EXECUTION
      COPY

     

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of January 5, 2006, by and among Phantom Fiber Corporation, a Delaware
      corporation, with headquarters located at 144 Front Street, Suite 580, Toronto,
      Ontario, Canada M5J 2L7 (the "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties
      hereto of even date herewith (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i)
      convertible notes of the Company (the "Notes")
      which
      will, among other things, be convertible into shares of the Company's common
      stock, par value $0.001 per share (the "Common
      Stock")
      (as
      converted, the "Conversion
      Shares"),
      in
      accordance with the terms of the Notes, and (ii) two series of warrants
      (collectively, the "Warrants")
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

    B. The
      Notes
      bear interest, which at the option of the Company, subject to certain
      conditions, may be paid in shares of Common Stock (the "Interest
      Shares").

     

    C. To
      induce
      the Buyers to execute and deliver the Securities 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 each of the Buyers hereby agree as
      follows:

     

    1.  Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a.  "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in The City of New York are authorized or required by law to remain
      closed.

     

    b.  "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c.  "Effective
      Date"
      means
      the date that the Registration Statement has been declared effective by the
      SEC.

     

    d.  "Effectiveness
      Deadline"
      means
      the date which is 110 days after the Closing Date.

     

    e.  "Filing
      Deadline"
      means
      45 days after the Closing Date.

     

    f.  "Investor"
      means a
      Buyer or any transferee or assignee of the Notes or Warrants, as applicable,
      to
      whom a Buyer assigns its rights under this Agreement and who agrees to become
      bound by the provisions of this Agreement in accordance with Section 9 and
      any
      transferee or assignee thereof to whom a transferee or assignee of the Notes
      or
      Warrants, as applicable, assigns its rights under this Agreement and who agrees
      to become bound by the provisions of this Agreement in accordance with Section
      9
      and, in each case, is identified in the register of the Company.

     

    g.  "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    h.  "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 and the declaration of effectiveness of such Registration Statement(s)
      by the SEC.

     

    i.  "Registrable
      Securities"
      means
      (i) the Conversion Shares issued or issuable upon conversion of the Notes,
      (ii) the Warrant Shares issued or issuable upon exercise of the Warrants,
      (iii) the Interest Shares issued or issuable under the Notes and (iv) any
      share capital of the Company issued or issuable, with respect to the Conversion
      Shares, the Interest Shares, the Warrant Shares or the Warrants as a result
      of
      any share split, share dividend, recapitalization, exchange or similar event
      or
      otherwise, without regard to any limitations on conversions of the Notes or
      exercises of the Warrants.

     

    j.  "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    k.  "Required
      Holders"
      means
      the holders of at least a majority of the Registrable Securities.

     

    l.  "Required
      Registration Amount"
      means
      125% of the sum of (i) the maximum number of Interest Shares issued and issuable
      pursuant to the terms of the Notes calculated as if all such Interest Shares
      were to be issued as of the trading date immediately preceding the applicable
      date of determination, (ii) the number of Conversion Shares issued and issuable
      pursuant to the Notes as of the trading day immediately preceding the applicable
      date of determination, and (iii) the number of Warrant Shares issued and
      issuable pursuant to the Warrants as of the trading day immediately preceding
      the applicable date of determination, all subject to adjustment as provided
      in
      Section 2(e).

     

    
      
        
        

      

      
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    m.  "Rule
      415"
      means
      Rule 415 under the 1933 Act or any successor rule providing for offering
      securities on a continuous or delayed basis.

     

    n.  "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2.  Registration.

     

    a.  Mandatory
      Registration.
      The
      Company shall prepare, and, as soon as practicable, but in no event later than
      the Filing Deadline, file with the SEC the Registration Statement on Form S-3
      covering the resale of all of the Registrable Securities. In the event that
      Form
      S-3 is unavailable for such a registration, the Company shall use such other
      form as is available for such a registration on another appropriate form
      reasonably acceptable to the Required Holders, subject to the provisions of
      Section 2(d). The Registration Statement prepared pursuant hereto shall register
      for resale at least the number of shares of Common Stock equal to the Required
      Registration Amount as of the date the Registration Statement is initially
      filed
      with the SEC. The Registration Statement shall contain (except if otherwise
      directed by the Required Holders) the "Selling
      Shareholders"
      and
      "Plan
      of Distribution"
      sections in substantially the form attached hereto as Exhibit
      B.
      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 the
      Effectiveness Deadline.

     

    b.  Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase in the number of Registrable Securities included therein shall
      be allocated pro rata among the Investors based on the number of Registrable
      Securities held by each Investor at the time the Registration Statement covering
      such initial 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 that becomes
      an
      Investor 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 covered by such Registration Statement shall be allocated to the
      remaining Investors, pro rata based on the number of Registrable Securities
      then
      held by such Investors which are covered by such Registration Statement. In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement without the prior written consent of the Required
      Holders.

     

    c.  Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review any registration pursuant to this Section 2
      ("Legal
      Counsel"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      designated by the Required Holders. The Company and Legal Counsel shall
      reasonably cooperate with each other in regards to the performance of the
      Company's obligations under this Agreement.

     

    d.  Ineligibility
      for Form S-3.
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another appropriate form reasonably acceptable
      to
      the Required Holders and (ii) undertake to register the Registrable Securities
      on Form S-3 as soon as such form is available, provided that the Company shall
      maintain the effectiveness of the Registration Statement then in effect until
      the earlier of (A) such time as a Registration Statement on Form S-3 covering
      the Registrable Securities has been declared effective by the SEC and (B) the
      time period during which the Company is otherwise required to keep the
      Registration Statement effective pursuant to Section 3(a).

     

    
      
        
        

      

      
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    e.  Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover all of the Registrable
      Securities required to be covered by such Registration Statement or an
      Investor's allocated portion of the Registrable Securities pursuant to Section
      2(b), the Company shall amend the applicable Registration Statement, or file
      a
      new Registration Statement (on the short form available therefor, if
      applicable), or both, so as to cover at least the Required Registration Amount
      as of the trading day immediately preceding the date of the filing of such
      amendment or new Registration Statement, in each case, as soon as practicable,
      but in any event not later than fifteen (15) days after the necessity therefor
      arises. The Company shall use its best efforts to cause such amendment and/or
      new Registration Statement to become effective as soon as practicable following
      the filing thereof. For purposes of the foregoing provision, the number of
      shares available under a Registration Statement shall be deemed "insufficient
      to
      cover all of the Registrable Securities" if at any time the number of shares
      of
      Common Stock available for resale under the Registration Statement is less
      than
      the product determined by multiplying (i) the Required Registration Amount
      as of
      such time by (ii) 0.90. The calculation set forth in the foregoing sentence
      shall be made without regard to any limitations on the conversion of the Notes
      or the exercise of the Warrants and such calculation shall assume that the
      Notes
      are then convertible into Shares of Common Stock at the then prevailing
      Conversion Rate (as defined in the Notes) and that the Warrants are then
      exercisable for Shares of Common Stock at the then prevailing Exercise Price
      (as
      defined in the Warrants).

     

    f.  Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the respective Filing
      Deadline (a "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the respective Effectiveness
      Deadline (an "Effectiveness
      Failure")
      or
      (ii) on any day after the Effective Date sales of all of the Registrable
      Securities required to be included on such Registration Statement cannot be
      made
      (other than during an Allowable Grace Period (as defined in Section 3(r))
      pursuant to such Registration Statement (including, without limitation, because
      of a failure to keep such Registration Statement effective, to disclose such
      information as is necessary for sales to be made pursuant to such Registration
      Statement or to register a sufficient number of Shares of Common Stock) (a
      "Maintenance
      Failure")
      then,
      as partial relief for the damages to any holder by reason of any such delay
      in
      or reduction of its ability to sell the underlying Shares of Common Stock (which
      remedy shall be exclusive of any other remedies available at law or in equity,
      the Company shall pay to each holder of Registrable Securities relating to
      such
      Registration Statement an amount in cash equal to two percent (2.0%) of the
      aggregate Purchase Price (as such term is defined in the Securities Purchase
      Agreement) of such Investor's Registrable Securities included in such
      Registration Statement on each of the following dates: (i) the day of a Filing
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty days) after a Filing Failure until such Filing Failure is cured; (ii)
      the
      day of an Effectiveness Failure and on every thirtieth day (pro rated for
      periods totaling less than thirty days) after an Effectiveness Failure until
      such Effectiveness Failure is cured; and (iii) the initial day of a Maintenance
      Failure and on every thirtieth day (pro rated for periods totaling less than
      thirty days) after a Maintenance Failure until such Maintenance Failure is
      cured. The payments to which a holder shall be entitled pursuant to this Section
      2(f) are referred to herein as "Registration
      Delay Payments."
      Registration Delay Payments shall be paid on the day of the Filing Failure,
      Effectiveness Failure and the initial day of a Maintenance Failure, as
      applicable, and thereafter on the earlier of (I) the thirtieth day after the
      event or failure giving rise to the Registration Delay Payments has occurred
      and
      (II) the third Business Day after the event or failure giving rise to the
      Registration Delay Payments is cured. In the event the Company fails to make
      Registration Delay Payments in a timely manner, such Registration Delay Payments
      shall bear interest at the rate of one percent (1.0%) per month (prorated for
      partial months) until paid in full.

     

    
      
        
        

      

      
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    3.  Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), 2(d) 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 promptly prepare and file with the SEC a Registration Statement
      with respect to the Registrable Securities and use its reasonable best efforts
      to cause such Registration Statement relating to the Registrable Securities
      to
      become effective as soon as practicable after such filing (but in no event
      later
      than the Effectiveness Deadline). The Company shall keep each Registration
      Statement effective pursuant to Rule 415 at all times until the earlier of
      (i)
      the date as of which the Investors may sell all of the Registrable Securities
      covered by such Registration Statement without restriction pursuant to Rule
      144(k) (or any successor thereto) promulgated under the 1933 Act or (ii) the
      date on which the Investors shall have sold all of the Registrable Securities
      covered by such Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that each Registration Statement (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 the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading. The Company shall submit to the SEC, within two (2) Business Days
      after the later of the date that (i) the Company learns that no review of a
      particular Registration Statement will be made by the staff of the SEC or that
      the staff has no further comments on a particular Registration Statement, as
      the
      case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c)
      (which approval is immediately sought), a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request.

     

    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 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. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company filing a
      report on Form 10-Q, Form 10-K or any analogous report under the Securities
      Exchange Act of 1934, as amended (the "1934
      Act"),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC on the same day on which the 1934 Act report is filed which created the
      requirement for the Company to amend or supplement such Registration
      Statement.

     

    
      
        
        

      

      
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    c.  The
      Company shall (A) permit Legal Counsel to review and comment upon (i) a
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to all Registration Statements
      (except for Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q
      and
      any similar or successor reports) within a reasonable number of days prior
      to
      their filing with the SEC, and (B) not file any Registration Statement or
      amendment or supplement thereto in a form to which Legal Counsel reasonably
      objects. The Company shall not submit a request for acceleration of the
      effectiveness of a Registration Statement or any amendment or supplement thereto
      without the prior approval of Legal Counsel, which consent shall not be
      unreasonably withheld. The Company shall furnish to Legal Counsel, without
      charge, (i) copies of any correspondence from the SEC or the staff of the SEC
      to
      the Company or its representatives relating to any Registration Statement,
      (ii)
      promptly after the same is prepared and filed with the SEC, one copy of any
      Registration Statement and any amendment(s) thereto, including financial
      statements and schedules, all documents incorporated therein by reference,
      if
      requested by an Investor, and all exhibits and (iii) upon the effectiveness
      of
      any Registration Statement, one copy of the prospectus included in such
      Registration Statement and all amendments and supplements thereto. The Company
      shall reasonably cooperate with Legal Counsel in performing the Company's
      obligations pursuant to this Section 3.

     

    d.  The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) promptly after the same
      is
      prepared and filed with the SEC, at least one copy of any Registration Statement
      and any amendment(s) thereto, including financial statements and schedules,
      all
      documents incorporated therein by reference, if requested by an Investor, all
      exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
      Registration Statement, ten (10) copies of the prospectus included in such
      Registration Statement and all amendments and supplements thereto (or such
      other
      number of copies as such Investor may reasonably request) and (iii) such other
      documents, including copies of any preliminary or final prospectus, as such
      Investor may reasonably request from time to time in order to facilitate the
      disposition of the Registrable Securities owned by such Investor.

     

    e.  The
      Company shall use its best efforts to (i) register and qualify, unless an
      exemption from registration and qualification applies, the resale by Investors
      of the Registrable Securities covered by a Registration Statement under such
      other securities or "blue sky" laws of all applicable jurisdictions in the
      United States, (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(e), (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 each 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.

     

    
      
        
        

      

      
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    f.  The
      Company shall notify Legal Counsel and each Investor in writing of the happening
      of any event, as promptly as practicable after becoming aware of such 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 omission to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in the light of the circumstances under which they were
      made, not misleading (provided that in no event shall such notice contain any
      material, nonpublic information), and, subject to Section 3(r), promptly prepare
      a supplement or amendment to such Registration Statement to correct such untrue
      statement or omission and deliver ten (10) copies of such supplement or
      amendment to Legal Counsel and each Investor (or such other number of copies
      as
      Legal Counsel or such Investor may reasonably request). The Company shall also
      promptly notify Legal Counsel and each Investor in writing (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 each Investor by facsimile or e-mail on the same day of such
      effectiveness and by overnight mail), (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.

     

    g.  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 each Investor who holds Registrable Securities being
      sold 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.

     

    h.  At
      the
      reasonable request of any Investor, the Company shall furnish to such Investor,
      on the date of the effectiveness of the Registration Statement and thereafter
      from time to time on such dates as an Investor may reasonably request (i) a
      letter, dated such date, from the Company's independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      addressed to the Investors, and (ii) an opinion, dated as of such date, of
      counsel representing the Company for purposes of such Registration Statement,
      in
      form, scope and substance as is customarily given in an underwritten public
      offering, addressed to the Investors.

     

    
      
        
        

      

      
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    i.  The
      Company shall make available for inspection by (i) any Investor, (ii) Legal
      Counsel and (iii) one firm of accountants or other agents retained by the
      Investors (collectively, the "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees, counsel and the Company's independent
      certified public accountants to supply all information which may be necessary
      and any Inspector may reasonably request; provided, however, that each Inspector
      shall agree to hold in strict confidence and shall not make any disclosure
      (except to an Investor) or use of any Record or other information which the
      Company determines in good faith to be confidential, and of which determination
      the Inspectors are so notified, unless (a) the disclosure of such Records is
      necessary to avoid or correct a misstatement or omission in any Registration
      Statement or is otherwise required under the 1933 Act, (b) the release of such
      Records is ordered pursuant to a final, non-appealable subpoena or order from
      a
      court or government body of competent jurisdiction, or (c) the information
      in
      such Records has been made generally available to the public other than by
      disclosure in violation of this or any other agreement of which the Inspector
      has knowledge. Each Investor agrees that it shall, upon learning that disclosure
      of such Records is sought in or by a court or governmental body of competent
      jurisdiction or through other means, give prompt notice to the Company and
      allow
      the Company, at its expense, to undertake appropriate action to prevent
      disclosure of, or to obtain a protective order for, the Records deemed
      confidential. Nothing herein (or in any other confidentiality agreement between
      the Company and any Investor) shall be deemed to limit the Investors' ability
      to
      sell Registrable Securities in a manner which is otherwise consistent with
      applicable laws and regulations.

     

    j.  The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning an Investor is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      written notice to such Investor and allow such Investor, at the Investor's
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, such information.

     

    k.  The
      Company shall use its best efforts to cause all of the Registrable Securities
      covered by a Registration Statement to be listed or quoted on each securities
      exchange or securities association 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
      association. The Company shall pay all fees and expenses in connection with
      satisfying its obligation under this Section 3(k).

     

    
      
        
        

      

      
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    l.  The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    m.  If
      requested by an Investor, the Company shall within five (5) days of receipt
      of
      notice from such Investor (i) incorporate in a prospectus supplement or
      post-effective amendment such information as an Investor reasonably requests
      to
      be included therein relating to the sale and distribution of Registrable
      Securities, including, without limitation, information with respect to the
      number of Registrable Securities being offered or sold, the purchase price
      being
      paid therefor and any other terms of the offering of the Registrable Securities
      to be sold in such offering; (ii) make all required filings of such prospectus
      supplement or post-effective amendment after being notified of the matters
      to be
      incorporated in such prospectus supplement or post-effective amendment; and
      (iii) supplement or make amendments to any Registration Statement if reasonably
      requested by an Investor holding any Registrable Securities.

     

    n.  The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the 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.

     

    o.  The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company's
      fiscal quarter next following the effective date of the Registration
      Statement.

     

    p.  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.

     

    q.  Within
      two (2) Business Days after a Registration Statement which covers 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 Investors whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit A.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    r.  Notwithstanding
      anything to the contrary herein, at any time after the Registration Statement
      has been declared effective by the SEC, the Company may delay the disclosure
      of
      material, non-public information concerning the Company the disclosure of which
      at the time is not, in the good faith opinion of the Board of Directors of
      the
      Company and its counsel, in the best interest of the Company and, in the opinion
      of counsel to the Company, otherwise required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Investors) and the date on which the
      Grace Period will begin, and (ii) notify the Investors in writing of the
      date on which the Grace Period ends; and, provided further, that no Grace Period
      shall exceed five (5) consecutive days and during any three hundred sixty five
      (365) day period such Grace Periods shall not exceed an aggregate of twenty
      (20)
      days and the first day of any Grace Period must be at least two (2) trading
      days
      after the last day of any prior Grace Period (each, an "Allowable
      Grace Period").
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section 3(g) hereof shall not be applicable during
      the
      period of any Allowable Grace Period. Upon expiration of the Grace Period,
      the
      Company shall again be bound by the first sentence of Section 3(f) with respect
      to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended Shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, and delivered a copy of the prospectus included as part of the applicable
      Registration Statement, prior to the Investor's receipt of the notice of a
      Grace
      Period and for which the Investor has not yet settled. 

     

    4.  Obligations
      of the Investors.

     

    a.  At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor's Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it, as shall be reasonably required to effect and maintain
      the effectiveness of the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. 

     

    b.  Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    c.  Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(g) or the first
      sentence of 3(f), such Investor will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Investor's receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(g) or the first
      sentence of 3(f) or receipt of notice that no supplement or amendment is
      required. Notwithstanding anything to the contrary, the Company shall cause
      its
      transfer agent to deliver unlegended Shares of Common Stock to a transferee
      of
      an Investor in accordance with the terms of the Securities Purchase Agreement
      in
      connection with any sale of Registrable Securities with respect to which an
      Investor has entered into a contract for sale prior to the Investor's receipt
      of
      a notice from the Company of the happening of any event of the kind described
      in
      Section 3(g) or the first sentence of 3(f) and for which the Investor has not
      yet settled.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    d.  Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it in connection with sales of
      Registrable
      Securities pursuant to the Registration Statement.

     

    5.  Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions, incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualifications fees, printers and accounting fees, and fees and disbursements
      of
      counsel for the Company shall be paid by the Company. The Company shall also
      reimburse the Investors for the fees and disbursements of Legal Counsel in
      connection with registration, filing or qualification pursuant to Sections
      2 and
      3 of this Agreement which amount shall be limited to $10,000.

     

    6.  Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    a.  To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
      an "Indemnified
      Person"),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys' fees, amounts paid in settlement or
      expenses, joint or several, (collectively, "Claims")
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified
      Damages"),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other "blue sky" laws of any jurisdiction
      in
      which Registrable Securities are offered ("Blue
      Sky Filing"),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in light of the circumstances under which
      the
      statements therein were made, not misleading, (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement or (iv) any violation of this
      Agreement (the matters in the foregoing clauses (i) through (iv) being,
      collectively, "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      for such Indemnified Person expressly for use in connection with the preparation
      of the Registration Statement or any such amendment thereof or supplement
      thereto, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(d); (ii) shall not be available to the extent such Claim is based
      on a
      failure of the Investor to deliver or to cause to be delivered the prospectus
      made available by the Company, including a corrected prospectus, if such
      prospectus or corrected prospectus was timely made available by the Company
      pursuant to Section 3(d); and (iii) shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of the Company, which consent shall not be unreasonably withheld or
      delayed. Such indemnity shall remain in full force and effect regardless of
      any
      investigation made by or on behalf of the Indemnified Person and shall survive
      the transfer of the Registrable Securities by the Investors pursuant to Section
      9.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    b.  In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section 6(a), the Company, each of its directors, each of its officers
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation occurs in reliance
      upon and in conformity with written information furnished to the Company by
      such
      Investor expressly for use in connection with such Registration Statement;
      and,
      subject to Section 6(c), such Investor will reimburse any legal or other
      expenses reasonably incurred by an Indemnified Party in connection with
      investigating or defending any such Claim; provided, however, that the indemnity
      agreement contained in this Section 6(b) and the agreement with respect to
      contribution contained in Section 7 shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of such Investor, which consent shall not be unreasonably withheld
      or
      delayed; provided, further, however, that the Investor shall be liable under
      this Section 6(b) for only that amount of a Claim or Indemnified Damages as
      does
      not exceed the net proceeds to such Investor as a result of the sale of
      Registrable Securities pursuant to such Registration Statement. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(b) with respect to any preliminary prospectus shall
      not inure to the benefit of any Indemnified Party if the untrue statement or
      omission of material fact contained in the preliminary prospectus was corrected
      on a timely basis in the prospectus, as then amended or
      supplemented.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    c.  Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one counsel for all such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. In the case of an Indemnified Person, legal counsel
      referred to in the immediately preceding sentence shall be selected by the
      Investors holding at least a majority in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate reasonably with the indemnifying party in connection with any
      negotiation or defense of any such action or Claim by the indemnifying party
      and
      shall furnish to the indemnifying party all information reasonably available
      to
      the Indemnified Party or Indemnified Person which relates to such action or
      Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
      Person fully apprised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent, provided, however, that the indemnifying party shall
      not unreasonably withhold, delay or condition its consent. No indemnifying
      party
      shall, without the prior written consent of the Indemnified Party or Indemnified
      Person, consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such Claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    d.  The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    e.  The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

     

    7.  Contribution.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no Person involved
      in the sale of Registrable Securities which Person is guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
      connection with such sale shall be entitled to contribution from any Person
      involved in such sale of Registrable Securities who was not guilty of fraudulent
      misrepresentation; and (ii) contribution by any seller of Registrable Securities
      shall be limited in amount to the net amount of proceeds received by such seller
      from the sale of such Registrable Securities pursuant to such Registration
      Statement.

     

    8.  Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule
      144"),
      the
      Company agrees to:

     

    a.  make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144; 

     

    b.  file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements (it being understood that nothing herein shall
      limit the Company's obligations under Section 4(c) of the Securities Purchase
      Agreement) and the filing of such reports and other documents is required for
      the applicable provisions of Rule 144; and

     

    c.  furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      Act, (ii) a copy of the most recent annual or quarterly report of the Company
      and such other reports and documents so filed by the Company, and (iii) such
      other information as may be reasonably requested to permit the Investors to
      sell
      such securities pursuant to Rule 144 without registration.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    9.  Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of such Investor's Registrable
      Securities if: (i) the Investor agrees in writing with the transferee or
      assignee to assign such rights, and a copy of such agreement is furnished to
      the
      Company within a reasonable time after such assignment; (ii) the Company is,
      within a reasonable time after such transfer or assignment, furnished with
      written notice of (a) the name and address of such transferee or assignee,
      and
      (b) the securities with respect to which such registration rights are being
      transferred or assigned; (iii) immediately following such transfer or assignment
      the further disposition of such securities by the transferee or assignee is
      restricted under the 1933 Act and applicable state securities laws; (iv) at
      or
      before the time the Company receives the written notice contemplated by clause
      (ii) of this sentence the transferee or assignee agrees in writing with the
      Company to be bound by all of the provisions contained herein; and (v) such
      transfer shall have been made in accordance with the applicable requirements
      of
      the Securities Purchase Agreement.

     

    10.  Amendment
      of Registration Rights.

     

    Provisions
      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 Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon each Investor and the Company. No such amendment shall
      be
      effective to the extent that it applies to less than all of the holders of
      the
      Registrable Securities. No consideration shall be offered or paid to any Person
      to amend or consent to a waiver or modification of any provision of any of
      this
      Agreement unless the same consideration also is offered to all of the parties
      to
      this Agreement.

     

    11.  Miscellaneous.

     

    a.  A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from the record owner of such
      Registrable Securities.

     

    b.  Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with a nationally recognized overnight
      delivery service, in each case properly addressed to the party to receive the
      same. The addresses and facsimile numbers for such communications shall
      be:

     

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    If
      to the
      Company: 

    


    Phantom
      Fiber Corporation 

    144
      Front
      Street, Suite 580, 

    Toronto,
      Ontario, Canada M5J 2L7

    Telephone:
       (416)
      703-4007 

    Facsimile:
       (416)
      703-0900

    Attention:
       Jeffrey
      Halloran

     

    With
      a
      copy (for informational purposes only) to:

     

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas, 21st Floor

    New
      York,
      New York 10018

    Telephone: (212)
      930-9700

    Facsimile:
       (212)
      930-9725

    Attention: Gregory
      Sichenzia, Esq.

    


    If
      to the
      Transfer Agent:

     

    PacWest
      Transfer, LLC

    360
      Main
      Street

    P.O.
      Box
      393

    Washington,
      Virginia 22747

    Telephone:
       (540)
      675-3129

    Facsimile:
       (540)
      675-3281

    Attention: Laurel
      Poffenroth

     

    If
      to
      Legal Counsel:

    


    Schulte 
      Roth
& Zabel LLP

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Telephone:
      (212) 756-2000

    Facsimile:
      (212) 593-5955

    Attention:
      Eleazer N. Klein, Esq.

    


    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, or to such other address and/or facsimile number and/or
      to
      the attention of such other Person as the recipient party has specified by
      written notice given to each other party five (5) days prior to the
      effectiveness of such change. Written confirmation of receipt (A) given by
      the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender's facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    The
      Company hereby irrevocably appoints The Corporation Trust Company at 1209 Orange
      Street, Wilmington, Delaware 19801, Telephone: (302) 658-7581, Facsimile: (302)
      655-5049, as
      its
      agent for the receipt of service of process in connection with any action
      pursuant to any Transaction Document in the United States. The Company agrees
      that any document may be effectively served on it in connection with any action,
      suit or proceeding in the United States by service on its agents.

     

    Any
      document shall be deemed to have been duly served if marked for the attention
      of
      the agent at its address (as set out above) or such other address in the United
      States as may be notified to the party wishing to serve the document and
      delivered in accordance with the notice provisions set forth in this Section
      11(b).

     

    If
      the
      Company's agent at any time ceases for any reason to act as such, the Company
      shall appoint a replacement agent having an address for service in the United
      States and shall notify each Buyer in writing of the name and address of the
      replacement agent. Failing such appointment and notification, each Buyer shall
      be entitled by notice to the Company to appoint a replacement agent to act
      on
      the Company's behalf. The provisions of this Section 11(b) applying to service
      on an agent apply equally to service on a replacement agent.

     

    c.  Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d.  All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    e.  This
      Agreement, the other Transaction Documents (as defined in the Securities
      Purchase Agreement) and the instruments referenced herein and therein constitute
      the entire agreement among the parties hereto with respect to the subject matter
      hereof and thereof. There are no restrictions, promises, warranties or
      undertakings, other than those set forth or referred to herein and therein.
      This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein supersede all prior agreements and understandings among the parties
      hereto with respect to the subject matter hereof and thereof.

     

    f.  Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    g.  The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    h.  This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    i.  Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    j.  All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

    k.  The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party, determined as if all of the Notes held by
      Investors then outstanding have been converted into Registrable Securities
      and
      all Warrants then outstanding have been exercised for Registrable Securities
      without regard to any limitations on conversion of the Notes or on exercises
      of
      the Warrants.

     

    l.  This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    m.  Unless
      otherwise indicated, all dollar amounts referred to in this Agreement are in
      United States Dollars ("US
      Dollars").
      All
      amounts owing under this Agreement or any Transaction Document shall be paid
      in
      US Dollars. All amounts denominated in other currencies shall be converted
      in
      the US Dollar equivalent amount in accordance with the Exchange Rate on the
      date
      of calculation. "Exchange
      Rate"
      means,
      in relation to any amount of currency to be converted into US Dollars pursuant
      to this Agreement, the US Dollar exchange rate as published in the Wall Street
      Journal on the relevant date of calculation.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    n.  (i)
      If
      for the purpose of obtaining or enforcing judgment against the Company or any
      Subsidiary, in any court in any jurisdiction it becomes necessary to convert
      into any other currency (such other currency being hereinafter in this Section
      11(n) referred to as the "Judgment
      Currency")
      an
      amount due in US Dollars under this Agreement, the conversion shall be made
      at
      the Exchange Rate prevailing on the Business Day immediately
      preceding:

     

    (1)  the
      date
      of actual payment of the amount due, in the case of any proceeding in the courts
      of New York or in the courts of any other jurisdiction that will give effect
      to
      such conversion being made on such date: or 

     

    (2)  the
      date
      on which the foreign court determines, in the case of any proceeding in the
      courts of any other jurisdiction (the date as of which such conversion is made
      pursuant to this Section 11(n) being hereinafter referred to as the
      "Judgment
      Conversion Date").

     

    (ii)
      If
      in the case of any proceeding in the court of any jurisdiction referred to
      in
      Section 11(n)(i)(2) above, there is a change in the Exchange Rate prevailing
      between the Judgment Conversion Date and the date of actual payment of the
      amount due, the applicable party shall pay such adjusted amount as may be
      necessary to ensure that the amount paid in the Judgment Currency, when
      converted at the Exchange Rate prevailing on the date of payment, will produce
      the amount of US Dollars which could have been purchased with the amount of
      Judgment Currency stipulated in the judgment or judicial order at the Exchange
      Rate prevailing on the Judgment Conversion Date.

     

    Any
      amount due from the Company or any Subsidiary, under this provision shall be
      due
      as a separate debt and shall not be affected by judgment being obtained for
      any
      other amounts due under or in respect of this Agreement.

     

    o.  The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

     

     

    *
      * * * *
      *

    


    


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              COMPANY:

               

              
                PHANTOM
                  FIBER CORPORATION

              

            
	 
 	 
 	 
 
	 	By:  	/s/ Jeffrey
              Halloran
	 	
              

              Name:  
                Jeffrey Halloran

              Title:    Chief
                Executive Officer

            
	 	 


    

     

    


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              BUYERS:

               

              MAGNETAR
                CAPITAL MASTER FUND, LTD.

            
	 
 	 
 	 
 
	 	By:  	Magnetar
              Financial LLC
	 	Its: 	
              Investment Manager

               

            
	 	By:	/s/ Paul Smith 
	 	
              

              Name:
                Paul Smith

              Title:
                General Counsel

            
	 	 


    

     

    
 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              [OTHER
                BUYERS]:

            
	 
 	 
 	 
 
	 	By:  	/s/
              Mark
              J. Nuovo 
	 	
              

              Name:
                Mark J. Nuovo 

              Title:
                Individual

            
	 	 


    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Konstantine (Gus) John Lucas
	 	
                

                Name:
                  Konstantine (Gus) John Lucas

                Title:
                  Investor

              
	 	 


      

       

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Pamela Ritchie 
	 	
                

                Name:
                  Pamela Ritchie

                Title:
                  Investor

              
	 	 


      

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

                 

                The
                  Sunderland Family Trust

              
	 
 	 
 	 
 
	 	By:  	/s/
                Ronald B. Sunderland 
	 	
                

                Name:
                  Ronald B. Sunderland

                
                  Title:
                    Trustee/Trustor

                

              
	 	 


      

    

     

    
 

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Linda A. Abrams 
	 	
                

                Name:
                  Linda Anne Abrams

                Title:
                  Investor

              
	 	 


      

    

     

    
 

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Michael Russo 
	 	
                

                Name:
                  Michael Russo

                Title:
                  Trustee, Russ Living Trust 5/1/98

              
	 	 


      

       

    

    


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Mark
                P. DeVitre 
	 	
                

                Name:
                  Mark P. DeVitre

                Title:
                  Investor

              
	 	 


      

    

     

     

    

 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Howard
                Shapiro
	 	
                

                Name:

                Title:
                  

              
	 	 


      

    

     

    

 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

                 

                Financial
                  Trading Consultants Pension Plan

              
	 
 	 
 	 
 
	 	By:  	/s/
                Howard Shapiro
	 	
                

                Name:
                  

                Title:
                  

              
	 	 


      

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

                 

                Meuqer
                  Master Intl Pension Plan

              
	 
 	 
 	 
 
	 	By:  	/s/
                Howard Shapiro
	 	
                

                Name: 

                Title:
                  Trustee

              
	 	 


      

    

    
 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     
       

      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Timothy J. Livak
	 	
                

                Name:
                  Timothy J. Livak

                Title:
                  

              
	 	 


      

    

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     
       

      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/ John
                Cramer 
	 	 	
                

                Name:
                  John Cramer

                Title:
                  

              
	 	 	 
	 	By:	
                /s/
                  Sharon R. Hawkins

              
	 	
                

                
                  Sharon
                    R. Hawkins

                

              
	 	 


      

    

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
       

      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Robert Kantor 
	 	
                

                Name:
                  Robert Kantor

                Title:
                  

              
	 	 


      

       

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

     

    
      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Harry Forman 
	 	
                

                Name:
                  Harry Forman

                Title:
                  

              
	 	 


      

       

    

     

    

 

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their respective signature page to this
      Registration Rights Agreement to be duly executed as of the date first written
      above.

    
       

      
        	 	 	 
	 	
                [OTHER
                  BUYERS]:

              
	 
 	 
 	 
 
	 	By:  	/s/
                Philip M. Barone
	 	
                

                Name:
                  

                Title:
                  

              
	 	 


      

    

     

    
 

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    


    SCHEDULE
      OF BUYERS

     

    


    
      	
               

              Buyer
                

            	 	
              Buyer
                Address

              and
                Facsimile Number

            	 	
              Buyer's
                Representative's Address 

              and
                Facsimile Number

            
	
              Magnetar
                Capital Master Fund, Ltd.

            	 	
              1603
                Orrington Avenue

              Evanston,
                IL 60201

              Attn:
                Richard Levy and Matthew Ray

              Facsimile:
                (847)
                905-5603

              Telephone:
                (847) 962-2308

            	 	
              Schulte
                Roth & Zabel LLP

              919
                Third Avenue

              New
                York, NY 10022

              Attn:
                Eleazer Klein, Esq. 

              Facsimile:
                (212) 593-5955

              Telephone:
                (212) 756-2000

            
	
              Mark
                J. Nuovo

            	 	
              2302
                City Lights Dr.

              Aliso
                Viejo, CA 92656

               

            	 	 
	
              Konstantine
                (Gus) John Lucas

            	 	
              17428
                Oak Creek Court

              Encino,
                CA 91316

              Telephone:
                (818) 891-6465

               

            	 	 
	
              Pamela
                Ritchie

            	 	
              7514
                Graystone Dr.

              West
                Hills, CA 91304

              (818)
                716-6568

               

            	 	 
	
              The
                Sutherland Family Trust

            	 	
              3728
                Regal Vista Drive

              Sherman
                Oaks, CA 91403

              Fax:
                (818) 906-0197

              H:
                (818) 906-0197

              O:
                (818) 977-4370

              C:
                (310) 850-0571

               

            	 	 
	
              Linda
                Anne Abrams

            	 	
              7251
                Sycamore Trail

              Los
                Angeles, CA 90068

              Home:
                (323) 876-5277

              Cell:
                (818) 802-9995

              Wk:
                (818) 977-4242

               

            	 	 
	
              Russo
                Living Trust 5/1/98

            	 	
              Michael
                Russo, Trustee

              4610
                Encino Ave.

              Encino,
                CA 91316

              Fax:
                (818) 789-0053

              Phone:
                (818) 788-9335

               

            	 	 
	
              Mark
                P. DeVitre

            	 	
              530
                S. Bentley Ave.

              Los
                Angeles, CA 90049

              Hm:
                (310) 476-4633

              Work:
                (818) 977-1056

               

            	 	 
	
              Howard
                Shapiro

            	 	
              199
                Logtown Road

              Port
                Jeruis, NY 12771

              (845)
                856-0451

               

            	 	 
	
              Financial
                Trading Consultants Pension Plan

            	 	
              199
                Logtown Road

              Port
                Jeruis, NY 12771

              (845)
                856-0451

            	 	 
	
              Meuqer
                Masters International Pension Plan

            	 	
              199
                Logtown Road

              Port
                Jeruis, NY 12771

              (845)
                856-0451

               

            	 	 
	
              Timothy
                J. Livak

            	 	
              24945
                Grissom Circle

              Laguna
                Hills, CA 92653

              (714)
                878-6766

              Fax:
                (949) 305-6073

               

            	 	 
	
              John
                Cramer and

              Sharon
                Hawkins

            	 	
              33167
                Wakeen Circle

              Temecola,
                CA 92592

              Fax:
                (818) 549-1409

              Tel:
                (310) 764-3439

               

            	 	 
	
              Robert
                Kantor

            	 	
              31
                Garfield Avenue

              Clifton,
                NJ 07012

              Fax:
                (212) 206-6028

              Phone:
                (212) 206-6179

               

            	 	 
	
              Harry
                Forman

            	 	
              5401
                Bevis Ave.

              Sherman
                Oaks, CA 91411

              (818)
                787-4900

               

            	 	 
	
              Philip
                M. Barone

            	 	
              3103
                Executive Parkway, Suite 100

              Toledo,
                OH 43606

              (419)
                551-4300

              cell:
                (419) 392-2812

            	 	 


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
      A

    


    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

     

     

    [Transfer
      Agent]

    [Address]

    Attention:
      

    


    Re: Phantom
      Fiber Corporation

     

    Ladies
      and Gentlemen:

     

    [We
      are][I am] counsel to Phantom Fiber Corporation, a Delaware corporation (the
      "Company"),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the "Securities
      Purchase Agreement")
      entered into by and among the Company and the buyers named therein
      (collectively, the "Holders")
      pursuant to which the Company issued to the Holders subordinated secured
      convertible notes (the "Notes")
      convertible into the Company's common stock, $0.001 par value
      (the "Common
      Stock"),
      warrants exercisable for shares of Common Stock (the "Warrants").
      Pursuant to the Securities Purchase Agreement, the Company also has entered
      into
      a Registration Rights Agreement with the Holders (the "Registration
      Rights Agreement")
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement),
      including the shares of Common Stock issuable upon conversion of the Notes
      and
      the shares of Common Stock issuable upon exercise of the Warrants, under the
      Securities Act of 1933, as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-_____________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the Registrable Securities which names each of the Holders as a
      selling shareholder thereunder.

     

    In
      connection with the foregoing, [we][I] advise you that a member of the SEC's
      staff has advised [us][me] by telephone that the SEC has entered an order
      declaring the Registration Statement effective under the 1933 Act at
[ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and
      [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
      staff, that any stop order suspending its effectiveness has been issued or
      that
      any proceedings for that purpose are pending before, or threatened by, the
      SEC
      and the Registrable Securities are available for resale under the 1933 Act
      pursuant to the Registration Statement.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    This
      letter shall serve as our standing opinion to you that the shares of Common
      Stock are freely transferable by the Holders pursuant to the Registration
      Statement. You need not require further letters from us to effect any future
      legend-free issuance or reissuance of shares of Common Stock to the Holders
      as
      contemplated by the Company's Irrevocable Transfer Agent Instructions dated
      January 4, 2005. 

     

     

    Very
      truly yours,

     

    [ISSUER'S
      COUNSEL]

     

    By:_____________________

    CC: [LIST
      NAMES OF HOLDERS]

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
      B

    


    SELLING
      SHAREHOLDERS

     

    The
      shares of Common Stock being offered by the selling shareholders are issuable
      upon conversion of the convertible notes and upon exercise of the warrants
      and
      as interest on the convertible notes. For additional information regarding
      the
      issuance of those convertible notes and warrants, see "Private Placement of
      Convertible Notes and Warrants" above. We are registering the shares of Common
      Stock in order to permit the selling shareholders to offer the shares for resale
      from time to time. Except for the ownership of the Convertible Notes and
      Warrants issued pursuant to the Securities Purchase Agreement to our knowledge,
      the selling shareholders have not had any material relationship with us within
      the past three years.

     

    The
      table
      below lists the selling shareholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      shareholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling shareholder, based on its ownership of the
      convertible notes and warrants, as of ________, 200_, assuming conversion of
      all
      convertible notes and exercise of the warrants held by the selling shareholders
      on that date, without regard to any limitations on conversions or
      exercise.

     

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      the
      selling shareholders.

     

    In
      accordance with the terms of registration rights agreements with the selling
      shareholders, this prospectus generally covers the resale of at least 125%,
      or
      (i) the maximum number of shares of Common Stock issuable as interest on the
      convertible notes, of the sum of (ii) the number of shares of Common Stock
      issuable upon conversion of the convertible notes (and the interest accrued
      and
      payable thereunder) as of the trading day immediately preceding the date the
      registration statement is initially filed with the SEC and (iii) the number
      of
      shares of Common Stock issuable upon exercise of the related warrants as of
      the
      trading day immediately preceding the date the registration statement is
      initially filed with the SEC. Because
      the conversion price of the convertible notes, the price used to determine
      the
      number of interest shares and the exercise price of the warrants may be
      adjusted, the number of shares that will actually be issued may be more or
      less
      than the number of shares being offered by this prospectus. The fourth column
      assumes the sale of all of the shares offered by the selling shareholders
      pursuant to this prospectus.

     

    Under
      the
      terms of the convertible notes and the warrants, a selling shareholder may
      not
      convert the convertible notes or exercise the warrants to the extent such
      conversion or exercise would cause such selling shareholder, together with
      its
      affiliates, to beneficially own a number of shares of Common Stock which would
      exceed 4.99% of our then outstanding shares of Common Stock following such
      conversion or exercise, excluding for purposes of such determination shares
      of
      Common Stock issuable upon conversion of the convertible notes which have not
      been converted and upon exercise of the warrants which have not been exercised.
      The number of shares in the second column does not reflect this limitation.
      The
      selling shareholders may sell all, some or none of their shares in this
      offering. See "Plan of Distribution."

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    



    


     

    
      	
               

              Name
                of Selling Stockholder

               

            	
              Number
                of Shares of Common Stock Owned Prior to
                Offering

               

            	
              Maximum
                Number of Shares of Common Stock to be Sold Pursuant to this
                Prospectus

               

            	
              Number
                of Shares of Common Stock Owned After Offering

               

            
	
              Magnetar
                Capital Master Fund, Ltd. 

              (1)

               

            	 	 	
              0

            
	
              [Other
                Buyers]

               

            	 	 	 


    

    


     

    (1)
      Magnetar Financial LLC is the investment advisor of Magnetar Capital Master
      Fund, Ltd. ("Magnetar Master Fund") and consequently has voting control and
      investment discretion over securities held by Magnetar Master Fund. Magnetar
      Financial LLC disclaims beneficial ownership of the securities held by Magnetar
      Master Fund. Alec Litowitz is the manager of Magnetar Capital Partners LLC,
      which is the sole member of Magnetar Financial LLC. As a result, Mr. Litowitz
      may be considered the beneficial owner of any shares deemed to be beneficially
      owned by Magnetar Financial LLC. Mr. Litowitz disclaims beneficial ownership
      of
      these shares.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    


    PLAN
      OF DISTRIBUTION

     

    We
      are
      registering the shares of Common Stock issuable upon conversion of the
      convertible notes, as interest on the convertible notes and upon exercise of
      the
      warrants to permit the resale of these shares of Common Stock by the holders
      of
      the convertible notes and warrants from time to time after the date of this
      prospectus. We will not receive any of the proceeds from the sale by the selling
      shareholders of the shares of Common Stock. We will bear all fees and expenses
      incident to our obligation to register the shares of Common Stock.

     

    The
      selling shareholders may sell all or a portion of the shares of Common Stock
      beneficially owned by them and offered hereby from time to time directly or
      through one or more underwriters, broker-dealers or agents. If the shares of
      Common Stock are sold through underwriters or broker-dealers, the selling
      shareholders will be responsible for underwriting discounts or commissions
      or
      agent's commissions. The shares of Common Stock may be sold in one or more
      transactions at fixed prices, at prevailing market prices at the time of the
      sale, at varying prices determined at the time of sale, or at negotiated prices.
      These sales may be effected in transactions, which may involve crosses or block
      transactions, 

     

    
      	·  	
              on
                any national securities exchange or quotation service on which the
                securities may be listed or quoted at the time of
                sale;

            


    

     

    
      	·  	
              in
                the over-the-counter market;

            


    

     

    
      	·  	
              in
                transactions otherwise than on these exchanges or systems or in the
                over-the-counter market;

            


    

     

    
      	·  	
              through
                the writing of options, whether such options are listed on an options
                exchange or otherwise;

            


    

     

    
      	·  	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            


    

     

    
      	·  	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            


    

     

    
      	·  	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            


    

     

    
      	·  	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            


    

     

    
      	·  	
              privately
                negotiated transactions;

            


    

     

    
      	·  	
              short
                sales;

            


    

     

    
      	·  	
              sales
                pursuant to Rule 144;

            


    

     

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    
      	·  	
              broker-dealers
                may agree with the selling securityholders to sell a specified number
                of
                such shares at a stipulated price per
                share;

            


    

     

    
      	·  	
              a
                combination of any such methods of sale;
                and

            


    

     

    
      	·  	
              any
                other method permitted pursuant to applicable
                law.

            


    

     

    If
      the
      selling shareholders effect such transactions by selling shares of Common Stock
      to or through underwriters, broker-dealers or agents, such underwriters,
      broker-dealers or agents may receive commissions in the form of discounts,
      concessions or commissions from the selling shareholders or commissions from
      purchasers of the shares of Common Stock for whom they may act as agent or
      to
      whom they may sell as principal (which discounts, concessions or commissions
      as
      to particular underwriters, broker-dealers or agents may be in excess of those
      customary in the types of transactions involved). In connection with sales
      of
      the shares of Common Stock or otherwise, the selling shareholders may enter
      into
      hedging transactions with broker-dealers, which may in turn engage in short
      sales of the shares of Common Stock in the course of hedging in positions they
      assume. The selling shareholders may also sell shares of Common Stock short
      and
      deliver shares of Common Stock covered by this prospectus to close out short
      positions and to return borrowed shares in connection with such short sales.
      The
      selling shareholders may also loan or pledge shares of Common Stock to
      broker-dealers that in turn may sell such shares.

     

    The
      selling shareholders may pledge or grant a security interest in some or all
      of
      the convertible notes or warrants or shares of Common Stock owned by them and,
      if they default in the performance of their secured obligations, the pledgees
      or
      secured parties may offer and sell the shares of Common Stock from time to
      time
      pursuant to this prospectus or any amendment to this prospectus under Rule
      424(b)(3) or other applicable provision of the Securities Act of 1933, as
      amended, amending, if necessary, the list of selling shareholders to include
      the
      pledgee, transferee or other successors in interest as selling shareholders
      under this prospectus. The selling shareholders also may transfer and donate
      the
      shares of Common Stock in other circumstances in which case the transferees,
      donees, pledgees or other successors in interest will be the selling beneficial
      owners for purposes of this prospectus.

     

    The
      selling shareholders and any broker-dealer participating in the distribution
      of
      the shares of Common Stock may be deemed to be "underwriters" within the meaning
      of the Securities Act, and any commission paid, or any discounts or concessions
      allowed to, any such broker-dealer may be deemed to be underwriting commissions
      or discounts under the Securities Act. At the time a particular offering of
      the
      shares of Common Stock is made, a prospectus supplement, if required, will
      be
      distributed which will set forth the aggregate amount of shares of Common Stock
      being offered and the terms of the offering, including the name or names of
      any
      broker-dealers or agents, any discounts, commissions and other terms
      constituting compensation from the selling shareholders and any discounts,
      commissions or concessions allowed or reallowed or paid to
      broker-dealers.

     

    Under
      the
      securities laws of some states, the shares of Common Stock may be sold in such
      states only through registered or licensed brokers or dealers. In addition,
      in
      some states the shares of Common Stock may not be sold unless such shares have
      been registered or qualified for sale in such state or an exemption from
      registration or qualification is available and is complied with.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    There
      can
      be no assurance that any selling shareholder will sell any or all of the shares
      of Common Stock registered pursuant to the shelf registration statement, of
      which this prospectus forms a part.

     

    The
      selling shareholders and any other person participating in such distribution
      will be subject to applicable provisions of the Securities Exchange Act of
      1934,
      as amended, and the rules and regulations thereunder, including, without
      limitation, Regulation M of the Exchange Act, which may limit the timing of
      purchases and sales of any of the shares of Common Stock by the selling
      shareholders and any other participating person. Regulation M may also restrict
      the ability of any person engaged in the distribution of the shares of Common
      Stock to engage in market-making activities with respect to the shares of Common
      Stock. All of the foregoing may affect the marketability of the shares of Common
      Stock and the ability of any person or entity to engage in market-making
      activities with respect to the shares of Common Stock.

     

    We
      will
      pay all expenses of the registration of the shares of Common Stock pursuant
      to
      the registration rights agreement, estimated to be
      $[     ] in total, including, without limitation,
      Securities and Exchange Commission filing fees and expenses of compliance with
      state securities or "blue sky" laws; provided, however, that a selling
      shareholder will pay all underwriting discounts and selling commissions, if
      any.
      We will indemnify the selling shareholders against liabilities, including some
      liabilities under the Securities Act, in accordance with the registration rights
      agreements, or the selling shareholders will be entitled to contribution. We
      may
      be indemnified by the selling shareholders against civil liabilities, including
      liabilities under the Securities Act, that may arise from any written
      information furnished to us by the selling shareholder specifically for use
      in
      this prospectus, in accordance with the related registration rights agreements,
      or we may be entitled to contribution.

     

    Once
      sold
      under the shelf registration statement, of which this prospectus forms a part,
      the shares of Common Stock will be freely tradable in the hands of persons
      other
      than our affiliates.

    
 

    
      
        
        

      

      
        3