Exhibit 10.25

ANNUAL INCENTIVE PROGRAM

The Company does not have a formal, written plan with respect to its annual incentive program applicable to all executive officers. The below summarizes the principal aspects of the Company’s annual incentive program. Each year the Company does notify, in writing, those executive officers selected to participate in the annual incentive program and, if awards are earned, the amount of annual incentive program compensation earning. Samples of those letters also appear below.

The Compensation Committee (the “Committee”) believes that a significant portion of the compensation for each executive officer should be in the form of annual performance-based cash bonuses. Short-term incentives like our annual incentive program tie executive compensation to our immediate financial performance as well as, to a certain extent, individual performance. Each executive officer generally participates in our annual incentive program as it is our primary means of providing for an annual cash bonus. The annual incentive program is based on goals determined by the Committee. Outside of the annual incentive program, the Committee has and does exercise its discretion to grant bonuses for performance or for other circumstances in any year.

Under our program we establish separate performance goals for each of Orthofix International N.V., Orthofix Inc., Breg, Inc., Blackstone Medical, Inc. and our international division based on a matrix of performance goals as set forth below. As a result, executive officers of any of our divisions may be treated differently according to the applicable objectives specific to them. The Chief Financial Officer oversees the process of determining proposed goals for Orthofix International N.V., Orthofix Inc. and Breg, Inc. The proposed goals for Blackstone Medical, Inc. and our international division are supervised by the President of Blackstone Medical, Inc. and the international division head, respectively. The proposed goals and related matrix are then provided to the Committee for review and approval. Typically, the goals are set in February for the current year and payments are made in March for the previous year. We set the performance goals with the intent that it will be challenging for a participant to receive 100% of his potential bonus amount. Executive officers are notified in writing of the goals and bonus eligibility for any given year. The terms of the notice generally require that the executive officer be an employee on the date of payment in order to be paid any compensation under the annual incentive program.

Although each entity and business unit generally has different performance goal amounts applicable to it, the annual incentive program consists of the following performance goal components and are weighted as follows:

50% - based on the attainment of a specified dollar amount of net income or operating income;

40% - based on attainment of specified dollar amount of sales; and

10% - based on individual performance goals.

We developed these weightings with the intent of linking most of the bonus to quantifiable entity or business unit performance measures, but also to permit discretion to recognize individual performance. For 2007, the percent of attainment of the goals relating to corporate performance (net income or operating income and sales) have a floor and a ceiling ranging from 25% to 150%. In 2006, the range was 0-150%, the percentage attainment of which is determined by the Committee at the February meeting. As indicated below, varying bonuses are paid for the attainment of specified goals within that range. The Committee has the discretion to review an entity's or business unit's actual results and consider certain mitigating factors, such as one-time costs or events such as acquisitions or other unique corporate events not contemplated at the time the goals were established. These may be excluded from the financial information used in connection with the determination of bonuses or the financial information may be otherwise adjusted in light of these mitigating factors. With respect to the individual performance component of the formula, each respective entity or business unit determines the appropriate percentage ranging from 0% to 100% and makes a recommendation to the Committee.

To calculate the bonus amount, each percentage is multiplied by its component's percentage weight. The products are added together to produce a resulting weighted percentage. For each participant, this percentage is used to determine what amount of the pre-established bonus goal amount will be paid. The weighted percentage is then multiplied by the maximum amount of bonus for which that participant is eligible. For named executive officers the maximum bonus is a percentage of that person's salary. The following is an illustration of how this calculation may work using sample attainment percentages and maximum eligible bonus numbers: