Document:

exv10w3

EXHIBIT 10.3

ENGINEERING SERVICES AGREEMENT

     THIS ENGINEERING SERVICES AGREEMENT (this “Agreement”) is made and entered into, as of
June 19, 2009 (the “Effective Date”), by and between FALLBROOK TECHNOLOGIES INC., a Delaware
corporation (“Fallbrook”), having a place of business at 9444 Waples St., Suite 410, San Diego,
California 92121 and ***

***                          (collectively the “Parties”).

1. Background. The Parties have entered into a Non Disclosure Agreement on September 5,
2008 (the “NDA”) pursuant to which the Parties have discussed application of Fallbrook’s
NuVinci® technology to various applications. In further pursuit of determining whether
a further business relationship can be reached, the Parties desire that Fallbrook perform certain
engineering services as set forth in this Agreement. As part of the program for these engineering
services, the Parties desire to establish an option to certain rights in Fallbrook’s NuVinci
continuously variable planetary drive (“CVP”) technology.

2. Services. Fallbrook shall use its commercially reasonable efforts to perform the
services specified on Exhibit A to this Agreement (the “Services”) in a timely manner.

3. Compensation. *** shall pay Fallbrook each of the milestone fees when payable as
described on Exhibit A. For milestone payments that require action or information from ***
that are delayed due to the failure of *** to timely provide such action or information, the
associated milestone payment shall become due upon the associated estimated completion date for the
subject milestone payment regardless of whether the milestone is actually completed by that date.
Payments are net 60 upon delivery of an invoice from Fallbrook.

3.1 Costs. Except as identified on Exhibit A or otherwise agreed to by the Parties
Fallbrook shall bear its own costs in providing the Services. All amounts paid under this
Section 3 shall be non-refundable.

4. Independent Contractor Relationship. Fallbrook’s relationship with *** is that of
an independent contractor, and nothing in this Agreement is intended to, or shall be construed to,
create a partnership, agency, joint venture, employment or similar relationship. Neither party is
authorized to make any representation, contract or commitment on behalf of the other party unless
specifically requested or authorized in writing to do so by the other party. No part of
Fallbrook’s compensation shall be subject to withholding by *** for the payment of any social
security, federal, state or any other employee payroll taxes.

5. Ownership. Other than for the Developments (as defined below), *** shall own all
inventions, discoveries, enhancements, improvements, technology, data or information relating to
systems or components resulting from the Services. Fallbrook hereby sells, assigns, and transfers
to *** all of Fallbrook’s right, title and interest thereto. Except for the Actuator as
described below, Fallbrook shall solely own all Developments that are made or conceived by
Fallbrook or *** under this Agreement, together with all patent and other intellectual property
rights thereto. *** hereby sells, assigns and transfers to Fallbrook all of *** right,
title and interest to such Developments. For Developments to the Actuator (defined below) of the
NuVinci Technology (defined below) *** shall, by providing input that constitutes inventive
input for purposes of patenting, earn joint ownership of any patents resulting

 

			
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ENGINEERING SERVICES AGREEMENT

directly from the Services that claim as inventions methods or apparatuses that constitute improved
actuators for continuously variable transmissions.

5.1 Definitions.

(a) “Developments” shall mean all inventions, discoveries, enhancements, improvements, technology,
data or information (whether or not patentable) of or to the NuVinci Technology developed under
this Agreement.

(b) “NuVinci Technology” shall mean the components, assemblies, subassemblies and associated
methods of manufacture and use pertaining directly to Fallbrook’s patented NuVinci continuously
variable transmission (CVT) including: 1) the structure housing the CVT; 2) the components
supporting power flow into and out of the CVT (but excluding any upstream or downstream gearing
that is not integral with the CVT in its housing); 3) the lubrication system components integral
with or inside the CVT housing; 4) the CVT control mechanism integral with or directly coupled to
the CVT (including the actuator that provides motive shift force to the CVT internal shifting
components (the “Actuator”). NuVinci Technology does not include generally available components or
parts that may be implemented under this Agreement to the extent such components or parts are not
specialized or modified for use with the CVT under this Agreement.

6. Confidentiality.

6.1 Confidential Information. During the term of this Agreement, and for a period of five
(5) years following the expiration or earlier termination hereof, each party shall maintain in
confidence all information of the other party disclosed by the other party (the “Discloser”) and
identified as, acknowledged to be, or can reasonably be inferred from the subject matter of the
disclosure to be, confidential (the “Confidential Information”), and shall not use, disclose or
grant the use of the Confidential Information except on a need-to-know basis to those directors,
officers or employees, to the extent such disclosure is reasonably necessary in connection with
such party’s activities. To the extent that disclosure is authorized by this Agreement, each party
hereto shall obtain, prior to disclosure, agreement of any person receiving the Confidential
Information to hold in confidence and not make use of the Confidential Information for any purpose
other than those permitted by this Agreement or the NDA; provided, however, that the Parties shall
maintain in strict confidence any Confidential Information of the Discloser that the Discloser
maintains as a trade secret.

6.2 Permitted Disclosures. The confidentiality obligations contained in Section 6.1 above
shall not apply to the extent that (a) any receiving party (the “Recipient”) is required to
disclose information by law, order or regulation of a governmental agency or a court of competent
jurisdiction, provided that the Recipient shall provide written notice thereof to the Discloser and
sufficient opportunity to object to any such disclosure or to request confidential treatment
thereof; or (b) the Recipient can demonstrate that (i) the disclosed information was public
knowledge at the time of such disclosure to the Recipient, or thereafter became public knowledge,
other than as a result of actions of the Recipient in violation hereof; (ii) the disclosed
information was rightfully known by the Recipient (as shown by its written records) prior to the
date of disclosure to the Recipient by the other party hereunder; (iii) the disclosed information
was disclosed to the Recipient on an unrestricted basis from a source unrelated to any party to
this Agreement and not under a duty of confidentiality to the Discloser; or (iv) the disclosed
information was independently developed by the Recipient without use of the Confidential
Information disclosed by the Discloser.

6.3 Return of Confidential Information. Within thirty (30) days after any request by a
Discloser, the Recipient shall destroy or deliver to the Discloser, at the Discloser’s option, all
materials in the Recipient’s possession or control that contain or disclose any Confidential
Information of the Discloser that the Discloser requests in writing.

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ENGINEERING SERVICES AGREEMENT

6.4 No License. Nothing herein shall be construed as granting either party a license under
any trade secrets, patents, copyrights, or trademarks owned or controlled by the other party.

7. Disclaimer of Warranty. Limitation of Damages. Fallbrook shall provide the Services to
*** in a reasonably competent manner considering industry standards and norms.
NOTWITHSTANDING THE FOREGOING, FALLBROOK SHALL HAVE NO LIABILITY UNDER THIS AGREEMENT ARISING FROM,
RELATED TO, OR CONNECTED WITH THE SALE AND/OR USE OF ANY PRODUCTS MADE BY *** . FALLBROOK
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SERVICES AND RESULTING
DELIVERABLES, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR
ANY PARTICULAR PURPOSE. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES, LOST REVENUE, LOST PROFITS, OR LOST OPPORTUNITY ARISING FROM,
RELATED TO, OR CONNECTED WITH THE SERVICES OR RESULTING DELIVERABLES EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF. FALLBROOK’S MAXIMUM LIABILITY UNDER THIS AGREEMENT IS LIMITED
TO THE AMOUNTS RECEIVED BY FALLBROOK FROM *** UNDER THIS AGREEMENT.

8. Term and Termination.

8.1 Term. The term of this Agreement shall commence on the Effective Date and shall,
unless earlier terminated as provided herein, continue until the earlier of; (i) a period of two
months after the completion of Task IV of Exhibit A, or (ii) one year from the Effective Date.

8.2 Termination. Either party may terminate this Agreement immediately for a material
breach by the other party if the other party’s material breach of any provision of this Agreement
is not cured within thirty (30) days after the date of such party’s written notice of breach. A
material breach for purposes of this section include, but are not limited to, the failure of either
Party to fulfill in a reasonably timely manner their obligations under Exhibit A.

8.3 Effect of Expiration or Termination. The definitions contained in this Agreement and
the rights and obligations contained in this Section and Sections 5, 6, 7, 8.3 and 9 shall survive
any termination or expiration of this Agreement.

9. General Provisions.

9.1 Notices. Any notice required or permitted by this Agreement shall be in writing and
shall be delivered as follows, with notice deemed given as indicated: (a) by personal delivery,
when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by
facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by
certified or registered mail, return receipt requested, upon verification of receipt. Notice shall
be sent to the addresses set forth above or to such other address as either party may provide in
writing.

9.2 Assignment. Except as otherwise expressly provided under this Agreement and except as
part of an equity offering or transfer of substantially all the assets of one of the Parties,
neither this Agreement nor any right or obligation hereunder may be assigned or otherwise
transferred, whether voluntarily, by operation of law or otherwise, without the prior express
written consent of the other party; provided,

 

			
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however, that either party may, without such consent, assign this Agreement and its rights and
obligations hereunder in connection with the transfer or sale of all or substantially all of its
business assets associated with this Agreement, or in the event of its merger, consolidation,
change in control or other similar transaction for such assets. Any permitted assignee shall
assume all obligations of its assignor under this Agreement. Any purported assignment or transfer
in violation of this Section 9.2 shall be void.

9.3 Governing Law; Forum. This Agreement shall be governed in all respects by the laws of
the United States of America and by the laws of the State of Delaware.

9.4 Force Majeure. If either party fails to perform its obligations because of strikes,
lockouts, labor disputes, embargoes, acts of God, inability to obtain labor or materials,
governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy
or hostile governmental action, terrorist act, civil commotion, riot, fire, earthquake, or natural
disaster, or other causes (except financial causes) beyond the reasonable control of the party
obligated to perform, then that party’s performance shall be excused for a period equal to the
period of such event.

9.5 Severability. If a court of law holds any provision of this Agreement to be illegal,
invalid or unenforceable, (a) that provision shall be deemed amended to achieve an economic effect
that is as near as possible to that provided by the original provision and (b) the legality,
validity and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

9.6 Waiver; Modification. If a party waives any term, provision or the other party’s
breach of this Agreement, such waiver shall not be effective unless it is in writing and signed by
such party. No waiver by a party of a breach of this Agreement shall constitute a waiver of any
other or subsequent breach by the other party. This Agreement may be modified only by mutual
written agreement of authorized representatives of the parties.

9.7 Entire Agreement. This Agreement constitutes the entire agreement between the parties
relating to this subject matter and supersedes all prior or contemporaneous agreements concerning
such subject matter, written or oral.

9.8 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

9.9 Export Limitations. The Confidential Information that the Parties may desire to
disclose, or that is discovered, pursuant to this Agreement may be subject to the provisions of the
Export Administration Act and the Export Administration Regulations promulgated thereunder, or the
Arms Export Control Act or the International Traffic in Arms Regulations. The Parties acknowledge
that these statutes and regulations impose restrictions on import, export and transfer to countries
of certain categories of data and licenses from the U. S. Department of State and/or the U. S.
Department of Commerce may be required before such data can be disclosed hereunder. Moreover, such
licenses may impose further restrictions on use and further disclosure of such data.

10. Option. *** shall have the following rights to negotiate an agreement
(a “Commercialization Agreement”) for the purchase of NuVinci CVTs from Fallbrook in the Field of
Use (as defined on Exhibit B), which agreement shall include at least the terms provided on Exhibit
B (the “Option”) but if no additional terms are agreed, the terms of Exhibit B will constitute the
Commercialization Agreement.

 

			
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ENGINEERING SERVICES AGREEMENT

			
	***	 	and Fallbrook will include at least customary mutually satisfactory
confidentiality, shipping, termination, liability, indemnification and boilerplate terms in the
Commercialization Agreement.

10.1 Right of First Offer. For a period of ninety (90) days from the expiration
(but not early termination if Fallbrook terminates for *** breach) of this agreement (the
“Lockup Period”), Fallbrook shall neither solicit nor enter into negotiations with any other party
relating to the sale of NuVinci CVTs for the Field of Use. After the expiration of the Lockup
Period, and subject to the rights set forth in this Section 0 and Section 0 below, Fallbrook shall
not be restricted from soliciting or entering into negotiations or agreements with other parties
for the sale of NuVinci CVTs in the Field of Use. For a period (the “Option Exercise Period”) of
two (2) years following the expiration of this Agreement, *** may exercise the Option by
providing Fallbrook written notice of its intent to do so, and upon the receipt of such notice
Fallbrook and *** shall negotiate in good faith the terms of a Commercialization Agreement
until the earlier of (1) the expiration of the Option Exercise Period, or (2) ninety (90) days from
the date of such notification.

The Commercialization Agreement will consist of:

(1) the terms in Exhibit B,

(2) confidentiality, shipping, termination, liability, indemnification and miscellaneous
boilerplate terms, and

(3) whatever other terms to which the Parties agree.

After the expiration of the earlier of (1) or (2) above, if Fallbrook and *** cannot agree on
the confidentiality, shipping, termination, liability, indemnification or miscellaneous boilerplate
terms, either party may invoke binding arbitration using a nationally recognized dispute resolution
organization, which shall resolve the dispute using its rules for commercial arbitration and based
on which of the Parties’ positions is most typical in agreements similar to the Commercialization
Agreement. The arbitration will be “baseball” (i.e., arbitrator will select from one
Party’s final offer) arbitration and shall be complete within 60 days of the notice of
invocation. The Parties shall share the cost of the arbitration proceedings.

10.2 Right of First Refusal. If during the Option Exercise Period, but after the
Lockup Period, Fallbrook notifies *** of its receipt of a bona fide offer pertaining to rights
in the Field of Use, *** shall have the right for sixty (60) days from the date of such
notification to exercise the Option and Fallbrook and *** shall negotiate in good faith the
terms of a Commercialization Agreement. During such sixty (60) day period Fallbrook shall not
enter into an agreement with the other party regarding the bona fide offer.

The Commercialization Agreement will consist of:

(1) the terms in Exhibit B,

(2) confidentiality, shipping, termination, liability, indemnification and miscellaneous
boilerplate terms, and

(3) whatever other terms to which the Parties agree.

 

			
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ENGINEERING SERVICES AGREEMENT

After the expiration of such sixty (60) day period, if Fallbrook and *** cannot agree on the
confidentiality, shipping, termination, liability, indemnification or miscellaneous boilerplate
terms, either party may invoke binding arbitration using a nationally recognized dispute resolution
organization, which shall resolve the dispute using its rules for commercial arbitration and based
on which of the Parties’ positions is most typical in agreements similar to the Commercialization
Agreement. The arbitration will be “baseball” (i.e., arbitrator will select from one Party’s
final offer) arbitration and shall be complete within 60 days of the notice of
invocation. The Parties shall share the cost of the arbitration proceedings.

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

	 	 	 	 	 	 	 	 	 
	FALLBROOK TECHNOLOGIES INC.	 	***	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Nicole Nicks
	 	By:
	 	***	 	 
	 

	 	 

	 	 	 	 

	 	 
	Name:

	 	Nicole Nicks
	 	Name:
	 	***	 	 
	Title:

	 	CFO
	 	Title:
	 	 ***	 	 
	Date:

	 	6/23/09
	 	Date:
	 	6/23/2009	 	 

 

			
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ENGINEERING SERVICES AGREEMENT

EXHIBIT A

SERVICES

***

***

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EXHIBIT B

TERMS FOR A COMMERCIALIZATION AGREEMENT

***

***

***

 

			
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10exv10w4

EXHIBIT 10.4

ENGINEERING SERVICES AGREEMENT

     THIS ENGINEERING SERVICES AGREEMENT (this “Agreement”) is made and entered into, as of
October 7, 2008 (the “Effective Date”), by and between FALLBROOK TECHNOLOGIES INC., a Delaware
corporation (“Fallbrook”), having a place of business at 9444 Waples St., Suite 410, San Diego,
California 92121 and THE GATES CORPORATION, a Delaware corporation (“Gates”), having a place of
business at 1551 Wewatta Street, Denver, Colorado 80202 (collectively the “Parties”).

1. Background. The Parties have entered into a Non Disclosure Agreement on May 16, 2008
(the “NDA”) pursuant to which the Parties have discussed application of Fallbrook’s NuVinci®
technology to various applications. In further pursuit of determining whether a further business
relationship can be reached, the Parties desire that Fallbrook perform certain engineering services
as set forth in this Agreement.

2. Services. Fallbrook shall use its commercially reasonable efforts to perform the
services specified on Exhibit A to this Agreement (the “Services”) in a timely manner.

3. Compensation. Gates shall pay Fallbrook each of the milestone fees when payable as
described on Exhibit A. For milestone payments that require action or information from Gates that
are delayed due to the failure of Gates to timely provide such action or information, the
associated milestone payment shall become due upon the associated estimated completion date for the
subject milestone payment regardless of whether the milestone is actually completed by that date.
Payments are net 30 upon delivery of an invoice from Fallbrook.

3.1 Costs. All costs for the manufacture and assembly of prototypes deliverable under this
Agreement shall be the responsibility of each the Parties as identified on Exhibit A. All amounts
paid under this Section 3 shall be non-refundable.

4. Independent Contractor Relationship. Fallbrook’s relationship with Gates is that of an
independent contractor, and nothing in this Agreement is intended to, or shall be construed to,
create a partnership, agency, joint venture, employment or similar relationship. Neither party is
authorized to make any representation, contract or commitment on behalf of the other party unless
specifically requested or authorized in writing to do so by the other party. No part of
Fallbrook’s compensation shall be subject to withholding by Gates for the payment of any social
security, federal, state or any other employee payroll taxes.

5. Ownership. Other than for the Developments to the NuVinci Technology, as defined below,
Gates shall own all inventions, discoveries, enhancements, improvements, technology, data or
information relating to systems or components resulting from the Services. Fallbrook hereby sells,
assigns, and transfers to Gates all of Fallbrook’s right, title and interest to such developments.
The ownership of all Developments that are made or conceived by Fallbrook or Gates under this
Agreement shall be the exclusive property of Fallbrook. Gates hereby sells, assigns and transfers
to Fallbrook all of Gates’ right, title and interest to such Developments.

5.1 Definitions.

(a) “Developments” shall mean all inventions, discoveries, enhancements, improvements, technology,
data or information (whether or not patentable) of or to the NuVinci Technology.

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ENGINEERING SERVICES AGREEMENT

(b) “NuVinci Technology” shall mean the components, assemblies, subassemblies and associated
methods residing within the Power Boundary, CVT Structure and CVT Controls.

(c) “Power Boundary” shall mean the area along the rotational power flow path through or
transmitted by the transmission that falls between 1) a point in the shaft supplying rotational
power into the transmission that is just upstream of any coupling into the transmission, and 2) a
point in the output of the transmission that is just downstream of any coupling out of the
transmission.

(d) “CVT Structure” shall mean that portion of any housing or support structure that is specific to
the design of the continuously variable transmission and supporting its components and functions,
but excluding any portion that is generic to the type of transmission and primarily provides
housing and support of a general nature.

(e) “CVT Controls” shall mean all of the control system for the transmission that exists downstream
of the point just before where the signal input lines interface with the transmission electronic
control unit.

(f) For illustrative purposes, an example of the NuVinci Technology defined in Sections (c), (d)
and (e) is shown below in Figure 1.

Figure 1: NuVinci Technology Definition

6. Confidentiality.

6.1 Confidential Information. During the term of this Agreement, and for a period of ten
(10) years following the expiration or earlier termination hereof, each party shall maintain in
confidence all information of the other party disclosed by the other party (the “Discloser”) and is
identified as, acknowledged to be, or can reasonably be inferred from the subject matter of the
disclosure to be, confidential (the “Confidential Information”), and shall not use, disclose or
grant the use of the Confidential Information except on a need-to-know basis to those directors,
officers or employees, to the

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extent such disclosure is reasonably necessary in connection with such party’s activities. To the
extent that disclosure is authorized by this Agreement, prior to disclosure, each party hereto
shall obtain agreement of any such person to hold in confidence and not make use of the
Confidential Information for any purpose other than those permitted by this Agreement or the NDA;
provided, however, that the Parties shall maintain in strict confidence any Confidential
Information of the Discloser that the Discloser maintains as a trade secret.

6.2 Permitted Disclosures. The confidentiality obligations contained in Section 6.1 above
shall not apply to the extent that (a) any receiving party (the “Recipient”) is required to
disclose information by law, order or regulation of a governmental agency or a court of competent
jurisdiction, provided that the Recipient shall provide written notice thereof to the Discloser and
sufficient opportunity to object to any such disclosure or to request confidential treatment
thereof; or (b) the Recipient can demonstrate that (i) the disclosed information was public
knowledge at the time of such disclosure to the Recipient, or thereafter became public knowledge,
other than as a result of actions of the Recipient in violation hereof; (ii) the disclosed
information was rightfully known by the Recipient (as shown by its written records) prior to the
date of disclosure to the Recipient by the other party hereunder; (iii) the disclosed information
was disclosed to the Recipient on an unrestricted basis from a source unrelated to any party to
this Agreement and not under a duty of confidentiality to the Discloser; or (iv) the disclosed
information was independently developed by the Recipient without use of the Confidential
Information disclosed by the Discloser.

6.3 Return of Confidential Information. Within ten (10) days after any request by a
Discloser, the Recipient shall destroy or deliver to the Discloser, at the Discloser’s option, all
materials in the Recipient’s possession or control that contain or disclose any Confidential
Information of the Discloser.

6.4 No License. Nothing herein shall be construed as granting either party a license under
any trade secrets, patents, copyrights, or trademarks owned or controlled by the other party.

7. Disclaimer of Warranty. Limitation of Damages. Fallbrook shall provide the Services to
Gates in accordance with Exhibit A. FALLBROOK SHALL HAVE NO LIABILITY UNDER THIS AGREEMENT ARISING
FROM, RELATED TO, OR CONNECTED WITH THE SALE AND/OR USE OF ANY PRODUCTS MADE BY GATES. FALLBROOK
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SERVICES AND RESULTING
DELIVERABLES, INCLUDING BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR
ANY PARTICULAR PURPOSE. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
SPECIAL, OR CONSEQUENTIAL DAMAGES, LOST REVENUE, LOST PROFITS, OR LOST OPPORTUNITY ARISING FROM,
RELATED TO, OR CONNECTED WITH THE SERVICES OR RESULTING DELIVERABLES EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF. Notwithstanding the foregoing, Fallbrook agrees to utilize
industry standard reasonable engineering practices in the provision of the Services under this
Agreement.

8. Right to Fields. During the period of this Agreement and three months following the
termination thereof, Fallbrook agrees that it shall not enter into any agreement with any third
party to license or otherwise grant rights to make, use, sell, offer to sell, or import NuVinci
Technology in the Fields unless Fallbrook first 1) provides Gates notice of receipt of such an
offer and 2) provide a period of at least ninety (90) days after such notice for Gates to enter
into an agreement on substantially the same terms offered by Fallbrook to such third party,
provided however, that if Gates does not enter into such agreement within ninety (90) days
Fallbrook’s obligation hereunder shall terminate.

8.1 Fields. For purposes of this Section 8, “Fields” shall mean the following:

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(a)                                    ***

                                         ***

                                        
***                                    ; and

(b)                                     ***                      ; and

(c)                                     *** .

9. Term and Termination.

9.1 Term. The term of this Agreement shall commence on the Effective Date and shall,
unless earlier terminated as provided herein, continue for a period of three (3) years.

9.2 Termination. Either party may terminate this Agreement immediately for a material
breach by the other party if the other party’s material breach of any provision of this Agreement
is not cured within thirty (30) days after the date of such party’s written notice of breach. A
material breach for purposes of this section include, but are not limited to the failure of either
Party to fulfill in a reasonably timely manner their obligations under Exhibit A.

9.3 Effect of Expiration or Termination. The definitions contained in this Agreement and
the rights and obligations contained in this Section and Sections 5, 6, 7, 9.3 and 10 shall survive
any termination or expiration of this Agreement.

10. General Provisions.

10.1 Notices. Any notice required or permitted by this Agreement shall be in writing and
shall be delivered as follows, with notice deemed given as indicated: (a) by personal delivery,
when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by
facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by
certified or registered mail, return receipt requested, upon verification of receipt. Notice shall
be sent to the addresses set forth above or to such other address as either party may provide in
writing.

10.2 Assignment. Except as otherwise expressly provided under this Agreement, neither this
Agreement nor any right or obligation hereunder may be assigned or otherwise transferred (whether
voluntarily, by operation of law or otherwise), without the prior express written consent of the
other party; provided, however, that either party may, without such consent, assign this Agreement
and its rights and obligations hereunder in connection with the transfer or sale of all or
substantially all of its business assets associated with this Agreement, or in the event of its
merger, consolidation, change in control or other similar transaction for such assets. Any
permitted assignee shall assume all obligations of its assignor under this Agreement. Any
purported assignment or transfer in violation of this Section 10.2 shall be void.

10.3 Governing Law; Forum. This Agreement shall be governed in all respects by the laws of
the United States of America and by the laws of the State of California, as such laws are applied
to agreements entered into and to be performed entirely within California between California
residents.

10.4 Force Majeure. If either party fails to perform its obligations because of strikes,
lockouts, labor disputes, embargoes, acts of God, inability to obtain labor or materials,
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governmental regulations, governmental controls, judicial orders, enemy or hostile
governmental action, terrorist act, civil commotion, riot, fire, earthquake, or natural disaster,
or other causes (except financial causes) beyond the reasonable control of the party obligated to
perform, then that party’s performance shall be excused for a period equal to the period of such
event.

10.5 Severability. If a court of law holds any provision of this Agreement to be illegal,
invalid or unenforceable, (a) that provision shall be deemed amended to achieve an economic effect
that is as near as possible to that provided by the original provision and (b) the legality,
validity and enforceability of the remaining provisions of this Agreement shall not be affected
thereby.

10.6 Waiver; Modification. If a party waives any term, provision or the other party’s
breach of this Agreement, such waiver shall not be effective unless it is in writing and signed by
such party. No waiver by a party of a breach of this Agreement shall constitute a waiver of any
other or subsequent breach by the other party. This Agreement may be modified only by mutual
written agreement of authorized representatives of the parties.

10.7 Entire Agreement. This Agreement constitutes the entire agreement between the parties
relating to this subject matter and supersedes all prior or contemporaneous agreements concerning
such subject matter, written or oral.

10.8 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

10.9 Export Limitations. The Confidential Information that the Parties may desire to
disclose, or that is discovered, pursuant to this Agreement may be subject to the provisions of the
Export Administration Act and the Export Administration Regulations promulgated thereunder, or the
Arms Export Control Act or the International Traffic in Arms Regulations. The Parties acknowledge
that these statutes and regulations impose restrictions on import, export and transfer to countries
of certain categories of data and licenses from the U. S. Department of State and/or the U. S.
Department of Commerce may be required before such data can be disclosed hereunder. Moreover, such
licenses may impose further restrictions on use and further disclosure of such data.

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

	 	 	 	 	 	 	 	 	 
	FALLBROOK TECHNOLOGIES INC.	 	THE GATES CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ William Klehm
 

	 	By:
	 	/s/ Justin Aschenbrenner
 

	 	 
	Name:

	 	William Klehm
	 	Name:
	 	Justin Aschenbrenner	 	 
	Title:

	 	CEO
	 	Title:
	 	V.P. Ind. Bus. Dev.	 	 
	Date:

	 	10/7/08
	 	Date:
	 	16 Oct. 08	 	 

5

 

ENGINEERING SERVICES AGREEMENT

EXHIBIT A

SERVICES AND SPECIFICATIONS

	1	 	Phase I: Project Kickoff

1.2 Description

	 	 	 	Fallbrook and Gates will define a detailed specification for the transmission system to
ensure understanding of the existing design and update milestones to be tracked throughout
the project.
In addition, as part of Phase I, Fallbrook will manage the sourcing and procurement of
hardware shown in Figure 2 to be used in Phase II. This unit will be termed the Lab Test
Prototype. Through the course of this project, at least 3 Lab Test Prototype variator
modules will be fabricated plus spare parts. The components produced in this phase are
intended to be the same subassembly parts used in the vehicles in phase IV.

Figure 2: CVP Lab Test Prototype Assembly

	 	 	 	In addition, Gates will procure at least one *** for use as a test and demonstration
vehicle. This vehicle will remain the property of Gates Corporation, with the agreement
that Fallbrook will have access to and mutually agreed upon physical possession of it for
continued development, testing and demonstration purposes or events.

	1.3	 	Gates Responsibilities

	 	§	 	Assign a project lead at Gates
	 
	 	§	 	Work with Fallbrook to define key milestones and meeting schedules throughout the project.
	 
	 	§	 	Review and confirm the system specification
	 
	 	§	 	Work with Fallbrook to define key milestones and meeting schedules throughout the project.
	 
	 	§	 	Procurement of at least one test vehicle.

	1.4	 	Fallbrook Responsibilities

	 	§	 	Assign a project lead at Fallbrook
	 
	 	§	 	Publish and a project plan document with key milestone summary and disseminate to all
team members
	 
	 	§	 	Review and update the system specification
	 
	 	§	 	Procurement of prototype test components and controls hardware for initial test.
	 
	 	§	 	Provide configuration management and document control of detailed designs.

	1.5	 	Schedule

 

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ENGINEERING SERVICES AGREEMENT

	 	 	 	This phase will last two weeks with expected completion in October 20081.
The completion of Phase I will be triggered by the final publication and agreement on the
design specification for this project.

2 Phase II: Variator Test and Controls Development

	2.1	 	Description

	 	 	 	Phase II will begin with Fallbrook refitting an existing test stand for use with the Lab
Test Prototype released in Phase I. Additionally, Fallbrook will design and develop the
control algorithms and interface electronics and hardware for controlling the test unit.
Fallbrook anticipates using a ruggedized commercially-available control unit for the test
stand development that will also be used for the vehicle controller. At a minimum, the
control will read at least one and possibly two inputs (vehicle speed, throttle position)
and shift the transmission according to some logic or map based on those inputs. The
controls development in this phase however will be focused on hardware validation and tuning
the valve body to control the transmission in stable operation, and not necessarily refine
the system for operation in the *** . Gates will be responsible for getting the speed
and/or throttle or other parameters on the *** to the transmission control module and
confirm proper and safe operation in the vehicle. The test stand transmission hardware
consists of the variator section only (Figure 2) and does not include all of the components
required for the In-Vehicle Prototype.

	2.2	 	Gates Responsibilities

	 	§	 	Review preliminary test summaries and provide feedback as necessary

	2.3	 	Fallbrook Responsibilities

	 	§	 	Refit and commissioning of appropriate Fallbrook test stand.
	 
	 	§	 	Assembly and installation of the CVP hardware.
	 
	 	§	 	Test and controls development of variator module.
	 
	 	§	 	Summary of test results
	 
	 	§	 	Deliver a functioning control module prepared for in-vehicle testing

	2.4	 	Schedule

	 	 	 	The fabrication of prototype test components sourced in Phase I will require 8 to 12 weeks
depending on the supplier and quantities. Upon receipt of the hardware, Fallbrook will
assembly the Lab Test Prototype and install on the stand to begin testing immediately.
Assembly and test
is expected to begin in December 20082, with controls tuning and
validation testing to continue

 

			
	1	 	All dates in this proposal are dependent
on the actual start date to the project. Alternatively, this is estimated to
be 2 weeks from initial project funding
	 
	2	 	All dates in this proposal are dependent
on the actual start date to the project. Alternatively, this is estimated to
be 2 months from initial project funding

 

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2

 

ENGINEERING SERVICES AGREEMENT

	 	 	 	through February 20093 in support of the detailed system design and
vehicle testing. The total cost for Phases I and II will be covered by Fallbrook as a part
of an internal development effort.

3 Phase III: Detailed System Design

	3.1	 	Description

	 	 	 	Phase III will be conducted in parallel with Phase II. Gates will be responsible for
completing the detailed design of components required to integrate the transmission into the
demonstration vehicle. Fallbrook will deliver the existing variator module, hydraulic valve
body and electronic control unit4 to be tested in Phase II. Significant design
work has been completed to date on the transmission (specifically the variator module shown
in Figure 2). However, there are several elements still required. Generally, the
outstanding items include the housing, gearing, pump, hydraulic circulation features,
clutch, vibration isolation, etc (see deliverables). Additionally, Gates will be
responsible for a vehicle specific wiring harness and any other components specific to the
vehicle. In order to support Gates and alleviate any delays or re-work efforts for proper
integration of the variator module, the Parties each agree to coordinate and collaborate
with respect to the integration of the variator and vehicle during generation of prints and
models before the final release for fabrication. Once complete, this assembly will be
referred to as the In-Vehicle Prototype.
	 
	 	 	 	As a part of Phase III, Fallbrook will submit CAD models of the existing variator assembly
and valve body for Gates to use in designing the housing and other vehicle specific
components. Likewise, Gates agrees to make available to Fallbrook, upon reasonable request,
CAD models and detailed prints of all of the system components sufficient for fabrication
and assembly on the test vehicle. Completion of Phase III will be realized when all
components for the In-Vehicle Prototype are released for fabrication.

	3.2	 	Gates Responsibilities

	 	§	 	Schedule and hold design reviews (in person or via conference call).
	 
	 	§	 	Define design detail of the remaining system components sufficient for vehicle installation and test.
	 
	 	§	 	Conduct preliminary and final design review of the complete system.
	 
	 	§	 	Provide configuration management and document control of detailed designs.
	 
	 	§	 	Submission of prints to FTI for check and approval prior to release for fabrication.
	 
	 	§	 	Complete design of all vehicle integration components with exception of the variator
module, the valve body and the electronic control unit (Fallbrook responsibility). This
will include both CAD models and detailed drawings sufficient for fabrication, at a minimum
anything not show in Figure 2, and specifically (but not limited to) the following list:

	 	o	 	Housing
	 
	 	o	 	Lube and control pump
	 
	 	o	 	Filter integration
	 
	 	o	 	Cooler integration
	 
	 	o	 	Integrate hydraulic system (includes integration of the valve body,
designed by Fallbrook, and lines and passages within the transmission)
	 
	 	o	 	Any required Input/output gearing

 

			
	3	 	All dates in this proposal are dependent on
the actual start date to the project. Alternatively, this is estimated to be 5
months from initial project funding
	 
	4	 	This may be a custom PCB or an off the shelf
control module

3

 

ENGINEERING SERVICES AGREEMENT

	 	o	 	Mounting provisions
	 
	 	o	 	Shift selector design (forward-neutral mechanism...if necessary)
	 
	 	o	 	Integrate speed sensors
	 
	 	o	 	Vibration isolation (if necessary)
	 
	 	o	 	Wiring harness and vehicle specific sensors (throttle position, vehicle
speed, engine speed, temps, etc.)
	 
	 	o	 	Clutch assembly (if necessary)

	3.3	 	Fallbrook Deliverables

	 	§	 	Release print and specification package for the variator, valve body and electronic
control unit for fabrication, assembly and test.5
	 
	 	§	 	Support design reviews with Gates
	 
	 	§	 	Provide configuration management and document control of detailed designs.

	3.4	 	Schedule

	 	 	 	The estimated completion for Phase III is primarily dependent on the timeframe for Gates
completion of the vehicle interface components. The completion of Phase III will be
triggered by the design release of the In-Vehicle Prototype for fabrication of the system.
This phase will not include fabrication of the In-Vehicle Prototypes (Phase IV). The
estimated completion date for phase III is early December 20086.

4 Phase IV: Prototype Fabrication and Vehicle Testing

	4.1	 	Description

	 	 	 	Fabrication:
	 
	 	 	 	The first task in Phase IV will be to fabricate at least 1 In-Vehicle Prototype system that
will be allocated for in-vehicle testing and replacement components. At least three of the
variator modules should be complete from Phase II. Phase IV will involve fabrication of the
components designed by Gates in Phase III. Each of the Parties will manage the sourcing and
procurement of all hardware associated with its respective tasks.7
	 
	 	 	 	Gates is willing to consider licensing the Gates technology to Fallbrook on commercially
reasonable terms in the event Gates terminates this Agreement or the Project. Absent prior
approval from Gates, Fallbrook may not use the Gates technical information for any reason
following termination of the Agreement or the Project.
	 
	 	 	 	Preliminary Test and Development:

Once all of the components are received, Gates will be responsible for assembling and
installing the transmission into the vehicle. Preliminary testing and tuning will begin.
The objective of the

 

			
	5	 	FALLBROOK will retain ownership of all
CAD and drawing data for the CVP system
	 
	6	 	All dates in this proposal are dependent
on the actual start date to the project. Alternatively, this is estimated to be
13 weeks from project funding
	 
	7	 	Prototyping costs are a function of
specific design details and cannot be known specifically until the final
release, however FALLBROOK estimates for a volume of 3, each prototype system
will cost ***

 

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4

 

ENGINEERING SERVICES AGREEMENT

	 	 	 	tests will be to develop the system to meet a minimum set of operational requirements laid
out in Phase I. This will include controls tuning and general performance evaluation.
Under the scope of this project, Fallbrook will provide at least one full time equivalent
engineer for up to one calendar month after the receipt of the variator module for support
with initial demos8. However, Gates will be chiefly responsible for system
validation and testing for performance and safety, controls refinement and any other
characteristic of in-vehicle operation.

	4.2	 	Gates Responsibilities

	 	§	 	Release and source all remaining components (outside of the variator module and valve body)
	 
	 	§	 	Conduct initial assembly and vehicle installation
	 
	 	§	 	Confirm safety requirements are met and maintained
	 
	 	§	 	Run function test to quantify system characteristics and tune controls.
	 
	 	§	 	Provide feedback on any changes desired for follow-on design iterations and/or production plans.

	4.3	 	Fallbrook Responsibilities

	 	§	 	Deliver functioning CVP module components (shown in Figure 2)
	 
	 	§	 	Document recommendations to meet operational and production requirements for future
production system based on initial assembly and test.
	 
	 	§	 	Provide engineering support during the in-vehicle testing and controls tuning in the
form of one full time equivalent engineer for a period of one calendar month following
receipt of all prototype hardware.

	4.4	 	Schedule

	 	 	 	The initial schedule for Phase IV is completely dependent on lead time for prototype
fabrication and design release of the components designed by Gates in Phase III. Fallbrook
typically plans for 10-12 weeks of lead time. Fabrication schedule is largely depending on
actual design details as well as supplier availability and cannot be assigned with certainty
at this stage. However, the estimated date for receipt of prototype hardware at is
March 2009.
	 
	 	 	 	Once In-Vehicle Prototypes are assembled, Fallbrook will provide engineering support for at
least one calendar month such that the estimated completion for Phase IV will be near the
end of April 20099.

 

			
	8	 	FALLBROOK is obviously interested in the
long term continuation of this project and will look to provide necessary
support as long as possible. This level of support is defined simply to
clarify what is regarded within the scope of this proposal. Ultimately, a long
term, production validation and planning project will be initiated (preferably
with no work stoppage from the initial project) to take the system from
demonstrator to final production.
	 
	9	 	All dates in this proposal are dependent
on the actual start date to the project. This was intended to be 9 months from
project start.

5

 

ENGINEERING SERVICES AGREEMENT

5 SCHEDULE AND BUDGETARY COST SUMMARY

Scheduling for Phases I through IV have been detailed above. The cost for Fallbrook activities in
all Phases total ***, due at the initiation of the project. Table 1 is a summary of the project
schedule as detailed in the previous sections.

Table 1: Project Schedule

Table 2: Milestone Summary

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Approximate Payment
	Line	 	Phase	 	Cost	 	Milestone	 	Date
	1

	 	Phase I
	 	***
	 	Initiation of Project
	 	9/22/2008
	2

	 	Phase II: Variator Test
and Controls Development
	 	 	 	Assembly on the test stand for
function test and controls tuning
	 	12/10/2008
	4

	 	Phase III: Detailed Design
	 	 	 	Design release for fabrication
	 	12/11/ 2008
	5

	 	Phase IV: Prototype
Fabrication and Vehicle
Demonstration
	 	 	 	Installation into the test vehicle
	 	3/24/2009
	7

	 	Phase IV: Prototype
Fabrication and Vehicle
Demonstration

     Program Total: 
	 	***	 	One month after delivery of
demonstration vehicle
	 	4/24/2009

All dates in this proposal are subject to the initial funding date and will be adjusted as
necessary at the initiation of the project.

In addition the above expenses, Gates will be responsible for prototype hardware that is expected
to range from ***, in addition to vehicle costs.

 

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6

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