SALES AGENCY AGREEMENT

 

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company's application requesting confidential treatment under Rule 406 of the Securities Act. Asterisks denote omissions.

Exhibit 10.32

SALES AGENCY AGREEMENT

DATE:		July 1, 2005
BETWEEN:		ALPHATEC SPINE, INC. (hereinafter referred to as "Alphatec" or the "Company")
AND:		JEFF TOEDTMANN ENTERPRISES, LLC d/b/a SPECTRUM MEDICAL (hereinafter referred to as "Sales Agent")

WHEREAS Sales Agent has established and maintained a business office staffed with professional sales personnel in the Territory; and

WHEREAS Alphatec wishes to retain Sales Agent to sell its Products as in Exhibit A and Sales Agent wishes to act as Alphatec's exclusive Sales Agent within the Territory.

NOW THEREFORE, in consideration of the mutual covenants and provisions herein contained, the parties agree as follows:

1.    APPOINTMENT OF SALES AGENT    

Subject to the provisions of the Agreement, Alphatec hereby appoints Sales Agent and Sales Agent hereby accepts appointment as the Sales Agent for the products described in Exhibit A (hereinafter the "Products") with responsibility for the geographical areas listed on Exhibit B (hereinafter the "Territory"):

1.1.

Agent shall have the right to solicit orders for Products only from persons and entities having their places of business within the Territory and intending to use the Products so ordered within the Territory.

2.    SALES AGENTS' OBLIGATIONS    

In addition to any and all covenants, duties and obligations of Sales Agent set forth elsewhere in this Agreement, Sales Agent agrees:

2.1.

To use its best efforts to promote the sale of the Products throughout the Territory;

2.2.

To use its best efforts to meet or exceed the sales quotas established by Alphatec and approved by Sales Agent pursuant to this Agreement for each fiscal year during the term of this Agreement;

2.3.

To provide and maintain at least one place of business in the Territory;

2.4.

To bear all costs and liabilities relating to the conduct of its business, including but not limited to the cost and expense of providing and maintaining its place of business, the wages of its employees, the payment of commissions or other compensation to its agents or independent contractors, and its expenses incurred for or in connection with its performance under this Agreement;

2.5.

To refrain from making any representations or warranties in respect of the Products, except: a) those representations and warranties authorized in writing by Alphatec, in the form of brochures, memorandums, press releases, advertisements, specification sheets, or correspondences, and b) verbal technical assistance that Sales Agent received from Alphatec which was subsequently confirmed in writing by Sales Agent and Alphatec did not immediately object to said writing.

2.6.

To comply with all applicable laws and regulations in force in the Territory;

2.7.

To render reasonable assistance to Alphatec, on Alphatec's request, in the defense of any and all product liability claims;

2.8.

To refrain from disparaging Alphatec and their subsidiaries or its Products, or from otherwise injuring the reputation and good standing of Alphatec and their subsidiaries within the orthopedic marketplace;

2.9.

To assist Alphatec, on request, in ascertaining the credit standing of and in collecting receivables from any customer; and

2.10.

To attend, at its own expense, all sales meetings, training sessions, seminars, trade shows and the like for which Alphatec reasonably requests attendance by Sales Agent and assist as requested by Alphatec.

3.    ALPHATEC'S DUTIES AND OBLIGATIONS    

In order to assist Sales Agent in fostering the promotion and sale of Alphatec's Products, Alphatec agrees:

3.1.

To assist Sales Agent with advertising material, sales promotion aids, displays, catalogues, literature and convention assistance;

3.2.

To provide Sales Agent with New Product information and assist Sales Agent in promotional activities;

3.3.

To provide Sales Agent technical assistance, through sales seminars, meetings and training programs; and

3.4.

To provide Sales Agent with assistance in training Sales Agent's personnel;

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3.5.

To make available to the Agent and their representatives, samples of Alphatec's products, to be used for detailing and demonstrating of these products. A sample of each product will be available for existing products, as well as every new Product introduced into the market by Alphatec which is offered to and accepted by Sales Agent under this contract.

4    QUOTATIONS, ORDERS AND PAYMENT    

4.1.

Quotations:    Sales Agent will make quotations in respect to the sales of the Products only in accordance with Alphatec's then current policies and procedures and on prices established by Alphatec and Alphatec's terms and conditions of sale, including the terms of payment specified by Alphatec. The Sales Agent will assist Alphatec in obtaining the appropriate documentation needed for new customers (credit reports, sales tax exemptions, etc.).

4.2.

Orders:    Sales orders generated by Sales Agent will be submitted directly to Alphatec by the customer. If Sales Agent receives any order for Products, it will promptly forward it to Alphatec. Alphatec will establish and promulgate the criteria for sales orders to be generated by Sales Agent and Sales Agent will use its best efforts to secure sales orders that meet Alphatec criteria. Alphatec will have the right at anytime to reject any order in whole or in part. If Alphatec reasonably rejects any sales order generated by Sales Agent, then Sales Agent shall be notified immediately and given the opportunity to inform its customer or potential customer of said rejection in an attempt to preserve Sales Agent's business goodwill. On request of Sales Agent, Alphatec will confidentially and completely inform Sales Agent in writing of the specific reason or reasons for the rejection. On request of Alphatec, Sales Agent will not supply product to customers put on credit hold until released by Alphatec.

4.3.

Invoices:    Alphatec will invoice the customer for the purchased Products. Sales Agent will not invoice customers for the product unless expressly requested to do so by Alphatec in writing. Payments against invoices are to be made directly to Alphatec, without intervention by Sales Agent unless expressly requested in writing by Alphatec in each instance. If Sales Agent receives any payment from a customer, then Sales Agent will immediately forward the entire amount of such payment to Alphatec.

4.4.

Credits:    Alphatec will have the right to issue credits, make discounts and allowances, and/or accept returns of the Products. Sales Agent in an effort to be competitive with the orthopedic market or to develop new customers will have the right to request Alphatec to issue credits, make discounts and allowances and/or accept returns of the Products. Alphatec shall use business judgment in determining whether to grant Sales Agent's request.

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5.    COMMISSIONS    

5.1.

Rate:    As compensation for Sales Agent's performance under this Agreement, Alphatec will pay to Sales Agent a commission at the rate specified in Exhibit C on Alphatec's Net Sales of Products in the Territory during the term of this Agreement. For purposes of this Agreement, the terms "Net Sales" means total dollar sales volume of the Products, less

5.1.1.

Sales taxes and other governmental assessments;

5.1.2.

Shipping and insurance charges;

5.1.3.

Prompt payment discounts actually allowed;

5.1.4.

Returns allowed and credited; and

5.1.5.

Allowances and/or trade discounts allowed and credited. The commission will be deemed to have been earned by Sales Agent at the time Alphatec collects invoices from the customer. Alphatec may establish the commission rate applicable to any new Product or materially modified Product (not currently listed on Exhibit A), which Alphatec and Sales Agent shall include in this Agreement by way of an addendum signed by a duly authorized officer of Alphatec and Sales Agent.

5.2.

Payment:    Alphatec will make payment of commissions earned by Sales Agent in accordance with Alphatec's applicable policies and procedures. Commissions will be posted by the 30th day after the close of the month in which the applicable orders are received and shipped. Any commissions paid on outstanding accounts receivable at the close of the month that exceed the payment terms of net 90 days will be deducted from Sales Agent's commission. Upon collection of past due accounts commissions will be re-posted to the commission.

5.3.

Records:    Alphatec will keep and maintain accurate, complete and current books and records relating to commissions earned by Sales Agent. Upon payment of commission to Sales Agent by Alphatec, Alphatec shall provide Sales Agent with a detailed breakdown of the customer sales used to calculate the commission as well as any credit, discount, allowance or set-off taken by Alphatec or applied against Sales Agent commission. Any discrepancies should be reported to Alphatec within 30 (thirty) days of the receipt of the detailed statement. On written request from Sales Agent, Alphatec will permit an independent certified public accountant designated by and at the expense of Sales Agent, to audit Alphatec's books and records pertaining to commissions earned by Sales Agent, such audit to be conducted on Alphatec's premises during normal business hours.

5.4.

Credits:    In the event that Alphatec has previously paid Sales Agent commission on sales to a customer whose account is subsequently entitled to a credit, for returns or otherwise, and sufficient commission is not available to deduct the credit within the period, Alphatec will submit an invoice and a written explanation containing the reasons why Alphatec is entitled to reimbursement by Sales Agent of any portion or all

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of the commission previously paid to Sales Agent. Agreement between Sales Agent and Alphatec shall constitute Sales Agent to pay amount invoiced within 30 (thirty) days of said invoice.

5.5.

No Liability for Rejection of Order:    Alphatec will have no liability whatsoever to Sales Agent for commission payments for Alphatec's reasonable rejection of all or part of any order.

6.    SALES OBJECTIVE    

For each calendar year, during the term of this Agreement, including extensions, Alphatec will establish annual sales objectives for Products to be sold by the Sales Agent within the Territory as measured in dollar volume.

If new product lines are added to the Product list during a calendar year an additional quota will be established for that line within that calendar year then added to the total quota for future periods.

7.    SAMPLES, PROMOTIONAL MATERIALS AND INSTRUMENTS    

7.1.

Samples for Promotion of Products:    From time to time Alphatec may deliver to Sales Agent such items as samples, models, literature and instrumentation for use in promoting and selling the Products. Except for items actually purchased by Sales Agent or delivered by Sales Agent as unrestricted no-charge samples according to Alphatec's specific instructions, Alphatec will retain all right, title and interest in and to such items and Sales Agent will hold them in a fiduciary capacity.

7.2.

Records Maintained by Sales Agent:    Sales Agent will prepare and maintain accurate, complete and current books and records pertaining to the samples, models, literature, instrumentation and other promotional items, that are owned by Alphatec, including but not limited to type and quantity of each item and disposition thereof.

7.3.

Consignment Inventory Policy:    Alphatec shall establish for Sales Agent a Products inventory account. Except for the Products actually purchased by Sales Agent, Alphatec will retain all right, title and interest in and to such Products. Sales Agent will hold said products in a fiduciary capacity under an account titled "Consigned Inventory".

Alphatec may request a physical inventory of Alphatec property held as consigned inventory by Sales Agent. Alphatec, at its expense, may elect to send a representative to review books and records of Sales Agent as they relate to consigned inventory as well as to physically audit the consigned inventory.

Alphatec shall establish for all of its sales agents an Agent Consignment Inventory

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Policy. Said Policy shall enumerate all parties' rights, responsibility, duties, and obligations as they pertain to the consigned inventory. Said Policy shall be attached to this Agreement as Exhibit D.

The level of Consigned Inventory for Sales Agent shall be established by Alphatec and approved by the Sales Agent.

The level of total consigned inventory in the Sales Agent territory will be reviewed each quarter. The initial level will be based on the Dollar value of current price list for the list attached hereto as Exhibit E. If any Product is returned damaged, then Alphatec, to the extent possible, will repair or refurbish the Product and invoice Sales Agent for the cost of said repairs and handling. If the damaged Product cannot be repaired, then Alphatec shall invoice Sales Agent.

Sales Agent will prepare and maintain complete and accurate books and records pertaining to all Consigned Inventory, including but not limited to the type and quantity of each Product as well as the disposition thereof. AGENT will supply Alphatec a copy of each agreement where consignment inventory is stocked by a hospital, on Sales Agent's premises or other mutually acceptable place during normal business hours with at least ten (10) days' prior written notice to Sales Agent. Failures or omissions on reports do not constitute a waiver of claims that Alphatec may have on the Sales Agent.

8.    SALES ACTIVITY BY ALPHATEC    

Alphatec reserves the right, at any time and from time to time, throughout the term of this Agreement, to engage in selling, promoting and/or other related activities concerning the Products in the Territory, so long as any sales of such activity will be credited to Sales Agent's account for purposes of determining achievement of sales quotas and calculating commissions. Prior to the commencement of any sales activity within the Territory for Product lines included in the contract, Alphatec shall notify Sales Agent of its intent to sell. AGENT will be invited to participate in all sales activity concerning product.

8.1.

Company reserves the right to sell the Products within the Territory to any person or entity offering to purchase and resell the Products as private label products so long as such person or entity is not at such time a company or person to whom Agent is actually selling the Products. In the event that private labeling occurs, if any, within the Territory, Alphatec may but is not obligated to modify Sales Agent's Monthly Sales Quotas to reflect the competitive impact of private labeling.

8.2.

Alphatec also reserves the right to sell the Products within the Territory to any Company-designated national, regional, or government person or entity, and Sales Agent shall service such account within the Territory in return for the applicable commission set forth in Exhibit C. If Sales Agent declines to service any such account, Company shall service such account itself and at its own expense, and Sales Agent shall

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receive no commission with respect to such account.

8.3.

Alphatec acknowledges it does not intend or desire to establish any customers as house accounts, however, under certain circumstances, Alphatec may find it necessary to establish certain customers as house accounts. Therefore, Alphatec also reserves the right with justification to designate certain customers or potential customers as house accounts. Justification for designation of a customer as a house account includes, without limitation, any customer having sales, service, marketing or technical service requirements beyond the facilities and abilities of Sales Agent and any customer who indicated to Alphatec an unwillingness to deal directly with Sales Agent. Alphatec reserves the right to deal directly with such house accounts for sale of the Products, which may include delivery of the Products within the Territory.

Alphatec shall pay Sales Agent such commissions as are agreed upon between Alphatec and the Sales Agent for the services, if any, rendered by Sales Agent at the request of Alphatec in connection with sales of the Products to such house accounts that are delivered within the Territory. If no services are rendered by Sales Agent, then no commission shall be payable to Sales Agent.

8.4.

Alphatec also reserves the right to negotiate and establish clinical investigators and/or clinical centers to conduct clinical evaluations of the Products within the Territory. Alphatec may find it necessary to implement certain remuneration programs to the clinical investigators/clinical centers as compensation for sales of the Products, which may include delivery of the Products within the Territory. Alphatec shall pay such commissions to Sales Agent as are agreed upon between Alphatec and the Sales Agent for services, if any, rendered by Sales Agent at the request of Alphatec in connection with sales of Products obtained from these clinical investigators/clinical centers located within the Territory. If no services are rendered by Sales Agent, then no commission shall be payable to Sales Agent.

8.5.

Alphatec also reserves the right to work with any surgeon or medical center in the design and development of new products. Alphatec may find it necessary to provide special remuneration programs to the surgeon inventors/medical centers as compensation for their assistance and expertise in new product development. Alphatec reserves the right to deal directly with such surgeon inventors/medical centers for the sale of the Products. Alphatec shall pay to Sales Agent such commissions as are agreed upon between Alphatec and the Sales Agent for services, if any, rendered by Sales Agent at the request of Alphatec in connection with sales of the products to such surgeons/inventors/medical centers located within the Territory. If no services are rendered by Sales Agent, then no commission shall be payable to Sales Agent.

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9.    RELATIONSHIP OF PARTIES    

Sales Agent is an independent contractor having only such authority to act for Alphatec as is expressly set forth in this Agreement. Sales Agent is not authorized to enter into any commitment or contract of any kind on behalf of Alphatec. Alphatec will not incur any liability whatsoever to any third party by reason of Sales Agent having exceeded its authority under the appointment granted by Alphatec herein or by reason of any misrepresentation by Sales Agent of its relationship to Alphatec or of Alphatec's products, warranties, policies, practices or procedures. If any claim of such liability is asserted against Alphatec, Sales Agent agrees to defend Alphatec and hold Alphatec harmless there from. Nothing contained in this Agreement is intended to be construed as creating or implying a relationship of principal and agent or employer and employee between Alphatec and Sales Agent or between Alphatec and Sales Agent's employees or agents, or a joint venture or partnership between Alphatec and Sales Agent.

10.    COMPLIANCE WITH LAWS AND REGULATIONS    

Alphatec and Sales Agent will each comply with all pertinent provisions of the Federal Food, Drug and Cosmetic Act, as the same may be amended from time to time, and with all regulations promulgated thereunder. Such compliance will include, but not be limited to, obtaining necessary market clearances and providing product labeling and safety and use instructions.

11.    REPORTS    

Sales Agent may be reasonably requested from time to time to submit to Alphatec written reports of Sales Agent's activities performed under this Agreement. Such reports will include a listing, by name and location, of customers contacted by Sales Agent, major opportunities being pursued, inquiries and/or problems reported by customers, physicians and/or users of the products, Sales Agent's recommendations respecting actions to be taken by Alphatec to secure orders, and any other pertinent matters requested by Alphatec to be included in such reports, for the relevant period to which the report applies.

12.    INDEMNIFICATION    

12.1.

Alphatec shall indemnify and hold Sales Agent, its agents, employees, or other representatives harmless from and against any liability, loss, costs, expenses, attorneys' fees, or damages howsoever caused by reason of any act, neglect, default, or omission that is solely caused by or solely attributable to its agents, employees, or other representatives.

12.2.

Sales Agent shall indemnify and hold Alphatec, its agents, employees, or other representatives harmless from and against any liability, loss, costs, expenses, attorneys' fees, or damages howsoever caused by reason of any injury (whether to body, property,

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or personal or business character or reputation) sustained by any person to property by reason of any act, neglect, default, or omission that is solely caused by or solely attributable to it, its agents, employees, or other representatives.

12.3.

Alphatec will indemnify and defend Sales Agent, Sales Agent's representatives, or employees against any and all suits or proceedings brought against it or them or any of them by any third parties based on one