SECOND AMENDMENT AND WAIVER

Exhibit 10.1

EXECUTION VERSION

SECOND AMENDMENT AND WAIVER

This SECOND AMENDMENT AND WAIVER (this “Amendment”) dated as of September 11, 2015 is by and among HANGER, INC., a Delaware corporation (“Borrower”), the Guarantors identified on the signature pages hereto, the Lenders identified on the signature pages hereto and BANK OF AMERICA, N.A., in its capacity as Agent (in such capacity, the “Agent”).

RECITALS

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

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

WHEREAS, as previously reported by the Borrower in Current Reports on Form 8-K filed with the SEC on February 17, 2015, March 23, 2015 and June 9, 2015, the Borrower will be restating certain previously filed financial statements and other financial data as a result of various accounting issues and related matters, and the Borrower also has not yet filed financial statements for the third quarter of 2014, the fourth quarter and full year ended December 31, 2014, or the first and second quarters of 2015;

WHEREAS, as disclosed by the Borrower in a Current Report on Form 8-K filed with the SEC on August 17, 2015, the Borrower believes that the earliest it will likely commence making its filings with the SEC is December 2015; and

WHEREAS, the Borrower has requested a waiver of a certain Event of Default under the Credit Agreement relating to the prior failures to deliver financial statements when due, 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 $208,125,000 and (b) the Total Revolving Usage is $146,300,000, each of which amounts constitutes a valid and subsisting obligation of the Loan Parties to the Lenders that is not subject to any credits, offsets, defenses, claims, counterclaims or adjustments of any kind (it being understood that the undrawn portion of the Stated Amount of outstanding Letters of Credit included in the Total Revolving Usage, if any, constitutes a contingent obligation for so long as the Loan Parties are not required to cash collateralize such obligation in accordance with the Credit Agreement).  Each of the Loan Parties hereby acknowledges its obligations under the respective Loan Documents to which it is a party, reaffirms that each of the Liens 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 Borrower has failed to deliver the Financial Information (as defined in the First Amendment and Waiver, the “Financial Information”) to the Agent for distribution to the Lenders on or before August 17, 2015 as required by Section 5.3(b) of the First Amendment and Waiver, which failure has resulted in an Event of Default under the Credit Agreement (the “Existing Financial Reporting Default”).  The Borrower’s failure to deliver the notice required by Section 7.03 of the Credit Agreement with respect to the occurrence of the Existing Financial Reporting Default constitutes an Event of Default under the Credit Agreement (together with the Existing Financial Reporting Default, the “Existing Events of Default”).

4.                                      Waiver of Existing Events of Default.

4.1                               Subject to the terms and conditions set forth herein, the Lenders waive the Existing 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 Existing 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; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Second Amendment and Waiver” means the Second Amendment and Waiver to this Agreement dated as of September 11, 2015.

(b)                                 In clause (e) of the definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement, the following language is inserted immediately after the words “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)

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

(a)                                 Clauses (ii) and (iii) of the definition of “Excluded Account” in Section 1.1 of the Security Agreement are amended and restated as follows:

(ii) prior to September 30, 2015 (which date may be extended by up to thirty (30) calendar days by the Administrative Agent in its discretion) only, any Deposit Account the balance of which is swept at the end of each Business Day into another Deposit Account that is subject to the Administrative Agent’s control (within the meaning of Section 9-104 of the applicable Uniform Commercial Code) and (iii) any Deposit Account the maximum balance of which (A) individually shall not exceed (I) $1,000,000 at any time on a Business Day and (II) $300,000 for more than two (2) Business Days, and (B) in the aggregate, together with the balance of all such other Deposit Accounts of all Grantors excluded pursuant to this clause (iii), shall not exceed $2,500,000 at any time on a Business Day, and

(b)                                 In clause “Third” of Section 6.5 of the Security Agreement, the following language is inserted immediately after the words “held by the Secured Creditors”:

; provided that the Administrative Agent shall not exercise rights or remedies pursuant to any Deposit Account control agreement to which the counterparty depository institution is not a Lender or an Affiliate of a Lender other than to (i) cause amounts on deposit in such Deposit Accounts to be applied to Obligations that are due and payable (past any applicable grace or notice period) at the time of such application or (ii) direct that withdrawals or transfers from the applicable Deposit Accounts by the applicable Grantor be prohibited pending further notice, other than any transfer to a Deposit Account as to which the depository institution is a Lender or an Affiliate of a Lender

8.                                      Agent Financial Advisor.  In the event that the Agent engages (or directs its counsel to engage) a financial advisor (including any replacement or successor financial advisor, the “Agent Financial Advisor”) to, among other things, perform a review of the Loan Parties’ financial performance, financial reporting, financial forecasts, accounting delays and other related matters, the Loan Parties shall provide the Agent Financial Advisor with reasonable access to the Loan Parties’ facilities, members of management and financial information as is necessary to perform the services within the scope of the engagement.  The Agent acknowledges and agrees that any information provided by the Loan Parties to the Agent Financial Advisor shall be subject to Section 11.08 of the Credit Agreement.  The Loan Parties shall reimburse the Agent promptly after demand for the reasonable fees and expenses incurred by the

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Agent in connection with the retention of the Agent Financial Advisor; provided that in the absence of an Event of Default, the Agent shall not be entitled to reimbursement for (a) more than one (1) Agent Financial Advisor engaged by (or on behalf of) the Agent at a time or (b) fees and expenses incurred by the Agent in connection with services performed or expenses incurred by the Agent Financial Advisor after October 30, 2015.

9.                                      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 “Waiver Fee”) in an amount equal to five (5) basis points (0.05%) of the outstanding principal amount of the Term A Loan held by such Consenting Lender and the amount of such Lender’s Revolving Commitments.  The Waiver Fee shall be fully-earned, payable and non-refundable as of the Second 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 September 11, 2015 (or, as to any Lender, such later time or date as may be agreed by the Agent and the Borrower).

10.                               Effectiveness; Conditions Precedent.  This Amendment shall become effective as of the date hereof (the “Second 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 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) incurred in connection with this Amendment, to the extent invoiced to the Borrower at least one Business Day prior to the Second 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.

11.                               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.

12.                               Representations and Warranties.  The Loan Parties hereby represent and warrant to the Agent and the Lenders as follows as of the Second 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.

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(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 12 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.

13.                               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.

14.                               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.

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15.                               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.

16.                               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.

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

18.                               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

19.                               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.

20.                               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.

21.                               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]

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

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver

Hanger, Inc.

Second Amendment and Waiver