exv10w13








Exhibit 10.13




CREDIT AGREEMENT




     THIS
CREDIT AGREEMENT (this “Agreement”) is entered into as of March 31, 2007, by and between
FALLBROOK TECHNOLOGIES INC., a Delaware corporation
(“Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”).



RECITALS




     Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the terms and
conditions contained herein.



     NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Bank and Borrower hereby agree as fallows:



ARTICLE I

CREDIT TERMS




     SECTION 1.1. LINE OF CREDIT.



     (a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank hereby
agrees to make advances to Borrower from time to time up to and including March 31, 2008, not
to exceed at any time the aggregate principal amount of Two Million
Dollars ($2,000,000.00)
(“Line of Credit”), the proceeds of which shall be used for working capital requirements and
corporate purposes. Borrower’s obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of March 31, 2007 (“Line of Credit Note”), all terms
of
which are incorporated herein by this reference.



     (b) Borrowing and Repayment. Borrower may from time to time during the term of the
Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow,
subject
to all of the limitations, terms and conditions contained herein or in the Line of Credit
Note;
provided however, that the total outstanding borrowings under the Line of Credit shall not at
any
time exceed the maximum principal amount available thereunder, as set forth above.



     SECTION 1.2. INTEREST/FEES.



     (a) Interest. The outstanding principal balance of each credit subject hereto shall
bear interest, at the rate of interest set forth in each promissory note or other instrument or
document executed in connection therewith.



     (b) Computation and Payment. Interest shall be computed on the basis of a 360-day
year, actual days elapsed. Interest shall be payable at the times and place set forth in
each
promissory note or other instrument or document required hereby.



     (c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one quarter
percent (0.25%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the
average daily unused amount of the Line or Credit, Which fee shall be calculated on a quarterly
basis by Bank and shall be due and payable by Borrower in arrears on the 10th day of each calendar
quarter.



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     SECTION
1.3. COMPENSATING BALANCES. Borrower shall maintain with Bank average
balances whether interest bearing or free collected non-interest bearing deposit balances, net of
any account balances required of offset service or other charges as shown on Borrower’s monthly
Account Analysis from Bank (“Compensating Balances”), calculated on a quarterly basis, equal to Two
Million Dollars ($2,000,000.00). To the extent such Compensating
Balances are not maintained. Borrower shall pay to Bank a fee equal to the product of the balance deficiency multiplied by a
rate per annum equal to the average Prime Rate plus 0% during the period in which such balance
deficiency occurred which fee shall be calculated on a fiscal quarter basis by Bank and shall be
due and payable by Borrower in arrears with ten days after each quarter.



     SECTION
1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest and
fees due under each credit subject hereto by charging Borrower’s deposit account number 4121-462725
with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such deposit account to pay all such sums when
due, the full amount of such deficiency shall be immediately due and payable by Borrower.



     SECTION 1.5. COLLATERAL.



     As security for all indebtedness and other obligations of Borrower to Bank subject
hereto. Borrower hereby grants to Bank security interests of first
priority in all Borrower’s
accounts receivable, other rights to payment, general intangibles, inventory and equipment.



     As additional security for all indebtedness of Borrower to Bank subject hereto. Borrower
hereby grants to Bank security interest of first priority in Borrower’s Liquidity Management
Account No. W87422262 maintained with Wells Fargo Investments, LLC.


All of the
foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all
in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the
full amount of all charges, costs and expenses (to include fees paid to third parties and all
allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the
forgoing security, including without limitation, filing and recording fees and costs of appraisals,
audits and title insurance.




ARTICLE II 

REPRESENTATIONS AND WARRANTIES




     Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and shall continue in
full force and effect until the full and final payment, and satisfaction and discharge, of all
obligations of Borrower to Bank subject to this Agreement.



     SECTION
2.1. LEGAL STATUS. Borrower is a corporation, duly organized and existing and in
good standing under the laws of Delaware, and is qualified or licensed to do business (and is in
good standing as a foreign corporation, it applicable) in all jurisdictions in which such
qualification or licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.



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     SECTION
2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at any time hereafter
delivered to Bank in connection herewith (collectively, the “Loan Documents”) have been duly
authorized, and upon their execution and delivery in accordance with the provisions hereof will
constitute legal, valid and binding agreements and obligations of Borrower or the party which
executes the same, enforceable in accordance with their respective terms.



     SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of
the Loan Documents do not violate any provision of any law or regulation, or contravene any
provision of the Articles of Incorporation or By-Laws of Borrower or result in any breach of or
default under any contract, obligation, indenture or other instrument to which Borrower is a party
or by which Borrower may be bound.



     SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower’s knowledge
threatened, actions, claims, investigations, suits or proceedings by or before any governmental
authority, arbitrator, court or administrative agency which could have a material adverse effect on
the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in
writing prior to the date hereof.



     SECTION
2.5. CORRECTNESS OF FINANCIAL STATEMENT. The annual financial
statement of Borrower dated December 31, 2006, and all interim financial statements delivered to
Bank since said date, true copies of which have been delivered by Borrower to Bank prior to
the date hereof, (a) are complete and correct and present fairly the financial condition of
Borrower, (b) disclose all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or unliquidated, fixed
or contingent, and (c) have been prepared in accordance with generally accepted accounting
principles consistently applied. Since the dates of such financial statements there has been no
material adverse change in the financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise, encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.



     SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year.



     SECTION
2.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower’s obligations subject to this Agreement to
any other obligation of Borrower.



     SECTION
2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all
permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct
the business in which it is now engaged in compliance with applicable law.



     SECTION
2.9. ERISA. Borrower is in compliance in all material respects with all applicable
provisions or the Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension
benefit plan (as defined, in ERISA) maintained or contributed to by
Borrower (each, a “Plan”); no
Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower: Borrower has met its minimum funding requirements under ERISA with respect
to each Plan: and each Plan will be able to fulfill its benefit obligations



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as they come due in accordance with the Plan documents and under generally accepted
accounting principles.




     SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material
lease, commitment, contract,
instrument or obligation.



     SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing
prior to the date hereof. Borrower is in compliance in all material respects with all applicable
federal or state environmental, hazardous waste, health and safety statutes, and any rules of
regulations adopted pursuant thereto, which govern of affect any of Borrower’s operations and/or
properties, including without limitation, the Comprehensive Environmental Response. Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to time. None of the
operations of Borrower is the subject of any federal or state investigation evaluating whether any
remedial action involving a material expenditure is needed to respond to a release of any toxic or
hazardous waste or substance into the environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into the environment.



ARTICLE III

CONDITIONS




     SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any
credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all
of the following conditions:



     (a) Approval of Bank Counsel. All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank’s counsel.



     (b) Documentation.
Bank shall have received, in form and substance satisfactory to
Bank, each of the following, duly executed:




	 	(i)	 	This Agreement and each promissory note or other instrument or document
required hereby.
	 
	 	(ii)	 	Corporate Borrowing Resolution.
	 
	 	(iii)	 	Certificate of Incumbency.
	 
	 	(iv)	 	Continuing Security Agreement: Rights to Payment and Inventory.
	 
	 	(v)	 	Security Agreement: Equipment.
	 
	 	(vi)	 	Security Agreement: Securities
Account.
	 
	 	(vii)	 	Securities Account Control Agreement.
	 
	 	(viii)	 	Statement of
Purpose.
	 
	 	(ix)	 	Such other documents as Bank may require under any other Section of
this Agreement.





     (c) Financial Condition. There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower, nor any material decline,
as determined by Bank, in the market value of any collateral required hereunder or a substantial or
material portion of the assets of Borrower.



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     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment
to Bank’s satisfaction of each of the following conditions:



     (a) Notice of Borrowing. Bank shall
have received a Notice of Borrowing in the
form of Exhibit A hereto, providing, among other things, that the representations and warranties
contained herein and in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with
the same effect as though such representations and warranties had been made on and as of each such
date, and on each such date, no Event of Default as defined herein, and no condition, event or act
which with the giving of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.



     (b) Documentation. Bank
shall have received all additional documents which may be
required in connection with such extension of credit.



ARTICLE IV

AFFIRMATIVE COVENANTS




     Borrower covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto. Borrower shall, unless Bank otherwise consents in
writing.



     SECTION 4.1. PUNCTUAL PAYMENTS.
 Punctually pay all principal, interest, fees or other
liabilities due under any of the Loan Documents at the times and place and in the manner
specified therein.



     SECTION 4.2. ACCOUNTING RECORDS. Maintain
adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time, to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the properties of Borrower.



     SECTION 4.3. FINANCIAL STATEMENTS.
Provide to Bank all of the following, in form and
detail satisfactory to Bank;



     (a) not later
than 150 days after and as of the end of each fiscal year, audited
consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an opinion which is unqualified or otherwise consented to in
writing by Bank on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank:



     (b) not later than 20 days after and as of the end of each calendar month during which
advances were outstanding under the Line of Credit, and 20 days after the end of each
calendar quarter, a company prepared consolidated and consolidating balance sheet and income
statement covering Borrower’s operations during such period, in a form reasonably acceptable to
Bank, together with account statements evidencing Borrower’s cash and marketable securities;




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     (c) contemporaneously
with each annual and monthly (or quarterly, as applicable)
financial statement of Borrower required hereby, a certificate of the
chief executive officer or chief
financial officer of Borrower that said financial statements are accurate and that there exists no
Event of Default nor any condition, act or event which with the giving of notice or the passage of
time or both would constitute an Event of Default;



     (d) from
time to time such other information as Bank may reasonably request, including
without limitation, Borrower’s Board of Director’s approved financial projections.



     SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the conduct of its
business; and comply with the provisions of all documents pursuant to which Borrower is organized
and/or which govern Borrower’s continued existence and with the requirements of all laws, rules,
regulations and orders of any governmental authority applicable to Borrower and/or its business.



     SECTION 4.5. INSURANCE. Maintain and keep in force, for each business in which Borrower is
engaged, insurance of the types and in amounts customarily carried in similar lines of business,
including but not limited to fire, extended coverage, public
liability, flood, property damage and
workers’ compensation, with all such insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance
then in effect.



     SECTION
4.6. FACILITIES.  Keep all properties useful or necessary to Borrower’s
business in good repair and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently preserved and
maintained.



     SECTION
4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or
personal, including without
limitation federal and state income taxes and state and local property taxes and assessments,
except such (a) as Borrower may in good faith contest or as to
which a bona fide dispute may
arise, and (b) for which Borrower has made provision, to Bank’s satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.



     SECTION
4.8. FINANCIAL CONDITION. Maintain Borrower’s financial condition as follows using
generally accepted accounting principles consistently applied and used consistently with prior
practices (except to the extent modified by the definitions herein), with compliance determined
commencing with Borrower’s financial statements for the period ending prior to the initial advance,
measured monthly unless there are no outstandings under the Line of Credit, in which case measured
quarterly:



     (a) Quick Ratio not less than 2.0 to 1.0 at any time, with “Quick Ratio” defined as the
aggregate of unrestricted cash and unrestricted marketable securities divided by total current
liabilities.



     (b) EBITDA loss as of the end of the fiscal quarter ending March 31, 2007 not greater
than $2,750,000 with no one monthly EBITDA loss greater than $1,000,000; as of the end of the
fiscal quarter ending June 30, 2007 not greater than $2,500,000 with no one monthly EBITDA
loss greater than $1,000,000; as of the end of the fiscal quarter ending September 31, 2007
not greater than $1,900,000 with no one monthly EBITDA loss greater than $750,000; as of the end



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of the fiscal quarter ending December 31, 2007, and thereafter, not greater than $250,0000 with no
one monthly EBITDA loss greater than $150,000. EBITDA shall be calculated on a cash basis for all
purposes of calculating compliance with this Section 4.8(b).




     SECTION 4.9. NOTICE TO BANK. Promptly (but in no event more than five (5) days after the
occurrence of each such event or matter) give written notice to Bank in reasonable detail of: (a)
the occurrence of any Event of Default, or any condition, event or act which with the giving of
notice or the passage of time or both would constitute an Event of Default; (b) any change in the
name or the organization structure of Borrower; (c) the occurrence and nature of any Reportable
Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency
with respect to any Plan; or (d) any termination or cancellation of any insurance policy which
Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or
property damage, or through fire, theft or any other cause affecting Borrower’s property.



     SECTION 4.10. DEPOSIT RELATIONSHIP. Maintain Borrower’s primary operating
accounts with Bank at all times during the term of this Agreement.



ARTICLE V

NEGATIVE COVENANTS




     Borrower further covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank’s
prior written consent:



     SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder
except for the purposes stated in Article I hereof.



     SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed assets in any
fiscal year in excess of an aggregate of $500,000.00.



     SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the
liabilities of Borrower to Bank, and (b) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof.



     SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of Borrower’s business
as conducted as of the date hereof; acquire all or substantially all of the assets of any other
entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion
of Borrower’s assets except in the ordinary course of its business.



     SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except any of the foregoing existing as of, and disclosed
to Bank prior to, the date hereof.



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     SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety, endorser (other
than as endorser of negotiable instruments for deposit or collection in the ordinary course of
business), accommodation endorser or otherwise for. nor pledge or hypothecate any assets of Borrower
as security for, any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.



     SECTION 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either
in cash, stock or any other property on Borrower’s stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of
Borrower’s stock now or hereafter outstanding.



     SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security
interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired,
except any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in
writing prior to, the date hereof. Nor shall Borrower enter into any agreement (other than this
Agreement or any other Loan Document) that limits in any material respect the ability of Borrower
to create, incur, assume or suffer to exist liens on property of Borrower.



ARTICLE VI

EVENTS OF DEFAULT




     SECTION 6.1. The occurrence of any of the following shall constitute an “Event
of Default” under this Agreement:



     (a) Borrower shall fail to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.



     (b) Any financial statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this Agreement or any
other Loan Document shall prove to be incorrect, false or misleading in any material respect
when furnished or made.



     (c) Any default in the performance of or compliance with any obligation, agreement or
other provision contained herein or in any other Loan Document (other than those referred to
in subsections (a) and (b) above), and with respect to any such default which by its nature can
be cured, such default shall continue for a period of ten (10) days from its occurrence.



     (d) Any default in the payment or performance of any obligation, or any defined event of
default, under the terms of any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower, any guarantor hereunder or any general partner or joint venturer in
Borrower if a partnership or joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a “Third Party Obligor”) has incurred any debt or other
liability to any person or entity, including Bank.



     (e) The filing of a notice of judgment
 lien against Borrower or any Third Party Obligor;
or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any
county in which Borrower or such Third Party Obligor has an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or execution, or other like process,
against the assets of Borrower or any Third Party Obligor; or the entry of a judgment against
Borrower of any Third Party Obligor.




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     (f) Borrower
or any Third Party Obligor shall become insolvent, or shall suffer or consent
to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any
of its property, or shall generally fail to pay its debts as they become due, or shall make a
general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, of seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy
Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time (“Bankruptcy Code”), or under any
state or federal law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or
commenced against Borrower or any Third Party Obligor, or Borrower or any Third Party Obligor shall
file an answer admitting the jurisdiction of the court and the material allegations of any
involuntary petition; or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower or any Third Party Obligor by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors.



     (g) There shall exist or occur
 any event or condition which Bank or good faith believes
impairs, or is substantially likely
to impair, the prospect of payment or performance by
Borrower of its obligations under any of the Loan Documents.



     (h) The death or incapacity of Borrower or any Third Party Obligor if an individual. The
dissolution or liquidation of Borrower or any Third Party Obligor if a corporation, partnership,
joint venture of other type of entity; of Borrower or any such Third Party Obligor, or any of its
directors, stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such Third Party Obligor.



     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall
at Bank’s option and without notice become immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including without limitation the right to
resort to any or all security for any credit subject hereto and to exercise any or all of
the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of
an Event of Default, are cumulative and not exclusive, and shall be in addition to any other
rights, powers or remedies provided by law or equity.



ARTICLE VII

MISCELLANEOUS




     SECTION 7.1. NO WAIVER. No delay, failure or discontinuances of Bank in exercising any
right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of
such right, power or remedy, nor shall any single of partial exercise of any such right, power or
remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of
any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of default under any of the Loan Documents must be in
writing and shall be effective
only to the extent set forth in such writing.




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     SECTION 7.2. NOTICES. All notices, requests and demands which any party is required
or may desire to give to any other party under any provision of this Agreement must be in writing
delivered to each party at the following address:



	 	 	 
	   BORROWER:

	 	Fallbrook Technologies Inc.
	 

	 	9444 Waples Street, Suite 410
	 

	 	San Diego, CA 92121
	 
	   BANK:

	 	WELLS FARGO BANK, NATIONAL ASSOCIATION
	 

	 	Southern California Growth Technology Group
	 

	 	400 Hamilton Avenue, Suite 210
	 

	 	Palo Alto, CA 94301





or to such
other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand
delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3)
days after deposit in the U.S. mail, first class and postage prepaid;
and (c) if sent by telecopy,
upon receipt.




     SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection
with (a) the negotiation and preparation of this Agreement and the other Loan Documents, to a
maximum of $2,500.00, Bank’s continued administration hereof and thereof, and the preparation of
any amendments and waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or the
collection of any amounts which become due to Bank under any to the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the
Loan Documents, including without limitation, any action for
declaratory relief, whether incurred at the trial or appeliate
level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to Borrower or
any other person or entity.



     SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of
the parties; provided however, that Borrower may not assign or transfer its interests or rights
hereunder without Bank’s prior written consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and
benefits under each of the Loan Documents. In connection therewith, Bank may disclose all
documents and information which Bank now has or may hereafter acquire relating to any credit
subject hereto, Borrower or its business, or any collateral required
hereunder.



     SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents
constitute the entire agreement between Borrower and Bank with respect to each credit
subject hereto and supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified only in writing
signed by each party hereto.




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     SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole  protection and benefit of  the parties hereto and their respective permitted
successors and assigns, and no other person or entity shall be a third party beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this Agreement or any other
of the Loan Documents to which it is not a party.



     SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.



     SECTION 7.8. SEVERABILITY OF PROVISIONS. If
any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity without invalidating the remainder of such
provision or any remaining provisions of this Agreement.



     SECTION 7.9. COUNTERPARTS. This Agreement may be executed in
any number of counterparts,
each of which when executed and delivered shall be deemed to be an original, and all of which when
taken together shall constitute one and the same Agreement.



     SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California.



     SECTION 7.11. ARBITRATION.



     (a) Arbitration. The
parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among them (and
their respective employees, officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise in any way arising out of or relating to (i) any credit subject hereto,
or any of the Loan Documents, and their negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement, enforcement default or
termination; or (ii) requests for additional credit.



     (b) Governing Rules. Any
arbitration proceeding will (i) proceed in a location in
California selected by the American Arbitration Association (“AAA”); (ii) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties; and (iii) be conducted by the
AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00
exclusive of claimed interest, arbitration fees and costs in which case the
arbitration shall be conducted in accordance with the  AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution procedures or the optional procedures
for large, complex commercial disputes to be referred to heroin, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and procedures set
forth herein shall control. Any party who fails or refuses to submit to arbitration following a
demand by any other party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by
any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar
applicable state law.



     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure.
The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal
property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of
collateral such as




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setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin,
injunctive relief, attachment or the appointment of a receiver, before during or after the pendency
of any arbitration proceeding. This exclusion does not constitute a waiver of the right or
obligation of any party to submit any dispute to arbitration or reference hereunder, including
those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.




     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the
amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater than $5,000,000.00.
Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority
vote of a panel of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed
in the State of California or a neutral retired judge of the state or federal judiciary of
California, in either case with a minimum of ten years experience in the substantive law applicable
to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not
an issue is arbitratable and will give effect to the statutes of limitation in determining any
claim. In any arbitration proceeding the arbitrator will  decide (by documents only or with a
hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall
resolve all disputes in accordance with the substantive law of California and may grant any remedy
or relief that a court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator shall also have the
power to award recovery of all costs and fees, to impose sanctions and to take such other action as
the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon
the award rendered by the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party contests such action for
judicial relief.



     (e) Discovery. In any arbitration
proceeding, discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to
the  dispute being arbitrated and must be completed no later than 20 days before the hearing date.
Any requests for an extension of the discovery periods, or any discovery disputes, will be subject
to final determination by the arbitrator upon a showing that the request for discovery is essential
for the party’s presentation and that no alternative means for obtaining information is available.



     (f) Class Proceedings and
Consolidations. No party hereto shall be entitled to
join or consolidate disputes by or against others in any arbitration, except parties who
have executed any Loan Document, or to include in any arbitration any dispute as a representative or
member of a class, or to act in any arbitration in the interest of the general public or in a
private attorney general capacity.



     (g) Payment Of Arbitration Costs And Fees.
 The arbitrator shall award all costs
and expenses of the arbitration proceeding.



     (h) Miscellaneous.
 To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration proceeding within 180
days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content of results thereof, except for disclosures of
information by a 


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party required in the ordinary course of its business or
by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the
arbitration provision most directly related to the Loan Documents or the subject matter of the
dispute shall control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.




     (i) Small Claims Court. Notwithstanding anything
herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction.
Further, this arbitration provision shall apply only to disputes in which either party seeks to
recover an amount of money (excluding attorneys’ fees and costs) that exceeds the
jurisdictional limit of the Small Claims Court.



     SECTION 7.12. CONFIDENTIALITY



     (a) Confidential Information. As used herein, the term
“Confidential Information”
shall mean all non-public, confidential and/or proprietary information of Borrower, now or at any
time hereafter provided to Bank by Borrower, or any of Borrower’s officers, employees, agents or
representatives, in connection with this Agreement.



     (b) Use of Information.
 The Confidential Information will be used by Bank solely for
the purpose of evaluating Borrower’s credit requests and/or Bank’s ongoing credit accommodations
to Borrower.



     (c) Confidentiality. Bank will keep all the Confidential Information
 confidential, and will
not disclose any of the Confidential Information to any person or entity, except disclosures:
(i) to federal and state bank examiners, and other regulatory officials having jurisdiction over
Bank, (ii) to Bank’s legal counsel and auditors, (iii) to other professional advisors to Bank, (iv)
to Bank’s representatives (which shall include, without limitation, all other banks and
companies affiliated with Wells Fargo & Company) who need to know the Confidential Information for the
purpose of evaluating Borrower’s credit requests and/or Bank’s ongoing credit accommodations
to Borrower, it being expressly understood and agreed that such representatives shall be
informed of the confidential nature of the Confidential Information, and shall be required by
Bank to treat the Confidential Information as confidential in accordance with the terms and conditions
hereof; (v) as otherwise required by law or legal process, (vi) to any actual or potential
assignee of or participant in Bank’s rights and interests under the Loan Documents, so long as such
person or entity agrees in writing to be bound by the  provisions of this Section 7.12,
(vii) to the extent reasonably required in connection with the exercise of any remedy hereunder, or (viii)
as otherwise authorized by Borrower in writing.



     (d) Legal Process. In the event that Bank or any of its representatives becomes
legally compelled to disclose any of the Confidential Information pursuant to Section 7.12(c)(v)
above, then Bank, except as otherwise required by law, will provide notice thereof to Borrower so that
Borrower, at its sole option (but without obligation to do so), may attempt to seek a protective
order or other appropriate remedy and/or waive compliance with the provisions of this Agreement.



     (e) Public Information. The confidentiality requirement set forth herein shall not
extend to any portion of the Confidential Information that: (a) is or becomes generally available
to the public other than as a result of a disclosure by Bank or its representatives: (b) is or
becomes available to Bank on a non-confidential basis by Borrower or any officer, employee, agent
or



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representative of Borrower prior to its disclosure by Bank;
 or (c) is or becomes available
to Bank on a non-confidential basis from a source other than Borrower.




     IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the day and year first written above.



	 	 	 	 	 	 	 	 	 
	FALLBROOK TECHNOLOGIES INC.	 	WELLS FARGO BANK,	 	 
	 	 	 	 	     NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Nicole Nicks 	 	By:	 	/s/ Eric Houser	 	 
	 

	 	Nicole Nicks

	 	 	 	 

Eric Houser
	 	 
	Title:

	 	CFO	 	 	 	Senior Vice President	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 		 	 







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