10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 0-19961

ORTHOFIX INTERNATIONAL N.V.

(Exact name of registrant as specified in its charter)

Netherlands Antilles	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7 Abraham de Veerstraat
Curaçao
Netherlands Antilles	N/A
(Address of principal executive offices)	(Zip Code)

599-9-4658525

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 1, 2009, 17,135,398 shares of common stock were issued and outstanding.

Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38
PART II OTHER INFORMATION
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	42
Item 6. Exhibits	43
SIGNATURES	48
Exhibit 10.17
Exhibit 10.37
Exhibit 10.39
Exhibit 10.41
Exhibit 10.42
Exhibit 10.44
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which relate to our business and financial outlook and which are based on our current beliefs, assumptions, expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “intends,” “predicts,” “potential” or “continue” or other comparable terminology. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any such statement to reflect new information, the occurrence of future events or circumstances or otherwise.

Factors that could cause actual results to differ materially from those indicated by the forward-looking statements or that could contribute to such differences include, but are not limited to, risks relating to the expected sales of products, including recently launched products, unanticipated expenditures, changing relationships with customers, suppliers, strategic partners and lenders, unfavorable results in litigation matters, risks relating to the protection of intellectual property, changes to the reimbursement policies of third parties, changes to and interpretation of governmental regulation of medical devices, the impact of competitive products, changes to the competitive environment, the acceptance of new products in the market, conditions of the orthopedic industry and the economy, currency or interest rate fluctuations, corporate development and marketing development activities, including acquisitions and divestitures, unexpected costs or operating unit performance related to recent acquisitions, unexpected difficulties meeting covenants under our senior secured bank credit facility and the other risks described under Item 1A — “Business — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Part II, Item 1A — “Risk Factors” in this Form 10-Q.

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
(US Dollars, in thousands except share data)	2009		2008
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,800	$	14,594
Restricted cash		13,218		10,998
Trade accounts receivable, less allowance for doubtful accounts of $7,329 and $6,473 at September 30, 2009 and December 31, 2008, respectively		127,359		110,720
Inventories, net		101,016		91,185
Deferred income taxes		20,497		17,543
Prepaid expenses and other current assets		34,426		29,610
Total current assets		303,316		274,650
Investments, at cost		345		2,095
Property, plant and equipment, net		37,559		32,660
Patents and other intangible assets, net		49,304		53,546
Goodwill		185,208		182,581
Deferred taxes and other long-term assets		13,046		15,683
Total assets	$	588,778	$	561,215
Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings	$	3,689	$	1,907
Current portion of long-term debt		3,336		3,329
Trade accounts payable		27,188		23,865
Other current liabilities		61,540		45,894
Total current liabilities		95,753		74,995
Long-term debt		255,049		277,533
Deferred income taxes		3,252		4,509
Other long-term liabilities		7,436		2,117
Total liabilities		361,490		359,154
Contingencies (Note 19)
Shareholders’ equity:
Common shares $0.10 par value; 50,000,000 shares authorized; 17,130,798 and 17,103,142 issued and outstanding as of September 30, 2009 and December 31, 2008, respectively		1,713		1,710
Additional paid-in capital		174,288		167,818
Retained earnings		44,658		29,647
Accumulated other comprehensive income		6,629		2,886
Total shareholders’ equity		227,288		202,061
Total liabilities and shareholders’ equity	$	588,778	$	561,215

The accompanying notes form an integral part of these condensed consolidated financial statements.

3

ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

	Three Months Ended						Nine Months Ended
(Unaudited, US Dollars, in thousands except share and per share data)	2009			2008			2009			2008
Net sales	$	135,098		$	129,301		$	401,618		$	387,372
Cost of sales		31,985			47,998			101,700			117,284
Gross profit		103,113			81,303			299,918			270,088
Operating expenses
Sales and marketing		55,012			50,210			162,547			153,652
General and administrative		20,819			19,293			64,694			60,252
Research and development		7,863			6,447			25,837			19,400
Amortization of intangible assets		1,668			5,347			4,944			15,220
Impairment of goodwill and certain intangible assets		—			289,523			—			289,523
Gain on sale of Pain Care® operations		—			—			—			(1,570	)
		85,362			370,820			258,022			536,477
Operating income (loss)		17,751			(289,517	)		41,896			(266,389	)
Other income (expense), net
Interest expense, net		(6,437	)		(4,249	)		(18,385	)		(13,708	)
Loss on refinancing of senior secured term loan		—			(5,735	)		—			(5,735	)
Unrealized non-cash gain (loss) on interest rate swap		(229	)		—			1,046			—
Other expense, net		(688	)		(3,822	)		(586	)		(2,737	)
		(7,354	)		(13,806	)		(17,925	)		(22,180	)
Income (loss) before income taxes		10,397			(303,323	)		23,971			(288,569	)
Income tax benefit (expense)		(4,209	)		66,072			(8,960	)		60,732
Net income (loss)	$	6,188		$	(237,251	)	$	15,011		$	(227,837	)
Net income (loss) per common share — basic	$	0.36		$	(13.87	)	$	0.88		$	(13.33	)
Net income (loss) per common share — diluted	$	0.36		$	(13.87	)	$	0.87		$	(13.33	)
Weighted average number of common shares — basic		17,130,247			17,101,718			17,113,891			17,093,133
Weighted average number of common shares — diluted		17,215,567			17,101,718			17,174,416			17,093,133

The accompanying notes form an integral part of these condensed consolidated financial statements.

4

ORTHOFIX INTERNATIONAL N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(Unaudited, US Dollars, in thousands)	2009			2008
Cash flows from operating activities:
Net income (loss)	$	15,011		$	(227,837	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		16,064			22,707
Amortization of debt costs		199			868
Provision for doubtful accounts		5,138			4,585
Provision for inventory obsolescence		6,769			13,708
Loss on refinancing of senior secured term loan		—			3,660
Impairment of goodwill and certain intangible assets		—			289,523
Impairment of investments held at cost		—			1,500
Deferred taxes		(2,015	)		(76,861	)
Share-based compensation		7,877			7,855
Minority interest		28			—
Amortization of step up of fair value in inventory		—			365
Gain on sale of Pain Care® operations		—			(1,570	)
Other		(159	)		3,062
Change in operating assets and liabilities:
Restricted cash		(2,141	)		(352	)
Accounts receivable		(18,357	)		(13,805	)
Inventories		(12,832	)		(19,498	)
Prepaid expenses and other current assets		(4,415	)		(5,250	)
Accounts payable		2,314			2,500
Current liabilities		14,743			(2,739	)
Net cash provided by operating activities		28,224			2,421
Cash flows from investing activities:
Capital expenditures		(16,073	)		(15,831	)
Proceeds from sale of investments held at cost		1,711			766
Proceeds from sale of Pain Care® operations		—			5,980
Net cash used in investing activities		(14,362	)		(9,085	)
Cash flows from financing activities:
Net proceeds from issuance of common shares		7			1,734
Repayments of long-term debt		(22,477	)		(6,223	)
Proceeds from (repayments of) bank borrowings, net		1,581			(2,377	)
Payment of refinancing fees		—			(283	)
Cash payment for purchase of minority interest in subsidiary		(1,143	)		(501	)
Tax benefit on non-qualified stock options		2			22
Net cash used in financing activities		(22,030	)		(7,628	)
Effect of exchange rate changes on cash		374			(486	)
Net decrease in cash and cash equivalents		(7,794	)		(14,778	)
Cash and cash equivalents at the beginning of the year		14,594			25,064
Cash and cash equivalents at the end of the period	$	6,800		$	10,286

The accompanying notes form an integral part of these condensed consolidated financial statements.

5

ORTHFIX INTERNATIONAL N.V.
NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BUSINESS

Orthofix International N.V. (the “Company”) is a multinational corporation principally involved in the design, development, manufacture, marketing and distribution of medical equipment, principally for the Orthopedics products market. The Company is comprised of four reportable segments: Domestic, Spinal Implants & Biologics, Breg and International. See Note 13 for a description of each segment.

NOTE 2: BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the Consolidated Financial Statements and Notes thereto of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

NOTE 3: RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 808 — Collaborative Arrangements (“ASC 808”) (formerly known as Emerging Issues Task Force (“EITF”) 07-1 “Accounting for Collaborative Arrangements”). ASC 808 provides information related to the classification of the payments between participants, the appropriate income statement presentation, as well as disclosures related to certain collaborative arrangements. The adoption of ASC 808 did not have a material impact on the Company’s results of operations or financial position, as the Company had applied this guidance since there was no prevailing authority previously.

In January 2009, the Company adopted ASC Subtopic 810-10 (“ASC 810-10”) (formerly known as Statement of Financial Accounting Standards (“SFAS”) No. 160, “Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB 51”). ASC 810-10 establishes accounting and reporting standards pertaining to ownership interest in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest, and the valuation of any retained non-controlling equity investment when a subsidiary is deconsolidated. ASC 810-10 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. ASC 810-10 and its adoption changed the method in which the Company accounted for a minority interest acquisition during the first quarter of 2009. It also requires the excess purchase price over the minority interest liability (at the time of the acquisition) to be recorded as a capital transaction. The disclosure requirements of ASC 810-10 did not have an impact on the Company’s financial reporting as the remaining minority interest liability is immaterial.

In May 2009, the FASB issued ASC Topic 855 — Subsequent Events (“ASC 855”) (formerly known as SFAS No. 165, “Subsequent Events”). ASC 855 provides authoritative accounting literature for a topic that was previously addressed only in auditing literature (AICPA AU Section 560, Subsequent Events). The guidance in ASC 855 is largely similar to the current guidance in the auditing literature with some exceptions that are not intended to result in significant changes in practice. Three modifications to the subsequent events guidance in AU Section 560 are: 1) to name the two types of subsequent events either as recognized subsequent events (currently referred to in practice as Type I subsequent events) or non-recognized subsequent events (currently referred to in practice as Type II subsequent events), 2) to modify the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued for public entities and 3) to require entities to disclose the date through which an entity has evaluated subsequent events and the basis for that date. ASC 855 is effective for interim or annual financial periods ending after June 15, 2009. In accordance with the provisions of ASC 855, the Company has evaluated all subsequent events that occurred through November 6, 2009, the date the financial statements were issued. Refer to Note 20 for disclosures related to the Company’s subsequent events.

6

NOTE 4: SHARE-BASED COMPENSATION

All share-based compensation costs are measured at the grant date, based on the estimated fair value of the award, and are recognized as expense in the statement of operations over the requisite service period. Commencing in June 2007, the Company offered restricted shares in addition to stock options as a form of share-based compensation.

The following table shows the detail of share-based compensation by line item in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(US$ in thousands)	2009		2008		2009		2008
Cost of sales	$	166	$	—	$	505	$	116
Sales and marketing		625		579		2,290		1,353
General and administrative		1,632		2,433		4,656		5,793
Research and development		138		186		426		593
Total	$	2,561	$	3,198	$	7,877	$	7,855

There are no performance requirements for share-based compensation awarded to employees.

NOTE 5: RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the 2009 presentation. The reclassifications have no effect on previously reported net loss or shareholders’ equity.

NOTE 6: INVENTORIES

Inventories are valued at the lower of cost or estimated net realizable value, after provision for excess or obsolete items. Cost is determined on a weighted-average basis, which approximates the FIFO method. The valuation of work-in-process, finished products, field inventory and consignment inventory includes the cost of materials, labor and production. Field inventory represents immediately saleable finished products inventory that is in the possession of the Company’s direct sales representatives and independent distributors.

Inventories were as follows:

	September 30,			December 31,
(US$ in thousands)	2009			2008
Raw materials	$	9,847		$	9,314
Work-in-process		7,341			8,829
Finished products		64,224			57,151
Field inventory		16,198			13,633
Consignment inventory		27,529			23,426
		125,139			112,353
Less reserve for obsolescence		(24,123	)		(21,168	)
	$	101,016		$	91,185

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NOTE 7: GOODWILL

The changes in the carrying value of goodwill by reportable segment for the period ended September 30, 2009 are as follows:

			Spinal Implants
(US$ in thousands)	Domestic		& Biologics		Breg		International		Total
At December 31, 2008	$	31,793	$	9,367	$	99,295	$	42,126	$	182,581
Foreign currency		—		—		—		2,627		2,627
At September 30, 2009	$	31,793	$	9,367	$	99,295	$	44,753	$	185,208

NOTE 8: PATENTS AND OTHER INTANGIBLE ASSETS

	September 30,			December 31,
(US$ in thousands)	2009			2008
Cost
Patents and developed technologies	$	26,853		$	25,602
Trademarks — definite lived (subject to amortization)		119			105
Trademarks — indefinite lived (not subject to amortization)		23,502			23,382
Distribution networks		44,586			44,586
		95,060			93,675
Accumulated amortization
Patents and developed technologies		(15,589	)		(13,194	)
Trademarks — definite lived (subject to amortization)		(106	)		(105	)
Distribution networks		(30,061	)		(26,830	)
Patents and other intangible assets, net	$	49,304		$	53,546

Amortization expense for intangible assets is estimated to be approximately $1.5 million for the remainder of 2009 and $5.9 million, $5.9 million, $4.6 million, $1.5 million and $6.4 million for the periods ending December 31, 2010, 2011, 2012, 2013, and thereafter, respectively.

NOTE 9: BANK BORROWINGS

	September 30,		December 31,
(US$ in thousands)	2009		2008
Borrowings under line of credit	$	3,689	$	1,907

The weighted average interest rates on borrowings under lines of credit as of September 30, 2009 and December 31, 2008 were 4.93% and 5.86%, respectively.

Borrowings under lines of credit consist of borrowings in Euros. The Company had unused available lines of credit of 4.8 million Euros ($7.0 million) and 5.2 million Euros ($7.3 million) at September 30, 2009 and December 31, 2008, respectively, in its Italian line of credit, which gives the Company the option to borrow amounts in Italy at rates which are determined at the time of borrowing. This line of credit is unsecured.

8

NOTE 10: LONG-TERM DEBT

	September 30,			December 31,
(US$ in thousands)	2009			2008
Long-term obligations	$	258,225		$	280,700
Other loans		160			162
		258,385			280,862
Less current portion		(3,336	)		(3,329	)
	$	255,049		$	277,533

On September 22, 2006 the Company’s wholly-owned US holding company subsidiary, Orthofix Holdings, Inc. (“Orthofix Holdings”), entered into a senior secured credit facility with a syndicate of financial institutions to finance the acquisition of Blackstone Medical Inc. (“Blackstone”). Certain terms of the senior secured credit facility were amended September 29, 2008. The senior secured credit facility provides for (1) a seven-year amortizing term loan facility of $330.0 million and (2) a six-year revolving credit facility of $45.0 million. As of September 30, 2009, the Company had no amounts outstanding under the revolving credit facility and $258.2 million outstanding under the term loan facility. Obligations under the senior secured credit facility can have a floating interest rate of the London Inter-Bank Offered Rate (“LIBOR”) plus a margin, with a LIBOR floor of 3.0%, or prime rate plus a margin. As of September 30, 2009, the entire term loan obligation of $258.2 million is at the prime rate plus a margin of 3.50%. The effective interest rates on the senior secured credit facility, including the impact of an interest rate swap (see Note 17), as of September 30, 2009 and December 31, 2008 were 9.0% and 8.4%, respectively.

Each of the domestic subsidiaries of the Company (which includes Orthofix Inc., Breg Inc., and Blackstone) and Colgate Medical Limited and Victory Medical Limited (wholly-owned financing subsidiaries of the Company) has guaranteed the obligations of Orthofix Holdings under the senior secured credit facility. The obligations of the subsidiaries under their guarantees are secured by the pledges of their respective assets.

Certain subsidiaries of the Company have restrictions on their ability to pay dividends or make intercompany loan advances pursuant to the Company’s senior secured credit facility. The net assets of Orthofix Holdings and its subsidiaries are restricted for distributions to the parent company. Domestic subsidiaries of the Company, as parties to the credit agreement, have access to these net assets for operational purposes. The amount of restricted net assets of Orthofix Holdings and its subsidiaries as of September 30, 2009 is $130.8 million compared to $111.3 million at December 31, 2008. In addition, the senior secured credit facility restricts the Company and subsidiaries that are not parties to the credit facility from access to cash held by Colgate Medical Limited and its subsidiaries. All credit party subsidiaries have access to this cash for operational and debt repayment purposes. The amount of restricted cash of the Company as of September 30, 2009 is $13.2 million compared to $11.0 million at December 31, 2008.

Weighted average interest rates on current maturities of long-term obligations as of September 30, 2009 and December 31, 2008 were 9.0% and 8.4%, respectively.

NOTE 11: COMMON SHARES

During the nine month period ended September 30, 2009, there were 27,656 shares of common stock issued upon the vesting of restricted stock and the exercise of outstanding stock options.

9

NOTE 12: COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income is comprised of foreign currency translation adjustments and the effective portion of the gain (loss) for the Company’s cross-currency swap which is designated and accounted for as a cash flow hedge (refer to Note 17). The components of and changes in accumulated other comprehensive income are as follows:

	Foreign Currency			Fair Value			Accumulated Other
	Translation			of Cross -			Comprehensive
(US$ in thousands)	Adjustments			Currency Swap			Income/(Loss)
Balance at December 31, 2008	$	(211	)	$	3,097		$	2,886
Unrealized loss on cross-currency swap, net of tax of $(943)		—			(2,426	)		(2,426	)
Foreign currency translation adjustment		6,169			—			6,169
Balance at September 30, 2009	$	5,958		$	671		$	6,629

Comprehensive income (loss) is comprised of the following components:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(US$ in thousands)	2009		2008			2009			2008
Net income (loss)	$	6,188	$	(237,251	)	$	15,011		$	(227,837	)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instrument(s), net of tax		159		(1,997	)		(2,426	)		(76	)
Foreign currency translation adjustment		948		(5,953	)		6,169			(5,782	)
Total comprehensive income (loss)	$	7,295	$	(245,201	)	$	18,754		$	(233,695	)

NOTE 13: BUSINESS SEGMENT INFORMATION

The Company’s segment information is prepared on the same basis that the Company’s management reviews the financial information for operational decision making purposes. The Company is comprised of the following segments:

Domestic

Domestic (“Domestic”) consists of the operations of Orthofix Inc. within the United States. Domestic designs, manufactures and distributes stimulation, orthopedic and biologics products. Domestic uses both direct and distributor sales representatives to sell Spine and Orthopedic products to hospitals, doctors and other healthcare providers in the United States market.

Spinal Implants & Biologics

Spinal Implants & Biologics (“Spinal Implants & Biologics”) consists of Blackstone and its two subsidiaries, Blackstone GmbH and Goldstone GmbH. Spinal Implants and Biologics specializes in the design, development and marketing of spinal implant and related human cellular and tissue based products (“HCT/P products”, often referred to as Biologic products). Spinal Implants & Biologics distributes its products through a network of domestic and international distributors, sales representatives and affiliates.

10

Breg

Breg, Inc. (“Breg”), based in Vista, California, designs, manufactures, and distributes orthopedic products for post-operative reconstruction and rehabilitative patient use and sells its products through a network of domestic and international distributors, sales representatives and affiliates.

International

International (“International”) consists of international operations located in Europe, Mexico, Brazil and Puerto Rico, as well as independent distributors located outside the United States. International uses both direct and distributor sales representatives to sell Spine, Orthopedics, Sports Medicine, Vascular and Other products to hospitals, doctors, and other healthcare providers.

Group Activities

Group activities are comprised of the operating expenses of Orthofix International N.V. and its US holding company subsidiary, Orthofix Holdings, Inc.

The following tables below present information by reportable segment for the three and nine months ended September 30:

For the three month period ended September 30:

	External Sales				Intersegment Sales
(US$ in thousands)	2009		2008		2009		2008
Domestic	$	52,222	$	47,065	$	1,145	$	1,552
Spinal Implants & Biologics		28,017		25,338		291		349
Breg		23,724		22,377		1,138		1,392
International		31,135		34,521		7,214		6,240
Total	$	135,098	$	129,301	$	9,788	$	9,533

For the nine month period ended September 30:

	External Sales				Intersegment Sales
(US$ in thousands)	2009		2008		2009		2008
Domestic	$	155,654	$	138,397	$	4,853	$	4,856
Spinal Implants & Biologics		86,562		81,093		1,965		2,938
Breg		70,175		66,341		4,031		4,048
International		89,227		101,541		17,641		19,673
Total	$	401,618	$	387,372	$	28,490	$	31,515

The following table presents operating income (loss) by segment for the three and nine months ended September 30:

	Three Months Ended						Nine Months Ended
Operating Income (Loss)	September 30,						September 30,
(US$ in thousands)	2009			2008			2009			2008
Domestic	$	16,505		$	17,155		$	51,011		$	47,235
Spinal Implants & Biologics (1)(2)(3)		(2,430	)		(309,201	)		(16,898	)		(319,993	)
Breg		3,210			2,206			9,227			9,273
International		5,066			4,741			12,516			14,451
Group Activities		(4,350	)		(4,309	)		(14,507	)		(16,525	)
Eliminations		(250	)		(109	)		547			(830	)
Total	$	17,751		$	(289,517	)	$	41,896		$	(266,389	)

(1)	Includes $0.8 million of research and development expense from collaborative arrangements and $0.6 million of restructuring charges for the three months ended September 30, 2009.
(2)	Includes $5.7 million of research and development expense from collaborative arrangements and $3.6 million of restructuring charges for the nine months ended September 30, 2009.
(3)	Includes impairment charges on goodwill and certain intangible assets of $289.5 million during the three and nine months ended September 30, 2008.

11

The following tables present sales by market sector for the three months ended September 30, 2009 and 2008:

	Sales by Market Sector
	for the three month period ended September 30, 2009
			Spinal
			Implants &
(US$ in thousands)	Domestic		Biologics		Breg		International		Total
Spine	$	39,609	$	28,017	$	—	$	510	$	68,136
Orthopedics		12,613		—		—		20,637		33,250
Sports Medicine		—		—		23,724		940		24,664
Vascular		—		—		—		3,904		3,904
Other		—		—		—		5,144		5,144
Total	$	52,222	$	28,017	$	23,724	$	31,135	$	135,098

	Sales by Market Sector
	for the three month period ended September 30, 2008
			Spinal
			Implants &
(US$ in thousands)	Domestic		Biologics		Breg		International		Total
Spine	$	35,340	$	25,338	$	—	$	640	$	61,318
Orthopedics		11,725		—		—		22,099		33,824
Sports Medicine		—		—		22,377		1,323		23,700
Vascular		—		—		—		4,274		4,274
Other		—		—		—		6,185		6,185
Total	$	47,065	$	25,338	$	22,377	$	34,521	$	129,301

12

The following tables present sales by market sector for the nine months ended September 30, 2009 and 2008:

	Sales by Market Sector
	for the nine month period ended September 30, 2009
			Spinal
			Implants &
(US$ in thousands)	Domestic		Biologics		Breg		International		Total
Spine	$	117,034	$	86,562	$	—	$	1,399	$	204,995
Orthopedics		38,620		—		—		56,848		95,468
Sports Medicine		—		—		70,175		3,194		73,369
Vascular		—		—		—		12,574		12,574
Other		—		—		—		15,212		15,212
Total	$	155,654	$	86,562	$	70,175	$	89,227	$	401,618

	Sales by Market Sector
	for the nine month period ended September 30, 2008
			Spinal
			Implants &
(US$ in thousands)	Domestic		Biologics		Breg		International		Total
Spine	$	104,143	$	81,093	$	—	$	1,252	$	186,488
Orthopedics		34,254		—		—		62,665		96,919
Sports Medicine		—		—		66,341		3,871		70,212
Vascular		—		—		—		13,391		13,391
Other		—		—		—		20,362		20,362
Total	$	138,397	$	81,093	$	66,341	$	101,541	$	387,372

NOTE 14: RESTRUCTURING CHARGES

In the fourth quarter of 2008, as part of the Company’s strategic plan to strengthen the business, the Company initiated a restructuring plan to improve operations and reduce costs at Blackstone. The plan involves the consolidation of substantially all of Blackstone’s current operations in Wayne, NJ and Springfield, MA into the same facility housing its spine stimulation and US orthopedics business in the Dallas, TX area. The Company plans to complete the restructuring and consolidation by the second quarter of 2010, at which time the Company anticipates a total restructuring expense of $3.6 million. During the three and nine months ended September 30, 2009, the Company recorded net restructuring charges of $0.6 million and $3.6 million, respectively, which were primarily related to severance costs and accelerated depreciation costs related to shortening lives of assets which will be disposed. These restructuring costs are recorded in general and administrative expense and are classified in the Spinal Implants & Biologics segment.

13

The following table presents changes in the restructuring liability, which is included within Other Current Liabilities in the Company’s condensed consolidated balance sheets as of September 30, 2009 and December 31, 2008:

				Assets
(US$ in thousands)	Severance			Abandoned			Total
Balance at December 31, 2008	$	548		$	—		$	548
Charges		2,565			1,020			3,585
Cash Payments		(1,018	)		—			(1,018	)
Non-cash Items		—			(1,020	)		(1,020	)
Balance at September 30, 2009	$	2,095		$	—		$	2,095

NOTE 15: INCOME TAXES

The reported year to date tax provision as a percentage of income before income taxes was 37.4%. The principal factors affecting the Company’s tax rate are the Company’s mix of earnings among various tax jurisdictions and a benefit related to a restructuring of the Company’s European operations in 2006 to optimize the Company’s supply chain. This benefit, which results in ongoing tax efficiencies is partially offset by current period losses in certain foreign jurisdictions for which the Company does not currently provide a tax benefit.

As of September 30, 2009, the Company’s gross unrecognized tax benefit was $1.2 million. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. As of September 30, 2009, the Company had approximately $0.4 million accrued for interest and penalties. The entire $1.6 million of unrecognized tax benefit would affect the Company’s effective tax rate if recognized. It is possible that the amount of unrecognized tax benefits may decrease by $0.5 million over the next twelve months due to the potential settlement of tax examinations.

The Company is subject to tax examinations in all major taxing jurisdictions in which it operates. The Company files a consolidated income tax return in the US federal jurisdiction and numerous consolidated and separate income tax returns in many state and foreign jurisdictions. The statute of limitations with respect to US federal tax filings is closed for years prior to December 31, 2004. The statute of limitations for the various US state tax filings is closed in most instances for years prior to December 31, 2006. The Company is currently under examination by the Internal Revenue Service (“IRS”) for the tax years ended December 31, 2005 and December 31, 2006. All issues raised to date by the IRS are reflected in the current unrecognized tax benefits. There are certain US state tax statutes open for years from 1997 forward due to current examinations. The statutes of limitations with respect to the major foreign tax filing jurisdictions are generally closed for years prior to December 31, 2004.

NOTE 16: EARNINGS PER SHARE

For the three and nine months ended September 30, 2009, there were no adjustments to net income (loss) for purposes of calculating basic and diluted net income (loss) per common share. The following table is a reconciliation of the weighted average shares used in the basic and diluted net income (loss) per common share computations.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Weighted average common shares-basic		17,130,247		17,101,718		17,113,891		17,093,133
Effect of dilutive securities		85,320		—		60,525		—
Weighted average common shares-diluted		17,215,567		17,101,718		17,174,416		17,093,133

14

For the three and nine months ended September 30, 2009, the Company did not include 2,953,381 and 3,252,174 options, respectively, in the diluted shares outstanding calculation because their inclusion would have been anti-dilutive or because their exercise price exceeded the average market price of the Company’s common stock during the period.

No adjustment has been made in the three and nine months ended September 30, 2008 for any common stock equivalents because their effects would be anti-dilutive. For the three and nine month periods ended September 30, 2008, potentially dilutive shares totaled 4,638 and 37,496, respectively.

NOTE 17: DERIVATIVE INSTRUMENTS

In 2006, the Company entered into a cross-currency swap agreement to manage its foreign currency exposure related to a portion of the Company’s intercompany receivable of a US dollar functional currency subsidiary that is denominated in Euro. The derivative instrument, a ten-year fully amortizable agreement with a notional amount of $63.0 million, is scheduled to expire on December 30, 2016. The instrument is designated as a cash flow hedge. The amount outstanding under the agreement as of September 30, 2009 and December 31, 2008 is $56.7 million. Under the agreement, the Company pays Euro and receives US dollars based on scheduled cash flows in the agreement. The Company recognized an unrealized gain (loss) on the change in fair value of this swap arrangement of $0.2 million and $(2.4) million, net of tax, within other comprehensive income in the three and nine months ended September 30, 2009, respectively. The Company recognized an unrealized gain (loss) on the change in fair value of this swap arrangement of $(1.0) million and $0.2 million, net of tax, within other comprehensive loss in the three and nine months ended September 30, 2008, respectively.

In June 2008, the Company entered into a three-year fully amortizable interest rate swap agreement (the “Swap”) with a notional amount of $150.0 million and an expiration date of June 30, 2011. During the second and third quarters of 2008, the interest rate Swap was accounted for as a cash flow hedge, and changes in its value were recorded as part of accumulated other comprehensive income on the balance sheet. Due to declining interest rates and a LIBOR floor in the Company’s amended credit facility, the Swap was no longer deemed highly effective. Therefore, during the fourth quarter of 2008, the Company recognized in earnings an unrealized, non-cash loss of approximately $8.0 million which resulted from changes in the fair value of the Company’s interest rate Swap. Cash flow accounting is no longer applied and mark-to-market adjustments are required to be reported in current earnings through the expiration of the Swap in June 2011. For the three and nine months ended September 30, 2009, the Company recorded an unrealized gain (loss) of $(0.2) million and $1.0 million, respectively, in other income (expense), net on the statement of operations. The Company recognized an unrealized loss on the change in fair value of this swap arrangement of $(1.0) million and $(0.3) million, net of tax, for the three and nine months ended September 30, 2008, respectively, within other comprehensive loss. The Swap continues to provide an economic hedge against fluctuating interest rate exposure on the $150.0 million portion of outstanding debt it covers, should the LIBOR interest rate rise above 3.73%.

As required by ASC Topic 815 — Derivatives and Hedging (“ASC 815”) (formerly known as SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities”), the tables below disclose the types of derivative instruments the Company owns, the classifications and fair values of these instruments within the balance sheet, and the amount of gain (loss) recognized in other comprehensive income (loss) (“OCI”) or income (loss).

	Fair value:				Amount of gain
	favorable				(loss) recognized
(US$ in thousands)	(unfavorable)			Balance sheet location	in OCI
As of September 30, 2009
Cross-currency swap	$	(5,879	)	Other long-term liabilities	$	(2,426	)
Interest rate swap	$	(6,929	)	Other current liabilities	$	—
As of September 30, 2008
Cross-currency swap	$	(1,751	)	Other long-term liabilities	$	200
Interest rate swap	$	(424	)	Other current liabilities	$	(276	)

(US$ in thousands)	For the three months ended					For the nine months ended
Amount of gain (loss)	September 30,					September 30,
recognized in income (loss)	2009			2008		2009		2008
Interest rate swap	$	(229	)	$	—	$	1,046	$	—

15

NOTE 18: FAIR VALUE MEASUREMENTS

The Company adopted the accounting guidance for fair value measurements on January 1, 2008. Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Non-financial assets and liabilities of the Company measured at fair value include any long-lived assets or equity method investments that are impaired in a currently reported period. The authoritative guidance also describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets and liabilities

Level 2 — observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 — unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions

As of September 30, 2009, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash equivalents, restricted cash, accounts receivable, short-term bank borrowings, accounts payable, long-term secured debt, an interest rate derivative contract, and a cross currency derivative contract. Cash equivalents consist of short-term, highly liquid, income-producing investments, all of which have original maturities of 90 days or less, including money market funds. Restricted cash, accounts receivable, short-term bank borrowings and accounts payable approximate fair value due to the short-term maturities of these instruments. The Company’s long-term secured debt carries a floating rate of interest and therefore, the carrying value is considered to approximate the fair value. The derivative instruments are related to the Company’s interest rate and foreign currency hedges.

The Company’s interest rate derivative instrument also consists of an over-the-counter (“OTC”) swap contract. The inputs used to determine the fair value of this contract are obtained in quoted public markets. Therefore, the Company has categorized the swap contract as Level 2. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented.

The Company’s cross currency derivative instrument consists of an OTC contract, which is not traded on a public exchange. The fair value of the swap contract is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized the swap contract as a Level 2 derivative financial instrument. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented.

The fair value of the Company’s financial assets and liabilities on a recurring basis were as follows:

	Balance
	September 30,
(US$ in thousands)	2009			Level 1		Level 2			Level 3
Derivative Financial Instruments(1)
Cash Flow Hedges
Interest rate hedge	$	(6,929	)	$	—	$	(6,929	)	$	—
Cross currency hedge	$	(5,879	)	$	—	$	(5,879	)	$	—

⁽¹⁾ See Note 17, “Derivative Instruments”.

16

NOTE 19: CONTINGENCIES

Litigation

On or about July 23, 2007, our subsidiary, Blackstone received a subpoena issued by the Department of Health and Human Services, Office of Inspector General, under the authority of the federal healthcare anti-kickback and false claims statutes. The subpoena seeks documents for the period January 1, 2000 through July 31, 2006, which is prior to Blackstone’s acquisition by the Company. The Company believes that the subpoena concerns the compensation of physician consultants and related matters. On September 17, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the agreement and plan of merger between the Company, New Era Medical Corp. and Blackstone, dated as of August 4, 2006 (the “Blackstone Merger Agreement”), for any losses to us resulting from this matter. (The Company’s indemnification rights under the Blackstone Merger Agreement are described further below). The Company was subsequently notified by legal counsel for the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

On or about January 7, 2008, the Company received a federal grand jury subpoena from the United States Attorney’s Office for the District of Massachusetts. The subpoena seeks documents from the Company for the period January 1, 2000 through July 15, 2007. The Company believes that the subpoena concerns the compensation of physician consultants and related matters, and further believes that it is associated with the Department of Health and Human Services, Office of Inspector General’s investigation of such matters. On September 18, 2008, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to the Company resulting from this matter. On or about April 29, 2009, counsel for the Company received a HIPAA subpoena issued by the US Department of Justice. The subpoena seeks documents from the Company for the period January 1, 2000 through July 15, 2007. The Company believes that the subpoena concerns the compensation of physician consultants and related matters, and further believes that it is associated with the Department of Health and Human Services, Office of Inspector General’s investigation of such matters, as well as the January 7, 2008 federal grand jury subpoena. On or about June 15, 2009, Orthofix, Inc., and Blackstone, executed an agreement with the United States Attorney’s Office for the District of Massachusetts (the “Tolling Agreement”) extending an agreement tolling the statute of limitations applicable to any criminal, civil, or administrative proceedings that the government might later initiate. The Tolling Agreement extended the period tolling the statute of limitations to include the period from December 1, 2008 through and including December 31, 2009.

On or about December 5, 2008, the Company obtained a copy of a qui tam complaint filed by Susan Hutcheson and Philip Brown against Blackstone and the Company in the US District Court for the District of Massachusetts. A qui tam action is a civil lawsuit brought by an individual for an alleged violation of a federal statute, in which the US Department of Justice has the right to intervene and take over the prosecution of the lawsuit at its option. On November 21, 2008, the US Department of Justice filed a notice of non-intervention in the case. The complaint was served on Blackstone on or about March 24, 2009. Counsel for the plaintiffs filed an amended complaint on June 4, 2009. The amended complaint sets forth a cause of action against Blackstone under the False Claims Act for alleged inappropriate payments and other items of value conferred on physician consultants; Orthofix is not named as a defendant in the amended complaint. The Company believes that this lawsuit is related to the matters described above involving the Department of Health and Human Services, Office of the Inspector General, and the United States Attorney’s Office for the District of Massachusetts. The Company intends to defend vigorously against this lawsuit. On September 18, 2008, after being informed of the existence of the lawsuit by representatives of the US Department of Justice and prior to the unsealing of the complaint (which was unsealed by the court on or about November 24, 2008), the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter.

17

On or about September 27, 2007, Blackstone received a federal grand jury subpoena issued by the United States Attorney’s Office for the District of Nevada (“USAO-Nevada subpoena”). The subpoena seeks documents for the period from January 1999 to the date of issuance of the subpoena. The Company believes that the subpoena concerns payments or gifts made by Blackstone to certain physicians. On February 29, 2008, Blackstone received a Civil Investigative Demand (“CID”) from the Massachusetts Attorney General’s Office, Public Protection and Advocacy Bureau, Healthcare Division. The Company believes that the CID seeks documents concerning Blackstone’s financial relationships with certain physicians and related matters for the period from March 2004 through the date of issuance of the CID. The Ohio Attorney General’s Office, Health Care Fraud Section has issued a criminal subpoena, dated August 8, 2008, to Orthofix, Inc. (the “Ohio AG subpoena”). The Ohio AG subpoena seeks documents for the period from January 1, 2000 through the date of issuance of the subpoena. The Company believes that the Ohio AG subpoena arises from a government investigation that concerns the compensation of physician consultants and related matters. On September 18, 2008, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from the USAO-Nevada subpoena, the Massachusetts CID and the Ohio AG subpoena.

By order entered on January 4, 2007, the United States District Court for the Eastern District of Arkansas unsealed a qui tam complaint captioned Thomas v. Chan, et al., 4:06-cv-00465-JLH, filed against Dr. Patrick Chan, Blackstone and other defendants including another device manufacturer. The amended complaint in the Thomas action alleges causes of action under the False Claims Act for alleged inappropriate payments and other items of value conferred on Dr. Chan and another provider. The Company believes that Blackstone has meritorious defenses to the claims alleged and the Company intends to defend vigorously against this lawsuit. On September 17, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter. The Company was subsequently notified by legal counsel for the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

Under the Blackstone Merger Agreement, the former shareholders of Blackstone have agreed to indemnify the Company for breaches of representations and warranties under the agreement as well as certain other specified matters. These post-closing indemnification obligations of the former Blackstone shareholders are limited to a cumulative aggregate amount of $66.6 million. At closing, an escrow fund was established pursuant to the terms of the Blackstone Merger Agreement to fund timely submitted indemnification claims. The initial amount of the escrow fund was $50.0 million. As of September 30, 2009, the escrow fund, which has subsequently accrued interest, contained $54.0 million. The Company is also entitled to seek direct personal recourse against certain principal shareholders of Blackstone after all monies on deposit in the escrow fund have been paid out or released or are the subject of pending or unresolved indemnification claims but only for a period of six years from the closing date of the Merger and only up to an amount equal to $66.6 million less indemnification claims previously paid.

In addition to the foregoing claims, the Company has submitted claims for indemnification from the escrow fund for losses that have resulted or may result from certain civil actions filed against Blackstone as well as certain claims against Blackstone alleging rights to payments for Blackstone stock options not reflected in Blackstone’s corporate ledger at the time of Blackstone’s acquisition by the Company, or that the shares or stock options subject to those claims were improperly diluted by Blackstone. To date, the representative of the former shareholders of Blackstone has not objected to approximately $1.5 million in such claims from the escrow fund, with certain claims remaining pending.

The Company is unable to predict the outcome of each of the escrow claims described above in the preceding paragraphs or to estimate the amount, if any, that may ultimately be returned to the Company from the escrow fund and there can be no assurance that losses to the Company from these matters will not exceed the amount of the escrow fund. Expenses incurred by the Company relating to the above matters are recorded as an escrow receivable in the Company’s financial statements to the extent the Company believes, among other things, that collection of the claims is reasonably assured. Expenditures related to such matters for which the Company believes collection is doubtful are recognized in earnings when incurred. As of September 30, 2009 and December 31, 2008, included in Prepaid Expenses and Other Current Assets is approximately $13.3 million and $8.3 million, respectively, of escrow receivable balances related to the Blackstone matters described above. These amounts include, among other things, attorneys’ fees and costs related to the government investigations manifested by the subpoenas described above, the stock option-related claims described above, and costs related to the qui-tam action described above. As described above, some of these reimbursement claims are being contested by the representative of the former shareholders of Blackstone. To mitigate the risk that some reimbursement claims will not be collected, the Company records a reserve against the escrow receivable during the period in which reimbursement claims are recognized.

18

On or about April 10, 2009, the Company received a HIPAA subpoena (“HIPAA subpoena”) issued by the US Attorney’s Office for the District of Massachusetts. The subpoena seeks documents for the period January 1, 1995 through the date of the subpoena. The Company believes that the subpoena concerns the classification and marketing of its bone growth stimulators and related matters. On or about September 21, 2009, the Company received an additional HIPAA subpoena issued by the U.S. Attorney’s Office for the District Of Massachusetts in connection with this investigation. The subpoena seeks additional documents pertaining to the investigation for the period January 1, 1995 through the date of the subpoena. The Company intends to cooperate with the government’s requests. The Company is unable to predict what actions, if any, might be taken by the government or what impact, if any, the outcome of this matter might have on the Company’s consolidated financial position, results of operations or cash flows.

On or about April 14, 2009, the Company obtained a copy of a qui tam complaint filed by Jeffrey J. Bierman in the US District Court for the District of Massachusetts against Orthofix, Inc., the Company, and other companies that have allegedly manufactured bone growth stimulation devices, including Orthologic Corp., DJO Incorporated, Reable Therapeutics, Inc., the Blackstone Group, L.P., Biomet, Inc., EBI, L.P., EBI Holdings, Inc., EBI Medical Systems, Inc., Bioelectron, Inc., LBV Acquisition, Inc., and Smith & Nephew, Inc. By order entered on March 24, 2009, the court unsealed the case. The amended complaint alleges various causes of action under the federal False Claims Act and state and city false claims acts premised on the contention that the defendants improperly promoted the sale, as opposed to the rental, of bone growth stimulation devices. The amended complaint also includes claims against the defendants for, among other things, allegedly misleading physicians and purportedly causing them to file false claims and for allegedly violating the Anti-kickback Act by providing free products to physicians, waiving patients’ insurance co-payments, and providing inducements to independent sales agents to generate business. The Company believes that this lawsuit is related to the matter described above involving the HIPAA subpoena. The Company and Orthofix, Inc. were served on or about September 8, 2009, and intend to defend vigorously against this lawsuit.

On or about July 2, 2009, the Company obtained a copy of a qui tam complaint filed by Marcus Laughlin that is pending in the US District Court for the District of Massachusetts against the Company. This complaint has been consolidated with the complaint described in the immediately preceding paragraph, and was unsealed on June 30, 2009. The complaint alleges violations of the False Claims Act, fraudulent billing, illegal kickbacks and wrongful termination based on allegations that the Company promoted the sale rather than the rental of bone growth stimulation devices, systematically overcharged for these products, provided physicians kickbacks in the form of free units, referral fees, and fitting fees, and that the defendant and its competitors discussed together strategies to encourage higher government pricing for the products. The complaint also alleges that TRICARE has been reimbursing the Company for its Cervical Stim^® product without approval to do so. An amended complaint alleges conspiracy and violations of the Sherman Anti-Trust Act in connection with the same alleged conduct. The Company was served with the complaint on or about September 9, 2009 and intends to defend vigorously against this lawsuit.

19

Effective October 29, 2007, Blackstone entered into a settlement agreement of a patent infringement lawsuit brought by certain affiliates of Medtronic Sofamor Danek USA Inc. In that lawsuit, the Medtronic plaintiffs had alleged that they were the exclusive licensees of certain US patents and that Blackstone’s making, selling, offering for sale, and using its Blackstone Anterior Cervical Plate, 3º Anterior Cervical Plate, Hallmark Anterior Cervical Plate and Construx Mini PEEK VBR System products within the United States willfully infringed the subject patents. Blackstone denied infringement and asserted that the Patents were invalid. The settlement agreement is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. On July 20, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter. The Company was subsequently notified by legal counsel of the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

The Company cannot predict the outcome of any proceedings or claims made against the Company or its subsidiaries described in the preceding paragraphs and there can be no assurance that the ultimate resolution of any claim will not have a material adverse impact on our consolidated financial position, results of operations, or cash flows.

In addition to the foregoing, in the normal course of our business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies.

NOTE 20: SUBSEQUENT EVENT

As further described in Note 19, as of September 30, 2009 and December 31, 2008, included in Prepaid Expenses and Other Current Assets is approximately $13.3 million and $8.3 million, respectively, of escrow receivable balances related to the Blackstone matters described above. During October 2009, the Company received approximately $1.0 million of proceeds from the escrow fund that was established as part of the Blackstone acquisition. These proceeds represent a portion of the escrow claims that had been previously submitted by the Company.

20

ORTHOFIX INTERNATIONAL N.V.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis addresses our liquidity, financial condition, and the results of our operations for the three and nine months ended September 30, 2009 compared to our results of operations for the three and nine months ended September 30, 2008. These discussions should be read in conjunction with our historical consolidated financial statements and related notes thereto and the other financial information included in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

General Overview

We are a diversified orthopedic products company offering a broad line of surgical and non-surgical products for the Spine, Orthopedics, Sports Medicine and Vascular market sectors. Our products are designed to address the lifelong bone-and-joint health needs of patients of all ages, helping them achieve a more active and mobile lifestyle. We design, develop, manufacture, market and distribute medical equipment used principally by musculoskeletal medical specialists for orthopedic applications. Our main products are invasive and minimally invasive spinal implant products and related human cellular and tissue based products (“HCT/P products”), non-invasive bone growth stimulation products used to enhance the success rate of spinal fusions and to treat non-union fractures, external and internal fixation devices used in fracture treatment, limb lengthening and bone reconstruction; and bracing products used for ligament injury prevention, pain management and protection of surgical repair to promote faster healing. Our products also include a device for enhancing venous circulation, cold therapy, bone cement and devices for removal of bone cement used to fix artificial implants and airway management products used in anesthesia applications.

We believe the keys to reaching our publicly stated financial goals for 2009 are primarily related to improvements in the operating performance of the Spinal Implants & Biologics segment, including:

• An acceleration in the growth of revenue,

• An increase of the gross profit margin, and

• A reduction in operating expenses as a percentage of net sales

We expect the acceleration of revenue growth will be driven by the introduction of a number of key new products in 2009, including the Trinity^® Evolution™ allograft, the Firebird™ pedicle screw system, the PILLAR SA interbody device, and the Ascent LE posterior cervical spine system. As of September 30, 2009, each of these new products had been introduced to the market and was contributing to the year-over-year net sales growth reported by the Company.

Our gross profit margin is expected to increase as a result of the introduction of the key new products indicated above, primarily Trinity^® Evolution™. We recognize a 100% gross profit margin from the marketing fees earned from the sales of this allograft, compared to approximately 50% gross profit margin on our previous Trinity^® product. This is due to the fact that we are not required to purchase inventory of Trinity^® Evolution™, whereas, previously, we were required to purchase inventory of the old Trinity^® product and record the associated cost of sales.

Our operating expenses are expected to decrease as a percentage of net sales as we leverage our operating infrastructure against the expected increase in net sales noted above. Additionally, we initiated a reorganization and consolidation plan, during the fourth quarter of 2008, to reduce operating expenses by eliminating redundancies and increasing operating efficiency. This plan includes the consolidation of operations in our Springfield, MA and Wayne, NJ locations into the Company’s operations in the Dallas, TX area. For a further discussion about this reorganization and consolidation plan, please refer to the explanation provided in our General and Administrative Expense section of this Management Discussion and Analysis.

We have administrative and training facilities in the United States and Italy and manufacturing facilities in the United States, the United Kingdom, Italy and Mexico. We directly distribute our products in the United States, the United Kingdom, Italy, Germany, Switzerland, Austria, France, Belgium, Mexico, Brazil, and Puerto Rico. In several of these and other markets, we also distribute our products through independent distributors.

21

Our condensed consolidated financial statements include the financial results of the Company and its wholly-owned and majority-owned subsidiaries and entities over which we have control. All intercompany accounts and transactions are eliminated in consolidation.

Our reporting currency is the United States Dollar. All balance sheet accounts, except shareholders’ equity, are translated at period-end exchange rates, and revenue and expense items are translated at weighted average rates of exchange prevailing during the period. Gains and losses resulting from foreign currency transactions are included in other income (expense), net on the statements of operations. Gains and losses resulting from the translation of foreign currency net assets are recorded in the accumulated other comprehensive income component of shareholders’ equity.

Our financial condition, results of operations and cash flows are not significantly impacted by seasonality trends. However, sales associated with products for elective procedures appear to be influenced by the somewhat lower level of such procedures performed in the late summer. Certain of the Breg bracing products experience greater demand in the fall and winter corresponding with high school and college football schedules and winter sports. In addition, we do not believe our operations will be significantly affected by inflation. However, in the ordinary course of business, we are exposed to the impact of changes in interest rates and foreign currency fluctuations. Our objective is to limit the impact of such movements on earnings and cash flows. In order to achieve this objective, we seek to balance non-dollar income and expenditures. During the nine months ended September 30, 2009 and all of 2008, we have used a derivative instrument to hedge certain foreign currency fluctuation exposures. During the nine months ended September 30, 2009 and the second half of 2008, we have used a derivative instrument to hedge certain interest rate exposure on LIBOR-based borrowings. See Item 3 — “Quantitative and Qualitative Disclosures About Market Risk.”

We manage our operations as four business segments: Domestic, Spinal Implants & Biologics, Breg, and International. Domestic consists of operations of our subsidiary Orthofix Inc. Spinal Implants and Biologics consist of our Blackstone subsidiary and its domestic and international operations. Breg consists of Breg Inc.’s operations and domestic and international distributors. International consists of operations which are located in the rest of the world as well as independent export distribution operations. Group Activities are comprised of the operating expenses and identifiable assets of Orthofix International N.V. and its US holding company subsidiary, Orthofix Holdings, Inc.

22

Segment and Market Sector Revenues

The following tables display net sales by business segment and net sales by market sector. We maintain our records and account for net sales, costs of sales and expenses by business segment. We provide net sales by market sector for information purposes only.

Business Segment:

	Three Months Ended September 30,
	2009					2008
			Percent of					Percent of
			Total Net					Total Net
(US$ in thousands)	Net Sales		Sales			Net Sales		Sales			Growth
Domestic	$	52,222		39	%	$	47,065		36	%		11	%
Spinal Implants & Biologics		28,017		21	%		25,338		20	%		11	%
Breg		23,724		17	%		22,377		17	%		6	%
International		31,135		23	%		34,521		27	%		-10	%
Total	$	135,098		100	%	$	129,301		100	%		4	%

	Nine Months Ended September 30,
	2009					2008
			Percent of					Percent of
			Total Net					Total Net
(US$ in thousands)	Net Sales		Sales			Net Sales		Sales			Growth
Domestic	$	155,654		39	%	$	138,397		36	%		12	%
Spinal Implants & Biologics		86,562		22	%		81,093		21	%		7	%
Breg		70,175		17	%		66,341		17	%		6	%
International		89,227		22	%		101,541		26	%		-12	%
Total	$	401,618		100	%	$	387,372		100	%		4	%

23

Market Sector:

	Three Months Ended September 30,
	2009					2008
			Percent					Percent
			of Total					of Total						Constant
	Net		Net			Net		Net			Reported			Currency
(US$ in thousands)	Sales		Sales			Sales		Sales			Growth			Growth
Spine	$	68,136		50	%	$	61,318		48	%		11	%		11	%
Orthopedics		33,250		25	%		33,824		26	%		-2	%		6	%
Sports Medicine		24,664		18	%		23,700		18	%		4	%		5	%
Vascular		3,904		3	%		4,274		3	%		-9	%		-5	%
Other		5,144		4	%		6,185		5	%		-17	%		-5	%
Total	$	135,098		100	%	$	129,301		100	%		4	%		7	%

	Nine Months Ended September 30,
	2009					2008
			Percent					Percent
			of Total					of Total						Constant
	Net		Net			Net		Net			Reported			Currency
(US$ in thousands)	Sales		Sales			Sales		Sales			Growth			Growth
Spine	$	204,995		51	%	$	186,488		48	%		10	%		10	%
Orthopedics		95,468		24	%		96,919		25	%		-1	%		8	%
Sports Medicine		73,369		18	%		70,212		18	%		4	%		5	%
Vascular		12,574		3	%		13,391		4	%		-6	%		-1	%
Other		15,212		4	%		20,362		5	%		-25	%		-9	%
Total	$	401,618		100	%	$	387,372		100	%		4	%		7	%

24

The following table presents certain items from our Condensed Consolidated Statements of Operations as a percent of total net sales for the periods indicated:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2009		2008			2009		2008
	(%)		(%)			(%)		(%)
Net sales		100		100			100		100
Cost of sales		24		37			25		30
Gross profit (1)		76		63			75		70
Operating expenses:
Sales and marketing		41		39			41		40
General and administrative		15		15			16		15
Research and development		6		5			7		5
Amortization of intangible assets		1		4			1		4
Gain on sale of Pain Care® operations		—		—			—		—
Impairment of goodwill and intangible assets		—		224			—		75
Total operating income (loss)		13		(224	)		10		(69	)
Net income (loss)		5		(184	)		4		(59	)

(1) Includes effect of obsolescence provision representing approximately 9% and 3% points, respectively, for the three and nine months ended September 30, 2008.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Net sales increased 4% to $135.1 million in the third quarter of 2009 compared to $129.3 million for the same period last year. The impact of foreign currency decreased sales by $3.6 million during the third quarter of 2009 when compared to the third quarter of 2008.

Sales by Business Segment:

Net sales in Domestic increased to $52.2 million in the third quarter of 2009 compared to $47.1 million for the same period last year, an increase of 11%. Domestic’s net sales represented 39% and 36% of total net sales during the third quarter of 2009 and 2008, respectively. The increase in Domestic’s net sales was partially the result of a 12% increase in sales in our Spine market sector, which was mainly driven by increased sales of our Spinal-Stim^® and Cervical-Stim^® products. The increase in Domestic’s net sales was also attributable to an 8% increase in our Orthopedics market sector which included a 14% increase in sales of Physio-Stim^® products and a 16% increase in sales of our external fixation products as compared to the same period in the prior year. Partially offsetting these sales increases was a decrease of 29% in the sales of our biologics products as a result of our replacement of the Trinity^® product line with Trinity^® Evolution™. Although biologics sales decreased, the quantity of product sold increased in the third quarter of 2009 compared to the third quarter of 2008 because, under the terms of the agreement, we recognized marketing fees of 70% of the end-user sales price of Trinity^® Evolution™ compared to 100% of the end-user sales price of Trinity^®. During the three months ended September 30, 2009, Domestic generated $0.6 million in revenues of Trinity^® Evolution™.

Domestic Sales by Market Sector:

	Net Sales for the
	Three Months Ended September 30,
(US$ in thousands)	2009		2008		Growth
Spine	$	39,609	$	35,340		12	%
Orthopedics		12,613		11,725		8	%
Total	$	52,222	$	47,065		11	%

25

Net sales in Spinal Implants & Biologics increased $2.7 million to $28.0 million in the third quarter of 2009 compared to $25.3 million for the same period last year, an increase of 11%. Spinal Implants & Biologics’ net sales represented 21% and 20% of total net sales during the third quarter of 2009 and 2008, respectively. The increase in sales was primarily related to a 21% increase in our thoracolumbar product sales due to the introduction of the new Firebird™ pedicle screw system during the second quarter of 2009. Sales of our interbody and cervical products increased by 22% and 10%, respectively, when compared to the same period in the prior year. These sales increases were partially offset by a 19% sales decrease in our biologics products when compared to the same period last year as a result of our replacement of the Trinity^® product line with Trinity^® Evolution™. Although biologics sales decreased, the quantity of product sold increased in the third quarter of 2009 compared to the third quarter of 2008 because, under the terms of the agreement, we recognized marketing fees of 70% of the end-user sales price of Trinity^® Evolution™ compared to 100% of the end-user sales price of Trinity^®. Full market release of our new Trinity^® Evolution™ stem cell-based allograft occurred on July 1, 2009 with sales reaching $3.5 million during the third quarter of 2009. All of Spinal Implants & Biologics’ sales are recorded in our Spine market sector.

Net sales in Breg increased $1.3 million to $23.7 million in the third quarter of 2009 compared to $22.4 million for the same period last year, an increase of 6%. Breg’s net sales represented 17% of total net sales during both third quarters of 2009 and 2008. The increase in Breg’s net sales was primarily due to a 9% increase in sales of our Breg bracing products when compared to the same period in the prior year, primarily as a result of the sales of our new products which include spine bracing. Further, sales of our cold therapy products increased 6% over the same period in the prior year which is due to the recent introduction of our Kodiak^® cold therapy products. All of Breg’s sales are recorded in our Sports Medicine market sector.

Net sales in International decreased 10% to $31.1 million in the third quarter of 2009 compared to $34.5 million for the same period last year. International’s net sales represented 23% and 27% of our total net sales in the third quarter of 2009 and 2008, respectively. The impact of foreign currency decreased International net sales by 10% or $3.5 million, during the third quarter of 2009 as compared to the third quarter of 2008. On a constant currency basis, sales for the Orthopedics sector increased 5% in the third quarter of 2009 when compared to the prior year. Within the Orthopedics sector, external fixation, stimulation, and deformity correction increased 4%, 18%, and 72% respectively, on a constant currency basis, when compared with the same period last year. Sales of our Vascular and Other distributed products both decreased 5% on a constant currency basis when compared to the same period in the prior year.

International Sales by Market Sector:

	Net Sales for the
	Three Months Ended							Constant
	September 30,				Reported			Currency
(US$ in thousands)	2009		2008		Growth			Growth
Spine	$	510	$	640		-20	%		-20	%
Orthopedics		20,637		22,099		-7	%		5	%
Sports Medicine		940		1,323		-29	%		-21	%
Vascular		3,904		4,274		-9	%		-5	%
Other		5,144		6,185		-17	%		-5	%
Total	$	31,135	$	34,521		-10	%		0	%

26

Sales by Market Sector:

Sales of our Spine products increased to $68.1 million in the third quarter of 2009 compared to $61.3 million in the third quarter of 2008. Sales of our Cervical-Stim^® and Spinal-Stim^® products increased 7% and 17%, respectively, in the third quarter of 2009 compared to 2008. In addition, sales of our Spinal Implants & Biologics products increased 10% over the same period in the prior year due to the introduction of new thoracolumbar products previously discussed as well as increased sales of our interbody and cervical products. Also, the full market release of our new Trinity^® Evolution™ stem cell-based allograft occurred on July 1, 2009 replacing the former Trinity^® product line. Sales of Trinity^® Evolution™ reached $3.5 million during the third quarter of 2009. Under the terms of the agreement, we recognized marketing fees of 70% of the end-user sales price of Trinity^® Evolution™ compared to 100% of the end-user sales price of Trinity^®. Spine product sales were 50% and 48% of our total net sales in the third quarters of both 2009 and 2008, respectively.

Sales of our Orthopedics products decreased $0.6 million to $33.3 million in the third quarter of 2009 compared to $33.8 million for the same period last year. On a constant currency basis, sales increased 6% compared to the same period last year due to increased sales of our Physio Stim^®, external fixation, and deformity correction products. Orthopedic product sales were 25% of our total net sales in the third quarter of 2009 compared to 26% for the same period last year.

Sales of our Sports Medicine products increased 4% to $24.7 million in the third quarter of 2009 compared to $23.7 million for the same period last year. As discussed above, the increase of $1.0 million is primarily due to sales of our Breg bracing and cold therapy products. Sports Medicine product sales were 18% of our total net sales in both the third quarters of 2009 and 2008.

Sales of our Vascular products, which consist of our A-V Impulse System^®, decreased 9% to $3.9 million in the third quarter of 2009 compared to $4.3 million for the same period last year. On a constant currency basis, sales decreased 5% compared to the prior period. Vascular product sales were 3% of our total net sales in both the third quarters of 2009 and 2008.

Sales of our Other products, which include the sales of our Laryngeal Mask as well as our Woman’s Care line, decreased 17% to $5.1 million in the third quarter of 2009 when compared to $6.2 million for the same period last year. On a constant currency basis, sales decreased 5% when compared to the third quarter of 2008. We distribute the Laryngeal Mask product in the United Kingdom and in Italy. We will transition out of the agreements to distribute the Laryngeal Mask product in Italy and in the United Kingdom, in October 2009 and June 2010, respectively. Other product sales were 4% and 5% of our total net sales in both the third quarters of 2009 and 2008, respectively.

Gross Profit — Our gross profit increased 27% to $103.1 million in the third quarter of 2009, compared to $81.3 million for the same period last year. Gross profit as a percent of net sales in the third quarter of 2009 was 76.3% compared to 62.9% for the same period last year. In the quarter ended September 30, 2008, due to reduced projections in revenue, distributor terminations, new products, and the replacement of one of our products with a successor product, the Company changed its estimates regarding the inventory allowance at Blackstone, primarily based on estimated net realizable value using assumptions about future demand and market conditions. The change in estimate resulted in an increase in the reserve for obsolescence of approximately $10.9 million. In addition, the Company recorded approximately $0.6 million of expense related to Blackstone instrumentation equipment, also as a result of the replacement of one of our products with a successor product. Gross profit as a percent of net sales in the third quarter of 2008 was 62.9%. Gross profit, excluding the additional reserve recorded at Blackstone was 71.8% in the quarter ended September 30, 2008. Excluding the negative impacts in the prior year, the increase in the gross profit is primarily due to the increased sales of higher margin stimulation products and Spinal Implants & Biologics products.

Sales and Marketing Expense — Sales and marketing expense, which includes commissions, certain royalties and the bad debt provision, generally increase and decrease in relation to sales. Sales and marketing expense increased $4.8 million, or 10%, to $55.0 million in the third quarter of 2009 compared to $50.2 million in the third quarter of 2008. As a percent of net sales, sales and marketing expense was 40.7% and 38.8% in the third quarter of 2009 and 2008, respectively. This increase is primarily the result of an increase in commission expenses reflecting the implementation of sales programs with new distributor programs. This increased investment in sales and marketing has facilitated the development of new customer relationships and increased sales in both the spine stimulation and orthopedic businesses.

27

General and Administrative Expense — General and administrative expense increased $1.5 million, or 8%, in the third quarter of 2009 to $20.8 million compared to $19.3 million in the third quarter of 2008. The increase is primarily due to a restructuring charge to consolidate substantially all of Blackstone’s current operations in Wayne, NJ and Springfield, MA into the same facility housing its spine stimulation and US orthopedics business in the Dallas, TX area. In addition, general and administrative expenses were also higher compared with the prior year due to infrastructure increases in some faster growing international markets. General and administrative expense as a percent of net sales was 15.4% in the third quarter of 2009 compared to 14.9% for the same period last year.

Research and Development Expense — Research and development expense increased $1.4 million in the third quarter of 2009 to $7.9 million compared to $6.4 million for the same period last year. This increase is primarily the result of our collaborative arrangement with Intelligent Implant Systems (“IIS”) for which we made an $0.8 million milestone payment during the third quarter of 2009. As a percent of sales, research and development expense was 5.8% in the third quarter of 2009 compared to 5.0% for the same period last year. We do not expect to incur any further expense in 2009 related to the IIS agreement; see Liquidity and Capital Resources for further detail.

Amortization of Intangible Assets — Amortization of intangible assets decreased $3.7 million in the third quarter of 2009 to $1.7 million compared to $5.3 million for the same period last year. This decrease is primarily attributed to the impairment of $105.7 million of definite-lived intangible assets at Blackstone during the third quarter of 2008.

Impairment of Goodwill and Certain Intangible Assets — In the third quarter of 2008, we incurred $289.5 million of expense related to the impairment of goodwill and certain intangible assets. As part of our debt refinancing completed in September 2008, five year projections were prepared for Blackstone. These projections provided an indication of impairment. Accordingly, an interim impairment test was performed in accordance with ASC Topic 350 — Intangibles — Goodwill and Other (formerly known as SFAS No. 142, “Goodwill and Other Intangible Assets,”). Based on this interim test, we determined that the Blackstone trademark, an indefinite-lived intangible asset, was impaired by $57.0 million. In addition, we determined that the carrying amount of goodwill related to Blackstone exceeded its implied fair value, and recognized a goodwill impairment loss of $126.9 million.

In accordance with ASC Topic 360 — Property, Plant and Equipment (formerly known as SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”), we determined that a triggering event had occurred with respect to the definite-lived intangible assets at Blackstone. We compared the expected cash flows to be generated by the definite lived intangible on an undiscounted basis to the carrying value of the intangible asset. We determined the carrying value exceeded the undiscounted cash flow and impaired the distribution network and technologies at Blackstone to the fair value which resulted in an impairment charge of $105.7 million.

Interest Expense, net — Interest expense, net was $6.4 million for the third quarter of 2009 compared to $4.2 million for the same period last year. Although our overall senior secured term loan balance has decreased when compared to the same period in the prior year, our effective interest rate has increased which is generating the additional interest expense. Included in interest expense, net for the third quarter of 2009 and 2008 was interest expense of $6.0 million and $3.3 million, respectively, related to the senior secured term loan used to finance the Blackstone acquisition.

Loss on Refinancing of Senior Secured Term Loan — In the third quarter of 2008, we incurred $5.7 million of expense related to the refinancing of the senior secured term loan which was originally used to finance the Blackstone acquisition. This included a $3.7 million non-cash write-off of previously capitalized debt placement costs and $2.0 million of fees associated with the amendment. We anticipated that we would not remain in compliance with certain financial covenants included in the senior secured credit facility and, consequently, negotiated an amendment of our financial covenants, among other things, with our lenders effective September 29, 2008.

28

Unrealized Non-cash Loss on Interest Rate Swap — In June 2008, the Company entered into a three-year fully amortizable interest rate swap agreement (the “Swap”) with a notional amount of $150.0 million and an expiration date of June 30, 2011. During the fourth quarter of 2008, the Company recognized in earnings an unrealized, non-cash loss of approximately $(8.0) million when it was determined that the Swap was no longer deemed highly effective. Therefore, cash flow accounting is no longer applied and mark-to-market adjustments are required to be reported in current earnings through the expiration of the swap in June 2011. For the three months ended September 30, 2009, the Company recorded an unrealized non-cash loss of $(0.2) million in other income (expense), net.

Other Income (Expense), net — Other income (expense), net reflected an expense of $(0.7) million for the third quarter of 2009 compared to an expense of $(3.8) million for the same period last year, an improvement of $3.1 million. The improvement can be mainly attributed to the effect of foreign exchange. During the third quarter of 2008, notably in September, we recorded foreign exchange losses of $2.2 million principally as a result of a rapid strengthening of the US Dollar against various foreign currencies, including the Euro, Pound, Peso and Brazilian Real. Several of our foreign subsidiaries hold trade payables or receivables in currencies (most notably the US Dollar) other than their functional (local) currency which results in foreign exchange gains or losses when there is relative movement between those currencies.

Income Tax (Benefit) Expense — Our effective tax rate was an expense of 40.5% and a benefit of 21.8% during the third quarters of 2009 and 2008, respectively. The effective tax rate for the third quarter of 2009 included an unfavorable discrete item resulting from additions to reserves for unrecognized tax benefits. The effective tax rate benefit for the third quarter of 2008 included unfavorable discrete items resulting from the impairment of goodwill for which we received no tax benefit. Excluding these discrete items in the third quarters of 2009 and 2008, our effective tax rate was an expense of 35.9% and a benefit of (38.8%), respectively. The decrease in the effective tax rate excluding discrete items is primarily attributable to changes in the jurisdictional mix of earnings.

Net Income (Loss) — Net income for the third quarter of 2009 was $6.2 million, or $0.36 per basic and diluted share, compared to a net loss of $(237.3) million, or $(13.87) per basic and diluted share for the same period last year. The weighted average number of basic common shares outstanding was 17,130,247 and 17,101,718 during the third quarters of 2009 and 2008, respectively. The weighted average number of diluted common shares outstanding was 17,215,567 and 17,101,718 during the third quarters of 2009 and 2008, respectively.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Net sales increased 4% to $401.6 million for the nine months of 2009 compared to $387.4 million for the same period last year. The impact of foreign currency decreased net sales by $14.0 million during the nine months of 2009 when compared to the same period last year.

Sales by Business Segment:

Net sales in Domestic increased to $155.7 million for the nine months ended September 30, 2009 compared to $138.4 million for the same period last year, an increase of 12%. Domestic’s net sales represented 39% and 36% of total net sales for the nine months ended September 30, 2009 and 2008, respectively. The increase in Domestic’s net sales was partially the result of a 12% increase in sales in our Spine market sector, which was mainly driven by the increase in sales of our Spinal-Stim^® and Cervical-Stim^® products. The increase in Domestic’s net sales was also attributable to the 13% increase in our Orthopedics market sector which included an 18% increase in sales of Physio-Stim^® products as compared to the prior year period. Also contributing to the growth in the Orthopedics market is a 9% growth in our external fixation product sales.

Domestic Sales by Market Sector:

	Net Sales for the
	Nine Months Ended September 30,
(US$ in thousands)	2009		2008		Growth
Spine	$	117,034	$	104,143		12	%
Orthopedics		38,620		34,254		13	%
Total	$	155,654	$	138,397		12	%

29

Net sales in Spinal Implants & Biologics increased $5.5 million to $86.6 million for the nine months ended September 30, 2009 compared to $81.1 million for the same period last year, an increase of 7%. Spinal Implants & Biologics’ net sales represented 22% and 21% of total net sales during the nine months ended September 30, 2009 and 2008, respectively. Sales of our thoracolumbar products increased 10% when compared to the same period last year due to the introduction of our new Firebird™ pedicle screw system earlier this year. In addition, the increase in sales was also attributed to a 5% growth in Biologics product sales, which included sales from the full market release of the Trinity^® Evolution™ stem cell-based allograft during the third quarter of 2009. All of Spinal Implants & Biologics’ sales are recorded in our Spine market sector.

Net sales in Breg increased $3.8 million to $70.2 million during the nine months ended September 30, 2009 compared to $66.3 million for the same period last year, an increase of 6%. Breg’s net sales represented 17% of total net sales during the nine months ended September 30, 2009 and 2008. The increase in Breg’s net sales was primarily due to a 10% increase in sales of our Breg bracing products when compared to the same period in the prior year, primarily as a result of the sales of our new products which include spine bracing. Further, sales of our cold therapy products increased 6% over the same period in the prior year which was due to the introduction of our Kodiak^® cold therapy products earlier this year. These increases were partially offset by a decrease in sales of our pain therapy products as a result of the sale of operations related to our Pain Care^® line of ambulatory infusion pumps during March 2008. All of Breg’s sales are recorded in our Sports Medicine market sector.

Net sales in International decreased 12% to $89.2 million for the nine months ended September 30, 2009 compared to $101.5 million for the same period last year. International’s net sales represented 22% and 26% of our total net sales for the nine months ended September 30, 2009 and 2008, respectively. The impact of foreign currency decreased International net sales by 15% or $13.8 million, during the nine months ended September 30, 2009 as compared to the same period last year. On a constant currency basis, Spine and Orthopedics sales in our International segment increased 13% and 5%, respectively, for the nine months ended September 30, 2009 when compared to the prior year. Within the Orthopedics sector, external fixation, stimulation, and deformity correction sales increased 8%, 24% and 33%, respectively, on a constant currency basis, when compared with the same period last year. Sales in our Vascular sector, which consist of the A-V^® Impulse System, and our Other distributed products, primarily the Laryngeal Mask, decreased 1% and 9%, respectively, on a constant currency basis when compared to the prior year.

International Sales by Market Sector:

	Net Sales for the
	Nine Months Ended							Constant
	September 30,				Reported			Currency
(US$ in thousands)	2009		2008		Growth			Growth
Spine	$	1,399	$	1,252		12	%		13	%
Orthopedics		56,848		62,665		-9	%		5	%
Sports Medicine		3,194		3,871		-17	%		-3	%
Vascular		12,574		13,391		-6	%		-1	%
Other		15,212		20,362		-25	%		-9	%
Total	$	89,227	$	101,541		-12	%		1	%

30

Sales by Market Sector:

Sales of our Spine products increased to $205.0 million for the nine months ended September 30, 2009 compared to $186.5 million for the same period last year. Sales of our Cervical-Stim^® and Spinal-Stim^® products increased 10% and 15%, respectively, for the nine months ended September 30, 2009 compared to 2008. In addition, sales of our Spinal Implants and Biologics products increased 7% over the same period in the prior year primarily due to sales in our Biologics products which included sales from the full market release of the Trinity^® Evolution™ stem cell-based allograft. Spine product sales were 51% and 48% of our total net sales for the nine months ended September 30, 2009 and 2008, respectively.

Sales of our Orthopedics products decreased $1.5 million to $95.5 million for the nine months ended September 30, 2009 compared to $96.9 million for the same period last year. On a constant currency basis, sales increased 8% compared to the same period last year due to increased sales of our Physio Stim^®, external fixation, and deformity correction products. Orthopedic product sales were 24% and 25% of our total net sales for the nine months ended September 30, 2009 and 2008, respectively.

Sales of our Sports Medicine products increased 4% to $73.4 million for the nine months ended September 30, 2009 compared to $70.2 million for the same period last year. As discussed above, the increase of $3.2 million is primarily due to sales of our Breg bracing and cold therapy products, offset by a decrease in our pain therapy products, which is principally attributable to the sale of operations relating to our Pain Care^® line in March 2008. Sports Medicine product sales were 18% of our total net sales for the nine months ended September 30, 2009 and 2008.

Sales of our Vascular products, which consist of our A-V Impulse System^®, decreased 6% to $12.6 million for the nine months ended September 30, 2009 compared to $13.4 million for the same period last year. On a constant currency basis, sales decreased 1% compared to the prior period. Vascular product sales were 3% and 4% of our total net sales for the nine months ended September 30, 2009 and 2008, respectively.

Sales of our Other products, which include the sales of our Laryngeal Mask as well as our Woman’s Care line, decreased 25% to $15.2 million for the nine months ended September 30, 2009 when compared to $20.4 million for the same period last year. On a constant currency basis, sales for the nine months ended September 30, 2009 decreased 9% when compared to prior year. We distribute the Laryngeal Mask product in the United Kingdom and in Italy. We will transition out of the agreements to distribute the Laryngeal Mask product in Italy and in the United Kingdom, in October 2009 and June 2010, respectively. Other product sales were 4% and 5% of our total net sales for the nine months ended September 30, 2009 and 2008, respectively.

Gross Profit — Our gross profit increased 11% to $299.9 million for the nine months ended September 30, 2009, compared to $270.1 million for the same period last year. Gross profit as a percent of net sales for the nine months ended September 30, 2009 was 74.7% compared to 69.7% for the same period last year. In the nine months ended September 30, 2008, due to reduced projections in revenue, distributor terminations, new products, and the replacement of one of our products with a successor product, the Company changed its estimates regarding the inventory allowance at Blackstone, primarily based on estimated net realizable value using assumptions about future demand and market conditions. The change in estimate resulted in an increase in the reserve for obsolescence of approximately $10.9 million. In addition, the Company recorded approximately $0.6 million of expense related to Blackstone instrumentation equipment, also as a result of the replacement of one of our products with a successor product. Gross profit, excluding the additional reserve recorded at Blackstone was 72.7% for the nine months ended September 30, 2008. Excluding the negative impacts in the prior year, the increase in the gross profit is primarily due to the increased sales of higher margin stimulation products and Spinal Implants & Biologics products. The gross margin in the nine months ended September 30, 2009 was impacted by a $1.8 million increase in our inventory reserve, which related primarily to the remaining supply of Trinity^® allograft on hand at the expiration of the Company’s distribution agreement on June 30, 2009.

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Sales and Marketing Expense — Sales and marketing expense, which includes commissions, certain royalties and the bad debt provision, generally increases and decreases in relation to sales. Sales and marketing expense increased $8.9 million, or 6%, to $162.5 million for the nine months ended September 30, 2009 compared to $153.7 million for the same period last year. As a percent of sales, sales and marketing expense was 40.5% and 39.7% for the nine months ended September 30, 2009 and 2008, respectively. The increase in sales and marketing expense as a percent of sales was due primarily to an increase in commission expenses reflecting the implementation of sales programs with new distributor partners. This increased investment in sales and marketing has facilitated the development of new customer relationships and increased sales, and has directly contributed to the improvement in the year-over-year operating profit margin in the Domestic segment.

General and Administrative Expense — General and administrative expense increased $4.4 million, or 7%, for the nine months ended September 30, 2009 to $64.7 million compared to $60.3 million for the same period last year. The increase is primarily due to a restructuring charge to consolidate substantially all of Blackstone’s current operations in Wayne, NJ and Springfield, MA into the same facility housing its spine stimulation and US orthopedics business in the Dallas, TX area. In addition, the Company also incurred legal and other professional services associated with a proxy contest with one of the Company’s shareholders. The contest was settled in a special shareholder meeting on April 2, 2009. As a result, the Company does not anticipate incurring any expenses associated with this matter going forward. In addition, general and administrative expenses were also higher compared with the prior year due to infrastructure increases in some faster growing international markets. General and administrative expense as a percent of sales was 16.1% in the for the nine months ended September 30, 2009 compared to 15.5% for the same period last year.

Research and Development Expense — Research and development expense increased $6.4 million during the nine months ended September 30, 2009 to $25.8 million compared to $19.4 million for the same period last year. This increase is primarily the result of two collaborative arrangements with Musculoskeletal Transplant Foundation (“MTF”) and Intelligent Implant Systems, LLC (“IIS”). We incurred approximately $3.9 million and $1.8 million in expenses as a result of our collaboration with MTF and IIS, respectively, for the nine months ended September 30, 2009. As a percent of sales, research and development expense was 6.4% in the nine months ended September 30, 2009 compared to 5.0% for the same period last year. We do not expect to incur any further expense in 2009 related to these agreements; see Liquidity and Capital Resources for further detail.

Amortization of Intangible Assets — Amortization of intangible assets decreased $10.3 million for the nine months ended September 30, 2009 to $4.9 million compared to $15.2 million for the same period last year. This decrease is primarily attributed to the impairment of $105.7 million of definite-lived intangible assets at Blackstone during the third quarter of 2008.

Impairment of Goodwill and Certain Intangible Assets — In the nine months ended September 30, 2008, we incurred $289.5 million of expense related to the impairment of goodwill and certain intangible assets. As part of our debt refinancing completed in September 2008, five year projections were prepared for Blackstone. These projections provided an indication of impairment. Accordingly, an interim impairment test was performed in accordance with ASC Topic 350 - Intangibles — Goodwill and Other (formerly known as SFAS No. 142, “Goodwill and Other Intangible Assets,”). Based on this interim test, we determined that the Blackstone trademark, an indefinite-lived intangible asset, was impaired by $57.0 million. In addition, we determined that the carrying amount of goodwill related to Blackstone exceeded its implied fair value, and recognized a goodwill impairment loss of $126.9 million.

In accordance with ASC Topic 360 — Property, Plant and Equipment (formerly known as SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”), we determined that a triggering event had occurred with respect to the definite-lived intangible assets at Blackstone. We compared the expected cash flows to be generated by the definite lived intangible on an undiscounted basis to the carrying value of the intangible asset. We determined the carrying value exceeded the undiscounted cash flow and impaired the distribution network and technologies at Blackstone to the fair value which resulted in an impairment charge of $105.7 million.

Gain on Sale of Pain Care^® Operations — Gain on sale of Pain Care^® operations was $1.6 million for the nine months ended September 30, 2008 and represented the gain on the sale of operations related to our Pain Care^® line of ambulatory infusion pumps during March 2008. No such gain was recorded in the same period of 2009.

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Interest Expense, net — Interest expense, net was $18.4 million for the nine months ended September 30, 2009 compared to $13.7 million for the same period last year. Included in interest expense, net for the nine months ended September 30, 2009 and 2008 was interest expense of $17.7 million and $11.5 million related to the senior secured term loan used to finance the Blackstone acquisition. Although our overall senior secured term loan balance has decreased when compared to the same period in the prior year, our effective interest rate has increased which is generating the additional interest expense.

Loss on Refinancing of Senior Secured Term Loan — In the nine months ended September 30, 2008, we incurred $5.7 million of expense related to the refinancing of the senior secured term loan used to finance the Blackstone acquisition. This included a $3.7 million non-cash write-off of previously capitalized debt placement costs and $2.0 million of fees associated with the amendment. We anticipated that we would not remain in compliance with certain financial covenants included in the senior secured credit facility and, consequently, negotiated an amendment of our financial covenants, among other things, with our lenders effective September 29, 2008.

Unrealized Non-cash Gain on Interest Rate Swap — In June 2008, the Company entered into a three-year fully amortizable interest rate swap agreement (the “Swap”) with a notional amount of $150.0 million and an expiration date of June 30, 2011. During the fourth quarter of 2008, the Company recognized in earnings an unrealized, non-cash loss of approximately $(8.0) million when it was determined that the Swap was no longer deemed highly effective. Therefore, cash flow accounting is no longer applied and mark-to-market adjustments are required to be reported in current earnings through the expiration of the swap in June 2011. For the nine months ended September 30, 2009, the Company recorded an unrealized non-cash gain of $1.0 million in other income (expense), net.

Other Income (Expense), net — Other income (expense), net was an expense of $(0.6) million for the nine months of 2009 compared to an expense of $(2.7) million for the same period last year. The decrease can be mainly attributed to the effect of foreign exchange. During the nine months ended September 30, 2008, notably in September, we recorded foreign exchange losses of $2.2 million principally as a result of a rapid strengthening of the US Dollar against various foreign currencies including the Euro, Pound, Peso and Brazilian Real. Several of our foreign subsidiaries hold trade payables or receivables in currencies (most notably the US Dollar) other than their functional (local) currency which results in foreign exchange gains or losses when there is relative movement between those currencies.

Income Tax Benefit (Expense) — Our effective tax rate was an expense of 37.4% and a benefit of 21.0% during the nine months ended September 30, 2009 and 2008, respectively. The effective tax rate for the nine months ended September 30, 2009 included an unfavorable discrete item resulting from additions to reserves for unrecognized tax benefits. The effective tax rate benefit for the nine months ended September 30, 2008 included unfavorable discrete items resulting from the impairment of goodwill for which we receive no tax benefit and the sale of our Pain Care^® operations. Excluding these discrete items, our effective tax rate was an expense of 35.4% and a benefit of (39.5%), respectively. The decrease in the effective tax rate excluding discrete items is primarily attributable to changes in the jurisdictional mix of earnings.

Net Income (Loss) — Net income for the nine months ended September 30, 2009 was $15.0 million, or $0.88 per basic share and $0.87 per diluted share, compared to a net loss of $(227.8) million, or $(13.33) per basic and diluted share for the same period last year. The weighted average number of basic common shares outstanding was 17,113,891 and 17,093,133 during the nine months ended September 30, 2009 and 2008, respectively. The weighted average number of diluted common shares outstanding was 17,174,416 and 17,093,133 during the nine months ended September 30, 2009 and 2008, respectively.

Liquidity and Capital Resources

Cash and cash equivalents at September 30, 2009 were $20.0 million, of which $13.2 million was subject to certain restrictions under the senior secured credit agreement described below. This compares to cash and cash equivalents of $25.6 million at December 31, 2008, of which $11.0 million was restricted.

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Net cash provided by operating activities was $28.2 million for the nine months ended September 30, 2009 compared to $2.4 million for the same period last year. Net cash provided by operating activities is comprised of net income (loss), non-cash items (including depreciation and amortization, share-based compensation, provision for doubtful accounts, provision for inventory obsolescence, impairment of goodwill and certain intangible assets, loss on refinancing of senior secured term loan, deferred taxes, and gain on the sale of Pain Care^® operations) and changes in working capital, including changes in restricted cash. Net income increased $242.8 million to $15.0 million for the nine months ended September 30, 2009 from net loss of $(227.8) million for the comparable period in the prior year. Non-cash expense for the nine months ended September 30, 2009 decreased $235.5 million compared to the same period last year primarily as a result of the impairment of goodwill and certain intangible assets of $289.5 million during the nine months ended September 30, 2008 that did not exist in the current year, a decrease in the provision for inventory obsolescence of $6.9 million, and a decrease in depreciation and amortization of $6.6 million, offset by an increase in the change in deferred taxes of $74.8 million. Working capital accounts consumed $20.7 million of cash in the nine months ended September 30, 2009 compared to $39.1 million for the same period last year. The principal change in working capital can be mainly attributable to an increase in the current liabilities position of $17.5 million mainly the result of restructuring costs previously mentioned, increases in accrued payroll, bonuses and related payroll taxes, increased commissions to distributors and the timing of inventory receipts near the end of the period. Overall performance indicators for our two primary working capital accounts, accounts receivable and inventory, reflect days sales in receivables of 87 days at September 30, 2009 compared to 82 days at September 30, 2008 and inventory turns of 1.3 times at September 30, 2009 compared to 2.0 times at September 30, 2008. Excluding the impact of the $11.5 million spinal implants inventory reserve taken in the third quarter of 2008, the inventory turns were 1.5. Also included in cash used in working capital during the nine months ended September 30, 2009 were $5.6 million in costs related to matters occurring at Blackstone prior to the acquisition and for which we are seeking reimbursement from the applicable escrow fund.

Net cash used in investing activities was $14.4 million during the nine months ended September 30, 2009 compared to $9.1 million provided by investing activities during the same period last year. During the first quarter of 2008, we sold the operations of our Pain Care^® line of ambulatory infusion pumps for net proceeds of $6.0 million. During the nine months ended September 30, 2009 and 2008, we invested $16.1 million and $15.8 million in capital expenditures, respectively. During the nine months ended September 30, 2009, we sold our remaining ownership in OPED AG, a German based bracing company, for net proceeds of $1.7 million. During the nine months ended September 30, 2008, we sold a portion of our ownership in OPED AG for net proceeds of $0.8 million.

Net cash used in financing activities was $22.0 million for the nine months ended September 30, 2009 compared to $7.6 million for the same period last year. During the nine months ended September 30, 2009, we repaid approximately $22.5 million against the principal on our senior secured term loan compared to $6.2 million during the nine months ended September 30, 2008. During the nine months ended September 30, 2009, we borrowed $1.6 million on our line of credit through our Italian subsidiary compared to a repayment on that same line of credit of $2.4 million for the same period in the prior year. During the nine months ended September 30, 2009, we used approximately $1.1 million to purchase an additional 32% minority interest in our Breg distributor in Germany. During the nine months ended September 30, 2008, we received proceeds of $1.7 million from the issuance of 51,052 shares of our common stock upon the exercise of stock options.

On September 22, 2006 the Company’s wholly-owned US holding company subsidiary, Orthofix Holdings, Inc. (“Orthofix Holdings”), entered into a senior secured credit facility with a syndicate of financial institutions to finance the acquisition of Blackstone. Certain terms of the senior secured credit facility were amended in September 29, 2008. The senior secured credit facility provides for (1) a seven-year amortizing term loan facility of $330.0 million and (2) a six-year revolving credit facility of $45.0 million. As of September 30, 2009, the Company had no amounts outstanding under the revolving credit facility and $258.2 million outstanding under the term loan facility. Obligations under the senior secured credit facility can have a floating interest rate of the London Inter-Bank Offered Rate (“LIBOR”) plus a margin, with a LIBOR floor of 3.0%, or prime rate plus a margin. As of September 30, 2009, the entire term loan obligation of $258.2 million is at the prime rate plus a margin of 3.50%.

In June 2008, we entered into a three-year fully amortizable interest rate swap agreement (the “Swap”) with a notional amount of $150.0 million and an expiration date of June 30, 2011. The amount outstanding under the Swap as of September 30, 2009 was $150.0 million. Under the Swap we will pay a fixed rate of 3.73% and receive interest at floating rates based on the three month LIBOR rate at each quarterly re-pricing date until the expiration of the Swap. As of September 30, 2009, the effective interest rate on the debt related to the Swap was 10.6%. Our overall effective interest rate, including the impact of the Swap as of September 30, 2009 on our senior secured debt was 9.0%.

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The credit agreement contains certain financial covenants, including a fixed charge coverage ratio and a leverage ratio applicable to Orthofix and its subsidiaries on a consolidated basis. A breach of any of these covenants could result in an event of default under the credit agreement, which could permit acceleration of the debt payments under the facility. The Company was in compliance with these financial covenants as measured at September 30, 2009. As defined in the senior secured credit facility, our leverage ratio can not exceed 3.50 and our fixed charge ratio must be greater than or equal to 1.30. At September 30, 2009, our leverage and fixed charge ratios were 2.93 and 1.50, respectively.

The leverage ratio the Company can not exceed, as defined in the senior secured credit facility, will be 3.25 for the fourth quarter of 2009, 2.85 for the first quarter of 2010, 2.75 for the second quarter of 2010 and 2.50 thereafter. The fixed charge coverage ratio must be greater than 1.30. This remains in effect for the rest of 2009. Effective January 1, 2010, this ratio will increase to 1.375 and remain at that rate for the remaining life of the senior secured credit facility. Based on the Company’s projected earnings, we believe that the Company should be able to meet these financial covenants in future fiscal quarters, however, there can be no assurance that it will be able to do so, and failure to do so could result in an event of default under the credit agreement, which could have a material adverse effect on our financial position.

Certain subsidiaries of the Company have restrictions on their ability to pay dividends or make intercompany loan advances pursuant to the Company’s senior secured credit facility. The net assets of Orthofix Holdings and its subsidiaries are restricted for distributions to the parent company. Domestic subsidiaries of the Company, as parties to the credit agreement, have access to these net assets for operational purposes. The amount of restricted net assets of Orthofix Holdings and its subsidiaries as of September 30, 2009 is $130.8 million compared to $111.3 million at December 31, 2008. In addition, the senior secured credit facility restricts the Company and subsidiaries that are not parties to the credit facility from access to cash held by Colgate Medical Limited and its subsidiaries. All credit party subsidiaries have access to this cash for operational and debt repayment purposes. The amount of restricted cash of the Company as of September 30, 2009 is $13.2 million compared to $11.0 million at December 31, 2008.

Each of the domestic subsidiaries of the Company (which includes Orthofix Inc., Breg Inc., and Blackstone) and Colgate Medical Limited and Victory Medical Limited (wholly-owned financing subsidiaries of the Company) has guaranteed the obligations of Orthofix Holdings under the senior secured credit facility. The obligations of the subsidiaries under their guarantees are secured by the pledges of their respective assets.

At September 30, 2009, we had outstanding borrowings of $3.7 million and unused available lines of credit of approximately 4.8 million Euro ($7.0 million) under a line of credit established in Italy to finance the working capital of our Italian operations. The terms of the line of credit give us the option to borrow amounts in Italy at rates determined at the time of borrowing.

In the fourth quarter of 2008, as part of the Company’s strategic plan to strengthen the business, the Company initiated a restructuring plan to improve operations and reduce costs at Blackstone. The plan involves the consolidation of substantially all of Blackstone’s current operations in Wayne, NJ and Springfield, MA into the same facility housing its spine stimulation and US orthopedics business in the Dallas, TX area. The Company plans to complete the restructuring and consolidation by the second quarter of 2010, at which time the Company anticipates a total restructuring expense of $3.6 million. During the three and nine months ended September 30, 2009, the Company recorded net restructuring charges of $0.6 million and $3.6 million, respectively, which were primarily related to severance costs and accelerated depreciation costs related to shortening lives of assets which will be disposed. These restructuring costs are recorded in general and administrative expense and are classified in the Spinal Implants & Biologics segment.

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The following table presents changes in the restructuring liability, which is included within Other Current Liabilities in the Company’s condensed consolidated balance sheets as of September 30, 2009 and December 31, 2008:

				Assets
(US$ in thousands)	Severance			Abandoned			Total
Balance at December 31, 2008	$	548		$	—		$	548
Charges		2,565			1,020			3,585
Cash Payments		(1,018	)		—			(1,018	)
Non-cash Items		—			(1,020	)		(1,020	)
Balance at September 30, 2009	$	2,095		$	—		$	2,095

On July 24, 2008, we entered into an agreement with Musculoskeletal Transplant Foundation (“MTF”) to collaborate on the development and commercialization of a new stem cell-based bone growth biologic matrix. Under the terms of the agreement, we have invested $10.0 million to develop the new stem cell-based bone growth biologic matrix that provides the beneficial properties of an autograft in spinal and orthopedic surgeries. With the development process now complete, the Company and MTF operate under the terms of a separate commercialization agreement. Under the terms of this 10-year agreement, MTF sources the tissue, processes it to create the bone growth matrix, and packages and delivers it in accordance with orders received directly from customers and from the Company. The Company has exclusive global marketing rights for the new allograft and receives a marketing fee from MTF based on total sales. We follow the authoritative accounting guidance for collaborative arrangements. The new matrix was launched with a full market release in the US effective on July 1, 2009. A total of $3.9 million of expenses incurred under the terms of the agreement are included in research and development expense in the nine months ended September 30, 2009.

As previously announced in 2008, we entered into an agreement with Intelligent Implant Systems (“IIS”) for the acquisition and development of a next-generation pedicle screw system for our spinal implants division. Under the agreement we purchased $2.5 million of intellectual property and related technology. During the nine months ended September 30, 2009, IIS met their first development milestone and under the terms of the agreement the Company paid IIS $1.0 million. During the third quarter of 2009, the Company and IIS amended the existing agreement and the Company paid IIS an additional $0.8 million for partially meeting its next milestone. The Company has recorded these payments totaling $1.8 million for the nine months ended September 30, 2009 as research and development expense. IIS will continue to perform research and development functions related to the technology and under the agreement and amended agreement we will pay IIS an additional amount up to $2.7 million for research and development performance milestones.

We believe that current cash balances together with projected cash flows from operating activities, the unused availability of the $45.0 million revolving credit facility, the available Italian line of credit, and our debt capacity are sufficient to cover anticipated working capital and capital expenditure needs including research and development costs and research and development projects formerly mentioned, over the near term.

36

ORTHOFIX INTERNATIONAL N.V.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business operations. Primary exposures include changes in interest rates and foreign currency fluctuations. These exposures can vary sales, cost of sales, costs of operations, and the cost of financing and yields on cash and short-term investments. We use derivative financial instruments, where appropriate, to manage these risks. However, our risk management policy does not allow us to hedge positions we do not hold nor do we enter into derivative or other financial investments for trading or speculative purposes. As of September 30, 2009, we had a currency swap in place to minimize foreign currency exchange risk related to a 38.3 million Euro intercompany note.

We are exposed to interest rate risk in connection with our senior secured term loan and borrowings under our revolving credit facility (if any), which bear interest at floating rates based on LIBOR or the prime rate plus an applicable borrowing margin. Therefore, interest rate changes generally do not affect the fair market value of the debt, but do impact future earnings and cash flows, assuming other factors are held constant. We had an interest rate swap in place as of September 30, 2009 to minimize interest rate risk related to our LIBOR-based borrowings.

As of September 30, 2009, we had $258.2 million of variable rate term debt represented by borrowings under our senior secured term loan which can have a floating interest rate of LIBOR plus a margin, with a LIBOR floor of 3.0%, or the prime rate plus a margin. As of September 30, 2009, the entire term loan obligation of $258.2 million is at the prime rate plus a margin of 3.50%, which is adjusted based upon the credit rating of the Company and its subsidiaries. In June 2008, we entered into a Swap with a notional amount of $150.0 million and an expiration date of June 30, 2011. The amount outstanding under the Swap as of September 30, 2009 was $150.0 million. Under the Swap we will pay a fixed rate of 3.73% and receive interest at floating rates based on the three month LIBOR rate at each quarterly re-pricing date until the expiration of the Swap. As of September 30, 2009, the effective interest rate on the debt related to the Swap was 10.6%. As of September 30, 2009, our overall effective interest rate, including the impact of the Swap, on our senior secured debt was 9.0%. Based on the balance outstanding under the senior secured term loan combined with the Swap as of September 30, 2009, an immediate change of one percentage point in the applicable interest rate on the variable rate debt would cause a change in interest expense of approximately $1.9 million on an annual basis.

Our foreign currency exposure results from fluctuating currency exchange rates, primarily the US Dollar against the Euro, Great Britain Pound, Mexican Peso and Brazilian Real. We are subject to cost of goods currency exposure when we produce products in foreign currencies such as the Euro or Great Britain Pound and sell those products in US Dollars. We are subject to transactional currency exposures when foreign subsidiaries (or the Company itself) enter into transactions denominated in a currency other than their functional currency. As of September 30, 2009, we had an un-hedged intercompany receivable denominated in Euro of approximately 22.8 million ($33.3 million). We recorded a foreign currency gain during the nine months ended September 30, 2009 of $1.5 million, which resulted from the strengthening of the Euro against the US dollar during the period.

We also are subject to currency exposure from translating the results of our global operations into the US dollar at exchange rates that have fluctuated from the beginning of the period. The US dollar equivalent of international sales denominated in foreign currencies was unfavorably impacted during the nine months ended September 30, 2009 by foreign currency exchange rate fluctuations with the strengthening of the US dollar against the local foreign currency during this period. The US dollar equivalent of the related costs denominated in these foreign currencies was favorably impacted during this period. During the nine months ended September 30, 2008, the US dollar equivalent of international sales denominated in foreign currencies was favorably impacted by foreign currency exchange rate fluctuations with the weakening of the US dollar against the local foreign currency during this period. The US dollar equivalent of the related costs denominated in these foreign currencies was unfavorably impacted during this period. As we continue to distribute and manufacture our products in selected foreign countries, we expect that future sales and costs associated with our activities in these markets will continue to be denominated in the applicable foreign currencies, which could cause currency fluctuations to materially impact our operating results.

37

ORTHOFIX INTERNATIONAL N.V.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a — 15(e) or 15d — 15 (e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

On July 1, 2009, we implemented an Enterprise Resource Planning (“ERP”) system at our Spinal Implants & Biologics division. The ERP system, developed by Oracle, is expected to improve and enhance internal controls over financial reporting. This ERP system materially changes how transactions are processed within this division.

Except for the conversion to the ERP system, there have not been any changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

38

ORTHOFIX INTERNATIONAL N.V.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On or about July 23, 2007, our subsidiary, Blackstone received a subpoena issued by the Department of Health and Human Services, Office of Inspector General, under the authority of the federal healthcare anti-kickback and false claims statutes. The subpoena seeks documents for the period January 1, 2000 through July 31, 2006, which is prior to Blackstone’s acquisition by the Company. The Company believes that the subpoena concerns the compensation of physician consultants and related matters. On September 17, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the agreement and plan of merger between the Company, New Era Medical Corp. and Blackstone, dated as of August 4, 2006 (the “Blackstone Merger Agreement”), for any losses to us resulting from this matter. (The Company’s indemnification rights under the Blackstone Merger Agreement are described further below). The Company was subsequently notified by legal counsel for the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

On or about January 7, 2008, the Company received a federal grand jury subpoena from the United States Attorney’s Office for the District of Massachusetts. The subpoena seeks documents from the Company for the period January 1, 2000 through July 15, 2007. The Company believes that the subpoena concerns the compensation of physician consultants and related matters, and further believes that it is associated with the Department of Health and Human Services, Office of Inspector General’s investigation of such matters. On September 18, 2008, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to the Company resulting from this matter. On or about April 29, 2009, counsel for the Company received a HIPAA subpoena issued by the US Department of Justice. The subpoena seeks documents from the Company for the period January 1, 2000 through July 15, 2007. The Company believes that the subpoena concerns the compensation of physician consultants and related matters, and further believes that it is associated with the Department of Health and Human Services, Office of Inspector General’s investigation of such matters, as well as the January 7, 2008 federal grand jury subpoena. On or about June 15, 2009, Orthofix, Inc., and Blackstone, executed an agreement with the United States Attorney’s Office for the District of Massachusetts (the “Tolling Agreement”) extending an agreement tolling the statute of limitations applicable to any criminal, civil, or administrative proceedings that the government might later initiate. The Tolling Agreement extended the period tolling the statute of limitations to include the period from December 1, 2008 through and including December 31, 2009.

On or about December 5, 2008, the Company obtained a copy of a qui tam complaint filed by Susan Hutcheson and Philip Brown against Blackstone and the Company in the US District Court for the District of Massachusetts. A qui tam action is a civil lawsuit brought by an individual for an alleged violation of a federal statute, in which the US Department of Justice has the right to intervene and take over the prosecution of the lawsuit at its option. On November 21, 2008, the US Department of Justice filed a notice of non-intervention in the case. The complaint was served on Blackstone on or about March 24, 2009. Counsel for the plaintiffs filed an amended complaint on June 4, 2009. The amended complaint sets forth a cause of action against Blackstone under the False Claims Act for alleged inappropriate payments and other items of value conferred on physician consultants; Orthofix is not named as a defendant in the amended complaint. The Company believes that this lawsuit is related to the matters described above involving the Department of Health and Human Services, Office of the Inspector General, and the United States Attorney’s Office for the District of Massachusetts. The Company intends to defend vigorously against this lawsuit. On September 18, 2008, after being informed of the existence of the lawsuit by representatives of the US Department of Justice and prior to the unsealing of the complaint (which was unsealed by the court on or about November 24, 2008), the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter.

39

On or about September 27, 2007, Blackstone received a federal grand jury subpoena issued by the United States Attorney’s Office for the District of Nevada (“USAO-Nevada subpoena”). The subpoena seeks documents for the period from January 1999 to the date of issuance of the subpoena. The Company believes that the subpoena concerns payments or gifts made by Blackstone to certain physicians. On February 29, 2008, Blackstone received a Civil Investigative Demand (“CID”) from the Massachusetts Attorney General’s Office, Public Protection and Advocacy Bureau, Healthcare Division. The Company believes that the CID seeks documents concerning Blackstone’s financial relationships with certain physicians and related matters for the period from March 2004 through the date of issuance of the CID. The Ohio Attorney General’s Office, Health Care Fraud Section has issued a criminal subpoena, dated August 8, 2008, to Orthofix, Inc. (the “Ohio AG subpoena”). The Ohio AG subpoena seeks documents for the period from January 1, 2000 through the date of issuance of the subpoena. The Company believes that the Ohio AG subpoena arises from a government investigation that concerns the compensation of physician consultants and related matters. On September 18, 2008, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from the USAO-Nevada subpoena, the Massachusetts CID and the Ohio AG subpoena.

By order entered on January 4, 2007, the United States District Court for the Eastern District of Arkansas unsealed a qui tam complaint captioned Thomas v. Chan, et al., 4:06-cv-00465-JLH, filed against Dr. Patrick Chan, Blackstone and other defendants including another device manufacturer. The amended complaint in the Thomas action alleges causes of action under the False Claims Act for alleged inappropriate payments and other items of value conferred on Dr. Chan and another provider. The Company believes that Blackstone has meritorious defenses to the claims alleged and the Company intends to defend vigorously against this lawsuit. On September 17, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter. The Company was subsequently notified by legal counsel for the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

Under the Blackstone Merger Agreement, the former shareholders of Blackstone have agreed to indemnify the Company for breaches of representations and warranties under the agreement as well as certain other specified matters. These post-closing indemnification obligations of the former Blackstone shareholders are limited to a cumulative aggregate amount of $66.6 million. At closing, an escrow fund was established pursuant to the terms of the Blackstone Merger Agreement to fund timely submitted indemnification claims. The initial amount of the escrow fund was $50.0 million. As of September 30, 2009, the escrow fund, which has subsequently accrued interest, contained $54.0 million. The Company is also entitled to seek direct personal recourse against certain principal shareholders of Blackstone after all monies on deposit in the escrow fund have been paid out or released or are the subject of pending or unresolved indemnification claims but only for a period of six years from the closing date of the Merger and only up to an amount equal to $66.6 million less indemnification claims previously paid.

In addition to the foregoing claims, the Company has submitted claims for indemnification from the escrow fund for losses that have resulted or may result from certain civil actions filed against Blackstone as well as certain claims against Blackstone alleging rights to payments for Blackstone stock options not reflected in Blackstone’s corporate ledger at the time of Blackstone’s acquisition by the Company, or that the shares or stock options subject to those claims were improperly diluted by Blackstone. To date, the representative of the former shareholders of Blackstone has not objected to approximately $1.5 million in such claims from the escrow fund, with certain claims remaining pending.

The Company is unable to predict the outcome of each of the escrow claims described above in the preceding paragraphs or to estimate the amount, if any, that may ultimately be returned to the Company from the escrow fund and there can be no assurance that losses to the Company from these matters will not exceed the amount of the escrow fund. Expenses incurred by the Company relating to the above matters are recorded as an escrow receivable in the Company’s financial statements to the extent the Company believes, among other things, that collection of the claims is reasonably assured. Expenditures related to such matters for which the Company believes collection is doubtful are recognized in earnings when incurred. As of September 30, 2009 and December 31, 2008, included in Prepaid expenses and other current assets is approximately $13.3 million and $8.3 million, respectively, of escrow receivable balances related to the Blackstone matters described above. These amounts include, among other things, attorneys’ fees and costs related to the government investigations manifested by the subpoenas described above, the stock option-related claims described above, and costs related to the qui-tam action described above. As described above, some of these reimbursement claims are being contested by the representative of the former shareholders of Blackstone. To mitigate the risk that some reimbursement claims will not be collected, the Company records a reserve against the escrow receivable during the period in which reimbursement claims are recognized.

40

On or about April 10, 2009, the Company received a HIPAA subpoena (“HIPAA subpoena”) issued by the US Attorney’s Office for the District of Massachusetts. The subpoena seeks documents for the period January 1, 1995 through the date of the subpoena. The Company believes that the subpoena concerns the classification and marketing of its bone growth stimulators and related matters. On or about September 21, 2009, the Company received an additional HIPAA subpoena issued by the U.S. Attorney’s Office for the District Of Massachusetts in connection with this investigation. The subpoena seeks additional documents pertaining to the investigation for the period January 1, 1995 through the date of the subpoena. The Company intends to cooperate with the government’s requests. The Company is unable to predict what actions, if any, might be taken by the government or what impact, if any, the outcome of this matter might have on the Company’s consolidated financial position, results of operations or cash flows.

On or about April 14, 2009, the Company obtained a copy of a qui tam complaint filed by Jeffrey J. Bierman in the US District Court for the District of Massachusetts against Orthofix, Inc., the Company, and other companies that have allegedly manufactured bone growth stimulation devices, including Orthologic Corp., DJO Incorporated, Reable Therapeutics, Inc., the Blackstone Group, L.P., Biomet, Inc., EBI, L.P., EBI Holdings, Inc., EBI Medical Systems, Inc., Bioelectron, Inc., LBV Acquisition, Inc., and Smith & Nephew, Inc. By order entered on March 24, 2009, the court unsealed the case. The amended complaint alleges various causes of action under the federal False Claims Act and state and city false claims acts premised on the contention that the defendants improperly promoted the sale, as opposed to the rental, of bone growth stimulation devices. The amended complaint also includes claims against the defendants for, among other things, allegedly misleading physicians and purportedly causing them to file false claims and for allegedly violating the Anti-kickback Act by providing free products to physicians, waiving patients’ insurance co-payments, and providing inducements to independent sales agents to generate business. The Company believes that this lawsuit is related to the matter described above involving the HIPAA subpoena. The Company and Orthofix, Inc. were served on or about September 8, 2009, and intend to defend vigorously against this lawsuit.

On or about July 2, 2009, the Company obtained a copy of a qui tam complaint filed by Marcus Laughlin that is pending in the US District Court for the District of Massachusetts against the Company. This complaint has been consolidated with the complaint described in the immediately preceding paragraph, and was unsealed on June 30, 2009. The complaint alleges violations of the False Claims Act, fraudulent billing, illegal kickbacks and wrongful termination based on allegations that the Company promoted the sale rather than the rental of bone growth stimulation devices, systematically overcharged for these products, provided physicians kickbacks in the form of free units, referral fees, and fitting fees, and that the defendant and its competitors discussed together strategies to encourage higher government pricing for the products. The complaint also alleges that TRICARE has been reimbursing the Company for its Cervical Stim^® product without approval to do so. An amended complaint alleges conspiracy and violations of the Sherman Anti-Trust Act in connection with the same alleged conduct. The Company was served with the complaint on or about September 9, 2009 and intends to defend vigorously against this lawsuit.

41

Effective October 29, 2007, Blackstone entered into a settlement agreement of a patent infringement lawsuit brought by certain affiliates of Medtronic Sofamor Danek USA Inc. In that lawsuit, the Medtronic plaintiffs had alleged that they were the exclusive licensees of certain US patents and that Blackstone’s making, selling, offering for sale, and using its Blackstone Anterior Cervical Plate, 3º Anterior Cervical Plate, Hallmark Anterior Cervical Plate and Construx Mini PEEK VBR System products within the United States willfully infringed the subject patents. Blackstone denied infringement and asserted that the Patents were invalid. The settlement agreement is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. On July 20, 2007, the Company submitted a claim for indemnification from the escrow fund established in connection with the Blackstone Merger Agreement for any losses to us resulting from this matter. The Company was subsequently notified by legal counsel of the former shareholders that the representative of the former shareholders of Blackstone has objected to the indemnification claim and intends to contest it in accordance with the terms of the Blackstone Merger Agreement.

The Company cannot predict the outcome of any proceedings or claims made against the Company or its subsidiaries described in the preceding paragraphs and there can be no assurance that the ultimate resolution of any claim will not have a material adverse impact on our consolidated financial position, results of operations, or cash flows.

In addition to the foregoing, in the normal course of our business, the Company is involved in various lawsuits from time to time and may be subject to certain other contingencies.

Item 1A. Risk Factors

There have been no material changes to our risk factors from the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

42

ORTHOFIX INTERNATIONAL N.V.

Item 6. Exhibits

(a) Exhibits

Exhibit
Number		Description
	3.1	Certificate of Incorporation of the Company (filed as an exhibit to the Company’s annual report on Form 20-F dated June 29, 2001 and incorporated herein by reference).
	3.2	Articles of Association of the Company as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference).
	10.1	Orthofix International N.V. Amended and Restated Stock Purchase Plan, as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2009 and incorporated herein by reference).
	10.2	Orthofix International N.V. Amended and Restated 2004 Long Term Incentive Plan (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2009 and incorporated herein by reference).
	10.3	Orthofix International N.V. Staff Share Option Plan, as amended through April 22, 2003 (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007 and incorporated herein by reference).
	10.4	Form of Employee Non-Qualified Stock Option Agreement (post-2008 grants) (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.5	Form of Non-Employee Director Non-Qualified Stock Option Agreement (post-2008 grants) (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.6	Form of Nonqualified Stock Option Agreement under the Orthofix International N.V. Amended and Restated 2004 Long Term Incentive Plan (pre-2009 grants — vesting over 3 years) (filed as an exhibit to the Company’s current report on Form 8-K filed June 20, 2008 and incorporated herein by reference).
	10.7	Form of Nonqualified Stock Option Agreement under the Orthofix International N.V. Amended and Restated 2004 Long Term Incentive Plan (pre-2009 grants — 3 year cliff vesting) (filed as an exhibit to the Company’s current report on Form 8-K filed June 20, 2008 and incorporated herein by reference).
	10.8	Form of Restricted Stock Grant Agreement under the Orthofix International N.V. Amended and Restated 2004 Long Term Incentive Plan (vesting over 3 years) (filed as an exhibit to the Company’s current report on Form 8-K filed June 20, 2008 and incorporated herein by reference).
	10.9	Form of Restricted Stock Grant Agreement under the Orthofix International N.V. Amended and Restated 2004 Long Term Incentive Plan (3 year cliff vesting) (filed as an exhibit to the Company’s current report on Form 8-K filed June 20, 2008 and incorporated herein by reference).
	10.10	Amended and Restated Orthofix Deferred Compensation Plan (filed as an exhibit to the Company’s current report on Form 8-K filed January 7, 2009, and incorporated herein by reference).

43

Exhibit
Number			Description
	10.11		Acquisition Agreement dated as of November 20, 2003, among Orthofix International N.V., Trevor Acquisition, Inc., Breg, Inc. and Bradley R. Mason, as shareholders’ representative (filed as an exhibit to the Company’s current report on Form 8-K filed January 8, 2004 and incorporated herein by reference).
	10.12		Amended and Restated Voting and Subscription Agreement dated as of December 22, 2003, among Orthofix International N.V. and the significant shareholders of Breg, Inc. identified on the signature pages thereto (filed as an exhibit to the Company’s current report on Form 8-K filed on January 8, 2004 and incorporated herein by reference).
	10.13		Amendment to Employment Agreement dated December 29, 2005 between Orthofix Inc. and Charles W. Federico (filed as an exhibit to the Company’s current report on Form 8-K filed December 30, 2005 and incorporated herein by reference).
	10.14		Form of Indemnity Agreement (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference).
	10.15		Settlement Agreement dated February 23, 2006, between Intavent Orthofix Limited, a wholly-owed subsidiary of Orthofix International N.V. and Galvin Mould (filed as an exhibit to the Company’s annual report on Form 8-K filed on April 17, 2006 and incorporated herein by reference).
	10.16		Amended and Restated Employment Agreement, dated December 6, 2007, between Orthofix Inc. and Raymond C. Kolls (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007, as amended, and incorporated herein by reference).
	10.17	*	Letter Agreement, dated July 25, 2009, between Orthofix Inc. and Raymond C. Kolls.
	10.18		Credit Agreement, dated as of September 22, 2006, among Orthofix Holdings, Inc., Orthofix International N.V., certain domestic subsidiaries of Orthofix International N.V., Colgate Medical Limited, Victory Medical Limited, Swiftsure Medical Limited, Orthofix UK Ltd, the several banks and other financial institutions as may from time to time become parties thereunder, and Wachovia Bank, National Association (filed as an exhibit to the Company’s current report on Form 8-K filed September 27, 2006 and incorporated herein by reference).
	10.19		First Amendment to Credit Agreement, dated September 29, 2008, by and among Orthofix Holdings, Inc., Orthofix International N.V., certain domestic subsidiaries of Orthofix International N.V., Colgate Medical Limited, Victory Medical Limited, Swiftsure Medical Limited, Orthofix UK Ltd, and Wachovia Bank, National Association, as administrative agent on behalf of the Lenders under the Credit Agreement (filed as an exhibit to the Company’s current report on Form 8-K filed September 29, 2008 and incorporated herein by reference).
	10.20		Agreement and Plan of Merger, dated as of August 4, 2006, among Orthofix International N.V., Orthofix Holdings, Inc., New Era Medical Limited, Blackstone Medical, Inc. and William G. Lyons, III, as Equityholders’ Representative (filed as an exhibit to the Company’s current report on Form 8-K filed August 7, 2006 and incorporated herein by reference).

44

Exhibit
Number			Description
	10.21		Employment Agreement, dated as of September 22, 2006, between Blackstone Medical, Inc. and Matthew V. Lyons (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2006, as amended, and incorporated herein by reference).
	10.22		Amended and Restated Employment Agreement dated December 6, 2007 between Orthofix Inc. and Timothy M. Adams (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007, as amended, and incorporated herein by reference).
	10.23		Nonqualified Stock Option Agreement between Timothy M. Adams and Orthofix International N.V. dated November 19, 2007 (filed as an exhibit to the Company’s current report on Form 8-K filed November 21, 2007 and incorporated herein by reference).
	10.24		Employment Agreement between Orthofix Inc. and Scott Dodson, dated as of December 10, 2007 (filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007, as amended, and incorporated herein by reference).
	10.25		Description of Director Fee Policy (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference).
	10.26		Summary of Orthofix International N.V. Annual Incentive Program (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2009 and incorporated herein by reference).
	10.27		Employment Agreement between Orthofix Inc. and Thomas Hein dated as of April 11, 2008 (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference).
	10.28		Nonqualified Stock Option Agreement under the Orthofix International N.V. Amended and Restated 2004 Long-Term Incentive Plan, dated April 11, 2008, between Orthofix International N.V. and Thomas Hein (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference).
	10.29		Summary of Consulting Arrangement between Orthofix International N.V. and Peter Hewett (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference).
	10.30		Employment Agreement between Orthofix Inc. and Denise E. Pedulla dated as of June 9, 2008 (filed as an exhibit to the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference).
	10.31		Form of Inducement Grant Nonqualified Stock Option Agreement between Orthofix International N.V. and Robert S. Vaters (filed as an exhibit to the current report on Form 8-K of Orthofix International N.V dated September 10, 2008 and incorporated herein by reference).
	10.32	+	Letter Agreement between Orthofix Inc. and Oliver Burckhardt dated August 28, 2008 (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference).

45

Exhibit
Number			Description
	10.33		Notice of Termination from Orthofix Inc. to Oliver Burckhardt dated August 27, 2008 (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference).
	10.34		Second Amended and Restated Performance Accelerated Stock Options Agreement between Orthofix International N.V. and Bradley R. Mason dated October 14, 2008 (filed as an exhibit to the Company’s current report on Form 8-K filed October 15, 2008 and incorporated herein by reference).
	10.35		Nonqualified Stock Option Agreement between Orthofix International N.V. and Bradley R. Mason dated October 14, 2008 (filed as an exhibit to the Company’s current report on Form 8-K filed October 15, 2008 and incorporated herein by reference).
	10.36		Amended and Restated Employment Agreement, entered into and effective as of July 1, 2009, by and between Orthofix Inc. and Alan W. Milinazzo (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.37	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 30, 2009, by and between Orthofix Inc. and Alan W. Milinazzo.
	10.38		Amended and Restated Employment Agreement, entered into and effective as of July 1, 2009, by and between Orthofix Inc. and Robert S. Vaters (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.39	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 30, 2009, by and between Orthofix Inc. and Robert S. Vaters.
	10.40		Amended and Restated Employment Agreement, entered into and effective as of July 1, 2009, by and between Orthofix Inc. and Bradley R. Mason (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.41	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 31, 2009, by and between Orthofix Inc. and Bradley R. Mason.
	10.42	*	Amended and Restated Employment Agreement, entered into on October 23, 2009 and effective as of November 1, 2009, by and between Orthofix Inc. and Bradley R. Mason.
	10.43		Amended and Restated Employment Agreement, entered into and effective as of July 1, 2009, by and between Orthofix Inc. and Michael M. Finegan (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.44	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated August 4, 2009, by and between Orthofix Inc. and Michael M. Finegan.
	10.45		Form of Amendment to Stock Option Agreements (for Alan W. Milinazzo, Robert S. Vaters, Bradley R. Mason, and Michael M. Finegan) (filed as an exhibit to the Company’s current report on Form 8-K filed July 7, 2009 and incorporated herein by reference).
	10.46		Inducement Stock Option Agreement between Orthofix International N.V. and Kevin L. Unger, dated August 17, 2009 (filed as an exhibit to the Company’s current report on Form 8-K filed August 17, 2009 and incorporated herein by reference).

46

Exhibit
Number			Description
	10.47		Amended and Restated Employment Agreement, entered into on September 4, 2009, by and between Orthofix Inc. and Michael Simpson (filed as an exhibit to the Company’s current report on Form 8-K filed September 11, 2009 and incorporated herein by reference).
	31.1	*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
	31.2	*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
	32.1	*	Section 1350 Certification of Chief Executive Officer.
	32.2	*	Section 1350 Certification of Chief Financial Officer.

*	Filed herewith.
+	Certain confidential portions of this exhibit were omitted by means of redacting a portion of the text. This exhibit has been filed separately with the Secretary of the Commission without redactions pursuant to our Application Requesting Confidential Treatment under the Securities Exchange Act of 1934.

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ORTHOFIX INTERNATIONAL N.V.
Date: November 6, 2009	By:	/s/ Alan W. Milinazzo
		Name:	Alan W. Milinazzo
		Title:	Chief Executive Officer and President
Date: November 6, 2009	By:	/s/ Robert S. Vaters
		Name:	Robert S. Vaters
		Title:	Executive Vice President and Chief Financial Officer

48

EXHIBIT INDEX

Exhibit
Number		Description
10.17	*	Letter Agreement, dated July 25, 2009, between Orthofix Inc. and Raymond C. Kolls.
10.37	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 30, 2009, by and between Orthofix Inc. and Alan W. Milinazzo.
10.39	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 30, 2009, by and between Orthofix Inc. and Robert S. Vaters.
10.41	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated July 31, 2009, by and between Orthofix Inc. and Bradley R. Mason.
10.42	*	Amended and Restated Employment Agreement, entered into on October 23, 2009 and effective as of November 1, 2009, by and between Orthofix Inc. and Bradley R. Mason.
10.44	*	Amendment No. 1 to Amended and Restated Employment Agreement, dated August 4, 2009, by and between Orthofix Inc. and Michael M. Finegan.
31.1	*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	*	Section 1350 Certification of Chief Executive Officer.
32.2	*	Section 1350 Certification of Chief Financial Officer.

* Filed herewith.

49

EX-10.17

Exhibit 10.17

July 25, 2009

Mr. Raymond C. Kolls
13809 Tributary Court
Davidson, NC 28036

Dear Ray:

We understand that you would like to sell the 28,167 of your vested options (Described in more detail in Attachment A) (The “Options”) back to Orthofix International N.V. (“Parent”) in exchange for payment to you of $120,000 (the “Option Payment”). In consideration for your agreement to forfeit your right to and to otherwise cancel those Options (including termination of the underlying Option agreements listed in Attachment A and any right to exercise those Options — except for the Option Agreement listed in #2 in Attachment A where you will retain the balance of the original grant, or 7,433 option shares). For the avoidance of doubt, you will not be terminating the underlying Agreement or the remaining 7,433 option shares in the June 29, 2007 Agreement.); we will agree to pay you the Option Payment as soon as reasonably practicable, but no later than July 31, 2009.

The payments described in this letter (the “Payments”) are intended by you and the Company to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the guidance and Treasury Regulations issued thereunder to the extent applicable thereto, and this letter will be interpreted and construed consistent with this intent. Notwithstanding the foregoing, the Company will not be required to assume any increased economic burden in connection with the Payments. The Company does not represent or warrant that the Payments will comply with Section 409A of the Code or any other provision of federal, state, or local law. Neither the Company, nor any parent or affiliate, nor its or their respective directors, officers, employees or advisers (collectively, the “Parent Group”) will be liable to you (or to any other individual claiming a benefit through you) for any tax, interest, or penalties you might owe as a result of the Payments, and no member of the Parent Group shall have any obligation to indemnify or otherwise protect you from the obligation to pay any taxes pursuant to Section 409A of the Code. You will indemnify the Parent Group for any tax, interest or penalties that may result under Section 409A of the Code as a result of the Payments.

This letter represents the entire agreement between you and the Company with regard to the subject matter hereof and supersedes the agreements between us listed in Attachment A (written or oral) to the contrary. This letter will be governed by North Carolina law and may only be amended or modified by a writing signed by you and the Company.

You acknowledge and agree that after the conclusion of this transaction, you will have no remaining right title or interest in the specific equity awards listed in Attachment A except as noted in paragraph 1 of this Agreement (whether award of stock option, restricted stock unit or any other form of equity award).

Please indicate your agreement and acknowledgment to the above by signing where indicated below and returning a copy to me by fax (617-912-2990). After we receive your signed acknowledgment, we will have a check for $120,000, less any applicable taxes, sent to your home address on file with Orthofix via Fed Ex. The offer represented by this letter shall be void if we do not receive from you a countersigned copy of this letter by 5:00 Eastern Time on July 25, 2009.

Sincerely,

Orthofix Inc.

/s/ Robert S. Vaters Robert S. Vaters, authorized signatory

Acknowledged and Accepted:

/s/ Raymond C. Kolls Raymond C. Kolls, an individual

Dated: July 25, 2009

Attachment A

List of Options

1. 13,300 Options with an exercise price of $43.04 shares represented by a Nonqualified Stock Option Agreement under the Orthofix International N.V. Amended and Restated 2004 Long-Term Incentive Plan, dated June 30, 2005, entered into between Raymond C. Kolls and Parent.

2. 14,867 Options with an exercise price of $44.97 shares represented by a Nonqualified Stock Option Agreement under the Orthofix International N.V. Amended and Restated 2004 Long-Term Incentive Plan, dated June 29, 2007, entered into between Raymond C. Kolls and Parent.

EX-10.37

Exhibit 10.37

AMENDMENT #1 TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDMENT #1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is dated as of July 27, 2009, between Orthofix Inc., (the “Company”), and Alan Milinazzo (the “Executive”).

WHEREAS, the Executive and the Company have previously entered into an Amended and Restated Employment Agreement entered into as of July 1, 2009 (the “Agreement”); and

WHEREAS, the parties desire to enter into this Amendment to revise the terms of the Agreement to provide that options granted after June 29, 2009 shall become vested in full and immediately exercisable following certain terminations of employment occurring during the term of the Agreement;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements of the parties contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Section 5.1(c) of the Agreement shall be deleted in its entirety and replaced with the following new Section 5.1(c):

“all stock options, stock appreciation rights or similar stock-based rights granted to the Executive shall vest in full and be immediately exercisable and any risk of forfeiture included in restricted or other stock grants previously made to the Executive shall immediately lapse. In addition, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) five (5) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any outstanding stock options or stock appreciation rights that were granted prior to June 30, 2009. For any new stock options awarded after June 29, 2009, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) two (2) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any vested and outstanding stock options or stock appreciation rights that were granted after June 29, 2009. The vesting and extension of the exercise period set forth in this Section 5.1(c) shall occur notwithstanding any provision in any Plans or related grant documents which provides for a lesser vesting or shorter period for exercise upon termination by the Company without Cause (which for this purpose shall include a termination by the Executive for Good Reason), notwithstanding anything to the contrary in any Plans or grant documents; provided, however, and for the avoidance of doubt, nothing in this Agreement shall be construed as or imply that this Agreement does or can grant greater rights than are allowed under the terms and conditions of the Plans; provided, further, and for the avoidance of doubt, the first sentence of this Section 5.1(c) shall not apply to a termination of employment after the Term.”

2. Except as otherwise provided herein, the Agreement shall remain in full force and effect in accordance with its original terms.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment, or have caused this Amendment to be executed and delivered, to be effective as of July 27, 2009.

	ORTHOFIX INC.
Date: July 30, 2009	By:	/s/ Robert S. Vaters
		Name:	Robert S. Vaters
		Title:	Executive Vice President and Chief Financial Officer
	EXECUTIVE
Date: July 30, 2009	/s/ Alan W. Milinazzo

EX-10.39

Exhibit 10.39

AMENDMENT #1 TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDMENT #1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is dated as of July 27, 2009, between Orthofix Inc., (the “Company”), and Robert Vaters (the “Executive”).

WHEREAS, the Executive and the Company have previously entered into an Amended and Restated Employment Agreement entered into as of July 1, 2009 (the “Agreement”); and

WHEREAS, the parties desire to enter into this Amendment to revise the terms of the Agreement to provide that options granted after June 29, 2009 shall become vested in full and immediately exercisable following certain terminations of employment occurring during the term of the Agreement;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements of the parties contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Section 5.1(c) of the Agreement shall be deleted in its entirety and replaced with the following new Section 5.1(c):

“all stock options, stock appreciation rights or similar stock-based rights granted to the Executive shall vest in full and be immediately exercisable and any risk of forfeiture included in restricted or other stock grants previously made to the Executive shall immediately lapse. In addition, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) five (5) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any outstanding stock options or stock appreciation rights that were granted prior to June 30, 2009. For any new stock options awarded after June 29, 2009, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) two (2) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any vested and outstanding stock options or stock appreciation rights that were granted after June 29, 2009. The vesting and extension of the exercise period set forth in this Section 5.1(c) shall occur notwithstanding any provision in any Plans or related grant documents which provides for a lesser vesting or shorter period for exercise upon termination by the Company without Cause (which for this purpose shall include a termination by the Executive for Good Reason), notwithstanding anything to the contrary in any Plans or grant documents; provided, however, and for the avoidance of doubt, nothing in this Agreement shall be construed as or imply that this Agreement does or can grant greater rights than are allowed under the terms and conditions of the Plans; provided, further, and for the avoidance of doubt, the first sentence of this Section 5.1(c) shall not apply to a termination of employment after the Term.”

2. Except as otherwise provided herein, the Agreement shall remain in full force and effect in accordance with its original terms.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment, or have caused this Amendment to be executed and delivered, to be effective as of July 27, 2009.

	ORTHOFIX INC.
Date: July 30, 2009	By:	/s/ Alan W. Milinazzo
		Name:	Alan W. Milinazzo
		Title:	Chief Executive Officer and President
	EXECUTIVE
Date: July 30, 2009	/s/ Robert S. Vaters

EX-10.41

Exhibit 10.41

AMENDMENT #1 TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDMENT #1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is dated as of July 27, 2009, between Orthofix Inc., (the “Company”), and Bradley Mason (the “Executive”).

WHEREAS, the Executive and the Company have previously entered into an Amended and Restated Employment Agreement entered into as of July 1, 2009 (the “Agreement”); and

WHEREAS, the parties desire to enter into this Amendment to revise the terms of the Agreement to provide that options granted after June 29, 2009 shall become vested in full and immediately exercisable following certain terminations of employment occurring during the term of the Agreement;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements of the parties contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Section 5.1(c) of the Agreement shall be deleted in its entirety and replaced with the following new Section 5.1(c):

“all stock options, stock appreciation rights or similar stock-based rights granted to the Executive shall vest in full and be immediately exercisable and any risk of forfeiture included in restricted or other stock grants previously made to the Executive shall immediately lapse. In addition, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) five (5) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any outstanding stock options or stock appreciation rights that were granted prior to June 30, 2009. For any new stock options awarded after June 29, 2009, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) two (2) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any vested and outstanding stock options or stock appreciation rights that were granted after June 29, 2009. The vesting and extension of the exercise period set forth in this Section 5.1(c) shall occur notwithstanding any provision in any Plans or related grant documents which provides for a lesser vesting or shorter period for exercise upon termination by the Company without Cause (which for this purpose shall include a termination by the Executive for Good Reason), notwithstanding anything to the contrary in any Plans or grant documents; provided, however, and for the avoidance of doubt, nothing in this Agreement shall be construed as or imply that this Agreement does or can grant greater rights than are allowed under the terms and conditions of the Plans; provided, further, and for the avoidance of doubt, the first sentence of this Section 5.1(c) shall not apply to a termination of employment after the Term.”

2. Except as otherwise provided herein, the Agreement shall remain in full force and effect in accordance with its original terms.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment, or have caused this Amendment to be executed and delivered, to be effective as of July 27, 2009.

	ORTHOFIX INC.
Date: July 31, 2009	By:	/s/ Alan W. Milinazzo
		Name:	Alan W. Milinazzo
		Title:	Chief Executive Officer and President
	EXECUTIVE
Date: July 31, 2009	/s/ Bradley R. Mason

EX-10.42

Exhibit 10.42

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (the “Agreement”), entered into and effective as of November 1, 2009 (the “Effective Date”), is by and between Orthofix Inc., a Minnesota corporation (the “Company”), and Bradley R. Mason, an individual (the “Employee”).

PRELIMINARY STATEMENTS

A. The Company and the Employee are parties to an Amended and Restated Employment Agreement, effective as of July 1, 2009, as amended by Amendment #1 dated July 27, 2009 (the “Prior Agreement”), but desire to further amend and restate the Prior Agreement in its entirety to memorialize the terms of Employee’s change in position and duties.

B. The Employee desires to render such services, upon the terms and conditions contained herein.

C. Simultaneously with the execution of this Agreement, the Employee is executing a Release of Claims in the form attached hereto as Exhibit B (the “Initial Release”).

D. The Company and the Employee are also parties to a Second Amended and Restated Performance Accelerated Stock Options Agreement, dated as of October 14, 2008 (as amended or modified from time to time, the “PASO Agreement”).

E. The Company is a subsidiary of Orthofix International N.V., a corporation organized under the laws of the Netherlands Antilles (the “Parent”), for whom Employee will also perform services as contemplated hereby, and under certain compensation plans of which Employee shall be eligible to receive compensation, and Parent is agreeing to provide such compensation and guarantee the Company’s payment obligations hereunder.

F. Capitalized terms used herein and not otherwise defined have the meaning for them set forth on Exhibit A attached hereto and incorporated herein by reference.

The parties, intending to be legally bound, hereby agree, and the Prior Agreement is hereby amended and restated in its entirety, as follows:

I. EMPLOYMENT AND DUTIES

1.1 Duties. The Company hereby employs the Employee as an employee, and the Employee agrees to be employed by the Company, upon the terms and conditions set forth herein. While serving as an employee of the Company, the Employee shall serve as a Strategic Advisor to the Company. The Employee shall report to the Chief Financial Officer of the Company and shall perform those assignments specifically designated by the Chief Financial Officer, including, but not limited to, providing strategic advice, market analysis, business development and employee mentoring. Employee will perform his responsibilities under this Agreement at a mutually agreed upon location in the San Diego, California area.

1.2 Services. During the Term (as defined in Section 1.3), and excluding any periods of vacation, sick leave or disability, the Employee agrees to devote the majority of his business time, attention and efforts to the business and affairs of the Company. Subject to the terms of Article VI hereof, during the Term, it shall not be a violation of this Section 1.2 for the Employee to (a) serve on boards or committees or engage in other business activities, (b) deliver lectures or fulfill speaking engagements or (c) manage personal investments, so long as such activities do not interfere with the performance of the Employee’s responsibilities in accordance with this Agreement. The Employee must provide five (5) calendar days advanced written notice to the Board before becoming a member of any corporate board.

1.3 Term of Employment. The term of this Agreement shall commence on the Effective Date and shall continue until 11:59 p.m. Eastern Time on October 31, 2010 unless sooner terminated as provided hereunder (the “Term”). In the event that the Employee continues to be employed by the Company (or any other member of the Parent Group) after the Term, unless otherwise agreed by the parties in writing, such continued employment shall be on an at-will, month-to-month basis upon terms agreed upon at such time without regard to the terms and conditions of this Agreement and this Agreement shall be deemed terminated at the end of the Term, regardless of whether such employment continues at-will, other than Articles VI and VII, which shall survive the termination or expiration of this Agreement for any reason.

1.4 Resignations. By executing this Agreement, the Employee hereby resigns from any officer, director or other similar positions he holds with the Company or any member of Parent Group and hereby resigns from any administrative or other committees of the Company or any member of Parent Group to which he is a member. Upon the request of the Company or any member of the Parent Group, the Employee agrees to promptly execute any agreements, documents or instruments to effectuate the foregoing resignations.

II. COMPENSATION

2.1 General. The Company shall pay the Employee the base salary and bonus amounts set forth below in cash, in accordance with the normal payroll practices of the Company. If the Employee does not execute, or executes and subsequently revokes, the Initial Release, the Employee will not be entitled to any payments or benefits under this Agreement.

2.2 Base Salary. The Employee shall be paid an annual base salary of $294,000 while he is employed by the Company during the Term.

2.3 2009 Bonus. With respect to fiscal year 2009, the Employee shall receive a bonus (the “2009 Bonus”) in accordance with the terms and conditions previously established for the Employee by the Compensation Committee of the Board for the fiscal year 2009. Such terms and conditions include a target bonus of 60% of $364,000 and a maximum bonus of 90% of $364,000 based on the attainment of specified performance goals related to revenue and operating income attached hereto as Exhibit C (the “Goals”). The amount of any actual payment for fiscal year 2009 will depend upon the achievement (or not) of the various performance metrics comprising the Goals. Amounts payable with respect to fiscal year 2009 shall be determined by the Board and shall be payable following such fiscal year and no later than two and one-half months after the end of such fiscal year; provided, however, that nothing shall prohibit the Company from reducing the 2009 Bonus from the amount that would otherwise have been paid to the Employee based on the attainment of the Goals if such reduction is part of an overall cost or bonus reduction program that affects all senior executives of the Company in the same proportion.

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2.4 2010 Bonus. With respect to the period commencing January 1, 2010 and ending October 31, 2010, Employee shall receive, subject to the provisions of Section 5.5, a bonus (the “2010 Bonus”) of $147,000, provided he has continuously served as an employee of the Company through October 31, 2010. Subject to the limitations in Section 5.5 hereof, if payable, the bonus for such period will be paid within two (2) business days of October 31, 2010 (the “2010 Bonus Due Date”).

III. EMPLOYEE BENEFITS

3.1 Retirement Plans, Welfare Benefits and Perquisites. During the Term, the Employee shall be eligible to participate in the following Company benefit plans: 401(k) savings plan, medical, dental, life insurance and disability. Employee’s participation in such plans shall be subject to and in accordance with the terms and conditions of the Company’s benefits policies and applicable plans (including as to deductibles, premium sharing, co-payments or other cost-splitting arrangements). In addition, during the Term, Employee shall receive a monthly car allowance of $900. All of the foregoing amounts that are includible in Employee’s income shall be subject to taxation and withholding. Employee will not participate in any benefit arrangements other than those specifically described herein.

3.2 Equity Incentive Awards. During the Term, the Employee shall continue to vest in his existing equity incentive awards as set forth on Exhibit D attached hereto. Provided Employee’s employment with the Company has not been terminated by the Company for “Cause” prior to April 1, 2010 (using the “Cause” definition contained in the Prior Agreement and in accordance with the procedural requirements set forth in Section 4.6 of the Prior Agreement) and Employee has not terminated his employment pursuant to a Voluntary Termination prior to April 1, 2010, all stock options granted to the Employee prior to 2009 shall vest in full and be immediately exercisable on April 1, 2010 and the Employee shall have until the latest date that each such pre-2009 stock option would otherwise expire by its original terms (but in no event later than 10 years from the original grant date) to exercise any such stock option granted prior to 2009. For the avoidance of doubt, nothing in this Agreement shall alter the Employee’s election to exercise options set forth in Section 3(b) of the PASO Agreement and the termination of the Employee and the payments to the Employee following such termination under this Agreement shall create no rights greater or different than those expressly set forth in Section 3(b) of the PASO Agreement.

3.3 Vacation. The Employee shall be entitled to four weeks paid vacation per 12-month period.

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3.4 Expenses. The Employee shall be entitled to receive prompt reimbursement for all reasonable business-related expenses incurred by the Employee in performing his duties under this Agreement. To the extent the Employee is requested by the Company to engage in air travel in the performance of his duties, the Company shall reimburse the Employee for his actual ticket expenses, provided that such expenses are for the purchase of a ticket on a commercial flight with a seat status no greater than that which is consistent with Employee’s past practice when travelling on Company business. Reimbursement of the Employee for such expenses will be made upon presentation to the Company of expense vouchers that are in sufficient detail to identify the nature of the expense, the amount of the expense, the date the expense was incurred and to whom payment was made to incur the expense, all in accordance with the expense reimbursement practices, policies and procedures of the Company.

3.5 Key Man Insurance. The Company shall be entitled to obtain a “key man” or similar life or disability insurance policy on the Employee, and neither the Employee nor any of his family members, heirs or beneficiaries shall be entitled to the proceeds thereof. Such insurance shall be available to offset any payments due to the Employee pursuant to Section 5.4 of this Agreement due to his death or Disability.

IV. TERMINATION OF EMPLOYMENT

4.1 Termination by Mutual Agreement. The Employee’s employment may be terminated at any time during the Term by mutual written agreement of the Company and the Employee.

4.2 Death. The Employee’s employment hereunder shall terminate upon his death.

4.3 Disability. In the event the Employee incurs a Disability for a continuous period exceeding 90 days or for a total of 180 days during any period of 12 consecutive months, the Company may, at its election, terminate the Employee’s employment during the Term by delivering a Notice of Termination (as defined in Section 4.8) to the Employee 30 days in advance of the date of termination.

4.4 Good Reason. The Employee may terminate his employment at any time during the Term for Good Reason by delivering a Notice of Termination to the Company 30 days in advance of the date of termination; provided, however, that the Employee agrees not to terminate his employment for Good Reason until the Employee has given the Company at least 30 days’ in which to cure the circumstances set forth in the Notice of Termination constituting Good Reason and if such circumstances are not cured by the 30^th day, the Employee’s employment shall terminate on such date. If the circumstances constituting Good Reason are remedied within the cure period to the reasonable satisfaction of the Employee, such event shall no longer constitute Good Reason for purposes of this Agreement and the Employee shall thereafter have no further right hereunder to terminate his employment for Good Reason as a result of such event. Unless the Employee provides written notification of an event described in the definition of Good Reason within 90 days after the Employee has actual knowledge of the occurrence of any such event, the Employee shall be deemed to have consented thereto and such event shall no longer constitute Good Reason for purposes of this Agreement.

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4.5 Termination without Cause. The Company may terminate the Employee’s employment at any time during the Term without Cause by delivering to the Employee a Notice of Termination 7 days in advance of the date of termination; provided that as part of such notice the Company may request that the Employee immediately cease performing his duties hereunder. The Notice of Termination need not state any reason for termination and such termination can be for any reason or no reason. The date of termination shall be the date set forth in the Notice of Termination.

4.6 Cause. The Company may terminate the Employee’s employment at any time during the Term for Cause by delivering a Notice of Termination to the Employee. Any determination that the Employee should be terminated for Cause must be approved by the affirmative vote of not less than a majority of the entire membership of the Board, at a meeting of the Board, finding that in the good faith opinion of the Board an event constituting Cause has occurred. If the event constituting Cause is curable (as specified in the definition of Cause), then the Employee shall have 30 days from the date of the Notice of Termination to cure such event described therein to the reasonable satisfaction of the Board in its sole discretion and, if such event is cured by the Employee within the cure period, such event shall no longer constitute Cause for purposes of this Agreement.

4.7 Voluntary Termination. The Employee may voluntarily terminate his employment at any time during the Term by delivering to the Company a Notice of Termination 30 days in advance of the date of termination (a “Voluntary Termination”). For purposes of this Agreement, a Voluntary Termination shall not include a termination of the Employee’s employment by reason of death or for Good Reason. A Voluntary Termination shall not be considered a breach or other violation of this Agreement.

4.8 Notice of Termination. Any termination of employment under this Agreement by the Company or the Employee requiring a notice of termination shall require delivery of a written notice by one party to the other party (a “Notice of Termination”). A Notice of Termination must indicate the specific termination provision of this Agreement relied upon and the date of termination. It must also set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination, other than in the event of a Voluntary Termination or termination without Cause. The date of termination specified in the Notice of Termination shall comply with the time periods required under this Article IV, and may in no event be earlier than the date such Notice of Termination is delivered to or received by the party getting the notice. If the Employee fails to include a date of termination in any Notice of Termination he delivers, the Company may establish such date in its sole discretion. No Notice of Termination under Section 4.4 or 4.6 shall be effective until the applicable cure period, if any, shall have expired without the Company or the Employee, respectively, having corrected the event or events subject to cure to the reasonable satisfaction of the other party. The terms “termination” and “termination of employment,” as used herein are intended to mean a termination of employment which constitutes a “separation from service” under Section 409A.

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V. PAYMENTS ON TERMINATION

5.1 Termination without Cause. If at any time during the Term the Employee’s employment with the Company is terminated by the Company without Cause pursuant to Section 4.5 or by the Employee for Good Reason pursuant to Section 4.4, the Employee shall be entitled to the payment and benefits set forth below only.

(a) Cash Payments.

(i) any unpaid base salary and accrued unpaid vacation then owing through the date of termination and the amount of any 2009 Bonus that is as of such date actually earned or owing under Section 2.3, but not yet paid to the Employee, which amounts shall be paid to the Employee within 30 days of the date of termination; provided, however, if Employee is terminated by the Company without Cause or if he terminates his employment for Good Reason in 2009, the Employee shall be entitled to receive the full amount of any 2009 Bonus that he would have received had his employment not been terminated during such year (payable no later than two and one-half months after the end of the fiscal year).

(ii) a one-time lump sum severance payment in an amount equal to the base salary the Employee would have received from the date of termination through October 31, 2010 had his employment not terminated plus $147,000. The lump sum severance payment shall be paid within 30 days of the Employee’s signing the release described in Section 5.5 and the expiration of any applicable revocation period, subject, in the case of termination other than as a result of the Employee’s death, to Section 7.16.

(b) 2009 Stock Options. If Employee’s employment with the Company is terminated by the Company without Cause pursuant to Section 4.5 or by the Employee for Good Reason pursuant to Section 4.4, in either case, prior to June 30, 2010, Employee will receive accelerated vesting in 21,667 options under Employee’s June 30, 2009 option award and the Employee shall have until the earlier of (i) two-years following such date of termination, and (ii) the latest date such option would otherwise expire by its original terms had the Employee’s employment not been terminated, to exercise any vested and outstanding options granted in 2009. In the event Employee’s employment with the Company is terminated by the Company without Cause pursuant to Section 4.5 or by the Employee for Good Reason pursuant to Section 4.4, in either case, after June 30, 2010, there shall be no additional acceleration of Employee’s June 30, 2009 option awards and the Employee shall have until the earlier of (i) two-years following such date of termination, and (ii) the latest date such option would otherwise expire by its original terms had the Employee’s employment not been terminated, to exercise any vested and outstanding options granted in 2009.

(c) Pre-2009 Stock Options. If at any time prior to April 1, 2010, Employee’s employment with the Company is terminated by the Company without Cause pursuant to Section 4.5 or by the Employee for Good Reason pursuant to Section 4.4, all stock options granted to the Employee prior to 2009 shall vest in full and be immediately exercisable and the Employee shall have until the earlier of (i) five-years following such date of termination, and (ii) the latest date such option would otherwise expire by its original terms had the Employee’s employment not been terminated, to exercise any vested and outstanding options granted prior to 2009.

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5.2 Termination for Cause. If at any time during the Term the Employee’s employment with the Company is terminated by the Company for Cause pursuant to Section 4.6, the Employee shall be entitled to the payment and benefits set forth below only.

(a) Cash Payments. Any unpaid base salary and accrued unpaid vacation then owing through the date of termination and the amount of any 2009 Bonus that is as of such date actually earned or owing under Section 2.3, but not yet paid to the Employee, which amounts shall be paid to the Employee within 30 days of the date of termination. Nothing in this provision is intended to imply that the Employee is entitled to any partial or pro rata payment of the 2009 Bonus on termination unless the Bonus Plan expressly provides as much under its specific terms.

(b) 2009 Stock Options. All of the Employee’s options granted in 2009 which are unvested as of the date of such termination shall be immediately forfeited and the Employee shall have until the earlier of (i) three months following the date of such termination of employment and (ii) the latest date that each stock option would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any options granted in 2009 which are vested and outstanding as of the date of such termination.

(c) Pre-2009 Stock Options. If such termination for Cause occurs at any time prior to April 1, 2010, all stock options granted to the Employee prior to 2009 shall vest in full and be immediately exercisable and the Employee shall have until the earlier of (i) five-years following such date of termination, and (ii) the latest date such option would otherwise expire by its original terms had the Employee’s employment not been terminated, to exercise any vested and outstanding options granted prior to 2009; provided, however, that if such termination for Cause would have been in accordance with the definition of “Cause” set forth in the Prior Agreement and such termination for Cause is otherwise made in compliance with any additional procedural requirements set forth in Section 4.6 of the Prior Agreement, then notwithstanding the foregoing, all of the Employee’s options granted prior to 2009 which are unvested as of the date of such termination shall be immediately forfeited and the Employee shall have until the earlier of (i) three months following the date of such termination of employment and (ii) the latest date that each stock option would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any options granted before 2009 which are vested and outstanding as of the date of such termination.

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5.3 Voluntary Termination. If at any time during the Term, the Employee’s employment with the Company is terminated pursuant to a Voluntary Termination pursuant to Section 4.7 by the Employee, the Employee shall be entitled to the payment and benefits set forth below only.

(a) Cash Payments. Any unpaid base salary and accrued unpaid vacation then owing through the date of termination and the amount of any 2009 Bonus that is as of such date actually earned or owing under Section 2.3, but not yet paid to the Employee, which amounts shall be paid to the Employee within 30 days of the date of termination. Nothing in this provision is intended to imply that the Employee is entitled to any partial or pro rata payment of the 2009 Bonus on termination unless the Bonus Plan expressly provides as much under its specific terms.

(b) 2009 Stock Options. All of the Employee’s options granted in 2009 which are unvested as of the date of such termination shall be immediately forfeited and the Employee shall have until the earlier of (i) three months following the date of such termination of employment and (ii) the latest date that each stock option would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any options granted in 2009 which are vested and outstanding as of the date of such termination.

(c) Pre-2009 Stock Options. If at any time prior to April 1, 2010, the Employee’s employment with the Company is terminated pursuant to a Voluntary Termination by the Employee, all of the Employee’s options granted prior to 2009 which are unvested as of the date of such termination shall be immediately forfeited and the Employee shall have until the earlier of (i) three months following the date of such termination of employment and (ii) the latest date that each stock option would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any options granted before 2009 which are vested and outstanding as of the date of such termination.

5.4 Death; Disability. If at any time during the Term the Employee’s employment with the Company is terminated by death or by the Company for Disability pursuant to Section 4.2 or 4.3, the Employee (or the Employee’s estate, as the case may be) shall be entitled to the payment and benefits set forth below only.

(a) Cash Payments.

(i) any unpaid base salary and accrued unpaid vacation then owing through the date of termination and the amount of any 2009 Bonus that is as of such date actually earned or owing under Section 2.3, but not yet paid to the Employee, which amounts shall be paid to the Employee within 30 days of the date of termination; provided, however, the Employee shall be entitled to receive the pro rata amount of any 2009 Bonus if he is terminated by death or by the Company for Disability in 2009 (based on the number of business days he was actually employed by the Company

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during the fiscal year 2009) that he would have received had his employment not been terminated during such year. Nothing in the foregoing sentence is intended to give the Employee greater rights to a 2009 Bonus than a pro rata portion of what he would ordinarily be entitled to under the Bonus Plan that would have been applicable to him had his employment not been terminated, it being understood that Employee’s termination of employment shall not be used to disqualify the Employee from or make him ineligible for a pro rata portion of the 2009 Bonus to which he would otherwise have been entitled. The pro rata portion of the 2009 Bonus shall, subject to Section 7.16, be paid at the time such 2009 Bonus is paid to senior executives of the Company, but in no event later than two and one-half months after the end of the fiscal year 2009.

(ii) a one-time lump sum severance payment in an amount equal to the sum of the base salary the Employee would have received from the date of termination through October 31, 2010 had his employment not terminated plus $147,000. The lump sum severance payment shall be paid within 30 days of the first to occur of (i) Employee’s death or (ii) Employee’s signing the release described in Section 5.5 and the expiration of any applicable revocation period, subject, in the case of termination other than as a result of the Employee’s death, to Section 7.16.

(iii) any of the foregoing payments by the Company pursuant to a termination by death or by the Company for Disability pursuant to Section 4.2 of 4.3 shall be reduced by any payments received by the Employee pursuant to any of the Company’s employee welfare benefit plans providing for payments in the event of death or Disability.

(b) 2009 Stock Options. If during the Term, Employee’s employment with the Company is terminated by death or by the Company for Disability pursuant to Section 4.2 or 4.3, all stock options granted to the Employee in 2009 shall vest in full and be immediately exercisable and the Employee (or the Employee’s estate, as the case may be) shall have until the earlier of (i) two years from the date of termination, and (ii) the latest date the each option granted in 2009 would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any vested and outstanding options that were granted in 2009.

(c) Pre-2009 Stock Options. If at any time prior to April 1, 2010, Employee’s employment with the Company is terminated by death or by the Company for Disability pursuant to Section 4.2 or 4.3, all stock options, granted to the Employee prior to 2009 shall vest in full and be immediately exercisable and the Employee shall have until the earlier of (i) five years from the date of termination, and (ii) the latest date the each option granted prior to 2009 would otherwise expire by its original terms had the Employee’s employment not terminated, to exercise any vested and outstanding options that were granted prior to 2009.

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5.5 Release. The Company’s obligation to pay any Post-Termination Payments (as defined below) to the Employee following termination (other than in the event of death pursuant to Section 4.2) is expressly subject to the requirement that the Employee execute and not revoke or rescind a release in the form attached hereto as Exhibit E (the “Second Release”) relating to employment matters and the circumstances surrounding his termination in favor of the members of the Parent Group and their officers, directors and related parties and agents. The Second Release must be signed and delivered to the Company no later than 21 calendar days after Employee’s date of termination (the “Second Release Delivery Date”), and must not be revoked within the period ending on the date that is seven (7) calendar days after delivery (the “Second Release Non-Revocation Date”), to receive any Post-Termination Payments. In addition, the Company’s obligation to pay any Post-Termination Payments to the Employee following termination is subject to Employee not violating the provisions of Article VI of this Agreement and the Employee not engaging in any activities constituting Cause. For the avoidance of doubt, and notwithstanding anything in this Agreement to the contrary, if Employee is terminated effective on or after October 31, 2010 but on or before the 2010 Bonus Due Date, then the 2010 Bonus shall not be payable until two business days following the Second Release Non-Revocation Date, and provided further, that in such event, if the Second Release is not delivered, or is revoked on or prior to the Second Release Non-Revocation Date, then the 2010 Bonus shall not be due and payable. For purposes of this Agreement, “Post-Termination Payments” shall mean any amounts (including any bonus amounts) that would otherwise have been due or payable to Employee from the Company at or after the time of termination, but excluding amounts which were due and payable prior to the time of such termination.

5.6 Other Benefits. Except as expressly provided otherwise in this Article V, the provisions of this Agreement shall not affect the Employee’s participation in, or terminating distributions and vested rights under, any pension, profit-sharing, insurance or other employee benefit plan of the Parent Group to which the Employee is entitled pursuant to the terms of such plans, or expense reimbursements he is otherwise entitled to under Section 3.4.

5.7 No Mitigation. It will be difficult, and may be impossible, for the Employee to find reasonably comparable employment following the termination of the Employee’s employment, and the protective provisions under Article VI contained herein will further limit the employment opportunities for the Employee. In addition, the Company’s severance pay policy applicable in general to its salaried employees does not provide for mitigation, offset or reduction of any severance payment received thereunder. Accordingly, the parties hereto expressly agree that the payment of severance compensation in accordance with the terms of this Agreement will be liquidated damages, and that the Employee shall not be required to seek other employment, or otherwise, to mitigate any payment provided for hereunder.

5.8 Limitation; No Other Rights. Any amounts due or payable under this Article V are in the nature of severance payments or liquidated damages, or both, and the Employee agrees that such amounts shall fully compensate the Employee, his dependents, heirs and beneficiaries and the estate of the Employee for any and all direct damages and consequential damages that they do or may suffer as a result of the termination of the Employee’s employment, or both, and are not in the nature of a penalty. Notwithstanding the above, no member of the Parent Group shall be liable to the Employee under any circumstances for any consequential, incidental, punitive or similar damages. The Employee expressly acknowledges that the payments and other rights under this Article V shall be the sole monies or other rights to which the Employee shall be entitled to and such payments and rights will be in lieu of any other rights or remedies he might have or otherwise be entitled to. In the event of any termination under this Article V, the Employee hereby expressly waives any rights to any other amounts, benefits or other rights, including without limitation whether arising under current or future compensation or severance or similar plans, agreements or arrangements of any member of the Parent Group (including as a result of changes in (or of) control or similar transactions), unless Employee’s entitlement to participate or receive benefits thereunder has been expressly approved by the Board. Similarly, no one in the Parent Group shall have any further liability or obligation to the Employee following the date of termination, except as expressly provided in this Agreement.

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5.9 No Right to Set Off. The Company shall not be entitled to set off against amounts payable to the Employee hereunder any amounts earned by the Employee in other employment, or otherwise, after termination of his employment with the Company, or any amounts which might have been earned by the Employee in other employment had he sought such other employment.

5.10 Adjustments Due to Excise Tax.

(a) If it is determined that any amount or benefit to be paid or payable to the Employee under this Agreement or otherwise in conjunction with his employment (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in conjunction with his employment) would give rise to liability of the Employee for the excise tax imposed by Section 4999 of the Code, as amended from time to time, or any successor provision (the “Excise Tax”), then the amount or benefits payable to the Employee (the total value of such amounts or benefits, the “Payments”) shall be reduced by the Company to the extent necessary so that no portion of the Payments to the Employee is subject to the Excise Tax. Such reduction shall only be made if the net amount of the Payments, as so reduced (and after deduction of applicable federal, state, and local income and payroll taxes on such reduced Payments other than the Excise Tax (collectively, the “Deductions”)) is greater than the excess of (1) the net amount of the Payments, without reduction (but after making the Deductions) over (2) the amount of Excise Tax to which the Employee would be subject in respect of such Payments.

(b) In the event it is determined that the Excise Tax may be imposed on the Employee prior to the possibility of any reductions being made pursuant to Section 5.10(a), the Company and the Employee agree to take such actions as they may mutually agree in writing to take to avoid any such reductions being made or, if such reduction is not otherwise required by Section 5.10(a), to reduce the amount of Excise Tax imposed.

(c) The independent public accounting firm serving as the Company’s auditing firm, or such other accounting firm, law firm or professional consulting services provider of national reputation and experience reasonably acceptable to the Company and Employee (the “Accountants”) shall make in writing in good faith all calculations and determinations under this Section 5.10, including the assumptions to be used in arriving at any calculations. For purposes of making the calculations and determinations under this Section 5.10, the Accountants and each other party may make reasonable assumptions and approximations concerning the application of Section 280G and Section 4999. The Company and Employee shall furnish to the Accountants and each other such information and documents as the Accountants and each other may reasonably request to make the calculations and determinations under this Section 5.10. The Company shall bear all costs the Accountants incur in connection with any calculations contemplated hereby.

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VI. PROTECTIVE PROVISIONS

6.1 Noncompetition. Without the prior written consent of the Board (which may be withheld in the Board’s sole discretion), until April 1, 2011, regardless of whether Employee is an employee of the Company or any other member of the Parent Group, the Employee agrees that he shall not anywhere in the Prohibited Area, for his own account or the benefit of any other, engage or participate in or assist or otherwise be connected with a Competing Business. For the avoidance of doubt, the Employee understands that this Section 6.1 prohibits the Employee from acting for himself or as an officer, director, employee, manager, operator, principal, owner, partner, shareholder, advisor, consultant of, or lender to, any individual or other Person that is engaged or participates in or carries out a Competing Business or is actively planning or preparing to enter into a Competing Business. The parties agree that such prohibition shall not apply to the Employee’s passive ownership of not more than 5% of a publicly-traded company.

6.2 No Solicitation or Interference. Until April 1, 2011, regardless of whether Employee is an employee of the Company or any other member of the Parent Group (other than while an employee acting solely for the express benefit of the Parent Group), the Employee shall not, whether for his own account or for the account or benefit of any other Person, throughout the Prohibited Area:

(a) request, induce or attempt to influence (i) any customer of any member of the Parent Group to limit, curtail, cancel or terminate any business it transacts with, or products or services it receives from or sells to, or (ii) any Person employed by (or otherwise engaged in providing services for or on behalf of) any member of the Parent Group to limit, curtail, cancel or terminate any employment, consulting or other service arrangement, with any member of the Parent Group. Such prohibition shall expressly extend to any hiring or enticing away (or any attempt to hire or entice away) any employee or consultant of the Parent Group.

(b) solicit from or sell to any customer any products or services that any member of the Parent Group provides or is capable of providing to such customer and that are the same as or substantially similar to the products or services that any member of the Parent Group, sold or provided while the Employee was employed with, or providing services to, any member of the Parent Group.

(c) contact or solicit any customer for the purpose of discussing (i) services or products that are competitive with and the same or closely similar to those offered by any member of the Parent Group or (ii) any past or present business of any member of the Parent Group.

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(d) request, induce or attempt to influence any supplier, distributor or other Person with which any member of the Parent Group has a business relationship or to limit, curtail, cancel or terminate any business it transacts with any member of the Parent Group.

(e) otherwise interfere with the relationship of any member of the Parent Group with any Person which is, or within one-year prior to the Employee’s date of termination was, doing business with, employed by or otherwise engaged in performing services for, any member of the Parent Group.

6.3 Confidential Information. During the period of the Employee’s employment with the Company or any member of the Parent Group and at all times thereafter, the Employee shall hold in secrecy for the Company all Confidential Information that may come to his knowledge, may have come to his attention or may have come into his possession or control while employed by the Company (or otherwise performing services for any member of the Parent Group). Notwithstanding the preceding sentence, the Employee shall not be required to maintain the confidentiality of any Confidential Information which (a) is or becomes available to the public or others in the industry generally (other than as a result of disclosure or inappropriate use, or caused, by the Employee in violation of this Section 6.3) or (b) the Employee is compelled to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena. Except as expressly required in the performance of his duties to the Company under this Agreement, the Employee shall not use for his own benefit or disclose (or permit or cause the disclosure of) to any Person, directly or indirectly, any Confidential Information unless such use or disclosure has been specifically authorized in writing by the Company in advance. During the Employee’s employment and as necessary to perform his duties under Section 1.1, the Company will provide and grant the Employee access to the Confidential Information. The Employee recognizes that any Confidential Information is of a highly competitive value, will include Confidential Information not previously provided the Employee and that the Confidential Information could be used to the competitive and financial detriment of any member of the Parent Group if misused or disclosed by the Employee. The Company promises to provide access to the Confidential Information only in exchange for the Employee’s promises contained herein, expressly including the covenants in Sections 6.1, 6.2 and 6.4.

6.4 Inventions.

(a) The Employee shall promptly and fully disclose to the Company any and all ideas, improvements, discoveries and inventions, whether or not they are believed to be patentable (“Inventions”), that the Employee conceives of or first actually reduces to practice, either solely or jointly with others, during the Employee’s employment with the Company or any other member of the Parent Group, and that relate to the business now or thereafter carried on or contemplated by any member of the Parent Group or that result from any work performed by the Employee for any member of the Parent Group.

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(b) The Employee acknowledges and agrees that all Inventions shall be the sole and exclusive property of the Company (or member of the Parent Group) and are hereby assigned to the Company (or applicable member of the Parent Group). During the term of the Employee’s employment with the Company (or any other member of the Parent Group) and thereafter, whenever requested to do so by the Company, the Employee shall take such action as may be requested to execute and assign any and all applications, assignments and other instruments that the Company shall deem necessary or appropriate in order to apply for and obtain Letters Patent of the United States and/or of any foreign countries for such Inventions and in order to assign and convey to the Company (or any other member of the Parent Group) or their nominees the sole and exclusive right, title and interest in and to such Inventions.

(c) The Company acknowledges and agrees that the provisions of this Section 6.4 do not apply to an Invention: (i) for which no equipment, supplies, or facility of any member of the Parent Group or Confidential Information was used; (ii) that was developed entirely on the Employee’s own time and does not involve the use of Confidential Information; (iii) that does not relate directly to the business of any member of the Parent Group or to the actual or demonstrably anticipated research or development of any member of the Parent Group; and (iv) that does not result from any work performed by the Employee for any member of the Parent Group.

6.5 Return of Documents and Property. Upon termination of the Employee’s employment for any reason, the Employee (or his heirs or personal representatives) shall immediately deliver to the Company (a) all documents and materials containing Confidential Information (including without limitation any “soft” copies or computerized or electronic versions thereof) or otherwise containing information relating to the business and affairs of any member of the Parent Group (whether or not confidential), and (b) all other documents, materials and other property belonging to any member of the Parent Group that are in the possession or under the control of the Employee.

6.6 Reasonableness; Remedies. The Employee acknowledges that each of the restrictions set forth in this Article VI are reasonable and necessary for the protection of the Company’s business and opportunities (and those of the Parent Group) and that a breach of any of the covenants contained in this Article VI would result in material irreparable injury to the Company and the other members of the Parent Group for which there is no adequate remedy at law and that it will not be possible to measure damages for such injuries precisely. Accordingly, the Company and any member of the Parent Group shall be entitled to the remedies of injunction and specific performance, or either of such remedies, as well as all other remedies to which any member of the Parent Group may be entitled, at law, in equity or otherwise, without the need for the posting of a bond or by the posting of the minimum bond that may otherwise be required by law or court order.

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6.7 Extension; Survival. The Employee and the Company agree that the time periods identified in this Article VI will be stayed, and the Company’s obligation to make any payments or provide any benefits under Article V shall be suspended, during the period of any breach or violation by the Employee of the covenants contained herein. The parties further agree that this Article VI shall survive the termination or expiration of this Agreement for any reason. The Employee acknowledges that his agreement to each of the provisions of this Article VI is fundamental to the Company’s willingness to enter into this Agreement and for it to provide for the severance and other benefits described in Article V, none of which the Company was required to do prior to the date hereof. Further, it is the express intent and desire of the parties for each provision of this Article VI to be enforced to the fullest extent permitted by law. If any part of this Article VI, or any provision hereof, is deemed illegal, void, unenforceable or overly broad (including as to time, scope and geography), the parties express desire is that such provision be reformed to the fullest extent possible to ensure its enforceability or if such reformation is deemed impossible then such provision shall be severed from this Agreement, but the remainder of this Agreement (expressly including the other provisions of this Article VI) shall remain in full force and effect.

VII. MISCELLANEOUS

7.1 Notices. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed to have been effectively made or given if personally delivered, or if sent via U.S. mail or recognized overnight delivery service or sent via confirmed e-mail or facsimile to the other party at its address set forth below in this Section 7.1, or at such other address as such party may designate by written notice to the other party hereto. Any effective notice hereunder shall be deemed given on the date personally delivered, three business days after mailed via U.S. mail or one business day after it is sent via overnight delivery service or via confirmed e-mail or facsimile, as the case may be, to the following address:

If to the Company:

Orthofix Inc.
Attn: Chief Financial Officer
800 Boylston Street
39th Floor
The PRU Tower
Boston, MA 02199
Facsimile:
E-mail: robertvaters@orthofix.com

With a copy which shall not constitute notice to:

Hogan & Hartson LLP
Attn: Joseph E. Gilligan
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telephone No.: (202) 637-5600
Email: jegilligan@hhlaw.com

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If to the Employee:
At the most recent address on file with the Company

With a copy which shall not constitute notice to:

John F. Seegal
Orrick, Herrington & Sutcliffe LLP
The Orrick Building
405 Howard Street
San Francisco, CA 94105-2669
Telephone No.: (415) 773-
E-mail: jseegal@orrick.com

7.2 Legal Fees.

(a) The Company shall pay up to $30,000 in reasonable, documented legal fees and expenses of the Employee’s counsel in connection with the preparation and negotiation of this Agreement.

(b) It is the intent of the Company that the Employee not be required to bear the legal fees and related expenses associated with the enforcement or defense of the Employee’s rights under this Agreement by litigation, arbitration or other legal action because having to do so would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the parties hereto agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved exclusively and finally by binding arbitration in San Diego, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall be responsible for its own fees, costs and expenses and shall pay to the Employee an amount equal to all reasonable attorneys’ and related fees, costs and expenses incurred by the Employee in connection with such arbitration unless the arbitrator determines that the Employee (a) did not commence or engage in the arbitration with a reasonable, good faith belief that his claims were meritorious or (b) the Employee’s claims had no merit and a reasonable person under similar circumstances would not have brought such claims. If there is any dispute between the Company and the Employee as to the payment of such fees and expenses, the arbitrator shall resolve such dispute, which resolution shall also be final and binding on the parties, and as to such dispute only the burden of proof shall be on the Company.

7.3 Severability. If an arbitrator or a court of competent jurisdiction determines that any term or provision hereof is void, invalid or otherwise unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) such arbitrator or court shall replace such void, invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the void, invalid or unenforceable term or provision. For the avoidance of doubt, the parties expressly intend that this provision extend to Article VI of this Agreement.

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7.4 Entire Agreement. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous contracts, arrangements or understandings between the Company, Parent and/or Breg, Inc., a California corporation, on the one hand, and the Employee, on the other hand, relating to the Employee’s employment, expressly including the Prior Agreement, which Prior Agreement is of no further force and effect (except for purposes of using the Cause definition and the procedural requirements specifically provided for in the Prior Agreement). The Employee expressly acknowledges that he has no further rights, and hereby waives or forfeits any and all rights he may have or may have had, under the Prior Agreement, and neither the Company nor any member of the Parent Group shall have any obligation to make any payments or satisfy any other liability to him thereunder (whether written or oral). Nothing in this Agreement shall modify or alter the Indemnity Agreement by and between Parent and the Employee (the “Indemnity Agreement”). In the event of any conflict between this Agreement and any other agreement between the Employee and the Company (or any other member of the Parent Group), including, without limitation the Parent’s Amended and Restated 2004 Long Term Incentive Plan (the “Plan”) or any stock option agreement, this Agreement shall control.

7.5 Amendment; Modification. This Agreement may be amended at any time only by mutual written agreement of the Employee and the Company; provided, however, that, notwithstanding any other provision of this Agreement, the Plan (or any award documents under the Plan) or the Indemnity Agreement, the Company may reform this Agreement, the Plan (or any award documents under the Plans), the Indemnity Agreement or any provision thereof (including, without limitation, an amendment instituting a six-month waiting period before a distribution) or otherwise as contemplated by Section 7.16 below.

7.6 Withholding. The Company shall be entitled to withhold, deduct or collect or cause to be withheld, deducted or collected from payment any amount of withholding taxes required by law, statutory deductions or collections with respect to payments made to the Employee in connection with his employment, termination (including Article V) or his rights hereunder, including as it relates to stock-based compensation.

7.7 Representations.

(a) The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound, and (ii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Employee, enforceable in accordance with its terms. The Employee hereby acknowledges and represents that he has consulted with legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

(b) The Company hereby represents and warrants to the Employee that (i) the execution, delivery and performance of this Agreement by the Company do not and shall not conflict with, breach, violate or cause a default under any material contract, agreement, instrument, order, judgment or decree to which the Company is a party or by which it is bound and (ii) upon the execution and delivery of this Agreement by the Employee, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms.

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7.8 Governing Law; Jurisdiction. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of Massachusetts without regard to any provision of that State’s rules on the conflicts of law that might make applicable the law of a jurisdiction other than that of the State of Massachusetts. Except as otherwise provided in Section 7.2, all actions or proceedings arising out of this Agreement shall exclusively be heard and determined in state or federal courts in the State of California having appropriate jurisdiction. The parties expressly consent to the exclusive jurisdiction of such courts in any such action or proceeding and waive any objection to venue laid therein or any claim for forum nonconveniens.

7.9 Successors. This Agreement shall be binding upon and inure to the benefit of, and shall be enforceable by the Employee, the Company, and their respective heirs, executors, administrators, legal representatives, successors, and assigns. In the event of a Business Combination, the provisions of this Agreement shall be binding upon and inure to the benefit of the parent or entity resulting from such Business Combination or to which the assets shall be sold or transferred, which entity from and after the date of such Business Combination shall be deemed to be the Company for purposes of this Agreement. In the event of any other assignment of this Agreement by the Company, the Company shall remain primarily liable for its obligations hereunder; provided, however, that if the Company is financially unable to meet its obligations hereunder, the Parent shall assume responsibility for the Company’s obligations hereunder pursuant to the guaranty provision following the signature page hereof. The Employee expressly acknowledges that the Parent and other members of the Parent Group (and their successors and assigns) are third party beneficiaries of this Agreement and may enforce this Agreement on behalf of themselves or the Company. Both parties agree that there are no third party beneficiaries to this Agreement other than as expressly set forth in this Section 7.9.

7.10 Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by the Employee, his beneficiaries, dependents or legal representatives without the Company’s prior written consent; provided, however, that nothing in this Section 7.10 shall preclude (a) the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death or (b) the executors, administrators or other legal representatives of the Employee or his estate from assigning any rights hereunder to the Person(s) entitled thereto.

7.11 No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation in favor of any third party, or to execution, attachment, levy or similar process or assignment by operation of law in favor of any third party, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

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7.12 Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

7.13 Construction. The headings of articles or sections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. References to days found herein shall be actual calendar days and not business days unless expressly provided otherwise.

7.14 Counterparts. This Agreement may be executed by any of the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

7.15 Effectiveness. This Agreement shall be effective as of the Effective Date when signed by the Employee and the Company.

7.16 Code Section 409A.

(a) It is the intent of the parties that payments and benefits under this Agreement comply with Section 409A and, accordingly, to interpret, to the maximum extent permitted, this Agreement to be in compliance therewith. If the Employee notifies the Company in writing (with specificity as to the reason therefor) that the Employee believes that any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Employee to incur any additional tax or interest under Section 409A and the Company concurs with such belief or the Company (without any obligation whatsoever to do so) independently makes such determination, the parties shall, in good faith, reform such provision to try to comply with Code Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified by the parties to try to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent of the applicable provision without violating the provisions of Code Section 409A. Notwithstanding the foregoing, the Company shall not be required to assume any economic burden in connection therewith.

(b) If the Employee is deemed on the date of “separation from service” to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is specified as subject to this Section, such payment or benefit shall be made or provided at the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Employee, and (B) the date of the Employee’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 7.16 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. If a payment is to be made promptly after a date, it shall be made within sixty (60) days thereafter.

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(c) Any expense reimbursement under this Agreement shall be made promptly upon Employee’s presentation to the Company of evidence of the fees and expenses incurred by the Employee and in all events on or before the last day of the taxable year following the taxable year in which such expense was incurred by the Employee, and no such reimbursement or the amount of expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year, except for (i) the limit on the amount of outplacement costs and expenses reimbursable pursuant to Section 5.1(c) and (ii) any limit on the amount of expenses that may be reimbursed under an arrangement described in Code Section 105(b).

(d) If at any point during the Term, the Employee’s level of services performed for the Company falls below 20% of the average level of services the Employee performed during the 36 month period immediately preceding the Effective Date, then payments to the Employee shall be suspended for a 6 month period to the extent the Company deems advisable to avoid the Employee incurring an excise tax under Section 409A.

7.17 Survival. As provided in Section 1.3 with respect to expiration of the Term, Articles VI and VII shall survive the termination or expiration of this Agreement for any reason.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

ORTHOFIX INC.	EMPLOYEE
/s/ Alan W. Milinazzo	/s/ Bradley R. Mason
Name: Alan W. Milinazzo	Bradley R. Mason, an individual
Title:   Chief Executive Officer

Guaranty by Parent

Parent (Orthofix International N.V.) is not a party to this Agreement, but joins in this Agreement for the sole purpose of guaranteeing the obligations of the Company to pay, provide, or reimburse the Employee for all cash or other benefits provided for in this Agreement, including the provision of all benefits in the form of, or related to, securities of Parent.

ORTHOFIX INTERNATIONAL N.V.

/s/ Alan W. Milinazzo Name: Alan W. Milinazzo

Title:   President and Chief Executive Officer

EXHIBIT A

Definitions

For purposes of this Agreement, the following capitalized terms have the meanings set forth below:

“Board” shall mean the Board of Directors of Parent. Any obligation of the Board other than termination for Cause under this Agreement may be delegated to an appropriate committee of the Board, including its compensation committee, and references to the Board herein shall be references to any such committee, as appropriate.

“Business Combination” shall mean the consummation of a reorganization, merger, consolidation or other business combination or the sale or other disposition of all or substantially all of the assets of Parent (including assets that are shares held by Parent in its subsidiaries).

“Cause” shall mean the occurrence of any of the following: (i) commission of a criminal act in respect of the Employee’s employment or conviction of, or plea of guilty or no contest to, a felony; (ii) Employee’s significant disparagement of the Company or any member of the Parent Group or any of their respective employees; (iii) Employee engaging in any shareholder proxy solicitation or other similar dissident activities in relation to the Parent or any member of the Parent Group or a successor in the event of a Business Combination; (iv) willful misconduct, gross negligence or breach of fiduciary duty in respect of the Employee’s employment; or (v) continuing neglect or failure of the Employee to perform the duties reasonably assigned to the Employee by the Company and, after notice from the Company of such neglect or failure, the Employee’s failure to cure such neglect or failure within thirty (30) days of such notice.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Competing Business” means any business or activity that (i) competes with any member of the Parent Group for which the Employee, under this Agreement or the Prior Agreement, performed services or the Employee was involved in for purposes of making strategic or other material business decisions and involves (ii) (A) the same or substantially similar types of products or services (individually or collectively) manufactured, marketed or sold by any member of the Parent Group during Term or (B) products or services so similar in nature to that of any member of the Parent Group during Term (or that any member of the Parent Group will soon thereafter offer) that they would be reasonably likely to displace substantial business opportunities or customers of the Parent Group.

“Confidential Information” shall include Trade Secrets and includes information acquired by the Employee in the course and scope of his activities under this Agreement, including information acquired from third parties, that (i) is not generally known or disseminated outside the Parent Group (such as non-public information), (ii) is designated or marked by any member of the Parent Group as “confidential” or reasonably should be considered confidential or proprietary, or (iii) any member of the Parent Group indicates through its policies, procedures, or other instructions should not be disclosed to anyone outside the Parent Group. Without limiting the foregoing definitions, some examples of Confidential Information under this Agreement include

(a) matters of a technical nature, such as scientific, trade or engineering secrets, “know-how”, formulae, secret processes, inventions, and research and development plans or projects regarding existing and prospective customers and products or services, (b) information about costs, profits, markets, sales, customer lists, customer needs, customer preferences and customer purchasing histories, supplier lists, internal financial data, personnel evaluations, non-public information about medical devices or products of any member of the Parent Group (including future plans about them), information and material provided by third parties in confidence and/or with nondisclosure restrictions, computer access passwords, and internal market studies or surveys and (c) and any other information or matters of a similar nature.

“Disability” as used in this Agreement shall have the meaning given that term by any disability insurance the Company carries at the time of termination that would apply to the Employee. Otherwise, the term “Disability” shall mean the inability of the Employee to perform his duties and responsibilities under this Agreement as a result of a physical or mental illness, disease or personal injury he has incurred. Any dispute as to whether or not the Employee has a “Disability” for purposes of this Agreement shall be resolved by a physician reasonably satisfactory to the Board and the Employee (or his legal representative, if applicable). If the Board and the Employee (or his legal representative, if applicable) are unable to agree on a physician, then each shall select one physician and those two physicians shall pick a third physician and the determination of such third physician shall be binding on the parties.

“Good Reason” shall mean the occurrence of any of the following without the written consent of the Employee: (i) any duties, functions or responsibilities are assigned to the Employee that are materially inconsistent with the duties, functions or responsibilities typically assigned to a strategic advisor of companies which are similar in size and nature to, and the financial position of, the Parent Group, (ii) the relocation of the Employee’s principal place of employment to a place other than the San Diego, California area, (iii) the base salary of the Employee is reduced, or (iv) the Company or Parent’s material breach of its obligations under this Agreement.

“Parent Group” shall mean Parent, together with its subsidiaries including the Company.

“Person” shall include individuals or entities such as corporations, partnerships, companies, firms, business organizations or enterprises, and governmental or quasi-governmental bodies.

“Prohibited Area” means North America, South America and the European Union, which Prohibited Area the parties have agreed to as a result of the fact that those are the geographic areas in which the members of the Parent Group conduct a preponderance of their business and in which the Employee provides substantive services to the benefit of the Parent Group.

“Section 409A” shall mean Section 409A of the Code and regulations promulgated thereunder (and any similar or successor federal or state statute or regulations).

“Trade Secrets” are information of special value, not generally known to the public that any member of the Parent Group has taken steps to maintain as secret from Persons other than those selected by any member of the Parent Group.

EX-10.44

Exhibit 10.44

AMENDMENT #1 TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDMENT #1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is dated as of July 27, 2009, between Orthofix Inc., (the “Company”), and Michael Finegan (the “Executive”).

WHEREAS, the Executive and the Company have previously entered into an Amended and Restated Employment Agreement entered into as of July 1, 2009 (the “Agreement”); and

WHEREAS, the parties desire to enter into this Amendment to revise the terms of the Agreement to provide that options granted after June 29, 2009 shall become vested in full and immediately exercisable following certain terminations of employment occurring during the term of the Agreement;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements of the parties contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Section 5.1(c) of the Agreement shall be deleted in its entirety and replaced with the following new Section 5.1(c):

“all stock options, stock appreciation rights or similar stock-based rights granted to the Executive shall vest in full and be immediately exercisable and any risk of forfeiture included in restricted or other stock grants previously made to the Executive shall immediately lapse. In addition, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) five (5) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any outstanding stock options or stock appreciation rights that were granted prior to June 30, 2009. For any new stock options awarded after June 29, 2009, if the Executive’s employment is terminated pursuant to Section 4.2, 4.3, 4.4 or 4.5 during or after the Term, the Executive shall have until the earlier of (i) two (2) years from the date of termination, or (ii) the latest date that each stock option or stock appreciation right would otherwise expire by its original terms had the Executive’s employment not terminated to exercise any vested and outstanding stock options or stock appreciation rights that were granted after June 29, 2009. The vesting and extension of the exercise period set forth in this Section 5.1(c) shall occur notwithstanding any provision in any Plans or related grant documents which provides for a lesser vesting or shorter period for exercise upon termination by the Company without Cause (which for this purpose shall include a termination by the Executive for Good Reason), notwithstanding anything to the contrary in any Plans or grant documents; provided, however, and for the avoidance of doubt, nothing in this Agreement shall be construed as or imply that this Agreement does or can grant greater rights than are allowed under the terms and conditions of the Plans; provided, further, and for the avoidance of doubt, the first sentence of this Section 5.1(c) shall not apply to a termination of employment after the Term.”

2. Except as otherwise provided herein, the Agreement shall remain in full force and effect in accordance with its original terms.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment, or have caused this Amendment to be executed and delivered, to be effective as of July 27, 2009.

	ORTHOFIX INC.
Date: August 4, 2009	By:	/s/ Alan W. Milinazzo
		Name:	Alan W. Milinazzo
		Title:	Chief Executive Officer and President
	EXECUTIVE
Date: August 4, 2009	/s/ Michael M. Finegan

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Alan W. Milinazzo, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Orthofix International N.V.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ Alan W. Milinazzo Name: Alan W. Milinazzo

Title:   Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert S. Vaters, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Orthofix International N.V.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ Robert S. Vaters Name: Robert S. Vaters

Title:   Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Orthofix International N.V. (“Orthofix”) on Form 10-Q for the period ended September 30, 2009 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Alan W. Milinazzo, Chief Executive Officer and President of Orthofix, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Orthofix.

Dated: November 6, 2009	/s/ Alan W. Milinazzo
	Name:	Alan W. Milinazzo
	Title:	Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Orthofix International N.V. (“Orthofix”) on Form 10-Q for the period ended September 30, 2009 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Robert S. Vaters, Executive Vice President and Chief Financial Officer of Orthofix, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Orthofix.

Dated: November 6, 2009	/s/ Robert S. Vaters
	Name:	Robert S. Vaters
	Title:	Executive Vice President and Chief Financial Officer