Document:

exv10w11

 

Exhibit
10.11

WARRANT
NO.: ___________________________

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.

Void
after 5:00 p.m. Eastern Standard Time on ________________, 2007

     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 on earlier of (i) the filing of an
amendment to the Certificate of Incorporation of the Company increasing the number of shares
of Common Stock the Company is authorized to issue such that a sufficient number of shares is
authorized to permit all of the notes and warrants issued in the offering described in that certain
Securities Purchase Agreement dated on or about the date hereof to be converted or exercised, as
applicable, into Common Stock; or (ii) the first day after the effective date of a reverse stock
split
of the outstanding shares of Common Stock such that a sufficient number of shares is authorized
to permit all of the notes and warrants issued in the offering described in that certain Securities
Purchase Agreement dated on or about the date hereof to be converted or exercised, as
applicable, into Common Stock (the earlier of such dates being the “Commencement Date”) and
ending at 5:00 p.m. Eastern Standard Time on ________________, 2007 (the “Termination Date”), at an
exercise price (the “Exercise Price”) of $2.00 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 nonassessable
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

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upon the exercise of this Warrant, and from time to time will take all steps necessary to amend
its Certificate 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. 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.

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

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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

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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, 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, 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

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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-hundredth 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.

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     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.

111 Presidential Boulevard

Suite 158A

Bala Cynwyd, PA 19004

Attention: President

with a copy to:

Duane Morris, LLP

51 Haddonfield Rod, Suite 340

Cherry Hill, NJ 08002

Attention: Vincent A Vietti, Esquire

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.

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     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 Warrant shall be deemed to be a contract made under the laws of
the State of Delaware and for all purposes shall be governed by and construed in accordance with
the laws of said jurisdiction without regard to such jurisdiction’s conflicts of laws provisions.

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.

     IN WITNESS WHEREOF, the Company has caused these presents to be duly executed
as of the                    , 2004.

	 	 	 	 	 
	 	TOUCHSTONE RESOURCES USA, INC.

 	 
	 	By:  	 
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

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APPENDIX A

NOTICE OF EXERCISE

			
	TO:	 	Touchstone Resources USA, Inc.

111 Presidential Boulevard

Suite 158A

Bala Cynwyd, PA 19004

Attention: President

     (1) The
undersigned hereby elects to purchase                      shares of Common Stock
(as defined in the attached Warrant) of TOUCHSTONE RESOURCES USA, INC.
pursuant to the terms of the attached Warrant, and tenders herewith payment of the Exercise
Price (as defined in the attached Warrant) for such shares in full in the following manner (please
check one 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) Please issue a certificate or certificates representing said shares of Common Stock
in the name of the undersigned.

	 	 	 
	 

	 	HOLDER
	 
	 	 
	 

(Date)

	 	 

(Signature)

9exv10w22

 

Exhibit 10.22

TOUCHSTONE RESOURCES USA, INC.

 

Securities Purchase Agreement

 

Units Comprised of

Common Stock and

Warrants to Acquire Common Stock

 

 

 

 

CONFIDENTIAL

 

 

CONFIDENTIAL INFORMATION

     THE OFFEREE, BY ACCEPTING THE SECURITIES PURCHASE AGREEMENT AND THE OTHER OFFERING DOCUMENTS
RELATING TO THE COMPANY’S PROPOSED OFFERING OF UNITS COMPRISED OF SHARES OF ITS COMMON STOCK AND
WARRANTS TO ACQUIRE SHARES OF ITS COMMON STOCK, ACKNOWLEDGES AND AGREES THAT: (I) THE
OFFERING DOCUMENTS HAVE BEEN FURNISHED TO THE OFFEREE ON A CONFIDENTIAL BASIS SOLELY FOR THE PURPOSE
OF ENABLING THE OFFEREE TO EVALUATE THE OFFERING; (II) THAT THE OFFEREE MAY NOT FURTHER DISTRIBUTE
THE OFFERING DOCUMENTS WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, EXCEPT TO THE OFFEREE’S
LEGAL, FINANCIAL OR OTHER PERSONAL ADVISORS, IF ANY, WHO WILL USE THE OFFERING DOCUMENTS ON THE
OFFEREE’S BEHALF SOLELY FOR PURPOSES OF EVALUATING THE OFFERING;
(III) ANY REPRODUCTION OR
DISTRIBUTION OF THE OFFERING DOCUMENTS, IN WHOLE OR IN PART, OR THE DIRECT OR INDIRECT
DISCLOSURE OF THE CONTENTS OF THE OFFERING DOCUMENTS FOR ANY OTHER PURPOSE WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMPANY IS PROHIBITED; AND (IV) THE OFFEREE SHALL BE BOUND BY ALL TERMS AND
CONDITIONS SPECIFIED IN THE OFFERING DOCUMENTS.

NOTICE TO OFFEREES

     THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. THIS SECURITIES PURCHASE AGREEMENT AND THE OTHER OFFERING DOCUMENTS DO
NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

     THE SECURITIES ARE BEING SOLD FOR INVESTMENT PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR
DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED, RESOLD OR OFFERED FOR RESALE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND EFFECTIVE
REGISTRATION OR QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, OR THE AVAILABILITY OF AN EXEMPTION THEREFROM.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR THE SECURITIES COMMISSION OR OTHER
REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY OF
THE OTHER OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 

ADDITIONAL INFORMATION

     Touchstone Resources USA, Inc. (the “Company”) files annual, quarterly and special reports, as
well as proxy statements and other information with the Securities and Exchange Commission (the
“SEC”). You may read and copy any document the Company files with the SEC at the SEC’s Public
Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. The Company’s filings are also
available to the public on the Internet at the SEC’s web site at http://www.sec.gov. This site
contains reports, proxy statements and other information regarding registrants like the Company
which file electronically with the SEC.

     Touchstone Resources USA, Inc. is incorporating by reference the following documents which
have been filed with the SEC:

     Form 10KSB
for the year ended December 31, 2003;

     Form 10QSB for the Quarters ended March 31 and June 30, 2004.

     Touchstone
Resources USA, Inc. has attached as Exhibit B, the Form 10QSB for the
quarter ended September 30, 2004.

     You may also obtain these filings, as well as additional information on the Company by
accessing the Company’s website at: www.touchstonetexas.com.

ii

 

CONFIDENTIAL

SECURITIES PURCHASE AGREEMENT

     THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated                               , 2004, by and between
TOUCHSTONE RESOURCES USA, INC., a Delaware corporation (the
“Company”), and the purchaser or purchasers identified on the signature page hereof (“Purchaser”).

R E C I T A L S :

     WHEREAS, Purchaser desires to purchase and the Company desires to sell units comprised of
shares of common stock and warrants to acquire shares of common stock on the terms and conditions
set forth herein.

     NOW, THEREFORE, in consideration of the premises hereof and the agreements set forth herein
below, the parties hereto hereby agree as follows:

     1. The Offering.

          (a) Private Offering. The securities offered by this Agreement are being
offered in a private offering (the “Offering”) of up to 3,000,000 shares (“Shares”) of common
stock, $.001 par value per share (“Common Stock”), and warrants (“Warrants”) to acquire up to
1,500,000 shares of Common Stock. The Shares and Warrants will be sold in units (“Units”) comprised
of two (2) shares of Common Stock and one (1) Warrant. Up to 1,500,000 Units will be sold in the
Offering; provided, however, that in the event of any over-allotments of Units during the offering
period, the Company reserves the right to sell in excess of 1,500,000 Units to cover such
over-allotments. The Units will be sold on a reasonable “best efforts” basis at a purchase price of
$2.10 per Unit (“Purchase Price”) pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 of Regulation D thereunder. The Units are being offered solely to a
limited number of “accredited investors” as that term is defined in Rule 501(a) of the Securities Act during an offering period that will
terminate at the sole discretion of the Company. Each Warrant is initially exercisable into one (1)
share of Common Stock at an exercise price of $2.00 per share, subject to adjustment. The terms of
the Warrants are set forth in the Form of Warrant, attached hereto and made a part hereof as
Exhibit A. The Shares, Warrants and shares of Common Stock issuable upon exercise of the Warrants
are hereinafter referred to collectively as the “Securities.”

          (b) Use of Proceeds. Assuming all 1,500,000 Units are sold, the net proceeds to the Company
are estimated to be approximately $2,785,000 (after deducting offering expenses payable by the
Company estimated at $50,000 and assuming payment of the maximum amount of fees to brokers and
dealers of up to $315,000). The Company intends to use the net proceeds for general
working capital purposes and other general corporate purposes.

          (c) Placement and Finder’s Fees. The Company reserves the right to pay fees to brokers and
dealers in connection with the sale of the Securities in an amount equal to up to ten percent (10%)
of the Purchase Price of such Securities and warrants to acquire up to that

 

 

number of shares equal to ten percent (10%) of the Shares sold in the Offering at an
exercise price of $2.00 per share.

     2. Sale and Purchase of Securities.

          (a) Sale and Purchase of Securities. Subject to the terms and conditions
hereof, the Company agrees to sell, and Purchaser agrees to purchase, the number of Units specified
on the signature page of this Agreement at a purchase price of $2.10 per Unit. The aggregate
purchase price for the Units shall be as set forth on the signature page hereto (the “Purchase
Price”) and shall be payable upon execution hereof by check or wire transfer of immediately
available funds.

          (b) Subscription Procedure. In order to purchase Securities, Purchaser shall deliver to the
Company, at its principal executive office identified in Section 16 hereof: (i) one completed and
duly executed copy of this Agreement; and (ii) immediately available funds in an amount equal to
the Purchase Price. Execution and delivery of this Agreement shall constitute an irrevocable subscription for that number of
Securities set forth on the signature page hereto. Payment for the Securities may be made by wire
transfer to:

	 	 	 
	 

	 	__________________________________________________ 
	 

	 	__________________________________________________ 
	 

	 	__________________________________________________ 
	 

	 	__________________________________________________ 
	 

	 	__________________________________________________ 

or by check made payable to: Touchstone Resources USA, Inc., 111 Presidential Boulevard,
Suite 165, Bala Cynwyd, PA 19004. The minimum purchase that may be made by a Purchaser is 10,000
Units for a purchase price of $21,000, although the Company may, in its sole discretion, accept
Agreements for a lesser number of Units. This Agreement may be rejected by the Company, in whole or
in part, in its sole discretion, in which event the Purchase Price will be returned (by mail) to
Purchaser within ten (10) business days thereafter. Unless the Offering is otherwise terminated by
the Company, as soon as possible after the receipt and acceptance by the Company of this Agreement
and collection of the funds paid therefor, the Company will issue certificates for the Shares to
Purchaser, together with a copy of Purchaser’s executed Agreement countersigned by the Company and
a Warrant (“Warrant Certificate”) executed by the Company.

     3. Representations and Warranties of Purchaser. Purchaser represents and warrants to the
Company as follows:

          (a)
Organization and Qualification.

               (i) If Purchaser is an entity, Purchaser is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, with the corporate or other entity
power and authority to own and operate its business as presently conducted, except where the
failure to be or have any of the foregoing would not have a material adverse effect on Purchaser,
and Purchaser is duly qualified as a foreign corporation or other entity to do business and is in
good standing in each jurisdiction where the character of its

2

 

properties owned or held under lease or the nature of their activities makes such
qualification necessary, except for such failures to be so qualified or in good standing as would
not have a material adverse effect on it.

               (ii) If Purchaser is an entity, the address of its principal place of business is as set forth
on the signature page hereto, and if Purchaser is an individual, the address of its principal
residence is as set forth on the signature page hereto.

          (b) Authority: Validity and Effect of Agreement.

               (i) If Purchaser is an entity, Purchaser has the requisite corporate or other entity power and
authority to execute and deliver this Agreement and perform its obligations under this Agreement.
The execution and delivery of this Agreement by Purchaser, the performance by Purchaser of its
obligations hereunder and all other necessary corporate or other entity action on the part of
Purchaser have been duly authorized by its board of directors or similar governing body, and no
other corporate or other entity proceedings on the part of Purchaser is necessary for Purchaser to
execute and deliver this Agreement and perform its obligations hereunder.

               (ii) This Agreement has been duly and validly authorized, executed and delivered by Purchaser
and, assuming it has been duly and validly executed and delivered by the Company, constitutes a
legal, valid and binding obligation of Purchaser, in accordance with its terms.

          (c) No Conflict: Required Filings and Consents. Neither the execution and delivery of this
Agreement by Purchaser nor the performance by Purchaser of its obligations hereunder will: (i) if
Purchaser is an entity, conflict with Purchaser’s articles of incorporation or bylaws, or other
similar organizational documents; (ii) violate any statute, law, ordinance, rule or regulation,
applicable to Purchaser or any of the properties or assets of Purchaser; or (iii) violate, breach,
be in conflict with or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or permit the termination of any provision of, or result
in the termination of, the acceleration of the maturity of, or the acceleration of the performance
of any obligation of Purchaser under, or result in the creation or imposition of any lien upon any
properties, assets or business of Purchaser under, any material contract or any order, judgment or
decree to which Purchaser is a party or by which it or any of its assets or properties is bound or
encumbered except, in the case of clauses (ii) and (iii), for such violations, breaches, conflicts,
defaults or other occurrences which, individually or in the aggregate, would not have a material
adverse effect on its obligation to perform its covenants under this Agreement.

          (d) Accredited Investor. Purchaser is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act. If Purchaser is an entity, Purchaser was not formed
for the specific purpose of acquiring the Securities, and, if it was, all of
Purchaser’s equity owners are “accredited investors”
as defined above.

          (e) No Government Review. Purchaser understands that neither the United States Securities and
Exchange Commission (“SEC”) nor any securities commission or other governmental authority of any
state, country or other jurisdiction has approved the issuance of

3

 

the Securities or passed upon or endorsed the merits of the Securities or this Agreement,
the Warrant Certificate or any of the other documents relating to the proposed Offering
(collectively, the “Offering Documents”), or confirmed the accuracy of, determined the adequacy of,
or reviewed this Agreement, the Warrant Certificate or the other Offering Documents.

          (f) Investment
Intent. The Securities are being acquired for the Purchaser’s own
account for investment purposes only, not as a nominee or agent and not with a view to the resale
or distribution of any part thereof, and Purchaser has no present intention of selling, granting
any participation in or otherwise distributing the same. By executing this Agreement, Purchaser
further represents that Purchaser does not have any contract,
undertaking, agreement or arrangement
with any person to sell, transfer or grant participation to such person or third person with
respect to any of the Securities.

          (g) Restrictions
on Transfer. Purchaser understands that the Securities are “restricted
securities” as such term is defined in Rule 144 under the Securities Act and have not been
registered under the Securities Act or registered or qualified under any state securities law, and
may not be, directly or indirectly, sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act and registration or
qualification under applicable state securities laws or the availability of an exemption therefrom.
In any case where such an exemption is relied upon by Purchaser from the registration requirements
of the Securities Act and the registration or qualification requirements of such state securities
laws, Purchaser shall furnish the Company with an opinion of counsel
stating that the proposed sale or other disposition of such securities may be effected without
registration under the Securities Act and will not result in any violation of any applicable state
securities laws relating to the registration or qualification of securities for sale, such counsel
and opinion to be satisfactory to the Company. Purchaser acknowledges that it is able to bear the
economic risks of an investment in the Securities for an indefinite period of time, and that its
overall commitment to investments that are not readily marketable is not disproportionate to its
net worth.

          (h) Investment
Experience. Purchaser has such knowledge, sophistication and experience in
financial, tax and business matters in general, and investments in securities in particular, that
it is capable of evaluating the merits and risks of this investment in the Securities, and
Purchaser has made such investigations in connection herewith as it deemed necessary or desirable
so as to make an informed investment decision without relying upon the Company for legal or tax
advice related to this investment. In making its decision to acquire the Securities, Purchaser has
not relied upon any information other than information provided to Purchaser by the Company or its
representatives and contained herein and in the other Offering Documents.

          (i) Access
to Information. Purchaser acknowledges that it has had access to and has reviewed
all documents and records relating to the Company, including, but not limited to, the Company’s
Annual Report on Form 10-KSB and other filings with the SEC, that it has deemed necessary in order
to make an informed investment decision with respect to an investment in the Securities; that it
has had the opportunity to ask representatives of the Company certain questions and request certain
additional information regarding the terms and conditions of such investment and the finances,
operations, business and prospects of the

4

 

Company and has had any and all such questions and requests answered to its satisfaction;
and that it understands the risks and other considerations relating to such investment.

          (j) Reliance
on Representations. Purchaser understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration requirements of the federal
and state securities laws and that the Company is relying in part upon the truth and accuracy of,
and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the availability of
such exemptions and the eligibility of such Purchaser to acquire the Securities. Purchaser
represents and warrants to the Company that any information that Purchaser has heretofore furnished
or furnishes herewith to the Company is complete and accurate, and further represents and
warrants that it will notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of the Securities.
Within five (5) days after receipt of a request from the Company, Purchaser will provide such
information and deliver such documents as may reasonably be necessary to comply with any and all
laws and regulations to which the Company is subject.

          (k) No
General Solicitation. Purchaser is unaware of, and in deciding to participate in the
Offering is in no way relying upon, and did not become aware of the Offering through or as a result
of, any form of general solicitation or general advertising including, without limitation, any
article, notice, advertisement or other communication published in any newspaper, magazine or
similar media, or broadcast over television or radio or the internet, in connection with the
Offering.

          (l) Placement
and Finder’s Fees. No agent, broker, investment banker, finder, financial
advisor or other person acting on behalf of Purchaser or under its authority is or will be entitled
to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, in
connection with the Offering, and no person is entitled to any fee or commission or like payment in
respect thereof based in any way on agreements, arrangements or understanding made by or on behalf
of Purchaser.

          (m) Investment
Risks. Purchaser understands that purchasing Securities in the Offering will
subject Purchaser to certain risks, including, but not limited to, those set forth under the
caption “Risk Factors” and elsewhere in the Company’s
Annual Report on Form 10-KSB and
other periodic reports filed with the SEC, as well as each of the following:

               (i) The Company’s business of exploring for and producing oil and gas involves a substantial
risk of investment loss. The Company’s oil and gas operations are subject to the economic risks
typically associated with exploration, development and production activities, including the
necessity of incurring significant expenditures to locate and acquire properties and to drill
exploratory wells. Drilling oil and gas wells involves the risk that the wells may be unproductive
or that, although productive, the wells may not produce oil or gas in economic quantities. No
assurance can be given that the Company will be able to find and develop or acquire additional
reserves on acceptable terms, or that commercial quantities of oil and gas deposits will be
discovered sufficient to enable the Company to recover its exploration and development costs or
sustain its business.

5

 

               (ii) The offering price of the Securities offered hereby has been determined solely by the
Company and does not necessarily bear any relationship to the value of the Company’s assets,
current or potential earnings of the Company, or any other recognized criteria used for measuring
value, and therefore, there can be no assurance that the offering price of the Units is
representative of the actual value of the underlying Securities.

               (iii) The Company has experienced net losses in each fiscal quarter since its inception and
expects to continue to incur significant net losses for the
foreseeable future. While the Company
is unable to predict accurately its future operating expenses, it currently expects these expenses
to increase substantially as it implements its business plan.

               (iv) In order to fund its future operations, attract and retain employees, consultants and
other service providers, and satisfy other obligations, the Company may be required to issue
additional shares of Common Stock, securities exercisable or convertible into shares of Common
Stock, or debt. Such shares may be issued for a purchase price consisting of cash, services or
other consideration that may be materially different than the purchase price of the Units. The
forgoing may result in substantial dilution to the relative ownership interests of the Company’s
existing shareholders and substantial reduction in net book value per share. Additional equity
securities may have rights, preferences and privileges senior to those of the holders of Common
Stock and any debt financing may involve restrictive covenants that may limit the Company’s
operating flexibility.

               (v) The Company has provided herein that it intends to use most of the net proceeds from the
Offering for general working capital purposes and other general corporate purposes. Thus, Purchaser
is making its investment in the Securities based in part upon very limited information regarding
the specific uses to which the net proceeds will be applied.

               (vi) An investment in the Securities may involve certain material
legal, accounting and federal and state tax consequences. Purchaser should consult with its legal
counsel, accountant and/or business adviser as to the legal, accounting, tax and related matters
accompanying such an investment.

          (n) Legends. The certificates and agreements evidencing the Securities shall have endorsed
thereon the following legend (and appropriate notations thereof will be made in the Company’s stock
transfer books), and stop transfer instructions reflecting these restrictions on transfer will be
placed with the transfer agent of the Securities:

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,

6

 

AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE SECURITIES LAWS.

     4. Representations
and Warranties of the Company. The Company represents and
warrants to Purchaser as follows:

          (a) Organization
and Qualification. The Company is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, with the corporate power and
authority to own and operate its business as presently conducted, except where the failure to be or
have any of the foregoing would not have a material adverse effect on the Company. The Company is
duly qualified as a foreign corporation or other entity to do business and is in good standing in
each jurisdiction where the character of its properties owned or held under lease or the nature of
their activities makes such qualification necessary, except for such failures to be so qualified or
in good standing as would not have a material adverse effect on the Company.

          (b) Authority;
Validity and Effect of Agreement.

               (i) The Company has the requisite corporate power and authority to execute and deliver this
Agreement, perform its obligations under this Agreement, and conduct the Offering. The execution
and delivery of this Agreement by the Company, the performance by the Company of its obligations
hereunder, the Offering and all other necessary corporate action on the part of the Company have
been duly authorized by its board of directors, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Offering. This Agreement has been duly
and validly executed and delivered by the Company and, assuming that it has been duly authorized,
executed and delivered by Purchaser, constitutes a legal, valid and binding obligation of the
Company, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

               (ii) The Shares have been duly authorized and, when issued and paid for in accordance with
this Agreement, will be validly issued, fully paid and non-assessable shares of Common Stock with
no personal liability resulting solely from the ownership of such shares and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company. The
shares of Common Stock issuable upon exercise of the Warrants when issued and paid for in
accordance with the Warrants, will be duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock with no personal liability resulting solely from the
ownership of such shares and will be free and clear of all liens, charges, restrictions, claims and
in encumbrances imposed by or through the Company.

          (c) No
Conflict; Required Filings and Consents. Neither the execution and delivery of this
Agreement by the Company nor the performance by the Company of its obligations hereunder will: (i)
conflict with the Company’s articles of incorporation or bylaws; (ii) violate any statute, law,
ordinance, rule or regulation, applicable to the Company or any of the properties or assets of the
Company; or (iii) violate, breach, be in conflict with or constitute a

7

 

default (or an event which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the termination of,
the acceleration of the maturity of, or the acceleration of the performance of any obligation of
the Company, or result in the creation or imposition of any lien upon any properties, assets or
business of the Company under, any material contract or any order, judgment or decree to which
the Company is a party or by which it or any of its assets or properties is bound or encumbered
except, in the case of clauses (ii) and (iii), for such violations, breaches, conflicts,
defaults or other occurrences which, individually or in the aggregate, would not have a material
adverse effect on its obligation to perform its covenants under this Agreement.

          (d) SEC
Reports and Financial Statements. The Company has filed with the SEC, and has
heretofore made available to Purchaser, true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or the Securities Act
(as such documents have been amended since the date of their filing, collectively, the “Company SEC
Documents”). As of their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including any financial statements or schedules included
therein: (i) did not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; and (ii) complied in all
material respects with the applicable requirements of the Exchange Act and the Securities Act,
as the case may be, and the applicable rules and regulations of the SEC thereunder. Each of the
financial statements included in the Company SEC Documents have been prepared from, and are in
accordance with, the books and records of the Company, comply in all material respects with
applicable accounting requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the financial position and the results of operations and cash
flows of the Company as of the dates thereof or for the periods presented therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments not material in amount).

          (e) Placement
and Finder’s Fees. Except as provided in Section 1(c), neither the Company
nor any of its respective officers, directors, employees or managers, has employed any broker,
dealer, finder, advisor or consultant, or incurred any liability for any investment banking
fees, brokerage fees, commissions or finders’ fees, advisory fees or consulting fees in
connection with the Offering for which the Company has or could have any liability.

     5. Indemnification. Purchaser agrees to indemnify, defend and hold
harmless the Company and its respective affiliates and agents from and against any and all demands,
claims, actions or causes of action, judgments, assessments, losses, liabilities, damages or
penalties and reasonable attorneys’ fees and related disbursements incurred by the Company that
arise out of or result from a breach of any representations or warranties made by Purchaser
herein, and Purchaser agrees that in the event of any breach of any representations or
warranties made by Purchaser herein, the Company may, at its option, forthwith rescind the sale
of the Units to Purchaser.

8

 

     6. Registration Rights. The Company covenants and agrees as follows:

          6.1 For the purpose of this Section 6, 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 6.2 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 Offering, and their respective successors and assigns.

          6.2. Registration of the Shares.

               (a)
The Company shall notify all Selling Stockholders in writing at least ten (10) days prior
to the filing of any registration statement under the Securities Act for purposes of registering
securities of the Company, excluding registration statements on SEC

9

 

Forms S-4, S-8 or any similar or successor forms, and will afford each such Selling
Stockholder an opportunity to include in such registration statement all or part of such Restricted
Stock held by such Selling Stockholder. Each Selling Stockholder desiring to include in any such
registration statement all or any part of the Restricted Stock held by it shall, within five
(5) days after the above-described notice from the Company, so notify the Company in
writing. Such notice shall state the intended method of disposition of the Restricted Stock by such
Selling Stockholder. If a 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. The Company may,
without the consent of the Selling Stockholders, withdraw such registration statement prior to its
becoming effective if the proposal to register the securities proposed to be registered thereby is
abandoned.

               (b) In the event that any registration pursuant to Section 6.2(a) shall be, in
whole or in part, an underwritten public offering of Common Stock on behalf of the Company, all
Purchasers proposing to distribute their Restricted Stock through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. If the managing underwriter thereof advises the Company in
writing that in its opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration (i)
first, the securities the Company proposes to sell, and (ii) second, the Restricted Stock and any
other registrable securities eligible and requested to be included in such registration to the
extent that the number of shares to be registered under this clause (ii) will not, in the opinion
of the managing underwriter, adversely affect the offering of the securities pursuant to clause
(i). In such a case, shares shall be registered pro rata among the holders of such Restricted Stock
and registrable securities on the basis of the number of shares eligible for registration that are
owned by all such holders and requested to be included in such registration.

               (c) Notwithstanding anything to the contrary contained herein, the Company’s obligation in
Sections 6.2(a) and 6.2(b) above shall extend only to the inclusion of the Restricted Stock in a
Registration Statement. The Company shall have no obligation to assure the terms and conditions of
distribution, to obtain a commitment from an underwriter relative to the sale of the Restricted
Stock or to otherwise assume any responsibility for the manner, price or terms of the distribution
of the Restricted Stock.

               (d) The Company shall have the right to terminate or withdraw any registration initiated by it
under this Section 6.2 prior to the effectiveness of such registration without thereby incurring
liability to the holders of the Restricted Stock, regardless of whether any holder has elected to
include securities in such registration. The Registration Expenses
(as defined in
Section 6.5) of such withdrawn registration shall be borne by the Company in accordance with
Section 6.4 hereof.

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

10

 

               (a) prepare and file with the SEC a Registration Statement with respect to the Restricted
Stock in the manner set forth in Section 6.2 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 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 6.3(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 6.2(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

11

 

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 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.

          6.4.
Delay of Registration. 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 6.

          6.5
Expenses.

               (a) For the purposes of this Section 6.5, the term “Registration Expenses” shall mean: all
expenses incurred by the Company in complying with Section 6.2 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 6.2 of this
Agreement. All Selling Expenses in connection with any Registration Statements filed pursuant to
Section 6.1 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.

12

 

          6.6. 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.

               (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.

          6.7. Information Blackout and Holdbacks.

               (a) At any time when a Registration Statement effected pursuant to Section 6.2 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

13

 

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.

     6.8. 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 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 offering covered by such registration statement
(“Violations”); provided, however, that
the indemnity agreement contained in this Section 6.8(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 written
information furnished expressly for use in connection with such registration 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 (i) occurs in reliance upon and in conformity with
written information furnished by
such Selling Stockholder to the Company for use in connection with such registration, (ii) occurs
as a result of any failure to deliver a copy of the prospectus relating to such Registration
Statement, or (iii) occurs 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

14

 

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 6.8 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 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 6.8(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 offering 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.

     7. Confidentiality. Purchaser acknowledges and agrees that:

          (a) All of the information contained herein and in the other Offering Documents is of a
confidential nature and may be regarded as material non-public information under Regulation FD of
the Securities Act.

          (b) This Agreement and the other Offering Documents have been furnished to
Purchaser by the Company for the sole purpose of enabling Purchaser to consider and evaluate an
investment in the Company, and will be kept confidential by Purchaser and not used for any other
purpose.

15

 

          (c) The information contained herein shall not, without the prior written consent of the
Company, be disclosed by Purchaser to any person or entity, other than Purchaser’s personal
financial and legal advisors for the sole purpose of evaluating an investment in the Company, and
Purchaser will not, directly or indirectly, disclose or permit Purchaser’s personal financial and
legal advisors to disclose, any of such information without the prior written consent of the
Company.

          (d) Purchaser shall make its representatives aware of the terms of this section and to be
responsible for any breach of this Agreement by such representatives.

          (e) Purchaser shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade publications or the press
with respect to the subject matter of this Agreement and the other Offering Documents.

          (f) If Purchaser decides to not pursue further investigation of the Company or
to not participate in the Offering, Purchaser will promptly return this Agreement, the other
Offering Documents and any accompanying documentation to the Company.

     8. Non-Public Information. Purchaser acknowledges that information concerning the matters that
are the subject matter of this Agreement may constitute material non-public information under
United States federal securities laws, and that United States federal securities laws prohibit any
person who has received material non-public information relating to the Company from purchasing or
selling securities of the Company, or from communicating such information to any person under
circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell
securities of the Company. Accordingly, until such time as any such non-public information has been adequately
disseminated to the public, Purchaser shall not purchase or sell any securities of the Company, or communicate such information to any other
person.

     9. Entire Agreement. This Agreement contains the entire agreement between the parties and
supercedes all prior agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereto, and no party shall be liable or bound to any other party in
any manner by any warranties, representations, guarantees or covenants except as specifically set
forth in this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

     10. Amendment and Modification. This Agreement may not be amended, modified or supplemented
except by an instrument or instruments in writing signed by the party against whom enforcement of
any such amendment, modification or supplement is sought.

     11. Extensions and Waivers. At any time prior to the Closing, the parties hereto entitled to
the benefits of a term or provision may (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing

16

 

delivered pursuant hereto, or (c) waive compliance with any obligation, covenant,
agreement or condition contained herein. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument or instruments in writing signed by the
party against whom enforcement of any such extension or waiver is sought. No failure or delay on
the part of any party hereto in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any representation, warranty,
covenant or agreement.

     12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided, however, that no party
hereto may assign its rights or delegate its obligations under this Agreement without the express
prior written consent of the other party hereto. Except as provided in Section 5, nothing in this Agreement is
intended to confer upon any person not a party hereto (and their
successors and assigns) any rights, remedies, obligations or liabilities under or by reason of this Agreement.

     13. Survival of Representations, Warranties and Covenants. The representations and warranties
contained herein shall survive the Closing and shall thereupon terminate 18 months from the
Closing, except that the representations contained in Sections 3(a), 3(b), 4(a), and 4(b) shall
survive indefinitely. All covenants and agreements contained herein which by their terms
contemplate actions following the Closing shall survive the Closing and remain in full force and
effect in accordance with their terms. All other covenants and agreements contained herein shall
not survive the Closing and shall thereupon terminate.

     14. Headings: Definitions. The Section headings contained in this Agreement are inserted for
convenience of reference only and will not affect the meaning or interpretation of this Agreement.
All references to Sections contained herein mean Sections of this Agreement unless otherwise
stated. All capitalized terms defined herein are equally applicable to both the singular and plural
forms of such terms

     15. Severability. If any provision of this Agreement or the application thereof to any person
or circumstance is held to be invalid or unenforceable to any extent, the remainder of this
Agreement shall remain in full force and effect and shall be reformed to render the Agreement valid
and enforceable while reflecting to the greatest extent permissible the intent of the parties.

     16. Notices. All notices hereunder shall be sufficiently given for all purposes hereunder if
in writing and delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the
appropriate address or number as set forth below:

                    If to the Company:

	 	 	 
	 

	 	Touchstone Resources USA, Inc.
	 

	 	111 Presidential Boulevard
	 

	 	Suite 165
	 

	 	Bala Cynwyd, PA 19004
	 

	 	Attention: Stephen P. Harrington
	 

	 	                 President

17

 

                    with a copy to:

	 	 	 
	 

	 	Duane Morris LLP
	 

	 	240 Princeton Avenue
	 

	 	Suite 150
	 

	 	Hamilton, NJ 08619-2304
	 

	 	Attention: Vincent A. Vietti, Esquire

          If to Purchaser:

          To that address indicated on the signature page hereof.

     17. 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.

     18. Arbitration. If a dispute arises as to the interpretation of this Agreement, it shall be
decided in an arbitration proceeding conforming to the Rules of the American Arbitration
Association applicable to commercial arbitration then in effect at the time of the dispute. The
arbitration shall take place in Philadelphia, Pennsylvania. The decision of the arbitrators shall
be conclusively binding upon the parties and final, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. The parties shall share equally the costs of the
arbitration.

     19. Counterparts. This Agreement may be executed and delivered by facsimile in two or more
counterparts, each of which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.

[Remainder of page intentionally left blank]

18

 

     IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this
Agreement to be executed as of the date set forth below.

	 	 	 	 	 
	 

	 	 	 	PURCHASER
	 
	 	 	 	 
	Date:

	 	 	 	 
	 

	 	 

	 	 

	 	 	 	 	 	 	 
	 

	 	By:	 	 

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 

	 	 	 	Address:
	 	 
	 

	 	 	 	 	 	 

	 

	 	 	 	 	 	 
	 	 	 	 	 

	 
	 	 	 	 	 	 
	 	 	 	 	 

	 	 	 	 	 
	 
	 	 	 	 
	 

	 	Number of Units Purchased:
	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 

	 	Purchase Price	 	 
	 

	 	@ $2.10 per Unit:
	 	 
	 

	 	 	 	 

	 	 	 
	 

	 	TOUCHSTONE RESOURCES USA, INC.

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 

	 	 

	 	 	 	 	 
	 

	 	By:	 	 

	 

	 	 	 	Stephen P. Harrington
	 

	 	 	 	President

19

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