Orthofix Medical (OFIX) DEF 14ADefinitive 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):

3451 Plano Parkway

Lewisville, Texas 75056

Dear Shareholders:

We will hold the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) of Orthofix Medical Inc. (“Orthofix” or the “Company”) on June 21, 2021 at 9:00 a.m. Central Daylight Time (“CDT”) at the Four Seasons Resort and Club Dallas at Las Colinas, 4150 North MacArthur Boulevard, Irving, Texas 75038.

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

2021 ANNUAL MEETING OF SHAREHOLDERS

to be held on June 21, 2021

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 2021 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 21, 2021 at 9:00 a.m. CDT, at the Four Seasons Resort and Club Dallas at Las Colinas, 4150 North MacArthur Boulevard, Irving, Texas 75038.

Purpose of the Annual Meeting

Please read a detailed description of proposals 1 through 5 stated above beginning on page 52 of the proxy statement.

Shareholders Entitled to Vote

All record holders of shares of Orthofix common stock at the close of business on April 22, 2021 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 21, 2021: A COPY OF THIS PROXY STATEMENT, PROXY VOTING CARD AND THE ORTHOFIX ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2020 ARE AVAILABLE AT WWW.PROXYDOCS.COM/OFIX.

 Proxy Summary

The summary highlights certain information about our business and 2020 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 by continuing directors as of the date of this proxy statement. As of the date of this proxy statement, Maria Sainz, a current independent director who is not standing for re-election at the Annual Meeting, also serves as a member of the Compensation Committee and Chair of the Compliance & Ethics Committee. The Board has resolved that, as of the Annual Meeting, Mr. Sicard will be appointed as a third member of the Compliance & Ethics Committee, and Mr. Hannon will be appointed Chair of such committee.

2020 Business Highlights

Notable financial results and accomplishments in 2020 include the following:

We manage our business by two reporting segments, Global Spine and Global Extremities, which accounted for 79% and 21%, respectively, of our total net sales in 2020. 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, 2020, 2019, and 2018.

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 2020 annual meeting, our say-on-pay proposal was supported by 95.4% of shares represented at the meeting, which we believe validates the Company’s “pay-for-performance” approach to executive compensation.

2020 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 2020.  These charts illustrate that a significant portion of our named executive officer total target direct compensation was performance-based or variable.

* Chart excludes compensation for Davide Bianchi, our former President of Global Extremities

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.

 2021 ANNUAL MEETING OF SHAREHOLDERS

THIS PROXY STATEMENT IS BEING DISTRIBUTED TO SHAREHOLDERS ON OR ABOUT APRIL 29, 2021.

 ABOUT VOTING

Who can vote?

All record holders of shares of Orthofix common stock at the close of business on April 22, 2021 (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 19,558,752 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. 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. 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.

Assuming a quorum is present, each of the nominees for election as directors in Proposal 1 will be elected upon the affirmative vote of a majority of votes cast with respect to such director seat (i.e., if the number of shares voted “FOR” such nominee exceed the number of votes cast “AGAINST” such nominee). For purposes of Proposal 1, abstentions and broker non-votes are not counted as either “FOR” or “AGAINST” votes, and have no effect on the outcome of the vote.

Assuming a quorum is present, the approval of Proposals 2, 3, 4, and 5 each requires the affirmative vote of a majority in voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the applicable proposal (meaning that a majority of the shares represented at the Annual Meeting and entitled to vote on the applicable proposal must be voted “FOR” the applicable proposal for it to be approved), with (i) abstentions having the same effect as a vote “AGAINST” the applicable proposal and (ii) broker non-votes (to the extent applicable) not counted as a vote either “FOR” or “AGAINST” and having no effect on the outcome of the vote the applicable proposal.

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, 2020 (the “2020 Form 10-K”) with the U.S. Securities and Exchange Commission (the “SEC”). The 2020 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 2020 Form 10-K, we will send you one free of charge. Please write to:

Orthofix Medical Inc.

3451 Plano Parkway

Lewisville, Texas 75056

Attention: Ms. Alexa Huerta, Investor Relations

You may also contact Ms. Huerta at (214) 937-3190 or at AlexaHuerta@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 Ms. Huerta at (214) 937-3190 or at AlexaHuerta@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 21, 2021

This proxy statement, your proxy voting card and the 2020 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 19,558,752 shares of our common stock outstanding as of April 22, 2021. 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 January 25, 2021. The Schedule 13G/A discloses that BlackRock has sole power to vote or direct the vote of 3,056,634 shares and sole power to dispose of or to direct the disposition of 3,088,855 shares.

⁽²⁾ Information obtained from a Schedule 13G filed with the SEC by Segall Bryant & Hamill, LLC (“Segall”) on February 16, 2021. The Schedule 13G discloses that Segall has sole power to vote or direct the vote of 1,644,930 shares, shared power to vote or direct the vote of zero shares, sole power to dispose of or to direct the disposition of 2,324,699 shares, and shared power to dispose of or to direct the disposition of zero shares.

⁽³⁾ Information obtained from a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 10, 2021. The Schedule 13G/A discloses that Vanguard has sole power to vote or direct the vote of zero shares, shared power to vote or direct the vote of 19,403 shares, sole power to dispose of or to direct the disposition of 1,919,776 shares, and shared power to dispose of or to direct the disposition of 33,062 shares.

⁽⁴⁾ Information obtained from a Schedule 13G filed with the SEC by Paradice Investment Management LLC (“Paradice”) on February 16, 2021. The Schedule 13G discloses that Paradice has sole power to vote or direct the vote of zero shares, shared power to vote or direct the vote of 651,831 shares, sole power to dispose of or to direct the disposition of zero shares, and shared power to dispose of or to direct the disposition of 975,695 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 22, 2021, by each current director, each director nominee, each named executive officer listed in the Summary Compensation Table, and all current directors, and executive officers as a group. The Percent of Class figure is based on 19,558,752 shares of our common stock outstanding as of April 22, 2021. All directors and executive officers as a group beneficially owned 798,085 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 138,149 shares owned directly, 26,675 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽²⁾ Reflects 206 shares owned directly, 4,588 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 6,175 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽³⁾ Reflects 28,364 shares owned directly, 14,498 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽⁴⁾ Reflects 1,892 shares owned directly, 14,498 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽⁵⁾ Reflects 11,577 shares owned directly, 14,498 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

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⁽⁶⁾ Reflects 5,632 shares owned directly, 14,498 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 30,000 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽⁷⁾ Reflects 26,583 shares owned directly and 14,498 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021.

⁽⁸⁾ Reflects 10,919 shares issuable pursuant to deferred stock units that are vested or potentially issuable within 60 days of April 22, 2021 and 22,500 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽⁹⁾ Reflects 18,682 shares owned directly and 59,882 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽¹⁰⁾ Reflects 44,514 shares owned directly and 80,114 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽¹¹⁾ Reflects 23,862 shares owned directly and 46,016 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽¹²⁾ Reflects 4,782 shares owned directly and 14,483 shares issuable pursuant to stock options that are currently exercisable or exercisable within 60 days of April 22, 2021.

⁽¹³⁾ Reflects 39,598 shares owned directly.

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and holders of more than 10% of our common stock (collectively, the “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Such persons are required by regulations of the SEC to furnish us with copies of all such filings. Based on our review of these reports and related representations by the Reporting Persons, we believe that all Section 16(a) reports were filed timely in 2020, except that, due to an internal administrative error at the Company, the Form 4 relating to the withholding of vested shares to cover income tax liabilities for Kimberley A. Elting’s September 5, 2018 grant of restricted stock was filed four business days late.

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INFORMATION ABOUT OUR executive officers

Our executive officers are listed and described below, together with a former executive officer whose compensation arrangement is described herein. Messrs. Serbousek, Rice, Kenny, Gonsalves, and Bianchi and Ms. Elting are referred to collectively throughout this proxy statement as our “named executive officers.”

Jon C. Serbousek. Mr. Serbousek joined Orthofix in August 2019 and became director, President and CEO in Nov. 2019. A seasoned executive with more than 30 years' experience in the medical device and biotech industries, Mr. Serbousek served 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, he held various general management positions within Medtronic Inc., including Worldwide Division President − Spine, and Worldwide Vice President and General Manager of Biologics for their Spine and Biologics business. Additionally, Mr. Serbousek spent 13 years with DePuy Orthopedics, a Johnson & Johnson company where he served in numerous roles of increasing responsibility, including Vice President of Marketing and Product Development and Vice President of Spinal Operations. Mr. Serbousek has held numerous board positions at for profit and not-for-profit organizations. He earned his BS in Engineering from Washington State University, his MS in Bioengineering from the University of Utah, and later completed several advanced management programs including a program at the IMD International School of Management in Lausanne, Switzerland.

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.

Kimberley A. Elting. Ms. Elting joined Orthofix as Chief Legal Officer in September 2016 and was named Chief Legal and Administrative Officer in 2017 and Chief Legal and Development Officer in 2020. In 2020, Kim assumed additional leadership responsibilities for Business Development and currently oversees the Legal, Business Development and Corporate Communications teams for the Company. 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.

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Kevin J. 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.

Paul W. Gonsalves.  Mr. Gonsalves became President, Global Extremities, in September 2020.  He joined Orthofix from Integra LifeSciences, a global provider of regenerative technologies, neurosurgical and extremity orthopedic solutions, where he served as Chief Commercial Officer.  With more than 30 years of industry experience and proven leadership, he has led global teams in the successful development and execution of innovative strategies focused on driving commercial optimization.  Mr. Gonsalves previously served as the Senior Vice President, Enterprise Sales and Corporate Marketing at Integra LifeSciences where he led the company’s creation of an enterprise sales organization to expand portfolio contracting and corporate marketing. Prior to this. Mr. Gonsalves held position of Senior Vice President and Chief Transformation Officer with AccentCare, Inc.  Additionally, he served as Vice President and General Manager of Primary Care at Novartis Pharmaceuticals Corporation. Mr. Gonsalves was also the Corporate Vice President of Sales Business Process Improvement and Strategic Initiatives for WellCare Health Plans Inc.  Early in his career, he held various roles of increasing commercial responsibility with GE Healthcare.  He earned his B.S. in Management from Rutgers University School of Business in Camden, New Jersey.

Davide Bianchi. Mr. Bianchi served as President, Global Extremities, from 2013 until his departure on April 1, 2020. In accordance with the terms of his Swiss-law governed employment contract, he continued on “garden leave” status with the Company’s Swiss subsidiary until his departure as an employee from such subsidiary as of October 1, 2020.

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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 nine seats, though two currently serving directors, Ronald A. Matricaria and Maria Sainz, are not standing for re-election at the Annual Meeting, and we have nominated Catherine M. Burzik to begin serving as a new director as of the Annual Meeting. Consistent with the foregoing, the Board has resolved to set the size of the Board at eight seats effective as of the Annual Meeting. 

Directors are elected at each annual meeting of shareholders by a majority of the votes cast with respect to the director, provided, however, that directors shall be elected by the vote of a plurality of the votes cast if (i) the Company receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for directors set forth in our Bylaws, which nomination is not subsequently withdrawn, or and (ii) the number of nominees for election to the Board of Directors at such meeting exceeds the number of directors to be elected. For purposes of this standard, a “majority of the votes cast” means that the number of shares voted “FOR” a director nominee must exceed the number of votes cast “AGAINST” that director nominee. The Company has not received any director nominations from stockholders for this year’s Annual Meeting, and the number of nominees is equal to the number of directors to be elected at the Annual Meeting. As such, a “majority of the votes cast” will be the standard for election at the Annual Meeting.

Under our Bylaws, if an incumbent director is nominated in an uncontested election, the director nominee is required, as a condition of the director’s nomination, to submit a conditional and irrevocable letter of resignation to the Chairman of the Board. If an incumbent director nominee does not receive a majority of the votes cast, the Nominating and Governance Committee of the Board is required to make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board is required to act on the Nominating and Governance Committee’s recommendation and publicly disclose its decision and the rationale behind the decision within 90 days from the date of certification of the election results. The director whose resignation is being considered may not participate in the recommendation of the Nominating and Governance Committee or the Board’s decision.

It is our policy that all directors attempt to attend the Annual Meeting, and at last year’s meeting, all currently serving directors attended telephonically. We expect that all directors will attend this year’s meeting in person.

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 or video conference as events require. The Board met seven times during 2020, five of which were in-person or virtual 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 2020 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.

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Of our eight director nominees, the Board has determined that each of Ms. Burzik, Mr. Hannon, Mr. Hinrichs, Mr. Lukianov, Ms. Marks, Mr. Paolucci, 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 52.

Board Leadership Structure

Mr. Matricaria, who is an independent director, currently serves as the Chairman of the Board, though he is not standing for re-election at the Annual Meeting. It is the Board’s intent that, if elected, Ms. Burzik, who will be an independent director, will be appointed as Chair 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 2020 is printed below at page 75.

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 2020 (either in-person or virtual 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.

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The Compensation Committee met five times during 2020 (either in-person or virtual 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. Ms. Sainz is not standing for re-election at the Annual Meeting; Messrs. Lukianov and Paolucci will continue serving as members of the committee following the Annual Meeting.

No interlocking relationship, as defined in the Exchange Act, currently exists, nor existed during 2020, 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 four times in 2020 (either in-person or virtual 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.

Mr. Hannon, Ms. Marks, 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. Ms. Sainz is not standing for re-election at the Annual Meeting. The Board has resolved that, as of the Annual Meeting, Mr. Sicard will be appointed as a third member of the committee, and Mr. Hannon will be appointed Chair of the committee.

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

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performance. The committee oversees the Company’s enterprise risk management program, reviews risk assessments, and receives reports from management on risk areas and mitigation plans. In addition, the committee oversees the Company’s ESG programs, reviews gap analysis, survey results and receives reports from management on ESG matters.

The Nominating and Governance Committee met four times in 2020 (either in-person or virtual 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. Paolucci 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 Development 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 or virtual 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 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.

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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.

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 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.

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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.

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

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Orthofix is committed to embedding sustainability throughout our business. We believe that all stakeholders must be considered in our actions every day. We approach issues surrounding sustainability with a mindset that is focused on providing superior solutions to physicians worldwide to improve the lives of patients. At the same time, we never lose sight of growing our businesses, developing our people, and enhancing our communities.

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Orthofix’s website contains information on our environmental and social policies and programs, including the following:

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For more information:

Our corporate website: https://ir.orthofix.com/governance/corporate-sustainability/default.aspx

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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). Other than as described in the paragraph below, the Company has not had any related party transactions meeting this threshold since the beginning of 2020.

On February 2, 2021, the Company entered into a technology assignment and royalty agreement with a medical device technology company partially owned and controlled by the wife of President and Chief Executive Officer, Jon Serbousek, whereby the Company acquired the intellectual property rights to certain assets for consideration of up to $10.0 million. Consideration is comprised of $1.0 million due at signing and $9.0 million in contingent consideration, dependent upon multiple milestones, such as receipt of 510(k) clearance and the attainment of certain net sales targets. In addition, the Company will pay a royalty of 2% to 4% on net sales, commencing upon commercialization of the acquired assets. The transaction was approved by the Company’s Audit and Finance Committee, with the Audit and Finance Committee directly supervising and directing the negotiation of the transaction by Company employees who reported directly to the committee in connection with such negotiations. Mr. Serbousek was excluded from such discussions and did not participate in the negotiation or evaluation of the transaction. Mr. Serbousek is also being excluded from the administration and implementation of the agreements and the transactions contemplated thereby, all discussions or disputes with the counterparty in connection with the agreement, the transactions contemplated thereby, or the administration or implementation thereof, oversight of the Company’s development and commercialization activities in relation to the acquired technology, and all other matters relating to the relationship between the Company and the counterparty.

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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.

Once again in 2020, a significant portion of our NEOs’ compensation was delivered in equity-based awards. Fifty percent of the equity-based awards was delivered via performance stock units (which only vest based upon the Company’s total shareholder return relative to a peer group over a three-year performance period), while the other fifty percent of the equity awards was equally delivered via time-based vesting awards (consisting of restricted stock units and stock options).

In addition, a significant portion of our NEOs’ cash compensation was at risk pursuant to our annual incentive program. The Compensation Committee typically designs the annual incentive program around challenging financial performance goals that measure fiscal year financial performance. However, in 2020, the COVID-19 pandemic presented unique challenges, and the Committee recognized during the first half of 2020 that the original performance goals it had set early in the year would not be achievable solely as a result of external events caused by the pandemic. As a result, the Committee determined in June 2020 to instead make 2020 executive incentive plan bonus achievement determinations based on the Committee’s assessment at the end of the year of the management team’s collective performance under the unique and fluid circumstances that existed. The Committee’s analysis and determinations are described further below.

In April 2020, as a precautionary measure to increase the Company’s cash position and preserve financial flexibility in response to the initial uncertainty of the COVID-19 pandemic, the Company temporarily suspended the 401(k) match program through December 31, 2020. The 401(k) match program was reinstated in January 2021. In addition, the Company instituted temporary salary reductions for U.S. employees and fee reductions for the Board of Directors (a 20% reduction for NEOs and board members), which were in effect for two months during the second quarter of 2020.

The Committee believes that its overall compensation program for NEOs follows through on the Committee’s pay-for-performance philosophy.

Notable financial results and accomplishments in 2020 include the following:

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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 2020. 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 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. Ms. Sainz is not standing for re-election at the Annual Meeting; Messrs. Lukianov and Paolucci will continue serving as members of the committee following the Annual Meeting

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 Development 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 2020 compensation, which was completed and presented in December 2019, 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 and December 2019. 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 2020 annual meeting, the Company’s say-on-pay proposal was supported by 95.4% of shares represented at the meeting, which we believe supports the Company’s “pay-for-performance” approach to executive compensation. The Committee evaluated the results of the vote in September 2020.

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 five 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 2020. 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 2020. These charts illustrate that a significant portion of our named executive officer total target direct compensation was performance-based or variable.

* Graph excludes compensation for Davide Bianchi, our former President of Global Extremities

 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.

In 2020, as a precautionary measure to increase the Company’s cash position and preserve financial flexibility in response to the initial uncertainty of the COVID-19 pandemic, the Company instituted temporary salary reductions for U.S. employees (including a 20% reduction for  named executive officers) and fee reductions for the Board of Directors, which were in effect for two months during the second quarter of 2020.

The 2019 and 2020 annual base salary amounts for our named executive officers were as follows. (The actual base salary amounts paid to named executive officers, after giving effect to the 2-month salary reduction that occurred in the second quarter of 2020, is set forth in the Summary Compensation Table on page 35).

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⁽¹⁾ Amounts shown for 2020 annual base salaries do not reflect the temporary salary reduction that was in place for two months in 2020 in response to the initial uncertainty of the COVID-19 pandemic.

⁽²⁾ Annual base salary amount shown for 2019 reflects Mr. Serbousek’s annual base salary following his promotion to President and Chief Executive Officer on November 1, 2019.

⁽³⁾ Reflects the annual base salary amount for Mr. Gonsalves, who was hired on September 11, 2020, rather than actual wages paid in 2020.

⁽⁴⁾ Mr. Bianchi is paid in Swiss Francs (CHF).  Mr. Bianchi had an annual base salary of CHF 412,000 while serving as President of Global Extremities in 2020. For his time as an employee in 2020, from January 1, 2020 until his departure date of October 1, 2020, following the conclusion of his “garden leave” status, Mr. Bianchi received total base salary payments of CHF 310,108.  Based on the average exchange rate of CHF to U.S. Dollars applicable during the time of his service of 1.0527, the amounts shown in the table would be $433,712 and $326,451, respectively.

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 seeks to align 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.

As it has done in recent years, the Committee established and approved performance goals at the outset of 2020, which goals were based on net sales and EBITDA targets derived from the Company’s internal budget and financial forecast. Beginning in late March 2020, the Company’s sales were suddenly and severely affected by the onset of the COVID-19 pandemic and accompanying government shutdown orders that, among other things, temporarily closed many surgery centers and resulted in the suspension of surgeries which utilize the Company’s products. As a result of these events, in early April 2020, the Company withdrew its previously provided public net sales and EBITDA guidance, as the extent, duration and severity of COVID-19’s impact was not determinable at such time.

As these events unfolded, the Committee recognized that the original performance goals it had approved would not be achievable, as these external events were of sufficient magnitude to render the original goals impossible to achieve under the larger medical device industry environment that then-existed. In early June 2020, the Committee determined that instead of using the original performance goals it had set at the outset of the year, it would instead make 2020 executive incentive plan bonus achievement determinations based on the Committee’s assessment at the end of the year of the management team’s collective performance under the unique and fluid circumstances that existed.

In reaching this conclusion, the Committee considered several factors, including (i) the difficulty of establishing new financial metric targets at the time due to the fluid and uncertain environment (which environment at the time prevented the Company from providing public financial guidance), (ii) the need to maintain executive and employee engagement and morale through the challenging environment, and (iii) the Committee’s belief that the management team’s performance during the initial acute phase of the pandemic up to that point evidenced extraordinary efforts and commitment towards the Company’s success during this period (including the

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maintenance of business continuity during an environment that required a sudden shift to a remote working environment).

In January 2021, the Committee evaluated the management team’s performance for the full year of 2020 and determined that it would be appropriate to award 100% of target bonus opportunity (without giving effect to temporary salary reductions in Q2) for all bonus eligible employees (including the NEOs) under the 2020 incentive plan. In addition to consideration of the factors described above, the Committee assessed the year's performance versus qualitative objectives that had been contained in Board-approved corporate objectives for the 2020-2021 period, which qualitative objectives had been set at the outset of 2020. The Committee noted that the management team had successfully completed a series of previously Board-approved objectives, including (i) a revitalization of organizational leadership, (ii) new communications plans, (iii) business development process improvements, (iv) an integration of the Company’s early 2020 acquisition of the FITBONE® intramedullary lengthening system, (v) improvements in the Company’s Spine business channel strategy, (vi) adjustments to the Company’s product strategies to better fulfill unmet market needs, and (vii) improvements to the Company’s global supply chain to better serve customers. The Committee also considered the management team’s stewardship of the Company’s resilient overall financial performance in the difficult environment, including that such stewardship from March 2020 through December 2020 helped the Company’s stock price regain during such period substantially all of the sharp decline that had occurred between late February 2020 and mid-March 2020, thereby providing substantial value to shareholders who otherwise could have suffered a significant financial loss on their investment due to the sudden and negative effects of the pandemic.

Aggregate Payouts

These resulting payouts of the annual incentive program are described in the table below:

⁽¹⁾ Mr. Gonsalves was hired as President of Global Extremities on September 11, 2020. As such, his annual incentive bonus plan payout for fiscal year 2020 represents a pro-rata portion of his agreed upon bonus percentage based upon the partial year of service provided in fiscal year 2020.

⁽²⁾ Mr. Bianchi is paid in Swiss Francs (CHF).  His annual incentive bonus plan payout for fiscal year 2020 was based upon his pro-rated salary received for his time as an employee in 2020.

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

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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 22, 2021, 687,315 shares remained available for grant pursuant to this plan. As further described under “Proposal 3: Approval of Amendment No. 2 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 1,200,000 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 former 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 occasionally makes inducement grants (in accordance with applicable Nasdaq rules) to newly hired employees outside of shareholder approved plans, as it did in 2020 in connection with the hiring of Mr. Gonsalves, in 2019 with the hiring of Mr. Serbousek, 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 2020, 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. Gonsalves joined the Company in September 2020, after the start of the 3-year performance period for the Company’s 2020 performance stock unit grants. As a result, all grants to Mr. Gonsalves in 2020 (which represent inducement grants he received at the time of hiring) were made via time-based vesting awards. However, for 2021, 50% of Mr. Gonsalves’ 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 or suffers a long-term disability, the full grant vests. In all of the foregoing circumstances, 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 grant will

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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, 2020 are described below.

Performance Stock Unit Grants

Since 2017, the Committee has 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. Since 2016, the Committee has used the S&P Healthcare Equipment Select Industry Index as the applicable 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 three-year performance period for the Company’s 2016 grant of performance stock units concluded in June 2019. The Company achieved a cumulative TSR over the performance period of 16.45%, which ranked at the 25^th percentile relative to the peer group. Per the terms of the award, this performance resulted in vesting of 50% of the target number of PSUs. 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 were delivered in June 2020, 12 months after the conclusion of the performance period.

The three-year performance period for the Company’s 2017 grant of performance stock units concluded in June 2020. The Company achieved a cumulative TSR over the performance period of (24.29%), which ranked at the 19^th percentile relative to the stated peer group, and thus did not meet the minimum threshold to vest in the award. As such, the awards were forfeited upon 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. However, in the case of PSUs granted in 2020, due to capacity limitations, all such grants of PSUs were deferred until June 8, 2020, following approval of the Company’s amendment to its LTIP. 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 cases of our President and Chief Executive Officer, President of Global Spine, and President of Global Extremities, each of whom received relocation benefits in 2020 in excess of $10,000, in addition to other benefits as discussed within the Summary Compensation Table on page 35. 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 with one Board meeting per year. We believe 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. In April 2020, as a precautionary measure to increase the Company’s cash position and preserve financial flexibility in response to the initial uncertainty of the COVID-19 pandemic, the Company temporarily suspended the 401(k) match program for all participants through December 31, 2020. The 401(k) match program was reinstated in January 2021.

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 — Our long-term incentive plan incorporates 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 include the impact of temporary salary reductions for U.S. employees (including a 20% reduction for named executive officers), which were in effect for two months during the second quarter of 2020.

⁽²⁾  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.

⁽³⁾  Amounts shown reflect cash bonuses paid in 2021, 2020, and 2019 for performance in 2020, 2019, and 2018, respectively, pursuant to our annual incentive program. Our annual incentive program with respect to the 2020 fiscal year, including the Committee’s criteria for determining the amounts awarded in 2021, are described above under “Compensation Discussion and Analysis – Elements of Executive Compensation – Cash Performance-Based Incentives – Annual Incentive Program.”

⁽⁴⁾ Reflects $71,418 for relocation expenses, $11,400 for 401k matching, and $9,742 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance and individual disability insurance, respectively.

⁽⁵⁾ Reflects $8,336 for 401k matching and $9,001 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance and individual disability insurance, respectively.

⁽⁶⁾ Reflects $8,294 for 401k matching and $7,606 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance and individual disability insurance, respectively.

⁽⁷⁾ Mr. Kenny was hired on December 4, 2019. Per the terms of his offer letter, Mr. Kenny received two time-based cash incentive awards of $100,000 as an inducement to join the Company, the first of which was paid in December 2019, and the second of which was paid upon the one-year anniversary of his start date.

⁽⁸⁾ Reflects $31,746 for relocation expenses, $3,646 for 401k matching, $4,525 for tax preparation reimbursement, and $11,409 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance and individual disability insurance, respectively.

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⁽⁹⁾ Mr. Gonsalves was hired on September 11, 2020. As such, his salary and non-equity annual incentive plan compensation payment for fiscal year 2020 represent a pro-rata portion of his agreed upon salary and bonus percentage based upon the partial year of service provided in fiscal year 2020.

⁽¹⁰⁾ Reflects $106,003 for relocation expenses and $808 for insurance premiums paid by, or on behalf of, the Company with respect to group term and life insurance and individual disability insurance, respectively.

⁽¹¹⁾ Mr. Bianchi is compensated in Swiss Francs (CHF). Amounts shown in for 2020 within the table reflect compensation amounts as converted to U.S. Dollars using the average exchange rate in effect during the first 10 months of calendar year 2020 of 1.0527.  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 continued on “garden leave” status with the Company’s Swiss subsidiary until his department as an employee from such subsidiary on October 1, 2020.

⁽¹²⁾ Mr. Bianchi is compensated in CHF. Reflects a lump sum payment of $756,328 made in accordance with Mr. Bianchi’s change in control and severance agreement, $19,017 for car allowance, and $101,373 for retirement matching.

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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, 2020.

⁽¹⁾ Amounts shown represent the threshold, target and maximum amounts that could have been earned for fiscal year 2020 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 2020 “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.

⁽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 June 8, 2020. 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 June 8, 2020.

⁽⁴⁾ Amounts shown represent an award of time-based restricted stock units granted in 2020 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).

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⁽⁵⁾ Amounts shown include awards of stock options granted in 2020 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).

⁽⁶⁾ The exercise price of the stock options is equal to the closing price of the common stock on the grant date.

⁽⁷⁾ 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. 

⁽⁸⁾  Represents grants of time-based vesting restricted stock units and time-based vesting stock options granted upon Mr. Gonsalves’ hire date of September 11, 2020 as President of Global Extremities. 

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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, 2020.