Document:

ORTHOFIX INTERNATIONAL N.V
                           EXECUTIVE SHARE OPTI0N PLAN
                                      * * *

                                    ARTICLE I

                                    Purpose
                                    -------

         The Orthofix International N.V. Executive Share Option Plan (the
"Plan") is intended as an incentive to encourage the continued employment and
increase the proprietary interest of certain directors, officers and key
employees of Orthofix International N.V. (the "Company") and its subsidiaries.
The Plan is designed to grant such directors, officers and key employees the
opportunity to share in the Company's long-term success through ownership of
common shares, par value $0.10 per share (the "Common Shares") of the Company,
and to afford them the opportunity for additional compensation related to the
value Common Shares.

         The word "Company", when used in the Plan with reference to the
employment of Optionees (as hereinafter defined), shall include subsidiaries of
the Company. The word "subsidiary", when used in the Plan shall mean any
subsidiary corporation of the Company within the meaning of Section 424(f) of
the Internal Revenue Code of 1986, as amended (the "Code").

         Options to acquire Common Shares ("Options") granted under the Plan are
not intended to qualify as, and may not be designated as, "incentive stock
options" within the meaning of Section 422 of the Code.

                                   ARTICLE II

                                 Administration
                                 --------------

         The Plan shall be administered by the Board of Directors of the Company
(the "Board"), or a committee selected by the Board from among its members,
which committee shall have the administrative powers granted to the Board
hereunder.

         Subject to the provisions of the Plan, the Board shall have sole
authority, in its absolute discretion: (a) to determine which of eligible
persons shall be granted Options; (b) to determine the times when Options shall
be granted and the number of Common Shares to be subject to Options; (c) to

<PAGE>

determine the Option price of the Common Shares subject to each Option; (d) to
determine the time or times when each Option becomes exercisable, the duration
of the exercise period and any other restrictions on the exercise of Options
issued hereunder; (e) to prescribe the form or forms of the Option agreements
under the Plan (which forms shall be consistent with the terms of the Plan but
need not be identical and may contain such terms as the Board may deem
appropriate to carry out the purposes of the Plan); (f) to determine the nature
of any rights and restrictions to be imposed on Common Shares subject to Options
issued hereunder; (g) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of the Plan; (h) to
construe and interpret the Plan, the Option agreements under the Plan and the
rules and regulations adopted from time to time, if any; and (i) to make all
other determinations deemed necessary or advisable for the administration of the
Plan but in no event shall any such actions referred to in (a) through (i)
hereof adversely affect the rights of an optionee over Options previously
granted.

                                   ARTICLE III

                                  Common Shares
                                  -------------

         Common Shares subject to Options granted under the Plan shall be
authorized but unissued Common Shares. Under the Plan, the total number of
Common Shares which may be purchased pursuant to Options granted hereunder shall
not exceed, in the aggregate, 1,750,000, except as such number of Common Shares
shall be adjusted in accordance with the provisions of ARTICLE IX hereof.

         Each Option granted under the Plan shall be evidenced by an Option
agreement between the Company and the Optionee containing such provisions, not
inconsistent with the Plan, as may be determined by the Board.

         The number of Common Shares available for grant of Options under the
Plan shall be decreased by the sum of the number of Common Shares with respect
to which Options have been issued and are then outstanding and the number of
Common Shares issued upon exercise of Options. In the event that any outstanding
Option for any reason expires, lapses, or is cancelled prior to the end of the
period during which Options may be granted, the Common Shares called for by the
unexercised portion of such Option may again be subject to an option under the
Plan.

<PAGE>

                                    ARTICLE IV

                          Eligibility of Participants
                          ---------------------------

         Directors, officers and key employees of the Company who have been
selected by the Board ("Optionees") shall be eligible to receive grants of
Options under the Plan.

                                    ARTICLE V

                                  Option Price
                                  ------------

         The Option price of each Option granted under the Plan shall be
determined by the Board; provided, however, that the Option price per Common
Share shall not be less than the lesser of (i) the fair market value of one
Common Share at the time the Option is granted, and (ii) 120% of the price to
the public in the offering registered on Form F-1, File No. 33-46255 (the "IPO
Price") (as adjusted in accordance with ARTICLE IX).

         At any time when the Common Shares are quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
fair market value of Common Shares as of any date shall be deemed to be the mean
betweeen the last quoted bid and asked prices on NASDAQ on the immediately
preceding date, or, if not quoted on that day, then on the last preceding date
on which such Common Shares were quoted. If the Common Shares are listed on one
or more national securities exchanges the fair market value of Common Shares as
of any date shall be deemed to be the mean between the highest and lowest sale
prices reported on the principal national securities exchange on which such
Common Shares are listed and traded on the immediately preceding date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported. If the Common Shares are not quoted on NASDAQ or
listed on an exchange, or representative quotes are not otherwise available, the
fair market value of the Common Shares shall mean the amount determined by the
Board to be the fair market value based upon a good faith attempt to value the
Common Shares accurately.

                                   ARTICLE VI

                         Terms and Conditions of Options
                         -------------------------------

         Options granted under the Plan shall vest and become exercisable in
such installments as the Board shall determine at the time of grant. Options may
be exercisable in whole or in part and if an Option is exercisable in part, the
portion thereof which is exercisable and not exercised shall remain exercisable.

<PAGE>

         The term of Options granted hereunder shall be set by the Board at the
time of grant. Options may provide that if, prior to expiration of the Option
term, the Optionee shall cease to be employed by the Company for any reason,
such Option shall remain exercisable by the Optionee for such period of time as
the Board may determine.

         For purposes of the Plan, in the case of an Optionee who is a
non-employee director of the Company, references to employment herein shall be
deemed to refer to such Optionee's service to the Company in such capacity.

                                   ARTICLE VII

                            Payment for Common Shares
                            -------------------------

         Payment for Common Shares acquired pursuant to an Option granted
hereunder shall be made in full upon exercise of the Option, in immediately
available funds in United States dollars, by certified or bank cashier's check
or by such other means, or combination of means, as the Board may determine,
including, but not limited to, the tendering by the Optionee's previously owned
Common Shares. Payment in full shall include payment of any amounts required
under paragraph (b) of ARTICLE XVII.

                                  ARTICLE VIII

                      Non-Transferability of Option Rights
                      ------------------------------------

         During the lifetime of an Optionee, Options granted to such Optionee
shall be exercisable only by him. No Option shall be transferable, except by
will or the laws of descent and distribution.

                                   ARTICLE IX

                   Adjustment of and Changes in Common Snares
                   ------------------------------------------

         In the event of any merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, distribution of property, special
cash dividend, or other change in corporate structure affecting the Common
Shares, the Board shall make such equitable adjustments, if any, as it deems
appropriate in the number and class of shares subject to, and the exercise price
of, outstanding Options granted under the Plan or available to be granted under
the Plan. The foregoing equitable adjustments shall be determined by the Board
in its sole discretion.

<PAGE>

                                    ARTICLE X

                        No Obligation to Exercise Option
                        --------------------------------

         Granting of an Option shall impose no obligation on the recipient to
exercise such Option.

                                   ARTICLE XI

                            Rights as a Shareholder
                            -----------------------

         An Optionee shall have no rights as a shareholder with respect to any
Common Shares covered by his Option until such person shall have become the
holder of record of such Common Shares, and such person shall not be entitled to
any dividends or distributions or other rights in respect of such Common Shares
for which the record date is prior to the date on which such person shall have
become the holder of record thereof, except as otherwise provided in ARTICLE IX.

                                   ARTICLE XII

                                Employment Rights
                                -----------------

         No Provision of the Plan or any Option granted hereunder shall confer
on an Optionee ant right to continue in the employ of the Company, or to
interfere in any way with the right of the Company to terminate the Optionee's
employment at any time.

                                  ARTICLE XIII

                              Compliance with Law
                              -------------------

         The Company is relieved from any liability for the non-issuance or
non-transfer or any delay in the issuance or transfer of any Common Shares
subject to Options under the Plan which results from the inability of the
Company to obtain, or from any delay in obtaining, from any regulatory body
having jurisdiction or authority, any requisite approval to issue or transfer
any such Common Shares if counsel for the Company deems such approval necessary
for lawful issuance or transfer thereof.

                                   ARTICLE XIV

                            Cancellation of Options
                            -----------------------

         The Board in its discretion may, with the written consent of an
Optionee, cancel any outstanding Option held by such Optionee.

<PAGE>

                                   ARTICLE XV

                    Effective Date; Expiration Date of Plan
                    ---------------------------------------

         The Plan shall become effective upon approval by the shareholders of
the Company. The expiration date of the Plan, after which no Options may be
granted hereunder, shall be the tenth (10th) anniversary of the date of such
approval.

                                   ARTICLE XVI

                       Amendment or Discontinuance of Plan
                       -----------------------------------

         The Board may terminate, amend or modify the Plan in its sole
discretion at any time or from time to time; provided however, that no such
action shall, without the consent of the Optionee affected thereby, adversely
affect the rights of any Optionee with respect to Options granted prior to such
termination, amendment or modification.

                                  ARTICLE XVII

                                 Miscellaneous
                                 -------------

         (a) Options shall be evidenced by Option agreements (which need not be
identical) in such forms as the Board may from time to time approve. Such
agreements shall not be inconsistent with the terms and conditions of the Plan
and may provide that the grant of any Option under the Plan and Common Shares
acquired pursuant to the Plan shall be subject to such other conditions as the
Board determines appropriate, including, without limitation, provisions to
assist the Optionee in financing the purchase of Common Shares through the
exercise of Options, provisions for the forfeiture of, or restrictions on,
resale or other disposition of Common Shares under the Plan, provisions giving
the Company the right to repurchase Common Shares acquired under the Plan in the
event the Optionee elects to dispose of such Common Shares, and provisions to
comply with any applicable securities laws and tax withholding requirements. The
options shall also be entered in a register, kept by or on behalf of the Board.

         (b) The Company may, in its discretion, require that an Optionee pay to
the Company, at the time of grant or exercise of Options, such amount as the
Company deems necessary to satisfy its obligations to withhold U.S. Federal,
state, or local income or other taxes, or taxes of any other jurisdiction,
incurred by reason of such grant, exercise or the transfer of Common Shares
acquired thereupon.

<PAGE>

         (c) If the Board shall find that any person to whom any amount is
payable under the plan is unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or his
estate (unless a prior claim therefor has been made by a duly appointed legal
representative), may, if the Board so directs the Company, be paid to his
spouse, child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Board to be a proper recipient on
behalf of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Board and the Company therefor.

         (d) The Plan shall be governed by and construed in accordance with the
internal laws of the Netherlands Antilles without reference to rules relating
to conflict of law.

         (e) No provision af the Plan shall require the Company, for the purpose
of satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Optioneees shall have no
rights under the Plan other than as unsecured general creditors of the Company,
except that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employeees under general law.

         (f) Each member of the Board shall be fully justified in relying,
acting or failing to act, and shall not be liable for having so relied, acted or
failed to act in good faith, upon any report made by the independent public
accountant of the Company and upon any other information furnished in
connection with the Plan by any person or persons other than such member.

         (g) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, profit-sharing, group insurance or
other benefit plan of the Company.

         (h) The expenses of administering the Plan shall be borne by the
Company.

         (i) Masculine pronouns and other words of masculine gender shall refer
to both men and women.

<PAGE>

                          SHARE OPTION AGREEMENT UNDER
                        THE ORTHOFIX INTERNATIONAL N.V.
                          EXECUTIVE SHARE OPTION PLAN
                          ---------------------------

         This Option Agreement (the "Agreement") is made effective as of the
31st day of March, 1992, between Orthofix International N.V., a Netherlands
Antilles company (the "Company"), and the person signing this Agreement adjacent
to the caption "Optionee" on the signature page hereof (the "Optionee").
Capitalized terms used and not otherwise defined herein shall have the meanings
attributed thereto in the Orthofix International N.V. Executive Share Option
Plan (the "Plan").

         WHEREAS, pursuant to the Plan, the Company desires to afford the
Optionee the opportunity to purchase Common Shares on the terms and conditions
set forth herein;

         NOW, THEREFORE, in connection with the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:

         1. Grant of Options. The Company hereby grants to the Optionee the
right and option (the "Option") to purchase up to, but not exceeding in the
aggregate, _______ Common Shares, on the terms and conditions herein set forth.

         2. Purchase Price. The purchase price of each Common Share covered by
the Option shall be 120% of the IPO Price.

         3. Term and Vesting of the Option.

            (a) Service Shares.

            (i) Vesting. Subject to Section (4) hereof, the Option, to the
      extent of 50% of the Common Shares covered thereby (the "Service Shares"),
      shall vest and become exercisable, on a cumulative basis, as to 20% of the
      Service Shares on and after the first anniversary of the date hereof, and
      as to an additional 20% of the Service Shares on and after each of the
      second, third, fourth and fifth anniversaries of the date hereof; provided
      that, with respect to each such installment, the Optionee remains in the
      employ of the Company as of such anniversary.

            (ii) Term. The term of the Option with respect to the Service Shares
      shall be six (6) years from the date hereof, subject to earlier
      termination in accordance with Section 4 hereof.

<PAGE>

          (b) Performance Shares.

          (i) Vesting. Subject to Section 4 hereof, the Option, to the extent of
     50% of the Common Shares covered thereby (the "Performance Shares"), shall
     vest and become exercisable on the tenth anniversary of the date hereof,
     provided that the Optionee remains in the employ of the Company as of such
     anniversary, and provided, further, that vesting with respect to
     Performance Shares may be accelerated in accordance with Section 3(b)(ii)
     hereof.

          (ii) Accelerated Vesting of Performance Shares.

                    (A) Subject to Section 3(b)(ii)(B) and Section 4 hereof, the
     Option shall vest and become exercisable, on a cumulative basis, with
     respect to 25% of the Performance Shares when the average fair market value
     of the Common Shares (determined in accordance with Article V of the Plan)
     over a period of 180 consecutive days (based on the days within such
     180-day period for which price quotes are available on NASDAQ, or, if the
     Common Shares are listed on a national securities exchange, the days for
     which prices are reported) (the "Average Price") attains a 100% multiple of
     the IPO Price, and with respect to an additional 25% of the Performance
     Shares each time the Average Price attains an additional 100% multiple of
     the IPO Price.

                    (B) Section 3(b)(ii)(A) hereof notwithstanding, and subject
     to Section 4 hereof, the Option shall vest and become exercisable with
     respect to not more than 25% of the Performance Shares for each full year
     of the Optionee's employment with the Company commencing with the date
     hereof.

          (iii) Term. The term of the Option with respect to the Performance
     Shares shall be eleven (11) years from the date hereof, subject to earlier
     termination in accordance with Section 4 hereof.

         4. Termination of Employment.

            (a) Without Cause or for Good Reason. In the event the Optionee's
employment with the Company is terminated by the Company without "Cause," or by
the Optionee for "Good Reason," (i) with respect to the Service Shares, the
Optionee shall be treated for vesting purposes as if he had continued in the
employ of the Company until the anniversary of the date hereof next succeeding
such termination, and (ii) with respect to the Performance Shares, the Optionee
shall be treated for vesting purposes as if he had continued in the employ of
the

<PAGE>

Company until the later of (A) the fourth anniversary of the date hereof, and
(B) the actual date of such termination. In either event, the Option, to the
extent exercisable at the time of termination of employment (after giving effect
to this Section 4(a)), shall remain so exercisable for a period of 180 days
after such termination, and shall thereafter terminate.

         For purposes of this Agreement, "Cause" and "Good Reason" shall have
the meanings given such terms in the Employment Agreement between the Optionee
and the Company dated as of March 31, 1992 (the "Employment Agreement").

            (b) Death or Disability. In the event the Optionee's employment
with the Company is terminated by reason of death or permanent disability
(within the meaning of Section 5.2 of the Employment Agreement), the Option, to
the extent exercisable at the time of termination of employment, shall remain so
exercisable for a period of twelve months after such termination, and shall
thereafter terminate.

            (c) For Cause or without Good Reason. In the event the Optionee's
employment with the Company is terminated by the Company for Cause, or by the
Optionee without Good Reason, the Option, to the extent exercisable at the time
of termination of employment, shall remain so exercisable for a period of 90
days after such termination, and shall thereafter terminate.

            (d) Changes in the Average Price occurring after termination of the
Optionee's employment with the Company shall not be considered in determining
the vesting of Performance Shares under Section 3(b)(ii) hereof.

            (e) The word "Company" as used in this Section 4 shall include any
subsidiary corporation of the Company within the meaning of Section 424(f) of
the Code.

         5. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may be exercised by written notice to the Company at
its offices located at 7 Abraham de Veerstraat, Curacao, Netherlands Antilles.
Such notice shall state the election to exercise the Option and the number of
Common Shares in respect of which the Option is being exercised, and shall be
signed by the person or persons so exercising the Option. Such notice shall be
accompanied by payment of (a) the full purchase price of such Common Shares in
accordance with Article VII of the Plan, and (b) any withholding or other taxes
due by reason of such exercise, in accordance with paragraph (b) of Article XVII
of the Plan.EMPLOYMENT AGREEMENT
                              --------------------

         EMPLOYMENT AGREEMENT dated as of July 1, 2001 (the "Agreement"),
between Orthofix International N.V., a corporation organized under the laws of
the Netherlands Antilles (the "Company"), and Charles W. Federico (the
"Executive").

         WHEREAS, the Company and the Executive desire to enter into a written
employment agreement to memorialize the terms of their relationship;

         NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

     1.  EMPLOYMENT AND DUTIES

         1.1 General. The Company hereby employs the Executive, and the
Executive agrees to serve, as President and Chief Executive Officer of the
Company and of its U.S. subsidiary, Orthofix Inc., and any other position
proposed by the Board of Directors of the Company (the "Board") and accepted by
him, upon the terms and conditions herein contained. The Executive also agrees
to serve, if elected, as an officer or director of any other direct or indirect
subsidiary of the Company besides Orthofix Inc., in each such case at no
compensation in addition to that provided for in this Agreement.

         1.2 Services. The Executive shall provide services to the Company and
its subsidiaries pursuant to this Agreement for at least 208 days in each
calendar year. Anything in this Agreement to the contrary notwithstanding, the
Executive may, with the consent of the Board, engage in other business matters
that do not interfere materially with his duties to the Company pursuant to this
Agreement. In addition, this Agreement shall not be construed to preclude the
Executive from devoting time to civic and community activities or the management
of personal investments so long as such activities do not interfere with the
performance of his duties hereunder.

         1.3 Term of Employment. The Executive's employment under this Agreement
shall commence on July 1, 2001 (the "Effective Date") and shall terminate on the
earlier of (i) the third anniversary of the Effective Date, or (ii) termination
of the Executive's employment pursuant to Sections 4 or 5 of this Agreement.
This initial three-year term, however, shall be automatically extended without
further action of either party for one or more additional one-year periods,
unless written notice of either party's intention not to extend has been given
to the other party hereto at least six months prior to the expiration of the
then-effective term (the period commencing on the Effective Date and ending on
the third anniversary thereof, or such later date

<PAGE>

                                       2

to which the term of the Executive's employment shall have been extended, is
hereinafter referred to as the "Employment Term").

     2.  COMPENSATION

         2.1 Base Salary and Bonus. The base salary and bonus compensation, if
any, to be paid to the Executive shall be determined from time to time by the
Board.

         2.2 Share Options. The Executive has heretofore received grants of
options under the Company's Executive Share Option Plan (the "Executive Plan")
to purchase a certain number of the Company's Common Shares. All such options
shall have the terms and be subject to the conditions specified therefor in the
Executive Plan and any award agreement relating to the options granted to the
Executive thereunder.

     3.  EMPLOYEE BENEFITS

         3.1 General. The Executive shall be included, to the extent eligible
thereunder by virtue of his position, tenure, salary, and other qualifications
(which may include nationality and residence), in all employee benefit plans,
programs or arrangements (including, without limitation, any plans, programs or
arrangements providing for retirement benefits, incentive compensation, profit
sharing, vacation, bonuses, disability benefits, health and life insurance, or
vacation and paid holidays) established by the Company for, or made available
to, its senior executives.

         3.2 Reimbursement of Expenses. The Company will reimburse the Executive
for reasonable travel and other business expenses incurred by him in the
fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company practices
consistently applied.

     4.  TERMINATION OF EMPLOYMENT

         4.1 Termination Without Cause; Resignation For Good Reason.

         4.1.1 General. If, prior to the expiration of the Employment Term, the
Executive's employment is terminated by the Company without Cause (as defined in
Section 4.3), or if the Executive resigns from his employment hereunder for Good
Reason (as defined in Section 4.4), the Executive shall be entitled under this
Agreement to convert his employment to a guaranteed consultancy at the
Executive's sole discretion for the remainder of the Employment Term. Such
consultancy may be terminated by the Company only for Cause (as defined in
Section 4.3) and shall remain an obligation of the Company notwithstanding a
Change in Control (as defined in Section 4.5). As a consultant, the Executive
shall perform such services as are mutually agreed between the Executive and the
Company and the Executive shall honor the covenants in Section

<PAGE>

                                       3

6.0. Unless otherwise determined by the Board, the compensation to be paid to
the Executive shall be US$50,000 per annum. Nothing in this Agreement shall be
construed to diminish or alter the rights of the Executive provided for in the
Company's Staff Share Option Plan (the "Staff Plan") and the Executive Plan in
the event of his termination without Cause or resignation for Good Reason in any
options granted to him under such Plans. Notwithstanding the conversion of the
Executive's employment to a guaranteed consultancy, the Executive shall be
deemed to have remained in the employ of the Company within the meaning of the
Executive Plan and Staff Plan and all unvested options granted in the
Executive's Share Option Agreement(s) shall vest on the schedule(s) set in that
(those) agreement(s). For determining the exercise date of the options that vest
during the period of the Executive's consultancy, the date of termination of
employment shall be the date of expiration of the guaranteed consultancy under
this Agreement.

         4.1.2 Date of Termination or Resignation. The date of termination of
employment without Cause shall be the date specified in a written notice of
termination to the Executive. The date of resignation for Good Reason shall be
the date specified in a written notice of resignation from the Executive to the
Company, or, if no date is specified therein, 10 business days after receipt by
the Company of notice of resignation from the Executive, provided, however, that
no such written notice shall be effective unless the cure period specified in
Section 4.4 has expired without the Company having corrected, to the reasonable
satisfaction of the Executive, the event or events subject to cure.

         4.1.3 Options. Nothing in this Agreement shall be construed to diminish
or alter the rights of the Executive provided for in the Staff Plan and the
Executive Plan in the event of his termination without Cause or resignation for
Good Reason in any options granted to him under such Plans.

         4.2 Termination for Cause; Resignation Without Good Reason.

         4.2.1 General. If, prior to the expiration of the Employment Term, the
Executive's employment is terminated by the Company for Cause, or if the
Executive resigns from his employment hereunder without Good Reason, the
Executive shall be entitled under this Agreement only to payment of his base
salary earned through and including the date of termination or resignation. The
Executive shall have no further right to receive any other compensation, or to
participate in any other plan, arrangement, or benefit, after such termination
or resignation of employment, provided, however, that nothing in this Agreement
shall be construed to diminish or alter the rights of the Executive provided for
in the Staff Plan and the Executive Plan in the event of his termination for
Cause or resignation without Good Reason in any options granted to him under
such Plans.

         4.2.2 Date of Termination or Resignation. The date of termination for
Cause shall be the date specified in a written notice of termination provided
for in Section 4.2.3, provided, however, that no such written notice shall be
effective unless the cure period specified in Section

<PAGE>

                                       4

4.2.3 has expired without the Executive having corrected, to the reasonable
satisfaction of the Board, the event or events subject to cure. The date of
resignation without Good Reason shall be the date specified in a written notice
of resignation from the Executive to the Company, or, if no date is specified
therein, 10 business days after receipt by the Company of notice of resignation
from the Executive.

         4.2.3 Notice of Termination. Termination of the Executive's employment
for Cause shall be communicated by delivery to the Executive of a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to the Executive and reasonable
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board prior to such vote), finding that in the good faith
opinion of the Board an event constituting Cause for termination in accordance
with Section 4.3 has occurred and specifying the particulars thereof (a "Notice
of Termination"). If the event constituting Cause for termination is of a type
specified in Section 4.3(iii), the Executive shall have 20 business days from
the date of receipt of such Notice of Termination to effect a cure of the event
described therein and, upon cure thereof by the Executive to the reasonable
satisfaction of the Board, such event shall no longer constitute Cause for
purposes of this Agreement.

         4.3 Cause. Termination for "Cause" means termination of the Executive's
employment because of the Executive's (i) involvement in fraud, misappropriation
or embezzlement related to the business or property of the Company, (ii)
conviction for, or guilty plea to, a felony or a crime of similar gravity in the
jurisdiction where such conviction or guilty plea occurs, or (iii) willful
breach of any of the material terms of this Agreement (it being acknowledged by
the parties that such material terms include, without limitation, the
Executive's covenants pursuant to Sections 1.2 and 6).

         4.4 Good Reason. For purposes of this Agreement, "Good Reason" means
the Executive's good faith determination that any of the following has occurred:
(i) any significant diminution, without the Executive's prior written consent,
in the Executive's position, duties, responsibilities, power, title or office,
(ii) any breach by the Company of any material provision of this Agreement, or
(iii) the circumstances described in Section 4.5. Unless the Executive provides
written notification of an event described in clause (i) or (ii) of the
preceding sentence within 30 days after the Executive knows or has reason to
know of the occurrence of any such event, the Executive shall be deemed to have
consented thereto and such event shall no longer constitute Good Reason for
purposes of this Agreement. If the Executive provides such written notice to the
Company, the Company shall have 20 business days from the date of receipt of
such notice to effect a cure of the event described therein and, upon cure
thereof by the Company to the reasonable satisfaction of the Executive, such
event shall no longer constitute Good Reason for purposes of this Agreement.

<PAGE>

                                       5

         4.5 Change in Control. (a) In the event of a Change in Control (as
defined in subsection (b) below), the Executive agrees that he shall continue as
President and Chief Executive Officer of the Company (or such other position
that he occupied pursuant to Section 1.1 before the Change in Control) for a
period of at least six months from the effective date of such Change in Control,
unless his employment shall be earlier terminated by the Company. For a period
of three months following such six-month period, the Executive shall have the
right to resign his employment hereunder on 10 business days' written notice to
the Company. Any such resignation shall be treated as a resignation for Good
Reason for purposes of this Agreement and for purposes of any other arrangement
between the Company and the Executive which incorporates by reference the
definition of "Good Reason" set forth in this Agreement.

         (b) For purposes of this Agreement, a "Change in Control" means:

         (i) the acquisition by any individual, entity or group of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the United States
Securities Exchange Act of 1934, as amended) of more than 50% of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors or of equity securities having a value equal to more
than 50% of the total value of all equity securities of the Company, provided,
however, that the following acquisitions of shares or other securities shall not
constitute a Change in Control: (I) any acquisition directly from the Company,
(II) any acquisition by the Company, and (III) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its affiliates; or

         (ii) individuals who as of the effective date of this Agreement
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, except that any director whose election or
nomination for election was approved by the vote of at least a majority of
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding for this purpose
any individual whose initial assumption of office occurs as the result of either
an actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board.

         5. DEATH OR PERMANENT DISABILITY

         5.1 Death. If the Executive's employment hereunder is terminated by
death, the Executive's estate shall be entitled only to payment of the
Executive's base salary earned through and including the date of the Executive's
death and the Company shall have no further obligations under this Agreement,
provided, however, that nothing in this Agreement shall be construed to diminish
or alter the rights of the Executive's estate provided for in the Staff Plan and
the Executive Plan in the event of his death in any options granted to him under
such Plans.

<PAGE>

                                       6

         5.2 Permanent Disability. In the event that the Board terminates the
Executive's employment as a result of a physical or mental incapacity which
substantially prevents the Executive from performing his duties as an employee
and that has continued at least six months and can reasonably be expected to
continue indefinitely, the Executive shall be entitled only to payment of
Executive's base salary earned through and including the last day of such
six-month period. The Company shall have no further obligations under this
Agreement, except as may be provided under any long-term disability policy
maintained by the Company and in which the Executive participated at the time of
his termination of employment, provided, however, that nothing in this Agreement
shall be construed to diminish or alter the rights of the Executive provided for
in the Staff Plan and the Executive Plan in the event of such incapacity in any
options granted to him under such Plans. Any dispute as to whether or not the
Executive is incapacitated within the meaning of the preceding sentence shall be
resolved by a physician reasonably satisfactory to the Board and the Executive.

         6. CONFLICT OF INTEREST, NONINTERFERENCE AND CONFIDENTIALITY

         6.1 Conflict of Interest. During the period of the Executive's
employment hereunder, the Executive shall not, unless he receives the prior
written consent of the Company, directly or indirectly, own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with, as an officer, employee,
partner, stockholder, consultant or otherwise (other than as a stockholder or
investor holding not more than 5% interest) of, any individual, partnership,
firm, corporation or other business organization or entity that, at such time,
is engaged in the business of producing or distributing orthopaedic products
manufactured, distributed or sold by or in competition with those of the
Company.

         6.2 No Solicitation or Interference. During the period of three years
following the Executive's voluntary or involuntary termination of employment for
any reason, the Executive shall not, whether for his own account or for the
account of any other individual, partnership, firm, corporation or other
business organization, directly solicit, endeavor to entice away from the
Company, directly or indirectly induce to terminate employment or business
relations with the Company, or otherwise interfere with the relationship of the
Company with, any person or entity who is, or was within the one-year period
ending on the Executive's date of termination, (a) employed by or otherwise
engaged to perform services for the Company, or (b) a customer or client of the
Company.

         6.3 Trade Secrets. During the period of the Executive's employment
hereunder and at all times thereafter, the Executive shall hold in secrecy for
the Company all trade secrets and other confidential information relating to the
Company's business and affairs that may come to his knowledge or have come to
his knowledge while heretofore employed by the Company, including but not
limited to matters of a technical nature, such as scientific, trade or
engineering secrets, "know-how", formulae, secret processes or machines,
inventions, and research projects, and matters of a business nature, such as,
information about costs, profits, markets, sales, lists of

<PAGE>

                                       7

customers and suppliers, and other information of a similar nature, and plans
for future development. Notwithstanding the preceding sentence, the Executive
shall not be required to maintain the confidentiality of any information which
(i) is or becomes available to the public other than as a result of disclosure
by the Executive in violation of this Section 6.3 or (ii) the Executive is
required to disclose under any applicable laws, regulations or directives of any
government agency, tribunal or authority having jurisdiction in the matter or
under subpoena or other process of law. Except as required in the performance of
his duties to the Company under this Agreement, the Executive shall not use for
his own benefit or disclose to any person, directly or indirectly, any trade
secrets or other confidential information relating to the Company's business and
affairs unless such use or disclosure has been specifically authorized in
writing by the Company in advance.

         6.4 Return of Documents and Property. Upon the termination of the
Executive's employment by the Company, the Executive (or his heir or personal
representative) shall deliver to the Company (a) all documents and materials
containing trade secrets and other confidential information relating to the
Company's business and affairs, and (b) all other documents, materials and other
property belonging to the Company or its affiliated companies that are in the
possession or under the control of the Executive.

         6.5 Remedies. The Executive acknowledges that a breach of any of the
covenants contained in this Section 6 may result in material irreparable injury
to the Company or its affiliates or subsidiaries 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 shall be entitled to the remedies
of injunction and specific performance, or either of such remedies, as well as
all other remedies to which the Company may be entitled, at law, in equity or
otherwise.

         7. 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 telegraphed, telexed or cabled 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 or on the date telegraphed, telexed, or cabled, as the case may be, at
the following address:

         (i) If to the Company:

             Orthofix International N.V.
             7 Abraham de Veerstraat
             Curacao
             Netherlands Antilles

<PAGE>

                                       8

        (ii) If to the Executive:

             Mr. Charles W. Federico
             19323 Peninsula Shores Drive
             Cornelius, NC 28031
             United States of America

         7.2 Disputes. Any dispute arising out of or in connection with this
Agreement, including any question regarding its existence, validity, or
termination, shall be referred to and finally resolved by arbitration
administered by the American Arbitration Association under its National Rules
for the Resolution of Employment Disputes, which Rules are deemed to be
incorporated by reference into this Section 7.2. The number of arbitrators shall
be one. The seat, or legal place, of arbitration shall be in or near
Huntersville, North Carolina. The language to be used in the arbitral
proceedings shall be English. The decision in such arbitration shall be final
and conclusive on the parties and judgment upon such decision may be entered in
any court having jurisdiction thereof. Pending resolution of any dispute, any
amounts payable pursuant to the terms of the Agreement shall be made as and when
due.

         7.3 Severability. If an arbitrator or a court of competent jurisdiction
determines that any term or provision hereof is invalid or unenforceable, (a)
the remaining terms and provisions hereof shall be unimpaired and (b) such
arbitrator or court shall have the authority to replace such 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 invalid or
unenforceable term or provision.

         7.4 Entire Agreement. This Agreement represents the entire agreement of
the parties and shall supersede any and all previous contracts, arrangements or
understandings between the Company and the Executive relating to the Executive's
employment by the Company, except that this Agreement shall not alter or impair
any of the Executive's rights under awards made to him pursuant to the Staff
Plan or the Executive Plan. The Agreement may be amended at any time only by
mutual agreement of the parties hereto.

         7.5 Withholding. The Company shall be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to the Executive in connection with his employment.

         7.6 Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of the State of New York 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 New York.

<PAGE>

                                        9

         7.7 Assignment and Successors. This Agreement shall be binding upon and
inure to the benefit of, and shall be enforceable by the Executive and the
Company, their respective heirs, executors, administrators and assigns. In the
event the Company is merged, consolidated, liquidated by a parent corporation,
or otherwise combined into one or more corporations, the provisions of this
Agreement shall be binding upon and inure to the benefit of the parent
corporation or the corporation resulting from such merger or to which the assets
shall be sold or transferred, which corporation from and after the date of such
merger, consolidation, sale or transfer 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, by operation of law or otherwise, the Company shall
remain primarily liable for its obligations hereunder. This Agreement shall not
be assignable by the Executive.

         7.8 Headings. The headings of 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.

         7.9 Counterparts. This Agreement may be executed by either 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.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                              ORTHOFIX INTERNATIONAL N.V.

By:                                           By:  /s/ Robert Gaines-Cooper
   -----------------------                       -------------------------------
   Name:                                         Name: Robert Gaines-Cooper
   Title:                                        Title: Group Chairman

                                                   /s/ Charles W. Federico
                                                 -------------------------------
                                                       Charles W. Federico

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