Exhibit 10.(d)


 


HANGER ORTHOPEDIC GROUP, INC.


SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN


(As Amended and Restated
Effective January 1, 2005)


 

















 


Table of Contents


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  PURPOSE

  	
  1

  
	
  1.1.

  	
  Effective Date

  	
  1

  
	
  1.2.

  	
  Purpose

  	
  1

  
	
  1.3.

  	
  Legal Compliance

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  DEFINITIONS

  	
  1

  
	
  2.1.

  	
  “Accrued Benefit”

  	
  1

  
	
  2.2.

  	
  “Administrator”

  	
  2

  
	
  2.3.

  	
  “Applicable Interest Rate”

  	
  2

  
	
  2.4.

  	
  “Base Salary”

  	
  2

  
	
  2.5.

  	
  “Beneficiary”

  	
  2

  
	
  2.6.

  	
  “Board”

  	
  2

  
	
  2.7.

  	
  “Change in Control”

  	
  2

  
	
  2.8.

  	
  “Code”

  	
  2

  
	
  2.9.

  	
  “Committee”

  	
  2

  
	
  2.10.

  	
  “Company”

  	
  2

  
	
  2.11.

  	
  “Effective Date”

  	
  3

  
	
  2.12.

  	
  “Employer”

  	
  3

  
	
  2.13.

  	
  “ERISA”

  	
  3

  
	
  2.14.

  	
  “Final Average Salary”

  	
  3

  
	
  2.15.

  	
  “Participant”

  	
  3

  
	
  2.16.

  	
  “Plan”

  	
  3

  
	
  2.17.

  	
  “Present Value”

  	
  3

  
	
  2.18.

  	
  “Separation from Service”

  	
  3

  
	
  2.19.

  	
  “Spouse”

  	
  3

  
	
  2.20.

  	
  “Year of Credited Service”

  	
  3

  
	
  2.21.

  	
  “Year of Vesting Service”

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PLAN ADMINISTRATION

  	
  4

  
	
  3.1.

  	
  Administrator

  	
  4

  
	
  3.2.

  	
  Administrator Duties

  	
  4

  
	
  3.3.

  	
  Information

  	
  5

  
	
  3.4.

  	
  Claims Procedure

  	
  5

  
	
  3.5.

  	
  Indemnification

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  ELIGIBILITY FOR PARTICIPATION AND ENTITLEMENT TO
  ACCRUED BENEFIT

  	
  6

  
	
  4.1.

  	
  Designation of Participants

  	
  6

  
	
  4.2.

  	
  Entitlement to Accrued Benefits

  	
  6

  
	
  4.3.

  	
  Forfeiture for Certain Reasons

  	
  6

  



 


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  ARTICLE V

  	
  VESTING

  	
  7

  
	
  5.1.

  	
  Vesting

  	
  7

  
	
  5.2.

  	
  Forfeiture If Not Vested

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  AMOUNT OF ACCRUED BENEFIT

  	
  7

  
	
  6.1.

  	
  Amount of Accrued Benefit

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  FORM AND COMMENCEMENT OF PAYMENTS TO A
  PARTICIPANT

  	
  8

  
	
  7.1.

  	
  Form

  	
  8

  
	
  7.2.

  	
  Commencement

  	
  8

  
	
  7.3.

  	
  Reduction for Early Commencement

  	
  8

  
	
  7.4.

  	
  Small Payment Rules

  	
  8

  
	
  7.5.

  	
  Death While In Pay Status

  	
  9

  
	
  7.6.

  	
  Withholding of Taxes and Amounts Due

  	
  9

  
	
  7.7.

  	
  No Representation as to Tax Consequences

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  DEATH BENEFITS BEFORE PAYMENTS COMMENCE

  	
  9

  
	
  8.1.

  	
  Amount

  	
  9

  
	
  8.2.

  	
  Form

  	
  9

  
	
  8.3.

  	
  Commencement

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EFFECT OF CHANGE IN CONTROL

  	
  10

  
	
  9.1.

  	
  Vesting Accelerated for Active Participants

  	
  10

  
	
  9.2.

  	
  Plan May Be Terminated and Paid Out

  	
  10

  
	
  9.3.

  	
  Rabbi Trust To Be Established and Funded

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  AMENDMENT OR TERMINATION

  	
  10

  
	
  10.1.

  	
  Amendment or Termination by Board

  	
  10

  
	
  10.2.

  	
  No Reduction or Delay of Benefit Payments

  	
  11

  
	
  10.3.

  	
  Cash Out on Plan Termination

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
  11

  
	
  11.1.

  	
  Unfunded Plan; Unsecured Liability

  	
  11

  
	
  11.2.

  	
  No Contract of Employment

  	
  11

  
	
  11.3.

  	
  Nonalienation of Benefits

  	
  11

  
	
  11.4.

  	
  Effect on Retirement Plans

  	
  12

  
	
  11.5.

  	
  Severability

  	
  12

  
	
  11.6.

  	
  Merger, Consolidation or Acquisition

  	
  12

  
	
  11.7.

  	
  Governing Law

  	
  12

  
	
  11.8.

  	
  Binding Effect

  	
  12

  



 


ii

















 


ARTICLE I


PURPOSE


 


1.1.                              Effective Date. 
HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation (the “Company”),
together with its subsidiaries and affiliates (collectively referred to herein
as the “Employer”), established the Hanger Orthopedic Group, Inc.
Supplemental Executive Retirement Plan (the “Plan”), as of the Effective
Date.  The Plan is amended and restated
as of January 1, 2005, to conform to the requirements of the American Jobs
Creation Act of 2004 and new Code Section 409A.


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE II


DEFINITIONS


 


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


 


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


 

















 


2.2.                              “Administrator” means the person
designated by the Committee pursuant to Article III to administer the Plan
on behalf of the Employers.  As of January 1,
2005, such person is the Vice President of Human Resources.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


ARTICLE III


PLAN ADMINISTRATION


 


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


 


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


 


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


 


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


 


(c)                                  To maintain Plan records;


 


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


 


4














 


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


 


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


 


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


 


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


 


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


 


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


 


5

















 


A written notice of any such extension shall be
furnished to the claimant prior to the commencement of the extension.


 


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


 


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


 


3.5.                              Indemnification. 
The Company shall indemnify, hold harmless and defend the Administrator
from any liability which the Administrator may incur in connection with the
performance of his or her duties in connection with this Plan, so long as the
Administrator has not acted in an arbitrary and capricious manner prior to a
Change in Control (or was acting in good faith after a Change in Control) and
within what the Administrator understood to be the scope of his or her duties.


 


ARTICLE IV


ELIGIBILITY FOR PARTICIPATION AND


ENTITLEMENT TO ACCRUED BENEFIT


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


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


 


ARTICLE V


VESTING


 


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


 


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


 


ARTICLE VI


AMOUNT OF ACCRUED BENEFIT


 


6.1.                              Amount of Accrued Benefit. 
Subject to other Plan provisions limiting or reducing benefits, the
amount of a Participant’s Accrued Benefit shall be equal to the Participant’s
Final Average Salary multiplied by the applicable percentage, as determined by
the Committee and set out in the Participants’ Table, attached hereto and
incorporated herein by this reference, multiplied by a fraction determined as
follows:


 


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


 


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


 


7

















 


maximum number of Years of Credited Service that could
be completed between the Participant’s initial Plan coverage date and the
Participant’s sixty-fifth (65th) birthday.


 


ARTICLE VII


FORM AND COMMENCEMENT OF


PAYMENTS TO A PARTICIPANT


 


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


 


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


 


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


 


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


 


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


 


8

















 


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


 


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


 


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


 


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


 


ARTICLE VIII


DEATH BENEFITS BEFORE PAYMENTS
COMMENCE


 


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


 


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


 


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


 


9

















 


date precedes the date on which normal retirement
benefits would have commenced to the Participant, with the reduction being at
the rate of two percent (2%) per year.


 


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


 


ARTICLE IX


EFFECT OF CHANGE IN CONTROL


 


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


 


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


 


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


 


ARTICLE X


AMENDMENT OR TERMINATION


 


10.1.                        Amendment or Termination by Board. 
There is no time limit on the duration of the Plan.  However, the Company, by action of the Board
or its Compensation Committee, may at any time to comply with Code Section 409A
or for any reason, amend or terminate the Plan; provided, however, that the
provisions of Section 9.3 shall not be amended or


 


10

















 


in any way curtailed following a Change in Control until all Accrued
Benefits as of the date of the Change in Control have been paid.


 


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


 


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


 


ARTICLE XI


MISCELLANEOUS


 


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


 


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


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


Dated this         day
of                      ,
2008.


 


	
   

  	
  HANGER ORTHOPEDIC GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


12

















 


PARTICIPANTS’ TABLE


 


	
  NAME

  	
   

  	
  INITIAL

  COVERAGE

  DATE

  	
   

  	
  DATE OF

  65th BIRTHDAY

  	
   

  	
  APPLICABLE

  PERCENTAGE

  	
   

  	
  STATUS

  
	
  Ivan R. Sabel

  	
   

  	
  January 1, 2004

  	
   

  	
  March 2, 2010

  	
   

  	
  90%

  	
   

  	
  Active

  
	
  Thomas F. Kirk

  	
   

  	
  January 1, 2004

  	
   

  	
  September 27, 2010

  	
   

  	
  85%

  	
   

  	
  Active

  
	
  Richmond L. Taylor

  	
   

  	
  January 1, 2004

  	
   

  	
  June 30, 2013

  	
   

  	
  80%

  	
   

  	
  Active

  
	
  George E. McHenry

  	
   

  	
  January 1, 2004

  	
   

  	
  July 12, 2017

  	
   

  	
  75%

  	
   

  	
  Active

  
	
  Ronald N. May

  	
   

  	
  January 1, 2004

  	
   

  	
  October 6, 2011

  	
   

  	
  65%

  	
   

  	
  Active

  
	
  Edward L. Mitzel

  	
   

  	
  January 1, 2004

  	
   

  	
  January 29, 2024

  	
   

  	
  65%

  	
   

  	
  Terminated – 4/22/05

  
	
  Brian Wheeler

  	
   

  	
  January 1, 2004

  	
   

  	
  November 8, 2025

  	
   

  	
  65%

  	
   

  	
  Active

  
	
  Mike Murphy

  	
   

  	
  January 1, 2004

  	
   

  	
  September 19, 2025

  	
   

  	
  65%

  	
   

  	
  Terminated – 9/30/05

  
	
  John Rush

  	
   

  	
  April 1, 2005

  	
   

  	
  March 15, 2026

  	
   

  	
  65%

  	
   

  	
  Active

  
	
  Alfred Kritter

  	
   

  	
  April 1, 2005

  	
   

  	
  October 9, 2017

  	
   

  	
  25%

  	
   

  	
  Active

  



 


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