Exhibit 10.4

 

 

HANGER ORTHOPEDIC GROUP, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(As Amended and Restated Effective January 1, 2011)

 

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Table of Contents

 

 

 

Page

 

 

ARTICLE I PURPOSE

3

1.1.

Effective Date

3

1.2.

Purpose

3

1.3.

Legal Compliance

3

 

 

 

ARTICLE II DEFINITIONS

4

2.1.

“Accrued Benefit”

4

2.2.

“Administrator”

4

2.3.

“Applicable Interest Rate”

4

2.4.

“Base Salary”

4

2.5.

“Beneficiary”

4

2.6.

“Board”

4

2.7.

“Change in Control”

4

2.8.

“Code”

4

2.9.

“Committee”

5

2.10.

“Company”

5

2.11.

“Effective Date”

5

2.12.

“Employer”

5

2.13.

“ERISA”

5

2.14.

“Final Average Salary”

5

2.15.

“Participant”

5

2.16.

“Plan”

5

2.17.

“Present Value”

5

2.18.

“Separation from Service”

5

2.19.

“Spouse”

5

2.20.

“Year of Credited Service”

5

2.21.

“Year of Vesting Service”

6

 

 

 

ARTICLE III PLAN ADMINISTRATION

6

3.1.

Administrator

6

3.2.

Administrator Duties

6

3.3.

Information

6

3.4.

Claims Procedure

6

3.5.

Indemnification

7

 

 

 

ARTICLE IV ELIGIBILITY FOR PARTICIPATION AND ENTITLEMENT TO ACCRUED BENEFIT

8

4.1.

Designation of Participants

8

4.2.

Entitlement to Accrued Benefits

8

4.3.

Forfeiture for Certain Reasons

8

 

 

 

ARTICLE V VESTING

9

5.1.

Vesting

9

5.2.

Forfeiture If Not Vested

9

 

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ARTICLE VI AMOUNT OF ACCRUED BENEFIT

9

6.1.

Amount of Accrued Benefit

9

 

 

 

ARTICLE VII FORM AND COMMENCEMENT OF PAYMENTS TO A PARTICIPANT

10

7.1.

Form

10

7.2.

Commencement

10

7.3.

Reduction for Early Commencement

10

7.4.

Small Payment Rules

10

7.5.

Death While In Pay Status

11

7.6.

Withholding of Taxes and Amounts Due

11

7.7.

No Representation as to Tax Consequences

11

 

 

 

ARTICLE VIII DEATH BENEFITS BEFORE PAYMENTS COMMENCE

11

8.1.

Amount

11

8.2.

Form

12

8.3.

Commencement

12

 

 

 

ARTICLE IX EFFECT OF CHANGE IN CONTROL

12

9.1.

Vesting Accelerated for Active Participants

12

9.2.

Plan May Be Terminated and Paid Out

12

9.3.

Rabbi Trust To Be Established and Funded

12

 

 

 

ARTICLE X AMENDMENT OR TERMINATION

13

10.1.

Amendment or Termination by Board

13

10.2.

No Reduction or Delay of Benefit Payments

13

10.3.

Cash Out on Plan Termination

13

 

 

 

ARTICLE XI MISCELLANEOUS

13

11.1.

Unfunded Plan; Unsecured Liability

13

11.2.

No Contract of Employment

14

11.3.

Nonalienation of Benefits

14

11.4.

Effect on Retirement Plans

14

11.5.

Severability

14

11.6.

Merger, Consolidation or Acquisition

14

11.7.

Governing Law

14

11.8.

Binding Effect

14

 

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ARTICLE I
PURPOSE

 

1.1.          Effective Date.  HANGER ORTHOPEDIC GROUP, INC., a Delaware
corporation (the “Company”), together with its subsidiaries and affiliates
(collectively referred to herein as the “Employer”), established the Hanger
Orthopedic Group, Inc. Supplemental Executive Retirement Plan (the “Plan”), as
of the Effective Date.  The Plan was previously amended and restated as of
January 1, 2005, to conform to the requirements of the American Jobs Creation
Act of 2004 and new Code Section 409A.  The Plan is now amended and restated to
revise the formula for determining the accrued benefits due to employees who
initially become participants on or after January 1, 2011.

 

1.2.          Purpose.  The purpose of the Plan is to promote the best interests
of the Company and Company stockholders by attracting and retaining key
management employees having a strong interest in the success of the Company and
its subsidiaries and affiliates and encouraging their service, loyalty and good
counsel.

 

1.3.          Legal Compliance.  It is the intention of the Company:

 

(a)           That the Plan and all elections, deferrals, rights and features,
notwithstanding any written terms or provisions to the contrary, be operated in
good faith compliance with Code Section 409A; and

 

(b)           That the Plan will be amended or restated retroactively to
January 1, 2005, or any later appropriate date, if necessary and without
requiring the consent of any Participant or Beneficiary, in order that the Plan
be in compliance with Code Section 409A; and

 

(c)           That the Plan shall at all times be administered and interpreted
in such a manner as to constitute an unfunded Plan for a select group of
management or highly compensated employees, so as to qualify for all available
exemptions from the provisions of Title I of ERISA; and

 

(d)           That the Plan constitutes a nonqualified deferred compensation
plan for all purposes of Code Section 3121(v)(2) (“Special Timing Rule”) and
4 U. S. C. Section 114 (“Pension Source Act”).

 

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ARTICLE II

DEFINITIONS

 

The following terms have the following meanings unless the context clearly
indicates otherwise:

 

2.1.          “Accrued Benefit” means the annual benefit amount calculated
pursuant to Article VI.

 

2.2.          “Administrator” means the person designated by the Committee
pursuant to Article III to administer the Plan on behalf of the Employers.  As
of January 1, 2011, such person is the Vice President of Human Resources.

 

2.3.          “Applicable Interest Rate” means one hundred twenty percent (120%)
of the applicable federal long-term rate rounded to the nearest two-tenths of
one percent, compounded annually, in effect under Code Section 1274 for the
month for which the determination is made.

 

2.4.          “Base Salary” means the annual base salary paid by an Employer to
an employee during a calendar year, prior to giving effect to any salary
reduction agreement to which Code Sections 125, 132(f), or 402(g)(3) applies or
any voluntary deferred compensation election, but not including any other kind
of extra or additional compensation.  If the rate of Base Salary changes during
a calendar year the higher rate shall be annualized to determine Base Salary for
the year.

 

2.5.          “Beneficiary” means the person or entity designated by a
Participant to be his or her beneficiary for purposes of receiving benefits
under the Plan in the event the Participant dies before receiving payment in
full of the Participant’s vested Accrued Benefit.  A designation of Beneficiary
shall be valid and in effect only if a properly executed designation, in such
form as the Administrator prescribes for this purpose, is filed and received by
the Administrator before the death of the Participant.  If a Participant
designates his or her Spouse as a Beneficiary, such Beneficiary designation
automatically shall become null and void on the date of the Participant’s
divorce or legal separation from such Spouse.  If a valid Beneficiary
designation is not in effect at the time of the Participant’s death, the estate
of the Participant is deemed to be the sole Beneficiary.  If the Administrator
is uncertain as to the identity of the Participant’s Beneficiary, the
Administrator may deem the estate of the Participant to be the sole
Beneficiary.  A legal minor shall not qualify as a Beneficiary under the Plan.

 

2.6.          “Board” means the Board of Directors of Hanger Orthopedic
Group, Inc.

 

2.7.          “Change in Control” means a change in the ownership of the
Company, a change in the effective control of the Company, or a change in the
ownership of a substantial portion of the assets of the Company, all as defined
by Code Section 409A and the guidance applicable to interpreting it.

 

2.8.          “Code” means the Internal Revenue Code of 1986, as it may be
amended from time to time and as interpreted by regulations and rulings issued
pursuant to the Code.  Any references to a specific provision shall be deemed to
include references to any successor Code provision.

 

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2.9.          “Committee” means the Compensation Committee of the Board, which
is authorized to oversee, administer and amend the Plan, or any successor
committee selected by the Board for this purpose.

 

2.10.        “Company” means Hanger Orthopedic Group, Inc., or any successor.

 

2.11.        “Effective Date” means January 1, 2004.

 

2.12.        “Employer” means the Company and any of its subsidiaries and
affiliates.

 

2.13.        “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended and as interpreted by regulations and rulings issued pursuant to
ERISA.  Any references to a specific provision shall be deemed to include
references to any successor ERISA provision.

 

2.14.        “Final Average Salary” means a Participant’s average Base Salary
for the three (3) calendar years during which the Participant’s Base Salary was
the highest within the last five (5) consecutive calendar years ending with the
calendar year in which occurs the Participant’s termination of employment.  If
the Participant has fewer than three (3) averaging years for this purpose, the
actual number of years in which Base Pay is earned shall be used to determine
Final Average Salary.

 

2.15.        “Participant” means an employee of an Employer who is employed in a
key management position and who is initially designated in this Plan, or
subsequently in writing by the Committee, as a Participant; provided, however,
if a Participant transfers out of employment in a key management position, but
remains an employee, the Committee shall, in its discretion, determine the
extent to which Plan benefits shall continue to accrue and/or vest following
such transfer.

 

2.16.        “Plan” means the Hanger Orthopedic Group, Inc. Supplemental
Executive Retirement Plan, as contained in this document and including all
amendments.

 

2.17.        “Present Value” means the present value of Accrued Benefits, as
determined by the Administrator, discounted on the basis of the Applicable
Interest Rate to the date of determination.

 

2.18.        “Separation from Service” means an employee’s last day of work or,
if later, the expiration date of any required notice period applicable to the
employee; provided, however, that no Separation from Service shall be deemed to
have occurred earlier than the date as of which the employee has incurred a
“separation from service” within the meaning of Code Section 409A, including
Treas. Reg. 1.409A-1(h), determined by applying the default rules thereof.

 

2.19.        “Spouse” means the surviving spouse of the Participant, as such
term is defined in the law of the State of residency of the Participant, and
within the meaning of the federal Defense of Marriage Act (Pub. L. 104-99), at
the applicable time.

 

2.20.        “Year of Credited Service” means twelve (12) full months of
employment with the Employer measured from a Participant’s initial coverage date
(as that term is described in Article VI).  Unless otherwise determined by the
Administrator to be a greater amount, service for this purpose is limited to
regular, full-time salaried employment by the Employer, including periods of
authorized leave of absence.  Effective January 1, 2006, any period following a
Participant’s termination of employment date with the Employer during which the
Participant is entitled to wage continuation

 

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payments, severance pay, or separation pay shall be deemed for this purpose to
be an authorized leave of absence and employment after a Participant’s initial
coverage date of fewer than twelve (12) full months shall be counted as a pro
rata Year of Credited Service.

 

2.21.        “Year of Vesting Service” means twelve (12) full months of
employment with the Employer measured from an employee’s most recent employment
date with the Employer.  Unless otherwise determined by the Administrator to be
a greater amount, service for this purpose is limited to regular, full-time
salaried employment by the Employer, including periods of authorized leave of
absence.  Effective January 1, 2006, any period following a Participant’s
termination of employment date with the Employer during which the Participant is
entitled to wage continuation payments, severance pay, or separation pay shall
be deemed for this purpose to be an authorized leave of absence.

 

ARTICLE III

PLAN ADMINISTRATION

 

3.1.          Administrator.  The Committee shall appoint the Administrator, who
shall administer the Plan for the exclusive benefit of Participants and their
Beneficiaries, subject to the terms of the Plan.  The Administrator shall
administer the Plan in accordance with its terms and shall have the power and
discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan.  The Administrator may establish procedures, correct any defect, or
reconcile any inconsistency in such manner and to such extent as is deemed
necessary or advisable to carry out the purposes of the Plan.  Prior to a Change
in Control, all actions by the Administrator shall be binding on all persons
unless they are arbitrary or capricious.  The standard of review of
Administrator actions following a Change in Control shall be the less
deferential de novo standard of review.

 

3.2.          Administrator Duties.  The Administrator is responsible for the
general administration of the Plan, including, but not limited to the following:

 

(a)           The discretion to determine matters of eligibility of employees to
participate or remain a Participant and to receive Plan benefits;

 

(b)           To determine the amount of benefits payable on behalf of a
Participant;

 

(c)           To maintain Plan records;

 

(d)           To interpret the Plan and adopt rules for Plan administration; and

 

(e)           To assist Participants and Beneficiaries regarding their rights
and benefits under the Plan.

 

3.3.          Information.  The Employer shall provide to the Administrator all
information necessary to the administration of the Plan.  The Administrator may
rely on such information as is supplied by the Employer and shall have no duty
to verify such information.

 

3.4.          Claims Procedure.  A claim for benefits shall be deemed filed when
the Administrator receives written notice from either the person claiming a
benefit (hereafter referred to as

 

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“claimant”), or an Employer, that a Participant has either retired, died, or
terminated the Participant’s employment for any other reason.  Upon receipt of
this written notice, the Administrator shall determine the benefits, if any,
payable to the claimant.  The Administrator shall communicate in writing to the
claimant the benefits, if any, so determined within ninety (90) days after the
date the Administrator receives the written notice described above that a claim
has been filed.  If special circumstances require, the 90-day period set forth
in the preceding sentence may be extended up to a period of ninety (90)
additional days, provided the Administrator furnishes the claimant a written
notice, prior to the expiration of the initial 90-day period, of the extension,
specifying the special circumstances requiring the extension and the date by
which the Administrator expects to determine the benefits payable, if any.

 

If any claim for benefits is subject to a dispute or is partially or wholly
denied, the Administrator shall provide the claimant a written notice setting
forth in a manner calculated to be understood by the claimant the specific
reason(s) for the benefit determination made by the Administrator; specific
reference(s) to pertinent Plan provisions on which the benefit determination is
based; a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; necessary information as to the requirements for
submitting the disputed claim for a review; and a statement of the claimant’s
right to bring a civil action under ERISA Section 502(a) following an adverse
benefit determination.

 

A claimant who, upon receipt of the written notice described in the preceding
paragraph, desires a review of the benefit determination made by the
Administrator must file not later than sixty (60) days (subject to
circumstantial extensions) after such receipt a written request for a review of
the benefit determination.  Such written request must be filed with the
Committee.  The requested review shall be conducted by the Committee in such a
manner so as to provide the claimant a full and fair review of the claimant’s
claim and the initial determination.  Upon receipt by the Committee of a written
request for such a review, the Committee shall advise the claimant in writing
that the claimant or the claimant’s duly authorized representative, may review
documents pertinent to the disputed claim and the claimant may submit written
issues and comments to the Committee for consideration during the review.

 

The Committee shall review the disputed claim and render a decision not later
than sixty (60) days following the receipt by the Committee of the written
request for a review, unless special circumstances require an extension of the
time for processing, in which case the decision shall be rendered not later than
one hundred twenty (120) days following such receipt.  A written notice of any
such extension shall be furnished to the claimant prior to the commencement of
the extension.

 

The Committee shall render its decision on review in writing to the claimant
within the applicable time period set forth above (but not later than five
(5) days after the determination is made) and shall include specific reasons for
the decision, written in a manner calculated to be understood by the claimant,
as well as references to the pertinent Plan provisions on which the decision is
based.  Should the Committee fail to render its decision within the applicable
time period the claim shall be deemed to have been denied.

 

“Written notice” includes electronic notification meeting the requirements of
ERISA regulation 2520.104b-1(c)(1)(i), (iii), and (iv).

 

3.5.          Indemnification.  The Company shall indemnify, hold harmless and
defend the Administrator from any liability which the Administrator may incur in
connection with the performance

 

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of his or her duties in connection with this Plan, so long as the Administrator
has not acted in an arbitrary and capricious manner prior to a Change in Control
(or was acting in good faith after a Change in Control) and within what the
Administrator understood to be the scope of his or her duties.

 

ARTICLE IV
ELIGIBILITY FOR PARTICIPATION AND ENTITLEMENT TO ACCRUED BENEFIT

 

4.1.         Designation of Participants.  The Committee is authorized to
designate as Participants those key management employees the Committee has
determined should be awarded coverage by this Plan.  In addition, the Committee
is authorized to increase the applicable percentage set forth in the
Participant’s Table, described in Article VI, for a Participant who is promoted.

 

4.2.         Entitlement to Accrued Benefits.  Subject to Section 4.3, and the
small payment rules in Section 7.4, a Participant shall be entitled to the
Participant’s vested Accrued Benefit upon the first to occur of:

 

(a)           Normal retirement; defined as Separation from Service and
attainment of age sixty-five (65); or

 

(b)           Early retirement; defined as Separation from Service and
attainment of age sixty-two (62), provided the Participant has completed at
least five (5) Years of Vesting Service.

 

4.3.         Forfeiture for Certain Reasons.  Notwithstanding Section 4.2 or any
other Plan provision, one hundred percent (100%) of a Participant’s unpaid
Accrued Benefit shall be forfeited and not eligible for payment if the Committee
determines as of the Participant’s termination of employment, or subsequently,
that either of the following has occurred:

 

(a)           The Participant, in a willful and continuous manner, failed to
discharge the Participant’s duties and responsibilities as an employee after
having been given notice and an opportunity to cure; the Participant committed a
material act of dishonesty involving the Employer; or the Participant was
convicted of a felony; or

 

(b)           The Participant materially violated any confidentiality agreement
or other covenant restricting actions detrimental to the Employer as set forth
in written agreements entered into by the Employer and the Participant.

 

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ARTICLE V

VESTING

 

5.1.         Vesting.  A Participant’s entitlement to his or her Accrued Benefit
hereunder vests and becomes nonforfeitable (except as provided in Section 4.3)
at the rate of twenty percent (20%) per Year of Vesting Service.  The Committee
may apply a shorter vesting schedule in the case of any Participant, should it
choose to do so.

 

5.2.         Forfeiture If Not Vested.  If Separation from Service occurs before
the Participant is vested in any Accrued Benefits, no benefits are payable
hereunder.

 

ARTICLE VI

AMOUNT OF ACCRUED BENEFIT

 

6.1.         Amount of Accrued Benefit.  Subject to other Plan provisions
limiting or reducing benefits, the amount of a Participant’s Accrued Benefit
shall be equal to:

 

(a)           with respect to a Participant whose initial coverage date was
prior to January 1, 2011, the Participant’s Final Average Salary multiplied by
the applicable percentage, as determined by the Committee and set out in the
Participants’ Table I, attached hereto and incorporated herein by this
reference, multiplied by a fraction determined as follows:

 

(i)            If a Participant’s initial coverage date (determined by the
Committee and set out in the Participants’ Table) occurs on or before the
Participant’s forty-fifth (45th) birthday, the numerator of the fraction shall
be the Participant’s total number of Years of Credited Service as of the
Participant’s termination of employment or twenty (20) Years of Credited Service
(whichever is less) and the denominator shall be twenty (20) Years of Credited
Service.

 

(ii)           If a Participant’s initial coverage date (as described in (i))
occurs after the Participant’s forty-fifth (45th) birthday, the numerator of the
fraction shall be the maximum number of Years of Credited Service that could be
completed between the Participant’s initial Plan coverage date and the
Participant’s sixty-fifth (65th) birthday or, if less, the Participant’s total
number of Years of Credited Service as of the Participant’s termination of
employment, and the denominator shall be the maximum number of Years of Credited
Service that could be completed between the Participant’s initial Plan coverage
date and the Participant’s sixty-fifth (65th) birthday.

 

(b)           with respect to a Participant whose initial coverage date
(determined by the Committee and set out in the Participants’ Table II) is on or
after January 1, 2011, the Participant’s Final Average Salary multiplied by two
percent (2%) (or such different percentage, as determined by the Committee and
set out in the Participants’ Table II, attached hereto and incorporated herein
by this reference), multiplied by the Participant’s total number of Years of
Credited Service as of the Participant’s termination of employment; provided
that in no event shall the amount of the Participant’s Accrued Benefit
determined under this

 

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subsection (b) exceed forty percent (40%) of the Participant’s Final Average
Salary.

 

ARTICLE VII
FORM AND COMMENCEMENT OF PAYMENTS TO A PARTICIPANT

 

7.1.         Form.  A Participant’s Accrued Benefit shall be paid in the form of
a single annual payment for fifteen (15) consecutive calendar years except as
otherwise provided in the small payment rules in Section 7.4.

 

7.2.         Commencement.  Payments shall ordinarily commence on an Employer
payroll date in January of the calendar year next following the calendar year in
which occurs the earlier of the Participant’s normal or early retirement dates. 
However, any benefit payments that would otherwise be payable within six
(6) months after the Participant’s Separation from Service shall be accumulated
and paid on the first day of the seventh month following the date of the
Participant’s Separation from Service (or if earlier, the date of death of the
Participant).

 

7.3.         Reduction for Early Commencement.  Any benefit payments commencing
before the Participant has attained age sixty-five (65) shall be reduced to
reflect the number of years by which the benefit payment commencement date
precedes the date on which normal retirement benefits would have commenced, with
the reduction being two percent (2%) per year.  There is no actuarial increase
for commencement of payments after the January following attainment of age
sixty-five (65).

 

7.4.         Small Payment Rules.  The following small payment rules are
effective on and after January 1, 2006:

 

(a)           Small Present Value at Payment Due Date.  If on any date on which
a payment to a Participant is otherwise due under this Article VII, the Present
Value of all remaining payments due to the Participant is one hundred thousand
dollars ($100,000) or less, such Present Value amount shall be paid in a lump
sum on the payment date to the Participant in full and complete termination of
the entirety of the Participant’s interest in the Plan.  Payment shall be made
on the first day of the month following the six (6) month anniversary of the
Participant’s Separation from Service.  Such dollar amount shall be adjusted not
less frequently than once every five (5) years by the Administrator for
cost-of-living increases based on changes in the Consumer Price Index for all
Urban Consumers (CPI-U) beginning in 2010.  Notwithstanding the foregoing, the
amount paid under this subsection shall not exceed the maximum permitted payment
amount described in Treas. Reg. 1.409A-2(b)(2)(iii).

 

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(b)           De Minimis Cash Out Rule at Termination of Employment.  If, as of
a Participant’s Separation from Service, the Present Value of the Participant’s
vested Accrued Benefit is no greater than the applicable dollar amount under
Code Section 402(g)(1)(B), such amount shall be paid to the Participant in a
single lump sum amount in full and complete settlement of the Participant’s
interest in the Plan.  Payment shall be made on the first day of the month
following the six (6) month anniversary of the Participant’s Separation from
Service.

 

7.5.         Death While In Pay Status.  If a Participant who is receiving
installment payments of his or her Accrued Benefits dies before payment in full
is completed, any remaining installment payments shall be made to the
Participant’s Beneficiary, including when applicable, in accordance with the
small payment rule of Section 7.4(a).

 

7.6.         Withholding of Taxes and Amounts Due.  The Employer shall have the
right to require the Participant to remit to the Employer an amount sufficient
to satisfy Federal, state, and local withholding tax requirements, or to deduct
from all payments made pursuant to the Plan (or from a Participant’s other
compensation) amounts sufficient to satisfy withholding tax requirements. 
Employment taxes with respect to amounts deferred hereunder shall be payable in
accordance with Code Section 3121(v)(2) and may be withheld from a Participant’s
compensation if due prior to the time of a distribution under the Plan.  In
addition, the Employer may deduct from any payment hereunder all amounts owed to
the Employer by the Participant for any reason.

 

7.7.         No Representation as to Tax Consequences.  The Employer makes no
representations, warranties, or assurances and assumes no responsibility as to
the tax consequences of this Plan.

 

ARTICLE VIII
DEATH BENEFITS BEFORE PAYMENTS COMMENCE

 

8.1.         Amount.  If a Participant who has a vested interest in his or her
Accrued Benefit dies before payment of the Participant’s vested Accrued Benefit
has commenced, the Beneficiary of the Participant shall be entitled to receive a
death benefit hereunder.  The death benefit is equal to the deceased
Participant’s vested Accrued Benefit at the time of death.

 

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8.2.         Form.  The death benefit shall be paid in the form of a single
annual payment for fifteen (15) consecutive calendar years, subject to
Section 8.3(b) and the small payment rules of Section 7.4.

 

8.3.         Commencement.  Upon the death of a Participant eligible for early
or normal retirement, death benefit payments shall commence on a payroll date in
January of the calendar year next following the calendar year in which the
Participant’s death occurs.  Any payments commencing before the Participant
would have reached age sixty-five (65) shall be reduced to reflect the number of
years by which the benefit payment commencement date precedes the date on which
normal retirement benefits would have commenced to the Participant, with the
reduction being at the rate of two percent (2%) per year.

 

(b)           Upon the death of a Participant who is not eligible for early or
normal retirement at the time of death, the Administrator shall discount to
their Present Value the installment payments that would otherwise be payable to
the Participant, had the Participant survived to age sixty-five (65), and make
payment in full in a single lump sum payment to the Beneficiary.

 

ARTICLE IX
EFFECT OF CHANGE IN CONTROL

 

9.1.         Vesting Accelerated for Active Participants.  If a Change in
Control is determined by the Board to have occurred while a Participant is
actively employed by the Employer, the Participant shall be immediately and
fully vested in the Participant’s Accrued Benefit determined as of the date of
the Change in Control.

 

9.2.         Plan May Be Terminated and Paid Out.  If a Change in Control is
determined by the Board to have occurred then, in the sole discretion of the
Board, and subject to Code Section 409A, including specifically the plan
termination rules in Treas. Reg. 1.409A-3(j)(4)(ix), the Plan may be terminated
and the entire Present Value of Accrued Benefits of each Participant be
distributed in a lump sum as soon as reasonably possible.

 

9.3.         Rabbi Trust To Be Established and Funded.  If a Change in Control
is determined by the Board to have occurred, and the Plan is not terminated as
described in Section 9.2, the Company shall, no later than thirty (30) days
after the Change in Control, pay into an irrevocable grantor trust (sometimes
also referred to as a “rabbi trust”), created by the Company for this purpose,
an amount so that the trust’s assets are equal to the Present Value of the
Accrued Benefits of all Participants determined on the date of the Change in
Control, and periodically thereafter pay into the trust any additional amount
necessary so that the trust’s assets continue to equal the Present Value of all
Accrued Benefits determined at least annually thereafter.  All assets held by
such trust shall be subject to the claims of the Company’s creditors in the
event of the Company’s insolvency.  Insolvency for this purpose means that the
Company is unable to pay its debts as they become due or the Company is subject
to a pending proceeding as a debtor under the United States Bankruptcy Code.

 

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ARTICLE X

AMENDMENT OR TERMINATION

 

10.1.       Amendment or Termination by Board.  There is no time limit on the
duration of the Plan.  However, the Company, by action of the Board or its
Compensation Committee, may at any time to comply with Code Section 409A or for
any reason, amend or terminate the Plan; provided, however, that the provisions
of Section 9.3 shall not be amended or in any way curtailed following a Change
in Control until all Accrued Benefits as of the date of the Change in Control
have been paid.

 

10.2.       No Reduction or Delay of Benefit Payments.  Except to the extent
required for the Plan to comply with Code Section 409A or other applicable law,
however, no amendment shall be effective so as to reduce the amount of benefit
payable to any Participant or to delay the payment of any amount to a
Participant beyond the time that such amount would be payable without regard to
such amendment.

 

10.3.       Cash Out on Plan Termination.  If the Plan is terminated, to the
extent permissible under Code Section 409A, the Present Value of all Accrued
Benefits shall be distributed to Participants in lump sum payments as of the
effective date of the Plan termination (or at such other time as permitted by
Code Section 409A).

 

ARTICLE XI
MISCELLANEOUS

 

11.1.       Unfunded Plan; Unsecured Liability.  This Plan is unfunded and is
maintained by the Company primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees. 
The Company may authorize creation of a trust or other arrangements to assist
the Company in meeting its obligations under the Plan.  However, any liability
to any person with respect to the Plan shall be based solely upon contractual
obligations created pursuant to the Plan.  Nothing contained in this Plan and no
action taken pursuant to its terms shall create or be construed to create a
trust of any kind, or a fiduciary relationship between any Employer and the
Participant, or any other person.  The right of the Participant to receive
benefits hereunder shall be an unsecured claim against the general assets of the
Participant’s Employer and neither the Participant nor any other person shall
have any rights in or against any amounts which may be earmarked by the Employer
in order to implement this Plan or any other specific assets of the Employer.

 

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11.2.       No Contract of Employment.  The Plan is an expression of the
Company’s current policy with respect to Company executives who meet the
eligibility requirements set forth in the Plan.  The Plan is not a contract of
employment, nor does it provide any Participant with a right to continue in the
employment of the Employer.  No Participant, Beneficiary or other person shall
have any legal or other right to any benefit payments except in accordance with
the terms of the Plan, and then only while the Plan is in effect and subject to
the Company’s right to amend or terminate the Plan.

 

11.3.       Nonalienation of Benefits.  The right of a Participant or any other
person to the payment of benefits under this Plan shall not be assigned,
transferred, pledged or encumbered except as otherwise provided by law, and no
rights or benefits hereunder shall be subject to attachment or legal process for
or against a Participant or his or her Beneficiary.

 

11.4.       Effect on Retirement Plans.  Any benefits accrued pursuant to this
Plan shall not be deemed compensation to the Participant for the purpose of
computing benefits under any qualified retirement plan or other benefit plan,
whether qualified or nonqualified, which may be maintained by the Employer.

 

11.5.       Severability.  If any of the provisions of the Plan shall be held to
be invalid, or shall be determined to be inconsistent with the purpose of the
Plan, the remainder of the Plan shall not be affected thereby.

 

11.6.       Merger, Consolidation or Acquisition.  This Plan shall be binding
upon and inure to the benefit of the Company and its successors and assigns and
the Participants and their heirs, executors, administrators, and legal
representatives.

 

11.7.       Governing Law.  This Plan shall be construed in accordance with and
governed by the laws of the State of Delaware to the extent not preempted by
federal law.

 

11.8.       Binding Effect.  This document and any amendments hereto contain all
the terms and provisions of the Plan and shall constitute the entire Plan, any
other alleged terms or provisions being of no effect.  Obligations incurred by
the Employer pursuant to this Plan shall be binding upon and inure to the
benefit of the Participant, his or her Beneficiaries, personal representatives,
heirs and legatees.

 

Dated this 18th day of January, 2011.

 

 

 

 

HANGER ORTHOPEDIC GROUP, INC.

 

 

 

 

 

 

 

 

By:

/s/ Andrew C. Morton

 

 

 

 

 

 

 

 

 

 

Its:

Vice President — Human Resources

 

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