FOURTH AMENDMENT TO STOCK OPTION
AND VESTING AGREEMENTS
AND AMENDMENT AGREEMENT
THIS FOURTH AMENDMENT (this "Amendment"), dated as of October 27, 1995,
is by and among Chemical Venture Capital Associates, A California Limited
Partnership ("CVCA"), Chemical Equity Associates, A California Limited
Partnership ("CEA"), Hanger Orthopedic Group, Inc., a Delaware corporation (the
"Company") and Messrs. Xxxxxx X. Xxxxxxxxxxx, Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx
(such individuals hereinafter referred to individually as an "Optionee" and
collectively as the "Optionees"). This Amendment amends (i) the Stock Option
and Vesting Agreements, dated as of March 14, 1991, by and between CVCA and the
Optionees (the "Additional Manager Option Agreements") and (ii) the Stock Option
and Vesting Agreements, dated as of May 16, 1994, by and between CVCA and the
Optionees (the "New Manager Option Agreements").
WHEREAS, pursuant to the Stock Option and Vesting Agreements, dated as
of August 13, 1990, by and between CVCA and the Optionees (the "Manager Option
Agreements"), CVCA granted options to the Optionees and Xxxxxx X. Xxxxxxx to
purchase a total of 496,250 shares of common stock, par value $.0l per share, of
the Company (the "Common Stock"), which number of shares gave effect to
the one-for-four reverse split of the Common Stock effected on December 31,
1990; and, as a result of the cancellation on March 31, 1991 of an option for
82,500 shares upon the resignation of Xxxxxx X. Xxxxxxx, options were then held
by the Optionees for a total of 413,750 shares (the "Manager Options") under the
Manager Option Agreements;
WHEREAS, pursuant to paragraph 3 of the Amendment Agreement, dated as of
August 13, 1990, by and among the Company, CVCA, CEA, the Optionees and Xxxxxx
X. Xxxxxxx (the "Amendment Agreement"), CVCA agreed to promptly pay to the
Company 27.5% of the exercise price received by CVCA upon the exercise of any
Manager Options (the "Company Payment");
WHEREAS, pursuant to the Additional Manager Option Agreements, CVCA
granted options to the Optionees (the "Additional Manager Options") to purchase
from CVCA an aggregate of 348,265 shares of Common Stock in accordance with the
terms of the Additional Manager Option Agreements;
WHEREAS, CVCA, CEA and Exeter Capital, L.P., a Delaware Limited
Partnership ("Exeter"), entered into an agreement, dated as of February 20, 1992
(the "Termination Agreement"), pursuant to paragraph 6 of which CVCA and Exeter
agreed to enter into an agreement amending each of the Manager Option Agreements
and Additional Manager Option Agreements to provide that Exeter would be
obligated as optionor with respect to 24.16% of the shares of Common Stock
covered by each of the Manager Options and Additional Manager Options;
WHEREAS, CVCA, CEA, Exeter, the Company and the Optionees entered into
an Amendment to Stock Option and Vesting Agreements and Amendment Agreement,
dated as of February 20, 1992 (the "First Amendment"), pursuant to which, among
other things, (i) each Manager Option Agreement and Additional Manager Option
Agreement was amended to provide that of the shares of Common Stock underlying
each Manager Option and Additional Manager Option, 75.84% of the shares could be
purchased by the Optionees from CVCA and 24.16% of the shares could be purchased
by the Optionees from Exeter, with each Optionee being required to provide
separate written notices to each of CVCA and Exeter with respect to each
exercise of a Manager Option or Additional Manager Option by the Optionee, and
that 75.84% and 24.16% of the shares of Common Stock purchased and purchase
price payable by the Optionee must be purchased from and paid to CVCA and
Exeter, respectively; (ii) the Amendment Agreement was amended to provide that
75.84% and 24.16% of the Company Payment would be made by CVCA and Exeter,
respectively; and (iii) each of CVCA and Exeter would not be liable for any
obligation of the other under the Manager Option Agreements and the Manager
Options granted pursuant thereto or the Additional Manager Option Agreements and
the Additional Manager Options granted pursuant thereto, as amended by the First
Amendment;
WHEREAS, the Manager Option Agreements and the Manager Options granted
pursuant thereto expired on May 15, 1994, together with the expiration on that
date of the obligation of CVCA and Exeter to pay the Company Payment, as set
forth in the Amendment Agreement and the First Amendment;
WHEREAS, pursuant to the New Manager Option Agreements, CVCA granted
options to the Optionees to purchase a total of 313,788 shares of Common Stock
(the "New Manager Options") to replace the 75.84% portion of the shares of
Common Stock that were previously purchasable by the Optionees from
CVCA under the Manager Option Agreements and the Manager Options that expired on
May 15, 1994 (it being understood by the Company that it has no right to a
Company Payment with respect to such New Manager Option Agreements);
WHEREAS, CVCA, CEA, the Company and the Optionees entered into a Second
Amendment to Stock Option and Vesting Agreements and Amendment Agreement, dated
as of May 16, 1994 (the "Second Amendment"), pursuant to which each Additional
Manager Option Agreement between CVCA and the Optionees was amended by replacing
the then existing expiration date of December 14, 1994, with a new expiration
date of December 14, 1995, with such extension having no effect on the
expiration date of the exercise period relating to the 24.16% portion of each
Additional Manager Option, which expired on December 14, 1994 and for which
Exeter was solely responsible as provided under the terms of the First
Amendment;
WHEREAS, CVCA, CEA, the Company and the Optionees entered into a Third
Amendment to Stock Option and Vesting Agreements and
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Amendment Agreement, dated as of September 22, 1994 (the "Third Amendment"),
pursuant to which each New Manager Option Agreement and each Additional Manager
Option Agreement between CVCA and the Optionees was amended by (i) changing the
exercise price per share of each New Manager Option and each Additional Manager
Option to equal $3.875, which exercise price exceeded the closing sale price of
$3.625 per share of Common Stock as reported on the American Stock Exchange as
of the close of business on September 22, 1994, (ii) extending the expiration
date of each New Manager Option from May 16, 1995 to March 22, 1996 and (iii)
extending the expiration date of each Additional Manager Option from December
14, 1995 to March 22, 1996; and
WHEREAS, CVCA, CEA, the Company and Xxxxxx X. Xxxxxxxxxxx each desire to
further amend each New Manager Option Agreement and each Additional Manager
Option Agreement between CVCA and Xxxxxx X. Xxxxxxxxxxx to (i) extend the
expiration date of the New Manager Option of Xxxxxx X. Xxxxxxxxxxx from March
22, 1996 to March 22, 1997; (ii) extend the expiration date of the Additional
Manager Option of Xxxxxx X. Xxxxxxxxxxx from March 22, 1996 to March 22, 1997;
and (iii) provide for the payment of the exercise price of the New Manager
Option and Additional Manager Option of Xxxxxx X. Xxxxxxxxxxx with cash and/or
the reduction in the number of shares of Common Stock issuable upon the exercise
of the subject option.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto agree as follows:
1. Each and all of the recital paragraphs set forth above are hereby
incorporated as if set forth herein.
2. Paragraph 3(b)(i) of the New Manager Option Agreement between CVCA
and Xxxxxx X. Xxxxxxxxxxx is hereby amended by replacing the existing expiration
date of March 22, 1996, with the new expiration date of March 22, 1997.
3. Paragraph 3(b)(i) of the Additional Manager Option Agreement between
CVCA and Xxxxxx X. Xxxxxxxxxxx is hereby amended by replacing the existing
expiration date of March 22, 1996, with the new expiration date of March 22,
1997.
4. Paragraph 5 of the New Manager Option Agreement between CVCA and
Xxxxxx X. Xxxxxxxxxxx is hereby amended by replacing the existing text thereof
with the following language:
5. Exercise of Option. Written notice of the exercise of the Option or
any portion thereof shall be given to CVCA accompanied by the aggregate Exercise
Price for the Option Shares proposed to be acquired payable (i) in cash by
certified or bank cashier's check, (ii) by instructing CVCA to cancel that
portion of this Option
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exercisable for that number of shares of Company Common Stock (the "Relinquished
Shares") having an aggregate Market Value on the last business day immediately
preceding the date of exercise equal to sum of (A) the Exercise Price multiplied
by the number of Relinquished Shares plus (B) the Exercise Price multiplied by
the number of shares subject to such exercise or (iii) by a combination of the
foregoing. If any exercise is made pursuant to clause (ii) above, the Option
shall automatically be adjusted to reduce the number of shares issuable upon
exercise of the Option by the number of Relinquished Shares. No exercise may be
made pursuant to clause (ii) above if the number of shares subject to such
exercise and the number of Relinquished Shares exceeds the number of shares
issuable upon exercise of the Option. As used herein, "Market Value" means as to
any security the average of the closing prices of such security's sales on the
United States securities exchanges on which such security may at the time be
listed, or, if there have no sales on any such exchange on the subject day, the
average of the highest bid and lowest asked prices on such exchange at the end
of such day, or, if on any such day such security is not so listed, the average
of the representative bid and asked prices quoted on the NASDAQ System as of
4:00 P.M., New York time on such day, or, if on any day such security is not
quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar or successor
organization.
5. Paragraph 5 of the Additional Manager Option Agreement between CVCA
and Xxxxxx X. Xxxxxxxxxxx is hereby amended by replacing the existing text
thereof with the following language:
5. Exercise of Option. Written notice of the exercise of the
Option or any portion thereof shall be given to CVCA accompanied by the
aggregate Exercise Price for the Vested Shares proposed to be acquired
payable (i) in cash by certified or bank cashier's check, (ii) by
instructing CVCA to cancel that portion of this Option exercisable for
that number of shares of Company Common Stock (the "Relinquished
Shares") having an aggregate Market Value on the last business day
immediately preceding the date of exercise equal to sum of (A) the
Exercise Price multiplied by the number of Relinquished Shares plus (B)
the Exercise Price multiplied by the number of shares subject to such
exercise or (iii) by a combination of the foregoing. If any exercise is
made pursuant to clause (ii) above, the Option shall automatically be
adjusted to reduce the number of shares
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issuable upon exercise of the Option by the number of Relinquished Shares. No
exercise may be made pursuant to clause (ii) above if the number of shares
subject to such exercise and the number of Relinquished Shares exceeds the
number of shares issuable upon exercise of the Option. As used herein, "Market
Value" means as to any security the average of the closing prices of such
security's sales on the United States securities exchanges on which such
security may at the time be listed, or, if there have no sales on any such
exchange on the subject day, the average of the highest bid and lowest asked
prices on such exchange at the end of such day, or, if on any such day such
security is not so listed, the average of the representative bid and asked
prices quoted on the NASDAQ System as of 4:00 P.M., New York time on such day,
or, if on any day such security is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization.
6. Except as otherwise herein amended, the terms and conditions of the
New Manager Option Agreements, the Additional Manager Option Agreements and the
Amendment Agreement shall remain in force.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CHEMICAL VENTURE CAPITAL ASSOCIATES
By: CHEMICAL VENTURE PARTNERS,
Its General Partner
By: /s/ Xxxxxxxx X. Xxxxx, M.D.
-------------------------------
Xxxxxxxx X. Xxxxx, M.D.,
Executive Partner
CHEMICAL EQUITY ASSOCIATES
By: CHEMICAL VENTURE PARTNERS,
Its General Partner
By: /s/ Xxxxxxxx X. Xxxxx, M.D.
--------------------------------
Xxxxxxxx X. Xxxxx, M.D.,
Executive Partner
HANGER ORTHOPEDIC GROUP, INC.
By: /S/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
President
OPTIONEE
/s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxxxx
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