Remuneration of Management Board members is in accordance with the statutory provisions of the German Stock Corporation Act (Aktiengesetz/AktG) and, as far Management Board contracts newly concluded in 2010 is concerned, with the recommendations of the German Corporate Governance Code, which are to apply to all new contracts in the future. In particular, the remuneration structure as per the Act on the Appropriateness of Management Board Compensation (VorstAG; Section 87 (1) AktG) for contracts newly concluded in 2010 is aimed at sustainable corporate development.

Two kinds of Management Board contract are currently in force. The following remarks will deal first the provisions of the contract that enjoys protection and then with the provisions of the two contracts newly concluded in 2010. All Management Board contracts run until December 31, 2012.

By the terms of the contract that enjoys protection, the total cash remuneration consists of a fixed and a variable, performance-related component with the variable component limited in amount to that of the fixed component. The yardstick for the variable component is EBIT as stated in the IFRS consolidated financial statements. In the event of extraordinarily large positive profit changes on the previous year the Supervisory Board may, at its discretion, award the Management Board a further appropriate extraordinary profit participation. Management Board members’ remuneration also includes benefits in kind and other payments such as, primarily, the value as per tax guidelines of the use of a company car, accident insurance premiums and pension contributions. If aap acquires another company or is merged with one that accounts for more than 50% of sales revenue earned by the Traumatology & Orthopaedics or Biomaterials segment in 2008 (dependent on the segment to which the company acquired belongs), the Management Board will receive in compensation for the effort and expense involved a further 75,000 aap Implantate AG stock options that on closure of the transaction can be taken up, in accordance with the terms of the stock options resolution adopted by the 2008 General Meeting, on the next possible issue date insofar as a sufficient number of options is available for the Management Board by the terms of the relevant resolution adopted by the General Meeting. If a sufficient number of options from the 2008 stock options program is no longer available, the remaining options will be distributed. In addition, the Management Board member was entitled to a total of 400,000 options from aap Implantate AG’s 2008 stock options program, to be issued at the time of the publication of quarterly results.

At the end of May 2010 the members of the Management Board chose not to take up the allocation of a further 400,000 stock options from the 2008 program to which they were entitled.

What follows is an outline of the two Management Board contracts newly concluded in March 2010. The total cash remuneration consists of a fixed and a performance-related variable component. The fixed component ensures a basic remuneration that enables the individual Management Board member to perform his duties in the company’s interest and in keeping with the duties of a prudent businessman without having to depend on merely short-term performance targets. The variable components, in contrast, being partly dependent on the company’s economic results, ensures a long-term incentive effect.

In the reporting year, Management Board members received fixed remuneration totalling €625K (previous year: €427K). The fixed remuneration included benefits in kind and other payments such as, primarily, the value as per tax guidelines of the use of a company car and accident insurance premiums. The tax due on benefits in kind was paid by aap.

Variable remuneration is based on achieving both qualitative and quantitative targets. It is limited to a maximum and by the company’s future development over a three-year period. Qualitative targets are determined in advance by the Supervisory Board on the basis of the Management Agenda as part of their approval of the annual budget and make up 25% of the variable remuneration component.

Quantitative targets account for 75% and are based on the following year’s budget as approved by the Supervisory Board. The yardsticks for the quantitative variable remuneration component are EBITDA (part bonus 1, weighting 2/3) and sales (part bonus 2, weighting 1/3). Bonus are graduated on the basis of target performance and limited to an absolute amount.

Payment of the qualitative bonus is made in full on achievement of the target after the following year’s general meeting, whereas only 25% of the quantitative bonus is paid at the same time. Half of the remaining 75% is paid after the annual general meeting in the second and third years after the bonus year.

If quantitative targets for the year after the bonus year or the year after that are only 85% fulfilled or less, the quantitative bonus for the bonus year will be reduced by 37.5%. The budget bonus for 2010 could be reduced if the budget targets are not met in 2012 and 2013, and the budget bonus for 2011 could be reduced if the budget targets for 2013 and 2014 are not met, with part bonus 1 and part bonus 2 being weighted equally.

If a contract begins or ends in the course of a financial year, the bonus is paid pro rata with 100% target achievement being assumed.

In determining the remuneration basis the Supervisory Board is entitled to eliminate extraordinary business developments that have led to one-time additional revenue that is not due to an increase in operative business.

In the event of a change of control over the company the two Management Board members have a special right of termination that they can exercise at the end of the second month after the change of control (but not including the month in which the change of control occurred) to the end of the month with 14 days’ notice. There are three cases in which a change of control entitles them to exercise this special right of termination. They are if an existing shareholder or a third party acquires at least 50% of the voting rights and thereby exceeds the mandatory offer threshold laid down in the German Acquisition and Takeover Act (WpÜG), if the company concludes an affiliation agreement as a dependent company, or if it is merged with another company.

For the consequences of takeover bids in relation to Management Board remuneration, see 7. (below).

In addition, Management Board members receive stock options from the company’s stock option programs. Stock options are a remuneration component with a long-term incentive effect.

Management Board remuneration in the 2010 financial year was as follows:

Supervisory Board Remuneration

In addition to reimbursement of their expenses, members of the Supervisory Board each receive an attendance fee of €1,250 per meeting. The chairman receives twice this amount, the deputy chairman one and a half times this amount. By resolution of the General Meeting held on July 16, 2010, Supervisory Board remuneration is to be revised from the beginning of the 2011 financial year. From the beginning of the 2011 financial year, Supervisory Board members receive in addition to reimbursement of their expenses a fixed remuneration of €5,000 per Supervisory Board meeting. No remuneration is paid for meetings held by conference call.

Stock Option Program 2006

By resolution of the General Meeting of June 30, 2006, the Management Board – provided members of the company’s Management Board are among the entitled persons – with the consent of the Supervisory Board is authorised to issue stock option programs by December 31, 2008 for the members of the company’s Management Board and members of the management of affiliated companies within the meaning of Section 15 ff. of the German Stock Corporation Act (AktG), and to grant option rights in up to 1,200,000 individual share certificates in the company with a term of up to four years from the date of issue. Only options entitling to purchase a maximum of 600,000 shares are to be issued through stock option programs in any one calendar year. Shareholders in the company do not have subscription rights. The option rights exercised can, at the company’s discretion, be fulfilled either by recourse to the contingent capital 2006/I or pursuant to any authorisations to purchase own shares in the company to be decided in the future.

The total number of option rights is allocated to the entitled groups as follows:

- 65% to members of the management of the company and members of the management of affiliated companies

- 35% to employees of the company and of its affiliates

Stock options are issued to the entitled persons only between the 10th and 20th trading day after publication of the company’s quarterly or annual reports.

The exercise price to be paid when exercising the option concerned for an individual share is calculated on the basis of the average value of the final auction price of shares in aap Implantate AG in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last ten trading days prior to the date of issue, but at least the minimum issue amount pursuant to Section 9 (1) of the German Stock Corporation Act, and thus not below the proportional amount per share of its €1.00 of the share capital.

Subscription rights can only be exercised under the stock options if the average value of the final auction price of shares in aap Implantate AG in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last ten trading days prior to the date of issues exceeds the exercise price by at least 10% since the date of issue.

Option rights granted can be exercised two years after the date of issue at the earliest.

Stock Option Program 2008

By resolution of the general meeting of September 29, 2008, the Management Board and – provided members of the company’s management are entitled – the Supervisory Board is authorised to issue stock option programs by September 28, 2013 for persons belonging to one of the groups named in clause 1 below, and to grant up to 1,200,000 stock options with subscription rights to one share in the company, each with a term of up to five years from the date of issue as defined in clause 3, below. Shareholders in the company do not have subscription rights. The stock options can also be taken over by a bank with the obligation to transfer them to the entitled parties as defined in clause 1, below, as instructed by the company. In this case too only the entitled persons may exercise the options. The fulfilment of exercised option rights may be effected at the company’s discretion either by recourse to contingent capital 2008/I or through own shares in the company. Granting the option to subscribe to shares in the company and issuing these shares shall be effected in accordance with the following provisions

(1) Entitled Persons

The following persons are entitled to acquire share options and to subscribe to shares in the company:

(i) Members of the company’s Management Board

(ii) Selected executive staff of the company and members of the management – only if they were not also entitled pursuant to (i) as members of the management of the company on the date of issue – and selected executive staff of affiliates as defined in Section 15 of the German Stock Corporation Act (AktG) (hereinafter referred as “affiliated companies”),

(iii) Employees of the company and of affiliated companies.

The total number of option rights is allocated as follows:

Up to 800,000 individual share options: to members of the company’s Management Board

Up to 200,000 individual share options: to selected members of executive staff of the company and members of the management of affiliated companies – but only if they are not also entitled pursuant to (i) as members of the company’s Management Board on the date of issue – and selected members of executive staff of affiliated companies

Up to 200,000 individual share options: to employees of the company and affiliated companies.

A report will be published on the issue of stock options to members of the Management Board once a year as an annex to the annual financial statements stating the names of beneficiaries and the number of stock options issued to them. The same applies to the number of subscription rights exercised under option rights by members of the Management Board in the previous financial year, to the exercise price paid and to the number of share options still held by members of the Management Board at the end of the year.

(2) Right to Purchase Shares

Each option right entitles the holder of the option to purchase a bearer share in the company in return for payment of the exercise pursuant to clause 4. New shares participate in the profits from the beginning of the financial year for which at the time when the subscription right was exercised no general meeting resolution has yet been passed on the appropriation of the balance sheet profit.

(3) Purchase Periods

The issue of stock options shall take place in no less than three annual tranches subject to the proviso that no tranche may include more than 50% of the total volume. The stock options can only be issued to the entitled person between the 10th and the 20th trading day after publication of the company’s quarterly or annual results (the date on which the option agreement signed by the company is handed over to the entitled party is referred as the “date of issue”).

(4) Exercise Price

The price to be paid for exercising the option for each share corresponds to the average value of the final auction price for shares in aap Implantate AG in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last 20 trading days prior to the date of issue, but at least the minimum issue amount as specified in Section 9 (1) of the German Stock Corporation Act (AktG), and thus not below the proportional amount per share of its €1.00 of the share capital

(5) Adjustment in the Event of Capital Measures

In the event of measures during the term of the stock option that affect the value of the options (capital increase with grant of a direct or indirect subscription right of shareholders in the company, sale of own shares, the issue of bonds with conversion and/or option rights to shares in the company), the option conditions can be subject to adjustments in the exercise price and/or the subscription situation. A reduction will not be made if the entitled person has a direct or indirect subscription right to the new shares or own shares or new bonds are granted that place them in the same position as if he/she had exercised the option right. The option conditions can furthermore provide for an adjustment of the option rights in the event of a capital increase from company funds and a reduction in capital, in the event of a new division of the shares (share split) or a consolidation of shares as well as bonuses and extraordinary cash and/or dividend in kind corresponding to the practices on German and international futures exchanges. This is without prejudice to Section 9 (1) of the German Stock Corporation Act (AktG).

(6) Performance Targets

Susbscription rights can only be exercised under stock options if the average value of the final auction price for shares in aap Implantate AG in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last 20 trading days prior to the date of the subscription right under the share option is at least 20% above the exercise price (absolute threshold).

(7) Waiting Periods

The option rights granted to individual entitled persons can be exercised at the earliest on expiry of a waiting period of two years from the date of issue. At the earliest two years after the date of issue 25%, three years after the date of issue a further 25%, four years after the date of issue a further 25% and five years after the date of issue the remaining 25% may be exercised.

(8) Exercise Periods

On expiry of the above waiting periods, subscription rights under the stock options can be exercised at any time, but not within the following periods:

- In the period from the last day on which shareholders can register to attend the company’s general meeting until the third banking day in Frankfurt after the general meeting;

- In the period from the date of publication of a subscription offer of new shares or bonds with conversion and/or option rights to shares in the company in an official journal of the Frankfurt Stock Exchange until the date on which the subscription period ends;

- Within the four weeks prior to publication of the relevant quarterly or annual results.

(9) Personal Rights

Stock options can only be exercised by the entitled persons themselves. This also applies if the stock options are taken over by a bank with the obligation to transfer them to the individual entitled persons as instructed by the company. The right of disposal over stock options is ruled out; specifically, they are non-transferable. Share options can, however, be inherited. The option conditions can, in derogation from this, provide for special rules in the event that the entitled person dies or retires, or their employment with the company or the affiliated companies is otherwise ended by means other than termination, or the affiliated company leaves the aap Group.

(10) Expiry

(a) Stock options expire six years after the date of issue.

(b) Stock options that are not exercised also expire on receipt of written termination of the option right agreement by the company. Such termination, which can be made with a notice period of one month, is possible if a creditor of the entitled person effects compulsory enforcement measures in the stock options, if insolvency proceedings are initiated with regard to the entitled person’s assets, if the initiation of insolvency proceedings is rejected due to lack of assets or if the entitled person contravenes material obligations set forth in law, in the company’s articles of association, in his or her employment contract with the company or with an affiliated company or in the option right agreement.

(c) Stock options that are not exercised also expire as soon as the respective service or employment relationship with the entitled person – be it as a member of the Management Board, a selected member of executive staff or an employee of the company, a selected member of executive staff or an employee of an affiliated company – is terminated or cancelled, or for other reasons, in particular if it ends through expiry of the term. On termination or cancellation the time of receipt of the termination declaration or that of the effective conclusion of the cancellation agreement shall count, even if termination only enters into effect at a future date. Options granted to a member of the company’s Management Board or the management of an affiliated company in this capacity also expire when the member of the company’s Management Board or the management of an affiliated company retires or is dismissed.

(d) Insofar as termination of the service or employment relationship with the company or with an affiliated company is connected with entering into a new service or employment relationship with the company or with an affiliated company, the stock options granted to an entitled person do not expire, however. This applies in equal measure to the end of a contract as a member of an executive body if it is followed by a new appointment with the company or with an affiliated company.

(e) Furthermore, option rights granted to an entitled person do not expire if his or her term of service or employment ends on reaching retirement age or through invalidity or death. In these cases the entitled person or his or her heirs can exercise the option rights on expiry of the waiting period specified in clause 7 sentence 2 during the next exercise period. The option rights shall lapse if they are not exercised during this period.

(11) Cash Compensation

In place of subscription to new shares the entitled person can be granted cash compensation. The exercise of this option is at the Management Board’s discretion. If Management Board members are affected, the Supervisory Board shall decide. The cash compensation shall correspond to the difference between the exercise price and the average value of the last auction of shares in aap Implantate AG in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last 20 trading days prior to the date on which the subscription right under the stock option was exercised.

(12) Regulation of Details

The Management Board is authorised to specify the details for the issue of shares from contingent capital and the further conditions of the stock option program, including the conditions of the option for entitled groups of persons. In derogation of this, the Supervisory Board decides on behalf of the members of the company’s Management Board. These additional details include, in particular, provisions governing the allocation of option rights within the entitled groups of persons, the date of issue within the specified period, the procedure of allocation to the individual entitled persons and the exercise of option rights as well as other procedural rules.

Stock Option Program 2010

The Management Board and, if members of the company’s Management Board are among the entitled persons, the company’s Supervisory Board are authorised to draw up by December 19, 2011 a stock option program (“Stock Option Program 2010”) for the entitled persons named in (1) below and to grant up to 1,486,000 stock options each with a subscription right to one share in the company for a term of up to eight years from the date of issue according to (6) below. Shareholders in the company do not have subscription rights. Subscription rights may also be taken over by a bank with the obligation to transfer them to the entitled parties as defined in (1) below. In this case too, only the entitled persons themselves may exercise the subscription rights. Fulfilment of exercised option rights can be effected at the company’s discretion either by recourse to the contingent capital, by recourse to own shares in the company or by means of cash compensation. Granting of subscription rights and issuing shares was subject to the following provisions:

(1) Entitled Persons

As part of the Stock Option Program 2010, subscription rights are issued to employees and Board members of the company and to employees and management of affiliated companies.

(2) Acquisition of Subscription Rights

Subscription rights are granted by the conclusion of an option agreement between the company and the entitled person.

Each subscription right entitles the holder to subscribe to one bearer share in the company in return for payment of the exercise price. New shares participate in profits from the beginning of the financial year in which they are issued. The option terms can provide for the company offering the entitled person in fulfilment of the subscription right at its discretion own shares with recourse to conditional capital or cash compensation instead of new shares. Details are to be specified by the Management Board or, if it is affected, by the Supervisory Board.

(3) Purchase Periods

Subscription rights are to be issued in two annual tranches on condition that no tranche accounts for more than 60% of the total volume. An option agreement must be concluded during a purchase period in 2010 or 2011. The purchase periods are as follows:

- The fourth and the nine following bank working days after the company’s annual general meeting (“purchase period 1”)

- The fourth and the nine following bank working days after publication of the company’s preliminary report for the third quarter of the financial year (“purchase period 2”)

The granting of subscription rights on the basis of this resolution will last be permissible in purchase period 2 of 2011.

The subscription rights issued in the course of a purchase period will form a tranche so that in all, over a period of two years, two annual tranches may be issued.

If subscription rights expire before the end of the last purchase period they may be offered to other members of the group specified at (5) below.

(4) Exercise Price

The exercise of subscription rights is free of charge for the entitled person. Each subscription right entitles the holder to purchase one share in the company at the exercise price. The exercise price for subscription rights that are granted as part of a tranche is the average final price (arithmetic mean) for aap shares in electronic trading (XETRA or a successor system) on the Frankfurt Stock Exchange on the five trading days prior to the first day of the purchase period in question. A trading day here means a day on which the Frankfurt Stock Exchange quotes prices for shares in the company in electronic trading.

The pecuniary gain resulting from exercise of the subscription right by the entitled person (the difference between the final auction price of the aap share in XETRA trading or a comparable successor system on the day the subscription right was exercised and the exercise price) may not exceed four times the exercise price (“the limit”) set when the stock option was issued. If this figure is exceeded, the exercise price will be adjusted accordingly and will correspond to the difference between the final auction price for the aap share in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange on the day the subscription was exercised and four times the exercise price. The Management Board or, if a member of the Management Board is involved, the Supervisory Board may decide in individual instances to reduce the limit appropriately.

In the event of measures during the term of the stock option that affect the value of the options (capital increase with grant of a direct or indirect subscription right of shareholders in the company, sale of own shares, the issue of bonds with conversion and/or option rights to shares in the company), the option conditions may be subject to an adjustment of the exercise price in the same proportion as the average price of the subscription right to which shareholders are entitled on all trading days on the Frankfurt Stock Exchange compared with the final auction price of the company’s shares in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange on the last trading day before the deduction of subscription rights.

The option conditions may also provide for an adjustment in the event of capital measures (a stock split or reverse stock split, a capital increase from company funds or a capital reduction) during the term of the subscription rights.

The minimum exercise price whatever happens is the lowest issue price as defined in Section 9 (1) of the German Stock Corporation Act (AktG).

(5) Allocation

Of the total number of possible subscription rights to up to 1,486,000 shares, subscription
rights may be granted

- for up to 40% of the shares to the group of Board members (“group 1”) and

- for up to 60% of the shares to the group of employees of the company and members of the management and employees of affiliated companies (“group 2”).

The Management Board or, if stock options are granted to its members, the company’s Supervisory Board will specify the precise groups of entitled persons and the scope of the stock options that are to be offered to them. A double allocation due to membership of both groups is ruled out. Shareholders do not have a subscription right.

(6) Waiting Period, Exercise Periods, Final Exercise

Subscription rights under stock options can only be exercised after the end of a waiting period and then only until the end of the option term. The waiting period is four years, the option terms is eight years.

Subscription rights may only be exercised (exercise periods) within four weeks beginning on the second trading day at the Frankfurt Stock Exchange

- after the company’s annual general meeting

- after the day on which the management of the stock exchange has made the company’s annual report, six-month report or interim report for the first or third quarter of the financial year available to the public.

The waiting period and the option term begin on the day after the stock options are issued. Subscription rights granted during the purchase period 1 in 2010 can therefore be exercised for the last time in 2018. Subscription rights granted in subsequence purchase periods may be last exercised accordingly, so that subscription rights granted during the last purchase period, period 2 of 2011, can be exercised for the last time in 2019. Subscription rights that are not exercised will expire.

(7) Performance Target

Subscription rights from stock options can only be exercised if the final auction price for shares in the company in XETRA trading (or a comparable successor system) on the Frankfurt Stock Exchange on the last trading day before the exercise date is at least 10% higher than the exercise price.

(8) Other Exercise Conditions

The option agreement must specify that only someone with an unterminated service or employment relationship with the company or with an affiliated company may exercise subscription rights. In derogation from this, the right to exercise subscription rights shall only be retained then and for the next exercise period if the termination of an employment relationship is due to permanent incapacitation or reaching retirement age. The right to exercise subscription rights shall also be retained if the Management Board or, if the Management Board or members of the Management Board are affected, the Supervisory Board decides in the individual instance that the right continues to exist. Subscription rights are non-transferable. If the entitled person dies, provision must be made for his or her subscription rights to be inheritable. The option agreement must also make provisions for adjustment of the exercise conditions in the event of capital measures by the company. It must further state that all taxes and duties are to be paid by the entitled persons.

The Management Board is authorised to specify further details for the issue of shares from the conditional capital increase and the further conditions of the Stock Option Program 2010. The Management Board is authorised, with the consent of the Supervisory Board, to specify the further details of implementation of the capital increase. If the stock option program and implementation of the capital increase affect the Management Board, the Supervisory Board will make these authorisations.