exv10w5



 







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.



 









 





                    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.



10









 





                    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



11









 




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









 




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.



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 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:




15









 







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









 




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









 





                    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









 








          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






 









 






          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






 









 






          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	 	 






 









 






          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	 	 






 









 






          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	 	 






 









 






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	 	 






 









 






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




1









 







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]
	 	 	 	 	 	 






2









 






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;




 









 






	 	•	 	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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