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Exhibit 10.5  

 
 

EMPLOYMENT AGREEMENT    
    

        THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 7th day of June, 2005, is entered into among Ronald G. Hiscock ("Employee"), Alphatec
Manufacturing, Inc., a California corporation (the "Company"), and AMI Acquisition I Corp., a Delaware corporation ("Parent"). 

        1.     Employment. Employee's employment with the Company shall commence on June 5, 2005 (the "Commencement Date") and
shall continue upon the terms set forth in this Agreement for the period set forth in Section 2 hereof. 

        2.     Term of Employment. 

        (a)   Until
such time as either the Employee or the Company terminates the employment as set forth herein, the term of the Employee's employment shall be three years from the
Commencement Date (the "Initial Term"). 

        (b)   The
Initial Term shall be automatically renewed as of each anniversary of the Commencement Date for an additional twelve-month period unless the Company or the Employee
delivers to the other, at least 30 days prior to each anniversary date, written notice specifying that the Employee's employment will not be renewed at the end of the
then-applicable term of the Agreement. 

        3.     Title; Capacity; Office. 

        (a)   The
Company shall employ Employee, and Employee agrees to work for the Company, initially as its President and Chief Operating Officer. It is presently contemplated that
upon the recommendation of the Company's Chairman and current Chief Executive Officer and subject to the approval of the Board of Directors (the "Board"), the Employee will become the Company's
President and Chief
Executive Officer. The target date for Employee to become Chief Executive Officer is approximately 90 days from the date hereof, but the determination as to when and whether this will occur
shall be exclusively in the discretion of the Chairman and the Board. The Employee shall perform the duties and responsibilities inherent in the positions in which he serves and such other duties and
responsibilities as the Board shall from time to time reasonably assign to him. As Chief Operating Officer, Employee shall report to the Chairman. As Chief Executive Officer, Employee would report to
the Board. During the term of his employment hereunder, Employee shall also serve as a member of the Board. 

        (b)   Employee's
office shall be located at the Company's headquarters in Carlsbad, California, or at such other corporate headquarters approved by the Board. Employee agrees
that, while he will retain his residence in the Philadelphia area, he will not be, and will act in a way that he will not be perceived as, a commuter executive. 

        4.     Compensation and Benefits. While employed by the Company, Employee shall be entitled to the following (it being agreed,
for the avoidance of doubt, that, except as provided in Section 6.2, amounts payable on the happening of any specified event will not be payable if the Employee is not employed by the Company
upon the happening of such event): 

        4.1   Salary. The Company shall pay Employee an annual base salary of $400,000.00, less applicable payroll withholdings,
commencing on the Commencement Date, payable in accordance with the Company's customary payroll practices, with salary increases, if any, to be determined by the Board on an annual basis beginning
January, 2006. 

        4.2   Performance Bonus. Employee will be eligible to receive a cash performance bonus each fiscal year, payable within
30 days after the end of the Company's fiscal year, in an amount of up to 50% of the annual base salary for such fiscal year.    In the fiscal year ended December 31, 2005
("FY 2005"), Employee will be entitled to his full performance bonus (which will be 50% of 

 

base
salary paid from the Commencement Date through December 31, 2005) if the Company's Net Sales (as that term is used in the Company's audited financial statements) to customers within the
United States, exclusive of sales by businesses acquired from and after the Commencement Date and exclusive of any sales for export outside the United States ("Same Store Domestic Sales") equal or
exceed $50 million. In the event that Same Store Domestic Sales in FY 2005 are less than $40 million, Employee will receive no performance bonus. In the event that Same Store Domestic
Sales in FY 2005 are between $40 million and $50 million, Employee will receive a percentage of his full performance bonus equal to (x) the excess of Same Store Domestic Sales
over $30 million divided by (y) $10 million. Thereafter, performance bonuses shall be based upon the achievement of objectives established by the Board prior to the commencement
of the fiscal year. 

        4.3   IPO Bonus. Upon the closing of an underwritten initial public offering by the Company, Employee shall receive a special
bonus of $300,000.00, less applicable payroll withholdings. 

        4.4   Sale of the Company. Upon the Sale of the Company, Employee shall receive a special cash bonus of not less than $500,000,
less applicable payroll withholdings. A "Sale of the Company" shall be deemed to occur upon the purchase by one person or a group of persons for cash or other consideration of more than 80% of the
capital stock or assets of the Parent; provided that a "Sale of the Company" shall not be deemed to have occurred in the event of the transfer of stock or assets in a transaction that would not result
in a Change in Control (as hereinafter defined). 

        4.5   Fringe Benefits. Subject to the provisions of paragraph (f) of Schedule I, Employee will be entitled to
participate in all benefit programs that the Company establishes and makes available to its management Employees. Employee will also be entitled to take fully paid vacation in accordance with Company
policy, which shall be not less than four (4) weeks per calendar year, with no forfeiture for unused vacation days. 

        4.6   Reimbursement of Expenses. Employee shall be entitled to prompt reimbursement for reasonable expenses set forth on
Schedule I incurred or paid by him in connection with, or related to the performance of, his duties, responsibilities or services under this Agreement, upon presentation by Employee of
documentation, expense statements, vouchers and/or such other supporting information as the Company may reasonably request. 

        4.7   Equity. Upon the Commencement Date, Employee shall be granted restricted shares of Series A-1 Common
Stock (the "Restricted Shares") of Parent representing approximately 2% of Parent's outstanding common stock. The Company agrees that any additional investment in equity capital by
non-employee investors will be made at fair market value. Upon the termination of Employee's employment, all restricted outstanding common stock shares that have not vested shall be
repurchased by the Company for an aggregate of $1.00. Fifty percent of such restricted shares will vest over a 5-year period in equal amounts beginning on the first anniversary of the
Commencement Date, and will vest immediately upon a Change in Control. Twenty-five percent of such restricted shares shall vest upon an IPO, if such IPO occurs on or before
December 31, 2005, provided, however, that if in the reasonable judgment of the Board any delay of the offering is attributable to market
conditions or other factors not related to the Company and its operations, then such vesting date shall be extended at the discretion of the Board. All of such restricted shares that have not
previously vested shall vest upon a Sale of the Company. For purposes of this Agreement, a "Change in Control" shall occur on the date after the Commencement Date that: (i) any one person,
entity or group acquires ownership of capital stock of the Company that, together with the capital stock of the Company already held by such person, entity or group, constitutes more than 50% of the
total fair market value or total voting power of the capital stock of the Company; provided, however, if any one person, entity or group is considered to own more than 50% of the total fair market
value or total voting power of the capital stock of the Company, 

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the
acquisition of additional capital stock by the same person, entity or group shall not be deemed to be a Change in Control; (ii) a majority of members of the Board is replaced during any
12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or (iii) any
one person, entity or group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person, entity or group) assets from the Company
that have a total gross fair market value at least equal to 80% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions;
provided, however, a transfer of assets by the Company shall not deemed to be a Change in Control if the assets are transferred to (A) a shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to its capital stock in the Company, (B) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the
Company, (C) a person, entity or group that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding capital stock of the Company, or (D) an
entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person, entity or group described in subparagraph (C) above. In all respects, the
definition of "Change in Control" shall be interpreted to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the provisions of Treasury Notice 2005-1,
and any successor statute, regulation and guidance thereto (provided, however, that the Company does not guarantee any tax treatment of any payment or benefit in this Agreement). 

The
restricted shares shall also be subject to the terms of the Shareholders' Agreement entered into by the Company and the holders of the other shares of Series A-1 Common Stock. 

        5.     Termination of Employment Period. The Agreement shall terminate upon the occurrence of any of the following: 

        5.1   Termination for Cause. At the election of the Company, for Cause. For the purposes of this Section 5.1, "Cause"
for termination shall be deemed to exist upon the occurrence of any of the following: 

        (a)   a
written finding by the Board of Directors made after reasonable investigation that Employee has engaged in dishonesty, gross negligence or gross misconduct that is
injurious to the Company, and notice to such Employee of such written finding; 

        (b)   Employee's
conviction or entry of nolo contendere to any felony or crime involving moral turpitude, fraud or embezzlement of Company property; and 

        (c)   a
written finding by the Board of Directors that Employee has engaged in a material breach of this Agreement, and that, after written notice of the right to cure within
sixty (60) days, has not cured such material breach. 

        5.2   Termination by the Company Without Cause. At the election of the Company, without Cause, at any time, upon thirty
(30) days written notice to Employee. Except as provided in Section 3(a) hereof, any material change in the duties or reporting responsibilities of Employee shall be treated, at the
election of Employee, as a termination without cause. 

        5.3   Voluntary Termination—At the election of the Employee, for any reason, upon thirty (30) days notice to
the Company. 

        6.     Effect of Termination. 

        6.1   Termination for Cause or at the Election of Employee. In the event that Employee's employment is terminated for Cause
pursuant to Section 5.1 or at the Election of the Employee pursuant to Section 5.3, the Company shall have no further obligations under this Agreement other than to pay to Employee the
compensation and benefits, including payment for accrued but 

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untaken
vacation days, otherwise payable to him under Section 4 through the last day of his actual employment by the Company. 

        6.2   Termination by the Company Without Cause. In the event that Employee's employment is terminated pursuant to
Section 5.2, the Company shall continue for a period of 12 months, or 24 months if such termination following a Change in Control, ("Severance Period") to pay to Employee his
annual base salary then in effect in the manner set forth in Section 4.1 and payment for accrued but untaken vacation days, and to provide benefits as set forth in section 4.5. Employee
shall also continue to be eligible for bonuses pursuant to Sections 4.2, 4.3 and 4.4 hereof, despite Employee's termination, for such 12-month (or 24-month) period;  provided, however, that in the event
Employee is terminated pursuant to Section 5.2 after a Change in Control, the Employee's bonus pursuant to
Section 4.2 for the fiscal year in which Employee is terminated shall be paid upon termination, and shall not be less than 100% of his target bonus (i.e., target bonus defined as 50% of then
base salary), prorated by multiplying the target bonus by the number of full or partial weeks Employee was employed during such fiscal year divided by 52 and the Employee shall continue to vest in his
restricted shares granted pursuant to section 4.7 during the Severance Period. 

        7.     Non-disclosure and Non-competition. 

        7.1   Proprietary Information. 

        (a)   Employee
agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company's business
or financial affairs (collectively, "Proprietary Information") is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs,
and customer and supplier lists. Employee will not disclose any Proprietary Information to others outside the Company or use the same for any unauthorized purposes without written approval by an
officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge without fault by Employee. 

        (b)   Employee
agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic,
or other tangible material containing Proprietary Information, whether created by Employee or others, which shall come into his
custody or possession, shall be and are the exclusive property of the Company to be used by Employee only in the performance of his duties for the Company. 

        (c)   Employee
agrees that his obligation not to disclose or use information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and tangible property of subsidiaries and joint ventures of the Company, customers of the Company or
suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to Employee in the course of the Company's business. 

        (d)   Employee
agrees that all Creations (as herein defined) shall be the property of the Company. "Creations" shall mean all ideas, prospect and customer lists, inventions,
research, plans for products or services, potential marketing and sales relationships, business development strategies, marketing plans, designs, logos, branding, layouts, templates, computer software
(including, without limitation, source code), computer programs, original works of authorship, copyrightable expression, characters, know-how, trade secrets, information, data,
developments, discoveries, improvements, modifications, technology, methodologies, algorithms 

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and
designs, whether or not subject to patent or copyright protection, made, conceived, expressed, developed, or actually or constructively reduced to practice by Executive solely or jointly with
others to the extent relating to or otherwise in connection with Executive's employment by the Company. Employee agrees to cooperate in all respects regarding requests by the Company relating to the
Company's intellectual property rights in the Creations, whether such cooperation is required during or after the termination of the employment period. 

        7.2   Noncompetition; Nonsolicitation; Nondisparagement. 

        (a)   During
his employment with the Company, Employee shall not, directly or indirectly, render services of a business, professional or commercial nature to any other person
or entity that competes with the Company's business, whether for compensation or otherwise, or engage in any business activities competitive with the Company's business, whether alone, as an Employee,
as a partner, or as a shareholder (other than as the holder of not more than one percent of the combined voting power of the outstanding stock of a public company), officer or director of any
corporation or other business entity, or as a trustee, fiduciary or in any other similar representative capacity of any other entity. Notwithstanding the foregoing, the expenditure of reasonable
amounts of time as a member of other companies' Board of Directors shall not be deemed a breach of this if those activities do not materially interfere with the services required under this Agreement. 

        (b)   For
a period of one (1) year after termination of Employee's employment for any reason, Employee will not recruit solicit or induce, or attempt to induce, any
Employee or Employees of the Company to
terminate their employment with, or otherwise cease their relationship with, the Company; provided, however, that this provision shall not apply in the
event that Employee is terminated pursuant to section 5.2 following a Change in Control. 

        (c)   During
his employment with the Company and at all times thereafter, Employee shall not make any statements that are professionally or personally disparaging about, or
adverse to, the interests of the Company or any of its divisions, affiliates, subsidiaries or other related entities, or their respective directors, officers, employees, agents, successors and assigns
(collectively, "Company-Related Parties"), including, but not limited to, any statements that disparage any person, product, service, finances, financial condition, capability or any other aspect of
the business of any Company-Related Party, and that Employee will not engage in any conduct which could reasonably be expected to harm professionally or personally the reputation of any
Company-Related Party. 

        7.3   If
any restriction set forth in this Section 7 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to
which it may be enforceable. 

        7.4   The
restrictions contained in this Section 7 are necessary for the protection of the business and goodwill of the Company and are considered by Employee to be
reasonable for such purpose. Employee agrees that any breach of this Section 7 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in
addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. 

        8.     Other Agreements. Employee represents that his performance of all the terms of this Agreement as an Employee of the
Company does not and will not breach any (i) agreement to keep in confidence proprietary information, knowledge or data acquired by him in confidence or in trust prior 

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to
his employment with the Company or (ii) agreement to refrain from competing, directly or indirectly, with the business of any previous employer or any other party. 

        9.     Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon
(a) a personal delivery, or (b) deposit in the United States Post Office, by registered or certified mail, postage prepaid. 

        10.   Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements
and understandings, whether written or oral relating to the subject matter of this Agreement 

        11.   Amendment. This Agreement may be amended or modified only by a written instrument executed by both the Company and
Employee. 

        12.   Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of both parties and their
respective successors and assigns, including any corporation into which the Company may be merged or which may succeed to its assets or business,  provided, however, that the obligations of Employee are personal and shall not be assigned by him, and
that the Agreement may not be assigned by the Company to any other entity without the Employee's written consent. 

        13.   Miscellaneous. 

        13.1 No Waiver. No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of
that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other
occasion. 

        13.2 Severability. In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the
validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 

        13.3 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of
the State of New York. 

        13.4 Consent to Jurisdiction. Each of the parties hereto irrevocably consents and submits to the jurisdiction of the courts
of the State of New York, sitting in the Borough of Manhattan, and the United States District Court for the Southern District of New York, sitting in the Borough of Manhattan, as the exclusive
jurisdiction and venue for any actions or proceedings brought against either party hereto, arising out of or relating to this Agreement. In any such action or proceeding brought in such courts, the
parties hereto irrevocably (i) waive any objection or jurisdiction or venue, (ii) waive personal service of the summons, complaint and other process and (iii) agree that service
thereof may be made by certified or registered first-class mail directed to the party to be served. 

        13.5 Waiver of Jury Trial. Each of the parties hereto irrevocably waives its right to a trial by jury in any action arising
out of or related to this Agreement. 

        13.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument. 

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

	 
	 	 
	 	 

	 	 	/s/  RONALD G. HISCOCK      
 Ronald G. Hiscock
	

 	
 	

ALPHATEC MANUFACTURING, INC.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      

	 	 	Name:	 	John H. Foster
	 	 	Title:	 	Chairman and CEO
	

 	
 	

AMI ACQUISITION I CORP.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      

	 	 	Name:	 	John H. Foster
	 	 	Title:	 	Chairman and CEO

7

 
 
 

Schedule I    
    

During
the term of employment, Company to provide: 

	(a)
	Residence
in California—Company to provide for rental living, e.g., comfortable furnished town home with normal maintenance and upkeep (i.e., two bedrooms) in appropriate
neighborhood, with Company to approve and sign lease;

	(b)
	Travel
expenses—Company to reimburse for first-class air travel to and from Philadelphia at discretion of Employee but subject to the agreement set forth in
Section 3(b) hereof;

	(c)
	Vehicle
expenses—Company to provide rental luxury car in California;

	(d)
	Other
Expenses—Company to reimburse, at the discretion of the Board, for normal business expenses associated with executive status relating to travel, airline clubs, dry
cleaning and laundry while in California, meal allowance while in California, parking while in California, and reasonable client and staff meal and entertainment expenses;

	(e)
	Company
to pay to Morgan Lewis up to $7,500 in legal fees and costs associated with negotiation of Employment Agreement and filing of 83b election.

	(f)
	Because
Employee is covered by certain health, dental, vision, and life insurance policies by his former employer until 9/1/2006 (and thus the Company will not have to duplicate that
coverage), Company to pay premiums for John Hancock Key Person life insurance policy at $3 million coverage on Employee's life (current premium is $672.00 per month) through 9/30/2006. 

8

 
 

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT    
    

        This Amendment No. 1 to the Employment Agreement (this "Amendment") is made as of July 7, 2005 by and among Ronald G. Hiscock ("Employee"), Alphatec
Manufacturing, Inc., a California corporation (the "Company"), and Alphatec Holdings, Inc. (formerly known as AMI Acquisition I Corp.), a Delaware corporation ("Parent") (collectively,
the "Parties"). Capitalized terms undefined herein shall have the meaning ascribed them in the Agreement. 

 
 

RECITALS    
    

        Reference is made to that certain Employment Agreement dated June 7, 2005 by and among the Parties (the "Agreement"). 

        The
Parties desire to amend the Agreement as set forth herein. 

        Now,
therefore, in consideration of the mutual promises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the
parties hereto, the parties hereto agree as follows. 

        1.     AMENDMENTS

        1.1   Replacement of Section 4.2. Section 4.2 of the Agreement is hereby deleted in the entirety and is replaced
with the following: 

        "Employee
will be eligible to receive a cash performance bonus each fiscal year, payable within 30 days after the end of the Company's fiscal year, in an amount of up to 50% of
the base salary received by Employee for such fiscal year.    In the fiscal year ended December 31, 2005 ("FY 2005"), Employee will be entitled to his full performance bonus (which
will be 50% of base salary paid from the Commencement Date through December 31, 2005) if the Company's Net Sales (as that term is used in the Company's audited financial statements), exclusive
of sales by businesses acquired from and after the Commencement Date and subject to the provisions of Schedule II ("Same Store Sales") equal or exceed $50 million. In the event that Same
Store Sales in FY 2005 are $33 million, Employee will receive
25% of his full performance bonus. In the event that Same Store Sales in FY 2005 are $40 million, Employee will receive 50% of his full performance bonus. In the event that Same Store Sales in
FY 2005 are between $33 million and $40 million, the percentage of Employee's full performance bonus shall be prorated between 25% and 50%, and in the event that Same Store Sales for FY
2005 are between $40 million and $50 million, such percentage shall be prorated between 50% and 100%. After FY 2005, performance bonuses shall be based upon the achievement of objectives
established by the Board prior to the commencement of the fiscal year." 

        1.2   No Other Changes. This Amendment constitutes the entire agreement between the parties concerning the subject matter
hereof. In the event of any conflict, ambiguity or inconsistency between the provisions of this Amendment and the Agreement, the provisions of this Amendment shall prevail. The remainder of the
Agreement shall remain in full force and effect, unamended. 

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Amendment on the day and year set forth above. 

	 
	 	 
	 	 

	 	 	/s/  RONALD G. HISCOCK      
 Ronald G. Hiscock
	

 	
 	

ALPHATEC MANUFACTURING, INC.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      
 John H. Foster

Chairman & Chief Executive Officer
	

 	
 	

ALPHATEC HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      
 John H. Foster

Chairman & Chief Executive Officer

2

 
 
 

Schedule II    
    

        Sales in Japan are currently made through a distributor. In the event that the Company shifts to direct sales, "Same Store Sales" will not include amounts that
would have been the distributor's markup. 

3

 
 

SECOND AMENDMENT TO
  EMPLOYMENT AGREEMENT OF
  RONALD G. HISCOCK    
    

        This Amendment No. 2 to the Employment Agreement (this "Amendment") is made as of December 5, 2005 by and among Ronald G. Hiscock ("Employee"),
Alphatec Spine, Inc. (formerly known as Alphatec Manufacturing, Inc.), a California corporation (the "Company"), and Alphatec Holdings, Inc. (formerly known as AMI Acquisition I
Corp.), a Delaware corporation (collectively, the "Parties"). Capitalized terms undefined herein shall have the meaning ascribed them in the Agreement. 

 
  RECITALS    
    

        Reference is made to that certain Employment Agreement dated June 7, 2005, as amended on July 7, 2005, by and among the Parties (the "Agreement"). 

        The
Parties desire to amend the Agreement as set forth herein. 

        Now,
therefore, in consideration of the mutual promises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the
parties hereto, the parties hereto agree as follows. 

	1.
	AMENDMENTS

        1.3   Replacement of Section 3(a). Section 3(a) of the Agreement is hereby deleted in the
entirety and is replaced with the following: 

        "(a)
The Company shall employ Employee, and Employee agrees to work for the Company as its President and Chief Executive Officer. The Employee shall perform the duties and
responsibilities inherent in the position in which he serves and such other duties and responsibilities as the Company's board of directors (the "Board") shall from time to time reasonably assign to
him. As Chief Executive Officer, Employee reports to the Board. During the term of his employment hereunder, Employee shall also serve as a member of the Board." 

        1.4   Replacement of Section 4.7. Section 4.7 of the Agreement is hereby deleted in the
entirety and is replaced with the following: 

        "4.7
Equity. Upon the Commencement Date, Employee shall be granted restricted shares of Series A-1 Common Stock (the
"Restricted Shares") of Parent representing approximately 2% of Parent's outstanding common stock. The Company agrees that any additional investment in equity capital by non-employee
investors will be made at fair market value. Upon the termination of Employee's employment, all restricted outstanding common stock shares that have not vested shall be repurchased by the Company for
an aggregate of $1.00. Seventy-five percent (75%) of such restricted shares will vest over a 5-year period in equal amounts beginning on the first anniversary of the
Commencement Date, and will vest immediately upon a Change in Control. Twenty-five percent (25%) of such restricted shares shall vest upon an IPO, if such IPO occurs on or before
March 31, 2005, provided, however, that if in the reasonable judgment of the Board any delay of the offering is attributable to market conditions
or other factors not related to the Company and its operations, then such vesting date shall be extended at the discretion of the Board. All of such restricted shares that have not previously vested
shall vest upon a Change in Control of the Company. For purposes of this Agreement, a "Change in Control" shall occur on the date after the Commencement Date that: (i) any one person, entity or
group acquires ownership of capital stock of the Company that, together with the capital stock of the Company already held by such person, entity or group, constitutes more than 50% of the total fair
market value or total voting power of the capital stock of the Company; provided, however, if any one person, entity or group is considered to own more than 50% of the total fair market value or total
voting power of the capital stock of the Company, the acquisition of additional capital stock by the same person, entity or group shall not be deemed to be a Change in Control; (ii) a majority
of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the
appointment or election; or (iii) any one person, entity or group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such
person, entity or 

 

group)
assets from the Company that have a total gross fair market value at least equal to 80% of the total gross fair market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions; provided, however, a transfer of assets by the Company shall not deemed to be a Change in Control if the assets are transferred to (A) a shareholder of the Company
(immediately before the asset transfer) in exchange for or with respect to its capital stock in the Company, (B) an entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company, (C) a person, entity or group that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding capital stock of
the Company, or (D) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person, entity or group described in subparagraph
(C) above. In all respects, the definition of "Change in Control" shall be interpreted to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the provisions of
Treasury Notice 2005-1, and any successor statute, regulation and guidance thereto (provided, however, that the Company does not guarantee any tax treatment of any payment or benefit in
this Agreement). 

The
restricted shares shall also be subject to the terms of the Shareholders' Agreement entered into by the Company and the holders of the other shares of Series A-1 Common Stock." 

	2.
	MISCELLANEOUS

        In
the event of any conflict, ambiguity or inconsistency between the provisions of this amendment and the Agreement, the provisions of this Amendment shall prevail. Other than as set
forth in this Amendment, the remainder of the Agreement shall remain in full force and effect. 

[Signature
Page Follows] 

2

 

        IN
WITNESS WEHREOF, the parties have executed this amendment to the Agreement on the 5th day of December, 2005. 

	 
	 	 
	 	 

	 	 	/s/  RONALD G. HISCOCK      
 Ronald G. Hiscock
	

 	
 	

ALPHATEC SPINE, INC.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      
 John H. Foster

Chairman
	

 	
 	

ALPAHTEC HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/  JOHN H. FOSTER      
 John H. Foster

Chairman

3

QuickLinks

EMPLOYMENT AGREEMENT

Schedule I

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

RECITALS

Schedule II

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT OF RONALD G. HISCOCK

RECITALSExhibit
10.7

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT
(the “Agreement”), effective as of the 6th day of February, 2006, is entered
into among Stephen T.D. Dixon (the “Employee”), Alphatec Manufacturing, Inc., a
California corporation (the “Company”), and Alphatec Holdings, Inc., a Delaware
corporation (“Parent”).

1.             Employment.  Employee’s employment with the Company shall
commence on February 6, 2006 (the “Commencement Date”) and shall continue upon
the terms set forth in this Agreement for the period set forth in Section 2
hereof.

2.             Term of Employment.

(a)           Until such time as either the
Employee or the Company terminates the employment as set forth herein, the term
of the Employee’s employment shall be three years from the Commencement Date
(the “Initial Term”).

(b)           The Initial Term shall be
automatically renewed as of each anniversary of the Commencement Date for an
additional twelve-month period unless the Company or the Employee delivers to
the other, at least 30 days prior to each anniversary date, written notice
specifying that the Employee’s employment will not be renewed at the end of the
then-applicable term of the Agreement.

3.             Title; Capacity; Office.

                (a)           The Company shall employ Employee, and Employee agrees to
work for the Company as its Chief Financial Officer and Vice President.  Employee shall perform the duties and
responsibilities inherent in the position in which he serves and such other
duties and responsibilities as the President and Chief Executive Officer (the “CEO”)
shall from time to time reasonably assign to him.  Employee shall report to the CEO.

                (b)           Employee’s office shall be located at the Company’s
headquarters in Carlsbad, California, or at such other corporate headquarters
approved by the Board of Directors (the “Board”).

4.              Compensation and Benefits.  While employed by the Company, Employee shall
be entitled to the following (it being agreed, for the avoidance of doubt,
that, except as provided in Section 6.2, amounts payable on the happening of
any specified event will not be payable if the Employee is not employed by the
Company upon the happening of such event):

4.1           Salary.  The Company shall pay Employee an annual base
salary of $285,000.00, less applicable payroll withholdings, payable in
accordance with the Company’s customary payroll practices, with salary
increases, if any, to be determined by the CEO on an annual basis beginning
January, 2007.

 

 

4.2           Performance Bonus.  Employee will be eligible to receive a cash
performance bonus each fiscal year, payable the conclusion of the Company’s end
of the fiscal year audit, in an amount of up to 50% of the base salary received
by Employee for such fiscal year.  Performance
bonuses shall be based upon the achievement of objectives established by the
CEO.

4.3           Intentionally Omitted.

4.4           Fringe Benefits.  Employee will be entitled to participate in
all benefit programs that the Company establishes and makes available to its
management Employees.  Employee will also
be entitled to take fully paid vacation in accordance with Company policy,
which shall be not less than three (3) weeks per calendar year.  Following the second anniversary of the
Commencement Date Employee shall be entitled to four (4) weeks of vacation per
calendar year.

4.5           Reimbursement of Expenses.  Subject to the Company’s standard policies
and procedures, as determined by the CEO or the Board from time to time,
Employee shall be entitled to prompt reimbursement for reasonable expenses
incurred or paid by him in connection with, or related to the performance of,
his duties, responsibilities or services under this Agreement, upon
presentation by Employee of documentation, expense statements, vouchers and/or
such other supporting information as the Company may reasonably request.

4.6           Equity.  Upon the Commencement Date, Employee shall be
granted options to purchase 35,000 shares of Series A-1 Common Stock of
Parent.  The options shall be issued at
the fair market value of the Series A-1 Common Stock on the date of issuance and
shall be issued pursuant to an incentive stock option agreement that shall,
among other things, contain a five-year vesting period with immediate vesting
upon a change of control.

5.             Termination of Employment Period.  The Agreement shall terminate upon the
occurrence of any of the following:

5.1           Termination for Cause.  At the election of the Company, for
Cause.  For the purposes of this Section
5.1, “Cause” for termination shall be deemed to exist upon the occurrence of
any of the following:

(a)           a written finding by the CEO made
after reasonable investigation that Employee has engaged in dishonesty, gross
negligence or gross misconduct that is injurious to the Company, and notice to
such Employee of such written finding;

(b)          Employee’s conviction or entry of nolo
contendere to any felony or crime involving moral turpitude, fraud or
embezzlement of Company property; and

(c)           a written finding by the CEO that
Employee has engaged in a material breach of this Agreement, and that, after
written notice of the right to cure within thirty (30) days, has not cured such
material breach.

5.2           Termination by the Company Without
Cause.  At the election of the
Company, without Cause, at any time, upon thirty (30) days’ written notice to
Employee.  Any

 

2

material
change in the duties or reporting responsibilities of Employee shall be
treated, at the election of Employee, as a termination without cause.

 

                                5.3           Voluntary Termination.  At the election of the Employee, for any
reason, upon thirty (30) days’ notice to the Company.

6.             Effect of Termination.

6.1           Termination for Cause or at the
Election of Employee.  In the event
that Employee’s employment is terminated for Cause pursuant to Section 5.1 or
at the Election of the Employee pursuant to Section 5.3, the Company shall have
no further obligations under this Agreement other than to pay to Employee the
compensation and benefits, including payment for accrued but untaken vacation
days, otherwise payable to him under Section 4 through the last day of his
actual employment by the Company.

6.2           Termination by the Company Without
Cause.  In the event that Employee’s
employment is terminated pursuant to Section 5.2, the Company shall continue
for a period of 12 months (“Severance Period”), to pay to Employee his annual
base salary then in effect in the manner set forth in Section 4.1 and payment
for accrued but untaken vacation days.  During the Severance Period, Employee shall be
entitled to continue to participate in all benefit programs that the Company
establishes and makes available to its management Employees.

7.             Non-disclosure and
Non-competition.

7.1           Proprietary Information.

(a)           Employee agrees that all information and know-how,
whether or not in writing, of a private,
secret or confidential nature concerning the Company’s business or financial
affairs (collectively, “Proprietary Information”) is and shall be the exclusive
property of the Company.  By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions, compounds,
projects, developments, plans, research data, clinical data, financial data,
personnel data, computer programs, and customer and supplier lists.  Employee will not disclose any Proprietary
Information to others outside the Company or use the same for any unauthorized
purposes without written approval by an officer of the Company, either during
or after his employment, unless and until such Proprietary Information has
become public knowledge without fault by Employee.

(b)          Employee agrees that all files, letters,
memoranda, reports, records, data,
sketches, drawings, laboratory notebooks, program listings, or other written,
photographic, or other tangible material containing Proprietary Information,
whether created by Employee or others, which shall come into his custody or
possession, shall be and are the exclusive property of the Company to be used
by Employee only in the performance of his duties for the Company.

(c)           Employee
agrees that his obligation not to disclose or use information, know-how and
records of the types set forth in paragraphs (a) and (b) above, also extends to
such types of information, know-how, records and tangible property of
subsidiaries and joint ventures of the

 

3

Company,
customers of the Company or suppliers to the Company or other third parties who
may have disclosed or entrusted the same to the Company or to Employee in the
course of the Company’s business.

(d)          Employee agrees that all Creations (as
herein defined) shall be the property of the Company.  “Creations” shall mean all ideas, prospect
and customer lists, inventions, research, plans for products or services,
potential marketing and sales relationships, business development strategies,
marketing plans, designs, logos, branding, layouts, templates, computer
software (including, without limitation, source code), computer programs,
original works of authorship, copyrightable expression, characters, know-how,
trade secrets, information, data, developments, discoveries, improvements,
modifications, technology, methodologies, algorithms and designs, whether or
not subject to patent or copyright protection, made, conceived, expressed,
developed, or actually or constructively reduced to practice by Executive
solely or jointly with others to the extent relating to or otherwise in connection
with Executive’s employment by the Company.  
Employee agrees to cooperate in all respects regarding requests by the
Company relating to the Company’s intellectual property rights in the
Creations, whether such cooperation is required during or after the termination
of the employment period.

7.2           Noncompetition; Nonsolicitation;
Nondisparagement.

(a)           During his employment with the
Company, Employee shall not, directly or indirectly, render services of a
business, professional or commercial nature to any other person or entity that
competes with the Company’s business, whether for compensation or otherwise, or
engage in any business activities competitive with the Company’s business,
whether alone, as an Employee, as a partner, or as a shareholder (other than as
the holder of not more than one percent of the combined voting power of the
outstanding stock of a public company), officer or director of any corporation
or other business entity, or as a trustee, fiduciary or in any other similar
representative capacity of any other entity. 
Notwithstanding the foregoing, the expenditure of reasonable amounts of
time as a member of other companies’ Board of Directors shall not be deemed a
breach of this if those activities do not materially interfere with the services
required under this Agreement.

(b)           For a period of one (1) year after
termination of Employee’s employment for any reason, Employee will not recruit
solicit or induce, or attempt to induce, any Employee or Employees of the
Company to terminate their employment with, or otherwise cease their
relationship with, the Company; provided, however, that this provision
shall not apply in the event that Employee is terminated pursuant to Section
5.2 following a Change in Control.

 

(c)           During his employment with the
Company and at all times thereafter, Employee shall not make any statements
that are professionally or personally disparaging about, or adverse to, the
interests of the Company or any of its divisions,
affiliates, subsidiaries or other related entities, or their respective
directors, officers, employees, agents, successors and assigns (collectively, “Company-Related
Parties”), including, but not limited to, any statements that disparage any
person, product, service, finances, financial condition, capability or any
other aspect of the business of any Company-Related Party, and that Employee will not engage in
any conduct which could reasonably be expected to harm professionally or 

 

4

personally
the reputation of any Company-Related Party.

7.3           If any restriction set forth in this
Section 7 is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be interpreted to extend
only over the maximum period of time, range of activities or geographic area as
to which it may be enforceable.

7.4           The restrictions contained in this
Section 7 are necessary for the protection of the business and goodwill of the
Company, which the Employee acknowledges he will have access to by virtue of
his position within the Company.  The
Employee further acknowledges and agrees that the restrictions contained in
this Section 7 are reasonable for such purpose. 
Employee agrees that any breach of this Section 7 will cause the Company
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Company
shall have the right to seek specific performance and injunctive relief.

8.             Other Agreements.  Employee represents that his performance of
all the terms of this Agreement as an Employee of the Company does not and will
not breach any (i) agreement to keep in confidence proprietary information,
knowledge or data acquired by him in confidence or in trust prior to his
employment with the Company or (ii) agreement to refrain from competing,
directly or indirectly, with the business of any previous employer or any other
party.

9.             Notices.  All notices required or permitted under this
Agreement shall be in writing and shall be deemed effective upon (a) a personal
delivery, or (b) deposit in the United States Post Office, by registered or
certified mail, postage prepaid.

10.           Entire Agreement.  This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral relating to the subject matter of this
Agreement

11.           Amendment.  This Agreement may be amended or modified
only by a written instrument executed by both the Company and Employee.

12.           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation into which the Company may be merged or
which may succeed to its assets or business, provided, however,
that the obligations of Employee are personal and shall not be assigned by him,
and that the Agreement may not be assigned by the Company to any other entity
without the Employee’s written consent.

13.           Miscellaneous.

13.1         No Waiver.  No delay or omission by the Company in
exercising any right under this Agreement shall operate as a waiver of that or
any other right.  A waiver or consent
given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any
other occasion.

 

5

13.2         Severability.  In case any provision of this Agreement shall
be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall in no way be affected or impaired thereby.

13.3         Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York.

13.4         Consent to Jurisdiction.  Each of the parties hereto irrevocably
consents and submits to the jurisdiction of the courts of the State of New
York, sitting in the Borough of Manhattan, and the United States District Court
for the Southern District of New York, sitting in the Borough of Manhattan, as
the exclusive jurisdiction and venue for any actions or proceedings brought
against either party hereto, arising out of or relating to this Agreement.  In any such action or proceeding brought in
such courts, the parties hereto irrevocably (i) waive any objection or
jurisdiction or venue, (ii) waive personal service of the summons, complaint
and other process and (iii) agree that service thereof may be made by certified
or registered first-class mail directed to the party to be served.

13.5         Waiver of Jury Trial.  Each of the parties hereto irrevocably waives
its right to a trial by jury in any action arising out of or related to this
Agreement.

13.6         Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

 

6

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

 

 

	
   

  	
   

  	
  /s/
  Stephen T. D. Dixon

  
	
   

  	
   

  	
  Stephen
  T.D. Dixon

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  .

  	
  ALPHATEC
  SPINE, INC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Ronald G. Hiscock

  
	
   

  	
   

  	
   

  	
  Ronald
  G. Hiscock

  
	
   

  	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ALPHATEC
  HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Ronald G. Hiscock

  
	
   

  	
   

  	
   

  	
  Ronald
  G. Hiscock

  
	
   

  	
   

  	
   

  	
  President
  and Chief Executive Officer

  

 

7

AMENDMENT
TO

EMPLOYMENT
AGREEMENT OF

STEPHEN
T.D. DIXON

 

 

                This Amendment
to the Employment Agreement (this “Amendment”) is made as of February 6, 2006
by and among Stephen T.D. Dixon (“Employee”), Alphatec Spine, Inc., a California
corporation (the “Company”), and Alphatec Holdings, Inc., a Delaware
corporation (collectively, the “Parties”). 
Capitalized terms undefined herein shall have the meaning ascribed them
in the Agreement.

RECITALS

Reference is made to that certain Employment Agreement dated Effective
as of February 6, 2006, by and among the Parties (the “Agreement”).

                The Parties desire to amend the Agreement as set
forth herein.

                Now, therefore, in consideration of the mutual
promises set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged by the parties hereto, the
parties hereto agree as follows.

1.             AMENDMENTS

1.1          Replacement of Section 3(a).  Section 3(a) of the Agreement is hereby
deleted in the entirety and is replaced with the following:

 

“(a)
Beginning on February 6, 2006 the Employee shall be employed by the
Company.  On February ___, 2006, the
Company shall employ Employee, and Employee agrees to work for the Company as
its Chief Financial Officer, Treasurer and Vice President.  Employee shall at all times perform the
duties and responsibilities inherent in the position in which he serves and
such other duties and responsibilities as the Company’s President and Chief
Executive Officer (the “CEO”) shall from time to time reasonably assign to
him.  The Employee shall report to the
CEO.

 

2.             MISCELLANEOUS

 

In the event of any
conflict, ambiguity or inconsistency between the provisions of this amendment
and the Agreement, the provisions of this Amendment shall prevail.  Other than as set forth in this Amendment,
the remainder of the Agreement shall remain in full force and effect.

 

[Signature Page Follows]

 

                IN
WITNESS WEHREOF, the parties have executed this amendment to the Agreement on
the 6th day of February, 2006.

 

 

	
   

  	
   

  	
  /s/ Stephen T.D. Dixon

  
	
   

  	
   

  	
  Stephen T.D. Dixon

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ALPHATEC SPINE, INC.

  
	
   

  	
   

  	
  By:

  	
  /s/
  Ronald G. Hiscock                                         

  
	
   

  	
   

  	
  Ronald G. Hiscock

  
	
   

  	
   

  	
  President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ALPAHTEC HOLDINGS, INC.

  
	
   

  	
   

  	
  By:

  	
  /s/
  Ronald G.
  Hiscock                                         

  
	
   

  	
   

  	
  Ronald G. Hiscock

  
	
   

  	
   

  	
  President and CEO

  

 

 

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