Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of April 4,
2006, by and among Touchstone Resources USA, Inc., a Delaware corporation, with
headquarters located at 1600 Smith Street, Suite 5100, Houston, Texas 77002 (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 (the
“Warrants”) which will be exercisable to purchase up to that number of shares of
Common Stock (as exercised collectively, the “Warrant Shares”).
          B. 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 90 days
after the Closing Date, or if there is a full review of the Registration
Statement by the SEC, 120 days after the Closing Date.

 

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                    e. “Filing Deadline” means the date 45 days from the date
hereof.
                    f. “Investor” means a Buyer or any transferee or assignee
thereof 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 assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
                    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 or ordering 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 and (iii) any capital stock of the
Company issued or issuable with respect to the Conversion Shares, the Notes, the
Warrant Shares or the Warrants as a result of any stock split, stock 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 130% of the sum of
(i) 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 (ii) 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) (without
regard to any limitations on conversion of the Notes or exercise of the
Warrants).
                    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

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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 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 Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit B.
The Company shall use its commercially reasonable 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. By 9:30 am on the Business
Day following the Effective Date, the Company shall file with the SEC in
accordance with Rule 424 under the 1933 Act the final prospectus to be used in
connection with sales pursuant to such Registration Statement.
                    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 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
other than the shares underlying or relating to the agreements and instruments
set forth on Schedule 2(b) which shares may be included on the Registration
Statement only to the extent the registration rights, as of the date hereof, of
such shares require their inclusion on the Registration Statement.
                    c. Legal Counsel. Subject to Section 5 hereof, the Required
Holders shall have the right to select one legal counsel to review and oversee
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 performing 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 such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.

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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
forty-five (45) days after the necessity therefor arises. The Company shall use
its commercially reasonable 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
not 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 one and a half percent (1.5%)
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(g) are referred to herein as

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“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.
          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 commercially reasonable 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
commercially 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 term “commercially reasonable best efforts” shall mean, among
other things, that 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

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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 or Form 10-QSB, Form 10-K or Form 10-KSB 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.
                    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 or Form 10-KSB,
and Reports on Form 10-Q or Form 10-QSB 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) if the Company shall not have filed a final prospectus in accordance
with Rule 424 per Section 2(a), 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 (ii) 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 commercially reasonable 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

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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.
                    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 commercially reasonable 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. If any Investor may be required under applicable
securities law to be described in the Registration Statement as an Underwriter,
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 commercially reasonable best
efforts either to (i) cause all of the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed
(which shall include the OTC Bulletin Board), if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all of the Registrable Securities
covered by a Registration Statement on the Nasdaq National Market, or (iii) if,
despite the Company’s commercially reasonable best efforts to satisfy the
preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the
preceding clauses (i) or (ii), to secure the inclusion for quotation on The
Nasdaq Capital Market

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or the American Stock Exchange for such Registrable Securities and, without
limiting the generality of the foregoing, to use its commercially reasonable
best efforts to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. (“NASD”) as such with respect
to such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(k).
                    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 ten
(10) 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 reasonably cooperate with the Investors
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 commercially
reasonable 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.
                    r. Notwithstanding anything to the contrary herein, at any
time after Effective Date, the Company may delay the disclosure of material,
non-public information

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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 ten (10) consecutive
days and during any three hundred sixty five (365) day period such Grace Periods
shall not exceed an aggregate of thirty (30) 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 (unless an exemption from such prospectus delivery requirement
exists), 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 ten (10) 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.

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                    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.
                    d. Each Investor covenants and agrees that it will comply
with the prospectus delivery requirements of the 1933 Act as applicable to or an
exemption therefrom 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 related to registrations 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 $15,000.
          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

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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) and (ii) 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.
                    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

12

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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.
                    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 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.

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                    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.

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          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 such 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:
If to the Company:

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Touchstone Resources USA, Inc.
1600 Smith Street,
Houston, TX 77002
Telephone:     (713) 784-1113
Facsimile:     (713) 785-8530
Attention:     Roger Abel
With a copy to:
Winstead
600 Town One Center
1450 Lake Robbins Drive
The Woodlands, TX 77380
Telephone: (281) 681-5900
Facsimile:  (281) 681-5901
Attention:     Paul Aubert
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.
                    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

16

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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.
                    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.

17

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

18

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          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:
 
            TOUCHSTONE RESOURCES USA, INC.
 
       
 
  By:   /s/ Roger Abel
 
       
 
      Name: Roger Abel
 
      Title:   Chairman and Chief Executive Officer

 

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          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:
 
            KINGS ROAD HOLDINGS II LLC
 
       
 
  By:   /s/ Erik M.W. Caspersen 
 
       
 
            Name: Erik M.W. Caspersen
 
            Title: Authorized Signatory

 

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          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.

                  CAPITAL VENTURES         INTERNATIONAL    
 
                By: Heights Capital Management Inc.    
 
           
 
  By:   /s/ Martin Kobinger     
 
     
 
Name: Martin Kobinger    
 
      Title: Authorized Signatory    

 

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          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.

                  SF CAPITAL PARTNERS LTD.    
 
           
 
  By:   /s/ Brian H. Davidson     
 
     
 
Name: Brian H. Davidson    
 
      Title: Authorized Signatory    

 

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          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.

                  RHP MASTER FUND, LTD    
 
           
 
  By:   Rock Hill Investment Management,    
 
      L.P.    
 
  By:   RHP General Partner, LLC    
 
           
 
  By:   /s/ Keith Marlowe     
 
     
 
Name: Keith Marlowe    
 
      Title: Authorized Signatory    

 

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SCHEDULE OF BUYERS

              Buyer Address   Buyer’s Representative’s Address Buyer   and
Facsimile Number   and Facsimile Number
 
       
Kings Road
  c/o Polygon Investment Partners LP   Schulte Roth & Zabel LLP
Holdings II LLC
  598 Madison Avenue, 14th Floor   919 Third Avenue
 
  New York, NY 10022   New York, NY 10022
 
  Attention: Erik M.W. Caspersen and Brandon L.   Attn: Eleazer Klein, Esq.
 
  Jones   Facsimile: (212) 593-5955
 
  Facsimile: (212) 359-7303   Telephone: (212) 756-2000
 
  Telephone: (212) 359-7300    
 
  Residence: Delaware    
 
       
Capital Ventures International
  c/o Heights Capital Management, Inc.    
 
  101 California Street, Suite 3250    
 
  San Francisco, California 94111    
 
  Attention: Sam Winer    
 
  Facsimile: (415) 403-6525    
 
  Telephone: (415) 403-6500    
 
  Residence: Cayman Islands    
 
       
SF Capital Partners Ltd.
  c/o Stark Offshore Management, LLC    
 
  3600 South Lake Drive    
 
  St. Francis, WI 53235    
 
  Attention: Brian Davidson    
 
  Facsimile: (414) 294-7700    
 
  Telephone: (414) 294-7000    
 
  Residence: British Virgin Islands    
 
       
RHP Master Fund, Ltd
  c/o Rock Hill Investment Management, LP    
 
  3 Bala Plaza East, Suite 585    
 
  Bala Cynwyd, PA 19004    
 
  Facsimile:(610)-949-9600    
 
  Telephone:(610) 949-9700    
 
  Residence: Cayman Islands    

 

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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
StockTrans, Inc
44 West Lancaster Avenue
Ardmore, PA 19003
Attention: Bob Winterle

     
Re:
  Touchstone Resources USA, Inc.

     Ladies and Gentlemen:
          [We are][I am] counsel to Touchstone Resources USA, Inc., 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 S-3 (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
stockholder 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.
          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

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Agent Instructions dated April 4, 2006. This letter shall serve as our standing
opinion with regard to this matter.

                  Very truly yours,    
 
                [ISSUER’S COUNSEL]    
 
           
 
  By:        
 
     
 
   
CC:     [LIST NAMES OF HOLDERS]
           

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EXHIBIT B
SELLING STOCKHOLDERS
     The shares of Common Stock being offered by the selling stockholders are
issuable upon conversion of the convertible notes and upon exercise of the
warrants. For additional information regarding the issuance of those convertible
notes and warrants, see “Private Placement of Shares of Convertible Notes”
above. We are registering the shares of Common Stock in order to permit the
selling stockholders 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, the selling stockholders have not had any
material relationship with us within the past three years.
     The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, 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 stockholders
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 stockholders.
     In accordance with the terms of registration rights agreements with the
selling stockholders, this prospectus generally covers the resale of at least
130% of the sum of (i) 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 (ii) 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 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 stockholders pursuant to this
prospectus.
     Under the terms of the convertible notes and the warrants, a selling
stockholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling stockholder,
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 stockholders may sell all, some or none of their
shares in this offering. See “Plan of Distribution.”

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                          Maximum Number of   Number of Ordinary     Number of
Ordinary Shares Owned Prior   Ordinary Shares to be Sold   Shares Owned After
Name of Selling Stockholder   to Offering   Pursuant to this Prospectus  
Offering
 
               
Kings Road Holdings II LLC (1)
            0  
 
               
Capital Ventures International
               
 
               
SF Capital Partners Ltd.
               
 
               
RHP Master Fund, Ltd
               

 
     (1) Polygon Investment Partners LLP and Polygon Investment Partners LP (the
“Investment Managers”) and Polygon Investments Ltd. (the “Manager”) each has the
right to vote and dispose of the securities held by Kings Road Holdings II LLC.
Alexander Jackson, Reade Griffith and Paddy Dear control the Investment Managers
and the Manager. The Investment Managers, the Manager, Alexander Jackson, Reade
Griffith and Paddy Dear disclaim beneficial ownership of the securities held by
Kings Road Holdings II LLC.

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PLAN OF DISTRIBUTION
     We are registering the shares of Common Stock issuable upon conversion of
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 stockholders 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 stockholders 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
stockholders 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;

 

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  •   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 stockholders 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 stockholders 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 stockholders
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 stockholders 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 stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.
     The selling stockholders 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 stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders 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 stockholders 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
stockholders 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

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for sale in such state or an exemption from registration or qualification is
available and is complied with.
     There can be no assurance that any selling stockholder 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 stockholders 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
stockholders 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 stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder 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.

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