Exhibit 4.10


 


NOTE
PURCHASE AGREEMENT


 


 


Dated as
of March 20, 2009


 


 


by and
between


 


 


EVERGREEN
ENERGY INC.


EVERGREEN
OPERATIONS, LLC


BUCKEYE
INDUSTRIAL MINING CO.


 


 


and


 


 


CENTURION
CREDIT FUNDING LLC


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I PURCHASE AND SALE OF NOTE

  	
   

  	
  1

  
	
  Section 1.1

  	
   

  	
  Purchase and Sale of Note

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Closings

  	
   

  	
  2

  
	
  Section 1.3

  	
   

  	
  Note Shares

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II REPRESENTATIONS AND WARRANTIES

  	
   

  	
  3

  
	
  Section 2.1

  	
   

  	
  Representations and Warranties of
  the Companies

  	
   

  	
  3

  
	
  Section 2.2

  	
   

  	
  Representations and Warranties of
  the Investor

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III COVENANTS

  	
   

  	
  15

  
	
  Section 3.1

  	
   

  	
  Securities
  Compliance

  	
   

  	
  15

  
	
  Section 3.2

  	
   

  	
  Registration and Listing

  	
   

  	
  15

  
	
  Section 3.3

  	
   

  	
  Compliance with Laws

  	
   

  	
  15

  
	
  Section 3.4

  	
   

  	
  Keeping of Records and Books of
  Account

  	
   

  	
  16

  
	
  Section 3.5

  	
   

  	
  Reporting Requirements

  	
   

  	
  16

  
	
  Section 3.6

  	
   

  	
  Other Agreements

  	
   

  	
  17

  
	
  Section 3.7

  	
   

  	
  Use of Proceeds

  	
   

  	
  17

  
	
  Section 3.8

  	
   

  	
  Reporting
  Status

  	
   

  	
  17

  
	
  Section 3.9

  	
   

  	
  Amendments

  	
   

  	
  17

  
	
  Section 3.10

  	
   

  	
  Distributions

  	
   

  	
  17

  
	
  Section 3.11

  	
   

  	
  Reservation of Shares

  	
   

  	
  18

  
	
  Section 3.12

  	
   

  	
  Prohibition on Liens

  	
   

  	
  18

  
	
  Section 3.13

  	
   

  	
  Prohibition on Indebtedness

  	
   

  	
  19

  
	
  Section 3.14

  	
   

  	
  Compliance with Transaction
  Documents

  	
   

  	
  19

  
	
  Section 3.15

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  19

  
	
  Section 3.16

  	
   

  	
  Merger and Sale of Assets

  	
   

  	
  20

  
	
  Section 3.17

  	
   

  	
  Payment of Taxes, Etc.

  	
   

  	
  20

  
	
  Section 3.18

  	
   

  	
  Corporate Existence

  	
   

  	
  20

  
	
  Section 3.19

  	
   

  	
  Maintenance of Assets

  	
   

  	
  21

  
	
  Section 3.20

  	
   

  	
  No Investments

  	
   

  	
  21

  
	
  Section 3.21

  	
   

  	
  Opinions

  	
   

  	
  21

  
	
  Section 3.22

  	
   

  	
  Acquisition of Assets

  	
   

  	
  21

  
	
  Section 3.23

  	
   

  	
  Registration Rights

  	
   

  	
  21

  
	
  Section 3.24

  	
   

  	
  Notices of Certain Events

  	
   

  	
  22

  
	
  Section 3.25

  	
   

  	
  Inspection

  	
   

  	
  22

  
	
  Section 3.26

  	
   

  	
  Material Contracts

  	
   

  	
  23

  
	
  Section 3.27

  	
   

  	
  Maintenance of Coal Reserves

  	
   

  	
  23

  
	
  Section 3.28

  	
   

  	
  Coal Sales Agreements

  	
   

  	
  23

  
	
  Section 3.29

  	
   

  	
  Mortgages

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV CONDITIONS

  	
   

  	
  23

  
	
  Section 4.1

  	
   

  	
  Conditions Precedent to the
  Obligation of the Companies to Close and to Sell the Securities at Each
  Closing

  	
   

  	
  23

  
	
  Section 4.2

  	
   

  	
  Additional Condition Precedent to
  the Obligation of the Companies to Close and to Sell the Securities at First
  Tranche Closing

  	
   

  	
  24

  



 


i

















 


TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3

  	
   

  	
  Conditions Precedent to the
  Obligation of the Investor to Close at Each Closing

  	
   

  	
  24

  
	
  Section 4.4

  	
   

  	
  Conditions Precedent to the
  Obligation of the Investor to Close at the First Tranche Closing

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V CERTIFICATE LEGEND

  	
   

  	
  27

  
	
  Section 5.1

  	
   

  	
  Legend

  	
   

  	
  27

  
	
  Section 5.2

  	
   

  	
  Removal of Legend

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI INDEMNIFICATION

  	
   

  	
  27

  
	
  Section 6.1

  	
   

  	
  General Indemnity

  	
   

  	
  27

  
	
  Section 6.2

  	
   

  	
  Indemnification Procedure

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
   

  	
  29

  
	
  Section 7.1

  	
   

  	
  Fees and Expenses

  	
   

  	
  29

  
	
  Section 7.2

  	
   

  	
  Specific Performance; Consent to
  Jurisdiction; Venue

  	
   

  	
  29

  
	
  Section 7.3

  	
   

  	
  Entire Agreement; Amendment

  	
   

  	
  29

  
	
  Section 7.4

  	
   

  	
  Notices

  	
   

  	
  30

  
	
  Section 7.5

  	
   

  	
  Waivers

  	
   

  	
  31

  
	
  Section 7.6

  	
   

  	
  Headings

  	
   

  	
  31

  
	
  Section 7.7

  	
   

  	
  Successors and Assigns

  	
   

  	
  31

  
	
  Section 7.8

  	
   

  	
  No Third Party Beneficiaries

  	
   

  	
  31

  
	
  Section 7.9

  	
   

  	
  Governing Law

  	
   

  	
  31

  
	
  Section 7.10

  	
   

  	
  Survival

  	
   

  	
  31

  
	
  Section 7.11

  	
   

  	
  Publicity

  	
   

  	
  32

  
	
  Section 7.12

  	
   

  	
  Counterparts

  	
   

  	
  32

  
	
  Section 7.13

  	
   

  	
  Severability

  	
   

  	
  32

  
	
  Section 7.14

  	
   

  	
  Further Assurances

  	
   

  	
  32

  



 


ii

















 


NOTE PURCHASE
AGREEMENT


 


This NOTE PURCHASE AGREEMENT, dated as of March 20, 2009 (this “Agreement”),
is by and among EVERGREEN ENERGY INC., a Delaware corporation (“Evergreen”),
EVERGREEN OPERATIONS, LLC, a Delaware limited liability company (“Evergreen
Op”) and BUCKEYE INDUSTRIAL MINING CO., an Ohio corporation (“Buckeye,”
together with Evergreen and Evergreen Op, the “Companies” and each
individually referred to as a “Company”) and CENTURION CREDIT FUNDING
LLC, a Delaware limited liability company (the “Investor”).


 


The parties hereto agree as follows:


 


ARTICLE I


 


PURCHASE AND SALE OF NOTE


 


Section 1.1                                      Purchase
and Sale of Note.


 


(a)                                  Upon
the following terms and conditions, the Companies shall issue and sell to the
Investor, and the Investor shall purchase from the Companies, one or more
senior secured promissory notes in an aggregate principal amount of up to
Fifteen Million Dollars ($15,000,000).


 


(b)                                 At
the First Tranche Closing (as hereafter defined), upon satisfaction of the
terms and conditions set forth in Article IV, the Companies shall issue to
the Investor a promissory note, substantially in the form of Exhibit B-1
hereto (the “First Tranche Note”), in the aggregate principal amount of
Five Million Dollars ($5,000,000), and the Investor shall advance, as payment
in full for the First Tranche Note, the sum of Five Million Dollars
($5,000,000) (the “First Tranche”) on the First Tranche Closing.  The issuance and sale of the First Tranche
Note is referred to herein as the “First Tranche Closing”.


 


(c)                                  At
the Second Tranche Closing (as hereafter defined), upon satisfaction of the
terms and conditions set forth in Article IV and this Section 1.1(c),
the Companies shall issue to the Investor a promissory note, substantially in
the form of Exhibit B-2 hereto (the “Second Tranche Note,”),
in the aggregate principal amount of Five Million Dollars ($5,000,000), and the
Investor shall advance, as payment in full for the Second Tranche Note the sum
of Five Million Dollars ($5,000,000) (the “Second Tranche”), provided
that (i) the Investor shall have
received a written request from the Companies at least five (5) Business
Days prior to the requested date of such advance in the form of Exhibit 1.1(c) attached
hereto (the “Form of Advance Request”); (ii) such request
shall have been made on or prior to April 3, 2009, (iii) no Event of
Default (as defined in the Notes) shall have occurred and be continuing, (iv) Buckeye
shall have executed and delivered security documents to Investor, in form and
substance reasonably satisfactory to Investor, such that upon filing and/or
recordation of such security documents, the Investor shall have a first
priority security interest in all real property of Buckeye (including fee owned
and leasehold interests) and (v) the Companies shall have satisfied such
other conditions reasonably requested by Investor (including, without
limitation, delivery of title insurance with respect to


 

















 


the fee owned real
property, in amounts and issued by an insurance company acceptable to Investor
(the “Title Insurance”)); provided, further that, Investor, in its sole
discretion, may waive any of the foregoing conditions, in which case, the Companies
must issue the Second Tranche Note on or prior to April 3, 2009
immediately upon the Investor’s request.  The Investor shall use
commercially reasonable efforts to advance the Second Tranche within three (3) Business
Days of satisfaction of the conditions immediately set forth above.  The issuance and sale of the Second Tranche
Note is referred to herein as the “Second Tranche Closing”.


 


(d)                                 At
the Third Tranche Closing (as hereafter defined), upon satisfaction of the
terms and conditions set forth in Article IV and this Section 1.1(d),
the Companies shall issue to the Investor a promissory note, substantially in
the form of Exhibit B-3 hereto (the “Third Tranche Note,”
and together with the First Tranche Note, and the Second Tranche Note,
collectively, the “Notes”), in the aggregate principal amount of Five
Million Dollars ($5,000,000), and the Investor shall advance, as payment in
full for the Third Tranche Note the sum of Five Million Dollars ($5,000,000)
(the “Third Tranche”), provided that (i) the Investor shall have received a written Form of
Advance request from the Companies at least five (5) Business Days prior
to the requested date of such advance; (ii) such request is made on or
before one day prior to the Maturity Date (as defined in the Notes), (iii) no
Event of Default (as defined in the Notes) shall have occurred and be
continuing and (iv) the conditions for the Second Tranche shall have been
satisfied and Investor shall have advanced the Second Tranche.  The issuance and sale of the Third
Tranche Note is referred to herein as the “Third Tranche Closing”.  The First Tranche Closing, Second Tranche
Closing, and Third Tranche Closing are sometimes referred to collectively
herein as the “Closings”.


 


(e)                                  The
Investor shall not be required to fund a request from the Companies for an
advance in connection with the Second Tranche or Third Tranche in an amount
less than Five Million Dollars ($5,000,000).   Subject to the limitations set forth in Section 7.1,
the Investor is permitted to deduct and retain from the First Tranche, Second
Tranche and Third Tranche any and all fees and expenses of the Investor that
that have been invoiced the same day as such advance.


 


Section 1.2                                      Closings.


 


The First Tranche Closing under this Agreement shall take place immediately
upon the execution of this Agreement by the parties hereto and the satisfaction
of the conditions contained in Article IV (as determined by the Investor)
or on such other date as may be agreed upon in writing by the parties hereto
(the “Closing Date”).  The First
Tranche Closing shall take place at the offices of the Investor, 152 West 57th Street, 4th Floor, New York,
NY 10:00 a.m. New York time or at some other time and location as may be
agreed upon by the parties hereto.  At
the First Tranche Closing, the Investor shall advance the First Tranche by wire
transfer of immediately available funds to an account designated by the
Companies.  At the Second Tranche
Closing, the Investor shall advance the Second Tranche by wire transfer of
immediately available funds to an account designated by the Companies.  At the Third Tranche Closing, the Investor
shall advance the Third Tranche by wire transfer of immediately available funds
to an account designated by the Companies.


 


2

















 


Section 1.3                                      Note
Shares.


 


Evergreen has authorized and has initially reserved and covenants to
continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of its authorized but unissued shares of
common stock of Evergreen (“Common Stock”) at least equal to one hundred
fifty percent (150%) of the aggregate number of shares of Common Stock to
effect the conversion of the Notes in full. 
Any shares of Common Stock issuable upon conversion of the Notes (and
such shares when issued) are herein referred to as the “Conversion Shares”.  The Notes and Conversion Shares are sometimes
collectively referred to herein as the “Securities”.


 


ARTICLE II


 


REPRESENTATIONS AND
WARRANTIES


 


Section 2.1                                      Representations
and Warranties of the Companies.


 


Each Company hereby represents and warrants to the Investor, as of the
date hereof and the date of each Closing (as applicable) hereunder (except as
set forth on the Schedule of Exceptions attached hereto with each numbered
Schedule corresponding to the section number herein), as follows:


 


(a)                                  Organization,
Good Standing and Power.  Each
Company is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware with
respect to Evergreen and Evergreen Op and the State of Ohio with respect to
Buckeye and has the requisite corporate or limited liability company power to
own, lease and operate its properties and assets and to conduct its business as
it is now being conducted.  No Company
has any direct or indirect Subsidiaries (as defined in Section 2.1(g)) or
own equity securities of any kind in any other entity except as set forth on Schedule
2.1(g) hereto.  Each Company is
duly qualified as a foreign corporation to do business and is in good standing
in every other jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect.  For the purposes of this Agreement, “Material
Adverse Effect” means any material adverse effect on the business,
operations, properties (including the Collateral (as defined in the Security
Agreement)), prospects, or financial condition of any Company and its
Subsidiaries.


 


(b)                                 Authorization;
Enforcement.  Each Company has the
requisite corporate or limited liability company power and authority to enter
into and perform (i) this Agreement, (ii) the Notes, (iii) the
Security Agreement by and between Buckeye and the Investor dated as of the
Closing Date (the “Security Agreement”), (iv) those certain
leasehold and fee mortgages by and between Buckeye and Investor to be dated on
or before April 3, 2009 (collectively, the “Mortgages”) the Officer’s
Certificate to be delivered by the Companies, dated as of the Closing Date (the
“Officer’s Certificate”), the Irrevocable Transfer Agent Instructions
dated as of the date hereof, substantially in the form of Exhibit E
attached hereto (“Instructions”), (v) and the Pledge Agreement to
be delivered by Evergreen Op in favor of the Investor dated as of the Closing
Date (the “Pledge Agreement”) (collectively, together with this
Agreement, the Notes, 


 


3

















 


Officer’s
Certificate, Security Agreement, the Mortgages, and the Instructions, the “Transaction
Documents”) and to issue and sell the Securities in accordance with the
terms hereof.  The execution, delivery
and performance of the Transaction Documents by each Company and the
consummation by each Company of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate or limited liability
company action, and, except as set forth on Schedule 2.1(b), no further
consent or authorization of any Company, its Board of Directors, manager,
stockholders, or any other third party is required.  When executed and delivered by each Company
and assuming the due authorization, execution and delivery thereof by the other
parties thereto, each of the Transaction Documents shall constitute a valid and
binding obligation of each Company that is a party thereto, enforceable against
each such Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.


 


(c)                                  Capitalization.  Schedule 2.1(c)(i) hereto sets
forth (i) the authorized capital stock on the Closing Date, (ii) the
issued and outstanding shares of capital stock of each Company as of the
Closing Date, (iii) the number of
shares of capital stock issuable pursuant to Evergreen’s equity incentive plan
as of February 28, 2009, and (iv) the number of capital shares
issuable and reserved for issuance pursuant to securities exercisable for, or
convertible into or exchangeable for any capital shares of Evergreen as of February 28,
2009.  All of the outstanding
shares of the Common Stock and any other outstanding security of each Company
have been duly and validly authorized. 
Except as set forth in this Agreement, or as set forth on Schedule
2.1(c)(ii) hereto, no shares of Common Stock or any other security of
any Company are entitled to preemptive rights or registration rights.  There are no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of Evergreen Op or Buckeye. 
Furthermore, except as set forth in this Agreement and as set forth on Schedule
2.1(c)(iii) hereto, there are no contracts, commitments,
understandings, or arrangements by which any Company is or may become bound to
issue additional shares of the capital stock of such Company or options,
securities or rights convertible into shares of capital stock of such Company.  Except as provided on Schedule 2.1(c)(iv) hereto,
no Company is a party to or bound by any agreement or understanding granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities.  Except as set
forth on Schedule 2.1(c)(v), no Company is a party to, and has no
knowledge of, any agreement or understanding restricting the voting or transfer
of any shares of the capital stock of any Company.


 


(d)                                 Issuance
of Securities.  The Notes have been
duly authorized by all necessary corporate action and, when paid for or issued
in accordance with the terms hereof, the Notes shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights of refusal of
any kind.  When the Conversion Shares are
issued and paid for in accordance with the terms of this Agreement and as set
forth in the Notes, such shares will be duly authorized by all necessary
corporate action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a
holder of Common Stock.


 


4

















 


(e)                                  No
Conflicts.  The execution, delivery
and performance of the Transaction Documents by each Company, the performance
by each Company of its obligations under the Notes and the consummation by each
Company of the transactions contemplated hereby and thereby, and the issuance
of the Securities as contemplated hereby, do not and will not (i) violate
or conflict with any provision of any Company’s Certificate of Incorporation or
Certificate of Formation (the “Charter”) or Bylaws or Limited Liability
Company Agreement (the “Bylaws or LLC Agreement”), each as amended to
date, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, mortgage, deed of trust, indenture, note, instrument,
bond, license, lease agreement, instrument or obligation to which any Company
is a party or by which any Company or any of any Company’s respective
properties or assets are bound, (iii) result in a violation of any
material federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations) applicable to any Company or by which any property or asset of any
Company are bound or affected, or (iv) result in or require the creation
or imposition of a lien, mortgage, security interest, charge or encumbrance of
any nature on any property or asset of any Company under any agreement or any
commitment to which any Company is a party or by which any Company is bound or
by which any of their respective properties or assets are bound (other than
pursuant to the Transaction Documents). 
No Company is required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Securities in accordance with the terms hereof
(other than any filings, consents and approvals which may be required to be
made by any Company under applicable state and federal securities laws, rules or
regulations or that are not material, and except for filings, consents and
approvals with respect to the Collateral (as defined in the Security
Agreement)).


 


(f)                                    Commission
Documents, Financial Statements.  The
Common Stock of Evergreen is registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Evergreen has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission (the “Commission”) pursuant to the reporting
requirements of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the “Commission
Documents”).  At the time of the
filing, except for prior errors or omissions contained in Commission Documents
at the time of filing, all of which have been corrected and refiled with the
Commission as of the date hereof, and then at the time of refiling, each
Commission Document complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and the Commission Documents do 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 therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, except for financial statements of Evergreen that have been
restated and refiled with the Commission prior to the date hereof, and then as
of the date of such restatement, the financial statements of Evergreen included
in the Commission Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto.  


 


5

















 


Such financial
statements, or if restated prior to the date hereof, such restated financial
statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects the financial
position of Evergreen and its Subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments).


 


(g)                                 Subsidiaries.  Schedule 2.1(g) hereto sets forth
each Subsidiary of each Company, showing the jurisdiction of its incorporation
or organization and showing the percentage of each person’s ownership of the
outstanding stock or other interests of such Subsidiary.  For the purposes of this Agreement, “Subsidiary”
shall mean any corporation or other entity of which at least 50% of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by a Company
and/or any of its other Subsidiaries. 
All of the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued, and are fully paid and
nonassessable.  Except as set forth on Schedule
2.1(g) hereto, there are no outstanding preemptive, conversion or
other rights, options, warrants or agreements granted or issued by or binding
upon any Subsidiary for the purchase or acquisition of any shares of capital
stock of any Subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital
stock.  No Company or any Subsidiary is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence except as set forth on Schedule 2.1(g) hereto.  No Company or any Subsidiary is party to, nor
has any knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of any Subsidiary. 
Each subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdictions set forth on Schedule 2.1(g) and
has the requisite corporate or other power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.


 


(h)                                 No
Material Adverse Change.  Except as
set forth on Schedule 2.1(h), since November 10, 2008, no event,
circumstance or change has occurred that has caused or evidences a Material
Adverse Effect.


 


(i)                                     No
Undisclosed Liabilities.  Except as
disclosed on Schedule 2.1(i) hereto, since November 10, 2008,  no Company or any of its Subsidiaries has incurred any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of such Company’s or such Company’s
Subsidiaries respective businesses or which, individually or in the aggregate,
are not reasonably likely to have a Material Adverse Effect.


 


(j)                                     No
Undisclosed Events or Circumstances. 
Since November 10, 2008,  except as
disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Companies, or any of them, or any
Company’s Subsidiaries or their respective businesses, 


 


6

















 


properties,
prospects, operations or financial condition, which would require Evergreen to
file a Form 8-K with the Commission under the Exchange Act or publicly
announced under the rules and regulations of NYSE Arca, but which has not
been so publicly announced or disclosed on a Form 8-K.


 


(k)                                  Indebtedness.  No Company is in default with respect to any
Indebtedness, the outstanding principal obligation of which exceeds
$100,000.  For the purposes of this
Agreement, “Indebtedness” shall mean, with respect to any Person,
without duplication: (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments,
(c) all obligations in respect of letters of credit, surety bonds, bankers’
acceptances, current swap agreements, interest rate hedging agreements,
interest rate swaps, or other financial products (excluding obligations in
respect of trade letters or credit or bankers’ acceptances issued in respect of
trade payables to the extent not drawn upon or presented, or, if drawn upon or
presented, the resulting obligation of the Person is paid within ten (10) Business
Days), (d) all obligations as lessee under capital leases, (e) all
obligations or liabilities secured by a lien or encumbrance on any asset of
such Person, irrespective of whether such obligation or liability is assumed, (f) trade
debt and accounts payable which remain unpaid more than ninety (90) days past
the invoice date, (g) any obligation to pay the deferred and unpaid
purchase price of property or services, which are recorded as liabilities under
GAAP, excluding trade payable arising in the ordinary course of business, and (h) any
Indebtedness of other Persons guaranteed by such Person to the extent so
guaranteed.  Schedule 2.1(k) hereto
sets forth as of the date hereof all outstanding secured Indebtedness and
Indebtedness for borrowed money (either on a secured or unsecured basis) of any
Company.  “Person” means any
individual, sole proprietorship, joint venture, partnership, corporation,
limited liability company, association, joint-stock company, unincorporated
organization, cooperative, trust, estate, governmental entity or any other entity
of any kind or nature whatsoever.


 


(l)                                     Title
to Assets.  Each Company and each of
the Subsidiaries has good and valid title to all of its real and personal
property reflected in the Commission Documents, free and clear of any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for Permitted Encumbrances.  Any
leases relating to real property of each Company are valid and subsisting and
in full force and effect and set forth on Schedule 2.1(l).  Pursuant to, and upon execution and delivery
of, the Security Agreement and the Mortgages, Buckeye shall have granted to the
Investor a first priority security interest in substantially all of the assets
of Buckeye.


 


(m)                               Actions
Pending.  There is no action, suit,
claim, investigation, arbitration, alternate dispute resolution proceeding or
other proceeding pending or, to the knowledge of any Company, threatened
against any Company or any Subsidiary which questions the validity of this
Agreement or any of the other Transaction Documents or any of the transactions
contemplated hereby or thereby or any action taken or to be taken pursuant
hereto or thereto.  Except as set forth
on Schedule 2.1(m) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other
proceeding pending or, to the knowledge of any Company, threatened against or
involving any Company, any Subsidiary or any of their respective properties or
assets, which individually or in the aggregate, would reasonably be expected,
if adversely determined, to have a Material Adverse Effect.  There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or


 


7














 


governmental or regulatory body against any Company or any Subsidiary
or any officers or directors of any Company or Subsidiary in their capacities
as such, which individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.


 


(n)           Compliance
with Law.  The business of the
Companies and the Subsidiaries has been and is presently being conducted in
accordance with all applicable federal, state and local governmental laws,
rules, regulations and ordinances, including, without limitation, Mining,
Safety or Environmental Laws, expect where such noncompliance could not
reasonably be expected to have a Material Adverse Effect.  Each Company and each of its Subsidiaries
have all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its
business as now being conducted by it (including any required under any
Environmental Laws), expect as could not reasonably be expected to have a
Material Adverse Effect. Except for such instances as could not reasonably be
expected to have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting any Company or any of its Subsidiaries that violate or
may violate any Environmental Law after the applicable Closing Date or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i) under
any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.  “Mining, Safety or Environmental Laws”
means all applicable federal, state, local and foreign statutes, Laws,
regulations, ordinances, rules, judgments, orders, decrees, permits or other
governmental restrictions, including, without limitation, those relating to or
addressing (i) mining operations and activities, (ii) workplace or
worker safety and health, or (iii) to the environment or emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes or to the
reclamation of lands (“Environmental Laws”) and shall include, but not
be limited to (A) the Surface Mining Control and Reclamation Act of 1977,
as amended, all other land reclamation and use statutes and regulations, the
federal Coal Mine Health and Safety Act of 1969, as amended, and other Laws
administered by the Federal Mine Safety and Health Administration and the Ohio  Department of Natural Resources (Ohio Division of Mineral
Resources Management), and (B) CERCLA as amended by the Superfund
Amendments and Reauthorization Act of 1986; the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980 and the Hazardous and Solid Waste
Amendments of 1984; the Toxic Substances Control Act, 15 U.S.C.; the Federal
Water Pollution Control Act; the Hazardous Materials Transportation Act; the Clean
Air Act; the Safe Drinking Water Act; The Occupational Safety and Health Act of
1970; the Federal Insecticide, Fungicide and Rodenticide Act and the Endangered
Species Act, each as amended and their state and local counterparts or
equivalents.


 


(o)           Taxes.  Each Company and each of the Subsidiaries has
accurately prepared in all material respects and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional 


 


8

















 


assessments, and adequate provisions have been and are reflected in the
financial statements of the Companies and the Subsidiaries for all current
taxes and other charges to which any Company or any Subsidiary is subject and
which are not currently due and payable. 
Except as disclosed on Schedule 2.1(o) hereto, none of the
federal income tax returns of any Company or any Subsidiary have been audited
by the Internal Revenue Service.  No
Company has knowledge of any additional assessments, adjustments or contingent
tax liability (whether federal or state) of any nature whatsoever, whether
pending or threatened against any Company or any Subsidiary for any period, or
of any basis for any such assessment, adjustment or contingency.


 


(p)           Disclosure.  Except for the transactions contemplated by
this Agreement, each Company confirms that neither it nor any other person
acting on its behalf has provided the Investor or its agents or counsel with
any information that constitutes or might constitute material, nonpublic
information.  Neither this Agreement or
the Schedules hereto nor any other documents, certificates or instruments
furnished to the Investor by or on behalf of any Company or any Subsidiary in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.


 


(q)           Books
and Records; Internal Accounting Controls. 
The records and documents of the Companies and their Subsidiaries
accurately reflect in all material respects the information relating to the
business of the Companies, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts
receivable of the Companies. Evergreen is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of
the Closing Date.  Evergreen maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  Evergreen has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for Evergreen and its Subsidiaries and designed such disclosure
controls and procedures to ensure that information required to be disclosed by
Evergreen in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission’s rules and forms. 
Each Company’s certifying officers have evaluated the effectiveness of
such Company’s disclosure controls and procedures as of the end of the period
covered by such Company’s most recently filed periodic report under the
Exchange Act (such date, the “Evaluation Date”).  Each Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in any Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, any Company’s
internal control over financial reporting.


 


9

















 


(r)            Material
Agreements.  Each Company and each of
its Subsidiaries have performed all obligations required to be performed by
them to date under any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, filed or required to be filed with
the Commission or any other material contract, material instrument, material
agreement, material commitment, material obligation, material plan or material
arrangement to which any Company is a party or by which any Company’s
properties or assets are bound (collectively, the “Material Agreements”).  No Company or any of its Subsidiaries has
received any notice of default under any Material Agreement.  No Company or any of its Subsidiaries is in
default under any Material Agreement now in effect.


 


(s)           Transactions
with Affiliates.  Except as set forth
on Schedule 2.1(s) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions between (a) any Company, any Subsidiary or any of
their respective customers or suppliers on the one hand, and (b) on the
other hand, any officer, employee, consultant or director of any Company, or
any of its Subsidiaries, or any person owning at least 5% of the outstanding
capital stock of any Company or any Subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of such officer,
employee, consultant, director or stockholder which, in each case, is required
to be disclosed in the Commission Documents or in any Company’s most recently
filed definitive proxy statement on Schedule 14A, that is not so disclosed in
the Commission Documents or in such proxy statement.


 


(t)            Securities
Act of 1933.  Subject to the accuracy
of the representations and warranties of the Investor contained in Section 2.2
hereof, Evergreen has complied and will comply with all applicable federal and
state securities laws in connection with the offer, issuance and sale of the
Securities hereunder.  Neither Evergreen nor to the Evergreen’s
knowledge any Person acting on its behalf has conducted any “general
solicitation” or “general advertising” (as those terms are used in Regulation D) in connection with the offer or sale of any
of the Securities.  Evergreen is
not, and has never been, a company described in Rule 144(i)(1) under
the Securities Act, and is a “reporting issuer” as described in Rule 144(c)(1) under
the Securities Act.  Neither Evergreen nor any of its
Subsidiaries, nor to Evergreen’s knowledge any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Evergreen
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by Evergreen on Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”) for the
exemption from the registration requirements imposed under Section 5 of
the Securities Act for the transactions contemplated hereby or that would
require such registration under the Securities Act.  Subject to the accuracy of the
representations and warranties of the Investor contained in Section 2.2
hereof, the offer and sale of the Notes to the Investor as contemplated hereby
is exempt from the registration requirements of the Securities Act  Evergreen has not, and to Evergreen’s
knowledge, none of its directors, officers or controlling persons, has taken or
will, in violation of applicable law, take, any action designed to or that
might reasonably be expected to cause or result in, or which has constituted,
stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the securities issued or issuable in connection with the
transactions contemplated hereunder.


 


10

















 


(u)           Employees.  As of the applicable Closing, no Company or
any Subsidiary has any collective bargaining arrangements or agreements
covering any of its employees, except as set forth on Schedule 2.1(u) hereto.  Except as set forth on Schedule 2.1(u) hereto,
no Company or any Subsidiary has any employment contract, agreement regarding
proprietary information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by such Company or such Subsidiary that is required to be
disclosed in the Commission Documents that is not so disclosed.


 


(v)           Intellectual
Property.  Except as set forth on Schedule
2.1(v) hereto, each Company and each of the Subsidiaries owns or
possesses the rights to use all patents (and any patentable improvements
thereof), trademarks, service marks, trade names, domain names, copyrights (and
any copyrightable derivative works thereof), websites and intellectual property
rights relating thereto (to any of the foregoing list, whether or not
registered), licenses and authorizations which are necessary for the conduct of
its business as now conducted without infringement or any conflict with the
rights of others, except where such conflicts could not reasonably be expected
to have a Material Adverse Effect.


 


(w)          Absence
of Certain Developments.  Except as
set forth in the Commission Documents or provided on Schedule 2.1(w) hereto,
since November 10, 2008, no Company or any Subsidiary has:


 


(i)            issued any stock,
bonds or other corporate securities or any right, options or warrants with
respect thereto;


 


(ii)           borrowed any amount in
excess of $100,000 or incurred or become subject to any other liabilities in
excess of $100,000 (absolute or contingent) except current liabilities incurred
in the ordinary course of business which are comparable in nature and amount to
the current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the business of such Company and its Subsidiaries;


 


(iii)          discharged or satisfied
any lien or encumbrance in excess of $100,000 or paid any obligation or
liability (absolute or contingent) in excess of $100,000, other than current
liabilities paid in the ordinary course of business;


 


(iv)          declared or made any
payment or distribution of cash or other property to stockholders with respect
to its stock, or purchased or redeemed, or made any agreements so to purchase
or redeem, any shares of its capital stock, in each case in excess of $100,000
individually or $100,000 in the aggregate;


 


(v)           sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, in each
case in excess of $100,000, except in the ordinary course of business;


 


(vi)          sold, assigned or
transferred any patent rights, trademarks, trade names, copyrights, trade
secrets or other intangible assets or intellectual property rights in excess of
$100,000, or disclosed any proprietary confidential information to any person
except to customers in the ordinary course of business;


 


11

















 


(vii)         suffered any material
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of prospective
business;


 


(viii)        made any changes in
employee compensation except in the ordinary course of business and consistent
with past practices;


 


(ix)           made capital
expenditures or commitments therefor that aggregate in excess of  (A) $100,000 for each of Evergreen and
Evergreen Ops and (B) $2,000,000 for Buckeye;


 


(x)            entered into any
material transaction, whether or not in the ordinary course of business;


 


(xi)           made charitable
contributions or pledges in excess of $100,000;


 


(xii)          suffered any material
damage, destruction or casualty loss, whether or not covered by insurance;


 


(xiii)         experienced any material
problems with labor or management in connection with the terms and conditions
of their employment; or


 


(xiv)                         entered
into an agreement, written or otherwise, to take any of the foregoing actions.


 


(x)            Public
Utility Holding Company Act and Investment Company Act Status.  No Company or any of its Subsidiaries is a “holding
company,” “subsidiary company” of a “holding company” or “affiliate” of a “holding
company” or a “public utility company” as such terms are defined in the Public
Utility Holding Company Act of 2005, as amended.  No Company or any of its Subsidiaries is, and
as a result of and immediately upon any of the Closings, will not be, an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended.


 


(y)           ERISA.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by any Company or any of
its Subsidiaries which is or would be materially adverse to the Companies, or
any of them, or its Subsidiaries.  The
execution and delivery of this Agreement and the issuance and sale of the
Securities will not involve any transaction which is subject to the
prohibitions of Section 406 of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”) or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as
amended.  As used in this Section 2.1(y),
the term “Plan” shall mean an “employee pension benefit plan” (as
defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by any Company or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with any Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.


 


(z)            No
Integrated Offering.  No Company, or
any of its affiliates, or any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or 


 


12

















 


solicited any offers to buy any security under circumstances that would
cause the offering of the Securities pursuant to this Agreement to be
integrated with prior offerings by Evergreen for purposes of the Securities Act
which would prevent Evergreen from selling the Securities pursuant to
Regulation D and Rule 506 thereof under the Securities Act, or any
applicable exchange-related stockholder approval provisions, nor will Evergreen
or any of its affiliates or subsidiaries take any action or steps that would
cause the offering of the Securities to be integrated with other
offerings.  Except as set forth on Schedule
2.1(z), (a)  Evergreen does not have any registration statement
pending before the Commission or currently under the Commission’s review or (b) since
November 10, 2008, Evergreen has not offered or sold any of its equity
securities or debt securities convertible into shares of Common Stock.


 


(aa)         Dilutive
Effect.  Evergreen understands and
acknowledges that its obligation to issue the Conversion Shares upon the
conversion of any Note in accordance with this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of Evergreen.


 


(bb)         DTC
Status.   Except as set forth on Schedule
2.1(bb) hereto, Evergreen’s transfer agent is a participant in and the
Common Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program. 
The name, address, telephone number, fax number, contact person and email
of Evergreen’s transfer agent is set forth on Schedule 2.1(bb) hereto.


 


(cc)         Governmental
Approvals.  Except for the filing of
any notice prior or subsequent to the First Tranche Closing that may be
required under applicable state and/or federal securities laws (which if
required, shall be filed on a timely basis), no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Notes, or for the performance by any Company or
any of its Subsidiaries of its obligations under the Transaction Documents.


 


(dd)         Broker’s
Fees.  Except as set forth on Schedule
2.1(dd), no Company or any Subsidiary has any obligation to any Person in
respect of any finder’s, broker’s, investment banking or other similar fee in
connection with any of the transactions contemplated under the Transaction
Documents.


 


(ee)         Letter
of Intent.  Buckeye has received and
delivered to the Investor executed letters of intent from unaffiliated party
with respect to the sale of all or substantially all of the assets of Buckeye.


 


Between the date hereof and the date of each of the respective
Closings, if any of the information or disclosures provided on any of the
Schedules originally attached hereto or any representation or warranty
contained in Article II become outdated or incorrect in any respect for
any facts or conditions that occur between the date hereof and the date of the
Second Tranche Closing, or the date of the Second Tranche Closing and the date
of the Third Tranche Closing, as applicable, the Companies shall deliver to the
Investor such revision or updates to such Schedule(s) as may be necessary
or appropriate to update or correct such Schedule(s), or representation or
warranty for 


 


13

















 


such change in facts or conditions (a “Supplement”).  Upon Investor’s receipt of such Supplement,
such representations or warranties shall be deemed to be automatically updated
as set forth therein; provided, that no such Supplement shall be deemed to cure
any breach of any representation or warranty existing when made as of the date
hereof, the date of the Second Tranche Closing or the date of the Third Tranche
Closing, as applicable (except for representations and warranties made as of
only a specified date, which shall be true and correct as of the specified
date) or other default that with the giving of notice or passage of time, or
both, would constitute an Event of Default or Event of Default with respect to
the information contained therein.


 


Section 2.2             Representations and Warranties of the
Investor.


 


(a)           Organization;
Authorization.  Investor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or organizational
power and authority to enter into and to consummate the transactions
contemplated in the Transaction Documents to which it is a party and to
otherwise carry out its obligations thereunder. 
The execution, delivery and performance by Investor of the transactions
contemplated by the Transaction Documents to which such Investor is a party have
been duly authorized and will each constitute the valid and legally binding
obligation of Investor, enforceable against Investor in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditor’s rights and remedies or by other equitable principles
of general application.


 


(b)           Purchase Entirely
for Own Account.  The Notes to be
purchased by Investor hereunder will be acquired by Investor as principal for
Investor’s own account, for investment purposes, not as nominee or agent, and
not with a view to the resale or distribution of any part thereof in violation
of the Securities Act, and Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation
of the Securities Act, provided, however, that by making the
representations herein, the Investor does not agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with Federal and state securities laws
applicable to such disposition.  Investor
is not a registered broker dealer or an entity engaged in the business of being
a broker dealer.


 


(c)           Securities Act.
The Investor further represents and warrants to the Companies as of the date
hereof that (i) the Investor has such knowledge and experience in
financial and business matters that the Investor is capable of evaluating the
merits and risks of the proposed investment in the Securities; (ii) the
Investor understands that neither the Notes nor the Conversion Shares may be
sold, transferred or otherwise disposed of by it without registration under the
Securities Act and any applicable state securities laws, or an exemption
therefrom, and that in the absence of an effective registration statement
covering such securities or an available exemption from registration, such
Investor might be required to hold such securities indefinitely; and (iii) the
Investor is an “accredited investor” within the meaning of Regulation D
promulgated under the Securities Act.


 


14

















 


(d)           No General Solicitation.  The
Investor did not learn of the investment in the Notes as a result of any “general
advertising” or “general solicitation” as those terms are contemplated in
Regulation D, as amended, under the 1933 Act.


 


ARTICLE III


 


COVENANTS


 


Each Company covenants with the
Investor as follows, which covenants are for the benefit of the Investor and
its assignees.  Unless otherwise set
forth in the covenants in this Article III, such covenants shall survive
each of the Closings hereunder until the Notes are paid in full and the
Investor has no obligation (contingent or otherwise) to advance funds hereunder.


 


Section 3.1             Securities Compliance.


 


The Companies shall notify the Commission in accordance with its rules and
regulations, of the transactions contemplated by any of the Transaction
Documents and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Investor or subsequent
holders.


 


Section 3.2             Registration
and Listing.


 


Evergreen shall cause its Common Stock to continue to
be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all material respects with its
reporting and filing obligations under the Exchange Act and to not take any
action or file any document (whether or not permitted by the Securities Act or
the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act. 
Evergreen will take all action necessary to continue the listing
or trading of its Common Stock on the OTC Bulletin Board, the NYSE Arca
Exchange, the New York Stock Exchange, the NYSE Alternext Exchange, the Nasdaq
Capital Markets, the Nasdaq Global Markets or the Nasdaq Global Select
Market.  If required, Evergreen will
promptly file the “Listing Application” for, or in connection with, the
issuance and delivery of any of the Conversion Shares.  Subject
to the terms of the Transaction Documents, Evergreen further covenants that it
will take such further action as the Investor may reasonably request, all to
the extent required from time to time to enable the Investor to sell the
Conversion Shares without registration under the Securities Act in accordance
with Rule 144 promulgated under the Securities Act.  Upon the request of the Investor, Evergreen
shall deliver to the Investor a written certification of a duly authorized
officer as to whether it has complied with such requirements.


 


Section 3.3             Compliance with Laws.


 


Each Company shall comply in all respects, and cause
each Subsidiary to
comply in all respects, with all applicable laws, rules, regulations and orders
of any governmental authority, including without limitation, all Mining, Safety
or Environmental Laws, securities law, rules and regulations, as well as
all contractual obligations and agreements with respect to remediation or other
mining, safety or environmental matters and timely make all filings required by
any such laws, rules and regulations, expect as could not reasonably be
expected to have a Material 


 


15

















 


Adverse Effect. 
Each Company shall obtain, at or prior to the time required by all
applicable laws, rules, regulations and orders of any governmental authority,
including without limitation, all Mining, Safety or Environmental Laws,
securities law, rules and regulations, all Mining, Safety or Environmental
Permits for its operations and will maintain all Mining, Safety or
Environmental Permits in full force and effect, expect as could not reasonably
be expected to have a Material Adverse Effect. 
“Mining, Safety or Environmental Permit” means any permit, approval,
identification number, license or other authorization required under any
Mining, Safety or Environmental Law.  No
Company or any of its Subsidiaries will do anything or permit anything to be
done which will subject any of its properties to any remedial obligations
under, or result in any noncompliance with applicable Mining, Safety or Environmental
Laws, assuming disclosure to the applicable governmental authorities of all
relevant facts, conditions and circumstances, expect as could not reasonably be
expected to have a Material Adverse Effect. 
After the occurrence and during the continuance of an Event of Default
(as defined in the Notes) and upon the Investor’s reasonable request, the
Companies will provide at their own expense a mining and environmental
inspection of any of the Company’s or any of its Subsidiaries’ material real
properties and audit of their mining, safety or environmental compliance
procedures and practices, in each case from an engineering or consulting firm
approved by the Investor.


 


Section 3.4             Keeping of Records and Books of Account.


 


Each Company shall keep and cause
each Subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of such Company and its Subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made. 
Upon request of Investor, each Company shall furnish or cause to be
furnished to Investor any and all books and records or any other information
requested by Investor relating to the financial condition of the Companies.


 


Section 3.5             Reporting Requirements.


 


The Companies shall furnish the following to the
Investor so long as the Investor shall be obligated hereunder to purchase the
Securities or shall beneficially own Securities:


 


(a)           Quarterly Reports filed with the Commission on Form 10-Q
as soon as practical after the document is or would have been required to be
filed with the Commission;


 


(b)           Annual Reports filed with the Commission on Form 10-K
as soon as practical after the document is or would have been required to be
filed with the Commission;


 


(c)           Current Reports filed with the Commission on Form 8-K
as soon as practical after the document is or would have been required to be
filed with the Commission;


 


(d)           Copies of any other filings filed or required to be
filed with the Commission as soon as practical after the document is or would
have been required to be filed with the Commission;


 


16

















 


(e)           Copies of all
notices, information and proxy statements in connection with any meetings that
are, in each case, provided to holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
holders of Common Stock; and


 


(f)            Within five (5) 
Business Days of Investor’s request, copies of any other reports, information
or filings reasonably requested by the Investor from time to time.


 


Provided that any such reports, information or documents filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
(or EDGAR) system shall be deemed furnished to the Investor.


 


Section 3.6             Other
Agreements.


 


No Company shall enter or permit any Subsidiary to
enter into any agreement in which the terms of such agreement would restrict or
impair the right or ability to perform of any Company or any of its
Subsidiaries under any Transaction Document.


 


Section 3.7             Use of Proceeds.


 


The
proceeds from the sale of the Notes hereunder shall be used by the Companies for working capital and ordinary course
general corporate purposes not inconsistent with or prohibited by any covenant
in the Transaction Documents.  In
no event shall the proceeds be used to
redeem any Common Stock or securities convertible, exercisable or exchangeable
into Common Stock or to settle any outstanding litigation.


 


Section 3.8             Reporting Status.


 


So long as the Investor beneficially owns any of the Securities, Evergreen
shall timely file all reports required to be filed with the Commission pursuant
to the Exchange Act, and Evergreen shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.  Evergreen shall promptly disclose on Form 8-K
the occurrence of any Material Adverse Effect or any event that could
reasonably be expected to cause a Material Adverse Effect, to the extent such
disclosure is required by the Exchange Act. 
In addition, the Companies shall promptly notify the Investor of any
event or events that have had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on any Company.


 


Section 3.9             Amendments.


 


No Company shall amend or waive any provision of its
Certificate of Incorporation or Bylaws in any way that would adversely affect
the rights of the holder of the Notes.


 


Section 3.10           Distributions.


 


So long as no event that with the giving of notice or
the passage of time, or both, would constitute an Event of Default or any Event
of Default (as defined in the Notes) has occurred and is continuing, each
Company agrees that it shall not, (i) declare or pay any dividends or make


 


17














 


any distributions (by reduction of capital or
otherwise) to any holder(s) of Common Stock (or security convertible into
or exercisable for Common Stock) or set aside or otherwise deposit or invest
any sums for such purpose, other than in connection with a distribution of
rights or preferred stock in accordance with the Rights Agreement, dated December 4,
2008, between Evergreen and Interwest Transfer Company, Inc., as Rights
Agent or (ii) redeem, retire, defease, purchase or otherwise acquire for
value, directly or indirectly, any Common Stock or other equity security of
Evergreen or set aside or otherwise deposit or invest any sums for such
purpose; provided, however, in any event nothing provided herein shall prohibit
the cashless exercise of outstanding options or warrants on Common Stock or
other equity security of Evergreen.


 


Section 3.11           Reservation of Shares.


 


So long as the Notes remain outstanding, Evergreen
shall take all action necessary to at all times have authorized and reserved
for the purpose of issuance, one hundred fifty percent (150%) of the aggregate
number of shares of Common Stock needed to provide for the issuance of the
Conversion Shares.


 


Section 3.12           Prohibition on Liens.


 


So long as the Notes remain outstanding or the
Investor has any obligation (contingent or otherwise) to advance funds
hereunder, Buckeye shall not enter into, create, incur, assume, suffer or
permit to exist any lien, security interest, mortgage, pledge, charge, claim or
other encumbrance of any kind (collectively, “Liens”) on or with respect
to any of its assets, including the Collateral (as defined in the Security
Agreement), now owned or hereafter acquired or any interest therein or any
income or profits therefrom, or file or permit the filing of, or permit to remain
in effect any financing statement or other similar notice of any Lien with
respect to such assets and Evergreen Op shall not create, incur, assume, suffer
or permit to exist any Lien on its shares in Buckeye, other than Permitted
Encumbrances.  “Permitted Encumbrances”
means the individual and collective reference to the following: (a) pledges
or deposits under worker’s compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts or leases, or to secure public or statutory obligations, performance
or surety bonds, customs duties and the like, or for the payment of rent, in
each case incurred in the ordinary course of business and not securing
Indebtedness, (b) Liens in respect of taxes, assessments and other
governmental charges or levies not yet due or Liens for taxes, assessments and
other governmental charges or levies which are not yet due or which are being
contested in good faith and by appropriate proceedings; (c) Liens imposed
by law, such as carriers’, vendors’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, in each case for sums not yet due or being
contested in good faith and by appropriate proceedings; (d) the Liens in
effect on the Closing Date and set forth on Schedule 3.12; (e) the
Liens securing the Securities; (f) Liens on cash securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the proceeds thereof; (g) survey
exceptions, encumbrances, easements or reservations of, or rights of others
for, licenses, rights of way, sewers, electric lines, telegraph and telephone
lines and other similar purposes, or zoning or other restrictions as to the use
of real property, not interfering in any material respect with the conduct of
the business of Buckeye; (h) licenses or leases or subleases as licensor,
lessor or sublessor of Buckeye of its property, including intellectual
property, in the 


 


18

















 


ordinary course of business; (i) judgment liens
in an aggregate amount not to exceed $25,000 and Liens securing appeal bonds or
letters of credit issued in support or in lieu of appeal bonds; (j) Liens
(including the interest of a lessor under a capital lease) on property that
secure Indebtedness for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of such property and
which attach contemporaneously with the completion of construction or
improvement; and (k) extensions, renewals or replacements of any Liens
referred to in the clauses above in connection with the refinancing of the
obligations secured thereby, provided that such Lien does not extend to any
other property and except as contemplated by the definition of Permitted
Refinancing Indebtedness (as defined in Section 3.13), the amount secured
by such Lien is not increased.


 


Section 3.13           Prohibition on Indebtedness.


 


So long as the Notes remain outstanding, Buckeye shall
not enter into, create, incur, assume, suffer, become or be liable for in any
manner with respect to, or permit to exist, any Indebtedness.  Notwithstanding the foregoing, Buckeye may
incur, assume, become liable for or permit to exist the following (“Permitted
Indebtedness”): (a) Indebtedness to any other Company; (b) Indebtedness
pursuant to the Notes; (c) Indebtedness (“Permitted Refinancing
Indebtedness”) constituting an extension or renewal of, replacement of, or
substitution for, or issued in exchange for, or the net proceeds of which are
used to repay, redeem, repurchase, refinance or refund, including by way of
defeasance (all of the above, for purposes of this clause, “refinance”)
then outstanding Permitted Indebtedness in an amount not to exceed the
principal amount of the Indebtedness so refinanced, plus premiums, fees and
expenses, (d) Indebtedness with respect to letters of credit and bankers’
acceptances issued in the ordinary course of business and not supporting
Indebtedness, including letters of credit supporting performance, surety or
appeal bonds or indemnification, adjustment or purchase price or similar
obligations incurred in connection with the acquisition or disposition of any
business or assets; (e) Indebtedness outstanding on the Closing Date and
set forth on Schedule 3.13; (f) Indebtedness, which may include
capital leases, incurred after the date of purchase or completion of
construction or improvement of property for the purpose of financing all or any
part of the purchase price or cost of construction or improvement; provided that the principal amount of any Indebtedness
incurred pursuant to this clause after the Closing Date may not exceed (i) Two
Million Dollars ($2,000,000) less (ii) the aggregate outstanding amount of
Permitted Refinancing Indebtedness incurred to refinance Indebtedness incurred
pursuant to this clause (f), or (g) unsecured Indebtedness incurred on or
after the Closing Date not otherwise permitted in an aggregate principal amount
at any time outstanding not to exceed Three Million Dollars ($3,000,000) for
each Company collectively.


 


Section 3.14           Reserved.


 


Section 3.15           Transactions with Affiliates.


 


No Company shall, directly or indirectly, (i) purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
any officer, director, agent, employee or any affiliate of such Company or any
Subsidiary, or (ii) make any payments of management, consulting or other
fees for management or similar services, or of any Indebtedness owing to any
officer, director, agent, employee, or other affiliate of such Company or any
Subsidiary, 


 


19

















 


including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director, agent or such employee or, to the knowledge of any Company,
any entity in which any officer, director, agent or any such employee has a substantial
interest or is an officer, director, trustee or partner, in an aggregate amount
in excess of $50,000, other than (w) payments on account of Indebtedness
described in clause (a) of the Permitted Indebtedness definition, so long
as no event with which the giving of notice or the passage of time, or both,
would constitute an Event of Default (as defined in the Notes) or any Event of
Default (as defined in the Notes) then exists (x) for payment of
reasonable salary for services actually rendered, as approved by the Board of
Directors of such Company as fair and reasonable in all respects to such
Company or the applicable Subsidiary and upon terms no less favorable to such
Company or such Subsidiary that such Company or such Subsidiary would obtain in
a comparable arm’s length transaction with an unaffiliated person, (y) reimbursement
for expenses incurred on behalf of such Company in the ordinary course of and
pursuant to the reasonable requirements of the business or any Subsidiary and (z) as
set forth on Schedule 3.15 hereof.


 


Section 3.16           Merger and Sale of Assets.


 


No Company shall, directly or indirectly: (i) merge
into or with or consolidate with any other Person or permit any other Person to
merge into or with or consolidate with it, (ii) in any way or manner alter
its organizational structure or effect a change of entity; (iii) wind up,
liquidate or dissolve or (iv) agree to do any of the foregoing.  Buckeye shall not, directly or indirectly: (i) sell,
issue, assign, lease, license, transfer, abandon or otherwise dispose of any or
all of its assets (other than inventory or obsolete or worn-out equipment in
the ordinary course of business), (ii) form or create any subsidiary or
become a partner in any partnership or joint venture, or make any acquisition
of any interest in any Person or acquire substantially all of the assets of any
Person or (iii) agree to do any of the foregoing.


 


Section 3.17           Payment of Taxes, Etc.


 


Each Company shall, and shall cause each of its
Subsidiaries to, promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of such Company and the Subsidiaries; provided,
however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if such Company or such
Subsidiaries shall have set aside on its books adequate reserves with respect
thereto, and provided, further,
that such Company and such Subsidiaries will pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien which may have attached as security therefor.


 


Section 3.18           Corporate Existence.


 


Each Company shall, maintain in full force and effect
its corporate existence, rights and franchises and all licenses and other
rights to use property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.


 


20

















 


Section 3.19           Maintenance of Assets.


 


So long as the Notes remain outstanding or the
Investor has any obligation (contingent or otherwise) to advance funds
hereunder, each Company shall keep its material properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time
to time make all necessary repairs thereto.


 


Section 3.20           No Investments.


 


Buckeye shall not make or suffer to exist any
Investments or commitments therefor, other than Investments made in the
ordinary course of business.  “Investment”
means, with respect to any Person, all investments (by capital contribution or
otherwise) in any other Person, or any extension of credit, loan, advance,
purchase or repurchase of stock or other ownership interest, any Indebtedness
or all or a substantial part of the assets or property of any Person, bonds,
notes, debentures or other securities, or otherwise, and whether existing on
the date of this Agreement or thereafter made, but such term shall not include
the cash surrender value of life insurance policies on the lives of officers or
employees, excluding amounts due from customers for services or products
delivered or sold in the ordinary course of business.


 


Section 3.21           Opinions.


 


For so long as the Investor holds any Securities,
Evergreen will provide, at Evergreen’s expense, such legal opinions in the
future as are reasonably necessary for the issuance and resale of the Common
Stock issuable upon conversion of any Note pursuant to an effective
registration statement, Rule 144 or an exemption from registration.  In the event that Common Stock is sold in a
manner that complies with an exemption from registration, Evergreen will
promptly instruct its counsel (at its expense) to issue to the transfer agent
an opinion permitting removal of the legend (indefinitely, if more than one
year has elapsed from the Closing Date, or to permit sale of the shares if
pursuant to the other provisions of Rule 144).


 


Section 3.22           Acquisition of Assets.


 


In the event Buckeye or any of Buckeye’s Subsidiaries,
if any, acquires any assets or other properties, such assets or properties
shall constitute a part of the Collateral (as defined in the Security
Agreement) and Buckeye shall take all action reasonably requested by Investor
to perfect the Investor’s security interest in such assets or properties.


 


Section 3.23           Registration Rights.


 


If Evergreen shall determine to prepare and file with
the Commission a registration statement (a “Registration Statement”)
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act), or their then equivalents,
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then Evergreen
shall send to the Investor a written notice of such determination and, if
within twenty (20) days after the date of such notice, the Investor shall so
request in writing, Evergreen shall include in such Registration Statement all
or any part of the Conversion Shares as the Investor 


 


21

















 


requests to be registered so long as such Conversion
Shares are proposed to be disposed in the same manner as those set forth in the
Registration Statement.  If the
registration statement under which Evergreen gives notice under this Section 3.23
is for an underwritten offering, if the lead underwriter for such offering
determines in its sole discretion and in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
Evergreen, second, to the Investor; and third, to any other person to be
included in the offering.  Evergreen
shall use its best efforts to cause any Registration Statement to be declared
effective by the Commission as promptly as is possible following it being filed
with the Commission and to remain effective until all Conversion Shares subject
thereto have been sold or may be sold without limitations as to volume or the
availability of current public information under Rule 144.  All fees and expenses incident to the
performance of or compliance with this Section 3.23 by Evergreen shall be
borne by Evergreen whether or not any Conversion Shares are sold pursuant to the
Registration Statement.  The Companies
shall, jointly and severally, indemnify and hold harmless the Investor, the
officers, directors, members, partners, agents, brokers, investment advisors
and employees of the Investor, each person who controls the Investor (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), and the officers, directors, members, shareholders, partners,
agents and employees of each such controlling person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any prospectus
included therein or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any prospectus or
form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading or (2) any violation or alleged
violation by Evergreen of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection with
the performance of its obligations under this Section 3.23.


 


Section 3.24           Notices of Certain Events.


 


The Companies shall promptly notify the Investor of
any event or events that have had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on any Company.


 


Section 3.25           Inspection.


 


Upon at least one (1) Business Day prior written
notice to a Company, each Company shall permit Investor and its duly authorized
representatives or agents to visit any of such Company’s properties and inspect
any of its assets or books and records to examine and make copies of its books
and records and to discuss its affairs, finances, technology and accounts with,
and to be advised as to the same by, its officers and employees at such
reasonable times during normal hours as may be reasonably requested by
Investor.  The Companies, jointly and
severally, agree to reimburse Investor for all of the reasonable expenses
relating to hotel, travel, meals and other out-of-pocket expenses incurred by
the Investor or their representatives in any such 


 


22

















 


inspection or examination upon presentation of
invoices or other documentation of such expenses; provided
that so long as no Event of Default (as defined in the Notes) has occurred and
is continuing, the Companies shall only be obligated to reimburse Investor for
out-of-pocket expenses relating to one (1) inspection during the term of
the Notes.


 


Section 3.26           Material Contracts.


 


Each Company and each of its Subsidiaries shall comply
with and perform all obligations required to be performed by them to date under
any Material Agreement.


 


Section 3.27           Maintenance of Coal Reserves.


 


Buckeye shall maintain at all times available Coal
reserves, or the rights to acquire coal from third parties, sufficient to
fulfill its requirements under existing Coal Sales Agreements.  “Coal” means all of the coal owned or
leased by Buckeye or any of its Subsidiaries and (i) located on, under or
within, or (ii) produced and severed from, the properties owned or leased
by Buckeye or any of its Subsidiaries.  “Coal
Sales Agreements” means contracts, verbal or written, now in effect and
hereafter entered into by Buckeye or any of its Subsidiaries for the purchase
and sale of Coal.


 


Section 3.28           Coal Sales Agreements.


 


Buckeye shall maintain in full force and effect (and
will not assign transfer or novate) each of its Coal Sale Agreements, comply
with all of the terms and conditions of its Coal Sales Agreements and further
perform any and all actions necessary to maintain all Coal Sales Agreements in
full force and effect, except where the failure to so maintain, comply or
perform could not reasonably be expected to result in a Material Adverse
Effect.


 


Section 3.29           Mortgages.


 


On or before April 3, 2009, Buckeye shall deliver
to Investor the Title Insurance and the duly executed Mortgages from Buckeye
and in favor of Investor.


 


ARTICLE IV


 


CONDITIONS


 


Section 4.1             Conditions Precedent to the
Obligation of the Companies to Close and to Sell the Securities at Each Closing.


 


The obligation hereunder of the Companies to close and
issue and sell the Securities to the Investor at the Closings is subject to the
satisfaction or waiver, at or before such closing of the conditions set forth
below.  These conditions are for the
Companies’ sole benefit and may be waived by the Companies at any time in their
sole discretion.


 


(a)           No Injunction.  No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or 


 


23

















 


governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.


 


(b)           Delivery of Note Amount.  In connection with the First Tranche Closing,
the Investor shall have advanced the First Tranche as payment for the purchase
price of the First Tranche Note on the date of the First Tranche Closing.   In connection with the Second Tranche
Closing, the Investor shall have advanced the Second Tranche as payment for the
purchase price of the Second Tranche Note on the date of the Second Tranche
Closing.  In connection with the Third
Tranche Closing, the Investor shall have advanced the Third Tranche as payment
for the purchase price of the Third Tranche Note on the date of the Third
Tranche Closing.


 


(c)           Accuracy of the Investor’s
Representations and Warranties.  Each
of the representations and warranties of the Investors in this Agreement and
the other Transaction Documents shall be true and correct in all material
respects as of the date of each of the Closings, except for representations and
warranties that speak as of a particular date, which shall be true and correct
in all material respects as of such date.


 


Section 4.2             Additional Condition Precedent
to the Obligation of the Companies to Close and to Sell the Securities at First
Tranche Closing.


 


In addition to the conditions set forth in Section 4.1,
the obligation hereunder of the Companies to close and issue and sell the First
Tranche Note to the Investor at the First Tranche Closing is subject to the
satisfaction or waiver, at or before such closing of the condition set forth
below.  This condition is for the
Companies’ sole benefit and may be waived by the Companies at any time in their
sole discretion.


 


(a)           Delivery of Transaction Documents.  The Transaction Documents to which the
Investor is a party shall have been duly executed and delivered by the Investor
to the Companies.


 


Section 4.3             Conditions Precedent to the
Obligation of the Investor to Close at Each Closing.


 


The obligation hereunder of the Investor to purchase
the Notes and consummate the transactions contemplated by this Agreement is
subject to the satisfaction or waiver, at or before each of the Closings, of
each of the conditions set forth below. 
These conditions are for the Investor’s sole benefit and may be waived
by the Investor at any time in its sole discretion.


 


(a)           Accuracy of the Company’s
Representations and Warranties.  Each
of the representations and warranties of the Companies, or any of them, in this
Agreement and the other Transaction Documents shall be true and correct in all
material respects as of the date of each of the Closings, except for
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date.


 


(b)           Event of Default.  No Event of Default (as defined in the Notes)
shall have occurred and be continuing.


 


(c)           No Suspension, Etc.  At any time prior to the First Tranche
Closing, the Second Tranche Closing, and the Third Tranche Closing, as
applicable, trading in securities generally as 


 


24

















 


reported by Bloomberg Financial Markets (“Bloomberg”) shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either
by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national
or international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of the Investor, makes it impracticable or inadvisable to purchase the
Securities.


 


(d)           No Suspension, Etc.  The Listing of the Common Stock shall not
have been suspended, without subsequent listing on any one of, or the failure
of the Common Stock to be listed on at least one of the NYSE Arca Exchange, the
New York Stock Exchange, Inc., the OTC Bulletin Board, the Nasdaq Capital
Markets, the Nasdaq Global Market, the Nasdaq Global Select Market, or the NYSE
Alternext Exchange for a period of five (5) consecutive Trading Days.


 


(e)           No Injunction.  No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transition Documents.


 


(f)            No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and to
Companies’ knowledge, no investigation by any governmental authority shall have
been threatened, against the Companies, or any of them, or any Subsidiary, or
any of the officers, directors or affiliates of the Companies, or any of them,
or any Subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.


 


(g)           Notes; Transaction Documents.  The Companies shall have delivered to the
Investor the applicable Note and, with respect to the Second Tranche Closing,
Buckeye shall have delivered to the Investor the duly executed Mortgages.


 


(h)           Material Adverse Effect.  No Material Adverse Effect shall have
occurred since November 10, 2008.


 


(i)            Payment of Investor’s Expenses.  The Companies shall have paid the fees and
expenses described in Section 7.1 that have been invoiced the same day as
such advance or shall have otherwise instructed the Investor to deduct and
retain from the applicable advance the amount of such invoiced fees and
expenses.


 


Section 4.4             Conditions Precedent to the
Obligation of the Investor to Close at the First Tranche Closing.


 


In addition to the conditions set forth in Section 4.3,
the obligation hereunder of the Investor to purchase the First Tranche Note and
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver, at or before the First Tranche Closing, of each of the
conditions set forth below.  These
conditions are for the Investor’s sole benefit and may be waived by the
Investor at any time in its sole discretion.


 


25

















 


(a)           Opinion of Counsel.  The Investor shall have received an opinion
of counsel to the Companies, dated as of the First Tranche Closing, reasonably
acceptable to counsel to the Investor.


 


(b)           Notes; Transaction Documents.  The Companies shall have delivered to the
Investor the First Tranche Note and shall have duly executed and delivered the
other Transaction Documents, except the Mortgages, to the Investor.


 


(c)           Secretary’s Certificate.  Each Company shall have delivered to the
Investor a secretary’s certificate, dated as of the First Tranche Closing, as
to (i) the resolutions adopted by the Board of Directors approving the
transactions contemplated hereby, (ii) the Charter, (iii) the Bylaws
or LLC Agreement, each as in effect at the First Tranche Closing, and (iv) the
authority and incumbency of the officers of such Company or applicable
Subsidiary executing the Transaction Documents and any other documents required
to be executed or delivered in connection therewith.


 


(d)           Officer’s Certificate.  The Companies shall have delivered to the
Investor a certificate signed by an executive officer on behalf of the
Companies, dated as of the date of the First Tranche Closing, confirming the
accuracy of the Companies’ representations, warranties and covenants as of such
date and confirming the compliance by the Companies and each of the
Subsidiaries with the conditions precedent set forth Sections 4.3 and 4.4 as of
the date of such First Tranche Closing.


 


(e)           Due Diligence.  The Companies shall have permitted Investor
to make such audits and inspections as the Investor deems reasonably
appropriate and the Investor is satisfied, in its reasonable discretion, with
the results thereof.  Such audits and
inspections by the Investor shall not affect any of the representations and
warranties made by the Companies, or any of them, in this Agreement and shall
not, under any circumstances constitute a waiver of the Investor’s
indemnification rights under Article 6 hereof, or otherwise relieve the
Companies, or any of them, of any liability thereunder.


 


(f)            UCC Financing Statements.  On or prior to the date of the First Tranche
Closing, the Companies and each of the Subsidiaries shall have filed (or
authorized the filing of) all Code and similar financing statements in form and
substance satisfactory to the Investor at the appropriate offices to create a
valid and perfected security interest in the Collateral (as such terms are defined
in the Security Agreement).


 


(g)           Consents.  The Companies shall have obtained all
consents, approvals, or waivers from all governmental authorities, third
parties and any Company security holders necessary (i) for the execution,
delivery and performance of this Agreement and the Transaction Documents and
the transactions contemplated hereby and thereby and (ii) to not, except
as set forth on Schedule 4.4(g), trigger any preemptive rights, rights
of first refusal, put or call rights or obligations, anti-dilution rights or
similar rights that any holder of any Company’s securities may have with
respect to the execution, delivery and performance of this Agreement and each
of the Transaction Documents and all transactions contemplated hereby and
thereby, all without material cost or other adverse consequences to any
Company.


 


26

















 


(h)           Insurance Certificates.  The Investor shall
have received insurance certificates 
from Buckeye evidencing insurance coverage acceptable to Investor
indicating Investor as additional insured on liability insurance policies and
lender loss payee on property insurance policies.


 


ARTICLE V


 


CERTIFICATE LEGEND


 


Section 5.1             Legend.


 


Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or “blue
sky” laws):


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR EVERGREEN ENERGY INC. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.


 


Section 5.2             Removal of Legend.


 


Evergreen agrees to issue or reissue certificates
representing any of the Conversion Shares, without the legend set forth above
if at such time, prior to making any transfer of the Conversion Shares, the
holder thereof shall give written notice to Evergreen describing the manner and
terms of such transfer and removal as Evergreen may reasonably request, and (x) such
Conversion Shares have been registered for sale under the Securities Act and
the holder is selling such shares and is complying with its prospectus delivery
requirement under the Securities Act, (y) the holder is selling such
Conversion Shares in compliance with the provisions of Rule 144 or other
exemption from registration or (z) the provisions of paragraph (b)(1)(i) of
Rule 144 apply to such Shares.


 


ARTICLE VI


 


INDEMNIFICATION


 


Section 6.1             General Indemnity.


 


The Companies, jointly and severally, agree to
indemnify and hold harmless the Investor (and its directors, officers, members,
partners, affiliates, agents, successors and assigns) from and


 


27














 


against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the Investor as a
result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Companies, or any of them, herein.


 


Section 6.2             Indemnification Procedure.


 


Any party entitled to indemnification under this Article VI
(an “indemnified party”) will give written notice to the indemnifying
party of any matter giving rise to a claim for indemnification; provided, that
the failure of any party entitled to indemnification hereunder to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under this Article VI except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice.  In case any such action, proceeding or claim
is brought against an indemnified party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to participate in
and, unless in the reasonable judgment of the indemnifying party a conflict of
interest between it and the indemnified party exists with respect to such
action, proceeding or claim (in which case the indemnifying party shall be
responsible for the reasonable fees and expenses of one separate counsel for
the indemnified parties), to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. 
In the event that the indemnifying party advises an indemnified party
that it will contest such a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification notice to notify, in
writing, such person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim.  In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party’s
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder.  The indemnified party shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
indemnified party which relates to such action or claim.  The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto.  If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense.  The indemnifying party shall
not be liable for any settlement of any action, claim or proceeding effected
without its prior written consent. 
Notwithstanding anything in this Article VI to the contrary, the
indemnifying party shall not, without the indemnified party’s prior written
consent, settle or compromise any claim or consent to entry of any judgment in
respect thereof which imposes any future obligation on the indemnified party or
which does not include, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such claim.  The
indemnification obligations to defend the indemnified party required by this Article VI
shall be made by periodic payments of the amount thereof during the course of
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party shall refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification.  The indemnity 


 


28

















 


agreements contained herein shall be in addition to (a) any
cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (b) any liabilities the indemnifying
party may be subject to pursuant to the law.


 


ARTICLE VII


 


MISCELLANEOUS


 


Section 7.1             Fees and Expenses.


 


The Companies shall pay the costs, fees and expenses
of the Investor incurred in connection with the transactions contemplated by
the Transaction Documents, including reasonable diligence and legal fees and
expenses and the costs, fees and expenses associated with title information,
recordation or perfection of the Collateral (as defined in the Security
Agreement), which fees and expenses shall not exceed One Hundred Thousand
Dollars ($100,000) in the aggregate without the prior written notice to the
Companies.  In addition, the Companies
shall pay all reasonable fees and expenses incurred by the Investor in
connection with the administration and enforcement of this Agreement or any of
the other Transaction Documents, including, without limitation, all reasonable
attorneys’ fees and expenses.


 


Section 7.2             Specific Performance; Consent to
Jurisdiction; Venue.


 


(a)           The Companies and the Investor
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement or the other Transaction Documents were not
performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.


 


(b)           The parties agree that venue for any dispute arising under this Agreement
will lie exclusively in the state or federal courts located in New York County,
New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is
not the proper venue.  The parties
irrevocably consent to personal jurisdiction in the state and federal courts of
the state of New York.  Each
Company and the Investor consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 7.2
shall affect or limit any right to serve process in any other manner permitted
by law.  THE PARTIES HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.


 


Section 7.3             Entire Agreement; Amendment.


 


This Agreement and the Transaction Documents contain
the entire understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth herein or in the
other Transaction Documents, no Company or the Investor make any
representation, warranty, covenant or undertaking with respect to such matters,
and they 


 


29

















 


supersede all prior understandings and agreements with
respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived
or amended other than by a written instrument signed by each Company and the
Investor.  Any amendment or waiver
effected in accordance with this Section 7.3 shall be binding upon the
Investor (and its assigns) and each Company.


 


Section 7.4             Notices.


 


Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at
the address or number designated below (if delivered on a Business Day (as
defined in the Notes) during normal business hours where such notice is to be
received), or the first Business Day (as defined in the Notes) following such
delivery (if delivered other than on a Business Day (as defined in the Notes)
during normal business hours where such notice is to be received) or (b) on
the second Business Day (as defined in the Notes) following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall
be:


 


	
  If to the Companies:

  	
   

  	
  Evergreen Energy Inc.

  Evergreen Operations, LLC

  Buckeye Industrial Mining Co.

  1225 17th Street, Suite 1300

  Denver, Colorado 80202-5506

  Tel: (303) 293-2992

  Fax:(303) 293-8430

  Attention: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  with copies (which
  copies

  shall not constitute notice

  to the Companies) to:

  	
   

  	
  Hogan & Hartson,
  L.L.P.

  One Tabor Center

  1200 Seventeenth Street, Suite 1500

  Denver, Colorado 80202

  Tel: (303) 899-7300

  Fax: (303) 899-7333

  Attention: Richard Mattera, Esq.

  
	
   

  	
   

  	
   

  
	
  If to the Investor:

  	
   

  	
  Centurion Credit
  Funding LLC

  152 West 57th Street, 4th Floor

  New York, NY 10019

  Tel: (212) 582-0500

  Fax: (212) 582-2424

  Attention: David Levy

  
	
   

  	
   

  	
   

  
	
  with copies (which
  copies

  shall not constitute notice

  to the Investor) to:

  	
   

  	
  Blank Rome LLP

  405 Lexington Avenue

  New York, NY 10174

  Tel: (212) 885-5431

  Fax: (917) 332-3065

  Attention: Eliezer M. Helfgott, Esq.

  



 


30

















 


Any party hereto may from time to time change its
address for notices by giving written notice of such changed address to the
other party hereto.


 


Section 7.5             Waivers.


 


No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.


 


Section 7.6             Headings.


 


The article, section and subsection headings in this Agreement
are for convenience only and shall not constitute a part of this Agreement for
any other purpose and shall not be deemed to limit or affect any of the
provisions hereof.


 


Section 7.7             Successors and Assigns.


 


This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns.  After the First Tranche Closing, the
assignment by a party to this Agreement of any rights hereunder shall not
affect the obligations of such party under this Agreement.  The Investor may assign the Securities and
its rights under this Agreement and the other Transaction Documents and any
other rights hereto and thereto without the consent of the Companies.


 


Section 7.8             No Third Party Beneficiaries.


 


This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.


 


Section 7.9             Governing Law.


 


This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This Agreement shall not be interpreted or
construed with any presumption against the party causing this Agreement to be
drafted.


 


Section 7.10           Survival.


 


The representations and warranties of each Company and
the Investor shall survive the execution and delivery hereof and each of the
Closings; the agreements and covenants set forth 


 


31

















 


in Articles I, III, V, VI and VII of this
Agreement shall survive the execution and delivery hereof and each of the
Closings, as applicable.


 


Section 7.11           Publicity.


 


Each Company agrees that it will not disclose, and
will not include in any public announcement, the names of the Investor without
the consent of the Investor, which consent shall not be unreasonably withheld
or delayed, except as such disclosure is required by law, rule or
applicable regulation and then only to the extent of such requirement.


 


Section 7.12           Counterparts.


 


This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart.


 


Section 7.13           Severability.


 


The provisions of this Agreement are severable and, in
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions or part of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.


 


Section 7.14           Further Assurances.


 


From and after the date of this Agreement, upon the
reasonable request of the Investor, the Companies shall execute and deliver
such instruments, documents and other writings as may be reasonably necessary
or desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other Transaction Documents.


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


 


32

















 


IN WITNESS WHEREOF, the parties
hereto have caused this Note Purchase Agreement to be duly executed by their
respective authorized officers as of the date first above written.


 


	
  Companies:

  	
   

  	
  EVERGREEN ENERGY INC. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Diana L. Kubik

  
	
   

  	
   

  	
  Name: Diana L. Kubik

  
	
   

  	
   

  	
  Title: Vice President
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EVERGREEN OPERATIONS, LLC 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Diana L. Kubik

  
	
   

  	
   

  	
  Name: Diana L. Kubik

  
	
   

  	
   

  	
  Title: Vice President
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BUCKEYE INDUSTRIAL MINING CO. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Diana L. Kubik

  
	
   

  	
   

  	
  Name: Diana L. Kubik

  
	
   

  	
   

  	
  Title: Vice President
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  Investor:

  	
   

  	
  CENTURION CREDIT FUNDING LLC 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David Levy

  
	
   

  	
   

  	
  Name: David Levy

  
	
   

  	
   

  	
  Title: Authorized
  Signatory

  



 

















 


EXHIBIT B-1


 


THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR
EVERGREEN ENERGY INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.


 


SENIOR SECURED CONVERTIBLE PROMISSORY NOTE


(FIRST TRANCHE)


 


	
  Dated:

  	
  March 20, 2009

  	
   

  	
  $5,000,000

  



 


For value received, EVERGREEN ENERGY INC., a
corporation organized under the laws of the State of Delaware (“Evergreen”),
EVERGREEN OPERATIONS, LLC, a limited liability company organized under the laws
of the State of Delaware (“Operations”) and BUCKEYE INDUSTRIAL MINING
CO., a corporation organized under the laws of the State of Ohio (“Buckeye,”
and together with Operations and Evergreen, collectively, the “Makers”
or the “Companies” and each individually referred to as a “Maker”
or a “Company”), hereby, jointly and severally, promise to pay to the
order of CENTURION CREDIT FUNDING LLC, a Delaware limited liability company,
with an address at 152 West 57th Street, 4th Floor, New York,
NY 10019 (together with its successors, representatives, and assigns, the “Holder”),
in accordance with the terms hereinafter provided, the principal amount of Five
Million Dollars ($5,000,000) hereunder, together with interest and all other
obligations outstanding hereunder.


 


All payments under or pursuant to this Senior Secured
Convertible Promissory Note (this “Note”) shall be made in United States
Dollars in immediately available funds to the Holder at the address of the
Holder first set forth above or at such other place as the Holder may designate
from time to time in writing to the Makers or by wire transfer of funds to the
Holder’s account, instructions for which are attached hereto as Exhibit A.  The outstanding principal balance of this
Note shall be due and payable on the earliest of (i) December 20,
2009, (ii) the date all obligations and indebtedness hereunder are
accelerated in accordance with Section 2.2 hereof, and (iii) a sale
of the capital stock, or all or substantially all of the assets, of Buckeye
(the “Maturity Date”).


 


ARTICLE VIII


 


Section 8.1             Purchase Agreement.  This Note has been executed and delivered
pursuant to the Note Purchase Agreement, bearing even date herewith (the “Purchase
Agreement”), by and among the Makers and the Holder (as an Investor).  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.


 


34

















 


Section 8.2             Interest.  Interest on the original principal amount of
this Note shall bear interest, in arrears, at a rate of ten percent (10%) per
annum and shall be payable in the amount of $375,000 for the period commencing
on the date hereof through December 20, 2009 (the “Nine Month
Anniversary”) on an unconditional, non-refundable basis to be paid in full
on the date hereof.  Furthermore, upon the occurrence and
during the continuance of an Event of Default (as defined below), the Maker
will pay additional default rate interest to the Holder, payable on demand, at
a rate equal to the lesser of four percent (4%) per month (prorated for partial
months) and the maximum applicable legal rate per annum, computed on the basis
of a 360-day year of twelve (12) thirty-day months on the outstanding principal
balance of this Note.


 


Section 8.3             Exit
Fee.  When the Note is repaid, in whole or in part,
for any reason and at any time (whether by voluntary prepayment by Makers, by
reason of the occurrence of an Event of Default, upon maturity, or otherwise),
Makers shall pay to the Investor, as compensation for the cost of the Investor
making funds available to Makers, an exit fee (the “Exit Fee”) in an amount equal to (i) 5% of the
amount of such repayment or prepayment, as applicable, if Maker repays or
prepays this Note at any time following the date hereof, but on or prior to June 20,
2009, (ii) 10% of the amount of such repayment or prepayment, as
applicable, if Maker repays or prepays this Note at any time following June 20,
2009, but on or prior to September 20, 2009 and (iii) 15% of the
amount of such repayment or prepayment, as applicable, if Maker repays or
prepays this Note at any time following September 20, 2009. All fees payable pursuant to this paragraph
shall be deemed fully earned and non-refundable as of the Closing Date.


 


Section 8.4             Payment of Principal; Prepayment.
The outstanding principal balance plus all outstanding interest, the Exit Fee
and all other amounts due and owing hereunder shall be paid in full on the
Maturity Date.  Any amount of principal
repaid hereunder may not be reborrowed. 
The Maker may prepay all or any portion of the principal amount of this
Note in an amount equal to the sum of (i) 100% of the amount of such
principal prepayment, (ii) the Exit Fee and (iii) all outstanding
interest and all other amounts due and owing hereunder, upon not less than
three (3) Business Days prior written notice to the Holder.  This Note is further subject to mandatory
prepayment at the option of the Holder as set forth in Article 4 hereof.


 


Section 8.5             Security Documents.  The obligations of the Makers hereunder are
secured by a continuing security interest in (i) substantially all of the
assets of Buckeye pursuant to the terms of the Security Agreement, the
Mortgages and other collateral documents and (ii) Operation’s equity
interest in Buckeye pursuant to the terms of the Pledge Agreement.


 


Section 8.6             Payment
on Non-Business Days.  Whenever any
payment to be made shall be due on a Saturday, Sunday or a public holiday under
the laws of the State of New York, such payment shall be due on the next
succeeding Business Day and such next succeeding day shall be included in the
calculation of the amount of accrued interest payable on such date.


 


Section 8.7             Transfer.  This Note may be transferred or sold, and may
also be pledged, hypothecated or otherwise granted as security, by the Holder;
provided, however, that any transfer or sale of this Note must be in compliance
with any applicable securities laws.


 


35

















 


Section 8.8             Replacement.  Upon receipt of a duly executed, notarized
and unsecured written statement from the Holder with respect to the loss, theft
or destruction of this Note (or any replacement hereof) and a standard
indemnity, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Makers shall issue a new Note, of like tenor and
amount, in lieu of such lost, stolen, destroyed or mutilated Note.


 


Section 8.9             Use of Proceeds.  The Makers shall use the proceeds of this
Note as set forth in the Purchase Agreement.


 


ARTICLE IX


 


EVENTS OF DEFAULT;
REMEDIES


 


Section 9.1             Events of Default.  The occurrence of any of the following events
shall be an “Event of Default” under this Note:


 


(a)           any
failure to make any payment of the principal amount, interest or any other
monetary obligation under this Note, as and when the same shall be due and
payable (whether on the Maturity Date or by acceleration or otherwise); or


 


(b)           any
Maker shall failure to (i) observe, perform, or comply with the first
sentence of Section 3.4 or Sections 3.17, 3.19, 3.22 or 3.26 of the
Purchase Agreement or Sections 6(f)(ii), 6(j) or the first two sentences
of Section 6(k) of the Security Agreement and such failure continues
for thirty (30) days following the earlier of knowledge or written notice from
the Investor or (ii) observe, perform or comply with any other condition,
covenant, undertaking or agreement contained in this Note, the Purchase
Agreement, the Security Agreement or the Pledge Agreement; provided, however,
upon entering into any other Transaction Document, the parties will negotiate
in good faith to amend this provision to incorporate sections of each such
Transaction Document into subclause (i) or (ii) of this Section 2.1(b),
or


 


(c)           the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of , the NYSE Arca
Exchange, the New York Stock Exchange, Inc., the OTC Bulletin Board, the
Nasdaq Capital Markets, the Nasdaq Global Market, the Nasdaq Global Select
Market, or the NYSE Alternext Exchange for a period of five (5) consecutive
Trading Days; or


 


(d)           any
representation or warranty made by the Makers, or any of them, herein or in the
Purchase Agreement or any other Transaction Document shall prove to have been
false or incorrect or breached in a material respect on the date as of which
made; or


 


(e)           any
Maker (i) shall fail to make any payment when due under the terms of any
Indebtedness for borrowed money to be paid by such Person and such failure
shall continue beyond any period of grace provided with respect thereto, or (ii) shall
default in the observance or performance of any other agreement, term or
condition contained in any agreement (related to Indebtedness or otherwise),
and the effect of such failure or default as set forth in subsections (i) or
(ii), is to cause, or permit the holder or holders thereof, or any counterparty
to an agreement relating to Indebtedness, to cause Indebtedness, or amounts due
thereunder, in an aggregate


 


36

















 


amount of One Hundred
Thousand Dollars ($100,000) or more to become due prior to its stated date of
maturity or the date such amount would otherwise have been due notwithstanding
such default; or


 


(f)            the
Makers, or any of them, shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property or assets,
(ii) make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or
domestic), (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable
laws of any jurisdiction (foreign or domestic), (vi) issue a notice of
bankruptcy or winding down of its operations or issue a press release regarding
same, or (vii) take any action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing; or


 


(g)           a
proceeding or case shall be commenced in respect of the Makers, or any of them,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution,
winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
Makers, or any of them, or of all or any substantial part of Makers’, or any of
Maker’s assets or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and
in effect, for a period of sixty (60) days or any order for relief shall be
entered in an involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic) against the Makers, or any of them, or action under the laws of
any jurisdiction (foreign or domestic) analogous to any of the foregoing shall
be taken with respect to the Makers, or any of them, and shall continue
undismissed, or unstayed and in effect for a period of sixty (60) days; or


 


(h)           a
judgment or judgments in the aggregate amount exceeding One Hundred Thousand
Dollars $100,000 is/are entered against the Makers, or any of them, and not
dismissed or discharged within twenty (20) days following the entry thereof; or


 


(i)            the
Makers, or any of them, shall cease to actively conduct its business operations
for a period of five (5) consecutive Business Days; or


 


(j)            any
material portion of the properties or assets of the Makers, or any of them, is
seized by any governmental authority; or


 


(k)           the
Makers, or any of them, are indicted for the commission of any criminal
activity.


 


Section 9.2             Remedies Upon An Event of
Default.  If an Event of Default
shall have occurred and shall be continuing, the Holder may at any time at its
option (a) declare the entire unpaid principal balance of this Note,
together with all interest accrued hereon, plus the


 


37














 


Exit
Fee and other fees and expenses, due and payable, and thereupon, the same shall
be accelerated and so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably
waived by the Makers; provided, however, that upon the occurrence of an Event
of Default described in Sections 2.1 (f) or (g) above, the
outstanding principal balance and accrued interest hereunder, plus the Exit Fee
and other fees and expenses, shall be immediately and automatically due and
payable, and/or (b) exercise or otherwise enforce any one or more of the
Holder’s rights, powers, privileges, remedies and interests under this Note,
the Purchase Agreement, the Security Agreement, the Pledge Agreement, the
Mortgages or other Transaction Document or applicable law.  No course of delay on the part of the Holder
shall operate as a waiver thereof or otherwise prejudice the right of the
Holder.  No remedy conferred hereby shall
be exclusive of any other remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise.  Upon the occurrence and during the
continuance of an Event of Default, this Note shall bear interest at the
default rate set forth in Section 1.2 hereof.


 


CONVERSION; ANTIDILUTION


 


Conversion Option.  At any time and from time to time, this Note
shall be convertible (in whole or in part), at the option of the Holder (the “Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing (x) an amount equal to (i) the
sum of (A) that portion of the outstanding principal balance of the Note
that the Holder elects to convert, and (B) any accrued but unpaid interest
under this Note as of such date by (y) the Conversion Price (as defined in
Section 3.2 hereof) then in effect on the date on which the Holder
delivers a notice of conversion (the “Conversion Notice”), duly
executed, to Evergreen (the “Conversion Date”).  The Holder shall deliver this Note to
Evergreen at the address designated in the Purchase Agreement at such time that
this Note is fully converted.  With
respect to partial conversions of this Note, Evergreen shall keep written
records of the amount of this Note converted as of each Conversion Date.  Following a partial conversion of the Note
and upon request by Evergreen, the Holder shall deliver this Note to Evergreen
at the address designated in the Purchase Agreement in exchange for an
identical note reflecting the remaining outstanding aggregate principal amount of
the Note that has not been converted.


 


Conversion Price.  The term “Conversion Price” shall mean $3.65,
subject to adjustment under Section 3.6 hereof (the “Set Price”).


 


Mechanics of Conversion.


 


Not later than three (3) Trading
Days after any Conversion Date, Evergreen or its designated transfer agent, as
applicable, shall issue and deliver to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”) as specified in the Conversion Notice, registered in the
name of the Holder or its affiliates, for the number of shares of Common Stock
to which the Holder shall be entitled. 
In the alternative, not later than three (3) Trading Days after any
Conversion Date, Evergreen or its designated transfer agent, as applicable,
shall deliver to the applicable Holder by express courier a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other 


 


38

















 


than those required by Section 5.1 of the Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of this Note (the “Delivery
Date”).  Notwithstanding the
foregoing to the contrary, Evergreen or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the Holder’s behalf via
DWAC (or certificates free of restrictive legends) if such conversion is in
connection with a sale and the Holder has complied with the applicable
prospectus delivery requirements (as evidenced by documentation furnished to
and reasonably satisfactory to Evergreen) or such shares may be sold pursuant
to Rule 144 or other exemption under the Securities Act.  If in the case of any Conversion Notice such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the Delivery Date, the Holder shall be entitled by written
notice to Evergreen at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event Evergreen
shall immediately return this Note tendered for conversion, whereupon Evergreen
and the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the
date notice of rescission is given to Evergreen.


 


Evergreen understands
that a delay in the delivery of the shares of Common Stock upon conversion of
this Note beyond the Delivery Date could result in economic loss to the
Holder.  If Evergreen fails to deliver to
the Holder such shares via DWAC (or, if applicable, certificates) by the
Delivery Date, Evergreen shall pay to such Holder, in cash, an amount per
Trading Day for each Trading Day until such shares are delivered via DWAC or
certificates are delivered (if applicable), together with interest on such
amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to the greater of (A) 2% of the
aggregate principal amount of the Note requested to be converted for each
Trading Day and (B) $2,000 per day (which amount shall be paid as
liquidated damages and not as a penalty). 
Nothing herein shall limit a Holder’s right to pursue actual damages for
Evergreen’s failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).  Notwithstanding
anything to the contrary contained herein, the Holder shall be entitled to
withdraw a Conversion Notice, and upon such withdrawal Evergreen shall only be
obligated to pay the liquidated damages accrued in accordance with this Section 3.3(b) through
the date the Conversion Notice is withdrawn.


 


In addition to any other
rights available to the Holder, if Evergreen fails to cause its transfer agent
to transmit via DWAC or transmit to the Holder a certificate or certificates
representing the shares of Common Stock issuable upon conversion of this Note
(the “Conversion Shares”) on or before the Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the shares of Common Stock issuable upon conversion of
this Note which the Holder anticipated receiving upon such conversion (a “Buy-In”),
then Evergreen shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon
conversion of this Note that Evergreen was required to deliver to the Holder in
connection with the conversion at issue times (B) the price at which the


 


39

















 


sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Note and
equivalent number of shares of Common Stock for which such conversion was not
honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had Evergreen timely complied with its conversion and
delivery obligations hereunder.  For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares of
Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding
sentence Evergreen shall be required to pay the Holder $1,000. The Holder shall
provide Evergreen written notice indicating the amounts payable to the Holder
in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by Evergreen. 
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to
Evergreen’s failure to timely deliver certificates representing shares of
Common Stock upon conversion of this Note as required pursuant to the terms
hereof.


 


Section 9.3             Ownership
Cap and Certain Conversion Restrictions. Notwithstanding anything to the
contrary set forth in Article III of this Note, at no time may the Holder
convert all or a portion of this Note if the number of shares of Common Stock
to be issued pursuant to such conversion, when aggregated with all other shares
of Common Stock owned by the Holder at such time, would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 4.99% of the then
issued and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon the Holder providing Evergreen with 61 days’ prior
written notice that the Holder would like to waive Section 3.4 of this
Note with regard to any or all shares of Common Stock issuable upon conversion
of this Note, this Section 3.4 shall be of no force or effect with regard
to all or a portion of the Note referenced in the waiver notice.


 


Trading
Market Regulation.  Evergreen
shall not be obligated to issue any shares of Common Stock upon conversion of
this Note if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which Evergreen may issue upon
conversion of the Notes in the aggregate without breaching Evergreen’s
obligations under the rules or regulations of any applicable Trading
Market, except that such limitation shall not apply in the event that Evergreen
(A) obtains the approval of its stockholders as required by the applicable
rules of such Trading Market for issuances of Common Stock in excess of
such amount or (B) obtains a written opinion from outside counsel to
Evergreen that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.


 


Adjustment of Conversion Price.


 


Until the Note has been
paid in full or converted in full, the Set Price shall be subject to adjustment
from time to time as follows (but shall not be increased, other than pursuant
to Section 3.6(a)(i) hereof):


 


(i)            Adjustment
for Stock Dividends, Subdivisions and Combinations.  If at any time Evergreen shall:


 


40

















 


(a)           set
a record date or take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,


 


(b)           subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or


 


(c)           combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,


 


then (1) the number of Conversion Shares
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of shares of Common Stock for which this Note may be converted immediately
prior to the occurrence of such event would own or be entitled to receive after
the happening of such event (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof), and (2) the Set Price
then in effect shall be adjusted to equal (A) the Set Price then in effect
multiplied by the number of shares of Common Stock for which this Note may be
converted immediately prior to the adjustment (without giving effect to the
limitations on conversion set forth in Section 3.4 hereof) divided by (B) the
number of shares of Common Stock for which this Note may be converted
immediately after such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof).


 


Adjustment upon Issuance
of shares of Common Stock. 
If at any time Evergreen issues or sells, or in accordance with this Section 3.6(a)(ii) is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of Evergreen, but excluding Common Stock deemed to have been issued or sold by
Evergreen in connection with any Excluded Security) for a consideration per
share (the “New Issuance Price”)
less than a price (the “Applicable
Price”) equal to the Set Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Set Price then in effect shall be
reduced to an amount equal to the New Issuance Price.  “Excluded
Securities” means any Common Stock issued or issuable or deemed to
be issued in accordance with this Section 3.6(a)(ii) by Evergreen: (i) in
connection with any employee benefit plan currently existing, pursuant to which
Evergreen’s securities may be issued to any employee, consultant, officer or
director for services provided to Evergreen; (ii) upon conversion of the
Notes; (iii) pursuant to any contract, commitment, understanding or
arrangement in effect as of the date hereof and set forth on Schedule 2.1(c)(iii) of
the Purchase Agreement; (iv) upon conversion, exercise or exchange of any
Options or Convertible Securities which are outstanding on the date hereof, provided
that such issuance of Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or Convertible
Securities in effect on the date hereof and such Options or Convertible
Securities are not amended, modified or changed on or after the date hereof;
and (v) in connection with any stock split, stock dividend,
recapitalization or similar transaction by Evergreen for which adjustment is
made pursuant to Section 3.6(a)(i). 
Upon each such adjustment of the Set Price hereunder, the number of
Conversion Shares shall be adjusted to the number of shares of Common Stock
determined by multiplying the Set Price in effect immediately prior to such
adjustment by the number of 


 


41

















 


Conversion Shares acquirable upon conversion of this
Note immediately prior to such adjustment and dividing the product thereof by
the Set Price resulting from such adjustment. For purposes of determining the
adjusted Set Price under this Section 3.6, the following shall be
applicable:


 


(d)           Issuance
of Options.  If Evergreen in any
manner grants any options to purchase Common Stock (“Options”), and the
lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock (“Convertible
Securities”) issuable upon exercise of any such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by Evergreen at the time of the
granting or sale of such Option for such price per share.  For purposes of this Section 3.6(a)(ii)(1),
the “lowest price per share for which one share of Common Stock is issuable
upon exercise of such Options or upon conversion, exercise or exchange of such
Convertible Securities issuable upon exercise of any such Option” shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by Evergreen with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option.  No further
adjustment of the Set Price or number of Conversion Shares shall be made upon
the actual issuance of such shares of Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual issuance of
such shares of Common Stock upon conversion, exercise or exchange of such
Convertible Securities.


 


(e)           Issuance
of Convertible Securities.  If
Evergreen in any manner issues or sells any Convertible Securities and the
lowest price per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by Evergreen at the time of the issuance or sale of such
Convertible Securities for such price per share.  For the purposes of this Section 3.6(a)(ii)(2),
the “lowest price per share for which one share of Common Stock is issuable
upon the conversion, exercise or exchange thereof” shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by
Evergreen with respect to one share of Common Stock upon the issuance or sale
of the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security.  No further
adjustment of the Set Price or number of Conversion Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Note has been or is to be made pursuant to other provisions
of this Section 3.6, no further adjustment of the Set Price or number of
Conversion Shares shall be made by reason of such issue or sale.


 


(f)            Change
in Option Price or Rate of Conversion. 
If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exercise or exchange
of any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exercisable or exchangeable for shares of Common Stock
increases or decreases at any time, the Set Price and the number of Conversion
Shares in 


 


42

















 


effect at the time
of such increase or decrease shall be adjusted to the Set Price and the number
of shares of Common Stock issuable upon conversion of this Note which would
have been in effect at such time had such Options or Convertible Securities
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be, at
the time initially granted, issued or sold. 
For purposes of this Section 3.6(a)(ii)(3), if the terms of any
Option or Convertible Security that was outstanding as of the date of issuance
of this Note are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and
the shares of Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
increase or decrease.  No adjustment
pursuant to this Section 3.6(a)(ii)(3) shall be made if such
adjustment would result in an increase of the Set Price then in effect or a
decrease in the number of Conversion Shares.


 


(g)           Calculation
of Consideration Received.  In case
any Option is issued in connection with the issue or sale of other securities
of Evergreen, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued for a consideration of $0.01.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the net
amount received by Evergreen therefor. 
If any shares of Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of such
consideration received by Evergreen will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by Evergreen will be the closing sale
price of such security on the date of receipt. 
If any shares of Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which Evergreen is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such shares of
Common Stock, Options or Convertible Securities, as the case may be.  The fair value of any consideration other
than cash or securities will be determined jointly by Evergreen and the
Holder.  If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation
Event”), the fair value of such consideration will be determined
within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by Evergreen and
the Holder.  The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by Evergreen.


 


(ii)           Certain
Other Distributions.  If at any time
Evergreen shall set a record date or take a record of the holders of its Common
Stock for the purpose of entitling them to receive any dividend or other
distribution of:


 


(a)           cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of Evergreen),


 


43

















 


(b)           any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash or Common
Stock), or


 


(c)           any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash or Common Stock),


 


then (1) the number
of Conversion Shares may shall be adjusted to equal the product of the number
of shares of Common Stock for which this Note may be converted immediately
prior to such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof) multiplied by a fraction (A) the
numerator of which shall be the Closing Sale Price of Common Stock at the date
of taking such record and (B) the denominator of which shall be such
Closing Sale Price minus the amount allocable to one share of Common Stock of
any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of Evergreen and supported by an opinion from
an investment banking firm reasonably acceptable to the Holder) of any and all
such evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights so distributable, and (2) the
Set Price then in effect shall be adjusted to equal (A) the Set Price then
in effect multiplied by the number of shares of Common Stock for which this
Note may be converted immediately prior to the adjustment (without giving
effect to the limitations on conversion set forth in Section 3.4 hereof)
divided by (B) the number of shares of Common Stock for which this Note
may be converted immediately after such adjustment (without giving effect to
the limitations on conversion set forth in Section 3.4 hereof).  A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by Evergreen to the holders of its
Common Stock of such shares of such other class of stock within the meaning of
this Section 3.6(a) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 3.6(a).


 


(b)           Other
Provisions applicable to Adjustments under this Section.  The following provisions shall be applicable
to the making of adjustments of the number of shares of Common Stock for which
this Note may be converted and the Set Price then in effect provided for in
this Section 3.6:


 


(i)            Fractional
Interests.  In computing adjustments
under this Section 3.6, fractional interests in Common Stock shall be
taken into account to the nearest one one-hundredth (1/100th) of a share.


 


(ii)           When
Adjustment Not Required.  If
Evergreen shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the 


 


44

















 


taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.


 


(c)           Form of
Note after Adjustments.  The form of
this Note need not be changed because of any adjustments in the Set Price or
the number and kind of securities purchasable upon conversion of this Note.


 


(d)           Escrow
of Property.  If after any property
becomes distributable pursuant to this Section 3.6 by reason of the taking
of any record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and the Holder converts this Note,
such property shall be held in escrow for the Holder by Evergreen to be
distributed to the Holder upon and to the extent that the event actually takes
place, upon payment of the then current Set Price.  Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed property shall be returned to Evergreen.


 


(e)           No
Impairment.  Evergreen shall not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
Evergreen, but will at all times in good faith, assist in the carrying out of
all the provisions of this Section 3.6 and in the taking of all such
action as may be necessary or appropriate in order to protect the Conversion
Rights of the Holder against impairment. 
In the event the Holder shall elect to convert the Note as provided
herein, Evergreen cannot refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder has been engaged in any
violation of law, violation of an agreement to which the Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of the Note shall have issued and
Evergreen posts a surety bond for the benefit of the Holder in an amount equal
to one hundred fifty percent (150%) of the amount of the Notes, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to the Holder (as liquidated
damages) in the event it obtains judgment.


 


(f)            Certificates
as to Adjustments.  Upon occurrence
of each adjustment or readjustment of the Conversion Price or number of shares
of Common Stock issuable upon conversion of this Note pursuant to this Section 3.6,
Evergreen at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and furnish to the Holder a certificate
setting forth such adjustment and readjustment, showing in detail the facts
upon which such adjustment or readjustment is based.  Evergreen shall, upon written request of the
Holder, at any time, furnish or cause to be furnished to the Holder a like
certificate setting forth such adjustments and readjustments, the applicable
Conversion Price in effect at the time, and the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon the conversion of this Note.  Notwithstanding the foregoing, Evergreen
shall not be obligated to deliver a certificate unless such certificate would
reflect an increase or decrease of at least one percent (1%) of such adjusted
amount.


 


(f)            Issue
Taxes.  Evergreen shall pay any and
all issue and other taxes, excluding federal, state or local income taxes, that
may be payable in respect of any issue or 


 


45

















 


delivery of shares
of Common Stock on conversion of this Note pursuant thereto; provided, however,
that Evergreen shall not be obligated to pay any transfer taxes resulting from
any transfer requested by the Holder in connection with any such conversion.


 


(g)           Fractional
Shares.  No fractional shares of
Common Stock shall be issued upon conversion of this Note.  In lieu of any fractional shares to which the
Holder would otherwise be entitled, Evergreen shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Sale Prices
of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.


 


(h)           Reservation
of Common Stock.  Evergreen shall at
all times when this Note shall be outstanding, reserve and keep available out
of its authorized but unissued Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of this
Note and all interest accrued thereon; provided that the number of
shares of Common Stock so reserved shall at no time be less than one hundred
fifty percent (150%) of the number of shares of Common Stock for which this
Note and all interest accrued thereon are at any time convertible.  Evergreen shall, from time to time in
accordance with Delaware law, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be
sufficient to satisfy Evergreen’s obligations under this Section 3.6(h).


 


(i)            Regulatory Compliance.  If any shares of Common Stock to be reserved
for the purpose of conversion of this Note or any interest accrued thereon
require registration or listing with or approval of any governmental authority,
stock exchange or other regulatory body under any federal or state law or
regulation or otherwise before such shares may be validly issued or delivered
upon conversion, Evergreen shall, at its sole cost and expense, in good faith
and as expeditiously as possible, endeavor to secure such registration, listing
or approval, as the case may be.


 


PREPAYMENT


 


Prepayment.


 


Prepayment Option Upon Major Transaction.  In addition to all other rights of the Holder
contained herein, simultaneous with the occurrence of any Major Transaction (as
defined below), the Holder shall have the right, at the Holder’s option, to
require the Maker to prepay the Note in cash at a price equal to the sum of (i) one
hundred percent (100%) of the aggregate principal amount of this Note plus all
accrued and unpaid interest (if any), plus (ii) the Exit Fee plus (iii) all
other fees, costs, expenses, liquidated damages or other amounts (if any) owing
in respect of this Note and the other Transaction Documents (the “Major
Transaction Prepayment Price”).


 


“Major Transaction.”  A “Major Transaction” shall be deemed to have
occurred at such time as any of the following events:


 


46

















 


the consolidation, merger
or other business combination of the Makers, or any of them, with or into
another Person (other than (A) pursuant to any migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Makers, or any of them, or (B) a consolidation, merger or other business
combination in which holders of the Makers’, or any Maker’s, voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities);


 


the sale or transfer of
more than fifty percent (50%) of the Makers’, or any Maker’s, assets (based on
the fair market value as determined in good faith by each Maker’s Board of
Directors) other than inventory in the ordinary course of business in one or a
related series of transactions; or


 


closing of a purchase,
tender or exchange offer made to the holders of more than fifty percent (50%)
of the outstanding shares of Common Stock in which more than fifty percent
(50%) of the outstanding shares of Common Stock were tendered and accepted.


 


Mechanics of Prepayment at Option of Holder Upon Major
Transaction.  No sooner
than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Major Transaction, but not prior to the public announcement
of such Major Transaction, the Makers shall deliver written notice thereof via
facsimile and overnight courier (“Notice of Major  Transaction”)
to the Holder of this Note.  At any time
after receipt of a Notice of Major Transaction (or, in the event a Notice of
Major Transaction is not delivered at least ten (10) days prior to a Major
Transaction, at any time within ten (10) days prior to a Major
Transaction), the Holder of this Note may require the Makers to prepay,
effective immediately prior to the consummation of such Major Transaction, the
Note by delivering written notice thereof via facsimile and overnight courier (“Notice
of Prepayment at Option of the Holder Upon Major  Transaction”) to
the Makers, which Notice of Prepayment at Option of Holder Upon Major
Transaction shall indicate the applicable Major Transaction Prepayment Price,
as calculated pursuant to Section 4.1(a) above.


 


Payment of Prepayment Price.  Upon the Makers’ receipt of a Notice(s) of
Prepayment at Option of Holder Upon Major Transaction from the Holder of this
Note, the Makers shall immediately notify the Holder of this Note by facsimile
of the Makers’ receipt of such Notice(s) of Prepayment at Option of Holder
Upon Major Transaction and the Makers shall deliver the Major Transaction
Prepayment Price immediately prior to or contemporaneous with the consummation
of the Major Transaction.  If the Makers
shall fail to prepay the Note submitted for prepayment (other than pursuant to
a dispute as to the arithmetic calculation of the Major Transaction Prepayment
Price) immediately prior to or contemporaneous with the consummation of the
Major Transaction, in addition to any remedy the Holder of this Note may have
under this Note and the Purchase Agreement, the Major Transaction Prepayment
Price payable in respect of the Note not prepaid shall bear interest at the
rate of four percent (4%) per month (prorated for partial months) until paid in
full.


 


47














 


ARTICLE X


 


MISCELLANEOUS


 


Section 10.1           Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, telecopy or facsimile at
the address or number designated in the Purchase Agreement (if delivered on a
Business Day during normal business hours where such notice is to be received),
or the first Business Day following such delivery (if delivered other than on a
Business Day during normal business hours where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.


 


Section 10.2           Governing
Law.  This Note shall be governed by
and construed in accordance with the internal laws of the State of New York,
without giving effect to any of the conflicts of law principles which would
result in the application of the substantive law of another jurisdiction.  This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.


 


Section 10.3           Headings.  Article and section headings in this
Note are included herein for purposes of convenience of reference only and
shall not constitute a part of this Note for any other purpose.


 


Section 10.4           Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under this Note, at
law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit a holder’s right to pursue actual damages for
any failure by the Maker to comply with the terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall not, except
as expressly provided herein, be subject to any other obligation of the Makers,
or any of them, (or the performance thereof). 
Each Maker acknowledges that a breach by it of its obligations hereunder
will cause irreparable and material harm to the Holder and that the remedy at
law for any such breach may be inadequate. Therefore each Maker agrees that, in
the event of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available rights and remedies, at law or in
equity, to seek and obtain such equitable relief, including but not limited to
an injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being
required.


 


Section 10.5           Enforcement
Expenses.  Each Maker agrees to pay
all costs and expenses incurred from time to time by the Holder with respect to
any modification, consent or waiver of the provisions of this Note or the
Transaction Documents and any enforcement of this Note and the Transaction
Documents, including, without limitation, reasonable attorneys’ fees and
expenses.


 


48

















 


Section 10.6           Amendments.


 


(a)           This Note may not be
modified or amended in any manner except in writing executed by the Makers and
the Holder.


 


(b)           To the extent that
amendments to this Note are required in connection with the filing of a listing
application with the NYSE Arca Exchange or any other Trading Market in
connection with the transactions contemplated hereby, the Makers and the Holder
shall cooperate in good faith to reach mutually acceptable resolutions with
regard to such amendments, without penalty; provided that the Holder has, in
its sole discretion, determined such amendments to be advisable.


 


Section 10.7           Compliance
with Securities Laws.


 


(a)           The Holder of this
Note acknowledges that this Note is being acquired solely for the Holder’s own
account and not as a nominee for any other party, and for investment, and that
the Holder shall not offer, sell or otherwise dispose of this Note except in
accordance with applicable law.


 


(b)           The Holder is an “accredited
investor” (as defined in Rule 501 of Regulation D under the Securities
Act), and such Holder has such experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in the
Securities.  The Holder is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act
and it is not a broker-dealer.  The
Holder acknowledges that an investment in the Securities is speculative and
involves a high degree of risk.


 


Section 10.8           Consent
to Jurisdiction.  Each of each Maker
and the Holder (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New
York county for the purposes of any suit, action or proceeding arising out of
or relating to this Note and (ii) hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper.  Each of each
Maker and the Holder consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under the Purchase Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 5.8
shall affect or limit any right to serve process in any other manner permitted
by law.


 


Section 10.9           Binding
Effect.  This Note shall be binding
upon, inure to the benefit of and be enforceable by the Makers, the Holder and
their respective successors and permitted assigns.  No Maker shall delegate or transfer this Note
or any obligations or undertakings contained in this Note.


 


Section 10.10         Failure
or Indulgence Not Waiver.  No failure
or delay on the part of the Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.


 


49

















 


Section 10.11         Maker
Waivers; Dispute Resolution.


 


(a)           Except as otherwise
specifically provided herein, each Maker and all others that may become liable
for all or any part of the obligations evidenced by this Note, hereby waive
presentment, demand, notice of nonpayment, protest and all other demands’ and
notices in connection with the delivery, acceptance, performance and
enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or extensions
may be made without notice to any such persons and without affecting their
liability herein and do further consent to the release of any person liable
hereon, all without affecting the liability of the other persons, firms or
Makers liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.


 


(b)           No delay or omission
on the part of the Holder in exercising its rights under this Note, or course
of conduct relating hereto, shall operate as a waiver of such rights or any
other right of the Holder, nor shall any waiver by the Holder of any such right
or rights on any one occasion be deemed a waiver of the same right or rights on
any future occasion.


 


(c)           EACH MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.


 


Section 10.12         Definitions.  Capitalized terms used herein and not defined
shall have the meanings set forth in the Purchase Agreement.  For the purposes hereof, the following terms
shall have the following meanings:


 


“Business Day”
(whether or not capitalized) shall mean any day banking transactions can be
conducted in New York City, NY, USA and does not include any day which is a
federal or state holiday in such location.


 


“Closing Sale Price” means, on any particular
date (i) the last trading price per share of the Common Stock on such date
on the New York Stock Exchange or another registered national securities
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last trading price on such exchange or quotation system
on the date nearest preceding such date, or (ii) if the Common Stock is
not then listed or traded on a registered national securities exchange or
quoted on the OTC Bulletin Board, then the average of the “Pink Sheet” quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (iii) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by the Holder and reasonably
acceptable to the Makers.


 


“Common Stock”
means shares of common stock, par value $0.001 per share, of Evergreen.


 


“Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.


 


“Trading Day”
means (a) a day on which the Common Stock is traded on the New York Stock
Exchange or other registered national securities exchange, or (b) if the
Common Stock is not traded on the OTC Bulletin Board or a registered national
securities exchange, a day 


 


50

















 


on which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government action to close.


 


“Trading Market”
means the Over the Counter Bulletin Board, the New York Stock Exchange, the
NYSE Arca Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets,
the Nasdaq Global Markets or the Nasdaq Global Select Market.


 


“Transaction Documents”
means this Note, the Purchase Agreement, the Security Agreement, the Mortgages,
the Pledge Agreement and all other security documents or related agreements now
or hereafter entered into in connection with and/or as security for this Note
and all amendments and supplements thereto and replacements thereof and any
other Transaction Document (as that term is defined in the Purchase Agreement).


 


[Signature appears on
following page]


 


51

















 


IN WITNESS WHEREOF, each Maker
has caused this Note to be duly executed by its duly authorized officer as of
the date first above indicated.


 


 


	
   

  	
  EVERGREEN
  ENERGY INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EVERGREEN OPERATIONS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Vice President
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUCKEYE
  INDUSTRIAL MINING CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  and Chief Financial Officer

  



 


[SIGNATURE
PAGE TO SENIOR SECURED 


CONVERTIBLE
PROMISSORY NOTE]


 


S-1

















 


EXHIBIT B


 


FORM OF


 


NOTICE OF CONVERSION


 


(To be Executed by the
Registered Holder in order to Convert the Note)


 


The undersigned hereby irrevocably elects to convert $                                 
of the principal amount of the above Note No.       
into shares of Common Stock of Evergreen Energy Inc. (the “Maker”) according to
the conditions hereof, as of the date written below.


 


	
  Date of Conversion

  	
   

  



 


	
  Applicable Conversion Price

  	
   

  



 


Number of shares of Common Stock beneficially owned or deemed beneficially
owned by the Holder on the Date of Conversion:                                                            


 


	
  Signature

  	
   

  



 


[Name] 


 


	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			



 

















 


EXHIBIT B-2


 


THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR EVERGREEN
ENERGY INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.


 


SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE


(SECOND TRANCHE)


 


	
  Dated:                       ,
  2009

  	
   

  	
   

  	
   

  	
  $5,000,000

  	
   

  



 


For value received, EVERGREEN ENERGY INC., a corporation organized
under the laws of the State of Delaware (“Evergreen”), EVERGREEN
OPERATIONS, LLC, a limited liability company organized under the laws of the
State of Delaware (“Operations”) and BUCKEYE INDUSTRIAL MINING CO., a
corporation organized under the laws of the State of Ohio (“Buckeye,”
and together with Operations and Evergreen, collectively, the “Makers”
or the “Companies” and each individually referred to as a “Maker”
or a “Company”), hereby, jointly and severally, promise to pay to the
order of CENTURION CREDIT FUNDING LLC, a Delaware limited liability company,
with an address at 152 West 57th Street, 4th Floor, New York,
NY 10019 (together with its successors, representatives, and assigns, the “Holder”),
in accordance with the terms hereinafter provided, the principal amount of Five
Million Dollars ($5,000,000) hereunder, together with interest and all other
obligations outstanding hereunder.


 


All payments under or pursuant to this Senior Secured Convertible
Promissory Note (this “Note”) shall be made in United States Dollars in
immediately available funds to the Holder at the address of the Holder first
set forth above or at such other place as the Holder may designate from time to
time in writing to the Makers or by wire transfer of funds to the Holder’s
account, instructions for which are attached hereto as Exhibit A.  The outstanding principal balance of this
Note shall be due and payable on the earliest of (i) December 20,
2009, (ii) the date all obligations and indebtedness hereunder are
accelerated in accordance with Section 2.2 hereof, and (iii) a sale
of the capital stock, or all or substantially all of the assets, of Buckeye (the
“Maturity Date”).


 


Purchase Agreement.  This Note has been executed and delivered
pursuant to the Note Purchase Agreement, bearing even date herewith (the “Purchase
Agreement”), by and among the Makers and the Holder (as an Investor).  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.


 


3

















 


Interest.  Interest on the original principal amount of
this Note shall bear interest, in arrears, at a rate of ten percent (10%) per
annum and shall be payable in the amount of [$            ]
for the period commencing on the date hereof through December 20, 2009
(the “Nine Month Anniversary”) on an unconditional, non-refundable basis
to be paid in full on the date hereof.  Furthermore, upon the occurrence and
during the continuance of an Event of Default (as defined below), the Maker
will pay additional default rate interest to the Holder, payable on demand, at
a rate equal to the lesser of four percent (4%) per month (prorated for partial
months) and the maximum applicable legal rate per annum, computed on the basis
of a 360-day year of twelve (12) thirty-day months on the outstanding principal
balance of this Note.


 


Exit Fee.  When
the Note is repaid, in whole or in part, for any reason and at any time
(whether by voluntary prepayment by Makers, by reason of the occurrence of an
Event of Default, upon maturity, or otherwise), Makers shall pay to the
Investor, as compensation for the cost of the Investor making funds available
to Makers, an exit fee (the “Exit
Fee”) in an amount equal to (i) 5% of the amount of such
repayment or prepayment, as applicable, if Maker repays or prepays this Note at
any time following the date hereof, but on or prior to June 20, 2009, (ii) 10%
of the amount of such repayment or prepayment, as applicable, if Maker repays
or prepays this Note at any time following June 20, 2009, but on or prior
to September 20, 2009 and (iii) 15% of the amount of such repayment
or prepayment, as applicable, if Maker repays or prepays this Note at any time
following September 20, 2009. All
fees payable pursuant to this paragraph shall be deemed fully earned and
non-refundable as of the Closing Date.


 


Payment of Principal; Prepayment.
The outstanding principal balance plus all outstanding interest, the Exit Fee
and all other amounts due and owing hereunder shall be paid in full on the
Maturity Date.  Any amount of principal
repaid hereunder may not be reborrowed. 
The Maker may prepay all or any portion of the principal amount of this
Note in an amount equal to the sum of (i) 100% of the amount of such
principal prepayment, (ii) the Exit Fee and (iii) all outstanding
interest and all other amounts due and owing hereunder, upon not less than
three (3) Business Days prior written notice to the Holder.  This Note is further subject to mandatory
prepayment at the option of the Holder as set forth in Article 4 hereof.


 


Security Documents.  The obligations of the Makers hereunder are
secured by a continuing security interest in (i) substantially all of the
assets of Buckeye pursuant to the terms of the Security Agreement, the
Mortgages and other collateral documents and (ii) Operation’s equity
interest in Buckeye pursuant to the terms of the Pledge Agreement.


 


Payment on Non-Business Days.  Whenever any payment to be made shall be due
on a Saturday, Sunday or a public holiday under the laws of the State of New
York, such payment shall be due on the next succeeding Business Day and such
next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.


 


Transfer.  This Note may be transferred or sold, and may
also be pledged, hypothecated or otherwise granted as security, by the Holder;
provided, however, that any transfer or sale of this Note must be in compliance
with any applicable securities laws.


 


4

















 


Replacement.  Upon receipt of a duly executed, notarized
and unsecured written statement from the Holder with respect to the loss, theft
or destruction of this Note (or any replacement hereof) and a standard
indemnity, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Makers shall issue a new Note, of like tenor and
amount, in lieu of such lost, stolen, destroyed or mutilated Note.


 


Use of Proceeds.  The Makers shall use the proceeds of this
Note as set forth in the Purchase Agreement.


 


EVENTS OF DEFAULT;
REMEDIES


 


Events of Default.  The occurrence of any of the following events
shall be an “Event of Default” under this Note:


 


(a)           any failure to make any
payment of the principal amount, interest or any other monetary obligation
under this Note, as and when the same shall be due and payable (whether on the
Maturity Date or by acceleration or otherwise); or


 


(b)           any Maker shall failure
to (i) observe, perform, or comply with the first sentence of Section 3.4
or Sections 3.17, 3.19, 3.22 or 3.26 of the Purchase Agreement or Sections
6(f)(ii), 6(j) or the first two sentences of Section 6(k) of the
Security Agreement and such failure continues for thirty (30) days following
the earlier of knowledge or written notice from the Investor or (ii) observe,
perform or comply with any other condition, covenant, undertaking or agreement
contained in this Note, the Purchase Agreement, the Security Agreement or the
Pledge Agreement; provided, however, upon entering into any other Transaction
Document, the parties will negotiate in good faith to amend this provision to
incorporate sections of each such Transaction Document into subclause (i) or
(ii) of this Section 2.1(b), or


 


(c)           the suspension from
listing, without subsequent listing on any one of, or the failure of the Common
Stock to be listed on at least one of, the NYSE Arca Exchange, the New York
Stock Exchange, Inc., the OTC Bulletin Board, the Nasdaq Capital Markets,
the Nasdaq Global Market, the Nasdaq Global Select Market, or the NYSE
Alternext Exchange for a period of five (5) consecutive Trading Days; or


 


(d)           any representation or
warranty made by the Makers, or any of them, herein or in the Purchase
Agreement or any other Transaction Document shall prove to have been false or
incorrect or breached in a material respect on the date as of which made; or


 


(e)           any Maker (i) shall
fail to make any payment when due under the terms of any Indebtedness for
borrowed money to be paid by such Person and such failure shall continue beyond
any period of grace provided with respect thereto, or (ii) shall default
in the observance or performance of any other agreement, term or condition
contained in any agreement (related to Indebtedness or otherwise), and the
effect of such failure or default as set forth in subsections (i) or (ii),
is to cause, or permit the holder or holders thereof, or any counterparty to an
agreement relating to Indebtedness, to cause Indebtedness, or amounts due
thereunder, in an aggregate


 


5

















 


amount of One
Hundred Thousand Dollars ($100,000) or more to become due prior to its stated
date of maturity or the date such amount would otherwise have been due
notwithstanding such default; or


 


(f)            the Makers, or any of
them, shall (i) apply for or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of
all or a substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic), (iv) file
a petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against
it in an involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic), (vi) issue a notice of bankruptcy or winding down of its
operations or issue a press release regarding same, or (vii) take any
action under the laws of any jurisdiction (foreign or domestic) analogous to
any of the foregoing; or


 


(g)           a proceeding or case
shall be commenced in respect of the Makers, or any of them, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of Makers, or any of them,
or of all or any substantial part of Makers’, or any of Maker’s assets or (iii) similar
relief in respect of it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall
continue undismissed, or unstayed and in effect, for a period of sixty (60)
days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Makers,
or any of them, or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Makers, or any of them, and shall continue undismissed, or unstayed and in
effect for a period of sixty (60) days; or


 


(h)           a judgment or judgments
in the aggregate amount exceeding One Hundred Thousand Dollars $100,000 is/are
entered against the Makers, or any of them, and not dismissed or discharged
within twenty (20) days following the entry thereof; or


 


(i)            the Makers, or any of
them, shall cease to actively conduct its business operations for a period of
five (5) consecutive Business Days; or


 


(j)            any material portion
of the properties or assets of the Makers, or any of them, is seized by any
governmental authority; or


 


(k)           the Makers, or any of
them, are indicted for the commission of any criminal activity.


 


Remedies Upon An Event of Default.  If an Event of Default shall have occurred
and shall be continuing, the Holder may at any time at its option (a) declare
the entire unpaid principal balance of this Note, together with all interest
accrued hereon, plus the Exit Fee


 


6














 


and other fees and expenses, due and payable, and
thereupon, the same shall be accelerated and so due and payable, without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Makers; provided, however, that
upon the occurrence of an Event of Default described in Sections 2.1 (f) or
(g) above, the outstanding principal balance and accrued interest
hereunder, plus the Exit Fee and other fees and expenses, shall be immediately
and automatically due and payable, and/or (b) exercise or otherwise
enforce any one or more of the Holder’s rights, powers, privileges, remedies
and interests under this Note, the Purchase Agreement, the Security Agreement,
the Pledge Agreement, the Mortgages or other Transaction Document or applicable
law.  No course of delay on the part of
the Holder shall operate as a waiver thereof or otherwise prejudice the right
of the Holder.  No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.  Upon the occurrence and during the
continuance of an Event of Default, this Note shall bear interest at the
default rate set forth in Section 1.2 hereof.


 


CONVERSION; ANTIDILUTION


 


Conversion Option.  At any time and from time to time, this Note
shall be convertible (in whole or in part), at the option of the Holder (the “Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing (x) an amount equal to (i) the
sum of (A) that portion of the outstanding principal balance of the Note
that the Holder elects to convert, and (B) any accrued but unpaid interest
under this Note as of such date by (y) the Conversion Price (as defined in
Section 3.2 hereof) then in effect on the date on which the Holder
delivers a notice of conversion (the “Conversion Notice”), duly
executed, to Evergreen (the “Conversion Date”).  The Holder shall deliver this Note to
Evergreen at the address designated in the Purchase Agreement at such time that
this Note is fully converted.  With
respect to partial conversions of this Note, Evergreen shall keep written
records of the amount of this Note converted as of each Conversion Date.  Following a partial conversion of the Note
and upon request by Evergreen, the Holder shall deliver this Note to Evergreen
at the address designated in the Purchase Agreement in exchange for an
identical note reflecting the remaining outstanding aggregate principal amount
of the Note that has not been converted.


 


Conversion Price.  The term “Conversion Price” shall mean $3.65,
subject to adjustment under Section 3.6 hereof (the “Set Price”).


 


Mechanics of Conversion.


 


(a)           Not later than three (3) Trading
Days after any Conversion Date, Evergreen or its designated transfer agent, as
applicable, shall issue and deliver to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”) as specified in the Conversion Notice, registered in the
name of the Holder or its affiliates, for the number of shares of Common Stock
to which the Holder shall be entitled. 
In the alternative, not later than three (3) Trading Days after any
Conversion Date, Evergreen or its designated transfer agent, as applicable,
shall deliver to the applicable Holder by express courier a certificate or
certificates which shall be free of restrictive legends and trading


 


7

















 


restrictions (other than those required by Section 5.1
of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of this Note (the “Delivery Date”).  Notwithstanding the foregoing to the
contrary, Evergreen or its transfer agent shall only be obligated to issue and
deliver the shares to the DTC on the Holder’s behalf via DWAC (or certificates
free of restrictive legends) if such conversion is in connection with a sale
and the Holder has complied with the applicable prospectus delivery requirements
(as evidenced by documentation furnished to and reasonably satisfactory to
Evergreen) or such shares may be sold pursuant to Rule 144 or other
exemption under the Securities Act.  If
in the case of any Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the Delivery Date, the
Holder shall be entitled by written notice to Evergreen at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event Evergreen shall immediately return this Note
tendered for conversion, whereupon Evergreen and the Holder shall each be
restored to their respective positions immediately prior to the delivery of
such notice of revocation, except that any amounts described in Sections 3.3(b) and
(c) shall be payable through the date notice of rescission is given to
Evergreen.


 


(b)           Evergreen understands that a delay in
the delivery of the shares of Common Stock upon conversion of this Note beyond
the Delivery Date could result in economic loss to the Holder.  If Evergreen fails to deliver to the Holder
such shares via DWAC (or, if applicable, certificates) by the Delivery Date,
Evergreen shall pay to such Holder, in cash, an amount per Trading Day for each
Trading Day until such shares are delivered via DWAC or certificates are
delivered (if applicable), together with interest on such amount at a rate of
10% per annum, accruing until such amount and any accrued interest thereon is
paid in full, equal to the greater of (A) 2% of the aggregate principal
amount of the Note requested to be converted for each Trading Day and (B) $2,000
per day (which amount shall be paid as liquidated damages and not as a
penalty).  Nothing herein shall limit a
Holder’s right to pursue actual damages for Evergreen’s failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity (including, without limitation, a
decree of specific performance and/or injunctive relief).  Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal Evergreen shall only be obligated to pay the
liquidated damages accrued in accordance with this Section 3.3(b) through
the date the Conversion Notice is withdrawn.


 


(c)           In addition to any other rights
available to the Holder, if Evergreen fails to cause its transfer agent to
transmit via DWAC or transmit to the Holder a certificate or certificates
representing the shares of Common Stock issuable upon conversion of this Note
(the “Conversion Shares”) on or before the Delivery Date, and if after
such date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the shares of Common Stock issuable upon conversion of
this Note which the Holder anticipated receiving upon such conversion (a “Buy-In”),
then Evergreen shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Common Stock issuable upon
conversion of this Note that Evergreen was required to deliver to the Holder in
connection with the conversion at issue times (B) the price at which the


 


8

















 


sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the
portion of the Note and equivalent number of shares of Common Stock for which
such conversion was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had Evergreen timely complied with
its conversion and delivery obligations hereunder.  For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to an attempted conversion of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause (1) of
the immediately preceding sentence Evergreen shall be required to pay the
Holder $1,000. The Holder shall provide Evergreen written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with
applicable confirmations and other evidence reasonably requested by Evergreen.  Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to Evergreen’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of this Note as required
pursuant to the terms hereof.


 


Ownership Cap and Certain Conversion Restrictions.
Notwithstanding anything to the contrary set forth in Article III of this
Note, at no time may the Holder convert all or a portion of this Note if the
number of shares of Common Stock to be issued pursuant to such conversion, when
aggregated with all other shares of Common Stock owned by the Holder at such
time, would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder)
in excess of 4.99% of the then issued and outstanding shares of Common Stock
outstanding at such time; provided, however, that upon the Holder
providing Evergreen with 61 days’ prior written notice that the Holder would
like to waive Section 3.4 of this Note with regard to any or all shares of
Common Stock issuable upon conversion of this Note, this Section 3.4 shall
be of no force or effect with regard to all or a portion of the Note referenced
in the waiver notice.


 


Trading
Market Regulation.  Evergreen
shall not be obligated to issue any shares of Common Stock upon conversion of
this Note if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which Evergreen may issue upon
conversion of the Notes in the aggregate without breaching Evergreen’s
obligations under the rules or regulations of any applicable Trading
Market, except that such limitation shall not apply in the event that Evergreen
(A) obtains the approval of its stockholders as required by the applicable
rules of such Trading Market for issuances of Common Stock in excess of
such amount or (B) obtains a written opinion from outside counsel to
Evergreen that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.


 


Adjustment of Conversion Price.


 


(a)           Until the Note has been paid in full
or converted in full, the Set Price shall be subject to adjustment from time to
time as follows (but shall not be increased, other than pursuant to Section 3.6(a)(i) hereof):


 


Adjustment for Stock Dividends, Subdivisions and
Combinations.  If at
any time Evergreen shall:


 


9

















 


set a record date or take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, shares of Common Stock,


 


subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or


 


combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,


 


then (1) the number of Conversion Shares
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of shares of Common Stock for which this Note may be converted immediately
prior to the occurrence of such event would own or be entitled to receive after
the happening of such event (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof), and (2) the Set Price
then in effect shall be adjusted to equal (A) the Set Price then in effect
multiplied by the number of shares of Common Stock for which this Note may be
converted immediately prior to the adjustment (without giving effect to the
limitations on conversion set forth in Section 3.4 hereof) divided by (B) the
number of shares of Common Stock for which this Note may be converted
immediately after such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof).


 


Adjustment upon Issuance
of shares of Common Stock. 
If at any time Evergreen issues or sells, or in accordance with this Section 3.6(a)(ii) is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of Evergreen, but excluding Common Stock deemed to have been issued or sold by
Evergreen in connection with any Excluded Security) for a consideration per
share (the “New Issuance Price”)
less than a price (the “Applicable
Price”) equal to the Set Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Set Price then in effect shall be
reduced to an amount equal to the New Issuance Price.  “Excluded
Securities” means any Common Stock issued or issuable or deemed to
be issued in accordance with this Section 3.6(a)(ii) by Evergreen: (i) in
connection with any employee benefit plan currently existing, pursuant to which
Evergreen’s securities may be issued to any employee, consultant, officer or
director for services provided to Evergreen; (ii) upon conversion of the
Notes; (iii) pursuant to any contract, commitment, understanding or
arrangement in effect as of the date hereof and set forth on Schedule 2.1(c)(iii) of
the Purchase Agreement; (iv) upon conversion, exercise or exchange of any
Options or Convertible Securities which are outstanding on the date hereof, provided
that such issuance of Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or Convertible
Securities in effect on the date hereof and such Options or Convertible
Securities are not amended, modified or changed on or after the date hereof;
and (v) in connection with any stock split, stock dividend,
recapitalization or similar transaction by Evergreen for which adjustment is
made pursuant to Section 3.6(a)(i). 
Upon each such adjustment of the Set Price hereunder, the number of
Conversion Shares shall be adjusted to the number of shares of Common Stock
determined by multiplying the Set Price in effect immediately prior to such adjustment
by the number of


 


10

















 


Conversion Shares acquirable upon conversion of this
Note immediately prior to such adjustment and dividing the product thereof by
the Set Price resulting from such adjustment. For purposes of determining the
adjusted Set Price under this Section 3.6, the following shall be
applicable:


 


Issuance of Options.  If Evergreen in any manner grants any options
to purchase Common Stock (“Options”), and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock (“Convertible Securities”)
issuable upon exercise of any such Option is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by Evergreen at the time of the granting or sale of such
Option for such price per share.  For
purposes of this Section 3.6(a)(ii)(1), the “lowest price per share for
which one share of Common Stock is issuable upon exercise of such Options or
upon conversion, exercise or exchange of such Convertible Securities issuable
upon exercise of any such Option” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by Evergreen with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Set Price or
number of Conversion Shares shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities.


 


Issuance of Convertible Securities.  If Evergreen in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of Common Stock is issuable upon the conversion, exercise or exchange thereof
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by Evergreen at the
time of the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 3.6(a)(ii)(2),
the “lowest price per share for which one share of Common Stock is issuable
upon the conversion, exercise or exchange thereof” shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by
Evergreen with respect to one share of Common Stock upon the issuance or sale
of the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security.  No further
adjustment of the Set Price or number of Conversion Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Note has been or is to be made pursuant to other provisions
of this Section 3.6, no further adjustment of the Set Price or number of
Conversion Shares shall be made by reason of such issue or sale.


 


Change in Option Price or Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Set Price and the number of Conversion Shares in


 


11

















 


effect at the time of such increase or decrease shall be adjusted to
the Set Price and the number of shares of Common Stock issuable upon conversion
of this Note which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold.  For purposes of this Section 3.6(a)(ii)(3),
if the terms of any Option or Convertible Security that was outstanding as of
the date of issuance of this Note are increased or decreased in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease. 
No adjustment pursuant to this Section 3.6(a)(ii)(3) shall be
made if such adjustment would result in an increase of the Set Price then in
effect or a decrease in the number of Conversion Shares.


 


Calculation of Consideration Received.  In case any Option is issued in connection
with the issue or sale of other securities of Evergreen, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $0.01.  If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by Evergreen
therefor.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by Evergreen will be the
fair value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by Evergreen
will be the closing sale price of such security on the date of receipt.  If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which Evergreen is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of
any consideration other than cash or securities will be determined jointly by
Evergreen and the Holder.  If such
parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will
be determined within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by Evergreen and
the Holder.  The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by Evergreen.


 


Certain Other Distributions.  If at any time Evergreen shall set a record
date or take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:


 


cash (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of dividends under
the laws of the jurisdiction of incorporation of Evergreen),


 


12

















 


any evidences of its indebtedness, any shares of stock
of any class or any other securities or property of any nature whatsoever
(other than cash or Common Stock), or


 


any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or
any other securities or property of any nature whatsoever (other than cash or
Common Stock),


 


then (1) the number
of Conversion Shares may shall be adjusted to equal the product of the number
of shares of Common Stock for which this Note may be converted immediately
prior to such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof) multiplied by a fraction (A) the
numerator of which shall be the Closing Sale Price of Common Stock at the date
of taking such record and (B) the denominator of which shall be such
Closing Sale Price minus the amount allocable to one share of Common Stock of
any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of Evergreen and supported by an opinion from
an investment banking firm reasonably acceptable to the Holder) of any and all
such evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights so distributable, and (2) the
Set Price then in effect shall be adjusted to equal (A) the Set Price then
in effect multiplied by the number of shares of Common Stock for which this
Note may be converted immediately prior to the adjustment (without giving
effect to the limitations on conversion set forth in Section 3.4 hereof)
divided by (B) the number of shares of Common Stock for which this Note
may be converted immediately after such adjustment (without giving effect to
the limitations on conversion set forth in Section 3.4 hereof).  A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by Evergreen to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this Section 3.6(a) and,
if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be,
of the outstanding shares of Common Stock within the meaning of Section 3.6(a).


 


(b)           Other
Provisions applicable to Adjustments under this Section.  The following provisions shall be applicable
to the making of adjustments of the number of shares of Common Stock for which
this Note may be converted and the Set Price then in effect provided for in
this Section 3.6:


 


Fractional Interests.  In computing adjustments under this Section 3.6,
fractional interests in Common Stock shall be taken into account to the nearest
one one-hundredth (1/100th) of
a share.


 


When Adjustment Not Required.  If Evergreen shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of
the


 


13

















 


taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.


 


(c)           Form of
Note after Adjustments.  The form of
this Note need not be changed because of any adjustments in the Set Price or
the number and kind of securities purchasable upon conversion of this Note.


 


(d)           Escrow
of Property.  If after any property
becomes distributable pursuant to this Section 3.6 by reason of the taking
of any record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and the Holder converts this Note,
such property shall be held in escrow for the Holder by Evergreen to be
distributed to the Holder upon and to the extent that the event actually takes
place, upon payment of the then current Set Price.  Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed property shall be returned to Evergreen.


 


(e)           No
Impairment.  Evergreen shall not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
Evergreen, but will at all times in good faith, assist in the carrying out of
all the provisions of this Section 3.6 and in the taking of all such
action as may be necessary or appropriate in order to protect the Conversion
Rights of the Holder against impairment. 
In the event the Holder shall elect to convert the Note as provided
herein, Evergreen cannot refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder has been engaged in any
violation of law, violation of an agreement to which the Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of the Note shall have issued and
Evergreen posts a surety bond for the benefit of the Holder in an amount equal
to one hundred fifty percent (150%) of the amount of the Notes, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to the Holder (as liquidated
damages) in the event it obtains judgment.


 


(f)            Certificates
as to Adjustments.  Upon occurrence
of each adjustment or readjustment of the Conversion Price or number of shares
of Common Stock issuable upon conversion of this Note pursuant to this Section 3.6,
Evergreen at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and furnish to the Holder a certificate
setting forth such adjustment and readjustment, showing in detail the facts
upon which such adjustment or readjustment is based.  Evergreen shall, upon written request of the
Holder, at any time, furnish or cause to be furnished to the Holder a like
certificate setting forth such adjustments and readjustments, the applicable
Conversion Price in effect at the time, and the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon the conversion of this Note.  Notwithstanding the foregoing, Evergreen
shall not be obligated to deliver a certificate unless such certificate would
reflect an increase or decrease of at least one percent (1%) of such adjusted
amount.


 


(f)            Issue
Taxes.  Evergreen shall pay any and
all issue and other taxes, excluding federal, state or local income taxes, that
may be payable in respect of any issue or


 


14

















 


delivery of shares of Common Stock on conversion of this Note pursuant
thereto; provided, however, that Evergreen shall not be obligated
to pay any transfer taxes resulting from any transfer requested by the Holder
in connection with any such conversion.


 


(g)           Fractional
Shares.  No fractional shares of
Common Stock shall be issued upon conversion of this Note.  In lieu of any fractional shares to which the
Holder would otherwise be entitled, Evergreen shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Sale Prices
of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.


 


(h)           Reservation
of Common Stock.  Evergreen shall at
all times when this Note shall be outstanding, reserve and keep available out
of its authorized but unissued Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of this
Note and all interest accrued thereon; provided that the number of
shares of Common Stock so reserved shall at no time be less than one hundred
fifty percent (150%) of the number of shares of Common Stock for which this
Note and all interest accrued thereon are at any time convertible.  Evergreen shall, from time to time in
accordance with Delaware law, increase the authorized number of shares of
Common Stock if at any time the unissued number of authorized shares shall not
be sufficient to satisfy Evergreen’s obligations under this Section 3.6(h).


 


(i)            Regulatory Compliance.  If any shares of Common Stock to be reserved
for the purpose of conversion of this Note or any interest accrued thereon
require registration or listing with or approval of any governmental authority,
stock exchange or other regulatory body under any federal or state law or
regulation or otherwise before such shares may be validly issued or delivered
upon conversion, Evergreen shall, at its sole cost and expense, in good faith
and as expeditiously as possible, endeavor to secure such registration, listing
or approval, as the case may be.


 


PREPAYMENT


 


Prepayment.


 


(a)           Prepayment
Option Upon Major Transaction.  In
addition to all other rights of the Holder contained herein, simultaneous with
the occurrence of any Major Transaction (as defined below), the Holder shall
have the right, at the Holder’s option, to require the Maker to prepay the Note
in cash at a price equal to the sum of (i) one hundred percent (100%) of
the aggregate principal amount of this Note plus all accrued and unpaid
interest (if any), plus (ii) the Exit Fee plus (iii) all other fees,
costs, expenses, liquidated damages or other amounts (if any) owing in respect
of this Note and the other Transaction Documents (the “Major Transaction
Prepayment Price”).


 


(b)           “Major
Transaction.”  A “Major Transaction”
shall be deemed to have occurred at such time as any of the following events:


 


15

















 


the consolidation, merger
or other business combination of the Makers, or any of them, with or into
another Person (other than (A) pursuant to any migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Makers, or any of them, or (B) a consolidation, merger or other business
combination in which holders of the Makers’, or any Maker’s, voting power
immediately prior to the transaction continue after the transaction to hold,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities);


 


the sale or transfer of
more than fifty percent (50%) of the Makers’, or any Maker’s, assets (based on
the fair market value as determined in good faith by each Maker’s Board of
Directors) other than inventory in the ordinary course of business in one or a
related series of transactions; or


 


closing of a purchase,
tender or exchange offer made to the holders of more than fifty percent (50%)
of the outstanding shares of Common Stock in which more than fifty percent
(50%) of the outstanding shares of Common Stock were tendered and accepted.


 


(c)           Mechanics
of Prepayment at Option of Holder Upon Major Transaction.  No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Major Transaction, but
not prior to the public announcement of such Major Transaction, the Makers
shall deliver written notice thereof via facsimile and overnight courier (“Notice
of Major  Transaction”) to the Holder of this Note.  At any time after receipt of a Notice of
Major Transaction (or, in the event a Notice of Major Transaction is not
delivered at least ten (10) days prior to a Major Transaction, at any time
within ten (10) days prior to a Major Transaction), the Holder of this
Note may require the Makers to prepay, effective immediately prior to the
consummation of such Major Transaction, the Note by delivering written notice
thereof via facsimile and overnight courier (“Notice of Prepayment at Option
of the Holder Upon Major  Transaction”) to the Makers, which Notice
of Prepayment at Option of Holder Upon Major Transaction shall indicate the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section 4.1(a) above.


 


(d)           Payment
of Prepayment Price.  Upon the Makers’
receipt of a Notice(s) of Prepayment at Option of Holder Upon Major
Transaction from the Holder of this Note, the Makers shall immediately notify
the Holder of this Note by facsimile of the Makers’ receipt of such Notice(s) of
Prepayment at Option of Holder Upon Major Transaction and the Makers shall
deliver the Major Transaction Prepayment Price immediately prior to or
contemporaneous with the consummation of the Major Transaction.  If the Makers shall fail to prepay the Note
submitted for prepayment (other than pursuant to a dispute as to the arithmetic
calculation of the Major Transaction Prepayment Price) immediately prior to or
contemporaneous with the consummation of the Major Transaction, in addition to
any remedy the Holder of this Note may have under this Note and the Purchase
Agreement, the Major Transaction Prepayment Price payable in respect of the
Note not prepaid shall bear interest at the rate of four percent (4%) per month
(prorated for partial months) until paid in full.


 


16














 


MISCELLANEOUS


 


Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, telecopy or facsimile at
the address or number designated in the Purchase Agreement (if delivered on a
Business Day during normal business hours where such notice is to be received),
or the first Business Day following such delivery (if delivered other than on a
Business Day during normal business hours where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.


 


Governing Law.  This Note shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.


 


Headings.  Article and section headings in this
Note are included herein for purposes of convenience of reference only and
shall not constitute a part of this Note for any other purpose.


 


Remedies, Characterizations, Other Obligations,
Breaches and Injunctive Relief.  The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under this Note, at
law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit a holder’s right to pursue actual damages for
any failure by the Maker to comply with the terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall not, except
as expressly provided herein, be subject to any other obligation of the Makers,
or any of them, (or the performance thereof). 
Each Maker acknowledges that a breach by it of its obligations hereunder
will cause irreparable and material harm to the Holder and that the remedy at
law for any such breach may be inadequate. Therefore each Maker agrees that, in
the event of any such breach or threatened breach, the Holder shall be
entitled, in addition to all other available rights and remedies, at law or in
equity, to seek and obtain such equitable relief, including but not limited to
an injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being
required.


 


Enforcement Expenses.  Each Maker agrees to pay all costs and
expenses incurred from time to time by the Holder with respect to any
modification, consent or waiver of the provisions of this Note or the
Transaction Documents and any enforcement of this Note and the Transaction
Documents, including, without limitation, reasonable attorneys’ fees and
expenses.


 


17

















 


Amendments.


 


(a)                                  This
Note may not be modified or amended in any manner except in writing executed by
the Makers and the Holder.


 


(b)                                 To
the extent that amendments to this Note are required in connection with the
filing of a listing application with the NYSE Arca Exchange or any other
Trading Market in connection with the transactions contemplated hereby, the
Makers and the Holder shall cooperate in good faith to reach mutually
acceptable resolutions with regard to such amendments, without penalty;
provided that the Holder has, in its sole discretion, determined such
amendments to be advisable.


 


Compliance with Securities Laws.


 


(a)                                  The
Holder of this Note acknowledges that this Note is being acquired solely for
the Holder’s own account and not as a nominee for any other party, and for
investment, and that the Holder shall not offer, sell or otherwise dispose of
this Note except in accordance with applicable law.


 


(b)                                 The
Holder is an “accredited investor” (as defined in Rule 501 of Regulation D
under the Securities Act), and such Holder has such experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Securities.  The Holder
is not required to be registered as a broker-dealer under Section 15 of
the Exchange Act and it is not a broker-dealer. 
The Holder acknowledges that an investment in the Securities is
speculative and involves a high degree of risk.


 


Consent to Jurisdiction.  Each of each Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. 
Each of each Maker and the Holder consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under the Purchase Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing in this Section 5.8
shall affect or limit any right to serve process in any other manner permitted
by law.


 


Binding Effect.  This Note shall be binding upon, inure to the
benefit of and be enforceable by the Makers, the Holder and their respective
successors and permitted assigns.  No
Maker shall delegate or transfer this Note or any obligations or undertakings
contained in this Note.


 


Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.


 


18

















 


Maker Waivers; Dispute Resolution.


 


(a)                                  Except
as otherwise specifically provided herein, each Maker and all others that may
become liable for all or any part of the obligations evidenced by this Note,
hereby waive presentment, demand, notice of nonpayment, protest and all other
demands’ and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, and do hereby consent to any number of renewals
of extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person liable
hereon, all without affecting the liability of the other persons, firms or
Makers liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.


 


(b)                                 No
delay or omission on the part of the Holder in exercising its rights under this
Note, or course of conduct relating hereto, shall operate as a waiver of such
rights or any other right of the Holder, nor shall any waiver by the Holder of
any such right or rights on any one occasion be deemed a waiver of the same
right or rights on any future occasion.


 


(c)                                  EACH
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.


 


Definitions.  Capitalized terms used herein and not defined
shall have the meanings set forth in the Purchase Agreement.  For the purposes hereof, the following terms
shall have the following meanings:


 


“Business Day”
(whether or not capitalized) shall mean any day banking transactions can be
conducted in New York City, NY, USA and does not include any day which is a
federal or state holiday in such location.


 


“Closing Sale Price” means, on any particular
date (i) the last trading price per share of the Common Stock on such date
on the New York Stock Exchange or another registered national securities
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last trading price on such exchange or quotation system
on the date nearest preceding such date, or (ii) if the Common Stock is
not then listed or traded on a registered national securities exchange or
quoted on the OTC Bulletin Board, then the average of the “Pink Sheet” quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (iii) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by the Holder and reasonably
acceptable to the Makers.


 


“Common Stock”
means shares of common stock, par value $0.001 per share, of Evergreen.


 


“Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.


 


“Trading Day”
means (a) a day on which the Common Stock is traded on the New York Stock
Exchange or other registered national securities exchange, or (b) if the
Common Stock is not traded on the OTC Bulletin Board or a registered national
securities exchange, a day


 


19

















 


on which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or
(b) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other government action to close.


 


“Trading Market”
means the Over the Counter Bulletin Board, the New York Stock Exchange, the
NYSE Arca Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets,
the Nasdaq Global Markets or the Nasdaq Global Select Market.


 


“Transaction Documents”
means this Note, the Purchase Agreement, the Security Agreement, the Mortgages,
the Pledge Agreement and all other security documents or related agreements now
or hereafter entered into in connection with and/or as security for this Note
and all amendments and supplements thereto and replacements thereof and any
other Transaction Document (as that term is defined in the Purchase Agreement).


 


[Signature appears on
following page]


 


20

















 


IN WITNESS WHEREOF, each Maker
has caused this Note to be duly executed by its duly authorized officer as of
the date first above indicated.


 


 


	
   

  	
  EVERGREEN
  ENERGY INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EVERGREEN OPERATIONS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUCKEYE
  INDUSTRIAL MINING CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  and Chief Financial Officer

  



 


[SIGNATURE
PAGE TO SENIOR SECURED 


CONVERTIBLE
PROMISSORY NOTE]


 


S-1

















 


EXHIBIT A


 


WIRE INSTRUCTIONS


 


Wire instructions for Centurion Credit Funding LLC


 


Bank:


 


ABA#:


 


Account Name:


 


Account Number:                                                 


 

















 


EXHIBIT B


 


FORM OF


 


NOTICE OF CONVERSION


 


(To be Executed by the
Registered Holder in order to Convert the Note)


 


The undersigned hereby irrevocably elects to convert $                                 
of the principal amount of the above Note No.        
into shares of Common Stock of Evergreen Energy Inc. (the “Maker”) according to
the conditions hereof, as of the date written below.


 


	
  Date of Conversion

  	
   

  



 


	
  Applicable Conversion Price

  	
   

  



 


Number of shares of Common Stock beneficially owned or deemed
beneficially owned by the Holder on the Date of Conversion:                                                            


 


	
  Signature

  	
   

  



 


[Name] 


 


	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			



 

















 


EXHIBIT B-3


 


THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR EVERGREEN ENERGY
INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED.


 


SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE


(THIRD TRANCHE)


 


	
  Dated:
                              ,
  2009

  	
  $5,000,000

  



 


For value received, EVERGREEN ENERGY INC., a corporation organized
under the laws of the State of Delaware (“Evergreen”), EVERGREEN
OPERATIONS, LLC, a limited liability company organized under the laws of the
State of Delaware (“Operations”) and BUCKEYE INDUSTRIAL MINING CO., a
corporation organized under the laws of the State of Ohio (“Buckeye,”
and together with Operations and Evergreen, collectively, the “Makers”
or the “Companies” and each individually referred to as a “Maker”
or a “Company”), hereby, jointly and severally, promise to pay to the
order of CENTURION CREDIT FUNDING LLC, a Delaware limited liability company,
with an address at 152 West 57th Street, 4th Floor, New York,
NY 10019 (together with its successors, representatives, and assigns, the “Holder”),
in accordance with the terms hereinafter provided, the principal amount of Five
Million Dollars ($5,000,000) hereunder, together with interest and all other
obligations outstanding hereunder.


 


All payments under or pursuant to this Senior Secured Convertible
Promissory Note (this “Note”) shall be made in United States Dollars in
immediately available funds to the Holder at the address of the Holder first
set forth above or at such other place as the Holder may designate from time to
time in writing to the Makers or by wire transfer of funds to the Holder’s
account, instructions for which are attached hereto as Exhibit A.  The outstanding principal balance of this
Note shall be due and payable on the earliest of (i) December 20,
2009, (ii) the date all obligations and indebtedness hereunder are
accelerated in accordance with Section 2.2 hereof, and (iii) a sale
of the capital stock, or all or substantially all of the assets, of Buckeye
(the “Maturity Date”).


 


Purchase Agreement.  This Note has been executed and delivered
pursuant to the Note Purchase Agreement, bearing even date herewith (the “Purchase
Agreement”), by and among the Makers and the Holder (as an Investor).  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the Purchase
Agreement.


 


4

















 


Interest.  Interest on the original principal amount of
this Note shall bear interest, in arrears, at a rate of ten percent (10%) per
annum and shall be payable in the amount of
[$          ]for the period
commencing on the date hereof through December 20, 2009 (the “Nine
Month Anniversary”) on an unconditional, non-refundable basis to be paid in
full on the date hereof.  Furthermore, upon the occurrence and
during the continuance of an Event of Default (as defined below), the Maker
will pay additional default rate interest to the Holder, payable on demand, at
a rate equal to the lesser of four percent (4%) per month (prorated for partial
months) and the maximum applicable legal rate per annum, computed on the basis
of a 360-day year of twelve (12) thirty-day months on the outstanding principal
balance of this Note.


 


Exit Fee.  When
the Note is repaid, in whole or in part, for any reason and at any time
(whether by voluntary prepayment by Makers, by reason of the occurrence of an
Event of Default, upon maturity, or otherwise), Makers shall pay to the
Investor, as compensation for the cost of the Investor making funds available
to Makers, an exit fee (the “Exit
Fee”) in an amount equal to (i) 5% of the amount of such
repayment or prepayment, as applicable, if Maker repays or prepays this Note at
any time following the date hereof, but on or prior to June 20, 2009, (ii) 10%
of the amount of such repayment or prepayment, as applicable, if Maker repays
or prepays this Note at any time following June 20, 2009, but on or prior
to September 20, 2009 and (iii) 15% of the amount of such repayment
or prepayment, as applicable, if Maker repays or prepays this Note at any time
following September 20, 2009. All
fees payable pursuant to this paragraph shall be deemed fully earned and
non-refundable as of the Closing Date.


 


Payment of Principal; Prepayment.
The outstanding principal balance plus all outstanding interest, the Exit Fee
and all other amounts due and owing hereunder shall be paid in full on the
Maturity Date.  Any amount of principal
repaid hereunder may not be reborrowed. 
The Maker may prepay all or any portion of the principal amount of this
Note in an amount equal to the sum of (i) 100% of the amount of such
principal prepayment, (ii) the Exit Fee and (iii) all outstanding
interest and all other amounts due and owing hereunder, upon not less than
three (3) Business Days prior written notice to the Holder.  This Note is further subject to mandatory
prepayment at the option of the Holder as set forth in Article 4 hereof.


 


Security Documents.  The obligations of the Makers hereunder are
secured by a continuing security interest in (i) substantially all of the
assets of Buckeye pursuant to the terms of the Security Agreement, the
Mortgages and other collateral documents and (ii) Operation’s equity
interest in Buckeye pursuant to the terms of the Pledge Agreement.


 


Payment on Non-Business Days.  Whenever any payment to be made shall be due
on a Saturday, Sunday or a public holiday under the laws of the State of New
York, such payment shall be due on the next succeeding Business Day and such
next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.


 


Transfer.  This Note may be transferred or sold, and may
also be pledged, hypothecated or otherwise granted as security, by the Holder;
provided, however, that any transfer or sale of this Note must be in compliance
with any applicable securities laws.


 


5

















 


Replacement.  Upon receipt of a duly executed, notarized
and unsecured written statement from the Holder with respect to the loss, theft
or destruction of this Note (or any replacement hereof) and a standard
indemnity, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Makers shall issue a new Note, of like tenor and
amount, in lieu of such lost, stolen, destroyed or mutilated Note.


 


Use of Proceeds.  The Makers shall use the proceeds of this
Note as set forth in the Purchase Agreement.


 


 


EVENTS OF DEFAULT;
REMEDIES


 


Events of Default.  The occurrence of any of the following events
shall be an “Event of Default” under this Note:


 


(a)                                  any
failure to make any payment of the principal amount, interest or any other
monetary obligation under this Note, as and when the same shall be due and
payable (whether on the Maturity Date or by acceleration or otherwise); or


 


(b)                                 any
Maker shall failure to (i) observe, perform, or comply with the first
sentence of Section 3.4 or Sections 3.17, 3.19, 3.22 or 3.26 of the
Purchase Agreement or Sections 6(f)(ii), 6(j) or the first two sentences
of Section 6(k) of the Security Agreement and such failure continues
for thirty (30) days following the earlier of knowledge or written notice from
the Investor or (ii) observe, perform or comply with any other condition,
covenant, undertaking or agreement contained in this Note, the Purchase
Agreement, the Security Agreement or the Pledge Agreement; provided, however,
upon entering into any other Transaction Document, the parties will negotiate
in good faith to amend this provision to incorporate sections of each such
Transaction Document into subclause (i) or (ii) of this Section 2.1(b),
or


 


(c)                                  the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of, the NYSE Arca
Exchange, the New York Stock Exchange, Inc., the OTC Bulletin Board, the
Nasdaq Capital Markets, the Nasdaq Global Market, the Nasdaq Global Select
Market, or the NYSE Alternext Exchange for a period of five (5) consecutive
Trading Days; or


 


(d)                                 any
representation or warranty made by the Makers, or any of them, herein or in the
Purchase Agreement or any other Transaction Document shall prove to have been
false or incorrect or breached in a material respect on the date as of which
made; or


 


(e)                                  any
Maker (i) shall fail to make any payment when due under the terms of any
Indebtedness for borrowed money to be paid by such Person and such failure
shall continue beyond any period of grace provided with respect thereto, or (ii) shall
default in the observance or performance of any other agreement, term or
condition contained in any agreement (related to Indebtedness or otherwise),
and the effect of such failure or default as set forth in subsections (i) or
(ii), is to cause, or permit the holder or holders thereof, or any counterparty
to an agreement relating to Indebtedness, to cause Indebtedness, or amounts due
thereunder, in an aggregate


 


6














 


amount of One Hundred Thousand Dollars ($100,000) or more to become due
prior to its stated date of maturity or the date such amount would otherwise
have been due notwithstanding such default; or


 


(f)            the
Makers, or any of them, shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property or assets,
(ii) make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or
domestic), (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable
laws of any jurisdiction (foreign or domestic), (vi) issue a notice of
bankruptcy or winding down of its operations or issue a press release regarding
same, or (vii) take any action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing; or


 


(g)           a
proceeding or case shall be commenced in respect of the Makers, or any of them,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution,
winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
Makers, or any of them, or of all or any substantial part of Makers’, or any of
Maker’s assets or (iii) similar relief in respect of it under any law
providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and
in effect, for a period of sixty (60) days or any order for relief shall be
entered in an involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any jurisdiction (foreign
or domestic) against the Makers, or any of them, or action under the laws of
any jurisdiction (foreign or domestic) analogous to any of the foregoing shall
be taken with respect to the Makers, or any of them, and shall continue
undismissed, or unstayed and in effect for a period of sixty (60) days; or


 


(h)           a
judgment or judgments in the aggregate amount exceeding One Hundred Thousand
Dollars $100,000 is/are entered against the Makers, or any of them, and not
dismissed or discharged within twenty (20) days following the entry thereof; or


 


(i)            the
Makers, or any of them, shall cease to actively conduct its business operations
for a period of five (5) consecutive Business Days; or


 


(j)            any
material portion of the properties or assets of the Makers, or any of them, is
seized by any governmental authority; or


 


(k)           the
Makers, or any of them, are indicted for the commission of any criminal
activity.


 


Remedies Upon An Event of
Default.  If an Event
of Default shall have occurred and shall be continuing, the Holder may at any
time at its option (a) declare the entire unpaid principal balance of this
Note, together with all interest accrued hereon, plus the Exit Fee


 


7

















 


and other fees and expenses, due and payable, and
thereupon, the same shall be accelerated and so due and payable, without
presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Makers; provided, however, that
upon the occurrence of an Event of Default described in Sections 2.1 (f) or
(g) above, the outstanding principal balance and accrued interest
hereunder, plus the Exit Fee and other fees and expenses, shall be immediately
and automatically due and payable, and/or (b) exercise or otherwise
enforce any one or more of the Holder’s rights, powers, privileges, remedies
and interests under this Note, the Purchase Agreement, the Security Agreement,
the Pledge Agreement, the Mortgages or other Transaction Document or applicable
law.  No course of delay on the part of
the Holder shall operate as a waiver thereof or otherwise prejudice the right
of the Holder.  No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.  Upon the occurrence and during the
continuance of an Event of Default, this Note shall bear interest at the
default rate set forth in Section 1.2 hereof.


 


CONVERSION; ANTIDILUTION


 


Conversion Option.  At any time and from time to time, this Note
shall be convertible (in whole or in part), at the option of the Holder (the “Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock as is determined by dividing (x) an amount equal to (i) the
sum of (A) that portion of the outstanding principal balance of the Note
that the Holder elects to convert, and (B) any accrued but unpaid interest
under this Note as of such date by (y) the Conversion Price (as defined in
Section 3.2 hereof) then in effect on the date on which the Holder
delivers a notice of conversion (the “Conversion Notice”), duly
executed, to Evergreen (the “Conversion Date”).  The Holder shall deliver this Note to
Evergreen at the address designated in the Purchase Agreement at such time that
this Note is fully converted.  With
respect to partial conversions of this Note, Evergreen shall keep written
records of the amount of this Note converted as of each Conversion Date.  Following a partial conversion of the Note
and upon request by Evergreen, the Holder shall deliver this Note to Evergreen
at the address designated in the Purchase Agreement in exchange for an
identical note reflecting the remaining outstanding aggregate principal amount
of the Note that has not been converted.


 


Conversion Price.  The term “Conversion Price” shall mean $3.65,
subject to adjustment under Section 3.6 hereof (the “Set Price”).


 


Mechanics of Conversion.


 


(a)           Not later than three (3) Trading
Days after any Conversion Date, Evergreen or its designated transfer agent, as
applicable, shall issue and deliver to the Depository Trust Company (“DTC”)
account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“DWAC”) as specified in the Conversion Notice, registered in the
name of the Holder or its affiliates, for the number of shares of Common Stock
to which the Holder shall be entitled. 
In the alternative, not later than three (3) Trading Days after any
Conversion Date, Evergreen or its designated transfer agent, as applicable,
shall deliver to the applicable Holder by express courier a certificate or
certificates which shall be free of restrictive legends and trading


 


8

















 


restrictions (other than those required by Section 5.1
of the Purchase Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of this Note (the “Delivery Date”).  Notwithstanding the foregoing to the
contrary, Evergreen or its transfer agent shall only be obligated to issue and
deliver the shares to the DTC on the Holder’s behalf via DWAC (or certificates
free of restrictive legends) if such conversion is in connection with a sale
and the Holder has complied with the applicable prospectus delivery
requirements (as evidenced by documentation furnished to and reasonably
satisfactory to Evergreen) or such shares may be sold pursuant to Rule 144
or other exemption under the Securities Act. 
If in the case of any Conversion Notice such certificate or certificates
are not delivered to or as directed by the applicable Holder by the Delivery
Date, the Holder shall be entitled by written notice to Evergreen at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event Evergreen shall immediately return this
Note tendered for conversion, whereupon Evergreen and the Holder shall each be
restored to their respective positions immediately prior to the delivery of
such notice of revocation, except that any amounts described in Sections 3.3(b) and
(c) shall be payable through the date notice of rescission is given to
Evergreen.


 


(b)           Evergreen understands
that a delay in the delivery of the shares of Common Stock upon conversion of
this Note beyond the Delivery Date could result in economic loss to the
Holder.  If Evergreen fails to deliver to
the Holder such shares via DWAC (or, if applicable, certificates) by the
Delivery Date, Evergreen shall pay to such Holder, in cash, an amount per
Trading Day for each Trading Day until such shares are delivered via DWAC or
certificates are delivered (if applicable), together with interest on such
amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to the greater of (A) 2% of the
aggregate principal amount of the Note requested to be converted for each
Trading Day and (B) $2,000 per day (which amount shall be paid as
liquidated damages and not as a penalty). 
Nothing herein shall limit a Holder’s right to pursue actual damages for
Evergreen’s failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).  Notwithstanding
anything to the contrary contained herein, the Holder shall be entitled to
withdraw a Conversion Notice, and upon such withdrawal Evergreen shall only be
obligated to pay the liquidated damages accrued in accordance with this Section 3.3(b) through
the date the Conversion Notice is withdrawn.


 


(c)           In addition to any
other rights available to the Holder, if Evergreen fails to cause its transfer
agent to transmit via DWAC or transmit to the Holder a certificate or
certificates representing the shares of Common Stock issuable upon conversion
of this Note (the “Conversion Shares”) on or before the Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the shares of Common Stock issuable
upon conversion of this Note which the Holder anticipated receiving upon such
conversion (a “Buy-In”), then Evergreen shall (1) pay in cash to
the Holder the amount by which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of
shares of Common Stock issuable upon conversion of this Note that Evergreen was
required to deliver to the Holder in connection with the conversion at issue
times (B) the price at which the


 


9

















 


sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of the Note and equivalent number of shares of Common Stock for which such
conversion was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had Evergreen timely complied with its
conversion and delivery obligations hereunder. 
For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Common Stock with an aggregate sale price giving rise
to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence Evergreen shall be required to pay the Holder
$1,000. The Holder shall provide Evergreen written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with
applicable confirmations and other evidence reasonably requested by
Evergreen.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to Evergreen’s failure to timely deliver
certificates representing shares of Common Stock upon conversion of this Note
as required pursuant to the terms hereof.


 


Ownership Cap and Certain Conversion Restrictions.
Notwithstanding anything to the contrary set forth in Article III of this
Note, at no time may the Holder convert all or a portion of this Note if the
number of shares of Common Stock to be issued pursuant to such conversion, when
aggregated with all other shares of Common Stock owned by the Holder at such
time, would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder)
in excess of 4.99% of the then issued and outstanding shares of Common Stock
outstanding at such time; provided, however, that upon the Holder
providing Evergreen with 61 days’ prior written notice that the Holder would
like to waive Section 3.4 of this Note with regard to any or all shares of
Common Stock issuable upon conversion of this Note, this Section 3.4 shall
be of no force or effect with regard to all or a portion of the Note referenced
in the waiver notice.


 


Trading
Market Regulation.  Evergreen
shall not be obligated to issue any shares of Common Stock upon conversion of
this Note if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which Evergreen may issue upon
conversion of the Notes in the aggregate without breaching Evergreen’s
obligations under the rules or regulations of any applicable Trading
Market, except that such limitation shall not apply in the event that Evergreen
(A) obtains the approval of its stockholders as required by the applicable
rules of such Trading Market for issuances of Common Stock in excess of
such amount or (B) obtains a written opinion from outside counsel to
Evergreen that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.


 


Adjustment of
Conversion Price.


 


(a)           Until the Note has been
paid in full or converted in full, the Set Price shall be subject to adjustment
from time to time as follows (but shall not be increased, other than pursuant
to Section 3.6(a)(i) hereof):


 


Adjustment for Stock Dividends, Subdivisions and
Combinations.  If at
any time Evergreen shall:


 


10

















 


set a record date or take a record of the holders of
its Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, shares of Common Stock,


 


subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or


 


combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,


 


then (1) the number of Conversion Shares
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of shares of Common Stock for which this Note may be converted immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event (without giving effect to the limitations on conversion
set forth in Section 3.4 hereof), and (2) the Set Price then in
effect shall be adjusted to equal (A) the Set Price then in effect
multiplied by the number of shares of Common Stock for which this Note may be
converted immediately prior to the adjustment (without giving effect to the
limitations on conversion set forth in Section 3.4 hereof) divided by (B) the
number of shares of Common Stock for which this Note may be converted
immediately after such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof).


 


Adjustment upon Issuance
of shares of Common Stock. 
If at any time Evergreen issues or sells, or in accordance with this Section 3.6(a)(ii) is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of Evergreen, but excluding Common Stock deemed to have been issued or sold by
Evergreen in connection with any Excluded Security) for a consideration per
share (the “New Issuance Price”)
less than a price (the “Applicable
Price”) equal to the Set Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Set Price then in effect shall be
reduced to an amount equal to the New Issuance Price.  “Excluded
Securities” means any Common Stock issued or issuable or deemed to
be issued in accordance with this Section 3.6(a)(ii) by Evergreen: (i) in
connection with any employee benefit plan currently existing, pursuant to which
Evergreen’s securities may be issued to any employee, consultant, officer or
director for services provided to Evergreen; (ii) upon conversion of the
Notes; (iii) pursuant to any contract, commitment, understanding or
arrangement in effect as of the date hereof and set forth on Schedule 2.1(c)(iii) of
the Purchase Agreement; (iv) upon conversion, exercise or exchange of any
Options or Convertible Securities which are outstanding on the date hereof, provided
that such issuance of Common Stock upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or Convertible
Securities in effect on the date hereof and such Options or Convertible
Securities are not amended, modified or changed on or after the date hereof;
and (v) in connection with any stock split, stock dividend,
recapitalization or similar transaction by Evergreen for which adjustment is
made pursuant to Section 3.6(a)(i). 
Upon each such adjustment of the Set Price hereunder, the number of
Conversion Shares shall be adjusted to the number of shares of Common Stock
determined by multiplying the Set Price in effect immediately prior to such
adjustment by the number of


 


11

















 


Conversion Shares acquirable upon conversion of this
Note immediately prior to such adjustment and dividing the product thereof by
the Set Price resulting from such adjustment. For purposes of determining the
adjusted Set Price under this Section 3.6, the following shall be
applicable:


 


Issuance of Options.  If Evergreen in any manner grants any options
to purchase Common Stock (“Options”), and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exercise or exchange of any stock or securities
(other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock (“Convertible Securities”)
issuable upon exercise of any such Option is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by Evergreen at the time of the granting or sale of such
Option for such price per share.  For
purposes of this Section 3.6(a)(ii)(1), the “lowest price per share for
which one share of Common Stock is issuable upon exercise of such Options or
upon conversion, exercise or exchange of such Convertible Securities issuable
upon exercise of any such Option” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by Evergreen with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Set Price or
number of Conversion Shares shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities.


 


Issuance of Convertible Securities.  If Evergreen in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of Common Stock is issuable upon the conversion, exercise or exchange thereof
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by Evergreen at the
time of the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 3.6(a)(ii)(2),
the “lowest price per share for which one share of Common Stock is issuable
upon the conversion, exercise or exchange thereof” shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by
Evergreen with respect to one share of Common Stock upon the issuance or sale
of the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security.  No further
adjustment of the Set Price or number of Conversion Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Note has been or is to be made pursuant to other provisions
of this Section 3.6, no further adjustment of the Set Price or number of
Conversion Shares shall be made by reason of such issue or sale.


 


Change in Option Price or Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Set Price and the number of Conversion Shares in


 


12

















 


effect at the time of such increase or decrease shall be adjusted to
the Set Price and the number of shares of Common Stock issuable upon conversion
of this Note which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold.  For purposes of this Section 3.6(a)(ii)(3),
if the terms of any Option or Convertible Security that was outstanding as of
the date of issuance of this Note are increased or decreased in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease. 
No adjustment pursuant to this Section 3.6(a)(ii)(3) shall be
made if such adjustment would result in an increase of the Set Price then in
effect or a decrease in the number of Conversion Shares.


 


Calculation of Consideration Received.  In case any Option is issued in connection
with the issue or sale of other securities of Evergreen, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $0.01.  If
any shares of Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by Evergreen
therefor.  If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of such consideration received by Evergreen will be the
fair value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by Evergreen
will be the closing sale price of such security on the date of receipt.  If any shares of Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which Evergreen is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible Securities,
as the case may be.  The fair value of
any consideration other than cash or securities will be determined jointly by
Evergreen and the Holder.  If such
parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will
be determined within five (5) Business Days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by Evergreen and
the Holder.  The determination of such
appraiser shall be final and binding upon all parties absent manifest error and
the fees and expenses of such appraiser shall be borne by Evergreen.


 


Certain Other Distributions.  If at any time Evergreen shall set a record
date or take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:


 


cash (other than a cash dividend payable out of
earnings or earned surplus legally available for the payment of dividends under
the laws of the jurisdiction of incorporation of Evergreen),


 


13

















 


any evidences of its indebtedness, any shares of stock
of any class or any other securities or property of any nature whatsoever
(other than cash or Common Stock), or


 


any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or
any other securities or property of any nature whatsoever (other than cash or
Common Stock),


 


then (1) the number
of Conversion Shares may shall be adjusted to equal the product of the number
of shares of Common Stock for which this Note may be converted immediately
prior to such adjustment (without giving effect to the limitations on
conversion set forth in Section 3.4 hereof) multiplied by a fraction (A) the
numerator of which shall be the Closing Sale Price of Common Stock at the date
of taking such record and (B) the denominator of which shall be such
Closing Sale Price minus the amount allocable to one share of Common Stock of
any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of Evergreen and supported by an opinion from
an investment banking firm reasonably acceptable to the Holder) of any and all
such evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights so distributable, and (2) the
Set Price then in effect shall be adjusted to equal (A) the Set Price then
in effect multiplied by the number of shares of Common Stock for which this
Note may be converted immediately prior to the adjustment (without giving
effect to the limitations on conversion set forth in Section 3.4 hereof)
divided by (B) the number of shares of Common Stock for which this Note
may be converted immediately after such adjustment (without giving effect to
the limitations on conversion set forth in Section 3.4 hereof).  A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by Evergreen to the holders of its
Common Stock of such shares of such other class of stock within the meaning of
this Section 3.6(a) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 3.6(a).


 


(b)           Other
Provisions applicable to Adjustments under this Section.  The following provisions shall be applicable
to the making of adjustments of the number of shares of Common Stock for which
this Note may be converted and the Set Price then in effect provided for in
this Section 3.6:


 


Fractional Interests.  In computing adjustments under this Section 3.6,
fractional interests in Common Stock shall be taken into account to the nearest
one one-hundredth (1/100th) of
a share.


 


When Adjustment Not Required.  If Evergreen shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of
the


 


14

















 


taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.


 


(c)           Form of
Note after Adjustments.  The form of
this Note need not be changed because of any adjustments in the Set Price or
the number and kind of securities purchasable upon conversion of this Note.


 


(d)           Escrow
of Property.  If after any property
becomes distributable pursuant to this Section 3.6 by reason of the taking
of any record of the holders of Common Stock, but prior to the occurrence of
the event for which such record is taken, and the Holder converts this Note,
such property shall be held in escrow for the Holder by Evergreen to be
distributed to the Holder upon and to the extent that the event actually takes
place, upon payment of the then current Set Price.  Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed property shall be returned to Evergreen.


 


(e)           No
Impairment.  Evergreen shall not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
Evergreen, but will at all times in good faith, assist in the carrying out of
all the provisions of this Section 3.6 and in the taking of all such
action as may be necessary or appropriate in order to protect the Conversion
Rights of the Holder against impairment. 
In the event the Holder shall elect to convert the Note as provided
herein, Evergreen cannot refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder has been engaged in any
violation of law, violation of an agreement to which the Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of the Note shall have issued and
Evergreen posts a surety bond for the benefit of the Holder in an amount equal
to one hundred fifty percent (150%) of the amount of the Notes, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to the Holder (as liquidated
damages) in the event it obtains judgment.


 


(f)            Certificates
as to Adjustments.  Upon occurrence
of each adjustment or readjustment of the Conversion Price or number of shares
of Common Stock issuable upon conversion of this Note pursuant to this Section 3.6,
Evergreen at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and furnish to the Holder a certificate
setting forth such adjustment and readjustment, showing in detail the facts
upon which such adjustment or readjustment is based.  Evergreen shall, upon written request of the
Holder, at any time, furnish or cause to be furnished to the Holder a like
certificate setting forth such adjustments and readjustments, the applicable
Conversion Price in effect at the time, and the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon the conversion of this Note.  Notwithstanding the foregoing, Evergreen
shall not be obligated to deliver a certificate unless such certificate would
reflect an increase or decrease of at least one percent (1%) of such adjusted
amount.


 


(f)            Issue
Taxes.  Evergreen shall pay any and
all issue and other taxes, excluding federal, state or local income taxes, that
may be payable in respect of any issue or


 


15

















 


delivery of shares of Common Stock on conversion of this Note pursuant
thereto; provided, however, that Evergreen shall not be obligated
to pay any transfer taxes resulting from any transfer requested by the Holder
in connection with any such conversion.


 


(g)           Fractional
Shares.  No fractional shares of
Common Stock shall be issued upon conversion of this Note.  In lieu of any fractional shares to which the
Holder would otherwise be entitled, Evergreen shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Sale Prices
of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.


 


(h)           Reservation
of Common Stock.  Evergreen shall at
all times when this Note shall be outstanding, reserve and keep available out
of its authorized but unissued Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of this
Note and all interest accrued thereon; provided that the number of
shares of Common Stock so reserved shall at no time be less than one hundred
fifty percent (150%) of the number of shares of Common Stock for which this
Note and all interest accrued thereon are at any time convertible.  Evergreen shall, from time to time in
accordance with Delaware law, increase the authorized number of shares of
Common Stock if at any time the unissued number of authorized shares shall not
be sufficient to satisfy Evergreen’s obligations under this Section 3.6(h).


 


(i)            Regulatory
Compliance.  If any shares of Common
Stock to be reserved for the purpose of conversion of this Note or any interest
accrued thereon require registration or listing with or approval of any
governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be
validly issued or delivered upon conversion, Evergreen shall, at its sole cost
and expense, in good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may be.


 


PREPAYMENT


 


Prepayment.


 


(a)           Prepayment
Option Upon Major Transaction.  In
addition to all other rights of the Holder contained herein, simultaneous with
the occurrence of any Major Transaction (as defined below), the Holder shall
have the right, at the Holder’s option, to require the Maker to prepay the Note
in cash at a price equal to the sum of (i) one hundred percent (100%) of
the aggregate principal amount of this Note plus all accrued and unpaid
interest (if any), plus (ii) the Exit Fee plus (iii) all other fees,
costs, expenses, liquidated damages or other amounts (if any) owing in respect
of this Note and the other Transaction Documents (the “Major Transaction
Prepayment Price”).


 


(b)           “Major
Transaction.”  A “Major Transaction”
shall be deemed to have occurred at such time as any of the following events:


 


16














 


the consolidation, merger or other business combination of the Makers,
or any of them, with or into another Person (other than (A) pursuant to
any migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Makers, or any of them, or (B) a
consolidation, merger or other business combination in which holders of the
Makers’, or any Maker’s, voting power immediately prior to the transaction
continue after the transaction to hold, directly or indirectly, the voting power
of the surviving entity or entities necessary to elect a majority of the
members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities);


 


the sale or transfer of more than fifty percent (50%) of the Makers’,
or any Maker’s, assets (based on the fair market value as determined in good
faith by each Maker’s Board of Directors) other than inventory in the ordinary
course of business in one or a related series of transactions; or


 


closing of a purchase, tender or exchange offer made to the holders of
more than fifty percent (50%) of the outstanding shares of Common Stock in
which more than fifty percent (50%) of the outstanding shares of Common Stock
were tendered and accepted.


 


(c)                                  Mechanics
of Prepayment at Option of Holder Upon Major Transaction.  No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Major Transaction, but
not prior to the public announcement of such Major Transaction, the Makers
shall deliver written notice thereof via facsimile and overnight courier (“Notice
of Major  Transaction”) to the Holder of this Note.  At any time after receipt of a Notice of
Major Transaction (or, in the event a Notice of Major Transaction is not
delivered at least ten (10) days prior to a Major Transaction, at any time
within ten (10) days prior to a Major Transaction), the Holder of this
Note may require the Makers to prepay, effective immediately prior to the
consummation of such Major Transaction, the Note by delivering written notice
thereof via facsimile and overnight courier (“Notice of Prepayment at Option
of the Holder Upon Major  Transaction”) to the Makers, which Notice
of Prepayment at Option of Holder Upon Major Transaction shall indicate the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section 4.1(a) above.


 


(d)                                 Payment
of Prepayment Price.  Upon the Makers’
receipt of a Notice(s) of Prepayment at Option of Holder Upon Major
Transaction from the Holder of this Note, the Makers shall immediately notify
the Holder of this Note by facsimile of the Makers’ receipt of such Notice(s) of
Prepayment at Option of Holder Upon Major Transaction and the Makers shall
deliver the Major Transaction Prepayment Price immediately prior to or
contemporaneous with the consummation of the Major Transaction.  If the Makers shall fail to prepay the Note
submitted for prepayment (other than pursuant to a dispute as to the arithmetic
calculation of the Major Transaction Prepayment Price) immediately prior to or
contemporaneous with the consummation of the Major Transaction, in addition to
any remedy the Holder of this Note may have under this Note and the Purchase
Agreement, the Major Transaction Prepayment Price payable in respect of the
Note not prepaid shall bear interest at the rate of four percent (4%) per month
(prorated for partial months) until paid in full.


 


17

















 


MISCELLANEOUS


 


Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, telecopy or facsimile at
the address or number designated in the Purchase Agreement (if delivered on a
Business Day during normal business hours where such notice is to be received),
or the first Business Day following such delivery (if delivered other than on a
Business Day during normal business hours where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.


 


Governing Law.  This Note shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction.  This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.


 


Headings.  Article and section headings in this
Note are included herein for purposes of convenience of reference only and
shall not constitute a part of this Note for any other purpose.


 


Remedies, Characterizations, Other Obligations, Breaches
and Injunctive Relief. 
The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder’s right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note. 
Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to
be received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Makers, or any of them, (or
the performance thereof).  Each Maker acknowledges
that a breach by it of its obligations hereunder will cause irreparable and
material harm to the Holder and that the remedy at law for any such breach may
be inadequate. Therefore each Maker agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available rights and remedies, at law or in equity, to seek and obtain
such equitable relief, including but not limited to an injunction restraining
any such breach or threatened breach, without the necessity of showing economic
loss and without any bond or other security being required.


 


Enforcement Expenses.  Each Maker agrees to pay all costs and
expenses incurred from time to time by the Holder with respect to any
modification, consent or waiver of the provisions of this Note or the
Transaction Documents and any enforcement of this Note and the Transaction
Documents, including, without limitation, reasonable attorneys’ fees and
expenses.


 


18

















 


Amendments.


 


(a)                                  This
Note may not be modified or amended in any manner except in writing executed by
the Makers and the Holder.


 


(b)                                 To
the extent that amendments to this Note are required in connection with the
filing of a listing application with the NYSE Arca Exchange or any other
Trading Market in connection with the transactions contemplated hereby, the
Makers and the Holder shall cooperate in good faith to reach mutually
acceptable resolutions with regard to such amendments, without penalty;
provided that the Holder has, in its sole discretion, determined such
amendments to be advisable.


 


Compliance with Securities Laws.


 


(a)                                  The
Holder of this Note acknowledges that this Note is being acquired solely for
the Holder’s own account and not as a nominee for any other party, and for
investment, and that the Holder shall not offer, sell or otherwise dispose of
this Note except in accordance with applicable law.


 


(b)                                 The
Holder is an “accredited investor” (as defined in Rule 501 of Regulation D
under the Securities Act), and such Holder has such experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Securities.  The Holder
is not required to be registered as a broker-dealer under Section 15 of
the Exchange Act and it is not a broker-dealer. 
The Holder acknowledges that an investment in the Securities is
speculative and involves a high degree of risk.


 


Consent to Jurisdiction.  Each of each Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. 
Each of each Maker and the Holder consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under the Purchase Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing in this Section 5.8
shall affect or limit any right to serve process in any other manner permitted
by law.


 


Binding Effect.  This Note shall be binding upon, inure to the
benefit of and be enforceable by the Makers, the Holder and their respective
successors and permitted assigns.  No
Maker shall delegate or transfer this Note or any obligations or undertakings
contained in this Note.


 


Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.


 


19

















 


Maker Waivers; Dispute Resolution.


 


(a)                                  Except
as otherwise specifically provided herein, each Maker and all others that may
become liable for all or any part of the obligations evidenced by this Note,
hereby waive presentment, demand, notice of nonpayment, protest and all other
demands’ and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, and do hereby consent to any number of renewals
of extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person
liable hereon, all without affecting the liability of the other persons, firms
or Makers liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY
JURY.


 


(b)                                 No
delay or omission on the part of the Holder in exercising its rights under this
Note, or course of conduct relating hereto, shall operate as a waiver of such
rights or any other right of the Holder, nor shall any waiver by the Holder of
any such right or rights on any one occasion be deemed a waiver of the same
right or rights on any future occasion.


 


(c)                                  EACH
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.


 


Definitions.  Capitalized terms used herein and not defined
shall have the meanings set forth in the Purchase Agreement.  For the purposes hereof, the following terms
shall have the following meanings:


 


“Business Day”
(whether or not capitalized) shall mean any day banking transactions can be
conducted in New York City, NY, USA and does not include any day which is a
federal or state holiday in such location.


 


“Closing Sale Price” means, on any particular
date (i) the last trading price per share of the Common Stock on such date
on the New York Stock Exchange or another registered national securities
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last trading price on such exchange or quotation system
on the date nearest preceding such date, or (ii) if the Common Stock is
not then listed or traded on a registered national securities exchange or
quoted on the OTC Bulletin Board, then the average of the “Pink Sheet” quotes
for the relevant conversion period, as determined in good faith by the Holder,
or (iii) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by the Holder and reasonably
acceptable to the Makers.


 


“Common Stock”
means shares of common stock, par value $0.001 per share, of Evergreen.


 


“Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.


 


“Trading Day”
means (a) a day on which the Common Stock is traded on the New York Stock
Exchange or other registered national securities exchange, or (b) if the
Common Stock is not traded on the OTC Bulletin Board or a registered national
securities exchange, a day


 


20

















 


on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted
as set forth in (a) or (b) hereof, then Trading Day shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close.


 


“Trading Market”
means the Over the Counter Bulletin Board, the New York Stock Exchange, the
NYSE Arca Exchange, the NYSE Alternext Exchange, the Nasdaq Capital Markets,
the Nasdaq Global Markets or the Nasdaq Global Select Market.


 


“Transaction Documents”
means this Note, the Purchase Agreement, the Security Agreement, the Mortgages,
the Pledge Agreement and all other security documents or related agreements now
or hereafter entered into in connection with and/or as security for this Note
and all amendments and supplements thereto and replacements thereof and any
other Transaction Document (as that term is defined in the Purchase Agreement).


 


[Signature appears on
following page]


 


21

















 


IN WITNESS WHEREOF, each Maker
has caused this Note to be duly executed by its duly authorized officer as of
the date first above indicated.


 


 


	
   

  	
  EVERGREEN
  ENERGY INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Diana L.
  Kubik

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Vice
  President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EVERGREEN OPERATIONS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Diana L.
  Kubik

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Vice
  President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUCKEYE
  INDUSTRIAL MINING CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Diana L.
  Kubik

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Vice
  President and Chief Financial Officer

  



 


 


[SIGNATURE PAGE TO SENIOR SECURED


CONVERTIBLE PROMISSORY NOTE]


 


S-1

















 


EXHIBIT A


 


WIRE INSTRUCTIONS


 


Wire instructions for Centurion Credit Funding LLC


 


Bank:


 


ABA#:


 


Account Name:


 


Account Number:                                                 


 

















 


EXHIBIT B


 


FORM OF


 


NOTICE OF CONVERSION


 


(To be Executed by the
Registered Holder in order to Convert the Note)


 


The undersigned hereby irrevocably elects to convert $                                 
of the principal amount of the above Note No.        
into shares of Common Stock of Evergreen Energy Inc. (the “Maker”) according to
the conditions hereof, as of the date written below.


 


	
  Date of Conversion

  	
   

  
	
   

  
	
  Applicable Conversion Price

  	
   

  
	
   

  
	
  Number of shares of Common Stock beneficially owned
  or deemed beneficially owned by the Holder on the Date of Conversion:                                                                      

  
	
   

  
	
  Signature

  	
   

  
	
   

  
	
  [Name]

  
	
   

  
	
  Address: