Exhibit 10.12


 


EXECUTION VERSION


 


REGISTRATION
RIGHTS AGREEMENT


 


This Registration
Rights Agreement (this “Agreement”) is made and entered into as of November 23,
2005, by and among Energy Coal Resources, Inc., a Delaware corporation
(together with any successor entity thereto, the “Company”),  Sentient
Global Resources Fund I, L.P., a Cayman Islands exempted limited partnership,
Sentient Global Resources Trust No. 1, an Australian unit trust,
Colorado Energy Investments, LLC, a Kentucky limited liability company,
Fountain Investments, LLC, a Kentucky limited liability company, John C. Smith, Jr.
(together, the “Current Stockholders”) and Friedman, Billings, Ramsey &
Co., Inc., a Delaware corporation (“FBR”), for the benefit of FBR,
the Current Stockholders and the purchasers of the Company’s common stock, par
value $0.01 per share, as participants (“Participants”) in the private
placement by the Company of shares of its common stock (the “Private
Placement”), and the direct and indirect transferees of FBR and each of the
Participants.


 


This Agreement is
made pursuant to the Purchase/Placement Agreement (the “Purchase/Placement
Agreement”), dated as of November 16, 2005, by and between the Company
and FBR in connection with the purchase and sale or placement of an aggregate
of 5,700,000 shares of the Company’s common stock (plus an additional 855,000
shares to cover additional allotments, if any). 
In order to induce FBR to enter into the Purchase/Placement Agreement,
the Company has agreed to provide the registration rights provided for in this
Agreement to FBR, the Participants, the Current Stockholders and their
respective direct and indirect transferees. 
The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase/Placement Agreement.


 


The parties hereby
agree as follows:


 


1.             DEFINITIONS.


 


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


 


144A/Regulation
S Shares:  Shares
initially sold to FBR in the Private Placement and resold by FBR to “qualified
institutional buyers” (as such term is defined in Rule 144A) or to “non-U.S.
persons” (in accordance with Regulation S) in an “offshore transaction” (in
accordance with Regulation S).


 


Agreement:  As defined in the preamble.


 


Affiliate:  As to any specified Person, (i) any
Person directly or indirectly owning, controlling or holding, with power to
vote, ten percent or more of the outstanding voting securities of such other
Person, (ii) any Person ten percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, with power to
vote, by such other Person, (iii) any Person directly or indirectly
controlling, controlled by or under common control with such other Person, (iv) any
executive officer, director, trustee or general partner of such 


 

















 


Person and (v) any legal entity for which such Person acts as an
executive officer, director, trustee or general partner.  An indirect relationship shall include
circumstances in which a Person’s spouse, children, parents, siblings or
mother-, father-, sister- or brother-in-law is or has been associated with a
Person.


 


Business
Day:  With respect to
any act to be performed hereunder, each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in New York, New
York or other applicable places where such act is to occur are authorized or
obligated by applicable law, regulation or executive order to close.


 


Closing
Date:  The date of this
Agreement or such other time or such other date as FBR and the Company may
agree.


 


Commission:  The Securities and Exchange Commission.


 


Common
Stock:  The common
stock, par value $0.01 per share, of the Company.


 


Company:  As defined in the preamble.


 


Controlling
Person:  As defined in Section 6(a) hereof.


 


Current
Stockholder Shares:  The
shares of Common Stock owned by the Current Stockholders immediately following
the consummation of the Private Placement.


 


End
of Suspension Notice: 
As defined in Section 5(b) hereof.


 


Exchange
Act:  The Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated by the Commission pursuant thereto.


 


FBR:  As defined in the preamble.


 


Form 8-K:  Current report required to
be filed with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act, as such form may be amended from time to time, or any similar
form, rule or regulation hereafter adopted by the Commission as a
replacement thereto having substantially the same effect as such form.


 


Form 10-K:  Annual report required to
be filed with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act, as such form may be amended from time to time, or any similar
form, rule or regulation hereafter adopted by the Commission as a
replacement thereto having substantially the same effect as such form.


 


Form 10-Q:  Quarterly report required
to be filed with the Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act, as such form may be amended from time to time, or any similar
form, rule or regulation hereafter adopted by the Commission as a
replacement thereto having substantially the same effect as such form.


 


Holder:  Each record owner of any Registrable Shares
from time to time, including FBR and its Affiliates.


 


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Indemnified
Party:  As defined in Section 6(c) hereof.


 


Indemnifying
Party:  As defined in Section 6(c) hereof.


 


IPO
Registration Statement: 
As defined in Section 2(b) hereof.


 


Liabilities:  As defined in Section 6(a) hereof.


 


NASD:  The National Association of Securities
Dealers, Inc.


 


No
Objections Letter:  As
defined in Section 4(a)(xx) hereof.


 


Offering
Memorandum:  The
Offering Memorandum of the Company dated November 16, 2005 pursuant to
which the 144A/Regulation S Shares and the Private Placement Shares are offered
and sold.


 


Participant:  As defined in the preamble.


 


Penalty
Payment Default:  As
defined in Section 2(f) hereof.


 


Person:  An individual, partnership, corporation,
trust, unincorporated organization, government or agency or political
subdivision thereof, or any other legal entity.


 


Private
Placement:  As defined
in the preamble.


 


Private
Placement Shares: 
Shares initially sold by the Company directly to “accredited investors”
(within the meaning of Rule 501(a) promulgated under the Securities
Act) as Participants, with FBR acting as placement agent.


 


Proceeding:  An action, claim, suit or proceeding
(including without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or, to the knowledge of the Person subject
thereto, threatened.


 


Prospectus:  The prospectus included in any Registration
Statement, including any preliminary prospectus, and all other amendments and
supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.


 


Purchase/Placement
Agreement:  As defined
in the preamble.


 


Purchaser
Indemnitee:  As defined
in Section 6(a) hereof.


 


Registrable Shares:  The 144A/Regulation S Shares, the Private
Placement Shares and the Current Stockholder Shares upon original issuance
thereof, and at all times subsequent thereto, including upon the transfer
thereof by the original holder or any subsequent holder and any shares or other
securities issued in respect of such Registrable Shares by reason of or in
connection with any stock dividend, stock distribution, stock split, purchase
in any rights offering or in connection with any exchange for or replacement of
such Registrable Shares or 


 


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any combination of shares, recapitalization, merger or
consolidation, or any other equity securities issued pursuant to any other pro
rata distribution with respect to the Common Stock, until, in the case of any
such 144A/Regulation S Share, Private Placement Share or Current Stockholder
Shares, the earliest to occur of (i) the date on which it has been first
registered effectively pursuant to the Securities Act and disposed of in
accordance with the Registration Statement relating to it, (ii) the date
on which either it is distributed to the public pursuant to Rule 144 (or
any similar provision then in effect) or is eligible for sale without
registration, pursuant to Rule 144(k) promulgated by the Commission
pursuant to the Securities Act or (iii) the date on which it is sold to
the Company  or any subsidiary of the Company.


 


Registration Expenses:  Any and all expenses incident to the
performance of or compliance with this Agreement, including, without
limitation:  (i) all Commission,
securities exchange, NASD registration (if any), listing, inclusion and filing
fees, (ii) all fees and expenses incurred in connection with compliance
with international, federal or state securities or blue sky laws (including,
without limitation, any registration, listing and filing fees and reasonable
fees and disbursements of counsel in connection with blue sky qualification of
any of the Registrable Shares and the preparation of a blue sky memorandum and
compliance with the rules of the NASD), (iii) all expenses in
preparing or assisting in preparing, word processing, duplicating, printing,
delivering and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities
sales agreements, certificates and any other documents relating to the
performance under and compliance with this Agreement, (iv) all fees and
expenses incurred in connection with the listing or inclusion of any of the
Registrable Shares on any securities exchange or The Nasdaq Stock Market
pursuant to Section 4(a)(xiv) of this Agreement, (v) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company (including, without limitation, the expenses of any
special audit and “cold comfort” letters required by or incident to such
performance), (vi) reasonable fees and disbursements of one counsel,
reasonably acceptable to the Company, for the Holders, selected by the Holders
holding a majority of the Registrable Shares included in the registration (such
counsel, “Selling Holders’ Counsel”) and (vii) any fees and
disbursements customarily paid in issues and sales of securities (including the
fees and expenses of any experts retained by the Company in connection with any
Registration Statement); provided, however, that Registration Expenses shall
exclude brokers’ or underwriters’ discounts and commissions, if any, relating
to the sale or disposition of Registrable Shares by a Holder.


 


Registration Statement:  Any registration statement of the Company
that covers the resale of Registrable Shares pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.


 


Regulation S:  Regulation S (Rules 901-904) promulgated
by the Commission under the Securities Act, as such rules may be amended
from time to time, or any similar rule or regulation hereafter adopted by
the Commission as a replacement thereto having substantially the same effect as
such regulation.


 


Rule 144:  Rule 144, and any of its referenced
paragraphs, promulgated by the Commission pursuant to the Securities Act, as
such rule may be amended from time to time, or 


 


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any similar rule or regulation hereafter adopted
by the Commission as a replacement thereto having substantially the same effect
as such rule.


 


Rule 144A:  Rule 144A promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same effect as
such rule.


 


Rule 158:  Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same effect as
such rule.


 


Rule 415:  Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same effect as
such rule.


 


Rule 424:  Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same effect as
such rule.


 


Rule 457:  Rule 457 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
Commission as a replacement thereto having substantially the same effect as
such rule.


 


Securities Act:  The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the Commission thereunder.


 


Selling Holders’ Counsel:  As defined under “Registration Expenses” in Section 1 hereof.


 


Shares:  The shares of Common Stock being offered and
sold pursuant to the terms and conditions of the Purchase/Placement Agreement
and the Current Stockholder Shares.


 


Shelf Registration Statement:  As defined in Section 2(a) hereof.


 


Suspension Event:  As defined in Section 5(b) hereof.


 


Suspension Notice:  As defined in Section 5(b) hereof.


 


Underwritten Offering:  A sale of securities of the Company to an
underwriter or underwriters for reoffering to the public.


 


2.             REGISTRATION
RIGHTS


 


(a)           Mandatory
Shelf Registration.  As
set forth in Section 4 hereof, the Company agrees to file with the
Commission as soon as reasonably practicable following the date of this
Agreement (but in no event later than the date that is one hundred eighty (180)
days after the Closing Date) a shelf Registration Statement on Form S-1 or
such other form under the Securities Act then available to the Company
providing for the resale of any Registrable Shares pursuant to Rule 415
from time to time by the Holders (a “Shelf Registration Statement”).  The Company shall use its commercially
reasonable efforts to cause such Shelf Registration Statement to be declared
effective by the Commission as soon as practicable.  Any Shelf Registration Statement shall
provide for the resale from time to time, and pursuant to any method or
combination of methods legally available (including, without limitation, an
Underwritten Offering, a direct sale to 


 


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purchasers or a sale through brokers or agents, which may include sales
over the internet) by the Holders of any and all Registrable Shares.


 


(b)           IPO
Registration.


 


(i)             If
the Company proposes to file a registration statement on Form S-1 or such
other form under the Securities Act providing for the initial public offering
of shares of Common Stock (the “IPO Registration Statement”), the
Company will notify each Holder of the proposed filing and afford each Holder
an opportunity to include in the IPO Registration Statement all or any part of
the Registrable Shares then held by such Holder. Each Holder desiring to
include in the IPO Registration Statement all or part of the Registrable Shares
held by such Holder shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Shares
such Holder wishes to include in the IPO Registration Statement.  Any election by any Holder to include any
Registrable Shares in the IPO Registration Statement will not affect the
inclusion of such Registrable Shares in the Shelf Registration Statement until
such Registrable Shares have been sold under the IPO Registration Statement.


 


(ii)            Right
to Terminate IPO Registration.  The
Company shall have the right to terminate or withdraw the IPO Registration
Statement initiated by it referred to in this Section 2(b) prior to
the effectiveness of such registration whether or not any Holder has elected to
include Registrable Shares in such registration.


 


(iii)           Selection of Underwriter.  The Company shall have the sole right to
select the managing underwriter(s) for its initial public offering,
regardless of whether any Registrable Shares are included in the IPO
Registration Statement or otherwise.  The
Company shall advise all Holders of the managing underwriter(s) for the Underwritten
Offering proposed under the IPO Registration Statement.


 


(iv)          Shelf
Registration not Impacted by IPO Registration Statement.  The Company’s obligation to file the Shelf
Registration Statement pursuant to Section 2(a) hereof shall not be
affected by the filing or effectiveness of the IPO Registration Statement;
provided, however, that if, prior to filing the Shelf Registration Statement
with the Commission, the Company shall have filed an IPO Registration Statement
with the Commission on or prior to the 180th day after the Closing Date and
such IPO Registration Statement shall not have been declared effective on or
prior to such 180th day, the Company may delay the filing of the Shelf
Registration Statement beyond such 180th day in the event the staff of the
Commission requests in writing, a copy of which shall be promptly provided to
FBR, that the Company delay the filing of the Shelf Registration Statement
until a later date or point in time in the staff review process, provided
further, however, that such delay shall not extend beyond thirty (30) days
following the date of initial effectiveness of the IPO Registration Statement.


 


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(c)           Underwriting.


 


(i)             The
right of any such Holder’s Registrable Shares to be included in the IPO
Registration Statement pursuant to Section 2(b) shall be conditioned
upon such Holder’s participation in such underwriting and the inclusion of such
Holder’s Registrable Shares in the underwriting to the extent provided herein.  All Holders proposing to distribute their
Registrable Shares through such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter(s) selected for
such underwriting and complete and execute any questionnaires, powers of
attorney, indemnities, securities escrow agreements and other documents
reasonably required under the terms of such underwriting, and furnish to the
Company such information as the Company may reasonably request in writing for
inclusion in the Registration Statement; provided, however, that no Holder
shall be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Holder, its holdings and such Holder’s intended
method of distribution and any other representation required by law, regulation
or reasonably requested by the underwriters. 
Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine(s) in good faith that marketing factors
require a limitation on the number of shares to be included, then the managing
underwriter(s) may exclude shares (including Registrable Shares) from the
IPO Registration Statement and Underwritten Offering, and any shares included
in such IPO Registration Statement and Underwritten Offering shall be allocated
first, to the Company, and second, to each of the Holders requesting inclusion
of their Registrable Shares in such IPO Registration Statement (on a pro rata basis
based on the total number of Registrable Shares then held by each such Holder
who is requesting inclusion); provided, however, that the number of Registrable
Shares to be included in the IPO Registration Statement shall not be reduced
unless all other securities of the Company held by (i) officers,
directors, other employees of the Company and consultants (other than
Registrable Shares held by such persons as Holders under this Agreement); and (ii) other
holders of the Company’s capital stock with registration rights that are
inferior (with respect to such reduction) to the registration rights of the
Holders set forth herein, are first entirely excluded from the underwriting and
registration.


 


(ii)            Regardless
of whether a Holder elects to include Registrable Shares in the IPO
Registration Statement, each Holder of Registrable Shares shall be deemed to
have agreed not to effect any public sale or distribution of securities of the
Company of the same or similar class or classes of the securities included in
the IPO Registration Statement or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to Rule 144
or Rule 144A, during such periods as reasonably requested (but in no event
for a period longer than thirty (30) days prior to and sixty (60) days
following the effective date of the IPO Registration Statement) by the
representatives of the underwriters, if an Underwritten Offering, or by the
Company in any other registration.


 


(iii)           If any Holder disapproves of the terms of
any such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) Business
Days prior to the effective date of the Registration Statement covering the Underwritten
Offering, provided that the Holder may agree to waive this right to withdraw
with the Company, the underwriters or any custodial agent in any custody
agreement and/or power of attorney executed by such Holder in connection with
the underwriting.  Any Registrable Shares
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.


 


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(d)        Company
Registrations.


 


(i)           Subject to the terms
of this Agreement, in the event the Company decides to register any of its
securities, other than as contemplated by Sections 2(a) and 2(b) (either
for its own account or the account of a security holder), on a form that would
be suitable for a registration involving Registrable Shares, the Company will (i) promptly
give the Current Stockholders and the other Holders written notice thereof and (ii) include
in such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the
Registrable Shares specified in a written request delivered to the Company by
the Current Stockholders and the other Holders within twenty (20) days after
delivery of such written notice from the Company.


 


(ii)          Underwriting in
Piggyback Registration.


 


a.             Notice of Underwriting in Piggyback Registration.  If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Current Stockholders and the other Holders as a
part of the written notice given pursuant to Section 2(d)(i).  In such event, the right of the Current
Stockholders and the other Holders to registration shall be conditioned upon
such underwriting and the inclusion of its Registrable Shares in such
underwriting to the extent provided in this Section 2(d)(ii).  To the extent that the Current Stockholders
or the other Holders wish to distribute their securities through such
underwriting it shall (together with the Company and any other Holders
distributing their securities through such underwriting) enter into an
underwriting agreement with the managing underwriter on behalf of all
underwriters for such offering.  The
Current Stockholders and the other Holders shall have no right to participate
in the selection of the underwriters for an offering pursuant to this Section 2(d)(ii).


 


b.             Marketing Limitation in Piggyback Registration.  In the event the managing underwriter on behalf
of all underwriters advises the Holders seeking registration of Registrable
Shares pursuant to this Section 2(d) in writing that market
factors (including, without limitation, the aggregate number of shares of
Common Stock requested to be registered, the general condition of the market,
and the status of the persons proposing to sell securities pursuant to the
registration) require a limitation of the number of shares to be underwritten,
the managing underwriter on behalf of all underwriters (subject to the
allocation set forth in this Section 2(d)(ii)(b)) may exclude some
or all Registrable Shares from such registration and underwriting.  In the event that the managing underwriter on
behalf of all underwriters limits the number of shares to be included in a
registration pursuant to this Section 2(d)(ii)(b), or shall
otherwise require a limitation of the number of shares to be included in the
registration, then the Company will include in such registration first
securities proposed by the Company to be sold for its own account, second
securities included in such registration by the Current Stockholders, and third
Registrable Shares requested to be included in the registration by any other
person holding registration rights.  No 


 


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Registrable Shares or other securities excluded from
the underwriting by reason of this Section 2(d)(ii)(b) shall be
included in the Registration Statement.


 


c.             Right of Withdrawal in Piggyback Registration.  If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter, delivered at least ten (10) Business
Days prior to the effective date of the Registration Statement covering the
Underwritten Offering, provided that the Holder may agree to waive this right
to withdraw with the Company, the underwriters or any custodial agent in any
custody agreement and/or power of attorney executed by such Holder in
connection with the underwriting.  Any
Registrable Shares excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.


 


(e)        Expenses.  The Company shall pay all Registration
Expenses in connection with the registration of the Registrable Shares pursuant
to this Agreement.  Each Holder
participating in a registration pursuant to this Section 2 shall bear such
Holder’s proportionate share (based on the total number of Registrable Shares
sold in such registration) of all discounts and commissions payable to
underwriters or brokers in connection with a registration of Registrable Shares
pursuant to this Agreement.


 


(f)         Penalties.


 


(i)            If the Company does
not file a Registration Statement registering the resale of the Private
Placement Shares and the 144A/Regulation S Shares within one hundred eighty
(180) days after the Closing Date, other than as a result of (a) the
Commission being unable to accept such filings, (b) circumstances in which
the Company has endeavored in good faith to file the Registration Statement
within the time period specified but is unable to make the filing as of the
specified date as a result of circumstances beyond the Company’s reasonable
control, or (c) under the circumstances described in the proviso of Section 2(b)(iv) then
the Company shall be required to pay to FBR, on behalf of the Participants, an
amount equal to $833,333 per month, with such payment to commence on the first
Business Day of the month following the expiration of the one hundred eighty
(180) day period.  In the event the
Company has not filed a Registration Statement within two hundred seventy (270)
days after the Closing Date, the monthly payment shall be increased to
$1,666,667 per month, with such payment to commence on the first Business Day
of the month following the expiration of the two hundred seventy (270) day
period.


 


(ii)           If the Company
fails to make the payments required by Section 2(f)(i) within
ten (10) Business Days of the date such payment is due (the “Penalty
Payment Default”), the Company, pursuant to that certain Voting Agreement,
dated November 23, 2005, by and among the Company, the Current
Stockholders (other than Sentient
Global Resources Fund I, L.P. and Sentient Global Resources Trust No.1)
and FBR, shall be required to (a) appoint two (2) additional persons,
designated by FBR, to the Board of Directors of the Company, and (b) amend
the Company’s certificate of incorporation, bylaws and such other documents as
may be necessary to allow for the appointment of the additional persons to the
Board of Directors.  The two (2) additional
members of the Board of Directors shall continue to serve on the Board of 


 


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Directors until
such time as the Company has become current on all payments triggering the
Penalty Payment Default and filed a Registration Statement registering the
resale of the Private Placement Shares and the 144A/Regulation S Shares.


 


(iii)          All penalties
described in this Section 2(f) shall terminate upon the filing
of a Registration Statement registering the resale of the Private Placement
Shares and the 144A/Regulation S Shares.


 


3.             RULES 144 AND 144A REPORTING


 


With a view to
making available the benefits of certain rules and regulations of the
Commission that may at any time permit the sale of the Registrable Shares to
the public without registration, the Company agrees to:


 


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


 


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


 


(c)         so long as a Holder
owns any Registrable Shares, if the Company is not required to file reports and
other documents under the Securities Act and the Exchange Act, it will make
available other information as required by, and so long as necessary to permit
sales of Registrable Shares pursuant to, Rule 144 or Rule 144A, and
in any event shall make available (either by mailing a copy thereof, by posting
on the Company’s website, or by press release) to each Holder a copy of:


 


(i)           the Company’s annual
consolidated financial statements (including at least balance sheets, statements
of profit and loss, statements of stockholders’ equity and statements of cash
flows) prepared in accordance with U.S. generally accepted accounting
principles, accompanied by an audit report of the Company’s independent
accountants, no later than one hundred twenty (120) days after the end of each
fiscal year of the Company; and


 


(ii)          the Company’s
unaudited quarterly financial statements (including at least balance sheets,
statements of profit and loss, statements of stockholders’ equity and statements
of cash flows) prepared in a manner consistent with the preparation of the
Company’s annual financial statements, no later than forty-five (45) days after
the end of each fiscal quarter of the Company for any fiscal quarter commencing
after December 31, 2005;


 


(d)        so long as a Holder
owns any Registrable Shares, the Company shall hold, a reasonable time after
the financial statements are made available pursuant to Section 3(c)(ii) and
upon reasonable notice to the Holders and FBR (either by mail, by posting on
the Company’s website, or by press release), a quarterly investor conference
call to discuss such financial 


 


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statements, which
call will also include an opportunity for the Holders to ask questions of
management with regard to such financial statements; and


 


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


 


4.             REGISTRATION PROCEDURES


 


(a)         In connection with the
obligations of the Company with respect to any registration pursuant to this
Agreement, (x) the Company shall use its commercially reasonable efforts
to effect or cause to be effected the registration of the Registrable Shares
under the Securities Act to permit the sale of such Registrable Shares by the
Holder or Holders in accordance with the Holder’s or Holders’ intended method
or methods of distribution, and (y) the Company shall:


 


(i)            notify FBR, the
Current Stockholders and Selling Holders’ Counsel, in writing, at least ten (10) Business
Days prior to the initial filing of a Registration Statement, of its intention
to file a Registration Statement with the Commission and, at least five (5) Business
Days prior to the initial filing, provide a copy of the Registration Statement
to FBR, its counsel, the Current Stockholders and Selling Holders’ Counsel for
review and comment; prepare and file with the Commission, as specified in this
Agreement, a Registration Statement(s), which Registration Statement(s) (x) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith and (y) shall be reasonably acceptable to FBR, its
counsel, the Current Stockholders and Selling Holders’ Counsel; notify FBR, the
Current Stockholders and Selling Holders’ Counsel in writing, at least five (5) Business
Days prior to the filing of any amendment or supplement to such Registration
Statement and, at least three (3) Business Days prior to filing, provide a
copy of such amendment or supplement to FBR, its counsel, the Current Stockholders
and Selling Holders’ Counsel for review and comment; promptly following receipt
from the Commission, provide to FBR, its counsel, the Current Stockholders and
Selling Holders’ Counsel copies of any comments made by the staff of the
Commission relating to such Registration Statement and of the Company’s
responses thereto for review and comment; and use its commercially reasonable
efforts to cause such Registration Statement to become effective as soon as
practicable after filing and to remain effective, subject to Section 5
hereof, until the earlier of (1) such time as all Registrable Shares
covered thereby have been sold in accordance with the intended distribution of
such Registrable Shares, (2) there are no Registrable Shares outstanding
(including as a result of such Shares having become eligible to be sold
pursuant to Rule 144(k)) or (3) the second anniversary of the
effective date of such Registration Statement (subject to extension as provided
in Section 5(c) hereof); provided, that if the Company has an
effective Shelf Registration Statement on Form S-1 under the Securities
Act and becomes eligible to use Form S-3 or such other short-form
registration statement form under the Securities 


 


11

















 


Act, the Company
may, upon thirty (30) Business Days prior written notice to all Holders,
register any Registrable Shares registered but not yet distributed under the
effective Shelf Registration Statement on such a short-form Shelf Registration
Statement and, once the short-form Shelf Registration Statement is declared
effective, de-register such shares under the previous Registration Statement or
transfer the filing fees from the previous Registration Statement (such
transfer pursuant to Rule 457, if applicable) unless any Holder registered
under the initial Shelf Registration Statement notifies the Company within
twenty (20) Business Days of receipt of the Company notice that such a
registration under a new Registration Statement and de-registration of the initial
Shelf Registration Statement would interfere with its distribution of
Registrable Shares already in progress;


 


(ii)           subject to Section 4(a)(ix) hereof,
(1) prepare and file with the Commission such amendments and
post-effective amendments to each such Registration Statement as may be
necessary to keep such Registration Statement effective for the period
described in Section 4(a)(i) hereof; (2) cause each
Prospectus contained therein to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 or any
similar rule that may be adopted under the Securities Act; (3) amend
or supplement each such Registration Statement to include the Company’s
quarterly and annual financial information and other material developments
(until the Company is eligible to incorporate such information by reference
into the Registration Statement), during which time sales of the Registrable
Shares under the Registration Statement will be suspended until such amendment
or supplement is filed and effective, and (4) comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by each Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the selling Holders thereof;


 


(iii)          furnish to the
Holders, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, if any, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable Shares; the
Company consents to the use of such Prospectus, including each preliminary
Prospectus, by the Holders, if any, in connection with the offering and sale of
the Registrable Shares covered by any such Prospectus;


 


(iv)         use its commercially
reasonable efforts to register or qualify, or obtain exemption from
registration or qualification for, all Registrable Shares by the time the
applicable Registration Statement is declared effective by the Commission under
all applicable state securities or blue sky laws of such jurisdictions as FBR
or any Holder of Registrable Shares covered by a Registration Statement shall
reasonably request in writing, keep each such registration or qualification or
exemption effective during the period such Registration Statement is required
to be kept effective pursuant to Section 4(a)(i) and do any
and all other acts and things that may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction of
such Registrable Shares owned by such Holder; provided, however, that the
Company shall not be required to (1) qualify generally to do business in
any jurisdiction or to register as a broker or dealer in such jurisdiction
where it would not otherwise be required to qualify but for this Section 4(a)(iv) and
except as may be required by the Securities Act, (2) subject itself to
taxation in any such jurisdiction, or (3) submit to the general service of
process in any such jurisdiction;


 


12

















 


(v)          use its commercially
reasonable efforts to cause all Registrable Shares covered by such Registration
Statement to be registered and approved by such other governmental agencies or
authorities as may be necessary to enable the Holders thereof to consummate the
disposition of such Registrable Shares;


 


(vi)         notify FBR and each
Holder promptly and, if requested by FBR or any Holder, confirm such advice in
writing (1) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective, (2) of
the issuance by the Commission or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (3) of any request by the
Commission or any other federal, state or foreign governmental authority for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information, (4) of the happening of any event during the
period a Registration Statement is effective as a result of which such
Registration Statement or the related Prospectus or any document incorporated
by reference therein contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading (which notice may be in the form of a
Suspension Notice under Section 5(b) hereof) and (5) at the
request of any such Holder, promptly to furnish to such Holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may
be necessary so that, as thereafter delivered to the purchaser of such
securities, such Prospectus shall not include an 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 not misleading.


 


(vii)        except as provided in
Section 5, use its commercially reasonable efforts to avoid the issuance
of, or if issued, to obtain the withdrawal of, any order enjoining or
suspending the use or effectiveness of a Registration Statement or suspending
of the qualification (or exemption from qualification) of any of the
Registrable Shares for sale in any jurisdiction, as promptly as reasonably
practicable;


 


(viii)       upon written request,
furnish to each requesting Holder of Registrable Shares, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment or supplement thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);


 


(ix)          except as provided
in Section 5, upon the occurrence of any event contemplated by Section 4(a)(vi)(4) hereof,
use its commercially reasonable efforts to promptly prepare a supplement or
post-effective amendment to a Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Shares, such Prospectus will 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 light of the circumstances
under which they were made, not misleading;


 


(x)           if requested by the
representative of the underwriters, if any, or any Holders of Registrable
Shares being sold in connection with such offering, (1) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the representative of the underwriters, if any, or such Holders
indicate relates to them or that they 


 


13

















 


reasonably request
be included therein and (2) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment;


 


(xi)          in the case of an
Underwritten Offering, use its commercially reasonable efforts to furnish to
the underwriters, of:  (1) an
opinion of counsel for the Company, dated the date of each closing under the
underwriting agreement, reasonably satisfactory to the underwriters; and (2) a
“comfort” letter, dated the effective date of such Registration Statement and
the date of each closing under the underwriting agreement, signed by the
independent public accountants who have certified the Company’s financial
statements included in such Registration Statement, covering substantially the
same matters with respect to such Registration Statement (and the Prospectus
included therein) and with respect to events subsequent to the date of such
financial statements, as are customarily covered in accountants’ letters
delivered to underwriters in underwritten public offerings of securities and
such other financial matters as the underwriters may reasonably request;


 


(xii)         enter into customary
agreements (including in the case of an Underwritten Offering, an underwriting
agreement in customary form) and take all other action in connection therewith
in order to expedite or facilitate the distribution of the Registrable Shares
included in such Registration Statement and, in the case of an Underwritten
Offering, make representations and warranties to the underwriters in such form
and scope as are customarily made by issuers to underwriters in such
underwritten offerings and confirm the same to the extent customary if and when
requested;


 


(xiii)        make available for
inspection by representatives of the Holders and the representative of any
underwriters participating in any disposition pursuant to a Registration
Statement and any special counsel or accountants retained by such Holders or
underwriters, all financial and other records, pertinent corporate documents
and properties of the Company and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representatives, the representative of the underwriters, counsel thereto
or accountants in connection with a Registration Statement; provided, however,
that such records, documents or information that the Company determines, in
good faith, to be confidential and notifies such representatives,
representative of the underwriters, counsel thereto or accountants are
confidential shall not be disclosed by the representatives, representative of
the underwriters, counsel thereto or accountants unless (1) the disclosure
of such records, documents or information is necessary to avoid or correct a
misstatement or omission in a Registration Statement or Prospectus, (2) the
release of such records, documents or information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, or (3) such
records, documents or information have been generally made available to the
public;


 


(xiv)        use its commercially
reasonable efforts (including, without limitation, seeking to cure any
deficiencies cited by the exchange or market in the Company’s listing or
inclusion application) to list or include all Registrable Shares on the New
York Stock Exchange, the American Stock Exchange or The Nasdaq Stock Market and
thereafter maintain the listing on such exchange or market;


 


14

















 


(xv)         prepare and file in a
timely manner all documents and reports required by the Exchange Act and, to
the extent the Company’s obligation to file such reports pursuant to Section 15(d) of
the Exchange Act expires prior to the expiration of the effectiveness period of
the Registration Statement as required by Section 4(a)(i) hereof, the
Company shall register the Registrable Shares under the Exchange Act and
maintain such registration through the effectiveness period required by Section 4(a)(i) hereof;


 


(xvi)        provide a CUSIP
number for all Registrable Shares, not later than the effective date of the
Registration Statement;


 


(xvii)       (1) otherwise
use its commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission, (2) make generally available to its
stockholders, as soon as reasonably practicable, earnings statements covering
at least 12 months that satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 (or any similar rule promulgated
under the Securities Act ) thereunder, but in no event later than the earlier
of any filing date required for the filing of an annual report on Form 10-K
as applicable to the Company or forty-five (45) days after the end of each
fiscal year of the Company and (3) not file any Registration Statement or
Prospectus or amendment or supplement to such Registration Statement or
Prospectus to which any Holder of Registrable Shares covered by any
Registration Statement shall have reasonably objected on the grounds that such
Registration Statement or Prospectus or amendment or supplement does not comply
in all material respects with the requirements of the Securities Act, such
Holder having been furnished with a copy thereof at least two (2) Business
Days prior to the filing thereof;


 


(xviii)      provide and cause to
be maintained a registrar and transfer agent for all Registrable Shares covered
by any Registration Statement from and after a date not later than the
effective date of such Registration Statement;


 


(xix)        in connection with
any sale or transfer of the Registrable Shares (whether or not pursuant to a
Registration Statement) that will result in the security being delivered no
longer being Registrable Shares, cooperate with the Holders and the
representative of the underwriters, if any, to the extent reasonably necessary
to facilitate the timely preparation and delivery of any certificates
representing the Registrable Shares to be sold, which certificates shall not bear
any transfer restrictive legends (other than as required by the Company’s
certificate of incorporation or bylaws) and to enable such Registrable Shares
to be in such denominations and registered in such names as the representative
of the underwriters, if any, or the Holders may request at least two (2) Business
Days prior to any sale of the Registrable Shares; provided, however, that such
Holder has provided the Company with any documents that are reasonably
requested by the Company;


 


(xx)         if required under the
rules of NASD, in connection with the initial filing of a Shelf
Registration Statement and each amendment thereto with the Commission pursuant
to Section 2(a) hereof, prepare and, within one Business Day
of such filing with the Commission, file with the NASD all forms and
information required or requested by the NASD in order to obtain written
confirmation from the NASD that the NASD does not object to the fairness and
reasonableness of the underwriting terms and arrangements (or any deemed underwriting
terms and arrangements) (each such written confirmation, a “No Objections
Letter”) relating to the 


 


15

















 


resale of
Registrable Shares pursuant to the Shelf Registration Statement, including,
without limitation, information provided to the NASD through its COBRADesk
system, and pay all costs, fees and expenses incident to the NASD’s review of
the Shelf Registration Statement and the related underwriting terms and
arrangements, including, without limitation, all filing fees associated with
any filings or submissions to the NASD and the legal expenses, filing fees and
other disbursements of FBR and any other NASD member that is the holder of, or
is affiliated or associated with an owner of, Registrable Shares included in
the Shelf Registration Statement (including in connection with any initial or
subsequent member filing); and


 


(xxi)        upon effectiveness of
the first Registration Statement filed under this Agreement, the Company will
take such actions and make such filings as are necessary to effect the
registration of the Common Stock under the Exchange Act simultaneously with or
immediately following the effectiveness of the Registration Statement.


 


(b)        Notwithstanding
anything to the contrary, if the Company files a mandatory Shelf Registration
Statement in accordance with Section 2(a) of
this Agreement, each Holder desiring to include all or any part of its
Registrable Shares in the Shelf Registration Statement pursuant to this
Agreement shall, within twenty (20) Business Days after the date of the notice
including a request therefor (the “Questionnaire Deadline”), provide to the
Company such information as the Company may reasonably request for use in
connection with the Shelf Registration Statement or any Prospectus included
therein and in any application to be filed with or under state securities laws
(the “Questionnaire”), and which shall cause the Holder to be bound by the
terms of this Agreement. Notwithstanding anything to the contrary, from and
after the date that the Shelf Registration Statement is declared effective by
the Commission, the Company shall as promptly as is reasonably practicable take
all actions as contemplated by Sections 4(a)(i), (ii), (iii), (vi),
(viii),
(ix) and (x) so that such Holder delivering the
Questionnaire in a timely fashion is named as a selling security holder in the
initial Shelf Registration Statement and the related Prospectus in such a
manner so as to permit the Holder to deliver such Prospectus to purchasers of
the Registrable Securities in accordance with the Securities Act and applicable
state securities laws. Notwithstanding anything to the contrary, to the extent
any Holder desiring to be added to the mandatory Shelf Registration Statement
after the effective date of such registration statement shall be required to
deliver the Questionnaire to the Company and upon receipt of such
Questionnaire, the Company will, as soon as is practicable, amend such
registration statement or supplement the prospectus contained therein in
accordance with Commission rules and guidance.


 


(c)         The Company may
require the Holders to furnish to the Company such information regarding the
proposed distribution by such Holder of such Registrable Shares as the Company
may from time to time reasonably request in writing or as shall be required to
effect the registration of the Registrable Shares, and no Holder shall be
entitled to be named as a selling stockholder in any Registration Statement and
no Holder shall be entitled to use the Prospectus forming a part thereof if
such Holder does not provide such information to the Company.  Each Holder further agrees to furnish
promptly to the Company in writing all information required from time to time
to make the information previously furnished by such Holder not misleading.


 


(d)        Each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(a)(vi)(3) or
4(a)(vi)(4) hereof,
such Holder will immediately discontinue disposition of Registrable Shares
pursuant to a Registration 


 


16

















 


Statement until
such Holder’s receipt of the copies of the supplemented or amended
Prospectus.  If so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies then in
such Holder’s possession, of the Prospectus covering such Registrable Shares
current at the time of receipt of such notice.


 


5.            BLACK-OUT PERIOD


 


(a)           Subject to the provisions of this Section 5
following the effectiveness of a Registration Statement (and the filings with
any international, federal or state securities commissions), the Company, by
written notice to FBR and the Holders, may direct the Holders to suspend sales
of the Registrable Shares pursuant to a Registration Statement for such times
as the Company reasonably may determine is necessary and advisable (but in no
event for more than an aggregate of ninety (90) days in any rolling twelve
(12)-month period commencing on the Closing Date or more than sixty (60) days
in any rolling 90-day period, except as a result of a review of any
post-effective amendment by the Commission prior to declaring any
post-effective amendment to the Registration Statement effective, provided the
Company has used all commercially reasonable efforts to cause such
post-effective amendment to be declared effective), if any of the following
events shall occur:  (i) the
representative of the underwriters of an Underwritten Offering of primary
shares by the Company has advised the Company that the sale of Registrable
Shares pursuant to the Registration Statement would have a material adverse
effect on the Company’s initial public offering; (ii) the majority of the
members of the Board of Directors of the Company shall have determined in good
faith that (1) the offer or sale of any Registrable Shares would
materially impede, delay or interfere with any proposed financing, offer or
sale of securities, acquisition, merger, tender offer, business combination,
corporate reorganization, consolidation or other significant transaction
involving the Company, (2) after the advice of counsel, the sale of
Registrable Shares pursuant to the Registration Statement would require disclosure
of non-public material information not otherwise required to be disclosed under
applicable law, and (3) either (x) the Company has a bona fide
business purpose for preserving the confidentiality of such transaction, (y) disclosure
would have a material adverse effect on the Company or the Company’s ability to
consummate such transaction, or (z) the proposed transaction renders the
Company unable to comply with Commission requirements, in each case under
circumstances that would make it impractical or inadvisable to cause the
Registration Statement (or such filings) to become effective or to promptly
amend or supplement the Registration Statement on a post-effective basis, as
applicable; or (iii) the majority of the members of the Board of Directors
of the Company shall have determined in good faith, after the advice of
counsel, that it is required by law, rule or regulation to supplement the
Registration Statement or file a post-effective amendment to the Registration
Statement in order to incorporate information into the Registration Statement
for the purpose of (1) including in the Registration Statement any
prospectus required under Section 10(a)(3) of the Securities Act; (2) reflecting
in the prospectus included in the Registration Statement any facts or events
arising after the effective date of the Registration Statement (or of the
most-recent post-effective amendment) that, individually or in the aggregate,
represents a fundamental change in the information set forth therein; or (3) including
in the prospectus included in the Registration Statement any material
information with respect to the plan of distribution not disclosed in the
Registration Statement or any material change to such information.  Upon the occurrence of any such suspension,
the Company shall use its commercially reasonable efforts to cause the
Registration Statement to


 


17














 


become effective or to
promptly amend or supplement the Registration Statement on a post-effective
basis or to take such action as is necessary to make resumed use of the
Registration Statement compatible with the Company’s best interests, as
applicable, so as to permit the Holders to resume sales of the Registrable
Shares as soon as possible.


 


(b)           In the case of an event that causes
the Company to suspend the use of a Registration Statement (a “Suspension
Event”), the Company shall give written notice (a “Suspension
Notice”) to FBR and the Holders to suspend sales of the
Registrable Shares and such notice shall state generally the basis for the
notice and that such suspension shall continue only for so long as the
Suspension Event or its effect is continuing and the Company is using its best
efforts and taking all reasonable steps to terminate suspension of the use of
the Registration Statement as promptly as possible.  The Holders shall not effect any sales of the
Registrable Shares pursuant to such Registration Statement (or such filings) at
any time after it has received a Suspension Notice from the Company and prior
to receipt of an End of Suspension Notice (as defined below).  If so directed by the Company, each Holder
will deliver to the Company (at the expense of the Company) all copies other
than permanent file copies then in such Holder’s possession of the Prospectus
covering the Registrable Shares at the time of receipt of the Suspension
Notice.  The Holders may recommence
effecting sales of the Registrable Shares pursuant to the Registration
Statement (or such filings) following further notice to such effect (an “End
of Suspension Notice”) from the Company, which End of
Suspension Notice shall be given by the Company to the Holders and FBR in the
manner described above promptly following the conclusion of any Suspension
Event and its effect.


 


(c)           Notwithstanding any provision herein
to the contrary, if the Company shall give a Suspension Notice pursuant to this
Section 5, the Company agrees that it shall extend the period of time
during which the applicable Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from the date of receipt by the Holders of the Suspension Notice to and including
the date of receipt by the Holders of the End of Suspension Notice and copies
of the supplemented and amended Prospectus necessary to resume sales.


 


6.            INDEMNIFICATION AND CONTRIBUTION


 


(a)           The Company agrees to indemnify and
hold harmless (i) each Holder of Registrable Shares and any underwriter
(as determined in the Securities Act) for such Holder (including, if
applicable, FBR), (ii) each Person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act), any such Person described in clause (i) (any of the
Persons referred to in this clause (ii) being hereinafter referred to as a
“Controlling Person”), and (iii) the respective
officers, directors, partners, members, employees, representatives and agents
of any such Person or any Controlling Person (any Person referred to in clause
(i), (ii) or (iii) may hereinafter be referred to as a “Purchaser
Indemnitee”), to the fullest extent lawful, from and against
any and all losses, claims, damages, judgments, actions, out-of-pocket
expenses, and other liabilities (the “Liabilities”), including
without limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Purchaser Indemnitee, joint or several, directly or indirectly related to,
based upon, arising out of or in 


 


18

















 


connection with
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus (as amended or supplemented if the
Company shall have furnished to such Purchaser Indemnitee any amendments or
supplements thereto), or any preliminary Prospectus or any other document used
to sell the Shares, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such Liabilities arise out of or are based upon (i) any
untrue statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Purchaser Indemnitee
furnished to the Company or any underwriter in writing by such Purchaser
Indemnitee expressly for use therein, or (ii) any untrue statement
contained in or omission from a preliminary Prospectus if a copy of the
Prospectus (as then amended or supplemented, if the Company shall have
furnished to or on behalf of the Holder participating in the distribution
relating to the relevant Registration Statement any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to the Person
asserting any such Liabilities who purchased Shares, if such Prospectus (or
Prospectus as amended or supplemented) is required by law to be sent or given
at or prior to the written confirmation of the sale of such Shares to such
Person and the untrue statement contained in or omission from such preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented).  The Company shall notify
the Holders promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation), or litigation of which
it shall have become aware in connection with the matters addressed by this
Agreement which involves the Company or a Purchaser Indemnitee.  The indemnity provided for herein shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Purchaser Indemnitee.


 


(b)          In connection with any Registration
Statement in which a Holder of Registrable Shares is participating, such Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
each Person who controls the Company within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act and the
respective officers, directors, partners, members, employees, representatives
and agents of such Person or any Controlling Person to the same extent as the
foregoing indemnity from the Company to each Purchaser Indemnitee, but only
with reference to untrue statements or omissions or alleged untrue statements
or omissions made in reliance upon and in strict conformity with information
relating to such Purchaser Indemnitee furnished to the Company in writing by
such Purchaser Indemnitee expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto or any preliminary
Prospectus.  The liability of any
Purchaser Indemnitee pursuant to this paragraph shall in no event exceed the
net proceeds received by such Purchaser Indemnitee from sales of Registrable
Shares giving rise to such obligations.


 


(c)           If any suit, action, proceeding
(including any governmental or regulatory investigation), claim or demand shall
be brought or asserted against any Person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) above, such Person (the “Indemnified
Party”) shall promptly notify the Person against whom such
indemnity may be sought (the “Indemnifying Party”), in
writing of the commencement thereof (but the failure to so notify an
Indemnifying Party shall not relieve it from any liability which it may have
under this Section 6, except to the extent the Indemnifying Party is
materially prejudiced by the failure to give notice), and the Indemnifying
Party, upon request of the Indemnified Party, shall retain 


 


19

















 


counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party and
any others the Indemnifying Party may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses actually incurred by such
counsel related to such proceeding. 
Notwithstanding the foregoing, in any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party, unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Party failed within a reasonable
time after notice of commencement of the action to assume the defense and
employ counsel reasonably satisfactory to the Indemnified Party, (iii) the
Indemnifying Party and its counsel do not actively and vigorously pursue the
defense of such action or (iv) the named parties to any such action
(including any impleaded parties), include both such Indemnified Party and the
Indemnifying Party, or any Affiliate of the Indemnifying Party, and such
Indemnified Party shall have been reasonably advised by counsel that, either (x) there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party or such Affiliate of
the Indemnifying Party or (y) a conflict may exist between such Indemnified
Party and the Indemnifying Party or such Affiliate of the Indemnifying Party
(in which case the Indemnifying Party shall not have the right to assume nor
direct the defense of such action on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel), for all such Indemnified
Parties, which firm shall be designated in writing by those Indemnified Parties
who sold a majority of the Registrable Shares sold by all such Indemnified
Parties and any such separate firm for the Company, the directors, the officers
and such control Persons of the Company as shall be designated in writing by
the Company).  The Indemnifying Party
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent or if there is a final non-appealable judgment for
the plaintiff, the Indemnifying Party agrees to indemnify any Indemnified Party
from and against any loss or liability by reason of such settlement or
judgment.  No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such proceeding.


 


(d)           If the indemnification provided for
in paragraphs (a) and (b) of this Section 6 is for any reason
held to be unavailable to an Indemnified Party in respect of any Liabilities
referred to therein (other than by reason of the exceptions provided therein)
or is insufficient to hold harmless a party indemnified thereunder, then each
Indemnifying Party under such paragraphs, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Liabilities (i) in such
proportion as is appropriate to reflect the relative benefits of the
Indemnified Party on the one hand and the Indemnifying Party(ies) on the other
in connection with the statements or omissions that resulted in such
Liabilities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Indemnifying Party(ies) and the Indemnified
Party, as well as any other relevant equitable considerations.  The relative fault of the Company 


 


20

















 


on the one hand
and any Purchaser Indemnitees on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Purchaser Indemnitees
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.


 


(e)           The parties agree that it would not
be just and equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if such Indemnified Parties were
treated as one entity for such purpose), or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph 6(d) above.  The amount
paid or payable by an Indemnified Party as a result of any Liabilities referred
to paragraph 6(d) shall be deemed to include, subject to the limitations
set forth above, any reasonable legal or other expenses actually incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section 6, in no event shall a Purchaser Indemnitee be
required to contribute any amount in excess of the amount by which proceeds
received by such Purchaser Indemnitee from sales of Registrable Shares exceeds
the amount of any damages that such Purchaser Indemnitee has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  For
purposes of this Section 6, each Person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) FBR or a Holder of Registrable Shares shall have the same rights
to contribution as FBR or such Holder, as the case may be, and each Person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act) the Company, and each officer, director, partner, member,
employee, representative and agent of the Company shall have the same rights to
contribution as the Company.  Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim for contribution may be made against another party or parties, notify
each party or parties from whom contribution may be sought, but the omission to
so notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any obligation it or they may have under
this Section 6 or otherwise, except to the extent that any party is
materially prejudiced by the failure to give notice.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the
Securities Act), shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.


 


(f)            The indemnity and contribution
agreements contained in this Section 6 will be in addition to any
liability which the Indemnifying Parties may otherwise have to the Indemnified
Parties referred to above.  The Purchaser
Indemnitees’ obligations to contribute pursuant to this Section 6 are
several in proportion to the respective number of Shares sold by each of the
Purchaser Indemnitees hereunder and not joint.


 


7.            MARKET STAND-OFF AGREEMENT


 


(a)           Each Holder hereby agrees that it
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, directly or indirectly sell, offer to sell
(including without limitation any short sale), grant any option or otherwise
transfer or dispose of any Registrable Shares or other shares of Common Stock
of the Company or any securities convertible into or exchangeable or
exercisable for shares of Common Stock of the Company then 


 


21

















 


owned by such
Holder (other than to donees or partners of the Holder who agree to be
similarly bound) for a period of sixty (60) days following the effective date
of an IPO Registration Statement of the Company filed under the Securities Act;
provided, however, that:


 


(i)            the
restrictions above shall not apply to Registrable Shares sold pursuant to the
IPO Registration Statement;


 


(ii)           all
executive officers and directors of the Company then holding shares of Common
Stock of the Company or securities convertible into or exchangeable or
exercisable for shares of Common Stock of the Company enter into similar
agreements;


 


(iii)          the
Holders shall be allowed any concession or proportionate release allowed to any
officer or director that entered into similar agreements (with such proportion
being determined by dividing the number of shares being released with respect
to such officer or director by the total number of issued and outstanding
shares held by such officer or director); provided, that nothing in this Section 7(a)(iii) shall
be construed as a right to proportionate release for the executive officers and
directors of the Company upon the expiration of the 90-day period applicable to
all Holders other than the executive officers and directors of the Company; and


 


(iv)          this
Section 7 shall not be applicable if a Shelf Registration Statement of the
Company filed under the Securities Act has been declared effective prior to the
filing of an IPO Registration Statement.


 


(b)           In order to enforce the foregoing
covenant, the Company shall have the right to place restrictive legends on the
certificates representing the securities subject to this Section 7 and to
impose stop transfer instructions with respect to the Registrable Shares and
such other securities of each Holder (and the securities of every other Person
subject to the foregoing restriction) until the end of such period.


 


8.            TERMINATION OF THE COMPANY’S OBLIGATION


 


The Company shall have no obligation pursuant to this
Agreement with respect to any Registrable Shares proposed to be sold by a
Holder in a registration pursuant to this Agreement if, in the opinion of
counsel to the Company, all such Registrable Shares proposed to be sold by a
Holder may be sold in a three-month period without registration under the
Securities Act pursuant to Rule 144 under the Securities Act.


 


9.            LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS


 


From and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders beneficially owning
not less than a majority of the then outstanding Registrable Shares (provided,
however, that for purposes of this Section 9, Registrable Shares that are
owned, directly or indirectly, by an Affiliate of the Company shall not be
deemed to be outstanding), enter into any agreement with any holder or
prospective holder of any Common Stock of the Company that would allow such
holder or prospective holder (a) to include such Common Stock in any
Registration Statement filed pursuant to the terms hereof, unless under the
terms of such agreement, such holder or prospective holder may include such 


 


22

















 


securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of Registrable Shares of
the Holders that is included, or (b) to have its Common Stock registered
on a registration statement that could be declared effective prior to, or
within one hundred eighty (180) days of, the effective date of any Registration
Statement filed pursuant to this Agreement (except for an IPO Registration
Statement in accordance with Section 2(b)).


 


10.          MISCELLANEOUS


 


(a)           Remedies.  In the event of a breach by the Company of
any of its obligations under this Agreement, each Holder, in addition to being
entitled to exercise all rights provided herein or, in the case of FBR, in the
Purchase/Placement Agreement, or granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement.  Subject to Section 6,
the Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.


 


(b)           Amendments
and Waivers.  The
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given, without the written
consent of the Company and Holders beneficially owning not less than a majority
of the then outstanding Registrable Shares; provided, however, that for
purposes of this Section 10(b), Registrable Shares that are owned,
directly or indirectly, by an Affiliate or employee of the Company shall not be
deemed to be outstanding.  No amendment
shall be deemed effective unless it applies uniformly to all Holders.  Notwithstanding the foregoing, a waiver or
consent to or departure from the provisions hereof with respect to a matter
that relates exclusively to the rights of a Holder whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders may
be given by such Holder; provided that the provisions of this sentence may not
be amended, modified or supplemented except in accordance with the provisions
of the immediately preceding sentence.


 


(c)           Notices.  All notices and other communications,
provided for or permitted hereunder shall be made in writing by delivered by
facsimile (with receipt confirmed), overnight courier or registered or
certified mail, return receipt requested, or by telegram:


 


(i)           if
to a Holder, at the most current address given by the transfer agent and
registrar of the Shares to the Company; and


 


(ii)          if
to the Company at the offices of the Company at:


 


Energy Coal Resources, Inc.


1500 North Big Run Road


Ashland, KY 41102


Attention:  Stephen Addington


(facsimile:  606-928-0460)


 


23

















 


(d)         Successors
and Assigns.  This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto, including, without limitation and
without the need for an express assignment or assumption, subsequent
Holders.  The Company agrees that the
Holders shall be third party beneficiaries to the agreements made hereunder by
FBR and the Company, and each Holder shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights hereunder; provided, however, that such Holder
fulfills all of its obligations hereunder.


 


(e)         Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.


 


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


 


(g)         GOVERNING
LAW.  THIS AGREEMENT
SHALL BE GOVERNED BY AND  CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE COURT IN THE
STATE OF DELAWARE OR ANY FEDERAL COURT SITTING IN DELAWARE IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE
LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.


 


(h)           Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.  It is hereby stipulated and
declared to be the intention of the parties hereto that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.


 


(i)            Entire
Agreement.  This
Agreement, together with the Purchase/Placement Agreement, is intended by the
parties hereto as a final expression of their agreement, and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.


 


24

















 


(j)            Registrable
Shares Held by the Company or its Affiliates.  Whenever the consent or approval of Holders
of a specified percentage of Registrable Shares is required hereunder,
Registrable Shares held by the Company or its Affiliates shall not be counted
in determining whether such consent or approval was given by the Holders of
such required percentage.


 


(k)           Adjustment
for Stock Splits, etc. 
Wherever in this Agreement there is a reference to a specific number of
shares with respect to any Registrable Shares, then upon the occurrence of any
subdivision, combination, or stock dividend of such shares, the specific number
of shares with respect to any Registrable Shares so referenced in this
Agreement shall automatically be proportionally adjusted to reflect the effect
on the outstanding shares of such class or series of stock by such subdivision,
combination, or stock dividend.


 


(l)            Survival.  This Agreement is intended to survive the
consummation of the transactions contemplated by the Purchase/Placement
Agreement.  The indemnification and
contribution obligations under Section 6 of this Agreement shall survive
the termination of the Company’s obligations under Section 2 of this
Agreement.


 


(m)          Attorneys’
Fees.  In any action or
proceeding brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party, as determined by
the court, shall be entitled to recover its reasonable attorneys’ fees in
addition to any other available remedy.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


 


25

















 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.


 


	
   

  	
  ENERGY COAL
  RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  Addington

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Stephen
  Addington

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SENTIENT GLOBAL RESOURCES FUND I, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [Signature
  Illegible]

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  [Name Illegible]

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  SENTIENT GLOBAL RESOURCES TRUST NO.1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter
  Cassidy

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Peter Cassidy

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COLORADO ENERGY INVESTMENTS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  Addington

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Stephen
  Addington

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FOUNTAIN INVESTMENTS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  Addington

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Stephen
  Addington

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ John C.
  Smith, Jr.

  
	
   

  	
  Name: John C.
  Smith, Jr.

  
	
   

  	
  Address:

  



 


S-1

















 


	
   

  	
  FRIEDMAN,
  BILLINGS, RAMSEY & CO., INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James R.
  Kleeblatt

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  James R.
  Kleeblatt

  
	
   

  	
  Title:

  	
  Senior Managing
  Director

  



 


S-2