UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
HANGER, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee paid previously with preliminary materials.

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 
[MISSING IMAGE: lg_hangerempowering-4c.jpg]
10910 Domain Drive, Suite 300
Austin, TX 78578
(512) 777-3800
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
August 26, 2022
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of Hanger, Inc., a Delaware corporation (“Hanger,” the “Company,” “we” or “us”), to be held on September 30, 2022 at 10:00 A.M., local time, at The Westin Austin at The Domain, 11301 Domain Drive, Austin, Texas 78758.
At the special meeting, you will be asked to consider and vote on three matters:
(i)
a proposal to adopt and approve the Agreement and Plan of Merger, dated July 21, 2022 (as it may be amended or restated from time to time, the “Merger Agreement”), by and among Hero Parent, Inc., a Delaware corporation (“Parent”), Hero Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Hanger, and the transactions contemplated thereby, including the Merger (as defined below). Parent and Merger Sub are indirect subsidiaries of funds managed and advised by Patient Square Capital, LP. Pursuant to the terms of the Merger Agreement, and upon the satisfaction or waiver of the conditions to closing set forth therein, Parent will acquire Hanger in a cash merger with Merger Sub merging with and into Hanger (the “Merger”) and Hanger surviving the Merger as a wholly owned subsidiary of Parent;
(ii)
a proposal to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger, at the time of the special meeting; and
(iii)
a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger.
If the Merger is completed, you will be entitled to receive $18.75 in cash, without interest and subject to all applicable withholding taxes, for each share of Hanger common stock (the “Merger Consideration”) you own (unless you have properly demanded appraisal for your shares in accordance with, and have complied in all respects with, Section 262 of the General Corporation Law of the State of Delaware). The Merger Consideration represents a premium of approximately 29% over the 30 calendar day volume-weighted average price ending July 20, 2022 and a premium of approximately 26% over the closing price of Hanger common stock on July 20, 2022, the latest trading day before the Merger Agreement was entered into and announced.
After reviewing and considering the terms and conditions of the Merger and the factors more fully described in the enclosed proxy statement, our board of directors unanimously (i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
Our board of directors unanimously recommends that you vote: (i) “FOR” the proposal to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger; (ii) “FOR” the proposal to adjourn the special meeting to a later date or dates if necessary; and (iii) “FOR” the non-binding,
 

 
advisory proposal to approve certain compensation that will or may become payable to our named executive officers in connection with the Merger.
The accompanying proxy statement contains, among other things, detailed information about Hanger, the special meeting, the Merger, the Merger Agreement and the Merger-related compensation. We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in their entirety.
Your vote is very important, regardless of the number of shares of Hanger common stock that you own. We cannot complete the Merger unless the Merger Agreement is adopted and approved by the affirmative vote of the holders of a majority of the shares of Hanger common stock outstanding and entitled to vote on the matter as of the record date. The failure of any stockholder of record to vote in person by ballot at the special meeting or to submit a signed proxy card will have the same effect as a vote “AGAINST” the Merger Agreement. If you hold your shares in “street name,” the failure to either instruct your broker, bank or nominee on how to vote your shares will have the same effect as a vote “AGAINST” the Merger Agreement.
We hope that you will be able to attend the special meeting. However, whether or not you plan to attend in person, please vote as soon as possible via the Internet, by telephone, or, if you receive a paper proxy voting card or voting instruction form in the mail with the accompanying proxy statement, complete, sign, date and return the proxy card enclosed or, if your shares are held in “street name” through a broker, bank or nominee, please instruct your broker, bank or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank or nominee, as promptly as possible. Submitting a signed proxy card by mail will ensure your shares are represented at the special meeting. If your shares are held in “street name” through a broker, bank or nominee, you may provide voting instructions through your broker, bank or nominee by completing and returning the voting instruction form provided by your broker, bank or nominee, or electronically over the Internet or by telephone through your broker, bank or nominee if such a service is provided. To provide voting instructions over the Internet or by telephone through your broker, bank or nominee, you should follow the instructions on the voting instruction form provided by your broker, bank or nominee.
On behalf of the board of directors and management of Hanger, I extend our appreciation for your continued support and your consideration of this matter.
Sincerely,
[MISSING IMAGE: sg_christopherbegley-bw.jpg]
Christopher Begley
Chairman of the Board
Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document or the accompanying proxy statement, including the Merger, passed upon the merits or fairness of such transactions or passed upon the adequacy or accuracy of the disclosure in the accompanying proxy statement. Any representation to the contrary is a criminal offense.
This proxy statement is dated August 26, 2022, and was first mailed to stockholders of Hanger on or about August 26, 2022.
 

 
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON September 30, 2022
Notice is hereby given that a special meeting of stockholders of Hanger, Inc., a Delaware corporation (“Hanger,” the “Company,” “we” or “us”), will be held on September 30, 2022 at 10:00 A.M., local time, at The Westin Austin at The Domain, 11301 Domain Drive, Austin, Texas 78758, for the following purposes:
1.
The Merger Proposal.   To adopt and approve the Agreement and Plan of Merger, dated July 21, 2022 (as it may be amended or restated from time to time, the “Merger Agreement”), by and among Hero Parent, Inc., a Delaware corporation (“Parent”), Hero Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Hanger, and the transactions contemplated thereby, including the Merger (as defined below). Parent and Merger Sub are indirect subsidiaries of funds managed and advised by Patient Square Capital, LP. Pursuant to the terms of the Merger Agreement, and upon the satisfaction or waiver of the conditions to closing set forth therein, Parent will acquire Hanger in a cash merger with Merger Sub merging with and into Hanger (the “Merger”) and Hanger surviving the Merger as a wholly owned subsidiary of Parent. A copy of the Merger Agreement is attached as Appendix A to the accompanying proxy statement and is incorporated by reference therein;
2.
The Adjournment Proposal.   To approve the adjournment of the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger, at the time of the special meeting; and
3.
The Compensation Proposal.   To approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger.
Only stockholders of record as of the close of business on August 24, 2022 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournment or postponement thereof.
The accompanying proxy statement contains, among other things, detailed information about the Merger Proposal, the Adjournment Proposal and the Compensation Proposal. We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in their entirety.
The affirmative vote of the holders of a majority of the shares of Hanger common stock outstanding and entitled to vote on the matter as of the record date is required to approve the Merger Proposal. The affirmative vote of the holders of a majority of the shares of Hanger common stock represented in person or by proxy at the special meeting and entitled to vote thereon is required to approve both the Adjournment Proposal and the Compensation Proposal.
Your vote is very important, regardless of the number of shares of Hanger common stock that you own.    The failure of any stockholder of record to vote via telephone, Internet, in person by ballot at the special meeting or to submit a signed proxy card will have the same effect as a vote “AGAINST” the Merger Proposal. If you hold your shares in “street name,” you should instruct your broker, bank or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank or nominee. The failure to do so will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal. Abstentions will have the same effect as a vote “AGAINST” each of the Merger Proposal, the Adjournment Proposal and the Compensation Proposal.
The presence at the special meeting, in person or by proxy, of the holders of record of a majority in voting power of the shares of outstanding Hanger common stock entitled to vote at the special meeting will constitute a quorum for the transaction of business at the special meeting. Abstentions will be counted as
 

 
present for purposes of determining the existence of a quorum. Shares held in “street name” for which the applicable broker, bank or nominee receives no instructions regarding how to vote on any of the proposals before the special meeting will not be counted as present at the special meeting for quorum purposes.
Stockholders who do not vote in favor of and do not otherwise consent in writing to the Merger Proposal and who otherwise meet the requirements of Section 262 of the General Corporation Law of the State of Delaware, as amended (the “DGCL”), will have the right to seek appraisal of the fair value of their shares of Hanger common stock, as determined in accordance with Section 262 of the DGCL. In addition to not voting in favor of and not otherwise consenting in writing to the Merger Proposal, any stockholder wishing to exercise its appraisal rights must deliver a written demand for appraisal to Hanger before the vote on the Merger Proposal and must comply in all respects with the requirements of Section 262 of the DGCL, the text of which is attached as Appendix B to the accompanying proxy statement and is incorporated by reference therein.
Our board of directors unanimously recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
By Order of the Board of Directors,
[MISSING IMAGE: sg_thomashartman-bw.jpg]
Thomas E. Hartman
Senior Vice President, General Counsel & Secretary
Austin, Texas
August 26, 2022
 

 
YOUR VOTE IS IMPORTANT
Ensure that your shares of Hanger common stock are voted at the special meeting by submitting your proxy card by mail, vote via telephone or Internet or, if your shares of Hanger common stock are held in “street name” through a broker, bank or nominee, by instructing your broker, bank or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank or nominee, as promptly as possible. If you fail to submit a proxy, vote in person at the special meeting or instruct your broker, bank or nominee how to vote your shares, it will have the same effect as voting “AGAINST” the Merger Proposal but will have no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal.
If your shares of Hanger common stock are registered directly in your name:   You are a stockholder of record and you may submit a proxy to vote your shares of Hanger common stock by mail, telephone or Internet. Please follow the instructions on the enclosed form of proxy.
If your shares of Hanger common stock are held in the name of a broker, bank or nominee:   You will receive voting instructions from the organization holding your account and you must follow those instructions to vote your shares of Hanger common stock. As a beneficial owner, you have the right to direct your broker, bank or nominee on how to vote the shares of Hanger common stock in your account. Your broker, bank or nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions.
If you are a stockholder of record and you fail to submit a signed proxy card, vote via telephone or Internet, or attend the special meeting and vote in person by ballot, or if you hold your shares through a bank, broker or nominee and you fail to provide voting instructions to your bank, broker or nominee, then your shares of Hanger common stock will not be counted for purposes of determining whether a quorum is present at the special meeting. A stockholder providing a proxy may revoke it at any time before 11:59 p.m., Eastern Time, the day before the special meeting if such revocation is exercised by providing written notice of revocation to our Secretary, by voting in person at the special meeting or by providing a proxy of a later date, pursuant to the instructions set forth in “The Special Meeting — Revocability of Proxies” on page 25 of the accompanying proxy statement. Attendance at the special meeting alone will not revoke a submitted proxy.
We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in their entirety. If you have any questions concerning the Merger, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Hanger common stock, please contact our proxy solicitor:
[MISSING IMAGE: lg_mackenziepartners-bw.jpg]
1407 Broadway, 27th Floor
New York, NY 10018
proxy@mackenziepartners.com
(212) 929-5500
Toll-Free: (800) 322-2885
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE VOTE VIA TELEPHONE OR INTERNET OR COMPLETE, DATE, SIGN AND RETURN A PROXY CARD OR VOTING INSTRUCTION FORM FURNISHED BY YOUR BROKER, BANK OR NOMINEE, AS PROMPTLY AS POSSIBLE.
 

 
TABLE OF CONTENTS
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APPENDICES
A-1
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SUMMARY
This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you as a holder of Hanger common stock or that you should consider before voting on the Merger Proposal. To better understand the Merger Proposal, you should read this proxy statement, including its appendices and the documents incorporated by reference herein, carefully and in their entirety. You may obtain the documents and information incorporated by reference into this proxy statement without charge by following the instructions under “Where You Can Find More Information” on page 106 of this proxy statement. The Merger Agreement is attached as Appendix A to this proxy statement and is incorporated by reference herein. You should read the Merger Agreement, carefully and in its entirety, as it is the legal document that governs the Merger.
Parties Involved in the Merger (page 30)
Hanger, Inc.
10910 Domain Drive, Suite 300
Austin, Texas 78758
(512) 777-3800
corporate.hanger.com
Hanger, a Delaware corporation, is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries, and we and our predecessor companies have provided orthotic and prosthetic (“O&P”) services for nearly 160 years. We provide O&P services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings.
We operate through two segments — Patient Care and Products & Services. Our Patient Care segment is primarily comprised of Hanger Clinic, which specializes in comprehensive, outcomes-based design, fabrication, and delivery of custom O&P devices through 760 patient care clinics and 115 satellite locations in 47 states and the District of Columbia, as of December 31, 2021. We also provide payor network contracting services to other O&P providers through this segment.
Our Products & Services segment is comprised of our distribution services and therapeutic solutions businesses. As a leading provider of O&P products in the United States, we engage in the distribution of a broad catalog of branded and private label O&P devices, products, and components to independent O&P providers nationwide. The other business in our Products & Services segment is our therapeutic solutions business, which develops specialized rehabilitation technologies and provides evidence-based clinical programs for post-acute rehabilitation to patients at approximately 4,000 skilled nursing and post-acute providers nationwide
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “HNGR.”
Our principal executive offices are located at 10910 Domain Drive, Suite 300, Austin, Texas 78758, and our telephone number is (512) 777-3800. For more information about Hanger, please visit our website, corporate.hanger.com. Our website address is provided as an inactive textual reference only. The information contained on (or accessible through) our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the Securities and Exchange Commission (the “SEC”). See “Where You Can Find More Information” on page 106 of this proxy statement.
Hero Parent, Inc.
c/o Patient Square Capital, LP
2884 Sand Hill Road, Suite 100
Menlo Park, California 94025
(650) 677-8000
Parent is a Delaware corporation that was formed by affiliates of Patient Square Capital, LP (“Patient Square”) solely for the purpose of entering into the Merger Agreement and, subject to the terms and conditions thereof, completing the transactions contemplated thereby and the related financing transactions.
 
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Hero Merger Sub, Inc.
c/o Patient Square Capital, LP
2884 Sand Hill Road, Suite 100
Menlo Park, California 94025
(650) 677-8000
Merger Sub is a Delaware corporation that was formed by Parent solely for the purpose of entering into the Merger Agreement and, subject to the terms and conditions thereof, completing the transactions contemplated thereby and the related financing transactions. Upon consummation of the Merger, Merger Sub will cease to exist, and Hanger will continue as the surviving corporation and as a wholly owned subsidiary of Parent.
The Special Meeting (page 23)
Date, Time and Place
A special meeting of our stockholders will be held on September 30, 2022 at 10:00 A.M., local time, at The Westin Austin at The Domain, 11301 Domain Drive, Austin, Texas 78758.
Record Date; Shares Entitled to Vote
You are entitled to vote at the special meeting if you owned shares of Hanger common stock at the close of business on August 24, 2022 (the “Record Date”). You will have one vote at the special meeting for each share of Hanger common stock you owned at the close of business on the Record Date.
Purpose
At the special meeting, we will ask our stockholders of record as of the Record Date to vote on the following proposals:
(i)
to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger (the “Merger Proposal”);
(ii)
to approve the adjournment of the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger, at the time of the special meeting (the “Adjournment Proposal”); and
(iii)
to approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger (the “Compensation Proposal”).
Quorum
As of the Record Date, there were 39,123,266 shares of Hanger common stock outstanding and entitled to be voted at the special meeting. A quorum of stockholders is necessary to hold a special meeting. The holders of record of a majority in voting power of the shares of outstanding Hanger common stock entitled to vote at the special meeting, present in person or represented by proxy, will constitute a quorum at the special meeting. As a result, 19,561,634 shares of Hanger common stock must be represented by proxy or by stockholders present and entitled to vote at the special meeting to have a quorum. Abstentions will be counted as present for purposes of determining the existence of a quorum. Shares held in “street name” for which the applicable broker, bank or nominee receives no instructions regarding how to vote on any of the proposals before the special meeting will not be counted as present at the special meeting for quorum purposes. Failure of a quorum to be represented at the special meeting may result in an adjournment of the special meeting and may subject us to additional expense.
Required Vote
Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the shares of Hanger common stock outstanding and entitled to vote on the matter as of the Record Date (the
 
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Company Stockholder Approval”). Approval of both the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of the holders of a majority of the shares of Hanger common stock represented in person or by proxy at the special meeting and entitled to vote thereon.
Stock Ownership of Our Directors and Executive Officers
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote an aggregate of 1,528,572 shares of Hanger common stock (excluding any shares that would be delivered upon the vesting, exercise or conversion, as applicable, of Company Options, Company RSUs or Company PRSUs), representing approximately 3.9% of the outstanding shares of Hanger common stock.
Our directors and executive officers have informed us that they currently intend to vote all of their shares of Hanger common stock: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Voting
Any Hanger stockholder of record entitled to vote at the special meeting may submit a proxy by returning a signed proxy card by mail, voting via telephone or Internet, or may attend the special meeting and vote in person. If you are a beneficial owner and hold your shares of Hanger common stock in “street name” through a broker, bank or nominee, you should instruct your broker, bank or nominee on how you wish to vote your shares of Hanger common stock using the instructions provided by your broker, bank or nominee. Under applicable stock exchange rules, brokers, banks or nominees have the discretion to vote your shares on certain “routine” matters if you fail to instruct your broker, bank or nominee on how to vote your shares with respect to such matters. The proposals in this proxy statement are non-routine matters, and brokers, banks and nominees therefore cannot vote on these proposals without your instructions. Therefore, it is important that you instruct your broker, bank or nominee on how you wish to vote your shares of Hanger common stock.
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by signing another proxy card with a later date and returning it to us or voting via telephone or Internet before 11:59 p.m., Eastern Time, the day before the special meeting, by providing written notice of revocation to Thomas E. Hartman, our Senior Vice President, General Counsel and Secretary, before your proxy is exercised or by attending the special meeting and voting in person pursuant to the instructions set forth in “The Special Meeting — Revocability of Proxies” on page 25 of this proxy statement. If you hold your shares of common stock in “street name,” you should contact your broker, bank or nominee for instructions regarding how to change your vote.
The failure of any stockholder of record to submit a signed proxy card, vote via telephone or Internet or vote in person by ballot at the special meeting will have the same effect as a vote “AGAINST” the Merger Proposal. If you hold your shares of Hanger common stock in “street name,” the failure to instruct your broker, bank or nominee on how to vote your shares on any of the proposals will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal. A “broker non-vote” results when banks, brokers and nominees return a valid proxy voting upon a matter or matters for which the applicable stock exchange rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the proposal and have not received specific voting instructions from the beneficial owner of such shares. Under applicable stock exchange rules, brokers, banks or nominees have the discretion to vote your shares on certain “routine” matters if you fail to instruct your broker, bank or nominee on how to vote your shares with respect to such matters. Hanger does not expect any broker non-votes at the special meeting as the proposals in this proxy statement are non-routine matters. Broker non-votes will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal. Abstentions will have the same effect as a vote “AGAINST” each of the Merger Proposal, the Adjournment Proposal and the Compensation Proposal.
 
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Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this proxy statement, including the Merger, passed upon the merits or fairness of such transactions, or passed upon the adequacy or accuracy of the disclosure in this proxy statement. Any representation to the contrary is a criminal offense.
Expenses of Proxy Solicitation (page 25)
Our board of directors (the “Board”) is soliciting your proxy, and Hanger will bear the cost of soliciting proxies. We have engaged the services of MacKenzie Partners, Inc. (“MacKenzie”) to solicit proxies for the special meeting. In connection with its retention, MacKenzie has agreed to provide consulting, analytic and proxy solicitation services in connection with the special meeting. We have agreed to pay MacKenzie a fee of approximately $20,000, plus reasonable out-of-pocket expenses for its services, and we will indemnify MacKenzie for certain losses arising out of its proxy solicitation services. In addition to the solicitation of proxies by mail, proxies may be solicited by our directors, officers and employees, or representatives of MacKenzie, in person or by telephone, email, fax, over the Internet or other means of communication, and we may pay persons holding shares of Hanger common stock on behalf of others their expenses for sending proxy materials to their principals. No additional compensation will be paid to our directors, officers or employees for their services in connection with solicitation of proxies.
Certain Effects of the Merger on Hanger (page 31)
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Hanger, with Hanger continuing as the surviving corporation and as a wholly owned subsidiary of Parent. As a result of the Merger, Hanger will cease to be a publicly traded company and will cease to be listed on the NYSE and its shares will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation and instead will only be entitled to receive the Merger Consideration described in “The Merger — Merger Consideration” on page 31 of this proxy statement (unless you are entitled to and have properly demanded appraisal for your shares in accordance with, and have complied in all respects with, Section 262 of the DGCL, in which case you will be entitled only to those rights granted under Section 262 of the DGCL as described in “The Merger — Appraisal Rights” on page 63 of this proxy statement and Appendix B to this proxy statement).
The effective time of the Merger (the “Effective Time”) will occur upon the filing of the certificate of merger with the Secretary of State of the State of Delaware, or at such later date and time as we, Parent and Merger Sub may agree and specify in the certificate of merger.
Effect on Hanger if the Merger is Not Completed (page 31)
If the Merger Proposal is not approved by the stockholders of Hanger or if the Merger is not completed for any other reason, you will not receive any payment for your shares of Hanger common stock. Instead, we will remain a public company, Hanger common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will continue to be obligated to file periodic reports with the SEC. Under specified circumstances, we may be required to pay Parent a termination fee, or may be entitled to receive a reverse termination fee from Parent, upon the termination of the Merger Agreement, as described in “The Merger Agreement — Termination Fees” on page 97 of this proxy statement.
Merger Consideration (page 75)
At the Effective Time, each share of Hanger common stock issued and outstanding (other than (i) shares held by Hanger as treasury stock or held directly by Parent or Merger Sub or any direct or indirect wholly owned subsidiary of Hanger, Parent or Merger Sub and (ii) shares of Hanger common stock held by stockholders who have not voted in favor of the adoption and approval of the Merger Agreement, including the Merger, or consented thereto in writing and who have properly exercised and validly perfected appraisal rights for such shares in accordance with, and who have complied with, Section 262 of the DGCL (the “Dissenting Shares”)) will be converted automatically into the right to receive $18.75 per share in cash, without interest, subject to any withholding of taxes required by applicable law (the “Merger Consideration”). All shares of Hanger common stock converted into the right to receive the Merger
 
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Consideration will automatically be cancelled and cease to exist as of the Effective Time, and will thereafter represent only the right to receive the Merger Consideration.
As described further in “The Merger Agreement — Exchange and Payment Procedures” on page 76 of this proxy statement, at or prior to the Effective Time, Parent will appoint a nationally recognized bank or trust company, reasonably acceptable to Hanger, to act as the paying agent to make payments of the Merger Consideration to Hanger stockholders (the “Paying Agent”) and deposit, or cause to be deposited, with the Paying Agent cash sufficient to pay the aggregate Merger Consideration. Following the completion of the Merger, holders of record of shares of Hanger common stock formerly represented by one or more stock certificates will provide the Paying Agent with such stockholder’s stock certificates and other items specified by the Paying Agent, including a letter of transmittal, and the Paying Agent will promptly pay the stockholder the Merger Consideration to which such stockholder is entitled. Stockholders who hold shares of Hanger common stock in book-entry form (other than shares held through the Depository Trust Company) will not be required to deliver stock certificates to the Paying Agent, but will be required to deliver an executed letter of transmittal and other items specified by the Paying Agent to the Paying Agent to receive the Merger Consideration to which they are entitled. Holders of shares of Hanger common stock in book-entry form who hold such shares through The Depository Trust Company will not be required to deliver an executed letter of transmittal to the Paying Agent to receive the Merger Consideration to which they are entitled.
After the completion of the Merger, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a Hanger stockholder (except that stockholders who hold Dissenting Shares will not have the right to receive the Merger Consideration but will instead have the right to receive a payment for the “fair value” of their Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law, as described in “The Merger — Appraisal Rights” on page 63 of this proxy statement and Appendix B to this proxy statement).
Treatment of Equity and Equity-Based Awards (page 54)
The Merger Agreement provides, at the Effective Time, by virtue of the Merger, and without any action on the part of Parent, Merger Sub, Hanger or any holder of securities of Hanger, for the following treatment with respect to equity and equity-based awards relating to Hanger common stock:
Stock Options
Each option to purchase shares of Hanger common stock (each, a “Company Option”), whether vested or unvested, that is outstanding immediately prior to the Effective Time will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to the product of (x) the total number of shares of Hanger common stock underlying the Company Option multiplied by (y) the excess, if any, of the Merger Consideration over the exercise price of such Company Option (less any taxes required to be withheld under applicable law). If the exercise price of a Company Option is equal to or greater than the Merger Consideration, then such Company Option will be cancelled for no consideration.
Restricted Stock Units and Performance-Based Restricted Stock Units
Each outstanding award of (i) Hanger restricted stock units, deferred restricted stock units or performance-based restricted stock units, in each case that at such time is subject solely to service-based vesting conditions (collectively, the “Company RSUs”), will become fully vested and will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to (x) the total number of shares of Hanger common stock underlying such award of Company RSUs, multiplied by (y) the Merger Consideration, and (ii) Hanger performance-based restricted stock units that at such time is subject to performance-based vesting conditions (collectively, the “Company PRSUs”) will become vested as to the number of shares of Hanger common stock subject to such award that would vest based on target level achievement of all performance targets (without application of any modifier) and will, after giving effect to such vesting, automatically and without any required action on the part of the holder thereof or Hanger, be cancelled and converted into the right to receive (without interest)
 
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an amount in cash (less any applicable withholding taxes) equal to (x) the number of vested shares of Hanger common stock underlying such award of Company PRSUs, multiplied by (y) the Merger Consideration, and the unvested portion of such Company PRSUs will be cancelled for no consideration.
Recommendation of Our Board of Directors and Reasons for the Merger (page 40)
The Board, after consulting with its financial advisor and outside legal counsel and carefully reviewing and considering various factors described in “The Merger — Recommendation of Our Board of Directors and Reasons for the Merger” on page 40 of this proxy statement, unanimously (i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger (the “Company Board Recommendation”).
The Board unanimously recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Fairness Opinion of BofA Securities, Inc. (page 45)
In connection with the Merger, BofA Securities, Inc. (“BofA Securities”), Hanger’s financial advisor, delivered to the Board a written opinion, dated July 21, 2022, as to the fairness, from a financial point of view and as of the date of the opinion, of the Merger Consideration to be received by holders of Hanger common stock (other than Dissenting Shares). The full text of the written opinion, dated July 21, 2022, of BofA Securities, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Appendix C to this proxy statement and is incorporated by reference herein in its entirety. BofA Securities provided its opinion to the Board (in its capacity as such) for the benefit and use of the Board in connection with and for purposes of its evaluation of the Merger Consideration from a financial point of view. BofA Securities’ opinion does not address any other aspect of the Merger and no opinion or view was expressed as to the relative merits of the Merger in comparison to other strategies or transactions that might be available to Hanger or in which Hanger might engage or as to the underlying business decision of Hanger to proceed with or effect the Merger. BofA Securities’ opinion does not address any other aspect of the Merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed Merger or any other matter.
Interests of the Directors and Executive Officers of Hanger in the Merger (page 54)
When considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted and approved by the stockholders of Hanger. These interests include the following:

Executive Severance Agreements with Hanger.   We have entered into severance agreements with each of our executive officers which include severance benefits that, upon our termination of the executive officer’s employment without “cause” or, by each executive officer other than Ms. Adams, for “good reason”, provide for (i) certain severance payments and (ii) certain reimbursement for COBRA coverage and other employee benefits, as described in “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Severance and Other Termination Benefits” on page 55 of this proxy statement;

Accelerated Equity Award Vesting.   Certain of our directors and executive officers hold equity awards, the treatment of which is described in “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Treatment of Equity and Equity-Based Awards” on page 54 of this proxy statement;
 
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Transaction Bonus Pool.   Hanger has approved an award pool of $350,000 to be paid in the form of cash bonuses to certain employees, with individual amounts to be determined by Hanger prior to the closing of the Merger, as described in “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Transaction Bonus Pool” on page 57 of this proxy statement;

Indemnification Rights.   Our directors and executive officers are entitled to continued indemnification pursuant to the Merger Agreement and our organizational documents, as well as directors’ and officers’ liability insurance to be maintained by the surviving corporation; and

Compensation Arrangements with Parent.   Parent held introductory discussions with certain members of Hanger’s management team in which Parent indicated that (i) it intends to provide for an equity pool of up to approximately 12% of the equity of Parent or one or more of its affiliates for the granting of new equity awards to Hanger employees after the closing of the Merger and (ii) it expects members of Hanger’s management team to use a portion of the proceeds they receive from the Merger to purchase equity of Parent or one or more of its affiliates, on customary terms, each as described in “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Compensation Arrangements with Parent” on page 60 of this proxy statement.
If the Merger Proposal is approved by our stockholders and the Merger is completed, any vested shares of Hanger common stock held by our directors and executive officers will be treated in the same manner as outstanding shares of Hanger common stock held by all other stockholders entitled to receive the Merger Consideration.
These interests are discussed in more detail in “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger” on page 54 of this proxy statement.
Financing of the Merger (page 60)
We anticipate that the total funds needed to complete the Merger, including the funds needed to pay Hanger stockholders and holders of other equity-based interests the amounts due to them under the Merger Agreement, will be approximately $1.25 billion based upon (i) the consideration payable under the Merger Agreement, (ii) the repayment and termination of Hanger’s existing credit agreement and (iii) fees, commissions and expenses in connection with the foregoing, which will be funded through a combination of the following:

a debt financing in an aggregate principal amount of up to approximately $945 million (the “Debt Financing” and the commitments therefor, the “Debt Financing Commitments”), consisting of (i) senior secured credit facilities in an aggregate principal amount of up to $685 million (comprised of an initial $550 million first lien term loan facility, a $35 million delayed draw first lien term loan facility and a $100 million super senior secured revolving credit facility) and (ii) a senior secured second lien term loan facility in an aggregate principal amount of $260 million (comprised of an initial $245 million second lien term loan facility and a $15 million delayed draw second lien term loan facility), as set forth in the debt commitment letter related thereto (the “Debt Commitment Letter”); and

a cash equity investment by Patient Square Equity Partners, LP, a Delaware limited partnership (“Patient Square Equity”), in an aggregate amount of $410 million (the “Equity Financing” and the commitments therefor, the “Equity Financing Commitment”), as set forth in the equity commitment letter related thereto (the “Equity Commitment Letter” and, together with the Debt Commitment Letter, the “Commitment Letters”).
The funding of the Debt Financing and the Equity Financing (collectively, the “Financing”) is subject to the satisfaction of the conditions set forth in the Debt Commitment Letter and the Equity Commitment Letter under which the Debt Financing and the Equity Financing will be provided, respectively. The obligation of the parties to complete the Merger is not subject to a financing condition. However, the failure of Parent to obtain the Financing (or to secure alternative financing) would likely result in the failure of the Merger to be completed. If Hanger terminates the Merger Agreement due to Parent’s failure to complete the Merger when the closing conditions have been satisfied, subject to the requirements described in the Merger Agreement, Parent would be obligated to pay to Hanger a $45 million reverse termination fee. See
 
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the section entitled “The Merger — Financing of the Merger” on page 60 of this proxy statement. For a description of the circumstances in which the reverse termination fee would be paid to Hanger, see the section entitled “The Merger Agreement — Termination Fees” on page 97 of this proxy statement.
Limited Guaranty (page 62)
To induce Hanger to enter into the Merger Agreement, Patient Square Equity entered into a limited guaranty in favor of Hanger pursuant to which Patient Square Equity absolutely and irrevocably guaranteed to Hanger, on the terms and conditions set forth in the limited guaranty, the due, prompt and faithful payment of (i) the reverse termination fee payable by Parent to Hanger, if and when due in accordance with the Merger Agreement, (ii) if Parent fails to timely pay the reverse termination fee to Hanger, the obligation to reimburse Hanger for all reasonable and documented out-of-pocket expenses incurred in the collection of the reverse termination fee up to $1,000,000 in the aggregate and interest on such unpaid reverse termination fee, (iii) subject to the limitations set forth in the Merger Agreement, any monetary damages awarded to Hanger pursuant to a final and non-appealable order by a court of competent jurisdiction in respect of any Willful and Material Breach (as defined in “The Merger Agreement — Termination of the Merger Agreement” on page 95 of this proxy statement) by Parent or Merger Sub of the Merger Agreement, and (iv) any reimbursement and/or indemnification obligations of Parent to Hanger and its subsidiaries and each of their respective directors, officers and other representatives that may arise pursuant to the Merger Agreement with respect to the Debt Financing (collectively, the “Guaranteed Obligations”); provided, that the maximum amount payable by Patient Square Equity under the limited guaranty may not exceed $50 million.
Transaction Litigation (page 63)
Following the announcement of the Merger on July 21, 2022, two substantially similar actions have been filed by purported Hanger stockholders against Hanger and our board of directors, and Hanger has received one demand letter. On August 9, 2022, a lawsuit styled Stein v. Hanger, Inc. et al., Civil Action No. 22-cv-6775 was filed in the United States District Court for the Southern District of New York. On August 17, 2022, a lawsuit styled Singh v. Hanger, Inc. et al., Civil Action No. 22-cv-07023 was filed in the United States District Court for the Southern District of New York. The complaints and demand letter assert similar claims against Hanger and our board of directors under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act. The complaints and demand letter allege, among other things, that the preliminary proxy statement filed August 5, 2022 with the SEC misstated or omitted material information regarding the financial projections, the financial analyses performed by Hanger’s financial advisor, potential conflicts of interest of our board of directors and management and the sales process leading up to the Merger. The complaints seek to enjoin the Merger unless and until the alleged omitted material information is disclosed, rescission of the Merger Agreement and/or rescissory damages, compensatory damages, attorneys’ fees and other litigation costs. Hanger believes the lawsuits and the demand letter are without merit and intends to vigorously defend against them. Additional lawsuits and demand letters arising out of or relating to the Merger Agreement or the Merger may be filed or made in the future, which could prevent or delay completion of the Merger and result in additional costs to the Company. If additional similar complaints or demands are filed or made, absent new or different allegations that are material, the Company will not necessarily announce them.
Appraisal Rights (page 63)
If the Merger is approved by our stockholders and becomes effective, holders of Dissenting Shares will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed to assert such rights and obtain payment of the fair value of such Dissenting
 
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Shares, see Section 262 of the DGCL, which is attached as Appendix B to this proxy statement, as well as the information set forth below.
TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO HANGER BEFORE THE VOTE IS TAKEN ON THE MERGER PROPOSAL AT THE SPECIAL MEETING, MUST NOT VOTE, IN PERSON OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL, MUST CONTINUE TO HOLD YOUR SHARES OF HANGER COMMON STOCK OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME AND MUST COMPLY WITH THE OTHER REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST, OR ABSTAINING FROM VOTING OR FAILING TO VOTE WITH RESPECT TO, THE MERGER PROPOSAL WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE MERGER PROPOSAL, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES OF HANGER COMMON STOCK AGAINST, OR ABSTAIN WITH RESPECT TO, THE MERGER PROPOSAL. NEITHER VOTING AGAINST THE MERGER PROPOSAL, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE MERGER PROPOSAL. IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK THROUGH A BANK, BROKERAGE FIRM OR NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKERAGE FIRM OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BANK, BROKERAGE FIRM OR NOMINEE. IF YOU HAVE A BENEFICIAL INTEREST IN SHARES OF HANGER COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A NOMINEE OR INTERMEDIARY, YOU MUST ACT PROMPTLY TO CAUSE THE HOLDER OF RECORD TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO DEMAND YOUR APPRAISAL RIGHTS. IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK THROUGH A BANK OR BROKERAGE FIRM WHO IN TURN HOLDS THE SHARES THROUGH A CENTRAL SECURITIES DEPOSITORY NOMINEE, SUCH AS THE DEPOSITORY TRUST COMPANY, A DEMAND FOR APPRAISAL OF SUCH SHARES MUST BE MADE BY OR ON BEHALF OF THE DEPOSITORY NOMINEE AND MUST IDENTIFY THE DEPOSITORY NOMINEE AS THE HOLDER OF RECORD. IN VIEW OF THE COMPLEXITY OF SECTION 262 OF THE DGCL, STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.
U.S. Federal Income Tax Consequences of the Merger (page 69)
The receipt of cash in exchange for shares of Hanger common stock pursuant to the Merger will generally be a taxable transaction for U.S. federal income tax purposes. The receipt of cash by a U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger — Tax Consequences to U.S. Holders” on page 70 of this proxy statement) in exchange for such U.S. holder’s shares of Hanger common stock in the Merger will generally result in the recognition of taxable gain or loss in an amount equal to the difference, if any, between the cash such U.S. holder receives in the Merger (including any cash required to be withheld for tax purposes) and such U.S. holder’s adjusted basis in such surrendered shares. Gain or loss will be determined separately for each block of shares of Hanger common stock (that is, shares acquired for the same cost in a single transaction). A non-U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger — Tax Consequences to Non-U.S. Holders” on page 71 of this proxy statement) will generally not be subject to U.S. federal income tax with respect to the exchange of Hanger common stock for cash in the Merger unless such non-U.S. holder has certain connections to the United States or Hanger is, or was during the relevant period, a U.S. real property holding corporation. Stockholders should refer to “The Merger — U.S. Federal Income Tax Consequences of the Merger” on page 69
 
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of this proxy statement, and consult their tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Regulatory Approvals Required for the Merger (page 72)
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated. In addition, the Merger cannot be completed until the applicable waiting period under Washington Revised Code 19.390.010, et. seq., a statute pertaining to certain health care transactions in the State of Washington, has expired. Hanger and Parent agreed to make the required filings as promptly as practicable after the date of the Merger Agreement. Hanger and Parent filed their respective pre-merger HSR Act notifications on August 2, 2022 with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “DOJ”) under the HSR Act. Hanger submitted its HSR Act notification form to the Washington Attorney General on August 2, 2022.
Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement.
No Solicitation of Other Offers; Change of Board Recommendation (page 83)
Except as expressly permitted by the Merger Agreement, we have agreed that we will, and will cause our subsidiaries and instruct our representatives to, cease and cause to be terminated any discussions or negotiations with any third party relating to any Acquisition Proposal (as defined in “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement), request the prompt return or destruction of all non-public information concerning Hanger and its subsidiaries and cease providing any further information with respect to Hanger and its subsidiaries or any Acquisition Proposal to any such third party or its representatives.
Under the Merger Agreement, subject to certain exceptions, we have agreed that we will not, and will cause our subsidiaries and instruct our representatives not to, directly or indirectly:

solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to an Acquisition Proposal;

furnish to any third party any non-public information relating to Hanger and its subsidiaries or afford to any third party access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Hanger or its subsidiaries, in any such case with the intent to induce, or that could reasonably be expected to result in, the making, submission or announcement of, or to knowingly encourage, facilitate or assist, an Acquisition Proposal or any inquiries or the making of any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; or

participate or engage in any discussions or negotiations with any third party with respect to an Acquisition Proposal.
Except as expressly permitted by the Merger Agreement, as described below, neither the Board nor any committee thereof will:

approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal;

withdraw, change or qualify, in a manner adverse to Parent or Merger Sub, the Company Board Recommendation;

approve or cause Hanger to enter into any merger agreement, letter of intent or other similar agreement relating to any Acquisition Proposal;
 
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fail to include the Company Board Recommendation in this proxy statement; or

resolve or agree to do any of the foregoing.
We refer to any event in the foregoing first, second, fourth or fifth bullets (to the extent related to one of the first two bullets) as a “Change of Board Recommendation.”
If, prior to the receipt of the Company Stockholder Approval, we receive a bona fide written Acquisition Proposal from a third party (other than as a result of a breach of the “no solicitation” provisions of the Merger Agreement) that the Board (or any duly authorized committee thereof) determines in good faith (after consultation with and advice from its financial advisors and outside counsel) constitutes or could reasonably be expected to lead to a Superior Proposal (as defined in “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement), Hanger may subject to the entry into, and solely in accordance with, a confidentiality agreement that contains confidentiality provisions that are no less favorable in the aggregate to Hanger than its confidentiality agreement with Patient Square, furnish to such third party and its representatives any non-public information relating to Hanger or its subsidiaries or afford to such third party and its representatives access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Hanger or its subsidiaries and participate or engage in discussions or negotiations with such third party and its representatives and otherwise facilitate or assist such third party and its representatives making such Acquisition Proposal. Hanger must provide to Parent and Merger Sub any non-public information that is provided to any third party and its representatives given such access that was not previously made available to Parent or Merger Sub as promptly as reasonably practicable after it is provided or made available to such third party.
The Board may effect a Change of Board Recommendation with respect to such Superior Proposal and/or terminate the Merger Agreement in accordance with its terms, only if it has provided Parent at least five days’ prior written notice of Hanger’s intention to take such action and (i) during the five days, if requested by Parent, Hanger has engaged in good faith negotiations regarding any amendment to the Merger Agreement and (ii) the Board will have considered in good faith any adjustments and/or proposed amendments to the Merger Agreement and will have determined in good faith that the Superior Proposal would continue to constitute a Superior Proposal if the proposed amendments to the Merger Agreement were to be given effect (as described in “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement). The Board (or any duly authorized committee thereof) will not be permitted to terminate the Merger Agreement for a Superior Proposal unless Hanger pays the termination fee described in “The Merger Agreement — Termination Fees” on page 97 of this proxy statement.
At any time prior to receipt of the Company Stockholder Approval, the Board may effect a Change of Board Recommendation if the Board (or a duly authorized committee thereof) determines, in good faith, after consultation with outside counsel, that an Intervening Event (as defined in “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement) has occurred and is continuing, and that the failure to effect a Change of Board Recommendation in response to such Intervening Event would be reasonably likely to be inconsistent with its fiduciary duties under applicable law, subject to compliance with certain notice and other requirements as set forth in the Merger Agreement (see “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement).
For a further discussion of the limitations on solicitation of Acquisition Proposals from third parties and the Board’s ability to make a Change of Board Recommendation with respect to the Merger Proposal, see “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation” on page 83 of this proxy statement.
Conditions to the Closing of the Merger (page 93)
The parties expect to complete the Merger in the fourth quarter of 2022. However, it is possible that factors outside of each party’s control could require them to complete the Merger at a later time or not to complete it at all. The following are some of the conditions that must be satisfied or, where permitted by law, waived before the Merger may be completed:
 
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the Company Stockholder Approval having been obtained;

the consummation of the Merger not being restrained, enjoined or prohibited by any law or order (whether temporary, preliminary or permanent) of a court of competent jurisdiction or any other governmental entity;

any applicable waiting period under the HSR Act, together with any extensions thereof as well as any timing agreements made with the FTC or the DOJ having the purpose or effect of committing a party not to close any of the transactions contemplated by the Merger Agreement (the “Transactions”) before a certain date or event, having expired or been terminated;

the waiting period under the Washington Revised Code 19.390.010 et. seq., a statute pertaining to certain health care transactions in the State of Washington, having expired;

the accuracy of the representations and warranties of Hanger, on the one hand, and Parent and Merger Sub, on the other hand, in the Merger Agreement, subject in some instances to materiality or “material adverse effect” qualifiers, at and as of the effective date of the Merger (except for representations and warranties that relate to a specific date or time);

the performance or compliance in all material respects by Hanger, on the one hand, and Parent and Merger Sub, on the other hand, of or with their respective covenants and agreements required to be performed or complied with by them under the Merger Agreement on or before the closing date of the Merger; and

a Company Material Adverse Effect (as defined in “The Merger Agreement — Representations and Warranties” on page 77 of this proxy statement) not having occurred and be continuing.
Termination of the Merger Agreement (page 95)
The Merger Agreement may be terminated at any time prior to the Effective Time, or such earlier time specified below, in the following ways (subject to certain limitations and exceptions):

By mutual written consent of Hanger and Parent.

By either Parent or Hanger:

if the Company Stockholder Approval is not obtained upon a vote taken at the special meeting or any adjournment or postponement thereof;

if any court of competent jurisdiction or other governmental entity of competent jurisdiction has issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the Transactions, and such order or other action has become final and non-appealable, or any law has been enacted, entered or enforced that is continuing and remains in effect and that prohibits, makes illegal or enjoins the consummation of the Transactions; or

if the Effective Time has not occurred on or before October 19, 2022, which date will be automatically extended to December 18, 2022, if necessary, to obtain required antitrust approvals (such date, as may be automatically extended, the “Outside Date”).

By Parent:

at any time prior to receipt of the Company Stockholder Approval, if (i) the Board has effected a Change of Board Recommendation or (ii) Hanger has entered into a merger agreement or other similar agreement relating to a Superior Proposal; or

if (i) Hanger has breached or failed to perform any of its representations, warranties or covenants contained in the Merger Agreement such that a condition to the obligations of Parent or Merger Sub to complete the Merger is not reasonably capable of being satisfied while such breach or failure to perform is continuing, (ii) Parent has delivered to Hanger written notice of such breach or failure to perform and (iii) either such breach or failure to perform is not capable of cure in a manner sufficient to allow satisfaction of the related closing conditions
 
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prior to the applicable Outside Date or at least 30 days have elapsed since the date of delivery of such written notice to Hanger and such breach or failure to perform has not been cured in all material respects.

By Hanger:

at any time prior to the receipt of the Company Stockholder Approval, if the Board determines to accept, and Hanger concurrently enters into a definitive agreement with respect to, a Superior Proposal (if Hanger complied with the “no solicitation” provisions of the Merger Agreement), provided that Hanger will, prior to or concurrently with such termination, pay the termination fee to Parent, as described in “The Merger Agreement — Termination Fees” on page 97 of this proxy statement;

if (i) Parent or Merger Sub has breached or failed to perform any of its representations, warranties or covenants contained in the Merger Agreement such that a condition to the obligations of Hanger to complete the Merger is not reasonably capable of being satisfied while such breach or failure to perform is continuing, (ii) Hanger has delivered to Parent written notice of such breach or failure to perform and (iii) either such breach or failure to perform is not capable of cure in a manner sufficient to allow satisfaction of the related closing conditions prior to the applicable Outside Date or at least 30 days have elapsed since the date of delivery of such written notice to Parent and such breach or failure to perform has not been cured in all material respects; or

if (i) all the conditions to the obligations of Parent and Merger Sub to complete the Merger have been satisfied or waived (other than the conditions that by their nature are to be satisfied at closing, but which will then be capable of satisfaction if the closing were to occur on such date), (ii) Parent fails to consummate the closing of the Merger, (iii) Hanger has delivered an irrevocable written notice to Parent stating that, if Parent performs its obligations under the Merger Agreement and the Financing contemplated by the Commitment Letters are funded, the closing will occur and (iv) Parent fails to consummate the Transactions within three business days.
Termination Fees (page 97)
Under the Merger Agreement, Hanger may be required to pay to Parent a termination fee of $23 million if the Merger Agreement is terminated under specified circumstances, and, Parent may be required to pay to Hanger a reverse termination fee of $45 million if the Merger Agreement is terminated under specified circumstances. See “The Merger Agreement — Termination Fees” on page 97 of this proxy statement for a discussion of the circumstances under which either party will be required to pay a termination fee or reverse termination fee, as applicable. In no event will either Hanger or Parent be required to pay a termination fee or reverse termination fee, as applicable, more than once.
Specific Performance (page 98)
In addition to any other remedy to which they are entitled, the parties will be entitled to an injunction or injunctions to prevent breaches of the Merger Agreement and to specific performance as to its terms, and the parties waive any requirement for the securing or posting of any bond in connection with the obtaining of any specific performance or injunctive relief and will waive, in any action for specific performance, the defense of adequacy of a remedy at law. Hanger’s or Parent’s pursuit of specific performance will not preclude the pursuing party from the right to pursue any other right or remedy to which such party may be entitled; provided, however, under no circumstances will Hanger or any of its affiliates be permitted or entitled to seek or receive both a grant of specific performance, on the one hand, and payment of all or a portion of the Parent reverse termination fee or any other monetary damages from Parent or any of Parent’s related parties, on the other hand.
Notwithstanding the foregoing, Hanger will have the right to enforce Parent’s obligation to cause the Equity Financing to be funded and to consummate the transactions contemplated by the Merger Agreement, only if, (i) all conditions to the obligations of Parent and Merger Sub to complete the Merger have been satisfied or waived (other than the conditions that by their terms are to be satisfied at closing, all of which
 
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would be satisfied if the closing of the Merger would occur as of such date ), (ii) Hanger has irrevocably confirmed in writing that, if specific performance is granted and the Financing is funded, the closing will occur, (iii) the Debt Financing (or any replacement debt financing) has been funded or will be funded at the closing of the Merger if the Equity Financing is funded (or in the case any alternative financing, such alternative financing has been funded or will be funded at the closing if the Equity Financing is funded), and (iv) Parent has failed to cause the closing of the Merger to occur by the date the closing of the Merger is required to have occurred.
Fees and Expenses (page 99)
Except in specified circumstances, all fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement will be paid by the party incurring such fees or expenses.
Delisting and Deregistration of Hanger Common Stock (page 93)
As promptly as practicable following the completion of the Merger, Hanger common stock will be delisted from the NYSE and deregistered under the Exchange Act, and we will no longer be required to file periodic reports with the SEC on account of Hanger common stock.
 
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting, the Merger and the Merger Agreement. These questions and answers may not address all questions that may be important to you as a stockholder of Hanger. Please refer to the preceding section of this proxy statement entitled “Summary” and the more detailed information contained elsewhere in this proxy statement, its appendices, including the Merger Agreement, and the documents incorporated by reference herein, which you should read carefully and in their entirety.
Q:
Why am I receiving these materials?
A:
On July 21, 2022, Hanger entered into the Merger Agreement, pursuant to which, among other things, Merger Sub will merge with and into Hanger, with Hanger surviving the Merger and becoming a wholly owned subsidiary of Parent. A copy of the Merger Agreement is attached as Appendix A to this proxy statement and is incorporated by reference herein. The Board is furnishing this proxy statement and form of proxy card to the holders of Hanger common stock on the Record Date (August 24, 2022) in connection with the solicitation of proxies in favor of the Merger Proposal to be voted at a special meeting of stockholders or at any adjournments or postponements thereof.
Q:
When and where is the special meeting?
A:
The special meeting will take place on September 30, 2022 at 10:00 A.M., local time, at The Westin Austin at The Domain, 11301 Domain Drive, Austin, Texas 78758.
Q:
Who is entitled to vote at the special meeting?
A:
Only stockholders of record as of the close of business on the Record Date (August 24, 2022) are entitled to notice of the special meeting and to vote at the special meeting or at any adjournments or postponements thereof. Each holder of Hanger common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of Hanger common stock that such holder owned as of the Record Date. As of the Record Date, there were 39,123,266 shares of Hanger common stock outstanding and entitled to be voted at the special meeting.
Q:
May I attend the special meeting and vote in person?
A:
Yes. You will be admitted to the special meeting only if you were a Hanger stockholder or joint holder as of the close of business on the Record Date, or you hold a valid proxy for the special meeting. You should be prepared to present photo identification for admittance. In addition, if you are a stockholder of record, then your name will be verified against the list of stockholders of record prior to admittance to the special meeting. If you are not a stockholder of record but hold shares through a broker, trustee or nominee, then you will need to provide proof of beneficial ownership on the record date, such as your most recent account statement.
If you are a stockholder of record, even if you plan to attend the special meeting in person, we encourage you to complete, sign, date and return the enclosed proxy card or vote via telephone or Internet to ensure that your shares of Hanger common stock will be represented at the special meeting. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted or vote submitted via telephone or Internet.
If you are a beneficial owner and hold your shares of Hanger common stock in “street name” through a broker, bank or nominee, you should instruct your broker, bank or nominee on how you wish to vote your shares of Hanger common stock using the instructions provided by your broker, bank or nominee. Your broker, bank or nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions.
Q:
What am I being asked to vote on at the special meeting?
A:
You are being asked to consider and vote on the following proposals:

The Merger Proposal;

The Adjournment Proposal; and
 
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The Compensation Proposal.
Q:
What is the proposed Merger and what effects will it have on Hanger?
A:
The proposed Merger is the acquisition of Hanger by Parent pursuant to the Merger Agreement. If the Merger Proposal is approved by the holders of Hanger common stock and the other closing conditions under the Merger Agreement are satisfied or waived, Merger Sub will merge with and into Hanger, with Hanger continuing as the surviving corporation. As a result of the Merger, Hanger will become a wholly owned subsidiary of Parent. Hanger will cooperate with Parent to de-list Hanger common stock from the NYSE and de-register under the Exchange Act as promptly as practicable following the Effective Time and, at such time, Hanger will no longer be a publicly traded company and will no longer be required to file periodic reports with the SEC. If the Merger is consummated, you will not own any shares of the capital stock of the surviving corporation.
Q:
What will I receive if the Merger is completed?
A:
Upon completion of the Merger, you will be entitled to receive the Merger Consideration of $18.75 in cash, without interest and less any applicable withholding taxes, for each share of Hanger common stock that you own, unless you are entitled to and have properly demanded appraisal rights and have properly exercised and not withdrawn your appraisal under Section 262 of the DGCL with respect to such shares. For example, if you own 100 shares of Hanger common stock, you will be entitled to receive $1,875 in cash in exchange for such shares, less any applicable withholding taxes. In either case, as a result of the Merger, your shares will be cancelled and you will not own shares in the surviving corporation.
Additionally, the Merger Agreement provides that each Company Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to the product of (x) the total number of shares of Hanger common stock underlying the Company Option multiplied by (y) the excess, if any, of the Merger Consideration over the exercise price of such Company Option (less any taxes required to be withheld under applicable law). If the exercise price of a Company Option is equal to or greater than the Merger Consideration, then such Company Option will be cancelled for no consideration.
Each outstanding award of Company RSUs will become fully vested and will automatically be cancelled and converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to (x) the total number of shares of Hanger common stock underlying such award of Company RSUs, multiplied by (y) the Merger Consideration. Each outstanding award of Company PRSUs will become vested as to the number of shares of Hanger common stock subject to such award that would vest based on target level achievement of all performance targets (without application of any modifier) and will, after giving effect to such vesting, automatically be cancelled and converted into the right to receive (without interest) an amount in cash (less any applicable withholding taxes) equal to (x) the number of vested shares of Hanger common stock underlying such award of Company PRSUs, multiplied by (y) the Merger Consideration, and the unvested portion of such Company PRSUs will be cancelled for no consideration.
Q:
How does the Merger Consideration compare to the market price of Hanger common stock prior to the public announcement of the Merger Agreement?
A:
The Merger Consideration represents a premium of approximately 29% over the 30 calendar day volume-weighted average price ending July 20, 2022 and a premium of approximately 26% over the closing price of Hanger common stock on July 20, 2022, the latest trading day before the Merger Agreement was entered into and announced.
Q:
What do I need to do now? If I am going to attend the special meeting, should I still submit a proxy?
A:
We encourage you to read this proxy statement, its appendices, including the Merger Agreement, and the documents incorporated by reference herein, carefully and in their entirety and consider how the Merger affects you. Whether or not you expect to attend the special meeting in person, we encourage you to complete, sign, date and return, as promptly as possible, the enclosed proxy card or vote via
 
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telephone or Internet so that your shares of Hanger common stock may be represented and can be voted at the special meeting. If you hold your shares of Hanger common stock in “street name,” please refer to the voting instruction forms provided by your broker, bank or nominee to vote such shares.
Q:
Should I send in my stock certificates now?
A:
No. If the Merger Proposal is approved, shortly after the Merger is completed, under the terms of the Merger Agreement, you will receive a letter of transmittal containing instructions for how to send your stock certificates to the Paying Agent to receive the cash payment of the Merger Consideration for each share of Hanger common stock represented by the stock certificate or book-entry shares. You should use the letter of transmittal to exchange your stock certificates or book-entry shares for the cash payment to which you are entitled upon completion of the Merger. If your shares of Hanger common stock are held in “street name” through a bank, broker or nominee, you will receive instructions from your bank, broker or nominee as to how to effect the surrender of your “street name” shares of Hanger common stock in exchange for the Merger Consideration. Please do not send in your stock certificates now.
Q:
What happens if I sell or otherwise transfer my shares of Hanger common stock after the Record Date but before the special meeting? What happens if I sell or otherwise transfer my shares of Hanger common stock after the special meeting but before the Effective Time?
A:
The Record Date for the special meeting is earlier than the date of the special meeting and earlier than the date the Merger is expected to be completed. If you sell or transfer your shares of Hanger common stock after the Record Date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares and each of you notifies Hanger in writing of such special arrangements, you will retain your right to vote such shares at the special meeting, but will transfer the right to receive the Merger Consideration if the Merger is completed to the person to whom you sell or transfer such shares.
If you sell or transfer your shares of Hanger common stock after the special meeting, but before the Effective Time, you will transfer the right to receive the Merger Consideration if the Merger is completed. To receive the Merger Consideration, you must hold your shares of Hanger common stock through the completion of the Merger.
Even if you sell or otherwise transfer your shares of Hanger common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card, vote via telephone or Internet, or, if your shares are held in “street name” through a broker, bank or nominee, instruct your broker, bank or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank or nominee.
Q:
What is the position of Hanger’s Board of Directors regarding the Merger?
A:
After consulting with its financial advisor and outside legal counsel and after reviewing and considering the terms and conditions of the Merger and the factors more fully described in this proxy statement, the Board unanimously (i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
The Board unanimously recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Q:
What happens if the Merger is not completed?
A:
If the Merger Agreement is not adopted and approved by the stockholders of Hanger or if the Merger is not consummated for any other reason, you will not receive any payment for your shares of common stock. Instead, we will remain a public company, Hanger common stock will continue to be listed and
 
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traded on the NYSE and registered under the Exchange Act, and we will continue to be obligated to file periodic reports with the SEC.
Under specified circumstances, we may be required to pay Parent a termination fee, or may be entitled to receive a reverse termination fee from Parent, upon the termination of the Merger Agreement, as described in “The Merger Agreement — Termination Fees”.
Q:
Do any of Hanger’s directors or officers have interests in the Merger that may differ from those of Hanger stockholders generally?
A:
In considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder. The Board was aware of these interests in approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted and approved by the stockholders of Hanger. For a description of these interests, see “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger”.
Q:
What vote is required to adopt and approve the Merger Agreement?
A:
The affirmative vote of the holders of a majority of the shares of Hanger common stock outstanding and entitled to vote on the matter as of the Record Date is required to approve the Merger Proposal.
The failure of any stockholder of record to submit a signed proxy card, vote via telephone or Internet, or vote in person by ballot at the special meeting will have the same effect as a vote “AGAINST” the Merger Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank or nominee on how to vote your shares will have the same effect as a vote “AGAINST” the Merger Agreement. A “broker non-vote” results when banks, brokers and nominees return a valid proxy voting upon a matter or matters for which the applicable stock exchange rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the proposal and have not received specific voting instructions from the beneficial owner of such shares. Broker non-votes, if any, and abstentions will also have the same effect as a vote “AGAINST” the Merger Proposal.
As of the Record Date (August 24, 2022), there were 39,123,266 shares of Hanger common stock issued and outstanding. Each holder of Hanger common stock is entitled to one vote per share of Hanger common stock owned by such holder as of the Record Date.
Q:
What vote is required to approve the Adjournment Proposal and the Compensation Proposal?
A:
Approval of both the Adjournment Proposal and the Compensation Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Hanger common stock represented in person or by proxy at the special meeting and entitled to vote thereon.
The failure of any stockholder of record to submit a signed proxy card, vote via telephone or Internet, or vote in person by ballot at the special meeting will not have any effect on the Adjournment Proposal or the Compensation Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank or nominee on how to vote your shares will not have any effect on the Adjournment Proposal or the Compensation Proposal. Broker non-votes, if any, will not have any effect on the Adjournment Proposal or the Compensation Proposal. Abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal.
Q:
What is “Merger-related compensation”?
A:
“Merger-related compensation” is certain compensation that is tied to or based on the completion of the Merger and may be payable to Hanger’s named executive officers under its existing plans or agreements, which is the subject of the Compensation Proposal. See “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation”.
 
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Q:
Why am I being asked to cast a non-binding, advisory vote to approve “Merger-related compensation” payable to Hanger’s named executive officers under its plans or agreements?
A:
In accordance with the rules promulgated under Section 14A of the Exchange Act, we are providing you with the opportunity to cast a non-binding, advisory vote on the compensation that may be payable to our named executive officers in connection with the Merger.
Q:
What will happen if the stockholders do not approve the Compensation Proposal at the special meeting?
A:
Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is on an advisory basis and will not be binding on Hanger or Parent. Further, the underlying compensation plans and agreements are contractual in nature and payments made pursuant to the terms of these plans and agreements are not, by their terms, subject to stockholder approval. Accordingly, payment of the “Merger-related compensation” is not contingent on stockholder approval of the Compensation Proposal.
Q:
What is a quorum?
A:
At any meeting of stockholders, the holders of record of a majority in voting power of the shares of outstanding Hanger common stock entitled to vote at the special meeting, present in person or by proxy, will constitute a quorum for the transaction of business, except as otherwise provided by law. Abstentions are considered as present for the purpose of determining the presence of a quorum. If you hold your shares in “street name” and you fail to provide your broker, bank or nominee with instructions how to vote on any of the proposals before the special meeting, your shares will not be counted as present at the special meeting for quorum purposes. Broker non-votes, if any, will be counted as present for the purpose of determining the presence of a quorum.
If a quorum is not present at the special meeting, the chairperson of the meeting or the affirmative vote of the holders of a majority of all the shares of Hanger common stock represented at the special meeting, in person or by proxy, and entitled to vote thereon, although less than a quorum, may adjourn the meeting to another place, date or time.
Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
Most of our stockholders hold their shares through a broker, bank or nominee rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholder of Record.   If your shares of Hanger common stock are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Hanger.

Beneficial Owner.   If your shares of Hanger common stock are held through a broker, bank or nominee, you are considered the “beneficial owner” of those shares held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting.
Q:
How may I vote?
A:
If you are a stockholder of record (that is, if your shares of common stock are registered in your name with our transfer agent, Computershare Trust Company, N.A.), you may vote or submit a proxy by attending the special meeting and voting in person by ballot, by completing, dating, signing and returning the enclosed proxy card or by voting via telephone or Internet.
If your shares are held in “street name” through a broker, bank or nominee, you may provide voting instructions through your broker, bank or nominee by completing and returning the voting instruction form provided by your broker, bank or nominee, or electronically over the Internet or by telephone
 
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through your broker, bank or nominee if such a service is provided. To provide voting instructions over the Internet or by telephone through your broker, bank or nominee, you should follow the instructions on the voting instruction form provided by your broker, bank or nominee.
If you are a stockholder of record, even if you plan to attend the special meeting in person, you are strongly encouraged to submit a proxy for your shares of common stock or vote via telephone or Internet. If you are a record holder, you may still vote your shares of common stock in person at the special meeting. Any vote in person at the special meeting will automatically revoke any proxy you previously submitted or submitted via telephone or Internet.
Q:
If my broker, bank or nominee holds my shares in “street name,” will my broker, bank or nominee vote my shares for me?
A:
Not without your direction. Your broker, bank or nominee will only be permitted to vote your shares on any proposal if you instruct your broker, bank or nominee on how to vote. Under applicable stock exchange rules, brokers, banks or nominees have the discretion to vote your shares on certain “routine” matters if you fail to instruct your broker, bank or nominee on how to vote your shares with respect to such matters. The proposals in this proxy statement are non-routine matters, and brokers, banks and nominees therefore cannot vote on these proposals without your instructions. Therefore, it is important that you instruct your broker, bank or nominee on how you wish to vote your shares of Hanger common stock.
You should follow the procedures provided by your broker, bank or nominee regarding the voting of your shares of Hanger common stock. Without instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the Merger Proposal and no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal.
Q:
May I revoke my proxy after I have mailed my signed proxy card or otherwise submitted my vote by proxy?
A:
Yes. If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the special meeting by:

delivering a written notice of revocation to our Secretary at Hanger, Inc., 10910 Domain Drive, Suite 300, Austin, Texas 78758, Attention: Thomas E. Hartman, specifying such revocation;

signing another proxy card with a later date and returning it to the Secretary of Hanger, or delivering a proxy with a later date by telephone or Internet, prior to the special meeting; or

attending the special meeting and voting in person.
If you hold your shares of common stock in “street name,” you should contact your broker, bank or nominee for instructions regarding how to revoke your proxy.
Q:
What is a proxy?
A:
A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of Hanger common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Hanger common stock is called a “proxy card.” The Board has designated Vinit K. Asar and Thomas E. Kiraly, each of them with full power of substitution, as proxies for the special meeting.
Q:
If a stockholder submits a proxy, how are the shares voted?
A:
Regardless of the method you choose to submit your proxy, the individuals named on the enclosed proxy card, your proxies, will vote your shares in the way that you indicate. When completing the proxy card or voting via telephone or Internet, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.
If you sign and properly return your proxy card or submit your vote via telephone or Internet, but do not include instructions on how to vote, your shares of Hanger common stock will be voted as
 
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recommended by the Board with respect to each proposal. It is not currently anticipated that any other proposals for consideration will be presented at the special meeting. If other proposals requiring a vote of stockholders are brought before the special meeting in a proper manner, the persons named in the enclosed proxy card, if properly authorized, will have discretion to vote the shares they represent in accordance with their best judgment.
Q:
What should I do if I receive more than one set of voting materials?
A:
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction forms. For example, if you hold your shares of Hanger common stock in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares of Hanger common stock are registered in more than one name, you will receive more than one proxy card. Please complete, date, sign and return each proxy card and voting instruction form that you receive. Each proxy card you receive comes with its own prepaid return envelope; if you submit a proxy by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card.
Q:
Who will count the votes?
A:
The votes will be counted by the independent inspector of election appointed for the special meeting. Representatives of Broadridge Financial Services, Inc. will count the votes and will serve as the independent inspector of election.
Q:
Where can I find the voting results of the special meeting?
A:
Hanger intends to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that Hanger files with the SEC are publicly available when filed. See “Where You Can Find More Information”.
Q:
Will I be subject to U.S. federal income tax upon the exchange of Hanger common stock for cash pursuant to the Merger?
A:
If you are a U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger — Tax Consequences to U.S. Holders”), the exchange of your shares of Hanger common stock for cash (including any cash required to be withheld for tax purposes) pursuant to the Merger will generally require you to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash that you receive pursuant to the Merger (including any cash required to be withheld for tax purposes) and your adjusted basis in such surrendered shares. A non-U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger — Tax Consequences to Non-U.S. Holders”) will generally not be subject to U.S. federal income tax with respect to the exchange of Hanger common stock for cash in the Merger unless such non-U.S. holder has certain connections to the United States or Hanger is, or was during the relevant period, a U.S. real property holding corporation. Because particular circumstances may differ, we recommend that you consult your tax advisor to determine the U.S. federal income tax consequences relating to the Merger in light of your own particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction. A more complete description of the U.S. federal income tax consequences of the Merger is provided in “The Merger — U.S. Federal Income Tax Consequences of the Merger”.
Q:
When do you expect the Merger to be completed?
A:
We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the fourth quarter of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to conditions, including adoption and approval of the Merger Agreement by the stockholders of Hanger and the receipt of regulatory approvals.
 
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Q:
Am I entitled to appraisal rights under the DGCL?
A:
Yes. As a holder of Hanger common stock, you are entitled to exercise appraisal rights under the DGCL in connection with the Merger if you take certain actions and meet certain conditions. See “The Merger — Appraisal Rights”.
Q:
Who can help answer my questions?
A:
If you have any questions concerning the Merger, the special meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of common stock, please contact MacKenzie, our proxy solicitor, toll-free at (800) 322-2885 or at (212) 929-5500 or by email at proxy@mackenziepartners.com.
 
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THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of the Board for use at the special meeting of stockholders or at any adjournments or postponements thereof.
Date, Time and Place
We will hold the special meeting on September 30, 2022 at 10:00 A.M., local time, at The Westin Austin at The Domain, 11301 Domain Drive, Austin, Texas 78758, unless the special meeting is postponed or adjourned.
Purpose of the Special Meeting
At the special meeting, we will ask our stockholders of record as of the Record Date to consider and vote on the following proposals:
(i)
to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger;
(ii)
to approve the adjournment of the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger, at the time of the special meeting; and
(iii)
to approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger.
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of the close of business on the Record Date (August 24, 2022) are entitled to notice of the special meeting and to vote at the special meeting or at any adjournments or postponements thereof. Each holder of record of Hanger common stock on the Record Date will be entitled to one vote for each share of Hanger common stock held as of the Record Date on each matter submitted to our stockholders for approval at the special meeting. If you sell or transfer your shares of Hanger common stock after the Record Date but before the special meeting, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares of Hanger common stock, but you will retain your right to vote those shares at the special meeting. A list of stockholders entitled to vote at the special meeting will be available in our offices located at 10910 Domain Drive, Suite 300, Austin, Texas 78758, during regular business hours for a period of at least ten days before the special meeting and at the place of the special meeting during such meeting.
As of the Record Date, there were 39,123,266 shares of Hanger common stock outstanding and entitled to be voted at the special meeting.
A quorum of stockholders is necessary to hold a special meeting. The holders of record of a majority in voting power of the shares of outstanding Hanger common stock entitled to vote at the special meeting, present in person or represented by proxy, will constitute a quorum at the special meeting. As a result, 19,561,634 shares must be represented by proxy or by stockholders present and entitled to vote at the special meeting to have a quorum. Broker non-votes, if any, and abstentions will be counted as present for quorum purposes.
In the event that a quorum is not present at the special meeting, it is expected that the special meeting would be adjourned to a later date until a quorum is present.
Vote Required; Abstentions and Broker Non-Votes
The affirmative vote of the holders of a majority of the shares of Hanger common stock outstanding and entitled to vote on the matter as of the Record Date is required to approve the Merger Proposal. Adoption and approval of the Merger Agreement by our stockholders is a condition to the closing of the Merger. The failure of any stockholder of record to submit a signed proxy card, vote via telephone or Internet or vote in person by ballot at the special meeting will have the same effect as a vote “AGAINST” the Merger
 
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Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank or nominee on how to vote your shares will have the same effect as a vote “AGAINST” the Merger Agreement. Broker non-votes, if any, and abstentions will also have the same effect as a vote “AGAINST” the Merger Proposal.
Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of Hanger common stock represented in person or by proxy at the special meeting and entitled to vote thereon.
Approval of the Compensation Proposal requires the affirmative vote of the holders of a majority of the shares of Hanger common stock represented in person or by proxy at the special meeting and entitled to vote thereon.
The failure of any stockholder of record to submit a signed proxy card, vote via telephone or Internet, or vote in person by ballot at the special meeting will not have any effect on the Adjournment Proposal or the Compensation Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank or nominee on how to vote your shares will not have any effect on the Adjournment Proposal or the Compensation Proposal. Broker non-votes, if any, will not have any effect on the Adjournment Proposal or the Compensation Proposal. Abstentions will have the same effect as a vote “AGAINST” each of the Adjournment Proposal and the Compensation Proposal.
Stock Ownership and Interests of Certain Persons
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote an aggregate of 1,528,572 shares of Hanger common stock (excluding any shares that would be delivered upon the vesting, exercise or conversion, as applicable, of Company Options, Company RSUs or Company PRSUs), representing approximately 3.9% of the outstanding shares of Hanger common stock.
Our directors and executive officers have informed us that they currently intend to vote all of their shares of Hanger common stock: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Voting
If your shares of Hanger common stock are registered in your name with our transfer agent, Computershare Trust Company, N.A., you may cause your shares to be voted at the special meeting by submitting your proxy card, by voting via telephone or Internet, or by voting in person at the special meeting. Based on your proxy cards or votes via telephone or Internet, the proxy holders will vote your shares of Hanger common stock according to your directions.
If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. You are encouraged to vote by proxy or via telephone or Internet even if you plan to attend the special meeting in person. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted or vote submitted via telephone or Internet.
All shares of Hanger common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
If your shares of Hanger common stock are held in “street name” through a broker, bank or nominee, you may provide voting instructions through your broker, bank or nominee by completing and returning the voting instruction form provided by your broker, bank or nominee, or over the Internet or by telephone through your broker, bank or nominee if such a service is provided. To provide voting instructions over the Internet or by telephone through your broker, bank or nominee, you should follow the instructions on the voting instruction form provided by your broker, bank or nominee. Under applicable stock exchange rules, brokers, banks or nominees have the discretion to vote your shares on certain “routine” matters if you fail to instruct your broker, bank or nominee on how to vote your shares with respect to such matters. The proposals in this proxy statement are non-routine matters, and brokers, banks and nominees therefore cannot vote on these proposals without your instructions. If you do not return your broker’s, bank’s or nominee’s
 
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voting instruction form, do not provide voting instructions over the Internet or by telephone through your broker, bank or other nominee, if applicable, or do not attend the special meeting and vote in person with a proxy from your broker, bank or nominee, this will have the same effect as if you voted “AGAINST” the Merger Proposal, but will have no effect on the outcome of any vote on the Adjournment Proposal or the Compensation Proposal.
Revocability of Proxies
If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the special meeting by:

delivering a written notice of revocation to our Secretary at Hanger, Inc., 10910 Domain Drive, Suite 300, Austin, Texas 78758, Attention: Thomas E. Hartman, specifying such revocation;

signing another proxy card with a later date and returning it to the Secretary of Hanger, or delivering a proxy with a later date by telephone or Internet, prior to the special meeting; or

attending the special meeting and voting in person.
Please note that to be effective, your new proxy must be received by our Secretary or submitted by telephone or Internet by 11:59 p.m., Eastern Time, the day before the special meeting. If you have submitted a proxy and you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.
If you hold your shares of Hanger common stock in “street name,” you should contact your broker, bank or nominee for instructions regarding how to revoke your proxy. Any adjournment of the special meeting for the purpose of soliciting additional proxies will allow stockholders of Hanger who have already sent in their proxies to revoke them at any time prior to their use at the special meeting, as adjourned, however any such proxies that are not revoked will be voted at any such special meeting, as adjourned. Additionally, if the special meeting is postponed, any proxies that are not revoked prior to their use at the special meeting, as postponed, will be voted at any such special meeting, as postponed.
Board of Directors’ Recommendation
The Board, after consulting with its financial advisor and outside legal counsel and carefully reviewing and considering various factors described in “The Merger — Recommendation of Our Board of Directors and Reasons for the Merger”, unanimously (i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
The Board unanimously recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Expenses of Proxy Solicitation
This proxy statement is being furnished in connection with the solicitation of proxies by the Board. Expenses incurred in connection with the printing and mailing of this proxy statement and in connection with notices or other filings with any governmental entities under any laws are our responsibility. We have engaged the services of MacKenzie to solicit proxies for the special meeting. In connection with its retention, MacKenzie has agreed to provide consulting, analytic and proxy solicitation services in connection with the special meeting. We have agreed to pay MacKenzie a fee of approximately $20,000, plus reasonable out-of-pocket expenses for its services, and we will indemnify MacKenzie for certain losses arising out of its proxy solicitation services. Copies of solicitation materials will also be furnished to banks, brokerage firms, fiduciaries and custodians holding shares of Hanger common stock in their names that are beneficially
 
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owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners of Hanger common stock for their costs of forwarding solicitation materials to the beneficial owners. In addition to the solicitation of proxies by mail, proxies may be solicited by our directors, officers and employees, or representatives of MacKenzie, in person or by telephone, email, fax or other means of communication and we may pay persons holding shares for others their expenses for sending proxy materials to their principals. No additional compensation will be paid to our directors, officers or employees for their services in connection with the solicitation of proxies.
Anticipated Date of Completion of the Merger
Assuming timely satisfaction of necessary closing conditions, including the approval of the Merger Proposal by our stockholders and the receipt of regulatory approvals, we anticipate that the Merger will be consummated in the fourth quarter of 2022.
Other Matters
At this time, we know of no other matters to be submitted at the special meeting.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting
The proxy statement is available on our website, corporate.hanger.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC.
Rights of Stockholders Who Assert Appraisal Rights
If the Merger is approved and becomes effective, holders of Dissenting Shares will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed to assert such rights and obtain payment of the fair value of such Dissenting Shares, see Section 262 of the DGCL, which is attached as Appendix B to this proxy statement, as well as the information set forth below.
TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO HANGER BEFORE THE VOTE IS TAKEN ON THE MERGER PROPOSAL AT THE SPECIAL MEETING, AND MUST NOT VOTE, IN PERSON OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL AND MUST CONTINUE TO HOLD YOUR SHARES OF HANGER COMMON STOCK OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME AND MUST COMPLY WITH THE OTHER REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST, OR ABSTAINING FROM VOTING OR FAILING TO VOTE WITH RESPECT TO, THE MERGER PROPOSAL WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE MERGER PROPOSAL, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES OF HANGER COMMON STOCK AGAINST, OR ABSTAIN WITH RESPECT TO, THE MERGER PROPOSAL. NEITHER VOTING AGAINST THE MERGER PROPOSAL, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL
 
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MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE MERGER PROPOSAL. IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK THROUGH A BANK, BROKERAGE FIRM OR NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKERAGE FIRM OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BANK, BROKERAGE FIRM OR NOMINEE. IF YOU HAVE A BENEFICIAL INTEREST IN SHARES OF HANGER COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A NOMINEE OR INTERMEDIARY, YOU MUST ACT PROMPTLY TO CAUSE THE HOLDER OF RECORD TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO DEMAND YOUR APPRAISAL RIGHTS. IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK THROUGH A BANK OR BROKERAGE FIRM WHO IN TURN HOLDS THE SHARES THROUGH A CENTRAL SECURITIES DEPOSITORY NOMINEE, SUCH AS THE DEPOSITORY TRUST COMPANY, A DEMAND FOR APPRAISAL OF SUCH SHARES MUST BE MADE BY OR ON BEHALF OF THE DEPOSITORY NOMINEE AND MUST IDENTIFY THE DEPOSITORY NOMINEE AS THE HOLDER OF RECORD. IN VIEW OF THE COMPLEXITY OF SECTION 262 OF THE DGCL, STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.
Questions and Additional Information
If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card, please contact our proxy solicitor:
[MISSING IMAGE: lg_mackenziepartners-bw.jpg]
1407 Broadway, 27th Floor
New York, NY 10018
proxy@mackenziepartners.com
(212) 929-5500
Toll-Free: (800) 322-2885
 
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us or on our behalf, may include “forward-looking” statements within the meaning of the U.S. securities laws, including Section 21E of the Exchange Act, that do not directly or exclusively relate to historical facts, including, without limitation, statements relating to the completion of the Merger. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “believes,” “plans,” “anticipates,” “projects,” “estimates,” “expects,” “intends,” “strategy,” “future,” “opportunity,” “may,” “will,” “should,” “could,” “potential” or other similar expressions, or the negative of these terms or comparable terminology. These statements are based on current beliefs and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation:

the inability to consummate the Merger within the anticipated time period, or at all, due to any reason, including the failure to obtain stockholder approval to adopt and approve the Merger Agreement, the failure to obtain required regulatory approvals or the failure to satisfy the other conditions to the consummation of the Merger;

the failure by Parent or Merger Sub to obtain the necessary Debt Financing and Equity Financing as set forth in the Commitment Letters received in connection with the Merger;

the risk that the Merger disrupts Hanger’s current plans and operations or diverts management’s attention from its ongoing business;

the effect of the announcement of the Merger on Hanger’s operating results and business generally;

the effect of the announcement of the Merger on the ability of Hanger to retain and hire key personnel and maintain relationships with its customers, suppliers and others with whom it does business;

the risk that Hanger’s stock price may decline significantly if the Merger is not consummated;

the nature, cost and outcome of any litigation and other legal proceedings, including any such proceedings related to the Merger and instituted against Hanger and others;

the risk that the Merger Agreement may be terminated in circumstances requiring Hanger to pay a termination fee of $23 million;

the amount of costs, fees and expenses related to the Merger;

other risks to consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period or at all; and

other factors that could affect the results of Hanger’s business such as the financial and business impacts of COVID-19 on our operations and the operations of our customers, suppliers, governmental and private payers and others in the healthcare industry and beyond, labor shortages and increased turnover in our employee base, contractual, inflationary and other general cost increases, including with regard to costs of labor, raw materials and freight, federal laws governing the health care industry, governmental policies affecting O&P operations, including with respect to reimbursement, failure to successfully implement a new enterprise resource planning system or other disruptions to information technology systems, the inability to successfully execute our acquisition strategy, including integration of recently acquired O&P clinics into our existing business, changes in the demand for our O&P products and services, including additional competition in the O&P services market, disruptions to our supply chain, our ability to enter into and derive benefits from managed-care contracts and our ability to successfully attract and retain qualified O&P clinicians.
The foregoing review of important factors that could cause actual results to differ from expectations should not be construed as exhaustive and should be read in conjunction with the information contained or incorporated by reference herein, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2021, our definitive proxy statement for our 2022 Annual Meeting of Stockholders filed with the SEC on April 7, 2022 and our recent Quarterly Reports on Form 10-Q and Current Reports
 
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on Form 8-K. See “Where You Can Find More Information”. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.
Except as required by applicable law, we do not intend, and assume no obligation, to update any forward-looking statements. Hanger stockholders are advised, however, to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.
All information contained in this proxy statement exclusively concerning Parent, Merger Sub and their affiliates has been supplied by Parent and Merger Sub and has not been independently verified by us.
 
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached as Appendix A to, and incorporated by reference into, this proxy statement. You should read the Merger Agreement carefully and in its entirety as it is the legal document that governs the Merger.
Parties Involved in the Merger
Hanger, Inc.
10910 Domain Drive, Suite 300
Austin, Texas 78758
(512) 777-3800
corporate.hanger.com
Hanger, a Delaware corporation, is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries, and we and our predecessor companies have provided orthotic and prosthetic (“O&P”) services for nearly 160 years. We provide O&P services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings.
We operate through two segments — Patient Care and Products & Services. Our Patient Care segment is primarily comprised of Hanger Clinic, which specializes in comprehensive, outcomes-based design, fabrication, and delivery of custom O&P devices through 760 patient care clinics and 115 satellite locations in 47 states and the District of Columbia, as of December 31, 2021. We also provide payor network contracting services to other O&P providers through this segment.
Our Products & Services segment is comprised of our distribution services and therapeutic solutions businesses. As a leading provider of O&P products in the United States, we engage in the distribution of a broad catalog of branded and private label O&P devices, products, and components to independent O&P providers nationwide. The other business in our Products & Services segment is our therapeutic solutions business, which develops specialized rehabilitation technologies and provides evidence-based clinical programs for post-acute rehabilitation to patients at approximately 4,000 skilled nursing and post-acute providers nationwide
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “HNGR.”
Our principal executive offices are located at 10910 Domain Drive, Suite 300, Austin, Texas 78758, and our telephone number is (512) 777-3800. For more information about Hanger, please visit our website, corporate.hanger.com. Our website address is provided as an inactive textual reference only. The information contained on (or accessible through) our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the Securities and Exchange Commission (the “SEC”). See “Where You Can Find More Information”.
Hero Parent, Inc.
c/o Patient Square Capital, LP
2884 Sand Hill Road, Suite 100
Menlo Park, California 94025
(650) 677-8000
Parent is a Delaware corporation that was formed by affiliates of Patient Square solely for the purpose of entering into the Merger Agreement and, subject to the terms and conditions thereof, completing the transactions contemplated thereby and the related financing transactions.
Hero Merger Sub, Inc.
c/o Patient Square Capital, LP
2884 Sand Hill Road, Suite 100
Menlo Park, California 94025
(650) 677-8000
 
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Merger Sub is a Delaware corporation that was formed by Parent solely for the purpose of entering into the Merger Agreement and, subject to the terms and conditions thereof, completing the transactions contemplated thereby and the related financing transactions. Upon consummation of the Merger, Merger Sub will cease to exist, and Hanger will continue as the surviving corporation and as a wholly owned subsidiary of Parent.
Certain Effects of the Merger on Hanger
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Merger Sub will merge with and into Hanger, with Hanger continuing as the surviving corporation and as a wholly owned subsidiary of Parent. Hanger will cooperate with Parent to de-list Hanger common stock from the NYSE and to de-register under the Exchange Act as soon as reasonably practicable following the Effective Time, and at such time, we will cease to be a publicly traded company and will no longer be obligated to file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation, and instead will only be entitled to receive the Merger Consideration described in “— Merger Consideration” or, with respect to Dissenting Shares, will only be entitled to receive the “fair value” of your Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law.
The Effective Time will occur upon the filing of the certificate of merger with the Secretary of State of the State of Delaware, or at such later date and time as we, Parent and Merger Sub may agree and specify in the certificate of merger.
Effect on Hanger if the Merger is Not Completed
If the Merger Proposal is not approved by the stockholders of Hanger or if the Merger is not completed for any other reason, you will not receive any payment for your shares of Hanger common stock. Instead, we will remain a public company, Hanger common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will be required to continue to file periodic reports with the SEC.
Furthermore, depending on the circumstances that would have caused the Merger not to be completed, it is possible that the price of Hanger common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of Hanger common stock would return to the price at which it trades as of the date of this proxy statement.
Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of Hanger common stock. If the Merger is not consummated, the Board will continue to evaluate and review our business operations and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the Merger Proposal is not approved by the stockholders of Hanger or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that our business, financial condition or results of operations will not be adversely impacted.
In addition, under specified circumstances, we may be required to pay Parent a termination fee, or may be entitled to receive a reverse termination fee from Parent, upon the termination of the Merger Agreement, as described under “The Merger Agreement — Termination Fees”.
Merger Consideration
At the Effective Time, each share of Hanger common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares held by Hanger as treasury stock or held directly by Parent or Merger Sub or any direct or indirect wholly owned subsidiary of Hanger, Parent or Merger Sub and (ii) Dissenting Shares) will be converted automatically into the right to receive the Merger Consideration. All shares of Hanger common stock converted into the right to receive the Merger Consideration will automatically be cancelled and cease to exist as of the Effective Time, and will thereafter represent only the right to receive the Merger Consideration
 
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After the completion of the Merger, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a Hanger stockholder (except that stockholders who hold Dissenting Shares will not have the right to receive the Merger Consideration but will instead have the right to receive a payment for the “fair value” of their Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law, as described in “— Appraisal Rights” and Appendix B to this proxy statement).
Background of the Merger
The following chronology summarizes key meetings and events that led to the signing of the Merger Agreement. The following chronology does not purport to catalogue every communication among the Board, representatives of Hanger and other parties.
In the ordinary course, the Board and Hanger management periodically review and assess Hanger’s results of operations, financial position, business strategy and growth opportunities, as well as the trends and conditions affecting Hanger’s industry and business generally. Such assessments include periodic meetings or consultations with third-party advisors, as well as consideration of potential strategic and financial alternatives to maximize stockholder value, including acquisitions and financing transactions. At regularly scheduled meetings of the Board, in connection with the Board’s evaluation of Hanger’s business strategy and growth opportunities, Hanger’s management routinely updates the Board on Hanger’s recent activities and reviews strategic opportunities and challenges for Hanger in light of current market conditions and trends. Hanger’s management and certain members of the Board also engage in general discussions from time to time with various parties, including strategic parties and financial sponsors, as well as financing sources, market participants and investment banking firms, regarding Hanger’s business, strategy and growth opportunities, including opportunities for collaboration, potential business combinations, acquisitions and financing transactions. Among numerous other discussions with financial sponsors and financing sources, a general discussion occurred in December 2021 between Vinit K. Asar, the President and Chief Executive Officer of Hanger, and a principal of Patient Square. In addition, BofA Securities, Inc. (“BofA Securities”), Hanger’s longstanding investment banking advisor, has from time to time made presentations to the Board regarding matters such as market conditions and trends and financing alternatives.
At a regularly scheduled Board meeting held by video conference on February 16, 2022, Hanger management updated the Board regarding, among other matters, the inflationary environment, including resulting key risk areas such as the impacts of inflation on material and labor costs. Hanger management also reviewed for the Board fourth quarter and full year 2021 financial results with comparisons to 2020 results, as well as against Hanger’s budget for 2022, including assumptions regarding inflation and labor costs. Also during the meeting, at the request of Hanger management, which was discussed in advance with Hanger’s independent Chairman of the Board, representatives of BofA Securities reviewed Hanger’s recent stock price performance and market benchmarking, noting that Hanger’s stock price performance had been negatively impacted relative to its peers due to sales volume, margin, productivity and supply chain issues exacerbated by the COVID-19 pandemic that resulted in downward impacts on Hanger’s revenues and earnings. BofA Securities also discussed with the Board certain strategic alternatives for Hanger, including executing on its current strategic business plan and exploring a sale of Hanger as a potential means to realize value with greater certainty, with rationales for and considerations regarding both alternatives. BofA Securities also discussed an illustrative process for exploring a potential sale of Hanger, should the Board determine to initiate such a process. Hanger’s outside legal advisors, Foley & Lardner LLP (“Foley”), provided an overview of the Board’s fiduciary duties in connection with the review of strategic alternatives, including a potential sale transaction, and legal matters related to the potential process described by BofA Securities. The Board did not make a determination to conduct a further evaluation of potential strategic alternatives at that time.
On February 25, 2022, the independent directors on the Board held a video conference without Hanger management or advisors present to further discuss the matters reviewed at the February 16, 2022 Board meeting.
At a special Board meeting held by video conference on March 18, 2022, Hanger management reviewed with the Board a comparison of Hanger’s long range forecast previously presented to the Board in August 2021 to an updated five-year forecast prepared by Hanger management. The five-year forecast prepared by Hanger management (as updated) and reviewed with the Board is referred to in this proxy
 
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statement as the “Management Forecast”, as discussed under “— Certain Financial Projections” in this proxy statement. Since the time of the development of the long range forecast, Hanger’s results for 2021 were significantly affected by the Delta and Omicron variants of COVID-19, as well as other factors, and results for 2021 were lower than had been forecasted in the long range plan forecast. Hanger management incorporated actual 2021 performance into the Management Forecast. Additionally, Hanger had prepared its budget for 2022 beginning in the fall of 2021, and that process had enabled Hanger management to incorporate into the Management Forecast updated information regarding Hanger’s business trends, particularly with respect to reimbursements and inflation. At the request of the Board, representatives of BofA Securities reviewed Hanger’s recent stock price performance, market benchmarking, the Management Forecast and certain illustrative valuation metrics for Hanger. BofA Securities again reviewed with the Board, and the Board discussed, certain strategic alternatives for Hanger. BofA Securities also discussed in detail a proposed process and timeline for exploring a potential sale of Hanger. BofA Securities reviewed with the Board a range of potential buyers to be approached in the process. In addition, BofA Securities and members of Hanger management discussed with the Board the likelihood that any strategic buyers would have both the financial wherewithal and interest to acquire Hanger and the risks to Hanger of sharing confidential information with potential strategic buyers before an agreed transaction was in place. As part of such discussions, representatives of Foley discussed certain matters relating to the proposed process and reminded the Board of its fiduciary duties in connection with the review of strategic alternatives, including a potential sale transaction. Based on these discussions, the Board determined that only potential financial sponsor buyers would be included in the process at this stage. After discussion by the Board of the proposed sale process (the “Sale Transaction Process”), the directors present unanimously determined to commence the Sale Transaction Process, and directed Hanger management and BofA Securities to undertake the initial steps thereof. Hanger management also reviewed with the Board the key terms of a proposed engagement letter with BofA Securities, noting that the terms had been reviewed by both management and Foley. In light of BofA Securities’ qualifications, expertise, reputation and knowledge of Hanger’s business and industry, the directors present unanimously authorized Hanger management to execute the engagement letter with BofA Securities on substantially the terms presented.
During the months of March and April 2022, Hanger management and its advisors prepared for the Sale Transaction Process, including by preparing a presentation for distribution to potential bidders (the “Hanger presentation”) that included the Management Forecast that was reviewed with the Board at the March 2022 meeting, documents to be uploaded to the virtual data room, and a form of confidentiality agreement to be furnished to potential bidders.
Beginning on March 31, 2022, BofA Securities initiated discussions with 14 potentially interested parties, all of which were financial sponsors, regarding whether such parties would have an interest in exploring a transaction with Hanger. Patient Square and Bidders A through I (as defined below) were included in such outreach. These discussions were conducted only based upon publicly available information given the parties had not yet entered into confidentiality agreements. Following this initial outreach, Hanger entered into confidentiality agreements with 12 potentially interested parties. Patient Square entered into a confidentiality agreement with Hanger on April 11, 2022. Each party that entered into a confidentiality agreement received certain process materials from BofA Securities, including the Hanger presentation. The remaining two parties that did not enter into confidentiality agreements indicated they were not interested in pursuing a transaction with Hanger for a variety of reasons.
Two of the potentially interested parties who entered into confidentiality agreements with Hanger and received process materials declined the opportunity to meet for a management presentation. During April 2022, Hanger conducted management presentations with ten potentially interested parties who had previously entered into confidentiality agreements with Hanger and received process materials, during which Hanger management provided an overview of Hanger’s business, results of operations, business strategies and growth opportunities. Three of such management presentations were held virtually and seven were held in person (or hybrid) at BofA Securities’ offices in New York, New York.
On April 12, 2022, representatives of a financial sponsor party (“Bidder A”) participated in a Hanger management presentation meeting. Following this meeting, BofA Securities had a follow-up telephone conversation with Bidder A. Bidder A ultimately declined to proceed in the process.
 
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On April 12, 2022, representatives of a financial sponsor party (“Bidder B”) participated in a Hanger management presentation meeting. Following this meeting, BofA Securities had a follow-up telephone conversation with Bidder B. Bidder B ultimately did not submit an indication of interest.
On April 12, 2022, representatives of a financial sponsor party (“Bidder C”) participated in a Hanger management presentation meeting. Following this meeting, BofA Securities had multiple follow-up telephone conversations with Bidder C. Bidder C also engaged in high-level due diligence with Hanger management on follow-up questions. Bidder C ultimately did not submit an indication of interest.
On April 13, 2022, representatives of a financial sponsor party (“Bidder D”) participated in a Hanger management presentation meeting. Following this meeting, BofA Securities had a follow-up telephone conversations with Bidder D. Bidder D also engaged in high-level due diligence with follow-up questions. Bidder D ultimately did not submit an indication of interest.
On April 13, 2022, representatives of Patient Square participated in a Hanger management presentation meeting.
On April 13, 2022, representatives of a financial sponsor party (“Bidder E”) participated in a Hanger management presentation meeting. Following this meeting, BofA Securities had multiple follow-up telephone conversations with Bidder E. Bidder E also engaged in high-level due diligence with follow-up questions. Bidder E ultimately did not submit an indication of interest.
On April 15, 2022, on a regularly scheduled monthly Board update video conference, Hanger management updated the Board on the preliminary results for the first quarter of 2022 and updated the Board on the status of the Sale Transaction Process to explore a potential sale of Hanger.
On April 19, 2022, representatives of a financial sponsor party (“Bidder F”) participated in a Hanger management presentation meeting. Bidder F ultimately did not submit an indication of interest.
On April 21, 2022, representatives of a financial sponsor party (“Bidder G”) participated in a Hanger management presentation meeting. Bidder G ultimately did not submit an indication of interest.
On April 21, 2022, representatives of a financial sponsor party (“Bidder H”) participated in a Hanger management presentation meeting. Bidder H ultimately did not submit an indication of interest.
On April 22, 2022, representatives of a financial sponsor party (“Bidder I”) participated in a Hanger management presentation meeting. Bidder I ultimately did not submit an indication of interest.
On April 25, 2022, BofA Securities distributed to Patient Square, Bidder B, Bidder C, Bidder D, Bidder E, Bidder F, Bidder G, Bidder H and Bidder I a process letter requesting non-binding indications of interest from potentially interested parties by no later than May 12, 2022 and supplemental materials regarding Hanger growth scenarios.
On May 4, 2022, Hanger publicly released its first quarter of 2022 earnings. On May 4, 2022, BofA Securities distributed to Patient Square, Bidder C, Bidder D, Bidder E, Bidder F, Bidder G and Bidder H supplemental materials regarding Hanger’s first quarter of 2022 financial results.
On May 12, 2022, Patient Square was the only potentially interested party to submit a non-binding initial indication of interest to acquire Hanger. Patient Square proposed an all-cash purchase price of $18.50 per share, subject to customary conditions, including completing due diligence. In addition, the indications of interest indicated Patient Square intended to finance the merger consideration with a combination of third-party debt and equity capital from its own managed funds and that debt financing would not be a condition to closing. Patient Square also noted its ability to move quickly and that it expected that it could complete its due diligence and sign definitive transaction documentation in approximately four weeks. No other bidders submitted an indication of interest.
On May 16, 2022, during a Board update call held by video conference, BofA Securities reviewed with the Board the status of the Sale Transaction Process, including that outreach had been made to 14 potentially interested parties, with 12 parties expressing interest in evaluating the opportunity, signing a confidentiality agreement and receiving a presentation and the Management Forecast, and ten parties receiving an
 
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executive presentation with Hanger management. BofA Securities discussed with the Board that as the deadline to submit non-binding initial indications of interest approached, market conditions had deteriorated significantly with heightened volatility, broad risk-off investor mentality, rising interest rates, constraints around availability of financing, growing inflationary pressures, and contraction of valuation multiples. BofA Securities also noted that a majority of the potential bidders communicated that they were unable to underwrite the Hanger growth and multiple expansion required to generate expected returns. BofA Securities reviewed with the Board the terms of the non-binding indication of interest received from Patient Square. A representative of Foley discussed with the Board certain matters relating to the process conducted, including fiduciary duty considerations relating to any decision to continue the process. The Board did not make a decision during the call as to whether to continue with the Sale Transaction Process.
At a regularly scheduled Board meeting held by video conference on May 19, 2022, representatives of BofA Securities reviewed with the Board Hanger’s recent stock price performance, macroeconomic factors driving the equity markets, and valuation benchmarking for Hanger. BofA Securities also discussed with the Board certain illustrative valuation metrics based on the Management Forecast previously provided to the Board, and also discussed challenges for Hanger in light of current market conditions and trends and their impact on potential bidders in the process. The Board then met in executive session with only Foley present and deliberated whether to continue the Sale Transaction Process or to terminate it, including a discussion of reasons for and against both strategic alternatives. Upon completion of the discussion, the Board unanimously supported continuing with the next steps of the Sale Transaction Process and directed management to instruct BofA Securities to advise Patient Square that Patient Square would need to increase its per share offer price for Hanger to be in the “twenties” for Patient Square to continue in the process.
On May 19, 2022, representatives of BofA Securities had telephone conversations with representatives of Patient Square to communicate that the proposed price of $18.50 per share was inadequate and that Patient Square would need to increase its per share offer price to be in the “twenties” for Patient Square to continue in the process. Later that day, Patient Square submitted to BofA Securities a revised non-binding indication of interest stating that it saw a path to $20.00 per share, subject to validation of certain assumptions that required access to Hanger management and an in-depth review of Hanger financial and business information to validate. Subsequently, on May 25, 2022, Patient Square received access to a virtual data room of certain limited business and financial information.
On May 25, 2022, representatives of a financial sponsor party (“Bidder J”) contacted BofA Securities expressing interest in Hanger and noting they had done outside due diligence work. On May 26, 2022, Bidder J entered into a confidentiality agreement and was provided with certain process materials from BofA Securities, including the presentation that included the Management Forecast.
On May 27, 2022, representatives of Patient Square and Hanger management held a phone call during which Patient Square conducted financial and business due diligence, including a review of the Management Forecast. Thereafter and into June 2022, Patient Square performed business and operating due diligence. On June 7, 2022, representatives of Patient Square attended a full day management presentation at Hanger’s headquarters in Austin, Texas.
On June 10, 2022, Bidder J had a virtual meeting with Hanger management. Bidder J ultimately declined to proceed in the process.
On June 14, 2022, representatives of Patient Square held a due diligence call with Hanger management on the Management Forecast and cost structure matters.
On June 17, 2022, on a regularly scheduled monthly Board update video conference, Hanger management updated the Board on the status of the Sale Transaction Process to explore a potential sale of Hanger.
On June 19, 2022, representatives of BofA Securities held a telephone conversation with representatives of Patient Square regarding the Sale Transaction Process.
On June 20, 2022, Patient Square submitted a letter to BofA Securities indicating that its time spent with Hanger management and access to Hanger information helped provide confidence to allow it to pay the price of $20.00 per share to which it saw a path in its May 19, 2022 indication of interest, but that in the
 
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intervening time the debt financing markets had moved materially, reducing the aggregate amount of debt that could be raised and increasing interest rates and debt issuance costs, resulting in lower expected returns on equity. As a result, Patient Square reaffirmed its initial valuation of $18.50 per share and noted it did not have additional flexibility to move on valuation. Patient Square also noted it anticipated completing remaining confirmatory due diligence and could sign definitive transaction documentation in the next three weeks.
On June 23, 2022, the Board held an update call by video conference to discuss the letter received from Patient Square. Representatives of BofA Securities reviewed with the Board that since the May 19, 2022 Board meeting, capital markets conditions had continued to deteriorate and debt financing had become increasingly more conservative from a leverage multiple standpoint and expensive from the cost of debt and original issue discount standpoint. Representatives of BofA Securities then reviewed updates to its principal valuation assumptions since the May 19, 2022 Board presentation due to the change in market conditions and updated illustrative valuation metrics, including selected publicly traded companies, selected precedent transactions and discounted cash flow analysis, based on the Management Forecast previously provided to the Board, which remained unchanged. A representative of Foley discussed with the Board certain fiduciary duty matters relating to the Sale Transaction Process, including the desire of the Board to include a “go-shop” period to allow Hanger to solicit proposals after signing of any merger agreement if the Board determined to continue such process. After deliberation, the Board directed BofA Securities to advise Patient Square that Patient Square would need to increase its per share offer price for Hanger to $19.25.
On June 23 and 24, 2022, representatives of BofA Securities had telephone conversations with representatives of Patient Square to communicate that the proposed price of $18.50 per share was inadequate and that Patient Square would need to increase its per share offer price to $19.25. As a result of such discussions Patient Square orally conveyed to BofA Securities that it was able to improve the proposed price to $18.75 per share, but that was Patient Square’s best and final offer.
On June 25, 2022, the Board held an update call by video conference to discuss the most recent offer received from Patient Square. The call began with an executive session of the Board with a representative of Foley reviewing with the Board certain legal matters relating to the Sale Transaction Process to explore a potential sale of Hanger, as well as fiduciary duty considerations. Representatives of BofA Securities then joined the call and reviewed the discussions that had occurred with representatives of Patient Square resulting in the offer of $18.75 per share. BofA Securities was then excused from the meeting and the Board engaged in an extended discussion of whether to continue the Sale Transaction Process with Patient Square at the offered price or to terminate the process, including a discussion of reasons for and against both strategic alternatives. Upon completion of the discussion, the Board unanimously supported continuing with the next steps of the Sale Transaction Process, including proceeding with making additional information available to Patient Square for due diligence and providing to Patient Square an auction draft of a form merger agreement, the key terms of which from a fiduciary duty perspective representatives of Foley had discussed with the Board, and directed management to instruct BofA Securities to obtain a confirmation of Patient Square’s offer of $18.75 per share in writing.
On June 25, 2022, representatives of BofA Securities requested and obtained from Patient Square a letter confirming Patient Square’s updated indication of interest price of $18.75 per share. Patient Square and its advisors were subsequently provided access to a full virtual data room of information for due diligence purposes and a process letter indicating final bids were due on July 19, 2022, with markups of the draft form of merger agreement and other transaction documents due in advance.
Beginning on June 27, 2022 and into July 2022, Hanger and its advisors engaged in an extensive financial, legal and regulatory due diligence process with Patient Square and its advisors, including numerous conference calls on due diligence matters.
On June 28, 2022, Patient Square and its transaction legal counsel, Greenberg Traurig, LLP (“Greenberg”), were provided auction drafts of a form Merger Agreement and a form Limited Guaranty. Among other terms, the draft Merger Agreement included a 45-day “go-shop” period to allow Hanger to solicit proposals after signing the proposed Merger Agreement with Patient Square, a “two-tiered” Hanger termination fee with a lower termination fee of 1.0% of Hanger’s equity value payable if the Merger Agreement was terminated by Hanger to accept a superior proposal during the “go-shop” period (as well as
 
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after the “go-shop” period for certain exempted persons who approached Hanger during the “go-shop” period) and a termination fee of 3.0% of Hanger’s equity value after the “go-shop” period. The draft Merger Agreement also contemplated that Parent, Hanger and their respective affiliates would be required to divest assets, pursue litigation and take certain other actions, if necessary, to obtain antirust and other regulatory approvals (a so-called “hell or high water” regulatory approvals provision). In addition, the draft Merger Agreement provided that Parent would be obligated to pay a reverse termination fee of 10.0% of the equity value of Hanger if the Merger Agreement was terminated due to Parent’s failure to consummate the Merger when required to do so under the Merger Agreement, due to a willful and material breach of the merger agreement by Parent or due to a failure of Parent to obtain antitrust and other regulatory approvals.
On July 6 and 8, 2022, representatives of Patient Square held due diligence calls with Hanger management regarding clinician employment, labor and other costs, reimbursement and payor dynamics and other Hanger business trends.
On July 7, 2022, Foley made available to Greenberg an initial draft of the Disclosure Schedule to the Merger Agreement. Subsequently, Foley sent Greenberg updated drafts of such Disclosure Schedule on which Greenberg commented.
On July 8, 2022, Greenberg sent Foley revised drafts of the Merger Agreement and the Limited Guaranty and an initial draft of the Equity Commitment Letter. The revised draft of the Merger Agreement removed the “go-shop” provision, replaced the “two-tiered” structure for Hanger’s termination fee with a “single-tier” structure and proposed a termination fee of $30 million (approximately 3.9% of Hanger’s equity value), added a provision that if the Merger Agreement was terminated for failure to obtain the Company Stockholder Approval Hanger must reimburse Parent for its transaction fees and expenses, stated that the “hell or high water” regulatory efforts provision was subject to due diligence, proposed a Parent reverse termination fee of $36 million (approximately 4.7% of Hanger’s equity value), and deleted triggers for payment of a Parent reverse termination fee for willful and material breach of the Merger Agreement and failure to obtain regulatory approvals.
On July 11, 2022, Foley had a telephone call with Greenberg to provide high-level feedback on the issues presented by Greenberg’s comments to the draft Merger Agreement. These issues included, among other things: (i) the Board’s desire to include a “go-shop” provision in the Merger Agreement; (ii) the size and structure of the Hanger termination fee; (iii) that Hanger would not agree to expense reimbursement for a failure to obtain the Company Stockholder Approval; (iv) the level of Parent’s efforts to obtain regulatory approvals; and (v) the size of and triggers for the Parent reverse termination fee.
On July 11 and July 12, 2022, representatives of BofA Securities had telephone calls with representatives of Patient Square to also discuss the Board’s desire to include a “go-shop” provision in the Merger Agreement and the expected “hell or high water” efforts to obtain regulatory approvals. During such calls, representatives of Patient Square expressed that Patient Square would not be willing to execute a Merger Agreement that contained a “go-shop” provision.
On July 12, 2022, representatives of Patient Square met with Hanger’s management team for a half-day meeting at Hanger’s headquarters in Austin, Texas for purposes of continuing due diligence as well as to discuss with Hanger’s management Patient Square’s plans for Hanger. During such discussion, Patient Square had an introductory discussion with certain members of Hanger’s management team in which it indicated that it may provide for an equity pool of up to approximately 12% of the equity of Parent or one or more of its affiliates for the granting of new equity awards to Hanger employees after the closing of the Merger, as described in “— Interests of the Directors and Officers of Hanger in the Merger — Compensation Arrangements with Parent”.
On July 12, 2022, Foley sent Greenberg revised drafts of the Merger Agreement, the Limited Guaranty and the Equity Commitment Letter for review and consideration prior to Greenberg submitting a revised draft of the Merger Agreement in advance of the July 15, 2022 Board call to review terms of the draft Merger Agreement. The revised draft of the Merger Agreement reinserted the “go-shop” provision and a “two-tiered” Hanger termination fee of $7.7 million (approximately 1.0% of Hanger’s equity value) if the Merger Agreement was terminated by Hanger to accept a superior proposal during the “go-shop” period and a
 
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termination fee of $23 million (approximately 3.0% of Hanger’s equity value) after the “go-shop” period and deleted the provision requiring Hanger to reimburse Parent for its transaction fees and expenses if the Merger Agreement was terminated for failure to obtain the Company Stockholder Approval. The revised draft continued to include “hell or high water” regulatory efforts provision, increased the Parent reverse termination fee to $56 million (approximately 7.3% of Hanger equity value) and reinserted the triggers for payment of a Parent reverse termination fee for willful and material breach of the Merger Agreement and failure to obtain regulatory approvals.
On July 13, 2022, representatives of BofA Securities had a telephone call with representatives of Patient Square to again discuss the Board’s desire to include a “go-shop” provision in the Merger Agreement and the expected “hell or high water” efforts to obtain regulatory approvals. During such call, representatives of Patient Square reiterated their position that Patient Square would not be willing to execute a Merger Agreement that contained a “go-shop” provision, but expected that they could include the “hell or high water” regulatory efforts provision in the Merger Agreement.
On July 14, 2022, Greenberg had a telephone call with Foley to provide feedback on the open material issues in the draft Merger Agreement. Among other items, Greenberg noted with respect to the request for a “go-shop” provision that the “no solicitation” provisions of the Merger Agreement contained customary “fiduciary out” provisions and that they expected to include the “hell or high water” regulatory efforts provision in the Merger Agreement with some qualifications. The size of both the Hanger termination fee and the Parent reverse termination fee were also discussed, along with the triggers for the Parent reverse termination fee. Greenberg also raised the desire of Patient Square to obtain consents and renewals with respect to certain third party contracts as a closing condition.
On July 14, 2022, Greenberg sent Foley a revised draft of the Merger Agreement that again removed the “go-shop” provision but lowered Hanger’s termination fee from Patient Square’s prior position to $28 million (approximately 3.6% of Hanger’s equity value) and did not include a provision for Hanger reimbursement of Parent’s transaction fees and expenses if the Merger Agreement was terminated for failure to obtain the Company Stockholder Approval. The revised draft also included the “hell or high water” regulatory efforts provision subject to certain qualifications and deleted the Parent reverse termination fee for failure to obtain regulatory approvals. In addition, the revised draft increased the Parent reverse termination fee from Patient Square’s prior position to $39 million (approximately 5.0% of Hanger’s equity value), and deleted the trigger for payment of a Parent reverse termination fee for willful and material breach of the Merger Agreement, but instead permitted that in such a situation Hanger has a damages remedy capped at $45 million.
On July 15, 2022, on a regularly scheduled monthly Board update video conference, representatives of Foley and BofA Securities reviewed with the Board the terms of the Merger Agreement, including the material open items. With respect to the “go-shop” provision, Foley discussed that such a provision was not required under Delaware law given 15 potentially interested parties had been engaged during the Sale Transaction Process and that the Merger Agreement’s “no solicitation” provisions contained customary “fiduciary out” provisions that would permit the Board to consider acquisition proposals from third parties, including from any potential strategic buyers, if they constituted or could reasonably be expected to lead to a Superior Proposal. BofA Securities also discussed with the Board the likelihood that other financial sponsor bidders would have different views regarding Hanger than those expressed by potential bidders in the Sale Transaction Process. Foley discussed that in exchange for eliminating the “go-shop” provision, Hanger could request a two-tiered termination fee of $10 million (approximately 1.3% of Hanger equity value) for the first 45 days after signing of the Merger Agreement and $25 million (approximately 3.3% of Hanger equity value) thereafter. Foley discussed continuing to include the “hell or high water” regulatory efforts provision in the Merger Agreement without qualification in exchange for eliminating the Parent reverse termination fee for failure to obtain regulatory approval. With respect to the Parent reverse termination fee and damages cap, Foley discussed pursuing a reverse termination fee of $50 million (approximately 6.5% of Hanger equity value) and a damages cap for willful and material breaches by Parent of $55 million. As part of the discussion on sizes of both the Hanger termination fee and Parent reverse termination fee, Foley reviewed with the Board data as to the historical median percentages of equity value for such fees. Foley also discussed with the Board that while the Merger Agreement generally provided for limited conditions to closing, including that the condition for accuracy of representations was generally subject to a Company
 
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Material Adverse Effect standard, the request by Patient Square for a closing condition relating to consents and renewal with respect to certain third party contracts created transaction closing uncertainty, and that this proposed closing condition should be deleted. The Board instructed Foley to revise the Merger Agreement consistent with the foregoing.
On July 15, 2022, Foley had a call with Greenberg to discuss the results of the discussion with the Board on the foregoing merger agreement terms and sent Greenberg a revised draft of the Merger Agreement consistent with Foley’s instructions from the Board. Also on July 15, 2022, Greenberg sent Foley revised drafts of the Limited Guaranty and Equity Commitment Letter, which Greenberg and Foley subsequently finalized.
On July 16, 2022, Greenberg sent Foley a revised draft of the Merger Agreement that deleted the two-tiered Hanger termination fee but lowered Hanger’s termination fee from Patient Square’s prior position to $23 million (approximately 3.0% of Hanger’s equity value). The revised draft also included the “hell or high water” regulatory efforts provision without qualification. In addition, the revised draft increased the Parent reverse termination fee from Patient Square’s prior position to $45 million (approximately 5.9% of Hanger’s equity value) and increased the damages cap for a willful and material breach by Parent to $50 million. The revised draft also noted the potential closing condition to obtain consents and renewals with respect to certain third party contracts would be the subject of a discussion between Hanger management and Patient Square.
On July 17, 2022, Foley sent Greenberg a revised draft of the Merger Agreement in an effort to resolve minor open issues, but reserved comment on open issues that had been the subject of the July 15, 2022 Board call pending further discussion with the Board on those items.
On July 18, 2022, Hanger management and representatives of Patient Square held a call to review Hanger’s preliminary financial results for the second quarter of 2022 and various matters regarding a proposed Merger, including the potential closing condition regarding consents and renewals with respect to certain third party contracts, which Patient Square agreed was not necessary. During such call, Patient Square had an introductory discussion with certain members of Hanger’s management team in which it indicated that it expects members of Hanger’s management team to use a portion of the proceeds they receive from the Merger to purchase equity of Parent or one or more of its affiliates, on customary terms, as described in “— Interests of the Directors and Officers of Hanger in the Merger — Compensation Arrangements with Parent”.
On July 18, 2022, Foley and Greenberg held a call to discuss various items to finalize the draft Merger Agreement and other transactions documents.
On July 18, 2022, Greenberg sent Foley a revised draft of the Disclosure Schedules to the Merger Agreement.
On July 19, 2022, Hanger management and representatives of Patient Square held a call to review the Management Forecast.
On July 19, 2022, Greenberg submitted to Foley as Patient Square’s final bid documentation, a revised draft of the Merger Agreement, which included the $18.75 per share Merger Consideration, revised drafts of the Equity Commitment Letter and Limited Guaranty, a draft of the Debt Commitment Letter and the revised draft of the Disclosure Schedules to the Merger Agreement.
On July 19, 2022, the Board held a special meeting by video conference, together with Hanger’s management and financial and legal advisors, to review Patient Square’s final proposal, including the terms of the proposed Merger Agreement. Foley reviewed the Board’s fiduciary duties in connection with the Board’s process to review strategic alternatives, including in connection with a potential sale transaction. BofA Securities reviewed a summary of the Sale Transaction Process and summarized key financial and other terms of Patient Square’s bid, which included an all-cash offer at a price of $18.75 per share, including the implied premiums and multiples that such price represented. BofA Securities also discussed selected terms of the merger agreement. BofA Securities then reviewed Hanger’s stock price performance, market benchmarking for Hanger, and updates to BofA Securities’ financial analysis and related assumptions since the June 23, 2022 Board presentation. Hanger management also discussed with the Board Hanger’s
 
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preliminary second quarter of 2022 financial results. Foley then reviewed the terms of the Merger Agreement, a copy of which, along with a summary thereof, was provided to the Board prior to the meeting. Foley reported that the Merger Agreement was substantially finalized other than the size of the Hanger termination fee, with respect to which, after discussion, the Board directed Foley and BofA Securities to request a decrease to $20 million (approximately 2.6% of Hanger equity value), and the size of the Parent reverse termination fee and damages cap, with respect to which, after discussion, the Board determined Patient Square’s most recent amounts were acceptable. Foley also reviewed with the Board the interests Hanger executive officers and directors may have in the Merger that may be different from, or in addition to, those of Hanger stockholders, as described in “— Interests of the Directors and Officers of Hanger in the Merger”, including calculations of estimated benefits to executive officers, a summary of which was provided to the Board before the meeting.
Over the course of July 19 and 20, 2022, Foley had multiple calls with Greenberg to discuss finalizing the Merger Agreement and other transaction documents and continued to exchange revised drafts thereof to finalize the Merger Agreement and other transaction documents. Foley conveyed the Board’s request for a $20 million Hanger termination fee. However, Greenberg noted that Patient Square was not willing to transact with a Hanger termination fee of less than $23 million.
On July 21, 2022, the Board held a special meeting by video conference, together with Hanger’s management and financial and legal advisors. Foley again reviewed the Board’s fiduciary duties, including in connection with consideration of approving the proposed Merger Agreement. Foley discussed the key terms of the merger agreement. Also at this meeting, BofA Securities reviewed with the Board certain transaction considerations and its financial analysis of the Merger Consideration and delivered to the Board an oral opinion, which was confirmed by delivery of a written opinion dated July 21, 2022, to the effect that, as of that date and based on and subject to various assumptions and limitations described in such opinion, the Merger Consideration to be received by holders of Hanger common stock (other than Dissenting Shares), was fair, from a financial point of view, to such holders, as more fully described in the section entitled “— Fairness Opinion of BofA Securities, Inc.” Foley then reviewed resolution of the key terms of the Merger Agreement, a copy of which, along with a summary thereof, was provided to the Board before the meeting, and noted with respect to the Hanger termination fee of $23 million that, based on historical median percentages of equity value for such fees, the size of the termination fee was slightly below the median for similar transactions and that combined with the customary “fiduciary out” provisions contained in the Merger Agreement was reasonable for the Board to determine to accept. Foley also reviewed the Board resolutions that the Board would consider at the meeting.
Having considered the various reasons to approve the Merger Agreement (see “— Recommendation of Our Board of Directors and Reasons for the Merger”), as well as certain countervailing factors noted therein, and taking into account the numerous discussions with Hanger’s management and financial and legal advisors, the Board unanimously:

determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders;

approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger;

directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval; and

recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
After the close of regular trading on the NYSE on July 21, 2022, each of Hanger, Parent and Merger Sub executed and delivered the Merger Agreement and the other ancillary documents to which they are a party. Thereafter, Hanger issued a press release announcing the execution of the Merger Agreement.
Recommendation of Our Board of Directors and Reasons for the Merger
Recommendation of Our Board of Directors
On July 21, 2022, the Board, after consulting with its financial advisor and outside legal counsel and carefully reviewing and considering various factors described in “— Reasons for the Merger,” unanimously
 
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(i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
The Board unanimously recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Adjournment Proposal; and (iii) “FOR” the Compensation Proposal.
Reasons for the Merger
In evaluating the Merger Agreement and the Merger, the Board consulted with Hanger’s management and its financial advisor, BofA Securities, and outside counsel, Foley. The Board carefully reviewed and considered a number of factors, including the following factors (which are not necessarily listed in order of relative importance), all of which it viewed as generally supporting its unanimous (i) determination and declaration that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of Hanger and its stockholders, (ii) approval of the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) direction that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommendation that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger:

the fact that the Merger Consideration represents an implied premium of approximately 26% over the closing price of Hanger common stock of $14.91 on July 20, 2022, the last full trading day before the Merger Agreement was entered into and announced, an implied premium of approximately 29% over the 30 calendar day volume-weighted average price ending July 20, 2022, and an implied premium of approximately 24% over the 90 calendar day volume-weighted average price ending July 20, 2022;

the fact that the Merger Consideration of $18.75 per share will be paid in cash, and provides certainty, immediate value and liquidity to Hanger’s stockholders, enabling them to realize value for their interest in Hanger relative to future execution and market risks presented by a challenging macroeconomic, operating and capital markets environment;

the belief of the Board, based on, among other things, a review of the Company’s business, market trends, results of operations and financial condition, and discussions with the Company’s management and its financial and legal advisors, that Hanger stockholders will have limited opportunities in the future to realize value in the public market for a variety of reasons, including the fact that the market for Hanger common stock has historically been negatively impacted by low trading volume, limited investor interest, concentrated stock ownership levels, and lack of attention from research analysts;

the belief of the Board, after review of Hanger’s business, financial condition, results of operations, market trends, competitive landscape, execution risks and strategic alternatives, and discussions with Hanger’s management and financial and legal advisors, that the value offered to Hanger stockholders pursuant to the Merger Agreement is more favorable to Hanger stockholders than the potential long-term and sustainable value that might have resulted from remaining an independent public company, considering:

the view of the Board that the state of the U.S. economy and resulting impact on capital markets, a higher interest rate environment with tighter lending conditions and lower investor tolerance for public company leverage present a potentially difficult operating environment for Hanger as a public company;

uncertainty regarding execution of Hanger’s strategic plan and management projections in light of the evolving macro-economic environment, including the impact of inflation on reimbursement rates, the impact of an inflationary environment on controlling costs, and the
 
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impact of tight labor markets on hiring and retention of employees and ultimately clinic relationships and productivity;

the costs associated with compliance with regulations pertaining to public companies; and

the historical, current and prospective financial condition, results of operations and business of Hanger;

the strategic alternatives review process undertaken by the Board prior to the signing of the Merger Agreement, which included outreach to 15 potential private equity bidders as described under “— Background of the Merger”, and which resulted in Parent’s submission of its final offer of $18.75 per share;

the belief of the Board, based upon arm’s length negotiations resulting in Parent’s submission of its final offer of $18.75 per share, that the price to be paid by Parent was the highest price per share that Parent was willing to pay for Hanger under the then-current facts and circumstances;

the fact that the Merger Agreement was the product of arm’s length negotiations, as well as the belief of the Board, based on these negotiations, that these were the most favorable terms to Hanger and its stockholders on which Parent was willing to agree under the then-current facts and circumstances;

the business reputation and capabilities of Patient Square and its management, and the ability of Patient Square to complete the Merger;

the belief that Parent had access to the resources needed to complete the Merger, including having obtained the Debt Financing Commitments for the transactions from a reputable financial institution and the Equity Financing Commitment from Patient Square Equity, and that Parent had agreed to use reasonable best efforts to consummate the Debt Financing and the Equity Financing in accordance with their respective terms;

the likelihood that the Merger will be consummated, based upon, among other things, the limited number of conditions to the Merger, the absence of a financing condition, the likelihood of obtaining required regulatory approvals and contractual commitments by Parent to use its reasonable best efforts to obtain such regulatory approvals and the remedies available under the Merger Agreement to Hanger in the event of any breaches by Parent;

the opinion provided by BofA Securities, dated July 21, 2022, to the Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Merger Consideration to be received by holders of Hanger common stock (other than Dissenting Shares), as more fully described in the section entitled “— Fairness Opinion of BofA Securities, Inc.” The full text of the opinion is attached as Appendix C to this proxy statement;

the terms and conditions of the Merger Agreement and other transaction agreements, including the following related factors:

the right, prior to receipt of the Company Stockholder Approval, for the Board to furnish information and to engage in discussions or negotiations made by a third party with regard to any Acquisition Proposal that the Board determines in good faith, after consultation with its independent financial advisors and outside counsel, constitutes or could reasonably be expected to lead to a Superior Proposal;

the ability of the Board, subject to certain limitations, to withdraw or modify its recommendation that stockholders vote in favor of adoption and approval of the Merger Agreement in connection with the receipt of a Superior Proposal or the occurrence of an Intervening Event (as defined in “The Merger Agreement — No Solicitation of Other Offers; Change of Board Recommendation”) if the Board determines in good faith, after consultation with outside counsel, that failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties under applicable law, and the Board’s right to terminate the Merger Agreement to accept a Superior Proposal and enter into a definitive agreement with respect to such Superior Proposal, subject to payment of a termination fee;
 
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the belief of the Board, based upon the advice of its financial and legal advisors, that the termination fee and the circumstances in which such termination fee may be payable are reasonable in light of the benefit of the Merger and would not be a significant impediment to third parties interested in making an Acquisition Proposal;

the representations, warranties and covenants of Hanger in the Merger Agreement;

the obligation of Parent to use its reasonable best efforts to obtain certain regulatory approvals;

the obligation of Parent to use its reasonable best efforts to consummate the Equity Financing and the Debt Financing;

the conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of the Company’s representations and warranties, is generally subject to a Company Material Adverse Effect qualification;

the absence of a financing condition to Parent’s obligation to consummate the Merger;

the fact that Parent has received the Equity Commitment Letter, which will provide sufficient funds for Parent, together with the proceeds of the Debt Financing, to consummate the Merger;

the fact that, pursuant to the Merger Agreement, Hanger is entitled to specific performance and other equitable remedies to prevent breaches of the Merger Agreement and, under appropriate circumstances, may enforce Parent’s obligation to cause the Equity Financing to be timely completed;

the fact that the Merger Agreement provides that, if the Merger is not consummated under certain circumstances, and as an alternative to specific performance under the Merger Agreement, Parent will pay Hanger a $45 million reverse termination fee, and that such payment obligation is guaranteed by Patient Square Equity;

the fact that the Merger would be subject to approval by Hanger’s stockholders and that the stockholders would be free to evaluate the Merger and vote for or against the adoption and approval of the Merger Agreement at the special meeting; and

the availability of statutory appraisal rights to Hanger stockholders who do not vote in favor of the adoption and approval of the Merger Agreement and otherwise comply with all required procedures applicable to appraisal rights under Section 262 of the DGCL.
The Board also considered a variety of risks and other potentially negative factors with respect to the Merger Agreement and the Merger, including the following (which are not listed in any relative order of importance):

the fact that, following the consummation of the Merger, Hanger would no longer exist as an independent, publicly traded company, and that the consummation of the Merger and receipt of the Merger Consideration, while providing relative certainty of value, will not allow Hanger stockholders to participate in any potential future earnings or growth or benefit from any potential future appreciation in value of Hanger as a private company;

the restrictions in the Merger Agreement on soliciting competing Acquisition Proposals to acquire Hanger from the date of the Merger Agreement;

the restrictions in the Merger Agreement on Hanger’s ability to terminate the Merger Agreement in connection with the receipt of a Superior Proposal, including the fact that the Board must (i) provide five days’ written notice to Parent of its intention to effect a Change of Board Recommendation or terminate the Merger Agreement in order to provide Parent with an opportunity to match a Superior Proposal and (ii) negotiate in good faith with Parent during such period, and the discouraging effect this may have on potential other bidders;

the requirement that Hanger may be required to pay Parent a termination fee of $23 million under certain circumstances after the date of the Merger Agreement, including the potential effect of the termination fee to deter other potential bidders from making an Acquisition Proposal for Hanger, and
 
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the impact of the termination fee on Hanger’s ability to engage in another transaction for twelve months if the Merger Agreement is terminated in certain circumstances;

the risk that the conditions to the consummation of the Merger may not be satisfied (including the expiration or termination of the waiting period under the HSR Act) and, as a result, the possibility that the Merger may not be completed in a timely manner or at all, even if the Merger Agreement is adopted and approved by Hanger’s stockholders;

the possibility that the Debt Financing contemplated by the Debt Commitment Letter and the Equity Financing contemplated by the Equity Commitment Letter will not be obtained, resulting in Parent not having sufficient funds to complete the Merger;

the potential negative effects if the Merger is not consummated in a timely manner or at all, including that:

the trading price of Hanger common stock could be adversely affected;

Hanger will have incurred significant transaction and opportunity costs attempting to complete the Merger;

Hanger could lose customers, suppliers, business partners and employees, including key sales and other personnel;

Hanger’s business may be subject to significant disruption and decline;

the market’s perceptions of Hanger’s prospects could be adversely affected; and

Hanger’s directors, officers and other employees will have expended considerable time and effort to consummate the Merger;

the fact that Parent and Merger Sub are newly formed entities with no material assets other than the Commitment Letters, and that, notwithstanding Hanger’s specific performance remedy under the Merger Agreement, Hanger’s remedy in the event of a breach of the Merger Agreement by Parent or Merger Sub may be limited to receipt of the $45 million reverse termination fee, that the monetary liability of Parent and Merger Sub under the Merger Agreement, and that of Patient Square Equity under the Limited Guaranty, is capped at $50 million with respect to willful and material breaches, and that under certain circumstances Hanger may not be entitled to the reverse termination fee or monetary damages at all;

the significant costs involved in connection with entering into the Merger Agreement and consummating the Merger (many of which are payable whether or not the Merger is consummated), including in connection with any litigation that may arise in the future, and the substantial time and effort of Hanger’s management required to complete the Merger, which may disrupt its normal business operations and have a negative effect on its financial results;

the restrictions imposed by the terms of the Merger Agreement on the conduct of Hanger’s business prior to completion of the Merger, which may delay or prevent Hanger from undertaking business opportunities that may arise pending completion of the Merger and the resultant risk if the Merger is not consummated;

the fact that any gain realized by Hanger stockholders as a result of the Merger will generally be taxable for U.S. federal income tax purposes to those stockholders that are U.S. persons subject to taxation in the United States; and

the fact that Hanger’s executive officers and directors may have interests in the Merger that may be different from, or in addition to, those of Hanger stockholders. See “— Interests of the Directors and Officers of Hanger in the Merger”.
After taking into account the factors set forth above, as well as others, the Board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the Merger were outweighed by the potential benefits of the Merger to Hanger’s stockholders. Accordingly, the Board unanimously (i) determined and declared that the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best
 
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interests of Hanger and its stockholders, (ii) approved the Merger Agreement, the ancillary agreements to which Hanger is a party and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement, including the Merger, be submitted to the stockholders of Hanger for its adoption and approval and (iv) recommended that Hanger’s stockholders adopt and approve the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.
The foregoing discussion summarizes the material factors considered by the Board, but is not intended to be exhaustive. In light of the variety of factors considered in connection with its evaluation of the Merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Board applied his or her own business judgment to the process and may have given different weight to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination and recommendation. The Board based its recommendation on the totality of the information presented, including its discussions with, and questioning of, Hanger’s management and its financial advisors and outside legal counsel. This explanation of the reasoning of the Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Concerning Forward-Looking Statements”.
Fairness Opinion of BofA Securities, Inc.
Hanger has retained BofA Securities to act as Hanger’s financial advisor in connection with the Merger. BofA Securities is an internationally recognized investment banking firm which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Hanger selected BofA Securities to act as Hanger’s financial advisor in connection with the Merger on the basis of BofA Securities’ experience in transactions similar to the Merger, its reputation in the investment community and its familiarity with Hanger and its business.
On July 21, 2022, at a meeting of the Board held to evaluate the Merger, BofA Securities delivered to the Board an oral opinion, which was confirmed by delivery of a written opinion dated July 21, 2022, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the Merger Consideration to be received by holders of Hanger common stock (other than Dissenting Shares) was fair, from a financial point of view, to such holders.
The full text of BofA Securities’ written opinion to the Board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Appendix C to this proxy statement and is incorporated by reference herein in its entirety. The following summary of BofA Securities’ opinion is qualified in its entirety by reference to the full text of the opinion. BofA Securities delivered its opinion to the Board for the benefit and use of the Board (in its capacity as such) in connection with and for purposes of its evaluation of the Merger Consideration from a financial point of view. BofA Securities’ opinion does not address any other aspect of the Merger and no opinion or view was expressed as to the relative merits of the Merger in comparison to other strategies or transactions that might be available to Hanger or in which Hanger might engage or as to the underlying business decision of Hanger to proceed with or effect the Merger. BofA Securities’ opinion does not address any other aspect of the Merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed Merger or any other matter.
In connection with rendering its opinion, BofA Securities has, among other things:

reviewed certain publicly available business and financial information relating to Hanger;

reviewed certain internal financial and operating information with respect to the business, operations and prospects of Hanger furnished to or discussed with BofA Securities by the management of Hanger, including the Management Forecasts;

discussed the past and current business, operations, financial condition and prospects of Hanger with members of senior management of Hanger;

reviewed the trading history for Hanger common stock and a comparison of that trading history with the trading histories of other companies BofA Securities deemed relevant;
 
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compared certain financial and stock market information of Hanger with similar information of other companies BofA Securities deemed relevant;

compared certain financial terms of the Merger to financial terms, to the extent publicly available, of other transactions BofA Securities deemed relevant;

considered the results of BofA Securities’ efforts on behalf of Hanger to solicit, at the direction of Hanger, indications of interest and definitive proposals from third parties with respect to a possible acquisition of Hanger;

reviewed a draft, dated July 21, 2022, of the merger agreement, referred to in this section of the proxy statement as the “Draft Agreement”; and

performed such other analyses and studies and considered such other information and factors as BofA Securities deemed appropriate.
In arriving at its opinion, BofA Securities assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with BofA Securities and BofA Securities relied upon the assurances of the management of Hanger that it was not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the Management Forecasts, BofA Securities was advised by Hanger, and assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Hanger as to the future financial performance of Hanger. BofA Securities did not make and was not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Hanger, nor did it make any physical inspection of the properties or assets of Hanger. BofA Securities did not evaluate the solvency or fair value of Hanger, Parent or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Securities assumed, at the direction of Hanger, that the Merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Hanger or the contemplated benefits of the Merger. BofA Securities also assumed, at the direction of Hanger, that the final executed merger agreement would not differ in any material respect from the Draft Agreement reviewed by BofA Securities.
BofA Securities expressed no view or opinion as to any terms or other aspects or implications of the Merger (other than the Merger Consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the Merger, any related transaction or any other agreement, arrangement or understanding entered into in connection with or related to the Merger or otherwise. BofA Securities’ opinion was limited to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of Hanger common stock (other than Dissenting Shares) and no opinion or view was expressed with respect to any consideration received in connection with the Merger by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the Merger, or class of such persons, relative to the Merger Consideration or otherwise. Furthermore, no opinion or view was expressed as to the relative merits of the Merger in comparison to other strategies or transactions that might be available to Hanger or in which Hanger might engage or as to the underlying business decision of Hanger to proceed with or effect the Merger. BofA Securities did not express any view or opinion with respect to, and relied, with Hanger’s consent, upon the assessments of Hanger and its representatives regarding, legal, regulatory, accounting, tax and similar matters relating to Hanger or the Merger (including the contemplated benefits thereof), as to which matters BofA Securities understood that Hanger had obtained such advice as Hanger deemed necessary from qualified professionals. In addition, BofA Securities expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the Merger or any other matter. Except as described in this summary, Hanger imposed no other limitations on the investigations made or procedures followed by BofA Securities in rendering its opinion.
 
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BofA Securities’ opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Securities as of, the date of its opinion. BofA Securities noted that the credit, financial and stock markets had been experiencing unusual volatility and BofA Securities expressed no opinion or view as to any potential effects of such volatility on Hanger, Parent or the Merger. It should be understood that subsequent developments may affect its opinion, and BofA Securities does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Securities’ opinion was approved by a fairness opinion review committee of BofA Securities.
The discussions set forth below in the section entitled “— Hanger Financial Analyses” represents a brief summary of the material financial analyses presented by BofA Securities to the Board in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Securities.
Hanger Financial Analyses
Selected Publicly Traded Companies Analysis
BofA Securities reviewed publicly available financial and stock market information for Hanger and the following 10 publicly traded companies in the outsourced physician services and post-acute care and rehabilitation businesses:
Outsourced Physician Services Companies

Surgery Partners, Inc.

Acadia Healthcare Company, Inc.

Pediatrix Medical Group, Inc.

DaVita Inc.
Post-Acute Care and Rehabilitation Companies

ATI Physical Therapy, Inc.

U.S. Physical Therapy, Inc.

The Pennant Group, Inc.

The Ensign Group, Inc.

Encompass Health Corporation

Select Medical Holdings Corporation
BofA Securities reviewed, among other things, enterprise values (“EV”) of the selected publicly traded companies, calculated as equity values based on closing stock prices on July 20, 2022, plus debt and minority interests, and less cash and cash equivalents, as a multiple of fiscal year 2022 and 2023 estimated adjusted earnings before interest, taxes, depreciations and amortization, not burdened by stock-based compensation, referred to as Adjusted EBITDA, as set forth in the table below. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates, and estimated financial data of Hanger were based on the Management Forecasts.
Enterprise Value / Estimated Adjusted EBITDA
Selected Publicly Traded Companies
2022E
2023E
Outsourced Physician Services
Companies

Surgery Partners, Inc.
16.3x
14.3x

Acadia Healthcare Company, Inc.
14.3x 13.1x

Pediatrix Medical Group, Inc.
10.2x 9.5x

DaVita Inc.
8.2x 7.1x
 
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Enterprise Value / Estimated Adjusted EBITDA
Selected Publicly Traded Companies
2022E
2023E
Post-Acute Care and Rehabilitation Companies

ATI Physical Therapy, Inc.
23.9x
10.7x

U.S. Physical Therapy, Inc.
21.8x 20.3x

The Pennant Group, Inc.
12.2x 10.0x

The Ensign Group, Inc.
10.9x 10.0x

Encompass Health Corporation
9.7x 8.8x

Select Medical Holdings Corporation
9.5x 8.1x

Hanger, Inc.
7.9x 7.3x
The median Enterprise Value / fiscal year 2022 estimated Adjusted EBITDA multiple observed for the outsourced physician services companies, which include Surgery Partners, Inc., Acadia Healthcare Company, Inc., Pediatrix Medical Group, Inc. and DaVita Inc., was 12.3x. The median Enterprise Value / fiscal year 2023 estimated Adjusted EBITDA observed for such companies was 11.3x.
The median Enterprise Value / fiscal year 2022 estimated Adjusted EBITDA multiple observed for the post-acute care and rehabilitation services companies, which include ATI Physical Therapy, Inc., U.S. Physical Therapy, Inc., The Pennant Group, Inc., The Ensign Group, Inc., Encompass Health Corporation and Select Medical Holdings Corporation, was 11.5x. The median Enterprise Value / fiscal year 2023 estimated Adjusted EBITDA observed for such companies was 10.0x.
The overall low to high Enterprise Value / fiscal year 2022 and 2023 Adjusted EBITDA multiples observed for all of the selected publicly traded companies were 8.2x to 23.9x and 7.1x to 20.3x, respectively.
Based on its professional judgment and experience, BofA Securities applied fiscal year 2022 and 2023 EBITDA multiples of 8.0x to 10.5x and 7.0x to 9.5x, respectively, derived from the selected publicly traded companies, to Hanger’s fiscal year 2022 and 2023 Adjusted EBITDA of $137 million and $149 million, respectively, as set forth in the Management Forecasts, to calculate ranges of implied enterprise values for Hanger.
This analysis indicated the following approximate implied per share value reference ranges for Hanger, rounded to the nearest $0.25, as compared to the Merger Consideration:
Implied Per Share Value Reference Ranges for Hanger
2022 Estimated Adjusted EBITDA
2023 Estimated Adjusted EBITDA
Merger Consideration
$15.25 – $23.50
$ 13.75 – $22.75 $ 18.75
No company used in this analysis is identical or directly comparable to Hanger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Hanger was compared.
Selected Precedent Transactions Analysis.
BofA Securities reviewed, to the extent publicly available, financial information relating to the following 15 selected transactions involving companies in the rehabilitation, outsourced physician services, post-acute care and specialty patient care businesses:
 
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Date Announced
Acquiror
Target
Transaction Value /
LTM Adjusted
EBITDA
Rehabilitation Companies
June 21, 2021
LifePoint Health, Inc.
Kindred Healthcare, Inc.
N/A
February 22, 2021 Fortress Value Acquisition Corp. II ATI Physical Therapy, Inc. 18.2x
October 23, 2017 Select Medical Holdings Corporation U.S. HealthWorks, Inc. 12.0x
January 25, 2016 Select Medical Holdings Corporation Physiotherapy Associates Holdings, Inc. 12.5x
June 11, 2015 Encompass Health Corp. Reliant Hospital Partners, LLC 8.9x
Outsourced Physician Services Companies
June 11, 2018
KKR & Co. L.P.
Envision Healthcare Corporation
10.9x
October 31, 2016 Blackstone Inc. Team Health Holdings, Inc. 12.8x
June 16, 2014 Surgery Partners, Inc. Symbion Inc. 10.3x
October 18, 2010 Hanger, Inc. Accelerated Care Plus Corporation 9.1x
Post-Acute Care Companies
April 25, 2018
ProMedica Health System, Inc.
HCR ManorCare Inc.
N/A
December 19, 2017
Humana Inc., TPG Inc. and Welsh, Carson, Anderson & Stowe Kindred Healthcare, Inc. 9.5x
October 9, 2014 Kindred Healthcare, Inc. Gentiva Health Services, Inc. 11.1x
August 18, 2014 Genesis Healthcare, Inc. Skilled Healthcare Group, Inc. 11.3x
Special Patient Care Companies
August 30, 2016
Clayton, Dubilier & Rice LLP
Drive DeVilbiss Healthcare, Inc.
N/A
July 1, 2015 Madison Dearborn Partners Patterson Companies, Inc. 10.6x
BofA Securities reviewed transaction values, calculated as the enterprise value implied for the target company based on the consideration payable in the selected transaction, as a multiple of the target company’s latest 12 months (“LTM”) Adjusted EBITDA. The overall low to high transaction value / LTM Adjusted EBITDA multiples observed for the selected transactions were 8.9x to 18.2x (with a mean of 11.4x and a median of 11.0x). Based on its professional judgment and experience and after taking into consideration, among other things, the observed data for the selected precedent transactions, BofA Securities then applied a selected range of transaction value / LTM Adjusted EBITDA multiples of 9.5x to 11.5x. Estimated financial data of the selected transactions were based on publicly available information at the time of announcement of the relevant transaction, and estimated financial data of Hanger were based on the Management Forecasts. This analysis indicated the following approximate implied per share value reference ranges for Hanger, rounded to the nearest $0.25, as compared to the Merger Consideration:
 
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Implied Per Share Value Reference Ranges for Hanger
LTM Q1’22A Adjusted EBITDA
Merger Consideration
$14.75 – $20.50
$ 18.75
No company, business or transaction used in this analysis is identical or directly comparable to Hanger or the Merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which Hanger and the Merger were compared.
Discounted Cash Flow Analysis.
BofA Securities performed a discounted cash flow analysis of Hanger to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Hanger was forecasted to generate during Hanger’s fiscal year 2022 (second through fourth quarters) through fiscal year 2026 based on the Management Forecasts. BofA Securities calculated terminal values for Hanger by applying terminal forward multiples of 8.5x to 10.5x, based on the historical trading range for the Hanger stock as a multiple of Adjusted EBITDA, to the terminal year Adjusted EBITDA. The cash flows and terminal values were then discounted to present value as of March 31, 2022 using discount rates ranging from 7.75% to 9.25%, which were based on an estimate of Hanger’s weighted average cost of capital. This analysis indicated the following approximate implied per share value reference ranges for Hanger, rounded to the nearest $0.25, as compared to the Merger Consideration:
Implied Per Share Value
Reference Range for Hanger
Merger Consideration
$17.25 – $25.25
$ 18.75
Other Factors
BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ material financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

historical trading prices and trading volumes of Hanger common stock, which indicated low and high closing prices for Hanger common stock during the 52-week period ended July 20, 2022 of approximately $13.77 to $25.44; and

one-year future stock price targets for Hanger common stock in the two publicly available research analyst reports, which were last updated on December 14, 2021 and February 8, 2022, prior to the announcement of the Merger, and which indicated stock price targets for Hanger, discounted to present value utilizing Hanger’s cost of equity of approximately 10%, of a range of $21.75 to $25.50.
Miscellaneous
As noted above, the discussion set forth above in the section entitled “— Hanger Financial Analyses” represents a brief summary of the material financial analyses presented by BofA Securities to the Board in connection with its opinion and is not a comprehensive description of all analyses undertaken or the factors considered by BofA Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Securities believes that its analyses summarized above must be considered as a whole. BofA Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Securities’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.
 
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In performing its analyses, BofA Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Hanger. The estimates of the future performance of Hanger in or underlying BofA Securities’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Securities’ analyses. These analyses were prepared solely as part of BofA Securities’ analysis of the fairness, from a financial point of view, of the Merger Consideration and were provided to the Board in connection with the delivery of BofA Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Securities’ view of the actual values of Hanger.
The type and amount of consideration payable in the Merger was determined through negotiations between Hanger and Parent, rather than by any financial advisor, and was approved by the Board. The decision to enter into the Merger agreement was solely that of the Board. As described above, BofA Securities’ opinion and analyses were only one of many factors considered by the Board in its evaluation of the proposed Merger and should not be viewed as determinative of the views of the Board or Hanger’s management with respect to the Merger or the Merger Consideration.
Hanger has agreed to pay BofA Securities for its services in connection with the Merger an aggregate fee of approximately $14 million, $1 million of which was payable upon the delivery of its opinion and the remaining portion of which is contingent upon the consummation of the Merger. Hanger also has agreed to reimburse BofA Securities for its expenses incurred in connection with BofA Securities’ engagement and to indemnify BofA Securities, any controlling person of BofA Securities and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.
BofA Securities and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Securities and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of (i) Hanger and certain of its affiliates, and (ii) Parent and certain of its affiliates, including Patient Square and certain of its affiliates and portfolio companies.
BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Hanger and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as an administrative agent, collateral agent, arranger, book-running manager and/or bookrunner for, and/or as a lender under, certain letters of credit, credit and leasing facilities and other credit arrangements of Hanger and/or certain of its affiliates, (ii) having provided or providing certain foreign exchange trading services to Hanger and/or certain of its affiliates, and (iii) having provided or providing certain treasury management products and services to Hanger and/or certain of its affiliates. From July 1, 2020 through June 30, 2022, BofA Securities and its affiliates derived aggregate revenues from Hanger and certain of its affiliates of approximately $6 million for investment and corporate banking services.
In addition, BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Parent and certain of its affiliates, including Patient Square and certain of its affiliates and portfolio companies, and have received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as an arranger and/or bookrunner for, and/or as a lender under, certain term loans, credit facilities and other credit arrangements of Parent and/or certain of its affiliates, including Patient Square Capital and/or certain of its affiliates and portfolio companies (including acquisition financing), and (ii) having provided or providing certain treasury management products and services to Parent and/or certain of its
 
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affiliates, including Patient Square Capital and/or certain of its affiliates and portfolio companies. From July 1, 2020 through June 30, 2022, BofA Securities and its affiliates derived aggregate revenues from Parent and certain of its affiliates, including Patient Square Capital and certain of its affiliates and portfolio companies, of approximately $3 million for investment and corporate banking services.
Certain Financial Projections
Except for a financial outlook with respect to the current fiscal year issued in connection with its ordinary course earnings announcements, Hanger does not normally publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer-term periods. In connection with the evaluation of the Merger, Hanger’s management prepared and provided to the Board and BofA Securities the Management Forecasts. Hanger is including a summary of the Management Forecasts to provide Company stockholders with access to information that was made available to the Board in connection with its evaluation of the Merger and the Merger Consideration. In addition, a summary of the Management Forecasts was made available to Parent and Merger Sub at Parent’s request in connection with their due diligence review of Hanger. The Management Forecasts were also made available to BofA Securities in connection with the rendering of its financial fairness opinion to the Board, as more fully described in “—Fairness Opinion of BofA Securities, Inc.” The summary of the Management Forecasts may not be appropriate for other purposes and is not being included in this proxy statement to influence a Company stockholder’s decision whether to vote in favor of the Merger Proposal or any other proposal. Please read the information set forth in this section below under the heading “Important Information Regarding the Management Forecasts.”
The following table presents a summary of the Management Forecasts.
Year ended December 31,
($ in millions)
2022E(3)
2023E
2024E
2025E
2026E
Net Revenue
$ 981 $ 1,315 $ 1,389 $ 1,465 $ 1,543
Adjusted EBITDA(1)
$ 129 $ 149 $ 165 $ 180 $ 195
Unlevered Free Cash Flow(2)
$ 37 $ 27 $ 34 $ 47 $ 59
(1)
Adjusted EBITDA is a non-GAAP financial measure, which is defined as operating income before depreciation and amortization, and adjusted to exclude expenses associated with stock based compensation, severance expenses, certain expenses incurred in connection with acquisitions (including the Merger and the Merger Agreement) and certain other charges.
(2)
Unlevered Free Cash Flow, as derived from the Management Forecast, means (a) Adjusted EBITDA less stock based compensation, depreciation and amortization, all tax effected, plus (b) depreciation and amortization, less (c) changes in net working capital, acquisition expenditures and capital expenditures.
(3)
The amounts presented for 2022 reflect the nine-month period ending December 31, 2022. All other years presented reflect full twelve-month periods.
Important Information Regarding the Management Forecasts
The Management Forecasts were developed by Hanger’s management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Forecasts do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. Although the Management Forecasts are presented with numerical specificity, they were based on numerous variables and assumptions made by Hanger’s management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Hanger’s business, all of which are difficult or impossible to predict accurately and many of which are beyond Hanger’s control. The Management Forecasts constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Forecasts, including, but not limited to, the
 
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factors set forth in “Cautionary Statement Concerning Forward-Looking Statements” and the various risks set forth in Hanger’s reports filed with the SEC. There can be no assurance that the Management Forecasts will be realized or that actual results will not be significantly higher or lower than the Management Forecasts. The Management Forecasts cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Forecasts will be affected by Hanger’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Management Forecasts reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Forecasts should not be regarded as an indication that Hanger, BofA Securities, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Management Forecasts in this proxy statement should not be regarded as an indication that the Management Forecasts will be necessarily predictive of actual future events. No representation is made by Hanger or any other person regarding the Management Forecasts or Hanger’s ultimate performance compared to such information. The Management Forecasts should be evaluated, if at all, in conjunction with the historical financial statements and other information about Hanger contained in Hanger’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Management Forecasts, Company stockholders are cautioned not to place undue, if any, reliance on the Management Forecasts.
The Management Forecasts were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to the preparation or presentation of prospective financial information. The Management Forecasts included in this proxy statement have been prepared by, and are the responsibility of, Hanger’s management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying Management Forecasts and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference into this proxy statement relates to Hanger’s previously issued financial statements. It does not extend to the Management Forecasts and should not be read to do so.
Adjusted EBITDA contained in the Management Forecasts and Unlevered Free Cash Flow derived therefrom, both as summarized above, are each a “non-GAAP financial measure,” which is a financial performance measure that is not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Forecasts were relied upon by BofA Securities for purposes of its opinion and by the Board in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by BofA Securities for purposes of its opinion or by the Board in connection with its evaluation of the Merger. Accordingly, Hanger has not provided a reconciliation of the financial measures included in the Management Forecasts to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Hanger may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, this non-GAAP financial measure should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.
The summary of such information above is included solely to give Company stockholders access to the information that was made available to the Board, BofA Securities, Parent and Merger Sub, and is not included in this proxy statement to influence any Company stockholder to vote their shares of Hanger common stock in favor of the Merger Proposal or any other proposal contained herein. In addition, the Management Forecasts have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities
 
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laws, Hanger does not intend to update or otherwise revise the Management Forecasts or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.
Interests of the Directors and Executive Officers of Hanger in the Merger
When considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder generally. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the transactions contemplated thereby, including the Merger, and in recommending that the Merger Proposal be adopted and approved by the stockholders of Hanger. See “— Background of the Merger” and “— Recommendation of Our Board of Directors and Reasons for the Merger”. You should take these interests into account in deciding whether to vote “FOR” the approval of the Merger Proposal.
These interests are described in more detail below. For purposes of the discussion below, Vinit K. Asar, Thomas E. Kiraly, Peter A. Stoy, Thomas E. Hartman, C. Scott Ranson, James H. Campbell, Mitchell D. Dobson, Keri L. Jolly, and Gabrielle B. Adams are referred to as the “executive officers.” In certain instances, Messrs. Asar, Kiraly, Stoy, Hartman and Ranson are referred to as the “named executive officers” as they were Hanger’s chief executive officer, chief financial officer and the three other most highly compensated executive officers, respectively, as determined for purposes of Hanger’s most recent annual proxy statement. Compensation that may become payable to our named executive officers in connection with the Merger is subject to a non-binding, advisory vote of the stockholders of Hanger and is quantified in the narrative below and in “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation”. The dates used below to quantify these interests have been selected for illustrative purposes only and do not necessarily reflect the dates on which certain events will occur.
Treatment of Equity and Equity-Based Awards
Under the Merger Agreement, the equity-based awards held by Hanger’s directors and executive officers under the Hanger Orthopedic Group, Inc. 2010 Omnibus Incentive Plan, the Hanger, Inc. 2016 Omnibus Incentive Plan, the Hanger, Inc. 2017 Special Equity Plan, the Hanger, Inc. 2019 Omnibus Incentive Plan, and the Hanger, Inc. 2022 Omnibus Incentive Plan (together, the “Equity Incentive Plans”), will not be continued following the Merger and therefore will be cancelled and treated as explained below at the Effective Time.
Stock Options
Each Company Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to the product of (x) the total number of shares of Hanger common stock underlying the Company Option multiplied by (y) the excess, if any, of the Merger Consideration over the exercise price of such Company Option (less any taxes required to be withheld under applicable law). If the exercise price of a Company Option is equal to or greater than the Merger Consideration, then such Company Option will be cancelled for no consideration.
Restricted Stock Units and Performance-Based Restricted Stock Units
Each outstanding award of Company RSUs will become fully vested and will automatically be cancelled and converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to (x) the total number of shares of Hanger common stock underlying such award of Company RSUs, multiplied by (y) the Merger Consideration. Each outstanding award of Company PRSUs will become vested as to the number of shares of Hanger common stock subject to such award that would vest based on target level achievement of all performance targets (without application of any modifier) and will, after giving effect to such vesting, automatically be cancelled and converted into the right to receive (without interest) an amount in cash (less any applicable withholding taxes) equal to (x) the number of vested shares of Hanger common stock underlying such award of Company PRSUs, multiplied by (y) the Merger Consideration, and the unvested portion of such Company PRSUs will be cancelled for no consideration.
 
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Estimated Value of Accelerated Equity
The following table sets forth the number of unvested Company RSUs and unvested Company PRSUs that were held by our executive officers and non-employee directors as of July 31, 2022 under our Equity Incentive Plans and the cash value that each executive officer and non-employee director will receive with respect to these awards in connection with the Merger.
Name
Company
RSUs
Company
PRSUs
Total Value(1)
Executive Officers
Vinit K. Asar
256,083 103,665 $ 6,745,275
Thomas E. Kiraly
69,704 21,597 $ 1,711,894
Peter A. Stoy
40,592 20,943 $ 1,153,781
Thomas E. Hartman
33,979 10,733 $ 838,350
C. Scott Ranson
24,125 7,199 $ 587,325
James H. Campbell
19,162 6,283 $ 477,094
Mitchell D. Dobson
14,723 4,451 $ 359,513
Keri L. Jolly
21,078 6,414 $ 515,475
Gabrielle B. Adams
17,454 5,760 $ 435,263
Non-Employee Directors
Asif Ahmad
9,911 $ 185,831
Christopher B. Begley
9,911 $ 185,831
John T. Fox
9,911 $ 185,831
Thomas C. Freyman
9,911 $ 185,831
Stephen E. Hare
9,911 $ 185,831
Mark M. Jones
9,911 $ 185,831
Cynthia L. Lucchese
9,911 $ 185,831
Richard Pettingill
9,911 $ 185,831
Kathryn M. Sullivan
9,911 $ 185,831
(1)
Equals the total number of Shares subject to Company RSUs and Company PRSUs that will vest in connection with the Merger, multiplied by the Merger Consideration ($18.75).
Severance and Other Termination Benefits
We have entered into executive employment agreements with each of our executive officers which include severance benefits, and which would continue to apply following the change in control unless the Parent negotiates otherwise with each executive.
Specifically, the agreements provide that if the executive officer is terminated by Hanger without “cause” or, for each executive officer other than Ms. Adams, by the executive for “good reason,” in either case within two years following a change in control of Hanger (such as the Merger), then the executive officer will be entitled to (i) severance payments equal to the executive officer’s base salary plus target bonus multiplied by a factor (which is equal to 2.5 for Mr. Asar; 2.0 for Messrs. Kiraly, Stoy, and Ranson; 1.5 for Mr. Hartman and Ms. Jolly; 1.0 for Mr. Campbell and Mr. Dobson; and 0.5 for Ms. Adams), (ii) reimbursement for COBRA coverage and other employee benefits for a period of time following termination (30 months for Mr. Asar; 24 months for Messrs. Kiraly, Stoy and Ranson; 18 months for Mr. Hartman and Ms. Jolly; 12 months for Mr. Campbell and Mr. Dobson; and six months for Ms. Adams), (iii) a pro-rata annual bonus for the year of termination, if earned based on the achievement of the relevant goals, and (iv) outplacement services.
 
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The foregoing amounts are in addition to the payment of all unpaid base salary to which the executive officer is entitled through the termination date and other vested benefits to which the executive officer is entitled under Hanger’s benefit plans and arrangements.
The employment agreements contain a “Section 280G better-of” provision, which provides that, if the total compensation paid to an executive officer in connection with the Merger, which may include the severance payments described above, would exceed the applicable threshold under Section 280G of the Code, such that the executive officer would be subject to an excise tax (and Hanger would forego a tax deduction) on a portion of those change in control payments, then those payments will either (i) be reduced to avoid the imposition of the excise taxes under Section 4999 of the Code, or (ii) paid in full (resulting in the executive becoming subject to the excise tax and resulting in a loss of a tax deduction for Hanger), whichever of (i) or (ii) results in a better after-tax result for the executive officer.
Cause” is generally defined to mean (i) the repeated failure or refusal of the executive to follow the lawful directives of the Chief Executive Officer of Hanger or the Board (except due to sickness, injury or disabilities), (ii) gross inattention to duty or any other willful, reckless or grossly negligent act (or omission to act) by the executive, which materially injures Hanger, including the repeated failure to follow the written policies and procedures of Hanger, (iii) the executive’s material breach of the employment agreement after written notice and a reasonable opportunity to cure, if curable, or (iv) the commission by the executive of a felony or other crime involving moral turpitude or an act of financial dishonesty against Hanger or any of its affiliates. Any determination of “cause” following a change in control (such as the Merger) can only be made by the Board or by the board of directors of the successor or acquirer in the change in control, which may terminate the executive for cause only after providing the executive (a) written notice that indicates in reasonable detail the facts and circumstances alleged to provide a basis for such termination, (b) a 30 day opportunity to cure such facts or circumstances, if curable, (c) the opportunity to appear before such board (with the accompaniment of counsel) and provide rebuttal to such proposed termination, and (d) written notice following such appearance confirming such termination and certifying that the decision to terminate the executive for cause was approved in good faith by at least 66% of the members of such board.
“Good Reason” is generally defined to mean (i) a material diminution of the executive officer’s responsibilities, (ii) a change to the location of the executive officer’s principal place of employment to a place that is 50 or more miles away from the executive officer’s current place of employment (unless the change is no farther from the executive officer’s current residence than the prior location), or Hanger’s failure to provide at least 60 days’ notice of its intent to relocate the executive officer, or (iii) Hanger’s material breach of the employment agreement.
In addition, certain of the executive officers may become entitled to additional benefits under Hanger’s supplemental executive retirement plans in connection with the Merger. Specifically, Mr. Asar and Mr. Hartman would be entitled to an additional benefit accrual under Hanger’s Defined Benefit Supplemental Executive Retirement Plan if they are terminated without cause or for good reason equal to the benefit they would have accrued if they had remained employed for the length of their severance period (30 months for Mr. Asar, and 18 months for Mr. Hartman), and all participants in Hanger’s Defined Contribution Supplemental Executive Retirement Plan who are not yet vested in their benefit (which include Mr. Stoy, Mr. Dobson and Ms. Jolly) would become fully vested if terminated without cause or with good reason following the Merger.
Funding of Rabbi Trust
Mr. Asar and Mr. Hartman both participate in Hanger’s Defined Benefit Supplemental Executive Retirement Plan, which provides benefit payments for 15 years following the executive’s retirement. The Defined Benefit Supplemental Executive Retirement Plan is an “unfunded plan,” meaning that benefits are generally paid out of Hanger’s general assets when due. However, pursuant to the terms of the Defined Benefit Supplemental Executive Retirement Plan, no later than 30 days after a change in control, Hanger is required to establish and fund a “rabbi trust” with assets equal to the present value of the accrued benefits of all participants in the plan, and make periodic contributions to the trust so that trust assets remain adequate to pay benefit amounts. As required by applicable tax laws, however, the trust assets continue to be subject to the claims of creditors in the event of insolvency.
 
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Transaction Bonus Pool
Hanger has approved a $350,000 transaction bonus pool to be paid in the form of cash bonuses to certain employees in connection with their efforts with respect to the Merger if such employees remain employed by Hanger through the closing of the Merger, with individual amounts to be determined by Hanger prior to the closing of the Merger. Hanger has agreed that it will not allocate an amount from the bonus pool to any of the named executive officers.
Continuing Employees
Under the Merger Agreement, from the Effective Time until the first anniversary thereof, Parent will cause the surviving corporation to provide to each employee of Hanger and any of its subsidiaries who, as of the closing of the Merger, continues to be employed with Hanger or any of its subsidiaries (a “Continuing Employee”), during any period of employment during such twelve month period, base compensation and a target annual cash bonus opportunity that is not less favorable than the base compensation and target annual cash bonus opportunity provided to such Continuing Employee immediately prior to the Effective Time, and other compensation and benefits (excluding equity award compensation, defined benefit pensions, nonqualified deferred compensation and change-in-control compensation or benefits) that are substantially equivalent in aggregate economic value to the other compensation and benefits provided to such Continuing Employee immediately prior to the Effective Time. The Merger Agreement further provides that the surviving corporation will continue all existing annual bonus plans and commission plans and arrangements through the end of 2022 without change.
With respect to benefit plans maintained by the surviving corporation (including any vacation, paid time-off and severance plans, but excluding any defined benefit pension plans), the Continuing Employees will be given service credit for all purposes, including determining eligibility to participate, level of benefits, vesting and benefit accruals under such benefit plans, for their length of service with (or otherwise recognized by) Hanger or any of its subsidiaries, as reflected in Hanger’s records, except that such service need not be recognized to the extent that such recognition would result in any duplication of benefits.
Named Executive Officer Golden Parachute Compensation
The following table provides information about certain compensation for each of our named executive officers that is based on or otherwise relates to the Merger. The values in this table assumes that the Merger closed on July 31, 2022, that the employment agreements described above remain in effect, and that each named executive officer was terminated from employment immediately after the closing of the Merger without cause or for good reason. The compensation summarized in the table and footnotes below is subject to a non-binding, advisory vote of Hanger’s stockholders, as described in “Proposal 3: Advisory Vote on Merger-Related Named Executive Officer Compensation”.
The footnotes to the table identify whether the benefit is “single-trigger” ​(meaning the benefit is payable solely as a result of the consummation of the Merger, and is not conditioned on a termination of the named executive officer’s employment) or “double trigger” ​(meaning a benefit that is only payable upon the named executive officer’s termination of employment without cause or for good reason following the Merger).
Golden Parachute Compensation
Name
Cash($)(1)
Equity($)(2)
Pension/NQDC
($)(3)
Benefits &
Perquisites($)(4)
Total($)
Vinit K. Asar
$ 5,177,000 $ 6,745,275 $ 833,257 $ 179,490 $ 12,935,022
Thomas E. Kiraly
$ 1,923,951 $ 1,711,894 $ 128,219 $ 3,764,064
Peter A. Stoy
$ 2,094,583 $ 1,153,781 $ 71,445 $ 101,320 $ 3,421,130
Thomas E. Hartman
$ 1,016,667 $ 838,350 $ 202,560 $ 92,339 $ 2,149,916
C. Scott Ranson
$ 1,233,648 $ 587,325 $ 68,868 $ 1,889,841
(1)
All amounts shown in this column are “double-trigger” benefits, and include (i) cash severance benefits
 
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that are payable under the terms of the executive employment agreements if the named executive officer’s employment is terminated without cause or for good reason within two years after the Merger, as described above under the heading “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Severance and Other Termination Benefits”, and (ii) a pro-rata annual bonus for the year of termination, calculated assuming target performance had been met, which is payable under the terms of the executive employment agreements upon a termination of employment at any time and for any reason (other than for cause). Severance amounts are calculated based on each named executive officer’s base salary and target bonus as of July 31, 2022.
The following table separately shows the amount of cash severance and the pro-rata annual bonus that are included in this column:
Name
Cash Severance
Pro-Rata
Annual Bonus
Vinit K. Asar
$ 4,592,500 $ 584,500
Thomas E. Kiraly
$ 1,717,663 $ 206,288
Peter A. Stoy
$ 1,870,000 $ 224,583
Thomas E. Hartman
$ 900,000 $ 116,667
C. Scott Ranson
$ 1,124,337 $ 109,311
(2)
This represents the cash value that will be paid with respect to the Company RSUs and Company PRSUs that will vest on an accelerated basis in connection with the Merger, as described above under the heading “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Treatment of Equity and Equity-Based Awards”. This is a “single-trigger” benefit. The value is calculated by multiplying the total number of Company RSUs and Company PRSUs being vested by $18.75 per share of Hanger common stock (i.e., the Merger Consideration). The number of Company RSUs and Company PRSUs for which vesting will accelerate for each named executive officer can be found above in the chart included above under the heading “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger — Treatment of Equity and Equity-Based Awards —Estimated Value of Accelerated Equity”.
(3)
All amounts shown in this column are “double trigger” benefits. For Mr. Asar and Mr. Hartman, this represents the present value of the additional benefit which would accrue under the Defined Benefit Supplemental Executive Retirement Plan if either of them are terminated by Hanger without cause or by the executive for good reason, in either case within two years following the Merger. Such additional benefit is equal to additional credited service under the Defined Benefit Supplemental Executive Retirement Plan for the duration of any severance period (30 months for Mr. Asar, and 18 months for Mr. Hartman). For Mr. Stoy, this represents the balance of his Defined Contribution Supplemental Executive Retirement Plan account (determined as of July 31, 2022) which would vest in full if he is terminated at any time following a change in control (such as the Merger) either by Hanger without cause or by him for good reason. The Defined Contribution Supplemental Executive Retirement Plan benefit otherwise vests following five years of employment. Mr. Kiraly and Mr. Ranson also participate in the Defined Contribution Supplemental Executive Retirement Plan, but their accounts are already fully vested and thus no additional benefit will be paid or accrue in connection with the Merger.
(4)
Amounts in this column are “double-trigger” benefits that will only be paid if the executive is terminated by Hanger without cause or resigns for good reason within two years following the Merger. The amounts shown in this column include continued group medical, dental and life and disability coverage, for a period of 30 months in the case of Mr. Asar, 24 months for Messrs. Kiraly, Stoy and Ranson, and 18 months for Mr. Hartman, plus continued Hanger contributions to the 401(k) plan for the length of the insurance continuation, plus continuation of the executive’s monthly automobile allowance over the same period (other than for Mr. Stoy), plus the estimated cost of outplacement services for 18 months (24 months for Mr. Asar). The estimated value of each of such benefits are set forth below:
Name
Insurance
Continuation
401(k)
Contributions
Automobile
Allowance
Outplacement
Benefits
Vinit K. Asar
$ 93,690 $ 18,300 $ 37,500 $ 30,000
 
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Name
Insurance
Continuation
401(k)
Contributions
Automobile
Allowance
Outplacement
Benefits
Thomas E. Kiraly
$ 67,079 $ 14,640 $ 24,000 $ 22,500
Peter A. Stoy
$ 64,180 $ 14,640 $ $ 22,500
Thomas E. Hartman
$ 46,259 $ 10,980 $ 12,600 $ 22,500
C. Scott Ranson
$ 17,328 $ 14,640 $ 14,400 $ 22,500
Narrative Disclosure to Named Executive Officer Golden Parachute Compensation Table
For additional information relating to the potential payments and benefits described in the table above, see “The Merger — Interests of the Directors and Executive Officers of Hanger in the Merger”.
Insurance and Indemnification of Directors and Executive Officers
Under the Merger Agreement, beginning at the Effective Time, Parent will, and will cause the surviving corporation to, indemnify, defend and hold harmless, and will advance expenses as incurred, to the fullest extent permitted under (i) applicable law and (ii) Hanger’s certificate of incorporation and by-laws or similar organizational documents in effect as of the date of the Merger Agreement, each present and former director and officer of Hanger and its subsidiaries and each of their respective employees who serves as a fiduciary of a Hanger benefit plan (in each case, when acting in such capacity) against any costs or expenses (including reasonable attorneys’ fees), judgments, settlements, fines, losses, claims, damages or liabilities incurred in connection with any proceeding or investigation, whether civil, criminal, administrative or investigative, whenever asserted, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including in connection with the Merger Agreement or the Transactions.
Under the Merger Agreement, Parent agrees that all rights to exculpation, indemnification and advancement of expenses arising from, relating to, or otherwise in respect of, acts or omissions occurring at or prior to the Effective Time (including in connection with the Merger Agreement or the Transactions) existing as of the Effective Time in favor of the current or former directors or officers of Hanger or any of its subsidiaries serving in such capacity at or prior to the Effective Time and each of their respective employees who serves as a fiduciary of a Hanger benefit plan as provided in its certificates of incorporation, by-laws or other organizational documents will survive the Merger and will continue in full force and effect in accordance with their terms. For a period of no less than six years from and after the Effective Time, Parent will cause the surviving corporation to, and the surviving corporation will, maintain in effect the exculpation, indemnification and advancement of expenses provisions of the applicable party’s certificate of incorporation and by-laws or similar organizational documents in effect as of the date of the Merger Agreement of Hanger or its subsidiaries with any of their respective directors, officers or employees in effect as of the date of the Merger Agreement, and will not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who immediately before the Effective Time were current or former directors, officers or employees of Hanger or its subsidiaries; provided, however, that all rights to exculpation, indemnification and advancement of expenses in respect of any proceeding pending or asserted or any claim made within such period will continue until the final disposition of such proceeding; provided, however that the advancement and payment of such expenses incurred by an indemnified party in advance of the final disposition of a proceeding will be made, unless otherwise agreed by the surviving corporation, only upon delivery to the surviving corporation of an undertaking by or on behalf of such indemnified party to repay all amounts so paid in advance if it is ultimately determined as set forth in a final, non-appealable judgment of a court of competent jurisdiction that such indemnified party is not entitled to be indemnified pursuant to the Merger Agreement.
For six years from and after the Effective Time, Parent and the surviving corporation will be jointly and severally responsible for maintaining for the benefit of the directors and officers of Hanger, as of the date of the Merger Agreement and as of the closing date of the Merger, an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time that is substantially equivalent to and in any event not less favorable in the aggregate than the existing policy of Hanger, or, if substantially equivalent insurance coverage is unavailable, the best available coverage. The provisions of the immediately preceding sentence will be deemed to have been satisfied if prepaid “tail” policies have been
 
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obtained by Parent or the surviving corporation on or prior to the Effective Time, which policies provide directors and officers with coverage for an aggregate period of six years with respect to acts or omissions occurring or alleged to have occurred prior to the Effective Time that were committed or alleged to have been committed by such directors and officers in coverage and amount no greater than the policies currently in place so long as the total premiums paid would not exceed 300% of the last annual premium paid for Hanger’s directors and officers liability insurance policies in effect as of the date of the Merger Agreement, it being understood that if the total premium payable for such insurance coverage exceeds such amount, Parent or the surviving corporation will obtain a policy with the greatest coverage available for a cost equal to such amount.
In the event that, during the six year period after the Effective Time, either Parent or the surviving corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each case, Parent will, and will cause the surviving corporation to, use reasonable best efforts to cause proper provisions to be made so that such successor or assign will expressly assume the obligations set forth in the Merger Agreement.
Compensation Arrangements with Parent
Parent held introductory discussions with certain members of Hanger’s management team in which Parent indicated it intends to provide for an equity pool of up to approximately 12% of the equity of Parent or one or more of its affiliates for the granting of new equity awards to Hanger employees after the closing of the Merger, but there have not been any discussions regarding the amount of any such equity awards to be granted to any particular Hanger employee, including Hanger’s executive officers. Parent also indicated in such discussions that it expects members of Hanger’s management team to use a portion of the proceeds they receive from the Merger to purchase equity of Parent or one or more of its affiliates, on customary terms. Following the execution and delivery of the Merger Agreement, Parent continued such introductory discussions with Hanger’s management team, including regarding continued employment after the closing of the Merger and potential terms of employment agreements, as well as a possible opportunity for Hanger’s executive officers and other senior employees to purchase or otherwise participate in the equity of Parent or one or more of its affiliates, on customary terms. As of the date of this proxy statement, none of Hanger’s executive officers or other senior employees has entered into any agreement with respect to the foregoing, and there can be no assurances that any such agreements or arrangements will be entered into with any executive officers in the future. Prior to or following the closing of the Merger, however, some or all of Hanger’s executive officers or other senior employees may enter into agreements with Parent or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Parent or one or more of its affiliates. If Parent or any of its affiliates and Hanger’s executive officers do not enter into agreements regarding employment with Parent or one or more of its affiliates, then Hanger’s executive officers will remain subject to their existing employment agreements with Hanger.
Financing of the Merger
We anticipate that the total funds needed to complete the Merger, including the funds needed to pay Hanger stockholders and holders of other equity-based interests the amounts due to them under the Merger Agreement, will be approximately $1.25 billion based upon (i) the consideration payable under the Merger Agreement, (ii) the repayment and termination of Hanger’s existing credit agreement and (iii) fees, commissions and expenses in connection with the foregoing, which will be funded through a combination of the following:

Debt Financing in an aggregate principal amount of up to approximately $945 million, consisting of (i) senior secured credit facilities in an aggregate principal amount of up to $685 million (comprised of an initial $550 million first lien term loan facility, a $35 million delayed draw first lien term loan facility and a $100 million super senior secured revolving credit facility) and (ii) a senior secured second lien term loan facility in an aggregate principal amount of $260 million (comprised of an initial $245 million second lien term loan facility and a $15 million delayed draw second lien term loan facility); and
 
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Equity Financing by Patient Square Equity in an aggregate amount of $410 million.
The funding of the Financing is subject to the satisfaction of the conditions set forth in the Commitment Letters under which the Financing will be provided, respectively. The obligation of the parties to complete the Merger is not subject to a financing condition. However, the failure of Parent to obtain the Financing (or to secure alternative financing) would likely result in the failure of the Merger to be completed. If Hanger terminates the Merger Agreement due to Parent’s failure to complete the Merger when the closing conditions have been satisfied, subject to the requirements described in the Merger Agreement, Parent would be obligated to pay to Hanger a $45 million reverse termination fee. For a description of the circumstances in which the reverse termination fee would be paid to Hanger, see the section entitled “The Merger Agreement — Termination Fees”.
Debt Financing
Merger Sub, an affiliate of Patient Square, entered into a Debt Commitment Letter, dated as of July 21, 2022, with Ares Capital Management LLC (together with such other lenders that become party thereto, the “Debt Commitment Parties”). Pursuant to and subject to the terms of the Debt Commitment Letter, the Debt Commitment Parties have committed to arrange and syndicate senior secured credit facilities and a senior secured second lien term facility in an aggregate amount of up to $945 million, consisting of (i) senior secured credit facilities in an aggregate principal amount of up to $685 million (comprised of an initial $550 million first lien term loan facility, a $35 million delayed draw first lien term loan facility and a $100 million super senior secured revolving credit facility) and (ii) a senior secured second lien term loan facility in an aggregate principal amount of $260 million (comprised of an initial $245 million second lien term loan facility and a $15 million delayed draw second lien term loan facility). The Debt Financing will be used to, among other things, (i) pay the consideration payable under the Merger Agreement, (ii) repay and terminate Hanger’s existing credit agreement, (iii) pay fees, commissions and expenses in connection with the foregoing and (iv) for working capital needs and other general corporate purposes. The Debt Commitment Letter and the commitments thereunder will automatically terminate in the event that the closing of the Merger and the satisfaction of the conditions under the Debt Commitment Letter does not occur on or before the earliest of (i) 11:59 p.m., New York City time, on the date that is five business days after the Extended Outside Date, (ii) the date of the termination of the Merger Agreement by Merger Sub or with Merger Sub’s written consent, in each case, prior to the closing of the Merger and (iii) the date of the closing of the Merger without the use of the Debt Financing.
The availability of the Debt Financing is subject to conditions precedent, customary for financings of transactions comparable to the Merger. Pursuant to the Merger Agreement, Parent has agreed to use its reasonable best efforts to satisfy all such conditions precedent and to enforce its rights under the Debt Commitment Letter in the event of a Financing Failure Event. Parent has also agreed not to permit any amendment, replacement, modification or waiver of the Debt Commitment Letter in a manner that would reduce the aggregate amount of the Debt Financing (unless an equal amount from alternative financing sources is then made available), impose new or additional conditions or otherwise expand any conditions that would reasonably be expected to delay or prevent the closing of the Merger, make the funding of the Debt Financing materially less likely to occur or materially and adversely impact the ability of Parent to enforce its rights against the Debt Commitment Parties.
If any portion of the Debt Financing becomes unavailable on the terms and conditions contemplated by the Debt Commitment Letter, Parent is required to promptly notify Hanger and to use its reasonable best efforts to obtain alternative financing in an amount that when added with the Equity Financing would be sufficient to enable Parent to meet its funding obligations contemplated by the Merger Agreement, provided that the terms of such alternative financing are on terms as favorable to Parent as the terms of the Debt Commitment Letter or are as are reasonably available for financings of the type contemplated by the Debt Commitment Letter in debt markets at such time. As of the last practicable date before the filing of this proxy statement with the SEC, the Debt Commitment Letter remains in effect. The documentation governing the Debt Financing contemplated by the Debt Commitment Letter has not been finalized and, accordingly, the actual terms of the Debt Financing may differ from those described in this proxy statement. The Debt Commitment Parties may invite other banks, financial institutions and institutional lenders to participate in the Debt Financing contemplated by the Debt Commitment Letter.
 
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Equity Financing
On July 21, 2022, Patient Square Equity entered into the Equity Commitment Letter with Parent pursuant to which Patient Square Equity committed to make or cause to be made a cash equity investment of $410 million to Parent. This Equity Financing is subject to the following conditions:

the execution and delivery of the Merger Agreement;

the satisfaction or, to the extent permitted by applicable law, written waiver by Parent and Merger Sub (with the prior written consent of Patient Square Equity) of each of the conditions to the obligations of Parent and Merger Sub to complete the Merger as set forth in the Merger Agreement (other than those closing conditions that by their nature are to be satisfied at closing and would be, if the closing of the Merger occurs, satisfied or waived);

the prior or substantially simultaneous receipt of the net cash proceeds of the Debt Financing and/or any replacement debt financing; and

the substantially contemporaneous occurrence of the Effective Time in accordance with the terms of the Merger Agreement.
Patient Square Equity’s obligations under the Equity Commitment Letter (including the obligation to fund the Equity Financing) will terminate automatically and immediately, upon the earliest to occur of: (i) the occurrence of the Effective Time; (ii) the termination of the Merger Agreement in accordance with its terms; (iii) Hanger or certain of its related parties that Hanger has the power to control instituting any proceeding asserting a claim (other than any retained claims) against Patient Square Equity or certain of its related parties under or otherwise related to the Equity Commitment Letter, the limited guaranty, the Merger Agreement or any of the ancillary agreements or transactions contemplated thereby; (iv) Hanger or certain of its related parties instituting any proceeding asserting that any of the provisions of the Equity Commitment Letter are illegal, invalid or unenforceable in whole or in part or the limitations on Patient Square Equity’s or certain of its related parties’ liabilities or obligations under the Equity Commitment Letter are illegal, invalid or unenforceable in whole or in part or that Patient Square Equity is liable under the Equity Commitment Letter in excess of the Equity Financing Commitment; or (v) the occurrence of any event under Patient Square Equity’s limited guaranty that terminates Patient Square Equity’s obligations or liabilities under the limited guaranty.
Hanger is an express third party beneficiary of the Equity Commitment Letter and is entitled to specifically enforce the terms of the Equity Commitment Letter to cause Parent to enforce the Equity Commitment Letter and cause Patient Square Equity to fund the Equity Financing Commitment substantially simultaneously with the occurrence of the Effective Time in the event the conditions set forth in the Equity Commitment Letter are satisfied, the conditions set forth in the Merger Agreement with respect to specific performance of the Equity Financing are satisfied and Parent is required pursuant to a final and non-appealable order of a chosen court to consummate the Transactions.
Limited Guaranty
To induce Hanger to enter into the Merger Agreement, Patient Square Equity entered into a limited guaranty in favor of Hanger pursuant to which Patient Square Equity absolutely and irrevocably guaranteed to Hanger, on the terms and conditions set forth in the limited guaranty, the due, prompt and faithful payment of (i) the reverse termination fee payable by Parent to Hanger, if and when due in accordance with the Merger Agreement, (ii) if Parent fails to timely pay the reverse termination fee to Hanger, the obligation to reimburse Hanger for all reasonable and documented out-of-pocket expenses incurred in the collection of the reverse termination fee up to $1,000,000 in the aggregate and interest on such unpaid reverse termination fee, (iii) subject to the limitations set forth in the Merger Agreement, any monetary damages awarded to Hanger pursuant to a final and non-appealable order by a court of competent jurisdiction in respect of any Willful and Material Breach (as defined in “The Merger Agreement — Termination of the Merger Agreement”) by Parent or Merger Sub of the Merger Agreement, and (iv) any reimbursement and/or indemnification obligations of Parent to Hanger and its subsidiaries and each of their respective directors, officers and other representatives that may arise pursuant to the Merger Agreement with respect to the Debt
 
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Financing (collectively, the “Guaranteed Obligations”); provided, that the maximum amount payable by Patient Square Equity under the limited guaranty may not exceed $50 million.
The guaranty by Patient Square Equity of the Guaranteed Obligations under the limited guaranty may be enforced only for money damages. The limited guaranty may not be revoked or terminated and will remain in full force and effect and binding on Patient Square Equity, its successors, and permitted assigns until the complete, irrevocable, and indefeasible payment and satisfaction in full of the Guaranteed Obligations. However, the limited guaranty will automatically and immediately terminate as of the earliest to occur of (i) the Effective Time, (ii) the funding of the commitment under the Equity Commitment Letter, provided the Effective Time also occurs, (iii) for each of the following subclauses (a) and (b), the date that is 90 days after the termination of the Merger Agreement by (a) Hanger due to a breach or failure to preform by Parent or Merger Sub of its representations, warranties, covenants or other agreements contained in the Merger Agreement or by Hanger due to Parent’s failure to complete the Merger when the closing conditions under the Merger Agreement have been satisfied, as more fully described in “The Merger Agreement — Termination of the Merger Agreement”, or (b) Hanger or Parent, if the Effective Time has not occurred on or before the applicable Outside Date and at a time when Hanger could have terminated the Merger Agreement pursuant to the termination provisions discussed in subclause (a) immediately above (each, a “Specified Termination”), unless prior to 90th day after such termination, Hanger has commenced a proceeding against Parent and/or Patient Square Equity alleging that the Guaranteed Obligations are payable pursuant to the Merger Agreement, (iv) termination of the Merger Agreement in accordance with its terms (other than pursuant to a Specified Termination), (v) the time at which the Guaranteed Obligations have been indefeasibly paid in full in cash, (vi) the time at which Hanger or certain of its related parties that Hanger has the power to control or their respective successors and assigns institutes any proceeding asserting any theory of liability against Patient Square Equity, certain of its related parties with respect to the Transactions, the limited guaranty, the Equity Commitment Letter or any other ancillary agreement, other than the retained claims (as defined in the limited guaranty) under the limited guaranty or (vii) the time at which Hanger or certain of its related parties or their respective successors and assigns institutes any proceeding asserting that the limit on the Guaranteed Obligations of $50 million is illegal, invalid, or unenforceable in whole or in part.
Transaction Litigation
Following the announcement of the Merger on July 21, 2022, two substantially similar actions have been filed by purported Hanger stockholders against Hanger and our board of directors, and Hanger has received one demand letter. On August 9, 2022, a lawsuit styled Stein v. Hanger, Inc. et al., Civil Action No. 22-cv-6775 was filed in the United States District Court for the Southern District of New York. On August 17, 2022, a lawsuit styled Singh v. Hanger, Inc. et al., Civil Action No. 22-cv-07023 was filed in the United States District Court for the Southern District of New York. The complaints and demand letter assert similar claims against Hanger and our board of directors under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act. The complaints and demand letter allege, among other things, that the preliminary proxy statement filed August 5, 2022 with the SEC misstated or omitted material information regarding the financial projections, the financial analyses performed by Hanger’s financial advisor, potential conflicts of interest of our board of directors and management and the sales process leading up to the Merger. The complaints seek to enjoin the Merger unless and until the alleged omitted material information is disclosed, rescission of the Merger Agreement and/or rescissory damages, compensatory damages, attorneys’ fees and other litigation costs. Hanger believes the lawsuits and the demand letter are without merit and intends to vigorously defend against them. Additional lawsuits and demand letters arising out of or relating to the Merger Agreement or the Merger may be filed or made in the future, which could prevent or delay completion of the Merger and result in additional costs to the Company. If additional similar complaints or demands are filed or made, absent new or different allegations that are material, the Company will not necessarily announce them.
Appraisal Rights
General
If the Merger is completed, holders of shares of Hanger common stock who do not vote in favor of or do not otherwise consent in writing to the adoption and approval of the Merger Agreement (and for which
 
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appraisal rights have not been waived) and who properly demand an appraisal of their shares and who otherwise comply with the requirements set forth in Section 262 of the DGCL will be entitled to appraisal rights in connection with the Merger. Strict compliance with the statutory procedures in Section 262 of the DGCL is required. Failure to timely and properly comply with such statutory requirements will result in the loss of your appraisal rights.
This section summarizes material provisions of the DGCL pertaining to appraisal rights. The following discussion, however, is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, which is attached as Appendix B to this proxy statement and incorporated by reference herein. All references within Section 262 of the DGCL to “stockholder” are to the record holder of shares of Hanger common stock. The following discussion does not constitute any legal or other advice, nor does it constitute a recommendation as to whether or not a Hanger stockholder should exercise its right to seek appraisal under Section 262 of the DGCL.
Under the DGCL, if you hold one or more shares of Hanger common stock, continuously hold such shares through the Effective Time, do not vote in favor of or do not otherwise consent in writing to the adoption and approval of the Merger Agreement and otherwise comply with the requirements set forth in Section 262 of the DGCL, you will be entitled to have your shares appraised by the Delaware Court of Chancery and to receive the “fair value” of such shares (as determined by the Delaware Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the Merger or related transactions) in cash, together with interest, if any, to be paid upon the amount determined to be the fair value. It is possible that any such “fair value” as determined by the Delaware Court of Chancery may be more or less than, or the same as, the Merger Consideration which Hanger stockholders will be entitled to receive upon the consummation of the Merger pursuant to the Merger Agreement. These rights are known as appraisal rights.
Under Section 262 of the DGCL, not less than 20 days prior to the special meeting at which the adoption and approval of the Merger Agreement will be submitted to the stockholders, Hanger must notify each stockholder who was a Hanger stockholder on the Record Date and who is entitled to exercise appraisal rights that appraisal rights are available and include in the notice a copy of Section 262 of the DGCL. This proxy statement constitutes the required notice, and a copy of Section 262 of the DGCL is attached as Appendix B to this proxy statement.
A HOLDER OF HANGER COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO SHOULD REVIEW THE FOLLOWING DISCUSSIONS AND APPENDIX B CAREFULLY. FAILURE TO COMPLY PRECISELY WITH THE PROCEDURES OF SECTION 262 OF THE DGCL IN A TIMELY AND PROPER MANNER WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO SEEK APPRAISAL UNDER SECTION 262 OF THE DGCL, A HOLDER OF HANGER COMMON STOCK WHO IS CONSIDERING WHETHER TO EXERCISE ITS APPRAISAL RIGHTS IS ENCOURAGED TO CONSULT WITH ITS OWN LEGAL COUNSEL AND/OR FINANCIAL ADVISOR. ANY SHARES OF HANGER COMMON STOCK HELD BY A HANGER STOCKHOLDER WHO FAILS TO PERFECT, SUCCESSFULLY WITHDRAWS OR OTHERWISE LOSES HIS, HER OR ITS APPRAISAL RIGHTS WILL BE DEEMED TO HAVE BEEN CONVERTED AS OF THE EFFECTIVE TIME INTO THE RIGHT TO RECEIVE THE MERGER CONSIDERATION.
How to Exercise and Perfect Your Appraisal Rights
If you are a Hanger stockholder and wish to exercise the right to seek an appraisal of your shares of Hanger common stock, you must comply with ALL of the following:

you must NOT vote “FOR,” or otherwise consent in writing to, the Merger Proposal. Because a proxy that is signed and submitted but does not otherwise contain voting instructions will, unless revoked, be voted in favor of the Merger Proposal, if you submit a proxy and wish to exercise your appraisal rights, you must include voting instructions to vote your share “AGAINST,” or as an abstention with respect to, the Merger Proposal;
 
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you must continuously hold your shares of Hanger common stock from the date of making the written demand for appraisal through the Effective Time. You will lose your appraisal rights if you transfer your shares of Hanger common stock before the Effective Time;

prior to the taking of the vote on the Merger Proposal at the special meeting, you must deliver a proper written demand for appraisal of your shares; and

you, another stockholder who has complied with the applicable subsections of Section 262 of the DGCL and who is otherwise entitled to appraisal rights under Section 262 of the DGCL, an appropriate beneficial owner or the surviving corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of your shares of Hanger common stock within 120 days after the Effective Time. The surviving corporation is under no obligation to file any such petition in the Delaware Court of Chancery and has no intention of doing so. Accordingly, it is the obligation of the appropriate Hanger stockholders to initiate all necessary action to properly demand their appraisal rights in respect of shares of Hanger common stock within the time prescribed in Section 262 of the DGCL.
Filing a Written Demand
Neither voting against the Merger Proposal, nor abstaining from voting or failing to vote on the Merger Proposal, will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262 of the DGCL. Any holder of shares of Hanger common stock wishing to exercise appraisal rights must deliver to Hanger, before the taking of the vote on the Merger Proposal at the special meeting, a written demand for the appraisal of the stockholder’s shares. A stockholder’s failure to deliver the written demand prior to the taking of the vote on the Merger Proposal at the special meeting will constitute a waiver of appraisal rights. The written demand for appraisal must be in addition to and separate from any proxy or vote on the Merger Proposal.
A demand for appraisal must be executed by or on behalf of the stockholder of record. Only a holder of record may demand appraisal rights for the shares of Hanger common stock registered in that holder’s name. Such demand will be sufficient if it reasonably informs Hanger of the identity of the stockholder and that the stockholder intends to demand appraisal of the “fair value” of his, her or its shares of Hanger common stock. Beneficial owners who do not also hold their shares of Hanger common stock of record may not directly make appraisal demands to Hanger. The beneficial owner must, in such case, arrange for the holder of record, such as a bank, broker or nominee, to timely submit the required demand in respect of those shares of Hanger common stock. A holder of record, such as a bank, broker or nominee, who holds shares of Hanger common stock as a nominee or intermediary for others, may exercise appraisal rights with respect to the shares of Hanger common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. The written demand should state the number of shares of Hanger common stock as to which appraisal is sought. Where no number of shares of Hanger common stock is expressly mentioned, the demand will be presumed to cover all shares of Hanger common stock held in the name of the holder of record.
IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK IN BANK OR BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS, AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKER OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKERAGE FIRM OR NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. IF YOU HAVE A BENEFICIAL INTEREST IN SHARES OF HANGER COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A NOMINEE OR INTERMEDIARY, YOU MUST ACT PROMPTLY TO CAUSE THE HOLDER OF RECORD TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO DEMAND YOUR APPRAISAL RIGHTS. IF YOU HOLD YOUR SHARES OF HANGER COMMON STOCK THROUGH A BANK OR BROKERAGE FIRM WHO IN TURN HOLDS THE SHARES THROUGH A CENTRAL SECURITIES DEPOSITORY NOMINEE, SUCH AS THE DEPOSITORY TRUST COMPANY, A DEMAND FOR APPRAISAL OF SUCH SHARES MUST BE MADE BY OR ON BEHALF OF THE DEPOSITORY NOMINEE AND MUST IDENTIFY THE DEPOSITORY NOMINEE AS THE HOLDER OF RECORD.
 
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If your shares of Hanger common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand for appraisal should be made in that capacity, and if your shares are owned of record jointly with one or more other persons, as in a joint tenancy or tenancy in common, the demand for appraisal should be executed by or for you and all other joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the holder or holders of record and expressly disclose the fact that, in exercising the demand, such person is acting as agent for the holder or holders of record. Stockholders who hold their shares of Hanger common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers or other nominees to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.
If you elect to exercise appraisal rights under Section 262 of the DGCL, you should mail or deliver a written demand to:
Hanger, Inc.
10910 Domain Drive, Suite 300
Austin, Texas 78758
Attention: Senior Vice President, General Counsel and Secretary
At any time within 60 days after the Effective Time, any Hanger stockholder that made a demand for appraisal but has not commenced an appraisal proceeding or joined in such a proceeding as a named party will have the right to withdraw the demand and to accept the Merger Consideration in accordance with the Merger Agreement for his, her or its shares of Hanger common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal, but after such 60 day period a demand for appraisal may be withdrawn only with the written approval of the surviving corporation.
Notice by the Surviving Corporation.   Within ten days after the effective date of the Merger, Hanger, as the surviving corporation, must notify each holder of Hanger common stock who has made a written demand for appraisal pursuant to Section 262 of the DGCL and has not voted in favor of the Merger Proposal of the date that the Merger has become effective.
Filing a Petition for Appraisal with the Delaware Court of Chancery.   Within 120 days after the Effective Time, but not later, either you or another stockholder, provided you or such other stockholder have complied with the requirements of Section 262 of the DGCL and are otherwise entitled to appraisal rights, or the surviving corporation may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by you or another stockholder, demanding an appraisal of the value of the shares of Hanger common stock held by all stockholders who have properly demanded appraisal. None of Patient Square, Parent, Merger Sub or Hanger, as the surviving corporation, is under any obligation to file an appraisal petition or has any intention to do so. If you desire to have your shares of Hanger common stock appraised, you should initiate any petitions necessary for properly demanding your appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.
Within 120 days after the Effective Time, provided you have complied with the provisions of Section 262 of the DGCL, you will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares of Hanger common stock not voted in favor of the Merger Proposal and with respect to which Hanger has received demands for appraisal, and the aggregate number of holders of those shares. The surviving corporation must mail this statement to you within the later of (i) ten days after receipt by the surviving corporation of the request therefor or (ii) ten days after expiration of the period for delivery of demands for appraisal. If you are the beneficial owner of shares of Hanger common stock held in a voting trust or by a nominee or intermediary on your behalf you may, in your own name, file an appraisal petition or request from the surviving corporation the statement described in this paragraph. If a petition for appraisal is not timely filed, then the right to appraisal will cease.
If a petition for appraisal is duly filed by you or another holder of record of Hanger common stock who has properly exercised his, her or its appraisal rights in accordance with the provisions of Section 262 of the DGCL, and a copy of the petition is delivered to the surviving corporation, the surviving corporation
 
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will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all holders who have demanded an appraisal of their shares of Hanger common stock and with whom agreements as to the value of their shares of Hanger common stock have not been reached by the surviving corporation. The Delaware Court of Chancery may order that notice of the time and place fixed for the petition hearing be given to the surviving corporation and all of the stockholders shown on the verified list at the addresses stated therein. Any such notice shall also be given by one or more publications at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware or any other publication which the Delaware Court of Chancery deems advisable. The forms of the notice by mail and by publication will be approved by the Delaware Court of Chancery and the costs thereof will be borne by the surviving corporation.
After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine which Hanger stockholders have complied with Section 262 of the DGCL and have become entitled to appraisal rights and may require the Hanger stockholders demanding appraisal who hold certificated shares of Hanger common stock to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and the Delaware Court of Chancery may dismiss the proceedings as to any Hanger stockholder who fails to comply with this direction. In addition, the Delaware Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (i) the total number of shares of Hanger common stock entitled to appraisal exceeds 1% of the outstanding shares of Hanger common stock, or (ii) the value of the consideration provided in the Merger for such total number of shares of Hanger common stock exceeds $1 million.
The appraisal proceeding will be conducted as to the shares of Hanger common stock owned by such stockholders, in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Delaware Court of Chancery will determine the fair value of the shares of Hanger common stock held by all Hanger stockholders who have properly demanded their appraisal rights, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, and except as otherwise provided in Section 262 of the DGCL, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest will accrue thereafter as provided herein only upon the sum of (i) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (ii) interest theretofore accrued, unless paid at that time. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon, if any, to the Hanger stockholders entitled to receive the same, forthwith in the case of uncertificated stockholders or upon surrender by certificated stockholders to the surviving corporation of their stock certificates.
Determination of Fair Value.   In determining the fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other factors which were known or which could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such
 
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accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” An opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to fair value under Section 262 of the DGCL. The fair value of shares of Hanger common stock as determined under Section 262 of the DGCL could be greater than, the same as or less than the Merger Consideration. Neither Parent nor Hanger, as the surviving corporation, anticipates offering more than the Merger Consideration to any Hanger stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of Hanger common stock is less than the Merger Consideration. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery.
If no party files a petition for appraisal within 120 days after the Effective Time, you will lose the right to an appraisal and will instead receive the Merger Consideration in accordance with the Merger Agreement, without interest thereon, less any withholding taxes.
The Delaware Court of Chancery may determine the costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) and may tax those costs upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares of Hanger common stock entitled to appraisal. In the absence of such an order, each party to the appraisal proceeding bears its own expenses.
If you have duly demanded an appraisal in compliance with Section 262 of the DGCL you will not, from and after the Effective Time, be entitled to vote the shares of Hanger common stock subject to the demand for any purpose or receive any dividends or other distributions on those shares, except dividends or other distributions payable to holders of record of Hanger common stock as of a record date prior to the Effective Time.
If you have not commenced an appraisal proceeding or joined such a proceeding as a named party you may withdraw a demand for appraisal and accept the Merger Consideration by delivering a written withdrawal of the demand for appraisal and an acceptance of the consideration payable in the Merger to the surviving corporation, except that any attempt to withdraw made more than 60 days after the Effective Time will require written approval of the surviving corporation, and no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery. Such approval may be conditioned on the terms the Delaware Court of Chancery deems just; provided, however, that this provision will not affect the right of any Hanger stockholder that has made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the Merger within 60 days after the Effective Time. If you fail to properly demand or successfully withdraw your demand for appraisal, or otherwise lose your appraisal rights, your shares of Hanger common stock will be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without interest thereon, less any withholding taxes.
Failure to follow the steps required by Section 262 of the DGCL for properly demanding appraisal rights may result in the loss of your appraisal rights. In that event, you will be entitled to receive the Merger Consideration for your shares of Hanger common stock in accordance with the Merger Agreement, without interest thereon, less any withholding taxes.
THE PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES STRICT COMPLIANCE WITH THE TECHNICAL PREREQUISITES OF SECTION 262 OF THE DGCL. IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR OWN LEGAL COUNSEL AND/OR FINANCIAL ADVISOR. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262 OF THE DGCL, SECTION 262 OF THE DGCL WILL GOVERN.
 
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Accounting Treatment
The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.
U.S. Federal Income Tax Consequences of the Merger
The following discussion is a summary of the material U.S. federal income tax consequences of the Merger to U.S. holders and non-U.S. holders (each as defined below) of Hanger common stock who receive cash in exchange for shares of Hanger common stock pursuant to the Merger. This discussion is for general informational purposes only and does not purport to be a complete analysis of all potential tax consequences of the Merger. The tax consequences of the Merger under U.S. federal tax laws other than those pertaining to income tax, such as estate and gift tax laws, and any applicable state, local and non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated thereunder, judicial decisions and published rulings and administrative pronouncements of the IRS, in each case in effect as of the date of this proxy statement. These authorities may change or be subject to differing interpretations, and any such change or differing interpretation may be applied retroactively in a manner that could affect the accuracy of the statements and conclusions set forth in this summary. The U.S. federal income tax laws are complex and subject to varying interpretation. We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. There can be no assurance that the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Merger.
This discussion is limited to holders of shares of Hanger common stock who hold such shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences that may be relevant to a holder in light of such holder’s particular circumstances, including the application of the alternative minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences to holders subject to special rules under the U.S. federal income tax laws, including, without limitation:

U.S. expatriates and former citizens or long-term residents of the United States;

U.S. holders whose functional currency is not the U.S. dollar;

persons holding shares of Hanger common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

banks, insurance companies and other financial institutions;

brokers or dealers in securities or foreign currencies;

traders in securities that elect to apply a mark-to-market method of accounting;

“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

“S corporations,” partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors therein);

real estate investment trusts and regulated investment companies;

tax-exempt organizations or governmental organizations;

persons deemed to sell their shares of Hanger common stock under the constructive sale provisions of the Code;

persons who own an equity interest, actually or constructively, in Parent or, following the Merger, the surviving corporation;

persons who hold or received their shares of Hanger common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and

tax-qualified retirement plans.
 
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This discussion also does not address the U.S. federal income tax consequence to holders of shares of Hanger common stock who exercise appraisal rights in connection with the Merger under the DGCL.
If an entity or arrangement classified as a partnership for U.S. federal income tax purposes holds shares of Hanger common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding Hanger common stock and partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences of the Merger to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS OF HANGER COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Tax Consequences to U.S. Holders
Definition of a U.S. Holder
For purposes of this discussion, a “U.S. holder” is any beneficial owner of shares of Hanger common stock that for U.S. federal income tax purposes is or is treated as:

an individual who is a citizen or resident of the United States;

a corporation (or other entity classified as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

a trust that (i) is subject to the primary supervision of a U.S. court and one or more “United States persons” ​(within the meaning of Section 7701(a)(30) of the Code) are authorized to control all substantial decisions of the trust or (ii) has a valid election in effect to be treated as a “United States person” for U.S. federal income tax purposes.
Effect of the Merger
The receipt of cash by a U.S. holder in exchange for shares of Hanger common stock in the Merger will generally be a taxable transaction for U.S. federal income tax purposes. The amount of any taxable gain or loss realized by a U.S. holder who receives cash for shares of Hanger common stock in the Merger will generally equal the difference, if any, between the amount of cash received for such shares (determined before the deduction of any applicable withholding taxes) and the U.S. holder’s adjusted basis in such shares. A U.S. holder’s adjusted basis in a share will generally be equal to the amount the U.S. holder paid for such share. The amount and character of such gain or loss and the holding period of shares will be determined separately for each block of shares of Hanger common stock (that is, shares acquired at the same cost in a single transaction) exchanged for cash in the Merger. Any gain or loss realized by a U.S. holder upon the receipt of cash in exchange for a share of Hanger common stock in the Merger will generally be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder has held such share for more than one year at the Effective Time. Otherwise, such gain or loss will be short-term capital gain or loss, which is subject to U.S. federal income tax at the same rates as ordinary income. Long-term capital gains recognized by certain non-corporate U.S. holders, including individuals, are generally taxable at a reduced rate. The deductibility of capital losses is subject to limitations.
A surtax of up to 3.8% may apply to so-called “net investment income” of certain U.S. citizens or residents, and to undistributed “net investment income” of certain estates and trusts. Net investment income includes any gain recognized on the receipt of cash in exchange for shares of Hanger common stock pursuant to the Merger. Holders should consult their tax advisors regarding the applicability of the tax on gain recognized pursuant to the Merger.
 
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Information Reporting and Backup Withholding
Payments made to a U.S. holder in exchange for shares of Hanger common stock pursuant to the Merger may be subject to information reporting to the IRS and backup withholding (currently at a rate of 24%). To avoid backup withholding on such payments, U.S. holders that do not otherwise establish an exemption should complete and return to the Paying Agent a properly executed IRS Form W-9 included in the letter of transmittal certifying that such holder is a U.S. person, that the taxpayer identification number provided is correct and that such holder is not subject to backup withholding. Certain holders (including corporations) are not subject to backup withholding or these information reporting rules.
Backup withholding is not an additional tax. Any amounts withheld from cash payments to a U.S. holder pursuant to the Merger under the backup withholding rules may be allowed as a refund or a credit against such U.S. holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS. U.S. holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Tax Consequences to Non-U.S. Holders
Definition of a Non-U.S. Holder
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of shares of Hanger common stock that is neither a U.S. holder nor an entity or arrangement classified as a partnership for U.S. federal income tax purposes.
Effect of the Merger
A non-U.S. holder will generally not be subject to U.S. federal income tax on any gain realized on the receipt of cash in exchange for shares of Hanger common stock in the Merger unless:

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, such gain is also attributable to a permanent establishment or, in the case of an individual, a fixed base, maintained by the non-U.S. holder in the United States);

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition of shares of Hanger common stock in the Merger, and certain other requirements are met; or

Hanger is or has been a U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the Merger or the period that the non-U.S. holder held shares of Hanger common stock and the non-U.S. holder held (actually or constructively) more than five percent of the shares of Hanger common stock at any time during such five-year period.
Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if such non-U.S. holder were a U.S. holder. A non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on after-tax profits effectively connected with a U.S. trade or business to the extent that such after-tax profits are not reinvested and maintained in the business.
Gain described in the second bullet point above will generally be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified under an applicable income tax treaty), which may be offset by U.S.-source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, the determination of whether Hanger is a USRPHC depends on the fair market value of its United States real property interests relative to the fair market value
 
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of its other trade or business assets and its United States and foreign real property interests. Hanger believes that it has not been a USRPHC for U.S. federal income tax purposes during the time described above.
Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments made to non-U.S. holders in the Merger may be subject to information reporting to the IRS and backup withholding (currently at a rate of 24%). Non-U.S. holders generally can avoid information reporting and backup withholding by providing the payor or applicable withholding agent with the applicable and properly executed IRS Form W-8 certifying under penalties of perjury the holder’s non-U.S. status (provided that the payor or applicable withholding agent does not have actual knowledge or reason to know that the holder is a U.S. person as defined under the Code) or by otherwise establishing an exemption. Copies of information returns that are filed with the IRS may be made available under an applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.
The discussion above of U.S. federal income tax consequences is not intended to constitute a complete description of all tax consequences relating to the Merger. This summary is for general information purposes only and is not tax advice. Because individual circumstances may differ, each holder should consult their tax advisor regarding the applicability of the rules discussed above to the holder and the particular tax effects to the holder of the Merger in light of such holder’s particular circumstances, including the tax consequences arising under the U.S. federal estate or gift tax rules, or through the application of any state, local or foreign tax laws.
Regulatory Approvals Required for the Merger
General
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period under the HSR Act has expired or been terminated. In addition, the Merger cannot be completed until the applicable waiting period under Washington Revised Code 19.390.010 et. seq., a statute pertaining to certain health care transactions in the State of Washington, has expired. Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger.
HSR Act and U.S. Antitrust Matters
Under the HSR Act and the rules promulgated thereunder by the FTC, the Merger cannot be completed until Hanger and Parent (the “Parties”) each file a notification and report form with the FTC and the DOJ under the HSR Act and the applicable waiting period thereunder has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30 calendar day waiting period following the parties’ filing of their respective HSR Act notification forms or the early termination of that waiting period. The Parties filed their respective HSR Act pre-merger notification and report forms on August 2, 2022 with the FTC and the DOJ under the HSR Act.
Under Washington Revised Code 19.390.010, et. seq., the Merger cannot be completed until Hanger submits a copy of its HSR Act filing to the Washington Attorney General and the applicable waiting period thereunder has expired or been terminated. A transaction notifiable under Washington Revised Code 19.390.010, et. seq., may not be completed until the expiration of a 60 calendar day waiting period following the submission of Hanger’s HSR Act notification form to the Washington Attorney General. Hanger filed its HSR Act notification form with the Washington Attorney General on August 2, 2022.
The Parties may receive a request for additional information and documentary material (a “Second Request”) from the FTC or DOJ in connection with the FTC’s or DOJ’s review of the transaction. The
 
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effect of a Second Request is to extend the waiting period imposed by the HSR Act until 30 days after the Parties have substantially complied with the Second Request, unless that period is extended voluntarily by the Parties or terminated sooner by the FTC or DOJ.
At any time before or after consummation of the Merger, notwithstanding the expiration or termination of the waiting period under the HSR Act, the FTC or the DOJ could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the Parties or requiring the Parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, and notwithstanding the expiration or termination of the waiting period under the HSR Act, any state could take action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the Parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
 
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THE MERGER AGREEMENT
The following summary describes material provisions of the Merger Agreement. This summary is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Appendix A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
Explanatory Note Regarding the Merger Agreement and the Summary of the Merger Agreement
The Merger Agreement and the summary of terms included in this proxy statement have been prepared to provide you with information regarding the terms of the Merger Agreement. Factual disclosures about Hanger contained in this proxy statement or in Hanger’s public filings with the SEC, as described in “Where You Can Find More Information”, may supplement, update or modify the factual disclosures about Hanger contained in the Merger Agreement and described in this summary. The representations, warranties and covenants contained in the Merger Agreement have been made solely for the purposes of the Merger Agreement and as of specific dates and solely for the benefit of parties to the Merger Agreement, and:

Were, in the case of the representations and warranties, negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to close the Merger if the representations and warranties of the other party prove to be untrue, due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement;

have been modified or qualified by certain confidential disclosures that were made among the parties to the Merger Agreement in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement itself;

may no longer be true as of a given date;

may be subject to a contractual standard of materiality in a way that is different from those generally applicable to you or other stockholders and reports and documents filed with the SEC; and

may be subject in some cases to other exceptions and qualifications, including exceptions that do not result in, and would not reasonably be expected to have, a Company Material Adverse Effect, as defined in “— Representations and Warranties”.
Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement. Accordingly, the representations, warranties, covenants and other provisions of the Merger Agreement or any description of such provisions should not be relied upon as characterization of the actual state of facts regarding, or the condition of, Hanger, Parent or Merger Sub, and should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference into this proxy statement. See “Where You Can Find More Information”.
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into Hanger, with Hanger continuing as the surviving corporation and as a wholly owned subsidiary of Parent from and after the Effective Time.
At the Effective Time, the directors of Merger Sub immediately prior to the Effective Time or such other individuals designated by Parent as of the Effective Time will become the directors of the surviving corporation, each to hold office until their respective successors have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the certificate of incorporation and
 
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the by-laws of the surviving corporation. The officers of Hanger immediately prior to the Effective Time will be the officers of the surviving corporation immediately following the Effective Time, each to hold office in accordance with the certificate of incorporation and by-laws of the surviving corporation until their respective successors have been duly elected, designated or qualified, or until their earlier death, resignation or removal, in accordance with the certificate of incorporation and by-laws of the surviving corporation.
At the Effective Time, the certificate of incorporation of the surviving corporation will be amended and restated to read in its entirety in the form set forth as Exhibit A to the Merger Agreement, and as so amended and restated will be the certificate of incorporation of the surviving corporation until thereafter changed or amended as provided therein or by applicable law. In addition, Hanger and the surviving corporation will take all necessary action such that, at the Effective Time, the by-laws of the surviving corporation will be amended to read in its entirety in the form set forth as Exhibit B to the Merger Agreement, and as so amended will be the by-laws of the surviving corporation until thereafter changed or amended as provided therein or by applicable law.
Closing and Effective Time of the Merger
Unless another date is agreed by the parties, the closing of the Merger will take place at 8:00 A.M., Eastern time, on the third business day following the satisfaction or waiver of all of the applicable conditions to closing set forth in Article 6 of the Merger Agreement (described in “— Conditions to the Closing of the Merger”) (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the fulfillment or waiver of those conditions). In no event will the closing of the Merger occur prior to 60 days from the date of the Merger Agreement without Parent’s prior written consent.
On the date of the closing of the Merger, or on a different date as the parties may agree, Merger Sub will cause a certificate of merger to be executed and filed in accordance with the relevant provisions of the DGCL and Merger Sub and Hanger will make all other filings required under the DGCL. The Merger will become effective upon the filing of the certificate of merger with the Delaware Secretary of State, or at such later date and time as is agreed by the parties to the Merger Agreement and specified in the certificate of merger.
Merger Consideration
Common Stock
At the Effective Time, each share of Hanger common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares held by Hanger as treasury stock or held directly by Parent or Merger Sub or any direct or indirect wholly owned subsidiary of Hanger, Parent or Merger Sub and (ii) Dissenting Shares) will be converted automatically into the right to receive the Merger Consideration. All shares of Hanger common stock converted into the right to receive the Merger Consideration will automatically be cancelled and cease to exist as of the Effective Time, and will thereafter represent only the right to receive the Merger Consideration.
Outstanding Equity Awards
The Merger Agreement provides, at the Effective Time, by virtue of the Merger, and without any action on the part of Parent, Merger Sub, Hanger or any holder of securities of Hanger, for the following treatment with respect to equity and equity-based awards relating to Hanger common stock:
Stock Options
Each option to purchase shares of Hanger common stock (each, a “Company Option”), whether vested or unvested, that is outstanding immediately prior to the Effective Time will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to the product of (x) the total number of shares of Hanger common stock underlying the Company Option multiplied by (y) the excess, if any, of the Merger Consideration over the exercise price of such Company Option (less taxes required to be withheld under applicable law). If the exercise price of
 
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a Company Option is equal to or greater than the Merger Consideration, then such Company Option will be cancelled for no consideration.
Restricted Stock Units and Performance-Based Restricted Stock Units
Each outstanding award of (i) Hanger restricted stock units, deferred restricted stock units or performance-based restricted stock units, in each case that at such time is subject solely to service-based vesting conditions (collectively, the “Company RSUs”) will become fully vested and will automatically be cancelled and be converted into the right to receive (without interest) an amount in cash (less any applicable tax withholdings) equal to (x) the total number of shares of Hanger common stock underlying such award of Company RSUs, multiplied by (y) the Merger Consideration, and (ii) Hanger performance-based restricted stock units that at such time is subject to performance-based vesting conditions (collectively, the “Company PRSUs”) will become vested as to the number of shares of Hanger common stock subject to such award that would vest based on target level achievement of all performance targets (without application of any modifier) and will, after giving effect to such vesting, automatically be cancelled and converted into the right to receive (without interest) an amount in cash (less any applicable withholding taxes) equal to (x) the number of vested shares of Hanger common stock underlying such award of Company PRSUs, multiplied by (y) the Merger Consideration, and the unvested portion of such Company PRSUs will be cancelled for no consideration.
Termination of Incentive Award Plans
As of the Effective Time, the Equity Incentive Plans will be terminated and no further shares of Hanger common stock, Company Options, Company RSUs, Company PRSUs, other equity interests in Hanger or other rights with respect to shares of Hanger common stock will be granted thereunder. Following the Effective Time, no such Company Option, Company RSU, Company PRSU, equity interest or other right with respect to any share of Hanger common stock that was outstanding immediately prior to the Effective Time will remain outstanding and each former holder of any such Company Option, Company RSU, Company PRSU, equity interest or other right with respect to any share of Hanger common stock will cease to have any rights with respect thereto, except the right to receive the Merger Consideration as discussed above.
Dissenting Shares
Any shares of Hanger common stock issued and outstanding immediately prior to the Effective Time and held by stockholders who have not voted in favor of the adoption and approval of the Merger Agreement, including the Merger, or consented thereto in writing and who have properly exercised and validly perfected appraisal rights for such shares in accordance with Section 262 of the DGCL will not be converted into the right to receive the Merger Consideration, and holders of such Dissenting Shares will be entitled to receive payment of the fair value of such Dissenting Shares, in accordance with, but only if and when required by, the provisions of Section 262, unless and until any such holder fails to perfect or effectively withdraws or loses its rights to appraisal and payment under the DGCL. If, after the Effective Time, any such stockholder fails to perfect or otherwise withdraws or loses such rights, such Dissenting Shares will thereupon be treated as if they had been converted into, as of the Effective Time, the right to receive the Merger Consideration, without interest thereon, on the terms and conditions in the Merger Agreement and will no longer constitute Dissenting Shares. At the Effective Time, any holder of Dissenting Shares will cease to have any rights with respect thereto other than such rights as are provided to holders of Dissenting Shares under Section 262 of the DGCL.
Exchange and Payment Procedures
At or prior to the Effective Time, Parent will appoint a nationally recognized bank or trust company, reasonably acceptable to Hanger, to act as the paying agent to make payments of the Merger Consideration to Hanger stockholders (the “Paying Agent”) to make payments of the Merger Consideration to stockholders. The surviving corporation will pay, or cause to be paid, the fees and expenses of the Paying Agent. At or prior to the Effective Time, Parent will deposit, or cause to be deposited, with the Paying Agent
 
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the aggregate Merger Consideration to which the holders of Hanger common stock (other than the Dissenting Shares) are entitled at the Effective Time pursuant to the Merger Agreement.
As soon as practicable (and no later than the third business day) after the Effective Time, the surviving corporation will cause the Paying Agent to mail to each person that was, immediately prior to the Effective Time, a holder of record of Hanger common stock represented by a certificate (the “Certificates”), which shares were converted into the right to receive the Merger Consideration, a letter of transmittal together with instructions for effecting the surrender of the certificates in exchange for payment of the Merger Consideration. Upon receipt of (i) in the case of shares of Hanger common stock represented by a stock certificate, a surrendered certificate or certificates (or affidavit of loss) in respect of such shares together with the signed letter of transmittal, or (ii) in the case of shares of Hanger common stock held in book-entry form (other than shares held through The Depository Trust Company), the receipt of the signed letter of transmittal, the Paying Agent or such other agent, in accordance with the letter of transmittal and instructions, will transmit to the holder of such shares the Merger Consideration in exchange therefor and such certificates or book-entry shares will be cancelled.
As promptly as practicable after the Effective Time, Parent will cause the Paying Agent to pay and deliver to The Depository Trust Company or its nominee, in respect of each book-entry share held through The Depository Trust Company, a cash amount in immediately available funds equal to the Merger Consideration (subject to any withholding of taxes) that holders of such book-entry shares will be automatically entitled to receive, and such book-entry shares of such holder will be cancelled.
At the Effective Time, the stock transfer books of Hanger will be closed and thereafter there will be no further registration of transfers of shares on the records of Hanger, and holders of Certificates and book-entry shares will cease to have rights with respect to such shares except as otherwise provided in the Merger Agreement or by applicable law. If, after the Effective Time, Certificates are presented to the surviving corporation for any reason, they will be cancelled and exchanged as provided in the Merger Agreement.
If any cash deposited with the Paying Agent remains unclaimed by holders of Hanger common stock on the first anniversary of the Effective Time, such cash (including any interest received in respect thereto) will be returned to the surviving corporation, and any holders of Hanger common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent and the surviving corporation (as general unsecured creditors) for delivery of the Merger Consideration, without any interest thereon and subject to any applicable withholding taxes and abandoned property, escheat or other similar laws. Any portion of the Merger Consideration that remains unclaimed by the holders of Hanger common stock immediately prior to such time as such amounts would otherwise escheat to, or become property of, any governmental entity will, to the extent permitted by applicable law, become the property of the surviving corporation free and clear of any claim or interest of any person previously entitled thereto.
If any Certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder of such Certificate to be lost, stolen or destroyed (and if required by Parent, the posting by the owners of a bond, in a reasonable sum as it may reasonably direct, as indemnity against any claim that may be made against Parent, Merger Sub, the surviving corporation or the Paying Agent with respect to such Certificate), the Paying Agent will, in exchange for such lost, stolen or destroyed stock certificate, pay the Merger Consideration deliverable in respect thereof pursuant to the Merger Agreement.
Representations and Warranties
In the Merger Agreement, Hanger has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

the due organization, valid existence, active status or good standing, to the extent applicable, and corporate or organizational power of Hanger and each of its subsidiaries;

the capitalization of Hanger, including the number of shares of Hanger common stock, and shares subject to Company Options, Company RSUs, Company PRSUs and other equity interests outstanding and the ownership of the capital stock of its subsidiaries;
 
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the indebtedness of Hanger and its subsidiaries;

the authority of Hanger to enter into the Merger Agreement and complete the Merger and the other Transactions and the enforceability of the Merger Agreement against Hanger;

the absence of (i) any conflict with or violation of the organizational documents of Hanger or any of its subsidiaries, (ii) any conflict with or violation of applicable laws, (iii) any required consent, approval, authorization, filing or notification under, breach of, loss of benefit under, change of control or default under, any contract or permit of Hanger or its subsidiaries or (iv) any grant to others of any right of termination, vesting, amendment, acceleration or cancellation of, or creation of a lien (other than permitted liens) on any property or asset of Hanger or any of its subsidiaries pursuant to, any contract or permit of Hanger or its subsidiaries, in each case, as a result of the execution, delivery and performance by Hanger of the Merger Agreement;

the consents, filings and approvals required by governmental entities in connection with the Transactions;

compliance with SEC filing requirements for Hanger’s SEC filings since December 31, 2020, including the accuracy of information contained in such documents and compliance with GAAP, and the rules and regulations of the SEC with respect to the consolidated financial statements contained therein;

the adequacy of disclosure controls and procedures and internal control over financial reporting;

the absence of certain undisclosed liabilities of Hanger or any of its subsidiaries;

the absence of certain changes and events since December 31, 2021 and the absence of a Company Material Adverse Effect (as defined below) since December 31, 2021;

the accuracy of information contained in this proxy statement, as it may be amended or supplemented from time to time;

litigation matters;

compliance with applicable laws and governmental orders;

the maintenance of and compliance with all required governmental licenses, permits, certificates, franchises, tariffs, grants, easements, variances, consents, orders, approvals, clearances, exemptions, registrations, enrollments, provider and supplier numbers, accreditations and authorizations necessary for the conduct of the business, and the use of the assets, of Hanger and its subsidiaries;

employee benefit plans, ERISA matters and other labor and employment matters;

environmental matters;

owned and leased real property;

title to assets;

tax matters;

material contracts;

intellectual property matters;

insurance;

the absence of any engagement of any financial advisor, broker or finder or any related liability for fees or commissions in connection with the Transactions, except for the fees and expenses of BofA Securities;

related party transactions;

the inapplicability of any anti-takeover statute or regulation to the Merger or the other Transactions;

receipt by the Board of an opinion of BofA Securities as to the fairness, as of the date of the opinion, from a financial point of view, of the Merger Consideration to be received by holders of shares of Hanger common stock (other than holders of Dissenting Shares); and
 
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the absence of any additional representations and warranties except for the representations and warranties expressly set forth in the Merger Agreement.
All of Hanger’s representations and warranties are qualified by reference to the disclosure in Hanger’s filings with the SEC on or after January 1, 2020 and prior to the date of the Merger Agreement (other than disclosures contained in the “Forward Looking Statements” or “Risk Factors” sections of such SEC filings) and as set forth in Hanger’s disclosure schedule delivered to Parent and Merger Sub pursuant to the Merger Agreement.
In addition, many of Hanger’s representations and warranties are qualified by knowledge or by a materiality or “Company Material Adverse Effect” standard. For purposes of the Merger Agreement, “Company Material Adverse Effect” means any change, effect, event, occurrence, circumstance, condition, fact, state of facts or development that, individually or in the aggregate, has, or would reasonably be expected to have, a material adverse effect on the business, financial condition, assets, liabilities, operations or results of operations of Hanger and its subsidiaries, taken as a whole. The foregoing notwithstanding, adverse effects arising out of or arising from the following will not constitute or be deemed to contribute to a Company Material Adverse Effect, and will not otherwise be taken into account in determining whether such Company Material Adverse Effect has occurred or would reasonably be expected to occur:

any changes or proposed changes in applicable laws, GAAP or the interpretation or enforcement thereof;

any changes in general economic, business, labor or regulatory conditions or in securities, credit or other financial markets, including inflation, monetary policy, commodity prices, interest rates or exchange rates, in the United States or globally;

any changes generally affecting the industries in which Hanger or its subsidiaries operate in the United States or globally (including seasonal fluctuations);

the continuation or worsening of supply chain disruptions affecting the industries, businesses or segments in which Hanger and its subsidiaries operate;

any changes in global or national political conditions (including the outbreak or escalation of war (whether declared or not), military action or operation, sabotage, civil unrest, civil disobedience, national or international calamity, the outbreak of hostilities or acts of terrorism), changes due to natural disasters or changes in the weather or changes due to the outbreak or worsening of an epidemic, pandemic or other health crisis (including COVID-19, or the taking of any permitted actions by Hanger or COVID-19 measures required to be taken by Hanger, or changes in such COVID-19 measures required to be taken by Hanger after the date of the Merger Agreement));

any actions or omissions required of Hanger under the Merger Agreement or taken or not taken at the request of, or with the consent of, Parent;

the negotiation, announcement, pendency or consummation of the Merger Agreement and the Merger;

any proceeding commenced by or involving any governmental entity or a current or former stockholder of Hanger arising from allegations of breach of fiduciary duty or violation of Law relating to the Merger Agreement or the Transactions;

changes in the trading price or trading volume of shares of Hanger common stock or any suspension of trading, or any changes in the ratings or the ratings outlook for Hanger by any applicable rating agency or changes in the analyst’s recommendations or ratings with respect to Hanger (provided that the underlying cause of such change may be taken into account in determining whether a Company Material Adverse Effect has occurred); or

any failure by Hanger or any of its subsidiaries to meet any revenue, earnings, adjusted EBITDA or other financial projections or forecasts (provided that the underlying cause of such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred).
Any change referred to in the first four bullets above may be taken into account in determining whether there has occurred, or would reasonably be expected to occur, a Company Material Adverse Effect to the
 
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extent such change adversely disproportionately impacts Hanger and its subsidiaries, taken as a whole, relative to other companies operating in the industries or in the markets in which Hanger and its subsidiaries operate.
Parent’s and Merger Sub’s representations and warranties under the Merger Agreement, relate to, among other things:

Parent’s and Merger Sub’s due organization, valid existence, good standing, to the extent applicable, corporate or other entity power;

the authority of Parent and Merger Sub to enter into the Merger Agreement and complete the Merger and the Transactions and the enforceability of the Merger Agreement against Parent and Merger Sub;

the absence of (i) any conflict with or violation of the organizational documents of Parent or Merger Sub, (ii) any conflict with or violation of applicable law, (iii) any required consent, approval, authorization, filing or notification under, breach of, loss of benefit under, change of control or default under, any contract or permit of Parent or Merger Sub or (iv) any grant to others of any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien on any asset of Parent and its subsidiaries, including Merger Sub, pursuant to any contract or permit of Parent or Merger Sub, in each case, as a result of the execution and delivery by Parent and Merger Sub of the Merger Agreement and completion by Parent and Merger Sub of the Merger;

the consents, filings and approvals required by governmental entities in connection with the Transactions;

litigation matters;

the delivery of the Commitment Letters and the Debt Fee Letter, the status of the Commitment Letters and the sufficiency of the proceeds of the Financing to fund the Transactions;

the limited guaranty;

the accuracy of information supplied to Hanger by Parent or Merger Sub for use in this proxy statement, as it may be amended or supplemented from time to time;

the absence of beneficial ownership of Hanger common stock by Parent, Merger Sub, or any Parent subsidiary;

the solvency of the surviving corporation;

the ownership of Parent and Merger Sub;

the absence of stockholder and management arrangements;

the absence any engagement of any financial advisor, broker or finder or any related liability for fees or commissions in connection with the Transactions; and

the absence of any additional representations and warranties except for the representations and warranties expressly set forth in the Merger Agreement.
None of the representations and warranties in the Merger Agreement will survive the completion of the Merger.
Conduct of Business Pending the Merger
Certain covenants in the Merger Agreement restrict the conduct of Hanger’s business between the date of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms. Except (i) as required by law or order, (ii) as set forth in Hanger’s disclosure schedule, (iii) as expressly contemplated by the Merger Agreement, or (iv) with the prior written consent of Parent (not to be unreasonably withheld, conditioned or delayed), from the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms, Hanger will and will cause each of its subsidiaries to use its commercially reasonable efforts to (x) conduct its business and operations, and the business and operations of each of Hanger’s subsidiaries, in
 
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all material respects in the ordinary course of business consistent with past practices and, to the extent consistent therewith, use reasonable best efforts to maintain and preserve intact the business organization, assets and properties of Hanger and each of its subsidiaries and (y) keep available the services of current officers, employees and consultants of Hanger and each of its subsidiaries and preserve the goodwill and current relationships of Hanger and each of its subsidiaries with customers, suppliers and other persons with which Hanger or any of its subsidiaries has significant business relations. Except for any action permitted under the Merger Agreement in connection with COVID-19, as required by law or order or as set forth in Hanger’s disclosure schedule, or as expressly contemplated under the Merger Agreement, without the prior written consent of Parent (not to be unreasonably withheld, conditioned or delayed in the case of matters in the 11th, 13th and 15th bullets below only), from the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement in accordance with its terms, Hanger will not, and will not permit any of its subsidiaries to:

amend its certificate of incorporation or by-laws (or equivalent organizational documents);

issue, sell, pledge, dispose of, grant, transfer or encumber any shares of capital stock of, or other equity interests in, Hanger or any of its subsidiaries, or securities convertible into, or exchangeable or exercisable for, any shares of such capital stock or other equity interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other equity interests or such convertible or exchangeable securities of Hanger or any of its subsidiaries, other than the issuance of shares upon the exercise of Company Options or settlement of Company RSUs or Company PRSUs outstanding as of the date of the Merger Agreement in accordance with their terms;

sell, pledge, dispose of, transfer, lease, guarantee or encumber (other than with permitted liens) any material property or assets of Hanger or any of its subsidiaries, except (i) pursuant to existing contracts, (ii) the sale or purchase of goods or inventory in the ordinary course of business consistent with past practice or (iii) the disposition of obsolete, surplus or worn out assets, inventory or equipment or assets that are no longer used in the ordinary course of Hanger’s business;

sell, assign, pledge, transfer, license, abandon, or otherwise dispose of any intellectual property owned by Hanger or its subsidiaries, except in the ordinary course of business consistent with past practice;

declare, set aside, make or pay any dividend or other distribution, whether payable in cash, stock, property or any combination of the foregoing, with respect to Hanger’s or any of its subsidiaries’ capital stock or other equity interests, other than dividends or other distributions paid by any wholly owned Hanger subsidiary to Hanger or another wholly owned subsidiary of Hanger;

reclassify, combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any shares of capital stock or other equity interests of Hanger or any of its subsidiaries, except with respect to any wholly owned Hanger subsidiary;

merge or consolidate Hanger or any of its subsidiaries with any person or adopt a plan of complete or partial liquidation, or resolutions providing for a complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Hanger or any of its subsidiaries, except with respect to any wholly owned subsidiary of Hanger;

acquire (including by merger, consolidation or acquisition of stock or assets) any person or assets, other than (i) acquisitions by Hanger from any of its wholly owned subsidiaries or among any wholly owned subsidiaries of Hanger or (ii) acquisitions of inventory, raw materials, supplies and other property in the ordinary course of business consistent with past practice;

(i) incur any indebtedness, (ii) issue any debt securities, (iii) assume, guarantee or endorse, or otherwise as an accommodation become responsible for any indebtedness of any person (other than a wholly owned subsidiary of Hanger) or (iv) redeem, repurchase, cancel or otherwise acquire any indebtedness, except in each case (a) for borrowings under Hanger’s existing credit facilities in the ordinary course of business consistent with past practice, (b) letters of credit for the benefit of Hanger vendors in the ordinary course of business consistent with past practice, (c) indebtedness to any
 
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seller incurred in connection with the acquisition of any person or assets permitted in the Hanger disclosure schedule, and (d) capital leases in the ordinary course of business consistent with past practice;

make any loans, advances or capital contributions to, or investments in, any other person (other than any of Hanger’s wholly owned subsidiaries) in excess of $500,000 in the aggregate;

terminate or cancel, or agree to any material amendment to or waiver under any material contract or enter into or amend any contract that, if existing on the date of the Merger Agreement, would be a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act of 1933, as amended, in each case other than in the ordinary course of business consistent with past practice (including extensions or renewals of material contracts related to real property leased by Hanger);

make any capital expenditure in excess of Hanger’s annual capital expenditure budget, other than capital expenditures that are not, in the aggregate, in excess of $1,000,000;

except to the extent required by the Merger Agreement, applicable law or the existing terms of any Hanger benefit plan or contract: (i) increase the compensation payable or to become payable to directors, officers or employees, except, in the case of non-officer employees only, for increases in the ordinary course of business consistent with past practice; (ii) amend any benefit plan, or establish, adopt, or enter into any new benefit plan, unless such amendment or new arrangement is not expected to result in any material cost to Hanger; (iii) accelerate the vesting, exercisability or funding under any benefit plan; or (iv) terminate (other than for cause) the employment of or hire or promote any employee, officer or consultant with a title of Senior Vice President or above with annual salary of $200,000 or more;

implement, adopt or make any change in accounting policies, practices, principles, methods or procedures, other than as required by law, GAAP, the NYSE or by a governmental entity;

compromise, settle or agree to settle any material proceeding, other than (i) the payment, or satisfaction, in the ordinary course of business, of liabilities reflected or reserved against in Hanger’s financial statements included in its filings with the SEC or (ii) those that involve only the payment by Hanger or any of its subsidiaries, after taking into account amounts paid or payable by insurance, of monetary damages not in excess of $500,000 individually, in any case without the imposition of equitable relief on, or the admission of wrongdoing by, Hanger or any of its subsidiaries;

take or omit to take any action that would or would reasonably be expected to result in a Company Material Adverse Effect;

implement or announce any employee layoffs, plant closings, reductions in force, furloughs, temporary layoffs, salary or wage reductions, work schedule changes or other such actions that would implicate the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar law;

waive or release any noncompetition, non-solicitation, nondisclosure, noninterference or non-disparagement obligation of any current or former employee, officer or consultant, except to forgo enforcement of certain such obligations;

enter into any new line of business;

fail to maintain with financially responsible insurance companies, insurance in such amounts and against such risks of losses as is maintained by it as of the date of the Merger Agreement;

make or change any material tax election, change an annual tax accounting period, adopt or change any material tax accounting method, settle any material tax claim, audit or assessment, file any amended tax return, file any material tax return in a manner inconsistent with past practice, enter into any tax sharing agreement or closing agreement relating to any material tax, surrender any right to a claim a material tax refund, incur any material taxes outside the ordinary course of business, or consent to any extension or waiver of the statute of limitations period applicable to any material tax claim or assessment; or

authorize or enter into any contract or otherwise agree to make any commitment to do any of the foregoing.
 
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No Solicitation of Other Offers; Change of Board Recommendation
From the execution and delivery of the Merger Agreement and continuing until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Hanger will, and will cause its subsidiaries to, and will instruct its representatives to on its behalf, cease and cause to be terminated any discussions or negotiations with any third party relating to any Acquisition Proposal that are not expressly permitted by the Merger Agreement, request the prompt return or destruction of all non-public information concerning Hanger and its subsidiaries and cease providing any further information with respect to Hanger and its subsidiaries or any Acquisition Proposal to any such third party or its representatives. Subject to the terms of the Merger Agreement, from and after the date of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Hanger will not, and will cause its subsidiaries to not, and will instruct its representatives to not on its behalf, directly or indirectly:

solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to, an Acquisition Proposal;

furnish to any third party any non-public information relating to Hanger and its subsidiaries or afford to any third party access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Hanger or its subsidiaries, in any such case with the intent to induce, or that could reasonably be expected to result in, the making, submission or announcement of, or to knowingly encourage, facilitate or assist, an Acquisition Proposal or any inquiries or the making of any proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; or

participate or engage in any discussions or negotiations with any third party with respect to an Acquisition Proposal.
Except as expressly permitted by the Merger Agreement, as described below, from and after the date of the Merger Agreement until the receipt of the Company Stockholder Approval or, if earlier, the termination of the Merger Agreement, neither the Board nor any committee thereof will:

approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal;

withdraw, change or qualify, in a manner adverse to Parent or Merger Sub, the Company Board Recommendation;

approve or cause Hanger to enter into any merger agreement, letter of intent or other similar agreement relating to any Acquisition Proposal;

fail to include the Company Board Recommendation in the proxy statement; or

resolve or agree to do any of the foregoing.
We refer to any event in the foregoing first, second, fourth or fifth bullets (to the extent related to one of the first two bullets) as a “Change of Board Recommendation.”
If at any time following the date of the Merger Agreement and prior to the receipt of the Company Stockholder Approval (i) Hanger has received a bona fide written Acquisition Proposal from a third party, (ii) Hanger has not breached the “no solicitation” provisions of the Merger Agreement in any respect with respect to such Acquisition Proposal and (iii) the Board (or a duly authorized committee thereof) determines in good faith (after consultation with and advice from its financial advisor and outside counsel), based on information then available, that such Acquisition Proposal constitutes or could reasonably be expected to lead to a Superior Proposal, then Hanger and its representatives may, directly or indirectly through Hanger’s representatives: (a) subject to the entry into, and solely in accordance with, a confidentiality agreement that contains confidentiality provisions that are no less favorable in the aggregate to Hanger than its confidentiality agreement with Patient Square, furnish to such third party making such Acquisition Proposal (and its representatives, prospective debt and equity financing sources, and/or their respective representatives) any non-public information relating to Hanger or any of its subsidiaries, or afford to such third party making such Acquisition Proposal (and its representatives, prospective debt and equity financing sources and/or their respective representatives) access to the business, properties, assets, books, records or
 
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other non-public information, or to any personnel, of Hanger or any of its subsidiaries, provided that any material non-public information concerning Hanger or its subsidiaries provided to such third party, to the extent not previously provided or made available to Parent or Merger Sub, has been provided or made available to Parent or Merger Sub as promptly as reasonably practicable after it is provided or made available to such third party and (b) participate or engage in discussions or negotiations with such third party making such Acquisition Proposal (and its representatives, prospective debt and equity financing sources and/or their respective representatives) with respect to such Acquisition Proposal and otherwise facilitate such Acquisition Proposal or assist such third party making such Acquisition Proposal (and its representatives, prospective debt and equity financing sources and/or their respective representatives) with such Acquisition Proposal.
Hanger will promptly (and in any event within 24 hours) notify Parent in the event that Hanger receives any Acquisition Proposal including providing (i) the identity of the third party making such Acquisition Proposal and (ii) a copy of such Acquisition Proposal or, where no such copy is available, a reasonable description of such Acquisition Proposal. Hanger will promptly (and in any event within 24 hours after such determination) advise Parent if Hanger determines to begin providing information or to engage in discussions or negotiations concerning an Acquisition Proposal.
If Hanger has received a bona fide written Acquisition Proposal that the Board (or any duly authorized committee thereof) determines in good faith, after consultation with and advice from its financial advisors and outside counsel, constitutes a Superior Proposal, the Board may at any time prior to the receipt of the Company Stockholder Approval, effect a Change of Board Recommendation with respect to such Superior Proposal and/or terminate the Merger Agreement and pay the termination fee to Parent as described in “— Termination Fees” in order to enter into a definitive written agreement with respect to such Superior Proposal. Hanger, however, is not entitled to effect a Change of Board Recommendation or terminate the Merger Agreement unless:

Hanger provided to Parent at least five days’ prior written notice of its intention to take such action, which notice will specify the material terms and conditions of such Acquisition Proposal and will have provided to Parent a copy of the available proposed transaction agreement to be entered into in respect of such Acquisition Proposal;

during the five day notice period described above, if requested by Parent, Hanger will have, and will have caused its legal and financial advisors to have, engaged in good faith negotiations with Parent regarding any amendment to the Merger Agreement proposed in writing by Parent and intended to cause the relevant Acquisition Proposal to no longer constitute a Superior Proposal; and

the Board will have considered in good faith any adjustments and/or proposed amendments to the Merger Agreement (including a change to the price terms thereof) and the other agreements contemplated thereby that were irrevocably offered in writing by Parent no later than 11:59 A.M., Eastern time, on the last day of such five day notice period, and will have determined in good faith that the Superior Proposal would continue to constitute a Superior Proposal if such adjustments or amendments proposed by Parent were to be given effect.
In the event of any material revisions to the Superior Proposal offered in writing by the party making the Superior Proposal, Hanger is required to deliver a new written notice to Parent and to again comply with the requirements of the “no solicitation” provisions of the Merger Agreement with respect to such new written notice, except that the five day notice period will be three days with respect to any such revised Superior Proposal.
The Board (or a duly authorized committee thereof) may, at any time prior to the receipt of the Company Stockholder Approval, effect a Change of Board Recommendation if the Board (or a duly authorized committee thereof) determines, in good faith, after consultation with outside counsel, that (i) an Intervening Event has occurred and is continuing and (ii) the failure to effect a Change of Board Recommendation in response to such Intervening Event would be reasonably likely to be inconsistent with its fiduciary duties to the Hanger stockholders under applicable law. However, the Board will not be entitled to effect a Change of Board Recommendation because of the occurrence of an Intervening Event unless:
 
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Hanger has given Parent at least five days’ prior written notice advising Parent of the material information and facts relating to such Intervening Event and stating that the Board intends to make a Change of Board Recommendation in response to such Intervening Event;

during the five day notice period described above, Hanger has engaged in good faith negotiations with Parent (if Parent wishes to so negotiate) regarding any adjustments to the terms and conditions of the Merger Agreement as would obviate the need for the Board to proceed with a Change of Board Recommendation; and

at the end of such five day notice period described above, the Board (after consultation with Hanger’s outside legal counsel and taking into account any adjustments offered by Parent to the terms and conditions of the Merger Agreement) maintains its determination that the failure of the Board to make such a Change of Board Recommendation in response to such Intervening Event would be reasonably likely to be inconsistent with its fiduciary duties to the Hanger stockholders under applicable law.
Each time any material amendment or modification to the Intervening Event occurs, Hanger will notify Parent of such amendment or modification in writing and the notice period will be extended for two days from the date of such notification.
Hanger or the Board may (i) disclose to the Hanger stockholders a position contemplated by Rule 14e-2(a), Rule 14d-9 and Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) make any disclosure to the stockholders of Hanger if the Board (or any duly authorized committee thereof) reasonably determines in good faith, after consultation with outside counsel, that the failure to make such disclosure would be reasonably likely to be inconsistent with its fiduciary duties to the Hanger stockholders or violate applicable law. The issuance by Hanger or the Board of a “stop, look and listen” statement pending disclosure of its position, as contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, will not constitute a Change of Board Recommendation.
As used in this proxy statement:

Acquisition Proposal” means any offer or proposal from a third party concerning (i) a merger, consolidation or other business combination transaction with Hanger, (ii) a sale, lease, license or other disposition, by merger, consolidation, business combination, share exchange, joint venture or otherwise, of assets of Hanger (including equity interests of any subsidiary of Hanger) or its subsidiaries representing 20% or more of the consolidated assets of Hanger and its subsidiaries, based on their fair market value as determined in good faith by the Board (or any duly authorized committee thereof), (iii) an issuance (including by way of merger, consolidation, business combination or share exchange) of equity interests representing 20% or more of the voting power of Hanger, or (iv) any combination of the foregoing (in each case, other than the Merger); provided that, all references to “third party” in this definition will include any “group” as defined pursuant to Section 13(d) of the Exchange Act.

Superior Proposal” means a bona fide written Acquisition Proposal (except the references therein to “20%” will be replaced by “50%”) that the Board (or a duly authorized committee thereof) determines in good faith (after consultation with its financial advisor and outside counsel), taking into account such factors as the Board (or any duly authorized committee thereof) considers in good faith to be appropriate (including the conditionality, timing and likelihood of consummation of such proposals), is more favorable from a financial point of view to Hanger’s stockholders than the Merger.

Intervening Event” means any event, change, effect, development, state of facts, condition or occurrence (including any acceleration or deceleration of existing changes or developments) that (i) is material to Hanger and its subsidiaries, (ii) was not known or reasonably foreseeable to the Board as of or prior to the date of the Merger Agreement, and (iii) does not involve or relate to an Acquisition Proposal; provided that (a) the fact that Hanger meets or exceeds any internal or published projections, forecasts, estimates or predictions of revenue, earnings or other financial or operating metrics for any period ending on or after the date of the Merger Agreement or (b) any changes after the date of the Merger Agreement in the market price and/or trading volume of Hanger common stock or the credit rating of Hanger, in each case will not be deemed to be an “Intervening Event”.
 
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Required Stockholder Vote
As promptly as reasonably practicable after the SEC confirms that it will not review or has completed its review of the special meeting proxy statement, Hanger will cause this proxy statement to be disseminated to holders of Hanger. Hanger will take all action necessary to duly call, give notice of, convene and hold a meeting of its stockholders promptly following the mailing of this proxy statement for the purposes of obtaining the Company Stockholder Approval.
Unless there has been a Change of Board Recommendation in accordance with the applicable provisions of the Merger Agreement, Hanger will include in this proxy statement the Company Board Recommendation and use its commercially reasonable efforts, which efforts will include hiring a reputable proxy solicitor firm, to solicit proxies from its stockholders in favor of the adoption and approval of the Merger Agreement, including by postponing or adjourning the special meeting to allow for additional solicitation of proxies if necessary to obtain the Company Stockholder Approval. Hanger may only postpone or adjourn the special meeting (i) with the consent of Parent (not to be unreasonably withheld, conditioned or delayed), (ii) if a quorum has not been established, (iii) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the Board has determined in good faith is necessary or advisable and for such supplemental or amended disclosure to be disseminated and reviewed by Hanger’s stockholders prior to the special meeting, (iv) to allow reasonable additional time to solicit additional proxies if necessary in order to obtain the Company Stockholder Approval or (v) if required by law.
Consents, Approvals and Filings
Hanger, Parent and Merger Sub have each agreed, subject to the terms and conditions of the Merger Agreement, to use its reasonable best efforts to take, or cause to be taken, all actions reasonably necessary, proper or advisable under the Merger Agreement and applicable law to consummate, as promptly as practicable, and in any event, by or before December 18, 2022 (the “Extended Outside Date”), the Merger and the other Transactions, including using reasonable best efforts to:

obtain all necessary consents, approvals or waivers from, or participation in other discussions or negotiations with, third parties;

obtain all necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from governmental entities (including those in connection with applicable Regulatory Laws), make all necessary or advisable registrations, declarations and filings with and take all steps as may be reasonably necessary to obtain an approval or waiver from, or to avoid any proceeding by, any governmental entity (including those in connection with applicable Regulatory Laws); and

execute and deliver any additional instruments necessary to consummate the Transactions and to carry out fully the purposes of the Merger Agreement.
Each of the parties to the Merger Agreement will furnish, or cause to be furnished, to each other party such necessary information and reasonable assistance as such other party may reasonably request in connection with the foregoing. Subject to applicable law, Hanger and Parent will have the right to review in advance, and to the extent practicable will consult with the other and consider in good faith the views of the other with respect to, all of the information relating to Hanger or Parent, as the case may be, and any of their respective subsidiaries, that appears in any filing made with, or written materials submitted to, any third party and/or any governmental entity in connection with the Merger and the Transactions. Notwithstanding the foregoing, no party to the Merger Agreement will be obligated to provide to any other party any portion of any filing under the HSR Act that is not customarily furnished to other parties in connection with such filings. In exercising the rights above, Hanger and Parent will act reasonably and as promptly as practicable. Subject to applicable law and the instructions of any governmental entity, Hanger and Parent will keep each other reasonably apprised of the status of matters relating to the completion of the Transactions, including promptly furnishing the other with copies of notices or other written substantive communications received by Hanger, Parent or any of their respective subsidiaries, from any governmental entity and/or third party with respect to the Transactions, and, to the extent practicable under the circumstances, will provide the other party and its counsel with the opportunity to participate in any meeting with any governmental entity in respect of any substantive filing, investigation or other inquiry in connection with the Transactions.
 
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In furtherance of the above, Hanger and Parent will, and will cause their respective affiliates to, make or cause to be made all filings required under applicable Regulatory Laws with respect to any of the Transactions as promptly as practicable and, in any event, file all required HSR Act notifications within ten business days after the date of the Merger Agreement. Parent will pay, or cause its affiliates to pay, all filing fees required under any Regulatory Laws for any of the Transactions.
Parent agrees to use its reasonable best efforts to take, or cause to be taken, any and all steps and to make, or cause to be made, any and all undertakings reasonably necessary to resolve, avoid or eliminate each and every impediment under any applicable Regulatory Law so as to enable the closing of the Merger to occur as promptly as practicable (and in any event, no later than the Extended Outside Date), including (i) proposing, negotiating, committing or agreeing to, and effecting, by consent decree, hold separate order, or otherwise, the sale, divestiture, transfer, licensing or disposition of any assets, properties or businesses of Hanger or any of its subsidiaries, (ii) accepting any operational restrictions or otherwise taking or committing to take actions that limit Parent’s or any of its subsidiaries’ freedom of action with respect to, or its ability to retain, any of the assets, properties, licenses, rights, product lines, operations or businesses of Hanger or any of its subsidiaries, as may be required in order to avoid the entry of, or to effect the lifting or dissolution of, any injunction, temporary restraining order, or other order in any suit or proceeding, which would otherwise have the effect of preventing or materially delaying the closing of the Merger, as applicable, and (iii) resisting, contesting, defending and appealing, including through litigation, any proceeding (including any administrative or judicial proceeding) or any other claim asserted by any person in order to avoid entry of, or to have vacated, reversed or terminated, any order (whether temporary, preliminary or permanent) that would prevent the closing of the Merger from occurring by the Extended Outside Date. Notwithstanding the foregoing or any other provision of the Merger Agreement, none of Parent, Hanger or any of their respective Subsidiaries shall be required to agree to any sale, transfer, license, separate holding, divestiture or other disposition of, or to any prohibition of or any limitation on the acquisition, ownership, operation, effective control or exercise of full rights of ownership, or other modification of rights in respect of, any assets, properties or businesses of Hanger or any of its subsidiaries that, in each case, is not conditioned on the consummation of the Transactions.
Neither Parent nor Merger Sub will, directly or indirectly, acquire or agree or agree in principle to acquire any person or portion thereof, or otherwise acquire or agree to acquire any assets or equity, if the entering into a definitive agreement relating to, or the consummation of, such acquisition, merger or consolidation would reasonably be expected to (i) impose any material delay in the obtaining of, or materially increase the risk of not obtaining any permits, orders or other approvals of any governmental entity necessary to consummate any of the Transactions or the expiration or termination of any applicable waiting period, (ii) materially increase the risk of any governmental entity seeking an order prohibiting the consummation of any of the Transactions, (iii) materially increase the risk of not being able to remove any such order on appeal or otherwise, or (iv) materially delay or prevent the consummation of any of the Transactions.
Except as otherwise set forth in the Merger Agreement, nothing contained in the Merger Agreement will give Parent or Merger Sub, directly or indirectly, the right to control, supervise or direct the operations of Hanger or its subsidiaries prior to the Effective Time. Prior to the Effective Time, Hanger will exercise, consistent with the terms and conditions of the Merger Agreement, complete unilateral control, supervision and direction over its and its subsidiaries’ business operations.
As used in this proxy statement, “Regulatory Laws” means any applicable supranational, national, federal, state, county, local or foreign antitrust, competition, trade regulation, or foreign investment laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening competition through merger or acquisition, including the HSR Act, the Sherman Act, the Clayton Act and the Federal Trade Commission Act, in each case, as amended, and other similar antitrust, competition or trade regulation laws of any jurisdiction other than the United States.
Continuing Employees
Under the Merger Agreement, from the date of the closing of the Merger until the date that is twelve months following the Effective Time, Parent will cause the surviving corporation to provide to each
 
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Continuing Employee, during any period of employment with the surviving corporation during such twelve month period, base compensation and a target annual cash bonus opportunity that, in each case, is not less favorable than the base compensation and target annual cash bonus opportunity provided to such Continuing Employee immediately prior to the Effective Time, and other compensation and benefits (excluding equity award compensation, pensions, nonqualified deferred compensation and change-in-control compensation or benefits) that are substantially equivalent in aggregate economic value to other compensation and benefits provided to such Continuing Employee immediately prior to the Effective Time. Parent will also cause the surviving corporation to continue in effect the awards made under Hanger’s annual incentive plans for officers and employees, as well as all existing commission plans or arrangements, through the end of 2022 without change.
With respect to benefit plans maintained by the surviving corporation (including any vacation, paid time-off and severance plans), for all purposes, including determining eligibility to participate, level of benefits, vesting and benefit accruals, each Continuing Employee’s service with (or otherwise recognized by) Hanger or any of its subsidiaries, as reflected in Hanger’s records, will be treated as service with Parent or any of its subsidiaries. Parent will not be required to recognize service with Hanger or any of its subsidiaries for each Continuing Employee to the extent that such recognition would result in any duplication of benefits and the foregoing service credit will not apply with respect to any defined benefit plan.
Parent will cause the surviving corporation to use commercially reasonable efforts to waive, or cause to be waived, any pre-existing condition limitations, exclusions, evidence of insurability, actively-at-work requirements and waiting periods under any welfare benefit plan maintained by Parent or any of its subsidiaries in which Continuing Employees (and their eligible dependents, including domestic partners) will be eligible to participate from and after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Hanger benefit plan immediately prior to the Effective Time. Parent will cause the surviving corporation to use commercially reasonable efforts to recognize, or cause to be recognized, the dollar amount of all co-payments, deductibles and similar expenses incurred by each Continuing Employee (and his or her eligible dependents, including domestic partners) during the calendar year in which the Effective Time occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant welfare benefit plan in which such Continuing Employee (and his or her eligible dependents, including domestic partners) will be eligible to participate from and after the Effective Time.
The “Continuing Employee” provisions of the Merger Agreement are solely for the benefit of the parties thereto. Nothing contained in the Merger Agreement will (i) guarantee employment for any period of time or preclude the ability of Parent, the surviving corporation or their respective affiliates to terminate the employment of any Continuing Employee at any time and for any reason (as allowed by and pursuant to applicable law, including without limitation the Worker Adjustment and Retraining Act of 1988, as amended), (ii) require Parent, the surviving corporation or any of their respective affiliates to continue any Hanger benefit plan or other employee benefit plans, programs or contracts or prevent the amendment, modification or termination thereof following the closing of the Merger or (iii) amend any Hanger benefit plan or other employee benefit plans, programs or contracts.
Directors’ and Officers’ Indemnification and Insurance
Pursuant to the Merger Agreement, from and after the Effective Time, Parent will, and will cause the surviving corporation to, indemnify, defend and hold harmless, and will advance expenses as incurred, to the fullest extent permitted under (i) applicable law and (ii) Hanger’s certificate of incorporation and by-laws or similar organizational documents in effect as of the date of the Merger Agreement, each present and former director and officer of Hanger and its subsidiaries and each of their respective employees who serves as a fiduciary of a Hanger benefit plan (in each case, when acting in such capacity) against any costs or expenses (including reasonable attorneys’ fees), judgments, settlements, fines, losses, claims, damages or liabilities incurred in connection with any proceeding or investigation, whether civil, criminal, administrative or investigative, whenever asserted, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including in connection with the Merger Agreement and the Transactions.
 
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All rights to exculpation, indemnification and advancement of expenses arising from, relating to, or otherwise in respect of, acts or omissions occurring at or prior to the Effective Time (including in connection with the Merger Agreement or the Transactions) existing as of the Effective Time in favor of the current or former directors or officers of Hanger or any of its subsidiaries serving in such capacity at or prior to the Effective Time and each of their respective employees who serves as a fiduciary of a Hanger benefit plan as provided in its certificates of incorporation, by-laws or other organizational documents will survive the Merger and will continue in full force and effect in accordance with their terms. For a period of no less than six years from and after the Effective Time, Parent will cause the surviving corporation to, and the surviving corporation will, maintain in effect the exculpation, indemnification and advancement of expenses provisions of the applicable party’s certificate of incorporation and by-laws or similar organizational documents in effect as of the date of the Merger Agreement of Hanger or its subsidiaries with any of their respective directors, officers or employees in effect as of the date of the Merger Agreement, and will not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who immediately before the Effective Time were current or former directors, officers or employees of Hanger or its subsidiaries; provided, however, that all rights to exculpation, indemnification and advancement of expenses in respect of any proceeding pending or asserted or any claim made within such period will continue until the final disposition of such proceeding; provided, however that the advancement and payment of such expenses incurred by an indemnified party in advance of the final disposition of a proceeding will be made, unless otherwise agreed by the surviving corporation, only upon delivery to the surviving corporation of an undertaking by or on behalf of such indemnified party to repay all amounts so paid in advance if it is ultimately determined as set forth in a final, non-appealable judgment of a court of competent jurisdiction that such indemnified party is not entitled to be indemnified pursuant to the Merger Agreement.
For six years from and after the Effective Time, Parent and the surviving corporation will be jointly and severally responsible for maintaining for the benefit of the directors and officers of Hanger, as of the date of the Merger Agreement and as of the closing date of the Merger, an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time that is substantially equivalent to and in any event not less favorable in the aggregate than the existing policy of Hanger, or, if substantially equivalent insurance coverage is unavailable, the best available coverage. The provisions of the immediately preceding sentence will be deemed to have been satisfied if prepaid “tail” policies have been obtained by Parent or the surviving corporation on or prior to the Effective Time, which policies provide directors and officers with coverage for an aggregate period of six years with respect to acts or omissions occurring or alleged to have occurred prior to the Effective Time that were committed or alleged to have been committed by such directors and officers in coverage and amount no greater than the policies currently in place so long as the total premiums paid would not exceed 300% of the last annual premium paid for Hanger’s directors and officers liability insurance policies in effect as of the date of the Merger Agreement, it being understood that if the total premium payable for such insurance coverage exceeds such amount, Parent or the surviving corporation will obtain a policy with the greatest coverage available for a cost equal to such amount.
In the event that, during the six year period after the Effective Time, either Parent or the surviving corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each case, Parent will, and will cause the surviving corporation to, use reasonable best efforts to cause proper provisions to be made so that such successor or assign will expressly assume the obligations set forth in the Merger Agreement.
Financing Efforts