Document:

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.

-10-

 

     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

-11-

 

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 

-12-

 

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

-13-

 

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	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 		 	 

-14-exv10w14

Exhibit
10.14

EMPLOYMENT AGREEMENT

     This
EMPLOYMENT AGREEMENT (“Agreement”), effective as of May 3, 2007, (“Effective Date”)
is entered into by and between Fallbrook Technologies Inc., a Delaware corporation
(the “Company”) and William Klehm, an individual resident of the State of California
(“Executive”).

     WHEREAS, Executive began his employment with the Company on May 3, 2004 and has continued an
uninterrupted tenure as President and Chief Executive Officer of the
Company;

     WHEREAS,
Executive’s Employment Agreement with the Company expired on May 2, 2007; and

     WHEREAS,
the parties desire to continue this employment relationship.

     NOW, THEREFORE, the Company and Executive hereby agree as follows:

     1. Position and Duties

          A. In
accordance with the terms and conditions of this agreement, Executive shall continue to
serve as President and Chief Executive Officer of the Company. In
such capacity, Executive shall
have the duties, responsibilities and authority consistent with such position. Executive shall
report directly and exclusively to the Company’s Board of Directors (the “Board”).

          B. Executive shall continue his service as an elected member of the Board and agrees to serve
in such capacity without additional compensation. The Company agrees to use its commercially
reasonable efforts to provide that Executive continues to be elected to the Board as long as he
remains in his position as President and Chief Executive Officer of the Company.

          C. Executive shall diligently, and to the best of his ability, perform all duties incident to
his position, and devote substantially all of his time, attention, and effort to the business and
affairs of the Company, and shall use his good and faithful efforts to promote the interests of the
Company. In addition, Executive agrees to comply with all applicable governmental laws, rules and
regulations and to abide by the Company’s policies and rules, including the rules and regulations
set forth in any Employee Handbook adopted by the Board, as such Employee Handbook may be amended
from time to time.

          D. Except
for the consulting arrangement described in a letter dated May 3, 2004, from
Executive to the Company’s Chairman. Executive shall not directly or indirectly render any services
of any kind or character for Executive’s own account or for any other person, firm or entity
without first obtaining the written consent of the Chairman of the
Board. Notwithstanding the
foregoing, Executive shall have the right to perform such incidental
services as are necessary in
connection with (i) his private passive investments, but only if Executive is not obligated or
required to and, in fact, does not devote any managerial efforts that interfere in a material
fashion with the services required to be performed by him hereunder; (ii) his charitable or
community activities; (iii) his participation in trade or professional organizations, but only if

 

 

such incidental services do not significantly interfere with the performance of Executive’s
services hereunder, or (iv) subject to the reasonable prior approval of the Board, his service on
the boards of directors of other companies.

          E. After the Effective Date, and during the term of this Agreement together with any period
(if any) in which Executive is receiving payments from the Company
pursuant to Section 9.C.
Executive shall not acquire, assume or participate in, directly or indirectly, any position,
investment or interest known by Executive to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise, or in any company, person or entity that is,
directly or indirectly, in competition with the business of the
Company or any of its Affiliates.
For purposes of this Agreement, “Affiliate” means, with
respect to an specific entity, any other
entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by
or is under common control with such specified entity. Ownership by Executive, as a passive
investment, of less than one percent (1%) of the outstanding shares of capital stock of any
corporation with one or more classes of its capital stock listed on a national securities exchange
or publicly traded on the Nasdaq Stock Market or in the over-the-counter market shall not
constitute a breach of this Section 1.E.

          F. Executive hereby represents that he is not a party to any agreement which would be a
material impediment to entering into this Agreement and that he is permitted to enter into this
Agreement and perform the obligations hereunder. Executive represents and warrants that he will not
use or disclose, in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other person has any
right, title or interest. Executive represents that his employment by the Company as contemplated
by this Agreement will not infringe or violate the rights of any other person or entity, Executive
represents and warrants to the Company that he has returned all property and confidential
information belonging to any prior employers, and that he will not bring onto the Company’s
premises any unpublished documents or property belonging to any former employer or other person to
whom he has an obligation of confidentiality.

     2. Salary. Beginning on the Effective Date, Executive shall be paid as compensation
for his services an annual salary at a rate of Four Hundred Thousand Dollars ($400,000) per year
(“Base Salary”), less all applicable withholdings and deductions, to be paid in accordance with the
Company’s standard payroll policy (but not less than semi-monthly).

     3. Bonus. Executive shall be eligible to receive an annual cash bonus, subject to the
sole discretion of the Board, upon such other date as determined by
the Board.

     4. Stock
Option/Stock Purchases

          A. Option Grant. As soon as practicable after the Effective Date, the Company
shall grant Executive an additional stock option (the
“Option”) to purchase up to 300,000 shares
(the “Option Shares”) of the Company’s common stock (“ Common Stock”). So long as your employment
relationship with the Company continues, the Option Shares shall vest in accordance with the
following schedule: one-third (1/3rd) of the total number of Option Shares shall vest and become
exercisable on the twelve (12) month anniversary of the vesting
commencement date (as defined in the
underlying option agreement, the terms of which shall

2

 

govern the
option), and one-twenty-forth (1/24th) of the remaining Option Shares shall vest and
become exercisable on the same day of each month thereafter. The exercise price of the Option Shares
will be $1.30 per share. On the date of grant, all or any part of the
Option Shares shall be
immediately exercisable, if Executive elects to do so, but the purchased shares shall be subject to
repurchase by the Company at the exercise price in the event that Executive’s employment terminates
before he vests in the Option Shares underlying such shares. The Option granted pursuant to this
Agreement shall be an incentive stock option to the maximum extent permitted under
United States tax laws.

          B. Exercise of Option. Except as provided herein, the Option Grant made pursuant to
Section 4.A above shall be subject to the terms of the
Company’s 2004 Stock Plan (the “Plan”) and
the Company’s standard form of stock option agreement, which must be executed as a condition of the
grant and exercise.

          C. Effect
of Change of Control. The provisions of the Plan or
other agreements
entered into by the Company and Executive relating to the potential acceleration of Options in the
event of certain events occurring after a Change of Control after the Effective Date, will be
applied to the Option Shares, so long as Executive’s employment with the Company has not been
terminated prior to such Change of Control.

     5. 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 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.

     6. Expenses. Executive shall be entitled to receive prompt reimbursement for all
reasonable and necessary employment-related expenses incurred by Executive after the Effective
Date. Such reimbursement is contingent upon Executive providing itemized accounts, receipts

3

 

and other documentation of expenses, in accordance with standard Company practice’s
applicable to other senior executives of the Company.

     7. Vacation. Executive will accrue (on a ratable basis) four (4) weeks of
paid vacation/sick leave per year, on the same terms as applicable to other senior executives
of the Company. Executive will be eligible to begin using any accrued
vacation/sick leave at any
time after the Effective Date.

     8. Other Employee Benefits. Executive shall receive medical insurance covering him
and his family on the same terms as available to other senior executives of the Company
(including the applicability of any co-pays and deductibles). Executive shall be eligible to
participate in all other employee benefit plans and insurance maintained by the Company that are
applicable to other senior management to the full extent provided for under those plans,
including dental, vision, short and long term disability and life insurance. Such benefits shall
continue uninterrupted, so long as the Executive remains employed by the Company The Company
reserves the right to cancel or change its benefits plans and programs it offers to its employees
at any time.

     9. Term of Employment/Termination Benefits.

          A. Basic
Rule. The Company agrees to continue Executive’s employment, and
Executive agrees to remain in employment with the Company, from the Effective Date until May 2,
2008; provided, however, Executive’s employment with the Company
shall be “at will,” which means
that either Executive or the Company may terminate Executive’s employment at any time, for any
reason, with Cause or Without Cause (both, as defined below), subject to the severance provisions
in Section 9.C below. This Agreement shall constitute the full and complete agreement between
Executive and the Company on the “at will” nature of Executive’s employment, which may only be
changed in an express written agreement signed by Executive and the Board. Any contrary
representations, which may have been made to Executive shall be superseded by this Agreement.

          B. Automatic
Renewal. This Agreement shall renew automatically each year unless
either party provides the other party with written notice of non-renewal at least ninety (90)
days prior to the end of the contract year. No action shall be necessary to effectuate the
renewal of this Agreement. All terms and conditions contained herein shall continue to bind the
parties during each consecutive term until the termination of the Executive’s employment.

          C. Termination. The Company may terminate Executive’s employment at any time
and for any reason (or no reason), and with Cause or Without Cause, by giving Executive notice in
writing. Executive may terminate his employment by giving the Company fourteen (14) days’ advance
notice in writing. Executive’s employment shall terminate automatically in the event of his
death, and may be terminated by the Company if Executive becomes permanently disabled or
incapacitated. Upon termination of Executive’s employment, Executive shall be paid his Base
Salary through his date of termination (the “Termination Date”) and for the value of all accrued
but unused vacation earned through the Termination Date. In addition, all unvested Option Shares
granted to Executive will be forfeited on the Termination

4

 

Date, and the expiration date by which all vested Option Shares must be exercised after the
Termination Date shall be determined in accordance with the terms of the Option.

          D.
Severance Payment. If Executive’s
employment is terminated for Cause or
Executive resigns without Good Reason, then, except as specifically stated in this Agreement, all
of the compensation and benefits to which he was entitled shall cease upon the Termination Date. If
the Company terminates Executive’s employment “Without Cause” or Executive resigns for “Good
Reason” prior to May 2, 2008 or a subsequent anniversary of this date resulting from an automatic
renewal as contemplated in Section 9.B, then (i) the Company shall pay Executive an amount equal to
six (6) months of his base salary then in effect, less all applicable withholdings and deductions,
and (ii) Executive shall be additionally vested in the number of Base Option Shares which would
have vested during the six months following his termination of employment. The benefits provided in
the preceding sentence shall be conditioned upon the execution by Executive of the Company’s
standard form of Separation Agreement and General Release (which will include the non-competition
covenant referred to in Section 1.E and a one-year non-solicitation clause). Such cash severance
payment shall be paid in six (6) equal payments over a six month period beginning on the
Termination Date. Executive shall not be required to mitigate damages or the amount of any
severance payment provided for by this Section 9.C and no future income earned by Executive from
employment or otherwise shall in any way reduce or offset the severance payments due to Executive
hereunder.

          E. Definitions.

               1. Good
Reason. For all purposes under this Agreement, “Good Reason” for
Executive’s resignation will exist if he resigns within sixty days of any of the following: (i) any
reduction in his Base Salary, other than a reduction in Base Salary in connection with general
cost-cutting objectives instituted by the Company which reduction is proportional when compared to
reductions of other employees of the Company; (ii) termination of Executive’s service as a member
of the Company’s Board (other than a termination as a result of Executive’s voluntary resignation
from the Board); (iii) a change in title or a change in his position with the Company or a
successor company which materially reduces his duties, authority, reporting, position or level of
responsibility: or(iv) any requirement that he relocate his place of employment by more than fifty
(50) miles from his then-current office, provided such reduction, change or relocation is effected
by the Company without his written consent. A resignation by Executive under any other
circumstances or for any other reasons will be a resignation “Without Good Reason.”

               2. Cause;
Without Cause. For all purposes under this Agreement, a termination
for “Cause” shall mean a good faith determination by the Board after consideration of all relevant
facts that Executive’s employment be terminated for any of the following reasons; (i) willful
misconduct which materially damages the Company; (ii) willful and material misappropriation of the
assets of the Company; or (iii) conviction of, or a plea of “guilty” or “no contest” to a felony
under the laws of the United States or any state thereof. A termination of Executive’s employment
in any other circumstances or for any other reasons will be a
termination “Without Cause.”

5

 

     10. Non-Solicitation and Non-Disclosure.

          A. Non-Solicitation. During the period commencing on the Effective Date 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.

          B. Non-Disclosure.
As a condition of employment, Executive will execute the Company’s
standard Employee Proprietary Information and Inventions Agreement.

     11. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, the Company, its successors and assigns, and Executive, the
personal representative of his estate and his heirs and legatees. This Agreement and all rights and
obligations of Executive hereunder are personal to Executive and may not be transferred or
assigned by Executive at any time. The Company may assign its rights under this Agreement to any
entity that assumes the Company’s obligations hereunder in connection with any sale or transfer of
all or a substantial portion of the Company’s assets to such entity.

     12. Notices.

          A. Any and all notices, demands or other communications required or desired to be given
hereunder by any party shall be in writing and shall be validly given or made to another party if
served either personally or, if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other communication shall be
served personally, service shall be conclusively deemed made at the time of such personal service.
If such notice, demand or other communication is given by mail, service shall be conclusively
deemed made at the time of the receipt by the party to whom such notice, demand or other
communication is sent. Any and all notices, demands or other communications shall be delivered to
the following address:

	 	 	 	 	 
	To the Company:

	 	Fallbrook Technologies Inc.	 	 
	 

	 	2018 Winterwarm Drive	 	 
	 

	 	Fallbrook, CA 92028	 	 
	 
	 	 	 	 
	To Executive:

	 	William Klehm	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 

          B. Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in the manner
aforesaid to the other party hereto.

     13. Waivers. No waiver of any term or provision of this Agreement shall be valid
unless such waiver is in writing signed by the party against whom enforcement of the waiver is
sought. In the case of the Company, such waiver shall be signed by at least one (1) member of

6

 

the Board
other than the President and CEO. The waiver of any term or provision of this
Agreement shall not apply to any subsequent breach of this Agreement.

     14. Governing Document. This Agreement and Executive’s Proprietary Information and
Inventions Agreement and any documents referenced herein or therein, including without limitation
any stock option agreement evidencing the Option, constitute the entire agreement and understanding
of the Company and Executive with respect to the terms and conditions of Executive’s employment
with the Company and the payment of severance benefits and supersede
all prior and contemporaneous
written or verbal agreements and understandings between Executive and the Company relating to such
subject matter. To the extent the provisions of this Agreement and the provisions of the
Proprietary Information and Inventions Agreement (which Executive will be required to sign on or
before the Effective Date) are inconsistent, the provisions of this Agreement shall govern the
relationship between the parties hereto.

     15. Governing Law. The provisions of this Agreement shall be construed and interpreted
under the laws of the State of California applicable to agreements executed and to be wholly
performed within the State of California. Subject to the provisions of Section 17. Executive
hereby consents to the personal jurisdiction of the state and federal courts located in San Diego
County, California for any lawsuit arising from or related to this Agreement.

     16. Severability. If any provision of this Agreement as applied to any party or to any
circumstance should be adjudged by a court of competent jurisdiction to be void or unenforceable
for any reason, the invalidity of that provision shall in no way affect (to the maximum extent
permitted by law) the application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this Agreement, or the
enforceability or invalidity of this Agreement as a whole.

     17. Arbitration. 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. This shall include, without limitation, disputes relating to this
Agreement, Executive’s employment by the Company or the termination thereof, the stock options
granted to Executive, claims for breach of contract or breach of the covenant of good faith and
fair dealing, and any claims of discrimination or other claims under any state or local law or
regulation now in existence or hereinafter enacted and as amended from time to time concerning in
any way the subject of Executive’s employment with the Company or its termination. The following
exceptions will be resolved as required by law 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 San Diego County, California, 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.

7

 

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.

     18. Indemnification. To the fullest extent permitted under California General
Corporation Law and the Company’s Articles of Incorporation or Bylaws, the Company shall indemnify
Executive against loss, liability, damages and other reasonable expenses incurred as a consequence
of his employment under this Agreement. Executive shall be entitled to indemnification (contractual
or otherwise) to the same extent as the Company’s other Board members and senior executives. Such
right of indemnification will not be deemed exclusive of any other rights to which Executive may be
entitled under the Company’s Articles of Incorporation or Bylaws. The indemnification provisions
for officers and directors under the Company’s Articles of Incorporation, Bylaws and any applicable
indemnification agreement between Executive and the Company will (to the maximum extent permitted
by law) be extended to Executive, during the period following Executive’s Termination of
Employment, with respect to any and all matters occurring or effected during Executive’s employment
hereunder.

     19. Reformation. Should any provision of this Agreement become or be deemed invalid,
illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its
coverage, then such provision shall be deemed amended to the extent necessary to conform to
applicable law so as to be valid and enforceable or, if such provision cannot be so amended without
materially, altering the intention of the parties, then such provision shall be stricken and the
remainder of this Agreement shall continue in full force and effect.

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

     21. Modification/Amendment. This Agreement may be modified or amended only by a
written agreement signed by a member of the Board (other than Executive) and Executive.

     22. Remedies. All rights and remedies provided pursuant to this Agreement or by law
shall be cumulative, and no such right or remedy shall be exclusive of any other. Subject to the
provisions of Section 17, a party may pursue any one or more rights or remedies hereunder or may
seek damages for specific performance in the event of another party’s breach hereunder or may
pursue any other remedy by law or equity, whether or not stated in
this Agreement.

     23. Drafting. This Agreement shall not be construed against any party by reason of the
drafting or preparation thereof.

8

 

     24. Counterparts. This Agreement may be executed in more than one counterpart,
each of which shall be deemed an original, but all of which together shall constitute but one and
the same instrument.

[Remainder of Page Intentionally Left Blank]

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     25. Acknowledgement. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD THE
OPPORTUNITY TO SEEK THE ADVICE OF HIS OWN INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE
NEGOTIATION AND EXECUTION OF THIS AGREEMENT. EXECUTIVE ALSO ACKNOWLEDGES THAT HE HAS READ
AND UNDERSTANDS ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.

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

	 	 	 	 	 	 	 
	 	 	/s/ William Klehm	 	 
	 	 	 	 	 
	 	 	William Klehm	 	 
	 
	 	 	 	 	 	 
	 	 	FALLBROOK TECHNOLOGIES INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Gary Weiss	 	 
	 	 	 	 	 
	 

	 	By:
	 	Gary Weiss	 	 
	 

	 	 	 	Chairman of the Board of Directors	 	 

10

 

FALLBROOK TECHNOLOGIES INC.

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT OF WILLIAM KLEHM

     This Amendment No. 1 to the Employment Agreement between the Company and William Klehm
(the “Amendment”) is being made as of January 16, 2008, by and between Fallbrook Technologies
Inc., a Delaware corporation (the “Company”) and William Klehm (“Executive”). Capitalized
terms used herein which are not defined herein shall have the definitions ascribed to them in
the Agreement (defined below).

RECITALS

	     WHEREAS, the Company and Executive have previously entered into an Employment Agreement
effective May 3, 2007 (the “Agreement”);

	     WHEREAS, the Board of Directors recently approved the execution of Executive Employment
Agreements with senior executives of the Company other than Executive, and such employment
agreements contain certain terms and provisions which the Board has approved extending to
Executive;

	     WHEREAS, Section 21 of the Agreement provides that the Agreement may be amended in a written
agreement signed by Executive and a member of the Board of Directors of the Company (other than
Executive).

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing and the promises and covenants contained
herein and in the Agreement, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

     1. Addendum to the Agreement. The Agreement is hereby amended as follows:

     Section 9 of the Agreement shall be amended to read as follows:

     9. Term of Employment/Termination Benefits.

          A. Basic Rule. The Company agrees to continue Executive’s employment, and
Executive agrees to remain in employment with the Company, from the Effective Date until May 2,
2008; provided, however, Executive’s employment with the Company shall be “at will,” which means
that either Executive or the Company may terminate Executive’s employment at any time, for any
reason, with Cause or without Cause (both, as defined below), subject to the severance provisions
in Section 9.C below. This Agreement shall constitute the full and complete agreement between
Executive and the Company on the “at will” nature of Executive’s employment, which may only be
changed in an express written agreement signed by Executive and the Company. Any contrary
representations, which may have been made to Executive shall be superseded by this Agreement.

 

 

          B. Automatic Renewal. This Agreement shall renew automatically each year unless either
party provides the other party with written notice of non-renewal at least ninety (90) days prior
to the end of the contract year. No action shall be necessary to effectuate the renewal of this
Agreement. All terms and conditions contained herein shall continue to bind the parties during each
consecutive term until the termination of the Executive’s employment.

          C. Termination.

               (a) Termination With Cause.

                    (1) During the period of employment, the Executive’s employment with the Company may be
terminated by the Company at any time for Cause.

                    (2) Upon termination for Cause, Executive shall be entitled only to accrued and unpaid Base
Salary and the benefits provided in Section 8 of this Agreement, and payment for any vacation or
leave accrued, through the date of termination of employment.

               (b) Termination Without Cause.

                    (1) During the period of employment, the Executive’s employment with the Company may be
terminated by the Company at any time without Cause.

                    (2) If the Executive’s employment is terminated without Cause during the initial term or any
renewal term of this Agreement, then the Executive will receive (i) severance in an amount equal to
six (6) months of the then-current annual Base Salary exclusive of bonus or incentive payments (the
“Severance Period”), 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 and the benefits provided in Section 8 of this
Agreement for the Severance Period (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.

               (c) By Executive (Resignation).

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

                    (2) In the event Executive resigns his employment at any time during the period of
employment, Executive shall be entitled to accrued and unpaid Base Salary and the benefits
provided in Section 8 of this Agreement, and payment for any vacation or leave accrued, through
the date of termination of employment.

               (d) Termination of Employment by Reason of Death. If Executive shall die during the
period of employment, this Agreement shall terminate automatically as of the date of death, and
Company shall pay to Executive’s legal representative the compensation and

2

 

benefits under Section 9.C.(c)(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 9.C.(b)(2).

               (e) 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 his 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 his estate or legal representatives, as the case may be) shall be entitled to receive any and
all compensation and benefits under Section 9.C.(c)(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 9.C.(b)(2).

               (f) 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 events listed in Section
9.D.(1).

                    (2) In the event Executive resigns his employment at any time for “Good Reason” during the
period of employment, Executive shall be entitled to the compensation and benefits set forth in
Section 9.C.(b)(2) of this Agreement.

          D. Definitions.

               (1) Good Reason. For all purposes under this Agreement, “Good Reason” for
Executive’s resignation will exist if he resigns within sixty days of any of the following: (i) any
reduction in his Base Salary, other than a reduction in Base Salary in connection with general
cost-cutting objectives instituted by the Company which reduction is proportional when compared to
reductions of other employees of the Company; (ii) termination of Executive’s service as a member
of the Company’s Board (other than a termination as a result of Executive’s voluntary resignation
from the Board); (iii) a change in title or a change in his position with the Company or a
successor company which materially reduces his duties,

3

 

authority, reporting, position or level of responsibility; or (iv) any requirement that he
relocate his place of employment by more than fifty (50) miles from his then-current office,
provided such reduction, change or relocation is effected by the Company without his written
consent. A resignation by Executive under any other circumstances or for any other reasons will be
a resignation “Without Good Reason.”

               (2) Cause; Without Cause. For all purposes under this Agreement, a termination
for “Cause” shall mean a good faith determination by the Board after consideration of all relevant
facts that Executive’s employment be terminated for any of the following reasons; (i) willful
misconduct which materially damages the Company; (ii) willful and material misappropriation of the
assets of the Company; or (iii) conviction of, or a plea of “guilty” or “no contest” to a felony
under the laws of the United States or any state thereof. A termination of Executive’s employment
in any other circumstances or for any other reasons will be a termination “Without Cause.”

          E. Separation Agreement/Release Condition to Severance Benefits.

     Other than the payment of accrued vacation or leave, the benefits provided in the preceding
sections 2(b), 2(d), 2(e) and 2(f) 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 10.A herein).

     2. Effect of Amendment. Except as expressly modified by this Amendment, the Agreement
shall remain unmodified and in full force and effect.

     3. Entire Agreement. This Amendment together with the Agreement and all
documents referred to herein and therein constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.

     4. Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Amendment shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Amendment, express or implied, is intended
to confer upon any party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this Amendment, except as
expressly provided in this Amendment.

     5. Governing Law. This Amendment shall be governed by and construed under the laws of
the State of California as applied to agreements among California residents entered into and to be
performed entirely within California.

     6. Counterparts. This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same instrument.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first
above written.

	 	 	 	 	 
	COMPANY	 	 
	 
	 	 	 	 
	FALLBROOK TECHNOLOGIES INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Gary L. Weiss
 

	 	 
	 

	 	Gary L. Weiss, Chairman of the Board	 	 
	 
	 	 	 	 
	EXECUTIVE	 	 
	 
	 	 	 	 
	/s/ William Klehm	 	 
	 	 	 
	William Klehm

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