REGISTRATION RIGHTS AGREEMENT

 

 

 

                          REGISTRATION RIGHTS AGREEMENT

 

     THIS   REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of October

18, 2005, is entered into by and between Airtrax, Inc., a New Jersey corporation

(the "COMPANY"), and the investors identified on the signature pages hereto (the

"INVESTOR").

 

     WHEREAS:

 

     A.      In   connection   with the 8% Series C Unsecured Convertible Debenture

and   Warrants   Purchase Agreement by and between the parties hereto of even date

herewith   (the "PURCHASE AGREEMENT"), the Company has agreed, upon the terms and

subject   to   the conditions of the Purchase Agreement (the "OFFERING"), to issue

and sell to the Investor (i) an 8% Series C Unsecured Convertible Debenture (the

"DEBENTURE") convertible into shares of the Company's common stock, no par value

per share (the "COMMON STOCK") (as issued upon conversion of the Debentures, the

"CONVERSION   SHARES"),   and   (ii)   warrants   ("WARRANTS")   to purchase shares of

Common   stock   (as   issued upon exercise of the Warrants, the "WARRANT SHARES");

 

     B.      To   induce   the   Investor   to   execute   and   deliver   the   Purchase

Agreement,   the   Company has agreed to provide certain registration rights under

the   Securities   Act   of   1933,   as   amended,   and   the   rules   and   regulations

thereunder, or any similar successor statute (collectively, the "1933 ACT"), and

applicable   state   securities   laws.

 

     NOW,   THEREFORE,   in consideration of the premises and the mutual covenants

contained   herein   and   other   good   and valuable consideration, the receipt and

sufficiency   of   which   are   hereby   acknowledged,   the Company and the Investor

hereby   agree   as   follows.

 

     1.      DEFINITIONS.

            -----------

 

     As   used   in   this   Agreement, the following terms shall have the following

meanings:

 

            a.      "INVESTOR"   means the Investor, any   permitted   transferee or

assignee   thereof   to   whom the Investor assigns its rights under this Agreement

and who agrees to become bound by the provisions of this Agreement in accordance

with   Section   9   of   this   Agreement   and   any permitted transferee or assignee

thereof to whom a transferee or assignee assigns its rights under this Agreement

and who agrees to become bound by the provisions of this Agreement in accordance

with Section 9 of this Agreement.

 

                                       

<PAGE>

            b.      "PERSON" means a corporation, a   limited   liability   company,

an   association,   a   partnership,   an organization, a business, an individual, a

governmental or political subdivision thereof or a governmental agency.

 

            c.      "REGISTER,"   "REGISTERED,"   and   "REGISTRATION"   refer   to   a

registration   effected   by   preparing   and   filing   one   or   more   Registration

Statements   (as   defined   below) in compliance with the 1933 Act and pursuant to

Rule   415   under   the   1933   Act   or   any   successor rule providing for offering

securities   on   a continuous basis ("RULE 415"), and the declaration or ordering

of   effectiveness   of   such   Registration   Statement(s)   by   the   United   States

Securities and Exchange Commission (the "SEC").

 

            d.      "REGISTRABLE SECURITIES" means (i) the Common Stock issued or

issuable pursuant to the Purchase Agreement, including the Conversion Shares and

the Warrant Shares, whether issued or issuable, (ii) any shares of capital stock

issued or issuable with respect to the foregoing as a result of any stock split,

stock   dividend, recapitalization, anti-dilution adjustment, exchange or similar

event   or   otherwise,   without   regard   to   any   limitation on conversion of the

Debenture or exercise of the Warrants, (iii) shares of Common Stock set forth on

Schedule   1(d)   annexed   hereto,   (iv) shares of Common Stock to issuable by the

Company,   at   the   sole   option of the Company, to make any payments of interest

upon   the   Debentures;   (v)   shares of Common Stock to be issued pursuant to the

Second   Closing;   and   (vi)   shares   of   Common Stock which may be issued by the

Company   between   the   date   hereof and the filing of the Registration Statement

with   the   SEC   in   an   amount   not   to   exceed the difference between the gross

proceeds   of   securities sold in the Offering and $5,000,000 of gross proceeds .

 

           e.      "REGISTRATION   STATEMENT"   means a   registration statement   or

registration   statements   of   the   Company   filed   under   the   1933   Act.

 

     2.      REGISTRATION.

            ------------

 

            a.   Mandatory   Registration.   The   Company   shall   prepare,   and, as

soon   as   practicable,   but   in no event later than one hundred fifty (150) days

after   the   date   hereof   (the   "SCHEDULED   FILING   DATE"),   file with the SEC a

separate   Registration   Statement on Form SB-2 covering the resale of all of the

Registrable   Securities   issued   and issuable in connection with the Closing. In

the event that Form SB-2 is unavailable for such registration, the Company shall

use   such   other   form   as   is   available   for such registration, subject to the

provisions of Section 2.e of this Agreement. The Registration Statement prepared

pursuant   hereto shall register for resale that number of shares of Common Stock

equal   to at least 200% of the number of Registrable Securities (both issued and

issuable) as of the Closing Date. The Company shall use its best efforts to have

the Registration Statement declared effective by the SEC as soon as practicable,

but in no event later than thirty five (35) days after the Scheduled Filing Date

(the "SCHEDULED EFFECTIVE DATE").

 

 

                                         2

<PAGE>

            b.      Piggy-Back   Registrations.   If,   at   any   time   prior   to the

expiration of the Registration Period (as hereinafter defined) that there is not

an   effective Registration Statement covering all of the Registrable Securities,

the   Company   proposes to file with the SEC a Registration Statement for its own

account   or   the   account   of others under the 1933 Act of any of its securities

(other   than   a   Registration   Statement   on   Form   S-4   or   Form   S-8 (or their

equivalents   at   such   time)   relating   to   securities   to   be   issued solely in

connection   with   any acquisition of any entity or business or equity securities

issuable   in   connection with stock option or other employee benefit plans), the

Company   shall   promptly   send   to   the Investor written notice of the Company's

intention   to   file   a Registration Statement and of the Investor's rights under

this   Section 2.b and, if within five (5) days after receipt of such notice, the

Investor   shall   so   request   in   writing,   the   Company   shall   include in such

Registration   Statement   all   or   any   part   of   the   Registrable Securities the

Investor   requests   to   be   registered for resale, subject to the priorities set

forth   in   this   Section   2.b   below.   No   right   to registration of Registrable

Securities   under   this Section 2.b shall be construed to limit any registration

required   under   Section   2.a. The obligations of the Company under this Section

2.b may be waived by holders of a majority of the Registrable Securities. In the

event   that   the   Registration   Statement   being filed by the Company under this

Section   2(b)   is   for   an underwritten offering, the Investor whose Registrable

Securities   are   included in such Registration Statement shall, unless otherwise

agreed   to   by   the   Company,   offer   and sell such Registrable Securities in an

underwritten offering using the same underwriter or underwriters and, subject to

the   provisions   of   this   Agreement,   on the same terms and conditions as other

shares   of   Common Stock included in such underwritten offering. If the managing

underwriter(s)   advise   the   Company,   in writing, that in their reasonable good

faith   opinion,   marketing   or   other   factors   dictate that a limitation on the

number   of   shares   of   Common   Stock   which may be included in the Registration

Statement   is   necessary   to   facilitate   and   not adversely affect the proposed

offering, then the Company shall include in such registration:

 

           (1) first, all securities the Company proposes   to   sell   for its own

account;

 

           (2) second, up   tothe   full   number   of   securities   proposed   to   be

registered for the account of the holders of securities entitled to inclusion of

their   securities in the Registration Statement by reason of demand or mandatory

registration rights; and

 

            c.      Allocation   of   Registrable   Securities.   The   initial number

of   Registrable   Securities   included   in   the   Registration   Statement and each

increase   in   the   number   of   Registrable   Securities included therein shall be

allocated   pro rata among multiple Investors, if applicable, based on the number

of   Registrable   Securities   held   by each Investor at the time the Registration

Statement   covering such number of Registrable Securities or increase thereof is

declared   effective by the SEC. In the event that an Investor sells or otherwise

transfers   any   of such Investor's Registrable Securities, each transferee shall

be   allocated   a   pro   rata   portion of the then remaining number of Registrable

Securities   included   in   such   Registration   Statement for such transferor. Any

shares   of   Common   Stock   included in a Registration Statement and which remain

allocated to any Person which ceases to hold any Registrable Securities shall be

allocated   to   the   remaining   Investors,   pro   rata   based   on   the   number   of

Registrable Securities then held by such Investors.

 

                                        3

<PAGE>

           d.      Legal   Counsel.   Subject   to Section   5   hereof,   the Investor

holding   a majority of the Registrable Securities shall have the right to select

one   legal   counsel to review and oversee as their counsel any offering pursuant

to   this   Section 2 ("LEGAL COUNSEL"), which shall be Goldstein & DiGioia LLP as

their counsel or such other counsel as thereafter designated by the holders of a

majority   of Registrable Securities. The Company shall reasonably cooperate with

Legal Counsel in performing the Company's obligations under this Agreement.

 

           e.      Sufficient   Number   of   Shares   Registered. If   the number   of

shares   available under the Registration Statement filed pursuant to Section 2.a

is   insufficient   to   cover   all   of   the   Registrable    Securities   which   such

Registration   Statement   is   required   to   cover,   the   Company   shall amend the

Registration   Statement, or file a new Registration Statement (on the short form

available therefore, if applicable), or both, as soon as practicable, but in any

event   not   later than thirty (30) days after the necessity therefore arises and

the Company is so requested by the Investor (such date, an "ADDITIONAL SCHEDULED

FILING   DATE").   The   Company   shall use it best efforts to cause such amendment

and/or   new   Registration   Statement   to become effective as soon as practicable

following   the filing thereof, but in no event later than seventy five (75) days

after   the   Additional   Scheduled   Filing   Date   (each such date, an "ADDITIONAL

SCHEDULED EFFECTIVE DATE").

 

 

     3.      RELATED   OBLIGATIONS.

            --------------------

 

            Whenever the Investor has requested   that any Registrable Securities

be   registered   pursuant   to   Section   2.b   or   at   such   time as the Company is

obligated   to file a Registration Statement with the SEC pursuant to Section 2.a

or   2.e, the Company will use its best efforts to effect the registration of the

Registrable   Securities   in   accordance   with the intended method of disposition

thereof and, pursuant thereto, the Company shall have the following obligations:

 

            a.      The   Company shall keep each   of the   Registration Statements

required to be filed hereunder effective pursuant to Rule 415 at all times until

the   earlier of (i) eighteen (18) months after the Effective Date; (ii) the date

as   of   which the Investor may sell all of the Registrable Securities covered by

such   Registration   Statement pursuant to Rule 144(k) promulgated under the 1933

Act   (or   successor   thereto)   or (iii) the date on which (A) the Investor shall

have   sold   all   of   the   Registrable   Securities   covered   by such Registration

Statement   and   (B)   none   of   the   Debenture   or   Warrants   is outstanding (the

"REGISTRATION   PERIOD"),   each   of   which Registration Statements (including any

amendments   or supplements thereto and prospectuses contained therein) shall not

contain any untrue statement of a material fact or omit to state a material fact

required   to   be stated therein, or necessary to make the statements therein, in

light of the circumstances in which they were made, not misleading.

                                   

            b.      The   Company   shall   prepare   and   file   with   the   SEC   such

amendments   (including   post-effective   amendments)   and   supplements   to   a

Registration   Statement   and   the   prospectus   used   in   connection   with   such

 

 

                                        4

<PAGE>

Registration   Statement,   which   prospectus   is to be filed pursuant to Rule 424

promulgated   under   the   1933 Act, as may be necessary to keep such Registration

Statement   effective   at   all   times during the Registration Period, and, during

such   period,   comply   with   the   provisions of the 1933 Act with respect to the

disposition   of   all   Registrable   Securities   of   the   Company   covered by such

Registration   Statement   until   such   time as all of such Registrable Securities

shall   have   been   disposed   of   in   accordance   with   the   intended   methods of

disposition   by   the seller or sellers thereof as set forth in such Registration

Statement.

 

            c.      The   Company   shall   (a)   permit   Legal Counsel to review and

comment   upon   the   Registration   Statement   at   least two (2) days prior to its

filing with the SEC.

 

            d.      The Company shall (i) register and   qualify   the   Registrable

Securities   covered   by   a Registration Statement under such other securities or

"blue   sky"   laws of such jurisdictions in the United States as Legal Counsel or

the   Investor reasonably requests, (ii) prepare and file in those jurisdictions,

such   amendments   (including   post-effective amendments) and supplements to such

registrations   and   qualifications   as   may   be   necessary   to   maintain   the

effectiveness   thereof   during   the   Registration   Period, (iii) take such other

actions as may be necessary to maintain such registrations and qualifications in

effect   at   all   times   during   the Registration Period, and (iv) take all other

actions   reasonably necessary or advisable to qualify the Registrable Securities

for sale in such jurisdictions; provided, however, that the Company shall not be

required   in connection therewith or as a condition thereto to (x) qualify to do

business in any jurisdiction where it would not otherwise be required to qualify

but   for   this   Section   3.d, (y) subject itself to general taxation in any such

jurisdiction,   or   (z)   file a general consent to service of process in any such

jurisdiction.   The   Company shall promptly notify Legal Counsel and the Investor

who   holds   Registrable   Securities   of   the   receipt   by   the   Company   of   any

notification with respect to the suspension of the registration or qualification

of any of the Registrable Securities for sale under the securities or "blue sky"

laws of any jurisdiction in the United States or its receipt of actual notice of

the   initiation   or   threatening   of   any   proceeding   for   such   purpose.

 

            e.      As   promptly   as   practicable   after   becoming   aware of such

event, the Company shall notify Legal Counsel and the Investor in writing of the

happening   of   any   event   as   a   result   of   which the prospectus included in a

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, in light of the circumstances under

which   they   were   made,   not   misleading,   and promptly prepare a supplement or

amendment   to   such   Registration   Statement to correct such untrue statement or

omission,   and   deliver   one   (1)   copy of such supplement or amendment to Legal

Counsel and the Investor (or such other number of copies as Legal Counsel or the

Investor   may   reasonably request). The Company shall also promptly notify Legal

Counsel   and   the   Investor   as soon as practicable (i) when a prospectus or any

prospectus   supplement   or   post-effective   amendment has been filed, and when a

Registration   Statement   or   any   post-effective   amendment has become effective

(notification   of such effectiveness shall be delivered to Legal Counsel and the

Investor   by   facsimile   on   the   same   day   of such effectiveness), (ii) of any

request   by the SEC for amendments or supplements to a Registration Statement or

related prospectus or related information, and (iii) of the Company's reasonable

determination   that a post-effective amendment to a Registration Statement would

be appropriate.

 

 

                                        5

<PAGE>

            f.      The   Company   shall   use   its   best   efforts   to   prevent the

issuance   of   any   stop   order   or   other   suspension   of   effectiveness   of   a

Registration   Statement,   or   the   suspension of the qualification of any of the

Registrable   Securities   for   sale   in any jurisdiction and, if such an order or

suspension   is   issued,   to obtain the withdrawal of such order or suspension at

the   earliest   possible   moment and to notify Legal Counsel and the Investor who

holds   Registrable   Securities   being sold (and, in the event of an underwritten

offering,   the   managing   underwriters)   of   the   issuance of such order and the

resolution   thereof   or its receipt of actual notice of the initiation or threat

of   any proceeding for such purpose (such notice to be delivered by facsimile on

the   same   day   such notice of the initiation or threat of such proceeding, such

order or suspension is received by the Company and by overnight mail).

 

           g.      The   Company   shall use   its best   efforts either to (i) cause

all   the Registrable Securities covered by a Registration Statement to be listed

on   each   securities exchange or market on which securities of the same class or

series   issued   by   the   Company are then listed, if any, if the listing of such

Registrable   Securities   is   then   permitted under the rules of such exchange or

market,   or   (ii)   secure   the   inclusion   for quotation on the over-the-counter

market   on   the   electronic   bulletin board for such Registrable Securities and,

without   limiting   the   generality of the foregoing, to arrange for at least two

market   makers   to register with the National Association of Securities Dealers,

Inc.   ("NASD"), as such with respect to such Registrable Securities. The Company

shall   pay   all   fees   and expenses in connection with satisfying its obligation

under this Section 3.h.

 

           h.      The   Company    shall   use   its   best   efforts   to    cause   the

Registrable   Securities   covered   by the applicable Registration Statement to be

registered   with   or approved by such other governmental agencies or authorities

as   may   be   necessary   to   consummate   the   disposition   of   such   Registrable

Securities.

 

           i.      The   Company   shall   otherwise   use its best efforts to comply

with   all   applicable   rules   and   regulations of the SEC in connection with any

registration hereunder.

 

           j.       Within   two   (2)   business days after a Registration Statement

which   covers applicable Registrable Securities is ordered effective by the SEC,

the   Company   shall   deliver,   and   shall cause legal counsel for the Company to

deliver,   to   the transfer agent for such Registrable Securities (with copies to

the   Investor)   confirmation   that such Registration Statement has been declared

effective by the SEC in the form attached hereto as Exhibit A.

 

           k.      The   Company   shall   take   all   other   reasonable   actions

necessary   to expedite and facilitate disposition by the Investor of Registrable

Securities pursuant to a Registration Statement.

 

           l.      Each of the following events shall constitute   a "REGISTRATION

DEFAULT"