SECOND AMENDED & RESTATED PERFORMANCE ACCELERATED STOCK OPTIONS AGREEMENT

EXHIBIT 10.3

SECOND AMENDED & RESTATED

PERFORMANCE ACCELERATED

STOCK OPTIONS AGREEMENT

This SECOND AMENDED & RESTATED PERFORMANCE ACCELERATED STOCK OPTIONS AGREEMENT (this “ Agreement ”), dated as of the 14 th day of October, 2008 by and between Orthofix International N.V. (the “ Company ”) and Mr. Bradley R. Mason (the “ Optionee ”).

WITNESSETH :

WHEREAS, in connection with the transaction contemplated by the Acquisition Agreement, dated as of November 20, 2003 (the “ Acquisition Agreement ”), among the Company, Trevor Acquisition, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Orthofix, Breg, Inc., a California corporation, and Bradley R. Mason, as shareholder’s representative, and the Optionee’s employment with the Company, the Company granted the Optionee Options (as defined herein) to purchase shares of the Company’s common stock, par value U.S. $0.10 per share (“ Common Stock ”), on the terms and conditions set forth in that certain Performance Accelerated Stock Options Agreement between the Company and the Optionee dated November 20, 2003 (the “ Original Agreement ”).

WHEREAS, the Company and Optionee entered into an Amended and Restated Performance Accelerated Stock Options Agreement on November 14, 2007 (the “ First Amended Agreement ”) in order to amend the Original Agreement and reflect Optionee's then-current election with respect to exercising the Options.

WHEREAS, all Options are vested as of December 30, 2007, pursuant to the terms of the First Amended Agreement.

WHEREAS, in connection with the extension of Optionee’s Employment Agreement through April 1, 2010, the Company and the Optionee have agreed to modify the Optionee’s election with respect to exercising the Options and desire to amend and restate the First Amended Agreement in its entirety by executing this Agreement.

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

SECTION 1.    Definitions .  For the purpose of this Agreement, the following terms shall have the meanings specified below:

(a)           “ Board ” means the Board of Directors of the Company.

(b)           “ Cause ” means termination of the Optionee’s employment because of any of the following events:

(c)           “ Code ” means the Internal Revenue Code of 1986, as amended.

(d)           “ Committee ” means the Compensation Committee of the Board.

(e)           “ Expiration Date ” means the date that is the ten (10) year anniversary of the Grant Date.

SECTION 2.   Grant of Options .  Pursuant to the Original Agreement, the Company granted to the Optionee, as of the Grant Date (as defined in the Original Agreement) and through the Expiration Date (the “ Option Period ”), options to purchase from the Company one hundred and fifty thousand (150,000) shares of Common Stock at an exercise price of $38.00 per share (the “ Options ”).

SECTION 3.   Exercise of Options .  Subject to the terms and conditions set forth in this Agreement, the Options shall be subject to the following exercisability requirements:

(a)            Generally .  All shares subject to the Options are fully vested.  Notwithstanding the Expiration Date, the Options are now only exercisable in accordance with the Optionee’s exercise elections set forth in Section 3(b) hereof and any limitations on exercise in effect on the date of exercise.

(b)            Election to Exercise Options .  Notwithstanding any other provision of this Agreement to the contrary:

(c)           Any portion of each respective tranche of 50,000 Options that is not exercised by midnight Eastern Time on the last day of the First Exercise Period, Second Exercise Period or Third Exercise Period (each, an “ Exercise Period ”), respectively, shall not be exercisable thereafter and shall terminate and be cancelled immediately following such date and time. For the avoidance of doubt and by way of example, if the Optionee exercises 35,000 of 50,000 Options during the First Exercise Period, the remaining 15,000 Options exercisable during the First Exercise Period but not exercised by the Optionee shall lapse and may not be exercised at any time after the First Exercise Period.

(d)           Any exercise described in Section 3(b) shall be delayed to the extent required to avoid a violation of federal securities laws or other applicable laws; provided , however , such exercise shall not be delayed beyond the earliest date at which the Company reasonably anticipates that such exercise will not cause such violation.  An exercise that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.

(e)           Upon the death of the Optionee, the executor or administrator of the estate of the Optionee or the person or persons to whom the Options shall have been validly transferred by the executor or administrator pursuant to will or the laws of descent and distribution shall have the right to exercise the Options to the extent that the Optionee was entitled to exercise them on the date of death under Section 3(b).

SECTION 4.   Termination of Employment .

(a)            General .  A termination of employment shall be deemed to have occurred if the Optionee has a "separation from service" from the Company as described under Code Section 409A and the guidance and Treasury Regulations issued thereunder. For purposes of the determination of whether the Optionee has had a “separation from service” as described under Code Section 409A and the guidance and Treasury Regulations issued thereunder, the terms “Company,” “employer” and “service recipient” mean Orthofix International N.V. and any affiliate with which Orthofix International N.V. would be considered a single employer under Code Section 414(b) or 414(c), provided that in applying Code Sections 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Code Sections 1563(a)(1), (2), and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2.  In addition, where the use of such definition of “Company,” “employer” or “service recipient” for purposes of determining a “separation from service” is based upon legitimate business criteria, in applying Code Sections 1563(a)(1), (2), and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 20 percent” is used instead of “at least 80 percent” at each place it appears in Code Sections 1563(a)(1), (2), and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Code Section 414(c), the language “at least 20 percent” is used instead of “at least 80 percent” at each place it appears in Treasury Regulation Section 1.414(c)-2.

(b)           The Board and the Committee each shall have the discretion to determine whether employment has been or could have been terminated for the purposes of this Agreement, and the reasons therefore.  Any such determination shall be final, binding and conclusive.  For the avoidance of doubt and notwithstanding anything to the contrary in this Agreement, the Optionee acknowledges that he must remain employed with the Company through March 31, 2010 as a condition precedent to his exercising any Options during any Exercise Period, except as provided in Sections 3(b)(ii).  If during any Exercise Period the Optionee's employment terminates for a reason other than termination by the Company for Cause, the respective Options shall continue to be exercisable by the Optionee, but only in the same amounts and until the end of each applicable Exercise Period, subject to any limitation on the exercise of the Options in effect on the date of exercise.