Exhibit 10.1

 

FIRST AMENDMENT AND WAIVER

 

This FIRST AMENDMENT AND WAIVER (this “Amendment”) dated as of June 19, 2015 is
by and among HANGER, INC., a Delaware corporation (“Borrower”), the Guarantors
identified on the signature pages hereto, the Lenders identified on the
signature pages hereto and BANK OF AMERICA, N.A., in its capacity as Agent (in
such capacity, the “Agent”).

 

RECITALS

 

WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit
Agreement (as amended, modified, supplemented, increased and extended from time
to time, the “Credit Agreement”) dated as of June 17, 2013;

 

WHEREAS, the Borrower, the Guarantors and the Agent are parties to the Guarantee
and Collateral Agreement (as amended, modified and supplemented from time to
time, the “Security Agreement”) dated as of June 17, 2013;

 

WHEREAS, the Borrower, the Guarantors, the Lenders identified therein and the
Agent are parties to Waiver No. 3 to the Credit Agreement (“Waiver No. 3”) dated
as of March 17, 2015; and

 

WHEREAS, the Borrower has requested certain waivers under and amendments to the
Credit Agreement and the Lenders have agreed to the requested waivers and
amendments on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.         Defined Terms.  Capitalized terms defined in the Credit Agreement and
used herein without other definition shall have the meanings ascribed to such
terms in the Credit Agreement.

 

2.         Estoppel, Acknowledgement and Reaffirmation.  Each of the Loan
Parties acknowledges and confirms that as of June 19, 2015 (a) the aggregate
outstanding principal amount of the Term A Loans is $210,937,500 and (b) the
Total Revolving Usage is $146,300,000, each of which amounts constitutes a valid
and subsisting obligation of the Loan Parties to the Lenders that is not subject
to any credits, offsets, defenses, claims, counterclaims or adjustments of any
kind (it being understood that the undrawn portion of the Stated Amount of
outstanding Letters of Credit included in the Total Revolving Usage, if any,
constitutes a contingent obligation for so long as the Loan Parties are not
required to cash collateralize such obligation in accordance with the Credit
Agreement).  Each of the Loan Parties hereby acknowledges its obligations under
the respective Loan Documents to which it is a party, reaffirms that each of the
liens and security interests created and granted in or pursuant to the
Collateral Documents is valid and subsisting and agrees that this Amendment
shall in no manner impair or otherwise adversely affect such obligations, liens
or security interests, except as explicitly set forth herein.

 

3.         Statement of Defaults.

 

3.1       Inventory Accounting Defaults.  The Borrower has notified the Agent
that (a) the Borrower has implemented a change as of December 31, 2014 in its
method of calculating inventory as described in the Borrower’s Report on
Form 8-K filed with the SEC on June 9, 2015 (the “Inventory Change in Method”),
(b) the Inventory Change in Method will result in the Borrower reporting an
inventory valuation adjustment for one or more periods for which the Borrower
delivered financial

 

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statements to the Agent and the Lenders under or in connection with the Credit
Agreement prior to the date hereof (the “Inventory Valuation Adjustment”) and
(c) the Inventory Valuation Adjustment will cause certain financial statements
delivered to the Agent and the Lenders under or in connection with the Credit
Agreement prior to the date hereof to become materially inaccurate (the
“Inventory Valuation Adjustment Inaccuracy”).  The Borrower has further notified
the Agent that the Inventory Valuation Adjustment Inaccuracy constitutes (a) a
Default under Section 9.01(d) of the Credit Agreement as a result of the
Borrower’s failure to comply with Section 7.01 of the Credit Agreement with
respect to such financial statements and (b) an Event of Default under
Section 9.01(b) of the Credit Agreement as a result of the representations and
warranties made by the Borrower under Section 6.11 and/or Section 6.21 of the
Credit Agreement being incorrect in a material respect (the “Inventory
Accounting Defaults”).

 

3.2       Financial Reporting Defaults.

 

(a)        Pursuant to Waiver No. 3, the Lenders waived the following in
accordance with the terms of Waiver No. 3 (collectively, the “Existing Financial
Reporting Defaults”): (i) any Default or Event of Default under
Section 9.01(d) of the Credit Agreement or Section 9.01(b) of the Credit
Agreement arising in connection with the Borrower’s failure to timely deliver
the following (collectively, the “Prior Financial Information”) (A) the
financial information and other materials required to be delivered pursuant to
Section 7.01(a) of the Credit Agreement for the fiscal year ended December 31,
2014, (B) the financial information and other materials required to be delivered
pursuant to Section 7.01(b) of the Credit Agreement for the fiscal quarters
ended September 30, 2014 and March 31, 2015 and (C) a Compliance Certificate
pursuant to Section 7.02(b) for the fiscal year ended December 31, 2014 and the
fiscal quarters ended September 30, 2014 and March 31, 2015; and (ii) any
Default under Section 9.01(e)(ii) of the Credit Agreement to the extent such
Default arises or has arisen as a result of the Borrower’s failure to timely
furnish its (A) Quarterly Reports on Form 10-Q for the quarters ended
September 30, 2014 and March 31, 2015 and (B) Annual Report on Form 10-K for the
year ended December 31, 2014, in each case to the holders of the notes and
trustee under the Indenture.

 

(b)        The Borrower has notified the Agent that the Borrower anticipates
that the Borrower will fail to: (i) timely deliver the following (collectively
with the Prior Financial Information, the “Financial Information”) (A) the
financial information and other materials required to be delivered pursuant to
Section 7.01(b) of the Credit Agreement for the fiscal quarter ending June 30,
2015 and (B) a Compliance Certificate pursuant to Section 7.02(b) for the fiscal
quarter ending June 30, 2015 and (ii) timely furnish its Quarterly Report on
Form 10-Q for the quarter ending June 30, 2015 to the holders of the notes and
trustee under the Indenture, which would cause a Default under
Section 9.01(e)(ii) of the Credit Agreement (together with the Existing
Financial Reporting Defaults, the “Financial Reporting Defaults”).

 

(c)        Pursuant to Waiver No. 3, the Lenders also waived the following in
accordance with the terms of Waiver No. 3 (collectively, the “Existing
Accounting Defaults”):  (i) any Default or Event of Default under
Section 9.01(b) and Section 9.01(d) of the Credit Agreement, to the extent such
Default or Event of Default has arisen as a result of the Borrower’s restatement
of, or revision or adjustment to, the annual and/or quarterly consolidated
financial statements substantially consistent with the accounting adjustments
specified in Item 4.02 of the Borrower’s Current Report on Form 8-K filed on
February 17, 2015 (other than under the caption “Additional Accounting Review
and Financial Statement Preparation”), and (ii) the inaccuracy of any
representation or warranty, including Section 6.11 and Section 6.21 of the
Credit Agreement, contained in the Loan Documents solely as a result of or in
connection with the matters referred to in clause (i) above.

 

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4.         Termination of Waiver No. 3.  Waiver No. 3 is superseded by this
Amendment as of the Amendment Effective Date and after giving effect to this
Amendment Waiver No. 3 shall have no further force and effect.

 

5.         Waiver of Existing Defaults and Events of Default.

 

5.1       The Loan Parties acknowledge the existence and continuance of the
Inventory Accounting Defaults and, subject to the waiver thereof in accordance
with the terms of Waiver No. 3 until the Amendment Effective Date, the Financial
Reporting Defaults and the Existing Accounting Defaults (collectively, the
“Acknowledged Events of Default”).

 

5.2       Subject to the terms and conditions set forth herein, the Lenders
waive the following:

 

(a)        the Inventory Accounting Defaults;

 

(b)        the Financial Reporting Defaults;

 

(c)        the Existing Accounting Defaults;

 

(d)        any Default or Event of Default arising solely from the Borrower’s
failure to timely deliver the notice required by Section 7.03 of the Credit
Agreement with respect to the occurrence of any Acknowledged Event of Default;
and

 

(e)        any Default or Event of Default resulting solely from any action
taken or any failure to take action during the existence of any Acknowledged
Event of Default to the extent such action or failure to take action would have
been permitted but for the existence of any Acknowledged Event of Default
including, without limitation, any request for any Loan (or any conversion or
continuation with respect thereto) or Issuance of any Letter of Credit during
the existence of any Acknowledged Event of Default.

 

5.3       Each of the Loan Parties acknowledges and agrees that:

 

(a)        The waivers set forth in Section 5.2 are one-time waivers limited
exclusively to the Defaults and Events of Default expressly waived in
Section 5.2 and shall not be construed to be a waiver of, or in any way obligate
the Lenders to waive, any other Default or Event of Default that may have
occurred or that may occur after the date hereof;

 

(b)        On or before August 17, 2015, the Borrower shall deliver the
Financial Information to the Agent for distribution to the Lenders, and any
failure to deliver any of the Financial Information by such date shall
constitute a new and immediate Event of Default under the Credit Agreement
without regard to any otherwise applicable notice or cure or grace period;

 

(c)        Any receipt by the Borrower of a notice from the trustee under the
Indenture (or from the holders of at least 25% in aggregate principal amount of
the outstanding notes under the Indenture) (the “Indenture Notice”) that an
“Event of Default” under section 6.01(v) of the Indenture has occurred as a
result of the Borrower’s failure to timely deliver to holders of the notes and
the trustee under the Indenture its (i) Quarterly Reports on Form 10-Q for the
quarters ended September 30, 2014, March 31, 2015 or June 30, 2015, or
(ii) Annual Report Form 10-K for the fiscal year ended December 31, 2014, shall
constitute a new and immediate Event of Default without regard to any otherwise
applicable notice or cure or grace period; provided that receipt of an Indenture
Notice shall not constitute an Event of Default if it is withdrawn (and not
reinstated) within 30 days after such receipt;

 

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(d)        The failure by the Borrower to give the Agent notice of the receipt
of the Indenture Notice on the first Business Day after receipt by the Borrower
of such notice shall constitute a new and immediate Event of Default without
regard to any otherwise applicable notice or cure or grace period; and

 

(e)        On or before July 15, 2015 (or such later date as the Agent may
agree) the Loan Parties (as “Grantors” under the Security Agreement) shall
deliver to the Agent a control agreement duly executed by the applicable Loan
Party and the applicable securities intermediary and in form reasonably
satisfactory to the Agent with respect to each Material Securities Account of
the Loan Parties.  As used herein “Material Securities Account” means any
securities account of a Loan Party with a balance in excess of $1 million. The
Loan Parties shall neither establish nor maintain any additional Material
Securities Accounts unless such Material Securities Accounts are each subject to
a control agreement duly executed by the applicable Loan Party and the
applicable securities intermediary and in form reasonably satisfactory to the
Agent, except that, in the case of a Material Securities Account obtained by
virtue of an Acquisition, the delivery of such a control agreement shall be due
within 60 days after the date of such Acquisition (or such later date as the
Agent may agree), unless such Material Securities Account shall have been closed
prior to such day.

 

6.         Additional Restrictions Pending Certain Deliveries.  Notwithstanding
anything in the Credit Agreement or the other Loan Documents to the contrary,
until such time as (a) the Borrower shall have delivered to the Agent for
distribution to the Lenders the Financial Information, (b) the Financial
Information shall demonstrate that the Loan Parties would have been in
compliance with Sections 8.09 and 8.10 of the Credit Agreement for the fiscal
quarters ended September 30, 2014, December 31, 2014, March 31, 2015 and
June 30, 2015 if the amendment to the definition of Consolidated EBITDA set
forth herein had been effective as of the last day of such fiscal quarters and
(c) the Borrower shall have delivered to the Agent for distribution to the
Lenders Projections prepared on a quarterly basis for each fiscal quarter
remaining during the term of the Credit Agreement demonstrating that (assuming
the Projections will be realized) the Borrower will be in compliance with
Sections 8.09 and 8.10 of the Credit Agreement as of the end of each fiscal
quarter remaining during the term of the Credit Agreement, the following
restrictions (the “Additional Restrictions”) in addition to those set forth in
the Credit Agreement shall apply:

 

(a)        no Credit Extension shall be permitted without the written consent of
the Required Lenders unless, after giving effect to such Credit Extension, the
Total Revolving Usage would be less than or equal to $146,300,000;

 

(b)        the Borrower and its Subsidiaries shall not create, incur, assume or
suffer to exist any Lien after the date hereof in reliance on Section 8.01(m) of
the Credit Agreement securing Indebtedness or other obligations of the Borrower
and its Subsidiaries exceeding in the aggregate, at any time, $15,000,000;

 

(c)        the aggregate value of all assets disposed of by the Borrower and its
Subsidiaries after the date hereof pursuant to Section 8.02(j) of the Credit
Agreement shall not exceed $5,000,000,except that assets may be disposed of
pursuant to Section 8.02(j) in respect of the Dosteon and CARES businesses,
whether pursuant to the plans to dispose of such businesses as described in the
Borrower’s Current Report on Form 8-K filed with the SEC on November 7, 2014 or
otherwise, without reducing the availability under the foregoing $5,000,000
basket;

 

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(d)        the aggregate principal amount of Investments by the Borrower and its
Subsidiaries after the date hereof pursuant to Section 8.04(e)(iii) of the
Credit Agreement shall not exceed $5,000,000;

 

(e)        no Acquisition shall be permitted after the date hereof (other than
any Acquisition to which only Loan Parties are parties);

 

(f)        the Borrower and its Subsidiaries shall not make any Investment after
the date hereof in reliance on Section 8.04(j) of the Credit Agreement;

 

(g)        the Borrower and its Subsidiaries shall not make any Investment after
the date hereof in reliance on Section 8.04(m) of the Credit Agreement;

 

(h)        the aggregate principal amount of Investments by the Borrower and its
Subsidiaries after the date hereof pursuant to Section 8.04(n) of the Credit
Agreement shall not exceed $5,000,000;

 

(i)         the Borrower and its Subsidiaries shall not create, incur, assume,
suffer to exist or otherwise become directly or indirectly liable with respect
to any Indebtedness after the date hereof in reliance on Section 8.05(i) of the
Credit Agreement;

 

(j)         the Borrower and its Subsidiaries shall not create, incur, assume,
suffer to exist or otherwise become directly or indirectly liable with respect
to any Indebtedness after the date hereof in reliance on Section 8.05(l) of the
Credit Agreement;

 

(k)        Foreign Subsidiaries shall not create, incur, assume, suffer to exist
or otherwise become directly or indirectly liable with respect to any
Indebtedness after the date hereof in reliance on Section 8.05(o) of the Credit
Agreement;

 

(l)         the Borrower and its Subsidiaries shall not create, incur, assume,
suffer to exist or otherwise become directly or indirectly liable with respect
to any Indebtedness after the date hereof in reliance on Section 8.05(p) of the
Credit Agreement, exceeding in the aggregate, at any time, $15,000,000;

 

(m)       the Borrower and its Subsidiaries shall not declare or make any
Restricted Payment after the date hereof in reliance on Section 8.08(a)(v) of
the Credit Agreement;

 

(n)        the Borrower and its Subsidiaries shall not declare or make any
Restricted Payment after the date hereof in reliance on Section 8.08(a)(vi) of
the Credit Agreement; and

 

(o)        the Borrower and its Subsidiaries shall not declare or make any
Restricted Payment after the date hereof in reliance on Section 8.08(b) of the
Credit Agreement.

 

7.         Amendments to Credit Agreement.  The Credit Agreement is amended as
follows:

 

(a)        The definition of “Capital Lease Obligations” in Section 1.01 is
amended to add the following to the end thereof:

 

For the avoidance of doubt, “Capital Lease Obligations” shall be deemed to
include the obligations of a lessee of real estate in respect of a build-to-suit
lease if GAAP requires the lessee to recognize the leased property as an owned
asset and such obligations as indebtedness.

 

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(b)        The following new definitions are added to Section 1.01 in the
appropriate alphabetical order:

 

“First Amendment and Waiver” means the First Amendment and Waiver to this
Agreement dated as of June 19, 2015.

 

“Historical Inventory Valuation Adjustments Schedule” has the meaning set forth
in the First Amendment and Waiver.

 

“Inventory Change in Method” has the meaning set forth in the First Amendment
and Waiver.

 

“Notice of Prepayment” means a notice of prepayment with respect to a Loan, in
such form as may be approved by the Agent (including any form on an electronic
platform or electronic transmission system as shall be approved by the Agent),
appropriately completed and signed by a Responsible Officer.

 

(c)        In clause (e) of the definition of “Consolidated EBITDA” in
Section 1.01 the following language is added to the end of such clause:

 

provided that (i) the aggregate amount of professional fees and expenses that
may be added back pursuant to this clause (e) for any period of four consecutive
fiscal quarters shall not exceed (A) for any period of four consecutive fiscal
quarters ending on or prior to December 31, 2015, 15.0% of Consolidated EBITDA
for such period (calculated without giving effect to any add back of
professional fees and expenses pursuant to this clause (e)) and (B) for any
other period of four consecutive fiscal quarters, 10.0% of Consolidated EBITDA
for such period (calculated without giving effect to any add back of
professional fees and expenses pursuant to this clause (e)) and (ii) this clause
(e) may not be used to add back the write-down of current assets;

 

(d)        Clause (i) of the definition of “Consolidated EBITDA” in Section 1.01
is amended to read as follows:

 

(i) without duplication, (i) for any period of four consecutive fiscal quarters
ending on or prior to December 31, 2015, up to $20 million in inventory
valuation adjustments (and/or reductions in the calculated valuation of
inventory) resulting from the Inventory Change in Method, (ii) for any period of
four consecutive fiscal quarters that includes the fiscal quarter ended
December 31, 2014, up to $15 million in inventory valuation adjustments
resulting from the Inventory Change in Method that, due to the absence of
historical data, were applied to the fiscal quarter ended December 31, 2014
instead of to retrospective periods, as disclosed by the Borrower in the
Historical Inventory Valuation Schedule and (iii) any other non-cash charges
(excluding any such non-cash charges to the extent (A) there were cash charges
with respect to such non-cash charges in past accounting periods and (B) the
Borrower reasonably expects that there will be cash charges with respect to such
non-cash charges in future accounting periods) provided that the aggregate
amount of non-cash charges relating to the write-down of current assets that may
be added back pursuant to this clause (i)(iii) for any period of four
consecutive fiscal quarters shall not exceed (A) for any period of four
consecutive fiscal quarters ending on or prior to December 31, 2015, 15.0% of
Consolidated EBITDA for such period (calculated without giving effect to any add
back of any non-cash charges relating to the write-down of

 

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current assets pursuant to this clause (i)(iii)) and (B) for any other period of
four consecutive fiscal quarters, 10.0% of Consolidated EBITDA for such period
(calculated without giving effect to any add back of any non-cash charges
relating to the write-down of current assets pursuant to this clause (i)(iii));

 

(e)        In the definition of “Notice of Borrowing” in Section 1.01 the
following language is added immediately prior to the period at the end thereof:

 

or such other form as may be approved by the Agent (including any form on an
electronic platform or electronic transmission system as shall be approved by
the Agent), appropriately completed and signed by a Responsible Officer of the
Borrower

 

(f)        In the definition of “Notice of Conversion/Continuation” in
Section 1.01 the following language is added immediately prior to the period at
the end thereof:

 

or such other form as may be approved by the Agent (including any form on an
electronic platform or electronic transmission system as shall be approved by
the Agent), appropriately completed and signed by a Responsible Officer of the
Borrower

 

(g)        In the definition of “Responsible Officer” in Section 1.01 the word
“or” is deleted from the penultimate line of such definition, and the following
language is added immediately after “responsibility,”:

 

or any officer or employee of the Borrower designated in or pursuant to an
agreement between the Borrower and the Agent,

 

(h)        In the definition of “Swingline Loan Notice” in Section 1.01 the
following language is added immediately prior to the period at the end thereof:

 

or such other form as may be approved by the Agent (including any form on an
electronic platform or electronic transmission system as shall be approved by
the Agent), appropriately completed and signed by a Responsible Officer of the
Borrower

 

(i)         Section 2.08 is amended by (i) replacing each instance of the word
“notice” in such Section with “Notice of Prepayment”, and (ii) deleting the
words “of prepayment” in the second sentence of such Section.

 

(j)         Section 8.04(a) is amended to read in its entirety as follows:

 

extensions of trade credit in the ordinary course of business and receivables
arising from leases to customers in the ordinary course of business

 

(k)        Section 9.01(c) is amended by adding the following to the end thereof
immediately prior to “; or”:

 

or in the First Amendment and Waiver (other than Section 22 (Further Assurances)
of the First Amendment and Waiver)

 

(l)         Section 11.07(f) is hereby amended and restated in its entirety as
follows:

 

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(f)        Electronic Execution of Assignments and Certain Other Documents.  The
words “delivery,” “execute,” “execution,” “signed,” “signature,” and words of
like import in any Assignment and Assumption, any other Loan Document or any
other document executed in connection herewith shall be deemed to include
electronic signatures, the electronic matching of assignment terms and contract
formations on electronic platforms approved by the Agent, or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act; provided that notwithstanding anything contained herein to the
contrary, neither the Agent, any Issuer, nor any Lender is under any obligation
to agree to accept electronic signatures in any form or in any format unless
expressly agreed to by the Agent, such Issuer or such Lender pursuant to
procedures approved by it, and provided further without limiting the foregoing,
upon the request of any party, any electronic signature shall be promptly
followed by such manually executed counterpart.

 

8.         Amendment to Security Agreement.  The Security Agreement is amended
by adding a new Section 8.17 to the Security Agreement as follows:

 

8.17     Appointment of Borrower.  Notwithstanding anything to the contrary
herein or in any of the other Loan Documents, each of the Guarantors hereby
appoints the Borrower to act as its agent for all purposes of this Agreement,
the other Loan Documents and all other documents and electronic platforms
entered in connection herewith and agrees that (i) the Borrower may execute such
documents and provide such authorizations on behalf of such Guarantor as the
Borrower deems appropriate in its sole discretion and each Guarantor shall be
obligated by all of the terms of any such document and/or authorization executed
on its behalf, (ii) any notice or communications delivered by the Agent, any
Issuer or a Lender to the Borrower shall be deemed delivered to each Guarantor
and (iii) the Agent, any Issuer or the Lenders may accept, and be permitted to
rely on, any document, authorization, instrument or agreement executed by the
Borrower on behalf of each of the Guarantors.

 

9.         Delivery of Third Party Audit Reports.  Promptly following receipt
thereof, the Borrower shall deliver to the Agent for distribution to the
Lenders, expressly subject to the confidentiality restrictions set forth in
Section 11.08 of the Credit Agreement, copies of all final written reports from
the Loan Parties’ third-party auditors with respect to such auditor’s
observations and recommendations concerning the Loan Parties’ financial controls
and reporting.

 

10.       Amendment Fee.  In consideration of the Lenders’ agreements set forth
herein, the Borrower agrees to pay to the Agent, for the account of each
Consenting Lender (defined below), an amendment fee (the “Amendment Fee”) in an
amount equal to 10 basis points (0.10%) of the outstanding principal amount of
the Term A Loan held by such Consenting Lender and the amount of such Lender’s
Revolving Commitments.  The Amendment Fee shall be fully-earned, payable and
non-refundable as of the Amendment Effective Date (defined below).  As used
herein, “Consenting Lender” means a Lender that executes and delivers to the
Agent a signature page to this Amendment on or prior to 5:00 p.m. Eastern time
on June 19, 2015 (or, as to any Lender, such later time or date as may be agreed
by the Agent and the Borrower).

 

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11.       Effectiveness; Conditions Precedent.  This Amendment shall become
effective as of the date hereof (the “Amendment Effective Date”) when, and only
when, each of the following conditions shall have been satisfied or waived, in
the sole discretion of the Agent and the Lenders:

 

(a)        the Agent shall have received counterparts of this Amendment duly
executed by each of the Loan Parties and each of the Required Lenders;

 

(b)        the Agent shall have received a written schedule of historical
inventory valuation adjustments (the “Historical Inventory Valuation Adjustments
Schedule”) containing a written acknowledgment by a Responsible Officer of the
Borrower that such schedule is the Historical Inventory Valuation Adjustments
Schedule;

 

(c)        the Agent shall have received the Amendment Fee;

 

(d)        the Loan Parties shall have paid all reasonable fees, costs and
expenses of the Agent (including, without limitation, fees, costs and expenses
of counsel) incurred in connection with this Amendment, to the extent invoiced
to the Borrower at least one Business Day prior to the Amendment Effective Date;
and

 

(e)        the Agent shall have received such other documents, instruments and
certificates as the Agent or any Lender may reasonably request.

 

12.       Incorporation of Amendment.  Except as specifically modified herein,
the terms of the Loan Documents shall remain in full force and effect.  The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Agent under the Loan Documents, or
constitute a waiver or amendment of any provision of the Loan Documents, except
as expressly set forth herein.  This Amendment shall constitute a Loan Document.

 

13.       Representations and Warranties.  The Loan Parties hereby represent and
warrant to the Agent and the Lenders as follows as of the Amendment Effective
Date:

 

(a)        Each Loan Party has the corporate or other legal entity power and
authority to execute, deliver and perform its obligations under this Amendment;

 

(b)        The execution, delivery and performance by each Loan Party of this
Amendment have been duly authorized by all necessary corporate or other legal
entity action.

 

(c)        This Amendment has been duly executed and delivered by such Loan
Party.

 

(d)        This Amendment constitutes a legal, valid and binding obligation of
each Loan Party enforceable against such Loan Party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors’ rights generally or by equity
principles relating to enforceability.

 

(e)        The execution, delivery and performance by each Loan Party of this
Amendment does not and will not (i) contravene the terms of any of such Person’s
Organization Documents, (ii) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing any
material Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such Person or
its property is subject or (iii) violate any Requirement of Law.

 

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(f)        No approval, consent, exemption, authorization or other action by, or
notice to, or filing with, any court Governmental Authority or any other Person
(except those that have been obtained and remain in effect and disclosure
filings that are required to be made with the SEC) is necessary or required to
be made or obtained by any Loan Party in connection with the execution, delivery
or performance by, or enforcement against, such Loan Party of this Amendment.

 

(g)        After giving effect to this Amendment, (i) the representations and
warranties of the Loan Parties contained in the Loan Documents are true and
correct in all material respects on and as of the date hereof to the same extent
as though made on and as of the date hereof except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date, and (ii) no Default has occurred and
is continuing.

 

(h)        The security interests held by the Agent in the Collateral continue
to be valid, binding and enforceable perfected security interests in accordance
with the Collateral Documents that secure the Obligations subject only to the
Permitted Liens.

 

(i)         As of the Amendment Effective Date, the Borrower has no Subsidiaries
other than those specifically disclosed on Schedule 1 hereto.

 

(j)         The amount of inventory valuation adjustments resulting from the
Inventory Change in Method for any period of four consecutive fiscal quarters
does not exceed an amount equal to 110% of the Specified Amount.  The “Specified
Amount” is, for any period of four consecutive fiscal quarters, the amount set
forth for such period on the Historical Inventory Valuation Adjustments Schedule
provided that such amount can be increased or decreased by the reallocation of
amounts from one period to another period.

 

If any representation and warranty set forth in this Section 13 is incorrect on
and as of the date hereof then such incorrect representation and warranty shall
constitute a new and immediate Event of Default without regard to any otherwise
applicable notice or cure or grace period.

 

14.       Release.  In consideration of the Agent’s and the Required Lenders’
willingness to enter into this Amendment, each of the Loan Parties hereby
releases and forever discharges the Agent, the Lenders and each of the Agent’s
and the Lenders’ predecessors, successors, assigns, officers, managers,
directors, employees, agents, attorneys, representatives, and affiliates
(hereinafter all of the above collectively referred to as the “Lender Group”),
from any and all claims, counterclaims, demands, damages, debts, suits,
liabilities, actions and causes of action of any nature whatsoever, in each case
to the extent arising in connection with the Loan Documents or any of the
negotiations, activities, events or circumstances arising out of or related to
the Loan Documents through the date of this Amendment, whether arising at law or
in equity, whether known or unknown, whether liability be direct or indirect,
liquidated or unliquidated, whether absolute or contingent, foreseen or
unforeseen, and whether or not heretofore asserted, which each of the Loan
Parties may have or claim to have against any of the Lender Group.

 

15.       FATCA.  For purposes of determining withholding Taxes imposed under
the FATCA, from and after the Amendment Effective Date, the Borrower and the
Agent shall treat (and the Lenders hereby authorize the Agent to treat) the
Loans as not qualifying as a “grandfathered obligation” within the meaning of
Treasury Regulation Section 1.1471-2(b)(2)(i).

 

16.       No Third Party Beneficiaries.  This Amendment and the rights and
benefits hereof shall inure to the benefit of each of the parties hereto and
their respective successors and assigns.  No other Person shall have or be
entitled to assert rights or benefits under this Amendment.

 

10

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17.       Entirety.  This Amendment and the other Loan Documents embody the
entire agreement among the parties hereto and supersede all prior agreements and
understandings, oral or written, if any, relating to the subject matter hereof. 
This Amendment and the other Loan Documents represent the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.

 

18.       Counterparts; Electronic Delivery.  This Amendment may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and it shall not be necessary in making proof of this
Amendment to produce or account for more than one such counterpart.  Delivery of
an executed counterpart of this Amendment by facsimile or other electronic means
shall be effective as an original.

 

19.       No Actions, Claim.  As of the date hereof, each Loan Party hereby
acknowledges and confirms that it has no actual knowledge of any actions, causes
of action, claims, demands, damages or liabilities of whatever kind or nature,
in law or in equity, against any of the Lender Parties arising from any action
by such Persons or failure of such Persons to act under the Loan Documents on or
prior to the date hereof.

 

20.       Governing Law.  This Amendment and the rights and obligations of the
parties hereunder shall be governed by, and construed in accordance with, the
law of the State of New York

 

21.       Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. 
The jurisdiction, service of process and waiver of jury trial provisions set
forth in Sections 11.15 and 11.16 of the Credit Agreement are hereby
incorporated by reference, mutatis mutandis.

 

22.       Further Assurances.  Each of the Loan Parties agrees to execute and
deliver, or to cause to be executed and delivered, all such instruments that are
consistent with the terms of this Amendment as may reasonably be requested by
the Agent to effectuate the intent and purposes, and to carry out the terms, of
this Amendment.

 

23.       Miscellaneous.

 

(a)        Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

 

(b)        Wherever possible, each provision of this Amendment shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Amendment shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Amendment.

 

(c)        Except as otherwise provided in this Amendment, if any provision
contained in this Amendment is in conflict with, or inconsistent with, any
provision in the Loan Documents, the provision contained in this Amendment shall
govern and control.

 

[Signature Pages Follow]

 

11

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment and
Waiver to be duly executed as of the date first above written.

 

BORROWER:

HANGER, INC., a Delaware corporation

 

 

 

By:

 

/s/ Thomas E. Hartman

 

 

Name:

Thomas E. Hartman

 

Title:

Vice President, General Counsel and Secretary

 

[SIGNATURE PAGES FOLLOW]

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

GUARANTORS:

ACCELERATED CARE PLUS CORP., a Delaware corporation

 

ACCELERATED CARE PLUS LEASING, INC., a Delaware corporation

 

ADVANCED PROSTHETICS OF AMERICA, INC., a Florida corporation

 

CREATIVE ORTHOTICS & PROSTHETICS, INC., a New York corporation

 

DIBELLO’S DYNAMIC ORTHOTICS AND PROSTHETICS, INC.,

 

a Texas corporation

 

DOSTEON CO HOLDING, INC., a Colorado corporation

 

DOSTEON SOLUTIONS, LLC, a Maryland limited liability company

 

EAST COAST ORTHOTICS, INC., a Florida corporation

 

EUGENE TEUFEL & SON ORTHOTICS & PROSTHETICS, INC.,

 

a Pennsylvania corporation

 

FAITH PROSTHETIC-ORTHOTIC SERVICES, INC.,

 

a North Carolina corporation

 

GENESIS MEDICAL GROUP, LLC, an Oregon limited liability company

 

GREAT PLAINS ORTHOTICS & PROSTHETICS, INC., an Iowa corporation

 

HANGER PROSTHETICS & ORTHOTICS, INC., a Delaware corporation

 

HANGER PROSTHETICS & ORTHOTICS EAST, INC.,

 

a Delaware corporation

 

HANGER PROSTHETICS & ORTHOTICS WEST, INC.,

 

a California corporation

 

INNOVATIVE NEUROTRONICS, INC., a Delaware corporation

 

LIBERTY HEALTH SERVICES, LLC, a Delaware limited liability company

 

LINKIA, LLC, a Maryland limited liability company

 

MK PROSTHETIC & ORHTOTIC SERVICES, INC., a Texas corporation

 

NASCOTT, INC., a Delaware corporation

 

OPNET, INC., a Nevada corporation

 

ORPRO, INC., a California corporation

 

ORTHO-MEDICAL PRODUCTS, INC., a New York corporation

 

ORTHOTIC & PROSTHETIC TECHNOLOGIES, INC., a Texas corporation

 

RAINIER SURGICAL INCORPORATED, a Washington corporation

 

SCOPE ORTHOTICS & PROSTHETICS, INC., a California corporation

 

SOUTHERN PROSTHETIC SUPPLY, INC., a Georgia corporation

 

TEAM POST-OP, INC., a California corporation

 

THE BRACE SHOP PROSTHETIC ORTHOTIC CENTERS, INC.,

 

an Ohio corporation

 

 

 

 

 

By:

 

/s/ Thomas E. Hartman

 

 

Name:

Thomas E. Hartman

 

Title:

Vice President, General Counsel and Secretary

 

 

of each of the foregoing Guarantors

 

 

 

[SIGNATURE PAGES FOLLOW]

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

AGENT:

BANK OF AMERICA, N.A.

 

 

 

 

By:

 

/s/ Christine Trotter

 

 

Name:

Christine Trotter

 

Title:

Assistant Vice President

 

 

[SIGNATURE PAGES FOLLOW]

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

LENDERS:

BANK OF AMERICA, N.A.

 

 

 

 

By:

 

/s/ Suzanne B Smith

 

 

Name:

Suzanne B Smith

 

Title:

SVP

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

 

 

 

By:

 

/s/ Kirk Tesch

 

 

Name:

Kirk Tesch

 

Title:

Managing Director

 

 

 

 

REGIONS BANK

 

 

 

By:

 

/s/ Robert B. Harrington

 

 

Name:

Robert B. Harrington

 

Title:

Vice President

 

 

 

SUMITOMO MITSUI BANKING CORPORATION

 

 

 

By:

 

/s/ James Weinstein

 

 

Name:

James Weinstein

 

Title:

Managing Director

 

 

 

 

SUNTRUST BANK

 

 

 

By:

 

/s/ Mary E. Coke

 

 

Name:

Mary E. Coke

 

Title:

Vice President

 

 

 

 

BRANCH BANKING AND TRUST COMPANY

 

 

 

By:

 

/s/ Janet L. Wheeler

 

 

Name:

Janet L. Wheeler

 

Title:

Vice President

 

 

 

 

FIFTH THIRD BANK

 

 

 

By:

 

/s/ Thomas Avery

 

 

Name:

Thomas Avery

 

Title:

Relationship Manager

 

 

 

 

ASSOCIATED BANK, NATIONAL ASSOCIATION

 

 

 

By:

 

/s/ James A. Goody

 

 

Name:

James A. Goody

 

Title:

Vice President

 

 

 

[SIGNATURE PAGES FOLLOW]

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

 

BOKF, NA

 

 

 

By:

 

/s/ Chris O’Brien

 

 

Name:

Chris O’Brien

 

Title:

Vice President

 

 

 

 

COMPASS BANK

 

 

 

By:

 

/s/ D. Sowards

 

 

Name:

Debbie Sowards

 

Title:

Senior Vice President

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

Schedule 1

Subsidiaries

 

Accelerated Care Plus Corp.

 

Accelerated Care Plus Leasing, Inc.

 

Advanced Prosthetics & Orthotics, LLC

 

Advanced Prosthetics Center, L.L.C.

 

Advanced Prosthetics of America, Inc.

 

Alabama Center for Prosthetics & Orthotics, Inc.

 

Atlanta Prosthetics & Orthotics, Inc.

 

Creative Orthotics & Prosthetics, Inc.

 

DiBello’s Dynamic Orthotics and Prosthetics, Inc.

 

Dosteon CO Holding, Inc.

 

Dosteon Solutions, LLC

 

East Coast Orthotics, Inc.

 

Eugene Teufel & Son Orthotics & Prosthetics, Inc.

 

Faith Prosthetic-Orthotic Services, Inc.

 

Genesis Medical Group, LLC

 

Great Plains Orthotics & Prosthetics, Inc.

 

Hanger National Laboratories, LLC

 

Hanger Prosthetics & Orthotics, Inc.

 

Hanger Prosthetics & Orthotics East, Inc.

 

Hanger Prosthetics & Orthotics West, Inc.

 

Hanger Risk Management, Inc.

 

Innovative Neurotronics, Inc.

 

Liberty Health Services, LLC

 

Linkia, LLC

 

MMAR Medical Group, Inc.

 

MK Prosthetic & Orhtotic Services, Inc.

 

Nascott, Inc.

 

Ogden Orthotics & Prosthetics, Inc.

 

OPNET, Inc.

 

OrPro, Inc.

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------

 

Ortho-Medical Products, Inc.

 

Orthotic & Prosthetic Technologies, Inc.

 

Prosthetic Laboratories of Rochester, Inc.

 

Savannah Orthotics & Prosthetics, Inc.

 

Rainier Surgical Incorporated1

 

SCOPe Orthotics & Prosthetics, Inc.

 

Shields Orthotic Prosthetics Services, Inc.

 

Southern Prosthetic Supply, Inc.

 

Specialty Brace & Limb, Inc.

 

Suncoast Orthotics & Prosthetics, Inc.

 

Superior Orthotics & Prosthetics, LLC

 

SureFit Shoes, LLC

 

Synergy Orthotics & Prosthetics, LLC

 

Team Post-Op, Inc.

 

The Brace Shop Prosthetic Orthotic Centers, Inc.

 

Tindal Orthotics, Inc.

 

TMC Orthopedic, L.P.

 

Valley Orthopedic, Inc.

 

 

--------------------------------------------------------------------------------

1  As of the date hereof, filings have been made to change the name of Rainier
Surgical Incorporated to Dosteon WA Holding, Inc.  The name change is expected
to become effective shortly after the closing of this Amendment.

 

 

Hanger Inc.

First Amendment and Waiver

 

--------------------------------------------------------------------------------