exv10w17





Exhibit
10.17



EMPLOYMENT AGREEMENT




     This
EMPLOYMENT AGREEMENT (“Agreement”), is made and entered as of April 15, 2008, by and
between Fallbrook Technologies Inc., a Delaware corporation (the
“Company”), and Robert Smithson, a
resident of the State of Texas (the “Executive”).



RECITALS:




     WHEREAS, the Company is engaged in the business of technology research and development (the
“Business”); and



     WHEREAS, the Company desires to retain the services of the Executive; and



     WHEREAS, the Company and the Executive desire to enter into this Agreement to set forth the
terms and conditions of the employment relationship between the Company and the Executive:



     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged,
the parties agree as follows:



     1. Nature of Employment.



          (a) The Company hereby engages the Executive as a full-time employee to serve in the
capacity of Vice-President of Product Development for the Initial Term and any Renewal Term
(collectively the “Employment Period”), and the Executive accepts such employment, on the
terms and conditions set forth in this Agreement. Throughout the Employment Period, subject to
the direction of the Company and the Company’s Board of Directors (the “Board”), the Executive
shall perform and discharge well and faithfully the duties that may be assigned to her from time to
time by the Company and the Board in connection with the conduct of its Business. If the Executive
is elected or appointed a director of the Company or any parent or subsidiary thereof during the
Employment Period, the Executive will serve in such capacity without further compensation, unless
otherwise specified.




          (b) The Executive will not (engage in any business activities that are directly or indirectly
competitive with any business conducted by the Company or any of its subsidiaries or affiliates.
Throughout the Employment Period, the Executive will: (i) devote his/her full employment energies,
interests, abilities and time to the performance of his/her duties and shall not render to others
any service of any kind for compensation, unless the Executive receives written consent of the
Board; (ii) observe and carry out such reasonable rules, regulations, policies, directions and
restrictions as may be established from time to time by the Company,
including but not limited to,
the standard policies and procedures of the Company as in effect from time to time; and (iii) do
such traveling as may reasonably be required in connection with the performance of such duties and
responsibilities.




 









 





          (c) Notwithstanding the foregoing provisions, the Executive shall be entitled to serve
in various leadership capacities in civic, charitable and professional organizations or managing
the Executive’s personal and family passive investments; provided in each case, and in the
aggregate, that such activities do not materially conflict or interfere with the performance of the
Executive’s duties hereunder. The Executive recognizes that the Executive’s primary and
paramount responsibility is to the Company.




          (d) The Executive acknowledges that Sections 5, 6 and 7 of this Agreement contain restrictive
covenants and non-disclosure of proprietary information provisions, and the Executive agrees to
comply with these provisions. The Executive understands that entering into and complying with
these provisions is a condition to the Executive’s continued employment with the Company and that
failure to comply with the terms and conditions of these provisions may result in termination “for
cause” under this Agreement.




     2. Term and Termination of Employment.



          (a) Term: Subject to prior termination in accordance with this Section 2 below, the term of
this Agreement and the Executive’s employment hereunder shall be
for a term of two (2) years
commencing on the date of this Agreement (“Initial Term”);
and following such Term, this Agreement
shall thereafter automatically renew for an additional term of one (1) year (“Renewal Term”),
unless either party gives written notice of termination to the other party not less than thirty
(30) days prior to the end of any term (in which event this Agreement shall terminate effective as
of the close of such Term or Renewal Term). Each twelve-month period beginning on the date hereof
or any anniversary thereof is referred to in this Agreement as a “Year”.




          (b)
Termination With Cause.




               (1) During
the Employment Period, the Executive’s employment with the Company may be
terminated by the Company at any time for cause.



               (2) As
used herein, the term “for cause” shall mean and be limited
to; (i) any willful and
material breach of this Agreement by the Executive; (ii) any willful or gross neglect by the
Executive of his/her duties and responsibilities hereunder; (iii) any fraud, criminal misconduct,
breach of fiduciary duty, dishonesty, or gross and willful misconduct by the Executive in
connection with the performance of his/her duties and
responsibilities hereunder; (iv) the
Executive being legally intoxicated or under the influence of illegal or illegally obtained drugs
during business hours or while on call, or being habitually drunk or
addicted to drugs (provided
that this shall not restrict the Executive from taking physician-prescribed medication in
accordance with the applicable prescription); (v) conviction of, or a plea of “guilty” or “no
contest” to a felony or crime of moral turpitude under the laws
of the United States or any state
thereof; (vi) any action by the Executive that may materially impair or materially damage the
reputation of the Company; (vii) insubordinate disregard of any lawful direction of material
consequence given to the Executive by the Company; or
(viii) repeated failure or refusal to comply
with the Company’s policies and procedures; provided that if the Executive is to be terminated
pursuant to subsections (i), (ii), (vi), (vii), or (viii), the Executive will receive notice and
thirty (30) days to cure.



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               (3) Upon termination for cause, Executive shall be entitled only to accrued and unpaid
Salary and Fringe Benefits, as defined in Section 3 of this Agreement, and payment for any vacation
or leave accrued, through the date of termination of employment. In addition, any shares of
Common Stock subject to unexercised options, whether the options are vested or unvested, shall not
be delivered to Executive and all such options and shares shall be void and have no further force
or effect as to the Executive.



          (c) Termination Without Cause.




               (1) During the Employment Period, the Executive’s employment with the Company may be
terminated at any time without cause.



               (2) In the event that during the Employment Period, the Executive’s employment is terminated
without cause pursuant to Section 2(c)(1) above, and subject to the execution and effectiveness of
a general release of all claims in favor the Company, if the Executive is terminated without cause
during the Initial Term or any Renewal Term of the Agreement, then the Executive will receive (i)
severance pay in an amount equal to six (6) months of the then-current annual base salary exclusive
of bonus or incentive payments, within sixty (60) days of the date of such termination (or such
later date as may be necessary to avoid any adverse tax consequences under Section 409(A) of the
Internal Revenue Code); (ii) continuation of health benefits for a period of six (6) months
beyond the date of such termination (medical, dental, vision, life insurance, and long term
disability, to the extent then provided by the Company and permitted by the various respective
policies and by law); (iii) immediate accelerated vesting of any existing options which have been
granted but are not fully vested as of the date of termination; and (iv) payment for any vacation
or leave accrued through the date of termination.



          (d) By Executive (Resignation).




               (1) At any time during the Employment Period. Executive may resign employment by giving
thirty (30) days prior notice of termination to Company.



               (2) In the event Executive resigns his/her employment at any time during the Employment
Period, Executive shall be entitled to accrued and unpaid Salary and Fringe Benefits, as defined
in Section 3 of this Agreement, and payment for any vacation or leave accrued, through the date of
termination of employment.



          (e) Termination of Employment by Reason of Death.




          If Executive shall die during the Employment Period, this Agreement shall terminate
automatically as of the date of death, and Company shall pay to Executive’s legal representative
the compensation and benefits under Section 2(d)(2), which would otherwise be payable to Executive
up to the end of the month in which death occurs, and, to the extent applicable, any insurance or
insurance proceeds, vested death benefits, compensation for accrued vacation or leave time. Should
the Executive die during the execution of, or during travel in connection with, his or her
duties, then the Company shall pay to the Executive’s legal representative the compensation and
benefits under Section 2(c)(2).




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          (f) Termination of Employment by Reason of Disability.




               (1) As used herein, the term “permanent disability” shall mean, and be limited to, any
physical or mental illness, disability or impairment that prevents or may reasonably be expected
to prevent the Executive from continuing for the performance of her normal duties and
responsibilities hereunder for a period in excess of four consecutive months. For purposes of
determining whether a “permanent disability” has occurred under this Agreement, the
written determination thereof by two (2) qualified practicing physicians selected and paid for by
the Company (and reasonably acceptable to the Executive) shall be conclusive, provided however that
if the disability is the result of an acute episode such determination shall be made in a
reasonable period of time, which in any case shall be less than sixty (60) days.



               (2) Upon any termination of this Agreement as hereinabove provided, the Company’s obligations
under this Agreement to pay further compensation shall cease forthwith, except that the Executive
(or her estate or legal representatives, as the case may be) shall be entitled to receive any and
all compensation and benefits under Section 2(d)(2), which would otherwise be payable to Executive
as of the effective date of termination. Should the Executive become disabled during the
execution of, or during travel in connection with, his or her duties, then the Executive (or his or
her estate or legal representatives, as the case may be) shall be entitled to the compensation and
benefits under 

Section 2(c)(2).



          (g) Termination by Executive for Good Reason.




               (1) The Executive may terminate this Agreement for “Good Reason” upon sixty (60) days’
written notice by the Executive to the Company of the occurrence of any of the following events,
in the event that the Company (A) reduces the Executive’s base salary, or (B) causes the
Executive, without Executive’s consent, to relocate to a facility or location more than fifty (50)
miles from his/her then current location; provided that in any of the above-circumstances, the
Company shall not have cured any such matter within thirty (30) days after written notice with
Executive’s intention to terminate for Good Reason has been given by the Executive to the Company.



               (2) In the event Executive resigns his/her employment at any time for “Good Reason” during
the Employment Period, Executive shall be entitled to the compensation and benefits set forth in
Section 2(c)(2) of this Agreement.



          (h) Golden Parachute Excise Tax.




          In the event that the benefits provided for in this Agreement or otherwise payable to
Executive (including, without limitation, any accelerated vesting of stock options or removal of
repurchase restrictions on restricted stock ) (the “Total Payments”) would constitute “parachute
payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
“Code”) and, but for this Section 5, would be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then the Total Payments will be delivered either (i) in full, or (ii)
to such lesser extent as would result in no portion of the benefits and payments being subject to
the Excise Tax, whichever results in the receipt by Executive of the larger amount of economic
value (on an after-tax basis, including application of the Excise Tax). All determinations
regarding Sections 280G and 4999 of the Code will be made in writing




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by the Company’s independent auditors (the “Accountants”). In the event a reduction in benefits
or payments is required under this Section 5, Executive will have the choice of which benefits or
payments to reduce. For purposes of making the calculations required by this Section 5, the
Accountants may make reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good-faith interpretations concerning the application of Sections 280G and
4999 of the Code. The Company and Executive will furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a determination under this
Section 5. The Company will pay all costs that the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 5. To the extent then applicable,
the Company agrees to use its reasonable commercial efforts to solicit shareholder approval
pursuant to Section 2800(b)(5) of the Code in order to preclude the application of Section 280G.




          (i) Separation
Agreement/Release Condition to Severance Benefits.




          Other than the payment of accrued vacation or leave, the benefits provided in the preceding
sections 2(c), 2(e), 2(f) and 2(g) shall be conditioned upon the execution by Executive of the
Company’s then-standard form of Separation Agreement and General Release (which will include the
one-year non-solicitation non-interference provisions in Section 7 herein).




     3. Compensation and Benefits.



          (a) Salary. Executive shall receive an annual salary in the amount of $137,150,
less statutory and customary deductions, which shall be payable in periodic
installments in accordance with the standard payroll practices of the Company in effect from time
to time unless and until the Company in its sole discretion determines that any increase to such
salary is appropriate.




          (b) Bonus. In addition to the Salary, the Executive may be entitled to receive a
bonus and/or other incentive compensation in an amount to be determined by the Board in its sole
discretion; provide, however, that the failure to award any such bonus and/or other incentive
compensation shall not give rise to any claim. If a bonus is to be paid, Executive must be employed
by the Company at the time that the bonus is paid to receive the bonus.




          (c) Fringe Benefits. The Company shall also make available to the
Executive, throughout the period of her employment hereunder, such benefits and perquisites as are
generally provided by the Company to its executives at the Executive’s level of responsibility and
comparable to the benefits the Executive had previously, provided, however, that nothing herein
contained shall be deemed to require the Company to adopt or maintain any particular plan or
policy.




          (d) Expenses. The Company shall reimburse the Executive, upon presentment by the
Executive to the Company of appropriate receipts and vouchers therefor, for any reasonable
out-of-pocket business expenses incurred by the Executive in connection with the performance of her
duties and responsibilities hereunder, in accordance with the Company’s standard policies and
procedures in effect from time to time.




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          (e) Equity. As an additional incentive, Executive may be granted stock options in the
Company. Except as set forth in Sections 2(b)(3) and 2(c)(2) of this Agreement, any such grants
will be subject to the terms and conditions of the Company’s Stock Option Plan and underlying
option agreements governing such options.


     4. Vacation, Personal Days and Sick Days.


          The Executive will be entitled to holidays, personal days and sick days in accordance
with the Company’s standard policies and procedures in effect from time to time. The Executive
will also be entitled to four (4) weeks of vacation.



     5. Nondisclosure of Confidential and Proprietary Information. 


          (a) The Executive agrees to comply with each of the terms and obligations contained in
the Company’s Employee Handbook, as amended, and the Employee Proprietary Information Agreement,
especially pertaining to the treatment of confidential and proprietary information.



     6. Assignment Of Inventions and Intellectual Property.


          The Executive agrees to comply with each of the terms and obligations contained in the
Company’s Employee Handbook, as amended, and the Employee Proprietary Information Agreement,
especially pertaining to the assignment of inventions and works of authorship.



     7. Non-Solicitation/Non-Interference.


          (a) During this Agreement and continuing until the first anniversary of the date when
Executive’s employment is terminated for any reason, Executive shall not directly or indirectly,
personally or through others, solicit or attempt to solicit (on Executive’s own behalf or on behalf
of any other person or entity) the employment or retention of any employee or consultant of the
Company or any of the Company’s affiliates. During this Agreement and thereafter, Executive shall
also not use any Company trade secrets to solicit business from, or enter into a business
relationship or transaction with, any person or entity that has or has had a business relationship
with the Company (including, but not limited to, customers) or disrupt, or attempt to disrupt, any
relationship, contractual or otherwise, between the Company and any such person or entity.



          (b) The Executive expressly authorizes the enforcement of the covenants provided for in this
Section 7 by (A) the Company and its subsidiaries, (B) the Company’s permitted assigns, and (C) any
successors to the Company’s business. To the extent that the covenant provided for in this Section
7 may later be deemed by a court to be too broad to be enforced with respect to its duration or
with respect to any particular activity or geographic area, the court making such determination
shall have the power to reduce the duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The provision as modified shall then be
enforced.



          (c) The Executive agrees that any breach of this Section 7 shall cause the Company substantial
and irrevocable damage and therefore, in the event of any such breach, the







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Executive agrees that the Executive shall not be entitled to any further payments due
under the terms of this Agreement. Furthermore, in addition to any
other remedies that may be
available, the Company shall have the right to seek specific performance and injunctive relief as
set forth in Section 9, without the need to post a bond or other
security.




          (d) The Executive
further acknowledges that the covenants contained in this
Section 7 are a material part of this
Agreement and if this Agreement is terminated for any reason, the Executive will be able to earn a
livelihood without violating these provisions.




     8. Return
of Company Property.



          When
the Executive leaves the employ of the Company, the Executive will deliver to the
Company (and will not keep in her possession, recreate or deliver to anyone else) any and all
devices, records, recordings data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, computer
materials, equipment, other
documents or property, together with all copies thereof (in whatever medium recorded), belonging
to the Company, its successors or assigns. The Executive further agrees that any property
situated on the Company’s premises and owned by the Company, including computer disks and other
digital, analog or hard copy storage media, filing cabinets or other work areas, is subject to
inspection by Company personnel at any time with or without notice.




     9. Legal and Equitable Remedies.



          Because
the Executive’s services are personal and unique and because the Executive
may have access to and become acquainted with the Proprietary Information of the Company, and
because the parties agree that irrepressible harm would result in the event of a breach of
Sections 5, 6, 7 and 8 by the Executive, the Company may not
have an adequate remedy at law, the
Company will have the right to enforce Sections 5, 6, 7 and 8 and any of their provisions by
injunction, restraining order, specific performance or other injunction relief, without bond, and
without prejudice to any other rights and remedies that the Company may have for a breach of this
Agreement. The Company’s remedies under this Section 9 are not exclusive and shall not prejudice
or prohibit any other rights or remedies under this Agreement or
otherwise.




     10. No Conflicting Obligations.



          The Executive represents that Executive’s compliance with the terms of this Agreement and
Executive’s performance as an executive of the Company does not and shall not breach any agreement
to keep in confidence information acquired by the Executive in confidence or in trust prior to
employment by the Company. The Executive has not entered into, and agrees not to enter into, any
agreement, either written or oral, in conflict herewith.




     11. Notification of New Employer.



          In the event that the Executive leaves the employ of the Company, the Executive hereby
agrees to notify the Executive’s new employer of those obligations that are continuing under this
Agreement after termination.




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     12. Notices.


          Any notice of communication permitted or required by this Agreement shall be in
writing and delivered personally or via overnight courier or certified mail, return receipt
requested:



	 	 	 	 	 
	 
	 	If to the Company:
	 	Fallbrook Technologies Inc.
	 
	 	 	 	Attn: Chief Executive Officer 
	 
	 	 	 	9444 Waples Street, Suite 410
	 
	 	 	 	San Diego, CA 92121
	 
	 	 	 	 
	 
	 	If to the Executive:
	 	 Robert Smithson
	 
	 	 	 	2408 Powderham Ln 
	 
	 	 	 	Cedar Park, TX 78613





     13. General.


          (a) No waiver by the Company of any breach of this Agreement will be a waiver of any
preceding or subsequent breach. No waiver by the Company of any right under this Agreement will be
construed as a waiver of any other right. The Company will not be required to give notice to
enforce strict adherence to all terms of this Agreement.



          (b) Except as provided for under Sections 2(e) and 2(f) of this Agreement, neither this
Agreement, nor any of the Executive’s rights, powers, duties, or
obligations hereunder, may be
assigned by the Executive. This Agreement shall be binding upon and inure to the benefit of
Executive and Executive’s heirs and legal representatives and the Company and its successors.
Successors of the Company shall include, without limitation, any company or companies acquiring,
directly or indirectly, all or substantially all of the assets of the Company, whether by merger,
consolidation, purchase, lease or otherwise, and successor shall thereafter be deemed “the
Company” for the purpose hereof.



          (c) The captions and Section headings used in this Agreement are for convenience of reference
only, and will not affect the construction or interpretation of this Agreement or any of the
provisions hereof.



          (d) The validity and construction of this Agreement or any of its provisions will be governed
by and constructed in accordance with the laws of the State of Texas without regard to its
conflicts of law. Each of the parties hereto submits to the exclusive jurisdiction of the United
States District Court for the Western District of Texas area, or if such court lacks subject
matter jurisdiction, to the jurisdiction of the courts of the State of Texas, Travis County. Each
of the parties hereto specifically waives any objection that it may otherwise have to the
jurisdiction or venue of any such Courts or that such Courts are an inconvenient forum and
acknowledges that service of process may be made by mailing a copy thereof in accordance with the
provisions of Section 12. However, the parties agree that, with the exception of the subjects
listed below, any and all disputes that they have with one another which arise out of Executive’s
employment or under the terms of this Agreement shall be resolved through final and binding
arbitration, as specified herein. The following exceptions will be resolved as required by law



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then in effect: (a) claims for benefits under the workers’ compensation, unemployment
insurance and state disability insurance laws; (b) claims concerning the validity, infringement
or enforceability of any trade secret, patent right, copyright trademark, or any other
intellectual or confidential property held or sought by the Company; and (c) claims of employment
discrimination or harassment brought under federal statutes. Binding arbitration will be
conducted in Travis County, Texas, before one arbitrator with expertise in the subject area of
the dispute. The arbitration shall be administered by JAMS pursuant to its Comprehensive
Arbitration Rules and Procedures. Judgment on the award may be entered in any court having
jurisdiction. The arbitrator shall be selected by the parties” mutual agreement within ten (10)
days following either party’s demand for arbitration. If the parties cannot timely mutually agree upon an arbitrator, each party shall select one arbitrator, and the two selected arbitrators
shall promptly select a third arbitrator who shall arbitrate the arbitration. This provision shall
not preclude the parties from seeking provisional remedies in aid of arbitration from a court of
appropriate jurisdiction. Each party shall bear its own costs and expenses of participating in the
arbitration, and each party shall bear one-half (1/2) of the fees and expenses of the arbitrator;
provided, however, that the arbitrator will have authority to award attorneys’ fees. Executive
understands and agrees that the arbitration shall be instead of any civil litigation and that the
arbitrator’s decision shall be final and binding to the fullest extent permitted by law and
enforceable by any court having jurisdiction thereof. The arbitrator will have no authority to add
to or to modify any provision of this Agreement. Nothing in this Section 13(d) will preclude the
Company from obtaining injunctive relief as set forth in Section 9 above.




          (e) This Agreement may be executed in counterparts, each of which will be deemed to be an
original hereof, but all of which together will constitute one and the same instrument.




          (f) This Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and supersedes all prior
discussions, agreements and understandings of every kind and nature between them as to such
subject matter.




          (g) This Agreement is intended for the sole and exclusive benefit of the parties hereto and
their respective heirs, executors, administrators, personal representatives, successors and
permitted assigns, and no other person or entity will have any right to rely on this Agreement or
to claim or derive any benefit herefrom absent the express written consent of the party to be
charged with such reliance or benefit.




          (h) If any provision of this Agreement is held invalid or unenforceable, either in its
entirety or by virtue of its scope or application to given circumstances, such provision will
thereupon be deemed modified only to the extent necessary to render same valid, or not applicable
to given circumstances, or excised from this Agreement, as the situation may require; and this
Agreement will be construed and enforced as if such provision had been included herein as so
modified in scope or application, or had not been included herein, as the case may be.




          (i) The provisions of this Agreement will survive the termination of the Employee’s employment
and the assignment of this Agreement by the Company to any successor in interest or other
assignee.




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          (j) All payments made under this Agreement shall be subject to reduction to reflect
taxes or other charges required to be withheld by law.




          (k) This Agreement may be modified or amended only by a written agreement signed by an
officer specifically authorized to do so by a resolution of the Company’s Board, and Executive.




          (l) This Agreement shall not be construed against any party by reason of the drafting
or preparation thereof.




          The Executive has read this Agreement carefully and fully understands its terms.




          The parties have executed and delivered this Agreement on the date first written above.




	 	 	 	 	 	 	 
	COMPANY:

	 	 	 	Fallbrook Technologies Inc.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William G. Klehm, III
 

         (Signature)
	 	 
	 

	 	 	 	Printed Name: William G. Klehm, III	 	 
	 

	 	 	 	Title: CEO	 	 
	 
	 	 	 	 	 	 
	EXECUTIVE:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Robert Smithson	 	 
	 	 	 	 	 
	 

	 	 	 	         (Signature)	 	 
	 

	 	 	 	Printed Name: Robert Smithson	 	 







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