Document:

exv10w12

Exhibit 10.12

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on this 7th
day of December, 2009, but effective as of the date set forth herein, by and between Waste
Management, Inc. (the “Company”), and Puneet Bhasin (the “Executive”).

     1. Employment.

     The Company shall employ Executive, and Executive shall be employed by the Company upon the
terms and subject to the conditions set forth in this Agreement.

     2. Term of Employment.

     The period of Executive’s employment under this Agreement shall commence on December 7, 2009
(“Employment Date”), and shall continue for a period of two (2) years, and shall automatically be
renewed for successive one (1) year periods on each anniversary of the Employment Date thereafter,
unless Executive’s employment is terminated in accordance with Section 5 below. The period during
which Executive is employed hereunder shall be referred to as the “Employment Period.”

     3. Duties and Responsibilities.

     (a) Executive shall serve as the Senior Vice President and Chief Information Officer. In such
capacity, Executive shall perform such duties and have the power, authority, and functions
commensurate with such position in similarly-sized public companies, and have and possess such
other authority and functions consistent with such position as may be assigned to Executive from
time to time by the Chief Executive Officer or the Board of Directors (the “Board”) of the Company.

     (b) Executive shall devote substantially all of his working time, attention and energies to
the business of the Company, and its affiliated entities. Executive may make and manage his
personal investments (provided such investments in other activities do not violate, in any material
respect, the provisions of Section 10 of this Agreement), be involved in charitable and
professional activities, and, with the prior written consent of the Board, serve on boards of other
for profit entities, provided such activities do not materially interfere with the performance of
his duties hereunder (however, the Board does not typically allow officers to serve on more than
one public company board at a time).

     4. Compensation and Benefits.

     (a) Base Salary. During the Employment Period, the Company shall pay Executive a base salary
at the annual rate of Three Hundred Eighty Thousand Dollars ($380,000.00) per year, or such higher
rate as may be determined from time to time by the Company (“Base Salary”). Such Base Salary shall
be paid in accordance with the Company’s standard payroll practice for its executive officers.
Once increased, Base Salary shall not be reduced.

 

     (b) Annual Bonus. Beginning on January 1, 2010 and continuing during the
remaining Employment Period, Executive will be entitled to participate in an annual incentive
compensation plan of the Company, as established by the Compensation Committee of the Board from
time to time. The Executive’s target annual bonus will be seventy-five percent (75%) of his Base
Salary in effect for such year (the “Target Bonus”), and his actual annual bonus may range from 0%
to 150% of Base Salary (i.e., a maximum possible bonus of two times the Target Bonus), and will be
determined based upon (i) the achievement of certain corporate performance goals, as may be
established and approved from time to time by the Compensation Committee of the Board, and (ii) the
achievement of personal performance goals as may be established by Executive’s immediate
supervisor. The annual bonus will be paid at such time and in such manner as set forth in the
annual incentive compensation plan document. Executive will not be eligible for a bonus for
calendar year 2009.

     (c) Benefit Plans and Vacation. Subject to the terms of such plans, Executive shall be
eligible to participate in or receive benefits under any pension plan, profit sharing plan, salary
deferral plan, medical and dental benefits plan, life insurance plan, short-term and long-term
disability plans, or any other health, welfare or fringe benefit plan, generally made available by
the Company to similarly-situated executive employees. The Company shall not be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, so long
as such changes are similarly applicable to similarly-situated employees generally. The Company
will also reimburse Executive for the actual cost of continued COBRA coverage, if applicable, until
such time as he is eligible to participate in the Company’s medical and dental benefits plans.

     During the Employment Period, Executive shall be entitled to vacation each year in accordance
with the Company’s policies in effect from time to time, but in no event less than four (4) weeks
paid vacation per calendar year. Vacation not taken in the calendar year in which it is granted
cannot be carried forward to any subsequent year.

     (d) Expense Reimbursement. The Company shall promptly reimburse Executive for the ordinary
and necessary business expenses incurred by Executive in the performance of the duties hereunder in
accordance with the Company’s customary practices applicable to executive officers. The
reimbursement of expenses during a year will not affect the expenses eligible for reimbursement in
any other year. In no event shall any expense be reimbursed after the last day of the year
following the year in which the expense was incurred.

     (e) Other Perquisites. Executive shall be entitled to all perquisites provided to Senior Vice
Presidents of the Company as approved by the Compensation Committee of the Board, and as they may
exist from time to time.

     (f) Sign-on Bonus. The Company will pay Executive an initial sign-on bonus in the
amount of Two Hundred Twenty-Five Thousand Dollars ($225,000.00) within thirty (30) days of the
Employment Date. It is expressly agreed and understood that should Executive resign without “Good
Reason” (as that term is defined in Section 5(d) below) prior to December 7, 2010, then Executive
shall repay on demand by the Company the entire sign-on bonus, net withholding taxes. It is
further agreed that any obligation of the Company to provide future

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payments to Executive beyond his employment with the Company shall be first credited and
applied to the repayment of this sign-on bonus.

     (g) Employment Commencement Equity Based Incentive Award. Subject to approval by the
Compensation Committee of the Board, effective on or about the Employment Date, Executive shall be
granted a one-time, promotional award of Restricted Stock Units pursuant to the Waste Management,
Inc. 2009 Stock Incentive Plan, valued at approximately Four Hundred Fifty-Five Thousand Dollars
($455,000.00). Such Restricted Stock Units will be subject to the restrictions imposed by, and
governed by the provisions of, the Stock Incentive Plan and the award agreement issued to Executive
in connection thereto; provided, however, that, unless earlier vested or forfeited pursuant to such
award agreement, the restrictions on this promotional award will lapse on certain anniversary dates
of the grant date of the promotional award in accordance with the following schedule: first
anniversary of the grant date — 50%; second anniversary of the grant date — 100%.

     (h) Relocation to Houston. Prior to the first anniversary of the Employment Date, Executive
will relocate his residence to the Houston, Texas area. Executive’s relocation of his residence to
Houston will be eligible for coverage under the Company’s relocation policy. It is expressly
agreed to and understood that should Executive resign without “Good Reason” (as that term is
defined in Section 5(d) below) during the twelve-month period following such relocation, then
Executive shall be required to reimburse the Company for the prorated portion of the relocation
expense.

     5. Termination of Employment.

     Executive’s employment hereunder may be terminated during the Employment Period under the
following circumstances:

     (a) Death. Executive’s employment hereunder shall terminate upon Executive’s death.

     (b) Total Disability. The Company may terminate Executive’s employment hereunder upon
Executive’s becoming “Totally Disabled.” For purposes of this Agreement, Executive shall be
considered “Totally Disabled” if Executive has been physically or mentally incapacitated so as to
render Executive incapable of performing the essential functions of any substantial gainful
activity that is expected to result in death or to last for a continuous period of at least 12
months. Executive’s receipt of disability benefits under the Company’s long-term disability plan
or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total
Disability for purpose of this Agreement.

     (c) Termination by the Company for Cause. The Company may terminate Executive’s employment
hereunder for “Cause” at any time after providing a Notice of Termination for Cause to Executive.

	 	(i)	 	For purposes of this Agreement, the term “Cause” means any of the following:
Executive’s (A) willful or deliberate and continual refusal to perform Executive’s

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	 	 	 	employment duties reasonably requested by the Company after receipt of written
notice to Executive of such failure to perform, specifying such failure (other than
as a result of Executive’s sickness, illness or injury) and Executive’s failure to
cure such nonperformance within ten (10) days of receipt of said written notice; (B)
breach of any statutory or common law duty of loyalty to the Company; (C) conviction
of, or plea of nolo contendre to, any felony; (D) willful or intentional cause of
material injury to the Company, its property, or its assets; (E) disclosure to
unauthorized person(s) of the Company’s proprietary or confidential information; (F)
material violation or a repeated and willful violation of the Company’s policies or
procedures, including but not limited to, the Company’s Code of Business Conduct and
Ethics (or any successor policy) then in effect; or (G) breach of any of the
covenants set forth in Section 10 hereof.
	 
	 	(ii)	 	For purposes of this Agreement, the phrase “Notice of Termination for Cause”
shall mean a written notice that shall indicate the specific termination provision or
provisions in Section 5(c)(i) relied upon, and shall set forth in reasonable detail the
facts and circumstances which provide the basis for termination for Cause.

     (d) Voluntary Termination by Executive. Executive may terminate his employment hereunder with
or without Good Reason at any time upon written notice to the Company.

	 	(i)	 	A termination for “Good Reason” means a resignation of employment by Executive
by written notice (“Notice of Termination for Good Reason”) given to the Company’s
Chief Executive Officer within ninety (90) days after the occurrence of the Good Reason
event, unless such circumstances are substantially corrected prior to the date of
termination specified in the Notice of Termination for Good Reason. For purposes of
this Agreement, “Good Reason” shall mean the occurrence or failure to cause the
occurrence, as the case may be, without Executive’s express written consent, of any of
the following circumstances: (A) the Company materially diminishes Executive’s core
duties or responsibility for those core duties, so as to effectively cause Executive to
no longer be performing the duties of his position (except in each case in connection
with the termination of Executive’s employment for Death, Total Disability, or Cause,
or temporarily as a result of Executive’s illness or other absence); (B) in the event
of the Company becoming a fifty percent or more subsidiary of any other entity, the
Company materially diminishes the duties, authority or responsibilities of the person
to whom Executive is required to report; (C) removal or the non-reelection of the
Executive from the officer position with the Company specified herein, or removal of
the Executive from any of his then officer positions; (D) any material breach by the
Company of any provision of this Agreement, including without limitation Section 10
hereof; or (E) failure of any successor to the Company (whether direct or indirect and
whether by merger, acquisition, consolidation or otherwise) to assume in a writing
delivered to Executive upon the assignee becoming such, the obligations of the Company
hereunder, resulting in a material negative change in the employment relationship.

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	 	(ii)	 	A “Notice of Termination for Good Reason” shall mean a notice that shall
indicate the specific termination provision or provisions relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The Notice of Termination for Good Reason shall provide
for a date of termination not less than thirty (30) nor more than sixty (60) days after
the date such Notice of Termination for Good Reason is given, provided that in the case
of the events set forth in Sections 5(d)(i)(A) or (B), the date may be twenty (20) days
after the giving of such notice.

     (e) Termination by the Company without Cause. The Company may terminate Executive’s
employment hereunder without Cause at any time upon written notice to Executive.

     (f) Effect of Termination. Upon any termination of employment for any reason, Executive shall
immediately resign from all Board memberships and other positions with the Company or any of its
subsidiaries held by him at such time.

     6. Compensation Following Termination of Employment.

     In the event that Executive’s employment hereunder is terminated in a manner as set forth in
Section 5 above, Executive shall be entitled to the compensation and benefits provided under this
Section 6, in each case subject to potential reduction as may be required by Section 22, as
applicable to the form of termination:

     (a) Termination by Reason of Death. In the event that Executive’s employment is terminated by
reason of Executive’s death, the Company shall pay the following amounts to Executive’s beneficiary
or estate:

	 	(i)	 	Any accrued but unpaid Base Salary for services rendered to the date of death,
any accrued but unpaid expenses required to be reimbursed under this Agreement, any
vacation accrued to the date of termination, any earned but unpaid bonuses for any
prior calendar year, and, to the extent not otherwise paid, a pro-rata bonus or
incentive compensation payment for the current calendar year to the extent payments are
awarded to senior executives of the Company and paid at the same time as senior
executives are paid.
	 
	 	(ii)	 	Any benefits accrued through the date of termination to which Executive may be
entitled pursuant to the plans, policies and arrangements (including those referred to
in Section 4(c) hereof), as determined and paid in accordance with the terms of such
plans, policies and arrangements.

     (b) Termination by Reason of Total Disability. In the event that Executive’s employment is
terminated by the Company by reason of Executive’s Total Disability (as determined in accordance
with Section 5(b)), the Company shall pay the following amounts to Executive:

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	 	(i)	 	Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, and any earned but unpaid
bonuses for any prior calendar year. Executive shall also be eligible for a pro-rata
bonus or incentive compensation payment for the current calendar year to the extent
such awards are made to senior executives of the Company for the year in which
Executive is terminated, and to the extent not otherwise paid to the Executive.
	 
	 	(ii)	 	Any benefits accrued through the date of termination to which Executive may be
entitled pursuant to the plans, policies and arrangements (including those referred to
in Section 4(c) hereof) shall be determined and paid in accordance with the terms of
such plans, policies and arrangements.

     (c) Termination for Cause. In the event that Executive’s employment is terminated by the
Company for Cause, the Company shall pay the following amounts to Executive:

	 	(i)	 	Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, and any earned but unpaid
bonuses for any prior calendar year.
	 
	 	(ii)	 	Any benefits accrued through the date of termination to which Executive may be
entitled pursuant to the plans, policies and arrangements (including those referred to
in Section 4(c) hereof up to the date of termination) shall be determined and paid in
accordance with the terms of such plans, policies and arrangements.

     (d) Voluntary Termination by Executive. In the event that Executive voluntarily terminates
employment other than for Good Reason, the Company shall pay the following amounts to Executive:

	 	(i)	 	Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, and any earned but unpaid
bonuses for any prior calendar year.
	 
	 	(ii)	 	Any benefits accrued through the date of termination to which Executive may be
entitled pursuant to the plans, policies and arrangements (including those referred to
in Section 4(c) hereof up to the date of termination) shall be determined and paid in
accordance with the terms of such plans, policies and arrangements.

     (e) Termination by the Company Without Cause Outside a Change in Control Period; Termination
by Executive for Good Reason Outside a Change in Control Period. In the event that Executive’s
employment is terminated by the Company outside a Change in Control Period (as defined in Section 7
below) for reasons other than death, Total Disability or Cause, or Executive terminates his
employment for Good Reason outside of a Change in Control Period, the Company shall pay the
following amounts to Executive:

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	 	(i)	 	Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, and any earned but unpaid
bonuses for any prior calendar year.
	 
	 	(ii)	 	Any benefits accrued through the date of termination to which Executive may be
entitled pursuant to the plans, policies and arrangements referred to in Section 4(c)
hereof shall be determined and paid in accordance with the terms of such plans,
policies and arrangements.
	 
	 	(iii)	 	Subject to Executive’s execution of the Release (as defined in Section 7),
Executive shall be eligible for a bonus or incentive compensation payment, at the same
time, on the same basis, and to the same extent payments are made to senior executives
of the Company, pro-rated for the fiscal year in which the Executive is terminated.
	 
	 	(iv)	 	Subject to Executive’s execution of the Release (as defined in Section 7), an
amount equal to two (2) times the sum of Executive’s Base Salary plus his Target Annual
Bonus (in each case, as then in effect), of which one-half shall be paid in a lump sum
within the calendar quarter in which the 60th day falls after the employment
termination date and one-half shall be paid during the two (2) year period beginning in
the calendar quarter within which the 60th day following Executive’s
employment termination date falls and continuing at the same time and in the same
manner as Base Salary would have been paid if Executive had remained in active
employment until the end of such period.
	 
	 	(v)	 	Subject to Executive’s execution of the Release (as defined in Section 7), the
Company will continue for Executive and Executive’s spouse and eligible dependents
coverage under the Company’s health benefit plan and disability benefit plans, in which
Executive was a participant at any time during the twelve-month period prior to the
date of termination, until the earliest to occur of (A) twenty-four (24) months after
the date of termination; (B) Executive’s death (provided that benefits provided to
Executive’s spouse and dependents shall not terminate until twenty-four (24) months
after the employment termination date); or (C) with respect to any particular plan, the
date Executive becomes eligible to participate in a comparable benefit provided by a
subsequent employer. In the event that Executive’s continued participation in any such
Company plan is prohibited, the Company will arrange to provide Executive with benefits
substantially similar to those which Executive would have been entitled to receive
under such plan, for such 24-month period on a basis which provides Executive with no
additional after-tax cost.

     (f) Suspension and Refund of Termination Benefits for Subsequently Discovered Cause.
Notwithstanding any provision of this Agreement to the contrary, if within one (1) year of
Executive’s employment termination date for any reason other than for Cause, it is determined

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by Company that Executive could have been terminated for Cause then, to the extent permitted
by law:

	 	(i)	 	the Company may elect to cancel any and all payments of any benefits otherwise
due Executive, but not yet paid, under this Agreement or otherwise; and
	 
	 	(ii)	 	Executive will refund to the Company any amounts, plus interest, previously
paid by Company to Executive pursuant to Subsections 6(e)(iii), 6(e)(iv) or 6(e)(v).

     7. Resignation by Executive for Good Reason or Termination by Company Without Cause During a
Change in Control Period.

     (a) Certain Terminations During a Change in Control Period. Subject to reduction required by
Section 22, in the event a Change in Control occurs and (x) Executive terminates his employment for
Good Reason during a Change in Control Period, or (y) the Company terminates Executive’s employment
without Cause (and for reason other than Death of Total Disability) during a Change in Control
Period, the Company shall, subject to Executive’s execution of the Release (as defined in this
Section 7), pay the following amounts to Executive:

	 	(i)	 	The payments and benefits provided for in Section 6(e)(i), (ii), (iv) and (v)
in the same form as provided for therein.
	 
	 	(ii)	 	A one time payment of the sum of Executive’s Base Salary plus his Target Annual
Bonus, and 12 times the applicable monthly COBRA premium for the Company’s medical
benefit plans in which Executive participates (in each case, as then in effect), which
shall be paid in a lump-sum on the 60th day after the later of the effective
date of Executive’s termination or the Change in Control.
	 
	 	(iii)	 	Executive shall also receive a bonus or incentive compensation payment for the
calendar year of the termination, payable at 100% of the maximum bonus available to
Executive, pro-rated as of the effective date of the employment termination. Such
bonus payment shall be payable within five (5) days after the later of the effective
date of Executive’s termination or the Change in Control.

     (b) Certain Definitions.

	 	(i)	 	For purposes of this Agreement, “Change in Control” means the first to occur on
or after the date on which this Agreement is first signed, the occurrence of any of the
following events:

	 	(A)	 	any Person, or Persons acting as a group (within the meaning of
Section 409A of the Code), directly or indirectly, including by purchases,
mergers, consolidation or otherwise, acquires ownership of securities of the
Company that, together with stock held by such Person or Persons, represents
fifty percent (50%) or more of the total voting power or total fair market
value of the Company’s then outstanding securities;

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	 	(B)	 	any Person, or Persons acting as a group (within the meaning of
Section 409A of the Code), acquires, (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such Person or
Persons) directly or indirectly, including by purchases, merger, consolidation
or otherwise, ownership of the securities of the Company that represent thirty
percent (30%) or more of the total voting power of the Company’s then
outstanding voting securities;
	 
	 	(C)	 	the following individuals cease for any reason to constitute a
majority of the number of directors then serving during any 12-month period:
individuals who, at the beginning of the 12-month period, constitute the Board
and any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest, including but
not limited to a consent solicitation, relating or the election of directors of
the Company) whose appointment or election by the Board or nomination for
election by the Company’s stockholders was approved or recommended by a vote of
at least a majority of the directors before the date of such appointment or
election or whose appointment, election or nomination for election was
previously so approved or recommended
	 
	 	(D)	 	a Person or Persons acting as a group acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such Person or Persons) assets from the Company that have a total gross fair
market value equal to or more than forty percent (40%) of the total gross fair
market value of all of the assets of the Company immediately before such
acquisition or acquisitions, other than a sale or disposition by the Company of
such assets to an entity, at least fifty percent (50%) of the combined voting
power of the voting securities of which are owned by the Company or by the
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.

	 	(ii)	 	For purposes of this Agreement, “Change in Control Period” means the period
commencing on the date occurring six months immediately prior to the date on which a
Change in Control occurs and ending on the second anniversary of the date on which a
Change in Control occurs.
	 
	 	(iii)	 	For purposes of this Agreement, “Exchange Act” means the Securities and
Exchange Act of 1934, as amended from time to time;
	 
	 	(iv)	 	For purposes of this Section 7, “Person” shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (1) the Company, (2) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company, (3)
an employee benefit plan of the Company, (4) an underwriter temporarily holding
securities pursuant to an offering of such securities or (5) a corporation owned,
directly or indirectly, by the stockholders of the Company in

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	 	 	 	substantially the same proportions as their ownership of shares of Common Stock of
the Company.
	 
	 	(v)	 	For purposes of this Agreement, “Release” means that specific document which
the Company shall present to Executive for consideration and execution after any
termination of employment pursuant to Section 5(e) and Section 6(e), wherein if he
agrees to such, he will irrevocably and unconditionally release and forever discharge
the Company, it subsidiaries, affiliates and related parties from any and all causes of
action which Executive at that time had or may have had against the Company (excluding
any claim for indemnity under this Agreement, any claim under state workers’
compensation or unemployment laws, or any claim under COBRA).

     8. No Other Benefits or Compensation. Except as may be provided under this Agreement, or
under the terms of any incentive compensation, employee benefit, or fringe benefit plan applicable
to Executive at the time of Executive’s termination or resignation, Executive shall have no right
to receive any other compensation, or to participate in any other plan, arrangement or benefit,
with respect to future periods after such termination or resignation.

     9. No Mitigation. In the event of any termination of employment hereunder, Executive shall be
under no obligation to seek other employment, and there shall be no offset against any amounts due
Executive under this Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain.

10. Covenants

     (a) Company Property. All written materials, records, data, and other documents prepared or
possessed by Executive during Executive’s employment with the Company are the Company’s property.
All information, ideas, concepts, improvements, discoveries, and inventions that are conceived,
made, developed, or acquired by Executive individually or in conjunction with others during
Executive’s employment (whether during business hours and whether on the Company’s premises or
otherwise) which relate to the Company’s business, products, or services are the Company’s sole and
exclusive property. All memoranda, notes, records, files, correspondence, drawings, manuals,
models, specifications, computer programs, maps, and all other documents, data, or materials of any
type embodying such information, ideas, concepts, improvements, discoveries, and inventions are the
Company’s property. At the termination of Executive’s employment with the Company for any reason,
Executive shall return all of the Company’s documents, data, or other Company property to the
Company.

     (b) Confidential Information; Non-Disclosure. Executive acknowledges that the business of the
Company is highly competitive and that the Company and will provide Executive with access to
“Confidential Information” relating to the business of the Company and its affiliates.

     For purposes of this Agreement, “Confidential Information” means and includes the Company’s
confidential and/or proprietary information and/or trade secrets that have been

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developed or used and/or will be developed and that cannot be obtained readily by third
parties from outside sources. Confidential Information includes, by way of example and without
limitation, the following information regarding customers, employees, contractors, and the industry
not generally known to the public; strategies, methods, books, records, and documents; technical
information concerning products, equipment, services, and processes; procurement procedures and
pricing techniques; the names of and other information concerning customers, investors, and
business affiliates (such as contact name, service provided, pricing for that customer, type and
amount of services used, credit and financial data, and/or other information relating to the
Company’s relationship with that customer); pricing strategies and price curves; positions, plans,
and strategies for expansion or acquisitions; budgets; customer lists; research; weather data;
financial and sales data; trading methodologies and terms; evaluations, opinions, and
interpretations of information and data; marketing and merchandising techniques; prospective
customers’ names and marks; grids and maps; electronic databases; models; specifications; computer
programs; internal business records; contracts benefiting or obligating the Company; bids or
proposals submitted to any third party; technologies and methods; training methods and training
processes; organizational structure; personnel information, including salaries of personnel;
payment amounts or rates paid to consultants or other service providers; and other such
confidential or proprietary information.

     Information need not qualify as a trade secret to be protected as Confidential Information
under this Agreement, and the authorized and controlled disclosure of Confidential Information to
authorized parties by Company in the pursuit of its business will not cause the information to lose
its protected status under this Agreement. Executive acknowledges that this Confidential
Information constitutes a valuable, special, and unique asset used by the Company or its affiliates
in their businesses to obtain a competitive advantage over their competitors. Executive further
acknowledges that protection of such Confidential Information against unauthorized disclosure and
use is of critical importance to the Company and its affiliates in maintaining their competitive
position.

     Executive will also have access to Confidential Information of third parties, such as actual
and potential customers, suppliers, partners, joint venturers, investors, financing sources, and
the like, of the Company and its affiliates.

     The Company also agrees to provide Executive with one or more of the following: access to
Confidential Information; specialized training regarding the Company’s methodologies and business
strategies, and/or support in the development of goodwill such as introductions, information and
reimbursement of customer development expenses consistent with Company policy. The foregoing is
not contingent on continued employment, but is contingent upon Executive’s use of the Confidential
Information access, specialized training, and goodwill support provided by Company for the
exclusive benefit of the Company and upon Executive’s full compliance with the restrictions on
Executive’s conduct provided for in this Agreement.

     In addition to the requirements set forth in Section 5(c)(i), Executive agrees that Executive
will not after Executive’s employment with the Company, make any unauthorized disclosure of any
then Confidential Information or specialized training of the Company or its affiliates, or make any
use thereof, except in the carrying out of his employment responsibilities

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hereunder. Executive also agrees to preserve and protect the confidentiality of third party
Confidential Information to the same extent, and on the same basis, as the Company’s Confidential
Information.

     (c) Unfair Competition Restrictions. The Company agrees to and shall provide Executive with
immediate access to Confidential Information. Ancillary to the rights provided to Executive
following employment termination, the Company’s provision of Confidential Information, specialized
training, and/or goodwill support to Executive, and Executive’s agreements, regarding the use of
same, and in order to protect the value of any restricted stock, training, goodwill support and/or
the Confidential Information described above, the Company and Executive agree to the following
provisions against unfair competition. Executive agrees that for a period of two (2) years
following the termination of employment for any reason (“Restricted Term”), Executive will not,
directly or indirectly, for Executive or for others, anywhere in the United States (including all
parishes in Louisiana, and Puerto Rico) (the “Restricted Area”) do the following, unless expressly
authorized to do so in writing by the Chief Executive Officer of the Company:

Engage in, or assist any person, entity, or business engaged in, the
selling or providing of products or services that would displace the
products or services that (i) the Company is currently in the
business of providing and was in the business of providing, or was
planning to be in the business of providing, at the time Executive
was employed with the Company, and (ii) that Executive had
involvement in or received Confidential Information about in the
course of employment; the foregoing is expressly understood to
include, without limitation, the business of the collection,
transfer, recycling and resource recovery, or disposal of solid
waste, hazardous or other waste, including the operation of
waste-to-energy facilities.

     It is further agreed that during the Restricted Term, Executive cannot engage in any of the
enumerated prohibited activities in the Restricted Area by means of telephone, telecommunications,
satellite communications, correspondence, or other contact from outside the Restricted Area.
Executive further understands that the foregoing restrictions may limit his ability to engage in
certain businesses during the Restricted Term, but acknowledges that these restrictions are
necessary to protect the Confidential Information the Company has provided to Executive.

     A failure to comply with the foregoing restrictions will create a presumption that Executive
is engaging in unfair competition. Executive agrees that this Section defining unfair competition
with the Company does not prevent Executive from using and offering the skills that Executive
possessed prior to receiving access to Confidential Information, confidential training, and
knowledge from the Company. This Agreement creates an advance approval process, and nothing herein
is intended, or will be construed as, a general restriction against the pursuit of lawful
employment in violation of any controlling state or federal laws. Executive shall be permitted to
engage in activities that would otherwise be prohibited by this covenant if such

12

 

activities are determined in the sole discretion of the Chief Executive Officer of the Company
to be no material threat to the legitimate business interests of the Company.

     (d) Non-Solicitation of Customers. For the Restricted Term, Executive will not call on,
service, or solicit competing business from customers of the Company or its affiliates whom
Executive, within the previous twelve (12) months, (i) had or made contact with, or (ii) had access
to information and files about, or induce or encourage any such customer or other source of ongoing
business to stop doing business with Company.

     (e) Non-Solicitation of Employees. During Executive’s employment, and for the Restricted Term,
Executive will not, either directly or indirectly, call on, solicit, encourage, or induce any other
employee or officer of the Company or its affiliates whom Executive had contact with, knowledge of,
or association within the course of employment with the Company to terminate his employment, and
will not assist any other person or entity in such a solicitation.

     (f) Non-Disparagement. Executive covenants and agrees that Executive shall not engage in any
pattern of conduct that involves the making or publishing of written or oral statements or remarks
(including, without limitation, the repetition or distribution of derogatory rumors, allegations,
negative reports or comments) which are disparaging, deleterious or damaging to the integrity,
reputation or good will of the Company, its management, or of management of corporations affiliated
with the Company.

     11. Enforcement of Covenants.

     (a) Termination of Employment and Forfeiture of Compensation. Executive agrees that any
breach by Executive of any of the covenants set forth in Section 10 hereof (a) during Executive’s
employment by the Company, shall be grounds for immediate dismissal of Executive for Cause pursuant
to Section 5(c)(i), which shall be in addition to and not exclusive of any and all other rights and
remedies the Company may have against Executive; or (b) after Executive’s employment terminated
without Cause or for Good Reason and during the Restricted Term, shall result in the forfeiture of
any remaining amounts under Section 6(e) or 7 of this Agreement.

     (b) Right to Injunction. Executive acknowledges that a breach of the covenants set forth in
Section 10 hereof will cause irreparable damage to the Company with respect to which the Company’s
remedy at law for damages will be inadequate. Therefore, in the event of breach or anticipatory
breach of the covenants set forth in this section by Executive, Executive and the Company agree
that the Company shall be entitled to seek the following particular forms of relief, in addition to
remedies otherwise available to it at law or equity: (A) injunctions, both preliminary and
permanent, enjoining or restraining such breach or anticipatory breach and Executive hereby
consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction;
and (B) recovery of all reasonable sums as determined by a court of competent jurisdiction expended
and costs, including reasonable attorney’s fees, incurred by the Company to enforce the covenants
set forth in this section.

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     (c) Separability of Covenants. The covenants contained in Section 10 hereof constitute a
series of separate but ancillary covenants, one for each applicable State in the United States and
the District of Columbia, and one for each applicable foreign country. If in any judicial
proceeding, a court shall hold that any of the covenants set forth in Section 10 exceed the time,
geographic, or occupational limitations permitted by applicable laws, Executive and the Company
agree that such provisions shall and are hereby reformed to the maximum time, geographic, or
occupational limitations permitted by such laws. Further, in the event a court shall hold
unenforceable any of the separate covenants deemed included herein, then such unenforceable
covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the
purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be
enforced in such proceeding. Executive and the Company further agree that the covenants in Section
10 shall each be construed as a separate agreement independent of any other provisions of this
Agreement, and the existence of any claim or cause of action by Executive against the Company
whether predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of any of the covenants of Section 10.

     12. Indemnification.

     The Company shall indemnify and hold harmless Executive to the fullest extent permitted by
Delaware law for any action or inaction of Executive while serving as an officer and director of
the Company or, at the Company’s request, as an officer or director of any other entity or as a
fiduciary of any benefit plan. This provision includes the obligation and undertaking of the
Executive to reimburse the Company for any fees advanced by the Company on behalf of the Executive
should it later be determined that Executive was not entitled to have such fees advanced by the
Company under Delaware law. The Company shall cover the Executive under directors and officers
liability insurance both during and, while potential liability exists, after the Employment Period
in the same amount and to the same extent as the Company covers its other officers and directors.

     13. Arbitration.

     Except with respect to enforcement of the covenants contained in Section 10 herein, the
parties agree that any dispute relating to this Agreement, or to the breach of this Agreement,
arising between Executive and the Company shall be settled by arbitration in accordance with the
Federal Arbitration Act and the commercial arbitration rules of the American Arbitration
Association (“AAA”), or any other mutually agreed upon arbitration service. The arbitration
proceeding, including the rendering of an award, shall take place in Houston, Texas, and shall be
administered by the AAA (or any other mutually agreed upon arbitration service). The arbitrator
shall be jointly selected by the Company and Executive within thirty (30) days of the notice of
dispute, or if the parties cannot agree, in accordance with the commercial arbitration rules of the
AAA (or any other mutually agreed upon arbitration service). All fees and expenses associated with
the arbitration shall be borne equally by Executive and the Company during the arbitration, pending
final decision by the arbitrator as to who should bear fees, unless otherwise ordered by the
arbitrator. The arbitrator shall not be authorized to create a cause of action or remedy not
recognized by applicable state or federal law. The award of the arbitrator shall be final and
binding upon the parties without appeal or review, except as permitted by the arbitration laws of

14

 

the State of Texas. The award shall be enforceable through a court of law upon motion of
either party.

     14. Requirement of Timely Payments.

     If any amounts which are required, or determined to be paid or payable, or reimbursed or
reimbursable, to Executive under this Agreement (or any other plan, agreement, policy or
arrangement with the Company) are not so paid promptly at the times provided herein or therein,
such amounts shall accrue interest, compounded daily, at an 8% annual percentage rate, from the
date such amounts were required or determined to have been paid or payable, reimbursed or
reimbursable to Executive, until such amounts and any interest accrued thereon are finally and
fully paid, provided, however, that in no event shall the amount of interest contracted for,
charged or received hereunder, exceed the maximum non-usurious amount of interest allowed by
applicable law.

     15. Withholding of Taxes.

     The Company may withhold from any compensation and benefits payable under this Agreement all
applicable federal, state, local, or other taxes.

     16. Source of Payments.

     All payments provided under this Agreement, other than payments made pursuant to a plan which
provides otherwise, shall be paid from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure payment. Executive
shall have no right, title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no greater than the right
of an unsecured creditor of the Company.

     17. Assignment.

     Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by Executive (but any payments due hereunder which
would be payable at a time after Executive’s death shall be paid to Executive’s designated
beneficiary or, if none, his estate) and shall be assignable by the Company only to any financially
solvent corporation or other entity resulting from the reorganization, merger or consolidation of
the Company with any other corporation or entity or any corporation or entity to or with which the
Company’s business or substantially all of its business or assets may be sold, exchanged or
transferred, and it must be so assigned by the Company to, and accepted as binding upon it by, such
other corporation or entity in connection with any such reorganization, merger, consolidation,
sale, exchange or transfer in a writing delivered to Executive in a form reasonably acceptable to
Executive (the provisions of this sentence also being applicable to any successive such
transaction).

15

 

     18. Entire Agreement; Amendment.

     This Agreement shall supersede any and all existing oral or written agreements,
representations, or warranties between Executive and the Company or any of its subsidiaries or
affiliated entities relating to the terms of Executive’s employment by the Company. It may not be
amended except by a written agreement signed by both parties.

     19. Governing Law.

     This Agreement shall be governed by and construed in accordance with the laws of the State of
Texas applicable to agreements made and to be performed in that State, without regard to its
conflict of laws provisions.

     20. Notices.

     Any notice, consent, request or other communication made or given in connection with this
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to
those listed below at their following respective addresses or at such other address as each may
specify by notice to the others:

	 	 	 	 	 
	 

	 	To the Company:
	 	Waste Management, Inc.
	 

	 	 	 	1001 Fannin, Suite 4000
	 

	 	 	 	Houston, Texas 77002
	 

	 	 	 	Attention: Corporate Secretary
	 
	 	 	 	 
	 

	 	To Executive:
	 	At the address for Executive set forth below.

     21. Miscellaneous.

     (a) Waiver. The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

     (b) Separability. Subject to Section 11 hereof, if any term or provision of this Agreement is
declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to
be enforceable, such term or provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.

     (c) Headings. Section headings are used herein for convenience of reference only and shall
not affect the meaning of any provision of this Agreement.

     (d) Rules of Construction. Whenever the context so requires, the use of the singular shall be
deemed to include the plural and vice versa.

16

 

     (e) Counterparts. This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such counterparts will
together constitute but one Agreement.

     22. Potential Limitation on Severance Benefits.

     (a) Maximum Severance Amount. Notwithstanding any provision in this Agreement to the
contrary, in the event of a qualifying termination (or resignation) under Section 6(e) or Section 7
of this Agreement it is determined by the Company that the Severance Benefits (as defined in
Section 22(b) below) would exceed 2.99 times the sum of the Executive’s then current base salary
and target bonus (the “Maximum Severance Amount”), then the aggregate present value of the
Severance Benefits provided to the Executive shall be reduced by the Company to the Reduced Amount.
The “Reduced Amount” shall be an amount, expressed in present value, that maximizes the aggregate
present value of the Severance Benefits without exceeding the Maximum Severance Amount.

     (b) Severance Benefits. For purposes of determining Severance Benefits under Section 22(a)
above, Severance Benefits means the present value of payments or distributions by the Company, its
subsidiaries or affiliated entities to or for the benefit of the Executive (whether paid or
provided pursuant to the terms of this Agreement or otherwise), and

(A) including: (i) cash amounts payable by the Company in the event of termination of
Executive’s employment; and (ii) the present value of benefits or perquisites provided for
periods after termination of employment (but excluding benefits or perquisites provided to
employees generally); and

(B) excluding: (i) payments of salary, bonus or performance award amounts that had accrued
at the time of termination; (ii) payments based on accrued qualified and non-qualified
deferred compensation plans, including retirement and savings benefits; (iii) any benefits
or perquisites provided under plans or programs applicable to employees generally; (iv)
amounts paid as part of any agreement intended to “make-whole” any forfeiture of benefits
from a prior employer; (v) amounts paid for services following termination of employment for
a reasonable consulting agreement for a period not to exceed one year; (vi) amounts paid for
post-termination covenants (such as a covenant not to compete); (vii) the value of
accelerated vesting or payment of any outstanding equity-based award; and (viii) any payment
that the Board or any committee thereof determines in good faith to be a reasonable
settlement of any claim made against the Company.

     (c) Possible 280G Reduction. Following application of Section 22(a), in the event that the
payment of the remaining Severance Benefits to Executive plus any other payments to Executive which
would be subject to Code Section 280G (including any reduced Severance Benefits) (“280G Severance
Benefits”) would be subject (in whole or part), to any excise tax imposed under Code Section 4999
(the “Excise Tax”), then the cash portion of the 280G Severance Benefits shall first be further
reduced, and the non-cash 280G Severance Benefits shall thereafter be further reduced, to the
extent necessary so that no portion of the 280G Severance Benefits is subject to the Excise Tax,
but only if (i) the amount of the 280G Severance Benefits to be received by Executive, as so
reduced by this Section 22(c) and after subtracting

17

 

the amount of federal, state and local income taxes on such reduced 280G Severance Benefits
(after taking into account the phase out of itemized deductions and personal exemptions
attributable to such reduced 280G Severance Benefits) is greater than or equal to (ii) the amount
of the 280G Severance Benefits to be received by Executive without such reduction by this Section
22(c) after subtracting the amount of federal, state and local income taxes on such 280G Severance
Benefits and the amount of the Excise Tax to which Executive would be subject in respect of such
unreduced 280G Severance Benefits (after taking into account the phase out of itemized deductions
and personal exemptions attributable to such unreduced 280G Severance Benefits ).

     (d) Calculation of 280G Severance Benefits. For purposes of determining the 280G Severance
Benefits, (i) no portion of the 280G Severance Benefits, the receipt or enjoyment of which
Executive shall have waived at such time and in such manner as not to constitute a “payment” within
the meaning of Code Section 280G(b), shall be taken into account, (ii) no portion of the 280G
Severance Benefits shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”)
who is reasonably acceptable to Executive and selected by the accounting firm (the “Auditor”) which
was, immediately prior to the Change in Control, the Company’s independent auditor, does not
constitute a “parachute payment” within the meaning of Code Section 280G(b)(2) (including by reason
of Code Section 280G(b)(4)(A)); (iii) no portion of the 280G Severance Benefits shall be taken into
account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services
actually rendered, within the meaning of Code Section 280G(b)(4)(B), in excess of the “base amount”
(as defined in Code Section 280G(b)(3)) allocable to such reasonable compensation, and (iv) the
value of any non-cash benefit or any deferred payment or benefit included in the 280G Severance
Benefits shall be determined by the Auditor in accordance with the principles of Code Sections
280G(d)(3) and (4).

     (e) Determination of Present Value. For purposes of this Section 22, the present value of
Severance Benefits and 280G Severance Benefits 280G shall be determined in accordance with Code
Section 280G(d)(4).

     23. Compliance with Code Section 409A.

     (a) Compliance. It is the intention of the Company and Executive that this Employment
Agreement not result in unfavorable tax consequences to Executive under Code Section 409A. This
Section 23 does not create an obligation on the part of Company to modify the Employment Agreement
in the future and does not guarantee that the amounts or benefits owed under the Employment
Agreement will not be subject to interest and penalties under Code Section 409A.

     (b) Payment Timing. The payments of severance under Sections 6(e)(iii) and (iv) and Sections
7(a)(i), (ii) and (iii) above (“Separation Payments”) are designated as separate payments for
purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i)(F),
and, with respect to such Separation Payments, the exemption for involuntary terminations under
separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii). As a result, (A)
Separation Payments that are by their terms scheduled to be made on or before March 15th of the
calendar year following the applicable year of termination

18

 

(excluding for this purpose any payments to be made under Section 7(a)(ii)), (B) any
additional Separation Payments that are made on or before December 31st of the second calendar year
following the year of Executive’s termination and do not exceed the lesser of two times Base Salary
or two times the limit under Code Section 401(a)(17) then in effect, and (C) any Separation
Payments under Section 7(a) made on account of a 409A Change in Control within the meaning of Code
Section 409A are exempt from the requirements of Code Section 409A. If Executive is designated as
a “specified employee” within the meaning of Code Section 409A, then to the extent the Disability
Payments and Separation Payments to be made during the first six month period following Executive’s
termination of employment exceed such exempt amounts, the payments shall be withheld and the amount
of the payments withheld will be paid in a lump sum, with interest (at the Company’s then
applicable overnight rate), on the date that is six (6) months and one (1) day after Executive’s
termination. Continued medical benefits under Sections 6(e)(v) and 7(a)(i) above are intended to
satisfy the exemption for medical expense reimbursements under Treasury Regulation Section
1.409A-1(b)(9)(v)(B).

          IN WITNESS WHEREOF, this Agreement is EXECUTED as of the date first set forth above and
effective as set forth therein.

	 	 	 	 	 	 	 	 	 
	EXECUTIVE	 	WASTE MANAGEMENT, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Signature:

	 	/s/ Puneet Bhasin
 

	 	By:
	 	/s/ David P. Steiner
 

	 	 
	 
	Printed Name:

	 	Puneet Bhasin	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Home Address:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Street	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	City, State, Zip	 	 	 	 	 	 

19exv4w2

Exhibit
4.2

FALLBROOK TECHNOLOGIES INC.

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of January
11, 2010 by and among Fallbrook Technologies Inc., a Delaware corporation (the “Company”), and each
of the investors listed on Exhibit A hereto (each an “Investor” and collectively, the
“Investors”), and shall be effective as of the Effective Time (as defined below).

RECITALS

     A. The Company and the Investors are parties to an Amended and Restated Investor Rights
Agreement dated as of December 18, 2008 (the “Prior Agreement”), which sets forth certain
registration rights, rights of first offer and information rights granted to the Investors by the
Company.

     B. The Company intends to effect an initial public offering of the Company’s Common Stock on
the Toronto Stock Exchange (the “IPO”).

     C. In order to facilitate the completion of the IPO, the Company and the Investors desire to
amend and restate the Prior Agreement to provide as set forth in this Agreement, which amendment
and restatement would be effective immediately prior to the closing of the IPO (the “Effective
Time”) and contingent upon the closing of the IPO.

     Therefore, the Prior Agreement is, as of the Effective Time, amended and restated and
superseded and replaced in its entirety by this Agreement, and in consideration of the foregoing
recitals and the mutual promises hereinafter set forth, the parties hereto further agree as
follows:

1. Definitions.

     1.1 “Affiliate” means, with respect to any specified individual or entity, any other
individual or entity who or that, directly or indirectly, controls, is controlled by, or is under
common control with such specified individual or entity, including without limitation any partner,
officer, director, manager or employee of such entity and any venture capital fund now or hereafter
existing that is controlled by or under common control with one or more general partners or
managing members of, or shares the same management company with, such individual or entity.

     1.2 “Board of Directors” means the Company’s Board of Directors.

     1.3 “Common Stock” means the Common Stock, $0.001 par value, of the Company.

     1.4 “Equity Securities” means (i) Common Stock, rights, options or warrants to purchase Common
Stock, (ii) any security other than Common Stock having voting rights in the election of the Board
of Directors, other than rights contingent upon a failure to pay dividends, or (iii) any security
convertible into or exchangeable for any of the foregoing.

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          1.5 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          1.6 “Form S-3” means such form under the Securities Act as is in effect on the date hereof or
any successor registration form under the Securities Act subsequently adopted by the SEC (as
defined below) which permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC (as defined below).

          1.7 “Holder” means any Investor that holds Registrable Securities (as defined below) or
securities convertible into Registrable Securities or any assignee of record of such Registrable
Securities to whom rights under Section 2 have been duly assigned in accordance with Section 2.11
hereof.

          1.8 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, domestic partner, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural
person referred to herein.

          1.9 “Preferred Stock” means the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (each as defined below).

          1.10 “Register,” “registered” and “registration” refer to a registration effected by the
preparation and filing of a registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.

          1.11 “Registrable Securities” means: (i) any and all shares of Common Stock issued or issuable
upon conversion of the shares of Preferred Stock held by the Investors, (ii) the Common Stock
issuable upon exercise of the Common Stock Purchase Warrant issued by the Company to Gary Jacobs,
and (iii) any shares of Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other distribution with respect
to, in exchange for, or in replacement of, such shares of Common Stock described in clause (i);
provided, however, that particular shares of any of the foregoing shall cease to be Registrable
Securities once they have been sold in any public offering or transferred by the Holder in a
transaction in which its rights under this Agreement are not assigned in accordance with the
provisions of this Agreement.

          1.12 “Registrable Securities then outstanding” means the number of shares of Common Stock
which are Registrable Securities and (i) are then issued and outstanding or (ii) are then issuable
pursuant to the exercise or conversion of options, warrants or convertible securities.

          1.13 “SEC” means the United States Securities and Exchange Commission.

          1.14 “Securities Act” means the Securities Act of 1933, as amended.

          1.15 “Series A Preferred Stock” means the Company’s Series A Preferred Stock, $0.001 par
value.

2

 

          1.16 “Series B Preferred Stock” means the Company’s Series B Preferred Stock, $0.001 par
value.

          1.17 “Series C Preferred Stock” means the Company’s Series C Preferred Stock, $0.001 par
value.

          1.18 “Series D Preferred Stock” means the Company’s Series D Preferred Stock, $0.001 par
value.

          1.19 “Voting Agreement” means that certain Voting Agreement by and between the Company and the
Stockholders (as defined therein) from time-to-time party thereto.

2. Registration Rights.

     2.1 Demand Registration.

          (a) Request by Holders. If the Company shall receive at any time after six (6) months after
the closing of the IPO a written request from the Holders of at least 30% of the Registrable
Securities then outstanding (“Initiating Holders”) that the Company file a registration statement
under the Securities Act covering the registration of such number of Registrable Securities as
would have an anticipated aggregate public offering price of not less than US$7,500,000, then the
Company shall, within fifteen (15) business days of the receipt of such written request, give
written notice of such request (“Demand Notice”) to all Holders and, as soon as practicable, file a
registration statement under the Securities Act covering all Registrable Securities that the
Initiating Holders requested to be registered and any additional Registrable Securities requested
to be included in such registration by any other Holders, as specified by notice given by each such
Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each
case, subject to the limitations of this Section 2.

          (b) Underwriting. If the Initiating Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, then they shall so advise the Company as a
part of their request made pursuant to Section 2.1(a) and the Company shall include such
information in the Demand Notice. In such event, the right of any Holder to include such Holder’s
Registrable Securities in such registration shall be conditioned upon such Holder’s participation
in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided herein. The underwriters will be selected by the Company and shall
be reasonably acceptable to a majority in interest of the Initiating Holders. All Holders proposing
to distribute their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or underwriters selected for
such underwriting. Notwithstanding any other provision of this Section 2.1, if the managing
underwriters advise the Company in writing that marketing factors require a limitation of the
number of securities to be underwritten, then the Company shall so advise all Holders of
Registrable Securities that would otherwise be registered and underwritten pursuant hereto, and the
number of Registrable Securities that may be included in the underwriting shall be reduced as
required by the underwriters and allocated among the Holders on a pro rata basis according to the
number of Registrable Securities held by each Holder

3

 

requesting registration (including the Initiating Holders); provided, however, that the number
of shares of Registrable Securities to be included in such underwriting and registration shall not
be reduced unless all other securities of the Company are first entirely excluded from the
underwriting and registration. Any Registrable Securities excluded and withdrawn from such
underwriting shall be withdrawn from the registration.

          (c) Exceptions to Registration Obligations. The Company shall not be obligated to effect, or
to take any action to effect, any registration pursuant to this Section 2.1: (i) during the period
starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of
filing of, and ending on the date that is one hundred eighty (180) days after the effective date
of, a Company-initiated registration, provided that the Company is actively employing in good faith
commercially reasonable efforts to cause such registration statement to become effective; (ii)
after the Company has effected two (2) such registrations; or (iii) if the Initiating Holders
propose to dispose of shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 2.3. A registration shall not be counted as
“effected” for purposes of this Section 2.1 until such time as the applicable registration
statement has been declared effective by the SEC, unless the Initiating Holders withdraw their
request for such registration and forfeit their right to one demand registration pursuant to
Section 2.6.

          (d) Deferral of Registration. Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting registration pursuant to this Section 2.1 a certificate signed by the President
or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of
Directors, it would be materially detrimental to the Company and its stockholders for such
registration statement to be filed and it is therefore essential to defer the filing of such
registration statement, then the Company shall have the right to defer such filing for a period of
not more than 120 days following receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any 12-month period.

          (e) Other Company Shares. If the managing underwriters have not limited the Registrable
Securities to be underwritten, the Company may include securities for its own account or for the
account of others in such registration if the managing underwriters so agree and if the number of
Registrable Securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.

     2.2 Company Registration.

          (a) Notice to Holders. If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for shareholders other
than the Holders) any of its stock in connection with the public offering of such stock (other than
a registration relating solely to the issuance of securities by the Company pursuant to a stock
option, stock purchase or similar benefit plan or an SEC Rule 145 transaction, or a registration in
which the only stock being registered is stock issuable upon conversion of debt securities that are
also being registered), the Company shall promptly give each Holder written notice of such
registration. Upon the request of each Holder given within twenty (20) days after such notice is
given by the Company, the Company shall, subject to the provisions of

4

 

Section 2.2(c), use all reasonable efforts to cause to be registered all of the Registrable
Securities that each such Holder has requested to be included in such registration.

          (b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw
any registration initiated by it under this Section 2.2 before the effective date of such
registration, whether or not any Holder has elected to include Registrable Securities in such
registration. The expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.6.

          (c) Underwriting. If a registration of which the Company gives notice under this Section 2.2
is for an underwritten offering, then the Company shall so advise the Holders. In such event, the
right of any Holder to include such Holder’s Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriters selected for such
underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriters
advise the Company in writing that marketing factors require a limitation of the number of
securities to be underwritten, then the managing underwriters may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the number of shares that
may be included in the registration and the underwriting shall be allocated, first, to the Company,
and second, to each of the Holders requesting inclusion of their Registrable Securities in such
registration statement on a pro rata basis based on the total number of Registrable Securities then
held by each such Holder; provided, however, that no such reduction shall reduce the amount of
securities of the selling Holders included in the registration below 25% of the total amount of
securities included in such registration, unless such offering is the IPO, in which event all
Registrable Securities may be excluded. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares that may be included by
selling Holders without the written consent of not less than a majority in interest of the selling
Holders. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the managing underwriters. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder that is a partnership, limited liability company or corporation, the
partners or members, retired partners or members or shareholders of such Holder, the estates and
immediate family members of any of the foregoing persons and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single Holder, and any pro rata reduction with
respect to such Holder shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such Holder.

     2.3 Form S-3 Registration. Following its initial public offering, the Company shall use
commercially reasonable efforts to qualify for registration on Form S-3 or its successor form or
forms. In case the Company shall receive from any Holder or Holders of at least 30% of the
Registrable Securities then outstanding a written request or requests that the Company effect a
registration on Form S-3 or a successor form and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or Holders, then the
Company shall:

5

 

          (a) promptly give written notice of the proposed registration and the Holder’s or Holders’
request therefor, and any related qualification or compliance, to all other Holders of Registrable
Securities; and

          (b) as soon as practicable, use commercially reasonable efforts to effect such registration as
would permit or facilitate the sale and distribution of all or such portion of such Holder’s or
Holders’ Registrable Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holders joining in such request as are specified in a
request given to the Company within fifteen (15) days after the S-3 Notice is given; provided,
however, that the Company shall not be obligated to effect any such registration pursuant to this
Section 2.3:

               (i) if Form S-3 is not then available for such offering by the Holders;

               (ii) if the Holders, together with the holders of any other securities of the Company entitled
to and requesting inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than US$1,000,000;

               (iii) if the Company furnishes to the Holders a certificate signed by the President or Chief
Executive Officer of the Company stating that, in the good-faith judgment of the Board of
Directors, it would be materially detrimental to the Company and its shareholders for such
registration to be effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than 120 days after
receipt of the request of the Initiating Holders under this Section 2.3; provided, however, that
the Company shall not invoke this right more than once in any twelve (12) month period; or

               (iv) if the Company has, within the twelve (12) month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders pursuant to this Section
2.3; or

               (v) during the period ending one hundred eighty (180) days after the effective date of a
registration effected under Section 2.2 hereof.

          (c) Registrations effected pursuant to this Section 2.3 shall not be counted as demands for
registration effected pursuant to Section 2.1.

          (d) If the registration is for an underwritten offering, the provisions of Section 2.1(b)
hereof shall apply to such registration.

     2.4 Obligations of the Company. Whenever required under this Section 2 to effect the
registration of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

          (a) prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use commercially reasonable efforts to cause such registration statement to become
effective, and, upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to

6

 

one hundred twenty (120) days or until the Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs; provided, however, that
such 120-day period shall be extended for a period of time equal to the period the Holders refrain
from selling any securities included in such registration at the request of an underwriter of
securities of the Company;

          (b) prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement and, in connection with any registration on
Form S-3 pursuant to Section 2.3 above, use reasonable, diligent efforts to timely file all reports
required under the 1934 Act in order to maintain the right to continue to use such Form and to
maintain such registration in effect;

          (c) furnish to the selling Holders such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration;

          (d) use commercially reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such states or other
jurisdictions as shall be reasonably requested by the selling Holders, provided that the Company
shall not be required in connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or jurisdictions;

          (e) in the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriters of
such offering (it being understood and agreed that, as a condition to the Company’s obligations
under this clause (e), each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement);

          (f) notify each Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;

          (g) cause all such Registrable Securities registered pursuant hereunder to be listed on each
securities exchange and trading system (if any) on which similar securities issued by the Company
are then listed;

          (h) provide a transfer agent and registrar for all Registrable Securities registered pursuant
to such registration statement and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration; and

          (i) promptly make available for inspection by the selling Holders, any managing underwriter
participating in any disposition pursuant to such registration statement,

7

 

and any attorney or accountant or other agent retained by any such underwriter or selected by
the selling Holders, all financial and other records, pertinent corporate documents and properties
of the Company and cause the Company’s officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with any such registration statement.

          (j) Opinion and “Comfort” Letter. Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable Securities are delivered
to the underwriters for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective: (1) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable Securities, and
(2) a “comfort” letter dated as of such date, from the independent certified public accountants of
the Company, in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable Securities.

          (k) Earnings Statement. Otherwise use its commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, the Securities Act and the Exchange Act, and make
available to its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first day of the Company’s
first full calendar quarter after the effective date of the registration statement, which earnings
statement shall satisfy in all respects the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder.

     2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company
to take any action pursuant to Sections 2.1, 2.2 or 2.3 hereof that the selling Holders shall
furnish to the Company such information regarding themselves, the Registrable Securities held by
them and the intended method of disposition of such securities as shall be required to timely
effect the registration of their Registrable Securities.

     2.6 Expenses. All expenses (other than underwriting discounts and commissions) incurred in
connection with a registration pursuant to Sections 2.1, 2.2 and 2.3, including, without
limitation, registration, filing and qualification fees, printers’ and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling Holders, shall be borne by the Company. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding begun pursuant to
Sections 2.1 or 2.3 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses on a pro rata basis based on the number of
Registrable Securities that were to requested be included in the withdrawn registration), unless
the Holders of a majority of the Registrable Securities then outstanding agree to forfeit their
right to one demand registration pursuant to Section 2.1.

8

 

     2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 2.

     2.8 Indemnification. In the event any Registrable Securities are included in a registration
statement under Sections 2.1, 2.2 or 2.3 hereof:

          (a) By the Company. To the extent permitted by law, the Company shall indemnify and hold
harmless each Holder, the partners, members, officers and directors of each Holder, legal counsel
and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any expenses, losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such expenses, losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (each a “Violation”):

               (i) any untrue statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto;

               (ii) the omission or alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or

               (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange
Act, any federal or state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any federal or state securities law in connection with the offering
covered by such registration statement;

and the Company shall reimburse each such Holder, partner, officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them, as incurred, in
connection with investigating or defending any such loss, claim, damage liability or action;
provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to
amounts paid in settlement of any such expense, loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon actions or omissions made
in reliance upon and in conformity with written information furnished by or on behalf of any such
Holder, partner, officer or director, underwriter or controlling person expressly for use in
connection with such registration by such Holder, partner, officer, director, underwriter or
controlling person.

          (b) By Selling Holders. To the extent permitted by law, each selling Holder shall indemnify
and hold harmless the Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within the meaning of the
Securities Act, legal counsel and accountants for the Company, any underwriter and any other Holder
selling securities under such registration statement or any of such other

9

 

Holder’s partners, directors or officers or any person who controls such Holder within the
meaning of the Securities Act or the Exchange Act, against any expenses, losses, claims, damages or
liabilities (joint or several) to which any of the foregoing persons may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such expenses, losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such Violation arises out of or
is based on actions or omissions made in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration; and each such
Holder shall reimburse the Company and such other persons for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement contained in this
Section 2.8(b) shall not apply to amounts paid in settlement of any such expense, loss, claim,
damage, liability or action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; and provided further, that the total amounts payable in
indemnity by a Holder under this Section 2.8(b) in respect of any Violation shall not exceed the
net proceeds received by such Holder in the registered offering out of which such Violation arises.

          (c) Notice. Promptly after receipt by an indemnified party under this Section 2.8 of notice of
the commencement of any action (including any governmental action) for which a party may be
entitled to indemnification hereunder, such indemnified party shall, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying party shall have the right
to participate in such action and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party to which notice has been given, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this Section 2.8, but the
omission so to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section 2.8.

          (d) Contribution. In order to provide for just and equitable contribution to joint liability
under the Securities Act in any case in which either (i) any party otherwise entitled to
indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is
judicially determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact that this
Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities
Act may be required on the part of any party hereto for which indemnification is provided under
this Section 2.8; then, and in each such case, such parties will contribute to the aggregate
expenses,

10

 

losses, claims, damages or liabilities to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative fault of the indemnifying
party and the indemnified party in connection with the Violation that resulted in such expense,
loss, claim, damage or liability as well as other equitable considerations. The relative fault of
such parties shall be determined by reference to, among other things, whether the untrue or
allegedly untrue statement of a material fact or the omission or alleged omission of a material
fact relates to information supplied by the indemnifying party or indemnified party and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case, (A) no such Holder will be
required to contribute any amount in excess of the net proceeds from the sale of all such
Registrable Securities offered and sold by such Holder pursuant to such registration statement, and
(B) no individual or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any individual or entity
who was not guilty of such fraudulent misrepresentation; and provided further, that in no event
shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or
payable by such Holder pursuant to Section 2.8(b), exceed the net proceeds from the offering
received by such Holder, except in the case of willful misconduct or fraud by such Holder.

          (e) Survival. The obligations of the Company and Holders under this Section 2.8 shall survive
the completion of any offering of Registrable Securities in a registration under this Section 2,
and otherwise shall survive the termination of this Agreement.

     2.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and
regulations of the SEC which may at any time permit the sale of the Registrable Securities to the
public without registration, after such time as a public market exists for the Common Stock, the
Company agrees to:

          (a) make and keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act, at all times after the effective date of the first registration
under the Securities Act filed by the Company for an offering of its securities to the general
public;

          (b) use commercially reasonable efforts to file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements); and

          (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it has become subject to
the reporting requirements of the Exchange Act), (ii) a copy of the most recent annual or quarterly
report of the Company and (iii) such other reports and documents of the Company as a Holder may
reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder
to sell any such securities without registration (at any time after the Company has become subject
to the reporting requirements of the Exchange Act).

11

 

     2.10 “Market Stand-Off” Agreement. Each Holder hereby agrees that it will not, without the
prior written consent of the managing underwriters, during the period commencing on the effective
date of registration statement relating to the IPO and ending on the date specified by the Company
and the managing underwriters (such period not to exceed one hundred eighty (180) days, unless
requested by the Company or an underwriter to accommodate regulatory restrictions on (a) the
publication or other distribution of research reports and (b) analyst recommendations and opinions,
including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule
472(f)(4), or any successor provisions or amendments thereto), (i) lend, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option or contract to sell,
grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are then owned by the
Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section
2.10 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting
agreement, and shall be applicable to the Holders only if all officers, directors and shareholders
individually owning more than one percent (1%) of the Company’s outstanding Common Stock are
subject to the same restrictions. The underwriters in connection with the offering are intended
third-party beneficiaries of this Section 2.10 and shall have the right, power, and authority to
enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to
execute such agreements as may be reasonably requested by the managing underwriters in the offering
that are consistent with this Section 2.10 or that are necessary to give further effect thereto.
The Company shall use commercially reasonable efforts to obtain the consent of the underwriter(s)
to decrease the restrictions set forth in this Section 2.10 by providing for periodic releases of
portions of the securities restricted pursuant to this Section 2.10 and to have the restrictions
terminate if the trading price of the Common Stock after the effective date of the IPO exceeds a
certain threshold for a certain time period. Any discretionary waiver or termination of the
restrictions of any or all of such agreements by the Company or the underwriters shall apply pro
rata to all Holders subject to such agreements, based on the number of shares subject to such
agreements.

     In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.

     2.11 Assignment of Registration Rights. The rights to cause the Company to register
Registrable Securities pursuant to this Section 2 may be assigned to a transferee or assignee in
connection with any transfer or assignment of Registrable Securities by the Holder, provided that
(i) such transfer or assignment may otherwise be effected in accordance with applicable securities
laws, (ii) such transferee or assignee acquires at least ten percent (10%) of the Registrable
Securities held by the Holder, (iii) written notice is promptly given to the Company and (iv) such
transferee or assignee agrees to be bound by the provisions of this Agreement and (v) such
transferee or assignee is not a competitor of the Company; provided however, that the foregoing
limitation shall not apply to transfers or assignments by a Holder to (a) a partner,

12

 

member or shareholder of a Holder that is a partnership, limited liability company or
corporation, respectively, (b) a retired partner or member of such partnership or limited liability
company who retires after the date hereof, (c) the estate of any such partner, member or
shareholder (d) an Affiliate of any such partnership, limited liability company or corporation, (e)
such Holder’s Affiliates, Immediate Family Members or family partnership, family limited liability
company or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate
Family Members, or (f) any domestic partner of such partner, member or shareholder or of the Holder
who is covered under an applicable domestic relations statute, provided, that all such transferees
or assignees agree in writing to appoint a single representative as their attorney-in-fact for the
purpose of exercising any rights, receiving notices, or taking any action under this Section 2.

     2.12 Termination of Registration Rights. The Company’s obligations pursuant to Sections 2.1,
2.2 and 2.3 shall terminate upon the earlier of (i) five (5) years after the closing date of the
IPO or (ii) as to any Registrable Securities, at such time following such IPO, as such Registrable
Securities may immediately be sold in any three-month period without registration pursuant to
Rule 144 under the Securities Act.

     2.13 Limitations on Subsequent Registration Rights. From and after the date of this Agreement,
the Company shall not, without the prior written consent of the Holders of a majority of the
Registrable Securities then outstanding (voting together as a single class and on an as converted
basis), enter into any agreement with any holder or prospective holder of any securities of the
Company that provides such holder or prospective holder with registration rights with respect to
such securities unless (i) such other registration rights are subordinate to the registration
rights granted to the Holders hereunder and the inclusion of such securities will not reduce the
amount of the Registrable Securities of the Holders that are included in a given registration, or
(ii) such registration rights are pari passu rights granted in connection with certain equipment
leases or bank credit arrangements approved by the Board of Directors including the affirmative
vote of the director designated by NGEN III, L.P. (“NGEN”) pursuant to the Voting Agreement (“NGEN
Designee”); provided however, that with respect to (i) and (ii) the holders of such rights are
subject to market standoff obligations no more favorable to such persons than those contained
herein, provided that this limitation shall not apply to any additional Investor who becomes a
party to this Agreement in accordance with Section 6.14 hereof.

3. Reserved.

4. Reserved.

5. Reserved.

6. Miscellaneous.

     6.1 Notices. Any notice, request or other communication required or permitted hereunder shall
be in writing and shall be deemed to have been duly given if delivered personally, by facsimile
when receipt is electronically confirmed, one business day after delivery to a nationally
recognized overnight delivery service, or otherwise upon receipt, addressed (i) if to Investor, at
the address set forth below such Investor’s name on Exhibit A, and (ii) if to the Company, at the
address set forth below:

13

 

Fallbrook Technologies Inc.

9444 Waples Street, #410

San Diego, CA 92121

Fax: (858) 623-9563

Attn: William G. Klehm III

with a copy to:

DLA Piper LLP (US)

4365 Executive Drive, Ste 1100

San Diego, CA 92121

Fax: (858) 638-5018

Attn: Craig Andrews

     Any party hereto may, by ten (10) days’ prior notice so given, change its address for future
notices hereunder.

     6.2 Successors and Assigns. Each Investor agrees that it may not assign any of its rights or
obligations hereunder unless such rights and obligations are assigned by such Investor to an
individual or entity to which Registrable Securities are transferred by such Investor pursuant to
Section 2.11, and such assignee shall be deemed an “Investor” for purposes of this Agreement,
provided that such assignment shall be contingent upon the assignee providing a written instrument
to the Company notifying the Company of such assignment and agreeing in writing to be bound by the
terms of this Agreement. Except as otherwise provided herein, the provisions of this Agreement
shall inure to the benefit of, and shall be binding upon, the successors and permitted assigns of
the parties hereto.

     6.3 Amendments and Waivers. Any provision of this Agreement may be amended and the observance
thereof may be waived, either generally or in a particular instance and either retroactively or
prospectively, only with the written consent of the Company and the holders of a majority of the
Registrable Securities; provided, however, that this Agreement may not be amended and the
observance of any term hereof may not be waived with respect to any Investor without the written
consent of such Investor unless such amendment or waiver applies to all Investors in the same
fashion. The Company shall give prompt notice of any amendment hereof or waiver hereunder to any
party hereto that did not consent in writing to such amendment or waiver. Any amendment or waiver
effected in accordance with this Section 6.3 shall be binding upon each Investor, each permitted
successor or assignee of such Investor and the Company.

     6.4 Entire Agreement. This Agreement, together with all the exhibits hereto, constitutes and
contains the entire agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings,
duties or obligations between the parties with respect to the subject matter hereof. Furthermore,
each of the parties hereto agrees that upon the effectiveness of this Agreement, any and all prior
oral or written agreements between the Company and such party regarding a right of such party to
attend board meetings as an observer (including any right to designate an individual to attend
board meetings as an observer and/or any right to receive

14

 

materials provided to the members of the board of directors) is hereby terminated and shall be
of no further force or effect.

     6.5 Governing Law. This Agreement shall be governed by and construed exclusively in accordance
with the internal laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.

     6.6 Severability. If any provision of this Agreement is held to be unenforceable under
applicable law, then such provision shall be excluded from this Agreement and the balance of this
Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

     6.7 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing
to any party under Agreement upon any breach or default of any other party under this Agreement
shall impair any such right, power or remedy of the nonbreaching or nondefaulting party, nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence therein, or waiver
of or acquiescence in any similar breach or default theretofore or thereafter occurring, nor shall
any waiver of any single breach or default be deemed a waiver of any other breach or default
therefore or thereafter occurring. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.

     6.8 Captions. The captions to sections of this Agreement have been inserted for identification
and reference purposes only and shall not be used to construe or interpret this Agreement.

     6.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument. In the
event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect as if such facsimile
or “.pdf” signature page were an original thereof.

     6.10 Costs and Attorneys’ Fees. In the event that any action, suit or other proceeding is
instituted concerning or arising out of this Agreement or any transaction contemplated hereunder,
the prevailing party shall recover all of such party’s costs and attorneys’ fees incurred in each
such action, suit or other proceeding, including any and all appeals or petitions therefrom.

     6.11 Adjustments for Recapitalization Events. Wherever in this Agreement there is a reference
to a specific number of shares of Common Stock or Preferred Stock of the Company or a specific
dollar amount per share, then, upon the occurrence of any stock split, stock dividend, reverse
stock split or similar recapitalization event affecting such shares, the specific number of shares
or dollar amount so referenced in this Agreement shall automatically be proportionally adjusted to
reflect the effect on the outstanding shares of such class or series of stock of such
recapitalization event.

15

 

     6.12 Aggregation of Stock. All shares held or acquired by Affiliates shall be aggregated
together for the purpose of determining the availability of any rights under this Agreement.

     6.13 Waiver of Registration Rights. By executing this Agreement, the undersigned Investors
hereby waive on behalf of all Holders any registration rights (including any notice provisions)
granted under Section 2.2 of the Prior Agreement or Section 2.2 of this Agreement with respect to
the IPO. Such waiver shall be effective as of the date of execution of this Agreement (and not as
of the Effective Time) and shall be as to and binding upon all of the Investors and their
respective permitted successors and assigns.

     6.14 Failure to Consummate IPO. Notwithstanding anything to the contrary in this Agreement,
in the event that the IPO is not consummated on or prior to December 31, 2010, this Agreement shall
terminate and shall be of no further force or effect and the Prior Agreement shall continue
unmodified in full force and effect; provided that the waiver of registration rights set forth in
Section 6.13 with respect to the IPO shall survive the termination of this Agreement pursuant to
this Section 6.14.

[Remainder of page left intentionally blank]

16

 

     
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of
the date and year first above written.

	 	 	 	 	 	 	 
	 	 	Company:	 	 
	 
	 	 	 	 	 	 
	 	 	FALLBROOK TECHNOLOGIES INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ William G. Klehm III	 	 
	 

	 	 	 	 

William G. Klehm III
	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Address: 9444 Waples Street, #410	 	 
	 

	 	 	 	San Diego, CA 92121	 	 

 

 

COUNTERPART SIGNATURE PAGE TO FALLBROOK TECHNOLOGIES INC.

REGISTRATION RIGHTS AGREEMENT

	 	 	 	 	 	 	 
	Individual Investor:	 	Entity Investor:
	 
	 	 	 	 	 	 
	 	 	 
	(Signature)
	 	(Print Name of Entity)

	 
	 	 	 	 	 	 
	Name:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 	 	 	 	(Signature)

	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT A

INVESTORS

NGEN Partners III, L.L.C.

Stichting Custody Robeco Master Clean Tech II (EUR)

Stichting Custody Robeco Master Clean Tech II (USD)

Robeco Clean Tech Co-Investment Fund II, L.P.

A. Finley France Revocable Trust Agreement 01/04/1983

Abby Moskovitz

Al Blum

AllHug Investors, L.L.P. Dated 08/01/06

Alvin From

Andrew R. Midler

Ann F. Cogswell

Avram Ninyo

Barry F. Berkov and Emily S. Berkov Family Trust dtd 7/27/00

Barry M. Davis, Trustee of the Benjamin Segall Davis Trust

Barry Seidman

Bernard & Carey Simkin Family Trust

Bertram Woolf

Big Wood Holdings L.P.

Black Rock, LLC

Brock Family Community Foundation

Bruce C. Auld or Martha C. Auld, Trustees, U.D.T. dated Nov. 19, 1982

Bruce R. Kermott

C. Fred Bergsten

The Willingham Family Trust

CHEP 2, LLC

Chestnut Capital, LLC

CJL Family Trust, Charles J. Lidman, Trustee

Cobb Family Trust UTD 3/29/94

Colette Sue Carson

Daniel Einhorn and Emily Feldman Einhorn, Co-Trustees of the Daniel and Emily Feldman-Einhorn Trust
of 1994 UDT 4/13/94

David and Lois Nordin, Joint Tenants

David and Susan Kabakoff Family

David Eisenberg

Ickovic & Co. PC Profit Sharing Plan and Trust

David S. Kabakoff, Trustee of the Kabakoff Family Trust DTD 2/24/2000

Davis Affiliates, LP

 

 

Dennis Haggerty and Natalie Haggerty

Donald M. Saunders

Donald W. Grimm and Kathryn A. Grimm, Trustees of the Grimm Family Trust DTD 1/31/1986

Donna Dau-thi Tran Trust Dated 3/11/2002

Dr. Mario Fortunato and Clair Fortunato

Dung A. Quach or Phuong T. Tran

Earl N. Feldman Trust DTD 3/29/91

Emhel Investors Limited Partnership

Emile Barrios, Inc.

Ernest H. Pomerantz

ESRAY LLC

Estate of Adam Solomon

Gary E. Jacobs and Jerri-Ann Jacobs, Trustees of the Jacobs Family Trust

Gary L. Weiss

Genoka H. Thomassy and Fernand A. Thomassy

Gregory F. Gibsen

Harold Feder

Harold S. Small, SEP IRA

Hieu N. Ly and Jacqueline O. Tran Revocable Trust

Hoa K. Tran

Hugh & Allyn Thompson, Trustees of the Thompson Revocable Trust DTD 11/12/91

Hugh C. Thompson, III Revocable Trust 11/11/91

Hun-Seng Chao, Trustee of the Thompson Family Trust UTD 10/12/2002

Peterson For International Economics

Ira M. Lechner and Winifred Eileen Haag trustees, Ira M. Lechner and Winifred Eileen Haag Family
Trust dtd 1/21/00

Ira M. Lechner Charitable Remainder Trust DTD 12/21/1988

J. Bradford Jensen

McBride Family Trust, UTD 4/1/93

Jack Lechner and/or Susan Anne Maser, Custodians for Maude Maser Lechner

Jacobs Investment Company LLC

Jaffe Family Trust

James Alexandre

James J. Travers Jr.

James L. Davenport Revocable Trust 6/30/97

James M. Kessler

James T. Bartlett

James W. Frace, Trustee of the Frace Living Trust UDT 3/17/94

Jamey and Julie Power Revocable Trust

Jan S. Tuttleman, Trustee of the Jan S. Tuttleman 2000 Trust UTD 3/23/2000

Jeffrey & Nicole Nicks Family Trust DTD 5/10/2002

 

 

Jeffrey and Britney Ewing

Jeffrey F. Schoenbaum & Susan Schoenbaum Revocable Trust DTD 10/29/99

Jeffrey J. Macketta

John A. Sprague and Dorothy W. Sprague as Tenants in Common

John A. Sprague Irrevocable Family Trust

John D. Santoleri

John David Wood

John Ellis

John H. Cogswell

John J. Wild, Jr.

John L. Klehm, Sr.

John M. Cogswell

John U. Moorhead II

Jonathan J. Cowan

Johnathan A. Kabakoff

Judy Halaby

Kara Lan Thompson

Kenneth Lieberman, Trustee of the Kenneth and Barbara Lieberman 1995 Trust

Kuhlman/Ramirez 1990 Revocable Trust

Larry J. Leber

Lawrence E. Hess

Lee H. Davis, Trustee of the Lee H. Davis Revocable Trust dated 9/1/75

Lee R. Miskowski Trust U/A 4/19/66

Leo Crowley

Lesley Weiss Zwick

Lieberman Intergenerational Trust

Madison Ventures, LLC

Mariana Weinhold

Mark A. Cleveland

Mark S. Davis

Mark S. Weiss

Martha C. Auld

Martin M. Ehrlich and Lois H. Ehrlich, Trustee of the Ehrlich Family Trust

Matthew Holland

Matthew McDowell Thompson

Matthew L. Bennett

Mercaldo Family Trust Dated Oct 8, 2002

Michael K. Boyd, Trustee of the Michael K. Boyd Trust

Millspaugh Family Holdings LLC

Morgan Stanley Dean Witter Custodian for Ira Lechner IRA Rollover dated 7/30/98

 

 

Motion One CVT, LLC

Motion Systems, Inc.

MPKM Private Equity Fund II L.P.

Myron Parr

Myron Parr, Trustee Parr Children trust DTD 9/9/99

Neal F. Gibsen and Mary E. Gibsen, Trustees of the Gibsen Trust Agreement Dtd 11/29/05

NSF, LLC Custodian-IRA Rollover FBO Anthony N. Natella

Peter Fisher, Trustee, Fisher Wallen Family Trust DTD 1/9/98

Project High Hopes

Revocable Trust of Johanna Thompson Dated 9/13/1994

Richard M. Thompson Revocable Trust 9/13/94

Richard Wilson Petree, Jr. IRA, Charles Schwab & Co., Inc. as Custodian

Rob Lachenauer

Robert B. Lapidus, Trustee, Sherman & Lapidus LLP Profit Sharing Plan FBO Robert B. Lapidus Dtd
1/1/97

Robert B. Rosene, Jr.

Robert G. Anderson, Jr.

Robert Sherr

Roger B. Harwell

Roy L. Bliss

Russell H. Lewis

Ruth M. Klehm Revocable Trust

Ryan Zhao Thompson

S&L Investments, LLC

Sara M. Kabakoff

Select Ventures, LLC

Stephen Kelly Christensen

Stephen Perestam, Trustee Alberta Perestam Family Trust

Stephen S. Christensen

Stephanie C. Fair, Custodian for Ashley Fair

Stephanie Welch

Susan Pyle

T. Bing Byington

Terry L. Hogelucht

The Alan M. Nordin and Megan E. Nordin Living Trust

The King Living Trust, Rockwell D. King, Trustee

The Pajama Family Trust, Dated 12/27/07

Thien V. Tran

Thomas Schroeder

Timothy S. Davis Trust

Todd and Kristin Ehrlich

 

 

Tracy Jake Solomon

Vanguard Fiduciary Trust Company as custodian F/B/O IRA FBO Allyn H. Thompson, IRA

Vicki Rosen-Solomon

Victoria R. Torrilhon Non-Exempt Trust

W. Robert Logan

Wells Fargo Bank IRA C/F Thomas I. Schroeder

Whistler Capital LTD

William C. Nicks or Patti S. Nicks

William Chris Bourne

William H. Bourne Family Trust

Windhorse Partners, LP

Yun-Seng Chao

Adventure Seekers Travel, Inc.

Robert L. Engler SPT 10/13/95

CLMS Management LLC

Jaffe Family Trust

Vincenza Sera

Ron Mercaldo

Barbara Mellman Davis Revocable Trust

Ivan O’Neil

John Perrotta

Allan R. Kammerer

Stuart and Joan Rubin Family Trust

Kathryn Kruckel

Moira McBride Murphy

Anne Ronce Clarke

Fallbrook Series of LTS Capital Partners II, LLC

Fallbrook II Series of LTS Capital Partners II, LLC

Jeremiah B. Robins Trust

Charles J. Lidman, Custodian for Noah Lidman

Charles J. Lidman, Custodian for Tye Lidman

Earl N. Feldman, Trustee of the Earl N. Feldman Trust dated March 29, 1991

Ruth Hochman, Trustee of the Alexander I. Hochman Revocable Living Trust dated 5/31/89

Gary D. Hochman and Elyse S. Hochman, Trustees U.D.T dated March 10, 1999, the Gary and Elyse
Hochman

Jeffrey and Barbara Hochman, husband and wife, as joint tenants

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