Document:

Exhibit 4.2

$95,000,000 Principal Amount

EVERGREEN ENERGY INC.

8.00%
Convertible Secured Notes due 2012

REGISTRATION RIGHTS AGREEMENT

July 30, 2007

Credit
Suisse Securities (USA) LLC

Capital One Southcoast, Inc.

Natexis Bleichroeder Inc.

Johnson Rice & Company L.L.C.

c/o                               Credit Suisse Securities (USA) LLC

Eleven Madison Avenue

New York, NY   10010-3629

Dear Ladies and
Gentlemen:

Evergreen Energy Inc., a Delaware corporation (the “Issuer”), proposes to issue and sell to Credit Suisse
Securities (USA) LLC, Capital One Southcoast, Inc., Natexis Bleichroeder Inc.
and Johnson Rice & Company L.L.C. (collectively, the “Initial
Purchasers”), upon the terms set forth in a purchase agreement of
even date herewith (the “Purchase Agreement”),
$95,000,000 aggregate principal amount of its 8.00% Convertible Secured Notes
due 2012 (the “Initial Securities”) to be
guaranteed (the “Guaranties”) by Evergreen
Operations, LLC, a Delaware limited liability company, KFx Operations, LLC, a
Wyoming limited liability company, Landrica Development Company, a South Dakota
corporation, KFx Plant, LLC, a Wyoming limited liability company and Buckeye
Industrial Mining Co., an Ohio corporation, the “Guarantors”
and, collectively with the Issuer, the “Company”).  The Initial Securities will be convertible
into shares of common stock, par value $.001 per share, of the Issuer (the “Common  Stock”)
at the conversion price set forth in the Offering Circular dated July 25,
2007.  The Initial Securities will be
issued pursuant to an Indenture, dated as of July 30, 2007 (the “Indenture”), among the Company and U.S. Bank, as trustee
(the “Trustee”).  As an inducement to the Initial Purchasers to
enter into the Purchase Agreement, the Company agrees with the Initial
Purchasers, for the benefit of (i) the Initial Purchasers and (ii) the holders
of the Initial Securities and the Common Stock issuable upon conversion of the
Initial Securities (collectively, the “Securities”)
from time to time (each of the forgoing a “Holder”
and collectively the “Holders”), as
follows:

1.  Shelf Registration. 
(a)  The Company shall, at their
cost, prepare and, as promptly as practicable (but in no event more than 90
days after so required or requested pursuant to this Section 1) file with the
Securities and Exchange Commission (the “Commission”)
and thereafter use their commercially reasonable efforts to cause to be
declared effective not later than 180 days after the date hereof (unless it
becomes effective automatically upon filing) a registration statement (the “Shelf Registration  Statement”) on
Form S-3, which if the Issuer is then eligible shall be an automatic shelf
registration statement, relating to the offer and sale of the Transfer
Restricted Securities (as defined in Section 5 hereof) by the Holders thereof
from time to time in accordance with the methods of distribution set forth in
the Shelf Registration Statement and Rule 415 under the Securities Act of
1933, as amended (the “Securities Act”)
(hereinafter, the “Shelf Registration”);
provided, however, that no Holder (other than an Initial
Purchaser) shall be entitled to have the Securities held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to be bound
by all the provisions of this Agreement applicable to such Holder.

(b)  The Company
shall use their commercially reasonable efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus included
therein (the “Prospectus”) to be 

lawfully
delivered by the Holders of the relevant Securities, for a period of two years
(or for such longer period if extended pursuant to Section 2(h) below)
from the date of its effectiveness or such shorter period that will terminate
when all the Securities covered by the Shelf Registration Statement (i) have
been sold pursuant thereto or (ii) are no longer restricted securities (as
defined in Rule 144(k) under the Securities Act, or any successor
rule thereof), assuming for this purpose that the Holders thereof are not
affiliates of the Company (in any such case, such period being called the “Shelf Registration Period”).  The Company shall be deemed not to have used
their commercially reasonable efforts to keep the Shelf Registration Statement
effective during the requisite period if any of them voluntarily take any
action that would result in Holders of Securities covered thereby not being
able to offer and sell such Securities during that period, unless such action
is (i) required by applicable law or (ii) taken by the Company in good faith
and contemplated by Section 2(b)(v) below, and the Company thereafter complies
with the requirements of Section 2(h).

(c) 
Notwithstanding any other provisions of this Agreement to the contrary,
the Company shall cause the Shelf Registration Statement and the Prospectus and
any amendment or supplement thereto, as of its respective effective date, (i)
to comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission and (ii) not to
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.

2.  Registration Procedures.  In connection with the Shelf Registration
contemplated by Section 1 hereof, the following provisions shall apply:

(a)  The Company
shall (i) furnish to each Initial Purchaser, prior to the filing thereof
with the Commission, a copy of the Shelf Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any
portion of an unsold allotment from the original offering) is participating in
the Shelf Registration Statement, shall use commercially reasonable efforts to
reflect in each such document, when so filed with the Commission, such comments
as such Initial Purchaser reasonably may propose; and (ii) include in the
prospectus included in the Shelf Registration Statement (or, if permitted by
Commission Rule 430B(b), in a prospectus supplement that becomes a part
thereof pursuant to Commission Rule 430B(f)) that is delivered to any
Holder pursuant to Section 2(d) and (e) the names of the Holders who
propose to sell Securities pursuant to the Shelf Registration Statement as
selling securityholders.

(b)  The Company
shall give written notice to the Initial Purchasers and the Holders of the
Securities (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied
by an instruction to suspend the use of the Prospectus until the requisite
changes have been made):

(i) when the Shelf
Registration Statement or any amendment thereto has been filed with the
Commission and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;

(ii) of any
request by the Commission for amendments or supplements to the Shelf
Registration Statement or the Prospectus or for additional information;

(iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Shelf Registration Statement or the initiation of any proceedings for that
purpose, of the issuance by the Commission of a notification of objection to
the use of the form on which the Shelf Registration Statement has been filed,
and of the happening of any event that causes the Issuer to become an
“ineligible issuer,” as defined in Commission Rule 405;

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(iv) of the
receipt by the Company or its legal counsel of any notification with respect to
the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and

(v) of the
happening of any event that requires the Company to make changes in the Shelf
Registration Statement or the Prospectus in order that the Shelf Registration
Statement or the Prospectus does not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading.

(c)  The Company
shall make every commercially reasonable effort to obtain the withdrawal at the
earliest possible time, of any order suspending the effectiveness of the Shelf
Registration Statement.

(d)  The Company
shall furnish to each Holder of Securities included within the coverage of the
Shelf Registration, without charge, at least one copy of the Shelf Registration
Statement and any post-effective amendment or supplement thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).  The Company shall not,
without the prior consent of the Initial Purchasers, make any offer relating to
the Securities that would constitute a “free writing prospectus,” as defined in
Commission Rule 405.

(e)  The Company
shall, during the Shelf Registration Period, deliver to each Holder of
Securities included within the coverage of the Shelf Registration, without
charge, as many copies of the Prospectus (including each preliminary
prospectus) included in the Shelf Registration Statement and any amendment or
supplement thereto as such person may reasonably request.  The Company consents, subject to the
provisions of this Agreement, to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of the Securities in
connection with the offering and sale of the Securities covered by the
Prospectus, or any amendment or supplement thereto, included in the Shelf
Registration Statement.

(f)  Prior to
any public offering of the Securities pursuant to the Shelf Registration
Statement, the Company shall register or qualify or cooperate with the Holders
of the Securities included therein and their respective counsel in connection
with the registration or qualification of the Securities for offer and sale
under the securities or “blue sky” laws of such states of the United States as
any Holder of the Securities reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Securities covered by such Shelf Registration
Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where
it is not then so qualified or (ii) take any action which would subject it
to general service of process or to taxation in any jurisdiction where it is not
then so subject.

(g)  The Company
shall cooperate with the Holders of the Securities to facilitate the timely
preparation and delivery of certificates representing the Securities to be sold
pursuant to any Registration Statement free of any restrictive legends and in
such denominations and registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities pursuant to the
Shelf Registration Statement.

(h)  Upon the
occurrence of any event contemplated by paragraphs (ii) through (v) of
Section 2(b) above during the period for which the Company is required to
maintain an effective Shelf Registration Statement, the Company shall promptly
prepare and file a post-effective amendment to the Shelf Registration
Statement or an amendment or supplement to the Prospectus and any other
required document so that, as thereafter delivered to Holders or purchasers of
the Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. 
If the Company notifies the Initial Purchasers and the Holders in
accordance with paragraphs (ii) through (v) of Section 2(b) above to
suspend the use of the Prospectus until the requisite changes to the 

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Prospectus
have been made, then the Initial Purchasers and the Holders shall suspend use
of such Prospectus, and the Shelf Registration Period provided for in
Section 1(b) above shall be extended by the number of days from and
including the date of the giving of such notice to and including the date when
the Initial Purchasers and the Holders shall have received such amended or
supplemented prospectus pursuant to this Section 2(h).  During the Shelf Registration Period the
Company will, prior to the three-year expiration of that Shelf
Registration Statement file, use their commercially reasonable efforts to cause
to be declared effective (unless it becomes effective automatically upon
filing) within a period that avoids any interruption in the ability of Holders
of Securities covered by the expiring Shelf Registration Statement to make
registered dispositions, a new registration statement relating to the Securities,
which shall be deemed the “Shelf Registration Statement” for purposes of this
Agreement.

(i)  Not later
than the effective date of the Shelf Registration Statement, the Company will
provide CUSIP numbers for the Initial Securities and the Common Stock
registered under the Shelf Registration Statement, and provide the Trustee with
printed certificates for the Initial Securities, in a form eligible for deposit
with The Depository Trust Company.

(j)  The Issuer
will comply with all rules and regulations of the Commission to the extent and
so long as they are applicable to the Shelf Registration and will make
generally available to its security holders (or otherwise provide in accordance
with Section 11(a) of the Securities Act) an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act, no later than
45 days after the end of a 12-month period (or 90 days, if such
period is a fiscal year) beginning with the first month of the Issuer’s first
fiscal quarter commencing after the effective date of the Shelf Registration
Statement, which statement shall cover such 12-month period.

(k)  The Company shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, (the “Trust Indenture Act”) in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification.  In the event that such
qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.

(l)  The Company
may require each Holder of Securities to be sold pursuant to the Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of the Securities as the Company may from time to
time reasonably require for inclusion in the Shelf Registration Statement, and
the Company may exclude from such registration the Securities of any Holder
that unreasonably fails to furnish such information within a reasonable time
after receiving such request.

(m)  The Company
shall enter into such customary agreements and take all such other actions, if
any, as any Holder shall reasonably request in order to facilitate the
disposition of the Securities pursuant to the Shelf Registration.

(n)  The Company
shall (i) make reasonably available for inspection by the Holders, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent retained by the Holders
or any such underwriter, all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company’s officers, directors, employees, accountants and auditors to supply
all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to
enable such persons, to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that
the foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers by you and on behalf of the other parties, by
one counsel designated by and on behalf of such other parties as described in
Section 3 hereof.

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(o)  The
Company, if requested by any Holder of Securities covered by the Shelf
Registration Statement, shall cause (i) its counsel to deliver an opinion
and updates thereof relating to the Securities in customary form addressed to
such Holders and the managing underwriters, if any, thereof, and dated, in the
case of the initial opinion, the effective date of such Shelf Registration
Statement (it being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution, authentication and issuance, and the validity and
enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Issuer and its subsidiaries; the absence
of governmental approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the Securities, the compliance
as to form of the Shelf Registration Statement and any documents incorporated
by reference therein and of the Indenture with the requirements of the
Securities Act and the Trust Indenture Act, respectively; as of the date of the
opinion and as of the effective date of the Shelf Registration Statement or
most recent post-effective amendment thereto or most recent prospectus
supplement thereto that is deemed to establish a new effective date, as the
case may be, the absence from the Shelf Registration Statement and the
Prospectus and any prospectus supplement included therein, as then amended or
supplemented and including any documents incorporated by reference therein, of
an untrue statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; as of an applicable time identified by such Holders or managing
underwriters, the absence from the Prospectus included in the Shelf
Registration Statement, as amended or supplemented at such applicable time and
including any documents incorporated by reference therein, taken together with
any other documents identified by such Holders or managing underwriters, of an
untrue statement of a material fact or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in the light of the circumstances under which they were made,
not misleading; (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof requested by any underwriters of
the Securities and (iii) its independent public accountants to provide to
the selling Holders of the applicable Securities and any underwriter therefor a
comfort letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with primary underwritten offerings,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.

(p)  The Company
will use its commercially reasonable efforts to (a) if the Initial
Securities have been rated prior to the initial sale of such Initial
Securities, confirm such ratings will apply to the Securities covered by the
Shelf Registration Statement, or (b) if the Initial Securities were not
previously rated, cause the Securities covered by the Shelf Registration
Statement to be rated with the appropriate rating agencies, if so requested by
holders of a majority in aggregate principal amount of Securities covered by
the Shelf Registration Statement, or by the managing underwriters, if any.

(q)  In the
event that any broker-dealer registered under the Securities Exchange Act of
1934 (the “Exchange Act”) shall underwrite
any Securities or participate as a member of an underwriting syndicate or
selling group or “assist in the distribution” (within the meaning of the
Conduct Rules (the “Rules”) of the
National Association of Securities Dealers, Inc. (“NASD”))
thereof, whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company will assist such broker-dealer in complying with
the requirements of such Rules, including, without limitation, by (i) if
such Rules, including Rule 2720, shall so require, engaging a “qualified
independent underwriter” (as defined in Rule 2720) to participate in the
preparation of the Shelf Registration Statement relating to such Securities, to
exercise usual standards of due diligence in respect thereto and, if any
portion of the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (iii) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules.

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(r)  The Company
shall use their commercially reasonable efforts to take all other steps
necessary to effect the registration of the Securities covered by a
Registration Statement contemplated hereby.

3.  Registration Expenses. 
(a) All expenses incident to the Company’s performance of and compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement is ever filed or becomes effective, including without
limitation;

(i)  all registration and filing fees and
expenses;

(ii) all fees
and expenses of compliance with federal securities and state “blue sky” or
securities laws;

(iii) all
expenses of printing (including printing certificates for the Securities to be
issued and printing of Prospectuses), messenger and delivery services and
telephone;

(iv) all fees
and disbursements of counsel for the Company;

(v) all
application and filing fees in connection with listing the Securities on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and

(vi) all fees
and disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).

The
Company will bear their internal expenses, the expenses of any annual audit and
the fees and expenses of any person, including special experts, retained by the
Company.

(b)  In
connection with the Shelf Registration Statement required by this Agreement,
the Company will reimburse the Initial Purchasers and the Holders of Securities
covered by the Shelf Registration Statement, for the reasonable fees and
disbursements of not more than one counsel, designated by the Holders of a
majority in principal amount of the Securities covered by the Shelf
Registration Statement (provided that Holders of Common Stock issued upon the
conversion of the Initial Securities shall be deemed to be Holders of the
aggregate principal amount of Initial Securities from which such Common Stock
was converted) to act as counsel for the Holders in connection therewith.

4.  Indemnification. 
(a)  The Company agrees, jointly
and severally, to indemnify and hold harmless each Holder and each person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act (each Holder, and such controlling persons are referred to
collectively as the “Indemnified  Parties”) from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including,
but not limited to, any losses, claims, damages, liabilities or actions
relating to purchases and sales of the Securities) to which each Indemnified
Party may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Shelf Registration Statement or Prospectus
including any document incorporated by reference therein, or in any amendment
or supplement thereto or in any preliminary prospectus or “issuer free writing
prospectus,” as defined in Commission Rule 433 (“Issuer FWP”),
relating to the Shelf Registration, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse, as incurred, the Indemnified Parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
provided, however, that the Company shall not be liable in any
such case to the extent that such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Shelf Registration 

 6
 

Statement
or Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus or Issuer FWP relating to the Shelf Registration in reliance upon
and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; provided  further, however, that this
indemnity agreement will be in addition to any liability which the Company may
otherwise have to such Indemnified Party. 
The Company shall also indemnify underwriters, their officers and
directors and each person who controls such underwriters within the meaning of
the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if requested
by such Holders.

(b)  Each
Holder, severally and not jointly, will indemnify and hold harmless the
Company, their officers and directors and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act from and
against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Shelf Registration Statement or Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus or Issuer FWP relating to
the Shelf Registration, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or omission or alleged untrue statement or omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. 
This indemnity agreement will be in addition to any liability which such
Holder may otherwise have to the Company or any of its controlling persons.

(c)  Promptly
after receipt by an indemnified party under this Section 4 of notice of
the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this Section 4, notify the
indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it
from any liability that it may have under subsection (a) or (b) above except to
the extent that it has been materially prejudiced (through the forfeiture of
substantive rights or defenses) by such failure; and provided further that the
failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified
party otherwise than under subsection (a) or (b) above.  In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof.  No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement (i)
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action, and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

(d)  If the
indemnification provided for in this Section 4 is unavailable or
insufficient to hold harmless an indemnified party under subsections (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims,

 7

damages
or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations.  The relative fault of
the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company on the one hand or such Holder or such other indemnified party, as
the case may be, on the other, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). 
Notwithstanding any other provision of this Section 4(d), the
Holders shall not be required to contribute any amount in excess of the amount
by which the net proceeds received by such Holders from the sale of the Securities
pursuant to the Shelf Registration Statement exceeds the amount of damages
which such Holders have otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this
paragraph (d), each person, if any, who controls such indemnified party within
the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.

(e)  The
agreements contained in this Section 4 shall survive the sale of the
Securities pursuant to the Shelf Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.

5.  Additional Interest Under Certain Circumstances.  (a)  Additional interest (the “Additional  Interest”) with
respect to the Initial Securities shall be assessed as follows if any of the
following events occur (each such event in clauses (i) through (iii) below
being herein called a “Registration Default”):

(i)  the Shelf Registration Statement has not been
filed with the Commission by the 90th day after the first date of
original issuance of the Initial Securities;

(ii)  the Shelf Registration Statement has not
become effective by the 180th day after the
first date of original issue of the Initial Securities; or

(iii)  after the Shelf Registration Statement has
become effective, such Shelf Registration Statement ceases to be effective
(without being succeeded immediately by an effective replacement Shelf
Registration Statement), or the Shelf Registration Statement or Prospectus
contained therein ceases to be usable in connection with the resales of
Transfer Restricted Securities (as defined below), during the periods specified
herein (including any suspension period) which exceeds 90 days in the aggregate
in any consecutive 12-month period because either (i) any event occurs as a
result of which the Prospectus forming part of such Shelf Registration
Statement would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein in the light
of the circumstances under which they were made not misleading, (ii) it shall
be necessary to amend such Shelf Registration Statement or supplement the
related Prospectus to comply with the Securities Act or Exchange Act or the
respective rules thereunder, or (iii) the occurrence or existence of any
pending corporate development or other similar event with respect to the
Company or a public filing with the Commission that, in the Company’s 

 8
 

reasonable
discretion, makes it appropriate to suspend the availability of a Shelf
Registration Statement and the related Prospectus.

Each
of the foregoing will constitute a Registration Default whatever the reason for
any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.

Additional Interest shall accrue on the Initial
Securities over and above the interest set forth in the title of the Initial
Securities from and including the date on which any such Registration Default
shall occur to but excluding the date on which all such Registration Defaults
have been cured, at a rate of 0.25% per annum (the “Additional
Interest Rate”)  for the first
90-day period immediately following the occurrence of such Registration
Default.  The Additional Interest Rate
shall increase by an additional 0.25% per annum with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
Additional Interest Rate of 1.0% per annum. 
In no event will additional interest accrue after the second anniversary
of the date hereof.

(b)  A
Registration Default referred to in Section 5(a)(iii) hereof shall be
deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuer where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related Prospectus or (y) other material events, with
respect to the Company that would need to be described in such Shelf
Registration Statement or the related Prospectus and (ii) in the case of clause
(y), the Company is proceeding promptly and in good faith to amend or
supplement the Shelf Registration Statement and related Prospectus to describe
such events as required by paragraph 2(h) hereof; provided, however,
that in any case if such Registration Default occurs for a continuous period in
excess of 30 days, Additional Interest shall be payable in accordance with
the above paragraph from the day such Registration Default occurs until
such Registration Default is cured.

(c)  Any amounts of Additional Interest due
pursuant to Section 5(a) will be payable in cash on the regular interest
payment dates with respect to the Initial Securities.  The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest Rate by the
principal amount of the Initial Securities, further multiplied by a fraction,
the numerator of which is the number of days such Additional Interest Rate
was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is
360.

(d)  “Transfer Restricted Securities” means each Security until
(i) the date on which such Security has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Security is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act.

6.  Rules 144 and 144A. 
The Issuer shall use its commercially reasonable efforts to file the
reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Issuer is not required to file
such reports, it will, upon the request of any Holder, make publicly available
other information so long as necessary to permit sales of their securities
pursuant to Rules 144 and 144A.  The
Company covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by
Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)).  The Company will
provide a copy of this Agreement to prospective purchasers of Securities
identified to the Company by the Initial Purchasers upon request.  Upon the request of any Holder, the Issuer
shall deliver to such Holder a written statement as to 

 9
 

whether
it has complied with such requirements. 
Notwithstanding the foregoing, nothing in this Section 6 shall be
deemed to require the Issuer to register any of its securities pursuant to the
Exchange Act.

7.  Underwritten Registrations. 
If any of the Transfer Restricted Securities covered by the Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
(“Managing Underwriters”) will be
selected by the holders of a majority in aggregate principal amount of such
Transfer Restricted Securities to be included in such offering (provided that
holders of Common Stock issued upon conversion of the Initial Securities shall
not be deemed holders of Common Stock, but shall be deemed to be holders of the
aggregate principal amount of Initial Securities from which such Common Stock
was converted.

No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person’s Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.

8.  Miscellaneous.

(a)  Remedies.  The Company acknowledges and agrees that any
failure by the Company to comply with its obligations under Section 1
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such
relief as may be required to specifically enforce the Company’s obligations
under Sections 1 hereof.  The
Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

(b)  No Inconsistent Agreements. 
The Company will not on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.  The rights granted to
the Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company’s securities under any
agreement in effect on the date hereof.

(c)  Amendments and Waivers.  The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents
(provided that holders of Common Stock issued upon conversion of Initial
Securities shall not be deemed holders of Common Stock, but shall be deemed to
be holders of the aggregate principal amount of Initial Securities from which
such Common Stock was converted). 
Without the consent of the Holder of each Initial Security, however, no
modification may change the provisions relating to the payment of Additional
Interest.

(d)  Notices.  All notices
and other communications provided for or permitted hereunder shall be made in
writing by hand delivery, first-class mail, facsimile transmission, or air
courier which guarantees overnight delivery:

(1)  if to a
Holder of the Securities, at the most current address given by such Holder to
the Issuer.

(2)  if to the
Initial Purchasers;

Credit
Suisse Securities (USA) LLC

 10
 

Eleven Madison Avenue

New York, NY 10010-3629

Fax No.:  (212) 325-8278

Attention:  LCD-IBD Group

with
a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Fax No.: (212) 450-5425

Attention: Keith Kearney

(3)  if to the Company, at its address as follows:

Evergreen Energy Inc.

1225 17th Street, Suite 1300

Denver, CO 80202

Attention: Bill Laughlin

with
a copy to:

Berenbaum, Weinshienk & Eason

370 17th Street, 48th Floor

Denver, CO 80202

Attention: John Wills

and

Hogan & Hartson LLP

One Tabor Center, Suite 1500

1200 Seventeenth Street

Denver, CO 80202

Attention: Richard Mattera

All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
three business days after being deposited in the mail, postage prepaid, if
mailed; when receipt is acknowledged by recipient’s facsimile machine operator,
if sent by facsimile transmission; and on the day delivered, if sent by
overnight air courier guaranteeing next day delivery.

(e) Third Party Beneficiaries.  The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect their rights or the
rights of Holders hereunder.

(f)  Successors and Assigns. 
This Agreement shall be binding upon the Company and their successors and
assigns.

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

 11
 

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

(i)  Governing Law.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

By the execution and delivery of this Agreement, the
Company and the Guarantors submit to the nonexclusive jurisdiction of any
federal or state court in the State of New York.

(j)  Severability.  If any
one or more of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.

(k)  Securities Held by the Company.  Whenever the consent or approval of Holders
of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.

 12
 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the several Initial Purchasers and the
Company in accordance with its terms.

 13
 

 

	
  

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KFx Operations, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Diana L. Kubik

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Landrica Development Company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Diana L. Kubik

  
	
   

  	
   

  	
  Name:

  	
  Diana L. Kubik

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KFx Plant, 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

  

 

 14
 

 

	
  The foregoing Registration

  	
   

  
	
  Rights Agreement is hereby confirmed

  	
   

  
	
  and accepted as of the date first

  	
   

  
	
  above written.

  	
   

  
	
   

  	
   

  
	
  Credit Suisse Securities (USA) LLC

  	
   

  
	
  Capital One Southcoast, Inc.

  	
   

  
	
  Natexis Bleichroeder Inc.

  	
   

  
	
  Johnson Rice & Company L.L.C.

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  Credit Suisse Securities (USA) LLC

  	
   

  
	
   

  	
   

  	
   

  
	
  by

  	
  /s/ Paul A. Meyer

  	
   

  
	
   

  	
  Name:

  	
  Paul A. Meyer

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  

 

 15Exhibit 10

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective the 26th day of July, 2007 by and between Parlux Fragrances, Inc. (the "Company") and Neil Katz (the "Executive" and, together with the Company, the "Parties").

WHEREAS, the Company desires to employ the Executive and the Executive agrees to be employed by the Company as the Chief Executive Officer (“CEO”) of the Company on the terms and conditions set forth in this Agreement; 

WHEREAS, the terms of this Agreement have been reviewed and approved by the members of the Compensation Committee of the Board of Directors of the Company (the "Committee").

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other valuable consideration the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1.

Position and Duties.  The Company hereby agrees to employ the Executive and the Executive hereby accepts and agrees to serve as CEO of the Company.  The Executive shall report to the Board.  Subject to the advice, consent and direction of the Company's Board of Directors, the Executive will perform all duties and responsibilities and will have all authority inherent in the position of CEO.  

2.

Term of Agreement and Employment.  The term of the Executive's employment under this Agreement will be for an initial period of three (3) years, beginning on the effective date of this Agreement (the “Term”), and terminating three years thereafter.  The Term will be automatically extended for two (2) consecutive one (1) year periods, unless either party provides six (6) months prior written notice of its desire not to so extend the Term.

3.

Definitions.

A.

Cause.  For purposes of this Agreement, “Cause” for the termination of the Executive’s employment hereunder shall be deemed to exist if, in the good faith judgment of the Company’s Board of Directors:  (i) the Employee commits fraud, theft or embezzlement; (ii) the Employee commits an act of dishonesty affecting the Company or a felony or a crime involving moral turpitude; (iii) the Employee breaches any non-competition, confidentiality or non-solicitation agreement with the Company; (iv) the Employee breaches any of the material terms of this Agreement and fails to cure such breach within 30 days after the receipt of written notice of such breach from the Company; (v) the Employee engages in gross negligence or willful misconduct that causes unreasonable harm to the business and operations of the Company; or (vi) the Executive’s unreasonable failure or refusal to diligently perform the duties and responsibilities required to be performed by the Executive under the terms of this Agreement.  

B.

Company Transaction Events. For purposes of this Agreement, (i) a "Going Private Event” means a transaction in which 90% or more of the issued and outstanding shares of the capital stock of the Company are to be sold or exchanged (pursuant to an agreement, tender or exchange offer or otherwise) by the holders thereof for cash or for securities, so that upon the closing of such a transaction (or a second step merger related thereto), Parlux common stock is no longer traded on any public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock 

prior to the closing of such a transaction hold cash or non-publicly traded securities in a private company after the transaction, (ii) a "Company Merger Event" means a transaction in which 90% or more of the issued and outstanding shares of the capital stock of the Company are to be exchanged (pursuant to an agreement, exchange offer or otherwise) by the holders thereof for securities of any public company, so that upon the closing of such a transaction (or a second step merger related thereto), all Parlux common stock has been exchanged or converted into securities of a public company that are traded on a public stock exchange (e.g., Nasdaq, AMEX, NYSE, etc.) or recognized trading market (e.g., Nasdaq OTCBB) and the holders of Parlux common stock prior to the closing of such a transaction hold publicly traded securities in a public company after the transaction.  

C.

Good Reason.  For purposes of this Agreement, termination by the Executive of his employment for "Good Reason" shall mean a termination by the Executive following a "Good Reason Event" provided (i) the Executive provides notice to the Company of such Good Reason Event within 90 days of the initial existence of such Good Reason Event; (ii) the notice provides the Company with 30 days during which it may remedy the Good Reason Event; and (iii) the Company fails to remedy the Good Reason Event within such 30 day period.  A "Good Reason Event shall be deemed to occur upon (i) a material diminution in the Executive’s authority, duties, or responsibilities or (ii) any action or inaction of the Company which constitutes a material breach of this Agreement.

4.

Compensation.  

A.

Annual Base Salary.  Unless terminated pursuant to Section 9 hereof, Executive shall be paid an annual base salary of (i) $500,000 for the first 12 months of the Term, (ii) $550,000 for months 13 through 24 of the Term and (iii) $600,000 for months 25 through 36 of the Term, and for any extension of the Term pursuant to Section 2 (as applicable, the "Annual Base Salary").  The Annual Base Salary shall be payable at such regular times and intervals as the Company customarily pays its executives from time to time.

B.

Executive Bonus Plan.  The Executive shall be entitled to participate in an executive bonus plan (the “Bonus Plan”), the terms and conditions of which shall be established by the Committee for each fiscal year and which will provide that Executive will be able to earn an annual bonus of up to 50% of the Annual Base Salary, based upon achievement by the Company of certain financial measures and management objectives as determined by the Committee.

5.

Executive Benefits.  The Executive will be entitled to four weeks of paid vacation per fiscal year.  Except as otherwise provided in this Agreement, the Executive will be eligible for and may participate in, without action by the Board or any committee thereof, any benefits and perquisites available to executive officers of the Company, including any group health, dental, disability, or other form of executive benefit plan or program of the Company existing from time to time on the same terms and conditions as is available to all other executives (collectively, the "Executive Benefits").  Executive shall receive additional term life insurance coverage with an annual cost to the Company not to exceed $2,000 per year, and shall be provided with an automobile allowance of $800 per month, at the Company’s expense.

6.

Reimbursement for Relocation.  The Company will reimburse Executive for Executive's reasonable and documented relocation expenses (which will include moving expenses, travel expenses for Executive and Executive's fiance or spouse, and temporary housing for up to three months commencing on the date hereof, but which shall exclude any closing costs, brokerage commissions and other expenses incurred by Executive in connection with Executive's purchase of a residence in Broward, Miami-Dade or Palm Beach Counties, Florida ("South Florida") and 

Executive's sale of his existing residence in New York).  If at any time during the Term of this Agreement, the Company moves the location where the Executive is required to work to a location outside of South Florida, the Company will reimburse Executive for Executive's reasonable and documented relocation expenses (which will include moving expenses, travel expenses for Executive and Executive's fiance or spouse, and temporary housing for up to three months commencing on the date he is required to relocate, but which shall exclude any closing costs, brokerage commissions and other expenses incurred by Executive in connection with Executive's purchase of a residence in the new location and Executive's sale of his residence in South Florida).  If, within one year from the date of any relocation of the Executive, Executive's employment with the Company is terminated for Cause or if Executive voluntarily terminates his employment with the Company other than for Good Reason, Executive will be required to refund all moving expenses, but not the travel expenses or temporary housing expenses, included within the relocation expenses paid to Executive by the Company.  The Company shall be entitled to offset any amount owed by the Executive against any other payment due to Executive.  If the Executive's employment with the Company is terminated without Cause or if Executive terminates his employment with the Company for Good Reason, the Company will reimburse Executive's reasonable and documented moving expenses (but no other expenses) to relocate himself and his fiance or spouse to New York within six months of such termination.

7.

Stock Options.  As additional consideration for the Executive's services hereunder and the covenants contained herein, the Company shall grant Executive an option (the "Option") to purchase 180,000 shares of common stock of the Company (the "Common Stock") pursuant to the Company's 2007 Stock Incentive Plan (the "2007 Plan") upon shareholder approval of the 2007 Plan.  The Option (i) shall provide for an exercise price equal to the market price of the Common Stock as of the close of trading on a public stock exchange or recognized trading market on the date the 2007 Plan is approved by the shareholders of the Company, and (ii) shall further provide that the Option shall vest as provided on Schedule A, unless terminated pursuant to Section 9 hereof.  Immediately prior to the closing of a Going Private Event or a Company Merger Event, any unvested portion of the Option shall fully vest and be exercisable by the Executive prior to the closing of the Going Private Event or Company Merger Event; provided, however, that if the Company Merger Event is with a public company that any individual shareholder or group of affiliated shareholders of the Company beneficially owns 10% or more of for a period of at least six months prior to the closing of the Company Merger Event  (an "Affiliated Public Company"), then the vesting of the unvested portion of the Executive's Option shall not be accelerated so long as the Executive's Option to purchase shares of the Common Stock of the Company is converted into an option to purchase shares of the common stock of the Affiliated Public Company with the same economic value as of the date of the closing of the transaction.

8.

Death or Disability.  The Executive's employment will terminate immediately upon the Executive's death.  If the Executive becomes physically or mentally disabled so as to become unable for a period of more than three consecutive months to perform the Executive's duties hereunder on a substantially full-time basis, the Executive's employment will terminate as of the end of such three-month and this shall be considered a "disability" under this Agreement.  The Executive agrees to submit to reasonable examination by a licensed physician selected by the Company to confirm existence or extent of any disability.  Such termination shall not affect the Executive's benefits under the Company's disability insurance program, if any, then in effect.

9.

Termination.  The Executive may terminate this Agreement for any reason upon not less than one hundred eighty (180) days written notice.  The Company may terminate this Agreement for Cause with no prior notice, or for any other reason upon one hundred eighty (180) days written notice.

A.

Termination of Employment Other Than by Resignation of Executive or Termination for Cause.  Upon the termination of this Agreement for any reason (including termination of employment by the Executive for Good Reason, termination by the Company without Cause, or termination upon the death or disability of the Executive) other than by the resignation of Executive without Good Reason or a termination by the Company for Cause, the following shall apply: 

(i)

Termination Payment.  The Executive, or his estate and heirs following his death, shall be entitled (A) to continue to receive, except as provided in Section 11 of this Agreement, his Annual Base Salary in effect at the time of such termination for a period of 12 months following the date of such termination (the "Severance Period"), (B) to be paid, except as provided in Section 11 of this Agreement, when otherwise payable as if employment was not terminated, any bonus earned by Executive through the date of termination pursuant to the terms of the Bonus Plan prorated to the date of termination (the “Termination Payments”), and (C) to have any unvested portion of his Option fully vest as of the date of such termination.  

(ii)

Termination Benefits.  The Company shall continue to provide the Executive with the Executive Benefits for the Severance Period in accordance with Section 11 of this Agreement.

(iii)

Condition to Severance.  In the event Executive breaches any of the covenants contained in Section 10, then (A) the Company shall have no further obligation to make Termination Payments to Executive or to continue to provide the Executive Benefits to Executive during the Severance Period, and (B) any unexercised Option shall be forfeited and be cancelled. 

B.

Termination of Employment by Resignation of Executive or by the Company With Cause.  Upon the termination of Executive’s employment by the Company with Cause or the resignation of the Executive without Good Reason, the Executive shall be due no further compensation under this Agreement other than what is due and owing through the effective date of Executive’s resignation or termination, as applicable. 

10.

Restrictive Covenants.

A.

General.  The Company and the Executive hereby acknowledge and agree that (i) the Executive will come into the possession of trade secrets (as defined in Section 688.002(4) of the Florida Statutes) of the Company (the "Trade Secrets"), (ii) the restrictive covenants contained in this Section 10 are justified by legitimate business interests of the Company, including, but not limited to, the protection of the Trade Secrets, in accordance with Section 542.335(1)(e) of the Florida Statutes, and (iii) the restrictive covenants contained in this Section 10 are reasonably necessary to protect such legitimate business interests of the Company.  

B.

Non-Competition.  During the period of the Executive's employment with the Company and for two years after the termination of the Executive's employment with the Company, the Executive will not, directly or indirectly, on the Executive's own behalf or as a partner, officer, director, trustee, executive, agent, consultant, investor or member of any person, firm or corporation, or otherwise, enter into the employ of, render any service to, or engage in any business or activity which is the same as or competitive with the principal business or activity conducted by Company and any of its majority-owned subsidiaries, namely, the licensing, manufacture, and/or distribution to wholesalers of fragrances.  The business or activity conducted by the Company and its majority-owned subsidiaries shall be deemed to also include any business not currently conducted by the Company, but which during the Term of this Agreement comes to comprise 30% of the Company's net sales or operating income for any fiscal quarter.  The foregoing shall not be deemed to prevent the Executive 

from investing in securities of any company having a class of securities which is publicly traded, so long as through such investment holdings in the aggregate, the Executive is not deemed to be the beneficial owner of more than 5% of the class of securities that are so publicly traded.    

C.

Confidentiality.  During and following the period of the Executive's employment with the Company, the Executive will not use for the Executive's own benefit or for the benefit of others, or divulge to others, any information, trade secrets, knowledge or data of a secret or confidential nature and otherwise not available to members of the general public that concerns the business or affairs of the Company or its affiliates and which was acquired by the Executive at any time prior to or during the Term of the Executive's employment with the Company, except with the specific prior written consent of the Company.

D.

Work Product.  The Executive agrees that all programs, inventions, innovations, improvements, developments, methods, designs, analyses, reports and all similar or related information which relate to the business of the Company and its affiliates, actual or anticipated, or to any actual or anticipated research and development conducted in connection with the business of the Company and its affiliates, and all existing or future products or services, which are conceived, developed or made by the Executive (alone or with others) during the Term of this Agreement ("Work Product") belong to the Company.  The Executive will cooperate fully in the establishment and maintenance of all rights of the Company and its affiliates in such Work Product.  The provisions of this Section 10(D) will survive termination of this Agreement indefinitely to the extent necessary to require actions to be taken by the Executive after the termination of the Agreement with respect to Work Product created during the Term of this Agreement.

E.

Non Solicitation.  During the Term of this Agreement, and until two years after the termination of Executive's employment with the Company, the Executive shall not, directly or indirectly  (i) induce any person or entity that is a contract manufacturer, supplier or wholesale distributor of the Company's products to manufacture for, supply, distribute for or otherwise patronize any business or activity which is the same as or competitive with any business or activity conducted by the Company or any of its majority-owned subsidiaries, (ii) canvass, solicit or accept any business with respect to any fragrance from any person or entity which is an actual or proposed licensor of brands or fragrance product lines to the Company, (iii) request or advise any person or entity which is a customer of the Company to withdraw, curtail or cancel any such customer's business with the Company (provided that the Executive after the Term of this Agreement, if it is terminated without Cause by the Company or for Good Reason by the Executive, may engage in the sale of other fragrance products to the same retailers that the Company sells its fragrance products to), or (iv) employ, solicit for employment or knowingly permit any entity or business directly or indirectly controlled by him to employ or solicit for employment, any person who was employed by the Company or its majority-owned subsidiaries at or within the then prior six months, or in any manner seek to induce any such person to leave his or her employment.

F.

Non-Disparagement.  The Executive will not during employment or at anytime thereafter criticize, ridicule, or make any statement or perform any act which disparages or is derogatory of the Company or of any subsidiary, officer, director, agent, employee, contractor, customer, vendor, supplier, licensor or licensee of the Company.  The Company will not, during the Term hereof or at anytime thereafter, criticize, ridicule or make any statement or perform any act which disparages or is derogatory of the Executive.

G.

Enforcement.  The parties agree and acknowledge that the restrictions contained in this Section 10 are reasonable in scope and duration and are necessary to protect the Company or any of its subsidiaries or affiliates.  If any covenant or agreement contained in this Section 10 is found by a court having jurisdiction to be unreasonable in duration, geographical scope or character of 

restriction, the covenant or agreement will not be rendered unenforceable thereby but rather the duration, geographical scope or character of restriction of such covenant or agreement will be reduced or modified with retroactive effect to make such covenant or agreement reasonable, and such covenant or agreement will be enforced as so modified.  The Employee agrees and acknowledges that the breach of this Section 10 will cause irreparable injury to the Company or any of its subsidiaries or affiliates and upon the breach of any provision of this Section 10, the Company or any of its subsidiaries or affiliates shall be entitled to injunctive relief, specific performance or other equitable relief, without being required to post a bond; provided, however, that, this shall in no way limit any other remedies which the Company or any of its subsidiaries or affiliates may have (including, without limitation, the right to seek monetary damages).

11.

Section 409A.   In the event that Executive is a "specified employee" as defined in Treas. Reg. § 1.409A-1(i) on the date that Executives separates from service with the Company, the payment of any amount due to Executive hereunder which would be deemed the "deferral of compensation" pursuant to Treas. Reg. §1.409-1(b) shall be delayed until the date that is six (6) months after the date of separation from service (or if earlier, the date of the Executive's death).   To the extent that any payment pursuant to this Agreement is due to Executive after the end of such six month period following his separation from service (or death), such amounts shall be paid without regard to this Section 11.

12.

Representations.  Executive hereby represents and warrants to the Company that (i) the execution, delivery and full performance of this Agreement by the Executive does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Executive is subject; (ii) the Executive is not a party or bound by any employment agreement, consulting agreement, agreement not to compete, confidentiality agreement or similar agreement with any other person or entity; and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement will be the Executive's valid and binding obligation, enforceable in accordance with its terms.

13.

Assignment.  The Executive may not assign, transfer, convey, mortgage, hypothecate, pledge or in any way encumber the compensation or other benefits payable to the Executive or any rights which the Executive may have under this Agreement.  Neither the Executive nor the Executive's beneficiary or beneficiaries will have any right to receive any compensation or other benefits under this Agreement, except at the time, in the amounts and in the manner provided in this Agreement.  This Agreement will inure to the benefit of and will be binding upon any successor to the Company and any successor to the Company shall be authorized to enforce the terms and conditions of this Agreement, including the terms and conditions of the restrictive covenants contained in Section 10 hereof.  As used in this Agreement, the term "successor" means any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the capital stock or assets of the Company.  This Agreement may not otherwise be assigned by the Company.

14.

Governing Law.  This Agreement shall be governed by the laws of Florida without regard to the application of conflicts of laws.

15.

Entire Agreement.  This Agreement constitutes the only agreements between Company and the Executive regarding the Executive's employment by the Company.  This Agreement supersedes any and all other agreements and understandings, written or oral, between the Company and the Executive regarding the subject matter hereof and thereof.  A waiver by either party of any provision of this Agreement or any breach of such provision in an instance will not be deemed or construed to be a waiver of such provision for the future, or of any subsequent breach of such provision.  This 

Agreement may be amended, modified or changed only by further written agreement between the Company and the Executive, duly executed by both Parties.

16.

Dispute Resolution and Venue.  If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures before resorting to litigation.  In the event any party to this Agreement commences any litigation, proceeding or other legal action with respect to any claim arising under this Agreement,  the Parties hereby (a) agree that any such litigation, proceeding or other legal action shall be brought exclusively in a court of competent jurisdiction located within Broward County, Florida, whether a state or federal court; (b) agree that in connection with any such litigation, proceeding, or action, such parties will consent and submit to personal jurisdiction in any such court described in clause (a) and to service of process upon them in accordance with the rules and statutes governing service of process or in accordance with the notice provisions contained herein; and (c) agree to waive to the full extent permitted by law any objection that they may now or hereafter have to the venue of any such litigation, proceeding or action was brought in an inconvenient forum.  The Parties expressly agree that any breach of this Agreement shall be deemed to have occurred in such County. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN, AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.

17.

Severability; Survival.  In the event that any provision of this Agreement is found to be void and unenforceable by a court of competent jurisdiction, then such unenforceable provision shall be deemed modified so as to be enforceable (or if not subject to modification then eliminated herefrom) to the extent necessary to permit the remaining provisions to be enforced in accordance with the parties intention.  The provisions of Section 10 (and the restrictive covenants contained therein) shall survive the termination for any reason of this Agreement and/or the Employee's relationship with the Company.

18.

Notices.  Any and all notices required or permitted to be given hereunder will be in writing and will be deemed to have been given when deposited in United States mail, certified or registered mail, postage prepaid.  Any notice to be given by the Executive hereunder will be addressed to the Company to the attention of the Committee at its main offices, currently 3725 S.W. 30th Avenue, Fort Lauderdale, FL 33312 with a copy provided to the Company's counsel, Akerman Senterfitt, One S.E. 3rd Ave., Miami, FL 33131, Attn:  Jonathan Awner.  Any notice to be given to the Executive will be addressed to the Executive at the Executive's residence address last provided by the Executive to Company with a copy to the Executive's counsel, Devine Goodman Pallot & Wells, 777 Brickell Ave., Suite 850, Miami, FL 33131, Attn: Joseph Pallot.  Either party may change the address to which notices are to be addressed by notice in writing to the other party given in accordance with the terms of this Section.

19.

Headings.  Section headings are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement or any of its terms and conditions.

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement under seal as of the date first above written.

PARLUX FRAGRANCES, INC.

By: /s/ Frank A. Buttacavoli

Name: Frank A. Buttacavoli

Title:   Executive Vice President and COO

EXECUTIVE

By: /s/ Neil J. Katz

Name: Neil J. Katz

SCHEDULE A

		
	Date

	Amount Vested

	March 31, 2008

	30,000

	March 31, 2009

	60,000

	March 31, 2010

	90,000

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