FOURTH AMENDMENT AND WAIVER

Exhibit 10.1

EXECUTION VERSION

FOURTH AMENDMENT AND WAIVER

This FOURTH AMENDMENT AND WAIVER (this “Amendment”) dated as of February 10, 2016 is by and among HANGER, INC., a Delaware corporation (“Borrower”), the Guarantors identified on the signature pages hereto, the Lenders identified on the signature pages hereto and BANK OF AMERICA, N.A., in its capacity as Agent (in such capacity, the “Agent”).

RECITALS

WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit Agreement dated as of June 17, 2013, as amended by the First Amendment and Waiver dated as of June 19, 2015, the Second Amendment and Waiver dated as of September 11, 2015 and the Third Amendment and Waiver dated as of November 13, 2015 (as further amended, modified, supplemented, increased and extended from time to time, the “Credit Agreement”);

WHEREAS, the Borrower has requested a waiver of certain Events of Default that have occurred or are anticipated to occur under the Credit Agreement, and the Lenders have agreed to the requested waiver on the terms and conditions set forth herein.

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

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

2.                                      Estoppel, Acknowledgement and Reaffirmation.  Each of the Loan Parties acknowledges and confirms that as of the date hereof (a) the aggregate outstanding principal amount of the Term A Loans is $199,687,500 and (b) the Total Revolving Usage is $136,300,000, each of which amounts constitutes a valid and subsisting obligation of the Loan Parties to the Lenders that is not subject to any credits, offsets, defenses, claims, counterclaims or adjustments of any kind (it being understood that the undrawn portion of the Stated Amount of outstanding Letters of Credit included in the Total Revolving Usage, if any, constitutes a contingent obligation for so long as the Loan Parties are not required to cash collateralize such obligation in accordance with the Credit Agreement).  Each of the Loan Parties hereby acknowledges its obligations under the respective Loan Documents to which it is a party, reaffirms that each of the Liens created and granted in or pursuant to the Collateral Documents is valid and subsisting and agrees that this Amendment shall in no manner impair or otherwise adversely affect such obligations or Liens, except as explicitly set forth herein.

3.                                      Statement of Defaults.  The following Events of Default exist or are anticipated to occur:

3.1                               Existing Financial Information Events of Default. The Borrower has failed to timely deliver the Financial Information (as defined in the First Amendment and Waiver) and the September 30, 2015 Financial Information (as defined in the Third Amendment and Waiver), in each case, on or before December 18, 2015, as required by Section 4.2(b) of the Third Amendment and Waiver, each of which constitutes an Event of Default under Section 4.2(b) of the Third Amendment and Waiver and Section 9.01(c) of the Credit Agreement (the “Existing Financial Information Events of Default”).

3.2                               Anticipated Financial Information Events of Default. The Borrower has notified the Agent that it anticipates failing to timely deliver the following (the “December 31, 2015 Financial Information”): (i) the financial information and other materials required to be delivered pursuant to Section 7.01(a) of the Credit Agreement for the fiscal year ending December 31, 2015, (ii) the certificate of the Independent Auditor required to be delivered pursuant to Section 7.02(a) of the Credit Agreement and (iii) a Compliance Certificate pursuant to Section 7.02(b) for the fiscal year ending December 31, 2015, which failures would each constitute an Event of Default under Section 9.01(d) of the Credit Agreement following notice to the Borrower by the Agent or any Lender and the expiration of the applicable cure period (individually and collectively, the “Anticipated December 31, 2015 Financial Information Events of Default” and together with the Existing Financial Information Events of Default, the “Financial Information Events of Default”).

4.                                      Waiver of Events of Default.

4.1                               Subject to the terms and conditions set forth herein, the Lenders waive the Financial Information Events of Default.

4.2                               It is acknowledged and agreed that:

(a)                                 The waiver set forth in Section 4.1 is a one-time waiver limited exclusively to the Financial Information Events of Default and shall not be construed to be a waiver of, or in any way obligate the Lenders to waive, any other Default or Event of Default that may have occurred or that may occur after the date hereof;

(b)                                 On or before May 16, 2016, the Borrower shall deliver the Financial Information, the September 30, 2015 Financial Information and the December 31, 2015 Financial Information to the Agent for distribution to the Lenders, and any failure to deliver any of the Financial Information, the September 30, 2015 Financial Information or the December 31, 2015 Financial Information on or before May 16, 2016 shall constitute a new and immediate Event of Default under the Credit Agreement without regard to any otherwise applicable notice, cure or grace period; and

(c)                               The execution and delivery by the Borrower of that certain Fifth Supplemental Indenture dated on or about December 11, 2015 did not violate the covenant set forth in Section 8.16 of the Credit Agreement.

5.                                      Additional Restrictions and Provisions Pending Certain Occurrences.  Notwithstanding anything in the Credit Agreement or the other Loan Documents to the contrary:

5.1                               Until such time as: (a) the Borrower shall have delivered to the Agent, for distribution to the Lenders, the Financial Information, the September 30, 2015 Financial Information and the December 31, 2015 Financial Information, (b) the Financial Information shall demonstrate that the Loan Parties would have been in compliance with Sections 8.09 and 8.10 of the Credit Agreement for the fiscal quarters ended September 30, 2014, December 31, 2014, March 31, 2015 and June 30, 2015 if the amendment to the definition of Consolidated EBITDA set forth in the First Amendment and Waiver had been effective as of the last day of such fiscal quarters (regardless of whether such amendment to such definition actually was effective at such time), (c) the September 30, 2015 Financial Information shall demonstrate the correctness of the representation set forth in Section 5 of the Third Amendment and Waiver, and (d) the Borrower shall have delivered to the Agent, for distribution to the Lenders, Projections (in form and with detail reasonably satisfactory to the Agent) prepared on a quarterly basis for each fiscal quarter remaining during the term of the Credit Agreement demonstrating that (assuming the Projections will be realized) the Borrower will be in compliance with Sections 8.09 and 8.10 of the Credit Agreement as of the end of each fiscal quarter remaining during the term of the Credit Agreement, the following restrictions and provisions in addition to those set forth in the Credit Agreement shall apply:

(a)                                 No Credit Extension shall be permitted without the written consent of the Required Lenders unless, after giving effect to such Credit Extension, the Total Revolving Usage would be less than or equal to $138,000,000;

(b)                                 The Borrower and its Subsidiaries shall not create, incur, assume or suffer to exist any Lien after June 19, 2015 in reliance on Section 8.01(m) of the Credit Agreement securing Indebtedness or other obligations of the Borrower and its Subsidiaries exceeding in the aggregate, at any time, $15,000,000;

(c)                                  The aggregate value of all assets disposed of by the Borrower and its Subsidiaries after June 19, 2015 pursuant to Section 8.02(j) of the Credit Agreement shall not exceed $5,000,000, except that assets may be disposed of pursuant to Section 8.02(j) in respect of the Dosteon and CARES businesses, whether pursuant to the plans to dispose of such businesses as described in the Borrower’s Current Report on Form 8-K filed with the SEC on November 7, 2014 or otherwise, without reducing the availability under the foregoing $5,000,000 basket;

(d)                                 The aggregate principal amount of Investments by the Borrower and its Subsidiaries after June 19, 2015 pursuant to Section 8.04(e)(iii) of the Credit Agreement shall not exceed $5,000,000;

(e)                                  No Acquisition shall be permitted after June 19, 2015 (other than any Acquisition to which only Loan Parties are parties);

(f)                                   The Borrower and its Subsidiaries shall not make any Investment after June 19, 2015 in reliance on Section 8.04(j) of the Credit Agreement;

(g)                                  The Borrower and its Subsidiaries shall not make any Investment after June 19, 2015 in reliance on Section 8.04(m) of the Credit Agreement;

(h)                                 The aggregate principal amount of Investments by the Borrower and its Subsidiaries after June 19, 2015 pursuant to Section 8.04(n) of the Credit Agreement shall not exceed $5,000,000;

(i)                                     The Borrower and its Subsidiaries shall not create, incur, assume, suffer to exist or otherwise become directly or indirectly liable with respect to any Indebtedness after June 19, 2015 in reliance on Section 8.05(i) of the Credit Agreement;

(j)                                    The Borrower and its Subsidiaries shall not create, incur, assume, suffer to exist or otherwise become directly or indirectly liable with respect to any Indebtedness after June 19, 2015 in reliance on Section 8.05(l) of the Credit Agreement;

(k)                                 Foreign Subsidiaries shall not create, incur, assume, suffer to exist or otherwise become directly or indirectly liable with respect to any Indebtedness after June 19, 2015 in reliance on Section 8.05(o) of the Credit Agreement;

(l)                                     The Borrower and its Subsidiaries shall not create, incur, assume, suffer to exist or otherwise become directly or indirectly liable with respect to any Indebtedness after June 19, 2015 in reliance on Section 8.05(p) of the Credit Agreement, exceeding in the aggregate, at any time, $15,000,000;

(m)                             The Borrower and its Subsidiaries shall not declare or make any Restricted Payment after June 19, 2015 in reliance on Section 8.08(a)(v) of the Credit Agreement;

(n)                                 The Borrower and its Subsidiaries shall not declare or make any Restricted Payment after June 19, 2015 in reliance on Section 8.08(a)(vi) of the Credit Agreement;

(o)                                 The Borrower and its Subsidiaries shall not declare or make any Restricted Payment after June 19, 2015 in reliance on Section 8.08(b) of the Credit Agreement; and

(p)                                 Commencing on February 12, 2016 and continuing on or before the tenth (10th) Business Day of each calendar month thereafter, the Borrower shall prepare and deliver to the Agent for distribution to the Lenders, consolidated forecasts of cash flows for the Borrower and its Subsidiaries for at least the thirteen (13) weeks following each such delivery date in form and detail substantially consistent with the forecasts provided by the Borrower to the Lenders most recently prior to the date hereof, together with reports reconciling actual cash flows for the Borrower and its Subsidiaries with the previously-delivered weekly forecasts of cash flows for each calendar week that includes one or more Business Days that occurred during the preceding calendar month (but excluding any calendar week covered by a previous reconciliation report hereunder), in each case in form and detail substantially consistent with the form of the report provided by the Borrower to the Lenders most recently prior to the date hereof, and any failure to deliver any such forecast or reconciliation report shall constitute a new and immediate Event of Default under the Credit Agreement without regard to any otherwise applicable notice, cure or grace period.

5.2                               Commencing on the Fourth Amendment Effective Date (as defined below), the Applicable Rate with respect to Base Rate Loans and LIBOR Rate Loans shall be increased, in each case, by 1.00% from the amounts that would otherwise apply in the absence of this Section 5.2 until such time as (a) the Consolidated Leverage Ratio for the Borrower’s most recently ended fiscal quarter shall be less than or equal to 4.00:1.00, (b) the Borrower shall have delivered to the Agent, for distribution to the Lenders, the Financial Information, the September 30, 2015 Financial Information and the December 31, 2015 Financial Information, (c) the Financial Information shall demonstrate that the Loan Parties would have been in compliance with Sections 8.09 and 8.10 of the Credit Agreement for the fiscal quarters ended September 30, 2014, December 31, 2014, March 31, 2015 and June 30, 2015 if the amendment to the definition of Consolidated EBITDA set forth in the First Amendment and Waiver had been effective as of the last day of such fiscal quarters (regardless of whether such amendment to such definition actually was effective at such time), (d) the September 30, 2015 Financial Information shall demonstrate the correctness of the representation set forth in Section 5 of the Third Amendment and Waiver, and (e) the Borrower shall have delivered to the Agent, for distribution to the Lenders, Projections (in form and with detail reasonably satisfactory to the Agent) prepared on a quarterly basis for each fiscal quarter remaining during the term of the Credit Agreement demonstrating that (assuming the Projections will be realized) the Borrower will be in compliance with Sections 8.09 and 8.10 of the Credit Agreement as of the end of each fiscal quarter remaining during the term of the Credit Agreement.

This Section 5 of this Amendment shall supersede and replace Section 6 of the Third Amendment and Waiver.

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

(a)                                 The following new definition is added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order:

“Fourth Amendment and Waiver” means the Fourth Amendment and Waiver to this Agreement dated as of February 10, 2016.

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

(e) any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business and loss on early retirement of debt); provided that (i) the aggregate amount of professional fees and expenses (excluding the aggregate amount of professional fees and expenses reimbursed by the Loan Parties in accordance with the Second Amendment and Waiver, which are not subject to the limitation set forth in this proviso) that may be added back pursuant to this clause (e) for any period of four consecutive fiscal quarters shall not exceed (A) for the period of four consecutive fiscal quarters ending on (1) or prior to December 31, 2015, $22,000,000, (2) March 31, 2016, $25,300,000, (3) June 30, 2016, $28,400,000, (4) September 30, 2016, $24,400,000, (5) December 31, 2016, $18,000,000, and (B) for any period of four consecutive fiscal quarters ending thereafter, 10.0% of Consolidated EBITDA for such period (calculated without giving effect to any add back of professional fees and expenses pursuant to this clause (e)) and (ii) this clause (e) may not be used to add back the write-down of current assets;

(c)                                  Section 8.09 of the Credit Agreement is amended and restated in its entirety to read as follows:

8.09                        Consolidated Leverage Ratio.

The Borrower will not permit the Consolidated Leverage Ratio to exceed (i) 4.35:1.00 as of the end of the fiscal quarter of the Borrower ending on March 31, 2016, (ii)  4.50:1.00 as of the end of the fiscal quarter of the Borrower ending on June 30, 2016, (ii) 4.20:1.00 for the fiscal quarter of Borrower ending on September 30, 2016; (iii) 4.10:1.00 for the fiscal quarter of the Borrower ending on December 31, 2016; and (iv) 4.00:1.00 as of the end of any fiscal quarter of the Borrower thereafter.

(d)                                 Section 9.01(c) of the Credit Agreement is amended and restated in its entirety to read as follows:

(c)                                  Specific Defaults.  The Borrower fails to perform or observe any term, covenant or agreement contained in Section 7.03(a), 7.04 (with respect to the Borrower), 7.11, the First Amendment and Waiver, the Second Amendment and Waiver, the Third Amendment and Waiver or the Fourth Amendment and Waiver; or

7.                                      Agent Financial Advisor.  Notwithstanding anything to the contrary contained in Section 8 of the Second Amendment and Waiver or in Section 9 of the Third Amendment and Waiver, the Agent shall be entitled to prompt reimbursement from the Loan Parties for fees and expenses incurred by the Agent in connection with services performed or expenses incurred by the Agent Financial Advisor (as defined in Section 8 of the Second Amendment and Waiver) from and after February 10, 2016 to the extent that, in the absence of any Event of Default (after giving effect to this Amendment), such fees and expenses do not exceed $100,000 in aggregate.

8.                                      Waiver Fee.  In consideration of the Lenders’ agreements set forth herein, the Borrower agrees to pay to the Agent, for the account of each Consenting Lender (defined below), a waiver fee (the “Fourth Amendment Waiver Fee”) in an amount equal to forty five (45) basis points (0.45%) of the outstanding principal amount of the Term A Loan held by such Consenting Lender plus the amount of such Lender’s Revolving Commitments.  The Waiver Fee shall be fully-earned, payable and non-refundable as of the Fourth Amendment Effective Date (defined below).  As used herein, “Consenting Lender” means a Lender that executes and delivers to the Agent a signature page to this Amendment on or prior to 12:00 p.m. Central time on February 10, 2016 (or, as to any Lender, such later time or date as may be agreed by the Agent and the Borrower).

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

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

(b)                                 The Agent shall have received the Fourth Amendment Waiver Fee;

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

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

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

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

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

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

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

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

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

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

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

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

If any representation and warranty set forth in this Section 11 is incorrect on and as of the date hereof then such incorrect representation and warranty shall constitute a new and immediate Event of Default without regard to any otherwise applicable notice, cure or grace period.

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

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

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

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

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

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

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

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

20.                               Miscellaneous.

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

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

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

[Signature Pages Follow]

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

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver

Hanger, Inc.

Fourth Amendment and Waiver