Touchstone Resources Closes Private Offering

Touchstone Resources USA, Inc. has closed a private placement of $22,000,000 aggregate principal amount of its 7.5% senior convertible notes due April 4, 2009, or the notes, resulting in net proceeds to the Company of $20,269,000.00. The notes are convertible into shares of the Company's common stock at a conversion price of $1.06 per share. First Albany Capital served as placement agent.

Under the purchase agreement for the notes, the investors also received Series A warrants to purchase up to a total of 12,971,700 shares of common stock of the Company at an exercise price of $1.06 and Series B warrants to purchase up to a total of 8,301,888 shares of common stock of the Company at an exercise price of $1.38 per share. The Series A and Series B warrants, or the warrants, are valid for 5 years from the date of issue and contain anti-dilution features. The Series B warrants are exercisable only if the Company conducts a mandatory conversion of the notes. In connection with the purchase agreement, the Company also entered into a registration rights agreement, which calls for the Company to register the shares issuable upon conversion of the notes and exercise of the warrants for resale on behalf of investors.

The Company intends to use the net proceeds from this private placement to fund its drilling and leasehold acquisitions in the Fayetteville and Caney Shales and for other corporate purposes, including the retirement of two of the Company's existing convertible notes.

Roger Abel, Chairman and Chief Executive Officer of Touchstone said, "We are pleased to have investors who believe in the Touchstone vision and see the value we are trying to create through our current exploration activities. Placements such as this one are an important part of our capital strategy as we continue to grow as a company."


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