THIRD AMENDED AND
RESTATED EMPLOYMENT AGREEMENT 



        THIRD
AMENDED AND RESTATED EMPLOYMENT AGREEMENT effective as of the 1st day of January, 2005
(“Agreement”), by and between HANGER PROSTHETICS & ORTHOTICS, INC., a
Delaware corporation (the “Company”), and GEORGE E. McHENRY (the
“Executive”). 



        WHEREAS,
the Executive and Hanger Orthopedic Group, Inc. (“Hanger”) executed an initial
Employment Agreement on August 1, 2001 (“Original Agreement”), which Original
Agreement was amended by the Amended and Restated Employment Agreement, dated April 18,
2003, and the Second Amended and Restated Employment Agreement, effective January 1, 2005
(“Second Amended Agreement”); 



        WHEREAS,
the Second Amended Agreement was assigned from Hanger to the Company pursuant to the
Assignment of Employment Agreement, effective as of January 1, 2007, between the
Executive, the Company and Hanger; 



        WHEREAS,
the parties hereto desire to amend the Second Amended Agreement as set forth in this
Agreement, with such amendments to be retroactively effective to January 1, 2005; and 



        WHEREAS,
the Company desires to employ the Executive and to incentivize the Executive to remain in
the employ of the Company, subject to the terms and conditions set forth below. 



        NOW,
THEREFORE, in consideration of the promises and mutual agreements set forth below, both
parties agree as follows: 



	 	1. 	Employment,
Term. 






        1.1    
Employment. The Company agrees to employ the Executive in the position and
with the responsibilities, duties, and authority set forth in Section 2. 



        1.2    
Term. The term of the Executive’s employment under this Agreement shall
commence as of the effective date of the Original Agreement and shall terminate on the
fifth anniversary of the effective date thereof, unless extended or sooner terminated in
accordance with this Agreement. In the event the Executive continues to be employed by the
Company following the fifth anniversary of the effective date of the Original Agreement,
this Agreement shall automatically renew for successive one (1) year terms, unless
terminated pursuant to Section 1.3, Section 6 or Section 7 of this Agreement. 



        1.3    
Automatic Extension. As of the fifth anniversary date of the Original
Agreement, and as of each anniversary subsequent thereto (“Automatic Renewal
Date”), unless either party shall have given thirty (30) days’ prior written
notice of non-extension prior to such Automatic Renewal Date, the term of this Agreement
shall be extended automatically for a period of one year. In the event that the Company
gives written notice of non-extension, such notice shall be considered a Termination
without Cause under the provisions of Section 6.4, unless otherwise mutually agreed
between the Parties. 












        1.4    Termination
Date. For purposes of this Agreement, the term “Termination Date” shall
mean (i) if the Executive’s employment is terminated by the Company for any reason
whatsoever, other than death or Disability, the Executive’s last day of work; (ii)
if the Executive’s employment is terminated by reason of death or Disability, the
date of death of the Executive or the effective date of the Disability, as the case may
be; and (iii) if the Executive’s employment is terminated by the Executive, the
expiration date of the applicable notice period that is required pursuant to this
Agreement. Notwithstanding the foregoing, no Termination Date shall be earlier than the
date as of which the Executive has incurred a “separation from service” within
the meaning of Internal Revenue Code (“Code”) Section 409A, as determined by
applying the default rules thereof.  




        1.5    Office.
 The Executive's principal office will be located in Bethesda, Maryland. 




	 	2. 	Position,
Duties. 






        The
Executive shall serve the Company in the positions of Treasurer and Secretary and Hanger
in the positions of Executive Vice President and Chief Financial Officer. The Executive
shall faithfully and diligently perform the duties appropriate to said positions, which,
in addition to those responsibilities assigned to him from time to time by the Chief
Executive Officer and the Board of Directors of Hanger (the “Board of
Directors”), shall include, among other things, responsibility for the financial,
accounting, financial reporting, treasury, tax and audit functions of Hanger and its
subsidiaries. The Executive shall devote his full business time and attention to the
performance of his duties and responsibilities hereunder. 



	 	 3. 	Salary,
Incentive Bonus, Stock Options, Other Benefits. 






        3.1    Salary.
Commencing after the Executive reports for full time duty with the Company, on or about
October 15, 2001 and continuing during the term of this Agreement, the Company shall pay
to the Executive a minimum base salary at the rate of Two Hundred Seventy-Five Thousand
Dollars ($275,000.00) per annum, payable in accordance with the standard payroll practices
of the Company (the “Base Salary”). The Base Salary shall be increased to Two
Hundred Eighty-Three Thousand Two Hundred Fifty Dollars ($283,250.00) effective January 1,
2006 and shall be increased to Two Hundred Ninety-Two Thousand Dollars ($292,000.00)
effective January 1, 2007. The Executive shall be entitled to such increases in Base
Salary during the term hereof as shall be determined and approved by the Compensation
Committee of the Board of Directors in its sole discretion, taking account of the
performance of Hanger and the Executive, and other factors generally considered relevant
to the salaries of executives holding similar positions with enterprises comparable to
Hanger. 



      3.2    
Bonus. 











        (a)               In
addition to the Base Salary, the Executive shall participate in Hanger’s
          current bonus plan for senior corporate officers (the “Bonus Plan”)
          beginning January 1, 2002, as approved by the Compensation Committee of the
          Board of Directors in each calendar year during the term of this Agreement. The
          Executive’s target bonus is fifty percent (50%) of the Base Salary (the
          “Target Bonus”) and is contingent on the Executive meeting certain
          performance criteria and Hanger achieving certain year-end financial criteria,
          and up to one hundred percent (100%) of the Base Salary (the “Maximum
          Bonus”) if the Employee exceeds certain performance criteria and Hanger
          exceeds certain year-end financial criteria all as determined in the reasonable
          discretion of the Board of Directors and its Compensation Committee. The
          Executive shall be entitled to such increases in the “Target Bonus”          and
the “Maximum Bonus” during the term hereof as shall be determined           and
approved by the Compensation Committee of the Board of Directors in its sole
          discretion, taking account of the performance of Hanger, the Company and the
          Executive, and other factors generally considered relevant to the salaries of
          executives holding similar positions with enterprises comparable to Hanger.  




        (b)               The
bonus shall be payable between January 1 and March 15 (inclusive) of the
          calendar year following the calendar year for which the bonus is determined in
          accordance with the Company’s normal practices. In the event that the
          Executive is employed for less than the full calendar year in the year in which
          his Termination Date occurs (“Termination Year”), the bonus payable
to           the Executive shall be subject to Sections 6 and 7 of this Agreement and
          calculated based on the Executive meeting certain performance criteria and
          Hanger achieving certain year-end financial criteria, all as determined by the
          Compensation Committee of the Board of Directors, in its sole discretion. Such
          bonus shall be pro-rated for the portion of the Termination Year during which
          the Executive was employed by the Company. With respect to the bonus for the
          Termination Year, any bonus payable pursuant to this Section 3.2(b) shall be
          payable to the Executive between January 1 and March 15 (inclusive) of the
          calendar year following the calendar year for which the bonus is determined in
          accordance with the Company’s normal practices.  




        3.3    Stock
Options & Restricted Stock. 




        (a)              As
an incentive for the Executive’s future performance in improving
          shareholder value, the Company shall grant to the Executive options to purchase
          seventy-five thousand (75,000) shares of Hanger’s common stock, $0.01 par
          value per share (the “Stock”), with such options being valued at the
          closing price of the Stock on the first day of Executive’s employment. The
          Company shall also grant to the Executive options to purchase seventy-five
          thousand (75,000) shares of Stock on the first anniversary of Executive’s
          commencement date of employment. The Executive may participate in future awards
          of options to purchase Stock or restricted shares in a manner consistent with
          any stock option plan or restricted share plan adopted by Hanger for its senior
          corporate officers. Option or restricted share grants subsequent to the
          foregoing initial one-year period shall be based upon targets adopted annually
          by the Board of Directors, which targets may be derived from budgets generated
          by Hanger’s management, and the determination as to the amount of such
          options or restricted shares, if any, shall be at the sole discretion of the
          Board of Directors.  




        (b)              The
options or restricted shares provided in subparagraph (a) of this Section           3.3
shall be evidenced by a stock option agreement or restricted share agreement           (“Stock
Agreement”) between the Executive and Hanger, which Stock           Agreement shall
provide for a vesting schedule of four (4) years, in equal           parts, of the
options or restricted shares granted thereunder. Notwithstanding           any provisions
now or hereafter existing under any stock incentive plan of           Hanger, all options
or restricted shares granted to the Executive shall vest in           full immediately
upon the Termination Date except for termination of employment           pursuant to
Section 6.3 or Section 6.5 hereof, and the Executive (or his estate           or legal
representative, if applicable) shall thereafter have twelve (12) months           from
such Termination Date to exercise such options, if applicable.  












        (c)               Notwithstanding
any provisions now or hereafter existing under any stock option           plan or
restricted share plan of Hanger, in the event of a Change in Control (as
          hereinafter defined), all options or restricted shares provided to the
Executive           pursuant to Section 3.3(a) of the Original Agreement or any Stock
Agreement           shall be granted and shall immediately fully vest as of the date of
such Change           in Control with such options or restricted shares being valued at
the closing           price of Hanger’s common stock on the day prior to the day of
the Change in           Control.  




        (d)              For
purposes of this Agreement, a “Change in Control” shall be deemed           to
exist if:  




	 	(i) 	a
person, as defined in Sections 13(d) and 14(d) of the Securities Exchange Act
                    of 1934 (other than the Executive or a group including the
Executive), either                     (A) acquires twenty percent (20%) or more of the
combined voting power of the                     outstanding securities of Hanger having
the right to vote in elections of                     directors and such acquisition
shall not have been approved within sixty (60)                     days following such
acquisition by a majority of the Continuing Directors (as                     hereinafter
defined) then in office, or (B) acquires fifty percent (50%) or more
                    of the combined voting power of the outstanding securities of Hanger
having a                     right to vote in elections of directors; or  






	 	(ii) 	Continuing
Directors shall for any reason cease to constitute a majority of the
                    Board of Directors; or  






	 	(iii) 	Hanger
disposes of all or substantially all of the business of Hanger to a party
                    or parties other than a subsidiary or other affiliate of Hanger
pursuant to a                     partial or complete liquidation of Hanger, sale of
assets (including stock of a                     subsidiary of Hanger) or otherwise; or  






	 	(iv) 	the
Board of Directors approves Hanger’s consolidation or merger with or
                    into any other person (other than a wholly-owned subsidiary of
Hanger), or any                     other person’s consolidation or merger with or
into Hanger, which results                     in all or part of the outstanding shares
of Stock being changed in any way or                     converted into or exchanged for
stock or other securities or cash or any other                     property.  















        (e)               For
purposes of this Agreement, the term “Continuing Director” shall           mean
a member of the Board of Directors who either was a member of the Board of
          Directors on the date hereof or who subsequently became a Director of Hanger
and           whose election, or nomination for election, was approved by a vote of at
least           two-thirds (2/3) of the Continuing Directors then in office.  




        3.4    
Senior Corporate Officer Benefits. The Executive shall be entitled to
participate in benefit plans now existing or hereinafter adopted by the Board of Directors
for the senior corporate officers of the Company. Upon a Change in Control, any interest
of the Executive in any future Supplemental Executive Retirement Plan or deferred
compensation plan shall immediately vest. 



        3.5    
Car Allowance and Parking. The Executive shall be provided with (a) a
luxury-class automobile leased by the Company under the same terms and conditions as
enjoyed by other senior corporate officers of the Company, which terms shall include
reimbursement for all fuel, toll, maintenance, insurance and upkeep costs associated with
the vehicle and (b) a paid parking space at the Company’s headquarters. Upon
termination of the Executive’s employment under this Agreement for any reason, the
Company may, at its option, demand the prompt return of the automobile, or, upon the
mutual agreement of the Executive and the Company, the Executive may assume the lease for
the automobile. 



        3.6    
Parachute Penalties. For all payments made or required to be made pursuant
to the terms of this Agreement, including any payments made with respect to the
Executive’s termination of employment for any reason, the Company shall determine and
pay the Executive, as soon as practicable, an amount sufficient to cover the gross-up of
any excise, income and other taxes resulting from the imposition of the parachute
penalties of the Code or applicable state tax laws. Such determination and payment by the
Company shall be made six (6) months and one (1) day after the Executive’s
Termination Date or, if later, before the end of the calendar year following the calendar
year in which the Executive paid any such excise tax. 



        3.7    
Relocation. The Company agrees to provide the following relocation
benefits and the Executive agrees to execute a promissory note, in the form attached
hereto as Exhibit A, payable to the Company relating hereto which will require the
Executive to reimburse the Company for portions of the following amounts in the event of
termination of the employment of the Executive pursuant to Section 6.3 (Due Cause) or
Section 6.5 (Voluntary Termination) of the Original Agreement within the first twenty-four
months after commencement of the term of the Original Agreement on October 15, 2001: 



        (a)              reimbursement
of all costs incurred by the Executive in connection with the           packing,
insuring, transporting and unpacking of his household items which are           moved
from his current residence to his new residence in the state of Maryland,           the
Commonwealth of Virginia or the District of Columbia (collectively called           the
“Washington D.C. Metropolitan Area”) as a result of his employment
          hereunder;  




        (b)              reimbursement
of reasonable costs incurred by Executive, including           transportation, room, and
food expenses, for up to two house-hunting trips from           his current state of
residence to the Washington D.C. Metropolitan Area (each           house-hunting trip
shall consist of a maximum period of five consecutive           calendar days);  













        (c)              payment
of all closing costs (excluding points), reasonable fees and commissions           to be
paid in connection with the sale of the Executive’s current residence           at
10 Blue Herron Court, Medford, NJ 08055;  




        (d)              Payment
of all closing costs (excluding points), reasonable fees and expenses           directly
related to the Executive’s purchase of a new residence in the           Washington
D.C. Metropolitan Area;  




        (e)              reimbursement
of travel costs, lodging, and meals incurred by the Executive           during the first
six (6) months immediately following the date of the Original           Agreement, for
purposes of the Executive performing his duties at the           Company’s
headquarters office located in Bethesda, MD while the Executive           is still
residing in his current residence at 10 Blue Herron Court, Medford, NJ           08055;
and  




        (f)              payment
to the Executive of five thousand dollars ($5,000) upon closing of the           purchase
of the Executive’s new residence in the Washington D.C.           Metropolitan Area
to help to offset the expenses incurred by the Executive in           his preparation of
his new residence in the Washington D.C. Metropolitan Area           for occupancy by the
Executive.  




        Any
non-deductible portions of any payments made pursuant to Sections 3.7(b), (c), (d) and/or
(e) will be paid to executive in an amount equal to (i) such payment as maybe actually due
pursuant to such Sections 3.7 (b), (c), (d) and/or (e), plus (ii) any federal and state
income tax imposed on Executive as a result of such payment. 



        Section
3.8    Other. The Company agrees to (a) provide or reimburse the
Executive’s costs for a supplemental long-term disability insurance policy and (b)
provide or reimburse the Executive’s costs for a life insurance policy for the
Executive in a minimum amount of two times the Base Salary in addition to the one times
the Base Salary provided in the base benefit package, payable to a beneficiary of the
Executive’s choosing. 



	 	4. 	Expense
Reimbursement.






        During
the term of this Agreement, the Company shall reimburse the Executive for all reasonable
and necessary out-of-pocket expenses incurred by him in connection with the performance of
his duties hereunder, upon presentation of proper accounts in accordance with the
Company’s policies and practices for senior corporate officers. 



	 	5. 	Pension
and Welfare Benefits; Vacation. 






        5.1    
Benefit Plans. During the term of this Agreement, the Executive will be
eligible to participate in all employee benefit plans and programs (including, without
limitation, 401(k), medical, dental, life, and disability plans of Hanger) offered by the
Company from time to time to its senior corporate officers, subject to the provisions of
such plans and programs as in effect from time to time. 












        5.2    Vacation.
 The Executive shall be entitled to four (4) weeks vacation per year. 




	 	6. 	Termination
of Employment. 






        6.1    Death.  




        (a)              The
Executive’s employment shall be terminated by the Executive’s           death.
In the event of the death of the Executive, the Company shall pay to the           estate
or other legal representative of the Executive the Base Salary and           vacation as
accrued through the Termination Date (at the annual rate then in           effect) and
the bonus provided for in Section 3.2 for the Termination Year (as           well as any
then earned but unpaid bonus for the year preceding the Termination           Year, if
applicable).  




        (b)              In
addition to the payments described in Section 6.1(a), the Company shall pay a
          death benefit of an additional eighteen (18) months of Base Salary and an
          additional bonus payment (“Additional Bonus Payment”) equal to one
and           one-half (1.5) times the Target Bonus for the Termination Year. Such
payment           shall be made in one (1) lump sum payment, with such payment to be made
to the           estate or other legal representative of the Executive within forty-five
(45)           days after receipt by the Company of notice of Executive’s death. The
          Executive’s estate or legal representative shall have no right to
designate           the taxable year of payment. Rights and benefits of the estate or
other legal           representative of the Executive under the benefit plans and
programs of Hanger           shall be determined in accordance with the provisions of
such plans and           programs.  





        6.2    Disability. 




        (a)              “Disability” means,
for purposes of this Agreement, that the Executive           is unable to engage in any
substantial gainful activity by reason of any           medically determinable physical
or mental impairment which can be expected to           result in death or can be
expected to last for a continuous period of not less           than twelve (12) months.  




        (b)              If
the Executive shall incur a Disability, the employment of the Executive shall
          be terminated. In the event of such termination, the Company shall pay to the
          Executive the Base Salary and vacation accrued through the Termination Date (at
          the annual rate then in effect) and the bonus provided for in Section 3.2 for
          the Termination Year (as well as any then earned but unpaid bonus for the year
          preceding the Termination Year, if applicable).  













        (c)              In
addition to the payments described in Section 6.2(a), the Company shall pay           to
the Executive, for a period of six (6) months following such termination, a
          monthly severance benefit consisting of: (i) the difference between the
          Executive’s monthly Base Salary at the Termination Date and the monthly
          disability pay benefits received by the Executive and (ii) an amount equal to
          one-eighteenth (1/18th) of the Additional Bonus Payment; provided, however,
that           the Company reserves the right to pay such amounts according to its normal
          payroll practices. Any portion of this severance benefit that is in excess of
          the lesser of two (2) times (i) the Executive’s annualized rate of
          compensation for the preceding taxable year (adjusted for certain increases
that           would have been received in the normal course of employment) or (ii) the
Code           Section 401(a)(17) compensation limit for qualified plan purposes as in
effect           for the Termination Year shall not be paid as a monthly severance
benefit but           shall be paid to the Executive six (6) months and one day after the
Termination           Date. On the day following the six (6) month anniversary of the
Termination           Date, Executive shall receive an amount equal to (i) twelve (12)
months of the           Executive’s monthly Base Salary at the Termination Date,
less the amount of           monthly disability pay benefits to which Executive will be
entitled over the           twelve (12) month period immediately following the six month
anniversary of the           Termination Date and (ii) two-thirds (2/3) of the Additional
Bonus Payment.           Notwithstanding the foregoing, in the event that Hanger is no
longer a           publicly-traded entity as of the Termination Date, or ceases to be a
          publicly-traded entity within the six (6) month period immediately following
the           Termination Date, then the Company shall pay to Executive the payments set
forth           in this Section 6.2(c), or any unpaid portion thereof, as applicable,
within           forty-five (45) days from the later of (i) the Termination Date or (ii)
the date           Hanger ceased to be a publicly-traded entity. Rights and benefits of
the           Executive under the other benefit plans and programs of Hanger shall be
          determined in accordance with the terms and provisions of such plans and
          programs. Notwithstanding the foregoing, in the event that the death of the
          Executive occurs within six (6) months following the Termination Date, the
          Company shall pay to the Executive’s estate any unpaid portion of the
          amounts due to be paid to the Executive pursuant to this Section 6.2(c) within
          forty-five (45) days following receipt by the Company of notice of
          Executive’s death. Notwithstanding anything in this Agreement to the
          contrary, Executive shall not be entitled to any payments under this Section
          6.2(c) unless Executive has first duly executed the form of agreement and
          general release attached hereto as Exhibit B (“Release”) on or
          immediately following the Termination Date; provided, however, that, in the
          event of any change in any applicable law (or interpretation thereof), the
          Release shall be subject to reasonable modification by the parties so as to
          preserve the intent of the parties with respect to such Release.  




        6.3    
Due Cause. The employment of Executive hereunder may be terminated by the
Company at any time for Due Cause (as hereinafter defined). In the event of such
termination, the Company shall pay to the Executive the Base Salary (at the annual rate
then in effect) and vacation accrued through the Termination Date and not theretofore paid
to the Executive. Rights and benefits of the Executive or his transferee under the benefit
plans and programs of Hanger shall be determined in accordance with the provisions of such
plans and programs. For purposes hereof, “Due Cause” shall be defined as (a) the
Executive’s willful and continuing failure to discharge duties and responsibilities
under this Agreement after having been given notice in writing and opportunity to cure,
(b) any material act of dishonesty involving the Company, or (c) conviction of a felony. 












      6.4    
Termination by the Company Without Cause.



        (a)              The
Company may terminate the Executive’s employment at any time, for           whatever
reason it deems appropriate or without reason; provided, however, that in
the event that such termination is not pursuant to           Section 6.1 (Death); 6.2
(Disability); 6.3 (Due Cause); 6.5 (Voluntary           Termination); or 6.6
(Retirement), the Company shall pay to the Executive the           Base Salary and
vacation accrued through the Termination Date (at the annual           rate then in
effect) and the bonus provided for in Section 3.2 for the           Termination Year (as
well as any then earned but unpaid bonus for the year           preceding the Termination
Year, if applicable).  




        (b)              In
addition to the payments described in Section 6.4(a), the Company shall pay           to
the Executive, within forty-five (45) days following the Termination Date, a
          severance payment in an amount equal to eighteen (18) months of the Base Salary
          (at the annual rate in effect immediately prior to termination) and the
          Additional Bonus Payment. Any portion of this severance benefit that is in
          excess of the lesser of two (2) times (i) the Executive’s annualized rate
          of compensation for the preceding taxable year (adjusted for certain increases
          that would have been received in the normal course of employment) or (ii) the
          Code Section 401(a)(17) compensation limit for qualified plan purposes as in
          effect for the year in which the Termination Date occurs, shall not be paid as
a           severance benefit but shall be paid to the Executive in a single lump sum six
          (6) months and one day after the Termination Date. For eighteen (18) months
          following termination pursuant to this Section 6.4(b), the Company shall (i)
          reimburse the Executive for his reasonable costs of medical and dental coverage
          as provided under COBRA, (ii) reimburse the Executive for his reasonable costs
          incurred in maintaining his life and disability coverage, and (iii) reimburse
          the Executive for all other benefits granted to the Executive in Sections 3.4,
          3.6, 3.8 and 5.1, each at levels substantially equivalent to those provided by
          the Company to the Executive immediately prior to the termination of his
          employment (including such other benefits as shall be provided to senior
          corporate officers of the Company in lieu of such benefits from time to time
          during the eighteen (18) month payment period), on the same basis, including
the           Company’s payment of premiums and contributions, as such benefits are
          provided to other senior corporate officers of the Company or were provided to
          the Executive prior to the termination. Reimbursements of expenses which
provide           for nonqualified deferred compensation under Code Section 409A, if any,
shall           not be paid before six (6) months and one day after the Executive’s
          Termination Date. The amount of expenses eligible for reimbursement, or in-kind
          benefits provided, during a taxable year of the Executive may not affect the
          expenses eligible for reimbursement, or in-kind benefits to be provided in any
          other taxable year. Reimbursements shall be paid on or before the last day of
          the Executive’s taxable year following the taxable year in which the
          expense was incurred. The right to reimbursement hereunder is not subject to
          liquidation or exchange for another benefit.  




        In
addition, for a period of eighteen (18) months immediately following the Executive’s
Termination Date, the Executive will be provided with outplacement services commensurate
with those provided to other senior corporate officers of the Company through a vendor
selected by the Company. Rights and benefits of the Executive or transferee under the
benefit plans and programs of Hanger shall be determined in accordance with the provisions
of such plans and programs. 












        (c)              Notwithstanding
the foregoing, in the event that Hanger is no longer a           publicly-traded entity
as of the Termination Date, or ceases to be a           publicly-traded entity within the
six (6) month period immediately following the           Termination Date, then the
Company shall pay to Executive the payments set forth           in Section 6.4(b), or any
unpaid portion thereof, as applicable, within           forty-five (45) days from the
later of (i) the Termination Date or (ii) the date           Hanger ceased to be a
publicly-traded entity. Notwithstanding the foregoing, in           the event that the
death of the Executive occurs within six (6) months following           the Termination
Date, the Company shall pay to the Executive’s estate any           unpaid portion
of the amounts due to be paid to the Executive pursuant to           Section 6.4(b)
within forty-five (45) days following receipt by the Company of           notice of
Executive’s death.  




        (d)              Notwithstanding
anything in this Agreement to the contrary, Executive shall not           be entitled to
any payments under Section 6.4(b) unless Executive has first duly           executed the
Release on or immediately following the Termination Date; provided,           however,
that, in the event of any change in any applicable law (or           interpretation
thereof), the Release shall be subject to reasonable modification           by the
parties so as to preserve the intent of the parties with respect to such
          Release.  




        6.5    Voluntary
Termination. 




        The
Executive may terminate his employment with the Company at any time upon sixty (60)
days’ prior written notice to the Company and the Company shall pay to the Executive
the Base Salary and vacation accrued through the Termination Date (at the annual rate then
in effect) and the bonus provided for in Section 3.2 for the Termination Year (as well as
any then earned but unpaid bonus for the year preceding the Termination Year, if
applicable). Except as otherwise provided in this Agreement, rights and benefits of the
Executive or his transferee under the benefit plans and programs of Hanger shall be
determined in accordance with provisions of such plans and programs. 



      6.6    
Retirement.



        (a)              In
the event of the Executive’s Retirement (as defined in Section 6.6(b)),
          the Company shall pay to the Executive the Base Salary and vacation accrued
          through the date of Retirement (at the annual rate then in effect) and the
bonus           provided for in Section 3.2 for the Termination Year (as well as any then
earned           but unpaid bonus for the year preceding the Termination Year, if
applicable).           Except as otherwise provided in this Agreement, rights and
benefits of the           Executive or his transferee under the benefit plans and
programs of Hanger shall           be determined in accordance with provisions of such
plans and programs.  




        (b)              “Retirement” shall
mean the Executive’s voluntary termination of           employment at or after age
sixty-five (65), provided the Executive has given the           Company written notice of
the Executive’s intent to retire no less than one           (1) year prior to the
scheduled Termination Date and the Executive has, as of           the scheduled
Termination Date, been continuously employed with Hanger,           including any of its
direct or indirect subsidiaries, for a period of no less           than ten (10) years.  













	 	7. 	Change
In Control and Termination Provisions. 






        If
within a two (2) year period following any Change in Control there occurs: 



        (a)              any
termination of the Executive (other than as set forth in Section 6.1           (Death),
6.2 (Disability), 6.3 (Due Cause), 6.5 (Voluntary Termination) or 6.6
          (Retirement) of this Agreement);  




        (b)              a
material diminution of the Executive’s responsibilities, as compared to
          the Executive’s responsibilities immediately prior to the Change in
          Control;  




        (c)              any
reduction in the Base Salary or Bonus Plan targets (as distinguished from           the
payments received thereunder), as compared to such Base Salary or such           targets
as of the date immediately prior to the Change in Control;  




        (d)              any
failure to provide the Executive with benefits: (1) at least as favorable as
          those enjoyed by similarly-situated senior corporate officers of the Company
          under Hanger’s pension, life insurance, medical, health and accident,
          disability or other written employee plans under which the form and/or amounts
          of benefits are prescribed in applicable documents or (2) granted to the
          Executive by this Agreement;  




        (e)              any
relocation of the Executive’s principal site of employment to a           location
more than twenty-five (25) miles from the Executive’s principal           place of
employment as of the date immediately prior to the Change in Control;           or  




        (f)              any
material breach of this Agreement by the Company;  




then, at the option of the Executive,
exercisable by the Executive within ninety (90) days after the occurrence of any of the
foregoing events, the Executive may resign his employment with the Company (or, if
involuntarily terminated, give notice of his intention to collect benefits under this
Agreement) by delivering a notice in writing (the “Notice of Termination”) to
the Company, and the Executive shall be entitled to receive the Base Salary and vacation
accrued to the Termination Date (at the annual rate then in effect) and the bonus provided
for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus
for the year preceding the Termination Year, if applicable). In addition, the Company
shall pay to the Executive six (6) months and one day after the Termination Date an amount
equal to eighteen (18) months of the Base Salary (at the annual rate in effect immediately
prior to termination) and the Additional Bonus Payment. In addition, the Company shall,
for eighteen (18) months following the Termination Date, (i) reimburse the Executive for
his reasonable costs of medical and dental coverage as provided under COBRA, (ii)
reimburse the Executive for his reasonable costs incurred in maintaining his life and
disability coverage, and (iii) reimburse the Executive for all other benefits granted to
the Executive in Sections 3.4, 3.6, 3.8 and 5.1, each at levels substantially equivalent
to those provided by the Company to the Executive immediately prior to the termination of
his employment (including such other benefits as shall be provided to senior corporate
officers of the Company in lieu of such benefits from time to time during the eighteen
(18) month payment period), on the same basis, including the Company’s payment of
premiums and contributions, as such benefits are provided to other senior corporate
officers of the Company or were provided to the Executive prior to the termination.
Reimbursements of expenses which provide for nonqualified deferred compensation under Code
Section 409A, if any, shall not be paid before six (6) months and one day after the
Executive’s Termination Date. The amount of expenses eligible for reimbursement, or
in-kind benefits provided, during a taxable year of the Executive may not affect the
expenses eligible for reimbursement, or in-kind benefits to be provided in any other
taxable year. Reimbursements shall be paid on or before the last day of the
Executive’s taxable year following the taxable year in which the expense was
incurred. The right to reimbursement hereunder is not subject to liquidation or exchange
for another benefit. 












        In
addition, for a period of eighteen (18) months immediately following the Executive’s
Termination Date, the Executive will be provided with outplacement services commensurate
with those provided to other senior corporate officers of the Company through a vendor
selected by the Company. Rights and benefits of the Executive or transferee under the
benefit plans and programs of Hanger shall be determined in accordance with the provisions
of such plans and programs. 



        (g)              Notwithstanding
the foregoing, in the event that Hanger is no longer a           publicly-traded entity
as of the Termination Date, or ceases to be a           publicly-traded entity within the
six (6) month period immediately following the           Termination Date, then the
Company shall pay to Executive the payments set forth           in this Section 7, or any
unpaid portion thereof, as applicable, within           forty-five (45) days from the
later of (i) the Termination Date or (ii) the date           Hanger ceased to be a
publicly-traded entity. Notwithstanding the foregoing, in           the event that the
death of the Executive occurs within six (6) months following           the Termination
Date, the Company shall pay to the Executive’s estate any           unpaid portion
of the amounts due to be paid to the Executive pursuant to this           Section 7
within forty-five (45) days following receipt by the Company of notice           of
Executive’s death.  




        (h)              Notwithstanding
anything contained in this Agreement to the contrary, Executive           shall not be
entitled to any payments under this Section 7 unless Executive has           first duly
executed the Release on or immediately following the Termination           Date;
provided, however, that, in the event of any change in any applicable law           (or
interpretation thereof), the Release shall be subject to reasonable
          modification by the parties so as to preserve the intent of the parties with
          respect to such Release.  




	 	8. 	Confidential
Information. 






        8.1    
Nondisclosure. Unless the Executive secures the Company’s
written consent, the Executive will not, for a period of two (2) years after the
Termination Date, disclose, use, disseminate, lecture upon, or publish Confidential
Information, whether or not such Confidential Information was developed by him. 



        8.2    
Confidential Information Defined. “Confidential Information” means
information disclosed to the Executive or known by him as a result of his employment with
the Company, not generally known in the industry, about the Company’s and/or
Hanger’s (including any direct or indirect subsidiary of Hanger) services, products,
or customers, including, but not limited to, clinical programs, procedures and protocols,
research, operating manuals, business methods, financial strategic planning, client
retention, customer and supplier lists, data processing, insurance plans, risk management,
marketing, contracting, selling and employees. 












	 	 9. 	Interference
With the Company. 






        The Executive
will not, during the Executive’s term of employment and for a period of two (2) years
after the Termination Date, directly or indirectly (i) engage, whether as principal,
agent, investor, representative, stockholder (other than as the holder of not more than
five percent (5%) of the stock or equity of any corporation the capital stock of which is
publicly traded), employee, consultant, volunteer or otherwise, with or without pay, in
any activity or business venture anywhere within the continental United States that is
competitive with the business of the Company and/or Hanger (including any direct or
indirect subsidiary of Hanger) on the Termination Date, (ii) solicit or entice or endeavor
to solicit or entice away from the Company and/or Hanger (including any direct or indirect
subsidiary of Hanger) any director, officer, employee, agent or consultant of the Company
and/or Hanger (including any direct or indirect subsidiary of Hanger), either on his own
account or for any person, firm, corporation or other organization, regardless of whether
the person solicited would commit any breach of such person’s contract of employment
by reason of leaving the Company’s service; (iii) solicit or entice or endeavor to
solicit or entice away any of the clients or customers of the Company and/or Hanger
(including any direct or indirect subsidiary of Hanger) as of the Termination Date for the
purpose of competing with the business of the Company and/or Hanger (including any direct
or indirect subsidiary of Hanger), either on his own account or for any other person,
firm, corporation or organization; (iv) employ or otherwise utilize (whether as a
consultant, advisor or otherwise) any person who was a director, officer, or employee of
the Company and/or Hanger (including any direct or indirect subsidiary of Hanger) at any
time during the two years preceding the Termination Date, unless such person’s
employment was terminated by the Company and/or Hanger (including any direct or indirect
subsidiary of Hanger); or (v) employ or otherwise utilize (whether as a consultant,
advisor or otherwise) any person who is or may be likely to be in possession of any
Confidential Information. The parties hereto agree that if, in any proceeding, the Court
or other authority shall refuse to enforce covenants set forth in this Section 9, because
such covenants cover too extensive a geographic area or too long a period of time, any
such covenant shall be deemed appropriately amended and modified in keeping with the
intention of the parties to the maximum extent permitted by law. 



	 	10. 	Injunctive
Relief.






        In
the event that the Company seeks an injunction or similar equitable relief for the breach
or threatened breach of the provisions of Sections 8 or 9 of this Agreement, the Executive
agrees that the Executive shall not use the availability of arbitration in Section 15
hereof as grounds for the dismissal of any such injunctive action. 



	 	11. 	Successors
and Assigns.















        11.1    Assignment
by the Company. The Company shall require any successors (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform if no
such succession had taken place. As used in this Section, the “Company” shall
mean the Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law and this Agreement shall be binding upon and inure to the
benefit of, the Company, as so defined. The Company and the Executive agree that the
Company may not assign this Agreement without the express, written consent of the
Executive. 



        11.2    
Assignment by the Executive. The Executive may not assign this Agreement or
any part thereof without the prior written consent of a majority of the Board of
Directors; provided, however, that nothing herein shall preclude one or more
beneficiaries of the Executive from receiving any amount that may be payable following the
occurrence of his legal incompetency or his death and shall not preclude the legal
representative of his estate from receiving such amount or from assigning any right
hereunder to the person or persons entitled thereto under his will or, in the case of
intestacy, to the person or persons entitled thereto under the laws of intestacy
applicable to his estate. The term “beneficiaries,” as used in this Agreement,
shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if
no beneficiary has been so designated, the legal representative of the Executive (in the
event of his incompetency) or the Executive’s estate. 



	 	12. 	Governing
Law. 






        This
Agreement shall be deemed a contract made under, and for all purposes shall be construed
in accordance with, the laws of the State of Delaware applicable to contracts to be
performed entirely within such state. In the event that a court of any jurisdiction shall
hold any of the provisions of this Agreement to be wholly or partially unenforceable for
any reason, such determination shall not bar or in any way affect the Company’s right
to relief as provided for herein within the courts of any other jurisdiction. Such
provisions, as they relate to each jurisdiction, are, for this purpose, severable into
diverse and independent covenants. Service of process on the parties hereto at the
addresses set forth herein shall be deemed adequate service of process. 



	 	13.	Entire
Agreement. 






        This
Agreement contains all the understandings and representations between the parties
pertaining to the subject matter hereof and supersedes all undertakings and agreements,
whether oral or in writing, previously entered into by them. 



	 	14. 	Amendment,
Modification, Waiver. 






        No
provision of this Agreement may be amended or modified unless such amendment or
modification is agreed to in writing and signed by the Executive and by a duly authorized
representative of the Company other than the Executive. Except as otherwise specifically
provided for in this Agreement, no waiver by either party of any breach by the other party
of any condition or provision of this Agreement to be performed by such other party shall
be deemed a waiver of a similar or dissimilar provision or condition at the same or any
prior or subsequent time, nor shall the failure of or delay by either party in exercising
any right, power, or privilege hereunder operate as a waiver thereof to preclude any other
or further exercise thereof, or exercise of any other such right, power, or privilege.
Notwithstanding anything in this Agreement to the contrary, the Company shall unilaterally
have the right to amend this Agreement to comply with Section 409A of the Code. 












	 	15. 	Arbitration. 






        The
Company and the Executive will attempt amicably to resolve disagreements and disputes
hereunder or in connection with the employment of Executive by negotiation. If the matter
is not amicably resolved through negotiation, within thirty (30) days after written notice
from either party, any controversy, dispute or disagreement arising out of or relating to
this Agreement, or the branch thereof, will be subject to exclusive, final, and binding
arbitration, which will be conducted in Washington, DC in accordance with the Labor
Arbitration Rules of Procedure of the American Arbitration Association. Either party may
bring a court action to compel arbitration under this Agreement or to enforce an
arbitration award. 



	 	16. 	Notices. 






        Any
notice to be given hereunder shall be in writing and delivered personally or sent by
certified mail, postage prepaid, return receipt requested, addressed to the party
concerned at the address indicated below or at such other address as such party may
subsequently be designated by like notice: 



	 	
If
to the Company:  






	 	
c/o
Hanger Orthopedic Group, Inc.
2 Bethesda Metro Center, Suite 1200 
Bethesda, MD
20814
Attention: Chief Executive Officer  






	 	
If
to the Executive:  






	 	
George
E. McHenry
25205 Bonny Brook Lane
Gaithersburg, MD 20882  






	 	17. 	Severability. 






        Should
any provision of this Agreement be held by a court or arbitration panel of competent
jurisdiction to be enforceable only if modified, such holding shall not affect the
validity of the remainder of this Agreement, the balance of which shall continue to be
binding upon the parties with any such modification to become a part hereof and treated as
though originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such unenforceable
provision of this Agreement in lieu of severing such unenforceable provision from this
Agreement in its entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this Agreement, or by making
such other modifications as it deems warranted to carry out the intent and agreement of
the parties as embodied herein to the maximum extent permitted by law. The parties
expressly agree that this Agreement as so modified by the court or arbitration panel shall
be binding upon and enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and if such provision or provisions are not modified as provided above,
this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions
had never been set forth herein. 












	 	18. 	Withholding. 






        Anything
to the contrary notwithstanding, all payments required to be made by the Company hereunder
to the Executive or his beneficiaries, including his estate, shall be subject to
withholding of such amounts relating to taxes as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, the Company may, in its sole discretion, accept other
provisions for payment of taxes as permitted by law, provided it is satisfied in its sole
discretion that all requirements of law affecting its responsibilities to withhold such
taxes have been satisfied. 



	 	 19. 	Survivorship. 






        The
respective rights and obligations of the parties hereunder shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such rights and
obligations. 



[ The next page is the
signature page. ]  











        IN
 WITNESS   WHEREOF,   the  parties  hereto  have  executed  this  Agreement  as  of  the
 14th  day  of October, 2007. 










		HANGER PROSTHETICS & ORTHOTICS, INC.
	

 	By:  /s/ Brian Wheeler
		        Brian Wheeler, Vice President
	

 	/s/ George E. McHenry
		George E. McHenry













EXHIBIT B 



AGREEMENT AND GENERAL
RELEASE 



[Attached.]