10. Stock Benefit Plans, Stock-Based Compensation and Equity Transactions

In 2005, the Company adopted its 2005 Employee, Director, and Consultant Stock Plan (the “2005 Plan”). The 2005 Plan expired in April 2016. As of December 31, 2016, there were 615,902 shares issuable under the 2005 Plan.

In the third quarter of 2016, the Company adopted its 2016 Equity Incentive Plan (the “2016 Plan”), which replaced the 2005 Plan. The 2016 Plan allows for the grant of options, restricted stock, restricted stock unit awards and performance unit awards to employees, directors, and consultants of the Company. Upon its adoption, the 2016 Plan had 1,083,333 shares of common stock reserved for issuance. The Board of Directors determines the terms of the grants made under the 2016 Plan. Options granted under the 2016 Plan expire no later than ten years from the date of grant (five years for incentive stock options granted to holders of more than 10% of the Company’s voting stock). Options generally vest over a four year period and may be immediately exercisable upon a change of control of the Company. The exercise price of incentive stock options may not be less than 100% of the fair value of the Company’s common stock on the date of grant. The exercise price of any option granted to a 10% stockholder may be no less than 110% of the fair value of the Company’s common stock on the date of grant. At December 31, 2016, 392,659 shares of common stock remained available for issuance under the 2016 Plan. The 2016 Plan will expire in May 2026.

On October 4, 2016, the Company’s Board of Directors adopted the 2016 Employment Inducement Award Plan (the “Inducement Plan”). The Inducement Plan allows for the grant of options, restricted stock, restricted stock unit awards and performance unit awards to new employees of the Company by granting an award to such new employee as an inducement for such new employee to begin employment with the Company. The Inducement Plan currently has 950,000 shares of common stock reserved for issuance, which may only be granted to an employee who has not previously been an employee or member of the board of directors of the Company. The terms of the Inducement Plan are substantially similar to the terms of the Company’s 2016 Plan with two principal exceptions: (i) incentive stock options may not be granted under the Inducement Plan; and (ii) the annual compensation paid by the Company to specified executives will be deductible only to the extent that it does not exceed $1.0 million. Under the Inducement Plan, the Company granted $0.8 million of value Performance Restricted Share Units ("PRSUs"). The PRSUs will vest in a dollar amount representing between 0% to 250% of the target value upon the earlier of September 14, 2019 or a change in control of the Company. The actual payout amount will be based on the Company’s market capitalization on the vesting date and the fair-market value of the Company’s common stock on such vesting date and will be paid in shares of the Company's common stock.

The 2005 Plan, the 2016 Plan and the Inducement Plan are cumulatively referred to as the Plans.

Stock Options

A summary of the Company’s stock option activity under the Plans and related information is as follows (in thousands, except as indicated and per share data), as adjusted for the 1-for-12 reverse stock split:

	Shares			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2015		637		$	24.96		6.36	$	—
Granted		668		$	4.43		—		—
Forfeited		(150	)	$	29.42		—		—
Outstanding at December 31, 2016		1,155		$	12.17		7.75	$	—
Options vested and exercisable at December 31, 2016		435		$	21.11		5.20	$	—
Options vested and expected to vest at December 31, 2016		991		$	13.37		7.41	$	—

The weighted-average grant-date fair value per share of stock options granted during the years ended December 31, 2016, 2015 and 2014 was $4.43, $15.36 and $9.72, respectively. The aggregate intrinsic value of options at December 31, 2016 is based on the Company’s closing stock price on that date of $3.21 per share.

As of December 31, 2016, there was $5.6 million of unrecognized compensation expense for stock options and awards which is expected to be recognized on a straight-line basis over a weighted average period of approximately 3.6 years. The total intrinsic value of options exercised was immaterial for the years ended December 31, 2016, 2015 and 2014.

Restricted Stock Awards and Units

The following table summarizes information about the restricted stock awards, restricted stock units and performance-based restricted units activity (in thousands, except as indicated and per share data), as adjusted for the 1-for-12 reverse stock split:

	Shares			Weighted average grant date fair value		Weighted average remaining recognition period (in years)
Unvested at December 31, 2015		260		$	16.91		1.48
Awarded		969		$	5.79
Vested		(64	)	$	9.73
Forfeited		(73	)	$	16.65
Unvested at December 31, 2016		1,092		$	7.48		3.02

The weighted average fair value per share of awards granted during the years ended December 31, 2016, 2015 and 2014 was $5.79, $16.11 and $16.62 respectively.

Performance-Based Restricted Stock Units

In July 2014, the Company granted 77,666 performance-based restricted stock units ("PSUs") to certain employees under its 2005 Plan. The PSUs vest based upon the Company's achievement of certain performance goals over the period from July 1, 2014 through December 31, 2016. The number of PSUs that may vest varies between 0%-200% based on the achievement of such goals. The PSUs were valued at $17.04 per share based on the closing price of the Company's common stock on the date of grant. The performance criteria for the PSUs issued in 2014 was not met and they were cancelled in 2017.

In February 2015, the Company granted 154,500 PSUs to certain employees under its 2005 Plan. The PSUs vest based upon the Company's achievement of certain performance goals over the period from January 1, 2015 through December 31, 2017. The number of PSUs that may vest varies between 0%-200% based on the achievement of such goals. The PSUs were valued at $16.20 per share based on the closing price of the Company's common stock on the date of grant.

For purposes of measuring compensation expense, the amount of PSUs ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The related compensation expense was $0.0 million, $0.2 million and $0.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. The recognition of compensation expense associated with PSUs requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals.

Elite Medical Holdings and Pac 3 Surgical Collaboration Agreement

In October 2013, the Company entered into a three-year collaboration agreement with Elite Medical Holdings, LLC and Pac 3 Surgical Products, LLC (the "Collaborators") (the "Collaboration Agreement") to provide consultation services to assist the Company in the development of its products and its products in development. Under the terms of the collaboration agreement, the Company will gain exclusive rights to the use of all intellectual property developed by the collaborators. The Company agreed to make three annual payments to the collaborator as sole consideration for services provided, totaling an aggregate of up to $8 million, paid in common stock of Alphatec Holdings at a per share price of $23.35, which was equal to the average NASDAQ closing price of the common stock on the five days leading up to and including the date of signing the Collaboration Agreement. The actual number of shares issued each year will be determined by the fair market value of the services provided over the prior 12 months.

On November 2, 2015, the Company entered into a first amendment (the "First Amendment") to the Collaboration Agreement. Pursuant to the First Amendment, in exchange for a "lock up" restriction on selling or transferring each tranche of shares issued to the Collaborators and a maximum value cap, as discussed below, the Company has agreed to make a cash payment to the Collaborators in the event that the shares in such tranche do not have a minimum amount of value based on the market value of the Company’s common stock at the end of the lock up period applicable to such tranche of shares. In addition, in the event that at the end of a lock up period the value of a tranche of shares issued to the Collaborators exceeds a certain amount, the Collaborators have agreed to forfeit shares back to the Company, so as to limit the maximum amount of value derived from such shares at the end of a lock up period. Pursuant to the First Amendment, the shares issued to the Collaborators in each of 2014, 2015 and 2016 are subject to a lock up that lasts until the first quarter of 2017, 2018 and 2019, respectively. The valuation of each tranche of shares occurs at the end of the applicable lock up period.

Based on the closing price of the Company’s common stock on December 31, 2016, the Company has recorded a guaranteed compensation liability of $6.7 million for shares of the Company’s common stock previously issued under the Collaboration Agreement, with $2.2 million payable in 2017, 2018 and 2019. The amount payable in 2017 is included in accrued expenses and the amounts payable in 2018 and 2019 are presented under other long-term liabilities in the consolidated balance sheet and represent the cash settlement amounts. If the Collaborators elect to sell, assign or transfer: (i) more than 20% of the shares issued to the Collaborators prior to the first valuation date; or (ii) any of the Collaborator shares still subject to a lockup after the first valuation date, all of the aforementioned restrictions on transfer and valuation minimums and maximums are null and void.

As of December 31, 2016, the Company has issued 342,356 shares of its common stock under this agreement and recorded expense of $2.1 million, $4.9 million and $1.9 million in the years ended December 31, 2016, 2015 and 2014, respectively, which is included in research and development expenses.

SVB Warrants

In December 2011, in connection with the third amendment to the Company’s former credit facility with the SiliconValley Bank ("SVB"), finance charges totaling $0.2 million were waived in exchange for the issuance to SVB of warrants to purchase 7,812 shares of the Company’s common stock. The warrants are immediately exercisable, can be exercised through a cashless exercise, have an exercise price of $19.20 per share and have a 10-year term.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consists of the following (in thousands), as adjusted for the 1-for-12 reverse stock split:

	December 31, 2016
Stock options outstanding		1,155
Awards outstanding		1,092
Warrants outstanding		8
Authorized for future grant under 2016 and INDC Plans		395
		2,650