Orthofix Medical (OFIX) DEFR14ARevised proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.   )

Filed by the Registrant  ☒                              Filed by a Party other than the Registrant  ☐

Check the appropriate box:

ORTHOFIX MEDICAL INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

EXPLANATORY NOTE

Orthofix Medical Inc. (the “Company”) is filing this DEFR 14A to provide the correct version of its 2020 definitive proxy statement, as the prior version filed on EDGAR on April 29, 2020 contained an incorrect meeting location in the letter to shareholders and notice pages. The proxy statement provided below is the version that is being provided to shareholders. No other changes have been made to the version of the proxy statement that was previously filed on EDGAR.

3451 Plano Parkway

Lewisville, Texas 75056

Dear Shareholders:

We will hold the 2020 Annual Meeting of Shareholders (the “Annual Meeting”) of Orthofix Medical Inc. (“Orthofix” or the “Company”) on June 8, 2020 at 11:00 a.m. Central Daylight Time (“CDT”) at the Orthofix Corporate Headquarters at 3451 Plano Parkway, Lewisville, Texas 75056. However, as part of our concern regarding the health and safety of our shareholders, directors, officers, employees, meeting attendees, and the public in light of the current coronavirus outbreak (“COVID-19”), we may elect to change the Annual Meeting location or hold a “virtual” meeting instead of a physical meeting. If we make such a change, we will provide you reasonable advance notice via a press release and SEC filing, as well as a posting on the Investors page of our website.

This booklet includes the notice of Annual Meeting and the proxy statement. The proxy statement describes the business that we will conduct at the meeting.

Your vote is important. Please refer to the proxy card or other voting instructions included with these proxy materials for information on how to vote by proxy or in person.

Notice of Annual Meeting of Shareholders

 and Proxy Statement

 Notice and Proxy Statement for Shareholders of

ORTHOFIX MEDICAL INC.

3451 Plano Parkway

Lewisville, Texas 75056

for

2020 ANNUAL MEETING OF SHAREHOLDERS

to be held on June 8, 2020

This notice and the accompanying proxy statement are being furnished to the shareholders of Orthofix Medical Inc., a Delaware corporation (“Orthofix” or the “Company”), in connection with the upcoming 2020 Annual Meeting of Shareholders (the “Annual Meeting”) and the related solicitation of proxies by the Board of Directors of Orthofix (the “Board of Directors” or “Board”) from holders of outstanding shares of common stock, par value $0.10 per share, of Orthofix for use at the Annual Meeting and at any adjournment thereof. In this notice and the accompanying proxy statement, all references to “we,” “our” and “us” refer to the Company, except as otherwise provided.

Time, Date and Place of Annual Meeting

Notice is hereby given that the Annual Meeting will be held on June 8, 2020 at 11:00 a.m. CDT, at the Orthofix Corporate Headquarters at 3451 Plano Parkway, Lewisville, Texas 75056. However, as part of our concern regarding the health and safety of our shareholders, directors, officers, employees, meeting attendees, and the public in light of the current coronavirus outbreak (“COVID-19”), we may elect to change the Annual Meeting location or hold a “virtual” meeting instead of a physical meeting. If we make such a change, we will provide you reasonable advance notice via a press release and SEC filing, as well as a posting on our Investors page of our website.

Purpose of the Annual Meeting

Please read a detailed description of proposals 1 through 4 stated above beginning on page 50 of the proxy statement.

Shareholders Entitled to Vote

All record holders of shares of Orthofix common stock at the close of business on April 9, 2020 are being sent this notice and will be entitled to vote at the Annual Meeting. Each record holder on such date is entitled to cast one vote per share of common stock.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS MEETING TO BE HELD JUNE 8, 2020: A COPY OF THIS PROXY STATEMENT, PROXY VOTING CARD AND THE ORTHOFIX ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019 ARE AVAILABLE AT WWW.PROXYDOCS.COM/OFIX.

 Proxy Summary

The summary highlights certain information about our business and 2019 performance. This summary does not contain all of the information that you should consider, and we encourage you to read the entire proxy statement before voting.

Director Nominees

¹ Committee composition in table reflects membership as of the date of this proxy statement. All committee members will continue to be independent directors meeting applicable Nasdaq and SEC membership requirements.

2019 Business Highlights

Notable highlights and accomplishments in 2019 include the following:

We manage our business by two reporting segments, Global Spine and Global Extremities, which accounted for 78% and 22%, respectively, of our total net sales in 2019. The chart below presents net sales, which includes product sales and marketing service fees, by reporting segment for each of the years ended December 31, 2019, 2018, and 2017.

Executive Compensation Highlights

We focus our compensation program for our named executive officers and other executive officers on financial, strategic, and operational goals established by the Board of Directors to create value for our shareholders.  Our guiding compensation principle is to pay for performance.  Our compensation program is designed to motivate, measure, and reward the successful achievement of our strategic and operating goals without promoting excessive or unnecessary risk taking.  At the 2019 annual meeting, our say-on-pay proposal was supported by 97.6% of the votes cast, which we believe validates the Company’s “pay-for-performance” approach to executive compensation.

2019 Executive Total Compensation Mix

The charts below show the annual total target direct compensation (full-year base salary, target annual cash incentive compensation and long-term incentive equity compensation received) for our President and Chief Executive Officer and our other named executive officers for 2019.  These charts illustrate that a significant portion of our named executive officer total target compensation was performance-based or variable.

* Graphs exclude compensation for Bradley R. Mason, who served as our President and Chief Executive Officer until his retirement on October 31, 2019. The 2019 CEO target compensation represents Mr. Serbousek’s target compensation during his five months of service in 2019 (which includes his initial 3 months of service as our President of Global Spine and his subsequent 2 months as President and Chief Executive Officer). Long-Term Vesting Equity Incentives include compensation derived from grants of time-based vesting stock options, time-based vesting restricted stock units, and performance-based vesting stock units. “All Other Compensation” value is not shown as it represents less than 1% of total target compensation.

Governance of Executive Compensation

Consistent with shareholder interests and market best practices, our executive compensation program includes the following sound governance features:

Corporate Governance Highlights

We are committed to effective corporate governance and the regular review of our corporate governance practices to continue building on our success and long-term shareholder value.

Director Election

Board Independence

Standing Board Committees

Practices and Policies

TABLE OF CONTENTS

 PROXY STATEMENT FOR THE

 ORTHOFIX MEDICAL INC.

 2020 ANNUAL MEETING OF SHAREHOLDERS

THIS PROXY STATEMENT IS BEING DISTRIBUTED TO SHAREHOLDERS ON OR ABOUT APRIL 29, 2020.

 ABOUT VOTING

Who can vote?

All record holders of shares of Orthofix common stock at the close of business on April 9, 2020 (the “Record Date”), are being distributed this proxy statement and will be entitled to vote at the Annual Meeting. Each record holder on such date is entitled to cast one vote per share of common stock. As of the Record Date, there were 19,172,678 shares of Orthofix common stock outstanding.

Quorum, vote required

The presence, in person or by proxy, of the holders of a majority of the shares of Orthofix common stock outstanding on the Record Date is required to constitute a quorum at the Annual Meeting. Assuming a quorum is present, the nominees for election as directors in Proposal 1 will be elected upon the affirmative vote of a plurality of all votes cast at the Annual Meeting. Assuming a quorum is present, the approval of the holders of a majority of the votes cast on Proposals 2, 3, and 4 at the Annual Meeting will be required to approve each of these Proposals.

Abstentions and “broker non-votes” are counted as shares that are present and entitled to vote on the proposals for purposes of determining the presence of a quorum, but they are not counted as votes cast and therefore will not have any effect on the outcome of voting on the proposals. A broker “non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

If you are a record holder, you may cast your vote at https://www.proxypush.com/OFIX. See your proxy card for your online control number in order to vote. If your shares of common stock are held in street name, you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted.

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Proxies

This proxy statement is being furnished to holders of shares of Orthofix common stock in connection with the solicitation of proxies by and on behalf of the Board for use at the Annual Meeting.

All shares of Orthofix common stock that are represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting and which are not validly revoked, will be voted at the Annual Meeting in accordance with the instructions indicated on such proxies. If no instructions are indicated on a properly executed proxy, such proxy will be voted in favor of each of the proposals. The Board does not know of any other matters that are to be presented for consideration at the Annual Meeting.

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (1) filing with Orthofix, at or before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy, or (2) duly executing a subsequent proxy relating to the same shares of Orthofix common stock and delivering it to Orthofix before the Annual Meeting. Attending the Annual Meeting will not in and of itself constitute the revocation of a proxy. Any written notice of revocation or subsequent proxy should be sent so as to be delivered to: Orthofix Medical Inc., 3451 Plano Parkway, Lewisville, Texas 75056, at or before the taking of the vote at the Annual Meeting.

Voting is confidential

We maintain a policy of keeping all proxies and ballots confidential.

The costs of soliciting these proxies and who will pay them

We will pay all the costs of soliciting these proxies, including reimbursing banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you. Our directors and employees may also solicit proxies by telephone, fax or other electronic means of communication, or in person.

Obtaining an Annual Report on Form 10-K

We have filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”) with the U.S. Securities and Exchange Commission (the “SEC”). The 2019 Form 10-K is available on our website at www.orthofix.com and at http://www.proxydocs.com/OFIX. If you would like to receive an additional copy of the 2019 Form 10-K, we will send you one free of charge. Please write to:

Orthofix Medical Inc.

3451 Plano Parkway

Lewisville, Texas 75056

Attention: Mr. Mark Quick, Investor Relations

You may also contact Mr. Quick at (214) 937-2924 or at MarkQuick@orthofix.com.

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The voting results

We will publish the voting results from the Annual Meeting in a Current Report on Form 8-K, which we will file with the SEC after the conclusion of the meeting. You will also be able to find the Form 8-K on our website at www.orthofix.com.

Whom to call if you have any questions

If you have questions about the Annual Meeting, voting or your ownership of shares of Orthofix common stock, please contact Mr. Quick at (214) 937-2924 or at MarkQuick@orthofix.com. Directions to the meeting can be found at http://www.proxydocs.com/OFIX.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on June 8, 2020

This proxy statement, your proxy voting card and the 2019 Form 10-K are available at http://www.proxydocs.com/OFIX.

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 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

 OWNERS AND MANAGEMENT AND RELATED

 STOCKHOLDERS

Who are the principal owners of shares of Orthofix common stock?

The following table shows each person, or group of affiliated persons, who beneficially owned, directly or indirectly, at least 5% of the shares of our common stock. Our information is based on reports filed with the SEC by each of the firms or individuals listed in the table below. You may obtain these reports from the SEC.

The Percent of Class figures for the shares of our common stock are based on 19,172,678 shares of our common stock outstanding as of April 9, 2020. Except as otherwise indicated, each shareholder has sole voting and dispositive power with respect to the shares indicated.

⁽¹⁾ Information obtained from a Schedule 13G/A filed with the SEC by BlackRock, Inc. (“BlackRock”) on February 4, 2020. The Schedule 13G/A discloses that BlackRock has sole power to vote or direct the vote of 2,964,470 shares and sole power to dispose of or to direct the disposition of 2,998,962 shares.

⁽²⁾ Information obtained from a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 12, 2020. The Schedule 13G/A discloses that Vanguard has sole power to vote or direct the vote of 32,549 shares, shared power to vote or direct the vote of 7,396 shares, sole power to dispose of or to direct the disposition of 1,966,224 shares, and shared power to dispose of or to direct the disposition of 38,079 shares.

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Shares of common stock owned by Orthofix’s directors and executive officers

The following table sets forth the beneficial ownership of shares of our common stock, including stock options currently exercisable and exercisable within 60 days of April 9, 2020, by each director, each director nominee, each named executive officer listed in the Summary Compensation Table, and all current directors, director nominees and executive officers as a group. The Percent of Class figure is based on 19,172,678 shares of our common stock outstanding as of April 9, 2020. All directors and executive officers as a group beneficially owned 905,613 shares of our common stock as of such date. Unless otherwise indicated, the beneficial owners exercise sole voting and/or investment power over their shares.

* Represents less than one percent.

⁽¹⁾ Reflects 131,200 shares owned directly, 18,155 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽²⁾ Reflects 27,639 shares owned directly, 9,910 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽³⁾ Reflects 1,295 shares owned directly, 9,910 shares issuable pursuant to deferred stock units that are potentially issuable within 60 days of April 9, 2020 and 22,500 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽⁴⁾ Reflects 11,097 shares owned directly, 9,910 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽⁵⁾ Reflects 4,950 shares owned directly, 9,910 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽⁶⁾ Reflects 26,174 shares owned directly and 9,910 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020.

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⁽⁷⁾ Reflects 6,331 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 9, 2020 and 15,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽⁸⁾ Reflects 2,900 shares owned directly.

⁽⁹⁾ Reflects 28,975 shares owned directly, and 60,513 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽¹⁰⁾ Reflects 17,287 shares owned directly and 24,683 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽¹¹⁾ Reflects 34,257 shares owned directly and 103,529 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽¹²⁾ Reflects 32,248 shares owned directly and 59,782 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

⁽¹³⁾ Reflects 116,333 shares owned directly and 425,072 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 9, 2020.

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INFORMATION ABOUT OUR executive officers

Our executive officers are listed and described below, together with certain former officers whose compensation arrangements are described herein. Messrs. Serbousek, Bianchi, Finegan, Rice, and Mason and Ms. Elting are referred to collectively throughout this proxy statement as our “named executive officers.”

Jon C. Serbousek. Mr. Serbousek was named President and Chief Executive Officer in October 2019 at the time of Mr. Mason’s retirement.  Mr. Serbousek joined the company in August 2019 as President of Global Spine. He has over 30 years’ experience in the medical device and biotech industries serving in several leadership positions at Biomet Inc., including Worldwide President of Biomet Biologics, Worldwide Group President of Orthopedics, and President of U.S. Orthopedics.  Prior to joining Biomet, Mr. Serbousek held various positions within Medtronic Inc. including Worldwide Division President, Spine, Worldwide Vice President and General Manager of Biologics for their Spine and Biologics business.  Additionally, he spent 13 years with DePuy Orthopedics, a Johnson & Johnson company where he served in numerous roles of increasing responsibility, including the Vice President of Marketing and Product Development and as Vice President of Spinal Operations.  In addition, Mr. Serbousek has held numerous board positions at for profit and not-for-profit organizations.  He earned his Bachelor of Science degree in Engineering from Washington State University, his Masters of Science degree in Bioengineering from the University of Utah and completed several advanced management programs including a program at the IMD International School of Management in Lausanne, Switzerland.

Kimberley A. Elting. Ms. Elting joined Orthofix as Chief Legal Officer in September 2016 and was named Chief Legal and Administrative Officer in 2017. Before joining the Company, she had served since 2013 as General Counsel and Vice President Corporate Affairs at TriVascular Technologies, Inc. In this role, she led the legal, compliance, human resources (HR) and government affairs functions. Between 2007 and 2012, she served in various roles of increasing responsibility with St. Jude Medical, including General Counsel and Vice President of HR and Health Policy for the Neuromodulation Division. She also previously was a partner at the Jones Day law firm where she counseled clients in the health care sector on mergers and acquisitions and regulatory matters. A graduate of Ithaca College, Ms. Elting earned her Law Degree from the University of Denver and an LL.M. in Health Law from Loyola University Chicago.

Michael M. Finegan. Mr. Finegan joined Orthofix in June 2006 as Vice President of Corporate Development, and became the President of Biologics in March 2009. In October 2011, he was promoted to Senior Vice President, Business Development, and President of Biologics, and in June 2013, to his current position as Chief Strategy Officer. On March 31, 2020, the Company and Mr. Finegan determined that he would depart as an executive officer and employee of the Company as of July 4, 2020. Prior to joining Orthofix, Mr. Finegan spent 16 years as an executive with Boston Scientific in a number of different commercial and strategic roles, most recently as Vice President of Corporate Sales. Earlier in his career, Mr. Finegan held sales and marketing roles with Marion Laboratories and spent three years in banking with First Union Corporation (Wachovia). Mr. Finegan earned a Bachelor of Arts in Economics from Wake Forest University.

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Kevin Kenny. Mr. Kenny became President, Global Spine, in December 2019. Mr. Kenny previously served as Vice President of U.S. Sales for Medtronic Spine and Biologics where he oversaw all sales functions for approximately 1,500 direct and non-direct sales personnel. During his nine-year tenure with Medtronic, Mr. Kenny held a variety of sales roles, each with increasing areas of responsibility. Mr. Kenny more recently served as the Chief Operating Officer for Cardiovascular Systems Incorporated where he drove business strategies focused on developing and commercializing new products worldwide. Earlier in his career, Mr. Kenny served as Vice President of Sales for Bausch and Lomb and also held various sales leadership roles with B. Braun/McGaw, a worldwide manufacturer and distributor of medical devices. Mr. Kenny serves on the board of directors for the Medical Device Manufacturers Association. He earned his B.S. in Business Administration from California State University in Sacramento, CA.

Douglas C. Rice. Mr. Rice became the Company’s Chief Financial Officer in April 2015. He joined Orthofix as Chief Accounting Officer in September 2014 and was appointed to the position of Interim Chief Financial Officer later that month. Mr. Rice joined the Company from Vision Source, an international optometric network provider, where he had served since 2012 as Chief Financial Officer. Mr. Rice served as the Vice President Finance, Treasurer of McAfee, a security technology company, from 2007 to 2012, when it was acquired by Intel. From 2000 to 2007, he served as the Senior Vice President, Corporate Controller of Concentra, Inc., a national healthcare service provider. Mr. Rice’s over 30 years of finance experience also included finance leadership positions with la Madeleine, Allied Marketing Group as well as PricewaterhouseCoopers (formerly Coopers & Lybrand). He is a certified public accountant, and holds an MBA and BBA, with honors, from Southern Methodist University.

Davide Bianchi. Mr. Bianchi joined Orthofix as President, International Extremity Fixation in July 2013 and was named as the Company’s President, Global Extremity Fixation in December 2013. In June 2018, he became the Company’s President, Global Extremities. Mr. Bianchi ceased serving as President of Global Extremities on March 31, 2020. In accordance with the terms of his Swiss-law governed employment contract, he continues on "garden leave" status with the Company’s Swiss subsidiary until his departure as an employee from such subsidiary as of October 1, 2020.

Bradley R. Mason. Mr. Mason served as President and Chief Executive Officer and as a director from 2013 until his retirement in October 2019. Since his retirement, he has served as a consultant to the Company.

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INFORMATION ABOUT DIRECTORS

The Board of Directors and Committees of the Board

Our Bylaws provide that the Board shall consist of not less than six and no more than fifteen directors, the exact number to be determined from time-to-time by resolution of the Board. The Board is currently comprised of eight seats, and will be expanded to nine seats effective as of this year’s Annual Meeting.

Directors are elected at each annual meeting of shareholders by a plurality of the votes cast, in person or by proxy by the shareholders. It is our policy that all directors attempt to attend the Annual Meeting, and at last year’s meeting, all currently serving directors did attend. We expect that all directors will attend this year’s meeting.

The Board meets at least four times per year in person at regularly scheduled quarterly meetings, but will meet more often in person if necessary. In addition, the Board typically holds several additional meetings each year by telephone conference as events require. The Board met 11 times during 2019, five of which were in-person meetings. The Board has four standing committees: the Audit and Finance Committee, the Compensation Committee, the Compliance and Ethics Committee and the Nominating and Governance Committee. During 2019 every director attended 75% or more of the aggregate of all meetings of the Board and the Committees on which he or she served held during the period for which he or she was a director or Committee member, as applicable.

Of our nine director nominees, the Board has determined that each of Mr. Hannon, Mr. Hinrichs, Mr. Lukianov, Ms. Marks, Mr. Matricaria, Mr. Paolucci, Ms. Sainz and Mr. Sicard are independent under the current Nasdaq listing standards. Mr. Serbousek is not considered independent, as he also serves as the Company’s President and Chief Executive Officer. A list of our director nominees and background information for each of them is presented in the section “Proposal 1: Election of Directors,” beginning on page 50.

Board Leadership Structure

Mr. Matricaria, who is an independent director, serves as the Chairman of the Board. Mr. Serbousek, who is also a director, serves as the Company’s President and Chief Executive Officer. The Board believes that the separation of these two critical roles best serves the Company’s shareholders at this time because it allows our President and Chief Executive Officer to focus on providing leadership over our day-to-day operations while our independent Chairman focuses on leadership of the Board.

The Audit and Finance Committee

Our Audit and Finance Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The committee oversees the Company’s financial reporting process on behalf of the Board. The committee is responsible for the selection, compensation, and oversight of the Company’s independent registered public accounting firm. The committee reviews matters relating to the Company’s internal controls, as well as other matters warranting committee attention. The committee also meets privately, outside the presence of Orthofix management, with our independent registered public accounting firm. The Audit and Finance Committee’s report for 2019 is printed below at page 69.

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The Board has adopted a written charter for the Audit and Finance Committee, a copy of which is available for review on our website at www.orthofix.com.

The Audit and Finance Committee met nine times during 2019 (five of which were in-person meetings).

Mr. Hinrichs, Mr. Lukianov and Mr. Sicard currently serve as members of the Audit and Finance Committee, with Mr. Hinrichs serving as Chair. Under the current rules of Nasdaq and pursuant to Rule 10A-3 of Schedule 14A under the Exchange Act, all of the committee members are independent. The Board has determined that Mr. Hinrichs is an “audit committee financial expert” as that term is defined in Item 407(d) of Regulation S-K.

The Compensation Committee

The Compensation Committee is responsible for establishing compensation policies and determining, approving and overseeing the total compensation packages for our executive officers, including all elements of compensation. The committee administers our Amended and Restated 2012 Long-Term Incentive Plan (the “2012 LTIP”), the primary equity incentive plan under which we make equity-related awards, together with its predecessor, the 2004 Long-Term Incentive Plan (under which some grants made prior to 2013 remain outstanding) (the “2004 LTIP”). In addition, the committee administers our Second Amended and Restated Stock Purchase Plan (the “SPP”), an equity plan under which most of our employees and directors are eligible to purchase shares of Company common stock.

The Compensation Committee met seven times during 2019 (four of which were in-person meetings).

The Board has adopted a written charter for the Compensation Committee, a copy of which is available for review on our website at www.orthofix.com.

Mr. Lukianov, Mr. Paolucci and Ms. Sainz currently serve as members of the Compensation Committee, with Mr. Paolucci serving as Chair. All of these members (i) are non-employee, non-affiliated, outside directors who have been determined by the Board to be independent under the current rules of Nasdaq and (ii) satisfy the qualification standards of Section 162(m) of the Code, and Section 16 of the Exchange Act.

No interlocking relationship, as defined in the Exchange Act, currently exists, nor existed during 2019, between the Board or Compensation Committee and the board of directors or compensation committee of any other entity.

The Compliance and Ethics Committee

The Compliance and Ethics Committee assists the Board in overseeing the Company’s Corporate Compliance and Ethics Program and the Company’s global compliance with various international and domestic laws and regulations, including those related to the U.S. Food and Drug Administration and requirements of the U.S. Foreign Corrupt Practices Act and other applicable global anti-corruption laws. The committee also assists the Board in overseeing the Company’s compliance with the Company’s own Corporate Code of Conduct, policies and procedures.

The Compliance and Ethics Committee met five times in 2019 (all of which were in-person meetings).

The Board has adopted a written charter for the Compliance and Ethics Committee, a copy of which is available for review on our website at www.orthofix.com.

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Ms. Marks, Mr. Paolucci and Ms. Sainz currently serve as members of the Compliance and Ethics Committee, with Ms. Sainz serving as Chair. All of these members have been determined by the Board to be independent under the current rules of the Nasdaq Global Select Market and the SEC.

The Nominating and Governance Committee

The Nominating and Governance Committee assists the Board in identifying qualified individuals to become Board members, recommends to the Board nominees for election at each annual meeting of shareholders, develops and recommends to the Board the Company’s corporate governance principles and guidelines, and evaluates potential candidates for executive positions as appropriate. In connection with this role, the committee periodically reviews the composition of the Board in light of the characteristics of independence, skills, experience and availability of service, with an emphasis on the particular areas of skill and experience needed by the Board at any given time. The committee periodically reviews with the Chairman of the Board and the President and Chief Executive Officer succession planning, and makes recommendations to the Board in connection with succession planning. The committee oversees the Board’s annual evaluation process, which includes the completion of questionnaires covering the Board, each committee and individual director performance. In addition, the committee oversees the Company’s enterprise risk management program, reviews risk assessments, and receives reports from management on risk areas and mitigation plans.

The Nominating and Governance Committee met four times in 2019 (all of which were in-person meetings).

The Board has adopted a written charter for the Nominating and Governance Committee, a copy of which is available for review on our website at www.orthofix.com.

Mr. Hinrichs, Ms. Marks, and Mr. Matricaria currently serve as members of the Nominating and Governance Committee, with Ms. Marks serving as Chair. All of these members have been determined by the Board to be independent under the current rules of Nasdaq and the SEC.

Board’s Role in Risk Oversight

The Board plays an important role in overseeing various risks that we may face from time to time. While the full Board has primary responsibility for risk oversight, it utilizes its committees, as appropriate, to monitor and address the risks that may be within the scope of a particular committee’s expertise or charter. For example, the Audit and Finance Committee oversees our financial statements, the Compliance and Ethics Committee assists in the Board’s oversight of compliance with certain legal and regulatory requirements, and the Nominating and Governance Committee oversees and receives reports on the Company’s enterprise risk management program. The Board believes the composition of its committees, and the distribution of the particular expertise of each committee’s members, makes this an appropriate structure to more effectively monitor these risks.

An important feature of the Board’s risk oversight function is to receive updates from its committees and management, as appropriate. In that regard, the Board regularly receives updates from the President and Chief Executive Officer, Chief Financial Officer, Chief Legal and Administrative Officer, and Chief Ethics and Compliance Officer, including in connection with material litigation and legal compliance matters. The Board also receives updates at quarterly in-person Board meetings on committee activities from each committee Chair. In addition, the senior executive of each Company division or business unit periodically reviews and assesses the most significant risks associated with his or her division or unit. These assessments are then aggregated by our management team and presented to the Board. The Board regularly discusses with management these risk

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assessments and includes risk management and risk mitigation as part of its oversight of the enterprise risk management program and its ongoing strategic planning process.

Cybersecurity Risk Management

The Nominating and Governance Committee regularly reviews the Company’s cybersecurity and other IT risks, controls and procedures, including plans to mitigate cybersecurity risks and respond to data breaches. The Nominating and Governance Committee periodically receives reports at its regularly scheduled meetings from the Chief Information Officer and Director of IT Security and Controls on, among other things, the Company’s cyber risks and threats, the status of projects to strengthen the Company’s IT systems, assessments of the Company’s security program and the emerging threat landscape.

Corporate Code of Conduct

Our Corporate Code of Conduct is the Company’s code of ethics applicable to all directors, officers and employees worldwide. The goals of our Corporate Code of Conduct, as well as our general corporate compliance and ethics program (which we have branded the Integrity Advantage™ Program), are to deter wrongdoing and to promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) the full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us, (iii) compliance with applicable governmental laws, rules and regulations, (iv) the prompt internal reporting of violations of the Corporate Code of Conduct, and (v) accountability for adherence to the Corporate Code of Conduct. Our Corporate Code of Conduct applies to all areas of professional conduct, including customer relationships, conflicts of interest, financial reporting, use of company assets, insider trading, intellectual property, confidential information and workplace conduct. Under the Corporate Code of Conduct, employees, directors and executive officers are responsible for promptly reporting potential violations of any law, regulation or the Corporate Code of Conduct to appropriate personnel or a hotline we have established.

Our Corporate Code of Conduct is available for review on our website at www.orthofix.com under the Corporate Governance caption in the Investors section.

Hedging and Pledging Policies

Under the Company’s insider trading policy, all directors, executives and employees are prohibited from engaging in hedging transactions involving the Company’s common stock, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds. In addition, all such persons are prohibited from holding the Company’s common stock in a margin account or otherwise pledging such shares as collateral for a loan.

Corporate Responsibility

The Company has a long-standing commitment to our shareholders, patients, employees and communities to operate in a sustainable and socially responsible manner.

Community Involvement

We strive to directly impact our communities around the world through meaningful partnerships, employee volunteer programs, and charitable contributions. To date, we’ve served thousands of people and organizations

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through education, funding, and aid. Our passion for community involvement spans across our leadership to our dedicated employees and worldwide partners. For example, we are proud to partner with Donate Life America, a U.S.-based nonprofit organization that promotes the importance of organ, eye, and tissue donation though a “Month of Life” awareness and fundraising campaign. We also support the World Pediatric Project, a non-profit organization dedicated to healing critically ill children in impoverished countries, through the donation of our Spine Fixation deformity correction devices. These donations help to enable surgeons to perform corrective surgery for young adult and pediatric patients in Honduras, enabling them to lead more normal lives. In addition, our employees volunteer in the community to assist disaster relief victims and other less fortunate individuals through organizations such as the Red Cross, Trusted World, Toys for Tots, and Banca del Giocattolo, a toy bank in Italy. Our team in Italy also supports Fondazione ANT, a cancer support organization and Bianca nel Curore, a non-profit for children. We participate in annual events like the Dallas Marathon benefiting Texas Scottish Rite Hospital for Children and we host onsite donation drives for Carter BloodCare. Orthofix is proud to provide support to the North Texas Food Bank, Second Harvest Food Bank, Veterans Coalition of North Central Texas, and Soldiers’ Angels, with over 1,200 hours volunteered by our employees in 2019.

Environmental and Sustainability Matters

Though the Company believes that its business and supply chains generally are not at unique risk due to climate change, the Company continually monitors these matters and considers ways it can further encourage sustainability in its operations and business practices. At the present time, the Company has not judged its business or operations to be vulnerable to climate change as compared to other companies in its industry, and the Company does not believe itself to be a significant source of carbon emissions. Our Lewisville, Texas facility is operating under a program implemented in 2017, which focuses on waste and equipment recycling, and the use of environmentally responsible office supplies, consumables, and cleaning products.  We transitioned the Lewisville, Texas facility to 100% sustainable energy in March 2020 and are working towards Leadership in Energy and Environmental Design (LEED) certification in 2020.

Diversity and Inclusion

We recognize that diversity at all levels, with everyone participating at their best, is critical to serving our patients and making the Company a great place to work. We endeavor to foster a respectful and supportive workplace environment in which women and men from all countries, cultures, and backgrounds are able to advance in their careers. The Company’s women’s initiative, Orthofix Women’s Network (OWN), is committed to hiring, retaining, and promoting women to positions of leadership through programming, mentoring, and education.

Shareholder Communication with the Board

To facilitate the ability of shareholders to communicate with the Board, we have established an electronic mailing address and a physical mailing address to which communications may be sent: boardofdirectors@orthofix.com, The Board of Directors, c/o Mr. Ronald A. Matricaria, Chairman of the Board, Orthofix Medical Inc., 3451 Plano Parkway, Lewisville, TX 75056.

Mr. Matricaria reviews all correspondence addressed to the Board and presents to the Board a summary of all such correspondence and forwards to the Board or individual directors, as the case may be, copies of all correspondence that, in the opinion of Mr. Matricaria, deals with the functions of the Board or committees thereof or that he otherwise determines requires their attention. Examples of communications that would be logged, but not automatically forwarded, include solicitations for products and services or items of a personal

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nature not relevant to us or our shareholders. Directors may at any time review the log of all correspondence received by Orthofix that is addressed to members of the Board and request copies of any such correspondence.

Nomination of Directors

As provided in its charter, the Nominating and Governance Committee identifies and recommends to the Board nominees for election or re-election to the Board and will consider nominations submitted by shareholders. The Nominating and Governance Committee Charter is available for review on our website at www.orthofix.com.

The Nominating and Governance Committee seeks to create a Board that is strong in its collective diversity of skills and experience with respect to finance, research and development, commercialization, sales, distribution, leadership, technologies and life science industry knowledge. The Nominating and Governance Committee reviews with the Board, on an annual basis, the current composition of the Board in light of the characteristics of independence, skills, experience and availability of service to Orthofix of its members and of anticipated needs. If necessary, we will retain a third party to assist us in identifying or evaluating any potential nominees for director. When the Nominating and Governance Committee reviews a potential new candidate, it looks specifically at the candidate’s qualifications in light of the needs of the Board at that time given the then current mix of director attributes.

As provided for in our Corporate Governance Guidelines, in nominating director candidates, the Nominating and Governance Committee strives to nominate directors that exhibit high standards of ethics, integrity, commitment and accountability. In addition, our Corporate Governance Guidelines state that all nominations should attempt to ensure that the Board shall encompass a range of talent, skills and expertise sufficient to provide sound guidance with respect to our operations and activities. Other than as set forth in the Corporate Governance Guidelines with respect to the Board’s objective in seeking directors with a range of talent, skills and expertise, the Board and the Nominating and Governance Committee do not have a formal policy with respect to the diversity of directors.

Under our Corporate Governance Guidelines, directors must inform the Chairman of the Board and the Chair of the Nominating and Governance Committee in advance of accepting an invitation to serve on another company’s board of directors. In addition, no director may sit on the board of directors of, or beneficially own a significant financial interest in, any business that is a material competitor of Orthofix. The Nominating and Governance Committee reviews any applicable facts and circumstances relating to any such potential conflict of interest and determines in its reasonable discretion whether a conflict exists.

To recommend a nominee, a shareholder shall send notice to The Board of Directors, Chair of the Nominating and Governance Committee of Orthofix Medical Inc., 3451 Plano Parkway, Lewisville, TX 75056. This notice should include the candidate’s brief biographical description, a statement of the qualifications of the candidate, taking into account the qualification requirements set forth above and the candidate’s signed consent to be named in the proxy statement and to serve as a director if elected. The notice must be given not later than 180 days before the first anniversary of the last annual meeting of shareholders. Once we receive the recommendation, the Nominating and Governance Committee will determine whether to contact the candidate to request that he or she provide us with additional information about the candidate’s independence, qualifications and other information that would assist the Nominating and Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our proxy statement, if nominated. Candidates must respond to our inquiries within the time frame provided in order to be considered for nomination by the Nominating and Governance Committee.

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The Nominating and Governance Committee has not received any nominations for director from shareholders for the Annual Meeting.  

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS

Compensation Committee Interlocks and Insider Participation

The Compensation Committee, comprised entirely of independent, non-management directors, is responsible for establishing and administering the Company’s policies involving the compensation of its executive officers. No employee of the Company serves on the Compensation Committee. The Committee members have no interlocking relationships as defined by the SEC.

Approval of Related Person Transactions

Our policy, which is set forth in our Corporate Code of Conduct and Audit and Finance Committee charter, is that the Audit and Finance Committee will review and approve all related person transactions that meet the minimum threshold for disclosure under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). The Company did not have any related party transactions meeting this threshold during 2019.

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Compensation Discussion and Analysis

Executive Overview

We focus our compensation program for our named executive officers (“NEOs”) and other executives on financial, strategic and operational goals established by the Board of Directors to create value for our shareholders. Our guiding compensation principle is to pay for performance. Our compensation program is designed to motivate, measure, and reward the successful achievement of our strategic and operating goals without promoting excessive or unnecessary risk taking. Our Compensation Committee has consistently set challenging financial performance goals under the annual cash incentive plan that rewards executives for achieving or exceeding the annual operating plan. The approach for setting the financial performance goals under the annual cash incentive plan was similar in 2019 as compared to prior years. However, actual performance fell short of the target performance goals, which resulted in significantly below target payouts for all NEOs and other executives. This is one example of the Committee’s commitment to its pay-for-performance philosophy as described further below.  

Notable highlights and accomplishments in 2019 include the following:

Consistent with shareholder interests and market best practices, our executive compensation program includes the following sound governance features:

What we do:

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Compensation Guiding Principles and Philosophy

The Compensation Committee (referred to throughout this Compensation Discussion and Analysis as the “Committee”) is comprised solely of independent directors. The Committee recommends to the Board for determination by the Board, the President and Chief Executive Officer’s compensation, and discharges the responsibilities of the Board relating to all compensation of the Company’s other executive officers (including equity-based compensation for both executive officers and other key employees). The Committee guides itself in large part by the Executive Compensation Guiding Principles. These guiding principles include an executive compensation philosophy for executives that reflects a meaningful “pay-for-performance” philosophy and seeks to align compensation payouts with the goals of growing our business and increasing shareholder value.

The Executive Compensation Guiding Principles were affirmed by the Committee in June 2019. These guiding principles are as follows:

Management is responsible for effectively communicating the design and administration of the program to employees. Consistent with these principles, the Committee’s compensation philosophy is to fairly compensate executive officers with an emphasis on providing incentives that balance our short- and long-term objectives. As described in more detail below, achievement of short-term financial performance goals is rewarded through annual cash incentive payouts, while grants of performance share units, and time-based vesting stock options, restricted stock and restricted stock units, encourage executive officers to focus on achieving longer-term goals and sustained increases in shareholder value. The Committee retains full discretion to make compensation decisions that differ from the Executive Compensation Guiding Principles, especially when special retention, recruitment or other factors suggest that such changes are believed to be in the best interests of the Company and its stockholders.

In implementing this overall “pay-for-performance” compensation philosophy for the Company’s executive officers, the Committee places considerable emphasis on variable elements of pay within the executive compensation program. These variable elements consist of the Company’s annual cash incentive plan, which is intended to reward executive officers for achieving specific financial performance goals during the fiscal year, as well as a long-term incentive plan that consists of stock options (25% of an executive’s total long-term incentive equity award), balanced with both performance-based (50%) and time-based vesting (25%) stock awards. The Committee seeks to provide payouts through the annual cash incentive plan based on actual performance

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relative to pre-established financial performance goals reflecting strong financial performance by the Company and its business units. The Committee also seeks to align executives’ interests with shareholders via grants of equity compensation, as the value of these awards is directly commensurate with the fluctuations in the value of the Company’s common stock. In addition to variable compensation programs, executives also receive health and welfare benefits (including our 401(k) plan) that are generally consistent with those provided by our peer group and with the level of health and welfare benefits provided to all Company employees.

Compensation Process

The Committee is responsible for establishing and evaluating compensation policies and determining, approving and evaluating executive compensation, including the total compensation packages for our Section 16 executive officers. The Committee is also responsible for administering the Company’s equity incentive plans and other executive compensation policies and programs. The Committee specifically considers and approves the compensation for the executive officers and recommends for approval of the Board the compensation for the Chief Executive Officer. The Chief Executive Officer is prohibited from being present during Committee or Board voting or deliberations with respect to his or her own compensation arrangements. The Committee also is responsible for making recommendations to the Board regarding the compensation of directors. The Committee relies on the President and Chief Executive Officer to make recommendations on certain aspects of compensation as discussed below. The Committee acts under a written charter adopted by the Board. The Committee reviews its charter annually and recommends any changes to the Board. The charter is available on our website at www.orthofix.com.  Messrs. Lukianov and Paolucci and Ms. Sainz currently serve as the members of the Compensation Committee, with Mr. Paolucci serving as Chair.

Each member of the Committee is an independent, non-employee, non-affiliated, outside director. The Committee has furnished its report below.

Role of Executive Officers

At the Committee’s request, from time to time certain of our senior management present compensation-related initiatives to the Committee. For instance, while the Committee approves all elements of compensation for executive officers, the Committee requests on an annual basis that senior management aid the Committee in fulfilling its duties by facilitating the gathering of information relating to potential financial performance targets and actual performance under our annual cash incentive program as well as possible equity incentive grants. The Committee then reviews this information in connection with it setting annual incentive targets, or making equity compensation grants. Under the Executive Compensation Guiding Principles, management is responsible for compensation decisions related to all executives who are non-Section 16 officers, subject to limits established by the Committee (e.g., long-term incentive awards and change in control agreement participation). In this context, the President and Chief Executive Officer has general oversight for the non-executive officer employee compensation process within the Company, and provides input to the Committee in such capacity. The President and Chief Executive Officer also provides the Committee with additional input, perspective, and recommendations in connection with the Committee’s salary determinations for executive officers. The President and Chief Executive Officer, Chief Financial Officer, Chief Legal and Administrative Officer, and Vice President of Human Resources frequently attend meetings of the Committee in these respective capacities. These individuals are excluded from any Committee or Board deliberations or votes regarding their own compensation.

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Compensation Consultant

The Committee has the authority under its charter to retain, at the Company’s expense, outside compensation consultants to assist in evaluating compensation. The Committee also has the authority to terminate those engagements. In accordance with this authority and to aid the Committee in fulfilling its duties, the Committee has engaged Mercer LLC (“Mercer”) as its outside compensation consultant since September 2017.

In its role as compensation consultant, Mercer, at the Committee’s request, periodically conducts reviews and recommends updates to our executive officer and director compensation programs and long-term incentive practices.

In connection with their engagement, Mercer reported to the Committee regarding its independence based on the six factors outlined in SEC regulations issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Committee considered these factors and concluded that Mercer is independent and that its engagement by the Committee raised no conflicts of interest.

Peer Group Benchmarking

Decisions related to executive compensation program design and pay levels are informed, in part, by the practices and pay levels of comparable peer organizations. The Committee engages Mercer to conduct an annual executive compensation analysis that provides market competitive levels of total compensation. The assessment used in connection with setting 2019 compensation, which was completed and presented in December 2018, compared Orthofix executive officer compensation levels in comparison with market data to determine whether compensation levels for our executive officers remain consistent with market practice and our compensation philosophy. In conducting the assessment, Mercer made comparisons to our peer group and survey data including companies in the life sciences/medical devices industries and technology companies.

In conducting the benchmarking, Mercer utilized a selection of 18 peer companies. This selection of peer companies, or “peer group,” originally was approved by the Committee in the fall of 2017, and was further updated in December 2018. The members of the peer group were selected for inclusion principally because of their overall similarity to Orthofix in terms of annual revenue, industry sector/sub-sector, medical technology product lines and international penetration. The peer group consists of the following medical technology and device manufacturers and distributors, which we compete against for executive talent.

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The Role of Shareholder Say-on-Pay Votes

The Company provides its shareholders with the opportunity to cast an annual advisory, non-binding vote on executive compensation (a “say-on-pay proposal”), and subsequently evaluates these results. At the 2019 annual meeting, the Company’s say-on-pay proposal was supported by 97.6% of the votes cast, which we believe supports the Company’s “pay-for-performance” approach to executive compensation. The Committee evaluated the results of the vote in June 2019.

The Committee believes that the voting results over the course of the last several years (which has included 90% or greater approval votes at each of the Company’s last four annual meetings of shareholders) affirm shareholders’ overall support of the Company’s approach to executive compensation, including continuing efforts by the Committee during that time to evolve the Company’s compensation programs towards policies viewed by institutional and other shareholders as aligning executive compensation with the interests of shareholders and good corporate governance. In addition to responding to the input of shareholders, the Committee also has considered many other factors in designing and evaluating the Company’s executive compensation programs, including the Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, periodic analysis of our programs by our compensation consultant, and annual review of data versus a comparator group of peer companies, each of which is evaluated in the context of the Committee members’ fiduciary duty to act as the directors determine to be in shareholders’ best interests. Each of these factors informed the Compensation Committee’s decisions regarding named executive officers’ compensation for 2019. The Committee will continue to consider feedback from shareholders, including the outcome of the Company’s say-on-pay votes, when making future compensation decisions for its named executive officers.

Elements of Executive Compensation

Overview

Our compensation program for executive officers and other key employees consists of three primary elements:

The Committee reviews annually what portion of an executive officer’s total compensation should be in the form of salary, target annual cash bonus opportunity and long-term equity-based incentive compensation. The Committee believes an appropriate mix of these elements, commensurate with our Executive Compensation Guiding Principles, will assist the Committee in meeting its compensation objectives. As part of its decision making process, the Committee reviews information setting forth all components of the compensation and benefits received by our named executive officers. This information includes a specific review of dollar amounts for salary, target bonus opportunity and long-term equity-based incentive compensation. In addition, as further described below, we sometimes grant one-time bonuses and stock awards in connection with new hires and promotions, or for retention or special recognition purposes.

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The charts below show the annual total target direct compensation (full-year base salary, target annual cash incentive compensation and long-term equity incentive compensation awards) for our President and Chief Executive Officer and our other named executive officers for 2019. These charts illustrate that a significant portion of our named executive officer total target compensation was performance-based or variable.

* Graphs exclude compensation for Bradley R. Mason, who served as our President and Chief Executive Officer through his retirement on October 31, 2019. The 2019 CEO target compensation represents Mr. Serbousek’s target compensation during his five months of service in 2019 (which includes his initial 3 months of service as our President of Global Spine, and his subsequent 2 months as President and Chief Executive Officer). Long-Term Vesting Equity Incentives include compensation derived from grants of time-based vesting stock options, time-based vesting restricted stock units, and performance-based vesting stock units. "All Other Compensation" value is not shown as it represents less than 1% of total target compensation.

 Annual Salary

The Committee makes annual determinations with respect to the salaries of executive officers. In making these decisions, the Committee considers proxy peer data and/or market survey data for each individual person, with the midpoint of the salary range being the 50^th percentile of the market. The Committee positions actual base salary within the salary range based upon an executive’s experience, performance and contribution to Orthofix’s success. The Committee endeavors to use the full width of the salary range to differentiate pay.

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The 2018 and 2019 annual base salary amounts for our named executive officers were as follows:  

⁽¹⁾ Annual base salary amount shown reflects Mr. Serbousek’s annual base salary following his promotion to President and Chief Executive Officer on November 1, 2019, after having originally joined the Company in August 2019 as the Company’s President of Global Spine with an annual base salary of $500,000. For the full calendar year, Mr. Serbousek received a total of $241,346 in base salary payments (of which $123,077 represented base salary earned as President of Global Spine from August 2019 through October 2019 and $118,269 represented base salary earned as President and Chief Executive Officer from November 2019 through December 2019).

⁽²⁾   Mr. Bianchi is paid in Swiss Francs (CHF). Based on the average exchange rate to U.S. Dollars applicable for the 2019 fiscal year 1.0064, the amounts shown in the table above would be $382,325 and $414,618, respectively. Mr. Bianchi ceased serving as President of Global Extremities on March 31, 2020.

⁽³⁾  Mr. Mason had an annual base salary of $750,000 while serving as President and Chief Executive Officer from January 2019 through October 2019. Following Mr. Mason’s retirement as a director and officer on October 31, 2019, Mr. Mason commenced service as a consultant to the Company, for which he receives a fee of $40,000 per month through October 2020. For the full year, Mr. Mason received total base salary payments of $603,308 for service as President and Chief Executive Officer from January 2019 through October 2019 and $80,000 in consulting fees for service as a consultant from November 2019 through December 2019.

Cash Performance-Based Incentives – Annual Incentive Program

The Committee believes that a significant portion of the compensation for each executive officer should be in the form of an annual performance-based cash bonus. These bonuses are provided through our annual cash incentive program, which aligns any payout to an executive officer with actual financial performance of the Company relative to pre-established financial performance targets.

The Committee is responsible for approving the annual bonus plan design every year. At the outset of each year the Committee establishes target financial performance goals and a range of performance around the target performance goals for which a bonus would be paid as described below. The plan design, metrics, and threshold, target, and maximum goals support the annual corporate operating plan for the year.

For 2019, performance goals for Messrs. Finegan, Rice, and Mason and Ms. Elting were based on Company-wide net sales and adjusted EBITDA performance, each weighted at 50%. Adjusted EBITDA consists of EBITDA (defined as GAAP-derived income from continuing operations plus net interest expense, income tax expense, depreciation and amortization) net of credits or charges that were considered by the Committee at the time bonus targets were set to be outside of the normal ongoing operations of the Company. For Mr. Bianchi, these two metrics were each weighted at 12.5%, while sales and adjusted EBITDA for Mr. Bianchi’s business segment were each collectively weighted at 37.5%. Mr. Serbousek joined the Company mid-year, and his pro-rated bonus for the year was determined by the Committee based on its qualitative assessment of his performance (including, specifically, his ability in 2020 to (i) recruit and fill key vacant Company leadership roles, and (ii) develop and implement a new strategic plan based on his evaluation of the Company's business and operations), rather than the quantitative Company-wide performance metrics that were approved prior to him joining the

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Company. In 2020, Mr. Serbousek’s incentive compensation will be based on the satisfaction of quantitative Company-wide performance metrics, rather than individual qualitative metrics, similar to other executive officers.

An executive officer could earn from 0% to 150% of his or her targeted bonus based upon actual performance measured against the range of established performance goals. The Committee determined that no payouts would be made for performance below the 50% achievement threshold on any specific goal.

The proposed goals and related matrix were reviewed and approved by the Committee in December 2018, and performance was then subsequently assessed by the Committee in March 2020. Each of the Committee members at the time of the applicable action participated in and approved these respective determinations.

The table below describes the threshold, target, and maximum performance goals relative to actual achievement for the financial performance metrics described above in 2019.

⁽¹⁾ Committee approval of financial performance targets in December 2018 provided that targeted amounts would be adjusted to eliminate the effect of subsequent currency fluctuations.  The targeted amounts shown in the table reflect the original targets as adjusted to reflect such pre-approved constant currency adjustments.  

Aggregate Payouts

To calculate the bonus amount payable for to the Company’s named executive officers, excluding the President and Chief Executive Officer, the aggregate weighted achievement percentage for each executive officer was multiplied by the target amount of bonus for which that participant was eligible. These results are described in the table below:

⁽¹⁾ Mr. Bianchi is paid in Swiss Francs (CHF). Based on the average exchange rate to U.S. Dollars applicable during the 2019 fiscal year (1.0064), the amounts shown in the table would be $414,618 and $19,446, respectively.

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⁽²⁾ As described earlier on page 23, Mr. Mason served as President and Chief Executive Officer from January 2019 through October 2019, during which period he received total base salary payments of $603,308 (based on his then-annual base salary amount of $750,000). In accordance with the incentive plan, Mr. Mason’s 2019 bonus was pro-rated based on his partial-year service. Mr. Mason did not receive any incentive plan bonus for the portion of the year during which he served as a consultant.

Payouts to the named executive officers under the annual incentive program are reflected in column (g) of the “Summary Compensation Table.”

2019 Bonus for Mr. Serbousek

As described earlier on page 23, Mr. Serbousek became the Company’s President and Chief Executive Officer on November 1, 2019, after having originally joined the Company as President of Global Spine in August 2019. Due to the timing of his hiring, the Compensation Committee evaluated Mr. Serbousek based on its qualitative assessment of his performance (including, specifically, his ability in 2020 to (i) recruit and fill key vacant Company leadership roles, and (ii) develop and implement a new strategic plan based on his evaluation of the Company's business and operations), rather than the quantitative Company-wide performance metrics used for executive officers who were employed as of the beginning of the year. The Committee ultimately determined to set a 2019 target bonus for Mr. Serbousek equal to 100% of his salary as President and Chief Executive Officer ($750,000), pro-rated to reflect the number of days that he served as an executive officer. In March 2020, the Committee evaluated Mr. Serbousek’s performance and determined that he would receive an achievement percentage of 100%, which resulted in a payout of $304,110. The Committee reached this conclusion (i) as a result of Mr. Serbousek successfully filling four key Company leadership roles (including, President of Global Spine, SVP Global Quality, Regulatory and Clinical Affairs, SVP Global Operations, SVP and Managing Director, International Spine, and SVP Global Motion Preservation), and (ii) based on his development and implementation of a Board-approved 3-year strategic plan that reflected Mr. Serbousek's evaluation of the Company's business and operations since joining the Company in August 2020. In 2020, Mr. Serbousek’s incentive compensation will be based on the satisfaction of quantitative Company-wide performance metrics, rather than individual qualitative metrics, similar to other executive officers.

Long-Term Equity-Based Incentives

Long-Term Incentive Plan – 2012 LTIP

In accordance with the Executive Compensation Guiding Principles, the creation of sustainable shareholder value by means of equity incentive awards is a very important element of the total compensation provided to executive officers.

Our primary equity compensation plan is the 2012 LTIP, which our shareholders most recently approved in July 2018. As of April 9, 2020, only 225,765 shares remained available for grant pursuant to this plan. As further described under “Proposal 3: Approval of Amendment No. 1 to the Amended and Restated 2012 LTIP,” at the Annual Meeting, the shareholders will be asked to consider, and, if thought fit, approve an amendment to the 2012 LTIP to replenish the shares available for awards under the plan by 1,100,000 shares. We request that shareholders support this proposal given that equity is a key component of our pay-for-performance philosophy and equity grants best align and engage our leadership team with shareholder value creation. One of our current executive officers continues to hold outstanding awards under our 2004 LTIP, although we no longer grant awards under this plan. 

The Committee administers each of these plans and only the Committee makes long-term incentive plan grants to named executive officers. In addition, the Committee has in rare instances made inducement grants (in

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accordance with applicable Nasdaq rules) to newly hired employees outside of shareholder approved plans, as it did in in 2019 in connection with the hiring of Mr. Serbousek and the acquisition of Options Medical LLC, and in 2018 in connection with the acquisition of Spinal Kinetics, Inc. These inducement grants have been made on terms that are substantially similar to grants under the 2012 LTIP.

In 2019, the Committee granted three types of equity incentive awards to executive officers: (i) time-based vesting stock options, (ii) time-based vesting restricted stock units (RSUs), and (iii) performance-based vesting stock units.

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In accordance with the Executive Compensation Guiding Principles, equity incentive awards currently follow the following principles:

Mr. Serbousek joined the Company in August 2019, after the start of the 3-year performance period for the Company’s 2019 performance stock unit grants. As a result, all grants to Mr. Serbousek in 2019 (including the inducement grants he received at the time of hiring) were made via time-based vesting awards. However, for 2020, 50% of Mr. Serbousek’s target equity compensation will be provided via performance stock units (with a 3-year relative total stockholder return performance criteria) and 50% will be provided via time-based vesting awards.

Time-Based Vesting Grants

Under the Company’s operative agreements with executive officers, the unvested portion of any time-based grant is forfeited if an employee voluntarily ceases employment prior to vesting. In the event that an employee is terminated by the Company without cause, any remaining unvested portion of the grant is forfeited. In the event an employee dies, suffers a long-term disability, or retires within certain age and service tenure parameters, the full grant vests. In all of the foregoing circumstances, with the exception of the transition and retirement of our former CEO in 2019, vested stock options are subject to a limited post-employment exercise period, which ranges from 3 to 18 months depending on the circumstance. In the case of stock options held by employees who remain continuously employed, the options expire and are no longer exercisable 10 years from the grant date. Should a change in control occur while a grantee remains employed, unvested portions of the

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grant will accelerate only if the employee separates from employment in specific circumstances within 24 months of the change in control.

Performance-Based Vesting Grants

In recent years, the Committee has actively worked with its compensation consultant to implement performance-based vesting equity grants. Performance-based awards that remained eligible to be earned as of December 31, 2019 are described below.

2016, 2017, 2018, and 2019 Performance Stock Unit Grants

For 2016, 2017, 2018, and 2019, the Committee granted 50% of executive officer(s) total annual equity award value in the form of performance stock units (“PSUs”) that are earned based on the TSR of the Company’s common stock relative to other companies in an applicable industry index during a three-year performance period following the date of grant, with the change in share price during the performance period measured using the average closing price during the 20 days preceding each of the beginning and the end of the performance period. For the PSUs granted in 2016 through 2018, the Committee used the S&P Healthcare Select Industry Index, and for the 2019 PSU grants, the Committee used the S&P Healthcare Equipment Select Industry Index. Achieved vesting percentages are based on the following criteria:

In the event that the Company’s TSR percentile rank for the performance period falls between any of the amounts set forth above (to the extent greater than the threshold and lower than the maximum), the vesting percentage will be determined by linear interpolation between such amounts.

The PSU award agreement provides that the vesting percentage may not exceed 100% if the Company’s absolute TSR during the performance period is negative. In addition, the vesting percentage is capped such that the PSU award will never trigger the issuance of shares with a vesting date fair market value of more than five times the fair market value of the target award on the date of grant. Following the end of the three-year performance period, the shares that vest are subject to a one-year holding period requirement. Generally, if an executive voluntarily ceases employment without “good reason” or “qualified retirement” eligibility prior to the end of the three-year performance period, the entire award is forfeited.

The performance period for the Company’s 2016 grant of performance stock units concluded in June 2019. The Company achieved a TSR over the performance period of 16.45%. Per the terms of the award, this performance resulted in vesting based upon the 25^th percentile rank of the applicable index, or for 50% vesting. The Committee certified the Company’s performance in relation to the specified index in July 2019. In accordance with the terms of the award, the shares will be delivered in June 2020, 12 months after the conclusion of the performance period.

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Equity Award Approval Process

The Committee currently reviews and approves dollar values for executive officer equity incentive grants at its March meeting, with the grant effective date being the first business day of April, and the number of shares/units underlying each award (and the exercise price for stock options) based on the closing price of the Company’s common stock on such effective date. For 2020, due to share capacity constraints under the 2012 LTIP, PSU grants to executive officers will occur as of June 8, 2020 (with a 3-year TSR performance period commencing on such date), subject to approval by shareholders of Amendment No. 1 to the 2012 LTIP at the Annual Meeting. Prior to 2018, the Committee reviewed and approved annual grants in June, with grant dates occurring on or around July 1.

Generally, the Committee’s approval of annual equity incentive grants occurs at a time when the Company’s insider trading window for executives is open. However, in the event that grants are approved when such window is closed, the Committee does not seek to affect the value of grants by timing them in relation to the release or non-release of material public information.

Perquisites and Other Personal Benefits

Our executive officers are entitled to or may otherwise be the beneficiaries of certain limited perquisites and other personal benefits, which have a collective value of less than $10,000 per year, except in the case of our President and Chief Executive Officer, who received relocation benefits in 2019 totaling $20,961 in addition to other benefits as discussed within the Summary Compensation Table on page 32. Among other things, these perquisites and benefits include reimbursement for tax preparation expenses, estate planning expenses, an annual physical exam, and reimbursement of expenses relating to spousal travel in connection one Board meeting per year. We consider our perquisites to be consistent with the market practices for similarly situated companies. Under our Executive Compensation Guiding Principles, the payment of any perquisite will generally require the approval of the Compensation Committee.

Other Plans

Executive officers participate in our health and welfare benefits (including our 401(k) plan) on the same basis as other similarly situated employees.

Governance of Executive Compensation

As described further below, executive compensation for our executive officers is reviewed and established annually by the Committee, which consists solely of independent directors. The Committee’s compensation decisions are intended to reflect its ongoing commitment to strong compensation governance, which the Committee believes is reflected in the following elements of our executive compensation program:

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•     Use of Independently Prepared Competitive Assessments — The practice of the Compensation Committee is to engage the Company’s compensation consultant to prepare an independent executive compensation competitive assessment to measure our program against peer companies and other survey data. The Committee takes these results into consideration (among other factors) in approving our executive compensation program.

•     Compensation Recoupment (Clawback) Policy — In 2012, we adopted a compensation recoupment, or “clawback” policy, which applies to all of our executive officers. Under this policy, if we are required to prepare an accounting restatement due to material noncompliance by Orthofix, as a result of misconduct, with any financial reporting requirement under the securities laws, each executive officer is required to reimburse Orthofix for (i) any bonus or other incentive-based or equity-based compensation received by such executive officer during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial document embodying such financial reporting requirement, and (ii) any profits realized from the sale of our securities of during that 12-month period.  

Accounting and Tax Effects

The impact of accounting treatment is considered in developing and implementing our compensation programs, including the accounting treatment as it applies to amounts awarded or paid to our executive officers.

The impact of federal tax laws on our compensation programs is also considered, including the deductibility of compensation paid to the named executive officers, as limited by Section 162(m) of the Code. Our compensation program historically has been designed with the intention that compensation paid in various forms may be eligible to qualify for deductibility under Section 162(m) of the Code, but there have been and may be other exceptions for administrative or other reasons. However, the Tax Cuts and Jobs Act of 2017 eliminated the exception under Section 162(m) for performance-based compensation and expanded the number of employees who may be covered by these deductibility limitations, which may have an effect on how we design future compensation programs and may affect the financial statement impact of executive compensation payments.

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the members of management of the Company and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s proxy statement.

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SUMMARY COMPENSATION TABLE

The following table sets forth the compensation earned by or paid to our named executive officers for each of the last three fiscal years during which the officer was a named executive officer.

⁽¹⁾  Amounts shown do not reflect compensation actually received. Instead, the amounts shown are the aggregate grant date fair value of equity awards, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly known as Statement of Financial Accounting Standards No. 123(R)), or ASC 718.

⁽²⁾  Amounts shown reflect cash bonuses paid in 2020, 2019, and 2018 for performance in 2019, 2018, and 2017, respectively, pursuant to our annual incentive program. Our annual incentive program with respect to the 2019 fiscal year, including the Committee’s criteria for determining the amounts awarded in 2020, are described above under “Compensation Discussion and Analysis – Elements of Executive Compensation – Cash Performance-Based Incentives – Annual Incentive Program.”

⁽³⁾  Mr. Serbousek’s salary represents $123,076.94 in wages earned during his time spent as Global Spine President (from July 2019 to October 2019) and $118,269.26 in wages earned as President and Chief Executive Officer (subsequent to October 2019). Mr. Serbousek’s bonus was calculated as 100% of his target bonus percentage and based upon his salary as President and Chief Executive Officer, as if this salary were in effect from his original hire date.

⁽⁴⁾ Reflects $20,961 for relocation expenses, $4,644 for 401k matching, $4,700 for tax preparation reimbursement, and $570 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance, respectively.

⁽⁵⁾ Mr. Bianchi is compensated in Swiss Francs. Amounts shown in table reflect compensation amounts as converted to U.S. Dollars using the average exchange rate in effect during the 2019 calendar year of 1.0064, the 2018 calendar year of 1.0228, and the 2017 calendar year of 1.0159. Mr. Bianchi ceased serving as President of Global Extremities on March 31, 2020. In accordance with the terms of his Swiss-law governed employment contract, he continues on "garden leave" status with the Company's Swiss subsidiary until his departure as an employee from such subsidiary as of October 1, 2020.

⁽⁶⁾ Reflects $65,212 for retirement matching and $24,152 for car and travel allowance.

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⁽⁷⁾ Reflects $10,428 for 401k matching and $2,142 for insurance premiums paid by, or on behalf of, the Company with respect to group term and term life insurance, respectively.

⁽⁸⁾ On March 31, 2020, the Company and Mr. Finegan determined that he would depart as an executive officer and employee of the Company as of July 4, 2020.

⁽⁹⁾ Reflects $11,200 for 401k matching and $2,142 for insurance premiums paid by, or on behalf of, the Company with respect to group term and term life insurance, respectively.

⁽¹⁰⁾ Reflects $11,200 for 401k matching and $1,302 for insurance premiums paid by, or on behalf of, the Company with respect to group term and term life insurance, respectively.

⁽¹¹⁾ Reflects $80,000 in consulting income, $11,200 for 401k matching, and $4,588 for insurance premiums paid by, or on behalf of, the Company with respect to group term and term life insurance, respectively.

⁽¹²⁾ On February 25, 2019, Mr. Mason and the Company entered into a Transition and Retirement Agreement. Pursuant to such agreement, Mr. Mason became entitled to acceleration of certain time-based restricted stock and time-based stock options by continuing to serve as President and Chief Executive Officer during the transition period through October 31, 2019, when Mr. Serbousek succeeded him as President and Chief Executive Officer. These amounts are further described on page 44 under the heading "Transition and Retirement Agreement with Mr. Mason.

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GRANTS OF PLAN-BASED AWARDS

The following table provides information regarding plan-based awards that were granted to our named executive officers during the fiscal year ended December 31, 2019.

⁽¹⁾ Amounts shown represent the threshold, target and maximum amounts that could have been earned for fiscal year 2019 by each Named Executive Officer under our annual performance-based incentive compensation program. The actual amounts earned by each Named Executive Officer are included in the fiscal year 2019 “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above and discussed under “—Compensation Discussion and Analysis—Elements of Executive Compensation—Cash Performance-Based Incentives – Annual Incentive Program” above.

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⁽²⁾ Amounts shown represent the threshold and maximum amounts in shares earned based on performance if the threshold or maximum performance goals are achieved over the three-year performance period beginning on April 1, 2019. No shares will be issued for performance below the threshold level.

⁽³⁾ Amounts shown represent the target amount in shares earned if the target performance goal is achieved with respect to the three-year performance period beginning on April 1, 2019.

⁽⁴⁾ Amounts shown represent an award of time-based restricted stock units granted in 2019 under the 2012 LTIP. Such units vest ratably over four years (subject to certain acceleration provisions, as discussed under “—Potential Payments upon Termination or Change in Control” below).

⁽⁵⁾ Amounts shown represent an award of time-based restricted stock units granted in 2019 under the 2012 LTIP. Such units cliff vest on the second anniversary of the grant date (subject to certain acceleration provisions, as discussed under “—Potential Payments upon Termination or Change in Control” below).

⁽⁶⁾ Amounts shown represent an award of time-based restricted stock units granted in 2019 under the 2012 LTIP. Such units cliff vest on the first anniversary of the grant date (subject to certain acceleration provisions, as discussed under “—Potential Payments upon Termination or Change in Control” below).

⁽⁷⁾ Amounts shown include awards of stock options granted in 2019 under the 2012 LTIP. Such options vest ratably over four years (subject to certain acceleration provisions, as discussed under “—Potential Payments upon Termination or Change in Control” below).

⁽⁸⁾ The exercise price of the stock options is equal to the closing price of the common stock on the grant date.

⁽⁹⁾ Amounts shown reflect the grant date fair value of equity awards, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (formerly known as Statement of Financial Accounting Standards No. 123(R)), or ASC 718. 

⁽¹⁰⁾ Represents grants of time-based vesting restricted stock units and time-based vesting stock options granted upon Mr. Serbousek’s hire date of August 5, 2019 as President of Global Spine. 

⁽¹¹⁾ Represents grants of time-based vesting restricted stock units and time-based vesting stock options granted upon Mr. Serbousek’s promotion on November 1, 2019 to President and Chief Executive Officer.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2019.