notes.

 

If any mutilated
Note is surrendered to the Trustee or the Issuers and the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note, the
Issuers will issue and the Trustee, upon receipt of an Authentication Order,
will authenticate a replacement Note if the Trustee’s requirements are
met.  If required by the Trustee or the
Issuers, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Issuers to protect the Issuers, the
Trustee, any Agent and any authenticating agent from any loss that any of them
may suffer if a Note is replaced.  The
Issuers may charge for its expenses in replacing a Note.

 

Every
replacement Note is an additional obligation of the Issuers and will be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.

 

39

 

Section 2.08                                Outstanding Notes.

 

The Notes
outstanding at any time are all the Notes authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation, those reductions
in the interest in a Global Note effected by the Trustee in accordance with the
provisions hereof, and those described in this Section 2.08 as not
outstanding.  Except as set forth in
Section 2.09 hereof, a Note does not cease to be outstanding because the
Issuers or an Affiliate of the Issuers holds the Note; however, Notes held by
the Issuers or a Subsidiary of either of the Issuers shall not be deemed to be
outstanding for purposes of Section 3.07(a) hereof.

 

If a Note is
replaced pursuant to Section 2.07 hereof, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note is
held by a protected purchaser.

 

If the principal
amount at maturity of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.

 

If the Paying
Agent (other than the Issuers, a Subsidiary or an Affiliate of any thereof)
holds, on a redemption date or maturity date, money sufficient to pay Notes
payable on that date, then on and after that date such Notes will be deemed to
be no longer outstanding and will cease to accrue interest.

 

Section 2.09                                Treasury Notes.

 

In determining
whether the Holders of the required principal amount at maturity of Notes have
concurred in any direction, waiver or consent, Notes owned by the Issuers or
any Guarantor, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuers or
any Guarantor, will be considered as though not outstanding, except that for
the purposes of determining whether the Trustee will be protected in relying on
any such direction, waiver or consent, only Notes that the Trustee knows are so
owned will be so disregarded.

 

Section 2.10                                Temporary Notes.

 

Until certificates
representing Notes are ready for delivery, the Issuers may prepare and the
Trustee, upon receipt of an Authentication Order, will authenticate temporary
Notes.  Temporary Notes will be
substantially in the form of certificated Notes but may have variations that
the Issuers consider appropriate for temporary Notes and as may be reasonably
acceptable to the Trustee.  Without
unreasonable delay, the Issuers will prepare and the Trustee will authenticate
definitive Notes in exchange for temporary Notes.

 

Holders of
temporary Notes will be entitled to all of the benefits of this Indenture.

 

Section 2.11                                Cancellation.

 

The Issuers at
any time may deliver Notes to the Trustee for cancellation.  The Registrar and Paying Agent will forward
to the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment.  The Trustee and no
one else will cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and will destroy canceled Notes
(subject to the record retention requirement of the Exchange Act).  Certification of the destruction of all
canceled Notes will be delivered to the Issuers.  The Issuers may not issue new Notes to
replace Notes that they have paid or that have been delivered to the Trustee
for cancellation.

 

40

 

Section 2.12                                Defaulted Interest.

 

If the Issuers
default in a payment of interest on the Notes, they will pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on
the defaulted interest, to the Persons who are Holders on a subsequent special
record date, in each case at the rate provided in the Notes and in
Section 4.01 hereof.  The Issuers will
notify the Trustee in writing of the amount of defaulted interest proposed to
be paid on each Note and the date of the proposed payment.  The Issuers will fix or cause to be fixed
each such special record date and payment date; provided that no such special record date may be less than 10 days
prior to the related payment date for such defaulted interest.  At least 15 days before the special record
date, the Issuers (or, upon the written request of the Issuers, the Trustee in
the name and at the expense of the Issuers) will mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.

 

Section 2.13                                CUSIP Numbers.

 

The Issuers in
issuing the Notes may use CUSIP numbers (if then generally in use), and, if so,
the Trustee will use CUSIP numbers in notices of redemption as a convenience to
Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption will not be affected by
any defect in or omission of such numbers. 
The Issuers will promptly notify the Trustee of any change in the CUSIP
numbers.

 

Section 2.14                                Issuance of Additional Notes.

 

The Issuers will
be entitled, from time to time, subject to its compliance with
Section 4.09 hereof, without consent of the Holders, to issue Additional
Notes under this Indenture with identical terms as the Initial Notes issued on
the Issue Date other than with respect to (i) the date of issuance, (ii) the
issue price, (iii) the amount of interest payable on the first interest payment
date and (iv) any adjustments in order to conform to and ensure compliance with
the Securities Act (or other applicable securities laws).  The Initial Notes issued on the Issue Date,
any Additional Notes and all Exchange Notes issued in exchange therefor will be
treated as a single class for all purposes under this Indenture; provided, however, that no Additional Notes may be issued unless (i) such
Additional Notes have the same yield to maturity as the Initial Notes, (ii) the
original issue discount allocable to each accrual period, and to each day within
each accrual period, of each Additional Note equals the original issue discount
allocable to such accrual period, and to each day within each such accrual
period, of each Initial Note, and (iii) such issuance of Additional Notes will
not cause any of the Notes to be treated as an Applicable High Yield Debt
Obligation within the meaning of Section 163(i)(1) of the Internal Revenue
Code of 1986, as amended.

 

With respect to
any Additional Notes, the Issuers will set forth in an Officer’s Certificate
pursuant to a resolution of the Board of Directors of the Issuers, copies of
which will be delivered to the Trustee, the following information:

 

(1)
the aggregate principal amount at maturity of such Additional Notes to be
authenticated and delivered pursuant to this Indenture;

 

(2)
the issue price, the issue date and the CUSIP number of such Additional Notes;
and

 

(3)
whether such Additional Notes will be subject to transfer restrictions or will
be issued in the form of Exchange Notes.

 

41

 

ARTICLE 3

REDEMPTION AND PREPAYMENT

 

Section 3.01                                Notices to Trustee.

 

In connection
with a redemption of Notes pursuant to Section 3.08 hereof, or if the
Issuers elect to redeem Notes pursuant to the optional redemption provisions of
Section 3.07 hereof, they must furnish to the Trustee, at least 30 days
but not more than 60 days before a redemption date, an Officers’ Certificate
setting forth:

 

(1)
the clause of this Indenture pursuant to which the redemption shall occur;

 

(2)
the redemption date;

 

(3)
the principal amount at maturity of Notes to be redeemed; and

 

(4)
the redemption price.

 

Section 3.02                                Selection of Notes to Be Redeemed or
Purchased.

 

If less than all
of the Notes are to be redeemed or purchased in an offer to purchase at any
time, the Trustee will select Notes for redemption or purchase on a pro rata basis except:

 

(1)
if the Notes are listed on any national securities exchange, in compliance with
the requirements of the principal national securities exchange on which the
Notes are listed; or

 

(2)
if otherwise required by law.

 

The Trustee will
promptly notify the Issuers in writing of the Notes selected for redemption or
purchase and, in the case of any Note selected for partial redemption or
purchase, the Accreted Value and principal amount at maturity thereof to be
redeemed or purchased.  Subject to
Section 3.08 hereof, Notes and portions of Notes selected will be in
amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes
of a Holder are to be redeemed or purchased, the entire outstanding amount of
Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed
or purchased.  Except as provided in the
preceding sentence, provisions of this Indenture that apply to Notes called for
redemption or purchase also apply to portions of Notes called for redemption or
purchase.

 

Section 3.03                                Notice of Redemption.

 

Subject to the
provisions of Section 3.09 hereof, at least 30 days but not more than 60
days before a redemption date, the Issuers will mail or cause to be mailed, by
first class mail, a notice of redemption to each Holder whose Notes are to be
redeemed at its registered address, except that redemption notices may be
mailed more than 60 days prior to a redemption date if the notice is issued in
connection with a defeasance of the Notes or a satisfaction and discharge of
this Indenture pursuant to Articles 8 or 11 hereof.

 

The notice will
identify the Notes to be redeemed and will state:

 

(1)
the redemption date;

 

(2)
the redemption price;

 

42

 

(3)
if any Note is being redeemed in part, the portion of the principal amount at
maturity of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount at maturity
equal to the unredeemed portion will be issued upon cancellation of the
original Note;

 

(4)
the name and address of the Paying Agent;

 

(5)
that Notes called for redemption must be surrendered to the Paying Agent to
collect the redemption price;

 

(6)
that, unless the Issuers default in making such redemption payment, the Notes
called for redemption cease to accrete, and interest on Notes called for
redemption ceases to accrue on and after the redemption date;

 

(7)
the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and

 

(8)
that no representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Notes.

 

At the Issuers’
request, the Trustee will give the notice of redemption in the Issuers’ names
and at the Issuers’ expense; provided,
however, that the Issuers have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers’ Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.

 

Section 3.04                                Effect of Notice of Redemption.

 

Once notice of
redemption is mailed in accordance with Section 3.03 hereof, Notes called
for redemption become irrevocably due and payable on the redemption date at the
redemption price.  A notice of redemption
may not be conditional, subject, in the case of a purchase of Notes pursuant to
an Excess Cash Flow Offer, to Section 4.22(b) hereof.

 

Section 3.05                                Deposit of Redemption or Purchase Price.

 

On or prior to
the Business Day prior to the redemption or purchase date, the Issuers will
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption or purchase price of and accrued interest and Liquidated Damages, if
any, on all Notes to be redeemed or purchased on that date.  The Trustee or the Paying Agent will promptly
return to the Issuers any money deposited with the Trustee or the Paying Agent
by the Issuers in excess of the amounts necessary to pay the redemption or
purchase price of, and accrued interest and Liquidated Damages, if any, on, all
Notes to be redeemed or purchased.

 

If the Issuers
comply with the provisions of the preceding paragraph, on and after the
redemption or purchase date, the Notes or the portions of Notes called for
redemption or purchase will cease to accrete and interest on such Notes or
portions of Notes will cease to accrue. 
If a Note is redeemed or purchased on or after an interest record date
but on or prior to the related interest payment date, then any accrued and
unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date.  If any Note called for redemption or purchase
is not so paid upon surrender for redemption or purchase because of the failure
of the Issuers to comply with the preceding paragraph, interest shall be paid
on the unpaid principal, from the redemption or purchase date until such

 

43

 

principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Notes and in Section 4.01 hereof.

 

Section 3.06                                Notes Redeemed or Purchased in Part.

 

Upon surrender
of a Note that is redeemed or purchased in part, the Issuers will issue and,
upon receipt of an Authentication Order, the Trustee will authenticate for the
Holder at the expense of the Issuers a new Note equal in principal amount at
maturity to the unredeemed or unpurchased portion of the Note surrendered.

 

Section 3.07                                Optional Redemption.

 

(a)                                  At any time prior to
April 1, 2007, the Issuers may on any one or more occasions redeem up to
40% of the aggregate principal amount at maturity of Notes issued under this
Indenture at a redemption price of 111.375% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest and Liquidated Damages,
if any, to the redemption date, with the net cash proceeds of a sale of Equity
Interests (other than Disqualified Stock) of Parent (to the extent that such
proceeds are contributed, directly or indirectly, as common equity to
Interactive Health) or of Interactive Health; provided that:

 

(1)
at least 60% of the aggregate principal amount at maturity of Notes originally
issued under this Indenture (excluding Notes held by Interactive Health and its
Subsidiaries) remains outstanding immediately after the occurrence of such
redemption; and

 

(2)
the redemption occurs within 45 days of the date of the closing of such sale of
Equity Interests.

 

(b)                                 At any time prior to
April 1, 2008, the Issuers may also redeem all or a part of the Notes,
upon not less than 30 nor more than 60 days prior notice mailed by first-class
mail to each Holder’s registered address, at a redemption price equal to 100%
of the Accreted Value of Notes redeemed on the redemption date plus the
Applicable Premium as of, and accrued and unpaid interest and Liquidated Damages,
if any, to the applicable date of redemption (the “Early Redemption Date”), subject to the rights of Holders on the
relevant record date to receive interest due on the relevant interest payment
date.

 

(c)                                  Except pursuant to the
preceding two paragraphs, the Notes will not be redeemable at the Issuers’
option prior to April 1, 2008.

 

(d)                                 On or after April 1,
2008, the Issuers may redeem all or a part of the Notes upon not less than 30
nor more than 60 days’ notice, at the redemption prices (expressed as
percentages of Accreted Value) set forth below plus accrued and unpaid interest
and Liquidated Damages, if any, on the Notes redeemed to the applicable
redemption date, if redeemed during the twelve-month period beginning on
April 1 of the years indicated below, subject to the rights of Holders on
the relevant record date to receive interest on the relevant interest payment
date:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2008

  	
   

  	
  105.688

  	
  %

  
	
  2009

  	
   

  	
  102.844

  	
  %

  
	
  2010 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

Unless the
Issuers default in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable
redemption date.

 

44

 

(e)                                  Any redemption pursuant to
this Section 3.07 shall be made pursuant to the provisions of Sections
3.01 through 3.06 hereof.

 

Section 3.08                                Mandatory Redemption.

 

(a)                                  The Issuers are not required
to make mandatory redemption or sinking fund payments with respect to the Notes
except that, on each of April 1, 2009, October 1, 2009, April 1,
2010 and October 1, 2010, (each a “Mandatory
Redemption Date”), if any Notes are outstanding, the Issuers will be
required to make a pro rata
redemption of approximately $4.0 million, $1.75 million, $1.75 million and
$1.75 million, respectively, of the Accreted Value of the Notes outstanding on
such Mandatory Redemption Date, at a redemption price of 100% of the Accreted
Value of the portion of Notes so redeemed, plus accrued and unpaid interest and
Liquidated Damages, if any, to the Mandatory Redemption Date; provided that if such redemption results
in any unredeemed portion of a Note having a principal amount that is not a
round multiple of $1,000, the Issuers shall redeem an additional portion of
such Note as to reduce the principal amount to a round multiple of $1,000; provided further that the amount of any
such redemption shall be reduced by the aggregate amount of the accretion on
Notes previously repaid pursuant to any pro
rata repurchase or redemption of the Notes hereunder pursuant to this
Indenture with respect to all then-outstanding Notes; and provided, additionally that, on each Mandatory Redemption Date, the
Issuers shall simultaneously be required to redeem an additional portion of
each Note at the price set forth above, plus accrued and unpaid interest and
Liquidated Damages, if any, to the Mandatory Redemption Date, to the extent, if
any, required to prevent such Note from being treated as an Applicable High
Yield Discount Obligation within the meaning of Section 163(i)(1) of the
Internal Revenue Code of 1986, as amended (the total amount redeemed pursuant
to this sentence, the “Mandatory
Redemption Amount”).

 

(b)                                 Any redemption pursuant to
this Section 3.08 shall be made pursuant to the provisions of Sections 3.01
through 3.06 hereof.

 

Section 3.09                                Offer to Purchase by Application of Excess
Proceeds or Cash Flow.

 

(a)                                  In the event that, pursuant
to Section 4.10 hereof, the Issuers are required to commence an offer to
all Holders to purchase Notes (an “Asset
Sale Offer”), they will follow the procedures specified below.

 

The Asset Sale
Offer shall be made to all Holders and all holders of other Indebtedness that
is pari passu with the Notes
containing provisions similar to those set forth in this Indenture with respect
to offers to purchase or redeem with the proceeds of sales of assets.  The Asset Sale Offer will remain open for a
period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the “Offer Period”).  No later than three Business Days after the
termination of the Offer Period (the “Purchase
Date”), the Issuers will apply all Excess Proceeds (the “Offer Amount”) to the purchase of Notes
and such other pari passu
Indebtedness (on a pro rata basis, if
applicable) or, if less than the Offer Amount has been tendered, all Notes and
other Indebtedness tendered in response to the Asset Sale Offer.  Payment for any Notes so purchased will be
made in the same manner as interest payments are made.

 

If the Purchase
Date is on or after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest and Liquidated Damages,
if any, will be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.

 

45

 

Upon the
commencement of an Asset Sale Offer, the Issuers will send, by first class
mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee.  The notice will contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer.  The
notice, which will govern the terms of the Asset Sale Offer, will state:

 

(1)
that the Asset Sale Offer is being made pursuant to this Section 3.09(a)
and Section 4.10 hereof and the length of time the Asset Sale Offer will
remain open;

 

(2)
the Offer Amount, the purchase price and the Purchase Date;

 

(3)
that any Note not tendered or accepted for payment will continue to accrete and
accrue interest;

 

(4)
that, unless the Issuers default in making such payment, any Note accepted for
payment pursuant to the Asset Sale Offer will cease to accrete and accrue
interest after the Purchase Date;

 

(5)
that Holders electing to have a Note purchased pursuant to an Asset Sale Offer
may elect to have Notes purchased in integral multiples of $1,000 only;

 

(6)
that Holders electing to have Notes purchased pursuant to any Asset Sale Offer
will be required to surrender the Note, with the form entitled “Option of
Holder to Elect Purchase” attached to the Notes completed, or transfer by
book-entry transfer, to the Issuers, a Depositary, if appointed by the Issuers,
or a Paying Agent at the address specified in the notice at least three days
before the Purchase Date;

 

(7)
that Holders will be entitled to withdraw their election if the Issuers, the Depositary
or the Paying Agent, as the case may be, receives, not later than the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount at maturity
of the Note the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased;

 

(8)
that, if the aggregate Accreted Value of Notes and principal amount or accreted
value, as applicable, of other pari passu
Indebtedness surrendered by holders thereof exceeds the Offer Amount, the
Issuers will select the Notes to be purchased on a pro rata basis based on the principal amount at maturity of Notes
surrendered (with such adjustments as may be deemed appropriate by the Issuers so
that only Notes in denominations of $1,000, or integral multiples thereof, will
be purchased) unless otherwise required by law or applicable stock exchange
requirements; and

 

(9)
that Holders whose Notes were purchased only in part will be issued new Notes
equal in principal amount at maturity to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).

 

On or before the
Purchase Date, the Issuers will, to the extent lawful, accept for payment, on a
pro rata basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Notes tendered, and will deliver or cause to be delivered to the Trustee the
Notes properly accepted together with an Officers’ Certificate stating that
such Notes or portions thereof were accepted for payment by the Issuers in
accordance with the terms of this Section 3.09(a).  The Issuers, the Depositary or the Paying
Agent, as the case may be, will promptly (but in any case not later than five
days after the Purchase Date) mail or

 

46

 

deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Issuers for purchase, and the Issuers will promptly issue a new
Note, and the Trustee, upon written request from the Issuers, will authenticate
and mail or deliver (or cause to be transferred by book entry) such new Note to
such Holder, in a principal amount at maturity equal to any unpurchased portion
of the Note surrendered.  Any Note not so
accepted shall be promptly mailed or delivered by the Issuers to the Holder
thereof.  The Issuers will publicly
announce the results of the Asset Sale Offer on the Purchase Date.

 

(b)                                 In the event that, pursuant
to Section 4.22 hereof, the Issuers are required to commence an offer to
all Holders to purchase Notes (an “Excess
Cash Flow Offer”), they will follow the procedures set forth below.

 

Each Excess Cash
Flow Offer shall be required to remain open for at least 20 Business Days
following its commencement and not more than 30 Business Days, except to the
extent that a longer period is required by applicable law.  No later than three Business Days after the
termination of such Excess Cash Flow Offer, the Issuers shall apply the lesser
of the Excess Cash Flow Offer Amount or Permitted Excess Cash Flow Payment to
the purchase of all Notes tendered at the Excess Cash Flow Purchase Price.  Payment for any Notes so purchased will be
made in the same manner as interest payments are made.

 

If the aggregate
Excess Cash Flow Purchase Price of the Notes tendered pursuant to any Excess
Cash Flow Offer exceeds the lesser of the Excess Cash Flow Offer Amount or the
Permitted Excess Cash Flow Payment with respect thereto, the Trustee shall
select the Notes to be purchased on a pro
rata basis.  To the extent that the
aggregate Excess Cash Flow Purchase Price of the Notes tendered pursuant to any
Excess Cash Flow Offer is less than the Excess Cash Flow Offer Amount or the
Permitted Excess Cash Flow Payment with respect thereto, as applicable, the
Issuers may use any remaining Excess Cash Flow for any purpose not otherwise
prohibited by this Indenture.

 

If the date on
which any Notes are purchased pursuant to an Excess Cash Flow Offer (an “Excess Cash Flow Purchase Date”) is on
or after an interest record date and on or before the related interest payment
date, any accrued and unpaid interest and Liquidated Damages, if any, will be
paid to the Person in whose name a Note is registered at the close of business
on such record date, and no additional interest will be payable to Holders who
tender Notes pursuant to the Excess Cash Flow Offer.

 

Upon the
commencement of an Excess Cash Flow Offer, the Issuers will send, by first
class mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee.  The notice will contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Excess Cash Flow Offer. 
The notice, which will govern the terms of the Excess Cash Flow Offer,
will state:

 

(1)
that the Excess Cash Flow Offer is being made pursuant to this
Section 3.09(b) and Section 4.22 hereof and the length of time the
Excess Cash Flow Offer will remain open;

 

(2)
the Excess Cash Flow Offer Amount, the purchase price, the Permitted Excess
Cash Flow Payment, if known, and the Excess Cash Flow Purchase Date;

 

(3)
that the consummation of the Excess Cash Flow Offer and/or the ability of the
Issuers to pay the entire Excess Cash Flow Offer Amount may be restricted by
certain of the Issuers’ lenders in accordance with Section 4.22(b) hereof,
and that the failure of the Issuers to make payment on any Notes tendered in
the Excess Cash Flow Offer will not be an Event of Default if the failure to
make such payment resulted from the exercise by any such lender of a right to
restrict or prohibit such payment as contemplated by Section 4.22(b);

 

47

 

(4)
that any Note not tendered or accepted for payment will continue to accrete and
accrue interest;

 

(5)
that any Note accepted for payment pursuant to the Excess Cash Flow Offer will
cease to accrete and accrue interest after the Excess Cash Flow Purchase Date
unless the Issuers are not prohibited or restricted from making payment thereon
pursuant to Section 4.22(b) hereof and default in making such payment;

 

(6)
that Holders electing to have a Note purchased pursuant to an Excess Cash Flow
Offer may elect to have Notes purchased in integral multiples of $1,000 only;

 

(7)
that Holders electing to have Notes purchased pursuant to any Excess Cash Flow
Offer will be required to surrender the Note, with the form entitled “Option of
Holder to Elect Purchase” attached to the Notes completed, or transfer by
book-entry transfer, to the Issuers, a Depositary, if appointed by the Issuers,
or a Paying Agent at the address specified in the notice at least three days
before the Excess Cash Flow Purchase Date;

 

(8)
that Holders will be entitled to withdraw their election if the Issuers, the
Depositary or the Paying Agent, as the case may be, receives, not later than
the expiration of the Excess Cash Flow Offer, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount at maturity of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;

 

(9)
that if the aggregate Excess Cash Flow Purchase Price of the Notes tendered
pursuant to any Excess Cash Flow Offer exceeds the Excess Cash Flow Offer
Amount or the Permitted Excess Cash Flow Payment with respect thereto, as
applicable, the Trustee shall select the Notes to be purchased on a pro rata basis based on the principal
amount at maturity of Notes surrendered (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1000, or
integral multiples thereof, will be purchased) unless otherwise required by law
or applicable stock exchange requirements; and

 

(10)
that Holders whose Notes were purchased only in part will be issued new Notes
equal in principal amount at maturity to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).

 

On or before
each Excess Cash Flow Purchase Date, the Issuers will, to the extent lawful or
otherwise not prohibited by certain of its lenders in accordance with
Section 4.22(b), accept for payment, on a pro rata basis to the extent necessary, that amount of Notes or
portions thereof tendered pursuant to the Excess Cash Flow Offer with an
aggregate Excess Cash Flow Purchase Price equal to the Permitted Excess Cash
Flow Payment, or if less than such amount has been tendered, all Notes
tendered, and will deliver or cause to be delivered to the Trustee the Notes
properly accepted together with an Officers’ Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuers in
accordance with the terms of this Section 3.09(b).  The Issuers, the Depositary or the Paying
Agent, as the case may be, will promptly (but in any case not later than five
days after the applicable Excess Cash Flow Purchase Date) mail or deliver to
each tendering Holder an amount equal to the Excess Cash Flow Purchase Price of
the Notes tendered by such Holder and accepted by the Issuers for purchase, and
the Issuers will promptly issue a new Note, and the Trustee, upon written
request from the Issuers, will authenticate and mail or deliver (or cause to be
transferred by book entry) such new Note to such Holder, in a principal amount
at maturity equal to any unpurchased portion of the Note surrendered.  Any Note not so accepted shall be promptly
mailed or delivered by the Issuers to the Holder thereof.  The Issuers

 

48

 

will publicly announce the
results of the Excess Cash Flow Offer on the Excess Cash Flow Purchase Date.

 

(c)                                  Other than as specifically
provided in this Section 3.09, any purchase pursuant to this
Section 3.09 shall be made pursuant to the provisions of Sections 3.01
through 3.06 hereof.

 

ARTICLE 4

COVENANTS

 

Section 4.01                                Payment of Notes.

 

The Issuers will
pay or cause to be paid the principal of, premium, if any, and interest and
Liquidated Damages, if any, on, the Notes on the dates and in the manner
provided in the Notes.  Principal,
premium, if any, and interest and Liquidated Damages, if any, will be
considered paid on the date due if the Paying Agent, if other than Interactive
Health or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due
date money deposited by the Issuers in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due.  The Issuers will pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.

 

The Issuers will
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in
excess of the then applicable interest rate on the Notes to the extent lawful;
the Issuers will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.

 

Section 4.02                                Maintenance of Office or Agency.

 

The Issuers will
maintain in the Borough of Manhattan, the City of New York, an office or agency
(which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Issuers
in respect of the Notes and this Indenture may be served.  The Issuers will give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency.  If at any time the Issuers
fail to maintain any such required office or agency or fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.

 

The Issuers may
also from time to time designate one or more other offices or agencies where
the Notes may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however, that no such designation or rescission will in
any manner relieve the Issuers of their obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such
purposes.  The Issuers will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.

 

The Issuers
hereby designate the Corporate Trust Office of the Trustee as one such office
or agency of the Issuers in accordance with Section 2.03 hereof.

 

49

 

Section 4.03                                Reports.

 

(a)                                  Whether or not required by
the rules and regulations of the SEC, so long as any Notes are outstanding, the
Issuers will furnish to the Holders of Notes or cause the Trustee to furnish to
the Holders of Notes, within the time periods specified in the SEC’s rules and
regulations:

 

(1)
all quarterly and annual reports that would be required to be filed with the
SEC on Forms 10-Q and 10-K if the Issuers were required to file reports; and

 

(2)
all current reports that would be required to be filed with the SEC on Form 8-K
if the Issuers were required to file such reports.

 

To facilitate
the foregoing, the Issuers have agreed that, until such time as they has
consummated the Exchange Offer contemplated by the Registration Rights
Agreement, they will engage a nationally recognized information agent to
furnish such reports to the Holders of Notes.

 

All such reports
will be prepared in all material respects in accordance with all of the rules
and regulations applicable to such reports. 
Each annual report on Form 10-K will include a report on Interactive
Health’s consolidated financial statements by Interactive Health’s certified
independent accountants.  In addition,
following the consummation of the Exchange Offer contemplated by the Registration
Rights Agreement, the Issuers will file a copy of each of the reports referred
to in clauses (1) and (2) above with the SEC for public availability within the
time periods specified in the rules and regulations applicable to such reports
(unless the SEC will not accept such a filing) and will post the reports on the
Interactive Health website within those time periods.

 

If, at any time
after consummation of the Exchange Offer contemplated by the Registration
Rights Agreement, the Issuers are no longer subject to the periodic reporting
requirements of the Exchange Act for any reason, the Issuers will nevertheless
continue filing the reports specified in this clause (a) with the SEC within
the time periods specified above unless the SEC will not accept such a filing.  The Issuers will not take any action for the
purpose of causing the SEC not to accept any such filings.  If, notwithstanding the foregoing, the SEC
will not accept the Issuers’ filings for any reason, the Issuers will post the
reports referred to in the preceding paragraph on Interactive Health’s website
within the time periods that would apply if the Issuers were required to file
those reports with the SEC and will, as soon as practicable thereafter, engage
a nationally recognized information agent to furnish such reports to the
Holders of Notes.

 

(b)                                 If Interactive Health has
designated any of its Subsidiaries as Unrestricted Subsidiaries, then the
quarterly and annual financial information required by paragraph (a) of this
Section 4.03 will include a reasonably detailed presentation, either on
the face of the financial statements or in the footnotes thereto, and in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of Interactive
Health and its Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of Interactive
Health.

 

(c)                                  For so long as any Notes
remain outstanding, if at any time they are not required to file with the SEC
the reports required by paragraphs (a) and (b) of this Section 4.03, the
Issuers and the Guarantors will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

50

 

Section 4.04                                Compliance Certificate.

 

(a)                                  The Issuers and each
Guarantor (to the extent that such Guarantor is so required under the TIA)
shall deliver to the Trustee, within 90 days after the end of each fiscal year,
an Officers’ Certificate stating that a review of the activities of the Issuers
and their Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Issuers have kept, observed, performed and fulfilled their obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuers have kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and are not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event
of Default has occurred, describing all such Defaults or Events of Default of
which he or she may have knowledge and what action the Issuers are taking or
propose to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Issuers are taking or propose to take with respect thereto.

 

(b)                                 So long as not contrary to
the then current recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant to
Section 4.03 above shall be accompanied by a written statement of the Issuers’
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements, nothing has come to their attention that would lead them
to believe that the Issuers have violated any provisions of Article 4 or
Article 5 hereof or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.

 

(c)                                  So long as any of the Notes
are outstanding, the Issuers will deliver to the Trustee, forthwith upon any
Officer becoming aware of any Default or Event of Default, an Officers’ Certificate
specifying such Default or Event of Default and what action the Issuers are
taking or propose to take with respect thereto.

 

Section 4.05                                Taxes.

 

The Issuers will
pay, and will cause each of their Subsidiaries to pay, prior to delinquency,
all material taxes, assessments, and governmental levies except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders of
the Notes.

 

Section 4.06                                Stay, Extension and Usury Laws.

 

The Issuers and
the Guarantors each covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and each of the Issuers and each of the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law has been enacted.

 

51

 

Section 4.07                                Restricted Payments.

 

(a)                                  Interactive Health will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly:

 

(1)
declare or pay any dividend or make any other payment or distribution on
account of Interactive Health’s or any of its Restricted Subsidiaries’ Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving Interactive Health or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Interactive Health’s or
any of its Restricted Subsidiaries’ Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Interactive Health and other than dividends or
distributions payable to Interactive Health or a Restricted Subsidiary of
Interactive Health);

 

(2)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving
Interactive Health) any Equity Interests of Interactive Health or any direct or
indirect parent of Interactive Health;

 

(3)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of Interactive Health or
any Guarantor that is contractually subordinated to the Notes or to any Note
Guarantee (excluding any intercompany Indebtedness between or among Interactive
Health and any of its Restricted Subsidiaries), except a payment of interest or
principal at the Stated Maturity thereof; or

 

(4)
make any Restricted Investment

 

(all such payments and other
actions set forth in these clauses (1) through (4) above being collectively
referred to as “Restricted Payments”),
unless, at the time of and after giving effect to such Restricted Payment:

 

(1)
no Default or Event of Default has occurred and is continuing or would occur as
a consequence of such Restricted Payment;

 

(2)
the Issuers would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09(a) hereof; and

 

(3)
such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by Interactive Health and its Restricted Subsidiaries
since the date of this Indenture (excluding Restricted Payments permitted by
clauses (2), (3), (4), (6), (7), (8) and (9) of paragraph (b) of this
Section 4.07), is less than the sum, without duplication, of:

 

(A)                              50% of the
Consolidated Net Income of Interactive Health for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of this Indenture to the end of Interactive Health’s most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit); plus

 

52

 

(B)                                100% of
the aggregate net cash proceeds received by Interactive Health since the date
of this Indenture as a contribution to its common equity capital or from the
issue or sale of Equity Interests of Interactive Health (other than
Disqualified Stock) or from the issue or sale of convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities of
Interactive Health that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Interactive Health); plus

 

(C)                                to the
extent that any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (i) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (ii) the initial amount
of such Restricted Investment; plus

 

(D)                               to the
extent that any Unrestricted Subsidiary of the Issuers designated as such after
the date of this Indenture is redesignated as a Restricted Subsidiary after the
date of this Indenture, the lesser of (i) the Fair Market Value of Interactive
Health’s Investment in such Subsidiary as of the date of such redesignation or
(ii) such Fair Market Value as of the date on which such Subsidiary was
originally designated as an Unrestricted Subsidiary after the date of this
Indenture; plus

 

(E)                                 100% of
any dividends received by the Issuers or a Restricted Subsidiary after the date
of this Indenture from an Unrestricted Subsidiary of Interactive Health, to the
extent that such dividends were not otherwise included in the Consolidated Net
Income of Interactive Health for such period.

 

(b)                                 The provisions of
Section 4.07(a) hereof will not prohibit:

 

(1)
the payment of any dividend or the consummation of any redemption within 60
days after the date of declaration of the dividend or giving of the redemption
notice, as the case may be, if at the date of declaration or notice, the
dividend or redemption payment would have complied with the provisions of this
Indenture;

 

(2)
the making of any Restricted Payment in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary of
Interactive Health) of, Equity Interests of Interactive Health (other than
Disqualified Stock) or from the substantially concurrent contribution of common
equity capital to Interactive Health; provided that the amount of any such net
cash proceeds that are utilized for any such Restricted Payment will be
excluded from clause (3)(B) of Section 4.07(a) hereof;

 

(3)
the repurchase, redemption, defeasance or other acquisition or retirement for
value of Indebtedness of Interactive Health or any Guarantor that is
contractually subordinated to the Notes or to any Note Guarantee with the net
cash proceeds from a substantially concurrent incurrence of Permitted
Refinancing Indebtedness;

 

(4)
the payment of any dividend (or, in the case of any partnership or limited
liability company, any similar distribution) by a Restricted Subsidiary of
Interactive Health to the holders of its Equity Interests on a pro rata basis;

 

(5)
so long as no Default or Event of Default shall have occurred and be continuing
or would result therefrom, the repurchase, redemption or other acquisition or
retirement (or a dividend or distribution to Parent solely to permit Parent to
repurchase, redeem or otherwise

 

53

 

acquire or
retire) for value of any Equity Interests of Interactive Health, any Restricted
Subsidiary of Interactive Health or Parent held by any current or former
officer, director or employee of Interactive Health or any of its Restricted
Subsidiaries pursuant to any equity subscription agreement, stock option
agreement, shareholders’ agreement or similar agreement; provided, that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests (or, in the case of any dividend
or distribution to Parent, the amount of such dividend or distribution) may not
exceed $500,000 in any calendar year (with any unused amounts in any calendar
year being available to be so utilized in the immediately succeeding calendar
year);

 

(6)
the repurchase of Equity Interests deemed to occur upon the exercise of stock
options to the extent such Equity Interests represent a portion of the exercise
price of those stock options;

 

(7)
the declaration and payment of regularly scheduled or accrued dividends to
holders of any class or series of Disqualified Stock of Interactive Health or
any Restricted Subsidiary issued on or after the date of this Indenture in
accordance with the Fixed Charge Coverage Ratio test described in
Section 4.09(d) hereof;

 

(8)
Permitted Payments to Parent;

 

(9)
on or about the date of this Indenture (i) the distribution by Interactive
Health to Parent in an amount not to exceed $19.549 million and (ii) the
redemption of the existing 12.0% Senior Subordinated Notes due 2008; and

 

(10)
so long as no Default or Event of Default shall have occurred and be continuing
or would result therefrom, other Restricted Payments in an aggregate amount not
to exceed $3.0 million since the date of this Indenture.

 

(c)                                  The amount of all Restricted
Payments (other than cash) will be the Fair Market Value on the date of the
Restricted Payment of the asset(s) or securities proposed to be transferred or
issued by Interactive Health or such Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment.  The
Fair Market Value of any assets or securities that are required to be valued by
this Section 4.07 will be determined by the Board of Directors of
Interactive Health, whose resolution with respect thereto will be delivered to
the Trustee.  Such determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the Fair Market Value exceeds
$10.0 million.

 

Section 4.08                                Dividend and Other Payment Restrictions
Affecting Subsidiaries.

 

(a)                                  Interactive Health will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:

 

(1)
pay dividends or make any other distributions on its Capital Stock to Interactive
Health or any of its Restricted Subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
indebtedness owed to Interactive Health or any of its Restricted Subsidiaries;

 

(2)  make loans or advances to Interactive Health
or any of its Restricted Subsidiaries; or

 

(3)
sell, lease or transfer any of its properties or assets to Interactive Health
or any of its Restricted Subsidiaries.

 

54

 

(b)                                 The restrictions in
Section 4.08(a) hereof will not apply to encumbrances or restrictions
existing under or by reason of:

 

(1)
agreements governing Existing Indebtedness and Credit Facilities as in effect
on the date of this Indenture and any amendments, restatements, modifications,
renewals, supplements, refundings, replacements or refinancings of those
agreements; provided that the
amendments, restatements, modifications, renewals, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
those agreements on the date of this Indenture;

 

(2)
this Indenture, the Notes and the Note Guarantees;

 

(3)
applicable law, rule, regulation or order;

 

(4)
any instrument governing Indebtedness or Capital Stock of a Person acquired by
Interactive Health or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; provided
that, in the case of Indebtedness, such Indebtedness was permitted by the terms
of this Indenture to be incurred;

 

(5)
customary non-assignment provisions in contracts and licenses entered into in
the ordinary course of business;

 

(6)
purchase money obligations for property acquired in the ordinary course of
business and Capital Lease Obligations that impose restrictions on the property
purchased or leased of the nature described in clause (3) of
Section 4.08(a) hereof;

 

(7)
any agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending the sale or other
disposition;

 

(8)
Permitted Refinancing Indebtedness; provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are not materially more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced;

 

(9)
Liens permitted to be incurred under the provisions of Section 4.12 hereof
that limit the right of the debtor to dispose of the assets subject to such
Liens;

 

(10)
provisions limiting the disposition or distribution of assets or property in
joint venture agreements, asset sale agreements, sale-leaseback agreements,
stock sale agreements and other similar agreements entered into with the
approval of Interactive Health’s Board of Directors, which limitation is
applicable only to the assets that are the subject of such agreements; and

 

(11)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business; and

 

(12)
any other agreement, instrument or document relating to or governing
Indebtedness incurred in compliance with this Indenture; provided that the terms and conditions of such

 

55

 

encumbrances or
restrictions contained in any such agreement, instrument or document are not
materially more restrictive, taken as a whole, than those contained in each of
the Credit Agreement, this Indenture and Existing Indebtedness, in each case as
in effect on the date of this Indenture.

 

Section 4.09                                Incurrence of Indebtedness and Issuance of
Preferred Stock.

 

(a)                                  Interactive Health will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, “incur”) any
Indebtedness (including Acquired Debt), and Interactive Health will not issue
any Disqualified Stock and will not permit any of its Restricted Subsidiaries
to issue any shares of preferred stock; provided,
however, that Interactive Health may
incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and
any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt) or
issue preferred stock, if the Fixed Charge Coverage Ratio for Interactive
Health’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or such
preferred stock is issued, as the case may be, would have been at least 2.25 to
1, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred or
the Disqualified Stock or the preferred stock had been issued, as the case may
be, at the beginning of such four-quarter period.

 

(b)                                 The provisions of
Section 4.09(a) hereof will not prohibit the incurrence of any of the
following items of Indebtedness (collectively, “Permitted Debt”):

 

(1)
the incurrence by Interactive Health and any Subsidiary Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1)(with letters
of credit being deemed to have a principal amount equal to the maximum
potential liability of Interactive Health and its Restricted Subsidiaries
thereunder) not to exceed (A) the greater of (i) $20.0 million or (ii) the
amount of the Borrowing Base as of the date of such incurrence, less (B) the aggregate amount of all Net
Proceeds of Asset Sales applied by Interactive Health or any of its Restricted
Subsidiaries since the date of this Indenture to repay any term Indebtedness
under a Credit Facility or to repay any revolving credit Indebtedness under a
Credit Facility and effect a corresponding commitment reduction thereunder pursuant
to Section 4.10 hereof;

 

(2)
the incurrence by Interactive Health and its Restricted Subsidiaries of the
Existing Indebtedness;

 

(3)
the incurrence by the Issuers and the Guarantors of Indebtedness represented by
the Notes and the related Note Guarantees to be issued on the date of this
Indenture and the Exchange Notes and the related Note Guarantees to be issued
pursuant to the Registration Rights Agreement and, if a Domestic Subsidiary is
formed, created or acquired after the date of this Indenture and not designated
an Unrestricted Subsidiary, the Note Guarantee to be made by such Domestic
Subsidiary in accordance with this Indenture;

 

(4)
the incurrence by Interactive Health or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, incurred for the purpose of financing
all or any part of the purchase price or cost of design, construction,
installation or improvement of property, plant or equipment used in the
business of Interactive Health or any of its Restricted Subsidiaries or
incurred within 180 days after such purchase, lease, construction or
improvement, in an aggregate principal

 

56

 

amount, including
all Permitted Refinancing Indebtedness incurred to renew, refund, refinance,
replace, defease or discharge any Indebtedness incurred pursuant to this clause
(4), not to exceed $5.0 million at any time outstanding;

 

(5)
the incurrence by Interactive Health or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to renew, refund, refinance, replace, defease or discharge any
Indebtedness (other than intercompany Indebtedness) that was permitted by this
Indenture to be incurred under the first paragraph of this covenant or clauses
(2), (3), (4), (5), (12) or (15) of this Section 4.09(b);

 

(6)
the incurrence by Interactive Health or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Interactive Health and any of its
Restricted Subsidiaries; provided,
however, that:

 

(A)                              if
Interactive Health or any Guarantor is the obligor on such Indebtedness and the
payee is not Interactive Health or a Guarantor, such Indebtedness must be
expressly subordinated to the prior payment in full in cash of all Obligations
then due with respect to the Notes, in the case of Interactive Health, or the
Note Guarantee, in the case of a Guarantor; and

 

(B)                                (1) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than Interactive Health or a
Restricted Subsidiary of Interactive Health and (2) any sale or other transfer
of any such Indebtedness to a Person that is not either Interactive Health or a
Restricted Subsidiary of Interactive Health,

 

will be deemed, in each case, to
constitute an incurrence of such Indebtedness by Interactive Health or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (6);

 

(7)
the issuance by any of Interactive Health’s Restricted Subsidiaries to
Interactive Health or to any of its Restricted Subsidiaries of shares of
preferred stock; provided, however, that:

 

(A)                              any
subsequent issuance or transfer of Equity Interests that results in any such
preferred stock being held by a Person other than Interactive Health or a
Restricted Subsidiary of Interactive Health; and

 

(B)                                any sale
or other transfer of any such preferred stock to a Person that is not either Interactive
Health or a Restricted Subsidiary of Interactive Health,

 

will be deemed, in each case, to
constitute an issuance of such preferred stock by such Restricted Subsidiary
that was not permitted by this clause (7);

 

(8)
the incurrence by Interactive Health or any of its Restricted Subsidiaries of
Hedging Obligations in the ordinary course of business;

 

(9)
the guarantee by Interactive Health or any of the Guarantors of Indebtedness of
Interactive Health or a Restricted Subsidiary of Interactive Health that was
permitted to be incurred by another provision of this Section 4.09; provided that if the Indebtedness being
guaranteed is subordinated to or pari
passu with the Notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same
extent as the Indebtedness guaranteed;

 

57

 

(10)
the incurrence by Interactive Health or any of the Subsidiary Guarantors of
Indebtedness in respect of workers’ compensation claims, self-insurance obligations,
bankers’ acceptances, performance and surety bonds in the ordinary course of
business;

 

(11)
the incurrence by Interactive Health or any of the Subsidiary Guarantors of
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently drawn against
insufficient funds, so long as such Indebtedness is covered within five
Business Days;

 

(12)
the incurrence by Foreign Subsidiaries of Indebtedness in an aggregate
principal amount at any time outstanding pursuant to this clause (12),
including all Permitted Refinancing Indebtedness incurred to renew, refund,
refinance, replace, defease or discharge any Indebtedness incurred pursuant to
this clause (12), not to exceed $5.0 million (or the equivalent thereof,
measured at the time of each incurrence, in applicable foreign currency);

 

(13)
Indebtedness consisting of customary indemnification, contribution, adjustment
of purchase price or similar obligations, in each case, incurred or assumed in
connection with the acquisition or disposition of any business or assets of
Interactive Health or any Restricted Subsidiary or Capital Stock of a
Restricted Subsidiary; provided, that
(1) with respect to any such disposition, the maximum aggregate liability in
respect of all such Indebtedness incurred pursuant to this clause (13) shall at
no time exceed the gross proceeds actually received by Interactive Health and
its Restricted Subsidiaries in connection with such dispositions and (2) all
such Indebtedness is discharged within 30 days of the date the amount thereof
becomes absolute or liquidated;

 

(14)
the issuance by Interactive Health of Disqualified Stock to (1) any employee
pursuant to an equity incentive plan or other similar plan approved by Interactive
Health’s Board of Directors or (2) any plan established for the benefit of
employees of Interactive Health or any of its Restricted Subsidiaries; provided, that Interactive Health’s
potential redemption or repurchase obligations with respect to such
Disqualified Stock shall not exceed $1.0 million at any time outstanding; and

 

(15)
the incurrence by the Issuers or the Subsidiary Guarantors of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to renew, refund, refinance, replace, defease or
discharge any Indebtedness incurred pursuant to this clause (15), not to exceed
$2.0 million.

 

Interactive
Health will not incur, and will not permit any Guarantor to incur, any
Indebtedness (including Permitted Debt) that is contractually subordinated in
right of payment to any other Indebtedness of Interactive Health or such
Guarantor unless such Indebtedness is also contractually subordinated in right
of payment to the Notes and the applicable Note Guarantee on substantially
identical terms; provided, however,
that no Indebtedness will be deemed to be contractually subordinated in right
of payment to any other Indebtedness of Interactive Health solely by virtue of
being unsecured or by virtue of being secured on a first or junior Lien basis.

 

For purposes of
determining compliance with this Section 4.09, in the event that an item
of proposed Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (1) through (15) above, or is entitled
to be incurred pursuant to Section 4.09(a) hereof, Interactive Health will
be permitted, in its sole discretion, to classify such item of Indebtedness on
the date of its incurrence, or later classify or reclassify all or a portion of
such item of Indebtedness, in any

 

58

 

manner that complies with this
Section 4.09.  Indebtedness under
Credit Facilities outstanding on the date on which the notes are first issued
and authenticated under this Indenture will initially be deemed to have been
incurred on such date in reliance on the exception provided by clause (1) of
the definition of Permitted Debt.  The
accrual of interest, the accretion or amortization of original issue discount,
the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, the reclassification of preferred stock as
Indebtedness due to a change in accounting principles, and the payment of
dividends on Disqualified Stock in the form of additional shares of the same
class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09;
provided, in each such case, that the
amount of any such accrual, accretion or payment is included in Fixed Charges
of Interactive Health as accrued. 
Notwithstanding any other provision of this Section 4.09, the
maximum amount of Indebtedness that Interactive Health or any of its Restricted
Subsidiaries may incur pursuant to this Section 4.09 shall not be deemed
to be exceeded solely as a result of fluctuations in exchange rates or currency
values.

 

The amount of
any Indebtedness outstanding as of any date will be:

 

(1)
the accreted value of the Indebtedness, in the case of any Indebtedness issued
with original issue discount;

 

(2)
the principal amount of the Indebtedness, in the case of any other
Indebtedness; and

 

(3)
in respect of Indebtedness of another Person secured by a Lien on the assets of
the specified Person, the lesser of:

 

(A)                              the Fair
Market Value of such assets at the date of determination; and

 

(B)                                the
amount of the Indebtedness of the other Person.

 

Section 4.10                                Asset Sales.

 

Interactive
Health will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

 

(1)
Interactive Health (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the Fair Market
Value of the assets or Equity Interests issued or sold or otherwise disposed
of; and

 

(2)
at least 75% of the consideration received in the Asset Sale by Interactive
Health or such Restricted Subsidiary is in the form of cash or Cash Equivalents.  For purposes of this clause (2), each of the
following shall be deemed to be cash:

 

(A)                              any
liabilities, as shown on Interactive Health’s most recent consolidated balance
sheet, of Interactive Health or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or any Note Guarantee) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases Interactive Health or
such Restricted Subsidiary from further liability;

 

(B)                                any
securities, notes or other obligations received by Interactive Health or any
such Restricted Subsidiary from such transferee that are converted by
Interactive

 

59

 

Health or such
Restricted Subsidiary into cash or Cash Equivalents within 90 days of each
Asset Sale, to the extent of the cash received in that conversion; and

 

(C)                                any stock
or assets of the kind referred to in clauses (2) or (4) of the next paragraph
of this Section 4.10.

 

Within 360 days
after the receipt of any Net Proceeds from an Asset Sale, Interactive Health
(or the applicable Restricted Subsidiary, as the case may be) may apply such
Net Proceeds:

 

(1)
to repay Indebtedness and other Obligations under a Credit Facility and, if the
Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto;

 

(2)
to acquire all or substantially all of the assets of, or any Capital Stock of,
another Permitted Business, if, after giving effect to any such acquisition of
Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of
Interactive Health;

 

(3)
to make a capital expenditure; or

 

(4)
to acquire other assets that are not classified as current assets under GAAP
and that are used or useful in a Permitted Business.

 

Pending the final application of
any Net Proceeds, Interactive Health may temporarily reduce revolving credit
borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited
by this Indenture.

 

Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the second
paragraph of this Section 4.10 will constitute “Excess Proceeds.”  When the
aggregate amount of Excess Proceeds exceeds $10.0 million, within 15 days
thereof, the Issuers will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in
this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets in accordance with Section 3.09(a) hereof to purchase
the maximum principal amount at maturity of Notes and principal amount at
maturity or accreted value, as applicable, of such other pari passu Indebtedness that may be purchased out of the Excess
Proceeds.  The offer price for the Notes
in any Asset Sale Offer will be equal to 100% of the Accreted Value thereof on
the date of purchase plus accrued and unpaid interest and Liquidated Damages,
if any, to the date of purchase and will be payable in cash.  If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Issuers may use those Excess Proceeds
for any purpose not otherwise prohibited by this Indenture.  If the aggregate Accreted Value of Notes and
principal amount or accreted value, as applicable, of other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select on a pro rata basis  the Notes to be purchased and such
Notes, together with such other pari
passu Indebtedness to be purchased, shall be purchased on a pro rata basis.  Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.

 

The Issuers will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with each repurchase of Notes pursuant
to an Asset Sale Offer.  To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of Section 3.09(a) hereof or this Section 4.10, the
Issuers will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under Section 3.09(a)
hereof or this Section 4.10 by virtue of such compliance.

 

60

 

Section 4.11                                Transaction with Affiliates.

 

Interactive
Health will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate of
Interactive Health (each, an “Affiliate
Transaction”), unless:

 

(1)
the Affiliate Transaction is on terms that are no less favorable to Interactive
Health or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by Interactive Health or such Restricted
Subsidiary with an unrelated Person; and

 

(2)
Interactive Health delivers to the Trustee:

 

(A)                              with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors of Interactive Health set forth in an
Officers’ Certificate certifying that such Affiliate Transaction complies with
clause (1) of this Section 4.11(A) and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors of Interactive Health; and

 

(B)                                with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to Interactive Health or such Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.

 

(b)                                 The following items will not
be deemed to be Affiliate Transactions and, therefore, will not be subject to
the provisions of Section 4.11(a) hereof:

 

(1)
any employment agreement, employee benefit plan, officer or director
indemnification agreement or any similar arrangement entered into by
Interactive Health or any of its Restricted Subsidiaries in the ordinary course
of business and payments pursuant thereto;

 

(2)
transactions between or among Interactive Health and its Restricted
Subsidiaries;

 

(3)
transactions with a Person (other than an Unrestricted Subsidiary of
Interactive Health) that is an Affiliate of Interactive Health solely because
Interactive Health owns, directly or through a Restricted Subsidiary, an Equity
Interest in, or controls, such Person;

 

(4)
payment of reasonable directors’ fees to Persons who are not otherwise
Affiliates of Interactive Health;

 

(5)
any issuance of Equity Interests (other than Disqualified Stock) of Interactive
Health to Affiliates of Interactive Health;

 

(6)
Restricted Payments that do not violate Section 4.07 hereof;

 

(7)
loans or advances to employees in the ordinary course of business not to exceed
$1.0 million in the aggregate at any one time outstanding; and

 

61

 

(8)
the Management Agreement, as in effect on the date of this Indenture, and
payments by Interactive Health or any of its Restricted Subsidiaries pursuant
thereto.

 

In addition,
Interactive Health shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment under the Management Agreement or any
successor or other similar agreement, or any amendment or supplement to any of
them, unless such payments, net of amounts reimbursed to the Affiliates of the
Principals identified therein for reasonable out-of-pocket expenses incurred by
such Affiliates of the Principals in connection with services rendered by them
thereunder, shall not exceed $1.0 million during any fiscal year.

 

Section 4.12                                Liens.

 

Interactive
Health will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any Lien of any
kind on any asset now owned or hereafter acquired, except Permitted Liens.

 

Section 4.13                                Business Activities.

 

Interactive
Health will not, and will not permit any of its Restricted Subsidiaries to,
engage in any business other than Permitted Businesses, except to such extent
as would not be material to Interactive Health and its Restricted Subsidiaries
taken as a whole.

 

Section 4.14                                Corporate Existence.

 

Subject to
Article 5 hereof, Interactive Health shall do or cause to be done all
things necessary to preserve and keep in full force and effect:

 

(1)
its corporate or limited liability company existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time
to time) of Interactive Health or any such Subsidiary; and

 

(2)
the rights (charter and statutory), licenses and franchises of Interactive
Health and its Subsidiaries; provided,
however, that subject to Section 4.16 hereof, Interactive Health shall
not be required to preserve any such right, license or franchise, or the corporate,
limited liability company, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of Interactive
Health and its Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders of the Notes.

 

Section 4.15                                Offer to Repurchase Upon Change of Control.

 

(a)                                  If a Change of Control
occurs, each Holder of Notes will have the right to require the Issuers to make
an offer (a “Change of Control Offer”)
to repurchase all or any part (equal to $1,000 or an integral multiple of
$1,000) of that Holder’s Notes pursuant to a Change of Control Offer on the
terms set forth in this Indenture.  In
the Change of Control Offer, the Issuers will offer to repurchase all or any
part of a Holder’s Notes (equal to $1,000 or an integral multiple of $1,000) at
a purchase price, payable in cash, equal to 101% of the aggregate Accreted
Value of Notes repurchased on the date of purchase plus accrued and unpaid
interest and Liquidated Damages, if any, on the notes repurchased to the date
of purchase (the “Change of Control
Payment”), subject to the rights of Holders of Notes on the relevant record
date to receive interest due on the relevant interest payment date.  Within 30 days following any

 

62

 

Change of Control, the Issuers
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and stating:

 

(1)
that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for payment;

 

(2)
the purchase price and the purchase date, which shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

 

(3)
that any Note not tendered will continue to accrete and accrue interest and
Liquidated Damages, if any;

 

(4)
that, unless the Issuers default in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
will cease to accrete and accrue interest and Liquidated Damages, if any, after
the Change of Control Payment Date;

 

(5)
that Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
“Option of Holder to Elect Purchase” attached to the Notes completed, or
transfer by book-entry transfer, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date;

 

(6)
that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount at maturity of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have the Notes purchased; and

 

(7)
that Holders whose Notes are being purchased only in part will be issued new
Notes equal in principal amount at maturity to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount at maturity or an integral multiple thereof.

 

The Issuers will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change in Control.  To the
extent that the provisions of any securities laws or regulations conflict with
the provisions of Section 4.15 hereof, the Issuers will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this Section 4.15 by virtue of such
compliance.

 

(b)                                 On the Change of Control
Payment Date, the Issuers will, to the extent lawful:

 

(1)
accept for payment all Notes or portions of Notes properly tendered pursuant to
the Change of Control Offer;

 

(2)
deposit with the Paying Agent an amount equal to the Change of Control Payment
in respect of all Notes or portions of Notes properly tendered; and

 

63

 

(3)
deliver or cause to be delivered to the Trustee the Notes properly accepted
together with an Officers’ Certificate stating the aggregate principal amount
at maturity and Accreted Value of Notes or portions of Notes being purchased by
Interactive Health.

 

The Paying Agent
will promptly mail to each Holder of Notes properly tendered the Change of
Control Payment for such Notes, and the Trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount at maturity to any unpurchased portion of the Notes
surrendered, if any.  The Issuers will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

 

(c)                                  Notwithstanding anything to
the contrary in this Section 4.15, the Issuers will not be required to
make a Change of Control Offer upon a Change of Control if (1) a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in this Section 4.15 hereof and
purchases all Notes properly tendered and not withdrawn under the Change of
Control Offer, or (2) notice of redemption has been given pursuant to
Section 3.07 hereof, unless and until there is a default in payment of the
applicable redemption price.

 

Section 4.16                                Existence of Corporate Co-Issuer.

 

Interactive
Health shall always maintain a wholly-owned Restricted Subsidiary of
Interactive Health organized as a corporation under the laws of the United
States of America, any State thereof or the District of Columbia that will
serve as a co-issuer of the Notes unless Interactive Health is itself a
corporation under the laws of the United States of America, any State thereof
or the District of Columbia.

 

Section 4.17                                Restrictions on Activities of Interactive
Finance.

 

Interactive
Finance may not hold any material assets, become liable for any material
obligations or engage in any significant business activities; provided, that Interactive Finance may
be a co-obligor with respect to, or Guarantor of, Indebtedness if Interactive
Health is a primary obligor of such Indebtedness and the net proceeds of such
Indebtedness are received by Interactive Health or one or more of Interactive
Health’s Restricted Subsidiaries other than Interactive Finance.

 

Section 4.18                                Payments for Consent.

 

Interactive
Health will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.

 

Section 4.19                                Additional Note Guarantees.

 

If Interactive
Health or any of its Restricted Subsidiaries acquires or creates another
Domestic Subsidiary after the date of this Indenture, then that newly acquired
or created Domestic Subsidiary will become a Guarantor and execute a supplemental
indenture and deliver an Opinion of Counsel satisfactory to the Trustee within
10 Business Days of the date on which it was acquired or created to the effect
that such supplemental indenture has been duly authorized, executed and
delivered by that Domestic Subsidiary and constitutes a valid and binding
agreement of that Domestic Subsidiary, enforceable in accordance with its terms
(subject to customary exceptions); provided
that any Domestic Subsidiary that

 

64

 

constitutes an Immaterial
Subsidiary need not become a Guarantor until such time as it ceases to be an
Immaterial Subsidiary.  The form of such
Note Guarantee is attached as Exhibit E hereto.

 

Section 4.20                                Designation of Restricted and Unrestricted
Subsidiaries.

 

The Board of
Directors of Interactive Health may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if that designation would not cause a Default.  If a Restricted Subsidiary is designated as
an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding
Investments owned by Interactive Health and its Restricted Subsidiaries in the
Subsidiary designated as Unrestricted will be deemed to be an Investment made
as of the time of the designation and will reduce the amount available for
Restricted Payments under Section 4.07 hereof or under one or more clauses
of the definition of Permitted Investments, as determined by Interactive
Health.  That designation will only be
permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.

 

If, at any time,
any Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary will be deemed to be incurred by a Restricted Subsidiary of
Interactive Health as of such date and, if such Indebtedness is not permitted
to be incurred as of such date under Section 4.09 hereof, Interactive
Health will be in default of such covenant. 
The Board of Directors of Interactive Health may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of Interactive Health of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
will only be permitted if (1) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period;
and (2) no Default or Event of Default would be in existence following such
designation.

 

Any designation
of a Subsidiary of Interactive Health as an Unrestricted Subsidiary will be
evidenced to the Trustee by filing with the Trustee a certified copy of a
resolution of the Board of Directors giving effect to such designation and an
Officers’ Certificate certifying that such designation complied with the
preceding conditions and was permitted by Section 4.07 hereof.

 

Section 4.21                                Limitation on Capital Expenditures.

 

Interactive
Health and its Restricted Subsidiaries, taken as a whole, will not, directly or
indirectly, make Capital Expenditures aggregating in excess of $2.0 million in
any fiscal year, with any unused amounts of up to $1.0 million in any fiscal
year being available to be so utilized in the immediately succeeding fiscal
year; provided, that Capital Expenditures of Interactive Health and its Related
Subsidiaries, taken as a whole, shall not exceed $3.0 million in any fiscal
year.

 

Section 4.22                                Excess Cash Flow.

 

(a)                                  Subject to
Section 4.22(e) hereof, within 120 days after the end of each Fiscal Period,
the Issuers shall make an Excess Cash Flow Offer to purchase the maximum
Accreted Value of Notes that is an integral multiple of $1,000 that may be
purchased with the Excess Cash Flow Offer Amount, at a purchase price, payable
in cash, equal to 101% of the Accreted Value of Notes to be repurchased on the
date of purchase, plus accrued and unpaid interest and Liquidated Damages, if
any, on the Notes repurchased to the date of purchase (the “Excess Cash Flow Purchase Price”),
subject to the rights of holders on the relevant record date to receive
interest due on the relevant interest payment date.

 

65

 

(b)                                 Notwithstanding the
foregoing, the Issuers shall not be required to make any payment for Notes
tendered pursuant to any Excess Cash Flow Offer in excess of the lowest amount
of cash, if any, that the requisite lenders of any Indebtedness outstanding
under Section 4.09(b)(1) have agreed in writing may be used for
repurchases of Notes so tendered (such amount, the “Permitted Excess Cash Flow Payment”).

 

(c)                                  If the aggregate Excess Cash
Flow Purchase Price of Notes tendered pursuant to any Excess Cash Flow Offer is
greater than the Permitted Excess Cash Flow Amount with respect to such offer
(such difference, the “Excess Cash Flow
Payment Shortfall”), then the Issuers shall deposit into and retain in a
segregated restricted cash account cash equal to the Excess Cash Flow Payment
Shortfall.  Amounts in the segregated
restricted cash account may not be used for any purpose other than a payment
pursuant to this Section 4.22.

 

(d)                                 Any Excess Cash Flow Offer
will be made in compliance with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Excess Cash Flow Offer.  To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Indenture,
the Issuers will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the Excess Cash Flow
provisions of this Indenture by virtue of such compliance.

 

(e)                                  Notwithstanding the above,
the Issuers’ obligations to make Excess Cash Flow Offers pursuant to this
Section 4.22 shall terminate upon the first to occur of (i) the
consummation of a Qualified IPO or (ii) the first date on which the ratio of
the Issuers’ Total Debt as of the last day of any Fiscal Period to the Issuers’
Consolidated Cash Flow for such Fiscal Period is less than 2.5 to 1.0.

 

ARTICLE 5

SUCCESSORS

 

Section 5.01                                Merger, Consolidation, or Sale of Assets.

 

Interactive
Health shall not, directly or indirectly: 
(i) consolidate or merge with or into another Person (whether or not
Interactive Health is the surviving entity); or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of Interactive Health and its Restricted Subsidiaries taken as a whole,
in one or more related transactions, to another Person, unless:

 

(1)
either:

 

(A)                              Interactive
Health is the surviving entity; or

 

(B)                                the
Person formed by or surviving any such consolidation or merger (if other than
Interactive Health) or to which such sale, assignment, transfer, conveyance or
other disposition has been made is a corporation organized or existing under
the laws of the United States, any state of the United States or the District
of Columbia;

 

(2)
the Person formed by or surviving any such consolidation or merger (if other
than Interactive Health) or the Person to which such sale, assignment,
transfer, conveyance or other disposition has been made assumes all the
obligations of Interactive Health under the Notes, this Indenture and the
Registration Rights Agreement pursuant to agreements reasonably satisfactory to
the Trustee;

 

66

 

(3)  immediately after such transaction, no
Default or Event of Default exists; and

 

(4)
Interactive Health or the Person formed by or surviving any such consolidation
or merger (if other than Interactive Health), or to which such sale,
assignment, transfer, conveyance or other disposition has been made would, on
the date of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09(a) hereof.

 

In addition,
Interactive Health will not, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other Person.  This Section 5.01
will not apply to:

 

(1)
a merger of Interactive Health with an Affiliate solely for the purpose of
reincorporating Interactive Health in another jurisdiction; or

 

(2)
any consolidation or merger, or any sale, assignment, transfer, conveyance,
lease or other disposition of assets between or among Interactive Health and
its Restricted Subsidiaries.

 

Notwithstanding
the foregoing, Interactive Health is permitted to reorganize as a corporation
in accordance with the procedures established in this Indenture, provided that Interactive Health shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that such reorganization is not
adverse to Holders of the Notes (it being recognized that such reorganization shall
not be deemed adverse to the Holders of the Notes solely because (1) of the
accrual of deferred tax liabilities resulting from such reorganization or (2)
the successor or surviving corporation (A) is subject to income tax as a
corporate entity or (B) is considered to be an “includible corporation” of an
affiliated group of corporations within the meaning of the Code or any similar
state or local law) and certain other conditions are satisfied.

 

Section 5.02                                Successor Corporation Substituted.

 

Upon any consolidation
or merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the properties or assets of
Interactive Health in a transaction that is subject to, and that complies with
the provisions of, Section 5.01 hereof, the successor Person formed by
such consolidation or into or with which Interactive Health is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition
is made shall succeed to, and be substituted for (so that from and after the
date of such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition, the provisions of this Indenture referring to
“Interactive Health” shall refer instead to the successor Person and not to Interactive
Health), and may exercise every right and power of Interactive Health under
this Indenture with the same effect as if such successor Person had been named
as Interactive Health herein; provided,
however, that the predecessor Interactive Health shall not be relieved from
the obligation to pay the principal of and interest on the Notes except in the
case of a sale of all of Interactive Health’s assets in a transaction that is
subject to, and that complies with the provisions of, Section 5.01 hereof.

 

67

 

ARTICLE 6

DEFAULTS AND REMEDIES

 

Section 6.01                                Events of Default.

 

Each of the
following is an “Event of Default”:

 

(1)
default for 30 days in the payment when due of interest on, or Liquidated
Damages, if any, with respect to, the Notes;

 

(2)
default in the payment when due (at maturity, upon redemption or otherwise) of
the principal of, or premium, if any, on, the Notes;

 

(3)
failure by either of the Issuers or any of their Restricted Subsidiaries to comply
with the provisions of Sections 3.08, 3.09, 4.10, 4.15, 4.22 or 5.01 hereof;

 

(4)
failure by either of the Issuers or any of their Restricted Subsidiaries for 60
days after notice to Interactive Health by the Trustee or the Holders of at
least 25% in aggregate principal amount at maturity of the Notes then
outstanding voting as a single class to comply with any of the other agreements
in this Indenture;

 

(5)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by Interactive Health or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by Interactive Health or any of its Restricted
Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created
after the date of this Indenture, if that default:

 

(A)                              is caused
by a failure to pay principal of, or interest or premium, if any, on, such
Indebtedness prior to the expiration of the grace period provided in such Indebtedness
on the date of such default (a “Payment
Default”); or

 

(B)                                results
in the acceleration of such Indebtedness prior to its express maturity,

 

and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more;

 

(6)
failure by Interactive Health or any of its Restricted Subsidiaries to pay
final judgments entered by a court or courts of competent jurisdiction
aggregating in excess of $5.0 million (other than any such judgments that are
fully covered by insurance, subject to ordinary deductibles) which judgments
are not paid, discharged or stayed for a period of 60 days after such judgment
becomes final;

 

(7)
except as permitted by this Indenture, any Note Guarantee is held in any
judicial proceeding to be unenforceable or invalid or ceases for any reason to
be in full force and effect, or any Guarantor, or any Person acting on behalf
of any Guarantor, denies or disaffirms its obligations under its Note
Guarantee;

 

68

 

(8)
Interactive Health or any of its Restricted Subsidiaries that is a Significant
Subsidiary or any group of Restricted Subsidiaries of Interactive Health that,
taken together, would constitute a Significant Subsidiary pursuant to or within
the meaning of Bankruptcy Law:

 

(A)                              commences a
voluntary case,

 

(B)                                consents
to the entry of an order for relief against it in an involuntary case,

 

(C)                                consents
to the appointment of a custodian of it or for all or substantially all of its
property,

 

(D)                               makes a
general assignment for the benefit of its creditors, or

 

(E)                                 generally
is not paying its debts as they become due; and

 

(9)
a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

 

(A)                              is for
relief against Interactive Health or any of its Restricted Subsidiaries that is
a Significant Subsidiary or any group of Restricted Subsidiaries of Interactive
Health that, taken together, would constitute a Significant Subsidiary in an
involuntary case;

 

(B)                                appoints
a custodian of Interactive Health or any of its Restricted Subsidiaries that is
a Significant Subsidiary or any group of Restricted Subsidiaries of Interactive
Health that, taken together, would constitute a Significant Subsidiary or for
all or substantially all of the property of Interactive Health or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries of Interactive Health that, taken together, would
constitute a Significant Subsidiary; or

 

(C)                                orders
the liquidation of Interactive Health or any of its Restricted Subsidiaries
that is a Significant Subsidiary or any group of Restricted Subsidiaries of
Interactive Health that, taken together, would constitute a Significant
Subsidiary;

 

and the order
or decree remains unstayed and in effect for 60 consecutive days.

 

Section 6.02                                Acceleration.

 

In the case of
an Event of Default specified in clause (8) or (9) of Section 6.01 hereof,
with respect to Interactive Health, any Restricted Subsidiary of Interactive
Health that is a Significant Subsidiary or any group of Restricted Subsidiaries
of Interactive Health that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice.  If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable immediately.

 

Upon any such
declaration, the Notes shall become due and payable immediately.  The Holders of a majority in aggregate
principal amount at maturity of the then outstanding Notes by written notice to
the Trustee may, on behalf of all of the Holders, rescind an acceleration and
its consequences, if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except

 

69

 

nonpayment of principal, interest
or premium or Liquidated Damages, if any, that has become due solely because of
the acceleration) have been cured or waived.

 

Section 6.03                                Other Remedies.

 

If an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal, premium and Liquidated Damages, if any,
and interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.

 

The Trustee may
maintain a proceeding even if it does not possess any of the Notes or does not
produce any of them in the proceeding.  A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.  All remedies are cumulative to the extent
permitted by law.

 

Section 6.04                                Waiver of Past Defaults.

 

Holders of not
less than a majority in aggregate principal amount at maturity of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive an existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of
the principal of, premium and Liquidated Damages, if any, or interest on, the
Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal
amount at maturity of the then outstanding Notes may rescind an acceleration
and its consequences, including any related payment default that resulted from
such acceleration.  Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.

 

Section 6.05                                Control by Majority.

 

Holders of a majority
in aggregate principal amount at maturity of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it.  However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of other Holders of
Notes or that may involve the Trustee in personal liability.

 

Section 6.06                                Limitation on Suits.

 

A Holder may
pursue a remedy with respect to this Indenture or the Notes only if:

 

(1)
such Holder gives to the Trustee written notice that an Event of Default is
continuing;

 

(2)
Holders of at least 25% in aggregate principal amount at maturity of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;

 

(3)
such Holder or Holders offer and, if requested, provide to the Trustee security
or indemnity reasonably satisfactory to the Trustee against any loss, liability
or expense;

 

(4)
the Trustee has not complied with the request within 60 days after receipt of
the request and the offer of security or indemnity; and

 

70

 

(5)
Holders of a majority in aggregate principal amount at maturity of the then
outstanding Notes have not given the Trustee a direction inconsistent with such
request within such 60-day period.

 

A Holder of a
Note may not use this Indenture to prejudice the rights of another Holder of a
Note or to obtain a preference or priority over another Holder of a Note.

 

Section 6.07                                Rights of Holders of Notes to Receive
Payment.

 

Notwithstanding
any other provision of this Indenture, the right of any Holder of a Note to
receive payment of principal, premium and Liquidated Damages, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note (including in connection with an offer to purchase), or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.

 

Section 6.08                                Collection Suit by Trustee.

 

If an Event of
Default specified in Section 6.01(1) or (2) hereof occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuers for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on, the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

 

Section 6.09                                Trustee May File Proofs of Claim.

 

The Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders of the Notes allowed in
any judicial proceedings relative to the Issuers (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof.  To the extent
that the payment of any such compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall
be denied for any reason, payment of the same shall be secured by a Lien on,
and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise.  Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or
to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.

 

Section 6.10                                Priorities.

 

If the Trustee
collects any money pursuant to this Article 6, it shall pay out the money
in the following order:

 

71

 

First:                   to the Trustee, its agents and attorneys
for amounts due under Section 7.07 hereof, including payment of all
compensation, expenses and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;

 

Second:     to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any, and interest, respectively; and

 

Third:               to Interactive Health or to such party as a
court of competent jurisdiction shall direct.

 

The Trustee may
fix a record date and payment date for any payment to Holders of Notes pursuant
to this Section 6.10.

 

Section 6.11                                Undertaking for Costs.

 

In any suit for
the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court
in its discretion may require the filing by any party litigant in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys’ fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant.  This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in aggregate principal amount at
maturity of the then outstanding Notes.

 

ARTICLE 7

TRUSTEE

 

Section 7.01                                Duties of Trustee.

 

(a)                                  If an Event of Default has
occurred and is continuing, the Trustee will exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and
skill in its exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person’s own affairs.

 

(b)                                 Except during the continuance
of an Event of Default:

 

(1)
the duties of the Trustee will be determined solely by the express provisions
of this Indenture and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and

 

(2)
in the absence of bad faith on its part, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. 
However, the Trustee will examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.

 

(c)                                  The Trustee may not be
relieved from liabilities for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:

 

72

 

(1)
this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;

 

(2)
the Trustee will not be liable for any error of judgment made in good faith by
a Responsible Officer, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and

 

(3)
the Trustee will not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 6.05 hereof.

 

(d)                                 Whether or not therein
expressly so provided, every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), and (c) of this
Section 7.01.

 

(e)                                  No provision of this
Indenture will require the Trustee to expend or risk its own funds or incur any
liability.  The Trustee will be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder has offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.

 

(f)                                    The Trustee will not be
liable for interest on any money received by it except as the Trustee may agree
in writing with the Issuers.  Money held
in trust by the Trustee need not be segregated from other funds except to the
extent required by law.

 

Section 7.02                                Rights of Trustee.

 

(a)                                  The Trustee may conclusively
rely upon any document believed by it to be genuine and to have been signed or
presented by the proper Person.  The
Trustee need not investigate any fact or matter stated in the document.

 

(b)                                 Before the Trustee acts or
refrains from acting, it may require an Officers’ Certificate or an Opinion of
Counsel or both.  The Trustee will not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers’ Certificate or Opinion of Counsel.  The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel will be full and
complete authorization and protection from liability in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.

 

(c)                                  The Trustee may act through
its attorneys and agents and will not be responsible for the misconduct or
negligence of any agent appointed with due care.

 

(d)                                 The Trustee will not be
liable for any action it takes or omits to take in good faith that it believes
to be authorized or within the rights or powers conferred upon it by this
Indenture.

 

(e)                                  Unless otherwise
specifically provided in this Indenture, any demand, request, direction or
notice from the Issuers will be sufficient if signed by an Officer of the
Issuers.

 

(f)                                    The Trustee will be under
no obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against the
losses, liabilities and expenses that might be incurred by it in compliance
with such request or direction.

 

(g)                                 Except with respect to
Section 4.01 hereof, the Trustee shall have no duty to inquire as to the
performance of the Issuers’ covenants in Article 4 hereof.  In addition, the Trustee shall not be deemed
to have knowledge of any Default or Event of Default except (i) any Event of
Default occurring pursuant to

 

73

 

clauses (1) and (2) of
Section 6.01(a), 6.1(b) and Section 4.01 hereof or (ii) any Default
or Event of Default of which the Trustee shall have received written
notification in the manner set forth in this Indenture or an officer in the
corporate trust administration of the Trustee shall have obtained actual
knowledge.  Delivery of reports,
information and documents to the Trustee under Section 4.03 hereof is for
informational purposes only and the Trustee’s receipt of the foregoing shall
not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers’ or any
Guarantor’s, as applicable, compliance with any of their covenants thereunder
(as to which the Trustee is entitled to rely exclusively on an Officer’s
Certificate).

 

Section 7.03                                Individual Rights of Trustee.

 

The Trustee in
its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or any Affiliate of the Issuer with the
same rights it would have if it were not Trustee.  However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee (if this Indenture
has been qualified under the TIA) or resign. 
Any Agent may do the same with like rights and duties.  The Trustee is also subject to Sections 7.10
and 7.11 hereof.

 

Section 7.04                                Trustee’s Disclaimer.

 

The Trustee will
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuers’ use of the proceeds from the Notes or any money paid to the Issuers or
upon the Issuers’ direction under any provision of this Indenture, it will not
be responsible for the use or application of any money received by any Paying
Agent other than the Trustee, and it will not be responsible for any statement
or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.

 

Section 7.05                                Notice of Defaults.

 

If a Default or
Event of Default occurs and is continuing and if it is known to the Trustee,
the Trustee will mail to Holders of Notes a notice of the Default or Event of
Default within 90 days after it occurs. 
Except in the case of a Default or Event of Default in payment of
principal of, premium or Liquidated Damages, if any, or interest on, any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.

 

Section 7.06                                Reports by Trustee to Holders of the Notes.

 

(a)                                  Within 60 days after each
May 15 beginning with the May 15 following the date of this Indenture, and for
so long as Notes remain outstanding, the Trustee will mail to the Holders of
the Notes a brief report dated as of such reporting date that complies with TIA
§ 313(a) (but if no event described in TIA § 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted).  The Trustee also will
comply with TIA § 313(b)(2).  The
Trustee will also transmit by mail all reports as required by TIA
§ 313(c).

 

(b)                                 A copy of each report at the
time of its mailing to the Holders of Notes will be mailed by the Trustee to
the Issuers and filed by the Trustee with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA § 313(d).  The Issuers will promptly notify the Trustee
when the Notes are listed on any stock exchange.

 

74

 

Section 7.07                                Compensation and Indemnity.

 

(a)                                  The Issuers will pay to the
Trustee from time to time reasonable compensation for its acceptance of this
Indenture and services hereunder.  The
Trustee’s compensation will not be limited by any law on compensation of a
trustee of an express trust.  The Issuers
will reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services.  Such
expenses will include the reasonable compensation, disbursements and expenses
of the Trustee’s agents and counsel.

 

(b)                                 The Issuers and the
Guarantors will indemnify the Trustee against any and all losses, liabilities
or expenses incurred by it arising out of or in connection with the acceptance
or administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuers and the Guarantors
(including this Section 7.07) and defending itself against any claim
(whether asserted by the Issuers, the Guarantors, any Holder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or bad faith.  The Trustee will notify the Issuers promptly
of any claim for which it may seek indemnity. 
Failure by the Trustee to so notify the Issuers will not relieve the
Issuers or any of the Guarantors of their obligations hereunder.  The Issuers or such Guarantor will defend the
claim and the Trustee will cooperate in the defense.  The Trustee may have separate counsel and the
Issuers will pay the reasonable fees and expenses of such counsel.  Neither the Issuers nor any Guarantor need
pay for any settlement made without its consent, which consent will not be
unreasonably withheld.

 

(c)                                  The obligations of the
Issuers and the Guarantors under this Section 7.07 will survive the
satisfaction and discharge of this Indenture.

 

(d)                                 To secure the Issuers’ and
the Guarantors’ payment obligations in this Section 7.07, the Trustee will
have a Lien prior to the Notes on all money or property held or collected by
the Trustee, except that held in trust to pay principal and interest on
particular Notes.  Such Lien will survive
the satisfaction and discharge of this Indenture.

 

(e)                                  When the Trustee incurs
expenses or renders services after an Event of Default specified in
Section 6.01(8) or (9) hereof occurs, the expenses and the compensation
for the services (including the fees and expenses of its agents and counsel)
are intended to constitute expenses of administration under any Bankruptcy Law.

 

(f)                                    The Trustee will comply
with the provisions of TIA § 313(b)(2) to the extent applicable.

 

Section 7.08                                Replacement of Trustee.

 

(a)                                  A resignation or removal of
the Trustee and appointment of a successor Trustee will become effective only
upon the successor Trustee’s acceptance of appointment as provided in this
Section 7.08.

 

(b)                                 The Trustee may resign in
writing at any time and be discharged from the trust hereby created by so
notifying the Issuers.  The Holders of a
majority in aggregate principal amount at maturity of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Issuers in
writing.  The Issuers may remove the
Trustee if:

 

(1)
the Trustee fails to comply with Section 7.10 hereof;

 

75

 

(2)
the Trustee is adjudged a bankrupt or an insolvent or an order for relief is
entered with respect to the Trustee under any Bankruptcy Law;

 

(3)
a custodian or public officer takes charge of the Trustee or its property; or

 

(4)
the Trustee becomes incapable of acting.

 

(c)                                  If the Trustee resigns or is
removed or if a vacancy exists in the office of Trustee for any reason, the
Issuers will promptly appoint a successor Trustee.  Within one year after the successor Trustee
takes office, the Holders of a majority in aggregate principal amount at
maturity of the then outstanding Notes may appoint a successor Trustee to
replace the successor Trustee appointed by the Issuers.

 

(d)                                 If a successor Trustee does
not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Issuers, or the Holders of at least 10% in
aggregate principal amount at maturity of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

 

(e)                                  If the Trustee, after
written request by any Holder who has been a Holder for at least six months,
fails to comply with Section 7.10 hereof, such Holder may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.

 

(f)                                    A successor Trustee will
deliver a written acceptance of its appointment to the retiring Trustee and to
the Issuers.  Thereupon, the resignation
or removal of the retiring Trustee will become effective, and the successor
Trustee will have all the rights, powers and duties of the Trustee under this
Indenture.  The successor Trustee will
mail a notice of its succession to Holders. 
The retiring Trustee will promptly transfer all property held by it as
Trustee to the successor Trustee; provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. 
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Issuers’ obligations under Section 7.07 hereof will
continue for the benefit of the retiring Trustee.

 

Section 7.09                                Successor Trustee by Merger, etc.

 

If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act will be the successor Trustee.

 

Section 7.10                                Eligibility; Disqualification.

 

There will at
all times be a Trustee hereunder that is a corporation organized and doing
business under the laws of the United States of America or of any state thereof
that is authorized under such laws to exercise corporate trustee power, that is
subject to supervision or examination by federal or state authorities and that
has a combined capital and surplus of at least $50.0 million as set forth in
its most recent published annual report of condition.

 

This Indenture
will always have a Trustee who satisfies the requirements of TIA
§ 310(a)(1), (2) and (5).  The
Trustee is subject to TIA § 310(b).

 

76

 

Section 7.11                                Preferential Collection of Claims Against
Issuers.

 

The Trustee is
subject to TIA § 311(a), excluding any creditor relationship listed in TIA
§ 311(b).  A Trustee who has
resigned or been removed shall be subject to TIA § 311(a) to the extent
indicated therein.

 

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT
DEFEASANCE

 

Section 8.01                                Option to Effect Legal Defeasance or
Covenant Defeasance.

 

The Issuers may
at any time, at the option of their respective Board of Directors evidenced by
a resolution set forth in an Officers’ Certificate, elect to have either
Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.

 

Section 8.02                                Legal Defeasance and Discharge.

 

Upon the
Issuers’ exercise under Section 8.01 hereof of the option applicable to
this Section 8.02, the Issuers and each of the Guarantors will, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their obligations with respect to all
outstanding Notes (including the Note Guarantees) on the date the conditions
set forth below are satisfied (hereinafter, “Legal Defeasance”).  For this
purpose, Legal Defeasance means that the Issuers and the Guarantors will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes (including the Note Guarantees), which will thereafter be
deemed to be “outstanding” only for the purposes of Section 8.05 hereof
and the other Sections of this Indenture referred to in clauses (1) and (2)
below, and to have satisfied all their other obligations under such Notes, the
Note Guarantees and this Indenture (and the Trustee, on demand of and at the
expense of the Issuers, shall execute proper instruments acknowledging the
same), except for the following provisions which will survive until otherwise terminated
or discharged hereunder:

 

(1)
the rights of Holders of outstanding Notes to receive payments in respect of
the principal or Accreted Value, as applicable, of, or interest or premium and
Liquidated Damages, if any, on, such Notes when such payments are due from the
trust referred to in Section 8.04 hereof;

 

(2)
the Issuers’ obligations with respect to such Notes under Article 2 and
Section 4.02 hereof;

 

(3)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Issuers’ and the Guarantors’ obligations in connection therewith; and

 

(4)
this Article 8.

 

Subject to
compliance with this Article 8, the Issuers may exercise their option
under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.

 

Section 8.03                                Covenant Defeasance.

 

Upon the
Issuers’ exercise under Section 8.01 hereof of the option applicable to
this Section 8.03, the Issuers and each of the Guarantors will, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from each of their obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4.18, 4.19,
4.20, 4.21 and 4.22 hereof and

 

77

 

clause (4) of Section 5.01
hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes
will thereafter be deemed not “outstanding” for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed
“outstanding” for all other purposes hereunder (it being understood that such Notes
will not be deemed outstanding for accounting purposes).  For this purpose, Covenant Defeasance means
that, with respect to the outstanding Notes and Note Guarantees, the Issuers
and the Guarantors may omit to comply with and will have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
will not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and
such Notes and Note Guarantees will be unaffected thereby.  In addition, upon the Issuers’ exercise under
Section 8.01 hereof of the option applicable to this Section 8.03,
subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(3) through 6.01(5) hereof will not constitute Events of
Default.

 

Section 8.04                                Conditions to Legal or Covenant Defeasance.

 

In order to
exercise either Legal Defeasance or Covenant Defeasance under either
Section 8.02 or 8.03 hereof:

 

(1)
the Issuers must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized investment bank, appraisal firm, or firm
of independent public accountants, to pay the principal or Accreted Value, as
applicable, of, or interest and premium and Liquidated Damages, if any, on, the
outstanding Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, and the Issuers must specify whether the
Notes are being defeased to such stated date for payment or to a particular
redemption date;

 

(2)
in the case of an election under Section 8.02 hereof, the Issuers must
deliver to the Trustee an Opinion of Counsel confirming that:

 

(A)                              the Issuers
have received from, or there has been published by, the Internal Revenue
Service a ruling; or

 

(B)                                since the
date of this Indenture, there has been a change in the applicable federal
income tax law,

 

in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred;

 

(3)
in the case of an election under Section 8.03 hereof, the Issuers must
deliver to the Trustee an Opinion of Counsel confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;

 

78

 

(4)
no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting from
the borrowing of funds to be applied to such deposit) and the deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which the Issuers or any Guarantor is a party or by which the
Issuers or any Guarantor is bound;

 

(5)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Issuers or any of their
Subsidiaries are a party or by which the Issuers or any of their Subsidiaries
are bound;

 

(6)
the Issuers must deliver to the Trustee an Officers’ Certificate stating that
the deposit was not made by the Issuers with the intent of preferring the
Holders of Notes over the other creditors of the Issuers with the intent of
defeating, hindering, delaying or defrauding any creditors of the Issuers or
others; and

 

(7)
the Issuers must deliver to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.

 

Section 8.05                                Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions.

 

Subject to
Section 8.06 hereof, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04
hereof in respect of the outstanding Notes will be held in trust and applied by
the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal or Accreted Value, as applicable, premium and Liquidated Damages,
if any, and interest, but such money need not be segregated from other funds
except to the extent required by law.

 

The Issuers will
pay and indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against the cash or non-callable Government Securities deposited
pursuant to Section 8.04 hereof or the principal or Accreted Value, as
applicable, and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.

 

Notwithstanding
anything in this Article 8 to the contrary, the Trustee will deliver or
pay to the Issuers from time to time upon the request of the Issuers any money
or non-callable Government Securities held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under
Section 8.04(1) hereof), are in excess of the amount thereof that would then
be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.

 

Section 8.06                                Repayment to the Issuers.

 

Any money
deposited with the Trustee or any Paying Agent, or then held by the Issuers, in
trust for the payment of the principal of, premium or Liquidated Damages, if
any, or interest on, any Note and remaining unclaimed for two years after such
principal, premium or Liquidated Damages, if any, or 

 

79

 

interest has become due and payable
shall be paid to the Issuers on their request or (if then held by the Issuers)
will be discharged from such trust; and the Holder of such Note will thereafter
be permitted to look only to the Issuers for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Issuers as trustee thereof, will thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which will not be less than
30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Issuers.

 

Section 8.07                                Reinstatement.

 

If the Trustee
or Paying Agent is unable to apply any U.S. dollars or non-callable Government
Securities in accordance with Section 8.02 or 8.03 hereof, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Issuers’ and the Guarantors’ obligations under this Indenture and the Notes and
the Note Guarantees will be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuers make any payment of
principal or Accreted Value, as applicable, of, premium or Liquidated Damages,
if any, or interest on, any Note following the reinstatement of its
obligations, the Issuers will be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.

 

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01                                Without Consent of Holders of Notes.

 

Notwithstanding
Section 9.02 of this Indenture, the Issuers, the Guarantors and the
Trustee may amend or supplement this Indenture or the Notes or the Note
Guarantees without the consent of any Holder of Note:

 

(1)
to cure any ambiguity, defect or inconsistency;

 

(2)
to provide for uncertificated Notes in addition to or in place of certificated
Notes;

 

(3)
to provide for the assumption of the Issuers’ or a Guarantor’s obligations to
the Holders of the Notes and Note Guarantees by a successor to the Issuers or
such Guarantor pursuant to Article 5 hereof;

 

(4)
to make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder;

 

(5)
to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA;

 

(6)
to conform the text of this Indenture or the Notes to any provision of the
“Description of Notes” Section of the Issuers’ Offering Circular dated
March 24, 2004, relating to the initial offering of the Notes, to the
extent that such provision in that “Description of Notes” was

 

80

 

intended to be a
verbatim recitation of a provision of this Indenture, the Note Guarantees or
the Notes;

 

(7)
to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or

 

(8)
to allow any Guarantor to execute a supplemental indenture and/or a Note
Guarantee with respect to the Notes.

 

Upon the request
of the Issuers accompanied by a resolution of their respective Boards of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee will join with the Issuers and the
Guarantors in the execution of any amended or supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee will
not be obligated to enter into such amended or supplemental indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.

 

Section 9.02                                With Consent of Holders of Notes.

 

Except as
provided below in this Section 9.02, the Issuers and the Trustee may amend
or supplement this Indenture (including, without limitation, Sections 3.08,
3.09, 4.10, 4.15 and 4.22 hereof) and the Notes and the Note Guarantees with
the consent of the Holders of at least a majority in aggregate principal amount
at maturity of the then outstanding Notes (including, without limitation,
Additional Notes, if any) voting as a single class (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium or Liquidated Damages,
if any, or interest on, the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes or the Note Guarantees may be waived with the consent of
the Holders of a majority in aggregate principal amount at maturity of the then
outstanding Notes (including, without limitation, Additional Notes, if any)
voting as a single class (including, without limitation, consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes).

 

Upon the request
of the Issuers accompanied by a resolution of their respective Boards of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt
by the Trustee of the documents described in Section 7.02 hereof, the
Trustee will join with the Issuers and the Guarantors in the execution of such
amended or supplemental indenture unless such amended or supplemental indenture
directly affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
will not be obligated to, enter into such amended or supplemental Indenture.

 

It is not be
necessary for the consent of the Holders of Notes under this Section 9.02
to approve the particular form of any proposed amendment, supplement or waiver,
but it is sufficient if such consent approves the substance thereof.

 

After an
amendment, supplement or waiver under this Section 9.02 becomes effective,
the Issuers will mail to the Holders of Notes affected thereby a notice briefly
describing the amendment, supplement or waiver. 
Any failure of the Issuers to mail such notice, or any defect therein,
will not, however, in any way impair or affect the validity of any such amended
or supplemental indenture or waiver. 
Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount at maturity of the

 

81

 

Notes then outstanding voting as
a single class may waive compliance in a particular instance by the Issuers
with any provision of this Indenture or the Notes or the Note Guarantees.  However, without the consent of each Holder
affected, an amendment, supplement or waiver under this Section 9.02 may
not (with respect to any Notes held by a non-consenting Holder):

 

(1)
reduce the principal amount at maturity of Notes whose Holders must consent to
an amendment, supplement or waiver;

 

(2)
reduce the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes (except as provided above
with respect to Sections 3.08, 3.09, 4.10, 4.15 and 4.22 hereof);

 

(3)
reduce the rate of or change the time for payment of interest, including
default interest, on any Note;

 

(4)
waive a Default or Event of Default in the payment of principal of, or premium
or Liquidated Damages, if any, or interest on, the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount at maturity of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration);

 

(5)
make any Note payable in money other than that stated in the Notes;

 

(6)
make any change in the provisions of this Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of,
or interest or premium or Liquidated Damages, if any, on, the Notes;

 

(7)
waive a redemption payment with respect to any Note (other than a payment
required by Sections 3.08, 3.09, 4.10, 4.15 or 4.22 hereof);

 

(8)
release any Guarantor from any of its obligations under its Note Guarantee or
this Indenture, except in accordance with the terms of this Indenture; or

 

(9)
make any change in the preceding amendment and waiver provisions.

 

Section 9.03                                Compliance with Trust Indenture Act.

 

Every amendment
or supplement to this Indenture or the Notes will be set forth in a amended or
supplemental indenture that complies with the TIA as then in effect.

 

Section 9.04                                Revocation and Effect of Consents.

 

Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Note is a continuing consent by the Holder of a Note and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder’s Note, even if notation of the consent is not made on any
Note.  However, any such Holder of a Note
or subsequent Holder of a Note may revoke the consent as to its Note if the
Trustee receives written notice of revocation before the date the amendment,
supplement or waiver becomes effective. 
An amendment, supplement or waiver becomes effective in accordance with
its terms and thereafter binds every Holder.

 

82

 

Section 9.05                                Notation on or Exchange of Notes.

 

The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Note thereafter authenticated.  The
Issuers in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.

 

Failure to make
the appropriate notation or issue a new Note will not affect the validity and
effect of such amendment, supplement or waiver.

 

Section 9.06                                Trustee to Sign Amendments, etc.

 

The Trustee will
sign any amended or supplemental indenture authorized pursuant to this
Article 9 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee.  The Issuers may not sign an amended or
supplemental indenture until the Board of Directors of each of the Issuers
approves it.  In executing any amended or
supplemental indenture, the Trustee will be entitled to receive and (subject to
Section 7.01 hereof) will be fully protected in relying upon, in addition
to the documents required by Section 12.04 hereof, an Officers’
Certificate and an Opinion of Counsel stating that the execution of such
amended or supplemental indenture is authorized or permitted by this Indenture.

 

ARTICLE 10

NOTE GUARANTEES

 

Section 10.01                          Guarantee.

 

(a)                                  Subject to this
Article 10, each of the Guarantors hereby, jointly and severally,
unconditionally guarantees to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity and enforceability of this Indenture, the Notes or the
obligations of the Issuers hereunder or thereunder, that:

 

(1)  the principal of, premium and Liquidated
Damages, if any, and interest on, the Notes will be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal of and interest on the Notes, if any, if
lawful, and all other obligations of the Issuers to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and

 

(2)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.

 

Failing payment
when due of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Guarantors will be jointly and severally obligated to pay
the same immediately.  Each Guarantor
agrees that this is a guarantee of payment and not a guarantee of collection.

 

(b)                                 The Guarantors hereby agree
that their obligations hereunder are unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Issuers, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.

 

83

 

Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuers, any right to require a
proceeding first against the Issuers, protest, notice and all demands
whatsoever and covenant that this Note Guarantee will not be discharged except
by complete performance of the obligations contained in the Notes and this
Indenture.

 

(c)                                  If any Holder or the Trustee
is required by any court or otherwise to return to the Issuers, the Guarantors
or any custodian, trustee, liquidator or other similar official acting in
relation to either the Issuers or the Guarantors, any amount paid by either to
the Trustee or such Holder, this Note Guarantee, to the extent theretofore
discharged, will be reinstated in full force and effect.

 

(d)                                 Each Guarantor agrees that it
will not be entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.  Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (1) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (2) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations
(whether or not due and payable) will forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.  The Guarantors will have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Note Guarantee.

 

Section 10.02                          Limitation on Guarantor Liability.

 

Each Guarantor,
and by its acceptance of Notes, each Holder, hereby confirms that it is the
intention of all such parties that the Note Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law to the extent applicable to any Note
Guarantee.  To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor will be limited to the maximum amount
that will, after giving effect to such maximum amount and all other contingent
and fixed liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to receive contribution
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 10, result in the
obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.

 

Section 10.03                          Execution and Delivery of Note Guarantee.

 

To evidence its
Note Guarantee set forth in Section 10.01 hereof, each Guarantor hereby
agrees that a notation of such Note Guarantee substantially in the form
attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
will be executed on behalf of such Guarantor by one of its Officers.

 

Each Guarantor
hereby agrees that its Note Guarantee set forth in Section 10.01 hereof
will remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Note Guarantee.

 

If an Officer
whose signature is on this Indenture or on the Note Guarantee no longer holds
that office at the time the Trustee authenticates the Note on which a Note
Guarantee is endorsed, the Note Guarantee will be valid nevertheless.

 

84

 

The delivery of
any Note by the Trustee, after the authentication thereof hereunder, will
constitute due delivery of the Note Guarantee set forth in this Indenture on
behalf of the Guarantors.

 

In the event
that Interactive Health or any of its Restricted Subsidiaries creates or
acquires any Domestic Subsidiary after the date of this Indenture, if required
by Section 4.19 hereof, Interactive Health will cause such Domestic Subsidiary
to comply with the provisions of Section 4.19 hereof and this
Article 10, to the extent applicable.

 

Section 10.04                          Guarantors May Consolidate, etc., on Certain
Terms.

 

Except as
otherwise provided in Section 10.05 hereof, no Guarantor may sell or otherwise
dispose of all or substantially all of its assets to, or consolidate with or
merge with or into (whether or not such Guarantor is the surviving Person)
another Person, other than the Issuers or another Guarantor, unless:

 

(1)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and

 

(2)
either:

 

(A)                              subject to
Section 10.05 hereof, the Person acquiring the property in any such sale
or disposition or the Person formed by or surviving any such consolidation or
merger unconditionally assumes all the obligations of that Guarantor under this
Indenture, its Note Guarantee and the Registration Rights Agreement on the
terms set forth herein or therein, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee; or

 

(B)                                the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of this Indenture, including without limitation,
Section 4.10 hereof.

 

In case of any
such consolidation, merger, sale or conveyance and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed
upon the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Guarantor, such successor
Person will succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor.  Such successor Person thereupon may cause to
be signed any or all of the Note Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Issuers and delivered to the Trustee. 
All the Note Guarantees so issued will in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
all of such Note Guarantees had been issued at the date of the execution
hereof.

 

Except as set
forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a) and (b)
above, nothing contained in this Indenture or in any of the Notes will prevent
any consolidation or merger of a Guarantor with or into the Issuers or another
Guarantor, or will prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Issuers or
another Guarantor.

 

Section 10.05                          Releases.

 

(a)                                  In the event of any sale or
other disposition of all or substantially all of the assets of any Guarantor,
by way of merger, consolidation or otherwise, or a sale or other disposition of
all of the

 

85

 

Capital Stock of any Guarantor,
in each case to a Person that is not (either before or after giving effect to
such transactions) the Issuers or a Restricted Subsidiary of the Issuers, then
such Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the Capital Stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will
be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10
hereof.  Upon delivery by the Issuers to
the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect
that such sale or other disposition was made by the Issuers in accordance with
the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee will execute any documents reasonably
required in order to evidence the release of any Guarantor from its obligations
under its Note Guarantee.

 

(b)                                 Upon designation of any
Guarantor as an Unrestricted Subsidiary in accordance with the terms of this
Indenture, such Guarantor will be released and relieved of any obligations
under its Note Guarantee.

 

(c)                                  Upon Legal Defeasance in
accordance with Article 8 hereof or satisfaction and discharge of this
Indenture in accordance with Article 11 hereof, each Guarantor will be
released and relieved of any obligations under its Note Guarantee.

 

Any Guarantor
not released from its obligations under its Note Guarantee as provided in this
Section 10.05 will remain liable for the full amount of principal of and
interest and premium and Liquidated Damages, if any, on the Notes and for the
other obligations of any Guarantor under this Indenture as provided in this
Article 10.

 

ARTICLE 11

SATISFACTION AND DISCHARGE

 

Section 11.01                          Satisfaction and Discharge.

 

This Indenture
will be discharged and will cease to be of further effect as to all Notes
issued hereunder, when:

 

(1)
either:

 

(A)                              all Notes
that have been authenticated, except lost, stolen or destroyed Notes that have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Issuers, have been delivered to
the Trustee for cancellation; or

 

(B)                                all Notes
that have not been delivered to the Trustee for cancellation have become due
and payable by reason of the mailing of a notice of redemption or otherwise or
will become due and payable within one year and the Issuers or any Guarantor
has irrevocably deposited or caused to be deposited with the Trustee as trust
funds in trust solely for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, without consideration of any reinvestment of interest,
to pay and discharge the entire Indebtedness on the Notes not delivered to the
Trustee for cancellation for principal, or Accreted Value, as applicable,
premium and Liquidated Damages, if any, and accrued interest to the date of
maturity or redemption;

 

86

 

(2)
the Issuers or any Guarantor has paid or caused to be paid all sums payable by
it under this Indenture; and

 

(3)
the Issuers have delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of the Notes at
maturity or on the redemption date, as the case may be.

 

In addition, the Issuers must
deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee
stating that all conditions precedent to satisfaction and discharge have been
satisfied.

 

Notwithstanding
the satisfaction and discharge of this Indenture, if money has been deposited
with the Trustee pursuant to subclause (b) of clause (1) of this
Section 11.01, the provisions of Sections 11.02 and 8.06 hereof will
survive.  In addition, nothing in this
Section 11.01 will be deemed to discharge those provisions of
Section 7.07 hereof, that, by their terms, survive the satisfaction and
discharge of this Indenture.

 

Section 11.02                          Application of Trust Money.

 

Subject to the
provisions of Section 8.06 hereof, all money deposited with the Trustee
pursuant to Section 11.01 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Issuers
acting as their own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal or Accreted Value, as applicable, and
premium and Liquidated Damages, if any and interest for whose payment such
money has been deposited with the Trustee; but such money need not be
segregated from other funds except to the extent required by law.

 

If the Trustee
or Paying Agent is unable to apply any money or Government Securities in
accordance with Section 11.01 hereof by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Issuers’
and any Guarantor’s obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to
Section 11.01 hereof; provided
that if the Issuers have made any payment of principal or Accreted Value, as
applicable, of, premium or Liquidated Damages, if any, or interest on, any
Notes because of the reinstatement of its obligations, the Issuers shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or Government Securities held by the Trustee or Paying Agent.

 

ARTICLE 12

MISCELLANEOUS

 

Section 12.01                          Trust Indenture Act Controls.

 

If any provision
of this Indenture limits, qualifies or conflicts with the duties imposed by TIA
§318(c), the imposed duties will control.

 

Section 12.02                          Notices.

 

Any notice or
communication by the Issuers, any Guarantor or the Trustee to the others is
duly given if in writing and delivered in Person or by first class mail
(registered or certified, return receipt requested), facsimile transmission or
overnight air courier guaranteeing next day delivery, to the others’ address:

 

87

 

If to the
Issuers and/or any Guarantor:

 

Interactive
Health LLC

Interactive Health Finance Corp.

3030 Walnut Avenue

Long Beach, California  90807-5222

Facsimile No.:  (562) 426-7127

Attention:  Chief Financial Officer

 

If to the Trustee:

 

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota 55107 -2292

Facsimile No.:  (651) 495-8097

Attention:  Frank Leslie

 

The Issuers, any
Guarantor or the Trustee, by notice to the others, may designate additional or
different addresses for subsequent notices or communications.

 

All notices and
communications (other than those sent to Holders) will be deemed to have been
duly given:  at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by
facsimile; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.

 

Any notice or
communication to a Holder will be mailed by first class mail, certified or
registered, return receipt requested, or by overnight air courier guaranteeing
next day delivery to its address shown on the register kept by the
Registrar.  Any notice or communication
will also be so mailed to any Person described in TIA § 313(c), to the
extent required by the TIA.  Failure to
mail a notice or communication to a Holder or any defect in it will not affect
its sufficiency with respect to other Holders.

 

If a notice or
communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.

 

If the Issuers
mail a notice or communication to Holders, it will mail a copy to the Trustee
and each Agent at the same time.

 

Section 12.03                          Communication by Holders of Notes with Other
Holders of Notes.

 

Holders may
communicate pursuant to TIA § 312(b) with other Holders with respect to
their rights under this Indenture or the Notes. 
The Issuers, the Trustee, the Registrar and anyone else shall have the
protection of TIA § 312(c).

 

Section 12.04                          Certificate and Opinion as to Conditions
Precedent.

 

Upon any request
or application by the Issuers to the Trustee to take any action under this
Indenture, the Issuers shall furnish to the Trustee:

 

(1)
an Officers’ Certificate in form and substance reasonably satisfactory to the
Trustee (which must include the statements set forth in Section 12.05
hereof) stating that, in the opinion

 

88

 

of the signers,
all conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and

 

(2)
an Opinion of Counsel in form and substance reasonably satisfactory to the
Trustee (which must include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.

 

Section 12.05                          Statements Required in Certificate or
Opinion.

 

Each certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Indenture (other than a certificate provided pursuant to TIA
§ 314(a)(4)) must comply with the provisions of TIA § 314(e) and must
include:

 

(1)
a statement that the Person making such certificate or opinion has read such
covenant or condition;

 

(2)
a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

 

(3)
a statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and

 

(4)
a statement as to whether or not, in the opinion of such Person, such condition
or covenant has been satisfied.

 

Section 12.06                          Rules by Trustee and Agents.

 

The Trustee may
make reasonable rules for action by or at a meeting of Holders.  The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.

 

Section 12.07                          No Personal Liability of Directors,
Officers, Employees and Stockholders.

 

No past, present
or future director, officer, employee, incorporator, stockholder or equity
holder of the Issuers or any Guarantor, as such, will have any liability for
any obligations of the Issuers or the Guarantors under the Notes, this
Indenture, the Note Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Notes by accepting a Note waives and releases all such
liability.  The waiver and release are
part of the consideration for issuance of the Notes.  The waiver may not be effective to waive
liabilities under the federal securities laws.

 

Section 12.08                          Governing Law.

 

THE INTERNAL LAW
OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE,
THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

89

 

Section 12.09                          No Adverse Interpretation of Other
Agreements.

 

This Indenture
may not be used to interpret any other indenture, loan or debt agreement of
Interactive Health or its Subsidiaries or of any other Person.  Any such indenture, loan or debt agreement
may not be used to interpret this Indenture.

 

Section 12.10                          Successors.

 

All agreements
of the Issuers in this Indenture and the Notes will bind each of their
successors.  All agreements of the
Trustee in this Indenture will bind its successors.  All agreements of each Guarantor in this
Indenture will bind its successors, except as otherwise provided in
Section 10.05 hereof.

 

Section 12.11                          Severability.

 

In case any
provision in this Indenture or in the Notes is invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.

 

Section 12.12                          Counterpart Originals.

 

The parties may
sign any number of copies of this Indenture. 
Each signed copy will be an original, but all of them together represent
the same agreement.

 

Section 12.13                          Table of Contents, Headings, etc.

 

The Table of
Contents, Cross-Reference Table and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and will in no way modify or restrict
any of the terms or provisions hereof.

 

[Signatures
on following page]

 

90

 

SIGNATURES

 

	
  Dated as of March 26, 2004

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERACTIVE HEALTH LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig Womack

  
	
   

  	
   

  	
  Name: Craig Womack

  
	
   

  	
   

  	
  Title: Chief Executive Officer
  and Chief Operating

  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERACTIVE HEALTH FINANCE
  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Interactive Health LLC

  
	
   

  	
  Its:

  	
  Sole stockholder

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig Womack

  
	
   

  	
   

  	
  Name: Craig Womack

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERACTIVE HEALTH, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig Womack

  
	
   

  	
   

  	
  Name: Craig Womack

  
	
   

  	
   

  	
  Title: Chief Executive Officer
  and Chief Operating

  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frank Leslie

  
	
   

  	
   

  	
  Name: Frank Leslie

  
	
   

  	
   

  	
  Title: Vice President

  
				

 

 

[Face
of Note]

 

THIS NOTE HAS BEEN ISSUED WITH
ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. FOR FURTHER
INFORMATION REGARDING THE ISSUE PRICE, ISSUE DATE AND THE YIELD TO MATURITY OF
THIS NOTE, THE HOLDER OF THIS NOTE SHOULD CONTACT THE OFFICE OF THE CHIEF
FINANCIAL OFFICER OF INTERACTIVE HEALTH LLC AT (562) 426-8700 AT ANY TIME
BEGINNING 10 DAYS AFTER THE CLOSING.

 

CUSIP/CINS
458408AA9

 

71⁄4%
Senior Notes due 2011

 

 

	
  No.

  	
   

  	
  $

  	
   

  	
   

  

 

INTERACTIVE
HEALTH LLC

INTERACTIVE HEALTH FINANCE CORP.

 

promises to pay to
[                ]
or registered assigns,

 

the principal sum of
                                                                                                                      
DOLLARS on April 1, 2011.

 

Interest Payment Dates:  April 1 and October 1

 

Record Dates:  March 15 and September 15

 

Dated:  March 26, 2004

 

 

	
   

  	
  INTERACTIVE HEALTH LLC

  
	
   

  	
  INTERACTIVE HEALTH FINANCE
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

This is one of the Notes referred
to

in the within-mentioned Indenture:

 

	
  U.S. BANK NATIONAL ASSOCIATION

  	
   

  
	
  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  

 

A1-1

 

[Back
of Note]

71⁄4%
Senior Notes due 2011

 

[Insert the Global Note Legend, if applicable pursuant to the
provisions of the Indenture]

 

[Insert the Private Placement Legend, if applicable pursuant to the
provisions of the Indenture]

 

Capitalized
terms used herein have the meanings assigned to them in the Indenture referred
to below unless otherwise indicated.

 

(1)
INTEREST.  Interactive Health LLC, a Delaware limited
liability company (the “Company”),
and Interactive Health Finance Corp., a Delaware corporation (“Co-Issuer” and together with the
Company, the “Issuers”), promise to
pay interest on the principal amount at maturity of this Note at 71⁄4% per annum
from
                            ,
20     until maturity and shall pay the Liquidated Damages,
if any, payable pursuant to Section 5 of the Registration Rights Agreement
referred to below.  The Issuers will pay
interest and Liquidated Damages, if any, semi-annually in arrears on
April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”).  Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided
that if there is no existing Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided
further that the first Interest Payment Date shall be 
                            ,
20    .  The Issuers
will pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect to
the extent lawful; it will pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages, if any (without regard to any applicable grace
periods), from time to time on demand at the same rate to the extent lawful.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

 

(2)
METHOD OF PAYMENT.  The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the March 15
or September 15 next preceding the Interest Payment Date, even if such
Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest.  The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Issuers maintained for such purpose
within or without the City and State of New York, or, at the option of the
Issuers, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders; provided that payment by
wire transfer of immediately available funds will be required with respect to
principal of and interest, premium and Liquidated Damages, if any, on, all
Global Notes and all other Notes the Holders of which will have provided wire
transfer instructions to the Issuers or the Paying Agent.  Such payment will be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.

 

(3)
PAYING AGENT AND REGISTRAR.  Initially, U.S. Bank National Association,
the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Issuers may change any Paying

 

A1-2

 

Agent or
Registrar without notice to any Holder. 
The Company or any of its Subsidiaries may act in any such capacity.

 

(4)
INDENTURE.  The Issuers issued the Notes under an
Indenture dated as of March 26, 2004 (the “Indenture”) among the Issuers, the Guarantors and the Trustee.  The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the TIA.  The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms.  To the extent any provision of
this Note conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling.  The Issuers may issue an aggregate principal
amount at maturity of Notes permitted by the provisions of the Indenture.

 

(5)
OPTIONAL REDEMPTION.

 

(a)                                  At any time prior to
April 1, 2007, the Issuers may on any one or more occasions redeem up to
40% of the aggregate principal amount at maturity of Notes issued under this
Indenture at a redemption price of 111.375% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest and Liquidated Damages,
if any, to the redemption date, with the net cash proceeds of a sale of Equity
Interests (other than Disqualified Stock) of Parent (to the extent that such
proceeds are contributed, directly or indirectly, as common equity to
Interactive Health) or of Interactive Health; provided that:

 

(1)
at least 60% of the aggregate principal amount at maturity of Notes originally
issued under this Indenture (excluding Notes held by Interactive Health and its
Subsidiaries) remains outstanding immediately after the occurrence of such
redemption; and

 

(2)
the redemption occurs within 45 days of the date of the closing of such sale of
Equity Interests.

 

(b)                                 At any time prior to
April 1, 2008, the Issuers may also redeem all or a part of the Notes,
upon not less than 30 nor more than 60 days prior notice mailed by first-class
mail to each Holder’s registered address, at a redemption price equal to 100%
of the Accreted Value of Notes redeemed on the redemption date plus the
Applicable Premium as of, and accrued and unpaid interest and Liquidated
Damages, if any, to the applicable date of redemption, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant
interest payment date.

 

(c)                                  Except pursuant to the
preceding two paragraphs, the Notes will not be redeemable at the Issuers’
option prior to April 1, 2008.

 

(d)                                 On or after April 1,
2008, the Issuers may redeem all or a part of the Notes upon not less than 30
nor more than 60 days’ notice, at the redemption prices (expressed as percentages
of Accreted Value) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, on the Notes redeemed to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of
the years indicated below, subject to the rights of Holders on the relevant
record date to receive interest on the relevant interest payment date:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2008

  	
   

  	
  105.688

  	
  %

  
	
  2009

  	
   

  	
  102.844

  	
  %

  
	
  2010 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

A1-3

 

Unless the
Issuers default in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable
redemption date.

 

(e)                                  Any redemption pursuant to
Section 3.07 of the Indenture shall be made pursuant to the provisions of
Sections 3.01 through 3.06 thereof.

 

(6)
MANDATORY REDEMPTION.  The Issuers are not required to make
mandatory redemption or sinking fund payments with respect to the Notes except
that, on each of April 1, 2009, October 1, 2009, April 1, 2010
and October 1, 2010, (each a “Mandatory
Redemption Date”), if any Notes are outstanding, the Issuers will be
required to make a pro rata redemption of approximately $4.0 million, $1.75
million, $1.75 million and $1.75 million, respectively, of the Accreted Value
of the Notes outstanding on such Mandatory Redemption Date, at a redemption
price of 100% of the Accreted Value of the portion of Notes so redeemed, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided that if such
redemption results in any unredeemed portion of a Note having a principal
amount that is not a round multiple of $1,000, the Issuers shall redeem an
additional portion of such Note as to reduce the principal amount to a round
multiple of $1,000; provided further that
the amount of any such redemption shall be reduced by the aggregate amount of
the accretion on Notes previously repaid pursuant to any pro rata repurchase or
redemption of the Notes hereunder pursuant to this Indenture with respect to
all then-outstanding Notes; and provided,
additionally that, on each Mandatory
Redemption Date, the Issuers shall simultaneously be required to redeem an
additional portion of each Note at the price set forth above, plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of redemption, to
the extent, if any, required to prevent such Note from being treated as an
Applicable High Yield Discount Obligation within the meaning of
Section 163(i)(1) of the Internal Revenue Code of 1986, as amended (the
total amount redeemed pursuant to this sentence, the “Mandatory Redemption Amount”).

 

(7)
REPURCHASE AT THE OPTION OF HOLDER.

 

(a)                                  If there is a Change of
Control, the Issuers will be required to make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes
at a purchase price in cash equal to 101% of the aggregate Accreted Value
thereof on the date of purchase plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant
interest payment date (the “Change of
Control Payment”).  Within 30 days
following any Change of Control, the Issuers will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.

 

(b)                                 If the Company or a
Restricted Subsidiary of the Company consummates any Asset Sales, within 15
days of each date on which the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Issuers will commence an offer to all Holders of Notes and
all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an “Asset Sale Offer”)
pursuant to Section 3.09(a) of the Indenture to purchase the maximum
principal amount at maturity of Notes (including any Additional Notes) and such
other pari passu Indebtedness that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the Accreted Value thereof on the date of purchase plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase, in accordance with the procedures set forth in the Indenture.  To the extent that the aggregate amount of
Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Issuers may use such deficiency for any
purpose not otherwise prohibited by the Indenture.  If the aggregate Accreted Value of Notes and

 

A1-4

 

principal amount or accreted
value, as applicable, of other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select on a pro
rata basis the Notes to be purchased, and such Notes, together with such
other pari passu Indebtedness to be
purchased, shall be purchased on a pro
rata basis.  Holders of Notes that
are the subject of an offer to purchase will receive an Asset Sale Offer from
the Issuers prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled “Option
of Holder to Elect Purchase” attached to this Note.

 

(c)                                  Within 120 days after the
end of each Fiscal Period, the Issuers shall make an offer to all holders of
Notes (an “Excess Cash Flow Offer”)
to purchase the maximum Accreted Value of Notes that is an integral multiple of
$1,000 that may be purchased with the Excess Cash Flow Offer Amount, at a
purchase price, payable in cash, equal to 101% of the Accreted Value of Notes
to be repurchased on the date of purchase, plus accrued and unpaid interest and
Liquidated Damages, if any, on the Notes repurchased to the date of purchase
(the “Excess Cash Flow Purchase Price”).  Notwithstanding the foregoing, the Issuers
shall not be required to make any payment for Notes tendered pursuant to any
Excess Cash Flow Offer in excess of the lowest amount of cash, if any, that the
requisite lenders of any Indebtedness outstanding under Section 4.09(b)(1)
of the Indenture have agreed in writing may be used for repurchases of Notes so
tendered (such amount, the “Permitted
Excess Cash Flow Payment”).  If the
aggregate Excess Cash Flow Purchase Price of Notes tendered pursuant to any
Excess Cash Flow Offer is greater than the Permitted Excess Cash Flow Amount
with respect to such offer (such different, the “Excess Cash Flow Payment Shortfall”), then the Issuers shall
deposit into and retain in a segregated restricted cash account cash equal to
the Excess Cash Flow Payment Shortfall. 
Amounts in the segregated restricted cash account may not be used for
any purpose other than a payment pursuant to Section 4.22 of the
Indenture.  If the aggregate Excess Cash
Flow Purchase Price of the Notes tendered pursuant to any Excess Cash Flow
Offer exceeds the lesser of the Excess Cash Flow Offer Amount or the Permitted
Excess Cash Flow Payment with respect thereto, the Trustee shall select the
Notes to be purchased on a pro rata basis. 
To the extent that the aggregate Excess Cash Flow Purchase Price of the
Notes tendered pursuant to any Excess Cash Flow Offer is less than the lesser
of the Excess Cash Flow Offer Amount or the Permitted Excess Cash Flow Payment
with respect thereto, the Issuers may use any remaining Excess Cash Flow for any
purpose not otherwise prohibited by this Indenture.  The Issuers’ obligations to make Excess Cash
Flow Offers pursuant to Section 4.22 of the Indenture shall terminate upon
the first to occur of (i) the consummation of a Qualified IPO or (ii) the first
date on which the ratio of the Issuers’ Total Debt as of the last day of any
Fiscal Period to the Issuers’ Consolidated Cash Flow for such Fiscal Period is
less than 2.5 to 1.0. Holders of Notes that are the subject of an offer to
purchase will receive an Excess Cash Flow Offer from the Issuers prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled “Option of Holder to
Elect Purchase” attached to this Note.

 

(8)
NOTICE OF REDEMPTION.  Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address, except that
redemption notices may be mailed more than 60 days prior to a redemption date
if the notice is issued in connection with a defeasance of the Notes or a
satisfaction or discharge of the Indenture. 
Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed.

 

(9)
DENOMINATIONS, TRANSFER, EXCHANGE.  The Notes are in registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.  The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Issuers may require a Holder to pay any taxes and fees required
by

 

A1-5

 

law or permitted
by the Indenture.  The Issuers need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in part.  Also, the Issuers need not exchange or
register the transfer of any Notes for a period of 15 days before a selection
of Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.

 

(10)
PERSONS DEEMED OWNERS.  The registered Holder of a Note may be
treated as its owner for all purposes.

 

(11)
AMENDMENT, SUPPLEMENT AND WAIVER.  Subject to certain exceptions, the Indenture
or the Notes or the Note Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount at
maturity of the then outstanding Notes including Additional Notes, if any,
voting as a single class, and any existing Default or Event or Default or
compliance with any provision of the Indenture or the Notes or the Note
Guarantees may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the then outstanding Notes including
Additional Notes, if any, voting as a single class.  Without the consent of any Holder of a Note,
the Indenture or the Notes or the Note Guarantees may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuers’ or a Guarantor’s obligations to
Holders of the Notes and Note Guarantees in case of a merger or consolidation,
to make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA,
to conform the text of the Indenture or the Notes to any provision of the
“Description of Notes” section of the Issuers’ Offering Circular dated
March 24, 2004, relating to the initial offering of the Notes, to the
extent that such provision in that “Description of the Notes” was intended to
be a verbatim recitation of a provision of the Indenture, the Note Guarantees
or the Notes; to provide for the issuance of Additional Notes in accordance
with the limitations set forth in the Indenture, or to allow any Guarantor to
execute a supplemental indenture to the Indenture and/or a Note Guarantee with
respect to the Notes.

 

(12)
DEFAULTS AND REMEDIES.  Events of Default include:  (i) default for 30 days in the payment when
due of interest on, or Liquidated Damages, if any, with respect to the Notes;
(ii) default in the payment when due of the principal of, or premium, if any,
on, the Notes when the same becomes due and payable at maturity, upon
redemption or otherwise; (iii) failure by either of the Issuers or any of their
Restricted Subsidiaries to comply with Sections 3.08, 3.09, 4.10, 4.15, 4.22 or
5.01 of the Indenture; (iv) failure by either of the Issuers or any of their
Restricted Subsidiaries for 60 days after notice to the Company by the Trustee
or the Holders of at least 25% in aggregate principal amount at maturity of the
Notes then outstanding voting as a single class to comply with any of the other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company which default results in the
acceleration of such Indebtedness prior to its express maturity; (vi) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days; (vii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary; and (viii) except as permitted by the
Indenture, any Note Guarantee is held in any judicial proceeding to be
unenforceable or invalid or ceases for any reason to be in full force and
effect or any Guarantor or any Person acting on behalf of any Guarantor denies
or disaffirms its obligations under such Guarantor’s Note Guarantee.  If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate

 

A1-6

 

principal amount
at maturity of the then outstanding Notes may declare all the Notes to be due
and payable immediately.  Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, all outstanding Notes will become due and payable
immediately without further action or notice. 
Holders may not enforce the Indenture or the Notes except as provided in
the Indenture.  Subject to certain
limitations, Holders of a majority in aggregate principal amount at maturity of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power.  The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest or premium or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. 
The Holders of a majority in aggregate principal amount at maturity of
the then outstanding Notes by notice to the Trustee may, on behalf of the
Holders of all of the Notes, rescind an acceleration or waive any existing
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of interest or premium or
Liquidated Damages, if any, on, or the principal of, the Notes.  The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required, upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.

 

(13)
TRUSTEE DEALINGS WITH COMPANY.  The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not the Trustee.

 

(14)
NO RECOURSE AGAINST OTHERS.  A director, officer, employee, incorporator
or stockholder of the Issuers or any of the Guarantors, as such, will not have
any liability for any obligations of the Issuers or the Guarantors under the
Notes, the Note Guarantees or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and
releases all such liability.  The waiver
and release are part of the consideration for the issuance of the Notes.

 

(15)
AUTHENTICATION.  This Note will not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.

 

(16)
ABBREVIATIONS.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT
TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

(17)
ADDITIONAL RIGHTS OF HOLDERS OF
RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES.  In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes will have all the rights set forth in the Registration Rights
Agreement dated as of March 26, 2004, among the Issuers, the Guarantors
and the other parties named on the signature pages thereof (the “Registration Rights Agreement”).

 

(18)
CUSIP NUMBERS.  Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as

 

A1-7

 

printed on the
Notes or as contained in any notice of redemption, and reliance may be placed
only on the other identification numbers placed thereon.

 

(19)
GOVERNING LAW.  THE INTERNAL LAW OF THE STATE OF NEW YORK
WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE
GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.  Requests may be made to:

 

Interactive Health

3030 Walnut Avenue

Long Beach, California  90807

Attention:  Chief Financial Officer

 

A1-8

 

ASSIGNMENT
FORM

 

To assign this
Note, fill in the form below:

 

	
  (I) or (we) assign and transfer
  this Note to:

  	
   

  	 

	
   

  	
  (Insert
  assignee’s legal name)

  	 

	
   

  	
   

  	 

	
   

  	 

	
  (Insert
  assignee’s soc. sec. or tax I.D. no.)

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
  (Print
  or type assignee’s name, address and zip code)

  	 

	
   

  	
   

  	 

	
  and irrevocably appoint

  	
   

  	 

	
  to transfer this Note on the
  books of the Company.  The agent may
  substitute another to act for him.

  	 

	
   

  	 

	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee*:

  	
   

  	
   

  	
   

  
										

 

*                                         Participant
in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).

 

A1-9

 

OPTION
OF HOLDER TO ELECT PURCHASE

 

If you want to
elect to have this Note purchased by the Company pursuant to Section 4.10,
4.15 or 4.22 of the Indenture, check the appropriate box below:

 

	
  o
  Section 4.10

  	
   

  	
  o
  Section 4.15

  	
   

  	
  o
  Section 4.22

  

 

If you want to
elect to have only part of the Note purchased by the Company pursuant to
Section 4.10, 4.15 or 4.22 of the Indenture, state the amount you elect to
have purchased:

 

	
  $

  

 

	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax Identification No.:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee*:

  	
   

  	
   

  	
   

  
									

 

*                                         Participant in a
recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).

 

A1-10

 

SCHEDULE OF
EXCHANGES OF INTERESTS IN THE GLOBAL NOTE *

 

The following
exchanges of a part of this Global Note for an interest in another Global Note
or for a Definitive Note, or exchanges of a part of another Global Note or
Definitive Note for an interest in this Global Note, have been made:

 

	
  Date of
  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount 

  at maturity of 

  this Global Note

  	
   

  	
  Amount of increase in

  Principal Amount 

  at maturity of 

  this Global Note

  	
   

  	
  Principal Amount 

  at maturity of this

  Global Note following

  such decrease 

  (or increase)

  	
   

  	
  Signature of authorized

  officer of Trustee or

  Custodian

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*                 This schedule should be included only if the Note is issued in
global form.

 

A1-11

 

[Face
of Regulation S Temporary Global Note]

 

THIS NOTE HAS BEEN ISSUED WITH
ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME TAX PURPOSES. FOR FURTHER
INFORMATION REGARDING THE ISSUE PRICE, ISSUE DATE AND THE YIELD TO MATURITY OF
THIS NOTE, THE HOLDER OF THIS NOTE SHOULD CONTACT THE OFFICE OF THE CHIEF
FINANCIAL OFFICER OF INTERACTIVE HEALTH LLC AT (562) 426-8700 AT ANY TIME
BEGINNING 10 DAYS AFTER THE CLOSING.

 

CUSIP/CINS
U45816AAO

 

71⁄4%
Senior Notes due 2011

 

 

	
  No.

  	
   

  	
  $

  	
   

  	
   

  

 

INTERACTIVE
HEALTH LLC

INTERACTIVE HEALTH FINANCE CORP.

 

promises to pay to CEDE & CO.
or registered assigns,

 

the principal sum of
                                                                                                                      
DOLLARS on April 1, 2011.

 

Interest Payment Dates:  April 1 and October 1

 

Record Dates:  March 15 and September 15

 

Dated:  March 26, 2004

 

 

	
   

  	
  INTERACTIVE HEALTH LLC

  INTERACTIVE HEALTH FINANCE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

This is one of the Notes referred
to

in the within-mentioned Indenture:

 

	
  U.S. BANK NATIONAL ASSOCIATION,

  	
   

  
	
  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  

 

A2-1

 

[Back
of Regulation S Temporary Global Note]

71⁄4% Senior Notes due 2011

 

THE RIGHTS ATTACHING TO THIS
REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING
ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS
DEFINED HEREIN).  NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.

 

THIS GLOBAL NOTE IS HELD BY THE
DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN
CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06
OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11
OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

 

UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY
OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. 
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS.  NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.  THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH OTHER
PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES
ACT AS PERMITTING RESALES OF RESTRICTED SECURITIES BY NON-AFFILIATES WITHOUT
RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH EITHER OF THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE “RESALE RESTRICTION
TERMINATION DATE”) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A

 

A2-2

 

REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT,
TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE SECURITIES
ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER REGULATION D UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL “ACCREDITED INVESTOR”, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY
U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION.  THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. 
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.

 

Capitalized
terms used herein have the meanings assigned to them in the Indenture referred
to below unless otherwise indicated.

 

(1)
INTEREST.  Interactive Health LLC, a Delaware limited
liability company (the “Company”) and
Interactive Health Finance Corp., a Delaware corporation (“Co-Issuer” and together with the Company, the “Issuers”), promise to pay interest on the principal amount at
maturity of this Note at 71⁄4% per annum from
                               ,
20      until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below.  The Issuers
will pay interest and Liquidated Damages, if any, semi-annually in arrears on
April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”).  Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided
that if there is no existing Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided
further that the first Interest Payment Date shall be
                               ,
20     .  The
Issuers will pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at a rate that is 1% per annum in excess of the rate then in
effect to the extent lawful; it will pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any (without

 

A2-3

 

regard to any
applicable grace periods), from time to time on demand at the same rate to the
extent lawful.  Interest will be computed
on the basis of a 360-day year of twelve 30-day months.

 

Until this
Regulation S Temporary Global Note is exchanged for one or more Regulation S
Permanent Global Notes, the Holder hereof shall not be entitled to receive
payments of interest hereon; until so exchanged in full, this Regulation S
Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.

 

(2)
METHOD OF PAYMENT.  The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the March 15
or September 15 next preceding the Interest Payment Date, even if such
Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest.  The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Issuers maintained for such purpose
within or without the City and State of New York, or, at the option of the
Issuers, payment of interest and Liquidated Damages, if any, may be made by check
mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer
of immediately available funds will be required with respect to principal of
and interest, premium and Liquidated Damages, if any, on, all Global Notes and
all other Notes the Holders of which will have provided wire transfer
instructions to the Issuers or the Paying Agent.  Such payment will be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.

 

(3)
PAYING AGENT AND REGISTRAR.  Initially, U.S. Bank National Association,
the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Issuers may change any Paying Agent or
Registrar without notice to any Holder. 
The Company or any of its Subsidiaries may act in any such capacity.

 

(4)
INDENTURE.  The Issuers issued the Notes under an
Indenture dated as of March 26, 2004 (the “Indenture”) among the Issuers, the Guarantors and the Trustee.  The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the
TIA.  The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms.  To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling.  The Issuers may issue an aggregate principal
amount at maturity of Notes permitted by the provisions of the Indenture.

 

(5)
OPTIONAL REDEMPTION.

 

(a)                                  At any time prior to
April 1, 2007, the Issuers may on any one or more occasions redeem up to
40% of the aggregate principal amount at maturity of Notes issued under this
Indenture at a redemption price of 111.375% of the Accreted Value thereof on
the redemption date, plus accrued and unpaid interest and Liquidated Damages,
if any, to the redemption date, with the net cash proceeds of a sale of Equity
Interests (other than Disqualified Stock) of Parent (to the extent that such
proceeds are contributed, directly or indirectly, as common equity to
Interactive Health) or of Interactive Health; provided that:

 

(1)                                  at
least 60% of the aggregate principal amount at maturity of Notes originally
issued under this Indenture (excluding Notes held by Interactive Health and its
Subsidiaries) remains outstanding immediately after the occurrence of such
redemption; and

 

A2-4

 

(2)
the redemption occurs within 45 days of the date of the closing of such sale of
Equity Interests.

 

(b)                                 At any time prior to
April 1, 2008, the Issuers may also redeem all or a part of the Notes,
upon not less than 30 nor more than 60 days prior notice mailed by first-class
mail to each Holder’s registered address, at a redemption price equal to 100%
of the Accreted Value of Notes redeemed on the redemption date plus the
Applicable Premium as of, and accrued and unpaid interest and Liquidated
Damages, if any, to the applicable date of redemption, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant
interest payment date.

 

(c)                                  Except pursuant to the
preceding two paragraphs, the Notes will not be redeemable at the Issuers’
option prior to April 1, 2008.

 

(d)                                 On or after April 1,
2008, the Issuers may redeem all or a part of the Notes upon not less than 30
nor more than 60 days’ notice, at the redemption prices (expressed as
percentages of Accreted Value set forth below plus accrued and unpaid interest
and Liquidated Damages, if any, on the Notes redeemed to the applicable
redemption date, if redeemed during the twelve-month period beginning on
April 1 of the years indicated below, subject to the rights of Holders on
the relevant record date to receive interest on the relevant interest payment
date:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
  2008

  	
   

  	
  105.688

  	
  %

  
	
  2009

  	
   

  	
  102.844

  	
  %

  
	
  2010 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

Unless the
Issuers default in the payment of the redemption price, interest will cease to
accrue on the Notes or portions thereof called for redemption on the applicable
redemption date.

 

(e)                                  Any redemption pursuant to
Section 3.07 of the Indenture shall be made pursuant to the provisions of
Sections 3.01 through 3.06 thereof.

 

(6)
MANDATORY REDEMPTION.  The Issuers are not required to make
mandatory redemption or sinking fund payments with respect to the Notes except
that, on each of April 1, 2009, October 1, 2009, April 1, 2010
and October 1, 2010, (each a “Mandatory
Redemption Date”), if any Notes are outstanding, the Issuers will be
required to make a pro rata redemption of approximately $4.0 million, $1.75
million, $1.75 million and $1.75 million, respectively, of the Accreted Value
of the Notes outstanding on such Mandatory Redemption Date, at a redemption
price of 100% of the Accreted Value of the portion of Notes so redeemed, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided that if such
redemption results in any unredeemed portion of a Note having a principal
amount that is not a round multiple of $1,000, the Issuers shall redeem an
additional portion of such Note as to reduce the principal amount to a round
multiple of $1,000; provided further that
the amount of any such redemption shall be reduced by the aggregate amount of
the accretion on Notes previously repaid pursuant to any pro rata repurchase or
redemption of the Notes hereunder pursuant to this Indenture with respect to
all then-outstanding Notes; and provided,
additionally that, on each Mandatory
Redemption Date, the Issuers shall simultaneously be required to redeem an
additional portion of each Note at the price set forth above, plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of redemption, to
the extent, if any, required to prevent such Note from being treated as an
Applicable High Yield Discount Obligation within the meaning of
Section 163(i)(1) of the Internal Revenue Code of 1986, as amended (the
total amount redeemed pursuant to this sentence, the “Mandatory Redemption Amount”).

 

A2-5

 

(7)
REPURCHASE AT THE OPTION OF HOLDER.

 

(a)                                  If there is a Change of
Control, the Issuers will be required to make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder’s Notes
at a purchase price in cash equal to 101% of the aggregate Accreted Value
thereof on the date of purchase plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, subject to the rights of
Holders on the relevant record date to receive interest due on the relevant
interest payment date (the “Change of
Control Payment”).  Within 30 days
following any Change of Control, the Issuers will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.

 

(b)                                 If the Company or a
Restricted Subsidiary of the Company consummates any Asset Sales, within 15
days of each date on which the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Issuers will commence an offer to all Holders of Notes and
all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an “Asset Sale Offer”)
pursuant to Section 3.09 of the Indenture to purchase the maximum
principal amount at maturity of Notes (including any Additional Notes) and such
other pari passu Indebtedness that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the Accreted Value thereof on the date of purchase plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase, in accordance with the procedures set forth in the Indenture.  To the extent that the aggregate amount of
Notes (including any Additional Notes) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Issuers may use such deficiency for any
purpose not otherwise prohibited by the Indenture.  If the aggregate Accreted Value of Notes and
principal amount or accreted value, as applicable, of other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select on a pro rata basis the Notes
to be purchased and such Notes, together with such other pari passu Indebtedness to be purchased, shall be purchased on a pro rata basis.  Holders of Notes that are the subject of an
offer to purchase will receive an Asset Sale Offer from the Issuers prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled “Option of
Holder to Elect Purchase” attached to this Note.

 

(c)                                  Within 120 days after the
end of each Fiscal Period, the Issuers shall make an offer to all holders of
Notes (an “Excess Cash Flow Offer”)
to purchase the maximum Accreted Value of Notes that is an integral multiple of
$1,000 that may be purchased with the Excess Cash Flow Offer Amount, at a
purchase price, payable in cash, equal to 101% of the Accreted Value of Notes
to be repurchased on the date of purchase, plus accrued and unpaid interest and
Liquidated Damages, if any, on the Notes repurchased to the date of purchase
(the “Excess Cash Flow Purchase Price”).  Notwithstanding the foregoing, the Issuers
shall not be required to make any payment for Notes tendered pursuant to any
Excess Cash Flow Offer in excess of the lowest amount of cash, if any, that the
requisite lenders of any Indebtedness outstanding under Section 4.09(b)(1)
of the Indenture have agreed in writing may be used for repurchases of Notes so
tendered (such amount, the “Permitted
Excess Cash Flow Payment”).  If the aggregate
Excess Cash Flow Purchase Price of Notes tendered pursuant to any Excess Cash
Flow Offer is greater than the Permitted Excess Cash Flow Amount with respect
to such offer (such different, the “Excess
Cash Flow Payment Shortfall”), then the Issuers shall deposit into and
retain in a segregated restricted cash account cash equal to the Excess Cash
Flow Payment Shortfall.  Amounts in the
segregated restricted cash account may not be used for any purpose other than a
payment pursuant to Section 4.09(b) of the Indenture.  If the aggregate Excess Cash Flow Purchase
Price of the Notes tendered pursuant to any Excess Cash Flow Offer exceeds the
lesser of the Excess Cash Flow Offer Amount or the Permitted Excess Cash Flow
Payment with respect thereto, the Trustee shall select the Notes to be
purchased on a pro rata basis.  To the
extent that the aggregate Excess Cash Flow Purchase Price of the Notes tendered
pursuant to any Excess Cash Flow Offer is less than the lesser of the Excess
Cash Flow

 

A2-6

 

Offer Amount or the Permitted
Excess Cash Flow Payment with respect thereto, the Issuers may use any
remaining Excess Cash Flow for any purpose not otherwise prohibited by this
Indenture.  The Issuers’ obligations to
make Excess Cash Flow Offers pursuant to Section 4.22 of the Indenture
shall terminate upon the first to occur of (i) the consummation of a Qualified
IPO or (ii) the first date on which the ratio of the Issuers’ Total Debt as of
the last day of any Fiscal Period to the Issuers’ Consolidated Cash Flow for
such Fiscal Period is less than 2.5 to 1.0. Holders of Notes that are the
subject of an offer to purchase will receive an Excess Cash Flow Offer from the
Issuers prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled “Option
of Holder to Elect Purchase” attached to this Note.

 

(8)
NOTICE OF REDEMPTION.  Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address, except that
redemption notices may be mailed more than 60 days prior to a redemption date
if the notice is issued in connection with a defeasance of the Notes or a
satisfaction or discharge of the Indenture. 
Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed.

 

(9)
DENOMINATIONS, TRANSFER, EXCHANGE.  The Notes are in registered form without
coupons in denominations of $1,000 and integral multiples of $1,000.  The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Issuers may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. 
The Issuers need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed portion of
any Note being redeemed in part.  Also,
the Issuers need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.

 

This Regulation
S Temporary Global Note is exchangeable in whole or in part for one or more
Global Notes only (i) on or after the termination of the 40-day distribution
compliance period (as defined in Regulation S) and (ii) upon presentation of
certificates (accompanied by an Opinion of Counsel, if applicable) required by
Article 2 of the Indenture.  Upon
exchange of this Regulation S Temporary Global Note for one or more Global
Notes, the Trustee shall cancel this Regulation S Temporary Global Note.

 

(10)
PERSONS DEEMED OWNERS.  The registered Holder of a Note may be
treated as its owner for all purposes.

 

(11)
AMENDMENT, SUPPLEMENT AND WAIVER.  Subject to certain exceptions, the Indenture
or the Notes or the Note Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount at
maturity of the then outstanding Notes including Additional Notes, if any,
voting as a single class, and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes or the Note
Guarantees may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the then outstanding Notes including
Additional Notes, if any, voting as a single class.  Without the consent of any Holder of a Note,
the Indenture or the Notes or the Note Guarantees may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuers’ or a Guarantor’s obligations to
Holders of the Notes and Note Guarantees in case of a merger or consolidation,
to make any change that would provide any

 

A2-7

 

additional
rights or benefits to the Holders of the Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, to comply with
the requirements of the SEC in order to effect or maintain the qualification of
the Indenture under the TIA, to conform the text of the Indenture or the Notes
to any provision of the “Description of Notes” section of the Issuers’
Offering Circular dated March 24, 2004, relating to the initial offering
of the Notes, to the extent that such provision in that “Description of the
Notes” was intended to be a verbatim recitation of a provision of the
Indenture, the Note Guarantees or the Notes; to provide for the issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Note Guarantee with respect to the Notes.

 

(12)
DEFAULTS AND REMEDIES.  Events of Default include:  (i) default for 30 days in the payment when
due of interest on, or Liquidated Damages, if any, with respect to the Notes;
(ii) default in the payment when due of the principal of, or premium, if any,
on, the Notes when the same becomes due and payable at maturity, upon
redemption or otherwise; (iii) failure by either of the Issuers or any of their
Restricted Subsidiaries to comply with Sections 3.08, 3.09, 4.10, 4.15, 4.22 or
5.01 of the Indenture; (iv) failure by either of the Issuers or any of their
Restricted Subsidiaries for 60 days after notice to the Company by the Trustee
or the Holders of at least 25% in aggregate principal amount at maturity of the
Notes then outstanding voting as a single class to comply with any of the other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company which default results in the
acceleration of such Indebtedness prior to its express maturity; (vi) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days; (vii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary; and (viii) except as permitted by the
Indenture, any Note Guarantee is held in any judicial proceeding to be
unenforceable or invalid or ceases for any reason to be in full force and
effect or any Guarantor or any Person acting on behalf of such Guarantor denies
or disaffirms its obligations under such Guarantor’s Note Guarantee.  If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of the then outstanding Notes may declare all the Notes to
be due and payable immediately. 
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable immediately without further action or notice.  Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. 
Subject to certain limitations, Holders of a majority in aggregate
principal amount at maturity of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. 
The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest or premium or Liquidated
Damages, if any) if it determines that withholding notice is in their
interest.  The Holders of a majority in
aggregate principal amount at maturity of the then outstanding Notes by notice
to the Trustee may, on behalf of the Holders of all of the Notes, rescind an
acceleration or waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest or premium or Liquidated Damages, if any,
on, or the principal of, the Notes.  The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required, upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.

 

(13)
TRUSTEE DEALINGS WITH COMPANY.  The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its

 

A2-8

 

Affiliates, as
if it were not the Trustee.

 

(14)
NO RECOURSE AGAINST OTHERS.  A director, officer, employee, incorporator
or stockholder of the Issuers or any of the Guarantors, as such, will not have
any liability for any obligations of the Issuers or the Guarantors under the
Notes, the Note Guarantees or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and
releases all such liability.  The waiver
and release are part of the consideration for the issuance of the Notes.

 

(15)
AUTHENTICATION.  This Note will not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.

 

(16)
ABBREVIATIONS.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT
TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

(17)
ADDITIONAL RIGHTS OF HOLDERS.  In addition to the rights provided to Holders
of Notes under the Indenture, Holders of this Regulation S Temporary Global
Note will have all the rights set forth in the Registration Rights Agreement
dated as of March 26, 2004, among the Issuers, the Guarantors and the
other parties named on the signature pages thereof (the “Registration Rights Agreement”).

 

(18)
CUSIP NUMBERS.  Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as printed on the Notes or as contained in any notice of
redemption, and reliance may be placed only on the other identification numbers
placed thereon.

 

(19)
GOVERNING LAW.  THE INTERNAL LAW OF THE STATE OF NEW YORK
WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE
GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

The Company will
furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.  Requests may be made to:

 

Interactive Health

3030 Walnut Avenue

Long Beach, California  90807

 

Attention:  Chief Financial Officer

 

A2-9

 

ASSIGNMENT
FORM

 

To assign this
Note, fill in the form below:

 

	
  (I) or (we) assign and transfer
  this Note to:

  	
   

  	 

	
   

  	
  (Insert
  assignee’s legal name)

  	 

	
   

  	
   

  	 

	
   

  	 

	
  (Insert
  assignee’s soc. sec. or tax I.D. no.)

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
   

  	 

	
  (Print
  or type assignee’s name, address and zip code)

  	 

	
   

  	
   

  	 

	
  and irrevocably appoint

  	
   

  	 

	
  to transfer this Note on the
  books of the Company.  The agent may substitute
  another to act for him.

  	 

	
   

  	 

	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee*:

  	
   

  	
   

  	
   

  
										

 

*                                         Participant
in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).

 

A2-10

 

OPTION
OF HOLDER TO ELECT PURCHASE

 

If you want to
elect to have this Note purchased by the Company pursuant to Section 4.10,
4.15 or 4.22 of the Indenture, check the appropriate box below:

 

	
  o
  Section 4.10

  	
   

  	
  o
  Section 4.15

  	
   

  	
  o
  Section 4.22

  

 

If you want to
elect to have only part of the Note purchased by the Company pursuant to
Section 4.10, 4.15 or 4.22 of the Indenture, state the amount you elect to
have purchased:

 

	
  $

  

 

	
   

  	 

	
  Date:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the face of this Note)

  
	
   

  	
   

  	
   

  
	
   

  	
  Tax Identification No.:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee*:

  	
   

  	
   

  	
   

  
									

 

*                                         Participant
in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).

 

A2-11

 

SCHEDULE OF
EXCHANGES OF INTERESTS IN THE REGULATION S TEMPORARY GLOBAL NOTE

 

The following
exchanges of a part of this Regulation S Temporary Global Note for an interest
in another Global Note, or exchanges of a part of another other Restricted
Global Note for an interest in this Regulation S Temporary Global Note, have
been made:

 

	
  Date of
  Exchange

  	
   

  	
  Amount of decrease in

  Principal Amount 

  at maturity of 

  this Global Note

  	
   

  	
  Amount of increase in

  Principal Amount 

  at maturity of 

  this Global Note

  	
   

  	
  Principal Amount 

  at maturity of this

  Global Note following

  such decrease 

  (or increase)

  	
   

  	
  Signature of authorized

  officer of Trustee or

  Custodian

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A2-12

 

EXHIBIT
B

 

FORM OF CERTIFICATE OF TRANSFER

 

Interactive Health LLC

Interactive Health Finance Corp.

 

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota  55107

 

Re:  71⁄4% Senior Notes due 2011

 

Reference is
hereby made to the Indenture, dated as of March 26, 2004 (the “Indenture”), among Interactive Health
LLC (the “Company”), Interactive
Health Finance Corp. (the “Co-Issuer”
and together with the Company, the “Issuers”),
the Guarantors party thereto and U.S. Bank National Association, as
trustee.  Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.

 

                                     
(the “Transferor”) owns and proposes
to transfer the Note[s] or interest in such Note[s] specified in Annex A
hereto, in the principal amount at maturity of
$                     
in such Note[s] or interests (the “Transfer”),
to
                                                    
(the “Transferee”), as further
specified in Annex A hereto.  In
connection with the Transfer, the Transferor hereby certifies that:

 

[CHECK
ALL THAT APPLY]

 

1.  o  Check
if Transferee will take delivery of a beneficial interest in the 144A Global
Note or a Restricted Definitive Note pursuant to Rule 144A.  The Transfer is being effected pursuant to
and in accordance with Rule 144A under the Securities Act of 1933, as amended
(the “Securities Act”), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect
to which such Person exercises sole investment discretion, and such Person and
each such account is a “qualified institutional buyer” within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer
is in compliance with any applicable blue sky securities laws of any state of
the United States.  Upon consummation of
the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the 144A Global Note and/or the Restricted Definitive Note and in the Indenture
and the Securities Act.

 

2.  o  Check
if Transferee will take delivery of a beneficial interest in the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note or a Restricted
Definitive Note pursuant to Regulation S.  The Transfer is being effected pursuant to
and in accordance with Rule 903 or Rule 904 under the Securities Act and,
accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a Person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being

 

B-1

 

made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser).   Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions on Transfer enumerated
in the Private Placement Legend printed on the Regulation S Global Note, the
Regulation S Temporary Global Note and/or the Restricted Definitive Note and in
the Indenture and the Securities Act.

 

3.  o  Check
and complete if Transferee will take delivery of a beneficial interest in the
IAI Global Note or a Restricted Definitive Note pursuant to any provision of
the Securities Act other than Rule 144A or Regulation S.  The Transfer is being effected in compliance
with the transfer restrictions applicable to beneficial interests in Restricted
Global Notes and Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act and any applicable blue sky securities laws of any
state of the United States, and accordingly the Transferor hereby further
certifies that (check one):

 

(a)                                  o  such Transfer is being effected pursuant to
and in accordance with Rule 144 under the Securities Act;

 

or

 

(b)                                 o  such Transfer is being effected to the
Company or a subsidiary thereof;

 

or

 

(c)                                  o  such Transfer is being effected pursuant to
an effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;

 

or

 

(d)                                 o  such Transfer is being effected to an
Institutional Accredited Investor and pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144,
Rule 903 or Rule 904, and the Transferor hereby further certifies that it has
not engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act.  Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the IAI Global Note and/or the
Restricted Definitive Notes and in the Indenture and the Securities Act.

 

4.  o  Check
if Transferee will take delivery of a beneficial interest in an Unrestricted
Global Note or of an Unrestricted Definitive Note.

 

(a)  o  Check
if Transfer is pursuant to Rule 144. 
(i) The Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. 
Upon consummation of

 

B-2

 

the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.

 

(b)  o  Check
if Transfer is Pursuant to Regulation S. 
(i) The Transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act and in compliance with the
transfer restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act.  Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.

 

(c)  o  Check
if Transfer is Pursuant to Other Exemption. 
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. 
Upon consummation of the proposed Transfer in accordance with the terms of
the Indenture, the transferred beneficial interest or Definitive Note will not
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.

 

This certificate
and the statements contained herein are made for your benefit and the benefit
of the Issuers.

 

	
   

  	
   

  
	
   

  	
   

  	
  [Insert Name of Transferor]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
					

 

B-3

 

ANNEX
A TO CERTIFICATE OF TRANSFER

 

1.                                       The Transferor owns and
proposes to transfer the following:

 

[CHECK
ONE OF (a) OR (b)]

 

(a)                                                    o  a beneficial interest in the:

 

(i)                               o  144A Global Note (CUSIP
                   ),
or

 

(ii)                            o  Regulation S Global Note (CUSIP
                   ),
or

 

(iii)                         o  IAI Global Note (CUSIP
                   );
or

 

(b)  o  a Restricted Definitive Note.

 

2.                                       After the Transfer the
Transferee will hold:

 

[CHECK
ONE]

 

(a)  o  a beneficial interest in the:

 

(i)                               o  144A Global Note (CUSIP
                   ),
or

 

(ii)                            o  Regulation S Global Note (CUSIP
                   ),
or

 

(iii)                         o  IAI Global Note (CUSIP
                   );
or

 

(iv)                        o  Unrestricted Global Note (CUSIP
                   );
or

 

(b)  o  a Restricted Definitive Note; or

 

(c)  o  an Unrestricted Definitive Note,

 

in accordance
with the terms of the Indenture.

 

B-4

 

EXHIBIT C

 

FORM OF CERTIFICATE OF EXCHANGE

 

Interactive Health LLC

Interactive Health Finance Corp.

 

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota  55107

 

Re:  71⁄4%  Senior Notes due 2011

 

(CUSIP
                   )

 

Reference is
hereby made to the Indenture, dated as of March 26, 2004 (the “Indenture”), among Interactive Health
LLC (the “Company”), Interactive
Health Finance Corp. (the “Co-Issuer”
and together with the Company, the “Issuers”),
the Guarantors party thereto and U.S. Bank National Association, as
trustee.  Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.

 

__________________________
(the “Owner”) owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount at maturity of $____________ in such Note[s] or interests (the
“Exchange”).  In connection with the Exchange, the Owner
hereby certifies that:

 

1.                                       Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note

 

(a)  o                Check if Exchange is from beneficial
interest in a Restricted Global Note to beneficial interest in an Unrestricted
Global Note.  In connection with the
Exchange of the Owner’s beneficial interest in a Restricted Global Note for a
beneficial interest in an Unrestricted Global Note in an equal principal amount
at maturity, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the Securities Act of 1933,
as amended (the “Securities Act”),
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global Note
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.

 

(b)  o               Check if Exchange is from beneficial interest
in a Restricted Global Note to Unrestricted Definitive Note.  In connection with the Exchange of the
Owner’s beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.

 

(c)  o                Check if Exchange is from Restricted
Definitive Note to beneficial interest in an Unrestricted Global Note.  In connection with the Owner’s Exchange of a
Restricted Definitive Note for

 

C-1

 

a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner’s own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any
state of the United States.

 

(d)  o               Check if Exchange is from Restricted
Definitive Note to Unrestricted Definitive Note.  In connection with the Owner’s Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner’s own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.

 

2.                                       Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes

 

(a)  o                Check if Exchange is from beneficial
interest in a Restricted Global Note to Restricted Definitive Note.  In connection with the Exchange of the
Owner’s beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount at maturity, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner’s
own account without transfer.  Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities Act.

 

(b)  o               Check if Exchange is from Restricted
Definitive Note to beneficial interest in a Restricted Global Note.  In connection with the Exchange of the
Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
o
144A Global Note, o Regulation S Global Note, o IAI Global Note with
an equal principal amount at maturity, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner’s own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States.  Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the beneficial interest issued will
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the relevant Restricted Global Note and in the Indenture and
the Securities Act.

 

C-2

 

This certificate
and the statements contained herein are made for your benefit and the benefit
of the Issuers.

 

	
   

  	
   

  
	
   

  	
   

  	
  [Insert Name of Transferor]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
					

 

C-3

 

EXHIBIT
D

 

FORM OF CERTIFICATE FROM

ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

 

Interactive Health LLC

Interactive Health Finance Corp.

 

U.S. Bank National Association

60 Livingston Avenue

St. Paul, Minnesota  55107

 

Re:  71⁄4 Senior Notes due 2011

 

Reference is
hereby made to the Indenture, dated as of March 26, 2004 (the “Indenture”), among Interactive Health
LLC (the “Company”), Interactive
Health Finance Corp. (the “Co-Issuer”
and together with the Company, the “Issuers”),
the guarantors party thereto and U.S. Bank National Association, as trustee.  Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.

 

In connection
with our proposed purchase of
$                             
aggregate principal amount at maturity of:

 

(a)  o                a
beneficial interest in a Global Note, or

 

(b)  o               a
Definitive Note,

 

we confirm that:

 

1.                                       We understand that any
subsequent transfer of the Notes or any interest therein is subject to certain
restrictions and conditions set forth in the Indenture and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Notes or any interest therein except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the “Securities Act”).

 

2.                                       We understand that the
offer and sale of the Notes have not been registered under the Securities Act,
and that the Notes and any interest therein may not be offered or sold except
as permitted in the following sentence. 
We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
“qualified institutional buyer” (as defined therein), (C) to an institutional
“accredited investor” (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Company a signed letter substantially in the form of this letter and an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any Person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.

 

D-1

 

3.                                       We understand that, on
any proposed resale of the Notes or beneficial interest therein, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions.  We further understand that the Notes
purchased by us will bear a legend to the foregoing effect.

 

4.                                       We are an institutional
“accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) and have such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment.

 

5.                                       We are acquiring the
Notes or beneficial interest therein purchased by us for our own account or for
one or more accounts (each of which is an institutional “accredited investor”)
as to each of which we exercise sole investment discretion.

 

You and the
Issuer are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.

 

 

	
   

  	
   

  
	
   

  	
   

  	
  [Insert Name of Accredited
  Investor]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
					

 

D-2

 

EXHIBIT E

 

FORM OF NOTATION OF GUARANTEE

 

For value
received, each Guarantor (which term includes any successor Person under the
Indenture) has, jointly and severally, unconditionally guaranteed, to the
extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of March 26, 2004 (the “Indenture”) among Interactive Health LLC (the “Company”), Interactive Health Finance Corp. (the “Co-Issuer” and together with the
Company, the “Issuers”), the
Guarantors party thereto and U.S. Bank National Association, as trustee (the “Trustee”), (a) the due and punctual
payment of the principal of, premium and Liquidated Damages, if any, and
interest on, the Notes, whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal of and
interest on the Notes, if any, if lawful, and the due and punctual performance
of all other obligations of the Issuers to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.  The
obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Note Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Note Guarantee.

 

Capitalized
terms used but not defined herein have the meanings given to them in the
Indenture.

 

 

	
   

  	
  [NAME OF GUARANTOR(S)]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

E-1

 

EXHIBIT F

 

FORM OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS

 

SUPPLEMENTAL
INDENTURE (this “Supplemental Indenture”),
dated as of
                                 ,
200    , among                                                                                    
(the “Guaranteeing Subsidiary”), a
subsidiary of
                                                      
(or its permitted successor), a [Delaware] corporation (the “Company”),
                                                                        
(or its permitted successor) (the “Co-Issuer”
and together with the Company, the “Issuers”),
the other Guarantors (as defined in the Indenture referred to herein) and
                                    ,
as trustee under the Indenture referred to below (the “Trustee”).

 

W
I T N E S S E T H

 

WHEREAS, the
Issuers have heretofore executed and delivered to the Trustee an indenture (the
“Indenture”), dated as of
March 26, 2004 providing for the issuance of 71⁄4% Senior Notes due 2011
(the “Notes”);

 

WHEREAS, the
Indenture provides that under certain circumstances the Guaranteeing Subsidiary
shall execute and deliver to the Trustee a supplemental indenture pursuant to
which the Guaranteeing Subsidiary shall unconditionally guarantee all of the
Issuers’ Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the “Note
Guarantee”); and

 

WHEREAS,
pursuant to Section 9.01 of the Indenture, the Trustee is authorized to
execute and deliver this Supplemental Indenture.

 

NOW, THEREFORE,
in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Guaranteeing
Subsidiary and the Trustee mutually covenant and agree for the equal and
ratable benefit of the Holders of the Notes as follows:

 

1.                                       CAPITALIZED TERMS.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.

 

2.                                       AGREEMENT TO
GUARANTEE.  The Guaranteeing Subsidiary
hereby agrees to provide an unconditional Guarantee on the terms and subject to
the conditions set forth in the Note Guarantee and in the Indenture including
but not limited to Article 10 thereof.

 

4.                                       NO RECOURSE AGAINST
OTHERS.  No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Issuers or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation.  Each Holder of the Notes by accepting a Note
waives and releases all such liability. 
The waiver and release are part of the consideration for issuance of the
Notes.  Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the SEC that such a waiver is against public policy.

 

5.                                       NEW YORK LAW TO
GOVERN.  THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

 

F-1

 

6.                                       COUNTERPARTS.  The parties may sign any number of copies of
this Supplemental Indenture.  Each signed
copy shall be an original, but all of them together represent the same
agreement.

 

7.                                       EFFECT OF
HEADINGS.  The Section headings
herein are for convenience only and shall not affect the construction hereof.

 

8.                                       THE TRUSTEE.  The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Issuers.

 

F-2

 

IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.

 

	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [GUARANTEEING SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [ISSUERS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [EXISTING GUARANTORS]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [TRUSTEE],

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

F-3Exhibit
10.19

 

SECURITY AGREEMENT

 

THIS SECURITY
AGREEMENT (the “Agreement”) dated as of February 13, 2004, is
entered into by and between Interactive Health LLC, a
Delaware limited liability company (“Company”) and such other entities which
from time to time become parties hereto (collectively, including the Company,
the “Debtors” and individually each a “Debtor”) and Comerica Bank, a
Michigan banking corporation (“Bank”). 
The addresses for the Debtors and the Bank are set forth on the
signature pages.

 

R
E C I T A L S:

 

A.                                   Pursuant to that certain
Interactive Health LLC Credit Agreement dated as of
December 30, 2003 (as amended or otherwise modified from time to time, the
“Credit Agreement”), among Company and the Bank, the Bank has agreed, subject
to the satisfaction of certain terms and conditions, to extend or continue to
extend financial accommodations to the Company, as provided therein.

 

B.                                     As a condition precedent
to the making of the initial loans, issuing Letters of Credit and creating and
discounting Acceptances under the Credit Agreement, the Debtors are required to
execute and deliver a security agreement in the form of this Agreement.

 

C.                                     The Debtors have directly
and indirectly benefited and will directly and indirectly benefit from the
transactions evidenced by and contemplated in the Credit Agreement.

 

NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

Definitions

 

Section 1.1.                                Definitions.  As used in this Agreement, capitalized terms
not otherwise defined herein have the meanings provided for such terms in the
Credit Agreement.  References to
“Sections,” “subsections,” “Exhibits” and “Schedules” shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided.  All
references to statutes and regulations shall include any amendments of the same
and any successor statutes and regulations. 
References to particular sections of the UCC
should be read to refer also to parallel sections of the Uniform Commercial
Code as enacted in each state or other jurisdiction where any portion of the
Collateral is or may be located.

 

The following
terms have the meanings indicated below, all such definitions to be equally
applicable to the singular and plural forms of the terms defined:

 

1

 

“Account”
means any “account,” as such term is defined in Article or Chapter 9 of
the UCC, now owned or hereafter acquired by a Debtor,
and, in any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by such Debtor: (a) all rights of the
Debtor to payment for goods sold or leased or services rendered, whether or not
earned by performance, (b) all accounts receivable of the Debtor, (c) all
rights of the Debtor to receive any payment of money or other form of
consideration, (d) all security pledged, assigned or granted to or held by the
Debtor to secure any of the foregoing, (e) all guaranties of, or
indemnifications with respect to, any of the foregoing, and (f) all rights of
the Debtor as an unpaid seller of goods or services, including, but not limited
to, all rights of stoppage in transit, replevin,
reclamation and resale.

 

“Chattel
Paper” means any “chattel paper,” as such term is defined in
Article or Chapter 9 of the UCC, now owned or
hereafter acquired by a Debtor, and shall include electronic chattel paper and
tangible chattel paper.

 

“Collateral”
has the meaning specified in Section 2.1 of this Agreement.

 

“Computer
Records” has the meaning specified in Section 2.1(f) of this
Agreement.

 

“Credit
Agreement” has the meaning specified in the recitals hereto.

 

“Deposit
Account” shall mean a demand, time savings, passbook or similar account
maintained with a bank but does not include Investment Property or Accounts
evidenced by an instrument.

 

“Document”
means any “document,” as such term is defined in Article or Chapter 9 of
the UCC, now owned or hereafter acquired by the
Debtor, including, without limitation, all documents of title and all receipts
covering, evidencing or representing goods now owned or hereafter acquired by a
Debtor.

 

“Equipment”
means any “equipment,” as such term is defined in Article or Chapter 9 of
the UCC, now owned or hereafter acquired by a Debtor
and, in any event, shall include, without limitation, all machinery, equipment,
furniture, trade fixtures, tractors, trailers, rolling stock, vessels, aircraft
and vehicles now owned or hereafter acquired by such Debtor and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.

 

“Event of
Default” has the meaning specified in the Credit Agreement.

 

“General
Intangibles” means any “general intangibles,” as such term is defined in
Article or Chapter 9 of the UCC, now owned or
hereafter acquired by a Debtor and, in any event, shall include, without
limitation, each of the following, whether now owned or hereafter acquired by
such Debtor: (a) all of the Debtor’s patents, copyrights, trademarks, service
marks, trade names, trade secrets, registrations, goodwill, franchises,
licenses, permits, proprietary information,

 

2

 

customer lists, designs,
inventions and all other intellectual property and proprietary rights,
including without limitation those described on Schedule E attached
hereto and incorporated herein by reference; (b) all of the Debtor’s books,
records, data, plans, manuals, computer software, computer tapes, computer
disks, computer programs, source codes, object codes and all rights of the
Debtor to retrieve data and other information from third parties; (c) all of
the Debtor’s contract rights, commercial tort claims, partnership interests,
membership interests, joint venture interests, securities, deposit accounts,
investment accounts and certificates of deposit; (d) all rights of the Debtor
to payment under chattel paper, documents, instruments and similar agreements;
(e) letters of credit, letters of credit rights, supporting obligations and
rights to payment for money or funds advanced or sold of the Debtor; (f) all
tax refunds and tax refund claims of the Debtor; (g) all choses
in action and causes of action of the Debtor (whether arising in contract, tort
or otherwise and whether or not currently in litigation) and all judgments in
favor of the Debtor; (h) all rights and claims of the Debtor under warranties
and indemnities; and (i) all rights of the Debtor under any insurance, surety
or similar contract or arrangement.

 

“Governmental
Authority” shall mean any nation or government, any state, province or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

 

“Indebtedness”
has the meaning ascribed to that term in the Credit Agreement.

 

“Instrument”
means any “instrument,” as such term is defined in Article or Chapter 9 of
the UCC, now owned or hereafter acquired by the
Debtor, and, in any event, shall include all promissory notes, drafts, bills of
exchange and trade acceptances, whether now owned or hereafter acquired.

 

“Inventory”
means any “inventory,” as such term is defined in Article or Chapter 9 of
the UCC, now owned or hereafter acquired by a Debtor,
and, in any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by such Debtor: (a) all goods and other
personal property of the Debtor that are held for sale or lease or to be
furnished under any contract of service; (b) all raw materials,
work-in-process, finished goods, supplies and materials of the Debtor; (c) all
wrapping, packaging, advertising and shipping materials of the Debtor; (d) all
goods that have been returned to, repossessed by or stopped in transit by the
Debtor; and (e) all Documents evidencing any of the foregoing.

 

“Investment
Property” means any “investment property” as such term is defined in
Article or Chapter 9 of the UCC, now owned or
hereafter acquired by a Debtor, and in any event, shall include without
limitation all shares of stock and other equity, partnership or membership
interests constituting securities, of the domestic Subsidiaries of such Debtor
from time to time owned or acquired by such Debtor in any manner (including,
without limitation, the Pledged Shares), and the certificates and all
dividends, cash, instruments, rights and other property from time to time
received, receivable or otherwise distributed or distributable in respect of or
in exchange for any or all of such shares;

 

3

 

“Loan
Documents” has the meaning specified in the Credit Agreement.

 

“Permitted
Liens” has the meaning specified in the Credit Agreement.

 

“Pledged
Shares” means the shares of capital stock or other equity, partnership or
membership interests described on Schedule D attached hereto and
incorporated herein by reference.

 

“Proceeds”
means any “proceeds,” as such term is defined in Article or Chapter 9 of
the UCC and, in any event, shall include, but not be
limited to, (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to a Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to a Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting, or purporting
to act, for or on behalf of any governmental authority), and (c) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.

 

“Records”
is defined in Section 4.9 of this Agreement.

 

“Software”
means all (i) computer programs and supporting information provided in
connection with a transaction relating to the program, and (ii) computer
programs embedded in goods and any supporting information provided in
connection with a transaction relating to the program whether or not the
program is associated with the goods in such a manner that it customarily is
considered part of the goods, and whether or not, by becoming the owner of the
goods, a person acquires a right to use the program in connection with the
goods, and whether or not the program is embedded in goods that consist solely
of the medium in which the program is embedded.

 

“Subsidiary”
has the meaning specified in the Credit Agreement.

 

“UCC” means the Uniform Commercial Code as in effect
in the State of Michigan; provided, that if, by applicable law, the
perfection or effect of perfection or non-perfection of the security interest
created hereunder in any Collateral is governed by the Uniform Commercial Code
as in effect on or after the date hereof in any other jurisdiction, “UCC” means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.

 

ARTICLE II

Security Interest

 

Section 2.1.                                Security Interest.  As collateral security for the prompt payment
and performance in full when due of the Indebtedness (whether at stated
maturity, by acceleration or otherwise), each Debtor hereby pledges and assigns
(as collateral) to the Bank, and grants the Bank a continuing lien on and
security interest in, all of such Debtor’s right, title and interest in

 

4

 

and to the following, whether now
owned or hereafter arising or acquired and wherever located (collectively, the
“Collateral”):

 

(a)                                  all
Accounts;

 

(b)                                 all
Chattel Paper;

 

(c)                                  all
General Intangibles;

 

(d)                                 all
Equipment;

 

(e)                                  all
Inventory;

 

(f)                                    all computer
records (“Computer Records”) and Software, whether relating to the
foregoing Collateral or otherwise, but in the case of such Software, subject to
the rights of any non-affiliated licensee of software and any cash collateral,
deposit account or investment account established or maintained hereunder,
including without limitation under Section 6.3 hereof,

 

(g)                                 all
Investment Property;

 

(h)                                 all
Instruments;

 

(i)                                     all
Deposit Accounts;

 

(j)                                     all
Documents; and

 

(k)                                  all
Proceeds, in cash or otherwise, of any of the property described in the
foregoing clauses (a) through (j) and all liens, security, rights. remedies and
claims of such Debtor with respect thereto;

 

provided, however,
that “Collateral” shall not include rights under or with respect to any General
Intangible, license, permit or authorization to the extent any such General
Intangible, license, permit or authorization, by its terms or by law, prohibits
the assignment of, or the granting of a security interest in, the rights of a
grantor thereunder or which would be invalid or
unenforceable upon any such assignment or grant.  The pledge and grant of a security interest
in Proceeds shall not be deemed to give the applicable Debtor any right to
dispose of any of the Collateral, except as may otherwise be permitted herein
or in the Credit Agreement.

 

Each Debtor hereby irrevocably
authorizes the Bank at any time and from time to time during the term hereof to
file in any filing office in any UCC jurisdiction any
initial financing statements and amendments thereto that (a) indicate any or
all of the Collateral upon which the Debtors have granted a lien, and (b)
provide any other information required by Part 5 of Article 9 of the UCC, including organizational information and in the case
of a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to

 

5

 

which the
Collateral related.  Each Debtor agrees
to furnish any such information to the Bank promptly upon request.

 

Section 2.2.                                Debtors Remain Liable.  Notwithstanding anything to the contrary
contained herein, (a) the Debtors shall remain liable under the contracts,
agreements, documents and instruments included in the Collateral to the extent
set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not
been executed, (b) the exercise by the Bank of any of its rights or remedies
hereunder shall not release the Debtors from any of their duties or obligations
under the contracts, agreements, documents and instruments included in the
Collateral, and (c) the Bank shall not have any indebtedness, liability or
obligation (by assumption or otherwise) under any of the contracts, agreements,
documents and instruments included in the Collateral by reason of this
Agreement, and none of such parties shall be obligated to perform any of the
obligations or duties of the Debtors thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.

 

Section 2.3.                                Delivery of Collateral.  All certificates or instruments representing
or evidencing the Pledged Shares, promptly upon a Debtor gaining any rights
therein, shall be delivered to and held by or on behalf of the Bank pursuant
hereto in suitable form for transfer by delivery, or accompanied by duly
executed stock powers or instruments of transfer or assignments in blank, all
in form and substance reasonably satisfactory to the Bank.

 

ARTICLE III

Representations and Warranties

 

To induce the
Bank to enter into this Agreement and the Credit Agreement, each Debtor
represents and warrants to the Bank that as of the date hereof:

 

Section 3.1.                                Title.  Such Debtor is, and with respect to
Collateral acquired after the date hereof such Debtor will be, the legal and
beneficial owner of the Collateral free and clear of any lien or other
encumbrance, except for the Permitted Liens and the other liens permitted under
the Credit Agreement, provided that, other than the lien established
hereby, no lien on the Collateral described in clause (g) of Section 2.1
shall constitute a Permitted Lien.

 

Section 3.2.                                Financing Statements.  No financing statement, security agreement or
other lien instrument covering all or any part of the Collateral is on file in
any public office with respect to any outstanding obligation of such Debtor
except (i) as may have been filed in favor of the Bank pursuant to this
Agreement and the other Loan Documents and (ii) financing statements filed to
perfect Permitted Liens and the other liens permitted under the Credit
Agreement.  As of the date hereof, except
as otherwise disclosed on Schedule F hereto, the Debtor does not do
business and has not done business under a trade name or any name other than
its legal name set forth at the beginning of this Agreement.

 

Section 3.3.                                Principal Place of
Business; Registered Organization, Change in Form or Jurisdiction.  The principal place of business and chief
executive office of the Debtor, and the office where the Debtor keeps its books
and records, is located at the address of the Debtor shown on the signature
page hereto. Each Debtor is duly organized and validly existing as a
corporation (or other business organization) under the laws of its jurisdiction
of

 

6

 

organization, as set forth on Schedule C,
and has the registration number set forth on such Schedule C, and
the Debtor has not changed its corporate form or its jurisdiction of
organization at anytime during the past five (5) years except as set forth on Schedule C.

 

Section 3.4.                                Location of Collateral.  All Inventory (except Inventory in transit)
and Equipment (other than vehicles) of the Debtor in the possession of the
Debtor are located at the places specified on Schedule A hereto (as
supplemented from time to time in accordance with the provisions hereof).  If any such location is leased by the Debtor
as of the date hereof, the name and address of the landlord leasing such
location is identified on Schedule A hereto.  If any Inventory or Equipment is held by a
warehouseman or bailee as of the date hereof, the
name and address of such person is identified on Schedule A hereto.  As of the date hereof, all Deposit Accounts
are located at the banks and have the account numbers specified on Schedule A.  Except for inventory in transit, none of the
Inventory or Equipment of the Debtor (other than trailers, rolling stock,
vessels, aircraft and vehicles) is evidenced by a Document (including, without
limitation, a negotiable document of title). 
All certificates of the Debtor representing shares of stock of any
domestic Subsidiary (including, without limitation, the Pledged Shares) will be
delivered to the Bank, accompanied by duly executed stock powers or instruments
of transfer or assignments in blank with respect thereto.

 

Section 3.5.                                Perfection.  Upon the filing of Uniform Commercial Code
financing statements in the jurisdictions listed on Schedule B
attached hereto, and upon the Bank’s obtaining possession of the certificates
evidencing the Pledged Shares accompanied by duly executed stock powers or
instruments of transfer or assignments in blank, or upon the execution and
delivery of control agreements or similar documentation (with respect to any
cash collateral or deposit account established hereunder), the security
interest in favor of the Bank created herein will constitute a valid and
perfected lien upon and security interest in the Collateral which may be
created and perfected under the UCC by filing
financing statements or obtaining possession thereof, subject to no equal or
prior liens except for those (if any) which constitute Permitted Liens.

 

Section 3.6.                                Pledged Shares.

 

(a)                                  The Pledged Shares that are
shares of a corporation have been duly authorized and validly issued and are
fully paid and nonassessable, and the Pledged Shares
that are membership interests or partnership units (if any) have been validly
granted, under the laws of the jurisdiction of organization of the issuers
thereof, and, to the extent applicable, are fully paid and nonassessable.
No such membership or partnership interests constitute “securities” within the
meaning of Article 8 of the UCC, and each Debtor
covenants and agrees not to allow any such membership or partnership interest
to become “securities” for purposes of Article 8 of the UCC.

 

(b)                                 Each Debtor is the legal and
beneficial owner of the Pledged Shares, free and clear of any lien (other than
the liens created by this Agreement), and the Debtor has not sold, granted any
option with respect to, assigned, transferred or otherwise disposed of any of
its rights or interest in or to the Pledged Shares.  None of the Pledged Shares are subject to any
contractual or other restrictions upon the pledge or other transfer of such
Pledged Shares, other than those

 

7

 

imposed by securities laws
generally.  No issuer of Pledged Shares
is party to any agreement granting “control” (as defined in Section 8-106
of the UCC) of such Debtor’s Pledged Shares to any
third party.  All such Pledged Shares are
held by each Debtor directly and not through any securities intermediary.

 

(c)                                  On the date hereof, the
Pledged Shares constitute the percentage of the issued and outstanding shares
of stock, partnership units or membership interests of the issuers thereof
indicated on Schedule D and such schedule contains a
description of all shares of capital stock, membership interests and other
equity interests of or in any domestic Subsidiaries owned by the Debtor (as
such Schedule D may from time to time be supplemented, amended or
modified in accordance with the terms of this Agreement).

 

Section 3.7.                                Intellectual Property.  Schedule E is a true, accurate and
complete list of all pending or issued patents, trademarks, copyrights and
other intellectual property owned or licensed (pursuant to exclusive licenses)
to or by the Debtors (as such Schedule E may from time to time be
supplemented, amended or modified in accordance with the terms of this
Agreement).

 

ARTICLE IV

Covenants

 

Each Debtor
covenants and agrees with the Bank that until the Indebtedness has been paid
and performed in full and all commitments to lend or provide other credit
accommodations under the Credit Agreement have been terminated:

 

Section 4.1.                                Encumbrances.  The Debtor shall not create, permit or suffer
to exist, and shall defend the Collateral against, any lien or other
encumbrance (other than the liens created by this Agreement and the Permitted
Liens and the other liens permitted under the Credit Agreement) or any
restriction upon the pledge or other transfer thereof (other than as provided
in the Credit Agreement), and shall, subject only to the Permitted Liens and
the other liens permitted under the Credit Agreement, defend the Debtor’s title
to and other rights in the Collateral and the Bank’s pledge and collateral
assignment of and security interest in the Collateral against the claims and
demands of all Persons.  Except to the
extent permitted by the Credit Agreement or in connection with any release of
Collateral under Section 7.13 hereof (but only to the extent of any
Collateral so released), the Debtor shall do nothing to impair the rights of
the Bank in the Collateral.

 

Section 4.2.                                Collection of Accounts and
Contracts; No Commingling.   The
Debtor shall, in accordance with its usual business practices, endeavor to
collect or cause to be collected from each account debtor under its Accounts,
as and when due, any and all amounts owing under such Accounts.

 

Section 4.3.                                Disposition of Collateral.
The Debtor shall not enter into or consummate any transfer or other disposition
of any of its assets except as permitted under Section 9.2 of the Credit
Agreement, or otherwise with the prior written consent of the Bank.

 

8

 

Section 4.4.                                Further Assurances.  At any time and from time to time, upon the
request of the Bank, and at the sole expense of the Debtor, the Debtor shall
promptly execute and deliver all such further agreements, documents and instruments
and take such further action as the Bank may reasonably deem necessary or
appropriate to preserve and perfect its security interest in and pledge and
collateral assignment of the Collateral and carry out the provisions and
purposes of this Agreement or to enable the Bank to exercise and enforce its
rights and remedies hereunder with respect to any of the Collateral.  Except as otherwise expressly permitted by
the terms of the Credit Agreement relating to disposition of assets and except
for Permitted Liens and the other liens permitted under the Credit Agreement,
the Debtor agrees to maintain and preserve the Bank’s security interest in and
pledge and collateral assignment of the Collateral hereunder.  Without limiting the generality of the
foregoing, the Debtor shall (a) execute and deliver to the Bank such financing
statements as the Bank may from time to time require; and (b) execute and
deliver to the Bank (or cause to be executed and delivered) such other
agreements, documents and instruments, including without limitation control
agreements or stock powers, as the Bank may require to perfect and maintain the
validity, effectiveness and priority of the liens intended to be created by the
Loan Document.  The Debtor authorizes the
Bank to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Debtor unless otherwise prohibited by law.

 

Section 4.5.                                Insurance.  The Collateral pledged by such Debtor or the
Debtors will be insured with insurance coverage in such amounts and of such
types as are customarily carried by companies similar in size and nature.  In the case of all such insurance policies,
each such Debtor shall designate the Bank, as mortgagee or lender loss payee
and such policies shall provide that any loss be payable to the Bank, as
mortgagee or lender loss payee, as its interests may appear. Further, upon the
request of the Bank, each such Debtor shall deliver certificates evidencing
such policies, including all endorsements thereon and those required hereunder,
to Bank; and each such Debtor assigns to Bank, as additional security
hereunder, all its rights to receive proceeds of insurance with respect to the
Collateral. All such insurance shall, by its terms, provide that the applicable
carrier shall, prior to any cancellation before the expiration date thereof,
mail 30 days’ prior written notice to the Bank of such cancellation. Each
Debtor further shall provide Bank upon request with evidence reasonably
satisfactory to Bank that each such Debtor is at all times in compliance with
this paragraph.  Upon the occurrence and
during the continuance of an Event of Default, Bank may act as each such
Debtor’s attorney-in-fact in obtaining, adjusting, settling and compromising
such insurance and endorsing any drafts. Upon Debtor’s failure to insure the
Collateral as required in this covenant, Bank may procure such insurance and
its costs therefor shall be charged to Debtor, payable on demand, with interest
at the highest rate set forth in the Credit Agreement and added to the
Indebtedness secured hereby. The disposition of proceeds payable to such Debtor
of any insurance on the Collateral (“Insurance Proceeds”) shall be governed by
the following:

 

(i)                                     provided that no Event of
Default has occurred and is continuing hereunder, (a) if the amount of
Insurance Proceeds in respect of any loss or casualty does not exceed Two
Hundred Fifty Thousand Dollars ($250,000), such Debtor shall be entitled, in
the event of such loss or casualty, to receive all such Insurance Proceeds and
to apply the same toward the replacement of the Collateral affected thereby or
to the purchase of other assets to be used in the Debtor’s business (provided
that such assets

 

9

 

shall be
subjected to a first lien in favor of Bank); and (b) if the amount of Insurance
Proceeds in respect of any loss or casualty exceeds Two Hundred Fifty Thousand
Dollars ($250,000), such Insurance Proceeds shall be paid to and received by
Bank, for release to such Debtor for the replacement of the Collateral affected
thereby or to the purchase of other assets to be used in the Debtor’s business
(provided that such assets shall be subjected to a first lien in favor of
Bank); or, upon written request of such Debtor (accompanied by reasonable
supporting documentation), for such other use or purpose as approved by the
Bank, in its reasonable discretion, it being understood and agreed in
connection with any release of funds under this subparagraph (b), that the Bank
may impose reasonable and customary conditions on the disbursement of such
Insurance Proceeds; and

 

(ii)                                  if an Event of Default has
occurred or is continuing and is not waived as provided in the Credit Agreement,
all Insurance Proceeds in respect of any loss or casualty shall be paid to and
received by the Bank, to be applied by the Bank against the Indebtedness and/or
to be held by the Bank as cash collateral for the Indebtedness, as the Bank may
direct in its sole discretion.

 

Section 4.6.                                Bailees.  If any of the Collateral is at any time in
the possession or control of any warehouseman, bailee
or any of the Debtor’s agents or processors not already disclosed to the Bank
by name and address pursuant to the terms of Section 3.4, the Debtor shall
notify the Bank (and revise Schedule A to this Agreement to this
effect), and at the request of the Bank, notify such warehouseman, bailee, agent or processor of the security interest created
hereunder, shall instruct such Person to hold such Collateral for the Bank’s
account subject to the Bank’s instructions (without further consent of the
Debtor) and shall obtain for the Bank such Person’s acknowledgment of the same.

 

Section 4.7.                                Furnishing of Information
and Inspection Rights.  The
Debtor will, at any time and from time to time during regular business hours,
upon reasonable advance notice (except if any Event of Default has occurred and
is continuing, when no prior notice shall be required), permit the Bank, or its
agents or representatives, to examine and make copies of and abstracts from all
Records, to visit the offices and properties of the Debtor for the purpose of
examining such Records, and to discuss matters relating to Debtor’s performance
hereunder and under the Credit Agreement with any of the officers, directors,
employees or independent public accountants of the Debtor having knowledge of
such matters; provided, however, that the Bank acknowledges that,
in exercising the rights and privileges conferred in this Section 4.7,
it or its agents and representatives may, from time to time, obtain knowledge
of information, practices, books, correspondence and records of a confidential
nature and in which the Debtor has a proprietary interest and agrees to
maintain the confidentiality of such information, practices, books,
correspondence and records in accordance with the customary practices of the
Bank.  The Bank may reply to a request
from any Person for information related to any Collateral referred to in any
financing statement filed to perfect the security interest and liens
established hereby, to the extent necessary to maintain the perfection or
priority of such security interests or liens, or otherwise required under
applicable law. Furthermore, the Debtor shall permit the Bank and its
representatives to examine, inspect and audit the Collateral and to examine,
inspect and audit the Debtor’s books and Records to the extent provided under
the Credit Agreement.

 

10

 

Section 4.8.                                Corporate Changes.  The Debtor shall not change its name,
identity, corporate structure or jurisdiction of organization in any manner
that might make any financing statement filed in connection with this Agreement
seriously misleading within the meaning of Section 9-506 of the UCC unless the Debtor shall have given the Bank thirty (30)
days prior written notice thereof and shall have taken all action deemed
necessary by the Bank to protect its liens and the perfection and priority
thereof.  The Debtor shall not change its
principal place of business, chief executive office or the place where it keeps
its books and records unless it shall have given the Bank thirty (30) days
prior written notice thereof and shall have taken all action deemed necessary
by the Bank to cause its security interest in the Collateral to be perfected
with the priority required by this Agreement.

 

Section 4.9.                                Books and Records.  The Debtor shall keep accurate and complete
books and records (the “Records”) of the Collateral and the Debtor’s business
and financial condition in accordance with the Credit Agreement.

 

Section 4.10.                         Equipment and Inventory.

 

(a)                                  The Debtor shall keep the
Equipment (other than vehicles) and Inventory (other than Inventory in transit)
at the locations specified on Schedule A hereto or, upon prompt
written notice to the Bank, at such other places within the United States of
America where all action required to perfect the Bank’s security interest in
the Equipment and Inventory with the priority required by this Agreement shall
have been taken.

 

(b)                                 The Debtor shall maintain the
Equipment and Inventory in accordance with the terms of the Credit Agreement.

 

Section 4.11.                         Notification.  The Debtor shall promptly notify the Bank in
writing of any lien, encumbrance or claim (other than a Permitted Lien and the
other liens permitted under the Credit Agreement, to the extent not otherwise
subject to any notice requirements under the Credit Agreement) that has
attached to or been made or asserted against any of the Collateral upon
becoming aware of the existence of such lien, encumbrance or claim.

 

Section 4.12.                         Collection of Accounts.  So long as no Event of Default has occurred
and is continuing and except as otherwise provided in this Section 4.12
and Section 6.3, the Debtor shall have the right to collect and
receive payments on the Accounts, and to use and expend the same in its
operations, in each case in compliance with the terms of the Credit Agreement.

 

Section 4.13.                         Voting Rights; Distributions, Etc.

 

(a)                                  So long as no Event of
Default shall have occurred and be continuing (both before and after giving
effect to any of the actions or other matters described in clauses (i) or (ii)
of this subparagraph):

 

(i)                                     The Debtor shall be
entitled to exercise any and all voting and other consensual rights (including,
without limitation, the right to give consents, waivers and

 

11

 

ratifications)
pertaining to any of the Pledged Shares or any part thereof; provided,
however, that no vote shall be cast or consent, waiver or ratification
given or action taken without the prior written consent of the Bank which would
violate any provision of this Agreement or the Credit Agreement; and

 

(ii)                                  Except as otherwise provided
by the Credit Agreement, the Debtor shall be entitled to receive and retain any
and all dividends, distributions and interest paid in respect to any of the
Pledged Shares.

 

(b)                                 Upon the occurrence and
during the continuance of an Event of Default:

 

(i)                                     The Bank may, without
notice to the Debtor, transfer or register in the name of the Bank or any of
its nominees, any or all of the Pledged Shares and the Proceeds thereof (in
cash or otherwise) held by the Bank hereunder, and the Bank or its nominee may
thereafter, after delivery of notice to the Debtor, exercise all voting and
corporate rights at any meeting of any corporation issuing any of the Pledged
Shares and any and all rights of conversion, exchange, subscription or any
other rights, privileges or options pertaining to any of the Pledged Shares as
if the Bank were the absolute owner thereof, including, without limitation, the
right to exchange, at its discretion, any and all of the Pledged Shares upon
the merger, consolidation, reorganization, recapitalization
or other readjustment of any corporation issuing any of such Pledged Shares or
upon the exercise by any such issuer or the Bank of any right, privilege or
option pertaining to any of the Pledged Shares, and in connection therewith, to
deposit and deliver any and all of the Pledged Shares with any committee,
depositary, transfer agent, registrar or other designated agency upon such
terms and conditions as the Bank may determine, all without liability except to
account for property actually received by it, but the Bank shall have no duty
to exercise any of the aforesaid rights, privileges or options, and the Bank
shall not be responsible for any failure to do so or delay in so doing.

 

(ii)                                  All rights of the Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Subsection 4.13(a)(i) and to
receive the dividends, interest and other distributions which it would
otherwise be authorized to receive and retain pursuant to Subsection 4.13(a)(ii)
shall, upon notice from the Bank, be suspended until such Event of Default
shall no longer exist, and all such rights shall, until such Event of Default
shall no longer exist, thereupon become vested in the Bank which shall
thereupon have the sole right to exercise such voting and other consensual
rights and thereupon have the sole right to receive, hold and dispose of as
Pledged Shares such dividends, interest and other distributions.

 

(iii)                               All dividends, interest and
other distributions which are received by the Debtor contrary to the provisions
of this Subsection 4.13(b) shall be received in trust for the
benefit of the Bank, shall be segregated from other funds of the Debtor and
shall be forthwith paid over to the Bank as Collateral in the same form as so
received (with any necessary endorsement).

 

12

 

(iv)                              The Debtor shall execute and
deliver (or cause to be executed and delivered) to the Bank all such proxies
and other instruments as the Bank may reasonably request for the purpose of
enabling the Bank to exercise the voting and other rights which it is entitled
to exercise pursuant to this Subsection 4.13(b) and to receive the
dividends, interest and other distributions which it is entitled to receive and
retain pursuant to this Subsection 4.13(b). The foregoing shall not
in any way limit the Bank’s power and authority granted pursuant to Section 5.1.

 

Section 4.14.                         Transfers and Other Liens;
Additional Investments. The Debtor agrees that, (a) except with the
written consent of the Bank, it will not permit any domestic Subsidiary to
issue to Debtor or any of Debtor’s other Subsidiaries any shares of stock,
membership interests, partnership units, notes or other securities or
instruments  (including without limitation
the Pledged Shares) in addition to or in substitution for any of the
Collateral, unless, concurrently with each issuance thereof, any and all such
shares of stock, membership interests, partnership units, notes or instruments
are encumbered in favor of the Bank under this Agreement or otherwise (it being
understood and agreed that all such shares of stock, membership interests,
partnership units, notes or instruments issued to Debtor shall, without further
action by Debtor or Bank, be automatically encumbered by this Agreement as
Pledged Shares) and (b) it will promptly upon the written request of Bank
following the issuance thereof (and in any event within five (5) Business Days
following such request) deliver to the Bank (i) an amendment, duly executed by
the Debtor, in substantially the form of Exhibit A hereto (an “Amendment”),
in respect of such shares of stock, membership interests, partnership units,
notes or instruments issued to Debtor or (ii) a new stock pledge, duly executed
by the applicable Subsidiary, in substantially the form of this Agreement (a “New
Pledge”), in respect of such shares of stock, membership interests,
partnership units, notes or instruments issued to any Subsidiary granting to
Bank, a first priority security interest, pledge and lien thereon, together in
each case with all certificates, notes or other instruments representing or
evidencing the same.  The Debtor hereby
(x) authorizes the Bank to attach each Amendment to this Agreement, (y) agrees
that all such shares of stock, membership interests, partnership units, notes
or instruments listed in any Amendment delivered to the Bank shall for all
purposes hereunder constitute Pledged Shares, and (z) is deemed to have made,
upon the delivery of each such Amendment, the representations and warranties
contained in Sections 3.1, 3.2, 3.4, 3.5 and 3.6 of this Agreement with
respect to the Collateral covered thereby.

 

Section 4.15.                         Possession; Reasonable Care.  Regardless of whether a Default or an Event
of Default has occurred or is continuing, the Bank shall have the right to hold
in its possession all Pledged Shares pledged, assigned or transferred hereunder
and from time to time constituting a portion of the Collateral.  The Bank may appoint one or more agents
(which in no case shall be the Debtor or an affiliate of the Debtor) to hold
physical custody, for the account of the Bank, of any or all of the
Collateral.  The Bank shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Bank accords its own property, it being
understood that the Bank shall not have any responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or not the Bank
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any Collateral.

 

13

 

Following the occurrence and
continuance of an Event of Default, the Bank shall be entitled to take
possession of the Collateral in accordance with the UCC.

 

Section 4.16                            Promissory Notes and Tangible
Chattel Paper.  If any Debtor
shall, now or at any time hereafter, hold or acquire any promissory notes in a
principal amount exceeding $250,000 or tangible Chattel Paper evidencing an
obligation exceeding $250,000 the Debtor shall forthwith endorse, assign and
deliver any such promissory note to the Bank, accompanied by such instruments
of transfer or assignment duly executed in blank as the Bank may from time to
time specify and cause all such Chattel Paper to bear a legend acceptable to
the Bank indicating that the Bank has a security interest in such Chattel
Paper.

 

Section 4.17                            Electronic Chattel Paper and
Transferable Records.  If any
Debtor, now or at any time hereafter, holds or acquires an interest in any
electronic Chattel Paper or any “transferable record,” as that term is defined
in the federal Electronic Signatures in Global and National Commerce Act, or in
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, such Debtor shall promptly notify the Bank thereof and, at the
request and option of the Bank, shall take such action as the Bank may
reasonably request to vest in the Bank control, under Section 9-105 of the
UCC, of such electronic chattel paper or control
under the federal Electronic Signatures in Global and National Commerce Act, or
the Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record.

 

Section 4.18                            Letter-of-Credit Rights.  If any Debtor is, now or at any time
hereafter, a beneficiary under a letter of credit in a face amount exceeding
$400,000 such Debtor shall promptly notify the Bank thereof and, at the request
and option of the Bank, such Debtor shall, pursuant to an agreement in form and
substance satisfactory to the Bank either (a) arrange for the issuer and any
confirmer of such letter of credit to consent to an assignment to the Bank of
the proceeds of the letter of credit or (b) arrange for the Bank to become the
transferee beneficiary of the letter of credit, with the Bank agreeing, in each
case, that the proceeds of the letter of credit are to be made available to
Debtor as long as no Event of Default has occurred and is continuing.

 

Section 4.19                            Commercial Tort Claims.  If any Debtor shall, now or at any time
hereafter, hold or acquire a commercial tort claim having a value in excess of
$400,000, such Debtor shall promptly notify the Bank in a writing signed by
such Debtor of the particulars thereof and grant to the Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
the Bank.

 

Section 4.20                            Intellectual Property.  Each Debtor agrees to (a) preserve and
maintain all rights to any of its registered intellectual property, and (b)
ensure any and all of its registered patents, trademarks, copyrights and tradenames remain enforceable, provided however, such
Debtor shall only be obligated to act in a manner consistent with commercially
reasonable business practices, and may fail to make payment of maintenance
fees, annuities and renewals where such Debtor determines, consistent with
commercially reasonable business practices, such intellectual property should
be abandoned.  Upon the occurrence and
during the continuance of an Event of Default, Bank may use such Debtor’s
intellectual property without payment of royalties or other fees.

 

14

 

Section 4.21.                         Future Subsidiaries / Additional
Collateral/Change in Collateral Location.

 

(a)                                  With respect to each Person
which becomes a domestic Subsidiary (which, for all purposes of this Agreement,
shall include any Subsidiary which is not a “controlled foreign corporation”
under Section 956 of the Internal Revenue Code, or any successor provision)
subsequent to the date hereof, within thirty (30) days of the date such Person
becomes a domestic Subsidiary, Debtor will cause such Subsidiary to execute and
deliver to the Bank a security agreement, substantially in the form of this
Agreement (or joinder agreement satisfactory to
Bank), granting to the Bank a first priority security interest, mortgage and
lien encumbering all right, title and interest of such Person in property,
rights and interests of the type included in the definition of the Collateral,
subject only to the Permitted Liens.

 

(b)                                 With respect to any
registered intellectual property acquired by any Debtor or licensed by any
Debtor pursuant to an exclusive license after the date hereof, such Debtor
shall promptly disclose such intellectual property to the Bank and shall
execute or cause to be executed, not later than thirty (30) days after such
property is acquired or obtained (i) an amendment, duly executed by the Debtor,
in substantially the form of Exhibit A hereto (an “Amendment”),
in respect of such additional collateral or (ii) a new security agreement, duly
executed by the applicable Debtor, in substantially the form of this Agreement,
in respect of such additional collateral, granting to Bank a first priority
security interest, pledge and lien thereon (subject only to the Permitted
Liens), together in each case with all certificates, notes or other instruments
representing or evidencing the same, and shall, upon Bank’s request, execute or
cause to be executed any financing statement or other document (including
without limitation, filings required by the U.S. Patent and Trademark Office
and/or the U.S. Copyright Office in connection with any such additional
collateral).  The Debtor hereby (x)
authorizes the Bank to attach each Amendment to this Agreement, (y) agrees that
all such additional collateral listed in any Amendment delivered to the Bank
shall for all purposes hereunder constitute Collateral, and (z) is deemed to
have made, upon the delivery of each such Amendment, the representations and
warranties contained in Sections 3.1, 3.2, 3.4, 3.5, 3.7 of this
Agreement with respect to the Collateral covered thereby.

 

(c)                                  Debtor shall notify the Bank
of any changes in the location of Inventory (other than Inventory in transit
and Inventory sold by such Debtor in accordance with Section 9.2 of the
Credit Agreement and any other Inventory which does not have a fair market
value in excess of $100,000 individually or in the aggregate) or Equipment
(other than trailers, rolling stock, vessels, aircrafts and vehicles and
Equipment sold by such Debtor in accordance with Section 9.2 of the Credit
Agreement and any other Equipment which does not have a fair market value in
excess of $100,000 individually or in the aggregate) or any of the other
information required to be provided pursuant to Sections 3.4 and 4.6 hereof,
and, at Bank’s request, shall execute or cause to be executed, an amendment to
this Agreement duly executed by the Debtor in respect of such change and any
financing statement or other document as deemed necessary by the Bank in its
sole discretion, provided, that Debtor shall give the Bank at least thirty (30)
days prior written notice of any change in the location of its primary
warehouse facility (which is located, as of the date hereof, at 3030 Walnut
Avenue, Long Beach California), and provided further, that prior to

 

15

 

or concurrently with any such
change in the location of such Inventory or Equipment, Debtor will have complied
with the requirements (to the extent applicable) of Section 4.6 of this
Agreement and Section 8.16(b)(ii) of the Credit Agreement.

 

ARTICLE V

Rights of the Bank

 

Section 5.1.                                Power of Attorney.  Each Debtor hereby irrevocably constitutes
and appoints the Bank and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of the Debtor or in its own name, to take,
after the occurrence and during the continuance of an Event of Default, any and
all actions, and to execute any and all documents and instruments which the
Bank at any time and from time to time deems necessary, to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, the Debtor hereby gives the Bank the power and right on behalf of
the Debtor and in its own name to do any of the following after the occurrence
and during the continuance of an Event of Default, without notice to or the
consent of the Debtor:

 

(i)                                     to demand, sue for,
collect or receive, in the name of the Debtor or in its own name, any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral and, in connection therewith, endorse checks, notes, drafts,
acceptances, money orders, documents of title or any other instruments for the
payment of money under the Collateral or any policy of insurance;

 

(ii)                                  to pay or discharge taxes,
liens or other encumbrances levied or placed on or threatened against the
Collateral;

 

(iii)                               (A) to direct account debtors
and any other parties liable for any payment under any of the Collateral to
make payment of any and all monies due and to become due thereunder
directly to the Bank or as the Bank shall direct; (B) to receive payment of and
receipt for any and all monies, claims and other amounts due and to become due
at any time in respect of or arising out of any Collateral; (C) to sign and
endorse any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, proxies, stock powers,
verifications and notices in connection with accounts and other documents
relating to the Collateral; (D) to commence and prosecute any suit, action or
proceeding at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding brought
against the Debtor with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Bank may deem
appropriate; (G) to exchange any of the Collateral for other property upon any
merger, consolidation, reorganization, recapitalization
or other readjustment of the issuer thereof and, in connection therewith,
deposit any of the Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms as the Bank may determine;
(H) to add or release any guarantor, indorser, surety
or other party to any of the Collateral; (I) to renew,

 

16

 

extend or
otherwise change the terms and conditions of any of the Collateral; (J) to
make, settle, compromise or adjust any claim under or pertaining to any of the
Collateral (including claims under any policy of insurance); and (K) to sell,
transfer, pledge, convey, make any agreement with respect to, or otherwise deal
with, any of the Collateral as fully and completely as though the Bank were the
absolute owner thereof for all purposes, and to do, at the Bank’s option and
the Debtor’s expense, at any time, or from time to time, all acts and things
which the Bank deems necessary to protect, preserve, maintain, or realize upon
the Collateral and the Bank’s security interest therein.

 

This power of
attorney is a power coupled with an interest and shall be irrevocable.  The Bank shall be under no duty to exercise
or withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Bank in this Agreement, and shall not be
liable for any failure to do so or any delay in doing so.  This power of attorney is conferred on the
Bank solely to protect, preserve, maintain and realize upon its security
interest in the Collateral.  The Bank
shall not be responsible for any decline in the value of the Collateral, other
than a decline in value caused by Bank’s willful misconduct or gross negligence
and shall not be required to take any steps to preserve rights against prior
parties or to protect, preserve or maintain any lien given to secure the
Collateral.

 

Section 5.2.                                Setoff.  In addition to and not in limitation of any
rights of Bank under applicable law, the Bank shall, upon the occurrence and
continuance of an Event of Default, without notice or demand of any kind, have
the right to appropriate and apply to the payment of the Indebtedness owing to
it (whether or not then due) any and all balances, credits, deposits, accounts
or moneys of Debtors then or thereafter on deposit with Bank.

 

Section 5.3.                                Assignment by the Bank.  The Bank may at any time assign or otherwise
transfer all or any portion of its rights and obligations as Bank under this
Agreement and the other Loan Documents (including, without limitation, the
Indebtedness) to any other Person, to the extent permitted by, and upon the
conditions contained in, the Credit Agreement and such Person shall thereupon
become vested with all the benefits and obligations thereof granted to the Bank
herein or otherwise.

 

Section 5.4.                                Performance by the Bank.
If any Debtor shall fail to perform any covenant or agreement contained in this
Agreement, the Bank may (but shall not be obligated to) perform or attempt to
perform such covenant or agreement on behalf of the Debtors, in which case Bank
shall exercise good faith and make diligent efforts to give Debtors prompt
prior written notice of such performance or attempted performance.  In such event, the Debtors shall, at the
request of the Bank, promptly pay any reasonable amount expended by the Bank in
connection with such performance or attempted performance to the Bank, together
with interest thereon at the interest rate set forth in the Credit Agreement,
from and including the date of such expenditure to but excluding the date such
expenditure is paid in full. 
Notwithstanding the foregoing, it is expressly agreed that the Bank
shall not have any liability or responsibility for the performance (or non-performance)
of any obligation of the Debtors under this Agreement.

 

Section 5.5.                                Certain Costs and Expenses.  The Debtors shall pay or reimburse the Bank
within five (5) Business Days after demand for all reasonable costs and
expenses

 

17

 

(including reasonable attorney’s
and paralegal fees) incurred by it in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or any other Security Document during the existence of an Event of
Default or after acceleration of any of the Indebtedness (including in
connection with any “workout” or restructuring regarding the Indebtedness, and
including in any insolvency proceeding or appellate proceeding).  The agreements in this Section 5.5 shall
survive the payment in full of the Indebtedness.

 

Section 5.6.                                Indemnification.  The Debtors shall indemnify, defend and hold
the Bank and each Benefited Party and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an “Indemnified
Person”) harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges, expenses
and disbursements (including reasonable attorneys’ and paralegals’ fees) of any
kind or nature whatsoever which may at any time (including at any time
following repayment of the Indebtedness and the termination, resignation or
replacement of the Bank) be imposed on, incurred by or asserted against any
such Indemnified Person in any way relating to or arising out of this Agreement
or any other Loan Document or any document relating to or arising out of or
referred to in this Agreement or any other Security Document, or the
transactions contemplated hereby, or any action taken or omitted by any such
Indemnified Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including any
bankruptcy proceeding or appellate proceeding) related to or arising out of
this Agreement or the Indebtedness or the use of the proceeds thereof, whether
or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities); provided, that the
Debtors shall have no obligation under this Section 5.6 to any
Indemnified Person with respect to Indemnified Liabilities to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person.  The agreements in this
Section 5.6 shall survive payment of all other Indebtedness.

 

ARTICLE VI

Default

 

Section 6.1.                                Rights and Remedies.  If an Event of Default shall have occurred
and be continuing, the Bank shall have the following rights and remedies:

 

(i)                                     The Bank may exercise any
of the rights and remedies set forth in this Agreement (including, without
limitation, in Section 5 of this Agreement), the Credit Agreement or by
applicable law.

 

(ii)                                  In addition to all other
rights and remedies granted to the Bank in this Agreement or in the Credit Agreement
or by applicable law, the Bank shall have all of the rights and remedies of a
secured party under the UCC (whether or not the UCC applies to the affected Collateral) and the Bank may
also, without previous demand or notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker’s board or at any of the Bank’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Bank may, in its reasonable discretion, deem commercially
reasonable or otherwise

 

18

 

as may be
permitted by law.  Without limiting the
generality of the foregoing, the Bank may (A) without demand or notice to the
Debtors (except as required under the Credit Agreement or applicable law),
collect, receive or take possession of the Collateral or any part thereof, and
for that purpose the Bank (and/or its agents, servicers
or other independent contractors) may enter upon any premises on which the
Collateral is located and remove the Collateral therefrom
or render it inoperable, and/or (B) sell, lease or otherwise dispose of the
Collateral, or any part thereof, in one or more parcels at public or private
sale or sales, at the Bank’s offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Bank may, in its reasonable
discretion, deem commercially reasonable or otherwise as may be permitted by
law.  The Bank shall have the right at any
public sale or sales, and, to the extent permitted by applicable law, at any
private sale or sales, to bid (which bid may be, in whole or in part, in the
form of cancellation of indebtedness) and become a purchaser of the Collateral
or any part thereof free of any right of redemption on the part of the Debtors,
which right of redemption is hereby expressly waived and released by the
Debtors to the extent permitted by applicable law.  The Bank may require the Debtors to assemble
the Collateral and make it available to the Bank at any place designated by the
Bank to allow Bank to take possession or dispose of such Collateral.  The Debtors agree that the Bank shall not be
obligated to give more than ten (10) Days prior written notice of the time and
place of any public sale or of the time after which any private sale may take
place and that such notice shall constitute reasonable notice of such
matters.  The Bank shall not be obligated
to make any sale of Collateral if, in the exercise of its reasonable discretion,
it shall determine not to do so, regardless of the fact that notice of sale of
Collateral may have been given.  The Bank
may, without notice or publication (except as required by applicable law),
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the same
was so adjourned.  The Debtors shall be
liable for all reasonable expenses of retaking, holding, preparing for sale or
the like, and all reasonable attorneys’ fees, legal expenses and other costs
and expenses incurred by the Bank in connection with the collection of the
Indebtedness and the enforcement of the Bank’s rights under this Agreement and
the Credit Agreement.  The Debtors shall,
to the extent permitted by applicable law, remain liable for any deficiency if
the proceeds of any such sale or other disposition of the Collateral (conducted
in conformity with this clause (ii) and applicable law) applied to the
Indebtedness are insufficient to pay the Indebtedness in full.  The Bank shall apply the proceeds from the
sale of the Collateral hereunder against the Indebtedness in such order and manner
as is provided in the Credit Agreement.

 

(iii)                               The Bank may cause any or all
of the Collateral held by it to be transferred into the name of the Bank or the
name or names of the Bank’s nominee or nominees.

 

(iv)                              The Bank may exercise any and
all rights and remedies of the Debtors under or in respect of the Collateral,
including, without limitation, any and all rights of the Debtors to demand or
otherwise require payment of any amount under, or performance of any provision
of any of the Collateral and any and all voting rights and corporate powers in
respect of the Collateral.

 

19

 

(v)                                 On any sale of the
Collateral, the Bank is hereby authorized to comply with any limitation or
restriction with which compliance is necessary (based on a reasoned opinion of
the Bank’s counsel) in order to avoid any violation of applicable law or in
order to obtain any required approval of the purchaser or purchasers by any
applicable Governmental Authority.

 

(vi)                              The Bank may direct account
debtors and any other parties liable for any payment under any of the
Collateral to make payment of any and all monies due and to become due thereunder directly to the Bank or as the Bank shall
direct.

 

(vii)                           For purposes of enabling the Bank
to exercise its rights and remedies under this Section 6.1 and
enabling the Bank and its successors and assigns to enjoy the full benefits of
the Collateral, the Debtors hereby grant to the Bank an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to the Debtors) to use, assign, license or sublicense any of the
Computer Records or Software (including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and all
computer programs used for the completion or printout thereof), exercisable
upon the occurrence and during the continuance of an Event of Default (and
thereafter if Bank succeeds to any of the Collateral pursuant to an enforcement
proceeding or voluntary arrangement with Debtor), except as may be prohibited
by any licensing agreement relating to such Computer Records or Software.  This license shall also inure to the benefit
of all successors, assigns, transferees of and purchasers from the Bank.

 

Section 6.2.                                Private Sales.

 

(a)                                  In view of the fact that
applicable securities laws may impose certain restrictions on the method by
which a sale of the Pledged Shares may be effected after an Event of Default,
Debtors agree that upon the occurrence and during the continuance of an Event
of Default, Bank may from time to time attempt to sell all or any part of the
Pledged Shares by a private sale in the nature of a private placement,
restricting the bidders and prospective purchasers to those who will represent
and agree that they are “accredited investors” within the meaning of Regulation
D promulgated pursuant to the Securities Act of 1933, as amended (the
“Securities Act”), and are purchasing for investment only and not for
distribution. In so doing, Bank may solicit offers for the Pledged Shares, or
any part thereof, from a limited number of investors who might be interested in
purchasing the Pledged Shares. Without limiting the methods or manner of
disposition which could be determined to be commercially reasonable, if Bank
hires a firm of regional or national reputation that is engaged in the business
of rendering investment banking and brokerage services to solicit such offers
and facilitate the sale of the Pledged Shares, then Bank’s acceptance of the
highest offer (including its own offer) obtained through such efforts of such
firm shall be deemed to be a commercially reasonable method of disposition of
such Pledged Shares.  The Bank shall not
be under any obligation to delay a sale of any of the Pledged Shares for the
period of time necessary to permit the issuer of such securities to register
such securities under the laws of any jurisdiction outside the United States,
under the Securities Act or under any applicable state securities laws, even if
such issuer would agree to do so.

 

20

 

(b)                                 The Debtors further agree to
do or cause to be done, to the extent that the Debtors may do so under
applicable law, all such other reasonable acts and things as may be necessary
to make such sales or resales of any portion or all
of the Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at the Debtors’
expense.

 

Section 6.3.                                Establishment of Cash
Collateral Account; and Lock Box.

 

(a)                                  Upon the occurrence and
during the continuance of an Event of Default, promptly upon demand by the Bank,
there shall be established by each Debtor with Bank a segregated non-interest
bearing cash collateral account (“Cash Collateral Account”) bearing a
designation clearly indicating that the funds deposited therein are held for
the benefit of the Bank; provided, however, that the Cash Collateral Account
may be an interest-bearing account with a commercial bank if determined by the
Bank, in its reasonable discretion, to be practicable, invested by Bank in its
sole discretion, but without any liability for losses or the failure to achieve
any particular rate of return. 
Furthermore, in connection with the establishment of a Cash Collateral
Account under the first sentence of this Section 6.3 (and on the terms and
within the time periods provided thereunder), (i)
each Debtor agrees to establish and maintain (and Bank may establish and
maintain) at Debtor’s sole expense a United States Post Office lock box (the
“Lock Box”), to which Bank shall have exclusive access and control.  Each Debtor expressly authorizes Bank, from
time to time, to remove the contents from the Lock Box for disposition in
accordance with this Agreement; and (ii) each Debtor shall notify all account
debtors that all payments made to Debtor (a) other than by electronic funds
transfer, shall be remitted, for the credit of Debtor, to the Lock Box, and
Debtor shall include a like statement on all invoices, and (b) by electronic
funds transfer, shall be remitted to the Cash Collateral Account, and Debtor
shall include a like statement on all invoices. Each Debtor agrees to execute
all documents and authorizations as reasonably required by the Bank to
establish and maintain the Lock Box and the Cash Collateral Account.  It is acknowledged by the parties hereto that
any lockbox presently maintained or subsequently established by a Debtor with
Bank may be used, subject to the terms hereof, to satisfy the requirements set
forth in the first sentence of this Section 6.3.

 

(b)                                 Upon the occurrence and
during the continuance of an Event of Default, promptly upon demand by the
Bank, any and all cash (including amounts received by electronic funds
transfer), checks, drafts and other instruments for the payment of money
received by each Debtor at any time, in full or partial payment of any of the
Collateral consisting of Accounts or Inventory, shall forthwith upon receipt be
transmitted and delivered to Bank, properly endorsed, where required, so that
such items may be collected by Bank. Any such amounts and other items received
by a Debtor shall not be commingled with any other of such Debtor’s funds or
property, but will be held separate and apart from such Debtor’s own funds or
property, and upon express trust for the benefit of Bank until delivery is made
to Bank.  All items or amounts which are
remitted to a Lock Box or otherwise delivered by or for the benefit of a Debtor
to Bank on account of partial or full payment of, or any other amount payable
with respect to, any of the Collateral shall, at Bank’s option, to any of the
Indebtedness, whether then due or not, in the order and manner set forth in the
Credit Agreement.  No Debtor shall have
any right whatsoever

 

21

 

to withdraw any funds so
deposited. Each Debtor further grants to Bank a first security interest in and
lien on all funds on deposit in such account. Each Debtor hereby irrevocably
authorizes and directs Bank to endorse all items received for deposit to the
Cash Collateral Account, notwithstanding the inclusion on any such item of a
restrictive notation, e.g., “paid in full”, “balance of account”, or other
restriction.

 

6.4                               Default Under Credit
Agreement.  Subject to any
applicable notice and cure provisions contained in the Credit Agreement, the
occurrence of any Event of Default (as defined in the Credit Agreement),
including without limit a breach of any of the provisions of this Agreement,
shall be deemed to be an Event of Default under this Agreement.

 

ARTICLE VII

Miscellaneous

 

Section 7.1.                                No Waiver; Cumulative
Remedies.  No failure on the part
of the Bank to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.  The rights and remedies provided for in this
Agreement are cumulative and not exclusive of any rights and remedies provided
by law.

 

Section 7.2.                                Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Debtor and the Bank and their respective heirs,
successors and assigns, except that no Debtor may assign any of its rights or
obligations under this Agreement without the prior written consent of the Bank.

 

Section 7.3.                                AMENDMENT; ENTIRE AGREEMENT.  THIS AGREEMENT, THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR
VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.  The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the parties
hereto.

 

Section 7.4.                                Notices.  All notices, requests, consents, approvals,
waivers and other communications hereunder shall be in writing (including, by
facsimile transmission) and mailed, faxed or delivered to the address or
facsimile number specified for notices on signature pages hereto; or, as
directed to the Debtor or the Bank, to such other address or number as shall be
designated by such party in a written notice to the other. All such notices,
requests and communications shall, when sent by overnight delivery, or faxed,
be effective when delivered for overnight (next business day) delivery, or
transmitted in legible form by facsimile machine,

 

22

 

respectively, or if mailed, upon
the third Business Day (as defined in the Credit Agreement) after the date
deposited into the U.S. mail certified or registered (return receipt
requested), or if otherwise delivered, upon delivery; except that notices to
the Bank shall not be effective until actually received by the Bank.

 

Section 7.5.                                GOVERNING LAW; SUBMISSION
TO JURISDICTION; SERVICE OF PROCESS. (a) THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF MICHIGAN.

 

(b)                                 ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER SECURITY DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF MICHIGAN OR OF THE UNITED
STATES FOR THE EASTERN DISTRICT OF MICHIGAN, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE DEBTORS AND THE BANK CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS.  EACH OF THE DEBTORS AND THE BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY SECURITY
DOCUMENT.

 

Section 7.6.                                Headings.  The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.

 

Section 7.7.                                Survival of Representations
and Warranties.  All
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the execution and delivery of this Agreement,
and no investigation by the Bank shall affect the representations and
warranties or the right of the Bank to rely upon them.

 

Section 7.8.                                Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

Section 7.9.                                Waiver of Bond.  In the event the Bank seeks to take
possession of any or all of the Collateral by judicial process, each Debtor
hereby irrevocably waives any bonds and any surety or security relating thereto
that may be required by applicable law as an incident to such possession, and
waives any demand for possession prior to the commencement of any such suit or
action.

 

Section 7.10.                         Severability.  Any provision of this Agreement which is
determined by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

23

 

Section 7.11.                         Construction.  Each Debtor and the Bank acknowledge that
each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel
and that this Agreement shall be construed as if jointly drafted by the Debtors
and the Bank.

 

Section 7.12.                         Termination.  If all of the Indebtedness (other than
contingent liabilities pursuant to any indemnity, including without limitation Sections
5.5 and 5.6 hereof, for claims which have not been asserted, or which have
not yet accrued) shall have been indefeasibly paid and performed in full (in
cash) and all commitments to extend credit or other credit accommodations under
the Credit Agreement have been terminated, the Bank shall, upon the written
request of the Debtors, execute and deliver to the Debtors a proper instrument
or instruments acknowledging the release and termination of the security
interests created by this Agreement, and shall duly assign and deliver to the
Debtors (without recourse and without any representation or warranty) such of
the Collateral as may be in the possession of the Bank and has not previously
been sold or otherwise applied pursuant to this Agreement.

 

Section 7.13                            Release of Collateral.
The Bank shall, upon the written request of the Debtors, execute and deliver to
the Debtors a proper instrument or instruments acknowledging the release of the
security interest and liens established hereby on any Collateral (other than
the Pledged Shares): (a) if the sale or other disposition of such Collateral is
permitted under the terms of the Credit Agreement or, (b) if the sale or other
disposition of such Collateral is not permitted under the terms of the Credit
Agreement, provided that the Bank has consented to such sale or disposition in
accordance with the terms thereof.

 

Section 7.14.                         WAIVER OF JURY TRIAL.  EACH DEBTOR AND THE BANK WAIVES ITS RIGHTS TO
A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY EITHER SUCH PARTY AGAINST THE OTHER, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  EACH DEBTOR AND THE BANK AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, EACH SUCH
PARTY FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION
OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

 

Section 7.15.                         Consistent Application.  The rights and duties created by this
Agreement shall, in all cases, be interpreted consistently with, and shall be
in addition to (and not in lieu of), the rights and duties created by the
Credit Agreement and the other Loan Agreements. 
In the

 

24

 

event that any provision of this
Agreement shall be inconsistent with any provision of the Credit Agreement,
such provision of the Credit Agreement shall govern.

 

Section 7.16.                         Continuing Lien.  The security interest granted under this
Security Agreement shall be a continuing security interest in every respect
(whether or not the outstanding balance of the Indebtedness is from time to
time temporarily reduced to zero) and Bank’s security interest in the
Collateral as granted herein shall continue in full force and effect for the
entire duration that the Credit Agreement remains in effect and until all of
the Indebtedness are repaid and discharged in full, and no commitment (whether
optional or obligatory) to extend any credit under the Credit Agreement remains
outstanding.

 

*    *   
*    *

 

25

 

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

 

 

	
   

  	
  DEBTORS:

  
	
   

  	
   

  
	
   

  	
  INTERACTIVE HEALTH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Thomas Dragotto

  	
   

  
	
   

  	
  Name: Thomas Dragotto

  
	
   

  	
  Title: Chief Financial Officer
  and Secretary

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  3030 Walnut Avenue

  
	
   

  	
  Long Beach, CA 90807

  
	
   

  	
  Fax No.: (562) 718-7614

  
	
   

  	
  Telephone No.: (562) 426-8700

  
	
   

  	
  Attention: Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Marc D. Adams

  	
   

  
	
   

  	
  Name: Marc D. Adams

  
	
   

  	
  Title: Associate Comerica Bank
  Private Equity Group

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
  One Detroit Center, 9th
  Floor

  
	
   

  	
  500 Woodward Avenue

  
	
   

  	
  Detroit, Michigan 48226

  
	
   

  	
  Fax No.: 313/222-6198

  
	
   

  	
  Telephone No.: 313/222-5182

  
	
   

  	
  Attention: Daryl Krause

  

 

26

 

SCHEDULE A

TO

SECURITY AGREEMENT

 

Locations
of Equipment and Inventory

(including leased locations) in the Possession of Debtor or Any Bailee/Warehouseman

 

 

[TO
BE COMPLETED BY COMPANY]

 

1

 

SCHEDULE B

TO

SECURITY AGREEMENT

 

Jurisdictions
for Filing

UCC-1 Financing Statements

 

 

[TO
BE COMPLETED BY COMPANY]

 

1

 

SCHEDULE C

TO

SECURITY AGREEMENT

 

Debtor
Jurisdiction of Organization

 

 

[TO
BE COMPLETED BY COMPANY]

 

1

 

SCHEDULE D

TO

SECURITY AGREEMENT

 

Pledged
Shares*

 

[TO
BE COMPLETED BY COMPANY]

 

	
  Stock

  Issuer

  	
   

  	
  Owner of Stock

  	
   

  	
  Class

  of

  Stock

  	
   

  	
  Stock

  Certificate

  No(s)

  	
   

  	
  Par

  Value

  	
   

  	
  Number

  of

  Shares

  	
   

  	
  Outstanding

  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

* Modify headings to the extent
necessary to identify membership interests, partnership units, notes or other
instruments.

 

1

 

SCHEDULE E

TO

SECURITY AGREEMENT

INTELLECTUAL PROPERTY

 

 

ITEM A.   TRADEMARKS

 

Registered
Trademarks

 

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pending
Trademark Applications

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

1

 

Expired,
Abandoned or Canceled Trademarks

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Trademark
Applications in Preparation

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2

 

ITEM B.   TRADEMARK LICENSES

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[TO
BE COMPLETED BY COMPANY]

 

3

 

ATTACHMENT
1

 

	
  to

  Schedule E to Security Agreement

  (Copyright)

  

 

ITEM A.   COPYRIGHTS

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ITEM B.   PENDING COPYRIGHT APPLICATIONS

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

4

 

ITEM C.   COPYRIGHT LICENSES

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ITEM A.   PATENTS (including letters
patent and applications for letters patent):

 

	
  Country

  	
   

  	
  Patent

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ITEM B.   PATENT LICENSES:

 

	
  Country

  	
   

  	
  Patent

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

5

 

[TO
BE COMPLETED BY COMPANY]

 

6

 

SCHEDULE F

ASSUMED NAMES

 

Interactive Health LLC

HWE, Inc.

New HWE Inc.

Interactive Health Global, Inc.

Refer also to Attachment 1 Corporate Structure Chart (before 8/22/2003)

 

[COMPANY
TO CONFIRM]

 

1

 

 

1

 

EXHIBIT
A

TO

SECURITY AGREEMENT

 

FORM
OF AMENDMENT

 

This Amendment,
dated
                   ,
20  , is delivered pursuant to Section [4.14/4.16/4.21] of the Security
Agreement referred to below.  The
undersigned hereby agrees that this Amendment may be attached to the Security
Agreement dated as of February 13, 2004, between the undersigned and
Comerica Bank (the “Security Agreement”), and [that the shares of stock,
membership interests, partnership units, notes or other instruments listed on Schedule D]
/ [that the intellectual property listed on Schedule E/ that the
collateral locations listed on Schedule A] annexed hereto shall be and
become part of the Collateral referred to in the Security Agreement and shall
secure payment and performance of all Indebtedness as provided in the Security
Agreement.

 

Capitalized
terms used herein but not defined herein shall have the meanings therefor
provided in the Security Agreement.

 

 

	
   

  	
  INTERACTIVE HEALTH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

1

 

SCHEDULE D

TO

SECURITY AGREEMENT

 

[PLEDGED
SHARES*

 

 

	
  Stock Issuer

  	
   

  	
  Owner of Stock

  	
   

  	
  Class

  of

  Stock

  	
   

  	
  Stock

  Certificate

  No(s)

  	
   

  	
  Par

  Value

  	
   

  	
  Number

  of

  Shares

  	
   

  	
  Outstanding

  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

* Modify headings to the extent
necessary to identify membership interests, partnership units, notes or other
instruments.

 

1

 

SCHEDULE E

TO

SECURITY AGREEMENT

Intellectual Property

 

ITEM A.   TRADEMARKS

 

Registered
Trademarks

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pending
Trademark Applications

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Expired,
Abandoned or Canceled Trademarks

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Trademark
Applications in Preparation

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

ITEM B.   TRADEMARK LICENSES

 

	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[TO
BE COMPLETED BY COMPANY]

 

 

ATTACHMENT
1

 

ITEM A.   COPYRIGHTS

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ITEM B.   PENDING COPYRIGHT APPLICATIONS

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

ITEM C.   COPYRIGHT LICENSES

 

	
  Country

  	
   

  	
  Copyright

  	
   

  	
  Registration No.

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[TO
BE COMPLETED BY COMPANY]

 

 

ITEM A.   PATENTS (including letters
patent and applications for letters patent):

 

	
  Country

  	
   

  	
  Patent

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ITEM B.   PATENT LICENSES:

 

	
  Country

  	
   

  	
  Patent

  	
   

  	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Debtor

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

[TO  BE COMPLETED BY COMPANY]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00065-of-00352.parquet"}]]