Exhibit 10.17


 


SECURITY
AGREEMENT


 


This Security Agreement is made and entered into this January 24, 2006,
by and between BANK OF THE WEST (the “Bank”) and the undersigned (the
“Debtor”).


 


1.                                       Grant of Security Interest. 
The Debtor hereby grants to the Bank a security interest in and to all
of the following property (hereinafter collectively referred to as the
“Collateral”):


 


(a)  Investment Property
Those shares of stock, bonds, indentures, negotiable and non-negotiable
securities and instruments listed on the attached Exhibit “A” and on any
additional and supplemental exhibits to this Security Agreement, together with
all warrants, options, stock rights, rights to subscribe, liquidating
dividends, cash dividends, payments, dividends paid in stock, new securities or
other property derived therefrom or to which the Debtor may become entitled to
receive on account thereof.


 


The Bank’s security interest in the Collateral shall
be a continuing lien and shall include all proceeds and products of the
Collateral including, but not limited to, the proceeds of any insurance
thereon.


 


Debtor hereby consents to and instructs Bank to file
financing statements in all locations deemed appropriate by the Bank from time
to time.


 


The security interest granted to Bank in the Collateral
shall not secure or be deemed to secure any Indebtedness of the Debtor to the
bank which is, at the time of its creation, subject to the provisions of any
state or federal consumer credit or truth-in-lending disclosure statutes.


 


2.                                       The Indebtedness. The Collateral secures payment of the
Indebtedness of the Debtor under that certain Guaranty dated as of January 24,
2006.  In the principal amount of
$14,000,000.00, given for the benefit of ALPHATEC SPINE, INC.  together with any and all modifications,
extensions and renewals of such Indebtedness (hereinafter collectively referred
to as the “Indebtedness”) and performance of all the terms, covenants and
agreements contained in this Security Agreement and in any other document,
instrument or agreement evidencing or related to the Indebtedness or the
Collateral.


 


The Indebtednsss secured hereby shall not include any
Indebtedness of the Debtor Incurred for personal, family or household purposes
except to the extent any disclosure required under any consumer protection law
(including but not limited to the Truth in Lending Act) or any regulation
thereto, as now existing or hereafter amended, is or has been given.


 


3.                                       Debtor’s Representations and
Warranties. The
Debtor hereby makes the following representations and warranties to the Bank,
which representations and warranties are continuing:


 


(a)  Status: The
Debtor’s correct legal name is as stated in this Agreement and the Debtor is a
corporation duly organized and validly existing under the laws of the state of
California, and with its chief executive office in the state of California, and
is properly licensed and is qualified to do business and in good standing in,
and, where necessary to maintain the Debtor’s rights and privileges, has
complied with the fictitious name statute of every jurisdiction in which the
Debtor is doing business.


 


(b)  Authority: The
execution, delivery and performance by the Debtor of this Agreement and any
instrument, document or agreement required hereunder have been


 


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duly authorized and do not and will not: (i) violate
any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having application to the Debtor; (ii) result in a breach of or constitute a
default under any material indenture or loan or credit agreement or other
material agreement, lease or instrument to which the Debtor is a party or by
which it or its properties may be bound or affected; or (iii) require any
consent or approval of its stockholders or violate any provision of its
articles of incorporation or by-laws; or (iv) violate any provision of its
partnership agreement; or (v) require any consent or approval of its members or
violate any provision of its articles of organization or operating agreement.


 


(c)  Legal Effect.
This Security Agreement constitutes, and any document, instrument or agreement
required hereunder when delivered will constitute, legal, valid and binding
obligations of the Debtor enforceable against the Debtor in accordance with
their respective terms.


 


(d)  Fictitious Trade Names:
There are no fictitious trade names, fictitious trade styles, assumed business
names or trade names (defined herein as “Trade Name”) used by the Debtor in
connection with its business operations. 
The Debtor shall notify the Bank not less than 30 days prior to
effecting any change in the matters described herein or prior to using any
other fictitious Trade Name at any future date, indicating the Trade Name and
state(s) of its use


 


(e)  Title to Collateral;
Permitted Liens.  The Debtor
has good and marketable title to the Collateral and the same is not now and
shall not become subject to any security interest, encumbrance, lien or claim
of any third person other than: (i) liens and security interests to secure the
Indebtedness or other Indebtedness owed to the Bank; (ii) liens for taxes,
assessments or similar charges either not yet due or being duly contested in
good faith; (iii) liens of mechanics, materialmen, warehousemen or other like
liens arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; (v)
purchase money liens or purchase money security interests upon or in any
property acquired or held by the Debtor in the ordinary course of business to
secure Indebtedness outstanding on the date hereof or permitted to be incurred
hereunder; and (vi) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of the Debtor’s assets (collectively “Permitted Liens”). 


 


(f)  Financial Statements.  All financial statements, information and
other data now or hereafter submitted to the Bank in connection with the
transaction with respect to which this Security Agreement is entered into are
true, accurate and correct and have been or will be prepared in accordance with
generally accepted accounting principles consistently applied.  Since the most recent submission of any such
financial statement, information or other data to the Bank, the Debtor
represents and warrants that no material adverse change in the financial
condition or operations as disclosed therein or thereby has occurred which has
not been fully disclosed to the Bank in writing.


 


(g)  Litigation.  Except as have been disclosed to the Bank in
writing, there are no actions, suits or proceedings pending or, to the
knowledge of the Debtor, threatened against or affecting the Debtor or the
Debtor’s properties before any court or administrative agency which, if
determined adversely to the Debtor, would have a material adverse effect on the
Debtor’s financial condition or operations or on the Collateral.


 


(h)  Taxes  The Debtor has filed all tax returns required
to be filed and paid all taxes shown thereon to be due, including interest and
penalties, other than taxes which are currently payable without penalty or
interest or those which are being duly contested in


 


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good faith.


 


(i)  Environmental Compliance.  The operations of the Debtor comply, and
during the term of this Security Agreement will at all times comply, in all
respects with all Environmental Laws; the Debtor has obtained all licenses,
permits, authorizations and registrations required under any Environmental Law
(“Environmental Permits”) and necessary for its ordinary course
operations, all such Environmental Permits are in good standing, and the Debtor
is in compliance with all material terms and conditions of such Environmental
Permits; neither the Debtor nor any of its present property or operations is
subject to any outstanding written order from or agreement with any
governmental authority nor subject to any judicial or docketed administrative
proceeding, respecting any Environmental Law, Environmental Claim or Hazardous
Material; there are no Hazardous Materials or other conditions or circumstances
existing, or arising from operations prior to the date of this Agreement, with
respect to any property of the Debtor that would reasonably be expected to give
rise to Environmental Claims; provided, however, that with respect to
property leased from an unrelated third party, the foregoing representation is
made to the best knowledge of the Debtor. 
In addition, (i) the Debtor does not have any underground storage tanks
that are not properly registered or permitted under applicable Environmental
Laws, or that are leaking or disposing of Hazardous Materials off-site, and
(ii) the Debtor has notified all of their employees of the existence, if any,
of any health hazard arising from the conditions of their employment and have
met all notification requirements under Title III of CERCLA and all other
Environmental Laws


 


For the purposes hereof:


 


(1)  “Environmental Claims” shall mean all
claims, however asserted, by any governmental authority or other person
alleging potential liability or responsibility for violation of any
Environmental Law or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal, remedial
or response costs, restitution, civil or criminal penalties, injunctive relief,
or other type of relief, resulting from or based upon (a) the presence,
placement, discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spills, leaks, discharges, emissions or releases) of
any Hazardous Material at, in, or from property, whether or not owned by the
Debtor, or (b) any other circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law


 


(2)  “Environmental Laws” shall mean all
federal, state or local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (“CERCLA), the Clean Air Act,
the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act,
the Federal Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Emergency Planning and Community Right-to-Know Act, the
California Hazardous Waste Control Law, the California Solid Waste Management,
Resource, Recovery and Recycling Act, the California Water Code and the
California Health and Safety Code.


 


(3)  “Hazardous Materials” means all those
substances which are regulated by, or which may form the basis of liability
under, any Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, 


 


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hazardous material, or toxic substance, or petroleum
or petroleum derived substance or waste.


 


(j) ERISA: If the
Debtor has a pension, profit sharing or retirement plan subject to Employee
Retirement Income Security Act of 1974 (“ERISA”), such plan has been and will
continue to be funded in accordance with its terms and otherwise complies with
and continues to comply with the requirements of ERISA.


 


4                                          Debtor’s Covenants. 
The Debtor covenants and agrees that, unless the Bank otherwise consents
in writing, the Debtor shall at all times:


 


(a)  Maintenance of Insurance
Keep and maintain the Collateral insured for not less than its full replacement
value against all risks of loss and damage and maintain such other insurance as
is usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Debtor operates and
maintain such other insurance and coverages as may be required by the Bank. All
such insurance shall be in form and amount and with companies satisfactory to
the Bank.  With respect to insurance
covering the Collateral, such insurance shall name the Bank as loss payee
pursuant to a loss payable endorsement satisfactory to the Bank and shall not
be altered or canceled except upon 10 days’ prior written notice to the Bank.
Upon the Bank’s request, the Debtor shall furnish the Bank with the original
policy or binder of all such insurance


 


(b)  Inspection Rights and
Accounting Records: The Debtor will maintain adequate books and
records in accordance with generally accepted accounting principals
consistently applied and in a manner otherwise acceptable to Bank, and, at any
reasonable time and from time to time, permit the Bank or any representative
thereof to examine and make copies of the records and visit the properties of
the Debtor and discuss the business and operations of the Borrower with any
employee or representative thereof.  If
the Debtor shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Debtor hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times
and to provide the Bank with copies of any records which it may request, all at
the Debtor’s expense, the amount of which shall be payable immediately upon
demand. In addition, the Bank may, at any reasonable time and from time to
time, conduct inspections and audits of the Collateral and the Debtor’s
accounts payable, the cost and expenses of which shall be paid by the Debtor to
the Bank upon demand.


 


(c)  Reporting Requirements
Promptly upon the Bank’s request, deliver or cause to be delivered to the Bank
such information pertaining to the Debtor, the Collateral or such other matters
as the Bank may reasonably request.


 


(d)  Payment of Obligations
Pay all of its liabilities and obligations when due


 


(e)  Compensation of Employees
Compensate its employees for services rendered at an hourly rate at least equal
to the minimum hourly rate prescribed by any applicable federal or state law or
regulation.


 


(f)  Maintenance of Jurisdiction:
Debtor shall maintain the jurisdiction of its organization and chief executive
office, or if applicable, principal residence, as set forth herein and not
change such jurisdiction name or form of organization without 30 days prior
written notice to Bank.


 


5.                                       Bank’s Rights Without Default At its option and without any obligation
to do so, the Bank may, either in the name of the Bank, the Bank’s nominee or
the Debtor:


 


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(a)  Collect, endorse and receive all sums,
including, but not limited to, dividends and interest, now or hereafter payable
upon or on account of the Collateral.


 


(b)  Enter into any agreement relating to or
affecting the Collateral and, in connection therewith, the Bank may surrender
control of any such Collateral, accept other property in exchange for such
Collateral, and do and perform such acts as it deems proper.  Any money or property received in exchange
for any such Collateral shall be subject to and held by the Bank pursuant to
the terms of this Security Agreement


 


(c)  Make any compromise or settlement with
respect to the Collateral that the Bank, in its sole and absolute discretion,
deems proper


 


(d)  Insure and do such other acts as the
Bank deems necessary, in its sole discretion, to preserve or protect the
Collateral


 


(e)  Cause the Collateral to be transferred
to the Bank’s name or the name of the Bank’s nominee.


 


(f)  With respect to the Collateral,
exercise all rights, powers and remedies of an owner but excluding any voting
rights.


 


6.                                       Events of Default. 
Any one or more of the following described events shall constitute an
event of default (“Event of Default”) hereunder:


 


(a)  Non-Payment:  The Debtor shall fail to pay the
aggregate principal amount of any Indebtedness when due or interest on the
Indebtedness within 5 days of when due.


 


(b)  Performance Under This
Agreement:  The Debtor shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Security Agreement or in any document, instrument
or agreement relating to this Agreement and any such failure shall continue
unremedied for more than 30 days after written notice from the Bank to the
Borrower of the existence and character of such Event of Default.


 


(c)  Representations and
Warranties; Financial Statements: 
Any representation or warranty made by the Debtor under or in connection
with this Security Agreement or any financial statement given by the Debtor or
any guarantor shall prove to have been incorrect in any material respect when
made or given or when deemed to have been made or given.


 


(d)  Other Agreements:
If there is a default under any agreement to which Debtor is a party with the
Bank or with a third party or parties resulting in a right by the Bank or such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness.


 


(e)  Insolvency: The
Debtor or any guarantor shall: (i) become insolvent or be unable to pay its
debts as they mature; (ii) make an assignment for the benefit of creditors or
to an agent authorized to liquidate any substantial amount of its properties
and assets; (iii) file a voluntary petition in bankruptcy or seeking
reorganization or to effect a plan or other arrangement with creditors; (iv)
file an answer admitting the material allegations of an involuntary petition
relating to bankruptcy or reorganization or join in any such petition; (v)
become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 30 days after the date of such appointment


 


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(f)  Execution: Any
writ of execution or attachment or any judgment lien shall be issued against
any property of the Debtor and shall not be discharged or bonded against or
released within 30 days after the issuance or attachment of such writ or lien


 


(g)  Revocation or Limitation
of Guaranty: Any guaranty shall be revoked or limited or its
enforceability or validity shall be contested by any guarantor, by operation of
law, legal proceeding or otherwise or any guarantor who is a natural person
shall die.


 


(h)  Revocation or Limitation
of Subordination Agreement: Any subordination agreement shall be
revoked or limited or its enforceability or validity shall be contested by any
creditor signatory thereto, by operation of law, legal proceeding or otherwise.


 


(i)  Suspension: The
Debtor shall voluntarily suspend the transaction of business or allow to be
suspended, terminated, revoked or expired any permit, license or approval of
any governmental body necessary to conduct the Debtor’s business as now
conducted.


 


(j)  Material Adverse Change:
If there occurs a material adverse change in the Debtor’s business or financial
condition, or if there is a material impairment of the prospect of repayment of
any portion of the Indebtedness or there is a material impairment of the value
or priority of the Bank’s security interest in the Collateral.


 


(k)  Change in Ownership:
There shall occur a sale, transfer, disposition or encumbrance (whether
voluntary or involuntary), or an agreement shall be entered into to do so, with
respect to more than 10% of the issued and outstanding capital stock of the
Debtor.


 


(l)  Impairment of Collateral:  There shall occur any injury or damage to all
or any part of the Collateral or all or any part of the Collateral shall be
lost, stolen or destroyed.


 


7.                                       Bank’s Rights and Remedies on
Default. Upon the
occurrence of any Event of Default, the Bank may, at its sole and absolute
election, without demand and only upon such notice as may be required by law:


 


(a)  Acceleration.  Declare the Indebtedness and any or all other
indebtedness owing to the Bank by the Debtor or any obligor on the Indebtedness
(however such indebtedness may be evidenced or secured) immediately due and
payable, whether or not otherwise due and payable


 


(b)  Cease Extending Credit.
Cease extending credit to or for the account of the Debtor or any obligor on
the Indebtedness under any agreement now existing or hereafter entered into
with the Bank


 


(c)  Termination.  Terminate any agreement as to any future
obligation of the Bank without affecting the Debtor’s obligations to the Bank
or the Bank’s rights and remedies under this Security Agreement or under any
other document, instrument or agreement


 


(d)  Segregate Collections.  Require the Debtor to segregate all
collections and proceeds of the Collateral so that they are capable of
identification and to deliver such collections and proceeds to the Bank, in
kind, without commingling, at such times and in such manner as required by the
Bank.


 


(e)  Records of Collateral.  Require the Debtor to periodically deliver to
the Bank records and schedules showing the status, condition and location of
the Collateral and such contracts or other matters which affect the Collateral.
In connection herewith, the Bank may conduct such audits or other examination
of such records, including, but not limited to, verification of balances owing
by any account debtor of the Debtor, as the Bank, in its sole


 


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and absolute discretion, deems necessary.


 


(f)  Compromise.  Grant extensions, compromise claims and settle
any account for less than the amount owing thereunder, all without notice to
the Debtor or any obligor on or any guarantor of the Indebtedness.


 


(g)  Protection of Security
Interest in Collateral.  Make
such payments and do such acts as the Bank, in its sole judgment, considers
necessary and reasonable to protect its security interest in the Collateral.
The Debtor hereby irrevocably authorizes the Bank to pay, purchase, contest or
compromise any encumbrance, lien or claim which the Bank, in its sole judgment,
deems to be prior or superior to its security interest. Further, the Debtor
hereby agrees to pay to the Bank, upon demand therefor, all expenses and
expenditures (including attorneys’ fees at trial and on appeal) incurred in
connection with the foregoing.


 


(h)  Foreclosure.  Enforce any security interest or lien given
or provided for under this Security Agreement or under any other document
relating to the Collateral, in such manner and such order, as to all or any
part of the Collateral, as the Bank, in its sole judgment, deems to be
necessary or appropriate and the Debtor hereby waives any and all rights,
obligations or defenses now or hereafter established by law relating to the
foregoing.  In the enforcement of its
security interest in the Collateral, the Bank is authorized to enter upon the
premises where any Collateral is located and take possession of the Collateral
or any part thereof, together with the Debtor’s records pertaining thereto, or
the Bank may require the Debtor to assemble the Collateral and records
pertaining thereto and make such Collateral and records available to the Bank
at a place designated by the Bank.  The
Bank may sell the Collateral or any portions thereof, together with all
additions, accessions and accessories thereto, giving only such notices and
following only such procedures as are required by law, at either a public or
private sale, or both, with or without having the Collateral present at the
time of sale, which sale shall be on such terms and conditions and conducted in
such manner as the Bank determines in its sole judgment to be commercially
reasonable.  The Collateral may be
disposed of in its then condition without any preparation or processing.  In connection with any disposition of the
Collateral, the Bank may disclaim any warranty relating to title, possession or
quiet enjoyment.  Any deficiency which
exists after the disposition or liquidation of the Collateral shall be a
continuing liability of any obligor on or any guarantor of the Indebtedness and
shall be immediately paid to the Bank. 
Further, the Debtor hereby agrees to pay to the Bank, upon demand
therefor, all expenses and expenditures (including attorney’s fees) incurred in
connection with the foregoing.


 


(i)  Non-Exclusivity of
Remedies.  Exercise one or
more of the Bank’s rights set forth herein or seek such other rights or pursue
such other remedies as may be provided by law, in equity or in any other
agreement now existing or hereafter entered into between the Bank and the
Debtor or any obligor on or guarantor of the Indebtedness, or otherwise.


 


(j)  Application of Proceeds.  All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied as
follows: first, to the costs and expenses of collection, including court costs
and reasonable attorneys’ fees, whether or not suit is commenced by the Bank;
next, to those costs and expenses incurred by the Bank in protecting,
preserving, enforcing, collecting, selling or disposing of the Collateral;
next, to the payment of accrued and unpaid interest on all of the Indebtedness;
next, to the payment of the outstanding principal balance of the indebtedness;
and last, to the payment of any other indebtedness owed by the Debtor to the
Bank.  Any excess Collateral or excess
proceeds existing after the disposition or liquidation of the Collateral will
be returned or paid by the Bank to the Debtor


 


If any non-cash proceeds are received in connection
with any sale of Collateral, the Bank shall not apply such non-cash proceeds to
the Obligations unless and until such proceeds are converted to
such; provided, however, that if such non-cash proceeds are not expected


 


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on the date of receipt thereof to be converted to cash
within one year after such date, the Bank shall use commercially reasonable
efforts to convert such non-cash proceeds to cash within such one year period.


 


8.                                       Miscellaneous.


 


(a)  Amounts Payable Under this
Security Agreement.  If the
Debtor fails to pay on  demand the amount
of any obligations referred to in this Security Agreement, the Bank may pay
such amount at its option and without any obligation to do so and without
waiving any default occasioned by the Debtor’s failure to pay such amount.  AlI amounts so paid by the Bank, together
with reasonable attorneys’ fees at trial and on appeal and all other costs,
charges and expenses relating to the Indebtedness, shall be a part of the
Indebtedness and shall bear interest at the highest rate chargeable on any Indebtedness
until paid in full


 


(b)  Other Terms.  Terms not otherwise defined in this Security
Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code as in effect on July 1, 2001 and from time to time thereafter


 


(c)  Reliance.  Each warranty, representation, covenant and
agreement contained in this Security Agreement shall be conclusively presumed
to have been relied upon by the Bank regardless of any investigation made or
information possessed by the Bank and shall be cumulative and in addition to
any other warranties, representations, covenants or agreements which the Debtor
shall now or hereafter give, or cause to be given, to the Bank.


 


(d)  Attorneys’ Fees.  Debtor shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, including any
bankruptcy, at trial and on appeal or the enforcement of any judgment or any
refinancing or restructuring of this Security Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
Indebtedness hereunder.


 


(e)  Notices.  All notices, payments, requests, information
and demands which either party hereto may desire, or be required to give or
make to the other party, shall be given or made to such party by hand delivery
or through deposit in the United States mail, postage prepaid, or by telephone
facsimile, addressed to the address set forth below such party’s signature to
this Security Agreement or to such other address as may be specified from time
to time in writing by either party to the other.


 


(f)  Waiver.  Neither the failure nor delay by the Bank in
exercising any right hereunder or under any document, instrument or agreement
mentioned herein shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder or under any other document, instrument
or agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder or under any other document, instrument or agreement mentioned herein
constitute a waiver of any other right or default or constitute a waiver of any
other default of the same or any other term or provision


 


(g)  Assignment.  This Security Agreement shall be binding upon
and inure to the benefit of the Debtor and the Bank and their respective
successors and assigns, except that the Debtor shall not have the right to
assign its rights hereunder or any interest herein without the Bank’s prior
written consent.  The Bank may sell or
assign all or any portion of its rights and benefits hereunder and, in
connection therewith, may deliver to such prospective buyer or assignee
financial statements and other relevant information pertaining to the Debtor or
any obligor on the Indebtedness


 


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(h)  Jurisdiction.  This Security Agreement and the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein, shall be
governed by and construed according to the laws of the State of California,
without regard to conflict of law principles, to the jurisdiction of whose
courts the parties hereby submit.


 


IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed as of the date first herein above written


 


 


	
   

  	
  DEBTOR(S):

  
	
   

  	
   

  
	
   

  	
  ALPHATEC HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott Palka

  	
   

  
	
   

  	
  NAME:  Scott Palka, CFO and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADDRESS:

  
	
   

  	
   

  
	
   

  	
  2051 Palomar Airport Road, Suite 100

  Carlsbad, CA 92011

  
	
   

  	
   

  
	
   

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  BANK OF THE WEST

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Kris Ilkov

  	
   

  
	
   

  	
  NAME:  Kris Ilkov, Vice President

  



 


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EXHIBIT
“A”


 


DESCRIPTION
OF SECURITIES AND INSTRUMENTS



SECURITY AGREEMENT (GUARANTY)


 


The securities and instruments described below are
subject to the terms and conditions of a certain Security Agreement dated as of
1/24, 2006, between BANK OF THE
WEST (the “Bank”) and ALPHATEC HOLDINGS, INC. 
(the “Debtor”) and are a part of the Collateral described therein:


 


	
   

  	
   

  	
   

  	
   

  	
  NO. OF SHARES

  	
   

  
	
  CERTIFICATE OR

  INSTRUMENT NO.

  	
   

  	
  NAME OF COMPANY OR

  DESCRIPTION OF INSTRUMENT

  	
   

  	
  OR AMOUNT OF

  INSTRUMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  001

  	
   

  	
  ALPHATEC SPINE, INC

  	
   

  	
  1,000

  	
   

  



 


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INCORPORATED UNDER
THE LAWS OF 


 


	
   

  	
   

  	
  CALIFORNIA

  	
   

  	
   

  
	
  NUMBER

  	
   

  	
   

  	
   

  	
  SHARES

  



 


Alphatec
Spine, Inc.


 


[IMAGE]


 


This certifies that **Alphatec Holdings, Inc.** is the registered
holder of **One Thousand** Shares


 


transferable only on the books of the corporation by the holder hereof
in person or by Attorney upon surrender of the certificate properly endorsed.


 


IN WITNESS WHEREOF the said Corporation has caused
this certificate to be signed by its duly authorized officers and and its
corporate seal to be hereunder affixed this 15th of August 2005.


 


	
  /s/ Scott Palka

  Vice President, CFO and Treasurer

  	
  [SEAL]

  	
  /s/ Ronald G. Hiscock

  President and COO

  



 

















 


CERTIFICATE


FOR


1000


SHARES


OF


 


 


Alphatec Spine, Inc.


 


ISSUED TO


 


Alphatec Holdings, Inc.


 


DATED


 


August 15, 2005


 


For Value Received,
                      
hereby sell, assign and transfer unto
                                                                                
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
                                                                            
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.


 


Dated
                                  


In presence of
                                    


 


	
   

  	
  NOTICE: THE SIGNATURE
  OF THIS ASSIGNMENT

  MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE

  FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT

  ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.