FIFTH AMENDMENT TO STOCK OPTION
AND VESTING AGREEMENTS
AND AMENDMENT AGREEMENT
THIS FIFTH 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 reguired 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 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;
WHEREAS, CVCA, CEA, the Company and Xxxxxx X. Xxxxxxxxxxx entered into a
Fourth Amendment to Stock Option and Vesting Agreements and Amendment Agreement,
dated as of October 27, 1995 (the "Fourth Amendment"), pursuant to which each
New Manager Option Agreement and each Additional Manager Option Agreement
between CVCA and Xxxxxx X. Xxxxxxxxxxx was amended by (i) extending the
expiration date of the New Manager Option of Xxxxxx X. Xxxxxxxxxxx from March
22, 1996 to March 22, 1997; (ii) extending the expiration date of the Additional
Manager Option of Xxxxxx X. Xxxxxxxxxxx from March 22, 1996 to March 22, 1997;
and (iii) providing for the payment of the exercise price of the New Manager
Option and Additional Manager Option of Xxxxxx X. Xxxxxxxxxxx with cash and/or
shares of Common Stock; and
WHEREAS, CVCA, CEA, the Company, Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx each
desire to further amend each New Manager Option Agreement and each Additional
Manager Option Agreement between CVCA and Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx to
(i) extend the expiration date of the New Manager Options of each of Xxxx X.
Xxxxx and Xxxxxxx X. Xxxxx from March 22, 1996 to March 22, 1997 with respect to
67,000 shares underlying the New Manager Options of Xxxx X. Xxxxx and 33,000
shares underlying the New Manager Options of Xxxxxxx X. Xxxxx, with the
expiration date for the balance of 51,500 shares for Xxxx X. Xxxxx and 29,568
shares for Xxxxxxx X. Xxxxx that underlie their respective New Manager Options
being extended from March 22, 1996 to December 31, 1997; (ii) extend the
expiration date of the Additional Manager Options of each of Xxxx X. Xxxxx and
Xxxxxxx X. Xxxxx from March 22, 1996 to December 31, 1997; and (iii) provide for
the payment of the exercise price of each such New Manager Option and Additional
Manager Option of Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx 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:
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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 each New Manager Option Agreement between CVCA
and each of Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx is hereby amended by replacing
the existing expiration date of March 22, 1996, with (A) the new expiration date
of March 22, 1997 with respect to 67,000 shares for Xxxx X. Xxxxx and 33,000
shares for Xxxxxxx X. Xxxxx and (B) the new expiration date of December 31, 1997
with respect to the balance of the 51,500 shares underlying such New Manager
Option of Xxxx X. Xxxxx and 29,568 shares underlying such New Manager Option of
Xxxxxxx X. Xxxxx.
3. Paragraph 3(b)(i) of each Additional Manager Option Agreement
between CVCA and each of Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx is hereby amended by
replacing the existing expiration date of March 22, 1996, with the new
expiration date of December 31, 1997.
4. Paragraph 5 of each New Manager Option Agreement between CVCA and
each of Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx 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 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
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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 each Additional Manager Option Agreement between CVCA
and each of Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx is hereby amended by replacing
the existing text thereof with the following language:
5. Exercise of Option. Written notice or 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 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.
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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.
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 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
By: /s/ Xxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxx
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx
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