Document:

exh10-1_q0907.htm

Exhibit
    10.1

    

    $95,000,000

    

    EVERGREEN
      ENERGY INC.

    

    8.00%
      Convertible Secured Notes Due August 1, 2012

    

    

    PURCHASE
      AGREEMENT

    

     July
      25, 2007

    

    CREDIT
      SUISSE SECURITIES (USA) LLC,

      As
      Representative of the Several Purchasers

    Eleven
      Madison Avenue

    New
      York, N.Y. 10010-3629

    

    Ladies
      and Gentlemen:

    

    1.  Introductory.  Evergreen
      Energy Inc., a Delaware corporation (the “Company”), proposes,
      subject to the terms and conditions stated herein, to issue and sell to the
      several initial purchasers named in Schedule A hereto (the
“Purchasers”) $95,000,000 principal amount of its 8.00%
      Convertible Secured Notes due August 1, 2012 (the “Notes”) to
      be issued under an indenture dated as of July 30, 2007 (the
“Indenture”), among the Company, Evergreen Operations, LLC, a
      Delaware limited liability company, KFx Plant, LLC, a Wyoming limited liability
      company, KFx Operations, LLC, a Wyoming limited liability company, Landrica
      Development Company, a South Dakota corporation, and Buckeye Industrial Mining
      Company, an Ohio corporation (collectively, the “Guarantors”)
      and U.S. Bank, as trustee (the “Trustee”) on a private
      placement basis pursuant to an exemption under Section 4(2) of the United
      States Securities Act of 1933, as amended (the “Securities
      Act”).  The payment of principal, premium and Additional
      Interest (as defined in the Indenture), if any, and interest on the Notes will
      be fully and unconditionally guaranteed (the “Guarantees”) on a
      secured basis, by the Guarantors.  The Notes and the Guarantees will
      be secured by a first-priority lien on the Collateral (as defined in the
      Indenture) (the “Collateral”) pursuant to a security agreement
      (the “Security Agreement”).  The Notes and Guarantees
      are herein collectively referred to as the “Offered
      Securities”.

    

    The
      holders of the Offered Securities
      will be entitled to the benefits of a Registration Rights Agreement of even
      date
      herewith among the Company and the Purchasers (the “Registration Rights
      Agreement”), pursuant to which the Company agrees to file a
      registration statement with the Securities and Exchange Commission (the
“Commission”) registering the resale of the Offered Securities
      and the Underlying Shares, as hereinafter defined, under the Securities
      Act.

    

    The
      Company hereby agrees with the
      several Purchasers as follows:

    

    2.  Representations
      and
      Warranties of the Company and the Guarantors.  The Company and
      the Guarantors, jointly and severally, represent and warrant to, and agree
      with,
      the several Purchasers that:

    

    
      	
               

            	
              (a)  A
                preliminary offering circular and an offering circular relating to
                the
                Offered Securities has been prepared by the Company. Such preliminary
                offering circular (the “Preliminary Offering Circular”)
                and offering circular (the “Offering Circular”), as
                supplemented as of the date of this Agreement, together with the
                pricing
                term sheet, dated as of the date of this agreement (the “Pricing
                Term Sheet”) attached hereto as Schedule B, are hereinafter
                collectively referred to as the “Offering Document”. As
                used herein, the terms Preliminary Offering Circular, Offering Circular
                and Offering Document shall include the documents incorporated by
                reference therein.  The terms
                “supplement,”

            

    

    
      
        
        

      

      
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              “amendment”
                and “amend,” as used herein, shall include all documents subsequently
                filed by the Company with the Commission pursuant to the Securities
                Exchange Act of 1934, as amended (the “Exchange Act”)
                that are deemed to be incorporated by reference therein. On the date
                of
                this Agreement at 9:20 a.m. (the “Applicable Time”), the
                Offering Document does not include any untrue statement of a material
                fact
                or omit to state any material fact necessary in order to make the
                statements therein, in the light of the circumstances under which
                they
                were made, not misleading. The preceding sentence does not apply
                to
                statements in or omissions from the Offering Document based upon
                written
                information furnished to the Company by or on behalf of any Purchaser
                through Credit Suisse Securities (USA) LLC (“Credit
                Suisse”) specifically for use therein, it being understood and
                agreed that the only such information is that described as such in
                Section 7(b) hereof.  Except as disclosed in the Offering
                Document, on the date of this Agreement at the Applicable Time, the
                Company's Annual Report on Form 10-K most recently filed with the
                Securities and Exchange Commission (the “Commission”) and
                all subsequent reports (collectively, the “Exchange Act
                Reports”) which have been filed by the Company with the
                Commission or sent to stockholders pursuant to the Exchange Act at
                the
                time of such filing did not 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. Such documents, when they were filed with the Commission,
                conformed in all material respects to the requirements of the Exchange
                Act
                and the rules and regulations of the Commission
                thereunder.

            

    

    

    
      	
               

            	
              (b)  The
                Company has been duly incorporated and is an existing corporation
                in good
                standing under the laws of the State of Delaware, with power and
                authority
                (corporate and other) to own its properties and conduct its business
                as
                described in the Offering Document; and the Company is duly qualified
                to
                do business as a foreign corporation in good standing in all other
                jurisdictions in which its ownership or lease of property or the
                conduct
                of its business requires such qualification, except where such failure
                to
                qualify would not have a material adverse effect on the condition
                (financial or other), business, properties or results of operations
                of the
                Company and its subsidiaries taken as a whole ("Material Adverse
                Effect").

            

    

    

    
      	
               

            	
              (c)  Each
                Guarantor has been duly incorporated or formed and is an existing
                corporation or limited liability company in good standing under the
                laws
                of the jurisdiction of its incorporation or formation, with power
                and
                authority (corporate and other) to own its properties and conduct
                its
                business as described in the Offering Document; and each Guarantor
                is duly
                qualified to do business as a foreign corporation in good standing
                in all
                other jurisdictions in which its ownership or lease of property or
                the
                conduct of its business requires such qualification, except where
                such
                failure to qualify would not have a Material Adverse Effect; all
                of the
                issued and outstanding capital stock or membership interests, as
                the case
                may be, of each Guarantor has been duly authorized and validly issued
                and
                is fully paid and nonassessable; and the capital stock or membership
                interests, as the case may be, of each Guarantor is owned by the
                Company,
                directly or indirectly through subsidiaries, free from liens, encumbrances
                and defects.

            

    

    

    
      	
               

            	
              (d)  The
                Indenture has been duly authorized by the Company and each Guarantor;
                the
                Offered Securities have been duly authorized by the Company and each
                Guarantor; and when the Offered Securities are delivered and paid
                for
                pursuant to this Agreement on the Closing Date (as defined below),
                the
                Indenture will have been duly executed and delivered by the Company
                and
                each Guarantor, such Offered Securities will have been duly executed,
                authenticated, issued and delivered by the Company and each Guarantor
                and
                will conform in all material respects to the description thereof
                contained
                in the Offering Document and (assuming the due authorization, execution
                and delivery thereof by the other parties thereto) the Indenture
                and such
                Offered Securities will constitute valid and binding obligations
                of the
                Company and each Guarantor, enforceable in accordance with their
                terms,
                subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
                moratorium and similar
                laws of general applicability relating to or affecting creditors'
                rights
                and to general equity
                principles.

            

    

    
      
        
        

      

      
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              (e)  When
                the Offered Securities are delivered and paid for pursuant to this
                Agreement on the Closing Date, such Offered Securities will be convertible
                into the shares of common stock, par value $.001 per share
                (“Underlying Shares”) of the Company in accordance with
                the terms of the Indenture; the Underlying Shares initially issuable
                upon
                conversion of such Offered Securities have been duly authorized and
                reserved for issuance upon such conversion, will conform in all material
                respects to the information in the Offering Document and will conform
                in
                all material respects to the description of such Offered Securities
                contained in the Offering Circular; the authorized equity capitalization
                of the Company is as set forth in the Offering Document; all outstanding
                shares of capital stock of the Company are, and when issued upon
                conversion the Underlying Shares will be, validly issued, fully paid
                and
                nonassessable; the outstanding Underlying Shares have been duly authorized
                and validly issued, are fully paid and nonassessable and conform
                in all
                material respects to the description thereof contained in the Offering
                Document; and the stockholders of the Company have no preemptive
                rights
                with respect to the Offered Securities or the Underlying
                Shares.

            

    

    

    
      	
               

            	
              (f)  The
                Security Agreement has been duly authorized by the Company and each
                Guarantor; and on the Closing Date (as defined below), the Security
                Agreement will have been duly executed and delivered by the Company
                and
                each Guarantor and, (assuming the due authorization, execution and
                delivery thereof by the other parties thereto) will constitute valid
                and
                binding obligations of the Company and each Guarantor, enforceable
                in
                accordance with their terms, subject to bankruptcy, insolvency, fraudulent
                transfer, reorganization, moratorium and similar laws of general
                applicability relating to or affecting creditors' rights and to general
                equity principles; the Security Agreement, when duly executed and
                delivered, will create valid and perfected security interests in
                the
                Collateral to which they relate, subject to no prior liens other
                than
                Permitted Liens (as defined in the Indenture); and each of the
                representations and warranties made by the Company and the Guarantors
                in
                the Security Agreement will be true and correct in  all material
                respects as of the Closing Date.  On the Closing Date, the
                Security Agreement will conform in all material respects as to legal
                matters to the descriptions thereof in the Offering
                Document.

            

    

    

    
      	
               

            	
              (g)  Except
                as disclosed in the Offering Document, there are no contracts, agreements
                or understandings between the Company or any Guarantor and any person
                that
                would give rise to a valid claim against the Company or any Purchaser
                for
                a brokerage commission, finder’s fee or other like payment in connection
                with transactions contemplated
                hereby.

            

    

    

    
      	
               

            	
              (h)  No
                consent, approval, authorization, or order of, or filing with, any
                governmental agency or body or any court is required for the consummation
                of the transactions contemplated by this Agreement, the Security
                Agreement
                and the Registration Rights Agreement in connection with the issuance
                and
                sale of the Offered Securities by the Company and the Guarantors,
                as
                applicable, except for the order of the Commission declaring the
                Shelf
                Registration Statement (as defined in the Registration Rights Agreement)
                effective.

            

    

    

    
      	
               

            	
              (i)  The
                execution, delivery and performance of this Agreement, the Security
                Agreement and the Registration Rights Agreement, and the issuance
                and sale
                of the Offered Securities and compliance with the terms and provisions
                thereof will not result in a breach or violation of any of the terms
                and
                provisions of, or constitute a default under (1) any statute, any
                rule,
                regulation or order of any governmental agency or body or any court,
                domestic or foreign, having jurisdiction over the Company or any
                subsidiary of the Company or any of their properties, or (2) any
                agreement
                or instrument to which the Company or any such subsidiary is a party
                or by
                which the Company or any such subsidiary is bound or to which any
                of the
                properties of the Company or any such subsidiary is subject, or (3)
                the
                charter or by-laws of the Company or any such subsidiary, except
                in the
                case of (1) and (2) for any such breach, violation or default which
                would
                not have a Material Adverse Effect, and the
                Company and each Guarantor has full power and authority to authorize,
                issue and sell the Offered Securities as contemplated by this
                Agreement.

            

    

    
      
        
        

      

      
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              (j)  This
                Agreement has been duly authorized, executed and delivered by the
                Company
                and each Guarantor.  The Registration Rights Agreement has been
                duly authorized by the Company and each Guarantor, and when executed
                and
                delivered on the Closing Date, (assuming the due authorization, execution
                and delivery thereof by the other parties thereto) will be a valid
                and
                binding agreement of the Company and each of the Guarantors, enforceable
                against the Company and each of the Guarantors in accordance with
                its
                terms, subject to bankruptcy, insolvency, fraudulent transfer,
                reorganization, moratorium and similar laws of general applicability
                relating to or affecting creditors' rights and to general equity
                principles.

            

    

    

    
      	
               

            	
              (k)  Except
                as disclosed in the Offering Document, the Company and the Guarantors
                have
                good and marketable title to all real properties and all other properties
                and assets owned by them, in each case free from liens, encumbrances
                and
                defects that would materially affect the value thereof or materially
                interfere with the use made or to be made thereof by them; and except
                as
                disclosed in the Offering Document, the Company and the Guarantors
                hold
                any leased real or personal property under valid and enforceable
                leases
                with no exceptions that would materially interfere with the use made
                or to
                be made thereof by them.

            

    

    

    
      	
               

            	
              (l)  The
                Company and the Guarantors possess adequate certificates, authorities
                or
                permits issued by appropriate governmental agencies or bodies necessary
                to
                conduct the business now operated by them and have not received any
                notice
                of proceedings relating to the revocation or modification of any
                such
                certificate, authority or permit that, if determined adversely to
                the
                Company or any of its subsidiaries, would individually or in the
                aggregate
                have a Material Adverse Effect.

            

    

    

    
      	
               

            	
              (m)  No
                labor dispute with the employees of the Company or any subsidiary
                exists
                or, to the knowledge of the Company, is imminent that might have
                a
                Material Adverse Effect.

            

    

    

    
      	
               

            	
              (n)  The
                Company and its subsidiaries own, possess or can acquire on reasonable
                terms, adequate trademarks, trade names and other rights to inventions,
                know-how, patents, copyrights, confidential information and other
                intellectual property (collectively, “intellectual
                propertyrights”) necessary to conduct the
                business now operated by them, or presently employed by them, and
                have not
                received any notice of infringement of or conflict with asserted
                rights of
                others with respect to any intellectual property rights that, if
                determined adversely to the Company or any of its subsidiaries, would
                individually or in the aggregate have a Material Adverse
                Effect.

            

    

    

    
      	
               

            	
              (o)  Except
                as disclosed in the Offering Document, neither the Company nor any
                of its
                subsidiaries is in violation of any statute, any rule, regulation,
                decision or order of any governmental agency or body or any court,
                domestic or foreign, relating to the use, disposal or release of
                hazardous
                or toxic substances or relating to the protection or restoration
                of the
                environment or human exposure to hazardous or toxic
                substances  (collectively,
                “environmentallaws”), owns or operates
                any real property contaminated with any substance that is subject
                to any
                environmental laws, is liable for any off-site disposal or contamination
                pursuant to any environmental laws, or is subject to any claim relating
                to
                any environmental laws, which violation, contamination, liability
                or claim
                would individually or in the aggregate have a Material Adverse Effect;
                and
                the Company is not aware of any pending investigation which might
                lead to
                such a claim.

            

    

    

    
      	
               

            	
              (p)  Except
                as disclosed in the Offering Document, there are no pending actions,
                suits
                or proceedings against or affecting the Company, any of its subsidiaries
                or any of their respective properties that, if determined adversely
                to the
                Company or any of its subsidiaries, would individually or in the
                aggregate
                have a Material Adverse Effect, or would materially and adversely
                affect
                the ability of the Company to perform its obligations under the Indenture,
                this Agreement or the Registration Rights Agreement, or which are
                otherwise material in the context of the sale of the
                

            

    

    
      
        
        

      

      
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              Offered
                Securities; and no such actions, suits or proceedings are threatened
                or,
                to the Company's knowledge,
                contemplated.

            

    

    

    
      	
               

            	
              (q)  The
                financial statements included in the Offering Document present fairly
                the
                financial position of the Company and its consolidated subsidiaries
                as of
                the dates shown and their results of operations and cash flows for
                the
                periods shown, and such financial statements have been prepared in
                conformity with the generally accepted accounting principles in the
                United
                States applied on a consistent basis throughout the periods covered
                thereby, except as may be expressly stated in the related notes and
                supporting schedules thereto.

            

    

    

    
      	
               

            	
              (r)  Except
                as disclosed in the Offering Document, since the date of the most
                recent
                financial statements included in the Offering Document there has
                been no
                material adverse change, nor any development or event involving a
                prospective material adverse change, in the condition (financial
                or
                other), business, properties or results of operations of the Company
                and
                its subsidiaries taken as a whole, and, except as disclosed in or
                contemplated by the Offering Document, there has been no dividend
                or
                distribution of any kind declared, paid or made by the Company on
                any
                class of its capital stock.

            

    

    

    
      	
               

            	
              (s)  Any
                third-party statistical and market-related data included in a Preliminary
                Offering Circular or the Offering Circular are based on or derived
                from
                sources that the Company believes to be reliable and accurate in
                all
                material respects.

            

    

    

    
      	
               

            	
              (t)  Except
                as set forth in the Offering Document, the Company, its subsidiaries
                and
                the Company’s Board of Directors (the “Board”) are in
                compliance with Sarbanes-Oxley Act of 2002
                (“Sarbanes-Oxley”) and the applicable rules of the New
                York Stock Exchange.  The Company maintains a system of internal
                controls, including, but not limited to, disclosure controls and
                procedures, internal controls over accounting matters and financial
                reporting, an internal audit function, and legal and regulatory compliance
                controls (collectively, “Internal Controls”), that comply
                with the Securities Laws.  The Internal Controls are overseen by
                the Audit Committee (the “Audit Committee”) of the Board
                in accordance with Exchange Rules.  The Company has not publicly
                disclosed or reported to the Audit Committee or the Board a significant
                deficiency, material weakness, change in Internal Controls or fraud
                involving management or other employees who have a significant role
                in
                Internal Controls, any violation of, or failure to comply with, the
                Securities Laws, or any matter which, if determined adversely, would
                have
                a Material Adverse Effect.  As used herein, “Securities
                Laws” means collectively, Sarbanes-Oxley, the Securities Act,
                the
                Rules and Regulations, the Exchange Act and the rules and regulations
                of
                the Commission thereunder, the auditing principles, rules, standards
                and
                practices applicable to auditors of “issuers” (as defined in
                Sarbanes-Oxley) promulgated or approved by the Public Company Accounting
                Oversight Board and the applicable rules of the New York Stock
                Exchange.

            

    

    

    
      	
               

            	
              (u)  The
                Company is not and, after giving effect to the offering and sale
                of the
                Offered Securities and the application of the proceeds thereof as
                described in the Offering Document, will not be an “investment company” as
                defined in the United States Investment Company Act of 1940 (the
                “Investment Company
                Act”).

            

    

    

    
      	
               

            	
              (v)  No
                securities of the same class (within the meaning of Rule 144A(d)(3)
                under the Securities Act) as the Offered Securities are listed on
                any
                national securities exchange registered under Section 6 of the Exchange
                Act or quoted in a U.S. automated inter-dealer quotation
                system.

            

    

    

    
      	
               

            	
              (w)  The
                offer and sale of the Offered Securities by the Company and the Guarantors
                to the several Purchasers in the manner contemplated by this Agreement
                will be exempt from the registration requirements of the Securities
                Act by
                reason of Section 4(2) thereof; and it is not
                

            

    

    
      
        
        

      

      
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              necessary
                to qualify an indenture in respect of the Offered Securities under
                the
                United States Trust Indenture Act of 1939, as amended (the “Trust
                Indenture Act”).

            

    

    

    
      	
               

            	
              (x)  Neither
                the Company, nor any of its affiliates, nor any person acting on
                its or
                their behalf (other than the Initial Purchasers, as to the Company
                makes
                no representation or warranty) (i) has, within the six-month period
                prior to the date hereof, offered or sold in the United States or
                to any
                U.S. person (as such terms are defined in Regulation S under the
                Securities Act) the Offered Securities or any security of the same
                class
                or series as the Offered Securities or (ii) has offered or will offer
                or
                sell the Offered Securities (A) in the United States by means of any
                form of general solicitation or general advertising within the meaning
                of
                Rule 502(c) under the Securities Act or (B) with respect to any
                securities sold in reliance on Rule 903 of Regulation S, by
                means of any directed selling efforts within the meaning of
                Rule 902(c) of Regulation S.  The Company has not
                entered and will not enter into any contractual arrangement with
                respect
                to the distribution of the Offered Securities except for this
                Agreement.

            

    

    

    3.  Purchase,
      Sale and
      Delivery of Offered Securities.  On the basis of the
      representations, warranties and agreements herein contained, but subject to
      the
      terms and conditions herein set forth, the Company agrees to sell to the
      Purchasers, and the Purchasers agree, severally and not jointly, to purchase
      from the Company, at a purchase price of 95.00% of the principal amount thereof
      plus accrued interest from July 30, 2007 to the Closing Date (as hereinafter
      defined) the respective principal amounts set forth opposite the names of the
      several Purchasers in Schedule A hereto.

    

    The
      Company will deliver against
      payment of the purchase price the Offered Securities in the form of one or
      more
      permanent global Securities in definitive form (the
“OfferedGlobalSecurities”)
      deposited with the Trustee as custodian for The Depository Trust Company
      (“DTC”) and registered in the name of Cede & Co., as
      nominee for DTC. Interests in any permanent global Securities will be held
      only
      in book-entry form through DTC, except in the limited circumstances described
      in
      the Offering Document. Payment for the Offered Securities shall be made by
      the
      Purchasers in Federal (same day) funds by official check or checks or wire
      transfer to an account at a bank acceptable to Credit Suisse drawn to the order
      of Evergreen Energy Inc. at the office of Davis Polk & Wardwell, 450
      Lexington Avenue, New York, New York 10017 at 10:00 A.M. (New York
      time), on July 30, 2007, or at such other time not later than four full business
      days thereafter as Credit Suisse and the Company determine, such time being
      herein referred to as the “Closing Date”, against delivery to
      the Trustee as custodian for DTC of the Offered Global Securities representing
      all of the Offered Securities. The Offered Global Securities will be made
      available for checking at the above office of Davis Polk & Wardwell at least
      24 hours prior to the Closing Date.

    

    4.  Representations
      by
      Purchasers; Resale by Purchasers.

    

    (a)  Each
      Purchaser severally
      represents and warrants to the Company that it is an “accredited investor”
within the meaning of Regulation D under the Securities Act.

    

    (b)  Each
      Purchaser severally
      acknowledges that the Offered Securities have not been registered under the
      Securities Act and may not be offered or sold within the United States or to,
      or
      for the account or benefit of, U.S. persons except pursuant to an exemption
      from
      the registration requirements of the Securities Act.  Each Purchaser
      severally represents and agrees that it has offered and sold the Offered
      Securities and will offer and sell the Offered Securities (i) as part of
      their distribution at any time and (ii) otherwise until the later of the
      commencement of the offering and the Closing Date, only in accordance with
      Rule 144A (“Rule 144A”) under the Securities
      Act.

    

    (c)  Each
      Purchaser severally
      agrees that it and each of its affiliates has not entered and will not enter
      into any contractual arrangement with respect to the distribution of the Offered
      Securities except for any such arrangements
      with the other Purchasers or affiliates of the other Purchasers or with the
      prior written consent of the Company.

    
      
        
        

      

      
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    (d)  Each
      Purchaser severally
      agrees that it and each of its affiliates will not offer or sell the Offered
      Securities by means of any form of general solicitation or general advertising,
      within the meaning of Rule 502(c) under the Securities Act, including, but
      not limited to (i) any advertisement, article, notice or other
      communication published in any newspaper, magazine or similar media or broadcast
      over television or radio, or (ii) any seminar or meeting whose attendees
      have been invited by any general solicitation or general
      advertising.  Each Purchaser severally agrees, with respect to resales
      made in reliance on Rule 144A of any of the Offered Securities, to deliver
      either with the confirmation of such resale or otherwise prior to settlement
      of
      such resale a notice to the effect that the resale of such Offered Securities
      has been made in reliance upon the exemption from the registration requirements
      of the Securities Act provided by Rule 144A.

    

    5.  Certain
      Agreements of
      the Company.  The Company agrees with the several Purchasers
      that:

    

    
      	
               

            	
              (a)  The
                Company will advise Credit Suisse promptly of any proposal to amend
                or
                supplement the Offering Document and will not effect such amendment
                or
                supplementation without Credit Suisse’s consent. If, at any time prior to
                the completion of the resale of the Offered Securities by the Purchasers
                any event occurs as a result of which the Offering Document as then
                amended or supplemented would include an untrue statement of a material
                fact or omit to state any material fact necessary in order to make
                the
                statements therein, in the light of the circumstances under which
                they
                were made, not misleading, the Company promptly will notify Credit
                Suisse
                of such event and promptly will prepare, at its own expense, an amendment
                or supplement which will correct such statement or
                omission.  Neither Credit Suisse’s consent to, nor the
                Purchaser’ delivery to offerees or investors of, any such amendment or
                supplement shall constitute a waiver of any of the conditions set
                forth in
                Section 6.

            

    

    

    
      	
               

            	
              (b)  The
                Company represents and agrees that, unless it obtains the prior consent
                of
                Credit Suisse it has not made and will not make any offer relating
                to the
                Offered Securities that would constitute an Issuer
                Communication.  As used herein, “Issuer
                Communication” means a written communication prepared by or on
                behalf of the Company, used or referred to by the Company that constitutes
                an offer to sell or a solicitation of an offer to buy the Offered
                Securities and is made by means other than the Preliminary Offering
                Circular, Pricing Term Sheet or the Offering
                Circular.

            

    

    

    
      	
               

            	
              (c)  The
                Company will furnish to Credit Suisse copies of any preliminary offering
                circular, the Offering Document and all amendments and supplements
                to such
                documents, in each case as soon as available and in such quantities
                as
                Credit Suisse requests, and the Company will furnish to Credit Suisse
                on
                the date hereof three copies of the Offering Document signed by a
                duly
                authorized officer of the Company, one of which will include the
                independent accountants’ reports therein manually signed by such
                independent accountants. At any time when the Company is not subject
                to
                Section 13 or 15(d) of the Exchange Act and, upon request of holders
                and prospective purchasers of the Offered Securities, to such holders
                and
                purchasers, copies of the information required to be delivered to
                holders
                and prospective purchasers of the Offered Securities pursuant to
                Rule 144A(d)(4) under the Securities Act (or any successor provision
                thereto) in order to permit compliance with Rule 144A in connection
                with resales by such holders of the Offered Securities.  The
                Company will pay the expenses of printing and distributing to the
                Purchasers all such documents.

            

    

    

    
      	
               

            	
              (d)  The
                Company will arrange for the qualification of the Offered Securities
                for
                sale and the determination of their eligibility for investment under
                the
                laws of such states in the United States as Credit Suisse designates
                and
                will continue such qualifications in effect so long as required for
                the
                resale of the Offered Securities by the Purchaser provided that
                the Company will not be required to qualify as a foreign corporation
                or to
                file a general consent to service of process or become subject to
                taxation
                as a foreign corporation in any such
                state.

            

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    
      	
               

            	
              (e)  During
                the period of two years after the Closing Date, the Company will,
                upon
                request, furnish to Credit Suisse, each of the other Purchasers and
                any
                holder of Offered Securities a copy of the restrictions on transfer
                applicable to the Securities.

            

    

    

    
      	
               

            	
              (f)  During
                the period of two years after the Closing Date, the Company will
                not, and
                will not permit any of its affiliates (as defined in Rule 144 under
                the Securities Act) to, resell any of the Offered Securities that
                have
                been reacquired by any of them.

            

    

    

    
      	
               

            	
              (g)  During
                the period of two years after the Closing Date, the Company will
                not be or
                become, an open-end investment company, unit investment trust or
                face-amount certificate company that is or is required to be registered
                under Section 8 of the Investment Company
                Act.

            

    

    

    
      	
               

            	
              (h)  For
                so long as the Offered Securities remain outstanding, the Company
                will
                furnish to the Purchasers, as soon as practicable after the end of
                each
                fiscal year, a copy of its annual report to stockholders for such
                year;
                and the Company will furnish to the Purchasers (i) as soon as available,
                a
                copy of each report and any definitive proxy statement of the Company
                filed with the Commission under the Exchange Act or mailed to
                stockholders, and (ii) from time to time, such other information
                concerning the Company as the Purchasers may reasonably
                request.  Notwithstanding the foregoing, so long as the Company
                is subject to the reporting requirements of either Section 13 or
                Section
                15(d) of the Exchange Act and is timely filing reports with the Commission
                on EDGAR, it is not required to furnish such reports or statements
                to the
                Purchasers.

            

    

    

    
      	
               

            	
              (i)  The
                Company will pay all expenses incidental to the performance of its
                obligations under this Agreement, the Indenture and the Registration
                Rights Agreement, including (i) the fees and expenses of the Trustee
                and
                its professional advisers; (ii) all expenses in connection with the
                execution, issue, authentication and initial delivery of the Offered
                Securities and, as applicable, the Exchange Securities (as defined
                in the
                Registration Rights Agreement), the preparation and printing of this
                Agreement, the Registration Rights Agreement, the Securities, the
                Indenture, the Offering Document and amendments and supplements thereto,
                and any other document relating to the issuance, offer, sale and
                delivery
                of the Offered Securities; (iii) the cost of qualifying the Offered
                Securities for trading in The PortalSM
                Market
                (“PORTAL”) of The Nasdaq Stock Market, Inc. and any
                expenses incidental thereto; (iv) the cost of any advertising approved
                by
                the Company in connection with the issue of the Offered Securities;
                (v)
                for any expenses (including fees and disbursements of counsel) incurred
                in
                connection with qualification of the Offered Securities for sale
                under the
                laws of such jurisdictions as Credit Suisse designates and the printing
                of
                memoranda relating thereto and (vi) for expenses incurred in distributing
                preliminary offering circulars and the Offering Document (including
                any
                amendments and supplements thereto) to the Purchasers.  The
                Company will reimburse the Purchasers for all travel expenses of
                the
                Purchasers and the Company’s officers and employees and any other expenses
                of the Purchasers and the Company in connection with attending or
                hosting
                meetings with prospective purchasers of the Offered
                Securities.

            

    

    

    
      	
               

            	
              (j)  In
                connection with the offering, until Credit Suisse shall have notified
                the
                Company and the other Purchasers of the completion of the resale
                of the
                Offered Securities, neither the Company nor any of its affiliates
                has or
                will, either alone or with one or more other persons, bid for or
                purchase
                for any account in which it or any of its affiliates has a beneficial
                interest any Offered Securities or attempt to induce any person to
                purchase any Offered Securities; and neither it nor any of its affiliates
                will make bids or purchases for the purpose of creating actual, or
                apparent, active trading in, or of raising the price of, the Offered
                Securities.

            

    

    

    
      	
               

            	
              (k)  For
                a period of 90 days after the date of the initial offering of the
                Offered
                Securities by the Purchasers, the Company will not offer, sell, contract
                to sell, pledge, or otherwise dispose of, directly or indirectly, any
                shares of Common Stock of the Company or securities convertible into
                or
                exchangeable or exercisable for shares of Common Stock of the Company
                or
                warrants or other rights 

            

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              to
                purchase shares of Common Stock of the Company, without the prior
                written
                consent of Credit Suisse, or publicly disclose the intention to make
                any
                such offer, sale, pledge or disposition, except grants of employee
                stock
                options pursuant to the terms of a plan in effect on the date hereof,
                issuances of Offered Securities pursuant to the exercise of such
                options
                or the exercise of any other stock options or stock purchase warrants
                outstanding on the date hereof. The Company will not at any time
                offer,
                sell, contract to sell, pledge or otherwise dispose of, directly
                or
                indirectly, any securities under circumstances where such offer,
                sale,
                pledge, contract or disposition would cause the exemption afforded
                by
                Section 4(2) of the Securities Act to cease to be applicable to the
                offer
                and sale of the Securities.

            

    

    

    
      	
               

            	
              6.  Conditions
                of the Obligations of the Purchasers. The obligations of the several
                Purchasers to purchase and pay for the Offered Securities on the
                Closing
                Date will be subject to the accuracy of the representations and warranties
                on the part of the Company herein, to the accuracy of the statements
                of
                officers of the Company made pursuant to the provisions hereof, to
                the
                performance by the Company of its obligations hereunder and to the
                following additional conditions
                precedent:

            

    

    

    
      	
               

            	
              (a) The
                Purchaser shall have received a letter, dated the date of this Agreement,
                of Deloitte & Touche LLP that they are independent public accountants
                within the meaning of the Securities Act and the applicable published
                rules and regulations thereunder (“Rules and
                Regulations”) and to the effect
                that:

            

    

    

    
      	
               

            	
              (i)  In
                their opinion the financial statements examined by them and included
                in
                the Offering Document and in the Exchange Act Reports comply as to
                form in
                all material respects with the applicable accounting requirements
                of the
                Securities Act and the related published Rules and
                Regulations;

            

    

    

    
      	
               

            	
               (ii)  they
                have performed the procedures specified by the American Institute
                of
                Certified Public Accountants for a review of interim financial information
                as described in Statement of Auditing Standards No. 100, Interim
                Financial Information, on the unaudited financial statements included
                in
                the Offering Document and in the Exchange Act
                Reports;

            

    

    

    
      	
               

            	
              (iii)  on
                the basis of the review referred to in clause (ii) above, a reading
                of the
                latest available interim financial statements of the Company, inquiries
                of
                officials of the Company who have responsibility for financial and
                accounting matters and other specified procedures, nothing came to
                their
                attention that caused them to believe
                that:

            

    

    

    
      	
               

            	
              (A)
                the unaudited financial statements included in the Offering Document
                or in
                the Exchange Act Reports do not comply as to form in all material
                respects
                with the applicable accounting requirements of the Securities Act
                and the
                related published Rules and Regulations or any material modifications
                should be made to such unaudited financial statements for them to
                be in
                conformity with generally accepted accounting
                principles;

            

    

    

    
      	
               

            	
              (B)
                at the date of the latest available balance sheet read by such
                accountants, or at a subsequent specified date not more than three
                business days prior to the date of this Agreement, there was any
                change in
                the capital stock or any increase in short-term indebtedness or long-term
                debt of the Company and its consolidated subsidiaries or, at the
                date of
                the latest available balance sheet read by such accountants, there
                was any
                decrease in consolidated net assets, as compared with amounts shown
                on the
                latest balance sheet included in the Offering Document the Exchange
                Act
                Reports; or

            

    

     

    
      	
               

            	
              
                (C)
                  for the period from the closing date of the latest income statement
                  included in the Offering Document, Exchange Act Reports to the
                  closing
                  date of the latest available

              

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                
                  income
                    statement read by such accountants there were any decreases,
                    as compared
                    with the corresponding period of the previous year, in consolidated
                    net
                    sales, net operating income or in the total or per share amounts
                    of
                    consolidated net income or in the ratio of earnings to fixed
                    charges.

                

              

      

    

     

    
      	
               

            	
              except
                in all cases set forth in clauses (B) and (C) above for changes,
                increases
                or decreases which the Offering Document discloses have occurred
                or may
                occur or which are described in such letter;
                and

            

    

    

    
      	
               

            	
              (iv)  they
                have compared specified dollar amounts (or percentages derived from
                such
                dollar amounts) and other financial information contained in the
                Offering
                Document and the Exchange Act Reports (in each case to the extent
                that
                such dollar amounts, percentages and other financial information
                are
                derived from the general accounting records of the Company and its
                subsidiaries subject to the internal controls of the Company's accounting
                system or are derived directly from such records by analysis or
                computation) with the results obtained from inquiries, a reading
                of such
                general accounting records and other procedures specified in such
                letter
                and have found such dollar amounts, percentages and other financial
                information to be in agreement with such results, except as otherwise
                specified in such letter.

            

    

     

    
      	
               

            	
              
                (b)  Subsequent
                  to the execution and delivery of this Agreement, there shall not
                  have
                  occurred (i) any change, or any development or event involving a
                  prospective change, in the condition (financial or other), business,
                  properties or results of operations of the Company and its subsidiaries
                  taken as one enterprise which, in the judgment of a majority in
                  interest
                  of the Purchasers, including Credit Suisse is material and adverse
                  and
                  makes it impractical or inadvisable to proceed with completion
                  of the
                  offering or the sale of and payment for the Offered Securities;
                  (ii) any downgrading in the rating of any debt securities of the
                  Company by any “nationally recognized statistical rating organization” (as
                  defined for purposes of Rule 436(g) under the Securities Act), or any
                  public announcement that any such organization has under surveillance
                  or
                  review its rating of any debt securities of the Company (other
                  than an
                  announcement with positive implications of a possible upgrading,
                  and no
                  implication of a possible downgrading, of such rating); (iii) any
                  change
                  in U.S. or international financial, political or economic conditions
                  or
                  currency exchange rates or exchange controls as would, in the judgment
                  of
                  a majority in interest of the Purchasers including Credit Suisse,
                  be
                  likely to prejudice materially the success of the proposed issue,
                  sale or
                  distribution of the Offered Securities, whether in the primary
                  market or
                  in respect of dealings in the secondary market; (iv) any material
                  suspension or material limitation of trading in securities generally
                  on
                  the New York Stock Exchange or any setting of minimum prices for
                  trading
                  on such exchange; (v) or any suspension of trading of any securities
                  of
                  the Company on any exchange or in the over-the-counter market;
                  (vi) any
                  banking moratorium declared by U.S. Federal or New York authorities;
                  (vii)
                  any major disruption of settlements of securities or clearance
                  services in
                  the United States; or (viii)  any attack on, outbreak or escalation
                  of hostilities or act of terrorism involving the United States,
                  any
                  declaration of war by Congress or any other national or international
                  calamity or emergency if, in the judgment of a majority in interest
                  of the
                  Purchasers including Credit Suisse, the effect of any such attack,
                  outbreak, escalation, act, declaration, calamity or emergency makes
                  it
                  impractical or inadvisable to proceed with completion of the offering
                  or
                  sale of and payment for the Offered
                  Securities.

              

            

    

    

    
      	
               

            	
              
                (c)  The
                  Purchaser shall have received opinions, dated the Closing Date,
                  of
                  Berenbaum, Weinshienk & Eason, P.C. and of Hogan & Hartson LLP,
                  counsel for the Company, substantially in the form is attached
                  hereto as
                  Exhibit A and Exhibit B,
                  respectively.

              

            

    

     

    
      	
               

            	
              (d)  The
                Purchasers shall have received opinions from counsel in the states
                of
                Ohio, South Dakota and Wyoming, as counsel for certain Guarantors
                organized under the laws of such states, dated the Closing Date,
                with
                respect to the matters relating to such Guarantors set forth below,
                in
                form and substance reasonably satisfactory to the Representative,
                and the
                Company and the Guarantors 

            

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              shall
                have furnished to such counsel such documents as they request for
                the
                purpose of enabling them to pass upon such
                matters.

            

    

    

    
      	
               

            	
              (i)  The
                Company has been duly incorporated and is an existing corporation
                in good
                standing under the laws of the State of Delaware, with corporate
                power and
                authority to own its properties and conduct its business as described
                in
                the Offering Document and Exchange Act Reports; and the Company is
                duly
                qualified to do business as a foreign corporation in good standing
                in all
                other jurisdictions in which its ownership or lease of property or
                the
                conduct of its business requires such
                qualification;

            

    

    

    
      	
               

            	
              (ii)
                Each subsidiary of the Company and each Guarantor has been duly
                incorporated and is an existing corporation in good standing under
                the
                laws of the jurisdiction of its incorporation, with power and authority
                (corporate and other) to own its properties and conduct its business
                as
                described in the Prospectus; and each subsidiary of the Company is
                duly
                qualified to do business as a foreign corporation in good standing
                in all
                other jurisdictions in which its ownership or lease of property or
                the
                conduct of its business requires such qualification; all of the issued
                and
                outstanding capital stock of each subsidiary of the Company has been
                duly
                authorized and validly issued and is fully paid and nonassessable;
                and the
                capital stock of each subsidiary owned by the Company, directly or
                through
                subsidiaries, is owned free from liens, encumbrances and
                defects;

            

    

    

    
      	
               

            	
              (iii)  The
                Indenture has been duly authorized, executed and delivered by the
                Company
                and each Guarantor; the Offered Securities delivered on the Closing
                Date
                have been duly authorized, executed, authenticated, issued and delivered
                by the Company and each Guarantor and conform to the description
                thereof
                contained in the Offering Document; and the Indenture and the Securities
                delivered on the Closing Date constitute valid and legally binding
                obligations of the Company and each Guarantor enforceable in accordance
                with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
                reorganization, moratorium and similar laws of general applicability
                relating to or affecting creditors' rights and to general equity
                principles;

            

    

    

    
      	
               

            	
              (iv)  The
                Offered Securities delivered on the Closing Date are convertible
                into
                Common Stock of the Company in accordance with the terms of the Indenture;
                the shares of such Common Stock initially issuable upon conversion
                of the
                Offered Securities delivered on the Closing Date have been duly authorized
                and reserved for issuance upon such conversion and, when issued upon
                such
                conversion, will be validly issued, fully paid and nonassessable;
                the
                outstanding shares of such Common Stock have been duly authorized
                and
                validly issued, are fully paid and nonassessable and conform to the
                description thereof contained in the Offering Document; and the
                stockholders of the Company have no preemptive rights with respect
                to the
                Securities or the Common Stock;

            

    

    

    
      	
               

            	
              (v)  The
                Company is not and, after giving effect to the offering and sale
                of the
                Offered Securities and the application of the proceeds thereof as
                described in the Prospectus, will not be an “investment company” as
                defined in the Investment Company Act of
                1940;

            

    

    

    
      	
               

            	
              (vi)  No
                consent, approval, authorization or order of, or filing with, any
                governmental agency or body or any court is required for the consummation
                of the transactions contemplated by this Agreement, the Security
                Agreement
                and the Registration Rights Agreement in connection with the issuance
                or
                sale of the Offered Securities by the Company and the Guarantors,
                except
                such as may be required under state securities laws except for the
                order
                of the Commission declaring the Shelf Registration Statement
                effective;

            

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    
      	
               

            	
              (vii)  There
                are no pending actions, suits or proceedings against or affecting
                the
                Company, any of its subsidiaries or any of their respective properties
                that, if determined adversely to the Company or any of its subsidiaries,
                would individually or in the aggregate have a Material Adverse Effect,
                or
                would materially and adversely affect the ability of the Company
                to
                perform its obligations under the Indenture this Agreement, the
                Registration Rights Agreement, or which are otherwise material in
                the
                context of the sale of the Offered Securities; and no such actions,
                suits
                or proceedings are threatened or, to such counsel's knowledge,
                contemplated;

            

    

    

    
      	
               

            	
              (viii)  The
                execution, delivery and performance of the Indenture, this Agreement,
                the
                Security Agreement and the Registration Rights Agreement and the
                issuance
                and sale of the Offered Securities and compliance with the terms
                and
                provisions thereof will not result in a breach or violation of any
                of the
                terms and provisions of, or constitute a default under, any statute,
                any
                rule, regulation or order of any governmental agency or body or any
                court
                having jurisdiction over the Company or any subsidiary of the Company
                or
                any of their properties, or any agreement or instrument to which
                the
                Company or any such subsidiary is a party or by which the Company
                or any
                such subsidiary is bound or to which any of the properties of the
                Company
                or any such subsidiary is subject, or the charter or by-laws of the
                Company or any such subsidiary, and the Company has full power and
                authority to authorize, issue and sell the Offered Securities as
                contemplated by this Agreement;

            

    

    

    
      	
               

            	
              (ix)  Such
                counsel have no reason to believe that the Offering Circular, or
                any
                amendment or supplement thereto, or any Exchange Act Report as of
                the date
                hereof and as of the Closing Date, contained any untrue statement
                of a
                material fact or omitted to state any material fact necessary to
                make the
                statements therein not misleading; the descriptions in the Offering
                Circular and the Exchange Act Reports of statutes, legal and governmental
                proceedings and contracts and other documents are accurate and fairly
                present the information, it being understood that such counsel need
                express no opinion as to the financial statements or other financial
                data
                contained in the Offering Circular and the Exchange Act
                Reports;

            

    

    

    
      	
               

            	
              (x)  This
                Agreement and the Registration Rights Agreement have been duly authorized,
                executed and delivered by the Company and each
                Guarantor;

            

    

    

    
      	
               

            	
              (xi)  The
                Registration Rights Agreement is a valid and binding agreement of
                the
                Company and each Guarantor, enforceable against the Company and each
                Guarantor in accordance with its terms, subject to bankruptcy, insolvency,
                fraudulent transfer, reorganization, moratorium and similar laws
                of
                general applicability relating to or affecting creditors' rights
                and to
                general equity principles;

            

    

    

    
      	
               

            	
              (xii)  It
                is not necessary in connection with (i) the offer, sale and delivery
                of
                the Offered Securities by the Company to the several Purchasers pursuant
                to this Agreement or (ii) the resales of the Offered Securities by
                the several Purchasers in the manner contemplated hereby to register
                the
                Offered Securities under the Securities Act or to qualify an indenture
                in
                respect thereof under the Trust Indenture
                Act;

            

    

    

    
      	
               

            	
              (xii)  The
                Security Agreement has been duly authorized, executed and delivered
                by the
                Company and each Guarantor;

            

    

    

    
      	
               

            	
              (xiii)  The
                Security Agreement constitutes a legally valid and binding obligation
                of
                the Company and each Guarantor, enforceable in accordance with its
                terms,
                subject to bankruptcy,
                insolvency, fraudulent transfer, reorganization, moratorium and similar
                laws of general applicability relating to or affecting creditors'
                rights
                and to general equity
                principles;

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              (xiv)  The
                Security Agreement is effective to create, in favor of the Collateral
                Agent (as defined in the Indenture) for the benefit of the Secured
                Parties
                (as defined in the Security Agreement) as security for the Secured
                Obligations (as defined in the Security Agreement), a valid security
                interest (the “Article 9 Security Interest”) in the
                right, title and interest of the Company and each Guarantor in that
                portion of the Collateral described therein (the “Article 9
                Collateral”) in which a security interest may be created pursuant
                to Article 9 of the Uniform Commercial Code as in effect in the applicable
                jurisdiction on the Closing Date (the “UCC”);
                and

            

    

    

    
      	
               

            	
              (xv)  To
                the extent that the filing of a Uniform Commercial Code financing
                statement in the applicable jurisdiction is effective under the UCC
                to
                perfect a security interest in the Article 9 Collateral, the Article
                9
                Security Interest in the Article 9 Collateral will be perfected upon
                the
                filing of Uniform Commercial Code financing statements in the forms
                attached to such opinion (the “Financing Statements”) in
                the filing office located in the jurisdiction that is indicated thereon,
                except that (i) continuation statements with respect to each Financing
                Statement must be filed within the period of six months prior to
                the
                expiration of five years from the date of the filing of such Financing
                Statement and any such continuation statement and (ii) additional
                filings
                may be necessary if the Company or a Guarantor indicated as the debtor
                in
                a Financing Statement changes its name or its “location” (as defined in
                Section 9-307 of the UCC).

            

    

     

    
      	
               

            	
              (e)  The
                Purchasers shall have received from Davis Polk & Wardwell, counsel for
                the Purchasers, such opinion or opinions, dated the Closing Date,
                with
                respect to such matters as Credit Suisse may require, and the Company
                shall have furnished to such counsel such documents as they request
                for
                the purpose of enabling them to pass upon such
                matters.

            

    

    

    
      	
               

            	
              (f)  The
                Purchasers shall have received a certificate, dated the Closing Date,
                of
                the President or any Vice President and a principal financial or
                accounting officer of the Company and the Guarantors in which such
                officers, to the best of their knowledge after reasonable investigation,
                shall state that the representations and warranties of the Company
                and the
                Guarantors in this Agreement are true and correct, that the Company
                has
                complied with all agreements and satisfied all conditions on its
                part to
                be performed or satisfied hereunder at or prior to the Closing Date,
                and
                that, subsequent to the date of the most recent financial statements
                in
                the Offering Document there has been no material adverse change,
                nor any
                development or event involving a prospective material adverse change,
                in
                the condition (financial or other), business, properties or results
                of
                operations of the Company and its subsidiaries taken as a whole except
                as
                set forth in the Offering Document and Exchange Act Reports or as
                described in such certificate.

            

    

    

    
      	
               

            	
              (g)  The
                Purchasers shall have received a letter, dated the Closing Date,
                of
                Deloitte & Touche LLP which meets the requirements of subsection (a)
                of this Section, except that the specified date referred to in such
                subsection will be a date not more than three days prior to the Closing
                Date for the purposes of this
                subsection.

            

    

    

    
      	
               

            	
              (h)  The
                Purchasers shall have received, on or prior to the date of this Agreement,
                lockup letters from each of the executive officers and directors
                of the
                Company.

            

    

    

    
      	
               

            	
              (i)  The
                Offered Securities shall have been designated as PORTAL-eligible
                securities in accordance with the rules and regulation of the National
                Association of Securities Dealers, Inc., and the Offered Securities
                shall
                be eligible for clearance and settlement through the facilities of
                DTC.

            

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    
      	
               

            	
              (j)  The
                Purchasers shall have received fully executed original copies of
                the
                Security Agreement and such evidence as they may reasonably require
                of the
                effectiveness of the security contemplated thereby and the perfection
                of
                the security interest created thereby (including, without limitation,
                the
                filing of UCC-1s, the delivery of certificated securities or other
                possessory collateral and any LLC interests which are certificated
                together with duly executed instruments of transfer or assignment
                in
                blank).

            

    

    

    
      	
               

            	
              (k)  The
                Company and the Guarantors shall have entered into the Registration
                Rights
                Agreement.

            

    

    

    The
      Company will furnish the Purchasers with such conformed copies of such opinions,
      certificates, letters and documents as the Purchasers reasonably request. Credit
      Suisse may in its sole discretion waive on behalf of the Purchasers compliance
      with any conditions to the obligations of the Purchasers hereunder.

    

    7.  Indemnification
      and
      Contribution.  (a)  The Company and the Guarantors will
      jointly and severally indemnify and hold harmless each Purchaser, its partners,
      members, directors, officers and affiliates and each person, if any, who
      controls such Purchaser within the meaning of Section 15 of the Securities
      Act,
      against any losses, claims, damages or liabilities, joint or several, to which
      such person may become subject, under the Securities Act or the Exchange Act
      or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the Offering Document, or
      any
      amendment or supplement thereto, or any related Preliminary Offering Circular
      or
      the Exchange Act Reports, 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 in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading, including any losses,
      claims, damages or liabilities arising out of or based upon the Company's or
      a
      Guarantor’s failure to perform its obligations under Section 5(a) of this
      Agreement, and will reimburse such indemnified person for any legal or other
      expenses reasonably incurred by such indemnified person in connection with
      investigating or defending any such loss, claim, damage, liability or action
      as
      such expenses are incurred; provided, however, that the
      Company and the Guarantors will not be liable in any such case to the extent
      that any such loss, claim, damage or liability arises out of or is based upon
      an
      untrue statement or alleged untrue statement in or omission or alleged omission
      from any of such documents in reliance upon and in conformity with written
      information furnished to the Company by or on behalf of any Purchaser through
      Credit Suisse specifically for use therein, it being understood and agreed
      that
      the only such information consists of the information described as such in
      subsection (b) below.

    

    (b)  Each
      Purchaser will
      severally and not jointly indemnify and hold harmless the Company and the
      Guarantors, their respective directors and officers and each person, if any,
      who
      controls either the Company or any Guarantor within the meaning of Section
      15 of
      the Securities Act, against any losses, claims, damages or liabilities to which
      the Company or any Guarantor may become subject, under the Securities Act or
      the
      Exchange Act or otherwise, insofar as such losses, claims, damages or
      liabilities (or actions in respect thereof) arise out of or are based upon
      any
      untrue statement or alleged untrue statement of any material fact contained
      in
      the Offering Document, or any amendment or supplement thereto, or any related
      preliminary offering circular, or arise out of or are based upon the omission
      or
      the alleged omission to state therein a material fact necessary in order to
      make
      the statements therein, in the light of the circumstances under which they
      were
      made, not misleading, in each case to the extent, but only to the extent, that
      such untrue statement or alleged untrue statement or omission or alleged
      omission was made in reliance upon and in conformity with written information
      furnished to the Company by such Purchaser through Credit Suisse specifically
      for use therein, and will reimburse any legal or other expenses reasonably
      incurred by the Company in connection with investigating or defending any such
      loss, claim, damage, liability or action as such expenses are incurred, it
      being
      understood and agreed that the only such information furnished by any Purchaser
      consists of the following information in the Offering Document under the caption
      “Plan of Distribution”: paragraphs 3, 12 and 13; provided,
however, that the Purchasers shall not be liable for any losses,
      claims, damages or liabilities

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    arising
      out of or based upon the Company's failure to perform its obligations under
      Section 5(a) of this Agreement.

    

    (c)  Promptly
      after receipt
      by an indemnified party under this Section of notice of the commencement of
      any
      action, such indemnified party will, if a claim in respect thereof is to be
      made
      against the indemnifying party under subsection (a) or (b) above, 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 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 for any legal or
      other expenses subsequently incurred by such indemnified party in connection
      with the defense thereof other than reasonable costs of investigation. 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
      includes (i) 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 failure
      to act by or on behalf of any indemnified party.

    

    (d)  If
      the indemnification
      provided for in this Section is unavailable or insufficient to hold harmless
      an
      indemnified party under subsection (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, damages or liabilities referred to in
      subsection (a) or (b) above (i) in such proportion as is appropriate to
      reflect the relative benefits received by the Company on the one hand and the
      Purchasers on the other from the offering of the Offered Securities or
      (ii) if the allocation provided by clause (i) above is not permitted by
      applicable law, in such proportion as is appropriate to reflect not only the
      relative benefits referred to in clause (i) above but also the relative fault
      of
      the Company on the one hand and the Purchasers on the other in connection with
      the statements or omissions which resulted in such losses, claims, damages
      or
      liabilities as well as any other relevant equitable considerations. The relative
      benefits received by the Company on the one hand and the Purchasers on the
      other
      shall be deemed to be in the same proportion as the total net proceeds from
      the
      offering (before deducting expenses) received by the Company bear to the total
      discounts and commissions received by the Purchasers from the Company under
      this
      Agreement. The relative fault 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 or the Purchasers and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      untrue 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 the provisions of this subsection (d), no
      Purchaser shall be required to contribute any amount in excess of the amount
      by
      which the total price at which the Offered Securities purchased by it were
      resold exceeds the amount of any damages which such Purchaser has otherwise
      been
      required to pay by reason of such untrue or alleged untrue statement or omission
      or alleged omission.  The Purchasers’ obligations in this subsection
      (d) to contribute are several in proportion to their respective purchase
      obligations and not joint.

    

    (e)  The
      obligations of the
      Company and the Guarantors under this Section shall be in addition to any
      liability which the Company may otherwise have and shall extend, upon the same
      terms and conditions, to each

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    person,
      if any, who controls any Purchaser within the meaning of the Securities Act
      or
      the Exchange Act; and the obligations of the Purchasers under this Section
      shall
      be in addition to any liability which the respective Purchasers may otherwise
      have and shall extend, upon the same terms and conditions, to each person,
      if
      any, who controls the Company and any Guarantor within the meaning of the
      Securities Act or the Exchange Act.

    

                  8.  Default
      of Purchasers.  If any Purchaser or Purchasers default in their
      obligations to purchase Securities hereunder on the Closing Date and the
      aggregate principal amount of the Offered Securities that such defaulting
      Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of
      the
      total principal amount of the Offered Securities that the Purchasers are
      obligated to purchase on the Closing Date, Credit Suisse may make arrangements
      satisfactory to the Company for the purchase of such Offered Securities by
      other
      persons, including any of the Purchasers, but if no such arrangements are made
      by the Closing Date, the non-defaulting Purchasers shall be obligated severally,
      in proportion to their respective commitments hereunder, to purchase the
      Securities that such defaulting Purchasers agreed but failed to purchase on
      the
      Closing Date.  If any Purchaser or Purchasers so default and the
      aggregate principal amount of the Offered Securities with respect to which
      such
      default or defaults occur exceeds 10% of the total principal amount of the
      Offered Securities that the Purchasers are obligated to purchase on the Closing
      Date and arrangements satisfactory to Credit Suisse and the Company for the
      purchase of such Offered Securities by other persons are not made within 36
      hours after such default, this Agreement will terminate without liability on
      the
      part of any non-defaulting Purchaser or the Company, except as provided in
      Section 9.  As used in this Agreement, the term “Purchaser” includes
      any person substituted for a Purchaser under this Section. Nothing herein will
      relieve a defaulting Purchaser from liability for its default.

    

    9.  Survival
      of Certain
      Representations and Obligations.  The respective indemnities,
      agreements, representations, warranties and other statements of the Company
      and
      the Guarantors or their respective officers and of the several Purchasers set
      forth in or made pursuant to this Agreement will remain in full force and
      effect, regardless of any investigation, or statement as to the results thereof,
      made by or on behalf of any Purchaser, the Company, any Guarantor or any of
      their respective representatives, officers or directors or any controlling
      person, and will survive delivery of and payment for the Offered Securities.
      If
      this Agreement is terminated pursuant to Section 8 or if for any reason the
      purchase of the Offered Securities by the Purchasers is not consummated, the
      Company shall remain responsible for the expenses to be paid or reimbursed
      by it
      pursuant to Section 5 and the respective obligations of the Company and the
      Purchasers pursuant to Section 7 shall remain in effect and if any Offered
      Securities have been purchased hereunder the representations and warranties
      in
      Section 2 and all obligations under Section 5 shall remain in
      effect.  If the purchase of the Offered Securities by the Purchasers
      is not consummated for any reason other than solely because of the termination
      of this Agreement pursuant to Section 8 or the occurrence of any event specified
      in clause (iii), (iv), (vi), (vii) or (viii) of Section 6(b), the Company
      will reimburse the Purchasers for all out-of-pocket expenses (including fees
      and
      disbursements of counsel) reasonably incurred by them in connection with the
      offering of the Offered Securities.

    

    10.  Notices.  All
      communications hereunder will be in writing and, if sent to the Purchasers
      will
      be mailed, delivered or telegraphed and confirmed to the Purchasers c/o Credit
      Suisse Securities (USA) LLC, at Eleven Madison Avenue, New York, New York
      10010-3629, Attention:  Transactions Advisory Group, or, if sent to
      the Company, will be mailed, delivered or telegraphed and confirmed to it at
      1225 17th
      Street, Suite 1300, Denver, CO 80202, Attention:  General Counsel;
      provided, however, that any notice to a Purchaser pursuant to Section 7 will
      be
      mailed, delivered or telegraphed and confirmed to such Purchaser.

    

    11.  Successors.  This
      Agreement will inure to the benefit of and be binding upon the parties hereto
      and their respective successors and the controlling persons referred to in
      Section 7, and no other person will have any right or obligation hereunder,
      except that holders of Offered Securities shall be entitled to enforce the
      agreements for their benefit contained in the second and third sentences of
      Section 5(b) hereof against the Company as if such holders were parties
      hereto.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    12.  Representation
      of
      Purchasers.  You will act for the several Purchasers in
      connection with this purchase, and any action under this Agreement taken by
      you.

    

    13.  Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original, but all such counterparts shall together constitute
      one and the same Agreement.

    

    14.  Absence
      of Fiduciary
      Relationship.  The Company and each Guarantor acknowledges and
      agrees that:

    

    (a)
      The Representative has been retained solely to act as initial purchaser in
      connection with the sale of the Offered Securities and that no fiduciary,
      advisory or agency relationship between the Company or any Guarantor and the
      Representative has been created in respect of any of the transactions
      contemplated by this Agreement, irrespective of whether the Representative
      has
      advised or is advising Company on other matters;

    

    (b)
      the price of the Offered Securities set forth in this Agreement was established
      by the Company and the Guarantors following discussions and arms-length
      negotiations with the Representative and the Company and the Guarantors are
      capable of evaluating and understanding and understand and accept the terms,
      risks and conditions of the transactions contemplated by this
      Agreement;

    

    (c)
      it has been advised that the Representative and its affiliates are engaged
      in a
      broad range of transactions which may involve interests that differ from those
      of the Company and the Guarantors and that the Representative has no obligation
      to disclose such interests and transactions to the Company and the Guarantors
      by
      virtue of any fiduciary, advisory or agency relationship; and

    

    (d)
      it waives, to the fullest extent permitted by law, any claims it may have
      against the Representative for breach of fiduciary duty or alleged breach of
      fiduciary duty and agrees that the Representative shall have no liability
      (whether direct or indirect) to the Company or any Guarantor in respect of
      such
      a fiduciary duty claim or to any person asserting a fiduciary duty claim on
      behalf of or in right of the Company or any Guarantor, including stockholders,
      employees or creditors of the Company.

    

    14. Applicable
      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.

    

    The
      Company and each Guarantor hereby
      submits to the non-exclusive jurisdiction of the Federal and state courts in
      the
      Borough of Manhattan in The City of New York in any suit or proceeding arising
      out of or relating to this Agreement or the transactions contemplated
      hereby.

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    If
      the foregoing is in accordance with
      the Purchasers’ understanding of our agreement, kindly sign and return to the
      Company one of the counterparts hereof, whereupon it will become a binding
      agreement between the Company, the Guarantors and the several Purchasers in
      accordance with its terms.

    

    Very
      truly yours,

    

    EVERGREEN
      ENERGY INC.

    

    By: 
/s/
      Kevin R.
      Collins

    Title: 
President
      and
      CEO

    

    

    

    EVERGREEN
      OPERATIONS, LLC

    

    By: 
/s/
      Kevin R.
      Collins

    Title: 
President
      and
      CEO

    

    

    

    KFX
      PLANT, LLC

    

    By: 
/s/
      Kevin R.
      Collins

    Title: 
President
      and
      CEO

    

    

    

    KFX
      OPERATIONS, LLC

     

    By: 
/s/
      Kevin R.
      Collins

    Title:
 President
      and
      CEO

    
 

    

    LANDRICA
      DEVELOPMENT
      COMPANY

    

    By: 
/s/
      Kevin R.
      Collins

    Title: 
President
      and
      CEO

    

    

    

    BUCKEYE
      INDUSTRIAL MINING
      COMPANY

    

    By:
      /s/ William G.
      Laughlin

    Title: 
Vice
      President,
      General  Counsel and Secretary

    

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              The
                foregoing Purchase Agreement is hereby con-

                firmed
                and accepted as of the date first above
                written.

            

    

    

    

    

    
      	
               

            	
              Credit
                Suisse Securities (USA) LLC

            

    

    

    

    
      	
               

            	
              By:
                /s/ Paul Meyer

            

    

                      Title:
       Director

    

    Acting
      on behalf of itself and as the Representative of

    the
      several Purchasers

     

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      SCHEDULE
        A

      

      
        	 
                
                Purchaser

              	 	
                
                

                
                  Principal
                    Amount of

                  Offered
                    Securities

                

              	 
	 	 	 	 
	
                Credit
                  Suisse Securities (USA)
                  LLC                                                                                       

              	 	$	
                82,507,500.00

              	 
	 	 	 	 	 
	
                Capital
                  One Southcoast,
                  Inc.                                                                                       

              	 	$	
                3,999,500.00

              	 
	 	 	 	 	 
	
                Natexis
                  Bleichroeder
                  Inc.                                                                                       

              	 	$	
                4,493,500.00

              	 
	 	 	 	 	 
	
                Johnson
                  Rice & Company
                  L.L.C.                                                                                       

              	 	$	
                3,999,500.00

              	 
	 	 	 	 	 
	 	 	 	 	 
	
                Total

              	 	$	
                95,000,000.00

              	 

      

       

       

      
 

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      SCHEDULE
        B

      

      Pricing
        Term Sheet

      

      Evergreen
        Energy Inc. 8.00% Convertible Secured Notes Due August 1,
        2012

       

      Issuer:      Evergreen
        Energy Inc.

      Ticker:      EEE
        (NYSE Arca)

      Issue
        Size (Proceeds):      $95,000,000

      Escrow
        Amount:      $18,000,000

      Overallotment
        Option:      $0

      Security:      8.00%
        Convertible Secured Notes Due August 1, 2012

      Form
        of
        Registration:      144A with
        Registration Rights

      Face
        Amount:      $1,000 per
        Convertible Note

      Trade
        Date:      July
        25,
        2007

      Settlement
        Date:      July
        30,
        2007

      Maturity:      August
        1,
        2012

      Bilateral
        Provisional Call Feature:      At
        $6.83  (20
        out of 30 days)

      Interest
        Payment Dates:      February
        1 and August
        1

      Coupon
        Make-Whole Rate:      T
        +
        50bps

      Coupon:      8.00%

      Coupon
        Step-Down:      300 bps (5.00% all-in
        rate)

      Conversion
        Premium:      40.0%

      Closing
        Bid Price:      $3.75

      Conversion
        Price:      $5.25

      Conversion
        Rate:      190.4762

      Underlying
        Shares:      18,095,239

      CUSIP:      30024BAA2

      ISIN:      US30024BAA26

      

      ECONOMICS

      Sole
        Bookrunner      Credit Suisse
        (86.85%)

      
        Co-Manager      Natexis
          Bleichroeder (4.73%), CapitalOne Southcoast (4.21%), Johnson Rice & Co
          (4.21%)

      

      Gross
        Spread:      5.00%

      Gross
        Spread: $ / Bond:      $50.00

      Management:      $10.00

      Underwriting:      $10.00

      Selling
        Concession:      $30.00

      

      [continued
        on next page]

      

      

       

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      

      

      
        	
                Ticker

              	
                EEE

              	 	 	 	 	 	 	 
	
                Stock
                  Price

              	
                $3.75

              	 	 	 	 	 	 	 
	
                Conversion
                  Price

              	
                $5.25

              	 	 	 	 	 	 	 
	
                Premium

              	
                40.0%

              	 	 	 	 	 	 	 
	
                Ratio

              	
                190.4762

              	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	
                Additional
                  Shares per $1,000 Principal Amount of Notes

              
	 	 	 	 	 	 	 	 	 
	 	 	 	
                Change
                  of Control Date

              
	 	 	 	
                8/1/2007

              	
                8/1/2008

              	
                8/1/2009

              	
                8/1/2010

              	
                8/1/2011

              	
                8/1/2012

              
	 	 	
                $3.75

              	
                76.19

              	
                76.19

              	
                76.19

              	
                76.19

              	
                76.19

              	
                76.19

              
	 	 	
                $4.00

              	
                73.43

              	
                72.42

              	
                71.76

              	
                70.43

              	
                67.23

              	
                59.52

              
	 	 	
                $4.50

              	
                56.48

              	
                54.67

              	
                53.50

              	
                51.13

              	
                45.44

              	
                31.75

              
	 	 	
                $5.00

              	
                39.96

              	
                38.47

              	
                37.58

              	
                35.51

              	
                30.43

              	
                9.52

              
	 	 	
                $5.50

              	
                26.63

              	
                25.50

              	
                24.99

              	
                23.32

              	
                19.23

              	
                0.00

              
	 	 	
                $6.00

              	
                15.85

              	
                15.25

              	
                15.01

              	
                13.77

              	
                10.80

              	
                0.00

              
	 	 	
                $6.50

              	
                7.46

              	
                7.42

              	
                7.38

              	
                6.53

              	
                4.70

              	
                0.00

              
	 	 	
                $7.00

              	
                2.67

              	
                2.52

              	
                2.43

              	
                1.93

              	
                0.00

              	
                0.00

              
	 	 	
                $7.50

              	
                0.72

              	
                0.56

              	
                0.39

              	
                0.22

              	
                0.00

              	
                0.00

              
	 	 	
                $8.00

              	
                0.15

              	
                0.10

              	
                0.05

              	
                0.03

              	
                0.00

              	
                0.00

              
	 	 	
                $8.50

              	
                0.05

              	
                0.03

              	
                0.02

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $9.00

              	
                0.02

              	
                0.02

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $9.50

              	
                0.02

              	
                0.02

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $10.00

              	
                0.02

              	
                0.02

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $10.50

              	
                0.02

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $11.00

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $11.50

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $12.00

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00

              
	 	 	
                $12.50

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.01

              	
                0.00

              	
                0.00Exhibit 10.1

                             SECURED PROMISSORY NOTE

$3,000,000                                                         June 25, 2007

         FOR VALUE  RECEIVED,  the  undersigned,  STEVEN  MADDEN,  an individual
residing at 175 East 73rd  Street,  New York,  New York 10021 (the  "Borrower"),
hereby  unconditionally  promises to pay to the order of STEVEN MADDEN,  LTD., a
Delaware  corporation  (the  "Company"),  at the time,  place and in the  manner
specified below, the principal amount of three million dollars ($3,000,000), and
to pay simple  interest  on the unpaid  principal  amount  hereof at the rate of
eight  percent  (8%) per annum  (calculated  on the  basis of a  360-day  year),
payable from the date hereof until such principal amount shall be paid in full.

         Borrower  shall pay the full  principal  amount of this  Note,  and all
accrued and unpaid  interest  thereon,  to the Company on the earlier of (i) the
date Borrower ceases to be employed by the Company and (ii) December 31, 2007.

         Payment of principal  and interest  under this Note shall be payable in
lawful money of the United States of America in immediately  available  funds at
the offices of the Company at 52-16 Barnett  Avenue,  Long Island City, New York
11104,  or at such other place as the Company  may  designate  in writing to the
Borrower.

         Borrower may prepay this Note in whole or in part at any time and from
time to time, without penalty. All payments shall be applied first to accrued
and unpaid interest and then to principal.

         The Company is hereby  authorized  by Borrower from time to time to set
off, appropriate and apply any and all amounts due and payable to the Company by
the Borrower under this Note against any and all amounts payable to the Borrower
by the Company pursuant to Section 4.10 of that certain Third Amended Employment
Agreement, dated as of July 15, 2005, by and between Borrower and the Company.

         To secure the Borrower's  payment and  performance of all of Borrower's
obligations  hereunder,  Borrower  hereby pledges to and assigns to the Company,
and grants to the Company a first  priority  continuing  security  interest  in,
510,000  shares of common  stock of the Company,  par value  $.000067 per share,
owned by Borrower (the "Pledged  Shares") and all dividends and  distribution in
respect  of  such  Pledged  Shares,   and  proceeds  of  all  of  the  foregoing
(collectively,  the  "Collateral").  Simultaneously  with the  execution of this
Note,  the  Borrower  shall  deliver  and  pledge  to the  Company  any  and all
certificates  evidencing  the Pledged  Shares  (accompanied  by stock  powers or
assignments,   as  applicable,   duly  executed  in  blank).   If  a  securities
intermediary,  broker or agent is holding the Pledged  Shares,  Borrower  shall,
simultaneously   with  the  execution  of  this  Note,  in  the  Company's  sole
discretion:  (a) cause such  securities  intermediary,  broker  and/or  agent to
execute and deliver to the Company a control agreement  acknowledging the pledge
granted hereunder and perfecting the Company's  security interest in the Pledged
Shares, which agreement shall be in form and substance acceptable to the Company
in its sole discretion,  (b) authorize such securities  intermediary,  broker or
agent to  transfer  Borrower's  securities  entitlements  with  respect  to such
Pledged  Shares to an account as to which the  Company is its  customer,  or (c)

<PAGE>

cause the Pledged  Shares to be evidenced by  certificates  and delivered to the
Company  pursuant to the immediately  preceding  sentence.  Until the Borrower's
obligations under this Note are satisfied in full, the Borrower shall not offer,
sell, contract to sell, transfer or otherwise dispose of or encumber the Pledged
Shares without the Company's prior written consent.

         From time to time upon  request  by the  Company,  the  Borrower  shall
furnish such further assurances of title with respect to the Collateral, execute
such  written  agreements,  or do  such  other  acts,  in  each  case  as may be
reasonably necessary,  in the Company's sole discretion,  in order to perfect or
continue the first  priority  lien and  security  interest of the Company in the
Collateral.

         The  Borrower  hereby  authorizes  the  Company to file one or more UCC
financing  statements,  and  amendments  and  continuations  thereto (or similar
documents required by any laws of any applicable jurisdiction),  relating to all
or any part of the  Collateral  without the  signature  of the  Borrower (to the
extent  such   signature   is  required   under  the  laws  of  any   applicable
jurisdiction).

         If Borrower  fails to make any payment of  principal or interest on the
date when such  payment  is due and  payable  under  this Note and such  failure
continues for a period of three (3) days (a "Default"), then, in addition to all
other  rights,  options and remedies  granted or available to the Company  under
this  Note,  the  Company  may,  upon or at any time after the  occurrence  of a
Default,  exercise all rights under the Uniform  Commercial  Code,  as in effect
from time to time, and any other applicable law or in equity.

         Borrower  waives  presentment,  notice of dishonor  and protest of this
Note.  The  Company  shall  not be deemed to have  waived  any of its  rights or
remedies  hereunder  unless  such  waiver  shall be in writing and signed by the
Company, and no delay or omission by the Company in exercising any of its rights
or remedies  hereunder shall operate as a waiver thereof.  A waiver of any right
or remedy on one occasion  shall not be construed as a waiver of any other right
or remedy then or thereafter existing.

         This Note may not be  modified or amended  without the express  written
consent of the Company and the Borrower.

         This Note shall be binding upon the Borrower and the Borrower's  heirs,
legal representatives,  successors and assigns. This Note may be transferred and
assigned by the Company in its sole discretion. This Note may be transferred and
assigned by the Borrower only with the prior written consent of the Company.

         This Note shall be  construed  in  accordance  with and governed by the
laws of the State of New York without regard to principles of conflicts of law.

         In the event of a Default under this Note,  Borrower  agrees to pay all
costs  of  collection,   including  reasonable   attorney's  fees,  incurred  in
collection of this Note.

                                       2
<PAGE>

IN WITNESS  WHEREOF,  Borrower  has hereunto set his hand as of the day and year
first above written.

                                       /s/ Steven Madden
                                       -------------------------------
                                       Steven Madden

                                       3

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