Document:

exv10w1

 

Confidential
Treatment Requested

Exhibit 10.1

ASSIGNMENT AND TRANSFER AGREEMENT

     This Assignment and Transfer Agreement (“Agreement”) is entered into by and between
Paradigm Asset Holdings, Inc. and Paradigm Strategic Exploration, Inc. (collectively referred to as
“Paradigm”) and Touchstone Resources USA, Inc., a Delaware corporation (“Touchstone”) as of the
date noted below and under the following terms and conditions:

I.

SEI Seismic Data

Paradigm agrees to transfer and assign certain licensing rights to Touchstone, wherein Touchstone
will have the right to utilize some (REDACTED) of 3D seismic data and (REDACTED) of 2D
seismic data from the database of Seismic Exchange, Inc. (“SEI”). The rights and obligations
transferred to and assumed by Touchstone are set out the in the Volume Data Licensing Agreement
which is attached hereto and incorporated herein as Exhibit “A”. Per the terms of the Volume Data
Licensing Agreement with SEI, Touchstone will have two years from the date of this Agreement to
make its selection of seismic data and will be responsible for any reproduction costs as outlined
in the Volume Licensing Agreement.

     Additionally, Paradigm agrees to enter into a consulting agreement in the form attached hereto
incorporated herein as Exhibit “B”, in order to provide consulting and prospecting services to
Touchstone on the 3D portion of the seismic data referenced above. The consulting agreement will
have an initial term of eighteen months, commencing July 1, 2006

II.

Opportunities in Alabama

     Paradigm has caused its rights and obligations to certain opportunities in the “Smackover
Play” in Conceuh and Escambia counties in Alabama to be assigned to Touchstone pursuant to the
following:.

A.
The “(REDACTED) Prospect”

     Paradigm has assigned its rights and obligations in those agreements it entered into with
Trinity USA Partnership, LP and Black Stone Minerals Company, LP (“BSM”), copies of which are
attached hereto and incorporated herein respectively as Exhibit “C” and “D”. Touchstone agrees to
assume the rights and obligations of Paradigm in these agreements and to be responsible for all
costs and burdens in any way related to the (REDACTED) Prospect, formerly known as prospects “D”
and “E”. Not withstanding anything to the contrary, Paradigm and/or its assigns shall be entitled
to a 1.0% ORRI (to the 8/8ths) proportionately reduced to Touchstone’s working interest in the
Chitterling Prospect area.

B. Prospects P, R, Y and Z

Paradigm will cause the assignment of its rights and obligations to prospect areas P, R, Y and Z in
the referenced counties in Alabama to Touchstone. Plats describing the location of these prospect
areas are collectively shown in EXHIBIT “E” which is attached and incorporated

1

 

herein. Paradigm agrees to assign the leases covering such prospects to Touchstone. EXHIBIT “F”
attached hereto and incorporated herein, represents the lease form as prepared by BSM for Prospects
P, R, and Y. Paradigm agrees to be responsible for the leasing costs as referenced in the BSM
invoices contained in EXHIBIT “E”. Additionally, Paradigm will assign the rights and obligations
contained in the agreement with Carrizo Oil and Gas, Inc. (“CRZO”) and Touchstone agrees to assume
all such rights and obligations in the CRZO agreement as attached hereto and incorporated herein as
Exhibit “G”. Not withstanding anything to the contrary, Paradigm and/or its assigns shall be
entitled to a 1.0% ORRI (to the 8/8ths) proportionately reduced to Touchstone’s working interest in
Prospects P, R, Y, and Z. Touchstone agrees to save and defend, indemnify and hold Paradigm
harmless from any and all liabilities related to the rights and obligations assumed by Touchstone
in regard to all of the prospects outline under A and B above.

III.

Compensation

     In exchange for the transfer and assignment of the rights and obligations outlined in I and II
above, Touchstone shall issue, grant, pay or enter into, as applicable, the following:

     (a) To Paradigm:

(Stock)

          (i) As of May 25, 2006, contingent upon shareholder approval of an increase in
authorized shares, 1,777,778 shares of Touchstone common stock.

(Warrants)

          (ii) As of May 25, 2006, a warrant (the “Warrant”) to purchase 1,388,889 shares exercisable at
any time during the three year period after the date hereof, at an exercise price per share equal
to $ 1.50. The Warrant shall be in the form attached hereto as EXHIBIT ”H”.

     (b) To SEI:

(Stock)

          (i) As of May 25, 2006, contingent upon shareholder approval of an
increase in authorized shares, 1,000,000 shares of Touchstone common stock.

2

 

     (c) As of the date hereof, Touchstone, SEI and Paradigm shall enter into a Registration
Rights Agreement granting to Paradigm and SEI (and their permitted assigns) certain
registration rights which provides for the registering for resale of the shares of
Touchstone common stock issued pursuant to this Article III as well as shares of Touchstone
common stock underlying the Warrant under the Securities Act of 1933, as amended (the
“Securities Act”), which registration rights agreement shall be in the form attached hereto
as Exhibit “I.”

(Consulting Fee/Participation Rights)

          (iii) Beginning July 1, 2006, (A) a monthly fee of $12,500.00 for the consulting
services set out in I above, (B) the right, but not the obligation, to participate up to a
ground floor 25% working interest as to any prospects or opportunities developed by Paradigm
from the Seismic Data, and (C) Paradigm shall retain a 1% overriding royalty interest
(“ORRI”) in such prospects and opportunities proportionally reduced to Touchstone’s 75%
working interest.

IV.

Investment Representations

Paradigm represents that is acquiring the shares of Touchstone common stock and the Warrant
(including any shares of Touchstone common stock issued on exercise of the Warrants) being issued
to it under the terms of this Agreement (collectively, the “Securities”) for its own account for
investment only and not with view towards, or for resale in connection with, the public sale or
distribution of the Securities, except pursuant to transfers registered or exempted under the
Securities Act; provided, however, that by making such representations herein, Paradigm does not
agree to hold the Securities for any minimum or specific term and reserves the right to dispose of
the Securities at any time pursuant to a registration statement or an exemption from registration
under the Securities Act. Paradigm further acknowledges that such Securities are “restricted
securities” as such term is defined under the Securities Act, and represents that as of the date
hereof, it is an “accredited investor” as such term is defined in Rule 501 promulgated under the
Securities Act.

V.

Disclaimer

     Paradigm makes no warranties or representations whatsoever regarding the rights and benefits
being transferred hereunder. Touchstone acknowledges that it has done a thorough due diligence on
these opportunities and has also reviewed the contracts under
which it is assuming the rights and obligations. Touchstone thereby agrees to not hold
Paradigm, its officers, directors or employees liable for any liability arising under the
contractual rights and obligations assumed by Touchstone and Touchstone thereby agrees to save,
defend, indemnify and hold Paradigm harmless from and against any and all

3

 

liability arising in any
way from Touchstone’s assumption of these rights and liabilities transferred and assumed hereunder.

VI.

Indirect Losses

     The Parties shall in no event be liable one to the other under this Agreement for indirect
losses and loss of revenue, production, use, profit or anticipated profits or business interruption
or any other indirect loss arising out of or in connection with this Agreement.

VII.

Notices

     All notices, requests, demands or other communications hereunder shall be in writing; hand
delivered, sent by first class mail, overnight mail, or facsimile (upon electronic confirmation
that the transmission was received) to the following address, and shall be deemed to have been
given when received. Any notice provided by facsimile that is received after 4:00 p.m. local time
shall be deemed received the following business day. A party may change its addresses for notice
on not less than ten (10) business days’ prior written notice to the other party.

	 	 	 	 	 	 	 
	 

	 	Paradigm:
	 	Nat S. Turner
	 	 
	 

	 	 	 	Managing Director	 	 
	 

	 	 	 	2204 Timberloch Place	 	 
	 

	 	 	 	          Suite 280	 	 
	 

	 	 	 	The Woodlands, TX 77382	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	281-367-8808	 	 
	 

	 	 	 	281-367-7755 Fax	 	 
	 
	 	 	 	 	 	 
	 

	 	Touchstone:
	 	Jerry Walrath	 	 
	 

	 	 	 	Vice-President, Land and Business Development	 	 
	 

	 	 	 	1600 Smith, Suite 5100	 	 
	 

	 	 	 	Houston, TX 77002	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	713-784-1113	 	 
	 

	 	 	 	713-785-8530 fax	 	 

VIII.

Electronic Mail Communications

     The Parties hereby agree that electronic mail is sufficient for purposes of all general
communications and for notice purposes under this Agreement.

4

 

IX.

Assignment

     Neither party may assign any of its rights or delegate any of its rights and obligations under
this Agreement without the other party’s prior written consent, and such consent shall not be
unreasonably withheld, except that Paradigm may freely assign its retained ORRI.

X.

Force Majeure

     Each party hereto shall be excused from performance hereunder for any period and to the extent
that it is prevented from performing any services pursuant hereto, in whole or in part, as a result
of delays caused by the other party or an act of God, or other cause beyond its reasonable control
and which it could not have prevented by reasonable precautions, including fire, strike, slowdown
or labor interruption, civil commotion, acts of terrorism, embargo, delay or failure of suppliers,
contractors, or common carriers, breakdown of equipment, explosion, accident, governmental act or
regulation, failures or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment, and such nonperformance shall not be a default hereunder or a ground
for termination hereof.

XI.

Waiver

     Except as provided for specifically herein, no delay or omission by either party hereto to
exercise any right or power hereunder shall impair such right or power or be construed to be a
waiver thereof. A waiver by either of the parties hereto shall not be construed to be a waiver of
any succeeding breach thereof or of any other covenant herein contained.

XII.

Dispute Resolution

Mediation

     If a dispute arises out of or relates to this Agreement, or the interpretation or breach
thereof (a “Dispute”), and such Dispute cannot be settled through good faith negotiation or
consultation between the parties, Customer and Vendor each agree first to attempt to settle in good
faith the Dispute by non-binding mediation (“Mediation”) in Montgomery County, Texas. Either party
may submit a request for Mediation to the other party. Such Mediation shall be completed within
thirty (30) business days (the “Mediation Period”) of the initial request for Mediation. The
mediator shall be selected by mutual agreement from a list of impartial mediators familiar with the
nature of the subject matter of the Dispute provided by the American Arbitration Association (the
“AAA”). Customer and Vendor each agree to participate in good faith in the Mediation, and will use
reasonable commercial efforts to reach a resolution within the Mediation Period. Customer and
Vendor each will make available during the Mediation Period a representative with authority to
resolve the Dispute. The parties may agree to extend the Mediation beyond the Mediation Period.

5

 

Arbitration

     Upon the expiration of the Mediation Period, either party may seek arbitration of a Dispute in
accordance with this Section. Any Dispute that has not been resolved pursuant to this Section
shall be determined by arbitration as provided herein (“Arbitration”) in Harris County, Texas.
This Agreement to arbitrate will survive the rescission or termination of this Agreement. Three
(3) neutral arbitrators (“Arbitrators”) will be used and will be selected from impartial
arbitrators designated by the American Arbitration Association (“AAA”) and the Arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the AAA, and judgment upon the
award rendered by the Arbitrators may be entered in any court having jurisdiction thereof. No
person who served as a mediator pursuant to this Section shall be eligible to act as an arbitrator
pursuant to this Section.

XIII.

Construction

     The Parties have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the context requires
otherwise.

XIV.

Press Releases And Public Announcements

     No Party shall issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer and the Seller; provided,
however, that any Party may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its reasonable best efforts to advise the other Parties
prior to making the disclosure).

XV.

No Third Party Beneficiaries

     Nothing in this Agreement, express or implied, is intended to confer on any person other than
the Parties or their respective heirs, successors and assigns, any rights, remedies, obligations or
other liabilities under or by reason of this Agreement.

6

 

XVI.

Termination

     Either party shall have the right to terminate this Agreement upon written notice to the other
party upon: (i) a material breach by the other party of any provision of this Agreement, which
material breach remains uncured thirty (30) days after written notice thereof has been provided to
the breaching party; (ii) an unauthorized assignment of this Agreement; (iii) termination of the
business of the other party; (iv) insolvency of the other party; or (v) an assignment for the
benefit of creditors or the filing of a petition in bankruptcy against the other party, which
petition is not dismissed within sixty (60) days from the date of filing.

XVII.

Governing Law.

     This Agreement, and the rights and duties of the parties under it, are governed by the laws of
the State of Texas without regard to conflict of laws principles.

XVIII.

Entire Agreement

     This Agreement including the Exhibits attached hereto sets forth the entire agreement between
the parties in connection with the subject matter hereof and it incorporates, replaces, and
supersedes all prior agreements, promises, proposals, representations, understandings and
negotiations, written or not, between the parties in connection therewith. The making, execution,
and delivery of this Agreement have been induced by no representations, statements, warranties or
agreements other than those expressed herein.

XIX.

Modification

     No modification, amendment, supplement to or waiver of any provision of this Agreement shall
be binding upon the parties hereto unless made in writing and duly signed by both parties.

XX.

Severability

     Whenever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement shall be
prohibited or invalid under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement. Any unenforceable provision will be replaced by a mutually
acceptable provision which comes closest to the intention of the parties at the time the original
provision was agreed upon.

7

 

EXECUTED this                     day of April, 2006.

	 	 	 	 	 
	 

	 	Paradigm Asset Holdings, Inc.
	 	 
	 
	 	 	 	 
	 

	 	/s/ Nat S. Turner	 	 
	 

	 	 	 	 
	 

	 	Printed Name: Nat S. Turner	 	 
	 

	 	Title: President	 	 
	 
	 	 	 	 
	 

	 	Paradigm Strategic Exploration, LLC-.	 	 
	 
	 	 	 	 
	 

	 	/s/ Nat S. Turner	 	 
	 

	 	 	 	 
	 

	 	Printed Name: Nat S. Turner	 	 
	 

	 	Title: Manager	 	 
	 
	 	 	 	 
	 

	 	Touchstone Resources USA, Inc.	 	 
	 
	 	 	 	 
	 

	 	/s/ Roger Abel	 	 
	 

	 	 	 	 
	 

	 	Printed Name: Roger Abel	 	 
	 

	 	Title: Chairman & CEO	 	 

8

 

EXHIBIT A

 

 

Attachment A

Volume License Agreement

March 1, 2006

Paradigm Asset Holdings, Inc.

2204 Timberloch Place

Suite 280

The Woodlands, Texas 77380

Attn: Mr. Steve Scott and Mr. Nat Turner

Re: Volume License Agreement

Dear Mssrs. Scott and Turner,

Seismic Exchange, Inc. (“SEI”) is pleased to grant Paradigm Asset Holdings (“PAH”) certain data
credits that may be used for licensing 100%-owned and currently available 2D and 3D seismic data
(“Data”) located onshore in the lower 48 states and owned or controlled by SEI. For certain good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, PAH and
SEI do hereby agree to a volume data license agreement (the “Agreement”) in accordance with the
following terms and conditions:

SEI is granting PAH (REDACTED) credits (“Data Credit(s)”)which may be applied to licenses of Data
which is 2D
in nature (“2D Data Credits”) and (REDACTED) credits which may be applied to licenses of Data which
is 3D in nature(“3D Data Credits”).

The 2D Data Credits and 3D Data Credits granted to PAH herein will only become effective on the
date of the acquisition and assignment of the rights contained herein (“Effective Date”) by PAH to
Touchstone Resources USA, Inc. (“TSNU”). Upon such acquisition, PAH shall immediately assign, and
TSNU shall assume and receive the Data Credits, and other rights and obligations as outlined
herein. TSNU must verify to SEI in writing the receipt and express assumption of these Data Credits
and the other rights and obligations contained herein, within 10 days of the Effective Date by
forwarding a written notice to SEI, which is substantially the same in form and substance as that
attached hereto as Exhibit “A”.

Term of Agreement

The term of this Agreement shall commence upon the Effective Date and shall expire upon the
earlier of the utilization of the last Credit or the two year anniversary of the Effective Date
(“Expiration Date”).

Selection of Licensed Data

Each 2D Data Credit may be used to select for license 1 linear mile of Data which is 2D in
nature (“2D Data”) and excluding any restricted Data (“Restricted Data”) as set forth on Exhibit
“B” attached hereto. Each 3D Data Credit may be used to select 1 square mile of SEI Data, which is
3D in nature (“3D Data”) and excluding Restricted Data and Data from the Catapult portion of SEI’s
Catapult/Cameron Prairie 3D Merge Survey (“Catapult Data”) or SEI’s Judge Digby/Judge Digby
Extension 3D Survey (“Judge Digby

 

 

Data”). Each 3D Data Credit may be applied to .8333 square miles of SEI’s Catapult Data or
Judge Digby Data. All Data selected for license hereunder will be collectively referred to as
Licensed Data. All Licensed Data must be selected directly through an SEI representative. Any Data
Credits which are not utilized by Assignee on or before the Expiration Date shall be forfeited. All
2D Licensed Data shall be selected as a minimum of ten (10) miles or the entire line if less than
ten (10) miles per seismic line, and such Licensed Data selections shall be submitted to SEI in
fifty (50) mile minimum selections. All 3D Licensed Data must be selected in minimum increments of
five (5) contiguous square miles.

License Agreement

TSNU’s license to and use of all Licensed Data shall be governed by, and subject to, the terms and
conditions of the Master Geophysical
Data-Use License (“TSNU License”) by and between SEI and TSNU
and effective September 23, 2004. Individual selections of Licensed Data shall be transmitted on
Supplements as designated in the License or Affiliate License, as applicable, incorporating by
reference this Agreement in its entirety, including all exhibits hereto. Notwithstanding anything
contained in the TSNU License or in Affiliate License (collectively the “Licenses”) to the
contrary, SEI hereby expressly grants consent for Paradigm Strategic Exploration, LLC (“PSE”) to
act as Consultant(s), as defined in the Licenses, and in such capacity, PSE may remove Licensed
Data from Assignee’s premises for interpretation purposes without obtaining prior consent from SEI.

Reproduction

Assignee shall be responsible for all costs associated with reproduction or reformatting of hard
copy prints, films, maps, etc. which shall be invoiced at SEI’s then applicable rates for such
reproduction. Assignee shall be responsible for all costs of reproduction or reformatting of media
related to field or shot gather versions of the Licensed Data and associated support data (“Field
Data”) or processed versions of the Licensed Data (“Processed Data”). Such Field Data and Processed
Data reproduction, if requested on or before the Expiration Date, shall be invoiced by GeoTape,
Ltd., subject to the price list attached hereto as Exhibit “C”. In addition, 3D Field Data, if
requested by Assignee, shall only be provided directly to a bona fide geophysical processor,
subject to execution of an Agreement for Transmittal of Data for Reprocessing, which shall be
substantially the same as the Agreement for Transmittal of Field Data for Reprocessing, attached
hereto as Exhibit “D”. From and after the Expiration Date, all requested reproduction of Field Data
or Processed Data shall be made available subject to then standard rates for reproduction of such
data by SEI’s designated reproduction facility.

Assignment

This Agreement, and the rights and obligations contained herein, including the unexercised
right(s), if any, to select Data for License, may not be sold, assigned, transferred, traded,
conveyed, or otherwise disposed of to a third party for any reason, including, but not limited to,
the acquisition or merger of PAH or Assignee with a third party. Provided, however, that PAH’s
assignment, and TSNU’s assumption, of the rights, obligations, and Data Credits set forth herein is
expressly permitted, subject to the terms hereof.

Confidentiality

All terms and conditions of this Agreement must be held confidential by PAH, TSNU and and SEI.
Except as may be required by applicable securities laws and stock exchange regulations, TSNU, and
SEI each shall not, without prior written consent of the other, disclose or publicize the financial
terms, conditions, and details of the licensing terms set forth in this Agreement, other than to
their respective counsel, public accountants, financial advisors, or key personnel.

 

 

If the terms and conditions for a volume license as set forth herein are acceptable to PAH, please
indicate

PAH’s agreement by signing b[ILLEGIBLE]

	 	 	 	 
	 

	 	Sincerely,	 
	 
	 	 	 
	 

	 	/s/ John P. Havens	 
	 

	 	John P. Havens	 
	 

	 	President	 
	 

	 	Seismic Exchange, Inc.	 

Accepted and agreed to this 13 day of March, 2006

 

Paradigm Asset Holdings

 

By: /s/
[ILLEGIBLE]

 

Title: Vice President

 

 

Exhibit A

Attached to and made a
part of that certain Volume License Agreement dated March 13, 2006

by and between Paradigm Asset Holdings, Inc. and Seismic Exchange, Inc.

[TSNU
LETTERHEAD]

[DATE]

Julie Kay Hardie 
Seismic
Exchange, Inc. 
11050
Capital Park Drive 
Houston,
Texas 77041

	 	 	 
	Re:

	 	Volume License Proposal dated                                         , 2006

by and between Seismic Exchange, Inc. and Paradigm Asset Holdings, Inc.

Dear Ms. Hardie,

     Please note that this letter shall serve as notice that Touchstone Resources USA, Inc.
(“TSNU”), as contemplated and defined in that certain Volume License Proposal (the “Agreement”)
by and between Seismic Exchange, Inc. (“SEI”) and Paradigm Asset Holdings, Inc. (“PAH”) dated
                                        , 2006 has acquired the Data Credits and certain rights granted by SEI to PAH in
said Agreement.

TSNU acquired these rights from PAH on                                        and such date is the Effective Date as defined in
the Agreement. TSNU hereby acknowledges receipt of the Data Credits and certain rights granted by
SEI to PAH in the Agreement. TSNU also hereby assumes the obligations set forth in the Agreement
for the exercise of such Data Credits.

     Please update your records accordingly and forward any necessary documentation.

	 	 	 
	 

	 	Regards,
	 
	 	 
	 

	 	Roger Abel
	 

	 	Chairman & CEO
	 

	 	Touchstone Resources USA, Inc.]

	 
	Accepted and agreed to this                      day of                                         , 2006

	 

	Paradigm Asset Holdings, Inc.

	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name and
Title: 	 	 	 	 	 	 
	 	 	 	 	 	 

 

 

Exhibit B

(REDACTED)

 

 

Exhibit C

Attached to and made a part of that certain Volume License Agreement dated March 13, 2006

by and between Paradigm Asset Holdings, Inc. and Seismic Exchange, Inc.

	 	 	 	 	 	 	 
	Input
Media-Cost:	 	Price Per Original Input	 	 
	7-track
	 	$	100.00	 	 	 
	9-track
	 	 	48.00	 	 	 
	14-track (HDDR)
	 	 	170.00	 	 	 
	21-track
	 	 	60.00	 	 	 
	3480 cartridge
	 	 	48.00	 	 	 
	8MM
	 	 	0.15	 	 	per MB read ($75.00 minimum charge)
	3590 or DLT
	 	 	0.12	 	 	per MB read ($150.00 minimum charge)
	DVD
	 	 	0.12	 	 	per MB read ($150.00 minimum charge)
	Texas 2D AVO
	 	 	63.00	 	 	per linear mile
	A-D
	 	 	4.75	 	 	per record
	3D Data — Processed Versions
	 	 	50.00	 	 	per sq. mi., per display - $25. /sq. mi. - additional display
	3D Data — CDP Gathers
	 	 	N/A	 	 	Access Fee handled through SEI
	3D Data — Shot Gathers & Raw Field
	 	 	300.00	 	 	per square mile
	Data
	 	 	 	 	 	 

	 	 	 	 	 	 	 
	Output
Media Cost:	 	Price Per Output	 	 
	9-track
	 	$	24.00	 	 	 
	3480
	 	 	10.00	 	 	 
	8 mm
	 	 	10.00	 	 	 
	DLT-III (10gb)
	 	 	65.00	 	 	 
	DLT-IV (20gb)
	 	 	115.00	 	 	 
	DLT-7000 (20-35gb)
	 	 	130.00	 	 	 
	DLT-8000 (20-40gb)
	 	 	130.00	 	 	 
	External Hard Drive (120 Gig)
	 	 	500.00	 	 	 
	External Hard Drive (250 Gig)
	 	 	650.00	 	 	 
	External Hard Drive (500 Gig)
	 	 	1,000.00	 	 	 
	External Hard Drive (1,000 Gig)
	 	 	1,300.00	 	 	 
	3590
	 	 	85.00	 	 	 
	CD
	 	 	15.00	 	 	Charge is for “writing” seismic data to CD
	DVD
	 	 	45.00	 	 	 

	 	 	 	 	 	 	 
	Other
Charges:	 	 	 	 	 	 
	Tape edits
	 	 	$5.00	 	 	per edit
	Stiction fee
	 	 	10.50	 	 	per tape requiring special stiction treatment
	Document scanning
	 	 	0.40	 	 	per sheet
	Support data
	 	 	0.40	 	 	 
	Rush charge
	 	 	7.5	%	 	of total invoice - ($50.00 minimum charge)
	Overnight shipping & handling
	 	 	65.00	 	 	 
	Normal deliver (local)
	 	 	45.00	 	 	 
	Normal retrieval & refile charge
	 	 	28.00	 	 	per hour PLUS
	”
	 	 	4.00	 	 	per tape if digital
	”
	 	 	5.00	 	 	per box if analog
	Handling fee
	 	 	15.50	 	 	storage facility charges
	Texas sales tax
	 	 	8.25	%	 	of total invoice

Notes:

	~	 	Invoices not paid within 30 days of invoice date will receive a 1.5% per month interest
charge added.
	 
	~	 	Prices listed are subject to change without notice consistent with GeoTape’s standard price
list at the time the service is provided.
	 
	~	 	Prices include Demux, Reformat, and/or Copy.
	 
	~	 	Prices include any length and/or density of tape

Rev. 9-07-05

	 	 	 	 	 	 	 	 	 	 	 
	Approved by SEI:

	 	/s/ [ILLEGIBLE]	 	 	 	Approved by PAH:	 	/s/ [ILLEGIBLE]	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

 

 

Exhibit D

Attached to and made a part of that certain Volume License Agreement dated March 13, 2006

by and between Paradigm Asset Holdings, Inc. and Seismic, Exchange, Inc.

AGREEMENT FOR TRANSMITTAL OF DATA FOR REPROCESSING

This
Agreement is made and effective as of this                      day of
                                        ,
200
                      by and between
Seismic Exchange, Inc. (“SEI”), 11050 Capital Park Drive, Houston, Texas 77041,
{Licensee’s Name} (“Licensee”), {Licensee’s Address} and {Processor’s
Name} (“Processor”), {Processor’s Address}.

The raw field data and associated support data (“Field Data”) covering certain portions of SEI’s
{Survey Name} 3D Survey(the “Survey”) are being transmitted to Processor from GeoTape,
Ltd., SEI’s designated tape copy provider, for the sole purpose of reprocessing on behalf of
Licensee. The Field Data transmitted to Processor may cover a portion of the Survey not licensed to
Licensee, but available for use in reprocessing, and includes the area licensed to Licensee as
described below (“Licensed Data”) and as
set forth in that certain License Agreement dated                     . Additionally, since this data includes
subsurface traces, which as an unavoidable consequence of the acquisition geometry, while honoring
all permit restrictions, can be processed into areas which were originally designated as “no
permit” during acquisition by Seismic Exchange, Inc. SEI and edited after processing, hereinafter
the “No Permit Areas”, such license and use of the Field Data is subject to the following terms and
conditions related to the Survey and the “No Permit Areas”, in addition to the terms and conditions
set forth in the License Agreement referenced herein above. SEI, Licensee, and Processor hereby
agree as follows:

	 	•	 	The Licensed Data consists of approximately                     square miles and falls within the area
covered by the following line and trace coordinates as listed on Schedule “A” attached
hereto.
	 
	 	•	 	The Field Data shall remain in the physical possession and control of Processor
during all
phases of the reprocessing and shall not be disclosed to any third party except as set forth
herein.
	 
	 	•	 	Licensee and Processor acknowledge that the No Permit Areas are listed on Schedule “B”,
attached hereto and made a part hereof.
	 
	 	•	 	All QC outputs and final deliveries from Processor to Licensee, including edited copies of the
Field Data, in either hard copy or digital form, shall be edited to remove traces which
fall i) outside the Licensed Data or ii) within the No Permit Areas as set forth herein.
	 
	 	•	 	SEI retains the right to view all QC outputs and final deliveries to verify
compliance with
these conditions.
	 
	 	•	 	Within ninety (90) days of receipt of the Field Data, Processor will return all
Field Data to SEI,
attention Jayme Morrell, and shall not retain any copies of the Field Data in any format.
Within sixty (60) days of completion of Processor’s work for Licensee, Processor agrees to,
and represents and warrants that it shall, remove all copies of the Field Data or other
unedited products containing the No Permit Areas from its computer drives, storage, and
archival systems.
	 
	 	•	 	Processor represents and warrants that only the trace data falling within the Licensed Data
area as set forth on Schedule “A” and excluding the No Permit Areas shall be delivered to
Licensee.
	 
	 	•	 	Licensee agrees to defend, indemnify, and hold SEI harmless from and against any and all
claims, damages, liabilities, or judgments arising from any use by Licensee of the No Permit
Areas.
	 
	 	•	 	Processor agrees to defend, indemnify, and hold SEI harmless from and against any and all
claims, damages, liabilities, or judgments arising from any deliveries by Processor to Licensee
of the No Permit Areas.
	 
	 	•	 	Processor acknowledges that the Field Data are proprietary to SEI and Processor will only
utilize such Field Data within the guidelines set forth herein.

 

 

	 	 	 	 	 	 	 	 	 	 	 
	Accepted and Agreed to this
                    
day of                                         , 200__.	 	 	 	Accepted and Agreed to
this
                     day of                                          200__.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	For: Licensee	 	 	 	For: Processor	 	 
	{Licensee’s Company Name}	 	 	 	{Processor’s Name}	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Accepted and Agreed to this
                    day
of                                         , 200__.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	For: SEI	 	 	 	 	 	 	 	 
	Seismic Exchange, Inc.	 	 	 	 	 	 	 	 

 

Transmittal for Data Processing — Schedule “A” 
Line
& Trace Coordinates

 

Transmittal for Data Processing — Schedule “B” 
No
Permit Areas

 

 

EXHIBIT B

 

 

1

CONSULTING AGREEMENT

          THIS AGREEMENT (“Agreement”) is entered into effective as of the                      day of April
2006, by and between PARADIGM STRATEGIC EXPLORATION, L.L.C. (“PSE”), A Delaware Limited Liability
Company, and TOUCHSTONE RESOURCES USA, INC. (“TSNU”), a Delaware corporation, under the following
terms and conditions:

I.

TERM AND EFFECTIVE DATE

     1.01 Subject to the terms and provisions hereof, this Agreement shall be for a term of
eighteen (18) months from the date hereof (“Term”).

     1.02 Upon the termination of this Agreement, the parties agree and obligate themselves to
account to one another in an effort to fix and establish the relative rights and obligations of
each party. Specifically, PSE and TSNU acknowledge that the rights and obligations of the
respective parties shall continue beyond the expiration of the Term as to prospects pursued or
being pursued and leases and leasehold acquired or being acquired pursuant hereto.

II.

3D SEISMIC EXPLORATION

     2.01 It is the intent of the parties that PSE will provide consulting and interpretation
services to TSNU under the terms of this Agreement in regards to the (REDACTED) of Seismic
Exchange, Inc. (“SEI”) 3D seismic data as outlined in the SEI Assignment and Transfer Agreement
(“Seismic Agreement”) executed this same date by and between the parties hereto. PSE may from time
to time propose to TSNU certain areas whereby seismic data will be selected per the terms of the
Seismic Agreement. Upon agreement by TSNU as to seismic data to be selected, said data will be
made available to PSE, in PSE’s offices, for geophysical and geological interpretation services in
cooperation with TSNU. Each Prospect or opportunity developed by PSE within the area of selected
seismic data (“Prospect”) shall be offered first and exclusively to TSNU, supported with such
geological or geophysical information, maps, logs or other data which support, or otherwise relate
to such Prospect, a land plat of the geographical area deemed to overlay the geological limits of
such Prospect (“Prospective Acreage”), as well as such data, if any, which might be considered
adverse or contradictory to the interpretation or presentation of PSE. In the event TSNU does not
agree with the geographic extent of the Prospective Acreage, TSNU will, within ten (10) days of
presentation thereof by PSE to TSNU, propose to PSE a land plat of the area it deems to be the
Prospective Acreage. If PSE and TSNU do not agree within ten (10) additional days as to the area
deemed to be the Prospective Acreage, then both proposals shall be submitted to a mutually
acceptable third party who is familiar with the business of reviewing, promoting, analyzing or
otherwise dealing in matters which are the subject of

 

 

2

this Agreement such as the generation, acquisition and packaging for sale prospects as
contemplated herein, and the outline of the Prospective Acreage, for purposes hereof, shall be as
set forth and submitted by such third party. The costs and expenses charged by such third party
for such services shall be shared equally by TSNU and PSE

     2.02 PSE, or its assigns, shall have the right and the opportunity, but not the obligation, to
participate up to a 25.00% ground-floor working interest in any Prospect within a Prospect Area
(“Election”). PSE shall notify TSNU of its Election within ten (10) days of the establishment of
the Prospective Acreage. TSNU and PSE agree to negotiated in good faith with respect to the
establishment of a Joint Operating Agreement for each Prospective Area. Upon the later of written
receipt and/or presentation by PSE of the aforedescribed data on each Prospect or of PSE’s Election, TSNU will:

          (a) Have a period of thirty (30) days within which to elect either

(i) to accept and pursue such Prospect and proceed in good faith and with
due diligence with the purchase, acquisition or earning of leasehold
rights reasonably covering and affecting the Prospective Acreage, or

(ii) to not accept and pursue such Prospect

          If such Election under subsection (a) is not made by TSNU within such time period, it shall be
automatically deemed that TSNU has elected to not accept and pursue such Prospect pursuant to the
provisions of subsection (a)(ii) above.

     2.04 Should TSNU elect to accept and pursue such Prospect or per (a)(i), TSNU and PSE will
bear the costs for said acquisition and purchase of leasehold rights in proportion to the Elected
Working Interest Percentages. The Elected Working Interest Percentage for PSE will be percentage
elected in section 2.02. The Elected Working Interest Percentage for TSNU will be 100% minus the
PSE percentage.

     2.05 Per (a)(ii) above, should TSNU elect to not accept and pursue any such Prospect, then PSE
shall be entitled to sell, promote, own and generally deal with such Prospect without any
obligation or responsibility to TSNU in relation thereto, except that PSE, after assigning or
reserving to itself the overriding royalty interest provided for in Article III hereof, shall owe
to TSNU an undivided fifty (50%) percent of whatever remaining interest it receives from third
parties for the “sale” of such Prospect (including cash, overriding royalty interest, carried
working interest and the like), after deducting therefrom all of PSE’s direct costs and expenses
incurred (after the date of TSNU’s election to not accept and pursue such Prospect), in developing,
evaluating, acquiring and marketing such Prospect in the event of the sale thereof to a third party
or parties, but only in the event such sale occurs within one year from the date of termination of
this Agreement. However, it is understood and agreed that PSE shall not devote an unreasonable
amount of time to the promotion or sale of such Prospects(s) during the Term hereof. By way of
illustration, but not in limitation of the generality of the

 

 

3

foregoing, it is understood and agreed that should TSNU elect to not participate in
the drilling of a well or wells on a specific Prospect then, in lieu thereof, PSE will endeavor to
promote, farmout and/or participate in the promotion or selling of such Prospect to a third person
or persons on terms agreed upon by PSE in an effort to cause such Prospect to be evaluated, tested
and developed by the drilling of a test well. TSNU agrees to assist and cooperate in this
endeavor.

III.

COMPENSATION

     3.01 In consideration of the mutual covenants and agreements herein contained, TSNU agrees and
is hereby obligated to pay to PSE the sum of $12,500 per month for the Term of this Agreement.

     3.02 TSNU shall reimburse PSE certain out-of-pocket costs incurred in performing the
exploration and consulting work contemplated herein. Such reasonable costs shall include the
accessing of digital and well log databases and any other associated costs approved in advance by
TSNU.

     3.03 At the end of each calendar month, the PSE shall submit to TSNU a separate invoice
reflecting the amount due for such month. Each invoice shall be itemized to the TSNU’s reasonable
satisfaction. TSNU shall make payment to PSE of each proper invoice within thirty (30) days after
the TSNU’s receipt thereof.

     3.04 PSE shall be solely responsible for any tax consequences applicable to it by reason of
this Agreement and the relationship established hereunder, and TSNU shall not be responsible for
the payment of any federal, state or local taxes or contributions imposed under any employment
insurance, social security, income tax or other tax law or regulation with respect to PSE’s
performance, or the performance of any member, manager, employee or third party consultant of PSE.
TSNU and PSE shall report any and all payments made by TSNU pursuant to this Agreement to the
appropriate governmental agencies in a manner consistent with PSE’s status as an independent
contractor. In the event any of the payments made by TSNU hereunder become subject to withholding
taxes under the laws of any jurisdiction, TSNU shall deduct and withhold the amount of such taxes
for the account of PSE to the extent required by law, such amounts payable to PSE shall be reduced
by the amount of taxes deducted and withheld, and TSNU shall pay the amounts of such taxes to the
proper governmental authority in a timely manner and promptly transmit to PSE an official tax
certificate or other evidence of such tax obligations together with proof of payment from the
relevant governmental authority of all amounts deducted and withheld sufficient to enable PSE to
claim such payment of taxes. Any such withholding taxes required under applicable law to be paid or
withheld shall be an expense of, and borne solely by, PSE.

     3.05 In addition to the cash consideration and reimbursement obligations provided for above,
TSNU shall deliver to PSE, or its assigns, an overriding royalty interest (“ORRI”) of one (1%)
percent of 8/8ths on all oil, gas, casing head gas, condensate, and other hydrocarbons produced,
saved or marketed from any lands covered

 

 

4

by any lease or other interest acquired on and after the date hereof by TSNU within a
designated Prospect Area. Said ORRI shall be proportionately reduced to TSNU’s Elected Working
Interest Percentage as described in Section 2.03. In the event the leases or leasehold interest
acquired do not validly cover and affect all of the mineral rights in and under the lands described
therein, the overriding royalty interest to which PSE is entitled shall be proportionately reduced
to the interest so earned or acquired by TSNU.

IV.

CONFIDENTIALITY

     4.01 It is recognized by the parties hereto that PSE and TSNU may have individually
accumulated geological and geophysical data within the areas to be worked by PSE pursuant to the
terms hereof. In this regard, the parties hereto agree to make any and all such data and
information available to one another for review, interpretation, reprocessing, prospect generation
and use in marketing the respective prospects during the term of this Agreement. It is recognized,
however, that certain data owned by the respective parties may be subject to restrictions and
limitations in ownership due to the manner in which the data was acquired, and therefore, the use
of such information and data shall be subject to such limitations and restrictions. In all events,
information provided from one party to the other will be held in the strictest confidence, save and
except the use thereof (if allowed under restrictions of ownership) in marketing the respective
prospects.

     4.02 Each party hereto agrees that it will, during the term of this Agreement, keep secret and
confidential and not disclose to any third party the contents of this Agreement and all information
relating to the prospects developed, pursued or acquired hereunder, except information which (i)
the parties specifically agree to be excluded from the provision, (ii) is required to be furnished
by any governmental laws or regulations or any stock exchange having jurisdiction over a party,
(iii) is furnished to prospective participants in Prospects acquired hereunder, or consultants for
evaluation purposes, (iv) is furnished to a lender by a party hereto arranging for financing from
such lender, (v) is necessary to allow representatives of shareholders and potential shareholders
to properly value the company, (vi) is available to the public, or (vii) was in possession of the
party prior to the effective date of this Agreement. With respect to information required to be
kept confidential hereunder, each party shall require third parties and consultants/contractors to
whom such information may be furnished to agree to be bound by these confidentially provisions in
the same manner as it is bound hereunder. Neither party shall be liable for any damages to the
other party, however, for breach of any obligation contained in this section except for breaches
attributable to a party’s gross negligence or willful misconduct.

 

 

5

V.

MISCELLANEOUS

     5.01 Notices. All notices authorized or required between the parties hereto, and required by
any of the provisions of this Agreement, unless otherwise specifically agreed to in writing, shall
be given in writing and delivered personally, or sent by Federal Express, United States mail,
postage or charges prepaid, or confirmed email, or by facsimile, and addressed to the parties at
the following respective addresses:

PARADIGM STRATEGIC EXPLORATION, L.L.C.

Attn: Mr. Nat S. Turner

P.O. Box 7446

The Woodlands, TX 77387

Telephone: (281) 367-8808

Facsimile: (281) 367-7755

       Email:     
nturner@pse-tx.com

TOUCHSTONE RESOURCES USA, INC.

Attn: Jerry Walrath

1600 Smith St., Suite 5100

Houston, TX 77002

Telephone: (713) 784-1113

Facsimile: (713) 785-8530

email: jwalrath@touchstonetexas.com

          The originating notice given under any provision hereof shall be deemed to be given only when
received by the party to whom such notice is directed, and the time for such party to give any
notice and response thereto shall run from the date of the originating notice is received. Each
party hereto shall have the right to change its address at any time and from time to time by giving
written notice thereof to the other party to this Agreement.

     5.02 Independent Contractor. PSE and TSNU acknowledge and agree that the relationship
hereunder created is one of an independent contractor and not one of employment. PSE shall at all
times during the Term act as an independent contractor and nothing hereunder shall be construed to
be inconsistent with this relationship or status or create or imply a relationship of
employer-employee between the TSNU or any of its subsidiaries and any member, manager, employee or
third party consultant of PSE. This Agreement does not create any contractual, employment or
other relationship by and between the TSNU or any of its subsidiaries with any member, manager,
employee or third party consultant of PSE. No member, manager, employee or third party consultant
of PSE, shall hold himself or herself out to third parties as an employee of the TSNU or of any of
its subsidiaries, and shall have no authority to bind or commit the TSNU or any

 

 

6

of its subsidiaries, legally or otherwise. Neither PSE nor any member, manager, employee or
third party consultant of PSE shall be entitled to any benefits paid by TSNU or any of its
subsidiaries to any of their respective employees.

     5.03 Assignment and Subcontracting. This Agreement, or any rights or obligations
hereunder, shall not be assigned, in whole or in part, by either party without the prior written
consent of the other party, and any attempted assignment without such written consent shall be
void. It is specifically agreed that PSE may assign its ORRIs or elected Working Interests.

     5.04 Disputes. Either party may give the other party written notice of any
dispute not resolved in the normal course of business. TSNU and PSE shall thereupon attempt in good
faith to resolve such dispute promptly by negotiations between executives who have the authority to
settle the dispute. Any dispute not resolvable by negotiations shall be resolved by arbitration as
hereinafter specified.

          If a dispute has not been resolved within sixty (60) days after the above-mentioned written
notice is given, either party may refer the dispute for arbitration in accordance with the
Commercial Rules of the American Arbitration Association. The arbitration will be held in Houston,
Texas before three neutral arbitrators, chosen in accordance with said rules. The decision of the
arbitrators shall be binding and final and neither party will have the right to carry out any
action before any court in regard to the dispute except for the enforcement of the decision of the
arbitrator, which may be entered in any court having jurisdiction.

     5.05 Interpretation. The Section headings in this Agreement are included for
reference only. They are not part of this Agreement and shall not affect the interpretation and
construction of this Agreement.

     5.06 Third Parties. This Agreement is intended for the benefit of the parties hereto
and does not grant any rights to any third parties unless otherwise specifically stated herein.

     5.07 Governing Law. As to all matters of interpretation and construction, this
Agreement shall be governed by and construed in accordance with the laws of the State of Texas,
without regard to conflicts of laws provisions.

     5.08. Entirety. The terms, provisions and conditions herein contained represent the
full and complete understanding and agreement between the parties, and this Agreement may not be
amended, modified or otherwise altered unless reduced to writing and signed by both parties.

 

 

7

EXECUTED on the date first written above:

	 	 	 	 	 
	PARADIGM STRATEGIC EXPLORATION, L.L.C.  
	 
	 	 	 	 
	By:

	 	/s/ Nat S. Turner	 	 
	 

	 	 	 	 
	Its:

	 	Nat S. Turner	 	 
	 

	 	 	 	 
	 

	 	     Manager	 	 
	 
	 	 	 	 
	TOUCHSTONE RESOURCES USA, INC	 
	 
	 	 	 	 
	By:

	 	/s/ Roger Abel	 	 
	 

	 	 	 	 
	Its:

	 	Chairman & CEO	 	 
	 

	 	 	 	 

 

 

EXHIBIT C

 

 

Paradigm
Strategic Exploration, Llc

2204 TIMBERLOCH PLACE,
SUITE 280

THE WOODLANDS, TEXAS
77380

281-367-8808

281-367-7755 (FAX)

December 15, 2005

Trinity USA Partnership, L.P.

16800 Imperial Valley Drive, suite 355

Houston, Texas 77060

Attn: Mr. Michael P. Moore

Dear Sirs,

Per the attached assignment document, Paradigm Strategic Exploration, LLC (“Paradigm”) has acquired
from Black Stone Minerals et al. certain rights as to the
(REDACTED) Prospect per the terms of
that certain Consulting Services Agreement between Trinity USA Partnership, L.P. (“Trinity”) and
Black Stone Minerals Company, L.P. and Black Stone Ivory Acquisition Partners, L.P. (collectively
“Black Stone”) dated April 20, 2005.

Per Section II.C.(l) of the Consulting Services Agreement, Paradigm, and/or its assigns, elects to
participate in the (REDACTED) Prospect on an un-promoted basis for its 12.5% working interest. The
description of the Prospect being:

(REDACTED)

Any Notices as to this prospect should be sent as follows:

Paradigm Strategic Exploration, LLC

2204 Timberloch Place, Suite 280

The Woodlands, TX 77382

Attn: Nat S. Turner

Telephone:       (281) 367-8808

Fax:
                 (281) 367-7755

 

 

We are looking forward to working with you on this project.

Yours truly

/s/
Nat S.
Turner                      

Nat S. Turner

Managing Director

 

 

EXHIBIT D

 

 

1001
Fannin, Suite 2020

Houston, TX 77002

Phone No:
(713) 658-0647
 Fax
No: (713) 658-0943

www.bsmc.cc

December 16, 2005

Mr. Nat S. Turner

Paradigm Strategic Exploration, LLC

2204 Timberloch Place, Suite 280

The Woodlands, TX 77380

	 	 	 	 	 
	 

	 	Re:	 	Partial Assignment of Consulting Services
	 

	 	 	 	Agreement dated April 20, 2005
	 

	 	 	 	(REDACTED) AL

Dear Nat:

     Enclosed for Paradigm’s execution please find duplicate originals of the referenced
Partial Assignment which have been executed on behalf of Black Stone Minerals Company, L.P.
and Black Stone Ivory Acquisitions Partners, L.P.

     Please return one fully executed and notarized original of this document to my attention
at your earliest convenience. If you have any questions regarding the enclosed or need any
additional information from us at this time, please call me at 713-445-3288.

Yours very truly,

/s/
Jane M. Pereski,
CPL           

Jane M. Pereski, CPL

Senior Landman

JMP:
ss

Enclosures

 

 

BLACK STONE MINERALS COMPANY, L.P.

1001 FANNIN, SUITE 2020, HOUSTON, TEXAS 77002

713/658-0647 FAX 713/658-0943

December 15, 2005

Sent via U.S. Mail and Fax (281-367-7755)

Mr. Nat S. Turner

Paradigm Strategic Exploration, L.L.C.

2204 Timberloch Place, Suite 280

The Woodlands, TX 77380

	 	 	 	 	 
	 

	 	Re:
	 	Letter Agreement
	 

	 	 	 	(REDACTED)

Dear Mr. Turner:

Black Stone Minerals Company, L.P. and Black Stone Ivory Acquisitions Partners, L.P. and/or their
designees (individually and collectively “Black Stone”) are parties to a Consulting Services
Agreement with Trinity USA Partnership, L.P. (“Trinity”) dated effective April 20, 2005
(“Agreement”), covering certain lands in Alabama as described therein. Pursuant to Section II. A.
of the Agreement, Trinity has generated the (REDACTED) Prospect (“Prospect”). Pursuant to Section
II.B. of the Agreement, Black Stone and Trinity have mutually agreed on a “Prospect AMI” that
covers the following lands;

(REDACTED)

Section II.C. of the Agreement provides that Black Stone has the right to participate with a
working interest in any prospect generated by Trinity pursuant thereto (“Participation Interest”).
Paradigm Strategic Exploration, L.L.C. (“Paradigm”) has expressed a desire to acquire Black
Stone’s Participation Interest in the Prospect. Black Stone is agreeable to selling its
Participation Interest in the Prospect to Paradigm, and Black Stone and Paradigm hereby agree as
follows:

 

 

     1. On or before December 16, 2005, Paradigm will pay cash consideration in the amount
of $30,000.00 to Black Stone, using two separate checks, payable as follows:

	 	 	 	 	 
	Black Stone Ivory Acquisitions Partners, L.P.
	 	$	22,753.38	 
	P.O. Box 203317
	 	 	 	 
	Houston, Texas 77216-3317
	 	 	 	 
	Tax ID Number: 20-0805692
	 	 	 	 
	($30,000.00 x 75.844595%)
	 	 	 	 
	 
	 	 	 	 
	Black Stone Acquisitions Partners I, L.P.
	 	$	7,246.62	 
	P.O. Box 203319
	 	 	 	 
	Houston, Texas 77216-3319
	 	 	 	 
	Tax ID Number: 22-3868921
	 	 	 	 
	($30,000.00 x 24.155405 %)
	 	 	 	 

     2. Effective with Black Stone’s receipt of the cash consideration, Black Stone
shall assign to Paradigm all of its rights, duties and obligations under the Agreement with
respect to the Participation Interest in the Prospect. Blade Stone shall retain all other
rights under the Agreement. This transfer of the Participation Interest to Paradigm under
the terms hereof specifically does not include any mineral interest
or royalty interest owned or acquired by Black Stone in the Prospect.

     3. Paradigm will notify Trinity of its election as provided in Section II.C. of
the Agreement no later than 1:00 p.m. CST on December 16, 2005.

     4. Paradigm agrees to be bound by the terms of the Agreement as to the
interest in the Prospect assigned to it by Black Stone.

     5. PARADIGM UNDERSTANDS THAT BLACK STONE MAKES NO
EXPRESS WARRANTY, AND DISCLAIMS ALL IMPLIED WARRANTIES, WITH
RESPECT TO THE PARTICIPATION INTEREST OR THE SUBJECT MATTER OF
THE AGREEMENT AS IT RELATES THERETO/ INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES AS TO (a) WHETHER OR NOT TRINITY WILL
DEVELOP THE PROSPECT, (b) THE PRESENCE OF HYDROCARBONS WITHIN
THE PROSPECT OR (c), THE RESULTS WHICH MIGHT BE EXPECTED FROM
ANY EXPLORATION, DEVELOPMENT, PRODUCTION AND/OR HYDROCARBON
MARKETING ACTIVITIES INVOLVING THE PROSPECT, AND NOTHING
DISCUSSED BETWEEN BLACK STONE AND PARADIGM IN CONNECTION
WITH THE PROSPECT IS OR SHALL BE RELIED UPON AS A PROMISE OR
REPRESENTATION OR WARRANTY, WHETHER AS TO THE PAST, PRESENT OR
FUTURE PRODUCTION OR PRODUCTION POTENTIAL INVOLVING THE
PROSPECT.

 

 

If the above and foregoing terms are acceptable to Paradigm, please execute and return one
copy of this letter to my attention by facsimile (713-658-0943) on or
before 5:00 p.m. CST today.

Yours very truly,

/s/
Jane M. Pereski,
            

Jane M. Pereski, CPL

Senior Landman

AGREED TO
AND ACCEPTED THIS

15TH DAY OF DECEMBER, 2005.

PARADIGM STRATEGIC EXPLORATION, L.L.C

	 	 	 	 	 
	By:

	 	/s/ Nat S. Turner,
 

Nat S. Turner, Manager
	 	 

 

 

PARTIAL ASSIGNMENT

OF

CONSULTING SERVICES AGREEMENT

     THIS ASSIGNMENT dated effective as of December 16th, 2005 (“Effective Date”), is from
Black Stone Minerals Company, L.P. and Black Stone Ivory Acquisitions Partners, L.P., both Delaware
limited partnerships, whose address is 1001 Fannin, Suite 2020, Houston, Texas 77002-6709
(individually and collectively “Assignor”), to Paradigm Strategic Exploration, L.L.C., a Delaware
limited liability company, whose address is 2204 Timberloch Place, Suite 280, The Woodlands, Texas
77380 (“Assignee”).

     FOR TEN DOLLARS ($10.00) cash, and other good, valuable and sufficient consideration received by
Assignor, the receipt of which is hereby acknowledged, Assignor has granted, conveyed, sold,
bargained, assigned and delivered, and by these presents does hereby grant, convey, sell, bargain,
assign and deliver unto Assignee, effective as of the Effective Date, all of Assignor’s right,
title and interest in and to the following contract:

Consulting Services Agreement dated April 20, 2005, between Black Stone Minerals Company, L.P. and
Black Stone Ivory Acquisitions Partners, L.P. and/or their designees and Trinity USA Partnership,
L.P., covering certain lands in (REDACTED) Counties, Alabama

and any and all amendments thereto, together with any other rights, titles, interests, tenements,
hereditaments, appurtenances, benefits and privileges of Assignor attributable thereto, INSOFAR AND
ONLY INSOFAR as the above contract covers the Participation Interest in the Prospect both as
defined in that certain unrecorded Letter Agreement dated December 15, 2005, between Black Stone
Minerals Company, L.P. and Black Stone Ivory Acquisitions Partners, L.P. and/or their designees and
Paradigm Strategic Exploration, L.L.C., reserving, however, unto Assignor all other right, title
and interest in and to the above described contract (all of the interest assigned hereinabove being
herein referred to as the “Assigned Interest”).

     TO HAVE AND TO HOLD the Assigned Interest, together with all and singular the rights and
appurtenances thereunto and in anywise belonging unto Assignee, its heirs and executors, successors
and assigns, forever.

     Assignor and Assignee agree to take all such further actions and execute, acknowledge and deliver
all such further documents as may reasonably be necessary or useful in carrying out the purposes of
this Assignment.

     This Assignment is made subject to the terms of the above described Letter Agreement and to the
Consulting Services Agreement.

 

 

     This Assignment shall be binding upon and shall inure to the benefit of the parties hereto, their
successors and assigns.

     This Assignment may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which counterparts shall constitute but one assignment.

     IN WITNESS WHEREOF, Assignor has caused this Assignment to be executed as of the Effective

Date.

ASSIGNOR:

BLACK STONE MINERALS COMPANY, L.P., individually and an behalf of the Grantees (and their
successors, if applicable) under that certain (REDACTED) Alabama

	 	 	 	 	 
	By:

	 	/s/ J. A. Mills	 	 
	 

	 	 	 	 
	 

	 	J. A. Mills, Senior Vice President, Operations
	 	 

BLACK STONE IVORY ACQUISITIONS PARTNERS, L.P.

	 	 	 	 	 
	By:

	 	/s/ J. A. Mills	 	 
	 

	 	 	 	 
	 

	 	J. A. Mills, Vice President
	 	 

ASSIGNEE:

PARADIGM STRATEGIC EXPLORATION, L.L.C.

	 	 	 	 	 
	By:

	 	/s/ Nat S. Turner	 	 
	 

	 	 	 	 
	 

	 	Nat S. Turner, Manager	 	 
	 

	 	 	 	 

2

 

ACKNOWLEDGMENTS

	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF HARRIS

	 	§

     I, GLORIA PLANK, a notary public, in and for the aforesaid
jurisdiction, hereby certify that J. A. Mills, as Senior Vice President, Operations of Black Stone
Minerals Company, L.P., a Delaware limited partnership, and as Vice President of Black Stone Ivory
Acquisitions Partners, L.P., a Delaware limited partnership, who is known to me, personally
appeared and acknowledged before me on this day, that being informed of the contents of the
foregoing instrument he signed, executed and delivered the foregoing instrument voluntarily for and
on behalf of said partnerships on the day the same bears, he being duly authorized to do so.

     Given under my hand and official seal this the 15th day of December, 2005.

___________(SEAL)

	 	 	 	 	 
	 	 	 
	 	 /s/ Gloria Plank
 	 
	 	Notary Public, State of Texas      	 
	 	 	 
	 

My commission expires: 2-22-06

	 	 	 
	STATE OF TEXAS

COUNTY OF Montaomery

	 	§

§

§

     I, K. Alldredge , a notary public, in and for the aforesaid
jurisdiction, hereby certify that Nat S. Turner, Manager of Paradigm Strategic Exploration, L.L.C.,
a Delaware limited liability company, who is known to me, personally appeared and acknowledged
before me on this day, that being informed of the contents of the foregoing instrument he signed,
executed and delivered the foregoing instrument voluntarily for and on behalf of said company on
the day the same bears, he being duly authorized to do so.

     Given under my hand and official seal this the 22 day of December, 2005.

	 	 	 	 	 
	  

	 	/s/ K. Alldredge
 

Notary Public, State of Texas
	 	  
	8/13/09

	 	 	 	 

3

 

BLACK
STONE MINERALS COMPANY, L.P.

1001 FANNIN, SUITE 2020, HOUSTON. TEXAS 77002

713/658-0647 FAX 713/658-0943

December 15,2005

Sent via U.S. Mail and Fax (281-367-7755)

Mr. Nat S. Turner

Paradigm Strategic Exploration, L.L.C.

2204 Timberloch Place, Suite 280

The Woodlands, TX 77380

Re: Letter Agreement

       (REDACTED)

Dear Mr. Turner:

Black Stone Minerals Company, L.P. and Black Stone Ivory Acquisitions Partners, L.P. and/or their
designees (individually and collectively “Black Stone”) are parties to a Consulting Services
Agreement with Trinity USA Partnership, L.P. (“Trinity”) dated effective April 20, 2005
(“Agreement”), covering certain lands in Alabama as
described therein. Pursuant to Section II.A. of
the Agreement, Trinity has generated the (REDACTED) Prospect (“Prospect”). Pursuant to Section
II.B. of the Agreement, Black Stone and Trinity have mutually agreed on a “Prospect AMI” that
covers the following lands:

(REDACTED)

Section II.C. of the Agreement provides that Black Stone has the right to participate with a working
interest in any prospect generated by Trinity pursuant thereto (“Participation Interest”). Paradigm
Strategic Exploration, L.L.C. (“Paradigm”) has expressed a desire to acquire Black Stone’s
Participation Interest in the Prospect. Black Stone is agreeable to selling its Participation
Interest in the Prospect to Paradigm, and Black Stone and Paradigm hereby agree as follows:

 

 

     1. On or before December 16, 2005, Paradigm will pay cash consideration in the amount of
$30,000.00 to Black Stone, using two separate checks, payable as follows:

	 	 	 	 	 	 
	 	Black Stone Ivory Acquisitions Partners, L.P.
	 	 	 	 
	 	P.O. Box
203317 
Houston, Texas 77216-3317
	 	 	 	 
	 	Tax ID Number: 20-0805692
	 	 	 	 
	 	($30,000.00x75.844595%)
	 	$	22,753.38	 
	 	 
	 	 	 	 
	 	Black Stone Acquisitions Partners I, L.P.
	 	 	 	 
	 	P.O. Box 203319
	 	 	 	 
	 	Houston, Texas 77216-3319
	 	 	 	 
	 	Tax ID Number: 22-3868921
	 	 	 	 
	 	($30,000.00x24.155405%)
	 	$	7,246.62	 

     2. Effective with Black Stone’s receipt of the cash consideration, Black Stone
shall assign to Paradigm all of its rights, duties and obligations under the Agreement with respect
to the Participation Interest in the Prospect. Black Stone shall retain all other rights under
the Agreement. This transfer of the Participation Interest to Paradigm under the terms hereof
specifically does not include any mineral interest or royalty interest owned or acquired by Black
Stone in the Prospect.

     3. Paradigm will notify Trinity of its election as provided in Section II.C. of the
Agreement no later than 1:00 p.m. CST on December 16,2005.

     4. Paradigm agrees to be bound by the terms of the Agreement as to the interest in the
Prospect assigned to it by Black Stone.

     5. PARADIGM UNDERSTANDS THAT BLACK STONE MAKES NO EXPRESS WARRANTY, AND DISCLAIMS ALL
IMPLIED WARRANTIES, WITH RESPECT TO THE PARTICIPATION INTEREST OR THE SUBJECT MATTER OF THE
AGREEMENT AS IT RELATES THERETO, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AS TO
(a) WHETHER OR NOT TRINITY WILL DEVELOP THE PROSPECT, (b) THE PRESENCE OF HYDROCARBONS WITHIN THE
PROSPECT OR (c), THE RESULTS WHICH MIGHT BE EXPECTED FROM ANY EXPLORATION, DEVELOPMENT, PRODUCTION
AND/OR HYDROCARBON MARKETING ACTIVITIES INVOLVING THE PROSPECT, AND NOTHING DISCUSSED
BETWEEN BLACK STONE AND PARADIGM IN CONNECTION WITH THE PROSPECT IS OR SHALL BE RELIED UPON AS A
PROMISE OR REPRESENTATION OR WARRANTY, WHETHER AS TO THE PAST, PRESENT OR FUTURE PRODUCTION OR
PRODUCTION POTENTIAL INVOLVING THE PROSPECT.

 

 

If the above and foregoing terms are acceptable to Paradigm, please execute and return one copy of
this letter to my attention by facsimile (713-658-0943) on or before 5:00 p.m. CST today.

Yours very truly,

	 	 	 	 	 
	 	 	 
	 	 /s/Jane M. Pereski
 	 
	 	Jane M. Pereski, CPL 	 
	 	Senior Landman 	 
	 

AGREED TO AND ACCEPTED THIS

15TH DAY OF DECEMBER, 2005.

PARADIGM
STRATEGIC EXPLORATION, L.L.C.

	 	 	 	 	 
	By:

	 	/s/ Nat S. Turner	 	 
	 

	 	 	 	 
	 

	 	Nat S. Turner, Manager
	 	 

 

 

BLACK STONE MINERALS COMPANY, L.P.

1001 FANNIN, SUITE 2020, HOUSTON, TEXAS 77002

713/658-0647 FAX 713/658-0943

December 15, 2005

Sent via U.S. Mail and Fax (281-367-7755)

Mr. Nat S. Turner

Paradigm Strategic Exploration, L.L.C.
 2204
Timberloch Place, Suite 280

The Woodlands, TX 77380

Re: Letter Agreement

(REDACTED)

Dear Mr. Turner:

Black Stone Minerals Company, L.P. and Black Stone Ivory Acquisitions Partners, L.P. and/or their
designees (individually and collectively “Black Stone”) are parties to a Consulting Services
Agreement with Trinity USA Partnership, L.P. (“Trinity”) dated effective April 20, 2005
(“Agreement”), covering certain lands in Alabama as described therein. Pursuant to Section II.A. of
the Agreement, Trinity has generated the (REDACTED) Prospect (“Prospect”). Pursuant to Section
II.B. of the Agreement, Black Stone and Trinity have mutually agreed on a “Prospect AMI” that
covers the following lands:

(REDACTED)

Section II.C. of the Agreement provides that Black Stone has the right to participate with a
working interest in any prospect generated by Trinity pursuant thereto (“Participation Interest”).
Paradigm Strategic Exploration, L.L.C. (“Paradigm”) has expressed a desire to acquire Black
Stone’s Participation Interest in the Prospect. Black Stone is agreeable to selling its
Participation Interest in the Prospect to Paradigm, and Black Stone and Paradigm hereby agree as
follows:

 

 

     1. On or before December 16, 2005, Paradigm will pay cash consideration
in the amount of $30,000.00 to Black Stone, using two separate checks, payable
as follows:

	 	 	 	 	 	 
	Black Stone Ivory Acquisitions Partners, L.P.

P.O. Box 203317

Houston, Texas 77216-3317

Tax ID Number: 20-0805692

($30,000.00 x 75.844595%)	 	$	22,753.38	 
	 
	Black Stone Acquisitions Partners I, L.P.

P.O. Box 203319

Houston, Texas 77216-3319

Tax ID Number: 22-3868921

($30,000.00 x 24.155405%)	 	$	7,246.62	 

     2. Effective with Black Stone’s receipt of the cash consideration, Black
Stone shall assign to Paradigm all of its rights, duties and obligations under
the Agreement with respect to the Participation Interest in the Prospect.
Black Stone shall retain all other rights under the Agreement. This transfer of
the Participation Interest to Paradigm under the terms hereof specifically does
not include any mineral interest or royalty interest owned or acquired by Black
Stone in the Prospect.

     3. Paradigm will notify Trinity of its election as provided in Section
II.C. of the Agreement no later 1:00 p.m. CST on December 16, 2005.

     4. Paradigm agrees to be bound by the terms of the Agreement as to the
interest in the Prospect assigned to it by Black Stone.

     5. PARADIGM UNDERSTANDS THAT BLACK STONE MAKES NO EXPRESS WARRANT, AND
DISCLAIMS ALL IMPLIED WARRANTIES, WITH RESPECT TO THE PARTICIPATION INTEREST OR
THE SUBJECT MATTER OF THE AGREEMENT AS IT RELATES THERETO, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES AS TO (a) WEATHER OR NOT TRINITY WILL DEVELOP THE
PROSPECT, (b) THE PRESENCE OF HYDROCARBONS WITHIN THE PROSPECT OR (c), THE
RESULTS WHICH MIGHT BE EXPECTED FROM ANY EXPLORATION, DEVELOPMENT, PRODUCTION
AND/OR HYDROCARBON MARKETING ACTIVITIES INVOLVING THE PROSPECT, AND NOTHING
DISCUSSED BETWEEN BLACK STONE AND PARADIGM IN CONNECTION WITH THE PROSPECT IS OR
SHALL BE RELIED UPON AS A PROMISE OR REPRESENTATION OR WARRANTY, WHETHER AS TO
THE PAST, PRESENT OR FUTURE PRODUCTION OR PRODUCTION POTENTIAL INVOLVING THE
PROSPECT.

 

 

If the above and foregoing terms are acceptable to Paradigm, please execute and
return one copy of this letter to may attention by facsimile (713-658-0943) on
or before 5:00 p.m. CST today.

Yours very truly,

/s/ Jane M. Pereski

Jane M. Pereski, CPL

Senior Landman

	 	 	 	 	 	 	 
	AGREED TO AN ACCEPTED THIS	 	 		 
	15TH DAY OF DECEMBER, 2005.	 	 	 	 
	 
	 
	PARADIGM STRATEGIC EXPLORATION, L.L.C.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Nat S. Turner	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Nat S. Turner, Manager	 	 	 	 

 

CONSULTING
SERVICES AGREEMENT

     This Consulting Services Agreement (“Agreement”) is entered into effective as of April 20,
2005 (“Effective Date”), between Trinity USA Partnership, L.P., a Delaware limited liability
company (“Trinity”), whose address is 16800 Imperial Valley Drive, Suite 355, Houston, Texas
77060 and Black Stone Minerals Company, L.P., Black Stone Ivory Acquisitions Partners, L.P.
and/or their designees (individually and collectively “Black Stone”), whose address is 1001
Fannin, Suite 2020, Houston, Texas 77002. Trinity and Black Stone may sometimes be referred to
herein individually as “Party” or collectively as “Parties.”

WITNESSETH:

     WHEREAS, Black Stone owns or has license to certain seismic surveys known as
(REDACTED) (referred to herein collectively as the “Existing Data”) covering the lands
situated in (REDACTED) Alabama, as depicted on Exhibit “A” attached hereto and made a part
hereof (referred to collectively as the “Black Stone Program Area”); and

     WHEREAS, Trinity intends to utilize the Existing Data to identify prospective leads
for oil and/or gas exploration within the Black Stone Program Area (“Prospects”); and

     WHEREAS, Black Stone desires to retain Trinity as a consultant and Trinity desires to
provide Black Stone its consulting services to develop the Black Stone Program Area,
subject and in accordance with the terms and provisions of this Agreement.

     NOW, THEREFORE, in consideration of the premises and the covenants between the
Parties as set out herein, the Parties do hereby agree as follows:

I.

SERVICES OF TRINITY

A. Prospect Generation

During the term of this Agreement, Trinity will use so much of its time and efforts as are
reasonably necessary to review the Existing Data and all other geological and geophysical
data provided by Black Stone covering the Black Stone Program Area, and initiate, develop,
evaluate and prepare Prospects that are suitable for acquisition and development. In
connection with such efforts, Trinity will:

(1) prepare and /or obtain and submit to Black Stone such maps, logs and other
geological data as Trinity considers necessary for Black Stone’s consideration and
evaluation of all Prospects identified by Trinity;

- 1 -

 

(2) study, analyze and recommend to Black Stone Property Interests (as defined below) to be
acquired and operations to be conducted in connection with any such Prospects.

B. Trinity as Manager

Subject to the remaining provisions hereof and to any existing third party agreements, Trinity
shall manage:

(1) the acquisition and evaluation of all data and information relating to Prospects
generated by Trinity,

(2) the designation of Prospects in accordance with Section II below,

(3) the acquisition of any interest in petroleum leases within a Prospect generated by
Trinity, including without limitation, any oil, gas and mineral leases, monetary or acreage
contributions, contractual rights, options, licenses, concessions, and any and all other
rights relating to the acquisition, development, exploration, or production of petroleum
substances from lands situated within a Prospect generated by Trinity (“Property
Interest(s)”). The term Property Interest specifically does not include any
producing property acquisition, or any non-leasehold oil or gas interest, including but not
limited to any mineral interest, royalty interest, non-participating royalty interest,
overriding royalty interest, production payment, or net profits interest.

(4) the participation by third parties in the drilling of wells on Prospects generated by
Trinity under this Agreement, if applicable.

Trinity may, in its discretion, contract for services and labor with third parties in the
performance of the above services, and the costs thereof shall be borne as provided elsewhere
herein.

Notwithstanding anything herein to the contrary, Trinity acknowledges that Black Stone may make
the Existing Data available to other parties for the identification of Prospects within the Black
Stone Program Area.

II.

DESIGNATION OF PROSPECTS

AND ACQUISITION OF PROPERTY INTERESTS

A. Prospects

Prior to the acquisition of any Property Interests relating to a Prospect generated by Trinity,
Trinity shall provide Black Stone written notice of its good faith intention to pursue such
Prospect, which notice shall be delivered by e-mail to Jane Pereski at jpereski@bsmc.cc

- 2 -

 

and include a specific acreage description of the Prospect (“Prospect Notice”). Trinity
shall present the Prospect which was the subject of its Prospect Notice to Black Stone at a time of
Black Stone’s choosing within three (3) calendar days after such notice, with such presentation to
include all relevant information, including, without limitation, (i) a lease map showing the
results of a lease check conducted by Trinity and all other information regarding the land-lease
situation generally, (ii) any geologic or geophysical information that Trinity believes will
support the existence of a drillable Prospect, (iii) a proposed budget for evaluation and
acquisition costs, and (iv) all other information or data relating thereto (“Prospect
Presentation”).

If prior to receipt of a Prospect Notice from Trinity, Black Stone has received written notice
from another party identifying a Prospect which is the same or substantially similar to the
Prospect covered by Trinity’s Prospect Notice, Black Stone will promptly notify Trinity in writing
of such event and thereafter the lands included in the Prospect area identified by such other
party shall no longer be subject to this Agreement. Upon the request of either Party, this
Agreement shall be considered to exclude those lands that are no longer subject in this Agreement.

B. Area of Mutual Interest

Within fifteen (15) days after a Prospect Presentation, Trinity and Black Stone shall establish an
Area of Mutual Interest around the Prospect (“Prospect AMI”). Each Prospect AMI shall be
established by mutual agreement of the Parties to cover, as nearly as reasonably possible, giving
effect to established property lines and any other Prospect AMI’s (whether established by Black
Stone and Trinity or by Black Stone and another party), the area that is anticipated to be
geologically prospective within such Prospect. Any Prospect AMI may be revised from time to time
by mutual agreement of the Parties hereto based upon additional geologic or geophysical
information or to avoid any overlapping areas with other Prospect AMI’s established hereunder or
with other parties.

C. Prospect Elections

Black Stone shall have thirty (30) days from the date of mutual agreement on the Prospect AMI
(“Election Period”) to elect to do one of the following:

(1) participate in the Prospect on an unpromoted basis for up to an undivided 12.5% working
interest;

(2) participate on a partial unpromoted and a partial promoted basis for up to an aggregate
undivided 12.5% working interest;

(3) participate on a promoted basis only for up to an undivided 12.5% working interest; or

(4) not participate.

- 3 -

 

In the event Black Stone elects to participate in a Prospect on an unpromoted basis for all
or a portion of an undivided 12.5% working interest pursuant to Section II(C).(1) or (2) above,
such elected percentage is hereinafter referred to as “Ownership Percentage”.

In the event Black Stone elects to participate in a Prospect pursuant to Section II(C)(1), (2) or
(3) above, Black Stone shall not pay for any costs incurred by Trinity in connection with the
acquisition of Property Interests or otherwise in connection with assembling the Prospect in
question. Should Black Stone fail to respond to a Prospect Notice in a timely fashion, or elect
not to participate in a Prospect, Trinity may, at its option, proceed to develop the Prospect on
its own, subject, however, to the further provisions hereof.

D. Leasehold Acquisition

Commencing after the expiration of the Election Period, Trinity shall use reasonable best efforts
to obtain Property Interests covering one hundred percent of the right to explore for and to
develop oil and/or gas in the lands included in the Prospect AMI (“Acquisition Program”). Should
Black Stone own any available mineral interest(s) within a Prospect AMI, Trinity shall acquire one
or more leases from Black Stone covering such mineral interest(s) on a lease form similar to the
form attached hereto as Exhibit “B”. (REDACTED)

III.

PARTICIPATION AGREEMENT 

A. Prospect Participation Agreement

During and after the term of this Agreement, Trinity will use its reasonable best efforts to
arrange for the drilling of an exploratory well on any Prospect assembled under this Agreement.
Once the Acquisition Program has been completed with regard to a particular Prospect, Trinity
shall use its best efforts to enter into an agreement with a third party or parties whereby
Trinity sells, farms out, or otherwise contracts for third party participation in such Prospect
on such terms as Trinity shall in its sole discretion elect (a “Participation Agreement”).

If Black Stone has elected to participate for all or a portion of an undivided twelve and one
half percent (12.5%) interest on a promoted basis, as provided for in Section II(C)(2) or (3)
above, the promoted portion of such interest shall be promoted with any of Trinity’s interest
which Trinity is promoting on a prorata basis under the same terms (both Black

- 4 -

 

Stone’s and Trinity’s promoted interests being collectively referred to as the
“Promoted Interest”). Concurrent with the consummation of a Participation Agreement, any cash
consideration realized from the Promoted Interest will first be used to reimburse Trinity for
all direct lease acquisition costs it incurred during the Acquisition Program that are associated
with the Promoted Interest. All cash consideration in excess of these reimbursed costs shall be
owned and distributed to Trinity and Black Stone based upon their proportionate share of the
Promoted Interest contributed to the Participation Agreement. Any carried interest, reversionary
interest, overriding royalty interest other than the overriding royalty interest set forth in
Section VI or other benefit given by third parties in exchange for the Promoted Interest shall also
be owned by Trinity and Black Stone based upon their proportionate share of the Promoted Interest
contributed to the Participation Agreement. The overriding royalties set forth in Section VI. below
shall apply to the entire Promoted Interest regardless of whether Black Stone or Trinity
contributed such interest and such overriding royalties shall be the exclusive property of Trinity.

B. Prospect Operating Agreement

When a Participation Agreement is consummated, Trinity and, if appropriate, Black Stone, together
with any third parties who have elected to participate in the Prospect pursuant to the
Participation Agreement that has been finalized by Trinity, shall enter into a mutually acceptable
operating agreement covering such Prospect (“Prospect Operating Agreement”), setting forth each
such party’s respective interest in such Prospect. Thereafter, all operations within the Prospect
shall be governed by the Prospect Operating Agreement.

IV.

ASSIGNMENT

If Black Stone elects to participate in a Prospect as provided in Section II(C) above, Trinity
will deliver to Black Stone one or more assignments or conveyances, free of all costs, in
recordable form, of Black Stone’s interest in all Property Interests in the Prospect. Such
assignments or conveyances shall be subject to the terms and provisions of this Agreement, as well
as all other contracts and agreements (including the applicable operating agreement) to which such
Property Interests are subject at the time such assignments or conveyances are made. Once a
Participation Agreement has been proposed for a Prospect, each Party agrees to execute such
further assignments or instruments as may be necessary to bind the interest (if any) owned by it
that is committed by such Party to such Participation Agreement.

V.

WARRANTY OF TITLE

Trinity agrees to warrant title to any interest assigned to Black Stone in and to the Property
Interests acquired by it pursuant to this Agreement by, through or under Trinity, but not

- 5 -

 

otherwise; however, Black Stone shall be proportionately subrogated to Trinity’s rights or
actions on the warranty given by others. Upon request, Trinity will provide to Black Stone copies
of such abstracts and other title information as Trinity has in its files or hereafter acquires,
together with copies of the leases and all intermediate assignments thereof.

VI.

OVERRIDING ROYALTY INTEREST

Trinity shall have the right to retain or receive (or assign as the case may be) an overriding
royalty interest in each of the Property Interests, except as to Black Stone’s Ownership Percentage
in any leases granted by Black Stone, for the use and benefit of the employees of Trinity and other
third parties who, in the judgment of Trinity, contribute toward the success of the Black Stone
Program Area equal to the following percentages:

	 	 	 
	*NET REVENUE INTEREST IN	 	 
	THE SPECIFIC LANDS	 	 
	COVERED BY THE LEASES	 	OVERRIDING ROYALTY INTEREST
	Greater than or equal to 80%
	 	(REDACTED)
	Greater than or equal to 77% but less than 80%
	 	(REDACTED)
	Greater than or equal to 75% but
less than 77%
	 	(REDACTED)
	Less than 75%
	 	(REDACTED)

 

			
	*	 	Except as provided below, Net Revenue Interest being the undivided interest covered
by the lease subject only to those third party burdens existing at the time the specific
lease is acquired hereunder.

If any of the Property Interests burdened by the foregoing overriding royalty interests do not
cover and include the entire fee mineral estate to the minerals in and under the lands affected
thereby, the overriding royalty interest on such Property Interest shall be proportionately
reduced to the proportion that the interest covered thereby bears to the full and undivided fee
mineral estate in and under such lands. In the event any Property Interests subjected to the
foregoing overriding royalty interest are pooled or unitized with other lands or leases to form
one or more pooled units, the overriding royalty interests above described shall be reduced to the
proportion that the total net mineral acres covered by said Property Interests and included in
such unit or units bears to the entire surface acreage of said unit or units. Each Party shall
bear their respective percentages of the overriding royalty interest specified above, except for
Black Stone’s Ownership Percentage in any leases granted by Black Stone. If a mineral interest not
subject to an oil and gas lease is acquired within a Prospect AMI through force integration,
Trinity or its designee shall receive a royalty interest on such mineral interest, which royalty
interest shall be a percentage equal to the overriding royalty interest percentage as set forth
above, proportionately reduced to correspond to the mineral interest acquired.

- 6 -

 

VII.
 NOTICES

All notices, requests, consents, elections and statements hereunder shall be in writing and shall
be deemed to have been given properly if hand delivered, mailed by certified mail, or if sent by
recognized third party delivery service, addressed in each case to:

	 	 	 
	Trinity USA Partnership, L.P.

	 	Black Stone Minerals Company, L.P.
	16800 Imperial Valley Drive, Suite 355

	 	1001 Fannin, Suite 2020
	Houston, Texas 77060

	 	Houston, Texas 77002
	Attn: Mr. Michael P. Moore

	 	Attn: Mr. J. A. Mills
	Telephone: (281) 931-4200

	 	Telephone: (713) 658-0647
	Fax: (281) 931-4232

	 	Fax: (713) 658-0943

or to such other address or addresses as any Party shall have otherwise designated in writing
to the other Parties.

VIII.

OWNERSHIP OF DATA 

A. Existing Data

The Existing Data is and shall be the property of Black Stone or such third parties as Black Stone
may have acquired a license from covering all or any portion of the Existing Data. The Existing
Data shall be subject to any applicable licenses or other agreements governing the use and/or
transfer thereof, but it is understood and agreed that Trinity shall have no ownership rights,
interests in or claims to the Existing Data. Upon termination of this Agreement, and at such other
times as Black Stone may request, Trinity agrees to immediately deliver to Black Stone all Existing
Data, within its possession or control, or such of it as is requested, and shall not retain any
copies thereof unless so authorized in writing by Black Stone. Notwithstanding the above, Trinity
shall be allowed to retain as much of the Existing Data as necessary for the sole purpose of
marketing the Prospects generated hereunder until such time as a Participation Agreement has been
executed by sufficient parties to cause the drilling of a test well or eighteen (18) months of the
Effective Date hereof, whichever is earlier. If the Existing Data is returned to Black Stone
pursuant to this Section VIII, Black Stone agrees to make only that portion of the Existing Data as
may cover a Prospect available to signatories to a Participation Agreement (including Trinity)
covering that Prospect until such time as the last lease covered by the Participation Agreement has
expired. In such event, Black Stone will make such data available in its office during normal
business hours.

- 7 -

 

B. Program Data

All data (including, but not limited to, all seismic surveys, licensed seismic data, geological and
geophysical interpretations and evaluations, logs, maps, photos and other forms of written or
electronically stored information) obtained, furnished, acquired or prepared during the term of
this Agreement (collectively the “Program Data”), but excluding the Existing Data, interpretations
thereof and related work product, shall be the property of Trinity, and shall be owned by it.
However, Trinity agrees to provide proprietary copies of any of the Program Data to Black Stone
within fifteen (15) days after its request for same at Trinity’s sole cost. The Program Data shall
be subject to any applicable licenses or other agreements governing the use and/or transfer
thereof.

IX.

TERM OF AGREEMENT

This Agreement shall remain in force and effect for a period of six (6) months from the date
hereof. This Agreement may be extended for an additional period of three (3) months, at Black
Stone’s sole option at the request of Trinity delivered, in writing, thirty (30) days prior to the
end of the original six (6) month period. The Parties agree that in the event the exploration and
development activities contemplated by this Agreement are unsuccessful or abandoned prior to the
expiration hereof, or in the event the contemplated activities necessitate the continuation of
this Agreement, they will negotiate in good faith with one another so as to arrive at a mutually
acceptable termination or extension agreement. The expiration or termination of this Agreement
shall not, however, affect the rights, interests, duties or obligations of the Parties that have
accrued as of such time, or any of the provisions of this Agreement which by their nature survive
the expiration or termination hereof.

X.

INDEPENDENT CONTRACTOR

In the performance of services hereunder, Trinity is and at all times shall be an independent
contractor specifically engaged by Black Stone to perform the herein described services. Black
Stone shall not be entitled to direct Trinity as to the details of the work to be accomplished.
Black Stone shall not be entitled to, or in any way participate in, any incentive compensation
plans, vacation allowances, insurance or other benefits made available by Trinity to its
employees.

XI.

ASSIGNABILITY

Trinity and Black Stone shall each have the right and option, exercisable from time to time as it
may elect, to assign or otherwise dispose of all or any portion of its rights, interests,

- 8 -

 

duties and obligations hereunder, or in any leasehold or other interests acquired within the
Black Stone Program Area.

XII.

CONFIDENTIALITY OF EXISTING DATA

Trinity shall use the Existing data solely for the purposes contemplated by this Agreement in
connection with the exploration and development of the Black Stone Program Area. Except as provided
herein, Trinity shall not sell, give, transfer, or otherwise dispose of all or any portion of the
Existing data, or use the Existing data for any purpose not contemplated by this Agreement without
the prior written consent of Black Stone. Trinity agrees to keep the Existing data confidential and
that it will not disclose the Existing data; provided, however, that (i) Trinity may make a
disclosure of any Existing data to which Black Stone gives its prior written consent, (ii) Trinity
may make a disclosure of its interpretations of any Existing data and allow prospective third
parties with whom Trinity is discussing a Participation Agreement to review only that portion of
the Existing data as may cover the applicable Prospect, and (iii) any such Existing data may be
disclosed by Trinity if required to do so by law, statute, rule, ordinance, subpoena, summons, or
order of any court or other regulatory or law enforcement body. Provided, however, should any
person seek to legally compel Trinity to disclose any of the Existing data, Trinity will provide
Black Stone with prompt written notice so that Black Stone may seek a protective order or other
appropriate remedy (including by participation in any proceeding to which Trinity is a party, which
at Black Stone’s request Trinity will use its best efforts to permit Black Stone to do) and/or
waive compliance with the provisions of this Agreement. In any event, Trinity will furnish only
that portion of the Existing data that is legally required and will exercise its best efforts to
obtain reliable assurance that confidential treatment will be accorded such Existing Data.

XIII.

MISCELLANEOUS

A. Enforceability

If any term, provision, covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, all of the other terms and provisions hereof
shall remain in force and effect.

B. Nonexclusive Rights

Nothing contained in this Agreement is intended to grant to Trinity the exclusive right to the
Existing Data and Black Stone expressly reserves the right to allow third parties access to the
Existing Data during the term of this Agreement. Except as provided
in Section II.C., nothing in this
Agreement is intended to grant Trinity the exclusive right to lease any of

- 9 -

 

Black Stone’s mineral interests within the Black Stone Program Area and Black Stone expressly
reserves the right to enter into oil and gas leases or commit its mineral interest to other
contractual arrangements with third parties during the term of this Agreement.

C. Waiver of Rights

No failure or delay by Trinity or Black Stone in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege hereunder.

D. Governing Laws

This Agreement shall be governed by and construed in accordance with the laws of the State of
Texas without giving effect to the conflicts of laws principles thereof. In addition, each
Party consents to jurisdiction and venue for any suit relating to or arising out of the
activities contemplated by this Agreement in any court of competent jurisdiction in Harris
County, Texas, or the United States District Court for the Southern District of Texas.

E. Entire Agreement

This Agreement constitutes the entire agreement between the Parties relating to the Black Stone
Program Area and supersedes all prior agreements, understandings, conversations and
correspondence concerning the same.

F. Binding Effect

This Agreement shall be binding upon and inure to the benefit of the Parties, and their
respective successors and permitted assigns.

     IN WITNESS WHEREOF, this Agreement is entered the 20th day of April, 2005, but
shall be effective for all purposes as of the Effective Date.

BLACK STONE MINERALS COMPANY, L.P, and

BLACK STONE IVORY ACQUISITIONS PARTNERS, L.P.

	 	 	 	 	 
	 	 	 
	 	By:  	      /s/ J. A. Mills
 	 
	 	 	J. A. Mills, Senior Vice President, Operations 	 
	 	 	 	 
	 

TRINITY USA PARTNERSHIP, L.P.

By: Trinity USA Operating, L.L.C., its General Partner

	 	 	 	 	 
	 	 	 
	 	By:  	      /s/ Michael P. Moore
 	 
	 	 	Michael P. Moore, Vice President 	 
	 	 	 	 

- 10 -

 

	 	 	 	 	 

Exhibit A

(REDACTED)

 

 

EXHIBIT E

 

 

(REDACTED)

 

 

(REDACTED)

 

 

(REDACTED)

 

 

(REDACTED)

 

 

EXHIBIT F

 

 

THIS PAGE

INTENTIONALLY

LEFT BLANK

 

 

EXHIBIT G

 

 

Exploration Agreement

This agreement is entered into this 1st day of September, 2005, by and between Carrizo Oil &
Gas, Inc. (hereinafter referred to as “Carrizo”) whose address is 1000 Louisiana, Suite 1500,
Houston, Texas 77002, and Paradigm Strategic Group, LLC, whose address is 2204 Timberloch Place,
Suite 280, The Woodlands, Texas 77380.

WHEREAS, Paradigm has developed an active subsurface and 3D seismic exploration program in the area
as indicated on Exhibit A of this Agreement (herein after referred to as the “Exploration Area”),
and

WHEREAS, Carrizo is interested in obtaining recommendations resulting from the interpretation and
technical evaluations of the Exploration Area, which may lead to the generation of oil and gas
exploratory drilling prospects.

NOW
THEREFORE, Carrizo and Paradigm hereby agree as follows:

	 	1.	 	Carrizo will pay to Paradigm (REDACTED) per month for a period
of four months (the “Term”) from the date hereof. Furthermore, Carrizo agrees to
reimburse Paradigm for any pre-agreed out-of-pocket expenses that it incurs as part of
this Agreement (i.e, costs for well logs, culture, etc.) Carrizo can unilaterally end
the program by sending written notice to Paradigm during the four month period. Upon
receipt by Paradigm of the notice, the Term will end and Carrizo will not be required
to make any additional payments except the pre-agreed out-of-pocket expenses described
above. All post-Term obligations for both parties remain.
	 
	 	2.	 	Subject to the terms of this Agreement, each party shall have the right to a
50% undivided working interest in certain prospects and opportunities as contemplated
herein.
	 
	 	3.	 	Paradigm will work within the Exploration Area during the Term of this
Agreement to generate oil and gas exploratory drilling prospects. During said
Term, Paradigm will notify Carrizo as to any prospects and
opportunities that it deems to be of sufficient quality to warrant further action,
such as further technical evaluations, commercial evaluations, leasing, etc.
Subject to certain conditions outlined below, Carrizo shall have the right to
review, in Paradigm’s offices, the data and studies in support of an oil and gas
prospect identified by Paradigm. Within 5 days of a presentation of an opportunity or
prospect, Paradigm and Carrizo shall establish an Area of Mutual Interest around such
prospect or opportunity (“Prospect AMI”). Each Prospect AMI shall be established by
mutual consent to cover as reasonably as possible the area that is anticipated to be
geologically prospective. Such AMI as established shall remain in effect for
(REDACTED) from the termination of this Agreement or for as long as
Carrizo holds an active lease or Mineral Interest within said AMI.

 

 

	 	4.	 	If Carrizo elects to pursue a Prospect(s) or acquire any lease or Mineral Interest
within the Exploration Area or a Prospect AMI during the Term of this Agreement or for
a period of one year from the termination of this Agreement or within the term of a
Prospect AMI, it shall have the right to an undivided 50% working interest in each
prospect subject to the following:

(REDACTED)

	 	5.	 	If Carrizo elects to pursue such prospect(s), it shall be responsible for acquiring
leases on prospects and shall pay (REDACTED) of all leasehold costs associated
with a prospect.
	 
	 	6.	 	Carrizo understands that Paradigm is subject to certain Confidentiality
provisions as to its seismic and exploration data and evaluations. For purposes of
this Agreement, Confidential Information may include the following: (i) 3D seismic
data and derivatives, and (ii) geologic and geophysical interpretations and maps
relating to the Exploration Area, and (iii) business plans, terms, arrangements, and
transactions related to the Exploration Area and this Agreement. All data and
information shall be considered confidential information of Paradigm, fully
subject to the provisions as herein provided. Carrizo agrees that it shall not
divulge, take possession of or receive any such Information as contemplated above.
Paradigm agrees to make available, in its office, any documents pertaining to its
rights, if any, as to seismic data or leasehold acquisition agreements.

 

 

	 	7.	 	The validity, effect and construction of this agreement shall be governed by
the laws of the State of Texas.

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

	 	 	 	 
	CARRIZO OIL & GAS, INC.

	 	PARADIGM STRATEGIC GROUP, LLC
	 
	 	 	 
	By:
/s/ [ILLEGIBLE]

	 	By: /s/ [ILLEGIBLE]	 
	 
	 	 
	 
	As its: President

	 	As
its: Managing Director
	 

 

 

Exhibit A

(REDACTED)

 

 

EXHIBIT H

 

 

WARRANT NO.: 2006-****

WARRANT

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY
THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY
NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, THE
RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE SECURITIES LAWS.

WARRANT TO PURCHASE

COMMON STOCK OF

TOUCHSTONE RESOURCES USA, INC.

     This warrant (“Warrant”) is to verify that, FOR VALUE RECEIVED,                                                             
(“Holder”) is entitled to purchase, subject to the terms and conditions hereof, from TOUCHSTONE
RESOURCES USA, INC., a Delaware corporation (the “Company”),                                                     shares of
common stock, $.001 par value per share, of the Company (the “Common Stock”), at any time during
the period commencing at 9:00 a.m., Eastern Standard Time on the date hereof (the “Commencement
Date”) and ending at 5:00 p.m. Eastern Standard Time on the third (3rd) anniversary of
the Commencement Date (the “Termination Date”), at an exercise price (the “Exercise Price”) of
$1.50 per share of Common Stock. The number of shares of Common Stock purchasable upon exercise of
this Warrant and the Exercise Price per share shall be subject to adjustment from time to time upon
the occurrence of certain events as set forth below.

     The shares of Common Stock or any other shares or other units of stock or other securities or
property, or any combination thereof, then receivable upon exercise of this Warrant, as adjusted
from time to time, are sometimes referred to hereinafter as “Exercise Shares.” The exercise price
per share as from time to time in effect is referred to hereinafter as the “Exercise Price.”

1. Exercise of Warrant; Issuance of Exercise Shares.

     (a) Exercise of Warrant. Subject to the terms hereof, the purchase rights represented
by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the address of

 

 

the Holder appearing on the books of the Company) accompanied by payment of the Exercise Price
in full either: (i) in cash or by bank or certified check for the Exercise Shares with respect to
which this Warrant is exercised; (ii) by delivery to the Company of shares of the Company’s Common
Stock having a Fair Market Value (as defined below) equal to the aggregate Exercise Price of the
Exercise Shares being purchased that Holder is the record and beneficial owner of and that have
been held by the Holder for at least six (6) months; (iii) provided that the sale of the Exercise
Shares are covered by an effective registration statement, by delivering to the Company a Notice of
Exercise together with an irrevocable direction to a broker-dealer registered under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), to sell a sufficient portion of the Exercise
Shares and deliver the sales proceeds directly to the Company to pay the Exercise Price; or (iv) by
any combination of the procedures set forth in subsections (i), (ii) and (iii) of this Section
1(a). For the purposes of this Section 1(a), “Fair Market Value” shall be an amount equal to the
average of the Current Market Value (as defined below) for the ten (10) days preceding the
Company’s receipt of the duly executed Notice of Exercise form attached hereto as Appendix
A.

     In the event that this Warrant shall be duly exercised in part prior to the Termination Date,
the Company shall issue a new Warrant or Warrants of like tenor evidencing the rights of the Holder
thereof to purchase the balance of the Exercise Shares purchasable under the Warrant so surrendered
that shall not have been purchased.

     (b) Issuance of Exercise Shares: Delivery of Warrant Certificate. The Company shall,
within ten (10) business days or as soon thereafter as is practicable of the exercise of this
Warrant, issue in the name of and cause to be delivered to the Holder one or more certificates
representing the Exercise Shares to which the Holder shall be entitled upon such exercise under the
terms hereof. Such certificate or certificates shall be deemed to have been issued and the Holder
shall be deemed to have become the record holder of the Exercise Shares as of the date of the due
exercise of this Warrant.

     (c) Exercise Shares Fully Paid and Non-assessable. The Company agrees and covenants
that all Exercise Shares issuable upon the due exercise of the Warrant represented by this Warrant
certificate (“Warrant Certificate”) will, upon issuance and payment therefor in accordance with the
terms hereof, be duly authorized, validly issued, fully paid and non-assessable and free and clear
of all taxes (other than taxes which, pursuant to Section 2 hereof, the Company shall not be
obligated to pay) or liens, charges, and security interests created by the Company with respect to
the issuance thereof.

     (d) Reservation of Exercise Shares. The Company covenants that during the term that
this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of the Exercise Shares upon the exercise
of this Warrant, and from time to time will take all steps necessary to amend its articles of
incorporation to provide sufficient reserves of shares of Common Stock issuable upon the exercise
of the Warrant.

     (e) Fractional Shares. The Company shall not be required to issue fractional shares
of capital stock upon the exercise of this Warrant or to deliver Warrant Certificates that evidence
fractional shares of capital stock. In the event that any fraction of an Exercise Share would,

 

 

except for the provisions of this subsection (e), be issuable upon the exercise of this
Warrant, the Company shall pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the Current Market Value of the Exercise Share on the last business day
prior to the date on which this Warrant is exercised. For purposes of this subsection (e), the
“Current Market Value” for any day shall be determined as follows:

          (i) if the Exercise Shares are traded in the over-the-counter market and not on any national
securities exchange and not on the NASDAQ National Market System or NASDAQ Small Cap Market
(together, the “NASDAQ Reporting System”), the average of the mean between the last bid and asked
prices per share, as reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, or if not so reported, the average of the closing bid and asked prices
for an Exercise Share as furnished to the Company by any member of the National Association of
Securities Dealers, Inc., selected by the Company for that purpose; or

          (ii) if the Exercise Shares are listed or traded on a national securities exchange or the
NASDAQ Reporting System, the closing price on the principal national securities exchange on which
they are so listed or traded, on the NASDAQ Reporting System, as the case may be, on the last
business day prior to the date of the exercise of this Warrant. The closing price referred to in
this clause (ii) shall be the last reported sales price or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices, in either case on the
national securities exchange on which the Exercise Shares are then listed or in the NASDAQ
Reporting System; or

          (iii) if no such closing price or closing bid and asked prices are available, as determined in
any reasonable manner as may be prescribed by the Board of Directors of the Company.

2. Payment of Taxes.

     (a) Stamp Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of this Warrant;
provided, however, that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for Exercise Shares in a name other than that of the Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.

     (b) Withholding. The Holder shall pay to the Company, or make arrangements
satisfactory to the Company regarding payment of, any federal, state, local and/or payroll taxes of
any kind required by law to be withheld with respect to the grant of this Warrant or the issuance
of the Exercise Shares. The Company may, to the extent permitted by law, deduct any such taxes
from any payment of any kind otherwise due to the Holder whether or not pursuant to this Warrant.
The Holder may elect, with the consent of the Company, to have such tax withholding obligation
satisfied, in whole or in part, by: (i) authorizing the Company to withhold

 

 

from the Exercise Shares a number of shares of Common Stock having an aggregate Fair Market
Value that would satisfy the minimum withholding amount due, or (ii) delivering to the Company a
number of shares of Common Stock of which the Holder is the record and beneficial owner and that
have been held by the Holder for at least six (6) months with an aggregate Fair Market Value that
would satisfy the minimum withholding amount due. The Company may require that any fractional
share amount be settled in cash. For the purposes of this Section 2, Fair Market Value shall be
determined as of the date on which the amount of tax to be withheld is determined.

3. Mutilated or Missing Warrant Certificates. In case any Warrant shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue, in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the
Warrant lost, stolen or destroyed, a new Warrant or Warrants of like tenor and in the same
aggregate denomination, but only (i) in the case of loss, theft or destruction, upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such Warrant and
indemnity or bond, if requested, also satisfactory to them and (ii) in the case of mutilation, upon
surrender of the mutilated Warrant. Applicants for such substitute Warrants shall also comply with
such other reasonable regulations and pay such other reasonable charges as the Company or its
counsel may prescribe.

4. Rights of Holder. The Holder shall not, by virtue of anything contained in this Warrant
or otherwise, be entitled to any right whatsoever, either in law or equity, of a stockholder of the
Company, including without limitation, the right to receive dividends or to vote or to consent or
to receive notice as a shareholder in respect of the meetings of shareholders or the election of
directors of the Company or any other matter.

5. Registration of Transfers and Exchanges. The Warrant shall be transferable, subject to
the provisions of Section 7 hereof, only upon the books of the Company, if any, to be maintained by
it for that purpose, upon surrender of the Warrant Certificate to the Company at its principal
office accompanied (if so required by the Company) by a written instrument or instruments of
transfer in form satisfactory to the Company and duly executed by the Holder thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer. In all cases of
transfer by an attorney, the original letter of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly authenticated evidence of
their authority shall be produced, and may be required to be deposited and remain with the Company
in its discretion. Upon any such registration of transfer, a new Warrant shall be issued to the
transferee named in such instrument of transfer, and the surrendered Warrant shall be canceled by
the Company.

     Any Warrant may be exchanged, at the option of the Holder thereof and without change, when
surrendered to the Company at its principal office, or at the office of its transfer agent, if any,
for another Warrant or other Warrants of like tenor and representing in the aggregate the right to
purchase from the Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the Company or transfer
agent, as the case may be.

 

 

6. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the number and
kind of Exercise Shares purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as hereinafter provided. The
Exercise Price in effect at any time and the number and kind of securities purchasable upon
exercise of each Warrant shall be subject to adjustment as follows:

     (a) In case of any consolidation or merger of the Company with another corporation (other than
a merger with another corporation in which the Company is the surviving corporation and which does
not result in any reclassification or change — other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a subdivision or combination
— of outstanding Common Stock issuable upon such exercise), the rights of the Holder of this
Warrant shall be adjusted in the manner described below:

          (i) In the event that the Company is the surviving corporation or is merged into a wholly
owned subsidiary for the purpose of incorporating the Company in a different jurisdiction, this
Warrant shall, without payment of additional consideration therefor, be deemed modified so as to
provide that the Holder of this Warrant, upon the exercise thereof, shall procure, in lieu of each
share of Common Stock theretofore issuable upon such exercise, the kind and amount of shares of
stock, other securities, money and property receivable upon such reclassification, change,
consolidation or merger by the holder of each share of Common Stock, had exercise of this Warrant
occurred immediately prior to such reclassification, change, consolidation or merger. This Warrant
(as adjusted) shall be deemed to provide for further adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 6. The provisions of this
clause (i) shall similarly apply to successive reclassifications, changes, consolidations and
mergers.

          (ii) In the event that the Company is not the surviving corporation (except in the case of a
merger of the Company into a wholly owned subsidiary for the purpose of incorporating the Company
in a different jurisdiction), Holder shall be given at least fifteen (15) days prior written notice
of such transaction and shall be permitted to exercise this Warrant, to the extent it is
exercisable as of the date of such notice, during this fifteen (15) day period. Upon expiration of
such fifteen (15) day period, this Warrant and all of Holder’s rights hereunder shall terminate.

     (b) If the Company, at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the
securities as to which purchase rights under this Warrant exist into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the result of such change
with respect to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this Section 6.

     (c) In case the Company shall (i) pay a dividend or make a distribution on its shares of
Common Stock in shares of Common Stock, (ii) subdivide or classify its outstanding Common Stock
into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the

 

 

record date for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification, shall be proportionally adjusted so that the Holder of this
Warrant exercised after such date shall be entitled to receive the aggregate number and kind of
shares that, if this Warrant had been exercised by such Holder immediately prior to such date, he
would have owned upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. For example, if the Company declares a 2 for 1 stock dividend or
stock split and the Exercise Price immediately prior to such event was $2.00 per share, the
adjusted Exercise Price immediately after such event would be $1.00 per share. Such adjustment
shall be made successively whenever any event listed above shall occur. Whenever the Exercise
Price payable upon exercise of each Warrant is adjusted pursuant to this subsection (c), the number
of Exercise Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Exercise Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise
Price, as adjusted.

     (d) In the event that at any time, as a result of an adjustment made pursuant to subsection
(a), (b) or (c) above, the Holder of this Warrant thereafter shall become entitled to receive any
Exercise Shares of the Company, other than Common Stock, thereafter the number of such other shares
so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subsections (a), (b) or (c) above.

     (e) Irrespective of any adjustments in the Exercise Price or the number or kind of Exercise
Shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated in the similar
Warrants initially issuable pursuant to this Warrant.

     (f) Whenever the Exercise Price shall be adjusted as required by the provisions of the
foregoing Section 6, the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer’s
certificate showing the adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer’s certificate shall be
made available at all reasonable times for inspection by the holder and the Company shall,
forthwith after each such adjustment, mail a copy by certified mail of such certificate to the
Holder.

     (g) All calculations under this Section 6 shall be made to the nearest cent or to the nearest
one one-hundredth (1/100th) of a share, as the case may be.

7. Restrictions on Transferability: Restrictive Legend. Neither this Warrant nor the
Exercise Shares shall be transferable except in accordance with the provisions of this Section.

     (a) Restrictions on Transfer; Indemnification. Neither this Warrant nor any Exercise
Share may be offered for sale or sold, or otherwise transferred or sold in any transaction which
would constitute a sale thereof within the meaning of the Securities Act of 1933, as amended (the

 

 

“1933 Act”), unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the offer and sale of
securities, or (ii) exemptions from the registration requirements of the 1933 Act and the
registration or qualification requirements of all such state securities laws are available and the
Company shall have received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without registration under the 1933
Act and would not result in any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and such opinion to be
satisfactory to the Company.

     The Holder agrees to indemnify and hold harmless the Company against any loss, damage, claim
or liability arising from the disposition of this Warrant or any Exercise Share held by such holder
or any interest therein in violation of the provisions of this Section 7.

     (b) Restrictive Legends. Unless and until otherwise permitted by this Section 7, this
Warrant Certificate, each Warrant Certificate issued to the Holder or to any transferee or assignee
of this Warrant Certificate, and each certificate representing Exercise Shares issued upon exercise
of this Warrant or to any transferee of the person to whom the Exercise Shares were issued, shall
bear a legend setting forth the requirements of subsection (a) of this Section 7, together with
such other legend or legends as may otherwise be deemed necessary or appropriate by counsel to the
Company.

     (c) Removal of Legend. The Company shall, at the request of any registered holder of
a Warrant or Exercise Share, exchange the certificate representing such security for a certificate
representing the same security not bearing the restrictive legend required by subsection (b) if, in
the opinion of counsel acceptable to the Company, such restrictive legend is no longer necessary.

8. Registration Rights. The Holder shall be entitled to the rights and subject
to the obligations set forth in Section 6 of that certain Securities Purchase Agreement dated on or
about the date hereof by and between the Company and the Holder.

9. Notices. All notices or other communications under this Warrant shall be in writing and
shall be deemed to have been given on the day of delivery if delivered by hand, on the fifth day
after deposit in the mail if mailed by certified mail, postage prepaid, return receipt requested,
or on the next business day after mailing if sent by a nationally recognized overnight courier such
as federal express, addressed as follows:

If to the Company:

Touchstone Resources USA, Inc.

1600 Smith Street

Suite 5100

Houston, Texas 77002

Attention: Chief Executive Officer

and to the Holder at the address of the Holder appearing on the books of the Company
or the Company’s transfer agent, if any.

 

 

     Either of the Company or the Holder may from time to time change the address to which notices
to it are to be mailed hereunder by notice in accordance with the provisions of this Section 9.

10. Supplements and Amendments. The Company may from time to time supplement or amend this
Warrant without the approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or inconsistent with
any other provision, or to make any other provisions in regard to matters or questions herein
arising hereunder which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder.

11. Successors and Assigns. This Warrant shall inure to the benefit of and be binding on
the respective successors, assigns and legal representatives of the Holder and the Company.

12. Severability. If for any reason any provision, paragraph or terms of this Warrant is
held to be invalid or unenforceable, all other valid provisions herein shall remain in full force
and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be
severable.

13. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to the laws that might otherwise
govern under applicable principles of conflicts of laws thereof, except to the extent that the
General Corporation Law of the State of Delaware shall apply to the internal corporate governance
of the Company.

14. Headings. Section and subsection headings used herein are included herein for
convenience of reference only and shall not affect the construction of this Warrant nor constitute
a part of this Warrant for any other purpose.

[Remainder of page intentionally left blank]

     IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as of the
                     day of                                         , 2006.

	 	 	 	 	 	 	 
	 	 	TOUCHSTONE RESOURCES USA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name: Roger Abel
	 	 
	 

	 	 	 	Title: Chief Executive Officer	 	 

 

 

APPENDIX A

NOTICE OF EXERCISE

	 	 	 
	To:

	 	Touchstone Resources USA, Inc.
	 

	 	1600 Smith Street, Suite 5100
	 

	 	Houston, TX 77002
	 

	 	Attention: Chief Executive Officer

     (1) The undersigned hereby elects to purchase                      shares of Common Stock of
Touchstone Resources USA, Inc., a Delaware corporation, pursuant to the terms of the attached
Warrant, and tenders herewith payment of the Exercise Price for such shares in full in accordance
with the terms of the Warrant in the following manner (please check one or more of the following
choices):

     o In cash;

     o Cashless exercise through a broker; or

     o Delivery of previously owned shares of Common Stock.

     (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the
shares of Common Stock to be issued upon conversion hereof are being acquired solely for the
account of the undersigned, not as a nominee for any other party, and for investment purposes only
(unless such shares are subject to resale pursuant to an effective prospectus), and that the
undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.

     (3) Terms not otherwise defined in this Notice of Exercise shall have the meanings ascribed to
such terms in the attached Warrant.

     (4) Please issue a certificate or certificates representing said shares of Common Stock in the
name of the undersigned.

	 	 	 	 	 	 	 
	 

	 	 	 	HOLDER	 	 
	 
	 	 	 	 	 	 
	 

(Date)

	 	 
	 	 

(Signature)
	 	 

 

 

EXHIBIT I

 

 

REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of May ___, 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 Assignment and Transfer Agreement by and among the parties hereto of
even date herewith (the “Assignment and Transfer Agreement”), the Company has agreed, upon the
terms and subject to the conditions set forth in the Assignment and Transfer Agreement, to issue
and sell to each Buyer (i) certain common shares of the Company and (ii) 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 Assignment and Transfer 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 — the following definitions shall apply:

               a. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC thereunder, all as the same shall be in effect at the time.

               b. “Person” shall mean an individual, partnership (general or limited), corporation, limited
liability company, joint venture, business trust, cooperative, association or other form of
business organization, whether or not regarded as a legal entity under applicable law, a trust
(inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.

               c. “Register,” “registered,” and “registration” shall refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or order of effectiveness of such registration statement or document by the SEC.

               d. “Registration Statement” shall mean any registration statement of the Company filed with
the SEC pursuant to the provisions of Section 1.2 of this Agreement, which covers the resale of the
Restricted Stock on an appropriate form then permitted by the SEC to be
used for such registration and the sales contemplated to be made thereby under the Securities

 

 

Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including any pre- and post- effective amendments thereto, in each case
including the prospectus contained therein, all exhibits thereto and all materials incorporated by
reference therein.

               (e) “Restricted Stock” shall mean (i) the Shares; (ii) the shares of Common Stock issuable
upon exercise of the Warrants; and (iii) any additional shares of Common Stock of the Company
issued or issuable after the date hereof in respect of any of the foregoing securities, by way of a
stock dividend or stock split; provided that as to any particular shares of Restricted Stock, such
securities shall cease to constitute Restricted Stock when (x) a Registration Statement with
respect to the sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of thereunder, (y) such securities are permitted to be
transferred pursuant to Rule 144(k) (or any successor provision to such rule) under the Securities
Act or (z) such securities are otherwise freely transferable to the public without further
registration under the Securities Act.

               (f) “Selling Stockholders” shall mean Purchaser and any other purchaser of Units in the
transaction, and their respective successors and assigns.

          1.2. Registration of the Shares.

               The Company shall use its reasonable best efforts to prepare and file with the SEC, within 60
days of the date the shares are issued, a Registration Statement under the Act to permit the public
sale of the Restricted Stock, and to cause such Registration Statement to be declared effective
within 150 days of the date the shares are issued, except that if the company has a registration
statement pending with the SEC during this period, the Company may suspend filing of the
registration statement until such time the pending registration statement is approved, and such
delay shall not be subject to the penalties et forth in Section 1.4 below. The Selling
Stockholders shall furnish such information as may be reasonably requested by the Company in order
to include such Restricted Stock in such Registration Statement. If any Selling Stockholder
decides not to include all of its Restricted Stock in any registration statement thereafter filed
by the Company, such Selling Stockholder shall nevertheless continue to have the right to include
any Restricted Stock in any subsequent registration statement or registration statements as may be
filed by the Company with respect to offerings of its securities, all upon the terms and conditions
set forth herein. In the event that any registration pursuant to this Section 1.2 is terminated or
withdrawn, the Company shall use its reasonable best efforts to prepare and file with the SEC, as
soon thereafter as practicable, a Registration Statement under the Securities Act to permit the
public sale of the Restricted Stock purchased hereby.

          1.3. Registration Procedures. Whenever it is obligated to register any Restricted
Stock pursuant to this Agreement, the Company shall:

               (a) prepare and file with the SEC a Registration Statement with respect to the Restricted
Stock in the manner set forth in Section 1.2 hereof and use its reasonable best efforts to cause
such Registration Statement to become effective as promptly as possible and to remain effective
until the earlier of: (i) the sale of all shares of Restricted Stock
covered thereby, (ii) the availability under Rule 144(k) for the Selling Stockholder to

2

 

immediately, freely resell without restriction all Restricted Stock covered thereby, or (iii) two
(2) years from the date of this Agreement;

               (b) prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to such Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for the period specified in Section
1.3(a) above and to comply with the provisions of the Act with respect to the disposition of all
Restricted Stock covered by such Registration Statement in accordance with the intended method of
disposition set forth in such Registration Statement for such period;

               (c) furnish to the Selling Stockholders such number of copies of the Registration Statement
and the prospectus included therein (including each preliminary prospectus) as such person may
reasonably request in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such Registration Statement;

               (d) use its reasonable best efforts to register or qualify the Restricted Stock covered by
such Registration Statement under the state securities laws of such jurisdictions as any Selling
Stockholder shall reasonably request; provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general service of process in any
such jurisdiction;

               (e) in the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of
such offering. Each Purchaser participating in such underwriting shall also enter into and perform
its obligations under such an agreement, as described in Section 1.2(b);

               (f) immediately notify each Selling Stockholder at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event as a result of which the
prospectus contained in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required or necessary to be stated
therein in order to make the statements contained therein not misleading in light of the
circumstances under which they were made. The Company will use reasonable efforts to amend or
supplement such prospectus in order to cause such prospectus not to include 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 not misleading in the light of the circumstances under which they were made;

               (g) prepare and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration Statements as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such Registration Statement;

               (h) use its reasonable best efforts to list the Restricted Stock covered by such Registration
Statement on each exchange or automated quotation system on which

3

 

similar securities issued by the
Company are then listed (with the listing application being made at the time of the filing of such
Registration Statement or as soon thereafter as is reasonably practicable);

               (i) notify each Selling Stockholder of any threat by the SEC or state securities commission to
undertake a stop order with respect to sales under the Registration Statement; and

               (j) cooperate in the timely removal of any restrictive legends from the shares of Restricted
Stock in connection with the resale of such shares covered by an effective Registration Statement.

     1.4. Delay of Registration.

          (a) The Company and the Selling Stockholders agree that the Selling Stockholders may suffer
damages if the Registration Statement is not filed on or prior to the date that is 60 days after
the date the shares are issued (the “Target Filing Date”) and maintained in the manner contemplated
herein. The Company and the Selling Stockholders further agree that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if the Registration Statement is
not filed on or prior to the Target Filing Date, the Company shall pay in cash or in shares of
Common Stock (at the Company’s option) as liquidated damages for such failure and not as a penalty
to the Selling Stockholders, an amount equal to two percent (2%) of the Purchase Price and an
additional amount equal to one percent (1%) of the Purchase Price at the end of each subsequent
30-day period during which the Registration Statement is not filed (the “Late Filing Damages”).
Any payments to be made to the Selling Stockholders pursuant to this Section 1.4(a) shall be due
and payable within three (3) business days of any demand therefor by the Selling Stockholders. The
parties agree that the Late Filing Damages represent the sole and exclusive remedy, whether at law
or in equity, available to the Selling Stockholders if the Registration Statement is not filed on
or prior to the Target Filing Date. If the Company elects to pay the Late Filing Damages in shares
of Common Stock, such shares of Common Stock shall be valued at the average closing price of a
share of Common Stock on the applicable trading market for the Common Stock for the 5-trading-day
period immediately preceding the date of demand of such Late Filing Damages.

               (b) The Company and the Selling Stockholders agree that the Selling Stockholders may suffer
damages if the Registration Statement is not declared effective by the SEC on or prior to the date
that is 150 days after the date the shares are issued (the “Effectiveness Deadline”). The Company
and the Selling Stockholders further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if the Registration Statement is not declared effective
by the SEC prior to the Effectiveness Deadline, the Company shall pay in cash or in shares of
Common Stock (at the Company’s option) as liquidated damages for such failure and not as a penalty
to the Selling Stockholders, an amount equal to two percent (2%) of the Purchase Price and an
additional amount equal to one percent (1%) of the Purchase Price at the end of each subsequent
30-day period during which the
Registration Statement is not declared effective (the “Non-Effectiveness Damages”). Payments
to be made to the Selling Stockholders pursuant to this Section 1.4(b) shall be due and payable

4

 

within three (3) business days of any demand therefor by the Selling Stockholders. The parties
agree that the Non-Effectiveness Damages represent the sole and exclusive remedy, whether at law or
in equity, available to the Selling Stockholders if the Registration Statement is not declared
effective on or prior to the date that is 150 days after the Target Filing Date. If the Company
elects to pay the Non-Effectiveness Damages in shares of Common Stock, such shares of Common Stock
shall be valued at the average closing price of a share of Common Stock on the applicable trading
market for the Common Stock for the 5-trading-day period immediately preceding the date of demand
of such Non-Effectiveness Damages.

               (c) No Selling Stockholder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 1.

          1.5 Expenses.

               (a) For the purposes of this Section 1.5, the term “Registration Expenses” shall mean: all
expenses incurred by the Company in complying with Section 1.2 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees under state securities laws, fees
of the National Association of Securities Dealers, Inc. (“NASD”), fees and expenses of listing
shares of Restricted Stock on any securities exchange or automated quotation system on which the
Company’s shares are listed and fees of transfer agents and registrars. The term “Selling
Expenses” shall mean: all underwriting discounts and selling commissions applicable to the sale of
Restricted Stock and all accountable or non-accountable expenses paid to any underwriter in respect
of such sale.

               (b) Except as otherwise provided herein, the Company will pay all Registration Expenses in
connection with the Registration Statements filed pursuant to Section 1.2 of this Agreement. All
Selling Expenses in connection with any Registration Statements filed pursuant to Section 1.2 of
this Agreement shall be borne by the Selling Stockholders pro rata on the basis of the number of
shares registered by each Selling Stockholder whose shares of Restricted Stock are covered by such
Registration Statement, or by such persons other than the Company (except to the extent the Company
may be a seller) as they may agree.

          1.6. Obligations of the Selling Stockholders.

               (a) In connection with each registration hereunder, each Selling Stockholder will furnish to
the Company in writing such information with respect to it and the securities held by it and the
proposed distribution by it, as shall be reasonably requested by the Company in order to assure
compliance with applicable federal and state securities laws as a condition precedent to including
the Selling Stockholder’s Restricted Stock in the Registration Statement. Each Selling Stockholder
shall also promptly notify the Company of any changes in such information included in the
Registration Statement or prospectus as a result of which there is an untrue statement of material
fact or an omission to state any material fact required or
necessary to be stated therein in order to make the statements contained therein not
misleading in light of the circumstances under which they were made.

5

 

               (b) In connection with the filing of the Registration Statement, each Selling Stockholder
shall furnish to the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with such Registration Statement or prospectus.

               (c) In connection with each registration pursuant to this Agreement, each Selling Stockholder
agrees that it will not effect sales of any Restricted Stock until notified by the Company of the
effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt
of telegraphic or written notice from the Company to suspend sales to permit the Company to correct
or update a Registration Statement or prospectus. At the end of any period during which the
Company is obligated to keep a Registration Statement current, each Selling Stockholder shall
discontinue sales of Restricted Stock pursuant to such Registration Statement upon receipt of
notice from the Company of its intention to remove from registration the Restricted Stock covered
by such Registration Statement that remains unsold, and each Selling Stockholder shall notify the
Company of the number of shares registered which remain unsold immediately upon receipt of such
notice from the Company.

          1.7. Information Blackout and Holdbacks.

               (a) At any time when a Registration Statement effected pursuant to Section 1.2 is effective,
upon written notice from the Company to Purchaser that the Company has determined in good faith
that the sale of Restricted Stock pursuant to the Registration Statement would require disclosure
of non-public material information, Purchaser shall suspend sales of Restricted Stock pursuant to
such Registration Statement until such time as the Company notifies Purchaser that such material
information has been disclosed to the public or has ceased to be material, or that sales pursuant
to such Registration Statement may otherwise be resumed.

               (b) Notwithstanding any other provision of this Agreement, Purchaser shall not effect any
public sale or distribution (including sales pursuant to Rule 144 under the Securities Act), if and
when available, of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the thirty (30) days prior to the
commencement of any primary offering to be undertaken by the Company of shares of its unissued
Common Stock (“Primary Offering”), which may also include other securities, and ending one hundred
twenty (120) days after completion of any such Primary Offering, unless the Company, in the case of
a non-underwritten Primary Offering, or the managing underwriter, in the case of an underwritten
Primary Offering, otherwise agree.

          1.8. Indemnification.

               (a) The Company agrees to indemnify, to the extent permitted by law, each Selling Stockholder,
such Selling Stockholder’s respective partners, officers, directors, underwriters and each Person
who controls any Selling Stockholder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by (i) any untrue statement of or alleged untrue
statement of material fact contained in the Registration
Statement, prospectus or preliminary prospectus or any amendment or supplement thereto, (ii)
any omission of or alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (iii) any violation or alleged violation by the

6

 

Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities law in connection
with the shares covered by such Registration Statement (“Violations”); provided,
however, that the indemnity agreement contained in this Section 1.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement
is effected without the consent of the Company, which consent shall not be unreasonably withheld,
nor shall the Company be liable in for any loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity
with information furnished to the Company by such Selling Stockholder, partner, officer, director,
underwriter or controlling person of such Selling Stockholder.

               (b) To the extent permitted by law, each Selling Stockholder shall indemnify and hold harmless
the Company, each of its directors, its officers and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Selling Stockholder selling
securities under such registration statement or any of such other Selling Stockholder’s partners,
directors or officers or any person who controls such Selling Stockholder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Selling Stockholder, or partner, director,
officer or controlling person of such other Selling Stockholder, may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such Violation occurs (i) in
reliance upon and in conformity with information furnished by such Selling Stockholder to the
Company, (ii) as a result of any failure to deliver a copy of the prospectus relating to such
Registration Statement, or (iii) as a result of any disposition of the Restricted Stock in a manner
that fails to comply with the permitted methods of distribution identified within the Registration
Statement.

               (c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification (provided that
the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party), and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a
claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.

               (d) If the indemnification provided for in this Section 1.8 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages
or liabilities referred to herein, the indemnifying party, in lieu of

7

 

indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the violation(s) described in
Section 1.8(a) that resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, that in no event shall any contribution by a
Selling Stockholder hereunder exceed the net proceeds from the shares received by such Selling
Stockholder.

               (e) The indemnification provided for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Company’s indemnification is
unavailable for any reason.

8

 

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

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	TOUCHSTONE RESOURCES USA, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

          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:	 	 
	 
	 	 	 	 	 	 
	 	 	PARADIGM STRATEGIC EXPLORATION,	 	 
	 	 	LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

   Name:
	 	 
	 

	 	 	 	   Title:	 	 

 

 

          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.

	 	 	 	 	 	 	 
	 	 	SEI	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

SCHEDULE OF BUYERS

	 	 	 	 	 	 	 	 	 
	Buyer	 	 	Shares	 	 	 	Warrants	 
	 
	 	 	 	 	 	 	 	 
	Paradigm Strategic
	 	 	1,777,778	 	 	 	1,388,889	 
	Exploration, LLC
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	SEI
	 	 	1,000,000	 	 	 	0exv10w1

 

EXHIBIT 10.1

SENIOR EXECUTIVE

EMPLOYMENT AGREEMENT

     THIS SENIOR EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is to be effective as of
January 1, 2006 by and between DECKERS OUTDOOR CORPORATION, a Delaware corporation (the
“Company”), and COLIN CLARK (the “Executive”).

ARTICLE I

DUTIES AND TERM

          1.1 EMPLOYMENT. In consideration of their mutual covenants, Executive’s continued
employment with the Company and other good and valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the Company agrees to enter into this Agreement with
the Executive, who is currently an employee of the Company on an “at will” basis, and the Executive
agrees to enter into this Agreement and remain in the employ of the Company upon the terms and
conditions herein provided and in accordance with all applicable employment rules of the Company.

          1.2 POSITION AND RESPONSIBILITIES. The Executive will continue to serve in the
Executive’s current position as Senior Vice President of International, and continue to report to
the Executive’s current supervisor.

          1.3 TERM. The term of the Executive’s employment under this Agreement will commence
on the effective date of this Agreement as first written above and will continue, unless sooner
terminated, until December 31, 2007. Employment of the Executive is at will and will continue
until such time as written notice of termination is given by the Company or written notice is given
by the Executive.

          1.4 AT-WILL EMPLOYMENT. Executive will continue to be employed as an at-will employee
of the Company. Subject to the provisions of Articles III and IV, as an at-will employee,
Executive is free to terminate his/her employment with the Company at any time, for any reason, and
the Company has the similar right to terminate Executive’s employment at any time, for any reason.
Although the Company may choose to terminate Executive’s employment for cause, Executive’s
employment is at-will and cause is not required.

          1.5 REVIEW OF AGREEMENT. It is the parties intention that the terms of this Agreement
will be reviewed prior to December 31, 2007 to determine whether any modifications are appropriate.
This review of the Agreement terms may occur at an earlier or later date, is not mandatory and
does not impose any binding obligations on either party.

ARTICLE II

COMPENSATION

     For all services rendered by the Executive in any capacity during the Executive’s employment
under this Agreement, the Company will compensate the Executive as follows:

          2.1 BASE SALARY. Effective as of January 1, 2006, and for a period of two (2) years
thereafter, the Company will pay to the Executive an annual base salary of TWO

-1-

 

HUNDRED TWENTY FIVE THOUSAND DOLLARS ($225,000) to be paid in equal installments in accordance
with the Company’s general payment policies in effect during the term hereof (the “Base
Salary”). Executive’s annual base salary may be reviewed prior to December 31, 2007 and
appropriate adjustments to salary implemented. If Executive’s annual base salary is not revised
effective January 1, 2008, his existing salary will continue on a monthly basis until changed.
This provision does not alter the at-will nature of Executive’s employment or the provisions of
Articles III and IV below.

     2.2 INCENTIVE BONUS. The Executive shall be eligible to receive a targeted annual
bonus based on performance criteria established annually by the Compensation Committee (the
“Incentive Bonus”). The Incentive Bonus criteria for the year ending December 31, 2006
is set forth on Exhibit A hereto.

     2.3 STOCK COMPENSATION. The Executive may be granted options to purchase shares of
Company Common Stock or Restricted Stock Units to purchase shares of Company Common Stock in
accordance with the Company’s Stock Option Plan. Any grants must be approved by the Compensation
Committee.

     2.4 ADDITIONAL BENEFITS. The Executive will be entitled to participate in all benefit
and welfare programs, plans, and arrangements that are from time to time made available to the
Company’s like-level executive employees.

ARTICLE III

TERMINATION OF EMPLOYMENT

          3.1 GENERAL. While Executive is an at-will employee as provided at Section 1.3 above,
the follow conditions for termination of employment are set forth in order to determine the nature
of Executive compensation entitlement upon termination of employment as discussed in Article IV
below. Neither the provisions of Article III or Article IV of this Agreement shall alter the
at-will nature of Executive’s employment with the Company.

          3.2 DEATH OR RETIREMENT OF EXECUTIVE. The Executive’s employment under this Agreement
will automatically terminate upon the death or Retirement (as defined in Section 6.1) of
the Executive.

          3.3 BY EXECUTIVE. The Executive may terminate the Executive’s employment under this
Agreement by giving Notice of Termination (as defined in Section 6.1 hereof) to the
Company:

     (a) for Good Reason (as defined in Section 6.1 hereof); and

     (b) at any time without Good Reason.

          3.4 BY COMPANY. The Company may terminate the Executive’s employment under this
Agreement by giving Notice of Termination to the Executive:

     (a) in the event of Executive’s Total Disability (as defined in Section 6.1
hereof);

-2-

 

     (b) for Cause (as defined in Section 6.1 hereof); and

     (c) at any time without Cause.

ARTICLE IV

COMPENSATION UPON TERMINATION OF EMPLOYMENT

     If the Executive’s employment hereunder is terminated, in accordance with the provisions of
Article III hereof, and except for any other rights or benefits specifically provided for
herein to be effective following the Executive’s period of employment, the Company will provide
compensation and benefits to the Executive only as follows:

          4.1 UPON TERMINATION FOR DEATH OR DISABILITY. If the Executive’s employment hereunder
is terminated by reason of the Executive’s death or Total Disability, the Company will:

     (a) pay the Executive (or the Executive’s estate) or beneficiaries any Base Salary that
has accrued but was not paid as of the termination date (the “Accrued Base Salary”);

     (b) pay the Executive (or the Executive’s estate) or beneficiaries for unused vacation
days accrued as of the termination date in an amount equal to the Executive’s Base Salary
multiplied by a fraction the numerator of which is the number of accrued unused vacation
days and the denominator of which is 260 (the “Accrued Vacation Payment”);

     (c) reimburse the Executive (or the Executive’s estate) or beneficiaries for expenses
incurred by him prior to the date of termination that are subject to reimbursement pursuant
to this Agreement (the “Accrued Reimbursable Expenses”);

     (d) provide to the Executive (or the Executive’s estate) or beneficiaries any accrued
and vested benefits required to be provided by the terms of any Company-sponsored benefit
plans or programs (the “Accrued Benefits”), together with any benefits required to
be paid or provided in the event of the Executive’s death or Total Disability under
applicable law;

     (e) pay the Executive (or the Executive’s estate) or beneficiaries any Incentive Bonus
with respect to a prior fiscal year that has accrued but has not been paid together with any
Accrued Incentive Bonus for the current fiscal year based upon actual performance (the
“Accrued Incentive Bonus”); and

     (f) the Executive (or the Executive’s estate) or beneficiaries shall have the right to
exercise all vested unexercised stock options and warrants outstanding at the termination
date in accordance with terms of the plans and agreements pursuant to which such options or
warrants were issued.

          4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If the
Executive’s employment is terminated by

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the Company for Cause, or if the Executive terminates the Executive’s employment with the
Company other than (x) upon the Executive’s death or Total Disability or (y) for Good Reason, the
Company will:

     (a) pay the Executive the Accrued Base Salary;

     (b) pay the Executive the Accrued Vacation Payment;

     (c) pay the Executive the Accrued Reimbursable Expenses;

     (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

     (e) pay the Executive any earned Accrued Incentive Bonus, but excluding any Accrued
Incentive Bonus for the year of termination; and

     (f) the Executive will have the right to exercise vested options and warrants in
accordance with Section 4.1(f) hereof.

          4.3 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. If
the Executive’s employment is terminated by the Company without Cause or by the Executive for Good
Reason, the Company will:

     (a) pay the Executive the Accrued Base Salary;

     (b) pay the Executive the Accrued Vacation Payment;

     (c) pay the Executive the Accrued Reimbursable Expenses;

     (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

     (e) pay the Executive any earned Accrued Incentive Bonus;

     (f) pay the Executive severance, commencing on the thirtieth (30th) day
following the termination date, of six (6) monthly payments equal to one-twelfth
(1/12th) of the Executive’s Annual Base Salary in effect immediately prior to the
time such termination occurs. Severance will be mitigated on a dollar for dollar basis for
any income received by Executive for duties performed for Company or any third party during
the six (6) months following termination. The severance payment required under this
subsection shall be conditioned upon the Executive confirming the release in Section
5.2 hereof; and

     (g) maintain in full force and effect, for the Executive’s and the Executive’s
eligible beneficiaries, until the first to occur of (x) the Executive’s attainment of
alternative employment if such employment includes health insurance benefits or (y) the six
(6) month anniversary of termination of employment, the benefits provided pursuant to
Company-sponsored benefit plans, programs, or other arrangements in which

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the Executive was entitled to participate as a full-time employee immediately prior to
such termination in accordance with Section 2.4 hereof, subject to the terms and
conditions of participation as provided under the general terms and provisions of such
plans, programs, and arrangements, or in the alternate, the Company will arrange to provide
the Executive with continued benefits substantially similar to those which the Executive
would have been entitled to receive under such plans, programs, and arrangements;

     (h) the Executive shall have the right to exercise vested options and warrants in
accordance with Section 4.1(f).

          4.4 UPON CHANGE OF CONTROL AND TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE
FOR GOOD REASON. If the Executive’s employment is terminated within two (2) years of a Change
of Control by the Company without Cause or by the Executive for Good Reason, the Company will:

     (a) pay the Executive the Accrued Base Salary;

     (b) pay the Executive the Accrued Vacation Payment;

     (c) pay the Executive the Accrued Reimbursable Expenses;

     (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

     (e) pay the Executive any Accrued Incentive Bonus; plus the pro rata Incentive Bonus
based on actual performance for the year of termination.

     (f) pay the Executive severance of one and one-half (1.5) times Executive’s Annual Base
Salary in effect immediately prior to the time such termination occurs plus the greater of
(x) one and one-half (1.5) times the targeted Incentive Bonus immediately prior to the time
such termination occurs or (y) one and one-half (1.5) times the average actual Incentive
Bonus for the previous three (3) years, whichever is greater. The severance payment
required under this subsection shall be conditioned upon the Executive confirming the
release in Section 5.2 hereof;

     (g) maintain in full force and effect, for the Executive’s and the Executive’s
eligible beneficiaries, until the first to occur of (x) the Executive’s attainment of
alternative employment if such employment includes health insurance benefits or (y) the
eighteen (18) month anniversary of termination, the benefits provided pursuant to
Company-sponsored benefit plans, programs, or other arrangements in which the Executive was
entitled to participate as a full-time employee immediately prior to such termination in
accordance with Section 2.4 hereof, subject to the terms and conditions of
participation as provided under the general terms and provisions of such plans, programs,
and arrangements, or in the alternate, the Company will arrange to provide the Executive
with continued benefits substantially similar to those which the Executive would have been
entitled to receive under such plans, programs, and arrangements;

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     (h) any payments will be grossed up for Internal Revenue Code Section 280G excise tax
penalty on “excess parachute payments;” and

     (i) the Executive shall have the right to exercise vested options and warrants in
accordance with Section 4.1(f).

ARTICLE V

ADDITIONAL AGREEMENTS

          5.1 OTHER AGREEMENTS. As further material consideration for the Company entering into
this Agreement, the Executive will also execute the Company’s standard employee confidentially
agreement, inventions assignment agreement, and any other agreements required to be executed by all
like level executives of the Company.

          5.2 EMPLOYEE’S RESTRICTIVE COVENANTS UPON TERMINATION. If the Executive’s employment
is terminated for any reason, Executive agrees:

     (a) To keep all of the Company’s Confidential Information confidential in perpetuity in
accordance with the Company’s policy;

     (b) To not hire or solicit for hire or consultation employees of the Company for a
period of one and one-half (1 1/2) years after termination of employment; and

     (c) To release the Company from any and all claims, whether known or unknown, except
for those based upon this Agreement. Such release shall include the rights of Section 1542
of the California Civil Code, which provides:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in the Executive’s favor at the time of executing the release,
which if known by him must have materially affected the Executive’s settlement with
the debtor.”

ARTICLE VI

MISCELLANEOUS

          6.1 DEFINITIONS. For purposes of this Agreement, the following terms will have the
following meanings:

     (a) “Accrued Base Salary” — as defined in Section 4.1(a) hereof.

     (b) “Accrued Benefits” — as defined in Section 4.1(d) hereof.

     (c) “Accrued Incentive Bonus” — as defined in Section 4.1(e) hereof.

     (d) “Accrued Reimbursable Expenses” — as defined in Section 4.1(c)
hereof.

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     (e) “Accrued Vacation Payment” — as defined in Section 4.1(b) hereof.

     (f) “Affiliate” of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common control with, the
first Person. “Control” (including the terms “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

     (g) “Incentive Bonus” as defined in Section 2.2 hereof.

     (h) “Base Salary” as defined in Section 2.1 hereof.

     (i) “Cause” will mean any willful breach of duty by the Executive in the course
of the Executive’s employment, continued violation of written Company employment policies
after written notice of such violation, violation of the Company’s Insider Trading Policies,
conviction of a felony or any crime involving fraud, theft, embezzlement, dishonesty or
moral turpitude, engaging in activities which materially defame the Company, engaging in
conduct which is material injurious to the Company or its Affiliates, or any of their
respective customer or supplier relationships, financially or otherwise, or the Executive’s
gross negligence or continued failure to perform Executive’s duties or his/her continued
incapacity to perform such duties.

     (j) “Change of Control” will mean if there is a merger, consolidation, sale of
all or a major portion of the assets of the Company (or a successor organization) or similar
transaction or circumstance where any person or group (other than Douglas B. Otto) acquires
or obtains the right to acquire, in one or more transactions, beneficial ownership of more
than Fifty Percent (50%) of the outstanding shares of any class of voting stock of the
Company (or a successor organization).

     (k) “Compensation Committee” means the Compensation Committee of the Company’s
Board of Directors.

     (l) “Continued Benefits” as defined in Section 4.3(g) hereof.

     (m) “Good Reason” will mean (1) the occurrence of material breach of this
Agreement by the Company, which breach is not cured within fifteen (15) calendar days after
written notice thereof is received by the Company, or (2) if within two (2) years of a
Change of Control, there is a reduction of the Employee’s total compensation, benefits, and
perquisites, the Company’s relocation is greater than fifty (50) miles further from the
Employee’s home, or a material change in the Employee’s position or duties.

     (n) “Notice of Termination” will mean a notice which shall indicate the
specific termination provision of this Agreement relied upon and shall generally set forth
the basis for termination of the Executive’s employment under the provision so indicated.

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     (o) “Person” means any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust, business trust,
governmental authority, or other entity.

     (p) “Retirement” will mean normal retirement at age 65.

     (q) “Severance” will mean payments after termination of Executive’s employment.

     (r) “Total Disability” will mean the Executive’s failure substantially to
perform the Executive’s duties hereunder on a full-time basis for a period exceeding one
hundred eighty (180) consecutive days or for periods aggregating more than one hundred
eighty (180) days during any twelve (12) month period as a result of incapacity due to
physical or mental illness. If there is a dispute as to whether the Executive is or was
physically or mentally unable to perform the Executive’s duties under this Agreement, such
dispute will be submitted for resolution to a licensed physician agreed upon by the Company
and the Executive, or if an agreement cannot be promptly reached, the Company and the
Executive will promptly each select a physician, and if these physicians cannot agree, the
physicians will promptly select a third physician whose decision will be binding on all
parties. If such a dispute arises, the Executive will submit to such examinations and will
provide such information as such physician(s) may request, and the determination of the
physician(s) as to the Executive’s physical or mental condition will be binding and
conclusive. Notwithstanding the foregoing, if the Executive participates in any group
disability plan provided by the Company, which offers long-term disability benefits,
“Total Disability” will mean total disability as defined therein.

          6.2 KEY MAN INSURANCE. The Company will have the right, in its sole discretion, to
purchase “key man” insurance on the life of the Executive. The Company shall be the owner and
beneficiary of any such policy. If the Company elects to purchase such a policy, the Executive
will take such physical examinations and supply such information as may be reasonably requested by
the insurer.

          6.3 SUCCESSORS; BINDING AGREEMENT. This Agreement will be binding upon any successor
to the Company and will inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees,
devisees and legatees.

          6.4 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended except by
an instrument in writing signed by the parties hereto. No term or condition of this Agreement will
be deemed to have been waived, nor will there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver will be deemed a continuing waiver unless specifically stated
therein, and each such waiver will operate only as to the specific term or condition waived and
will not constitute a waiver of such term or condition for the future or as to any other term or
condition.

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          6.5 SEVERABILITY. The covenants and agreements contained herein are separate and
severable and the invalidity or unenforceability of any one or more of such covenants or
agreements, if not material to the employment arrangement that is the basis for this Agreement,
will not affect the validity or enforceability of any other covenant or agreement contained herein.

          6.6 FORM OF NOTICE TO PARTIES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if (a) delivered personally, (b) mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy or telegram, to the following address:

			
	          If to Executive:     	 	Colin Clark
	 	 	
	          If to Company:     	 	Deckers Outdoor Corporation

495-A South Fairview Avenue

Goleta, CA 93117

Attn: Angel Martinez

Facsimile #805-681-9886

or, in each case, at such other address as may be specified in writing to the other parties hereto.

     All such notices, requests, demands, waivers and other communications shall be deemed to have
been received (w) if by personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the seventh business day after the mailing thereof, (y) if by next-day or
overnight mail or delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.

          6.7 ASSIGNMENT. This Agreement and any rights hereunder will not be assignable by
either party without the prior written consent of the other party except as otherwise specifically
provided for herein.

          6.8 ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding between
the parties hereto and no agreement, representation, warranty or covenant has been made by either
party except as expressly set forth herein.

          6.9 EXECUTIVE’S REPRESENTATIONS. The Executive represents and warrants that neither
the execution and delivery of this Agreement nor the performance of the Executive’s duties
hereunder violates the provisions of any other agreement to which he is a party or by which he is
bound.

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          6.10 GOVERNING LAW. This Agreement will be construed in accordance with the laws of
the State of California, without regard to the conflict of laws provisions thereof, with venue
proper only in the County of Santa Barbara, California.

          6.11 ARBITRATION.

          (a) Except as provided in Section 6.11(c) below, the parties hereto agree that any
dispute or controversy arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination thereof, shall be
finally settled by binding arbitration, unless otherwise required by law, to be held in Santa
Barbara, California under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association as then in effect (the “Rules”). The arbitrator(s) may grant
injunctions or other relief in such dispute or controversy. The decision of the arbitrator(s) shall
be final, conclusive and binding on the parties to the arbitration, and judgment may be entered on
the decision of the arbitrator(s) in any court having jurisdiction.

          (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim,
without reference to rules of conflicts of law.

          (c) The parties may apply to any court of competent jurisdiction for a temporary restraining
order, preliminary injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgement of the powers of the arbitrator.

          (d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EMPLOYEE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED BY
LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EMPLOYEE’S RELATIONSHIP WITH THE COMPANY,
INCLUDING BUT NOT LIMITED TO, CLAIMS OF HARASSMENT, DISCRIMINATION, WRONGFUL TERMINATION AND ANY
STATUTORY CLAIMS.

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 	 	 	 	 	 
	 

	 	COMPANY:

DECKERS OUTDOOR CORPORATION

	 	 
	 

	 	By:
	 	/s/ Angel Martinez
	 	4/17/06
	 

	 	 	 	 

	 

	 	Name: 	 	Angel Martinez
	 	Date
	 

	 	Title: 	 	Chief Executive Officer	 	 
	 

	 	 
EXECUTIVE:

	 	 
	 

	 	/s/ Colin Clark
	 	4/17/06
	 

	 	 

	 

	 	Name: 	 	Colin Clark
	 	Date
	 

	 	Title: 	 	Senior Vice President of International	 	 

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EXHIBIT A

TO

SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

2006 Incentive Bonus Criteria

	 	 	 
	Executive:

	 	Colin Clark
	 	 	 
	Target bonus:

	 	Potential 100% of base salary @ 100% level

Incentive Bonus Allocation:

	 	 	 	 	 
	 	25	%	 	Company Profit Component

	 	75	%	 	Management Business Objective (MBO) Component

	 	 	 	 

	 	100	%	 	 

	 	 	 	 

Incentive bonus to be calculated and paid in accordance with the attached Exhibit B.

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EXHIBIT B

TO

SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

-13-

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