Proxy Statement

Director

Year
First
Became
Director

Business Experience

NOMINEES FOR ELECTION AT THE 2013 ANNUAL MEETING CLASS III (TERM ENDS 2016)

Julianne M. Bowler

Ms. Bowler joined our Board of Directors in May 2007. Ms. Bowler is the Chief Compliance and Underwriting Operations Officer for Narragansett Bay Insurance Company, a position she has held since May 2009. Prior to that position she was an insurance consultant working with various companies and organizations such as Bearing Point, Commercial Union/OneBeacon, and Geico. Ms. Bowler served as commissioner of insurance for the Massachusetts Division of Insurance, based in Boston, Mass., from March 2002 to January 2007. Ms. Bowler has more than 10 years of experience in insurance regulation and health policy for companies such as Blue Cross Blue Shield of Massachusetts and the University of Massachusetts Medical Center, including nine years with the Massachusetts Division of Insurance. Ms. Bowler has a bachelor’s degree in philosophy from Assumption College and a master’s degree in philosophy from the University of Dallas. Ms. Bowler was a doctoral candidate in biomedical ethics at Georgetown University and received her master’s degree in business administration with a concentration in finance from the University of Massachusetts. She serves on the boards of Senior Health Insurance Plan of Pennsylvania (the successor to Conseco Senior Health Insurance) and Atlantic Charter Insurance Company. Ms. Bowler’s financial and insurance background provides our Board of Directors with valuable insurance and risk management expertise.

DEF 14A 1 d475612ddef14a.htm PROXY STATEMENT Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

Filed by the Registrant x 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))

x		Definitive Proxy Statement

¨		Definitive Additional Materials

¨		Soliciting Material Pursuant to § 240.14a-12

RTI BIOLOGICS, 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):



x	No fee required.

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¨	Fee paid previously with preliminary materials.

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)	Amount Previously Paid:


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	(4)	Date Filed:

RTI BIOLOGICS, INC.

11621 RESEARCH CIRCLE

ALACHUA, FLORIDA 32615

Dear Stockholder:

You are cordially invited to attend the 2013 Annual Meeting of Stockholders of RTI Biologics, Inc., to be held on Tuesday, April 23, 2013 at 8:00 a.m., local time, at the Hyatt Regency Orlando International Airport, Orlando, Florida 32827.

The notice and proxy statement accompanying this letter contain details of the business to be conducted at the meeting. You are being asked to: (i) elect three directors to serve for a term of three years; (ii) adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors and provide for the annual election of directors; and (iii) consider and vote on an advisory (non-binding) proposal concerning our 2012 executive compensation program (the “say on pay vote”).

At the meeting, we will also report on our affairs and provide a discussion period for questions and comments of general interest to our stockholders.

We look forward to personally greeting those of you who are able to be present at the meeting. However, whether or not you plan to attend the meeting, it is important that your shares be represented. We hope you will vote as soon as possible. You may vote over the internet, as well as by telephone, or by mailing the enclosed proxy card. Please review the instructions on each of your voting options described in this proxy statement.

Thank you for your ongoing support of, and continued interest in RTI Biologics.

Very truly yours,

LOGO

Brian K. Hutchison

President and Chief Executive Officer

March 18, 2013

RTI BIOLOGICS, INC.

11621 Research Circle

Alachua, Florida 32615

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The Annual Meeting of Stockholders of RTI Biologics, Inc. will be held on Tuesday, April 23, 2013 at 8:00 a.m., local time, at the Hyatt Regency Orlando International Airport, Orlando, Florida 32827, for the following purposes:

(1)

To elect three Class III directors, Julianne M. Bowler, Roy D. Crowninshield and Brian K. Hutchison, to serve on our Board of Directors, consisting of eight members, for a term of three years and until their successors are duly elected and qualified, subject to their earlier resignation or removal;

(2)

To adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board and provide for the annual election of directors;

(3)

To hold an advisory (non-binding) vote concerning our 2012 executive compensation program (the “say on pay vote”); and

(4)

To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

The above items of business are more fully described in our proxy statement accompanying this notice. We have not received notice of other matters that may be properly presented at the Annual Meeting.

Only stockholders of record at the close of business on February 25, 2013 will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

We cordially invite all stockholders to attend the Annual Meeting in person. However, whether or not you plan to attend the Annual Meeting in person, we urge you to read this proxy statement and return your proxy card or submit voting instructions as soon as possible. Please review the instructions in this proxy statement on how to vote your shares over the internet, by telephone, or by mailing the enclosed proxy card. Stockholders who attend the Annual Meeting may revoke their proxy and vote their shares in person.

This notice and the accompanying proxy statement are sent by order of the Board of Directors.

LOGO

Thomas F. Rose

Executive Vice President, Chief Operations Officer

and Secretary

Alachua, Florida

March 18, 2013

Important Notice Regarding the Availability of Proxy Materials For the Annual Meeting

of Stockholders To Be Held on April 23, 2013

This notice of annual meeting of stockholders and proxy statement, the form of proxy card, along with our annual report on Form 10-K and the 2012 annual report to stockholders, are available free of charge at the following website: www.rtiproxy.com.

PROXY STATEMENT

TABLE OF CONTENTS


	Page
GENERAL INFORMATION		1
PROPOSAL 1— ELECTION OF DIRECTORS		5
PROPOSAL 2— ADOPTION AND APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD OF DIRECTORS AND PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS		11
CORPORATE GOVERNANCE		12
EXECUTIVE OFFICERS OF THE COMPANY		17
PROPOSAL 3— ADVISORY VOTE ON EXECUTIVE COMPENSATION (THE SAY ON PAY VOTE)		19
EXECUTIVE COMPENSATION		20
SUMMARY COMPENSATION TABLE		33
GRANTS OF PLAN-BASED AWARDS		34
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END		35
OPTION EXERCISES AND STOCK VESTED		39
NONQUALIFIED DEFERRED COMPENSATION		39
DIRECTOR COMPENSATION		40
COMPENSATION COMMITTEE REPORT		41
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND CERTAIN BENEFICIAL OWNERS		42
AUDIT MATTERS		44
AUDIT COMMITTEE REPORT		45
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		46
OTHER MATTERS		46
ANNUAL REPORT		47
INCORPORATION BY REFERENCE		47
STOCKHOLDER PROPOSALS		47

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RTI BIOLOGICS, INC.

11621 Research Circle

Alachua, Florida 32615

PROXY STATEMENT

GENERAL INFORMATION

Our Board of Directors is soliciting proxies for our 2013 Annual Meeting of Stockholders (the “Annual Meeting”), or any adjournment or postponement thereof. The Annual Meeting will be held on Tuesday, April 23, 2013 at 8:00 a.m., local time, at the Hyatt Regency Orlando International Airport, Orlando, Florida 32827.

The proxy materials, including this proxy statement, proxy card or voting instruction card and our 2012 Annual Report on Form 10-K are first being distributed to stockholders and made available on our website at www.rtix.com under the headings “Investors/SEC Filings and Reports” on or about March 18, 2013. These materials are also available at www.rtiproxy.com in a manner that does not infringe on the anonymity of the person accessing such website.

Proxies will be solicited chiefly by mail; however, certain of our officers, directors, employees and agents, none of whom will receive additional compensation for their efforts, may solicit proxies by telephone or other personal contact. We will bear the cost of the solicitation of the proxies, including postage, printing and handling, and will reimburse the reasonable expenses of brokerage firms and others for forwarding material to beneficial owners of shares of our common stock.

All properly executed written proxies that are delivered pursuant to this solicitation will be voted at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Annual Meeting.

What items of business will be voted on at the Annual Meeting?

We are holding the Annual Meeting in order to: (1) elect three directors for the ensuing three years; (2) adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board and provide for the annual election of directors; and (3) hold an advisory (non-binding) vote concerning our 2012 executive compensation program.

What are my voting choices and what is the voting requirement to approve each of the proposals?

1. What are my voting choices when voting for director nominees identified in this proxy statement, and what vote is needed to elect directors?

In the vote on the election of the three director nominees identified in this proxy statement to serve on our Board of Directors for a term of three years or until their successors are duly elected and qualified, subject to their earlier resignation or removal, stockholders may:

•

vote in favor of all nominees;

•

withhold from voting with respect to all nominees; or

•

withhold from voting with respect to specific nominees.

Directors will be elected by a plurality of the votes cast, meaning that the three nominees receiving the most “FOR” votes (among votes properly cast in person or by proxy) will be elected. Only votes “FOR” will affect the outcome. Withheld votes or broker non-votes will not affect the outcome of the vote.

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The Board of Directors recommends a vote FOR all nominees.

2. What are my voting choices when voting on the proposal to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board and provide for the annual election of directors?

In the proposal to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board and provide for the annual election of directors, stockholders may:

•

vote in favor of the proposal;

•

vote against the proposal; or

•

abstain from voting on the proposal.

The affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the meeting will be required for the approval of the board declassification proposal.

The Board of Directors recommends a vote FOR the proposal to approve the amendment of our Amended and Restated Certificate of Incorporation to declassify our Board and provide for the annual election of directors.

3. What are my voting choices when voting on the advisory proposal on 2012 executive compensation (the “say on pay vote”), and what vote is needed to approve the say on pay vote?

In the advisory proposal on executive compensation, stockholders may:

•

vote in favor of the advisory proposal;

•

vote against the advisory proposal; or

•

abstain from voting on the advisory proposal.

The affirmative vote of a majority of the votes cast by the holders of the shares of common stock voting in person or by proxy at the meeting will be required for the approval, on an advisory basis, of the say on pay vote. As an advisory vote, this proposal is not binding upon the Company. However, the Compensation Committee of the Board of Directors, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.

The Board of Directors recommends a vote FOR the advisory vote on 2012 executive compensation.

What happens if additional matters are presented at the Annual Meeting?

Other than the three items of business described in this proxy statement, we are not currently aware of any other matters to come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the person designated as proxy intends to vote in accordance with their best judgment on these matters. If for any reason any of the nominees is not available as a candidate for director, the person named as proxy holder will have the discretion to vote for such other candidate or candidates as may be nominated by the Board of Directors.

How can I vote my shares?

In person. Shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to

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vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.

By proxy. Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by submitting a proxy by one of the methods described below. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For directions on how to vote, please refer to the instructions below and those included on your proxy card or, for shares held beneficially in street name, the voting instruction card provided by your broker, trustee or nominee.

•

By Internet—Stockholders of record of our common stock with internet access may submit proxies by following the “Vote by Internet” instructions on their proxy cards until 11:59 p.m. eastern time on April 22, 2013. Most stockholders who hold shares beneficially in street name may vote by accessing the web site specified on the voting instruction cards provided by their brokers, trustees or nominees. Please check the voting instruction card for internet voting availability.

•

By Telephone—Stockholders of record of our common stock who live in the United States or Canada may submit proxies by following the “Vote by Phone” instructions on their proxy cards until 11:59 p.m. eastern time on April 22, 2013. Most stockholders who hold shares beneficially in street name and live in the United States or Canada may vote by phone by calling the number specified on the voting instruction cards provided by their brokers, trustees or nominees. Please check the voting instruction card for telephone voting availability.

•

By Mail-Stockholders of record of our common stock may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted. Stockholders who hold shares beneficially in street name may vote by mail by completing, signing and dating the voting instruction cards provided by their brokers, trustees or nominees and mailing them in the accompanying pre-addressed envelopes.

If any matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the person named in the enclosed proxy card and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any other matters will be raised at the Annual Meeting.

Can I change my vote or revoke my proxy?

You may revoke the authority granted by the execution of a proxy at any time before the effective exercise of the powers conferred by that proxy by: (1) filing with our Secretary a written notice of revocation or a duly executed proxy bearing a later date, or (2) voting in person at the Annual Meeting. Attendance by a stockholder at the Annual Meeting will not itself revoke his or her proxy. If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee in revoking your previously granted proxy.

Who is entitled to vote?

On February 25, 2013, there were outstanding 55,869,087 shares of our common stock, par value $0.001 per share, each of which is entitled to one vote upon each of the matters to be presented at the Annual Meeting (excluding treasury shares, which cannot be voted.) Only stockholders of record at the close of business on February 25, 2013 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. The holders of a majority of the outstanding shares of our common stock present in person

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or by proxy and entitled to vote, will constitute a quorum at the Annual Meeting (excluding treasury shares, which do not count for this purpose.)

What if I am a beneficial owner and do not give voting instructions to my broker?

“Broker non-votes” are shares held by brokers or nominees which are present in person or represented by proxy, but which are not voted on a particular matter because instructions have not been received from the beneficial owner. Under the rules of the Financial Industry Regularity Authority, member brokers generally may not vote shares held by them in street name for customers unless they are permitted to do so under the rules of any national securities exchange of which they are a member.

All proposals before the meeting are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee.

Where can I find the voting results of the Annual Meeting?

We will announce preliminary voting results at the Annual Meeting. Voting results will also be disclosed on a Form 8-K filed with the SEC within four business days after the Annual Meeting, which will be available on our website.

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PROPOSAL 1

ELECTION OF DIRECTORS

Classification of Board of Directors and Election of Class III Directors. Our Board of Directors is currently divided into three classes, with the nominees for one class to be elected at each annual meeting of stockholders, to hold office for a three-year term and until their successors have been elected and qualified, subject to their earlier resignation or removal. The terms of the Class III directors are scheduled to expire on the date of the upcoming Annual Meeting. Based on the recommendation of the Nominating and Governance Committee, the Board of Directors’ nominees for election by the stockholders are three of the current Class III directors, Ms. Bowler, Mr. Crowninshield and Mr. Hutchison.

If elected at the Annual Meeting, the nominees will serve a three-year term until the 2016 Annual Meeting of Stockholders and until their successors are elected and qualified, subject to their earlier resignation or removal. It is the intention of the person named in the accompanying form of proxy to nominate as directors and to vote such proxy for the election of the nominees named below. We are not aware of any reason why any nominee would be unable to serve as a director. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board of Directors may nominate as a substitute.

Management Proposal to Declassify Board of Directors. Our Board of Directors and the Nominating and Governance Committee regularly review our corporate governance policies and practices. In 2012, the Nominating and Governance Committee recommended to our Board of Directors that a proposal to declassify the Board be submitted to stockholders at the Annual Meeting. Upon the recommendation of the Nominating and Governance Committee, our Board of Directors has unanimously approved an amendment to our Amended and Restated Certificate of Incorporation to declassify the Board and move to annual election of directors. See “Proposal 2–Adoption and Approval of an Amendment to our Amended and Restated Certificate of Incorporation to Declassify our Board of Directors and Provide for the Annual Election of Directors” below for additional information. If Proposal 2 is approved at the Annual Meeting, the declassification of our Board would be phased in commencing with the 2014 annual meeting of stockholders. Accordingly, if elected as Class III directors at the Annual Meeting, Ms. Bowler, Mr. Crowninshield and Mr. Hutchison will serve for a three-year term and until their successors have been elected and qualified.

Director Qualifications and Biographical Information. The Nominating and Governance Committee seeks directors with established strong professional reputations and experience in businesses and other organizations of comparable size to our Company and in areas relevant to the strategy and operations of our Company’s business. The nominees for director include individuals who hold or have held senior executive positions in organizations operating in industries and end-markets that our Company serves and who have experience serving on boards of directors of other companies. In these positions, they have gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management and oversight, leadership development and corporate governance practices and trends.

The Nominating and Governance Committee believes that each of the nominees has other key attributes that are important to an effective board: personal and professional integrity, exceptional ability and judgment, candor, analytical skills, the willingness to engage management and each other in a constructive and collaborative fashion, and the ability and commitment to devote significant time and energy to service on the Board of Directors and its committees. The Nominating and Governance Committee takes into account diversity considerations in determining the Company’s slate and planning for director succession and believes that, as a group, the nominees bring a diverse range of perspectives to the deliberations of the Board of Directors. Each of the nominees is also independent of the Company and management. We believe the atmosphere of our Board of Directors is collegial and that all directors are engaged in their responsibilities. For additional information about our director independence requirements, consideration of director candidates, leadership structure of our Board

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of Directors and other corporate governance matters, see the sections captioned “Corporate Governance—Board of Directors” and “—Director Nomination Process” beginning on page 15 of this proxy statement.

In addition to the above, the Nominating and Governance Committee considered the specific experience described in the biographical details of the nominees that follow in determining to nominate these individuals for election as directors.

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Director	Age	Year First Became Director	Business Experience

			Board of Directors with detailed knowledge and unique perspective and insights regarding the strategic and operational opportunities and challenges, economic and industry trends, and competitive and financial positioning of our Company and its business.
CONTINUING DIRECTORS CLASS I (TERM ENDS 2014)

Peter F. Gearen, M.D.	64	1998	Dr. Gearen was Chief of Staff at the Shands Hospital at the University of Florida and served as Assistant Dean of Clinical Affairs at the University of Florida College of Medicine from 1992 until 1999. Dr. Gearen also has been an Associate Professor of Orthopedics at the University of Florida College of Medicine since 1993. Dr. Gearen was appointed Chairman of the Department of Orthopedics in May 2002 and stepped down as Chairman on June 30, 2010. Dr. Gearen retired from practice on June 30, 2012. Dr. Gearen holds a B.A. from Spring Hill College and an M.D. from the Stritch Loyola Medical School. Dr. Gearen has a depth of medical experience and healthcare knowledge and, as a former practicing orthopedic surgeon, is knowledgeable about our products and the orthopedic products market in general.

Adrian J. R. Smith	68	2008	Mr. Smith has been the Chief Executive Officer of The Woolton Group since 1997. He is also the Non-Executive Chairman of Third Eye Technologies, Klean Industries and Harmonic Energy Inc. His business career includes 13 years in the professional services industry and 24 years with two Fortune 500 companies. He has been a Global Managing Partner, Marketing & Communication at Deloitte Touche Tohmatsu, the Chief Executive Officer of Grant Thornton LLP, and a Managing Partner at Arthur Andersen in the early to mid-1990’s. He held senior international management roles with Ecolab Inc. and also with Procter & Gamble. He serves on the board of the Education Foundation of Indian River County in Florida. Mr. Smith’s public accounting and consulting background provides our Board of Directors with valuable international operations and business strategy expertise.

CONTINUING DIRECTORS CLASS II (TERM ENDS 2015)

Dean H. Bergy	53	2010	Mr. Bergy joined RTI’s Board of Directors in July 2010. On May 5, 2011, Mr. Bergy was appointed as Chairman of our Board of Directors. Mr. Bergy currently serves as Interim Chief Financial Officer, Vice President and Corporate Secretary at Stryker

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Director	Age	Year First Became Director	Business Experience

			Corporation, a leading worldwide medical products and services company, a position he has held since October 2012. Mr. Bergy previously served as
			Secretary at Stryker from September 2011 to September 2012 and as Advisor to the Chief Financial Officer at Stryker from April 2009 to August 2011. Prior to that, Mr. Bergy served the previous six years as Stryker’s Vice President and Chief Financial Officer. Prior to that, Mr. Bergy served as Vice President of Finance and Chief Accounting Officer, Vice President of Finance for Stryker’s Medical Division, and started his tenure with Stryker in 1994 as the Corporate Controller. Previous to joining Stryker, Mr. Bergy worked with Ernst & Young and Pricewaterhouse. Mr. Bergy earned a bachelor’s degree in business administration from University of Michigan and completed the Program for Management Development at Harvard Business School. Mr. Bergy’s public accounting and executive management experience provides our Board of Directors with valuable financial reporting, compliance, accounting and controls, and corporate governance experience.

Philip R. Chapman	51	1998	Mr. Chapman is the President of Venad Administrative Services, Inc., and has been a general partner of Adler & Company since 1995. From 1991 until 1995, Mr. Chapman served as a principal of Adler & Company. From 1988 until 1991, Mr. Chapman served as a senior consultant at Booz Allen & Hamilton International. Mr. Chapman holds a bachelor’s degree and masters of business administration degree from Columbia University. Mr. Chapman’s depth of business experience and service on other companies’ boards of directors, knowledge of finance and accounting, compensation and benefits as well as broad management responsibilities provides our Board of Directors relevant experience in strategic and operational matters.

Gregory P. Rainey	60	2007	Mr. Rainey is the President of CCI Performance Group, a sales and marketing consulting company. Prior to opening CCI Performance Group in 2004, Mr. Rainey served 10 years with Stryker Corporation, most recently for four years as Vice President of Sales for Stryker’s Orthopedic Division. Previous to Stryker, Mr. Rainey served as Director of Sales for Joint Medical Corporation, as well as sales positions with U.S. Surgical Corporation. Mr. Rainey also serves as a Director for CAS Medical Inc., where he serves on the Compensation and Audit Committees. Mr. Rainey

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Vote Required

Directors must be elected by a plurality of votes cast at the meeting. This means the nominees receiving the greatest number of affirmative votes of the shares present in person or represented by proxy and entitled to vote shall be elected as directors. If you do not vote for a nominee, or you indicate “withholding authority” on your proxy card, your vote will not count either for or against the nominee.

Board Recommendation

The Board of Directors deems the election of the nominees listed above as directors to be in the best interests of RTI Biologics, Inc. and its stockholders, and recommends a vote “FOR” the election of the nominees.

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PROPOSAL 2

ADOPTION AND APPROVAL OF AN AMENDMENT TO OUR

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

TO DECLASSIFY OUR BOARD OF DIRECTORS AND

PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS

We are asking you to adopt and approve an amendment to our Amended and Restated Certificate of Incorporation to declassify the Board of Directors. Our Board of Directors believes that declassification of the Board is advisable and in the best interests of our stockholders. The Board of Directors, upon the recommendation of the Nominating and Governance Committee, has unanimously approved the proposed amendment, and recommends that the Company’s stockholders adopt and approve the proposed amendment.

If the amendment to our Amended and Restated Certificate of Incorporation is adopted and approved by the stockholders, the declassification of our Board would be phased in commencing with the 2014 annual meeting of stockholders, and would result in the Board being fully declassified (and all directors standing for annual elections) commencing with the 2016 annual meeting of stockholders.

To comply with Delaware law, the amendment to our Amended and Restated Certificate of Incorporation would not change the unexpired three-year terms of directors elected prior to the effectiveness of the amendment (including directors elected at this Annual Meeting). Accordingly, the three-year term for Class I directors elected at the 2011 annual meeting of stockholders will expire at the 2014 annual meeting of stockholders, the three-year term for Class II directors elected at the 2012 annual meeting of stockholders will expire at the 2015 annual meeting of stockholders, and the three-year term for Class III directors elected at this Annual Meeting will expire at the 2016 annual meeting of stockholders. In the case of any vacancy on the Board of Directors occurring after the Annual Meeting (created by an increase in the number of directors, or by a director’s retirement, resignation, removal, or death), the vacancy would be filled through an interim election by the Board of Directors with the new director to serve a term ending at the next annual meeting.

The table below summarizes the implementation of the declassification of our Board of Directors pursuant to the proposed amendment:


Annual Meeting Year and Election of Directors	Length of Term for Directors Elected		Year that Term Would Expire
2011—Class I		Three Years		2014
2012—Class II		Three Years		2015
2013—Class III		Three Years		2016
2014—directors whose terms expired and other director nominees		One Year		2015
2015—directors whose terms expired and other director nominees		One Year		2016
2016 and thereafter—all directors and director nominees		Annual Election		One year later

Background of Proposal

As described above under Proposal 1, our Amended and Restated Certificate of Incorporation currently provides that the Board of Directors shall be divided into three classes, with members of each class of directors serving a three-year term. The classification of the Board of Directors results in staggered elections, with each class of directors standing for election every third year. Any additional director of any class elected to fill a newly created Board seat or a vacancy in that class holds office for a term that coincides with the remaining term of that class.

As part of its ongoing review of corporate governance matters, the Board of Directors, assisted by the Nominating and Governance Committee, considered the advantages and disadvantages of maintaining the

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classified board structure. The Board of Directors considered the view of some shareholders who believe that classified boards have the effect of reducing the accountability of directors to shareholders because shareholders are unable to evaluate and elect all directors on an annual basis.

The Board of Directors also considered benefits of retaining the classified board structure, which has a long history in corporate law. A classified structure may provide continuity and stability in the management of the business and affairs of the company because a majority of directors always have prior experience as directors of the company. In some circumstances classified boards may enhance shareholder value by forcing an entity seeking control of the company to initiate discussions at arm’s-length with the board of the company, because the entity cannot replace the entire board in a single election. The Board of Directors also considered that even without a classified board, the company has defenses that work together to discourage a would-be acquirer from proceeding with a proposal that undervalues the company and to assist the Board of Directors in responding to such proposals. These defenses include other provisions of our Amended and Restated Certificate of Incorporation and Bylaws, as well as certain provisions of Delaware corporation law.

The Board of Directors believes it is important to maintain appropriate defenses to inadequate takeover bids, but also important to retain shareholder confidence by demonstrating that it is accountable and responsive to shareholders. After balancing these interests, the Board of Directors has decided to submit this proposal to eliminate the classified board structure.

Text of Amendments

Article Seven of our Amended and Restated Certificate of Incorporation contains the provisions that will be affected if this proposal is adopted. This article, set forth in Appendix A to this proxy statement, shows the proposed changes with deletions indicated by strike-outs and additions indicated by underlining. The Board of Directors has also adopted conforming amendments to the our Bylaws, to be effective immediately upon the effectiveness of the amendments to our Amended and Restated Certificate of Incorporation.

If the proposal to amend our Amended and Restated Certificate of Incorporation to declassify our Board is approved by our stockholders, the Board of Directors will amend and restate our Amended and Restated Certificate of Incorporation to reflect the revisions set forth in Appendix A, and the resulting Amended and Restated Certificate of Incorporation will be filed with the Secretary of State of the State of Delaware shortly after the annual meeting. If the proposed amendment is not adopted and approved, our Board of Directors will remain classified.

Vote Required

The affirmative vote of at least a majority of the shares of our common stock outstanding on the record date is required for the approval of the proposal to amend our Amended and Restated Certificate of Incorporation.

Board Recommendation

The Board of Directors recommends a vote “FOR” the adoption and approval of an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors and provide for the annual election of directors.

CORPORATE GOVERNANCE

Our Board of Directors believes the purpose of corporate governance is to maximize stockholder value in a manner consistent with legal requirements and the highest standards of integrity. Our Board of Directors adheres to corporate governance practices, which practices the Board and management believe promote this purpose, are sound and represent best practices.

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Board of Directors

Members and Director Independence

Our current Board of Directors consists of eight members: Dean H. Bergy, Julianne M. Bowler, Philip R. Chapman, Roy D. Crowninshield, Peter F. Gearen, Brian K. Hutchison, Gregory P. Rainey, and Adrian J. R. Smith. Our Board has determined that each of our directors, except for Mr. Hutchison, is an “independent director” as that term is defined in Rule 5605(a)(2) of the NASDAQ Listing Rules. Accordingly, if the three nominees to serve as Class III directors are elected at the Annual Meeting, our Board of Directors will consist of eight members, seven of whom qualify as an “independent director.”

The Board’s Role in Risk Oversight

The Board of Directors as a whole has responsibility for risk oversight, with reviews of certain areas being conducted by the relevant board committees. These committees then provide reports to the full Board. The oversight responsibility of the Board and its committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment, and management of critical risks and management’s risk mitigation strategies. These areas of focus include strategic, operational, financial and reporting, succession planning and compensation, compliance, and other risks. The Board of Directors and its committees oversee risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session with key management personnel and representatives of outside advisors as appropriate.


Board/Committee		Primary Areas of Risk Oversight
Full Board of Directors		Strategic, financial and execution risks and exposures associated with our business strategy, policy matters, significant litigation and regulatory exposures, and other current matters that may present material risk to our financial performance, operations, infrastructure, plans, prospects or reputation, mergers and acquisition activities and related integration matters, and divestitures.

Audit Committee		Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, investment guidelines and credit and liquidity matters, our programs and policies relating to legal compliance and strategy, and financial infrastructure.

Nominating and Governance Committee		Risks and exposures associated with director and management succession planning, corporate compliance and ethics, corporate governance, and overall board effectiveness, including appropriate allocation of responsibility for risk oversight among the committees of the Board.

Compensation Committee		Risks and exposures related to the attraction and retention of talent and risks relating to the design of compensation programs and arrangements, including incentive plans. We have determined that it is not reasonably likely that compensation and benefit plans would have a material adverse effect on the Company.

Science and Technology Committee		Risks and exposures associated with the direction, appropriateness of investment, and adequacy of progress of the Company’s science and technology programs.

Board Leadership Structure

We operate under a leadership structure in which the positions of Chairman of the Board and Chief Executive Officer have been separated, such that each position is held by a different person. Mr. Bergy currently

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serves as our Chairman and Mr. Hutchison serves as our President, Chief Executive Officer and a member of the Board of Directors. While we believe this structure is currently the most effective for our company, the Board of Directors has no mandatory policy with respect to the separation of the offices of Chairman and Chief Executive Officer. The Board believes that there are advantages to having an independent director serve as Chairman for matters such as communications and relations between the Board and the Chief Executive Officer and other senior management. In particular, the Board of Directors believes that the current structure enhances the Board’s oversight of management and allows our Chief Executive Officer to focus primarily on his management responsibilities.

The Chairman oversees the planning of the annual Board calendar, and, with the Chief Executive Officer, in consultation with the other directors, schedules and sets the agenda for meetings of the Board and leads the discussion at such meetings. The Chairman also presides at executive sessions, serves as a liaison between the Chief Executive Officer and the independent directors, sees that directors receive appropriate and timely information, assists the Chairmen of the Board committees in preparing agendas for the respective committee meetings, chairs the Company’s Annual Meeting of Stockholders, is available in appropriate circumstances to speak on behalf of the Board, and performs such other functions and responsibilities as set forth in our Bylaws or as requested by the Board from time to time.

Board Meetings

During 2012, the Board of Directors held seven meetings, the Audit Committee held ten meetings, the Compensation Committee held six meetings, the Nominating and Governance Committee held five meetings and the Science and Technology Committee held one meeting. All directors attended at least 75% of all Board of Directors and applicable committee meetings. The Board of Directors also regularly holds executive sessions of the non-management members of the Board of Directors. Each director attended our 2012 Annual Meeting of Stockholders.

Outside Advisors

Our Board of Directors and each of its committees may retain outside advisors and consultants of their choosing at our expense. The Board of Directors need not obtain management’s consent to retain outside advisors.

Committees of the Board of Directors

Our Board of Directors has an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Science and Technology Committee which assist our Board of Directors in discharging its responsibilities.

Nominating

Science

Name

Audit

Compensation

and Governance

and Technology

Dean H. Bergy (I)

—

Julianne M. Bowler (I)

—

Philip R. Chapman (I)

—

Roy D. Crowninshield (I)

—

Peter F. Gearen (I)

—

Brian K. Hutchison

—

Gregory P. Rainey (I)

—

Adrian J. R. Smith (I)

—

Committee Chairperson

Member

(I)	Independent director

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Audit Committee

Our Audit Committee is charged with, among other things, the appointment of our independent registered public accounting firm, as well as discussing and reviewing with the independent registered public accounting firm the scope of the annual audit and results thereof, pre-approving the engagement of the independent registered public accounting firm for all audit-related services and permissible non-audit related services, and reviewing and approving all related-party transactions. Our Audit Committee also reviews interim financial statements included in our quarterly reports and reviews documents filed with the Securities and Exchange Commission. The Board of Directors has determined that each member of the Audit Committee is independent within the meaning of the director independence standards of the NASDAQ Listing Rules as well as the heightened director independence standards of the SEC for Audit Committee members, including Rule 10A-3(b)(1) under the Exchange Act. The Board of Directors has also determined that each of the members of the Audit Committee is financially sophisticated and is able to read and understand consolidated financial statements and that Mr. Bergy is an “Audit Committee financial expert” as defined in the Exchange Act. During 2012, our Audit Committee met ten times. In December 2012, the Board of Directors adopted an amended written charter for the Audit Committee, which is available on our website at http://www.rtix.com/investors/corporate-governance/.

Compensation Committee

Our Compensation Committee plans, reviews and administers our executive compensation programs. The Board of Directors has determined that each member of the Compensation Committee is independent within the meaning of the director independence standards of the NASDAQ Listing Rules In addition, each member of the Compensation Committee is an “outside director” as defined in Section 162(m) of the Internal Revenue Code and a “non-employee” director as defined under Section 16 of the Exchange Act. Our Compensation Committee met six times during 2012. In December 2012, the Board of Directors adopted an amended written charter for the Compensation Committee, which is available on our website at http://www.rtix.com/investors/corporate-governance/.

Nominating and Governance Committee

Our Nominating and Governance Committee was established for the purposes of assisting our Board of Directors in its selection of nominees for election to the Board at annual meetings of the stockholders and to fill any vacancies or newly created directorships and assisting the Board of Directors in its corporate governance oversight. The Board of Directors has determined that each member of the Nominating and Governance Committee is independent within the meaning of the director independence standards of the NASDAQ Listing Rules. Our Nominating and Governance Committee met five times in 2012. In December 2012, the Board of Directors adopted an amended written charter for the Nominating and Governance Committee, which is available on our website at http://www.rtix.com/investors/corporate-governance/.

Science and Technology Committee

Our Science and Technology Committee reviews our annual research and product development plans. Our Science and Technology Committee met once during 2012. The charter of the Science and Technology Committee is available on our website at http://www.rtix.com/investors/corporate-governance/.

Director Nomination Process

Director Qualifications. Our Nominating and Governance Committee has not formally established any specific qualifications that must be met by each candidate for the Board of Directors or specific qualities or skills that are necessary for one or more of the members of the Board of Directors to possess. However, we seek board members who are highly qualified individuals with diverse backgrounds, have an understanding of the Company’s business and industry on a technical level, have good judgment and skills and have depth and breadth of professional experience or other background characteristics.

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Identifying Nominees. The Nominating and Governance Committee, on a periodic basis, solicits ideas for possible candidates from members of the Board of Directors, executive officers and individuals personally known to members of the Board of Directors. In addition, the Nominating and Governance Committee is authorized to use its authority under its charter to retain at the Company’s expense one or more search firms to identify candidates (and to approve such firms’ fees and other retention terms). Prospective candidates recommended by stockholders are also considered (as discussed below).

Stockholder Nominations. Our Nominating and Governance Committee will consider director nominees recommended by stockholders. Pursuant to the charter of our Nominating and Governance Committee, any candidates recommended by stockholders will be reviewed and evaluated against the same criteria applicable to the evaluation of candidates proposed by our directors, executive officers, third-party search firms or other sources.

Review of Director Nominees. In evaluating proposed director candidates, the Nominating and Governance Committee may consider, in addition to any minimum qualifications and other criteria for Board of Directors’ membership approved by the Board of Directors from time to time, all facts and circumstances that it deems appropriate or advisable, including, among other things, the proposed director candidate’s understanding of the Company’s business and industry on a technical level, his or her judgment and skills, his or her depth and breadth of professional experience or other background characteristics, his or her independence, his or her willingness to devote the time and effort necessary to be an effective board member, and the needs of the Board of Directors. We do not have a policy with regard to the consideration of diversity in identifying director nominees. However, our Nominating and Governance Committee takes into account diversity in professional experience, skills and background, and diversity in race and gender, in considering prospective director nominees and committee appointments and planning for director succession. The Nominating and Governance Committee considers at least annually, and recommends to the Board of Directors suggested changes to, if any, the size, composition, organization and governance of the Board of Directors and its committees.

Communications with the Board

Our Board of Directors maintains a process for stockholders to communicate with the Board or individual directors as follows. Stockholders who wish to communicate with the Board of Directors or an individual director should direct written correspondence to the Corporate Secretary at our principal office at 11621 Research Circle, Alachua, Florida 32615. Any such communication must contain (i) a representation that the stockholder is a holder of record of stock of the Company, (ii) the name and address, as they appear on our books, of the stockholder sending such communication and (iii) the number of our shares that are beneficially owned by such stockholder. The Corporate Secretary will forward such communications to the Board of Directors or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Corporate Secretary has the authority to discard the communication or take appropriate legal action regarding such communication.

Code of Ethics for Senior Financial Professionals

Our Board of Directors has adopted a Code of Ethics for Senior Financial Professionals, applicable to our Chief Executive Officer, Chief Financial Officer and Controller. The Code of Ethics for Senior Financial Professionals is available on our website at http://www.rtix.com/investors/corporate-governance/.

Code of Conduct

Our Board of Directors has also adopted a Code of Conduct applicable to all of our directors, officers and employees. The Code of Conduct is available on our website at http://www.rtix.com/investors/corporate-governance/.

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Compensation Committee Interlocks and Insider Participation

During 2012, Messrs. Crowninshield, Rainey and Smith served as members of our Compensation Committee. No member of our Compensation Committee was an officer or employee of ours during 2012 or had any other relationship with us requiring disclosure herein. None of our executive officers serves as a member of the Board of Directors or the Compensation Committee of any other entity that has one or more executive officers serving as a member of our Board of Directors or our Compensation Committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities (collectively, the “Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all such filings.

Based solely on our review of copies of such filings, or written representations from Reporting Persons that all reportable transactions were reported, we believe that during 2012, the Reporting Persons timely filed all reports they were required to file under Section 16(a).

EXECUTIVE OFFICERS OF THE COMPANY


Name	Age		Offices/Position
Brian K. Hutchison		53	President and Chief Executive Officer
Robert P. Jordheim		49	Executive Vice President and Chief Financial Officer
Thomas F. Rose		62	Executive Vice President, Chief Operations Officer and Secretary
Roger W. Rose		53	President, RTI Donor Services, Executive Vice President and Chief Commercial Officer
Caroline A. Hartill		56	Executive Vice President and Chief Scientific Officer

Brian K. Hutchison joined RTI in December 2001 and was elected Chairman of the Board of Directors in December 2002. On May 5, 2011, Hutchison stepped down as Chairman while continuing to serve as President and Chief Executive Officer and a member of our Board of Directors. In this role, Hutchison oversees all aspects of the Company and its affiliates. Hutchison spent the previous 12 years with Stryker Corporation. He served most recently as vice president, worldwide product development and distribution. Hutchison earned a bachelor’s degree in business administration from Grand Valley State University in 1981. He also completed the Program for Management Development from Harvard Business School in 1995.

Robert P. Jordheim joined RTI in June, 2010 as Executive Vice President and Chief Financial Officer, and oversees all aspects of finance for the Company. Jordheim has 24 years of progressive corporate finance experience, including 17 years with Medtronic, Inc. Most recently, he served as Vice President, Finance and Business Development for Medtronic’s Spinal and Biologics business unit. Previously, he served as Vice President, Finance for Medtronic’s Surgical Technologies business unit. His tenure with Medtronic also included responsibilities in corporate development and international experience gained through a five-year assignment in Europe. Previous to his tenure at Medtronic, Jordheim served as Manager of External Reporting at The Fairchild Corporation and as an auditor for Deloitte & Touche LLP. Jordheim earned a bachelor’s degree in business administration from Southern Methodist University and a master’s degree in business administration from the University of Pittsburgh with a concentration in finance.

Thomas F. Rose was named Executive Vice President and Chief Operations Officer in June, 2010. He also serves as Corporate Secretary to the Board of Directors. Rose joined the Company as Vice President and Chief Financial Officer in May 2002 and served as Executive Vice President and Chief Financial Officer until June 2010. Rose served the previous 10 years as Vice President and Chief Financial Officer at A.M. Todd Group.

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Rose earned a bachelor’s degree in business administration from Western Michigan University. He has also completed numerous executive education courses at University of Michigan and Northwestern University focusing on strategy and organizational issues.

Roger W. Rose was named Executive Vice President and Chief Commercial Officer in June, 2010. In February 2008, he was named President of RTI Donor Services, and, in August 2004, he was named Executive Vice President of RTI. Rose oversees all aspects of the organization’s not-for-profit affiliate, RTI Donor Services, marketing, and the distribution of donated tissue back into the community. Rose joined RTI as Vice President of Donor Services in October 2002 and assumed additional responsibility for distribution and marketing in October 2003. Prior to this, Rose spent seven years at Stryker Corporation where he held leadership positions in sales and marketing in both the medical and orthopedic divisions. Rose earned a bachelor’s degree in business administration from Western Michigan University and completed numerous executive education courses at UCLA, University of Michigan and Harvard Business School, focusing on finance, leadership, medical marketing, negotiation and strategy.

Caroline A. Hartill was named Executive Vice President and Chief Scientific Officer on June 21, 2010. She was named Chief Scientific Officer in March 2007. She joined RTI in November 2001 and was named Vice President of Quality Assurance and Regulatory Affairs in January 2003. In her role at RTI, Hartill oversees all research and development, quality assurance, regulatory affairs and clinical studies. She has served as a board member for BioFlorida and is chair for the Tissue Products Workgroup of the Advanced Medical Technology Association (AdvaMed). She also serves as chair of the Accreditation Committee of the American Association of Tissue Banks (AATB) and is an appointed member of the Agency for Healthcare Administration (AHCA), State of Florida Organ and Tissue Transplant Advisory Committee. For the previous 18 years, she worked in the areas of technology development and market approvals as a consultant working with many major and start-up biotechnology and medical device companies worldwide. Hartill earned a Bachelor’s degree with honors in Health Sciences from Birmingham University Medical School in England, as well as a Master’s degree in Management from the University of Wolverhampton in England. Hartill has also earned Master’s level credits in Sterilization Science from Manchester University.

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PROPOSAL 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

(THE SAY ON PAY VOTE)

As we do each year, we included a non-binding advisory vote on our executive compensation program (also referred to as a “say on pay vote”) in our 2012 proxy statement. We are gratified that at our 2012 Annual Meeting, our stockholders overwhelmingly approved the proposal, with more than 97% of the votes cast voting in favor of the proposal. In accordance with Section 14A of the Exchange Act, this year we are again asking our stockholders to vote “For” the compensation of our named executive officers as disclosed in this proxy statement. In considering their vote, stockholders may wish to carefully review our compensation policies and decisions regarding our named executive officers as presented in the Compensation Discussion and Analysis beginning on page 26.

We believe that our compensation policies and procedures are centered on a pay-for-performance philosophy. In deciding how to vote on this proposal, the Board of Directors urges you to consider the following factors, which are more fully discussed in the Compensation Discussion and Analysis beginning on page 26:

•

We tie pay to performance. A significant portion of executive pay is not guaranteed. We set clear financial goals for corporate performance and we review how executive pay aligns with Company financial performance.

•

We mitigate undue risk, including utilizing clawback provisions, multiple performance targets, and robust Board of Directors and management processes to identify risk.

•

Our Compensation Committee benefits from its utilization of an independent compensation consulting firm.

•

We do not engage in certain compensation practices, including the following:

•

We do not provide excise tax gross-ups.

•

We do not have an executive retirement plan that provides extra benefits to the named executive officers and do not include the value of equity awards in pension calculations.

•

We do not reprice underwater stock options.

We are asking you to indicate your support for the compensation of our named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we are asking you to vote, on an advisory basis, FOR the following resolution at the Annual Meeting:

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables, and the related narrative.”

While the results of this advisory vote are not binding, the Compensation Committee will consider the outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation decisions for named executive officers.

Board Recommendation

Our Board of Directors recommends a vote “FOR” the advisory vote on executive compensation.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

The primary objective of our executive compensation program has been to align executive pay with Company performance and long-term shareholder value creation. With respect to 2012 compensation decision, the Compensation Committee reviewed and considered the performance of the Company in 2011, the performance of each executive officer in 2011, relevant external market benchmark data provided by the Committee’s independent consultant, and relevant internal factors such as the Company’s business strategy and outlook for 2012 and the strength and continuity of the executive leadership team. Based on these and other relevant considerations, the Compensation Committee approved the following primary changes to executive compensation levels and plan designs for 2012:

•

A 5% increase to each executive’s base salary;

•

An increase in the CEO’s target short-term incentive opportunity from 62% to 70% of salary, with all other NEO’s target short-term incentive opportunities remaining at 50% of salary;

•

No changes to the design of the short-term incentive;

•

An increase in the CEO’s long-term incentive grant level from 75,000 options and 25,000 restricted shares to 120,000 options and 40,000 restricted shares, with all other NEO’s long-term incentive grant levels remaining at 60,000 stock options and 20,000 restricted shares;

•

No change in the equity grant mix of 75% stock options and 25% restricted shares, or to the material terms of these awards; and

•

Adoption of Transition Agreements with each of the NEOs that provides severance benefits in the event of an involuntary termination without “Cause” or a voluntary resignation for “Good Reason.”

The Company’s performance in 2012 was strong, as evidenced by the following summary results:

•

Revenue increased $8.8 million over 2011 and met the Company’s 2012 annual operating plan;

•

Pretax income increased $3.2 million over 2011, excluding a one-time $2.4 million litigation settlement charge in 2012, and was in-line with the Company’s 2012 annual operating plan;

•

Operating Cash Flow decreased $7.0 million from 2011, however, exceeded the Company’s 2012 annual operating plan; and

•

Stock price decreased 4%, from $4.44 on December 30, 2011 to $4.27 on December 31, 2012.

These performance results were reflected in our executive compensation results for 2012:

•

Short-term incentives were earned at 127% of the target opportunity;

•

The stock options granted on February 9, 2012 at an exercise price of $4.02 had accrued some in-the-money value by the end of the year (based on a year-end stock price of $4.27); and

•

The value of our executive’s stock holdings in RTI increased commensurate with the increase in shareholder value during the year.

We believe these performance and pay results demonstrate a strong alignment between executive compensation, Company performance, and shareholder value creation.

The remainder of this Compensation Discussion and Analysis provides the more detailed philosophy, process, considerations, and analysis involved in the determination of executive compensation.

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Oversight of Executive Compensation Program

General. The Compensation Committee of our Board of Directors (the “Compensation Committee”), presently consisting of Messrs. Crowninshield, Rainey and Smith, is responsible for the planning, review and administration of our executive compensation programs. The Board of Directors adopted an amended charter for the Compensation Committee in December 2012, a copy of which is available on our website at http://www.rtix.com/investors/corporate-governance/.

Our primary corporate objective is to provide a superior return to stockholders. To support this objective, we believe we must attract, retain and motivate top quality executive talent. The executive compensation program we adopt is a critical tool in this process. The executive compensation program is designed to link executive compensation to our performance through at-risk compensation opportunities, providing significant reward to executives based on our success. The executive compensation program consists of base salary, annual cash incentive opportunities and long-term incentives represented by stock option and restricted stock grants.

The Compensation Committee oversees our executive compensation programs. Our compensation programs are designed specifically for (1) our executive officers named in the Summary Compensation Table and other officers of the Company; and (2) a broad-base of Company employees. Additionally, the Compensation Committee is charged with the review and approval of all annual compensation decisions relating to executive officers and our annual compensation guidelines for all other Company officers and employees.

Compensation Consultant

The Compensation Committee retains an independent compensation consultant to assist with the annual review of executive compensation levels. During 2011, the Committee engaged Pearl Meyer & Partners as its independent consultant. Pearl Meyer & Partners reports to and is directed by the Compensation Committee, and provides no other services to the Company. The compensation consultant assists the Compensation Committee by providing comparative market data on compensation practices and programs based on an analysis of the companies in our peer group identified below, and also provides guidance on industry best practices.

Peer Group and Compensation Targets

With the assistance of Pearl Meyer & Partners, the Compensation Committee selected a peer group of public companies and prepared an analysis of compensation paid to our executive officers against the executive officers at the peer companies, which we refer to as “compensation benchmarking data.” The 2011 peer group consisted of the following thirteen publicly-traded medical device related companies which had executives in positions that were of similar scope to RTI Biologics’ executives: Symmetry Medical Inc., Arthrocare Corporation, Medical Action Industries, Merit Medical Systems Inc., Angiodynamics Inc., Exactech Inc., Cyberonics Inc., Alphatec Holdings Inc., Spectranetics Corporation, Cryolife Inc., Orthovita Inc., Synovis Life Tech Inc., and Kensey Nash Corporation.

The compensation benchmarking data provides information to compare the compensation levels of executives but is not the main determinant of compensation. In general, the Committee considers the executive’s compensation against the median of the compensation benchmarking data, and then considers additional factors such as Company performance, individual executive performance, internal pay equity among colleagues, and retention risks.

Overview of Compensation Philosophy and Program

In order to recruit and retain the most qualified and competent individuals as executive officers, we strive to maintain a compensation program that is competitive in the global labor market. The purpose of our compensation program is to reward exceptional organizational and individual performance.

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The following compensation objectives are considered in setting the compensation programs for our executive officers:

•

drive and reward performance which supports the Company’s core values of integrity, leadership and performance;

•

provide a significant percentage of total compensation that is at-risk, or variable, based on predetermined performance criteria;

•

design competitive total compensation and rewards programs to enhance our ability to attract and retain knowledgeable and experienced executive officers; and

•

set compensation and incentive levels that reflect competitive market practices.

Compensation Elements and Rationale for Pay Mix Decisions

To reward both short and long-term performance in the compensation program and in furtherance of our compensation objectives noted above, our executive compensation philosophy includes the following four principles:

(i)

Compensation should be related to performance

The Compensation Committee believes that a significant portion of an executive officer’s compensation should be tied not only to individual performance, but also to the performance of the executive officer’s function and to Company performance measured against both financial and non-financial goals and objectives.

During periods when performance meets or exceeds the established objectives, incentive compensation should be paid at or more than targeted levels, respectively. When our performance does not meet key objectives, incentive award payments, if any, should be less than such levels.

(ii)

Incentive compensation should represent a large portion of executive officers’ total compensation

A majority of targeted compensation should be in the form of short-term and long-term incentives, which are calculated and paid based primarily on financial measures of profitability and stockholder value creation. Executive officers have the incentive of increasing Company profitability and stockholder return in order to earn the major portion of their compensation package.

(iii)

Compensation levels should be competitive

The Compensation Committee reviews the compensation benchmarking data to ensure that the compensation program is competitive. We believe that a competitive compensation program will enhance our ability to attract and retain executive officers.

(iv)

Incentive compensation should balance short and long-term performance

The Compensation Committee seeks to structure a balance between achieving strong short-term annual results and ensuring our long-term viability and success. To reinforce the importance of balancing these perspectives, executive officers are regularly provided both short and long-term incentives.

We provide executive officers and many employees with various means of becoming stockholders of the Company. These opportunities include stock option grants and restricted stock awards.

The Compensation Committee believes that the mix of long-term incentives allows us to deliver long-term incentive awards aligned with the interests of stockholders. Stock options and restricted stock awards create a focus on share price appreciation. Finally, stock options and restricted stock awards serve as a retention tool to ensure that recipients remain at the Company.

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Financial Metrics Used in Compensation Programs

Financial metrics are commonly referenced in defining Company performance for executive officer compensation. The Compensation Committee based its compensation decisions on the Company’s performance related to certain objectives. The Compensation Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the performance of the executive officers. The Compensation Committee retains discretion to take other factors into account in determining bonuses and to award no bonuses even if performance criteria are met. These metrics are defined here and their use in annual and long-term incentive programs is described below.

(i)

Pretax Income

We use pretax income as a metric in the bonus plan for executive officers in order to measure growth and reflect how well we deliver value to our shareholders from our business operations. Pretax income is a GAAP measure. This year, the Company recorded a litigation settlement charge of $2.4 million in the second quarter of 2012, which was paid in the third quarter of 2012. The pretax income metric excluded this one-time charge, which management believes represents a successful resolution to the litigation and was attributable in part to key contributions of management time and leadership.

(ii)

Operating Cash Flow

Operating cash flow is a GAAP measure and an indication of liquidity. We believe that Operating Cash Flow is useful because it is a consistent measure of the underlying results of our business. Furthermore, management uses it internally as a measure of the performance of our operations.

(iii)

Increase in Revenue

Revenue growth is a reflection of our ability to successfully bring new products to market, gain market share and expand the many markets that we serve.

Review of Executive Officer Performance

The Compensation Committee reviews, on an annual basis, each compensation element of an executive officer. In each case, the Compensation Committee takes into account the scope of responsibilities and experience and balances these against competitive salary levels.

In addition, each year, the President and Chief Executive Officer presents to the Compensation Committee his evaluation of each executive officer, other than himself, which includes a review of contribution and performance over the past year, strengths, weaknesses, development plans and succession potential. The Compensation Committee also evaluates the President and Chief Executive Officer’s performance in light of corporate goals and objectives and other factors as the Compensation Committee deems appropriate. Following these reviews and a comparison to the compensation benchmarking data, the Compensation Committee makes its own assessments and approves compensation for each executive officer, including the President and Chief Executive Officer. The Compensation Committee recommends to the Board of Directors compensation for the executive officers, including the President and Chief Executive Officer. The Board of Directors evaluates the contribution and performance of the executive officers, including the President and Chief Executive Officer, and approves their compensation after considering the recommendation of the Compensation Committee.

Components of the Executive Compensation Program

The Compensation Committee believes the total compensation and benefits program for executive officers should consist of the following:

•

base salaries;

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•

annual incentive plan;

•

long-term incentive compensation; and

•

retirement, and health and welfare benefits.

Base Salaries

Base salaries are determined by evaluating an executive officer’s level of responsibility, experience, and performance. The Compensation Committee also considers the executive’s salary relative to the market median pay data provided by its independent consultant.

Increases to base salaries, if any, are driven primarily by individual performance and comparative data from the compensation benchmarking data. Individual performance is evaluated by reviewing the executive officer’s success in achieving business results, promoting our core values and demonstrating leadership abilities.

In setting the base salary of the executive officers for 2012, the Compensation Committee reviewed the compensation of comparable executive officers from the compensation benchmarking data. The Compensation Committee also considered the Company’s continuing achievement of its short- and long-term goals to:

•

achieve specific pretax income, operating cash flow and revenue levels;

•

communicate strategy and financial results effectively; and

•

develop leadership capabilities.

The Compensation Committee reviews the compensation benchmarking data annually for general economic conditions and marketplace compensation trends. Base salaries for executive officers are usually adjusted when:

•

the current compensation demonstrates a significant deviation from the market data;

•

recognizing outstanding individual performance; or

•

recognizing an increase in responsibility.

The executive officers received five percent increases to base salaries in 2012.

The salaries paid to the executive officers during 2012 are shown in the Summary Compensation Table.

Annual Bonus Plan

The Annual Bonus Plan provides executive officers with the opportunity to earn cash bonuses based on the achievement of specific Company-wide performance goals. The Compensation Committee approves the design of the annual incentive component of our compensation program to ensure alignment of executive officer pay with our annual (short-term) performance. Incentive bonuses are generally paid in cash in February or March of each year for the prior year’s performance. Bonus payments to executive officers above certain target amounts may be paid in restricted stock instead of cash.

The Compensation Committee approves a target incentive opportunity as a percentage of each executive officer’s base salary. These target percentages are based on a variety of factors, including the relative contribution of the role to company performance, internal equity among colleagues, and competitive market practices. The incentive target percentage represents the executive officer’s annual bonus opportunity if the annual performance goals of the incentive plan are achieved.

The Annual Bonus Plan establishes a set of financial metrics for each executive officer that will be used in the determination of that officer’s bonus. These metrics are selected to drive annual performance.

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The 2012 targets and bonus criteria for each of our executive officers were as follows:


Name	Office	Bonus Target			Bonus Criteria
Brian K. Hutchison	President and Chief Executive Officer		70	%	Revenue 33.3%, Pretax Income 33.3% and Operating Cash Flow 33.4%
Robert P. Jordheim	Executive Vice President and Chief Financial Officer		50	%	Revenue 33.3%, Pretax Income 33.3% and Operating Cash Flow 33.4%
Thomas F. Rose	Executive Vice President, Chief Operations Officer and Secretary		50	%	Revenue 33.3%, Pretax Income 33.3% and Operating Cash Flow 33.4%
Roger W. Rose	President, RTI Donor Services, Executive Vice President and Chief Commercial Officer		50	%	Revenue 33.3%, Pretax Income 33.3% and Operating Cash Flow 33.4%
Caroline A. Hartill	Executive Vice President and Chief Scientific Officer		50	%	Revenue 33.3%, Pretax Income 33.3% and Operating Cash Flow 33.4%

Mr. Hutchison’s short-term incentive target was increased from sixty-two percent to seventy percent of base salary in 2012. There were no changes in short-term incentive targets for the other executive officers in 2012.

Actual payouts under the short-term incentive plan are based upon a comparison of actual performance to performance goals approved by the Board of Directors at the beginning of the year. The Board sets performance goals that it believes are achievable, but that represent significant improvements over prior year’s performance. Our performance goals for 2012 were $13.5 million of Pretax Income, $16.2 million of Operating Cash Flow and $178.4 million of Revenue. Our actual performance for 2012 was $14.8 million of Pretax Income, $22.2 million of Operating Cash Flow and $178.1 million of Revenue.

Payouts under the Annual Bonus Plan are discretionary by the Board of Directors and annual bonus payouts under the plan may reflect adjustments for extraordinary or unusual accounting events.

Bonuses for 2012 were approved as follows: Mr. Hutchison ($477,855), Mr. Jordheim ($203,397), Mr. T. Rose ($203,397), Mr. R. Rose ($203,397), and Ms. Hartill ($203,397). These bonuses were awarded by the Compensation Committee based on achieving or exceeding the Company’s financial targets. The Board of Directors approved the bonuses which were paid in February 2013.

Long-Term Incentive Compensation

Long-term incentives comprise a significant portion of an executive officer’s total compensation package. The Compensation Committee’s objective is to provide executive officers with long-term incentive award opportunities that will align pay with shareholder value creation, encourage teamwork and collaboration in accomplishing long-term goals, facilitate stock ownership among executives, create retention incentives, and generally reflect competitive market practices. Currently, we provide executive officers with stock options and restricted stock awards.

Each year the Company budgets a certain level of equity compensation expense and the Compensation Committee and Board of Directors approve awards within budget guidelines. The executive officers are awarded stock options and/or restricted stock awards as part of the overall allocation of equity compensation to all managerial employees of the Company. The compensation benchmarking data is looked at as a point of reference as to whether or not executive officers are getting stock awards commensurate with responsibilities similar to

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executive officers in the peer companies. The Compensation Committee approves the total stock options and restricted stock awards that will be made available to executive officers as well as the size of individual grants for each executive officer.

The Compensation Committee approved long-term incentive awards to executive officers in 2012 consisting of stock options and restricted stock awards.

The long-term incentive information related to the executive officers during 2012 is included in the Summary Compensation Table under the columns Stock Awards and Option Awards. Additional information on long-term incentive awards is shown in the Grants of Plan-Based Awards Table and the Outstanding Equity Awards at Fiscal Year-End Table.

Stock Options

An important objective of the long-term incentive program is to strengthen the relationship between the long-term value of our stock price and the potential financial gain for employees. Stock options provide key employees, including the executive officers, with the opportunity to purchase our Common Stock at a price fixed on the grant date regardless of future market price. Stock options generally are subject to stock option agreements under which one-fifth of the options vest and become exercisable on each anniversary of the original award date.

A stock option becomes valuable only if our Common Stock price increases above the option exercise price and the holder of the option remains employed during the period required for the option to “vest” thus, providing an incentive for an option holder to remain employed by the Company. In addition, stock options link a portion of an employee’s compensation to stockholders’ interests by providing an incentive to make decisions designed to increase the market price of our stock.

The exercise prices of the stock options granted to the executive officers during 2012 are shown in the Grants of Plan-Based Awards Table. Additional information on these grants, including the number of shares subject to each grant, also is shown in the Grants of Plan-Based Awards Table.

Options generally are granted annually at the first Board of Directors meeting of the year, after final determination of our previous year operating results. Our practice is that the exercise price for each stock option is the market value on the date of grant. Under our option plans, the option price shall not be less than the fair market value of the shares on the date of grant.

There is a limited term in which the executive officers can exercise stock options, known as the option term. The option term is generally ten years from the date of grant. At the end of the option term, the right to purchase any unexercised options expires. Option holders generally forfeit any unvested options if their employment with us terminates.

In certain instances, stock options may vest on an accelerated schedule. Retirement may trigger accelerated vesting if an optionee’s age plus years of service with us is greater than or equal to 65 years. In this instance, all unvested options will vest as of the retirement date, and the optionee will have three or five years to exercise the options depending on the terms outlined in the stock option award agreement. However, the exercise period may not exceed the original option term.

Additionally, death or disability while employed with the Company will cause all stock options to vest automatically and become exercisable per the terms outlined in the stock option award agreement.

Restricted Stock Awards

Restricted stock awards (“RSAs”) are intended to retain key employees, including the executive officers, through vesting periods. Restricted stock awards provide the opportunity for capital accumulation and more predictable long-term incentive value.

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RSAs generally are awarded periodically and determined by the Compensation Committee. RSAs are shares of our Common Stock that are awarded with the restriction that the recipient remains with us until the date of vesting. RSAs generally vest one-third annually after the original award date. The purpose of granting RSAs is to encourage ownership of our Common Stock by, and retention of, our key employees. Executive officers are allowed to vote RSAs as a stockholder based on the number of shares held free of restriction.

Any unvested RSAs generally are forfeited if the recipient terminates employment with the Company or if they fail to meet the continuing employment restriction outlined in the RSA agreement. In the event of death or disability, any unvested RSAs are immediately vested.

The RSAs granted to the executive officers during 2012 are shown in the Grants of Plan-Based Awards Table. Additional information on these grants, including the number of shares subject to each grant, also is shown in the Grants of Plan-Based Awards Table.

Tax Implications of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) places a limit of $1,000,000 on the amount of compensation that may be deducted by the Company in any year with respect to each of the executive officers unless the compensation is performance-based compensation as described in Section 162(m) and the related regulations, as well as pursuant to a plan approved by the Company’s stockholders. We may from time to time pay compensation to our executive officers that may not be deductible, including discretionary bonuses or other types of compensation outside of our plans.

Although the Compensation Committee has generally attempted to structure executive compensation so as to preserve deductibility, it also believes that there are circumstances where our interests are best served by maintaining flexibility in the way compensation is provided, even if it might result in the non-deductibility of certain compensation under the Code.

Although equity awards may be deductible for tax purposes by the Company, the accounting rules pursuant to FASB ASC 718 require that the portion of the tax benefit in excess of the financial compensation cost be recorded to paid-in-capital.

Retirement, Health and Welfare Benefits

We offer a variety of health and welfare and retirement programs to all eligible employees. The executive officers generally are eligible for the same benefit programs on the same basis as the rest of the broad-based employees. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, wellness, pharmacy, dental, vision, life insurance and accidental death and disability. Coverage under the life insurance and disability programs offer benefit amounts specific to executive officers.

We offer retirement programs that are intended to supplement the employee’s personal savings and social security. The program includes RTI Biologics, Inc. Retirement Plan, which is a 401(k) plan. All U.S. employees, including executive officers, are generally eligible for the 401(k) Plan.

We adopted the 401(k) Plan to enable employees to save for retirement through a tax-advantaged combination of employee and Company contributions and to provide employees the opportunity to directly manage their retirement plan assets through a variety of investment options. The 401(k) Plan allows eligible employees to elect to contribute up to 100% of their eligible compensation to an investment trust. Eligible compensation generally means all wages, salaries and commissions from the Company. Employee contributions are matched in cash by us at the rate of $1.00 per $1.00 employee contribution for the first 6% of the employee’s eligible compensation. Employee’s contributions vest immediately and the employer’s contributions vest after

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the employee has three years of service with the Company. The 401(k) Plan provides for over nineteen different investment options, for which the participant has sole discretion in determining how both the employer and employee contributions are invested. The 401(k) Plan does not provide our employees the option to invest directly in the Company’s stock. The 401(k) Plan offers in-service withdrawals in the form of loans, hardship distributions and age 59.5 distributions. The 401(k) Plan benefits are payable pursuant to the participant’s election.

Perquisites and Perquisite Allowance Payments

Executive officers are provided with the following benefits as a supplement to their other compensation:

•

Health and Welfare Coverage: We pay 100% of the premium for both health and dental insurance for executive officers. In addition, at our expense each executive officer is allowed to have a complete and professional personal physical exam on an annual basis. Officers are responsible for deductibles under the health benefit plans.

•

Life Insurance & Accidental Death & Dismemberment Coverage: We pay 100% of the premium for both term life insurance and accidental death and dismemberment coverage, equal to $2,000,000 for our executive officers. We pay 100% of the premium for both term life insurance and accidental death and dismemberment coverage, equal to $500,000 for the remaining executive officers. In addition, we also pay 100% of the premium for a $50,000 term life insurance policy for the executive officers of the Company.

•

Short-Term and Long-Term Disability: We pay 100% of the premium cost for these benefit programs for executive officers. The short-term disability program provides income replacement at 60% of base pay level for up to eleven weeks or recovery. The long-term disability program then pays 60% of the base pay level beginning on week twelve up to age 65.

Severance Plan

We do not have in effect any general severance plan that provides for change-in-control payments to our executive officers. We have executive transition agreements with each of our executive officers, which contain change-in-control provisions. These agreements are described under “Executive Transition Agreements” and “Potential Payments upon Termination of Employment” below.

Employment Agreements

We do not currently have employment agreements with our executive officers. Our prior employment agreements with Messrs. Hutchison, T. Rose and R. Rose were each terminated effective August 29, 2012 pursuant to their respective executive transition agreement, which are described below.

Executive Transition Agreements

On August 29, 2012, we entered into an executive transition agreement with each of our executive officers: Brian K. Hutchison (President and Chief Executive Officer), Robert P. Jordheim (Executive Vice President and Chief Financial Officer), Thomas F. Rose (Executive Vice President, Chief Operations Officer and Secretary), Roger W. Rose (President, RTI Donor Services, Executive Vice President and Chief Commercial Officer) and Caroline A. Hartill (Executive Vice President and Chief Scientific Officer). Each executive transition agreement has an initial term of three years, subject to our right to extend the term of any agreement by giving written notice to the executive officer prior to its expiration. If a “Change in Control” (as defined in the agreement) occurs before the expiration of the then-current term of any agreement, and if the term would otherwise end within two years after the date of such Change in Control, then the term will automatically be extended to the second anniversary of the date of the Change in Control.

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In general, the executive transition agreement with each executive officer (other than Mr. Hutchison) provides that if, during the term of the agreement, we or our successor terminates the employment of the executive officer without “Cause” (as defined below), or the executive officer voluntarily terminates his or her employment for “Good Reason” (as defined below), the executive officer will be entitled to periodic severance payments for 12 months totaling an amount equal to the sum of (a) one year of the executive officer’s then-current annual base salary (or, if greater, the annual base salary in effect as of the beginning of the preceding year) plus (b) the amount of the executive officer’s then-current target bonus opportunity (or, if there is no target bonus for the year in which employment is terminated, the amount of the bonus earned by the executive officer for the immediately preceding year). Mr. Hutchison’s agreement provides for periodic severance payments, following such termination of employment, for 24 months totaling an amount equal to 2.0 times the sum of (a) one year of his then-current annual base salary (or, if greater, the annual base salary in effect as of the beginning of the preceding year) plus (b) the amount of his then-current target bonus opportunity (or, if there is no target bonus for the year in which his employment is terminated, the amount of his bonus earned for the immediately preceding year).

Termination without “Cause” occurs if the executive is terminated for any reason other than: (1) conviction or a nolo contendere (uncontested) plea to a felony; (2) commission of fraud or a material act or omission involving dishonesty with respect to the company or its subsidiaries, (3) willful failure to carry out the material employment responsibilities; or (4) gross negligence or willful misconduct in the performance of the executive’s duties which has had or is reasonably likely to have a material adverse effect on the company.

An executive may terminate his or her employment for “Good Reason” upon the occurrence of any of following events or conditions: (1) the assignment to executive of any duties materially inconsistent with executive’s position, authority, duties or responsibilities as in effect immediately prior to such assignment, or any other material diminution in such position, authority, duties or responsibilities; (2) any material reduction in executive’s annual base salary or annual bonus opportunity in effect at any time and from time to time; (3) a relocation of executive’s principal office by more than 150 miles; or (4) the failure or refusal by a successor or acquiring company to expressly assume our obligations under the executive transition agreement upon the consummation of a “Change in Control” (as defined in the agreement).

The agreements further provide for (1) the accelerated vesting of stock options, restricted stock units, shares of restricted stock and other forms of equity-based incentive awards granted to the executive officer, and (2) continued participation, at the same benefit and contribution levels, in our group health plan for 18 months following such termination of employment.

Each executive officer’s right to receive and retain his or her respective severance payments or benefits is subject to certain conditions, including delivery of a release of the company and compliance with specified restrictive covenants following such termination.

Potential Payments upon Termination of Employment

The following tables disclose the estimated payments and benefits that would be provided to each of our executive officers, applying the assumptions that the triggering events described in their respective executive transition agreements took place on December 31, 2012 and their last day of employment was December 31, 2012.

Due to a number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event, our stock price and the executive’s age.

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Brian K. Hutchison, President and Chief Executive Officer


	Termination without Cause or Resignation for Good Reason
Base Salary	$	1,074,000	(1)
Bonus		751,800	(2)
Unvested Equity Awards		418,364	(3)
Value of Life and Medical Insurance Benefits		9,999	(4)

Total	$	2,254,163

(1)	Assumes a base salary of $537,000 per year.

(2)	Assumes $375,900 as the target bonus opportunity for the year in which Mr. Hutchison’s employment terminates (or, if there is no target bonus for such year, $378,803 as the amount of the bonus earned for the immediately preceding year).

(3)

The closing price of our common stock on December 31, 2012 was $4.27 per share, and Mr. Hutchison had 120,000 unvested options with an exercise price of $4.02 per share, 40,000 unvested options with an exercise price of $2.98 per share, 60,000 unvested options with an exercise price of $2.69 per share and 56,666 restricted stock awards as of December 31, 2012.

(4)	Includes the premiums to be paid by the company for life, health, dental and vision insurance.

Robert P. Jordheim, Executive Vice President and Chief Financial Officer


	Termination without Cause or Resignation for Good Reason
Base Salary	$	320,000	(1)
Bonus		160,000	(2)
Unvested Equity Awards		361,572	(3)
Value of Life and Medical Insurance Benefits		10,291	(4)

Total	$	851,863

(1)	Assumes a base salary of $320,000 per year

(2)	Assumes $160,000 as the target bonus opportunity for the year in which Mr. Jordheim’s employment terminates (or, if there is no target bonus for such year, $181,979 as the amount of the bonus earned for the immediately preceding year).

(3)

The closing price of our common stock on December 31, 2012 was $4.27 per share, and Mr. Jordheim had 120,000 unvested options with an exercise price of $3.20 per share, 60,000 unvested options with an exercise price of $4.02 per share, 48,000 unvested options with an exercise price of $2.69 per share and 33,333 restricted stock awards as of December 31, 2012.

(4)	Includes the premiums to be paid by the company for life, health, dental and vision insurance.

Thomas F. Rose, Executive Vice President, Chief Operations Officer and Secretary


	Termination without Cause or Resignation for Good Reason
Base Salary	$	320,000	(1)
Bonus		160,000	(2)
Unvested Equity Awards		264,132	(3)
Value of Life and Medical Insurance Benefits		8,238	(4)

Total	$	752,370

(1)	Assumes a base salary of $320,000 per year

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(2)	Assumes $160,000 as the target bonus opportunity for the year in which Mr. T. Rose’s employment terminates (or, if there is no target bonus for such year, $181,979 as the amount of the bonus earned for the immediately preceding year).

(3)

The closing price of our common stock on December 31, 2012 was $4.27 per share, and Mr. T. Rose had 60,000 unvested options with an exercise price of $4.02 per share, 24,000 unvested options with an exercise price of $2.98 per share, 48,000 unvested options with an exercise price of $2.69 per share and 33,333 restricted stock awards as of December 31, 2012.

(4)	Includes the premiums to be paid by the company for life, health, dental and vision insurance.

Roger W. Rose, President, RTI Donor Services, Executive Vice President and Chief Commercial Officer


	Termination without Cause or Resignation for Good Reason
Base Salary	$	320,000	(1)
Bonus		160,000	(2)
Unvested Equity Awards		182,264	(3)
Value of Life and Medical Insurance Benefits		6,674	(4)

Total	$	668,938

(1)	Assumes a base salary of $320,000 per year

(2)	Assumes $160,000 as the target bonus opportunity for the year in which Mr. R. Rose’s employment terminates (or, if there is no target bonus for such year, $181,979 as the amount of the bonus earned for the immediately preceding year).

(3)

The closing price of our common stock on December 31, 2012 was $4.27 per share, and Mr. R. Rose had 60,000 unvested options with an exercise price of $4.02 per share, 12,000 unvested options with an exercise price of $2.98 per share, 24,000 unvested options with an exercise price of $2.69 per share and 26,666 restricted stock awards as of December 31, 2012.

(4)	Includes the premiums to be paid by the company for life, health, dental and vision insurance.

Caroline A. Hartill, Executive Vice President and Chief Scientific Officer


	Termination without Cause or Resignation for Good Reason
Base Salary	$	320,000	(1)
Bonus		160,000	(2)
Unvested Equity Awards		264,132	(3)
Value of Life and Medical Insurance Benefits		7,229	(4)

Total	$	751,361

(1)	Assumes a base salary of $320,000 per year

(2)	Assumes $160,000 as the target bonus opportunity for the year in which Ms. Hartill’s employment terminates (or, if there is no target bonus for such year, $181,979 as the amount of the bonus earned for the immediately preceding year).

(3)

The closing price of our common stock on December 31, 2012 was $4.27 per share, and Ms. Hartill had 60,000 unvested options with an exercise price of $4.02 per share, 24,000 unvested options with an exercise price of $2.98 per share, 48,000 unvested options with an exercise price of $2.69 per share and 33,333 restricted stock awards as of December 31, 2012.

(4)	Includes the premiums to be paid by the company for life, health, dental and vision insurance.

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Restricted Stock Awards

Upon vesting of a restricted stock award and after the payment of the taxes due as a result of vesting, the executive officer is allowed to sell the vested shares. We do not currently have any post vesting holding period on restricted stock awards.

Exercise of Stock Options

Upon exercise of a stock option, the executive officer is allowed to sell the shares acquired upon exercise. We do not currently have any post exercise holding period on shares acquired upon exercise of stock options.

Claw Backs

The Board shall, in all appropriate circumstances, require reimbursement of any annual incentive payment or long-term incentive payment under any Award to an executive officer where: (1) the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of Company financial statements filed with the Securities and Exchange Commission and (2) a lower payment would have been made to the executive based upon the restated financial results. In each such instance, the Company will seek to recover from the individual executive the amount by which the individual executive’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results. For purposes of this policy, the term “executive officer” means any officer who has been designated an executive officer by the Board.

Risk Assessment

Public companies are required to conduct a risk assessment to determine if there are any compensation programs, policies, or practices that are “reasonably likely” to have a material adverse effect on the Company.

The Compensation Committee conducted a risk assessment of the Company’s compensation policies and practices during the fiscal year 2012. This risk assessment consisted of a review of cash and equity compensation provided to senior executives and incentive compensation plans which provide variable compensation based upon Company and individual performance. The Compensation Committee concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to the Company’s overall business and do not create risk that is reasonably likely to have a material adverse effect on the Company. The following characteristics of our compensation programs support this finding:

•

our use of different types of compensation vehicles that provide a balance of long- and short-term incentives with fixed and variable components;

•

our use of multiple performance measures in the short-term incentive program;

•

our practice of looking beyond results-oriented performance and assessing the contributions of a particular executive;

•

the ability of the Compensation Committee to reduce incentive payouts if deemed appropriate; and

•

the ability of our Board to recoup compensation in accordance with our “Clawback Policy”.

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our chief executive officer, our chief financial officer and each of the other three most highly compensated executive officers who were serving as executive officers at December 31, 2012 for the years indicated.

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Summary Compensation Table


Name and Principal Position	Year		Salary ($)		Stock Awards ($) (16)		Option Awards ($) (16)		Non-Equity Incentive Plan Compensation ($) (17)		Nonqualified Deferred Compensation Earnings ($) (18)			All Other Compensation ($)			Total ($)
Brian K. Hutchison		2012		533,155		160,800		294,024		477,855		49,651			20,418	(1)		1,535,903
President and		2011		512,000		67,250		128,303		378,803		(611	)		20,201	(2)		1,105,946
Chief Executive Officer		2010		497,651		—		276,940		158,637		37,701			19,989	(3)		990,918

Robert P. Jordheim		2012		317,693		80,400		147,012		203,397		—			21,860	(4)		770,362
Executive Vice President,		2011		305,000		53,800		102,642		181,979		—			19,063	(5)		662,484
Chief Financial Officer		2010		158,365		—		412,180		40,391		—			188,736	(6)		799,672

Thomas F. Rose		2012		317,693		80,400		147,012		203,397		11,995			20,492	(7)		780,989
Executive Vice President,		2011		305,000		53,800		102,642		181,979		6,288			19,977	(8)		669,686
Chief Operations Officer and		2010		296,404		—		221,552		76,210		13,483			19,542	(9)		627,191
Secretary

Roger W. Rose		2012		317,693		80,400		147,012		203,397		837			19,449	(10)		768,788
President, RTI Donor Services,		2011		305,000		53,800		102,642		181,979		4,329			21,515	(11)		669,265
Executive Vice President, and		2010		296,404		—		221,552		76,210		12,268			21,093	(12)		627,527
Chief Commercial Officer

Caroline A. Hartill		2012		317,693		80,400		147,012		203,397		17,215			16,728	(13)		782,445
Executive Vice President,		2011		305,000		53,800		102,642		181,979		(136	)		16,930	(14)		660,215
Chief Scientific Officer		2010		291,461		—		221,552		76,210		11,422			16,418	(15)		617,063

(1)	Includes matching contributions under our 401(k) Plan of $13,752, payment of $3,840 for health and dental insurance and payment of $2,826 for term life insurance.

(2)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $3,625 for health and dental insurance and payment of $1,876 for term life insurance.

(3)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $3,413 for health and dental insurance and payment of $1,876 for term life insurance.

(4)	Includes matching contributions under our 401(k) Plan of $15,000, payment of $6,067 for health and dental insurance and payment of $793 for term life insurance.

(5)	Includes matching contributions under our 401(k) Plan of $12,549, payment of $5,721 for health and dental insurance and payment of $793 for term life insurance.

(6)	Includes payment of $2,792 for health and dental insurance, payment of $793 for term life insurance, payment of $96,064 for relocation and payment of $89,087 for sign-on bonus.

(7)	Includes matching contributions under our 401(k) Plan of $15,000, payment of $3,840 for health and dental insurance, payment of $1,652 for term life insurance.

(8)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $3,625 for health and dental insurance, payment of $1,652 for term life insurance.

(9)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $3,190 for health and dental insurance, payment of $1,652 for term life insurance.

(10)	Includes matching contributions under our 401(k) Plan of $15,000, payment of $3,355 for health and dental insurance and payment of $1,094 for term life insurance.

(11)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $5,721 for health and dental insurance and payment of $1,094 for term life insurance.

(12)	Includes matching contributions under our 401(k) Plan of $14,700, payment of $5,299 for health and dental insurance and payment of $1,094 for term life insurance.

(13)	Includes matching contributions under our 401(k) Plan of $11,909, payment of $3,840 for health and dental insurance and payment of $979 for term life insurance.

(14)	Includes matching contributions under our 401(k) Plan of $12,326, payment of $3,625 for health and dental insurance and payment of $979 for term life insurance.

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(15)	Includes matching contributions under our 401(k) Plan of $12,250, payment of $3,189 for health and dental insurance and payment of $979 for term life insurance.

(16)

Reflects the restricted stock award fair value at date of grant. The stock option award fair values are calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation. The assumptions underlying the valuation of restricted stock awards and stock options are set forth in footnote 4 to our consolidated financial statements for the year ended December 31, 2012.

(17)	Reflects bonuses earned under the Annual Bonus Plan.

(18)	Reflects the increase (or decrease) in value of named executive officer benefits under the Executive Nonqualified Excess Plan.

Grants of Plan-Based Awards

This table discloses the actual numbers of restricted stock awards and stock options granted during 2012 and the grant date fair value of these awards. It also captures potential future payouts under the Company’s non-equity incentive plans.


												All Other
									All Other			Option
									Stock			Awards:			Exercise
									Awards:			Number of			or Base		Grant Date
			Estimated Future Payouts Under Non-						Number of			Securities			Price of		Fair Value of
			Equity Incentive Plan Awards (1)						Shares of			Underlying			Option		Stock and
	Grant		Threshold		Target		Maximum		Stock or			Options			Awards		Option Awards
Name	Date		($)		($)		($)		Units (#)			(#)			($/Sh)		($)
Brian K. Hutchison		2/9/2012		187,950		375,900		563,850		40,000	(2)		120,000	(3)		4.02		454,824
Robert P. Jordheim		2/9/2012		80,000		160,000		240,000		20,000	(2)		60,000	(3)		4.02		227,412
Thomas F. Rose		2/9/2012		80,000		160,000		240,000		20,000	(2)		60,000	(3)		4.02		227,412
Roger W. Rose		2/9/2012		80,000		160,000		240,000		20,000	(2)		60,000	(3)		4.02		227,412
Caroline A. Hartill		2/9/2012		80,000		160,000		240,000		20,000	(2)		60,000	(3)		4.02		227,412

(1)	These amounts represent the threshold, target, and maximum bonuses payable to each executive under the Company’s 2012 Bonus Plan.

(2)	Such restricted stock awards were granted on February 9, 2012 pursuant to our 2010 Equity Incentive Plan. Subject to the recipient’s continued service with us, 33% of these restricted stock awards will become vested on each anniversary date from February 9, 2013 through February 9, 2015.

(3)	Such options were granted on February 9, 2012 pursuant to our 2010 Equity Incentive Plan. Subject to the recipient’s continued service with us, 20% of these options will become exercisable on each anniversary date from February 9, 2013 through February 9, 2017.

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Outstanding Equity Awards at Fiscal Year-End

The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2012 for executive officers.


	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested ($)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Brian K. Hutchison (1)		15,000		60,000		2.69		2/28/2021		—		—		—		—
		60,000		40,000		2.98		2/10/2019		—		—		—		—
		—		120,000		4.02		2/9/2022		—		—		—		—
		40,000		60,000		4.30		4/20/2020		—		—		—		—
		92,253		—		6.18		6/27/2015		—		—		—		—
		30,000		—		7.25		3/2/2017		—		—		—		—
		34,506		—		7.28		3/7/2016		—		—		—		—
		28,000		7,000		7.45		1/28/2018		—		—		—		—
		20,000		—		9.33		4/28/2013		—		—		—		—
		40,000		—		10.04		4/26/2014		—		—		—		—
										56,666		241,964		—		—
Robert P. Jordheim (2)		12,000		48,000		2.69		2/28/2021		—		—		—		—
		80,000		120,000		3.20		6/21/2020		—		—		—		—
		—		60,000		4.02		2/9/2022		—		—		—		—
										33,333		142,332		—		—
Thomas F. Rose (3)		12,000		48,000		2.69		2/28/2021		—		—		—		—
		36,000		24,000		2.98		2/10/2019		—		—		—		—
		—		60,000		4.02		2/9/2022		—		—		—		—
		32,000		48,000		4.30		4/20/2020		—		—		—		—
		50,000		—		6.18		6/27/2015		—		—		—		—
		30,000		—		7.25		3/2/2017		—		—		—		—
		20,000		—		7.28		3/7/2016		—		—		—		—
		24,000		6,000		7.45		1/28/2018		—		—		—		—
		20,000		—		9.33		4/28/2013		—		—		—		—
		20,000		—		10.04		4/26/2014		—		—		—		—
										33,333		142,332		—		—
Roger W. Rose (4)		6,000		24,000		2.69		2/28/2021		—		—		—		—
		18,000		12,000		2.98		2/10/2019		—		—		—		—
		—		60,000		4.02		2/9/2022		—		—		—		—
		16,000		24,000		4.30		4/20/2020		—		—		—		—
		50,000		—		6.18		6/27/2015		—		—		—		—
		30,000		—		7.25		3/2/2017		—		—		—		—
		20,000		—		7.28		3/7/2016		—		—		—		—
		12,000		3,000		7.45		1/28/2018		—		—		—		—
		20,000		—		9.18		8/9/2014		—		—		—		—
		20,000		—		9.33		4/28/2013		—		—		—		—
		20,000		—		10.04		4/26/2014		—		—		—		—
										26,666		113,864		—		—

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	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested ($)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Caroline A. Hartill (5)		12,000		48,000		2.69		2/28/2021		—		—		—		—
		36,000		24,000		2.98		2/10/2019		—		—		—		—
		—		60,000		4.02		2/9/2022		—		—		—		—
		32,000		48,000		4.30		4/20/2020		—		—		—		—
		50,000		—		6.18		6/27/2015		—		—		—		—
		30,000		—		7.25		3/2/2017		—		—		—		—
		20,000		—		7.28		3/7/2016		—		—		—		—
		24,000		6,000		7.45		1/28/2018		—		—		—		—
		20,000		—		9.33		4/28/2013		—		—		—		—
		20,000		—		10.04		4/26/2014		—		—		—		—
										33,333		142,332		—		—

(1)	Mr. Hutchison holds the following stock options which vest 20% per year over a five-year period from the date of grant and restricted stock awards which vests 33.3% per year over a three-year period from the date of grant:

120,000 stock options granted on February 9, 2012. 24,000 stock options vested on February 9, 2013.

24,000 stock options will vest on each of February 9, 2014, 2015, 2016 and 2017.

75,000 stock options granted on February 28, 2011. 15,000 stock options vested on February 28, 2012 and 2013. 15,000 stock options will vest on each of February 28, 2014, 2015 and 2016.

100,000 stock options granted on April 20, 2010. 20,000 stock options vested on April 20, 2011 and 2012. 20,000 stock options will vest on each of April 20, 2013, 2014 and 2015.

100,000 stock options granted on February 10, 2009. 20,000 stock options vested on each of February 10, 2010, 2011, 2012 and 2013. 20,000 stock options will vest on February 10, 2014.

100,000 stock options granted on June 27, 2005. 20,000 stock options vested on each of June 27, 2006, 2007, 2008, 2009 and 2010.

30,000 stock options granted on March 2, 2007. 6,000 stock options vested on each of March 2, 2008, 2009, 2010, 2011 and 2012.

40,000 stock options granted on March 7, 2006. 8,000 stock options vested on each of March 7, 2007, 2008, 2009, 2010 and 2011.

35,000 stock options granted on January 28, 2008. 7,000 stock options vested on each of January 28, 2009, 2010, 2011, 2012 and 2013.

20,000 stock options granted on April 28, 2003. 4,000 stock options vested on each of April 28, 2004, 2005, 2006, 2007 and 2008.

40,000 stock options granted on April 26, 2004. 8,000 stock options vested on each of April 26, 2005, 2006, 2007, 2008 and 2009.

10,000 restricted stock awards granted March 7, 2006. 3,334 restricted stock awards vested on March 7, 2007. 3,333 restricted stock awards vested on each of March 7, 2008 and 2009.

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25,000 restricted stock awards granted February 28, 2011. 8,334 restricted stock awards vested on February 28, 2012 and 8,333 restricted stock awards vested on February 28, 2013. 8,333 restricted stock awards will vest on February 28, 2014.

40,000 restricted stock awards granted February 9, 2012. 13,333 restricted stock awards vested on February 9, 2013. 13,333 restricted stock awards will vest on February 9, 2014 and 13,334 restricted stock awards will vest on February 9, 2015.

(2)	Mr. Jordheim holds the following stock options which vest 20% per year over a five-year period from the date of grant and a restricted stock award which vests 33.3% per year over a three-year period from the date of grant:

60,000 stock options granted on February 9, 2012. 12,000 stock options vested on February 9, 2013.

12,000 stock options will vest on each of February 9, 2014, 2015, 2016 and 2017.

60,000 stock options granted on February 28, 2011. 12,000 stock options vested on February 28, 2012 and 2013. 12,000 stock options will vest on each of February 28, 2014, 2015 and 2016.

200,000 stock options granted on June 21, 2010. 40,000 stock options vested on June 21, 2011 and 2012. 40,000 stock options will vest on each of June 21, 2013, 2014 and 2015.

20,000 restricted stock awards granted February 28, 2011. 6,667 restricted stock awards vested on February 28, 2012 and 2013. 6,666 restricted stock awards will vest on February 28, 2014.

20,000 restricted stock awards granted February 9, 2012. 6,666 restricted stock awards vested on February 9, 2013. 6,667 restricted stock awards will vest on February 9, 2014 and 2015.

(3)	Mr. Thomas Rose holds the following stock options which vest 20% per year over a five-year period from the date of grant and a restricted stock award which vests 33.3% per year over a three-year period from the date of grant:

60,000 stock options granted on February 9, 2012. 12,000 stock options vested on February 9, 2013.

12,000 stock options will vest on each of February 9, 2014, 2015, 2016 and 2017.

60,000 stock options granted on February 28, 2011. 12,000 stock options vested on February 28, 2012 and 2013. 12,000 stock options will vest on each of February 28, 2014, 2015 and 2016.

80,000 stock options granted on April 20, 2010. 16,000 stock options vested on April 20, 2011 and 2012. 16,000 stock options will vest on each of April 20, 2013, 2014 and 2015.

60,000 stock options granted on February 10, 2009. 12,000 stock options vested on each of February 10, 2010, 2011, 2012 and 2013. 12,000 stock options will vest on February10, 2014.

50,000 stock options granted on June 27, 2005. 10,000 stock options vested on each of June 27, 2006, 2007, 2008, 2009 and 2010.

30,000 stock options granted on March 2, 2007. 6,000 stock options vested on each of March 2, 2008, 2009, 2010, 2011 and 2012.

20,000 stock options granted on March 7, 2006. 4,000 stock options vested on each of March 7, 2007, 2008, 2009, 2010 and 2011.

30,000 stock options granted on January 28, 2008. 6,000 stock options vested on each of January 28, 2009, 2010, 2011, 2012 and 2013.

20,000 stock options granted on April 28, 2003. 4,000 stock options vested on each of April 28, 2004, 2005, 2006, 2007 and 2008.

20,000 stock options granted on April 26, 2004. 4,000 stock options vested on each of April 26, 2005, 2006, 2007, 2008 and 2009.

5,000 restricted stock awards granted on March 7, 2006. 1,667 restricted stock awards vested on each of March 7, 2007 and 2008. 1,666 restricted stock awards vested on March 7, 2009.

20,000 restricted stock awards granted February 28, 2011. 6,667 restricted stock awards vested on February 28, 2012 and 2013. 6,666 restricted stock awards will vest on February 28, 2014.

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20,000 restricted stock awards granted February 9, 2012. 6,666 restricted stock awards vested on February 9, 2013. 6,667 restricted stock awards will vest on February 9, 2014 and 2015.

(4)	Mr. Roger Rose holds the following stock options which vest 20% per year over a five-year period from the date of grant and a restricted stock award which vests 33.3% per year over a three-year period from the date of grant:

60,000 stock options granted on February 9, 2012. 12,000 stock options vested on February 9, 2013.

12,000 stock options will vest on each of February 9, 2014, 2015, 2016 and 2017.

30,000 stock options granted on February 28, 2011. 6,000 stock options vested on February 28, 2012 and 2013. 6,000 stock options will vest on each of February 28, 2014, 2015 and 2016.

40,000 stock options granted on April 20, 2010. 8,000 stock options vested on April 20, 2011 and 2012. 8,000 stock options will vest on each of April 20, 2013, 2014 and 2015.

30,000 stock options granted on February 10, 2009. 6,000 stock options vested on each of February 10, 2010, 2011, 2012 and 2013. 6,000 stock options will vest on February10, 2014.

50,000 stock options granted on June 27, 2005. 10,000 stock options vested on each of June 27, 2006, 2007, 2008, 2009 and 2010.

30,000 stock options granted on March 2, 2007. 6,000 stock options vested on each of March 2, 2008, 2009, 2010, 2011 and 2012.

20,000 stock options granted on March 7, 2006. 4,000 stock options vested on each of March 7, 2007, 2008, 2009, 2010 and 2011.

15,000 stock options granted on January 28, 2008. 3,000 stock options vested on each of January 28, 2009, 2010, 2011, 2012 and 2013.

20,000 stock options granted on August 9, 2004. 4,000 stock options vested on each of August 9, 2005, 2006, 2007, 2008 and 2009.

20,000 stock options granted on April 28, 2003. 4,000 stock options vested on each of April 28, 2004, 2005, 2006, 2007 and 2008.

20,000 stock options granted on April 26, 2004. 4,000 stock options vested on each of April 26, 2005, 2006, 2007, 2008 and 2009.

10,000 restricted stock awards granted February 28, 2011. 3,334 restricted stock awards vested on February 28, 2012 and 3,333 restricted stock awards vested on February 28, 2013. 3,333 restricted stock awards will vest on February 28, 2014.

20,000 restricted stock awards granted February 9, 2012. 6,666 restricted stock awards vested on February 9, 2013. 6,667 restricted stock awards will vest on February 9, 2014 and 2015.

(5)	Ms. Hartill holds the following stock options which vest 20% per year over a five-year period from the date of grant and a restricted stock award which vests 33.3% per year over a three-year period from the date of grant:

60,000 stock options granted on February 9, 2012. 12,000 stock options vested on February 9, 2013.

12,000 stock options will vest on each of February 9, 2014, 2015, 2016 and 2017.

60,000 stock options granted on February 28, 2011. 12,000 stock options vested on February 28, 2012 and 2013. 12,000 stock options will vest on each of February 28, 2014, 2015 and 2016.

80,000 stock options granted on April 20, 2010. 16,000 stock options vested on April 20, 2011 and 2012. 16,000 stock options will vest on each of April 20, 2013, 2014 and 2015.

60,000 stock options granted on February 10, 2009. 12,000 stock options vested on each of February 10, 2010, 2011, 2012 and 2013. 12,000 stock options will vest on February10, 2014.

50,000 stock options granted on June 27, 2005. 10,000 stock options vested on each of June 27, 2006, 2007, 2008, 2009 and 2010.

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