10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission file number: 001-14176

EVERGREEN ENERGY INC.
(Exact Name of Registrant as specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization)	84-1079971 (IRS Employer Identification No.)
1225 17th Street, Suite 1300 Denver, Colorado (Address of Principal Executive Offices)	80202 (Zip Code)

Registrant's Telephone Number, including area code: (303) 293-2992

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
Common Stock, $.001 par value	NYSE Arca

Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or section 15(d) of the Exchange Act. Yes o    No ý

          Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a
smaller reporting
company) Smaller reporting company o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

          The aggregate market value of the common stock held by non-affiliates of the registrant was $88,236,019 computed by reference to the closing price of the common stock on June 30, 2009, the last trading day of the registrant's most recently completed second fiscal quarter.

          Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at March 26, 2010
Common Stock, $.001 par value	201,295,116 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Definitive Proxy Statement for the 2010 Annual Meeting	Part III

TABLE OF CONTENTS

		Page No.
	PART I
Item 1.	Business		4
Item 1A.	Risk Factors		16
Item 1B.	Unresolved Staff Comments		35
Item 2.	Properties		35
Item 3.	Legal Proceedings		39
Item 4.	Submission of Matters to a Vote of Security Holders		39
	PART II
Item 5.	Market for Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities		40
Item 6.	Selected Financial Data		42
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		43
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		61
Item 8.	Financial Statements and Supplementary Data		61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		61
Item 9A.	Controls and Procedures		61
Item 9B.	Other Information		65
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance		65
Item 11.	Executive Compensation		65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		65
Item 13.	Certain Relationships and Related Transactions, and Director Independence		65
Item 14.	Principal Accountant Fees and Services		65
	PART IV
Item 15.	Exhibits and Financial Statement Schedules		66
SIGNATURES			72

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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K contains forward-looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies.

        We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "will," "plan," "predict," "project" and similar terms and phrases, including references to assumptions, in this Annual Report on Form 10-K to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

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general economic and industry conditions;

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our history of losses, deficits and negative operating cash flows;

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our substantial capital requirements and dependence on future financings and the sale of our equity securities to provide capital to fund our operations;

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our ability to complete the sale of Buckeye;

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our limited operating history;

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technical and operational problems at K-Fuel facilities;

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uncertain market for GreenCert technology;

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industry competition;

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environmental and government regulation;

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protection and defense of our intellectual property rights;

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reliance on, and the ability to attract, key personnel;

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inability to implement our acquisition strategy; and

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other factors including those discussed under "Risk Factors" in Item 1A of this Annual Report on Form 10-K.

        You should keep in mind that any forward-looking statement made by us in this Annual Report on Form 10-K or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Annual Report on Form 10-K after the date of this filing, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Annual Report on Form 10-K or elsewhere might not occur.

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PART I

ITEM 1.    BUSINESS

        In this Annual Report on Form 10-K, we use the terms "Evergreen Energy," "we," "our," and "us" to refer to Evergreen Energy Inc. and its subsidiaries. C-Lock refers to our subsidiary C-Lock Technology, Inc. Buckeye refers to our subsidiary Buckeye Industrial Mining Co. All references to C-Lock®, GreenCert™, K-Fuel, K-Fuel®, K-Fuel process, K-Fuel refined coal, K-Fuel refineries, K-Direct®, K-Fuel Plants, K-Fuel facilities, K-Direct facilities and K-Direct® plants, refer to our patented processes and technologies explained in detail throughout this Annual Report on Form 10-K. All references to years, unless otherwise noted, refer to our fiscal year, which ends on December 31st.

        We were founded in 1984 as a cleaner coal technology, energy production and environmental solutions company focused on developing our proprietary technologies. In the last two years, we have sharpened our focus on positioning us as a carbon technology company. We have developed two proprietary, patented, and potentially transformative green technologies: the GreenCert suite of software and services and K-Fuel. Our GreenCert technology is a scientifically accurate and scalable environment intelligence solution that measures greenhouse gases (or GHG) and other environmental costs enabling customers to manage and report their environmental assets and liabilities. GreenCert, built on IBM's Service-Oriented Architecture (or SOA), is an environment intelligence solution that provides customers the end-to-end visibility and traceability necessary to measure their complete environmental footprint. K-Fuel, our clean coal technology significantly improves the performance of low-rank coals yielding higher efficiency and lower emissions.

        Over the past year, we have been evaluating several alternatives related to our strategic positioning, including the potential sale of certain assets, including Buckeye. On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company for the sale of certain net assets of both Buckeye and Evergreen, which we refer to as the "sale of Buckeye", for $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. Further, $2.8 million of the purchase price will be deposited into escrow for a period of twelve months to cover amounts payable to Rosebud pursuant to the indemnification provision of the sales agreement. The closing is not subject to a financing condition, but is subject to the satisfaction of customary closing conditions, including, among other matters, (i) accuracy of the representations and warranties and compliance with the covenants set forth in the agreement, each in all material respects, (ii) receipt of legally required regulatory approvals, and (iii) consents of certain governmental authorities and certain of Buckeye's specified contractual counterparties. The sale is expected to close in April 2010, but in any event no later than June 30, 2010. The proceeds from the sale of Buckeye will be used to retire the outstanding 2009 Notes including fees and accrued interest of $21.1 million, to fund related transaction expenses estimated at $2.5 million and for general working capital purposes.

        With the sale of Buckeye we will be able to better focus our resources on core business activities, our GreenCert and K-Fuel technologies. We terminated the contemplated K-Fuel spin-off as previously announced. Concurrently, Evergreen-China Energy Technology Co., Ltd. ("Evergreen-China"), a Sino-US joint venture between Evergreen Energy and a Chinese investor, signed a letter of intent with a large Chinese integrated utility and chemical manufacturer to build a K-Fuel plant in Inner Mongolia to produce K-Fuel from low-ranked lignite feedstock.

        As the business environment changes, our ongoing business plan may be altered. The following discussion addresses the current aspects of our business.

GreenCert

        We are continuing the development of our GreenCert suite of software and services. GreenCert is an accurate and scalable environmental intelligence solution that quantifies greenhouse gas emission

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avoidances and reductions and generates verifiable emissions offsets. GreenCert provides real-time, multiple method data analysis to increase accuracy and reduce uncertainty to quantify incremental improvements. GreenCert also enables enterprises to reduce overall costs via the identification of significant operational efficiencies, compliance and risk reduction and sustainability measures. We intend to sell GreenCert as an on-premise offering and as a hosted software as a service (or SaaS) solution, both with annual licensing and renewal fees.

        GreenCert is a software framework that is both generally applicable to all industries and customizable for client and industry specifics and currently has two environmental intelligence solution sets: Energy/Utilities and Agriculture. The GreenCert Energy Solutions suite offers three levels: Reporting, Analytics and Enterprise. GreenCert Reporting contains baseline emissions tracking, an interface for emissions data entry, and base level reporting and dashboard capability. GreenCert Analytics offers reporting plus forward modeling and analysis tools. GreenCert Enterprise contains all of the components of GreenCert Analytics with the additional capability of an enterprise SOA solution which automates the quantification and verification of emission reductions. GreenCert Agriculture offers the unique ability to scientifically quantify, on a per field basis, soil carbon sequestration and generate terrestrial emission reduction offsets. GreenCert greenhouse gas consulting services are available to conduct environmental and efficiency assessments, to quantify footprints, and to provide utility, agricultural, and environmental expertise. All GreenCert products and services fall within the Enterprise Carbon Management solutions market as a broad class of solutions that cuts across industrial sectors to offer services, reporting, efficiency auditing, and emission reduction offsets for emitters of greenhouse gases.

        Evergreen Energy's GreenCert solutions are designed to be indifferent to legislation and meet and/or exceed any governmental mandate. Our scientifically rigorous solutions contain a flexible information technology backbone which can be adapted to any regulatory environment. Regardless of any new legislation, the efficiency and accuracy improvement that are obtained within the GreenCert Energy Solution appeals to utilities and provides a platform to prepare for future legislative or regulatory changes. Greenhouse gas regulation of any form will only enhance the market appeal for our GreenCert products.

        We have a three-phase plan to implement GreenCert at client locations. In the first phase, GreenCert quantifies the client's baseline emissions status and the accuracy of the methodology and data used. In the second phase, we assess and identify the capital expenditure and operating expense improvements that drive efficiencies within the client or specific plant and determines the GHG savings associated with those efficiency improvements. This phase also evaluates methods to reduce the uncertainty of the GHG measurement to improve accuracy. Combined, the first two phases deliver the GHG assessment and result in an understanding of the return on investment for employing the third phase. In this final phase, we deploy the site-specific, highly-customized solution that enables the quantification and monetization of the emissions reductions and efficiency improvements. The deployed solution then also enables further improvements to be quantified and monetized going forward.

        We continue to identify potential future strategic partners for GreenCert, in addition to IBM Corp. and Enterprise Information Management Corp (or EIM), to assist in the development, testing and roll-out of its products. Potential partners include companies offering services or products such as: energy engineering consulting; power generation performance optimization; environmental consulting; and products relating to sensor systems and devices, data collection devices, or other products that support energy or power plant operations. On November 5, 2009, we announced that GreenCert was validated on IBM's Solution Architecture for Energy and Utilities (or SAFE) framework, the software technology backbone that makes a wide range of utility solutions possible by helping clients build a standards-based integrated platform across the clients' entire operations and energy value chain. GreenCert will be marketed across the globe through the SAFE framework validation. Also on November 5, 2009, we announced our partnership with Black & Veatch to deploy GreenCert to the

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global power generation market. Black & Veatch expects to provide integrated emissions and performance management solutions by leveraging GreenCert for additional customer needs and requirements.

K-Fuel

        Through our proprietary K-Fuel process we intend to meet the specific needs of public utility, industrial and international customers by providing economical solutions for energy supply, energy efficiency and compliance with environmental emission standards. Additional markets served by our K-Fuel process include mines looking to expand the market for their low rank coal by transforming it into a higher value fuel and chemical manufacturers using coal as a feedstock. Our K-Fuel process uses heat and pressure to physically and chemically transform high-moisture, low-Btu coals, such as sub-bituminous coal and lignite, into a more energy dense, energy efficient, lower-emission fuel. The inherent efficiency of higher Btu-lower moisture coal improves power plant performance and reduces emissions on a per kilowatt-hour-generated basis. We believe that China presents the best opportunity to develop the K-Fuel technology because of its plentiful reserves of high-moisture, low-Btu coals, its rapid growth in electric power demand and its lower construction and manufacturing costs. The goal of our K-Fuel technology is to transform those lower-rank coals into more efficient and environmentally compliant fuels in order to meet the increasing demand for energy in an optimal fashion. As mentioned above Evergreen-China continues discussions with a Chinese conglomerate for the potential construction of a K-Fuel plant in Inner Mongolia. See further discussion of the K-Fuel business under Business History.

Segments

        Our segments include the GreenCert segment, the Plant segment, the Mining segment and the Technology segment. The GreenCert segment reflects activities related to the measurement of greenhouse gases and certification of environmental improvements such as carbon credits. The Plant segment primarily represents revenue and costs related to our Fort Union plant near Gillette, Wyoming, at which we suspended operations in March 2008. The Mining segment primarily represents our mining operations of our subsidiary Buckeye, and includes certain marketing capabilities such as an ash disposal facility and a coal preparation and blending facility. The Technology segment is comprised of all other operations that use, apply, own or otherwise advance our proprietary patented K-Fuel process, including our headquarters and related operations, around activities of KFx Technology, LLC, which holds the right to issue licenses of the K-Fuel technology. Corporate costs within our Technology segment are allocated to our other segments, generally based on a percentage of the number of employees, total segment operating expenses, or segment operating expenses plus segment capital expenditures. We will continue to evaluate how we manage our business and, as necessary, adjust our segment reporting accordingly.

Business Strategy

        The principal elements of our long-term strategy are to focus our efforts and resources on building our GreenCert and K-Fuel businesses through a combination of organic growth, acquisitions and joint ventures and to complete the sale of our Buckeye operations. We plan to focus on the following strategies.

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Develop and Market GreenCert.  We believe there is opportunity both domestically and internationally to market, license and sell our environmental intelligence and greenhouse gas software solutions and services. We believe that there is a unique opportunity for these services around the world. As "cap-and-trade" and other cap and carbon taxation programs seeking to limit emissions take hold, the global trading of emission reduction offsets is expected to expand,

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along with the need for accurate and precise measurements of emissions and the verification of emissions offsets.

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Enter into Strategic Arrangements, Leverage Distribution Channels and Advance Relationships with Original Equipment Manufacturers (OEMs).  We have strategic arrangements and believe there are additional opportunities to further expand GreenCert through new relationships. Evergreen Energy has agreements with Foxconn Technology Group related to the Asia-Pacific Rim region and Crowley-Shindler in the Eastern European region. Both of these relationships provide for the marketing and further licensing of GreenCert solutions within these geographic regions. As further described above, we have relationships with IBM, EIM and Black & Veatch that we believe will present us opportunities to reach a broad-base of energy and utility customers. Our solutions require implementation services, infrastructure for support and hardware and advisory services—we therefore believe that these relationships will present us opportunities to broaden the market reach of our solution by using our partners' sales programs and sales channels.

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Complete Assessments and Pilot Deployments and Enter into GreenCert Licensing Agreements.  We intend to complete assessments to determine and identify capital expenditure and operational improvements that result in efficiency improvements and therefore GHG emissions reductions. After this initial phase, we expect to implement pilot deployments at specific, individual customer sites using customer data to quantify these reductions and accurately determine the return on investment related to such improvements. Finally, we plan to license GreenCert as an on-premise offering and as a hosted SaaS solution, both with annual licensing fees and renewal fees. Our solutions will require consulting and implementation services.

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Pursue Strategic Growth Through Acquisitions and Joint Ventures.  We believe we are positioned to pursue selected acquisitions and attract industry joint venture partners to continue our strategic development. Our investments in GreenCert and K-Fuel are consistent with our integrated technology strategy. We expect to pursue acquisitions of, or joint ventures with, companies that have operations complementary to our business model and strategy.

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Enter into K-Fuel Licensing Agreements.  We believe that there are potential opportunities to license our K-Fuel technology internationally to third parties principally in the Asia-Pacific Rim region due to its vast reserves of low-rank coal, rapid economic growth and interest in upgrading that coal to meet its increasing appetite for electric power and use in industrial applications including chemical manufacturing. Concurrently, Evergreen-China signed a Letter of Intent with a large Chinese integrated utility and chemical manufacturer to build a K-Fuel plant in Inner Mongolia to produce K-Fuel from low ranked lignite feedstock.

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Complete Sale of our Buckeye Subsidiary.  As discussed above, we have entered into an agreement for the sale of Buckeye. Per the terms of the agreement, Rosebud Mining Company will purchase certain assets of both Buckeye and Evergreen, generating aggregate proceeds of $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. The transaction is subject to customary closing conditions and the completion by Rosebud of due diligence. The sale is expected to close in April 2010, but in any event no later than June 30, 2010.

Competitive Strengths

        We believe we are uniquely positioned in the energy market as a result of the following strengths:

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Highly Accurate and Patented Solution.  The GreenCert carbon information management software solution and services stand as an innovative software-based solution for the complex process of accurate, precise, transparent, verifiable and scientifically defensible quantification of greenhouse gases, emission reductions, and offsets. Uncertainties and costs associated with greenhouse gas

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measurement remain key issues for the emerging global carbon marketplace. The Federal Trade Commission has held hearings on guidelines for the sale of "carbon credits" and Congress has held hearings and is considering legislation to enact federal oversight of carbon markets. Also, in 2009, the Environmental Protection Agency (or EPA) took actions to require reporting of GHG emission and to include best available control technology for GHG emissions when initiating or renewing permits under the Clean Air Act. See further discussion under "Environmental Regulation Affecting Our Market". Through GreenCert, we offer a scientifically defensible, intelligence software and system solution to accurately measure greenhouse gas emissions and create verifiable and certifiable emission reduction credits that is also designed to be indifferent to legislation enacted.

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Scalable, Enterprise-wide Solution.  We believe that other greenhouse gas measurement methods are cumbersome and inadequate. They are expensive, ad-hoc and can be unreliable. The solutions from these companies focus on mandatory and voluntary reporting of greenhouse gases. As such, they do not offer the ability to quantify incremental improvements as monetizable offsets, which is a unique feature of GreenCert. GreenCert is positioned within the energy and utilities market segment to function as an integral middleware for plant operations to optimize efficiency and greenhouse gas management, not just as a reporting solution.

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Strong Base of Technical Experience and Expertise.  We have developed an employee population that is highly qualified and experienced in our GreenCert solution and in carbon management. Our experience and expertise includes carbon measurement, carbon emission modeling, power generation, soil carbon sequestration, and nitrogen oxides and sulfur dioxide reduction analysis. In addition, we have developed strong relationships and strategic partners to support our GreenCert solution, including IBM, EIM, and Black and Veatch, each of which has significant experience in the development, marketing and sale of software solutions.

Our K-Fuel employees and consultants have a wide range of technical experience and expertise in refining coal, coal thermal upgrading, thermal processing, coal gasification, coal liquefaction, chemical engineering, power plant engineering and process engineering.

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High Btu, Low Emission K-Fuel Refined Coal.  We have been able to convert thousands of tons of low-Btu sub-bituminous coals and lignites into K-Fuel refined coal, with higher Btu's and lower emissions, that is a replacement for dwindling supplies of higher quality coals. The EPA will likely impose strict mercury emission rules on a plant-by-plant basis due to the U.S. Supreme Court's rejection of a utility industry's appeal of a lower court ruling which vacated the "Clean Air Mercury Rule". Mercury reduction in coal is one of several environmental improvements where the K-Fuel process performs exceedingly well. With key congressional committees working to enact a "cap-and-trade" greenhouse gas emission or other carbon taxation bill in the future, and with groups of states rolling out regional limitations on sulfur dioxide, mercury, oxides of nitrogen and carbon dioxide emissions, K-Fuel's ability to reduce those emissions, including a potential 8% carbon dioxide reduction, stands out as a marketplace advantage. We believe K-Fuel industrial customers that use our K-Fuel refined coal or blended K-Fuel refined coal will be able to cost-effectively boost efficiency and will reduce these emissions without adding new, expensive, post-combustion cleanup equipment. Power generating facilities that burn our K-Fuel refined coal or blended K-Fuel refined coal instead of unrefined high Btu coal are expected to realize lower emissions and experience significant savings as a result of reducing the need to purchase carbon dioxide, sulfur dioxide, nitrogen oxide and mercury credits in order to comply with environmental regulations.

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Provide Flexibility in Feedstock.  Coal-fired power plants and industrial users with post-combustion pollution controls may see improved pollution control performance by using our K-Fuel refined coal or blended K-Fuel refined coal and will benefit from the ability to use alternative feedstock

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in addition to their traditional feedstocks or to blend with their traditional feedstocks. We believe that Carbon Capturing and Storage Technology, or CCS, especially a class of clean coal technology that integrates coal gasification with carbon capture and storage referred to as IGCC-CCS, will perform better if the quality of its coal feedstock is upgraded through the K-Fuel process.

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Key Industry Relationships.  In GreenCert, not only have we built strong alliances with IBM, EIM and Black and Veatch, but also strategic marketing partners in Asia and Eastern Europe. K-Fuel also benefits from key industry relationships, which we believe will assist us in the development, deployment and marketing of our K-Fuel and GreenCert technologies.

Competition

        We believe our GreenCert solution is a first-of-its-kind, web-based platform that accurately measures incremental greenhouse gas emission reductions and can certify these environmental improvements as emission offsets to meet any regulatory environment. There are other companies that have developed systems that measure greenhouse gases and certify emission offsets, and our potential customer base can choose to use other Enterprise Carbon Management solutions instead of ours. In the last year a number of additional companies have entered the Enterprise Carbon Management solution space. According to Groom Energy there are 68 companies that have software packages for GHG/Enterprise Carbon Management Solutions and they anticipate the number of sellers to increase 600% by 2011.

        Our K-Fuel refined coal is a coal with characteristics of low-moisture, high-Btu content and low sulfur dioxide, nitrogen oxides and mercury emissions. The known direct competitors for K-Fuel refined coal include other coal upgrading processes, other high-Btu coal, low sulfur coal and advanced pollution control technologies. The indirect competition to K-Fuel refined coal includes electrical generation from natural gas, nuclear fuel, oil, wind, bio-fuels, and other renewable energy sources. Potential customers could choose to install pollution equipment instead of using our K-Fuel refined coal and/or choose to inject additives to reduce emissions. These alternatives include equipment such as low-nitrogen oxide burners, over-fire air systems, selective catalytic reduction systems, sulfur scrubbers, fabric filters, electrostatic precipitators, mercury control technology, or other equipment and adding limestone or other chemicals to combustion and waste stream.

Intellectual Property

        Our success depends in part on our ability to protect our intellectual property and to avoid infringement of the intellectual property of third parties. Our trademarked GreenCert solution embodies greenhouse gas measurement, certification and carbon information management software. The technology and patents provide for certification of emission offset reduction credits—essential to maximizing the value of credits in compliance and trading markets. We have the worldwide exclusive rights to various patents. The technology can be applied to measurements of any emissions offsets reduction or other environmental attributes. This proprietary process is web-based and has been integrated with IBM software products and tools.

        The patents which cover earlier versions of our K-Fuel technology are near their expiration dates. Patents which cover newer versions of that technology expire from 2018 through 2024. Our most recently issued patent covers most of the aspects of our K-Fuel process as it is currently conducted. As we make modifications and improvements to our proprietary process, we continue to evaluate our patent protection. As new improvements result, we would anticipate the filing of additional patent applications.

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Business History

        We were founded in 1984. We incorporated under the laws of the state of Delaware in 1988. Our principal executive offices are located at 1225 17^th Street, Suite 1300, Denver, Colorado 80202, and our telephone number is (303) 293-2992.

        GreenCert.    In December 2007, our subsidiary, C-Lock Technology, Inc., in conjunction with IBM and Enterprise Information Management, Inc. began developing a greenhouse gas solution called GreenCert. Certain aspects of GreenCert are patented and available to us through an exclusive licensing agreement. We continue to focus our efforts on further development and commercialization of our GreenCert solution.

        K-Fuel.    Over the past 25 years, we have been principally focused on the development of our K-Fuel technology. We have obtained multiple patents for different versions of the K-Fuel technology using a variety of methods to apply heat and pressure to process high moisture coal feedstocks. We have patents or patent applications for the K-Fuel technology issued or pending in the United States and various foreign countries. As we continue to develop and make enhancements to either technology or develop new technologies consistent with our business strategy, we anticipate expanding our patent coverage.

        Multiple laboratory and test burn results have independently verified the effectiveness of the K-Fuel process at removing significant amounts of mercury from lower-rank coals. The amount of mercury reduction varies depending on the coal source. The K-Fuel process can reduce mercury by up to 70% in Wyoming Powder River Basin coal. Tests on Indonesian coal showed a 56% mercury reduction, and a test burn of blended K-Fuel at a western Pennsylvania power plant achieved an almost 82% mercury emission reduction at the stack when compared to the mercury content of the coal normally burned at that plant.

        The current K-Fuel process applies heat and pressure to lower-rank coals with high water content, such as those found in Wyoming's Powder River Basin, to reduce moisture from approximately 30% in the low-Btu coal to 8%-14% in our K-Fuel refined coal. As a result, the heat value is boosted by 25% to 40%. The increase is variable depending on the type of coal processed and process conditions. We believe the process results in increased efficiency of the fuel needs in power generating, industrial and institutional facilities. Further, the K-Fuel process removes a significant amount of impurities from the lower-Btu coal, which we believe will allow the power generation industry and smaller industrial coal boilers to economically comply with increasingly stringent air emission standards and environmental regulations. The pre-combustion refinement of raw coal into K-Fuel refined coal reduces the mercury content, and upon combustion, sulfur dioxide and nitrogen oxides are also reduced. Our analysis also shows that burning K-Fuel refined coal with its increased efficiency will reduce carbon dioxide emissions by up to 8% on a per-kilowatt-hour generated basis.

        We, along with Bechtel Power Corporation, have completed the modifications and improvements of the design and efficiency of the equipment used in the K-Fuel process. Bechtel and Evergreen's operations teams at our Fort Union plant near Gillette, Wyoming completed successful testing of new operational systems that will support construction of future K-Fuel refineries, including an enhanced standard processing tower design. We believe this work signals that we have resolved the most substantive technical challenges to scaling and fully commercializing our production process.

        In March 2008, we suspended operations at our Fort Union plant in order to redirect constrained resources, both capital and human, to focus on the commercialization of this process in future K-Fuel

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plants. Suspending production at Fort Union enabled us to reduce our cash expenditures. The significant resources invested in the Fort Union plant served four important purposes:

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First, as an engineering and process improvement platform, the Fort Union plant allowed Evergreen and Bechtel engineers and scientists to improve the performance of the K-Fuel process.

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Second, Fort Union served as an important coal testing facility that allowed Evergreen to build a database of test results from more than 100 coal types drawn from across the globe.

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Third, Fort Union served as an important business development tool and production platform for thousands of tons of K-Fuel used for marketing and test burn purposes.

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Fourth, Fort Union served to produce K-Fuel at a commercial scale for customer test burns and purchase.

        Through the construction and limited operation of our Fort Union facility, which is the first plant utilizing the current version of our technology, we sought to further develop the application of our proprietary K-Fuel technology. As previously stated, the Fort Union plant has realized virtually all of the goals and objectives which we set forth, except for continuous production, and we suspended operations at this site. Also, during the last five years we have completed numerous evaluations to further test and improve our K-Fuel refined coal and process. During the years ended December 31, 2009, 2008 and 2007, our research and development costs were approximately $49,000, $79,000, and $876,000, respectively.

        In February 2007, we expanded our contractual relationship with Bechtel to assist with future designs of additional K-Fuel plants we may build or license. On September 19, 2007, we amended and restated our agreement with Bechtel. Through this new program management agreement, we committed to provide Bechtel with $1 billion in construction contracts through 2013. This restated agreement increases the scope of engineering, procurement and construction services which may be performed by Bechtel. Bechtel's services are available to oversee both technical development and implementation of new facilities and plants.

        Buckeye.    On April 3, 2006, we completed the acquisition of Buckeye for a total purchase price of $39.1 million, including cash paid, stock issued, liabilities assumed and costs incurred in the acquisition. Buckeye's primary business is to mine, process, blend and sell high-quality coal to electric utilities, industrial and institutional end users. Buckeye also operates one of the largest ash disposal facilities in the State of Ohio, disposing up to one million tons of dry and conditioned ash per year. On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company for the sale of Buckeye for a purchase price of $27.9 million in cash payable at the closing of the transaction and the release of $5.0 million of reclamation bonds.

Customers

        As of December 31, 2009, two customers from our Mining segment accounted for 20% and 18% of total accounts receivable and three customers in our Mining segment accounted for 18%, 16% and 15% of total revenues for 2009. As of December 31, 2008, two customers from our Mining segment accounted for 32% and 20% of total accounts receivable and two customers in our Mining segment accounted for 20% and 9% of total revenues for 2008. As of December 31, 2007, three customers from our Mining segment accounted for 27%, 18% and 13% of total accounts receivable while two customers in our Mining segment accounted for 32% and 13% of total revenues for 2007. We believe the loss of any one of these customers would not have a material adverse effect on our financial position because we believe we would be able to sell our production to other customers at prevailing market prices.

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        Through March 2010, Buckeye has presold, for delivery in 2010, approximately 338,000 tons of coal pursuant to long-term contracts, which expire through 2012. Buckeye has committed to deliver, in 2010, approximately 529,000 tons of coal pursuant to customer purchase orders. The prices are generally tied to published indices. The prices range from $41.00 to $95.00 per ton net of transportation with average current prices of approximately $57.42 per ton. The prices vary depending on the characteristics of the coal. Currently, 95% of Buckeye's anticipated coal sales in 2010 will be delivered from the pre-sold and committed tons.

        Through March 2009, Buckeye had presold for delivery in 2009, approximately 335,000 tons of coal pursuant to long-term contracts, which expire through 2011. In 2009, Buckeye has committed to deliver approximately 375,000 tons of coal pursuant to customer purchase orders. The prices are generally tied to published indices. The prices range from $49.00 to $105.00 per ton net of transportation with an average current price of approximately $71.75 per ton. The prices vary depending on the characteristics of the coal.

        Through March 2008, Buckeye had presold, for delivery in 2008, approximately 500,000 tons of coal pursuant to long-term contracts which expire through 2012, at prices tied to various published indices. We expected these prices to range from $35 to $59 per ton in 2008. Buckeye had presold 400,000 tons for delivery in 2007 at prices ranging from $34 to $55 per ton. Pursuant to existing contracts, Buckeye has presold approximately 800,000 tons of coal for delivery through 2012 at pricing which are tied to various indices. In 2008 Buckeye had committed to deliver approximately 200,000 tons of coal pursuant to customer purchase orders at prices tied to various indices, with the expected price ranging from $39 to $74 per ton.

Environmental Regulations Affecting our Market

        The following summarizes federal, state, and international programs that may affect the market for our K-Fuel refined coal and for GreenCert products.

A.    Federal Requirements:

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National Ambient Air Quality Standards.  The Clean Air Act (CAA) requires that EPA set National Ambient Air Quality Standards (NAAQS), expressed as ambient concentration levels based on levels "requisite to protect" human health and welfare. NAAQS are established for six specific criteria pollutants (ozone; particulate matter (PM) and fine PM which are 2.5 microns or smaller; sulfur dioxides; nitrogen oxides (NOx); lead; and carbon monoxide). The NAAQS set to protect human health is called the primary standard, while the NAAQS established to protect welfare impacts, such as those on vegetation and visibility, is called the secondary standard. The primary standards have mandatory deadlines for attainment, whereas the secondary standards must be met as soon as practicable. The CAA requires EPA to review and, if appropriate, revise the NAAQS every five years.

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State Implementation Plans.  Once a standard is finalized, States are required to develop State Implementation Plans (SIP) that demonstrate how areas within each state will attain NAAQS by using a combination of "state" and "federally" imposed controls and measures affecting emission sources. Depending on how far out of attainment a county or area is determined to be, different deadlines to reach attainment may be set. The SIP must be submitted to EPA for formal approval. As part of the SIP, emission standards are set for "state-controlled" sources, and enforced on businesses through construction and operating permits, on transportation systems, and sometimes on commercial and consumer product content. A number of States have imposed stationary source controls on existing and new sources that are more stringent than the federal NAAQS standards would require.

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The Clean Air Act Acid Rain Program.  Title IV of the CAA separately regulates emissions of sulfur dioxide and nitrogen oxide from coal-fired power generating facilities. Specifically, title IV set a goal of reducing sulfur dioxide emissions by 10 million tons below 1980 levels and imposed a two-phased tightening of restrictions on fossil fuel-fired power plants. Phase I began in 1995 and focused primarily on coal-burning electric utility plants in the East and Midwest. In 2000, Phase II began and this phase tightened the annual emissions' limits on larger higher emitting plants and set restrictions on smaller, cleaner plants fired by coal, oil, and gas. The Acid Rain Program calls for a 2 million ton reduction in nitrogen oxide emission and focuses on one set of sources that emit nitrogen oxide: coal-fired electric utility boilers. Beginning in January 2000, nitrogen oxide emissions are to be reduced 900,000 tons per year beyond the 1.2 million per year reduction set by the EPA in 1995. Coal-fired electric utility boilers that are subject to the Acid Rain Program are required to report emissions of carbon dioxide along with their sulfur dioxide and nitrogen oxide emissions, but there is no required limit or control on the carbon dioxide emissions.

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Clean Air Interstate Rule.  The Clean Air Interstate Rule was finalized by the EPA in March 2005. Once fully implemented, this rule will reduce sulfur dioxide emissions in 28 eastern states and the District of Columbia by more than 70% and nitrogen oxide emissions by more than 60% from the 2003 levels. Through the use of a cap-and-trade approach, the rule promises to achieve substantial reduction of sulfur dioxide and nitrogen oxide emissions. Reduction of nitrogen oxide emissions began in January 2009, which was followed by reductions of sulfur dioxide emissions in January 2010. The program will be fully implemented by January 2015. This rule has been set aside by the U.S. Court of Appeals and the EPA is addressing that decision on remand.

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Clean Air Mercury Rule.  The U.S. Environmental Protection Agency, or EPA, finalized the Clean Air Mercury Rule, or CAMR, on March 15, 2005 to reduce mercury emissions from coal-fired power plants for the first time ever. Phase 1 of CAMR was set to go into effect on January 1, 2010. However, on February 8, 2008, the U.S. Circuit Court of Appeals for the District of Columbia vacated the rule, requiring the EPA to develop a new proposed utility mercury regulation. As a result of this ruling, it is likely that individual coal-fired boilers and power plants will be held to stringent levels of mercury emission reductions instead of averaging mercury emissions across multiple plants and across the country. EPA is currently developing air toxic emission standards for power plants under the Clean Air Act that are consistent with the U.S. Court of Appeals for the D. C. Circuit's decision and has stated its intention to finalize a regulation for coal and oil fired electric generating units in 2011.

        We believe that existing and proposed legislation and regulations could affect the profitability of fossil fuel-fired, and specifically coal-fired power generating facilities which can emit substantial levels of sulfur dioxide, nitrogen oxides, mercury and carbon dioxide into the environment. Regulation of these emissions can affect the market for our K-Fuel refined coal by imposing limits and caps on fossil fuel emissions. Regulation of carbon dioxide and other GHG's can also affect our GreenCert technology solutions by enhancing market opportunities. The most significant existing national legislation and regulations affecting our K-Fuel market include the Clean Air Act, the Clean Air Interstate Rule and the Clean Air Mercury Rule, which are implemented by the EPA as previously described.

        While carbon dioxide and other GHG emissions are not regulated at the federal level at this time, the U.S. House of Representatives passed a bill in June 2009 which would amend the Clean Air Act to impose an economy-wide cap on GHG emissions and set up an emissions trading system to help mitigate control costs. The U.S. Senate introduced a similar bill in 2009, but action on this bill has been stalled. Currently it is uncertain whether Congress will complete legislation which would create a federal-level GHG cap-and-trade system this year.

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        In 2009, the EPA initiated two actions which could potentially affect K-Fuel and GreenCert products. The first EPA action was a regulation for the Mandatory Reporting of Greenhouse Gases. The final rule for this regulation was published in the Federal Register in October 2009. This regulation does not limit or control GHG emissions, but requires reporting of GHG emissions from coal-fired power plants and other large industrial facilities starting with the 2010 calendar year. The second EPA action was issuance of the proposed rule for the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, also published in the Federal Register in October 2009. This rule, if finalized, would regulate GHG emissions from coal-fired power plants and other large industrial facilities by requiring that these installations include best available control technology for GHG emissions when initiating or renewing permits under the existing Clean Air Act. The EPA Administrator has recently stated (February 2010 letter to Senator Rockefeller) that it plans to phase in the GHG permit requirements over time starting in 2011 with large stationary sources.

        In addition, the K-Fuel market will be affected by additional national policies including the EPA's Nitrogen Oxide State Implementation Plan Call, the EPA's National Ambient Air Quality Standards for ozone and fine particulate matter, and the Regional Haze Rules, which require emission controls for industrial facilities emitting air pollutants that reduce visibility by causing or contributing to regional haze.

B.    State and Regional Requirements

        State and regional policies will also impact our market. Important regional frameworks include The Regional Greenhouse Gas Initiative (RGGI), which requires reduction in carbon dioxide emissions from electric generating units, beginning in January 2009 in ten northeastern states. The Western Climate Initiative, a coalition including seven western states and four Canadian provinces as partners (although Arizona has recently announced that it will not continue to be a full partner), has developed a regional, economy-wide GHG cap-and-trade program, the first phase of which will start in 2012. In the Midwest, six states and one province are full members of the Midwestern Greenhouse Gas Reduction Accord with the aim of establishing a regional GHG cap-and-trade market system. Many states have at least nominal economy-wide greenhouse gas reduction targets. A number of these are based only on Executive Orders, so implementation is not assured. Many states have legislated greenhouse gas targets and/or utility performance standards including California, Connecticut, Illinois, Maine, Maryland, Massachusetts, Minnesota, Montana, New Jersey, Oregon, and Washington.

        The GHG emission reduction target set by state legislation is more stringent than the target set by RGGI, a regional cap-and-trade program to which Maryland belongs. RGGI caps carbon dioxide emissions for electric utilities and will achieve a 10 percent reduction in emissions from 2009 levels by 2018. Maryland's legislation also has a broader scope than RGGI, covering sources across the economy except the manufacturing sector.

        Many states also have mandatory GHG Reporting Requirements for utilities. For example, Washington, Oregon, California, New Mexico, Florida, Iowa, Wisconsin, North Carolina, Maryland, Delaware, Rhode Island, New Jersey, New York, Connecticut, Massachusetts, Vermont, New Hampshire, and Maine. All but 8 states have at least some voluntary reporting system, mostly through the Climate Registry. Many states are also implementing emission reduction policies more stringent than national policies with respect to mercury, SO₂ and NOx and visibility,

C.    International Markets

        Markets for K-Fuel and GreenCert products are also influenced by international regulations. While the Kyoto Protocol to the UN Framework Convention on Climate Change (UNFCCC), to which the US is not a party, expires in 2012, negotiations are well underway for a successor treaty that will be more broadly-based. Of primary importance to future coal markets are the positions of China and

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India, the two largest coal-based emerging economies. While both have resisted calls for firm greenhouse gas targets, both submitted voluntary commitments to the Copenhagen Accord, concluded in December 2009. India committed to a 20-25% reduction in the GHG intensity of its economy by 2020, compared to 2005, and China to a 40-45% reduction in conjunction with at least a 15% increase in renewable energy use. China in particular has been aggressively investing in renewable energy technologies such as wind and photovoltaic generation. At the same time, both countries are likely to remain heavy producers and consumers of coal-based energy for the foreseeable future, and increasing levels of environmental consciousness and regulation will likely heighten interest in the benefits of K-Fuel refined coal. The UNFCCC Clean Development Mechanism (CDM) provides market opportunities for GreenCert products in GHG reduction projects in developing countries such as China and India. Market opportunities in developed countries are provided by the UNFCCC Joint Implementation (JI) mechanism and the European Union Emissions Trading Scheme (EU ETS).

Environmental Regulations Affecting the Construction and Operation of our Plants and Mining of Coal

        As a general matter, we are subject to a number of state and federal regulations that (i) seek to limit the amount of certain emissions into the environment, (ii) govern the handling and disposal of solid waste materials as well as potentially hazardous materials, and (iii) impose certain employee safety requirements. As we expand our operations we may become subject to more regulation. For example, if we build additional plants we may install coal-fueled electric generating units, which are subject to substantial federal, state, and local permitting requirements and more environmental regulation than gas- fueled electric generating units. Through our mining activities, we are also subject to additional regulations including the Coal Mine Health and Safety Act of 1969, the Federal Mine Safety and Health Act of 1977, the Black Lung Benefits Revenue Act of 1977 and other regulations that seek to protect the health and safety of employees.

        In the United States, K-Fuel refined coal is not expected to be subject to unusual levels of local, state or federal regulation with respect to its transportation and distribution. However, any future production plants will require numerous permits, approvals and certificates from appropriate federal, state and local governmental agencies before construction of each facility can begin and will be required to comply with applicable environmental laws and regulations (including obtaining operating permits) once facilities begin production. The most significant types of permits that are typically required for commercial production facilities include an operating and construction permit and a wastewater discharge permit under the Clean Water Act, and a treatment, storage and disposal permit under the Resource Conservation and Recovery Act. Some federal programs have delegated regulatory authority to the states and as a result, facilities may be required to secure state permits. Finally, the construction of new facilities may require review under the National Environmental Policy Act, or a state equivalent, which requires analysis of environmental impacts and potentially, the implementation of measures to avoid or minimize these environmental impacts.

        Any international K-Direct or K-Fuel plants will also be subject to various permitting and operational regulations specific to each country. International initiatives, such as the Kyoto Protocol, are expected to create increasing pressures on the electric power generation industry on a world-wide basis to reduce emissions of various pollutants, which management expects will create additional demand for our products and services.

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Employees

        At March 12, 2010, we had 145 full-time employees of which 108 are employed at Buckeye.

Access to Information

        Our web site address is www.evgenergy.com. We make available, free of charge on the Investor Info section of our web site, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after these reports are electronically filed with or furnished to the Securities and Exchange Commission. We also make available through our web site other reports electronically filed with the SEC under the Securities Exchange Act of 1934, including our proxy statements and reports filed by officers and directors under Section 16(a) of that Act. Additionally, we make available press releases and presentation material including slides and other investor information. We do not intend for information contained in our web site to be part of this Annual Report on Form 10-K.

ITEM 1A.    RISK FACTORS

        In addition to risk and uncertainties in the ordinary course of business that are common to all businesses, important factors that are specific to our industry and our company could materially impact our future performance and results. We have provided below a list of these risk factors that should be reviewed when considering our business and securities. These are not all the risks we face, and other factors currently considered immaterial or unknown to us may impact our future operations.

Business Risks

        Our financial condition continued to deteriorate during 2009.    We have been evaluating several alternatives related to our strategic positioning, including the potential sale of Buckeye which is not strategic to the further development of our GreenCert or K-Fuel technologies. While we have investigated a number of financing alternatives, we have not yet obtained sufficient additional financing to complete our strategic positioning. In October 2009 we completed a financing deal totaling $7.0 million resulting in net proceeds of $5.0 million, excluding transaction costs, and again completed a financing deal in January 2010 totaling $8.7 million resulting in net proceeds of $8.0 million. We completed another financing transaction in March 2010 totaling $9.3 million and resulting in net proceeds of $5.0 million, excluding transaction costs. Further, in March 2010, we entered a definitive agreement regarding the sale of Buckeye, as described further below. Notwithstanding these financings and the contemplated sale of Buckeye; we continue to require additional capital.

         As a result of the preceding,we are in need of capital. We are continuing to evaluate restructuring and capital raising alternatives—and to work towards the closing of the Buckeye assets. Without an additional influx of capital, we will not be able to pursue our business plan and may not be able to remain a going concern.

The contemplated sale of the Buckeye may not be consummated.

        On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company for the sale of Buckeye for $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. Further, $2.8 million of the purchase price will be deposited into escrow for a period of twelve months to cover amounts payable to Rosebud pursuant to the indemnification provision of the sales agreement. The closing is not subject to a financing condition, but is subject to the satisfaction of customary closing conditions, including, among other matters, (i) accuracy of the representations and warranties and compliance with the covenants set forth in the agreement, each in all material respects, (ii) receipt of legally required regulatory approvals, and (iii) consents of certain governmental authorities and certain of Buckeye's specified contractual counterparties. The sale is expected to close in April 2010, but in any

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event no later than June 30, 2010. The proceeds from the sale of Buckeye will be used to retire the outstanding 2009 Notes including fees and accrued interest of $21.1 million, to fund related transaction expenses estimated at $2.5 million and for general working capital purposes.

        If this transaction is not closed, we will need to reevaluate our strategy with respect to the Buckeye assets and identify another source of capital to retire the 2009 Notes. A failure to complete the sale of Buckeye could require us to immediately raise capital to pursue our business plan and remain a going concern.

         We have a history of losses, deficits, and negative operating cash flows and will likely continue to incur losses in the future. Such losses may impair our ability to pursue our business plan and our independent registered public accounting firm has expressed substantial doubt over our ability to continue as a going concern.

        We continue to incur operating losses and negative cash flows from operations for the foreseeable future. We have made, and will continue to make, substantial capital and other expenditures before we will have sufficient operating income and cash flow to recover all of our investments. We are not able to accurately estimate when, if ever, our cash flows from operating activities will increase sufficiently to cover these investments. Further, we may not achieve or maintain profitability or generate cash from operations in future periods. Our working capital (the amount by which our current assets exceed our current liabilities), accumulated deficit, net loss and cash (used in) provided by operating activities are as follows:

	December 31,
	2009			2008			2007
	(in thousands)
Working capital	$	(21,747	)	$	2,263		$	45,580
Accumulated deficit		(529,939	)		(473,303	)		(408,073	)
Net loss		(58,537	)		(65,230	)		(204,676	)
Cash used in operating activities	$	(12,908	)	$	(36,263	)	$	(51,581	)

         We have substantial capital requirements and as a result, we have been, and continue to be, dependent on financing activities or sales of our equity securities to fund our operating costs. The inability to raise funds through traditional financing means or sale of our equity securities may require us to sell assets to fund our operating costs.

        As a result of negative cash flows from operations, we have been, and continue to be, dependent on financing activities and sales of our equity securities to fund the operating and substantial capital costs associated with our business. Our success is dependent on our ability to utilize existing resources and to generate sufficient cash flows to meet our obligations on a timely basis, to obtain financing or refinancing as may be required, to attain profitability, or a combination thereof. The continued economic downturn has had, and may continue to have, an impact on our business and our financial condition. In addition, the economic downturn may present significant challenges for us if conditions in the financial markets do not improve or continue to worsen. We have limited ability to access traditional bank loan financing in current market conditions. Further, our ability to access capital markets, for example, may be severely restricted at times when we need adequate funding to pay our existing indebtedness, pursue our business strategy, respond to changing business and economic conditions and competitive pressures, absorb negative operating results and fund our continuing operations, capital expenditures or increased working capital requirements. We may also need to sell assets to fund our operating costs to the extent that we are unable to raise adequate funds in the capital markets. Given the global recession, we may not be able to sell assets on favorable terms or at all.

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         We have a limited operating history as a technology solutions company, and our business and prospects should be considered in light of the risks and difficulties typically encountered by a company with a limited operating history.

        You should consider our business and prospects in light of the risks and difficulties typically encountered by a company with a limited operating history. The specific risks include whether we will be able to:

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enter into agreements to measure, quantify certify and verify carbon dioxide emissions or to license our GreenCert technology;

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enter into or maintain strategic partnerships with vendors and other parties to maximize our K-Fuel and GreenCert technologies;

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raise additional capital;

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execute our business strategy;

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accurately assess potential markets and effectively respond to competitive developments;

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successfully market our products;

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attract and retain customers for product sales;

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attract and retain credit-worthy customers;

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effectively manage expanding operations;

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attract and retain key personnel; and

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enter into agreements for the purpose of building K-Direct and K-Fuel plants or licensing of that technology;

        We may not be successful in addressing these and other risks. As a result, our financial condition, results of operations and cash flows may be adversely affected.

         Competition from other companies that have developed or may develop other systems that measure greenhouse gases and certify carbon credits, could adversely affect our competitive position. Further, competition could increase depending upon the level of regulation ultimately enacted in the United States and international markets, which could further adversely affect our competitive position.

        While we believe we have developed the only science-based method to accurately measure greenhouses gas emissions, other companies have developed less costly methodologies to measure these emissions. In addition, a number of companies are developing carbon measurement alternatives and many of these companies have greater resources than ours. Carbon measurement regulation, in both the United States and internationally, is evolving and there is no clear consensus on how carbon emissions should be measured. While we believe that our measurement tool is the most accurate tool because it is scientifically based, regulations could be enacted allowing for less precise methods and therefore, less costly methodologies to be applied. Further, there is a risk that our GreenCert technology will not be accepted by regulators and customers even though we believe it is compliant. Future revenues will be dependent upon our ability to identify and adapt to our competition and the changing regulatory environment.

         We rely on key personnel and if we are unable to retain or attract qualified personnel, we may not be able to execute our business plan.

        Our success is currently dependent on the performance of a small group of senior managers, key technical personnel and independent contractors that have a wide range of technical experience and

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expertise. For K-Fuel, this experience and expertise includes coal refining, coal thermal upgrading, thermal processing, coal gasification, coal liquification and general plant operations, For GreenCert this expertise includes carbon measurement, carbon emission modeling, power generation, carbon sequestration and nitrogen oxides and sulfur dioxide reduction analysis. In addition, our business strategy will require us to attract and retain a substantially greater number of qualified personnel and/or hire additional contractors in these key areas. The inability to retain key managerial and technical personnel or attract and retain additional highly qualified managerial or technical personnel in the future could harm our business or financial condition.

         Competition from other companies in the clean coal, alternative fuel and emission-reducing equipment industries, including competition resulting from deregulation in the United States power industry, could adversely affect our competitive position.

        Competition in the clean coal, alternative fuel and emission-reducing equipment industries could impact our ability to generate revenue from our K-Fuel process. Many of these companies in the clean coal, alternative fuel technology and emission-reducing equipment industries have financial resources greater than ours. Providers of alternative or competing technologies in these industries may be subject to less regulation, or alternatively, may enjoy subsidies that provide them with increased financial strength, or make their products or services more attractive to energy consumers. Due to any of these competitive advantages, our existing and future competitors may be able to offer products more competitively priced and more widely available than ours. These companies also may have the resources to create new technologies and products that could make our process and products obsolete. Our future revenues may depend on our ability to address competition in these industries. In addition, deregulation in the United States power generating industry may result in increased competition from other producers of energy-efficient coal products, other clean fuel sources, and other products, services and technologies designed to provide environmental and operating cost benefits similar to those which we believe are available from our K-Fuel refined coal.

         Overseas development of our K-Fuel and GreenCert businesses is subject to international risks, which could adversely affect our ability to license, construct overseas plants or profitably operate our businesses overseas.

        We believe a portion of the growth opportunity for our businesses lies outside the United States. Doing business in foreign countries may expose us to many risks that are not present domestically. We lack significant experience dealing with such risks, including political, military, privatization, technology piracy, currency exchange and repatriation risks, and higher credit risks associated with customers. In addition, it may be more difficult for us to enforce legal obligations in foreign countries, and we may be at a disadvantage in any legal proceeding within the local jurisdiction. Local laws may also limit our ability to hold a majority interest in the projects that we develop.

         If the national and world-wide financial downturn continues or intensifies it could adversely impact demand for our technology and products.

        Continued market disruptions could cause broader economic downturns, which may lead to lower demand for our technology or products, increased incidence of customers' inability to pay their accounts, or insolvency of our customers, any of which could adversely affect our results of operations, liquidity, cash flows, and financial condition.

         Our inability to adequately protect and defend our proprietary K-Fuel and GreenCert processes could harm our business, increase our costs and decrease sales of our products and services.

        Our success depends, in part, upon our proprietary processes. We rely on a combination of patent, trademark and trade secret rights to establish and protect our proprietary rights. We currently have a

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series of patents and patent applications on our K-Fuel process and our GreenCert technology. However, competitors may successfully challenge the validity or scope of one or more of our patents, or any future patents. These patents alone may not provide us with any significant competitive advantage. Further, while our most recently issued K-Fuel patent protection covers what we believe are the unique aspects of our K-Fuel process as it is currently conducted, not all of the claims we filed were allowed. An additional patent application has been filed to address the examiner's comments and we expect some of the revised claims to be allowed. While we continue our efforts regarding these claims there can be no assurance that we will be able to obtain patent protection in the United States or abroad to protect these or any other aspects of our intellectual property, or that, in the absence of any such patent protection, that the combination of additional methods that we currently employ to maintain the confidentiality of our processes will adequately safeguard our proprietary processes and information. If our intellectual property is not adequately protected, this may have a material adverse impact on our financial condition, results of operations, cash flows and future prospects.

        Third parties could copy or otherwise obtain and use our technologies without authorization or develop similar technologies independently. The protection of our proprietary rights may be inadequate and our competitors could independently develop similar technology, duplicate our solutions, or design around any patents or other intellectual property rights we hold.

        Any actions taken by us to enforce our patents or other property rights could result in significant expense as well as the diversion of management time and resources. In addition, detecting infringement and misappropriation of patents or intellectual property can be difficult, and there can be no assurance that we would detect any infringement or misappropriation of our proprietary rights. Even if we are able to detect infringement or misappropriation of our proprietary rights, litigation to enforce our rights could cause us to divert significant financial and human resources from our business operations, and may not ultimately be successful. If we are required to divert significant resources and time to the enforcement of our proprietary rights, even if the enforcement is successful, our business could be materially adversely affected.

         Our success will depend on our ability to operate without infringing on or misappropriating the proprietary rights of others.

        We may be sued for infringing or misappropriating the proprietary rights of others. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could adversely affect our business. In addition, litigation is time consuming and could divert management attention and resources away from our business. If we do not prevail in any litigation, we could be required to stop the infringing activity and/or pay substantial damages. Under some circumstances, these damages could be triple the actual damages the patent holder incurs. If we have supplied infringing products to third parties for marketing or licensed third parties to manufacture, use or market infringing products, we may be obligated to indemnify these third parties for any damages they may be required to pay to the patent holder and for any losses the third parties may sustain themselves as the result of lost sales or damages paid to the patent holder.

        If a third party holding rights under a patent successfully asserts an infringement claim with respect to any of our products or processes, we may be prevented from manufacturing or marketing our infringing product in the country or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. Any required license might not be available to us on acceptable terms, or at all. Some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to market future products, which could have a material adverse effect on our business.

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         Our acquisition activities may not be successful.

        As part of our business strategy, we may make acquisitions of businesses and technologies. However, suitable acquisition candidates may not be available on terms and conditions we find acceptable. Further, acquisitions pose substantial risks to our financial condition, results of operations and cash flows. In pursuing acquisitions, we compete with other companies, many of which have greater financial and other resources to acquire attractive companies and properties. Even if future acquisitions are completed, the following are some of the risks associated with acquisitions:

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the acquired businesses or properties may not produce revenues, earnings or cash flow at anticipated levels;

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we may be unable to integrate acquired businesses successfully and realize anticipated economic, operational and other benefits in a timely manner;

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acquisitions could disrupt our ongoing business, distract management, divert resources and make it difficult to maintain our current business standards, controls and procedures;

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we may finance future acquisitions by issuing common stock for some or all of the purchase price, which could dilute the ownership interests of our stockholders; and

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we may incur additional debt related to future acquisitions.

Risks Relating to Our Debt, Our Common Stock and Other Risks.

         Our debt obligations may affect our business, operating results and financial condition.

        We have a significant amount of debt, especially given our limited cash flow from operations. In July 2007, we issued $95.0 million long-term debt due August 1, 2012, ("2007 Notes"), of which $27.4 million is outstanding as of December 31, 2009. In March 2009, we executed a senior secured convertible note agreement which provides for the issuance of up to $15 million in aggregate principal amount of 10% Senior Secured Promissory Notes, which we refer to as the "2009 Notes" in three $5 million tranches. All three tranches were drawn during the year ended December 31, 2009. Further, on December 18, 2009, we restructured and extended the terms of these 2009 Notes extending the maturity date to the earlier of June 30, 2010 or upon the sale of Buckeye. As part of the restructuring, the stated principal amount has been increased by $2.25 million, representing the 15% exit fee, bringing the aggregate principal amount of 2009 Notes to $17.25 million. In addition, we must pay a 15% exit fee upon the payment of the principal amount equaling $2.6 million. See further discussion in Item 8—Note 7—Debt.

        Our debt service obligations could adversely affect us in a number of ways, including by:

•

limiting our ability to obtain in the future, if needed, financing for working capital, capital expenditures, debt service requirements or other corporate purposes;

•

limiting our flexibility in implementing our business strategy and in planning for, or reacting to, changes in our business;

•

placing us at a competitive disadvantage relative to any of our competitors who have lower levels of debt;

•

decreasing our debt ratings and increasing our cost of borrowed funds;

•

making us more vulnerable to a downturn in our business or the economy generally;

•

subjecting us to the risk of being forced to refinance at higher interest rates these amounts when due; and

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•

requiring us to use a substantial portion of our cash to pay principal and interest on our debt instead of contributing those funds to other purposes such as working capital, capital expenditures or other corporate purposes.

        In addition, our ability to generate cash flow from operations sufficient to make scheduled payments on our debts as they become due will depend on our future performance, our ability to successfully implement our business strategy and our ability to obtain other financing, which may be influenced by economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

         Our ability to pay principal and interest on outstanding indebtedness depends upon our receipt of dividends or other intercompany transfers from our subsidiaries, and claims of creditors of our subsidiaries that do not guarantee our indebtedness will have priority over claims you may have as for our guaranteed indebtedness with respect to the assets and earnings of those subsidiaries.

        We are a holding company and substantially all of our properties and assets are owned by, and all our operations are conducted through, our subsidiaries. As a result, we are dependent upon cash dividends and distributions or other transfers from our subsidiaries to meet our debt service obligations, including payment of the interest on and principal of our indebtedness when due, and other obligations. The ability of our subsidiaries to pay dividends and make other payments to us may be restricted by, among other things, applicable corporate, tax and other laws and regulations in the United States and abroad and agreements made by us and our subsidiaries, including under the terms of our existing and potentially future indebtedness. In addition, claims of creditors, including trade creditors, of our subsidiaries will generally have priority with respect to the assets and earnings of such subsidiaries over the claims of our creditors, except to the extent the claims of our creditors are guaranteed by these subsidiaries. In the event of our dissolution, bankruptcy, liquidation or reorganization, the holders of such indebtedness will not receive any amounts from our non-guarantor subsidiaries with respect to such indebtedness until after the payment in full of the claims of the creditors of those subsidiaries. Furthermore, if there was default on the 2009 Notes, Buckeye would not be permitted to make cash dividends, dividends or other transfers.

         We may not have the ability to repurchase the 2007 Notes for cash upon the occurrence of a fundamental change as required by the Indenture governing the 2007 Notes or to make payments upon major transactions as required by the 2009 Notes.

        Holders of our 2007 Notes will have the right to require us to repurchase the 2007 Notes for cash upon the occurrence of a fundamental change, which would include, among other things, the failure of our common stock to be listed on the NYSE Arca or another national securities exchange or quoted on an established automated over-the-counter trading market. In addition, the 2009 Notes require that, upon the holder's request, we pay all amounts outstanding with certain exit fees upon a major transaction, which generally includes transactions such as mergers, business combinations, sales of secured assets and other change of control transactions. We may not have sufficient funds to repurchase the 2007 Notes or repay the 2009 Notes or have the ability to arrange necessary financing on acceptable terms. Our ability to repurchase the 2007 Notes for cash may be limited by law or the terms of other agreements relating to our indebtedness outstanding at the time. Our failure to repurchase the 2007 Notes or repay the 2009 Notes when required would result in an event of default with respect to the Notes and could result in the acceleration of the maturity of our then-existing indebtedness. This repurchase right may actually have the effect of making us a less attractive candidate for a fundamental change transaction.

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         Conversion of the Notes may dilute the ownership interest of existing stockholders, including holders who have previously converted their Notes.

        To the extent we deliver common stock upon conversion of either the 2007 Notes or the 2009 Notes, the ownership interests of existing stockholders may be diluted. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

         We may not be able to refinance the Notes if required or if we so desire.

        We may need or desire to refinance all or a portion of the Notes or any other future indebtedness that we incur on or before the maturity of the Notes. There can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms, if at all.

         We may be unable to deduct for tax purposes the interest or original issue discount, if any, paid or accrued on the Notes.

        No deduction is allowed for U.S. federal income tax purposes for interest paid on a disqualified debt instrument. A disqualified debt instrument generally includes any indebtedness of a corporation which is payable in equity of the issuer. Although we believe and intend to take the position that the Notes are not disqualified debt instruments, the Notes may be treated as disqualified debt instruments, and we may be prohibited from deducting the interest due on the Notes. Consequently, we may have less cash available with which to satisfy our obligations.

         Our common stock could be delisted from the NYSE Arca if we do not comply with its continued listing standards.

        On October 2, 2009, we were notified by NYSE Arca, Inc. ("NYSE Arca") that we are not in compliance with NYSE Arca's continued listing standard under Rule 5.5(b)(2) of the NYSE Arca Equities Rules. The standard requires that a listed common stock must maintain an average closing price in excess of $1.00 over a consecutive 30 trading-day period. We have six months from the receipt of the notice to regain compliance with the NYSE Arca price condition, or we may be subject to suspension and delisting procedures. Subject to NYSE Arca rules, during the six-month cure period, our common stock will continue to be listed, and trade on NYSE Arca. At the end of the six-month period, we will be in compliance if we have at least a $1.00 share price and have maintained a $1.00 average closing share price over the preceding 30 consecutive trading days. We are currently exploring alternatives for curing the deficiency and restoring compliance with NYSE Arca's continued listing standard. However, if our stock is delisted, it could reduce the liquidity of an investment in our common stock and also make it more difficult for us to raise capital in the future. In addition, efforts to maintain our listing on the NYSE Arca may result in the incurrence of costs that could be material in any given period.

         Our stock price has been volatile historically and may continue to be volatile. The price of our common stock may fluctuate significantly, which may make it difficult for holders to resell the shares of our common stock issuable upon conversion of the preferred stock or upon exercise of the warrants when desired or at attractive prices.

        The trading price of our common stock has been and may continue to be subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors, changes in financial estimates and recommendations by securities analysts,

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the operating and stock price performance of other companies that investors may deem comparable to us, and new reports relating to trends in our markets or general economic conditions.

        In addition, the stock market in general, and prices for companies in our industry in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of our operating performance. Because the preferred stock is convertible into shares of our common stock, volatility or depressed prices of our common stock could affect the value of the preferred stock or the warrants. Additionally, lack of positive performance in our stock price may adversely affect our ability to retain key employees.

         Sales of a significant number of shares of our common stock in the public markets, or the perception of such sales, could depress the market price of the Notes, our common stock, or both.

        Sales of a substantial number of shares of our common stock or other equity-related securities in the public markets could depress the market price of the Notes, our common stock, or both, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock or the value of the Notes. The price of our common stock could be affected by possible sales of our common stock by investors who view the Notes as a more attractive means of equity participation in our company and by hedging or arbitrage trading activity which we expect to occur involving our common stock. This hedging or arbitrage could, in turn, affect the market price of the Notes.

         Our stock price continues to be volatile, and any investment in our common stock could suffer a decline in value.

        An investment in our common stock is risky, and stockholders could suffer significant losses and wide fluctuations in the market value of their investment. The market price of our common stock has been extremely volatile. During 2009, the sale prices of our common stock on the NYSE Arca ranged from a low of $0.28 to a high of $1.43. We expect our common stock to continue to be subject to fluctuations. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. Volatility in the market price of shares may prevent investors from being able to sell their shares of common stock at prices they view as attractive. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources.

         We have adopted anti-takeover defenses that could make it difficult for another company to acquire control of us or limit the price investors might be willing to pay for our stock, which could adversely affect the performance of our stock.

        We have adopted a stockholder rights plan, commonly known as a "poison pill," under which each stockholder holds one share purchase right, which we refer to as a Right, for each share of common stock held. The Rights become exercisable upon the occurrence of certain events and may make our acquisition more difficult and expensive. In addition our certificate of incorporation, and Delaware General Corporation Law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. The stockholder rights plan, provisions of our certificate of incorporation, and Delaware law are intended to encourage potential acquirers to negotiate with us and allow our board of directors the opportunity to consider alternative proposals in the interest of maximizing stockholder value. However, such provisions may also discourage acquisition proposals or delay or prevent a change in control, which could harm our stock price.

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         The anti-dilution provisions of the 2009 Notes could have a substantial dilutive effect on our common stock and put downward pressure on the market price of our common stock.

        The conversion price of our 2009 Notes is subject to downward anti-dilution adjustments if we issue securities at a purchase, exercise or conversion price that is less than the then-applicable conversion price of the 2009 Notes. Consequently, the voting power of our common stock and the market value of our common stock in such an event would decline if the 2009 Notes are converted for shares of our common stock at the new lower conversion price.

         We have not paid cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future.

        We anticipate that we will retain all future earnings and other cash resources for the future operation and development of our business. Accordingly, we do not intend to declare or pay any cash dividends on our common stock in the foreseeable future. Payment of any future dividends will be at the discretion of our board of directors after taking into account many factors, including our operating results, financial conditions, current and anticipated cash needs and plans for expansion.

         The 2009 Notes contain restrictive covenants that limit our operational flexibility.

        The 2009 Notes contain covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest. These covenants include restrictions on:

•

Buckeye incurring additional debt;

•

upon a default, receiving dividends from Buckeye or allowing us to pay dividends on or make distributions in respect of our capital stock;

•

creating liens on certain assets to secure debt; and

•

selling certain assets.

        Our failure to comply with these restrictions could lead to a default under the 2009 Notes.

GreenCert Technology Risks

         We do not know if our GreenCert technology is commercially viable. Further, due to the uncertain market for, and commercial acceptance of our GreenCert technology, we may not be able to realize significant revenues from this technology.

        Our GreenCert technology is in an evolving market and as a result we do not know whether our GreenCert technology will be accepted by customers to measure greenhouse gas emissions and certify carbon credits in a cost effective manner. While we believe that a commercial market is developing both domestically and internationally for measuring greenhouse gasses and certifying carbon credits, we may face the following risks due to the developing market for our technology:

•

limited pricing information;

•

alternative methodologies are available at a lower price; and

•

sufficient market interest for us to continue in business.

        If we are unable to develop markets for our GreenCert technology, our ability to generate revenues and profits may be negatively impacted.

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         Future changes in the law may adversely affect our ability to sell products and services based on our GreenCert Technology.

        A significant factor in expanding the potential market for the measurement and reporting of greenhouse gases and certification of carbon credits is the continuation and expansion of emissions regulations both in the U.S. and internationally. We are unable to predict future regulatory changes and their impact on the demand for our products. While more stringent laws and regulations may increase demand for our products, such regulations may result in reduced reliance on various sources of emissions, including coal fired power plants, or increased reliance on alternative energy sources, which do not result in the emission of greenhouse gases. Similarly, amendments to the numerous federal and state environmental regulations that relax emission limitations would have a material adverse effect on our prospects.

         Our success depends upon our ability to develop and enhance our products and services.

        Rapid technological advances and evolving standards in computer hardware, software development and communications infrastructure, changing and increasingly sophisticated customer needs and frequent new product introductions and enhancements characterize the market in which we compete. If we are unable to continue to develop our products and services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy licenses or renew licenses. In addition, IT standards from both consortia and formal standards-setting forums as well as de facto marketplace standards are rapidly evolving. We cannot provide any assurance that the standards on which we choose to develop our products will allow us to compete effectively for business opportunities this emerging area.

         We may need to change our pricing models to compete successfully.

        The intense competition we face in the sales of our products and services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer discounts on certain products or services or develop products that the marketplace considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect operating results. Our license renewals are anticipated to be priced as a percentage of our net new license fees. Our competitors may offer lower percentage pricing on renewals, which could put pressure on us to further discount our new license prices.

         As we release our solution, we might experience significant errors or security flaws in our products and services.

        Despite testing prior to their release, products frequently contain errors or security flaws, especially when first introduced or when new versions are released. The detection and correction of any security flaws can be time consuming and costly. Errors in software products that underlie our solution could affect the ability of our products to work with other hardware or software products, could delay the development or release of new products or new versions of our products and could adversely affect market acceptance of our products. If we experience errors or delays in releasing new products or new versions of our products, we could lose revenues. End users, who rely on our products and services for applications that are critical to their businesses, may have a greater sensitivity to product errors and security vulnerabilities than customers for software products generally. Product errors and security flaws in our products or services could expose us to product liability, performance and/or warranty claims as well as harm our reputation, which could impact our future sales of products and services. In addition, we may be legally required to publicly report security breaches of our services, which could adversely impact future business prospects for those services.

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K-Fuel Process Risks

         We faced technical and operational issues at our Fort Union plant prior to suspending operations at the plant. These technical and operational problems may adversely impact our ability to develop future K-Fuel or K-Direct facilities, resulting in delays in achieving full scale commercial production of our K-Fuel refined coal.

        Research and development is an iterative process and our K-Fuel process has been evolving for approximately 25 years with the most recent material modification being the integration of the Lurgi (Pty) Ltd. proprietary coal processing equipment with our patented technology, which started in 2003.

        Our Fort Union plant was a third generation facility developed for this purpose. The first facility was a research and development plant that currently serves as our research laboratory. The second facility was a commercial demonstration plant that we constructed with a joint venture partner and commenced operations in 1998. In June 1999, our joint venture partner suspended production at the plant due to its strategic restructuring. Thereafter, we sold our interest in the plant to our joint venture partner and in September 2002, the major equipment at the plant was purchased by a third party and removed from the site. As part of the continued development of the K-Fuel process, we analyzed the operations of this plant and some of the problems that we encountered with respect to operations and product quality and made modifications to the K-Fuel process that we believe addressed these issues. We built upon this knowledge base in designing and constructing the Fort Union plant.

        While redesigned equipment and systems tested at the Fort Union plant showed positive results, we faced technical and operational problems in attempting to achieve commercial production of K-Fuel and decided to suspend operations at the plant in March 2008. Our goal was to dedicate our limited capital and human resources to building new plants built around the enhanced design and systems tested at the Fort Union plant. Problems we encountered included cost overruns, delays, technical issues, availability of workers and contractors, and weather. We may encounter similar problems at any future facilities we are able to build. Additionally, any future facilities may encounter the following additional problems:

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unforeseen construction problems and limited availability of raw material or fabrication capability;

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unforeseen problems not previously encountered at our Fort Union plant; and

•

current and future K-Fuel products may not meet the technical specifications required by our customers or other customer requirements.

        Our ability to effectively operate and develop K-Fuel and K-Direct facilities may be harmed to the extent these and other technical or operational problems materialize. Should we be unable to effectively develop K-Fuel or K-Direct facilities, our ability to generate revenues and profits from future facilities and future licensing opportunities may be negatively impacted. In particular, because we were unable to consistently operate our Fort Union plant for sustained periods of time to produce commercial quantities of K-Fuel refined coal, it will likely be more difficult for us to enter into arrangements with customers for their regular purchase of K-Fuel refined coal at future facilities.

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         We do not know if K-Fuel refined coal is commercially viable.

        While our Fort Union plant previously produced limited amounts of K-Fuel refined coal, we do not know whether K-Fuel refined coal can be produced and sold on a commercial basis in a cost effective manner after taking into account the cost of the feedstock, our production costs and the cost of transportation. As our Fort Union plant was not able to achieve full scale commercial production, we have not yet developed an efficient cost structure. We are currently using the knowledge base developed at our Fort Union plant to understand our pricing and costs, as well as the quality of the product when used in K-Fuel test burns, and intend to leverage this knowledge base when constructing any additional K-Fuel plants or any K-Direct plants. We experienced technical problems with respect to the K-Fuel refined coal produced at our Fort Union plant, including coal dusting. If we fail to adequately address these technical problems to the extent they occur at future K-Fuel or K-Direct facilities, or any other unforeseen problems that may occur in the future, it could make K-Fuel refined coal more expensive to transport and store, and therefore more expensive to burn. Failure to address both known and unforeseen technical challenges of K-Fuel refined coal, obtain feedstock in sufficient quantity and at acceptable prices and to arrange for transportation services at reasonable prices, may materially and adversely affect our business, results of operations and financial condition.

         Construction of future K-Fuel or K-Direct facilities will require substantial lead time and significant additional financing if constructed by us or Evergreen-China.

        We do not currently have any definitive contracts to construct additional K-Fuel facilities or K-Direct facilities. To the extent that we identify businesses to construct K-Fuel or K-Direct facilities, a lengthy permitting and construction process may commence. We estimate that it could take six months or longer to obtain necessary permits and approvals and that, depending on local circumstances, the required time could be much longer or shorter. Thereafter, construction of a facility with a capacity of approximately 1.5 million tons of K-Fuel refined coal per year could take an estimated further period of 18 to 24 months.

        Prior to suspending operations at our Fort Union plant in March 2008, we estimate that we spent approximately $110 million in constructing our Fort Union plant. We estimate that the cost of constructing additional facilities, such as a 1.5 million ton per year facility, could be greater depending on additional variables, including site location, material handling equipment and design, seismic zones, labor issues, and weather and climate conditions. Such variables could potentially increase costs. We would be required to obtain substantial amounts of financing to undertake any such project and there can be no assurance that such financing would be available to us. Inability to construct additional facilities to produce K-Fuel, or to finance the construction thereof on acceptable terms, will adversely affect our financial condition.

         Any negative results from the continuing evaluation of K-Fuel refined coal produced at future facility sites by us or third parties could have a material adverse effect on the marketability of K-Fuel refined coal and future prospects.

        We and certain third parties are continuing to evaluate the attributes of K-Fuel refined coal. There can be no assurance that these evaluations will result in positive findings concerning the moisture content, heat value, emission-levels, burn qualities or other aspects of our K-Fuel refined coal. Furthermore, even if current evaluations indicate that our K-Fuel refined coal performs to design specifications, there can be no assurance that later tests will confirm these current results or that our K-Fuel refined coal will be readily accepted by the market. The process of introducing our K-Fuel refined coal into the market may be further delayed if these test results are negative or if potential customers conduct their own tests of the K-Fuel refined coal to determine whether it meets their individual requirements and the results are not acceptable. Substantially all of our evaluations of K-Fuel refined coal at our Fort Union plant used Powder River Basin low-grade coal as the feedstock and we

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conducted only limited tests of the K-Fuel process at Fort Union using other feedstocks. However, we have conducted numerous tests of the K-Fuel process using other feedstocks in laboratories. The ability to use feedstocks from other locations in the United States or overseas will depend on the results of future tests on different types of coal. If these tests limit the range of viable low-grade coal feedstocks for use in the K-Fuel process, site locations for future K-Fuel or K-Direct plants may be limited and the commercial appeal of the process may be less than anticipated. If this continuing process of evaluation and market introduction results in negative findings concerning the K-Fuel process, this could have a material adverse effect on the marketability of K-Fuel refined coal and on our financial condition, results of operations and future prospects.

         Due to the uncertain market for, and commercial acceptance of, our K-Fuel refined coal, we may not be able to realize significant revenues from the sale of K-Fuel refined coal or licensing our technology.

        While we believe that a commercial market is developing both domestically and internationally for cleaner coal products such as K-Fuel refined coal, we may face the following risks due to the developing market for our cleaner coal technology:

•

limited pricing information;

•

changes in the price differential between low- and high-Btu coal;

•

unknown costs and methods of transportation to bring K-Fuel refined coal to market;

•

alternative fuel supplies available at a lower price;

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the cost and availability of emissions-reducing equipment and other technologies that may be more desirable than the K-Fuel refined coal;

•

potential future declines in energy prices which would make K-Fuel refined coal less attractive economically;

•

the market viability of K-Fuel refined coal based on a decline in energy prices; and

•

sufficient market interest for us to continue in business.

        If we are unable to develop markets for our K-Fuel technology, our ability to generate revenues and profits may be negatively impacted.

         If we are unable to license and commercialize K-Fuel production plants, our ability to generate profits from this process will be impaired.

        Our future success will be adversely affected if we can not locate, develop, construct, and/or license future commercial K-Fuel production plants and have them operate at a profit. Prior to suspending operations at our Fort Union plant, we were not able to achieve commercial production. A number of different variables, risks and uncertainties affect our successful construction of future K-Fuel production plants and our ability to operate such plants at a profit including:

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the complex, lengthy and costly regulatory permit and approval process;

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local opposition to development of projects, which can increase cost and delay timelines;

•

increases in construction costs such as for contractors, workers and raw materials;

•

transportation costs and availability of transportation;

•

our inability to acquire adequate amounts of low rank feedstock coal at forecasted prices to meet our projected goals;

•

engineering, operational and technical difficulties, as discussed above;

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•

possible price fluctuations of low-Btu coal, which could impact K-Fuel refined coal's profitability; and

•

expenditures related to researching and investigating future K-Fuel production sites, which we may not be able to recover.

        If we are unable to successfully address these risks, our results from operations, financial condition and cash flows may be adversely affected.

         Regulation of the K-Fuel process and K-Fuel refined coal may adversely affect our financial condition and results of operations and cash flows.

        Our K-Fuel refined coal is currently subject to federal, state, local, and foreign laws and regulations. In addition, as products and commercial applications are introduced into the market, governments may impose new regulations which may increase our costs and price of our product. If the cost of compliance with applicable laws and regulations increases past that forecasted, our ability to profitably market and sell K-Fuel refined coal may be jeopardized.

         Compliance with environmental laws and regulations may increase our costs and reduce our future sales.

        Our operations are subject to stringent and complex federal, state and local environmental laws and regulations. Failure to comply with these laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict joint and several liabilities for costs required to clean up and restore sites where hazardous substances have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of substances or other waste products into the environment.

         Future changes in the law may adversely affect our ability to sell our products and services.

        A significant factor in expanding the potential U.S. market for K-Fuel refined coal is the numerous federal, state and local environmental regulations, which provide various air emission requirements for power generating facilities and industrial coal users. We believe that the use of clean-burning fuel technologies, like K-Fuel refined coal, will help utility companies comply with the air emission regulations and limitations. We are unable to predict future regulatory changes and the impact on the demand for our products. While more stringent laws and regulations, including mercury emission standards, limits on sulfur dioxide emissions and nitrogen oxide emissions, may increase demand for our products, such regulations may result in reduced coal use and increased reliance on alternative fuel sources. Similarly, amendments to the numerous federal and state environmental regulations that relax emission limitations would have a material adverse effect on our prospects.

Coal Mining Risks

Certain conditions and events beyond our control could negatively impact our coal mining operations, our production or our operating costs.

        We mine coal at underground and surface mining operations. Certain factors beyond our control, including those listed below, could disrupt our coal mining operations, reduce our production or increase our operating costs:

•

delays and difficulties in acquiring, maintaining or renewing necessary permits or mining or surface rights;

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•

changes or variations in geological conditions, such as the thickness of the coal deposits and the amount of rock embedded in or overlying the coal deposit;

•

mining and processing equipment failures and unexpected maintenance problems;

•

interruptions due to transportation delays;

•

adverse weather and natural disasters, such as heavy rains or snow and flooding;

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shortage of qualified labor;

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unexpected or accidental surface subsidence from underground mining;

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accidental mine water discharges, fires, explosions or similar mining accidents; and

•

regulatory issues involving the plugging of and mining through oil and gas wells that penetrate the coal seams we mine.

        If any of these conditions or events occur at our Buckeye operations our coal mining operations may be disrupted; we could experience a delay or halt of production or our operating costs could increase significantly. In addition, if our insurance coverage is limited or excludes certain of these conditions or events, then we may not be able to recover any of the losses we may incur as a result of such conditions or events, some of which may be substantial.

         The substantial or extended decline in coal prices has negatively affected our revenues and the value of our coal reserves.

        Revenues from our Buckeye operations and the value of our coal reserves depend upon the prices we receive for our coal. In turn, the prices we receive for our coal depend upon factors beyond our control, including the following:

•

the supply of and demand for domestic and foreign coal;

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the demand for electricity and steel;

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domestic and foreign governmental regulations and taxes, including those establishing air emission standards for coal-fueled power plants;

•

regulatory, administrative and judicial decisions, including those affecting future mining permits;

•

the proximity, capacity and cost of transportation facilities;

•

the availability and price of alternative fuels, such as natural gas, and alternative energy sources, such as hydroelectric, wind and solar power;

•

technological developments, including those intended to convert coal to liquid or gas and those aimed at capturing and sequestering carbon; and

•

the effects of worldwide energy conservation measures.

        Decline in the prices we receive for our coal could adversely affect our revenues and the value of our coal reserves.

         Increases in the costs of mining and other industrial supplies, including steel-based supplies and diesel fuel, or the inability to obtain a sufficient quantity of those supplies, could negatively affect our operating costs or disrupt or delay our production.

        Our coal mining operations use significant amounts of steel, diesel fuel, and other mining and industrial supplies. The costs of roof bolts we use in our underground mining operations depend on the price of scrap steel. We also use significant amounts of diesel fuel for the trucks and other heavy

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machinery at our Buckeye operations. If the prices of mining and other industrial supplies, particularly steel-based supplies and diesel fuel increase, our operating costs could be negatively affected. In addition, if we are unable to procure these supplies, our coal mining operations may be disrupted or we could experience a delay or halt in our production.

         Our inability to acquire additional coal reserves or our inability to develop coal reserves in an economically feasible manner may adversely affect our business.

        As we mine, we deplete our coal reserves. As a result, our ability to produce coal in the future depends, in part, on our ability to acquire additional coal reserves. We may not be able to obtain replacement reserves when we require them. If available, replacement reserves may not be available at favorable prices, or we may not be capable of mining those reserves at costs that are comparable with our existing coal reserves. Our ability to obtain coal reserves in the future could also be limited by restrictions under our existing or future debt agreements and competition from other coal producers. If we are unable to acquire coal reserves to replace the coal reserves we mine, our future production may decrease significantly and our operating results may be negatively affected.

         Estimates of proven and probable reserves may vary substantially from actual results.

        There are numerous uncertainties inherent in estimating quantities of proven and probable reserves, including many factors beyond our control. Estimates of economically proven and probable coal reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions. These include historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future coal prices, future operating costs, severance and excise taxes, development costs and reclamation costs, all of which may in fact vary considerably from actual results. For these reasons, estimates of the economically recoverable quantities of coal attributable to any particular group of properties, classifications of such reserves based on risk of recovery and estimates of future net cash flows expected from them prepared by different engineers or by the same engineers at different times may vary substantially. Actual production, revenues and expenditures with respect to our reserves will likely vary from estimates, and such variances will likely be material. As a result, you should not place undue reliance on the coal reserve data included herein.

         A shortage of skilled labor in the mining industry could pose a risk to achieving optimal labor productivity and competitive costs, which could adversely affect our profitability.

        Efficient coal mining using modern techniques and equipment requires skilled laborers, preferably with at least a year of experience and proficiency in multiple mining tasks. In the event the shortage of experienced labor continues or worsens or we are unable to train the necessary amount of skilled laborers, there could be an adverse impact on our labor productivity and costs and our ability to expand production and therefore have a material adverse effect on our earnings.

         Defects in title or loss of any leasehold interests in our properties could limit our ability to conduct mining operations on these properties or result in significant unanticipated costs.

        We conduct a significant part of our mining operations on properties that we lease. A title defect or the loss of any lease upon expiration of its term, upon a default or otherwise, could adversely affect our ability to mine the associated reserves and/or process the coal that we mine. Title to most of our owned or leased properties and mineral rights is not usually verified until we make a commitment to develop a property, which may not occur until after we have obtained necessary permits and completed exploration of the property. In some cases, we rely on title information or representations and warranties provided by our lessors or grantors. Our right to mine some of our reserves has in the past been, and may again in the future be, adversely affected if defects in title or boundaries exist or if a

32

lease expires. Any challenge to our title or leasehold interests could delay the exploration and development of the property and could ultimately result in the loss of some or all of our interest in the property. Mining operations from time to time may rely on an expired lease that we are unable to renew. From time to time we also may be in default with respect to leases for properties on which we have mining operations. In such events, we may have to close down or significantly alter the sequence of such mining operations which may adversely affect our future coal production and future revenues. If we mine on property that we do not own or lease, we could incur liability for such mining. Also, in any such case, the investigation and resolution of title issues would divert management's time from our business and our results of operations could be adversely affected.

        In order to obtain leases or mining contracts to conduct our mining operations on property where these defects exist, we may in the future have to incur unanticipated costs. In addition, we may not be able to successfully negotiate new leases or mining contracts for properties containing additional reserves, or maintain our leasehold interests in properties where we have not commenced mining operations during the term of the lease. Some leases have minimum production requirements. Failure to meet those requirements could result in losses of prepaid royalties and, in some rare cases, could result in a loss of the lease itself.

         The availability and reliability of transportation facilities and fluctuations in transportation costs could affect the demand for our coal or impair our ability to supply coal to our customers.

        We depend upon barge, rail, and truck transportation systems to deliver coal to our customers. Disruptions in transportation services due to weather-related problems, mechanical difficulties, strikes, lockouts, bottlenecks, and other events could impair our ability to supply coal to our customers. As we do not have long-term contracts with transportation providers to ensure consistent and reliable service, decreased performance levels over longer periods of time could cause our customers to look to other sources for their coal needs. In addition, increases in transportation costs, including the price of gasoline and diesel fuel, could make coal a less competitive source of energy when compared to alternative fuels or could make coal produced in one region of the United States less competitive than coal produced in other regions of the United States or abroad. If we experience disruptions in our transportation services or if transportation costs increase significantly and we are unable to find alternative transportation providers, our coal mining operations may be disrupted, we could experience a delay or halt of production or our profitability could decrease significantly.

         Extensive government regulations impose significant costs on our mining operations, and future regulations could increase those costs or limit our ability to produce and sell coal.

        The coal mining industry is subject to increasingly strict regulation by federal, state and local authorities with respect to matters such as:

•

limitations on land use;

•

employee health and safety;

•

mandated benefits for retired coal miners;

•

mine permitting and licensing requirements;

•

reclamation and restoration of mining properties after mining is completed;

•

air quality standards;

•

water pollution;

•

protection of human health, plant life and wildlife;

•

the discharge of materials into the environment;

33

•

surface subsidence from underground mining; and

•

the effects of mining on groundwater quality and availability.

        In particular, federal and state statutes require us to restore mine property in accordance with specific standards and an approved reclamation plan and require that we obtain and periodically renew permits for mining operations. If we do not make adequate provisions for all expected reclamation and other costs associated with mine closures, it could harm our future operating results. In addition, state and federal regulations impose strict standards for particulate matter emissions which may restrict our ability to develop new mines or could require us to modify our existing operations and increase our costs of doing business.

        Federal and state safety and health regulation in the coal mining industry may be the most comprehensive and pervasive system for protection of employee safety and health affecting any segment of the U.S. industry. It is costly and time-consuming to comply with these requirements and new regulations; orders may materially adversely affect our mining operations or cost structure, any of which could harm our future results.

        Under federal law, each coal mine operator must secure payment of federal black lung benefits to claimants who are current and former employees and contribute to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry before July 1973. The trust fund is funded by an excise tax on coal production. If this tax increases, or if we could no longer pass it on to the purchaser of our coal under many of our long-term sales contracts, it could increase our operating costs and harm our results. New regulations that took effect in 2001 could significantly increase our costs related to contesting and paying black lung claims. If new laws or regulations increase the number and award size of claims, it could substantially harm our business.

        The costs, liabilities and requirements associated with these and other regulations may be costly and time-consuming and may delay commencement or continuation of exploration or production operations. Failure to comply with these regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our operations. We may also incur costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations. We must compensate employees for work-related injuries. If we do not make adequate provisions for our workers' compensation liabilities, it could harm our future operating results. If we are pursued for these sanctions, costs and liabilities, our mining operations and, as a result, our profitability could be adversely affected.

        The possibility exists that new legislation and/or regulations and orders may be adopted that may materially adversely affect our mining operations, our cost structure and/or our customers' ability to use coal. New legislation or administrative regulations (or new judicial interpretations or administrative enforcement of existing laws and regulations), including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us or our customers to change operations significantly or incur increased costs. These regulations, if proposed and enacted in the future, could have a material adverse effect on our financial condition and results of operations.

         We may be unable to obtain and renew permits necessary for our operations, which would reduce our production, cash flow and profitability.

        Mining companies must obtain numerous permits that impose strict regulations on various environmental and safety matters in connection with coal mining. These include permits issued by various federal and state agencies and regulatory bodies. The permitting rules are complex and may

34

change over time making our ability to comply with the applicable requirements more difficult or even impossible, thereby precluding continuing or future mining operations. Private individuals and the public have certain rights to comment upon and otherwise engage in the permitting process, including through court intervention. Accordingly, the permits we need may not be issued, maintained or renewed, or may not be issued or renewed in a timely fashion, or may involve requirements that restrict our ability to conduct our mining operations. An inability to conduct our mining operations pursuant to applicable permits would reduce our production, cash flow, and profitability.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

Headquarters

        We lease 32,727 square feet of office space in Denver, Colorado for our headquarters pursuant to a ten year lease that commenced in April 2007. We believe this space is sufficient for our near-term goals and growth projections.

Fort Union Plant Site

        In May 2004, we purchased Landrica Development Company, ("Landrica"). Through Landrica, we own approximately 1,000 acres of land located in Campbell County, Wyoming (near Gillette, Wyoming), on which our Fort Union plant is located. The land also includes various coal processing equipment, certain industrial buildings, waste injection wells, producing water wells, a coal-mining pit with limited reserves and a railroad spur.

Buckeye

        Buckeye Industrial Mining Co. has been mining bituminous coal from surface and underground mines in northeast Ohio since 1971. Buckeye currently operates five open-pit mines and one underground mine and has more than 400 lease agreements over five counties: Stark, Carroll, Columbiana, Jefferson, and Tuscarawas. All coal from these mines is Northern Appalachian, non-compliant steam coal, and the mines are located within a fifty mile radius in the State of Ohio. Additionally, virtually all of the coal mined from these sites is shipped to our wash facility, located in Kensington, Ohio, which we refer to as the Kensington preparation and blending facility, or Kensington. We operate and manage these surface and underground mines as one mine due to the fact these mines supply a single wash facility and coal from the various mines is blended together at this site to meet customer specifications.

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        The following map details the counties in which Buckeye has mining operations in the State of Ohio.

        The following map details Buckeye's mining operation by counties in the State of Ohio.

36

        Currently, 31 sites have been permitted, 0 sites have been permitted but not yet effective and 14 sites are in the permitting process. The permitted sites are either actively being mined, being reclaimed, or in the maintenance stage. Prospect drilling and evaluation on new leases is ongoing. As of December 31, 2009, Buckeye has approximately 80.2 million tons of in-place reserves. In connection with our purchase of Buckeye in 2006, we engaged an independent, third-party engineering firm to calculate in-place and proven and probable reserves, in which they applied Industry Guide 7 when preparing their analysis. In 2008, and again in 2009, we engaged the same independent engineering firm to generate a limited reserve letter for our underground mining operations, again applying Industry Guide 7.

        All rock formations encountered in Buckeye's mining operations are Pennsylvanian age. All strata encompass the Allegheny Group of the Pennsylvanian age with the exception of one which is in the Conemaugh Group. These coal beds are the most common coals mined at the Northern limit of the Allegheny coal field. Minable coal thickness ranges from 19 inches to 50 inches. Contained within these strata are marketable shales, clays, and limestones. These are mined and marketed when possible, but comprise a very small fraction of Buckeye's sales.

        All mines operate at designed capacity relative to the available equipment and capacity at Kensington. The mines are running at designed production, in compliance with all government permit conditions, and concurrently ongoing reclamation. The equipment used at the surface mining operations are typical of the heavy earthmoving, coal loading and coal transportation equipment found in the surface mining industry in Appalachia. Likewise, the underground mining and coal transport equipment is typical of that in underground room-and-pillar mines in the Appalachian coal field. For our underground mining operations, we contract the coal mining to a third party. The third-party contracting company is paid a fee based on tons mined and quality of the mined coal. In addition, various loaders, scrapers and bulldozers are utilized for ground preparation, road maintenance and drainage control at the sites. All equipment is constantly being upgraded to meet mining, operational or safety requirements.

        In 2006, the underground mining operations were expanded by constructing a second portal to include an additional coal seam and increase overall production. The original portal accessed a specific coal seam and the second portal accessed an additional coal seam. In late 2006, the original portal was idled and the mining unit transferred to the second portal to facilitate additional production of that coal seam. There is currently one portal with two mining units in the second coal seam.

        The following table presents our estimated assigned and unassigned recoverable coal reserves at December 31, 2009:

Total Assigned Reserves(1)
(Tons in millions)
December 31, 2009

							Sulfur Content (lbs per million Btus)								Reserve Control				Mining Method
	Total Assigned Recoverable Reserves(2)
													As Received Btus per lb(1)								Under Ground
			Proven		Probable		‹1.2		1.2-2.5		›2.5				Leased		Owned		Surface
		19.8		19.8		—		—		17.4		2.4		13,000		19.8		—		4.2		16.7
		—		—		—		—		—		—		—		—		—		—		—
Total		19.8		19.8		—		—		17.4		2.4		—		19.8		—		4.2		16.7

(1)

All coal is steam, in the ground and non-compliant.

(2)

Reject rate is 18% and not reflected in the table above.

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Total Unassigned Reserves(1)
(Tons in millions)
December 31, 2009

							Sulfur Content (lbs per million Btus)								Reserve Control				Mining Method
	Total Assigned Recoverable Reserves(2)
													As Received Btus per lb(1)								Under Ground
			Proven		Probable		‹1.2		1.2-2.5		›2.5				Leased		Owned		Surface
		64.0		64.0		—		—		—		64.0		13,000		64.0		—		—		64.0
		—		—		—		—		—		—		—		—		—		—		—
Total		64.0		64.0		—		—		—		64.0		—		64.0		—		—		64.0

(1)

All coal is steam, in the ground and non-compliant.

(2)

Reject rate is 19% and not reflected in the table above.

        Our Kensington preparation and blending facility was built in 1977 and repair and maintenance is performed as necessary. This facility cleans the coal impurities and sizes coal to meet various customer size and quality requirements. The cleaning process utilizes gravity separation, typical of most such plants in Appalachia. Sizing is accomplished with a sorting process using screens. Refuse from the cleaning operation is landfilled at sites approved by various government regulatory agencies. After cleaning, the coal may also be blended with other coals to meet specific customer requirements; such as heat value or post-combustion characteristics like ash content or mercury, sulfur dioxide, chlorine, nitrogen oxide or other emissions criteria.

        Access to all the mine sites and Kensington are via US, State, Township or County roads. Transportation of raw coal to Kensington is by trucks over public highways. Transportation of the product to customers is by train using a siding of the Norfolk Southern Railroad or by truck over public highways.

        Approximately 99% of all coal properties are leased. Typically, the properties that are mined are leased from the surface land owner, the coal owner or both. It is common for a single open-pit mine to contain multiple leases and many leases are required for underground mines. These lease agreements require Buckeye to pay royalties, on a per ton basis, for coal mined. New leases are being obtained continually. Leases for surface mine properties are typically written with a five-year term and typically allow for an extension of the term, to include the time necessary to mine and reclaim the area, at the time when physical mining activity on the leased area commences. Renewals or term extensions are necessary for areas not affected within the five-year term. Historically, renewals or term extensions have been rarely needed but easily obtained when necessary. Leases for underground coal reserves are typically written with a ten-year term. Similar to surface leases, the underground lease term extends when mining commences on that area to include the time necessary to complete mining. Extension or renewals of underground leases have also been obtained when necessary. According to current production plans, we do not anticipate any issues with lease term length. Buckeye pays a royalty on all mined tonnage and receives no royalty payments. Royalties paid to surface and/or mineral owners were calculated on 871,692, 922,474 and 857,900 tons for the years ended December 31, 2009, 2008 and 2007, respectively.

        The vast majority of Buckeye's reserves have undergone a title review. Buckeye engages a title company to determine the owner of a particular area (both surface and minerals as they are sometimes different owners). The title company's results are then provided to a title attorney who works in the area of the property. The attorney reviews the title documents placed of record and issues a Report of Title reflecting the surface and mineral owners as reflected by the records of the appropriate county.

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        In order to determine if potential sites are economically feasible, it is necessary to conduct drilling on the properties. If it has been determined that the properties are economically feasible, the permitting process is initiated which includes government permits. The permitting application process takes several years before a permit is granted. Not until a property is permitted and bonded can any mining begin.

        When mining on a property is completed, it must be reclaimed to government permit specifications. A five year, post-reclamation maintenance period is required by government regulation prior to final release of the performance security. Buckeye remains liable for any environmental issues until final release. A performance security instrument, typically a performance bond, is required to insure reclamation.

ITEM 3.    LEGAL PROCEEDINGS

        We are not engaged in any material legal proceedings to which we or any of our subsidiaries are a party.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART II

ITEM 5.    MARKET FOR COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Principal Market and Price Range of Common Stock

        Our common stock trades on the NYSE Arca exchange under the market symbol "EEE." The following table sets forth the range of high and low sales prices per share of common stock for the periods indicated.

Year	Period	High		Low
2009	Fourth Quarter	$	0.61	$	0.28
	Third Quarter	$	1.13	$	0.58
	Second Quarter	$	1.40	$	0.95
	First Quarter	$	1.43	$	0.28
2008	Fourth Quarter	$	0.93	$	0.23
	Third Quarter	$	2.05	$	0.94
	Second Quarter	$	2.50	$	1.14
	First Quarter	$	2.75	$	1.02

        As of March 8, 2010, we had approximately 209 holders of record of our common stock. This does not include holdings in street or nominee names. On March 8, 2010 the closing price of our common stock was $0.32 per share.

Comparative Performance Graph

The following Performance Graph and related information shall not deemed "soliciting material" or be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporates it by reference.

        The Securities and Exchange Commission requires that we include in this Form 10-K a line-graph presentation comparing cumulative, five-year stockholder returns (assuming reinvestment of dividends) for our common stock with a broad-based market index and either a nationally recognized industry standard or an index of peer companies selected by us. The following graph assumes $100 invested on December 31, 2004 in our common stock, two Peer Groups of companies and the NASDAQ Composite Index. The stock price performance shown on the following graph is not necessarily indicative of future price performance.

40

Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2008

        In 2009, we changed our Peer Group to better reflect energy companies and software companies more our size and complexity. Or new peer group is comprised of the following companies; Beacon Power Corp.; Orion Energy Systems; Lime Energy; PowerSecure; ADA-ES; Acorn Energy; Rentech Energy; Guidance Software; Pervasive Software Inc; and QAD Inc. All companies in the new Peer Group are listed on U.S. stock exchanges or the NASDAQ system. Our Peer Group in 2008 was comprised of the following companies: Alliance Resource Partners, LP.; Foundation Coal Holdings, Inc.; Massey Energy Co.; Westmoreland Coal Company; Yanzhou Coal Mining Co., Ltd.; ADA-ES, Inc.; Headwater, Inc.; Rentech, Inc.; Syntroleum Corporation; NGP Ingredients Inc.; and Pacific Ethanol, Inc.

        We are excluded from the Peer Group for purposes of the comparative performance graph.

Dividend Policy

        We have never paid cash dividends and do not anticipate paying dividends in the foreseeable future. We expect that we will retain all available earnings generated by our operations for the development and growth of our business. Payment of any future dividends will be at the discretion of our board of directors after taking into account many factors, including our operating results, financial condition, current and anticipated cash needs and plans for expansion. Historically, we have not repurchased any common stock.

Recent Sales of Unregistered Securities

        During the quarter ended December 31, 2009, we did not have any sales of securities in transactions that were not registered under the Securities Act that have not been reported in a Form 8-K or Form 10-Q.

Issuer Purchasers of Equity Securities

        We did not repurchase any of our shares of common stock during the quarter ended December 31, 2009.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements and related notes thereto in Item 8 of this report and Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this report. The selected consolidated results of operations and cash flow data for each of the three years in the period ended December 31, 2009 and the selected balance sheet data as of December 31, 2009 and 2008 are derived from, and qualified by reference to, our audited Consolidated Financial Statements, in Item 8 of this report. The selected consolidated results of operations and cash flow data related to 2006 and 2005 and selected consolidated balance sheet data related to 2006 and 2005 have been derived from audited financial statements not included in this report.

		Years ended December 31,
		2009			2008			2007			2006			2005
		(in thousands, except per share amounts)
Statement of operations data:
	Operating revenues	$	50,671		$	58,901		$	48,657		$	36,710		$	984
	Operating expenses		104,592			125,088			252,878			94,918			26,144
	Operating loss		(53,921	)		(66,187	)		(204,221	)		(58,208	)		(25,160	)
	Net loss(3)		(58,537	)		(65,230	)		(204,676	)		(51,527	)		(23,313	)
	Basic and diluted net loss per common share	$	(0.46	)	$	(0.72	)	$	(2.49	)	$	(0.66	)	$	(0.35	)
	Weighted average shares of common stock outstanding		132,070			90,676			82,232			77,783			66,399
Balance sheet data:
	Cash, cash equivalents and marketable securities(1)	$	2,207		$	9,467		$	51,458		$	84,276		$	28,793
	Property, plant and equipment, net, mineral rights net, and plant construction in progress		45,900			65,699			57,210			151,727			76,291
	Total assets		74,504			101,441			175,811			252,319			114,172
	Long-term obligations		45,017			42,643			112,178			12,403			10,429
	Stockholders' (deficit) equity		(5,877	)		43,850			46,699			224,984			93,641
	Working capital(2)	$	(21,747	)	$	2,263		$	45,580		$	79,156		$	19,910
Cash flow data:
	Cash used in operating activities	$	(12,908	)	$	(36,263	)	$	(51,581	)	$	(30,435	)	$	(12,071	)
	Cash provided by (used in) investing activities		(9,684	)		20,624			(50,236	)		(110,866	)		(73,858	)
	Cash (used in) provided by financing activities	$	17,132		$	(3,652	)	$	96,057		$	169,100		$	11,467

(1)

Cash, cash equivalents and marketable securities represent our cash and cash equivalents as reflected in our consolidated balance sheets and increased by our marketable securities outstanding as of the same balance sheet date. As of December 31, 2008, marketable securities totaling $1.8 million were included in long-term other assets in our consolidated balance sheet

(2)

Working capital represents the difference between our current assets and our current liabilities.

(3)

We recorded impairment charges of $20.1 million, $18.6 million and $122.7 million relating to our Buckeye mining operations, assets held for sale and to our Fort Union Plant for the years ended December 31, 2009, 2008 and 2007, respectively.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and are qualified by reference to, our Consolidated Financial Statements and related notes thereto in Item 8 of this report and Selected Financial Data included in Item 6 of this report. Certain statements set forth below under this caption constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform of 1995. Refer to the "Cautionary Statement About Forward Looking Statements" preceding Item 1 of this report. Also, for a discussion of certain risk factors applicable to our business and operations see "Risk Factors" in Item 1A of this report.

        We were founded in 1984 as a cleaner coal technology, energy production and environmental solutions company focused on developing our proprietary technologies. In the last two years, we have sharpened our focus as a carbon technology company. We have developed two proprietary, patented, and potentially transformative green technologies: the GreenCert suite of software and services and K-Fuel. Our GreenCert technology is a scientifically accurate and scalable environment intelligence solution that measures greenhouse gases (or GHG) and other environmental costs enabling customers to manage and report their environmental assets and liabilities. GreenCert, built on IBM's Service-Oriented Architecture (or SOA), is the environment intelligence solution that provides customers the end-to-end visibility and traceability necessary to measure their complete environmental footprint. K-Fuel, our clean coal technology significantly improves the performance of low-rank coals yielding higher efficiency and lower emissions.

        We are continuing the development of our GreenCert suite of software and services. GreenCert is an accurate and scalable environmental intelligence solution that quantifies GHG emission avoidances and reductions and generates verifiable emissions offsets. GreenCert provides real-time, multiple method data analysis to increase accuracy and reduce uncertainty to quantify incremental improvements. GreenCert also enables enterprises to reduce overall costs via the identification of significant operational efficiencies, compliance and risk reduction and sustainability measures. We intend to sell GreenCert as an on-premise offering and as a hosted software as a service (SaaS) solution, both with annual licensing fees and renewal fees.

        Over the past year, we have been evaluating several alternatives related to our strategic positioning, including the potential sale of Buckeye. As further described in Item 1—Business, on March 12, 2010, we signed a definitive agreement with Rosebud Mining Company with respect to the sale of certain net assets of Buckeye for $27.9 million, in addition to the the release of $5.0 million of cash reclamation bonds. Further, $2.8 million of the purchase price will be deposited into escrow for a period of twelve months to cover amounts payable to Rosebud pursuant to the indemnification provision of the sales agreement. The transaction is subject to customary closing conditions and the completion of Rosebud's due diligence. The sale is expected to close in April 2010, but in any event no later than June 30, 2010. The proceeds from the sale of Buckeye will be used to retire the outstanding 2009 Notes including fees and accrued interest of $21.1 million, to fund related transaction expenses estimated at $2.5 million and for general working capital purposes. We recorded an impairment charge of $20.1 million to write down these assets to their fair market value.

        With the sale of Buckeye we will be able to better focus our resources on core business activities, including the K-Fuel technology. We have terminated the contemplated spin-off of the K-Fuel technology as previously announced. Concurrently, Evergreen-China signed a letter of intent with a large Chinese integrated utility and chemical manufacturer to build a K-Fuel plant in Inner Mongolia to produce K-Fuel refined coal from low ranked lignite feedstock.

        The consolidated financial statements include our accounts and the accounts of our wholly and majority-owned subsidiaries. We consolidate all of our majority-owned subsidiaries and reflect as

43

minority interest the portion of these entities that we do not own and recorded in other long-term liabilities. We do not consolidate our Chinese joint venture, Evergreen-China, but record the activity using the equity method of investment. Intercompany transactions and balances have been eliminated.

        Our segments include the GreenCert segment, Plant segment, Mining segment and Technology segment. The GreenCert segment reflects activities related to the measurement of green house gases and certification of environmental improvements as carbon credits. The Plant segment primarily represents revenue and costs related to our Fort Union plant near Gillette, Wyoming, at which we suspended operations in March 2008. The Mining segment primarily represents our mining operations of our subsidiary, Buckeye, and includes certain marketing personnel, the ash disposal facility and the preparation and blending facility. The Technology segment is comprised of all other operations that use, apply, own or otherwise advance our proprietary patented K-Fuel process, including our headquarters and related operations, activities of Evergreen Energy Asia Pacific Corp. and KFx Technology, LLC, which holds the patents to our technology. Corporate costs within our Technology segment are allocated to our other segments, generally on a percentage based on the number of employees, total segment operating expenses, or segment operating expenses plus segment capital expenditures.

Significant Trends

        For the last several years, our operations have been focused on developing our two technologies GreenCert and K-Fuel and the construction of the Fort Union plant. To date, we have not yet generated significant revenues from either of these technologies. Historically most of our costs are related to general and administrative expenses. With the addition of Buckeye, we have begun to generate revenue and incur more substantial mining costs. As previously discussed, we have entered into an agreement to sell certain of our mining segments assets and as a result, do not expect there to be any mining revenues and limited mining expenses after the completion of this sale. In the future, we plan to identify potential future strategic partners for GreenCert, in addition to IBM, EIM and Black and Veatch, to assist in the development, testing and roll-out of our products. Potential partners include companies offering services or products such as: energy engineering; consulting; power generation performance optimization; environmental consulting; and products relating to sensor systems and devices, data collection devices, or other products that support energy or power plant operations. Through our GreenCert software we plan to generate revenues through measurement of baseline emissions, assess and identify capital and operational improvements and site-specific, highly-customized solution that enables the quantification and monetization of the emissions reductions and efficiency improvements. We plan to license our K-Fuel technology, focusing on the Asia Pacific region of the world through Evergreen-China. The following discussion and analysis is focused on the events and trends that we believe have or will have in the future the most significant impact on our business.

Revenue Trends

        In the future we expect to generate revenue from the following sources:

•

revenues from licensing our GreenCert technology;

•

revenues from renewal fees from our GreenCert technology;

•

revenues from the measurement of carbon credits using our GreenCert technology;

•

revenues from site specific efficiency improvements using our GreenCert technology;

•

revenues from pilot projects using our GreenCert technology;

•

revenues for supporting our GreenCert technology; and

•

coal sales from our Buckeye operations for the period during which we continue to own it;

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•

revenues from K-Fuel licensing.

Expense Trends

GreenCert

        As we develop and implement our GreenCert technology we will incur additional operational cost such as:

•

payroll and related burdens;

•

outsourced professional fees associated with the development of GreenCert software;

•

consulting costs for pilot deployment; and

•

professional fees related to the deployment of site-specific, highly-customized solution for the quantification and monetization of emissions.

General and Administrative Expenses

        As we identify business development opportunities and generally expand our business, including hiring additional personnel at our corporate office, GreenCert locations and increasing outsourced professional services, we will incur additional expenses, the most significant of which are:

•

payroll and related burdens;

•

non-cash, share-based compensation;

•

sales and marketing costs for GreenCert technology;

•

rent and utilities; and

•

professional support fees.

        We anticipate that accounting for non-cash, share-based compensation will add approximately $6.0 million to $10.0 million per year in the foreseeable future to our expenses. In the event we should achieve certain stock price targets, we would significantly accelerate recognition of these costs. Costs such as payroll and related burdens, professional support fees and utilities are variable costs that increase with size and adding locations. As we develop our GreenCert and K-Fuel technologies we expect these costs to increase in future periods.

Coal Mining OperatingEexpenses

        We incur mine operating expenses including all costs associated with the mining of saleable coal and costs relating to our coal ash disposal facility as a result of Buckeye's operations. As previously discussed, we have entered into an agreement to sell certain mining segment assets and as a result, do not expect there to be any revenues and limited mining expenses after the completion of this sale.

Fort Union

        In March 2008, we suspended operations at our Fort Union plant in order to redirect constrained resources, both capital and human, to focus on the commercialization of this process in future K-Fuel plants. Suspending production at Fort Union enabled us to reduce our cash expenditures. We will continue to incur various costs related to maintaining the site in a non-operational mode.

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Results of Operations

Comparison of Years Ended December 31, 2009 and 2008

Revenue

        Revenues for the year ended December 31, 2009 were $50.7 million compared to $58.9 million for the same period ended December 31, 2008. With the sale of Buckeye, we anticipate our future mining revenues to decline.

        Revenues in our Mining segment for the year ended December 31, 2009 were $50.2 million and $58.4 million for the same period ended December 31, 2008 respectively, as follows:

•

Coal revenue includes mined raw and prepared coal sales within our Buckeye operations. Buckeye coal sales, including transportation costs charged to customers, were $46.0 million and $50.7 million, for the years ended December 31, 2009 and 2008, respectively. Coal sales for the year ended December 31, 2009 were 566,600 tons at $66.18 sales realization per ton sold net of transportation costs of $8.5 million compared to 727,200 tons at $58.03 sales realization per tons sold, net of transportation cost of $8.5 million for the year ended December 31, 2008. Our coal price per ton increased due to our increase in our pre-sold negotiated price per ton. However, revenues decreased due to the depressed economy and the unusually mild summer temperatures in the North East region of the United States, both of which have led to lower than previously forecasted coal prices and reduced coal consumption. However, sales realization for the year ended December 31, 2009 increased primarily due to higher coal prices realized during the first quarter of 2009 compared to the same period ended 2008.

•

Net brokered coal sales, include the revenues reduced by costs associated with the purchase of coal from other coal producers, which we ship directly to customers. We recognized $5,000 of net revenue for the year ended December 31, 2009 compared to $437,000 of net revenue for the year ended December 31, 2008. We enter into brokered coal sales as opportunities arise or as needed to meet certain customers requests, and as a result, revenues in this area fluctuate.

•

Ash disposal revenues primarily include revenues generated from the disposal of coal combustion bi-products at our ash pit in Ohio. Ash disposal revenues were $4.2 million and $7.3 million for years ended December 31, 2009 and 2008, respectively. The decrease for the year ended December 31, 2009 was due to decreased disposal volume from one of our large customers.

        K-Fuel refined coal revenue is comprised of sales of our K-Fuel product to third parties. Blended K-Fuel refined coal revenue represents the proportionate revenue related to K-Fuel that has been blended with other raw or prepared coal from our Buckeye operations and sold to third parties. The remaining revenue related to the raw or prepared coal is reflected in Mining revenues. K-Fuel refined coal and blended K-Fuel refined coal sales were $0 and $463,000 for the years ended December 31, 2009 and 2008, respectively and are included in our Plant segment.

Coal Mining Operating Expenses

        Our coal mining operating expenses include all costs associated with the mining of saleable coal and costs relating to our coal ash disposal facility at Buckeye, which principally comprises our Mining segment.

Coal mining operating expenses

        Coal mining operating expenses include employee-related costs, outside contracted mining costs for our underground mines, internal and external coal transportation costs, blasting, drilling, heavy equipment costs, purchased coal and other mining-related costs. Coal mining operating expenses were

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$40.0 million and $42.4 million for the years ended December 31, 2009 and 2008, respectively. Coal mining operating expenses decreased for the year ended December 31, 2009 compared to 2008. However, costs per ton increased during this same period due to more than expected ash and rock content thus increasing transportation costs and preparation/separation costs.

Ash disposal

        Ash disposal expenses include employee-related costs, consulting costs, costs of repairs and maintaining culverts and drainage ponds, transportation, and heavy equipment costs and other costs associated with the ash disposal facility. Ash disposal expenses were $3.5 million and $5.4 million for the periods ended December 31, 2009 and 2008, respectively. The decrease for the year ended December 31, 2009 is in correlation with the decrease in revenue for the same period.

General and Administrative

        Corporate costs within our Technology segment are allocated to our other segments, generally on a percentage based on the number of employees, total segment operating expenses or segment operating expenses plus segment capital expenditures. As a result of idling our Fort Union plant, these allocated costs have significantly decreased in our Plant segment and increased in other segments most notably in our Technology and GreenCert segments, for the year ended 2009 when compared to 2008.

        The following table summarizes our general and administrative costs for the years ended December 31, 2009 and 2008.

		Year Ended December 31,
		2009		2008
		(in thousands)
Employee-related costs		$	11,303	$	12,559
Non-cash, share-based compensation			4,786		5,956
Professional fees			5,788		3,908
Office and travel costs			4,084		3,830
Insurance and other			3,121		5,712
	Total general and administrative	$	29,082	$	31,965

        Non-cash, share-based compensation expenses were $4.8 million and $6.0 million for the years ended December 31, 2009 and 2008, respectively, most of which related to our Technology segment. The decrease for the year ended 2009 was primarily due to the reduction of our workforce and the related forfeiture of the grants. We also recognized a one-time decrease due to the retirement of a former officer and the impact of his retirement on his restricted stock grant. Since the restricted shares never vested and were forfeited upon retirement, the cumulative non-cash compensation expense recorded since 2005 was reversed. This reversal of non-cash compensation totaled $2.9 million for the year ended December 31, 2009. The decreases were partially offset by a transition agreement we entered into with another former officer. Pursuant to that agreement, we accelerated the restricted stock grant and recorded $3.3 million of non-cash compensation for the year ended December 31, 2009.

        Employee-related costs primarily include salaries and wages, temporary employees, bonuses, benefits, employer payroll taxes and education and training. The following table summarizes our

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employee-related costs related to each of our segments for the years ended December 31, 2009 and 2008.

		Year Ended December 31,
		2009		2008
		(in thousands)
GreenCert		$	4,601	$	2,638
Technology			3,361		5,585
Mining			2,822		2,502
Plant			519		1,834
	Total Employee-related	$	11,303	$	12,559

        The decrease for the year ended December 31, 2009 in comparison to the same period in 2008 was primarily due to our cost cutting measures which resulted in lower employee count in our Technology and Plant segments. This decrease was offset by the addition of personnel to our GreenCert segment and severance expense for two former executive officers in the amount of $525,000 in our Technology segment.

        Professional fees include legal, audit and accounting, public relations, governmental relations and similar costs. The following table summarizes our professional fees related to each of our segments for the years ended December 31, 2009 and 2008.

		Year Ended December 31,
		2009		2008
		(in thousands)
GreenCert		$	972	$	830
Technology			3,842		2,340
Mining			923		375
Plant			51		363
	Total Professional fees	$	5,788	$	3,908

        The increase for the year ended December 31, 2009 compared the year ended 2008 was due to legal fees related to certain financing transactions that were not consummated, fees related to the marketing of Buckeye and international work, all related to our Technology segment, and filing patent applications for our GreenCert technology in our GreenCert segment.

        Office and travel costs include airfare, lodging, meals, office rent, marketing, office supplies, phone, publications, subscriptions and utilities. The following table summarizes our office and travel costs related to each of our segments for years ended December 31, 2009 and 2008.

		Year Ended December 31,
		2009		2008
		(in thousands)
GreenCert		$	1,794	$	881
Technology			1,997		2,255
Mining			192		245
Plant			101		449
	Total Office and travel	$	4,084	$	3,830

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        The increase in office and travel for the year ended December 31, 2009 is primarily due to a non-recurring charge of $1.0 million due to consolidating our employees into a smaller section of our office space to enable us to potentially sublease the remaining office space at our corporate location. The majority of this non-recurring charge was allocated to our GreenCert segment based on the number of employees, total segment operating expenses or segment operating expenses plus segment capital expenditures.

        Insurance and other costs primarily include costs related to our property and commercial liability, other insurance and all costs that cannot be categorized elsewhere and include, among other costs, various business and franchise taxes, licensing fees, repair and maintenance, engineering and technical services and director expenses. The following table summarizes our insurance and other costs related to each of our segments for the years ended December 31, 2009 and 2008.

		Year Ended December 31,
		2009		2008
		(in thousands)
GreenCert		$	—	$	821
Technology			2,449		3,740
Mining			645		742
Plant			27		409
	Total Insurance and other	$	3,121	$	5,712

        Costs decreased for the year ended December 31, 2009 mainly due to the idling of our Ft. Union plant in 2008 and the resulting decrease in Engineering and Technical services expense in our Technology segment.

Plant costs

        Subsequent to the idling of the Fort Union plant, costs primarily consist of salaries and wages, security, utilities and repair and maintenance. Previously, plant costs included purchased raw materials, coal transportation, outsourced engineering and technical support, fluid processing, by-products and water disposal, and employee-related costs, which are reflected in our Plant segment. Plant costs decreased during the year ended December 31, 2009 as compared to 2008 primarily due to the idling of our Fort Union plant in late March 2008. Overall, while we anticipate costs to somewhat decline in 2010, we will continue to incur various costs related to maintaining the site in a non-operating mode.

Depreciation, Depletion and Amortization

        Depreciation, depletion and amortization are principally comprised of: (i) depletion, based on actual tons mined at our mine sites in Ohio; (ii) amortization related to our patents; and (iii) depreciation on other fixed assets using the straight-line method. Depreciation, depletion and amortization expenses were $10.0 million for the year ended December 31, 2009 compared to $9.0 million during the same period ended 2008.

Research and Development

        Research and development costs include costs incurred to advance, test, or otherwise modify our proprietary K-Fuel technology or develop new technologies and primarily include costs incurred to operate and maintain our laboratory facilities and professional engineering fees related to off-site testing of our K-Fuel refined coal. Research and development costs were $49,000 and $79,000 for the years ended 2009 and 2008, respectively. As a result of cost cutting measures, we decreased the number of employees and the corresponding salary and wages at our lab at Fort Union.

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Asset Impairment Charges

        Asset impairment charges were $20.5 million and $18.6 million for the years ended December 31, 2009 and 2008, respectively. The majority of the impairment charge in 2009 relates to the write-down of our Buckeye assets. Other asset impairment charges for year ended December 31, 2009 relate to the impairment of our leasehold improvements of the vacated office space that we are attempting to sublease and is reflected in our Technology segment. Asset impairment charges for the year ended December 31, 2008 relate to further impairment of our boiler island which was classified as assets held for sale. See Note—2 Property Plant and Equipment in Item 8 of this report for further details.

Other Income Expense

Interest income

        Interest income was $65,000 and $1.3 million for the years ended December 31, 2009 and 2008, respectively. The decrease in interest income for the year ended December 31, 2009 was principally attributable to a lower cash balance in 2009.

Interest expense

        Interest expense for the years ended December 31, 2009 and December 31, 2008 was $7.6 million and $6.1 million, respectively. The interest expense relates to the 2007 Notes and 2009 Notes more fully described in Note 7—Debt.

Other income (expense)

        During the year ended December 31, 2009, other income was $2.8 million as compared to $300,000 of other expense for the same period ended 2008. The increase in 2009 compared to 2008 primarily relates to the fair value adjustments of our embedded derivatives in the amount of $2.1 million.

Comparison of Years Ended December 31, 2008 and 2007

Revenue

        Revenues for the year ended December 31, 2008 were $58.9 million compared to $48.7 million for the same period ended December 31, 2007.

        Revenues in our Mining segment for the year ended December 31, 2008 were $58.4 million and $47.4 million for the same period ended December 31, 2007 respectively, as follows:

•

Buckeye coal sales, including transportation costs charged to customers, were $50.7 million and $39.4 million, for the years ended December 31, 2008 and 2007, respectively. Coal sales for the year ended December 31, 2008 were 727,197 tons at $69.72 sales realization per ton sold compared to 728,059 tons at $54.12 sales realization per tons sold for the year ended December 31, 2007. The increase in the sales realization per ton sold for the year ended December 31, 2008 was due to higher coal prices when compared to the year ended December 31, 2007. Our production tons for the year ended December 31, 2008, were less than anticipated due to power outages and other weather issues related to Hurricane Ike. In addition, we experienced unexpected adverse roof conditions resulting from clay vein slip areas in a section of one of our underground mining veins. We have resolved the roof conditions by using longer and more bolts in each of the main entries and narrowing the belt entry. We were also required to obtain the Mine Safety and Health Administrations approval of the revised roof control and ventilation plans, which took longer than anticipated.

•

We recognized $437,000 of brokered coal sales net revenue for the year ended December 31, 2008 compared to $514,000 of net revenue for the year ended December 31, 2007. We enter into

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brokered coal sales as opportunities arise or as needed to meet certain customers requests, and as a result, revenues in this area fluctuate.

•

Ash disposal revenues were $7.3 million and $7.4 million for years ended December 31, 2008 and 2007, respectively.

        K-Fuel refined coal revenue is comprised of sales of our K-Fuel product to third parties. Blended K-Fuel refined coal revenue represents the proportionate revenue related to K-Fuel that has been blended with other raw or prepared coal from our Buckeye operations and sold to third parties. The remaining revenue related to the raw or prepared coal is reflected in Mining revenues. K-Fuel refined coal and blended K-Fuel refined coal sales were $463,000 and $1.1 million for the years ended December 31, 2008 and 2007, respectively and are included in our Plant segment.

Coal Mining Operating Expenses

Coal mining operating expenses

        Coal mining operating expenses were $42.4 million and $38.3 million for the years ended December 31, 2008 and 2007, respectively. The increase in cost per ton in comparing the year ended December 31, 2008 to 2007 is primarily due to the increased price of fuel used to mine and transport coal.

Ash disposal

        Ash disposal expenses were $5.4 million and $4.8 million for the periods ended December 31, 2008 and 2007, respectively.

General and Administrative

        Corporate costs within our Technology segment are allocated to our other segments, generally on a percentage based on the number of employees, total segment operating expenses or segment operating expenses plus segment capital expenditures. As a result of idling our Fort Union plant, these allocated costs have significantly decreased in our Plant segment and increased in other segments most notable in our Technology segment, for the year ended 2008 when compared to 2007.

        The following table summarizes our general and administrative costs for the years ended December 31, 2008 and 2007.

		Year Ended December 31,
		2008		2007
		(in thousands)
Employee-related costs		$	12,559	$	11,721
Employee non-cash, share-based compensation			5,956		19,015
Insurance and other			5,712		4,645
Professional fees			3,908		4,152
Office and travel costs			3,830		3,498
	Total general and administrative	$	31,965	$	43,031

        Employee non-cash, share-based compensation expenses were $6.0 million and $19.0 million for the years ended December 31, 2008 and 2007, respectively, substantially all of which related to our Technology segment. The decrease related to the year ended December 31, 2008 as compared to 2007 was due to the termination of two former executive officers and one-time charges of $10.5 million related to the accelerated vesting of a portion of their restricted stock grants.

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        The following table summarizes our employee-related costs related to each of our segments for the years ended December 31, 2008 and 2007.

		Year Ended December 31,
		2008		2007
		(in thousands)
GreenCert		$	2,638	$	536
Technology			5,585		4,617
Mining			2,502		2,593
Plant			1,834		3,975
	Total Employee-related	$	12,559	$	11,721

        Employee-related costs were $12.6 million and $11.7 million for the years ended December 31, 2008 and 2007, respectively. The increases for the year ended December 31, 2008 in comparison to the same period in 2007, were primarily due to adding personnel to our GreenCert segment, as well as adding engineering and other personnel in our Technology segment, recruiting fees, an overall increase in health insurance costs and changes in the allocation of corporate costs to various segments.

        The following table summarizes our professional fees related to each of our segments for the years ended December 31, 2008 and 2007.

		Year Ended December 31,
		2008		2007
		(in thousands)
GreenCert		$	830	$	410
Technology			2,340		2,929
Mining			375		335
Plant			363		478
	Total Professional fees	$	3,908	$	4,152

        The decrease for the year ended December 31, 2008 as compared to 2007, was due to less outsourced engineering work as a result of increasing our corporate engineering staff in our Technology segment. Offsetting these savings were increased professional fees in our GreenCert segment associated with patent-related costs.

        The following table summarizes our office and travel costs related to each of our segments for years ended December 31, 2008 and 2007.

		Year Ended December 31,
		2008		2007
		(in thousands)
Technology		$	2,255	$	2,061
GreenCert			881		336
Plant			449		867
Mining			245		234
	Total Office and travel	$	3,830	$	3,498

        The increases in office and travel costs for the year ended December 31, 2008, were primarily for international and domestic travel related to our business development efforts in both our Technology and GreenCert segments.

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        The following table summarizes our insurance and other costs related to each of our segments for the years ended December 31, 2008 and 2007.

		Year Ended December 31,
		2008		2007
		(in thousands)
GreenCert		$	821	$	593
Technology			3,740		2,776
Plant			409		511
Mining			742		765
	Total Insurance and other	$	5,712	$	4,645

Plant costs

        Plant costs decreased during the year ended December 31, 2008 as compared to 2007, primarily due to the idling of our Fort Union plant in March 2008. Overall, while we anticipate costs to decline in 2009, we will continue to incur various costs related to maintaining the site in a non-operating mode.

Depreciation, Depletion and Amortization

        Depreciation, depletion and amortization expenses were $9.0 million for the year ended December 31, 2008 compared to $8.4 million during the same period ended 2007.

Research and Development

        Research and development costs were $79,000 and $876,000 for the years ended 2008 and 2007, respectively. As a result of cost cutting measures, we decreased the number of employees and the corresponding salary and wages in our lab at our Fort Union facility.

Asset Impairment Charges

        Asset impairment charges were $18.6 million and $122.7 million for the years ended December 31, 2008 and 2007, respectively. Asset impairment charges for the year ended December 31, 2008, relate to further impairment of our boiler island which was classified as assets held for sale. See Note—2 Property Plant and Equipment in Item 8 of this report for further details. Impairment charges for the year ended December 31, 2007 are as follows:

•

we suspended operations at our Fort Union plant to allow us to focus on future K-Fuel and K-Direct plants by redirecting constrained resources, both capital and human, to focus on the commercialization of our process. We incurred impairment charges in our Plant segment totaling $109.5 million;

•

we are required to evaluate the fair value of our boiler, which is classified as held for sale. As result, of this fair value calculation we impaired the carrying value of our boiler by $7.8 million in our Technology segment;

•

we impaired $3.6 million of capitalized costs related to projects that we abandoned and/or replaced with more cost effective projects in our Plant segment; and

•

we impaired capital costs of $2.1 million related to a previously announced future potential project with a major utility because it was determined not to be economically feasible in our Technology segment.

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Other Income Expense

Interest income

        Interest income was $1.3 million and $4.3 million for the years ended December 31, 2008 and 2007, respectively. The decrease in interest income for the year ended December 31, 2008 was principally attributable to a lower cash balance as well as reduced interest rates during 2008.

Interest expense

        Interest expense for the years ended December 31, 2008 and December 31, 2007 was $6.1 million and $3.4 million, respectively. Interest expense relates to the $95.0 million in aggregate principal amount of our 8.00% Convertible Secured Notes due 2012, which we completed in July 2007. The increase in interest expense is in direct relation to the time and amount of the 2007 Notes outstanding in 2008 compared to 2007.

Gain on debt for equity exchange transactions

        During the year ended December 31, 2008, we entered into multiple individually negotiated agreements with certain existing noteholders to exchange $67.1 million in aggregate principal amount of the 8.00% Convertible Secured Notes due 2012, for an aggregate of 48.6 million shares of our common stock. We recognized a $6.1 million gain, which was reduced by transaction costs, non-cash reversal of debt issue costs and non-cash adjustment related to the embedded derivatives.

Other income (expense)

        During the year ended December 31, 2008, other expense was $300,000 as compared to $1.4 million of other expense for the same period ended 2007. We estimated the fair value of the embedded derivatives as of July 30, 2007, when the 2007 Notes were issued, and recorded those values as either assets or liabilities. In addition, we are required to evaluate the fair value of the embedded derivatives at the end of each subsequent reporting period. We recognized a decrease in the fair value of the derivatives of $934,000 for the year ended December 31, 2008. This fair value adjustment is a non-cash item and each quarter's estimation exercise is impacted, in part, by our stock price. For additional information, see Note 7—Debt included in Item 8 of this report. In addition we recognized a $744,000 gain for insurance reimbursements for cost incurred to repair certain equipment at our Fort Union plant for the year ended December 31, 2008.

2010 Liquidity and Capital Resources Discussion

        We have reduced our cash flow used in operations by $23.4 million when comparing the year ended December 31, 2009 to the same period in 2008. We accomplished these savings principally by suspending operations at our Fort Union plant, reducing corporate professional fees, and other general and administrative cost reductions. These cost reductions were offset by the expansion of our GreenCert operations, including the addition of personnel and other administrative costs associated with developing the business. In addition, we have invested $12.3 million in capital expenditures, primarily related to Buckeye, GreenCert's software development and K-Fuel process development during the year ended December 31, 2009.

        Over the past year, we have been evaluating several alternatives related to our strategic positioning, including the potential sale of Buckeye. As previously discussed, on March 12, 2010, we signed a definitive agreement with Rosebud Mining Company with respect to the sale of Buckeye for $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. The sale is expected to close in April 2010, but in any event no later than June 30, 2010. The proceeds from the sale of Buckeye will be used to retire the outstanding 2009 Notes including fees and accrued interest of

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$21.1 million, to fund related transaction expenses estimated at $2.5 million and for general working capital purposes.

        Actual 2009 cash flows from Buckeye's operations have been less than previously anticipated due in part to the depressed economy and the unusually mild summer temperatures in the North East region of the United States, both of which have led to lower than previously forecasted coal prices and reduced coal consumption. Because of these lower than expected results, combined with the on-going costs associated with GreenCert, we were required to raise additional capital in October 2009, January 2010 and March 2010, as discussed in more detail below. However, we continue to require additional capital to fully fund the anticapted development of our GreenCert technology and expect to investigate sources of additional capital. Because of the immediate need for additional capital to fund operations and the costs to develop GreenCert, there is substantial doubt as to our ability to continue to operate as a going concern for the foreseeable future.

        On March 16, 2010, we and certain institutional investors entered into a securities purchase agreement, pursuant to which we agreed to sell an aggregate of 9,312.5 shares of our preferred stock and warrants to purchase 12,500,000 shares of our common stock to such investors for gross proceeds of approximately $9.3 million. Subject to certain ownership limitations, the warrants are immediately exercisable for a five year period after closing at an exercise price of $.31 per share. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Our net proceeds from the registered direct public offering excluding certain transaction costs and the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $5.0 million.

        On January 26, 2010, we completed a registered direct public offering and raised gross proceeds of approximately $8.7 million. The securities were offered pursuant to a shelf registration statement on Form S-3 that was previously declared effective by the SEC on January 19, 2010. In total, we sold an aggregate of 29,236,664 shares of our common stock and warrants to purchase 14,618,331 shares of our common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock. The purchase price per unit is $.30. Subject to certain ownership limitations, the warrants are exercisable commencing six months following the closing date of the offering and for a five year period thereafter at an exercise price of $0.3859. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The net proceeds to us from the registered direct public offering, after deducting placement agent fees and our estimated offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $8.0 million.

        On October 21, 2009 we entered into the sale of shares of our Series B Convertible Preferred Stock ("Preferred Stock") pursuant to a private placement offering to institutional investors, representing gross proceeds to us of $7.0 million, with net proceeds of $5.0 million, prior to transactions costs. Evergreen plans to use the net proceeds for general corporate purposes.

        In March 2009, we executed a Senior Secured Convertible Note Agreement which provides for the issuance of up to $15 million in aggregate principal amount of 10% Senior Secured Promissory Notes (the "2009 Notes") in three $5 million tranches. All three of these tranches were funded during 2009. On December 18, 2009, we executed a binding term sheet and then on January 12, 2009 we executed an agreement to extend the maturity of these 2009 Notes to the earlier of June 30, 2010 or the sale of Buckeye. See further discussion in Note 7—Debt.

        We have a history of losses, deficits and negative operating cash flows and may continue to incur losses in the future. As stated above, we have dramatically reduced our cash flow used in operations. Continued market disruptions associated with the economic downturn, may lead to lower demand for our technology or products, increased incidence of customers' inability to pay their accounts, or

55

insolvency of our customers, any of which could adversely affect our results of operations, liquidity, cash flows, and financial condition. We continue to evaluate our cash position and cash utilization and may make additional adjustments to capital or certain operating expenditures.

        As stated above, we continue to require additional capital to fully fund the development of our GreenCert technology and expect to investigate sources of additional capital. Further, as we complete our strategic positioning or as opportunities arise to accelerate the expansion of our GreenCert and K-Fuel technologies, or our anticipated operating cash flows are less than expected due to among other things, a protracted global economic downturn, we may need to obtain further funding. We believe we have the ability to raise additional capital from time to time as needed principally through: (i) equity offerings; (ii) debt or debt offerings; and (iii) partnering with third parties. While we believe we will obtain additional capital through one or more of the alternatives described, we can provide no assurance that any of the alternatives will be available or be on acceptable terms.

Payment Obligations

        The following table summarizes our future commitments as of December 31, 2009:

		Payments due by period
		2010		2011		2012		2013		2014		Thereafter		Total
		(in thousands)
Operating leases		$	1,942	$	1,353	$	1,334	$	1,187	$	1,199	$	22,738	$	29,753
Short-term debt and purchase commitments			21,100		—		—		—		—		—		21,100
Consulting and service commitments			500		500		500		500		500		10,000		12,500
Long-term debt			2,190		2,190		28,470		—		—		—		32,850
	Total commitments	$	25,732	$	4,043	$	30,304	$	1,687	$	1,699	$	32,738	$	96,203

        This table does not include accounts payable, accrued liabilities, or asset retirement obligations, which are reported in our December 31, 2009 Consolidated Balance Sheet. We generally have not included any obligation in which either party has the right to terminate except as discussed below. Additionally, we have not included K-Fuel royalty payments, as we cannot presently determine when such payments will be made as such payments are based upon our receipt of cash for licensing and royalties.

        We are obligated under non-cancelable operating leases with initial terms exceeding one year relating to office space. Rent expense for the years ended December 31, 2009, 2008 and 2007 was $1.2 million, $1.1 million, and $784,000, respectively. Additionally, included in operating leases is the rent obligation associated with our former headquarters totaling $105,000, which we have sub-leased but are not released from the obligation. Furthermore, included in operating leases is a 46-year port dock lease on the Ohio River, which we have the right to cancel upon six months written notice. If this lease were cancelled as of December 31, 2009, we would be obligated to pay $250,000 rather than the entire obligation of $23.0 million. This dock lease and the related obligation are included as assets to be sold pursuant to the anticipated sale of Buckeye.

        Consulting and service commitments include an Exclusive Patent Sub-License Agreement with the developer of a proprietary technology for the measurement of carbon emissions. The agreement provides us with an exclusive worldwide sub-license to a technology to standardize the measurement of carbon emissions in energy and agricultural related activities. The Agreement was amended and restated to expand the energy and agricultural activities to all applications of the technology and eliminates other operating requirements. In order to maintain this licensing arrangement, we are required to make minimum annual royalty payments of $500,000 to the developer of the proprietary technology, with each payment extending the arrangement for one year if the parties are in material compliance with the contract. Additionally, consulting and service commitments includes our amended

56

and restated umbrella agreement with Bechtel. Through this new program management agreement we committed to provide Bechtel with $1 billion in construction contracts through 2013. Failure to meet this commitment by 2014 could cost us up to the $10 million in termination fees, which is included in the above table.

        Long-term debt includes our principal amount due 2012 and the 8% interest payments.

        Short-term debt includes our principal amount, exit fees and accrued interest due upon the earlier of the sale of Buckeye or June 30, 2010. Interest is accrued at 10% of the principal amount.

        While our former investment banking firm may claim that we owe them up to $1.0 million upon the sale of Buckeye, and, while the previous potential buyer may claim that we owe them up to an additional $650,000 if we do not sell Buckeye to them, we do not believe that these fees are payable due to the lack of the counterparties meeting certain performance and contractual criteria in addition to certain verbal understandings reached related thereto. If claims are made for these contingent payments, we intend to vigorously dispute these claims. These potential obligations are not included in the table above.

Historical View

Cash Used in Operating Activities

        Cash used in operating activities was $12.9 million, $36.3 million, and $51.6 million for the years ended December 31, 2009, 2008 and 2007, respectively. The majority of the cash used in operating activities for the year ended December 31, 2009 relates to cash utilized in our on-going operations, as adjusted for non-cash items, and changes in operating assets and liabilities. The most significant adjustments to net loss to arrive at cash used in operating activities for the year ended December 31, 2009 were an impairment charge of $20.1 million related to our Buckeye mining operations, non-cash, share-based compensation expenses of $5.3 million, debt issue cost amortization of $2.6 million, a non-recurring charge of $1.0 million from our attempt to sublease unused office space, and depreciation, depletion and amortization of $10.0 million.

        The majority of the cash used in operating activities for the year ended December 31, 2008 relates to cash utilized in our on-going operations, as adjusted for non-cash items and changes in operating assets and liabilities. The most significant adjustments for the year ended December 31, 2008 and 2007 were $18.6 million and $122.7 million impairment charges. Other significant adjustments to net loss to arrive at cash used in operating activities for the years ended December 31, 2008 and 2007 were: non-cash share-based compensation expense of $6.3 million and $19.6 million in 2008 and 2007, respectively, and depreciation, depletion and amortization of $9.0 million and $8.4 million, respectively, and gain on debt for equity exchange transactions of $6.1 million in 2008.

Cash Provided by (Used in) Investing Activities

        Cash used in investing activities was $9.7 million for the year ended December 31, 2009. The majority of the sources and uses of cash relate to the following:

•

We spent $12.3 million on capital equipment primarily with our Buckeye operations, GreenCert development and future plant design.

•

We liquidated our auction rate marketable securities and received $2.0 million in proceeds.

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        Cash provided by investing activities was $20.6 million and cash used in investing activities was $50.2 million for the years ended December 31, 2008 and 2007, respectively. The majority of the sources and uses of cash relate to the following:

•

We spent $16.8 million on our capital equipment, future plant design and construction in progress for the year ended December 31, 2008. We spent $49.4 million primarily on our Fort Union plant and future plant sites for the year ended December 31, 2007. We had capital expenditures related to other purchases of property and equipment of $4.1 million for the year ended December 31, 2007.

•

We purchased $5.0 million and $74.6 million of marketable securities and received $27.5 million and $101.7 million in proceeds from the maturity of marketable securities for the years ended December 31, 2008 and 2007, respectively.

•

In 2007, we were required to restrict cash and marketable securities to serve as collateral of $24.7 million, related to our 2007 Notes and to collateralize other contractual obligations and our asset retirement obligations. We received $15.0 million of restricted cash net, primarily relating to our debt for equity exchange transaction related to the 2007 Notes for the year ended December 31, 2008.

Cash (Used in) Provided by Financing Activities

        Cash provided by financing activities during the year ended December 31, 2009 was $17.1 million compared to cash used in financing activities of $3.7 million for the year ended December 31, 2008. The difference for the year ended December 31, 2009 was principally due to $15.0 million of proceeds from our 2009 Notes, $6.5 million of proceeds, net of closing costs, from our issuance of convertible preferred stock and the payment of $2.0 million in dividends from the subsequent preferred stock conversion, and payments of debt issuance costs of $2.4 million.

        Cash used in financing activities during the year ended December 31, 2008 relates to payments made related to the debt for equity exchange transactions. The principal differences for the year ended December 31, 2007 were due to $95.0 million of proceeds from issuance of convertible debt, offset by $5.8 million of debt issuance cost, $4.9 million from the exercise of options and warrants and $3.7 million of proceeds from minority interest investment in Evergreen-China.

Critical Accounting Policies and Estimates

        We have identified the policies and estimates below as critical to our current and future business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other significant accounting policies see the notes to our Consolidated Financial Statements in Item 8 of this Annual Report. These policies and estimates are considered "critical" because they either had a material impact or they have the potential to have a material impact on our financial statements, and because they require significant judgments, assumptions or estimates. The preparation of our financial statements in this Annual Report on Form 10-K requires us to make estimates and judgments that affect both the results of operations as well as the carrying values of our assets and liabilities. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We base estimates on historical experience and/or on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as of the date of the financial statements that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, making it possible that a change in these estimates could occur in the near term. Set forth below is a summary of our most critical accounting policies.

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        Revenue Recognition.    We expect to derive GreenCert and K-Fuel revenue from licensing arrangements that include licenses, technical support, and professional services.

        For each arrangement, we recognize revenue when: (i) persuasive evidence of an arrangement exists (e.g., a signed contract); (ii) delivery of the product has occurred and there are no remaining obligations or substantive customer acceptance provisions and all obligations are satisfied; (iii) the fee is fixed or determinable; and (iv) collection of the fee is reasonably assured. Any up-front fees received are deferred and recognized over the provision of specific deliverables as defined in the agreements. As our history related to non-coal sale customer relationships is limited, we may be required to change the estimated period over which we recognize our revenue as more information becomes available. Arrangements that include multiple deliverables are evaluated to determine whether the elements are separable based on objective evidence. If the elements are deemed separable, total consideration is allocated to each element and the revenue associated with each element is recognized as earned. If the elements are not deemed separable, total consideration is deferred and recognized ratably over the longer of the contractual period or the expected customer relationship period. We believe that the accounting estimates related to customer relationship periods and to the assessment of whether bundled elements are separable are "critical accounting estimates" because: (i) they require management to make assumptions about how long we will retain customers, for which we have limited history; (ii) the assessment of whether bundled elements are separable can be subjective; and (iii) the impact of changes in actual retention periods versus these estimates on the revenue amounts reported in our consolidated statements of operations could be material.

        Accounts and Notes Receivable and Allowances.    Receivables are recorded at their estimated net realizable value. The allowance for doubtful accounts is determined through an analysis of the past-due status of receivables and assessments of risk regarding collectability. If the financial condition of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

        Capitalization of Costs.    We expense mine exploration costs as incurred. Once it has been determined that it is economically feasible to extract coal, we begin to capitalize these costs as premining costs. We have identified the commencement of permitting as the point to begin capitalizing premining costs. We also capitalize all purchases of machinery, equipment, software, engineering costs and similar expenditures, where the useful life of the asset is greater than one year or the expenditures extends the useful life of an existing asset. All costs that are directly related to, or allocable to, developing a K-Fuel plant site are capitalized and separately identified as belonging to that site. Judgment is exercised in determining: (i) if costs extend the life of an asset; (ii) if costs increase production volumes; and (iii) the feasibility of extracting coal. If these judgments are incorrect, we may capitalize more costs than we otherwise should.

        Mineral Rights and Mine Development.    A significant portion of our coal reserves are controlled through leasing arrangements. Costs to obtain coal lands and leased mineral rights, including capitalized premining costs, are capitalized and depleted to operations using the units-of-production method based on tons produced utilizing only proven and probable reserves in the depletion base and are assumed to have no residual value. Premining costs include drilling, permitting, county and state filing fees and the initial overburden removal. We used assumptions such as selling price of coal, cost to mine and a discount rate to value our mines at Buckeye. If the assumptions used to value the proven and probable reserves change in the future, we may be required to record impairment charges for these assets.

        Valuation of Long-Lived Assets.    The valuation of our long-lived and intangible assets, including the remaining assets at our Fort Union plant, mineral rights, and patents, have significant impact on our results of operations and financial condition. We must assess the realizable value of these assets for potential impairment whenever events or changes in circumstances indicate that the carrying value may

59

not be recoverable. In assessing the recoverability of these assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. We must make assumptions regarding the useful lives of these assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets.

        Asset Retirement Obligations.    We are required to record the fair value of legally required removal costs and retirement obligations as a liability and we also recorded an offsetting asset. Initially, our asset retirement obligations were recorded at their fair value using an expected cash flow approach, in which multiple cash flow scenarios that reflected the range of possible outcomes and a credit-adjusted risk-free rate were applied. The liability is then accreted over time by applying the interest method of allocation. In determining the initial liability, we must make assumptions regarding estimated future cash flows and other factors. In addition, the rate of accretion is based upon our best estimate of the rate at which cost to complete the reclamation will increase. If these estimates and their related assumptions are incorrect or change in the future, we may be required to increase our obligation.

        Accounting for stock grants, options and warrants.    We issue stock grants, options and warrants to employees, board of directors and consultants in connection with our various business activities. In accounting for these awards we are required to make estimates of the fair value of the related instruments, the periods benefited and forfeiture rates. These estimates may affect such financial statement categories as stockholders' equity and general and administrative expense. If these estimates are incorrect, we may be required to incur additional expense in the future.

        Accounting for derivative financial instruments.    Derivatives may be embedded in financial instruments (the "host instrument"). Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not clearly and closely related to those of the host instrument. The terms of the embedded derivative are similar to those of a stand-alone derivative and the combined contract is not held for trading or designated at fair value. These embedded derivatives are measured at fair value and any subsequent changes are recognized in the statement of operations. We are required to make estimates and assumptions including, but not limited to, estimating the future market price of our common stock and probability of a change in control. If these assumptions and estimates are incorrect, we may be required to incur additional expense in the future.

        Accounting for Acquisitions.    The acquisition of businesses is an element of our strategy. We are required to record the net assets acquired at the estimated fair value at the date of acquisition. The determination of the fair value of the assets acquired and liabilities assumed requires us to make significant estimates and assumptions that affect our financial statements. For example, the value and estimated life of assets may affect the amount of future period depletion and depreciation expense for the assets as well as possible impairment charges that may be incurred.

        Marketable Securities.    As of December 31, 2009 and 2008, our balance sheet reflects $0 and $1.8 million of marketable securities, which are auction rate securities, respectively. These auction rate securities consisted of student-loan backed securities. During the year ended December 31, 2008, we reduced the carrying amount of our student loan-backed auction rate security by $200,000, which is reflected in general and administrative expense. In February 2009, we entered a reverse repurchase transaction for $1.8 million of our auction rate security which had a $2.0 million par value. In March 2009, we liquidated the auction rate security at $2.0 million, resulting in a gain of $200,000, which has been recorded in Other Income for the year ended December 31, 2009.

Recent Accounting Pronouncements

        Refer to Note 1—Recent Accounting Pronouncements of the accompanying notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for information regarding recent accounting pronouncements.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        In addition to risks inherent in operations, we are exposed to the following market risks in our business:

        Some of the products used in our mining activities, such as diesel fuel and explosives, are subject to commodity price risk. Through our Buckeye subsidiary, we generally consume 1.9 million to 2.1 million gallons of fuel per year. On a per gallon basis based on this usage, a change in fuel prices of one cent per gallon would result in an increase to our operating costs of approximately $19,000 per year. Alternatively, a one dollar per barrel change in the price of crude oil would increase or decrease our annual fuel costs by approximately $45,000.

        Ignoring embedded derivatives, we own (or hold) no derivative instruments or floating rate debt and do not expect to derive a material amount of our revenues from such interest bearing securities. Currently, we have no significant foreign operations. We hold no equity market securities, which are subject to equity market risk relative to our own equity securities.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements required pursuant to this item are included in Item 15 of this Annual Report on Form 10-K and begin on page F-1. The supplementary financial information required by this item is included in "Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

        With the participation of management, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. In performing this evaluation, management considered its controls over the identification and accounting for complex financial instruments including those with embedded derivatives. Management has determined that a material weakness in internal control over financial reporting related to identification and accounting for embedded derivatives existed as of December 31, 2009. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective in ensuring that material information required to be disclosed is included in the reports that we file with the Securities and Exchange Commission.

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Management's Annual Report on Internal Control over Financial Reporting

        Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management, with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. In performing this evaluation, management considered its controls over the identification and accounting for complex financial instruments including those with embedded derivatives. Based on this assessment, management has determined that there was a material weakness in our internal controls over financial reporting as of December 31, 2009, as more fully described below, and therefore we did not maintain effective internal controls as of December 31, 2009.

        A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weakness in their assessment: the Company's controls over the recognition of and accounting for complex financial instruments including those with embedded derivatives did not operate effectively to appropriately identify and account for certain such in accordance accounting principles generally accepted in the United States of America.

        The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm.

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

        In order to remediate the material weakness, we have implemented controls in the 1^st quarter of 2010 to identify and analyze our complex contracts, including arrangements related to financial instruments, at each reporting period to allow for proper financial reporting thereto. We will use third party specialists as necessary to assist us in this process.

        Notwithstanding the existence of a material weakness in internal controls, we believe that the consolidated financial statement fairly present, in all material respects, our consolidated balance sheets as of December 31, 2009 and 2008 and the related consolidated statements of operations, stockholder's deficit, equity and cash flows for each of the three years ended December 31, 2009, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

Changes in Internal Control over Financial Reporting

        There has been no change in our internal controls over financial reporting during the quarter ended December 31, 2009 that has materially affected our internal controls over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Evergreen Energy Inc.
Denver, Colorado

        We have audited the internal control over financial reporting of Evergreen Energy and subsidiaries (the "Company") as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weakness: The Company's controls are not sufficient to appropriately identify and account for complex financial instruments, including those with embedded derivatives, in accordance with accounting principles generally accepted in the United States of America. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2009 of the Company, and this report does not affect our report on such financial statements.

        In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2009 of the Company and our report dated March 31, 2010 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern.

/s/ Deloitte & Touche LLP
Denver, Colorado
March 31, 2010

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ITEM 9B.    OTHER INFORMATION

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        The required information for this item is incorporated by reference to our Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, since such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year pursuant to Regulation 14A.

ITEM 11.    EXECUTIVE COMPENSATION

        The required information for this item is incorporated by reference to our Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, since such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year pursuant to Regulation 14A.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The required information for this item is incorporated by reference to our Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, since such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year pursuant to Regulation 14A.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The required information for this item is incorporated by reference to our Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, since such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year pursuant to Regulation 14A.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The required information for this item is incorporated by reference to our Definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, since such Definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of our fiscal year pursuant to Regulation 14A.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

15(a)(1)    The following documents are filed as part of this Annual Report on Form 10-K:

        The following consolidated financial statements of Evergreen Energy Inc. are filed as part of this report:

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-3
Consolidated Statements of Changes in Stockholders' Equity	F-4
Consolidated Statements of Cash Flows	F-5
Notes to Consolidated Financial Statements	F-6 - F-56

15(a)(2) Financial Statement Schedules.    Schedules are omitted because they are not required or because the information is provided elsewhere in the financial statements.

15(a)(3)    Exhibits.

EXHIBIT NUMBER		DESCRIPTION
	3.1	Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 2.1 to our Form 10-KSB for the year ended December 31, 1993).
	3.2	Certificate of Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 2.2 to our Form 10-KSB for the year ended December 31, 1993).
	3.3	Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.4 to our Form 10-KSB, as amended, for the year ended December 31, 1995).
	3.4	Certificate of Amendment to Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2006).
	3.5	Certificate of Amendment to Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to our Form 10-Q for the quarter ended June 30, 2006).
	3.6	Certificate of Amendment to Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.6 to our Form 10-K for the year ended December 31, 2006).
	3.7	Certificate of Amendment to the Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to our Form 8-K filed July 16, 2008).
	3.8	Certificate of Designation, Preference and Rights of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.01 to our Form 8-K filed December 4, 2008).
	3.9	Third Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to our Form 8-K filed February 27, 2007).
	3.10	Amendments to the Third Amended Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Form 8-K filed July 16, 2008).

66

EXHIBIT NUMBER		DESCRIPTION
	4.1	Indenture, dated July 30, 2007, by and between Evergreen Energy Inc., Evergreen Operations, LLC, KFx Plant, LLC, KFx Operations, LLC, Landrica Development Company, Buckeye Industrial Mining Co. and U.S. Bank National Association, including the form of 8.00% Convertible Secured Note due 2012 (included as Exhibit A to the Indenture) (incorporated by reference to Exhibit 4.1 to our Form 8-K filed July 30, 2007).
	4.2	Registration Rights Agreement dated as of July 30, 2007, by and among Evergreen Energy Inc., Evergreen Operations, LLC, KFx Plant, LLC, KFx Operations, LLC, Landrica Development Company, Buckeye Industrial Mining Co. and the initial purchasers listed therein (incorporated by reference to Exhibit 4.2 to our Form 8-K filed July 30, 2007).
	4.3	Security Agreement, dated as of July 30, 2007, by and among Evergreen Energy Inc., Evergreen Operations, LLC, KFx Plant, LLC, KFx Operations, LLC, Landrica Development Company, Buckeye Industrial Mining Co. and U.S. Bank National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.3 to our Form 10-Q for the quarter ended September 30, 2007).
	4.4	Supplemental Indenture dated September 30, 2008, by and among Evergreen Energy Inc., Evergreen Operations, LLC, KFx Plant, LLC, KFx Operations, LLC, Landrica Development Company, Buckeye Industrial Mining Co. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to our Form 8-K filed October 1, 2008).
	4.5	Section 3(a)(9) exchange letter agreement, dated August 28, 2008, with Aristeia International Limited, Aristeia Special Investments Master, L.P. (incorporated by reference to Exhibit 4.2 to our Form 10-Q for the quarter ended September 30, 2008).
	4.6	Section 3(a)(9) exchange letter agreement, dated September 30, 2008, with Fidelity Advisors Series I: Fidelity Advisors Balanced Fund, Fidelity Puritan Trust: Fidelity Balanced Fund, and Variable Insurance Products Fund II: Balanced Portfolio (incorporated by reference to Exhibit 4.3 to our Form 10-Q for the quarter ended September 30, 2008).
	4.7	Section 3(a)(9) exchange letter agreement, dated September 30, 2008, with Highbridge International, LLC and Highbridge Convertible Arbitrage Master Fund L.P. (incorporated by reference to Exhibit 4.4 to our Form 10-Q for the quarter ended September 30, 2008).
	4.8	Section 3(a)(9) exchange letter agreement, dated September 30, 2008, with Whitebox Convertible Arbitrage Partners, L.P. and Whitebox Special Opportunities Partners, Series B, L.P. (incorporated by reference to Exhibit 4.5 to our Form 10-Q for the quarter ended September 30, 2008).
	4.9	Rights Agreement, dated as of December 4, 2008, between the Company and Interwest Transfer Company, Inc., as Rights Agent (incorporated by reference to Exhibit 4.1 to our Form 8-K filed December 4, 2008).
	4.10	Note Purchase Agreement, dated as of March 20, 2009, by and between Evergreen Energy Inc., Evergreen Operations, Buckeye Industrial Mining Co. and Centurion Credit Funding LLC (incorporated by reference as Exhibit 4.10 to our Form 10-K for the year ended December 31, 2008).

67

EXHIBIT NUMBER		DESCRIPTION
	4.11	Certificate of Designation and Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 4.1 to our Form 8-K filed October 22, 2009).
	4.12	Security Purchase Agreement dated October 21, 2009 (incorporated by reference as Exhibit 4.2 to our Form 10-Q for the quarter ended September 30, 2009).
	4.13	Registration Rights Agreement dated October 21, 2009 (incorporated by reference as Exhibit 4.3 to our Form 10-Q for the quarter ended September 30, 2009).
	4.14	Common Stock Purchase Warrant dated October 21, 2009 (incorporated by reference as Exhibit 4.4 to our Form 10-Q for the quarter ended September 30, 2009).
	4.15	Common Stock Purchase Warrant dated January 27, 2010 (incorporated by reference as Exhibit 4.1 to our Form 8-K filed January 27, 2010).
	4.16	Form of Common Stock Purchase Warrant to be Issued by Evergreen Energy (incorporated by reference as Exhibit 4.1 to our Form 8-K filed March 17, 2010).
	4.17	Form of Certificate of Designation from Series C Convertible Stock (incorporated by reference as Exhibit 4.2 to our Form 8-K filed March 17, 2010).
	4.18	State of Delaware Certificate of Correction (incorporated by reference as Exhibit 4.3 to our Form 8-K/A filed March 18, 2010).
	4.19	Second Amendment and Forbearance Agreement dated January 12, 2010.*
	10.1	Amendments to Agreements Between Theodore Venners, S.A. Wilson, Koppelman Fuel Development Company, and the Koppelman Group dated December 29, 1992 (incorporated by reference to Exhibit 6.1 to our Form 10-KSB for the year ended December 31, 1993).**
	10.2	Royalty Agreement dated December 29, 1992 between the Company and the Koppelman Group (incorporated by reference to Exhibit 6.7 to our Form 10-KSB for the year ended December 31, 1993).
	10.3	Stock Option Plan dated December 16, 1993 (incorporated by reference to Exhibit 6.19 to our Form 10-KSB for the year ended December 31, 1993).**
	10.4	Gross Royalty Share Agreement dated August 17, 1995 between the Company and Fort Union, Ltd. (incorporated by reference to Exhibit 10.51 to our Registration Statement on Form SB-2 (File No. 33-97418)).
	10.5	Letter of Agreement dated August 15, 1995 between the Company and Edward Koppelman (incorporated by reference to Exhibit 10.53 to our Registration Statement on Form SB-2 (File No. 33-97418)).
	10.6	Royalty Amendment Agreement dated June 3, 1996 between the Company, Edward Koppelman and Theodore Venners (incorporated by reference to Exhibit 10.1 to our Form 10-Q for the quarter ended June 30, 1996).**
	10.7	1999 Stock Incentive Plan (incorporated by reference from Annex A-1 of the Company's Proxy Statement filed May 4, 1999).**
	10.8	1996 Stock Option and Incentive Plan of KFx Inc. (incorporated by reference to Exhibit 10.1 to our Form 10-K for the year ended December 31, 2000).**

68

EXHIBIT NUMBER		DESCRIPTION
	10.9	Common Stock and Warrant Purchase Agreement dated as of March 28, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed April 2, 2002).
	10.10	Common Stock and Warrant Purchase Agreement between KFx Inc. and the Investors dated April 30, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed May 7, 2002).
	10.11	Common Stock and Warrant Purchase Agreement between KFx Inc. and the Investors dated July 1, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 3, 2002).
	10.12	Common Stock and Warrant Purchase Agreement between KFx Inc. and the Investors dated July 19, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 24, 2002)
	10.13	Common Stock and Warrant Purchase Agreement between KFx Inc. and the Investors dated August 21, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 28, 2002).
	10.14	Waiver of Penalty Warrants dated September 25, 2002 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed September 27, 2002).
	10.15	KFx Inc. 2004 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 8-K filed December 17, 2004).**
	10.16	Waiver Agreement dated December 17, 2004 between KFx Inc. and Theodore Venners (incorporated by reference to Exhibit 10.60 to our Form 10-K for the year ended December 31, 2004).**
	10.17	Employment Agreement between KFx Inc. and William G. Laughlin (incorporated by reference to Exhibit 10.61 to our Form 8-K filed March 15, 2005).**
	10.18	K-Fuel Projects Participation and Development Agreement Dated May 5, 2005 (incorporated by reference to Exhibit 10.63 to our Form 10-Q for the quarter ended March 31, 2005).
	10.19	First Amendment to Fourth Amended and Restated Investors' Rights Agreement (incorporated by reference to Exhibit 10.64 to our Form 10-Q for the quarter ended March 31, 2005).
	10.20	Employment Agreement between KFx Inc. and Kevin R. Collins (incorporated by reference to Exhibit 10.66 to our Form 8-K filed October 25, 2005).**
	10.21	KFx Inc. 2005 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.67 to our Form S-8 filed November 4, 2005).**
	10.22	Employment Agreement between KFx Inc. and Theodore Venners (incorporated by reference to Exhibit 10.69 to our Form 8-K filed December 22, 2005).**
	10.23	Business Development and Intellectual Property Rights Agreement, dated January 2, 2003 (incorporated by reference to Exhibit 99.1 to our Form 8-K filed January 31, 2006).
	10.24	Addendum to Business Development and Intellectual Property Rights Agreement, dated January 8, 2004 (incorporated by reference to Exhibit 99.2 to our Form 8-K filed January 31, 2006).

69

EXHIBIT NUMBER		DESCRIPTION
	10.25	First Amendment to the Business Development and Intellectual Property Rights Agreement, dated May 21, 2004 (incorporated by reference to Exhibit 99.3 to our Form 8-K filed January 31, 2006).
	10.26	Professional Services Agreement, dated July 16, 2003 (incorporated by reference to Exhibit 99.4 to our Form 8-K filed January 31, 2006).
	10.27	Marketing, Distribution and Transportation Logistics Service Agreement with DTE Coal Services, Inc. dated June 6, 2006 (incorporated by reference to Exhibit 10.79 to our Form 10-Q for the quarter ended June 30, 2006).
	10.28	Net lease agreement between Company and Seventeenth Street Plaza Realty Holding Company dated November 17, 2006 (incorporated by reference to Exhibit 10.37 to our Form 10-K for the year ended December 31, 2006).
	10.29	Purchase Agreement dated as of July 25, 2007, among Evergreen Energy Inc., Evergreen Operations, LLC, KFx Plant, LLC, KFx Operations, LLC, Landrica Development Company, Buckeye Industrial Mining Co. and the initial purchasers named therein (incorporated by reference to Exhibit 10.1 to our Form 10-Q for the quarter ended September 30, 2007).
	10.30	Program Management Agreement, dated September 19, 2007 (incorporated by reference to Exhibit 10.39 to our Form 10-K for the year ended December 31, 2007).
	10.31	Pledge Agreement, dated March 20, 2009, by and between Evergreen Operations LLC and Centurion Credit Funding LLC (incorporated by reference as Exhibit 10.31 to our Form 10-K for the year ended December 31, 2009).
	10.32	Security Agreement, dated as of March 20, 2009, by and between Evergreen Energy Inc., Evergreen Operations, LLC, Buckeye Industrial Mining Co. and Centurion Credit Funding LLC (incorporated by reference as Exhibit 10.32 to our Form 10-K for the year ended December 31, 2009).
	10.33	Severance Agreement and Waiver and Release Agreement Dated May 12, 2009 between Evergreen Energy Inc. and Steve Wolff (incorporated by reference to Exhibit 10.1 to our form 10-Q for the quarter ended June 30, 2009).
	10.34	Severance Agreement and Waiver and Release Agreement Dated May 27, 2009 between Evergreen Energy Inc. and Kevin R. Collins (incorporated by reference to Exhibit 10.2 to our form 10-Q for the quarter ended June 30, 2009).
	10.35	Employment Agreement Dated June 24, 2009 between Evergreen Energy Inc. and Thomas H. Stoner, Jr. (incorporated by reference to Exhibit 10.3 to our form 10-Q for the quarter ended June 30, 2009).***
	10.36	Transition Agreement Dated July 1, 2009 between Evergreen Energy Inc. and Theodore Venners (incorporated by reference to Exhibit 10.4 to our form 10-Q for the quarter ended June 30, 2009).
	10.37	Consulting Agreement Dated June 1, 2009 between Evergreen Energy Inc. and Wolff & Company, Alternative Energy Advisors, Inc. (incorporated by reference to Exhibit 10.5 to our form 10-Q for the quarter ended June 30, 2009).
	10.38	Form of Securities Purchase Agreement dated January 26, 2010 (incorporated by reference to Exhibit 10.1 of our 8-K filed January 27, 2010).

70

EXHIBIT NUMBER		DESCRIPTION
	10.39	Form of Securities Purchase Agreement dated March 16, 2010 (incorporated by reference to Exhibit 10.1 of our 8-K filed March 17, 2010).
	10.40	Asset Purchase Agreement dated March 12, 2010 among Rosebud Mining Company, Buckeye Industrial Mining Co. and Evergreen Energy, Inc.*
	10.41	Escrow Agreement dated March 12, 2010 among Rosebud Mining Company, Buckeye Industrial Mining Co. and Evergreen Energy, Inc.*
	10.42	Amendment No. 1 to Asset Purchase Agreement dated March 29, 2010 among Rosebud Mining Company, Buckeye Industrial Mining Co. and Evergreen Energy, Inc.*
	12.1	Deficiency of Earnings to Fixed Charges.*
	21.1	Subsidiaries.*
	23.1	Consent of Deloitte & Touche LLP—Evergreen Energy Inc.*
	24.1	Powers of Attorney, incorporated by reference to Signature page attached hereto.
	31.1	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	31.2	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
	32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*

Filed herewith.

**

Management contracts and compensatory plans.

71

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EVERGREEN ENERGY INC.
Date: March 31, 2010	By:	/s/ THOMAS H. STONER, JR Thomas H. Stoner, Jr Chief Executive Officer and Director (Principal Executive Officer)
		/s/ DIANA L. KUBIK Diana L. Kubik Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

POWER OF ATTORNEY

        Know all persons by these presents, that each person whose signature appears below constitutes and appoints Diana L. Kubik or Thomas H. Stoner, Jr. as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place, stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, including all amendments thereto, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 31, 2010	/s/ THOMAS H. STONER, JR Thomas H. Stoner, Jr., Chief Executive Officer and Director (Principal Executive Officer)
Date: March 31, 2010	/s/ DIANA L. KUBIK Diana L. Kubik, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Date: March 31, 2010	/s/ GUIDO R. BARTELS Guido Bartels, Director

72

Date: March 31, 2010	/s/ ROBERT J. CLARK Robert J. Clark, Director
Date: March 31, 2010	/s/ WILLIAM G. GIBSON William G. Gibson, Director
Date: March 31, 2010	/s/ MANUEL H. JOHNSON Manuel H. Johnson, Director
Date: March 31, 2010	/s/ ROBERT S. KAPLAN Robert S. Kaplan, Director
Date: March 31, 2010	/s/ RICHARD B. PERL Richard Perl, Director
Date: March 31, 2010	/s/ M. RICHARD SMITH M. Richard Smith, Chairman of the Board of Director
Date: March 31, 2010	/s/ CHESTER N. WINTERS Chester N. Winters, Director

73

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Evergreen Energy Inc.
Denver, Colorado

        We have audited the accompanying consolidated balance sheets of Evergreen Energy Inc. and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Evergreen Energy Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

        The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's recurring losses from operations and stockholders' deficit raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 31, 2010 expressed an adverse opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP
Denver, Colorado
March 31, 2010

F-1

EVERGREEN ENERGY INC.

Consolidated Balance Sheets

(in thousands)

			December 31,
			2009			2008
Assets
Current:
	Cash and cash equivalents		$	2,207		$	7,667
	Accounts receivable, net			5,194			6,640
	Inventory			1,747			958
	Debt issue costs, net of amortization			2,089			—
	Prepaid and other assets			1,647			833
		Total current assets		12,884			16,098
Property, plant and equipment, net of accumulated depreciation				18,660			29,965
Construction in progress				17,295			17,702
Mineral rights and mine development, net of accumulated depletion				9,945			18,032
Restricted cash and marketable securities				11,339			13,444
Debt issue costs, net of amortization				994			1,330
Other assets				3,387			4,870
			$	74,504		$	101,441
Liabilities, Temporary Capital and Stockholders' (Deficit) Equity
Current liabilities:
	Accounts payable		$	7,858		$	6,583
	Accrued liabilities			8,829			6,920
	Short-term debt			16,022			—
	Other current liabilities			1,922			332
		Total current liabilities		34,631			13,835
Long-term debt				27,898			28,573
Deferred revenue				8,265			6,732
Asset retirement obligations				6,869			6,505
Other liabilities, less current portion				2,716			1,946
Commitments and contingencies
		Total liabilities		80,379			57,591
Temporary Capital:
		Preferred stock, $.001 par value, $1,000 stated value, 7 shares authorized; .002 outstanding		2			—
Stockholders' equity:
	Preferred stock, $.001 par value, shares authorized 19,993; none outstanding			—			—
	Common stock, $.001 par value, shares authorized 280,000; 146,611 and 124,086 shares issued and outstanding, respectively			147			124
	Additional paid-in capital			525,816			517,029
	Accumulated deficit			(529,939	)		(473,303	)
	(Deficit) equity attributable to Evergreen Energy Inc. stockholders'			(3,976	)		43,850
	Deficit attributable to noncontrolling interest			(1,901	)		—
		Total stockholders' (deficit) equity		(5,877	)		43,850
			$	74,504		$	101,441

See accompanying notes to the consolidated financial statements.

F-2

EVERGREEN ENERGY INC.

Consolidated Statements of Operations

			Years Ended December 31,
			2009			2008			2007
			(in thousands, except per share amounts)
Operating revenues:
	Mining		$	50,248		$	58,434		$	47,362
	K-Fuel refined coal and blended K-Fuel refined coal			—			463			1,081
	Consulting and other			423			4			214
		Total operating revenue		50,671			58,901			48,657
Operating expenses:
	Coal mining operating costs			43,458			47,799			43,093
	General and administrative			29,082			31,965			43,031
	Plant costs			1,554			17,630			34,730
	Depreciation, depletion and amortization			9,962			9,000			8,383
	Research and development			49			79			876
	Cost of licensing and other revenue			—			—			77
	Asset impairment			20,487			18,615			122,688
		Total operating expenses		104,592			125,088			252,878
Operating loss				(53,921	)		(66,187	)		(204,221	)
Other income (expense):
	Gain on equity exchange transactions			167			6,138			—
	Interest income			65			1,251			4,348
	Interest expense			(7,645	)		(6,132	)		(3,433	)
	Other (expense) income, net			2,797			(300	)		(1,370	)
		Total other income (expense)		(4,616	)		957			(455	)
Net loss				(58,537	)		(65,230	)		(204,676	)
Less net loss attributable to noncontrolling interest				1,901			—			—
	Net loss attributable to Evergreen Energy		$	(56,636	)	$	(65,230	)	$	(204,676	)
Dividends on preferred stock				(1,973	)		—			—
Net loss attributable to common shareholders			$	(60,510	)	$	(65,230	)	$	(204,676	)
Basic and diluted net loss per common share			$	(0.46	)	$	(0.72	)	$	(2.49	)
Weighted-average common shares outstanding				132,070			90,676			82,232

See accompanying notes to the consolidated financial statements.

F-3

EVERGREEN ENERGY INC.

Consolidated Statements of Stockholders' (Deficit) Equity

For the Years ended December 31, 2009, 2008 and 2007

	Common Stock
					Additional Paid-in Capital			Accumulated Deficit			Non- controlling interest
	Shares		Amounts											Total
	(in thousands)
Balance, January 1, 2007		82,690	$	83	$	428,298		$	(203,397	)		—		$	224,984
Common stock issued on exercise of options and warrants		1,490		1		4,852			—			—			4,853
Share-based compensation expense related to employees and consultants		147		—		19,624			—			—			19,624
Payment of income tax liability in exchange for common stock and retirement of such shares		—		—		(1,641	)		—			—			(1,641	)
Sale of stock in subsidiary, net offering costs		—		—		3,555			—			—			3,555
Net loss		—		—		—			(204,676	)		—			(204,676	)
Balance, December 31, 2007		84,327		84		454,688			(408,073	)		—			46,699
Common stock issued on exercise of options, warrants and other		70		—		55			—			—			55
Share-based compensation expense related to employees and others		328		1		6,443			—			—			6,444
Debt for equity exchange transactions		39,361		39		55,843			—			—			55,882
Net Loss		—		—		—			(65,230	)		—			(65,230	)
Balance, December 31, 2008		124,086		124		517,029			(473,303	)		—			43,850
Common stock issued for services		1,543		2		980			—			—			982
Share-based compensation expense related to employees and others		5,433		5		5,276			—			—			5,281
Issuance of common stock upon the conversion of preferred stock		11,571		12		2,213			—			—			2,225
Debt for equity exchange transaction		3,978		4		318						—			322
Net Loss		—		—		—			(56,636	)		(1,901	)		(58,537	)
Balance, December 31, 2009		146,611	$	147	$	525,816		$	(529,939	)	$	(1,901	)	$	(5,877	)

See accompanying notes to the consolidated financial statements.

F-4

EVERGREEN ENERGY INC.

Consolidated Statements of Cash Flows

			Years ended December 31,
			2009			2008			2007
			(in thousands)
Operating activities:
	Net loss		$	(58,537	)	$	(65,230	)	$	(204,676	)
	Adjustments to reconcile net loss to cash used in operating activities:
		Share-based compensation expense to employees and others		5,281			6,339			19,624
		Depreciation, depletion and amortization		9,962			9,000			8,383
		Gain on debt for equity exchange transactions		(167	)		(6,138	)		—
		Derivative fair value adjustment		(2,036	)		934			1,730
		Amortization of initial fair value of derivative		(158	)		(453	)		(229	)
		Loss from subleasing		1,027			—			—
		Asset impairment		20,487			18,615			122,688
		Asset retirement obligation accretion		364			305			287
		Settlement of asset retirement obligation		—			(147	)		—
		Amortization of debt issuance costs		2,624			777			397
		Loss on disposal of fixed assets		247			—			(268	)
		Other than temporary impairment of marketable security		(200	)		200			—
		Other		520			640			2
	Changes in operating assets and liabilities:
		Accounts receivable		1,422			(170	)		(459	)
		Inventory		(789	)		485			(183	)
		Prepaid and other assets		800			1,264			119
		Deferred revenue and other liabilities		1,763			367			(324	)
		Accounts payable and accrued liabilities		4,482			(3,051	)		1,328
Cash used in operating activities				(12,908	)		(36,263	)		(51,581	)
Investing activities:
	Purchases of construction in progress			(11,575	)		(14,905	)		(49,363	)
	Purchases of property, plant and equipment			(773	)		(1,882	)		(4,096	)
	Proceeds from the sale of assets			180			13			934
	Purchases of marketable securities			—			(5,000	)		(74,613	)
	Proceeds from marketable securities			2,000			27,500			101,672
	Restricted cash and marketable securities, net			905			14,974			(24,728	)
	Other			(421	)		(76	)		(42	)
Cash provided by (used in) investing activities				(9,684	)		20,624			(50,236	)
Financing Activities:
	Proceeds from issuance of convertible debt			15,000			—			95,000
	Payments on debt for equity exchange transactions			—			(3,500	)		—
	Proceeds from sale or exercise of options and warrants			—			55			4,853
	Proceeds from issuance of convertible preferred stock, net of closing costs			6,515			—			—
	Proceeds from sale of stock in subsidiary, net of offering costs			—			—			3,715
	Proceeds from reverse repurchase transaction			1,800			—			—
	Payments on reverse repurchase transaction			(1,800	)		—			—
	Payment of dividends on convertible preferred stock			(1,973	)
	Payments of debt issuance costs			(2,387	)		(200	)		(5,785	)
	Payment of payroll taxes in exchange for common stock			—			—			(1,641	)
	Other			(23	)		(7	)		(85	)
Cash (used in) provided by financing activities				17,132			(3,652	)		96,057
Increase (decrease) in cash and cash equivalents				(5,460	)		(19,291	)		(5,760	)
Cash and cash equivalents, beginning of year				7,667			26,958			32,718
Cash and cash equivalents, end of year			$	2,207		$	7,667		$	26,958

See accompanying notes to the consolidated financial statements.

F-5

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements

Years ended December 31, 2009, 2008 and 2007

In this Annual Report on Form 10-K, we use the terms "Evergreen Energy," "we," "our," and "us" to refer to Evergreen Energy Inc. and its subsidiaries. C-Lock refers to our subsidiary C-Lock Technology, Inc. Buckeye refers to our subsidiary Buckeye Industrial Mining Co. All references to C-Lock®, GreenCert™, K-Fuel, K-Fuel®, K-Fuel process, K-Fuel refined coal, K-Fuel refineries, K-Direct®, K-Fuel Plants, K-Fuel facilities, K-Direct facilities and K-Direct® plants, refer to our patented processes and technologies explained in detail throughout this Annual Report on Form 10-K. All references to years, unless otherwise noted, refer to our fiscal year, which ends on December 31st.

(1) Business and Summary of Significant Accounting Policies

Overview and Financial Condition

        We were founded in 1984 as a cleaner coal technology, energy production and environmental solutions company focused on developing our proprietary technologies. In the last two years, we have sharpened our focus as a carbon technology company. We have developed two proprietary, patented, and potentially transformative green technologies: the GreenCert suite of software and services and K-Fuel. Our GreenCert technology is a scientifically accurate and scalable environment intelligence solution that measures greenhouse gases and other environmental costs enabling customers to manage and report their environmental assets and liabilities. GreenCert, built on IBM's Service-Oriented Architecture (or SOA), is the environment intelligence solution that provides customers the end-to-end visibility and traceability necessary to measure their complete environmental footprint. K-Fuel, our clean coal technology significantly improves the performance of low-rank coals yielding higher efficiency and lower emissions.

        We have been evaluating several alternatives related to our strategic positioning, including the sale of Buckeye. On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company ("Rosebud"), for the sale of certain net assets of both Buckeye and Evergreen, which we refer to as the "sale of Buckeye", for a purchase price of $27.9 million in cash payable at the closing of the transaction. We believe the closing will be consummated by April 2010, but no later than June 30, 2010. See further discussion below under "Buckeye."

        With the sale of Buckeye we will be able to better focus our resources on core business activities, including GreenCert and our K-Fuel technologies. We have terminated the contemplated K-Fuel spin-off as previously announced. Currently our China affiliate, Evergreen-China Energy Technology Co., Ltd. (or Evergreen-China) a Sino-US joint venture between Evergreen Energy and a Chinese investor, is continuing negotiations to construct a K-Fuel plant in Inner Mongolia, and will continue to lead the business development and plant construction activities related to this plant.

        Actual 2009 cash flows from Buckeye's operations have been less than previously anticipated, due in part to the depressed economy and the unusually mild summer temperatures in the North East region of the United States, both of which have led to lower than previously forecasted coal prices and reduced coal consumption. Because of these lower than expected results, combined with the on-going costs associated with GreenCert, we were required to raise additional capital. As a result, we completed three financing deals: (i) On March 16, 2010, we entered into a securities purchase agreement, and received gross proceeds of approximately $9.3 million; (ii) On January 26, 2010, we consummated a registered direct public offering and raised gross proceeds of approximately $8.7 million; and (iii) On October 21, 2009, we entered into an agreement to sell shares of our Series B Convertible Stock resulting in approximately $7.0 million in gross proceeds. See Note 18 Subsequent Events for further description of the financings completed in 2010 and Note 8—Preferred Stock for further description of the October 2009 financing. However, we continue to require additional capital to fully fund the anticipated development of our GreenCert technology and expect to investigate available sources of

F-6

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

capital. Because of the need for additional capital to fund operations and costs to develop GreenCert, there is substantial doubt as to our ability to continue to operate as a going concern for the foreseeable future.

        We have a history of losses, deficits and negative operating cash flows and may continue to incur losses in the future. We have dramatically reduced our cash utilization principally by suspending operations at our Fort Union plant and reducing other general and administrative costs. A portion of these savings have been offset by further investment in our GreenCert business. Continued market disruptions associated with the global economic downturn, which may lead to lower demand for our technology or products, increased incidence of customers' inability to pay their accounts, or insolvency of our customers, any of which could adversely affect our results of operations, liquidity, cash flows, and financial condition. We continue to evaluate our cash position and cash utilization and have and will make additional adjustments to capital or certain operating expenditures.

        These cost reductions were offset by the expansion of our GreenCert operations in 2009, including the addition of personnel and other administrative costs associated with developing a business. In addition, we invested $12.3 million in capital expenditures in 2009 primarily related to Buckeye, GreenCert development and K-Fuel process development.

        As of December 31, 2009, our accumulated deficit was $529.9 million. In addition, our net losses and cash flow used in operations for each of the years ending December 31, 2009, 2008 and 2007 are summarized as follows:

	December 31,
	2009			2008			2007
	(in thousands)
Net loss	$	(58,537	)	$	(65,230	)	$	(204,676	)
Cash used in operating activities	$	(12,908	)	$	(36,263	)	$	(51,581	)

        During 2009, we reduced our cash flow used in operations by $23.4 million when compared to 2008. We accomplished these savings principally by suspending operations at our Fort Union plant in March 2008, reducing professional fees and other general and administrative costs.

        On March 20, 2009, we executed a Senior Secured Convertible Note Agreement which provides for the issuance of up to $15 million in aggregate principal amount of 10% Senior Secured Promissory Notes ("2009 Notes"), in three $5 million tranches. The first $5 million tranche was funded in March 2009, the second $5 million tranche was funded in April 2009 and the third tranche was funded in July 2009. The 2009 Notes are reflected in short-term debt in our consolidated balance sheet. These 2009 Notes bear interest at a rate of 10% per annum beginning on the funding date of each tranche, which was required to be prepaid at the time the 2009 Notes were issued and is non-refundable. We prepaid $375,000 of interest related to the closing of the first tranche and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30. In connection with the second tranche, we prepaid $351,000 of interest and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30. In connection with the third tranche we prepaid $225,000 of interest and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30.

        On December 18, 2009, we entered into a binding term sheet to restructure and extend the terms of our 2009 Notes extending the maturity date to the earlier of June 30, 2010 or upon the sale of Buckeye. Per the terms of the restructured agreement, we were required to pay a $1.8 million cash

F-7

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

extension fee on our first raise of additional common equity offering. We paid this fee in connection with proceeds from our common equity raise on January 26, 2010. The lenders will receive 30% of the proceeds of any subsequent common equity offering to be used to reduce the outstanding balance of the 2009 Notes. Upon maturity, the repayment amount will be equal to 115% of the principal amount outstanding, plus accrued and unpaid interest. We incurred an additional fee of $350,000 due at maturity because our equity raise was consummated after the January 15, 2010 deadline. See further discussion in Note 7- Debt.

GreenCert

        We are continuing the development of our GreenCert suite of software and services. GreenCert is an accurate and scalable environmental intelligence solution that quantifies greenhouse gas emission avoidances and reductions and generates verifiable emissions offsets. GreenCert provides real-time, multiple method data analysis to increase accuracy and reduce uncertainty to quantify incremental improvements. GreenCert also enables enterprises to reduce overall costs via the identification of significant operational efficiencies, compliance and risk reduction and sustainability measures. We intend to sell GreenCert as an on-premise offering and as a hosted software as a service (or SaaS) solution, both with annual licensing and renewal fees.

K-Fuel

        Through our proprietary K-Fuel process we intend to meet the specific needs of public utility, industrial and international customers by providing economical solutions for energy supply and compliance with environmental emission standards. Additional markets served by our K-Fuel process include mines looking to expand the market for their low rank coal by transforming it into a higher value fuel and chemical manufacturers using coal as a feedstock. Our K-Fuel process uses heat and pressure to physically and chemically transform high-moisture, low-Btu coals, such as sub-bituminous coal and lignite, into a more energy dense, energy efficient, lower-emission fuel. The inherent efficiency of higher Btu-lower moisture coal improves power plant performance and reduces emissions on a per kilowatt-hour-generated basis. We executed a term-sheet to spin-off this technology with a partner in China in December 2009. We believe that China presents the best opportunity to develop the K-Fuel technology because of its plentiful reserves of high-moisture, low-Btu coals, its rapid growth in electric power demand and its lower construction and manufacturing costs. The goal of our K-Fuel technology is to transform those lower-rank coals into more efficient and environmentally compliant fuels in order to meet the increasing demand for energy in an optimal fashion. Evergreen-China continues to have discussions with a Chinese conglomerate for the potential construction of a K-Fuel plant in Inner Mongolia. We have terminated the contemplated K-Fuel spin-off as previously announced. Concurrently, Evergreen-China signed a letter of intent with a large Chinese integrated utility and chemical manufacturer to build a K-Fuel plant in Inner Mongolia to produce K-Fuel from low ranked lignite feedstock.

Buckeye

        On April 3, 2006, we completed the acquisition of Buckeye for a total purchase price of $39.1 million, including cash paid, stock issued, liabilities assumed and costs incurred in the acquisition. Buckeye's primary business is to mine, process, blend and sell high-quality coal to electric utilities,

F-8

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

industrial and institutional end users. Buckeye also operates one of the largest ash disposal facilities in the State of Ohio, disposing of up to one million tons of dry and conditioned ash per year.

        Over the past year, we have been evaluating several alternatives related to our strategic positioning, including the potential sale of Buckeye. On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company for the sale of certain assests of both Buckeye and Evergreen for $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. The sale includes inventory, property, plant, equipment, mineral rights, Evergreen's dock facilities and the assumption of asset retirement obligations and obligations related to the 47-year dock lease, which, collectively, we refer to as the "sale of Buckeye". Further, $2.8 million of the purchase price will be deposited into escrow for a period of twelve months to cover amounts payable to Rosebud pursuant to the indemnification provision of the sales agreement. The closing is not subject to a financing condition, but is subject to the satisfaction of customary closing conditions, including, among other matters: (i) accuracy of the representations and warranties and compliance with the covenants set forth in the agreement, each in all material respects; (ii) receipt of legally required regulatory approvals; and (iii) consents of certain governmental authorities and certain of Buckeye's specified contractual counterparties. The sale is expected to close in April 2010, but in any event no later than June 30, 2010. We recorded an impairment charge of $20.1 million to write-down these assets to their fair market value.

        With the sale of Buckeye we will be able to better focus our resources on core business activities, including the GreenCert and K-Fuel technologies.

        Basis of Presentation.    The consolidated financial statements include our accounts and the accounts of our wholly and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated. We do not consolidate, Evergreen-China, but record the activity using the equity method of investment. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

        The financial statements have been prepared on a "going concern" basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At December 31, 2009, we had negative working capital. For the period starting from the year of incorporation, 1988 through December 31, 2009, we have incurred a cumulative net loss of $529.9 million. These factors raise substantial doubt regarding our ability to continue as a going concern. We plan to obtain additional equity capital including from the sale of Buckeye to finance our GreenCert and K-Fuel development and marketing initiatives and our future operations. However, there is no assurance that we will be successful in accomplishing this objective. The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

        Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. We believe that the significant estimates, assumptions and judgments when accounting for items and matters such as asset retirement obligations, mineral reserves, capitalized premining costs, capitalized plant costs, depletion, depreciation, amortization, asset valuations, asset life, technology, deferred revenue, acquisitions, stock option and restricted stock grants and warrants, allowance for bad debts for receivables, taxes, recoverability of

F-9

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

assets, impairments, customer retention, fair value of derivatives and other provisions are reasonable, based upon information available at the time they are made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.

        Fair value of financial instruments.    The carrying amount of cash and cash equivalents, accounts receivable, marketable securities, other current assets, accounts payable, accrued liabilities, short-term debt and other current liabilities in the consolidated financial statements approximate fair value because of the short-term nature of the instruments. As of December 31, 2009 the carrying amount of our long-term debt was $27.9 million. We pay interest semi-annually at a rate of 8.00% per annum. The 2007 Notes mature on August 1, 2012. We are unable to estimate the fair value of our debt without incurring excessive costs because a quoted market price is not available, we have not developed the valuation model necessary to make the estimate, and the cost of obtaining an independent valuation would be excessive.

        Cash and cash equivalents.    Cash and cash equivalents are highly liquid investments that consist primarily of short-term money market instruments and overnight deposits with insignificant interest rate risk and original maturities of three months or less at the time of purchase. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of sound financial condition and in high quality and relatively risk-free investment products. Our investments are in low-risk instruments and we limit our credit exposure in any one institution or type of investment instrument based upon criteria including creditworthiness.

        Marketable Securities.    As of December 31, 2009 and 2008, our balance sheet reflects $0 and $1.8 million of marketable securities, which are auction rate securities, respectively. These auction rate securities consisted of student-loan backed securities. During the year ended December 31, 2008, we reduced the carrying amount of our student loan-backed auction rate security by $200,000. In February 2009, we entered a reverse repurchase transaction for $1.8 million of our auction rate security which had a $2.0 million par value. In March 2009, we liquidated the auction rate security at $2 million, resulting in a gain of $200,000, which has been recorded in Other Income for the year ended December 31, 2009.

        Receivables and allowance for doubtful accounts.    Accounts receivable and note receivable, which is reflected in prepaids and other assets, are recorded at their estimated net realizable value. The allowance for doubtful accounts is determined through an analysis of the past-due status of accounts receivable and assessments of risk regarding collectability. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. As of December 31, 2009 and 2008, we have an allowance for doubtful accounts of $1.3 million and $1.4 million, respectively, primarily relating to a note receivable.

        Inventory.    Inventory, which includes washed or prepared coal, raw coal and inventory in transit as well as consumable parts, materials and supplies, are stated at the lower of cost or market. Our practice is to value coal and purchased coal based on the average cost method by the applicable type of coal. Inventory principally consisted of $1.7 million and $804,000 of washed or prepared coal, raw coal and inventory in transit and $0 and $154,000 of spare parts and supplies as of December 31, 2009 and 2008, respectively.

        Property, plant and equipment.    Property, plant and equipment principally consists of our coal wash facility, buildings, furniture and fixtures, computers, third party software implementation and

F-10

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

development costs, vehicles, leasehold improvements, coal handling systems. Expenditures that extend the useful lives of the assets or increase production capacity are capitalized. Repairs and maintenance that do not extend the useful lives of the assets are expensed as incurred. We begin depreciation on property, plant and equipment assets once the assets are placed into service. Depreciation expense is computed using the straight-line method over the estimated useful lives of the property and equipment or the units-of-production method using total processed tonnage for our Fort Union plant.

        Construction in progress.    All costs that are directly related to the engineering, design, purchase or fabrication of plant equipment and are expected to be used in a commercial K-Fuel plant project are capitalized. All costs that are directly related to, or allocable to, developing a specific K-Fuel plant site are capitalized and separately identified as belonging to that site. Costs incurred to develop coal mines or to expand the capacity of operating mines are capitalized. Interest is capitalized during the construction phase for internal-use capital projects. Repair and maintenance costs incurred that extend the useful life of mining machinery and equipment are capitalized. Costs incurred to maintain current production capacity at a mine and exploration expenditures are charged to operating costs as incurred. Employee-related costs directly related to construction are also capitalized during the construction phase.

        Mineral rights and mine development.    A significant portion of our coal reserves are controlled through leasing arrangements. Costs to obtain coal lands and leased mineral rights, including capitalized premining costs, are depleted using the units-of-production method based on tons produced utilizing only proven and probable reserves in the depletion base and are assumed to have no residual value. Premining costs include drilling, permitting, county and state filing fees and the initial overburden removal. Also, included in mineral rights are the costs to establish the related asset retirement obligations. The leases have primary terms ranging from 3 to 10 years and substantially all of the leases contain provisions that allow for automatic extension once mining commences and for as long as mining activity continues.

        Restricted cash and marketable securities.    As of December 31, 2009, and 2008 we had $11.3 million and $13.4 million of restricted cash. Cash and marketable securities are set aside as collateral pledged toward our asset retirement obligations and to secure certain other obligations. During the year ended December 31, 2008, we entered into debt-for-equity exchange transactions and as a result, the amounts held in escrow related to the $95 million long-term debt in the amount of $18.0 million, were released. Until the asset retirement obligations are relieved, or our other obligations are fulfilled, the cash will remain restricted.

        Patents.    All costs incurred to the point when a patent application is to be filed are expensed as incurred as research and development. Patent application costs, generally legal costs, thereafter incurred are capitalized and are included in other assets. The costs of defending and maintaining patents are expensed as incurred. Patents are amortized over the expected useful lives of the patents, which is generally 17 to 20 years for domestic patents and 5 to 20 years for foreign patents. Patent amortization expense, including amortization of existing patents, was $151,000, $142,000, and $129,000 in 2009, 2008, and 2007, respectively. We estimate amortization expense of approximately $106,000 for each of the years ending December 31, 2010, 2011 and 2012.

        Health care costs.    We are self-insured, subject to a stop-loss policy, for individuals and all participants as a group, for our employee's health care costs. The liability for outstanding medical costs

F-11

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

has been estimated based on historical claims and is included in accrued liabilities in our consolidated balance sheets.

        Asset retirement obligations.    We value all asset retirement costs, for which we have a legal obligation, and record all such costs as liabilities with an equivalent amount added to the asset cost and depreciated over an appropriate period or depleted using actual tons mined or actual tons produced. The liability is accreted over time by applying an interest method of allocation to increase the liability. We have identified legal retirement obligations related to our site near Gillette, Wyoming and our coal mines in Ohio.

        Exploration costs.    Mineral exploration costs are expensed as incurred. When it has been determined that it is economically feasible to extract coal and the permitting process has been initiated, the costs incurred to further delineate and develop the mine are considered premining costs and are included in construction in progress in our consolidated balance sheets. Once the overburden has been removed and production has commenced these capitalized costs are transferred to mineral rights on our consolidated balance sheets.

        Long-lived assets.    We evaluate long-lived assets based on estimated future undiscounted net cash flows or other fair value measures whenever significant events or changes in circumstances occur that indicate the carrying amount may not be recoverable. If that evaluation indicates that an impairment has occurred a charge is recognized to the extent the carrying amount exceeds the discounted cash flows or fair values of the asset, whichever is more readily determinable. In addition, we periodically capitalize certain costs related to investigating potential sites for future facilities. We evaluate the status of these potential sites and if any site has been abandoned or we anticipate that it will be abandoned, we write-off all associated costs.

        Revenue.    We recognize revenue when there is persuasive evidence of an arrangement, generally when an agreement has been signed, all significant obligations have been satisfied, the fee is fixed or determinable, and collection is reasonably assured. Any up-front fees received are deferred and recognized over the provision of specific deliverables as defined in the agreements. Deferred Reveune, including current portion, was $8.8 million and $6.9 million as of December 31, 2009 and 2008, respectively. The $8.8 million balance as of December 31, 2009 was primarily comprised of $6.7 million related to an agreement executed in 2004 to construct a potential K-Fuel plant and $1.9 million related to an agreement with a customer in our GreenCert segment. As our history related to customer relationships is limited, we may be required to change the estimated period over which we recognize our revenue as more information becomes available. Arrangements that include multiple deliverables are evaluated to determine whether the elements are separable based on objective evidence. If the elements are deemed separable, total consideration is allocated to each element and the revenue associated with each element is recognized as earned. If the elements are not deemed separable, total consideration is deferred and recognized ratably over the longer of the contractual period or the expected customer relationship period.

        We recognize revenue from coal sales at the time risk of loss passes to the customer, either at our shipping point or upon delivery, depending on contractual terms. When sales include delivery to the customer, transportation costs are billed by us to our customers. We had $8.5 million, $8.5 million and $8.7 million of transportation costs included in costs of sales and revenues for the years ended

F-12

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

December 31, 2009, 2008 and 2007, respectively. Ash disposal revenue is recognized when coal combustion bi-products are received at our ash disposal facility.

        Brokered coal.    We act as an agent in certain transactions involving the brokering of coal produced by others. As we generally do not take title to the coal or bear the risk of loss, we have recognized the net amount of profit related to the transactions in our consolidated statements of operations in mining revenue.

        Research and development.    Costs incurred to advance, test, or otherwise modify our proprietary technology or develop new technologies are considered research and development costs until such time as the modification or new technology is ready for protection through patent and are expensed when incurred. These costs are primarily comprised of costs associated with the operation of our laboratories, pilot plants and operations of certain of our subsidiaries, including salaries and wages, supplies, repair and maintenance, general office expenses and professional fees. Once patents are applied for, certain of these costs are capitalized as a cost of obtaining the patents.

        Accounting for Derivative Financial Instruments.    Derivatives may be embedded in financial instruments (the "host instrument"). Embedded derivatives are treated as separate derivatives when the economic characteristics and risks are not clearly and closely related to those of the host instrument, the terms of the embedded derivative are similar to those of a stand-alone derivative and the combined contract is not held for trading or designated at fair value. These embedded derivatives are measured at fair value and any subsequent changes are recognized in the statement of operations. We are required to make significant estimates and assumptions when fair valuing these derivatives. See Notes 7—Debt and Note 9—stockholders' Equity for further.

        Income taxes.    We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for future tax consequences. A deferred tax asset or liability is computed for both the expected future impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry-forwards. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized, based upon an assessment of both negative and positive evidence, in future tax returns. We have provided a full valuation reserve related to our substantial deferred tax assets. In the future, if sufficient evidence of our ability to generate future taxable income becomes apparent, we may reduce this valuation allowance, resulting in income tax benefits in our consolidated statement of operations. Tax rate changes are reflected in the period such changes are enacted.

        Advertising costs.    We recognize advertising expense when incurred.

        Accounting for stock grants, options and warrants.    We measure and recognize compensation expense for all stock grants, options and warrants granted to employees, members of our board of directors and consultants, based on estimated fair values. In 2009, we granted restricted stock awards that vest upon the achievement of certain market conditions (the price of our common stock).We estimate the fair value of share-based payment awards on the grant date. We use the Black-Scholes option pricing model to calculate the fair value of stock options. Restricted stock grants, without market conditions, are valued based upon the closing price of our common stock on the date of grant. In measuring and recognizing compensation expense, we are required to make estimates of the fair value of the related instruments and the period benefited. Related to the restricted stock grants

F-13

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

containing market conditions, we are required to make significant estimates and assumptions when fair valuing these awards including probabilities of our future stock prices, historical volatility and risk free interest rates. We use a Monte-Carlo fair value model run with many iterations to fair value these market vesting awards. For all grants, the fair value is recognized as expense and additional paid-in capital over the requisite service period, which is usually the vesting period, if applicable, in our consolidated financial statements.

        Net loss per common share.    Basic net loss per common share is based on the weighted-average number of common shares actually outstanding during each respective period and reduced by shares that are subject to a contingency.

        During the fourth quarter of 2005, we granted 2 million shares of restricted stock to three of our then executive officers, which were to immediately vest upon the attainment of certain performance or market criteria, but no later than the seventh anniversary of the date of the agreement. Such unvested shares were transferred to an escrow agent during the first quarter of 2006. As a result, such shares are reflected as outstanding in the consolidated financial statements. However, shares for which the vesting criteria were not attained are excluded from the net loss per share calculations due to the contingent status of the shares.

        On July 22, 2009, one of the executive officers referred to above transitioned his officer positions and board seat (s) to our current chief executive officer. As a result, 600,000 of the former officer's shares will fully vest at his election upon satisfaction of certain conditions. See further discussion in Note (10) Stock Options, Stock Grants and Employee Benefit Plans.

        On May 31, 2009, another of the executive officers referred to above retired from his position and the restricted shares never vested and were forfeited upon his retirement.

        On April 19, 2007, we ceased our relationship with one of the executive officers who held contingent shares. Pursuant to the terms of his employment agreement, he was entitled to acceleration of vesting with respect to 899,000 of the 1 million shares of unvested common stock he was awarded in connection with his employment agreement.

        The calculation of diluted net earnings per common share adds the weighted- average number of potential common shares outstanding to the weighted-average common shares outstanding, as calculated for basic loss per share, except for instances in which there is a net loss. Our total incremental potential common shares outstanding as of December 31, 2009, 2008 and 2007 were 30.0 million, 26.4 million, and 30.1 million, respectively, and are comprised of outstanding stock options, restricted stock grants, warrants to purchase our common stock and potential conversion of our convertible debt into common stock. All potential common shares outstanding have been excluded from diluted net loss per common share because the impact of such inclusion on a net loss would be anti-dilutive.

        Recent accounting pronouncements.    In August 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2009-05 ("ASU 2009-05"), "Measuring Liabilities at Fair Value," which updates ASC 820 (Topic 820, "Fair Value Measurements and Disclosures"). ASU 2009-05 addresses the impact of transfer restrictions on the fair value of a liability that is traded as an asset as an input to the valuation of the underlying liability, and clarifies when to make adjustments to fair value. ASU 2009-05 is effective for periods ending after August 26, 2009. The implementation of this standard did not have a material impact on our financial condition, results of operations or cash flows.

F-14

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

        In June 2009, the FASB issued the FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles (the "Codification"). The Codification became the single official source of authoritative, nongovernmental GAAP. The Codification did not change GAAP but reorganizes the literature. The Codification is effective for interim and annual periods ending after September 15, 2009; we adopted the Codification during the three months ended September 30, 2009.

        In May 2009, the FASB issued authoritative guidance included in ASC 855 "Subsequent Events" which incorporates the accounting and disclosure requirements related to subsequent events found in auditing standards into GAAP, effectively making management directly responsible for subsequent events accounting and disclosures. The guidance also requires disclosure of the date through which subsequent events have been evaluated. The guidance is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. We have adopted this pronouncement beginning with the interim period ended September 30, 2009 and it did not have an impact on our results of operations, financial position, or cash flows.

        In April 2009, the FASB issued authoritative guidance included in ASC 825 "Financial Instruments". This guidance required disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. The provisions included in ASC 825 "Financial Instruments" became effective on April 1, 2009. We are unable to estimate the fair value of our debt without incurring excessive costs because a quoted market price is not available, we have not developed the valuation model necessary to make the estimate, the market conditions have dramatically changed and the cost of obtaining an independent valuation would be excessive. The adoption of this pronouncement did not have a material impact on our financial statements. See Note 7—Debt for further details.

        In April 2009, the FASB issued authoritative guidance included in ASC 820 "Fair Value Measurements and Disclosures" that provides additional guidance for estimating fair value in accordance with ASC 820 "Fair Value Measurements and Disclosures" when the volume and level of activity for the asset or liability have significantly decreased and requires that companies provide interim and annual disclosures of the inputs and valuation technique(s) used to measure fair value. The guidance is effective for interim and annual reporting periods ending after June 15, 2009 and is to be applied prospectively. The adoption of this guidance did not have a material impact on our financial statements.

        In November 2008, the FASB ratified a guideline that clarifies whether a financial instrument for which the payoff to the counterparty is based, in whole or in part, on the stock of an entity's consolidated subsidiary is indexed to the reporting entity's own stock and therefore should not be precluded from qualifying for the first part of the scope exception included in ASC 815 "Derivatives and Hedging". The guidance is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The adoption of this pronouncement did not have a material impact on our financial statements.

F-15

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

        In June 2008, the FASB ratified the consensus reached by the guidance included in ASC 470 "Debt". Because of Issue 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments," and ASC 480 "Distinguishing Liabilities from Equity", conforming changes were made to Issue 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios." Issue 08-4 provides transition guidance for those conforming changes and is effective for financial statements issued after January 1, 2009. The adoption of this pronouncement did not have a material impact on our financial statements.

        In June 2008, the FASB issued guidance included in ASC 260 "Earnings Per Share" and became effective on January 1, 2009. This guidance provides that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends or dividend equivalents (whether paid or unpaid) are considered participating securities. Because such awards are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share retrospectively to all prior-period earnings per share computations. The adoption of this pronouncement did not have a material impact on our financial statements.

        In May 2008, the FASB issued authoritative guidance included in ASC 470 "Debt". This guidance requires issuers of convertible debt instruments that may be settled in cash upon conversion to account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. Issuers will need to determine the carrying value of just the liability portion of the debt by measuring the fair value of a similar liability (including any embedded features other than the conversion option) that does not have an associated equity component. The excess of the initial proceeds received from the debt issuance and the fair value of the liability component should be recorded as a debt discount with the offset recorded to equity. The discount will be amortized to interest expense using the interest method over the life of a similar liability that does not have an associated equity component. Transaction costs incurred with third parties shall be allocated between the liability and equity components in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively, with the debt issuance costs amortized to interest expense. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is not permitted. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

        In March 2008, the FASB issued authoritative guidance included in ASC 815 "Derivatives and Hedging" which enhances the disclosure requirements about derivatives and hedging activities. The guidance requires additional narrative disclosure about how and why an entity uses derivative instruments, how they are accounted for under ASC 815 "Derivatives and Hedging", and what impact they have on financial position, results of operations and cash flows. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2008. The adoption of this pronouncement did not have a material impact on our consolidated financial statements. However, we are required to provide additional disclosures related to our embedded derivatives.

        In December 2007, the FASB issued authoritative guidance included in ASC 805 "Business Combinations". The guidance establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, including goodwill, the

F-16

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

liabilities assumed and any non-controlling interest in the acquiree. The guidance also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of this pronouncement did not have a material impact on our financial statements.

        We adopted the provisions included in ASC 810 "Consolidations", effective January 1, 2009. The provision clarifies that a noncontrolling interest in a subsidiary is an ownership interest in a consolidated entity, which should be reported as equity in the parent's consolidated financial statements. ASC 810 "Consolidations" requires disclosure, on the face of the consolidated income statements, of those amounts of consolidated net income and other comprehensive income attributable to controlling and noncontrolling interests, eliminating the past practice of reporting amounts of income attributable to noncontrolling interests as an adjustment in arriving at consolidated net income. The standard requires the parent to attribute to noncontrolling interests their share of losses even if such attribution results in a deficit noncontrolling interest balance within the parent's equity accounts, and in some instances, requires a parent to recognize a gain or loss in net income when a subsidiary is deconsolidated. As of December 31, 2008 we had granted C-Lock shares to employees and others that, at that time, represented a 23.3% noncontrolling interest. During 2009 we notified the holders of our intention to reacquire C-Lock shares from certain former employees and a consultant for which the first payment was made in 2010. After repurchasing these shares, our non-controlling interest will be 8%.

        In connection with our adoption of the guidance included in ASC 810 "Consolidations", we recorded into our consolidated equity accounts the noncontrolling interests in C-Lock Technology, Inc. At December 31, 2008, the carrying amount of noncontrolling interests was zero, due to the accumulated net losses and the application of the guidance. We are not permitted to attribute losses incurred prior to the adoption of ASC 810 "Consolidations" to our noncontrolling interest. Under ASC 810 "Consolidations", we attribute losses to noncontrolling interest even if such attribution results in a deficit noncontrolling interest balance within our equity accounts.

        Recently Issued accounting pronouncements.    In January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures about Fair Value Measurements," which amends ASC Subtopic 820-10, "Fair Value Measurements and Disclosures," requiring new disclosures of significant transfers in and out of Levels 1 and 2, the reasons for the transfers, and separate reporting of purchases, sales, issuances and settlements in the roll forward of Level 3 activity. The new ASU also clarifies that fair value measurement disclosures should be provided for each class of assets and liabilities and disclosures also should be provided about valuation techniques and inputs used to measure fair value for recurring and nonrecurring fair value measurements. The disclosures are required for either Level 2 or Level 3 fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010 (including interim periods within those fiscal years). We are currently evaluating the impact, if any, on our financial statements.

F-17

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(1) Business and Summary of Significant Accounting Policies (Continued)

        In October 2009, the FASB issued Accounting Standards Update 2009-13, "Multiple-Deliverable Revenue Arrangements—a consensus of the EITF," ("ASU 2009-13") which amends ASC 605 (Topic 605, "Revenue Recognition"). This amended guidance addresses the determination of when individual deliverables within an arrangement may be treated as separate units of accounting and modifies the manner in which transaction consideration is allocated across the separately identifiable deliverables. The guidance is effective for fiscal years beginning on or after June 15, 2010, and early adoption is permitted. We are currently evaluating the impact, if any, on our financial statements.

        In October 2009, the FASB amended the accounting standards for revenue arrangements with software elements. The amended guidance modifies the scope of the software revenue recognition guidance to exclude tangible products that contain both software and non-software components that function together to deliver the product's essential functionality. The pronouncement is effective for fiscal years beginning on or after June 15, 2010, and early adoption is permitted. This guidance must be adopted in the same period an entity adopts the amended revenue arrangements with multiple elements guidance described above.

        In June 2009, the FASB issued authoritative guidance included in ASC 860 "Transfers and Servicing" which is effective for interim and annual fiscal periods beginning after November 15, 2009. This standard removes the concept of a qualifying special-purpose entity and removes the exception from applying ASC 810 "Consolidation". This standard modifies the financial-components approach used in ASC 860 "Transfers and Servicing" and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized. This standard also requires enhanced disclosure regarding transfers of financial interests and a transferor's continuing involvement with transferred assets. The adoption of this pronouncement will not have a material impact on our financial statements.

        In December 2009, the FASB issued ASU 2009-17, "Amendments to FASB Interpretation 46(R)," ("ASU 2009-17") revising authoritative guidance associated with the consolidation of variable interest entities. This revised guidance replaces the current quantitative-based assessment for determining which enterprise has a controlling interest in a variable interest entity with an approach that is now primarily qualitative. This qualitative approach focuses on identifying the enterprise that has (i) the power to direct the activities of the variable interest entity that can most significantly impact the entity's performance; and (ii) the obligation to absorb losses and the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This revised guidance also requires an ongoing assessment of whether an enterprise is the primary beneficiary of a variable interest entity rather than a reassessment only upon the occurrence of specific events. ASU 2009-17 was effective for us on January 1, 2010. We are in the process of evaluating the impact that this standard will have on our financial condition, results of operations or cash flows.

F-18

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(2) Property, Plant & Equipment, Construction in Progress and Mineral Rights and Mine Development

        Property, plant and equipment consisted of the following:

			December 31,
	Lives		2009			2008
	(in years)		(in thousands)
Mine machinery and equipment		3-15	$	21,429		$	18,919
Mine, land, buildings and improvements		10-15		10,108			14,110
Computer software and equipment		3-5		5,304			5,302
Office leasehold, improvements and equipment		3-10		4,741			4,660
Other		3-30		2,840			3,216
Total				44,422			46,207
Less accumulated depreciation				(25,762	)		(16,242	)
Property, plant and equipment, net of accumulated depreciation			$	18,660		$	29,965

        Depreciation and depletion expense was $9.8 million, $8.9 million, and $8.3 million, in 2009, 2008 and 2007, respectively. Mine, land, buildings and improvements include $1.6 million of land, which is not depreciated.

        We transferred $7.6 million, $10.5 million and $13.7 million from construction in progress to property plant and equipment during the years ended December 31, 2009, 2008 and 2007, respectively. During the year ended December 31, 2007, we transferred $846,000 from construction in progress to mineral rights, increased property plant and equipment in the amount of $2.6 million for leasehold improvements related to our new office space and transferred $18.6 million from construction in progress to assets held for sale.

        Property, plant and equipment includes $628,000, $1.1 million and $1.9 million of accounts payable and other liabilities as of December 31, 2009, 2008 and 2007, respectively.

        Construction in progress consisted of the following:

		December 31,
		2009		2008
		(in thousands)
Future plant sites and equipment		$	7,505	$	6,805
Mine and site improvements			860		1,166
Mining equipment refurbishment			1,508		3,436
GreenCert technology development			4,955		2,400
Other			2,467		3,895
	Total construction in progress	$	17,295	$	17,702

        Total construction in progress includes $3.1 million, $2.0 million and $882,000 of accounts payable and other costs as of December 31, 2009, 2008 and 2007, respectively.

F-19

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(2) Property, Plant & Equipment, Construction in Progress and Mineral Rights and Mine Development (Continued)

        Mineral rights are comprised of leases and mine development costs from the acquisition of Buckeye. Costs are capitalized during the premining phase and are depleted using the units-of-production method based on actual tons mined.

Impairments

        During the year ended December 31, 2009, we impaired $20.1 million related to certain assets in our mining operations and $413,000 of leasehold improvements related to our unused corporate office space. We are attempting to sublease this unused office space.

        On March 19, 2008, we decided to suspend operations at our Fort Union plant. We recorded asset impairment charges of $93.5 million, $14.0 million and $1.7 million related to Property, Plant and Equipment, Construction in Progress, and mineral rights respectively associated with the Fort Union plant as of December 31, 2007. In addition, in 2007 we impaired $3.6 million of capitalized costs related to projects that we abandoned and/or replaced with more cost effective projects and $2.1 million of capital costs related to a previously announced future potential project with a major utility.

Asset Retirement Obligation

        Our asset retirement obligations relate to our surface and deep mines in Ohio, and the site on which our Fort Union plant is located. The following table reconciles the change in the asset retirement obligation during the year ended December 31, 2009:

		Changes in Asset Retirement Obligations
		(in thousands)
Balance at January 1, 2009		$	6,505
	Liability incurred		—
	Liability settled		—
	Accretion		364
Balance at December 31, 2009		$	6,869

        We allocate asset retirement costs to the underlying assets based on the fair value using an expected cash flow approach, in which multiple cash flow scenarios are used to reflect a range of possible outcomes and a credit-adjusted risk-free rate. The liabilities are then accreted over time by applying an interest method of allocation.

Assets Held for Sale

        In June 2006, we entered into an agreement to purchase a 700,000 pound per hour Circulating Fluidized Bed boiler island. In March 2007, we decided to sell this boiler and classified the costs associated with the boiler as assets held for sale. Effective January 31, 2008, we and the fabricator of the boiler island agreed to terminate the contract and as a result, all future financial obligations were

F-20

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(2) Property, Plant & Equipment, Construction in Progress and Mineral Rights and Mine Development (Continued)

also terminated. As of December 31, 2008, we computed a fair value analysis using the following: (i) the probabilities of the sale of the boiler at the current recorded value; (ii) the probabilities of selling the boiler at less than its carrying value; and (iii) the probabilities of not selling the boiler. As a result of the analysis of the probabilities, we calculated an estimated fair value of the boiler and recorded an impairment charge of $18.6 million in our Technology segment for the year ended December 31, 2008.

(3) Restricted Cash and Marketable Securities

        The following table represents the components of our restricted cash and marketable securities:

		December 31,
		2009		2008
		(in thousands)
Collateral:
	Environmental remediation obligations		11,339		12,074
	Other		—		1,370
	Total restricted cash	$	11,339	$	13,444

        As of December 31, 2009 and December 31, 2008, our balance sheet reflects $0 and $1.8 million of restricted marketable securities. In February 2009, we entered a reverse repurchase transaction for $1.8 million of our auction rate security which had a $2.0 million par value. In March 2009, we liquidated the auction rate security at $2 million, resulting in a gain of $200,000, which has been recorded in Other Income for the twelve months ended December 31, 2009.

        In July 2007, pursuant to our $95 million long-term debt offering, we deposited $18.0 million of the net proceeds in an escrow account. On September 30, 2008, such funds were released from escrow. See further discussion at Note 8—Debt.

(4) Other Assets

        Included within other assets are deferred royalty costs, totaling $1.4 million as of December 31, 2009 and 2008; patents totaling $1.1 million and $1.0 million as of December 31, 2009 and 2008; and $0 and $1.8 million of auction rate securities as of December 31, 2009 and 2008, respectively

        The deferred royalty costs associated with the issuances of licenses for K-Fuel represent the licensing fees paid to the Koppelman estate. Such costs are amortized over the same period as the deferred revenue related to the underlying contracts. In 1996, we entered into a royalty amendment agreement with Mr. Koppelman, or subsequent to his death, the Koppelman estate, that reduced the cap for payments by $500,000 to $75.2 million and set the royalty percentage at 25% of our worldwide licensing and royalty revenue, as defined in the agreement. Mr. Koppelman provided us an indemnification against potential claims made by certain parties if we licensed the technology. We paid Mr. Koppelman a total of $500,000 pursuant to the agreement as a prepayment. The $500,000 has no specified expiration date and recognition is solely dependent upon the issuance of licenses. We are amortizing the $500,000 payment as license revenue is generated. In addition, Mr. Theodore Venners,

F-21

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(4) Other Assets (Continued)

our former founder, is entitled to a 50% share of net royalties paid to the Koppelman estate. As of December 31, 2009 and 2008, there is $73.0 million remaining under the cap. Also, see discussion in Note 12—Commitments and Contingencies—Royalties and Other Rights.

(5) Assets and Liabilities Measured at Fair Value

        Fair Value Measurements and Disclosures establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•

Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement.

        A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2009

        The following table presents information about our net assets (liabilities) measured at fair value on a recurring basis as of December 31, 2009, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value.

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring:
2007 Notes embedded derivatives	$	7	$	—	$	—	$	7
Put Warrant liability	$	1,265		—		—	$	1,265
2009 Notes embedded derivatives	$	705	$	—	$	—	$	705

F-22

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(5) Assets and Liabilities Measured at Fair Value (Continued)

        The following table represents the change in fair value for the year ended December 31, 2009:

	Balance at December 31, 2008		Settlement		Unrealized (Loss) gain			Realized gain		Balance at December 31, 2009
	(in thousands)
2007 Notes embedded derivatives(1)	$	25		—	$	(8	)	$	—	$	7
Auction rate securities(2)		1,800		2,000		—			200		—
Put Warrant liability(1)		—		—		1,000			—	$	1,265
2009 Notes embedded derivatives		—		—		1,000			—	$	705

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2008

        The following table presents information about our net assets measured at fair value on a recurring basis as of December 31, 2008, and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value.

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Recurring:
2007 Notes embedded derivatives	$	25	$	—	$	—	$	25
Auction Rate Securities	$	1,800		—	$	—	$	1,800

        The following table represents the change in fair value for the year ended December 31, 2008:

	Balance at December 31, 2007		Transfers		Realized loss			Unrealized loss			Balance at December 31, 2008
	(in thousands)
Embedded derivatives(1)	$	1,470		—	$	(511	)	$	(934	)	$	25
Auction Rate Securities(2)	$	—	$	2,000	$	—		$	(200	)	$	1,800

(1)

We are required to make significant estimates and assumptions when fair valuing these derivatives including probabilities of change in control, probabilities of equity offerings, probabilities of stock option grants and probabilities of our future stock prices. We use a Monte-Carlo fair value model run with thousands of iterations to fair value these derivatives. In addition, we use lattice models and black scholes models. Our embedded derivatives are recorded in other long-term assets and other long-term liabilities with the fair value adjustment for the unrealized and realized gains/

F-23

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(5) Assets and Liabilities Measured at Fair Value (Continued)

losses recorded in total other (Expense)/ Income on our consolidated balance sheet and our consolidated statements of operations, respectively.

(2)

We are required to make significant estimates and assumptions when fair valuing auction rate securities. Our estimate is based upon consideration of various factors including the overall credit market, the issuer and guarantor credit ratings, credit enhancement structures, projected yields, discount rates and terminal periods. On February 17, 2009, we entered a Reverse Repurchase Transaction for our $1.8 million auction rate security. Through a reverse repurchase transaction, we are able to borrow up 90% of the par value of the auction rate security with interest rate comparable to the interest earned on the auction rate security.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

        Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. During the year ended December 31, 2009, we were required to test certain of our mining assets for recoverability based on future cash flows. As a result of this recoverability test, we wrote down certain mining assets by $20.1 million. We estimated the fair value of these assets based on a cash flow approach using significant unobservable inputs (Level 3). Additionally, during the year ended December 31, 2009, certain leasehold improvements were required to be measured at fair value in conjunction with the abandonment of a portion of our corporate office space. The leasehold improvements related to the unused office space had a net book value of $413,000 and were written down to an estimated value of zero, resulting in an impairment charge of $413,000. We estimated the fair value of these assets based on an income approach using significant unobservable inputs (Level 3). In addition, we recorded a loss associated with the abandonment of our unused office space in the amount of $1.0 million. We estimated the fair value of the loss based on an income approach using significant unobservable inputs (Level 3).

(6) Accrued liabilities

        Accrued liabilities consist of:

		December 31,
		2009		2008
		(in thousands)
Employee-related		$	2,185	$	2,709
Accrued interest on the 2007 Notes and 2009 Notes			1,158		1,345
Services or goods received, not invoiced			4,722		2,351
Taxes, other than income taxes			735		471
Other			29		44
	Total accrued liabilities	$	8,829	$	6,920

        Employee-related principally includes paid time off and payroll. Services or goods received not invoiced primarily consist of goods and services rendered at our corporate headquarters, Buckeye and

F-24

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(6) Accrued liabilities (Continued)

GreenCert operations. Taxes, other than income taxes represent various accrued taxes including property, use and franchise taxes.

(7) Debt

2007 Notes due 2012

        On July 30, 2007, we completed the sale of $95.0 million of our Convertible Secured Notes due 2012 ("2007 Notes") that were resold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. During the year ended December 31, 2008, we entered into multiple individually negotiated agreements with certain existing noteholders to exchange $67.1 million in aggregate principal amount of the 2007 Notes, for an aggregate of 48.6 million shares of our common stock and $3.5 million in cash, which was paid on October 1, 2008. We closed all transactions and issued all the shares by December 2008, except for a portion of one of the transactions. During the year ended December 31, 2009, we closed the remaining portion of this transaction and issued an aggregate of 9.3 million shares, representing $12.5 million in aggregate principal amount of the 2007 Notes. In addition, during the year ended December 31, 2009, we issued an additional 333,333 shares pursuant to another individually negotiated agreement, representing $500,000 principal amount of the 2007 Notes.

        Prior to each exchange of 2007 Notes for common stock, each of the converting noteholders agreed to release each guarantee issued pursuant to the indenture with respect to such 2007 Notes being exchanged such that, at the time of each exchange, such 2007 Notes being exchanged were not guaranteed securities and were solely securities of Evergreen Energy. Further, we received the requisite consents to amend the indenture and in compliance with the terms and provisions of the indenture, we, each of the guarantors and the trustee, executed a supplemental indenture. The supplemental indenture amends the indenture to eliminate substantially all of the restrictive covenants, to release the security interests in the collateral securing the 2007 Notes, which included the release of $18.0 million of cash that was held in escrow and to make certain other conforming changes to the indenture. For the period ended December 31, 2008, we recognized a $6.1 million gain, after reduction for transaction costs and the non-cash write off of debt issue costs and related embedded derivatives associated with these exchange transactions.

        We pay interest semi-annually at a rate of 8.00% per annum, due on February 1 and August 1 of each year, beginning on February 1, 2008. The 2007 Notes mature on August 1, 2012.

        Holders may convert their 2007 Notes into a number of shares of common stock or cash or a combination thereof, at our option, at the applicable conversion rate on any day up to and including the business day prior to the maturity date. The initial conversion rate for the 2007 Notes is 190.4762 shares of our common stock per $1,000 principal amount of 2007 Notes, equivalent to a conversion price of approximately $5.25 per share, subject to adjustment upon the occurrence of certain events. If we undergo certain fundamental changes, as defined in the indenture, the holders of the 2007 Notes may require us to repurchase the 2007 Notes in cash at 100% of the principal amount plus any accrued and unpaid interest. Additionally, upon a fundamental change, the holders, if they elect to convert, will receive a conversion rate adjustment that will require us to increase the number of shares based on our stock price and the passage of time.

F-25

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(7) Debt (Continued)

        At issuance, the 2007 Notes were senior secured obligations guaranteed by our 100% owned subsidiary, Evergreen Operations, LLC, and its subsidiaries, and secured by a first-priority security interest in: (i) all of our equity interest in Evergreen Operations, LLC; (ii) an escrow account established in connection with the offering; and (iii) our and each of Evergreen Operations, LLC and its subsidiaries' bank, investment, brokerage or similar accounts holding cash and cash equivalents, subject to certain exceptions. Our intellectual property rights relating to the K-Fuel refined coal process are held by a wholly owned subsidiary, which is not a subsidiary of Evergreen Operations, LLC and consequently, none of these intellectual property rights were included in the collateral securing the 2007 Notes. Additionally, our subsidiaries C-Lock Technology, Inc. and Evergreen Energy Asia Pacific Corp. were also excluded from the collateral securing the 2007 Notes. The 2007 Notes contained covenants, which among other things, limited our ability and the ability of our subsidiary guarantors to incur additional debt or issue certain preferred shares; pay dividends on or make distributions in respect to our capital stock; create liens on certain assets to secure debt; and sell certain assets. The collateral and restricted covenant provisions have been amended by the supplemental indenture as described above.

        If the closing price of our common stock for at least 20 trading days in any 30 consecutive trading day period is at least the conversion price, or the reduced interest rate threshold, then the initial interest rate will be permanently decreased to 5.00%. In addition, if the closing price of our common stock for at least 20 trading days in any 30 consecutive trading day period is at least 130% of the then applicable conversion price, or the collateral release threshold, then the security will be released, and the 2007 Notes will become automatically subordinated. At such time as the security is released, we may redeem the 2007 Notes at a redemption price payable in cash equal to 100% of the principal amount, plus any accrued and unpaid interest and an additional "coupon make whole payment." The "coupon make-whole" amount per $1,000 principal amount of 2007 Notes will be equal to the present value of all remaining scheduled payments of interest on each 2007 Note to be redeemed through the maturity date. The provisions relating to the collateral release threshold have been amended by the supplemental indenture as described above.

        We incurred $6.0 million of debt issuance costs relating to our 2007 Notes offering. We are amortizing the debt issuance costs using the effective interest rate method over the life of our debt. The portion of the debt issue costs related to the debt exchanged for equity were written-off by reducing the gain. Debt issue costs were $1.0 million and $1.3 million as of December 31, 2009 and 2008, respectively.

Derivatives

        At issuance, we evaluated the 2007 Notes and concluded that our conversion adjustment upon the occurrence of a fundamental change is an embedded derivative that needs to be bifurcated for valuation purposes. Additionally, we have concluded that the potential decrease in our interest rate based on our common stock price is also an embedded derivative that needed to be bifurcated. Both of these derivatives were determined to not be clearly and closely related to the host instrument. We used a fair value modeling technique to value these derivatives and recorded $3.2 million of long-term assets and a corresponding increase in long-term debt in our consolidated balance sheets at the date of issue of the 2007 Notes. Furthermore, we are required to fair value these derivatives at each reporting period

F-26

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(7) Debt (Continued)

and, as a result, we recorded $8,000, $934,000 and $1.7 million of other expense during the years ended December 31, 2009, 2008, and December 31, 2007 by decreasing the net derivative assets contained within other long-term assets to $6,000, $25,000 and $1.4 million in our consolidated balance sheet at December 31, 2009,2008 and 2007 respectively.

2009 Notes

Original terms

        In March 2009, we executed a Senior Secured Convertible Note Agreement ("2009 Notes") which provides for the issuance of up to $15 million in aggregate principal amount of 10% Senior Secured Promissory Notes in three $5 million tranches. The first $5 million tranche was funded in March 2009, the second $5 million tranche was funded in April 2009 and the third tranche was funded July 2009. The 2009 Notes are reflected in short-term debt in our condensed consolidated balance sheet. These 2009 Notes bear interest at a rate of 10% per annum beginning on the funding date of each tranche through December 20, 2009, which was prepaid at the time the 2009 Notes were issued and was non-refundable. We prepaid $375,000 of interest related to the closing of the first tranche and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30. In connection with the second tranche, we prepaid $351,000 of interest and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30. In connection with the third tranche we prepaid $225,000 of interest and issued 219,000 warrants to purchase our common stock at an exercise price of $1.30. We recognized $480,000 of debt issuance costs during the year ended December 31, 2009 related to the warrants.

        The following table summarizes the assumptions used to value the warrants issued for the three tranches:

		Tranche 1			Tranche 2			Tranche 3
Weighted-average:
	Risk free interest rate		1.7	%		2.4	%		2.3	%
	Expected option life (years)		5			5			5
	Expected volatility		91	%		81	%		81	%
	Expected dividends		None			None			None

        The outstanding principal balance was due and payable on the earliest of (i) December 20, 2009, (ii) the date all obligations and indebtedness are accelerated in accordance with the provisions under the purchase agreement, and (iii) a sale of the capital stock, or the assets secured, of Buckeye (the "Maturity Date"). Prior to the Maturity Date, holder may elect to convert its 2009 Notes into a number of fully paid and non-assessable shares of Evergreen's common stock, par value $0.001 per share at the applicable conversion rate on any day to and including the business day prior to the Maturity Date, subject to adjustment upon the occurrence of certain events. The initial conversion rate for the 2009 Notes is equivalent to a conversion price of $3.65 per share of our common stock.

        Provisions in the 2009 Notes prohibit Buckeye from transferring funds to Evergreen Energy in the form of cash dividends, loans or advances. The net assets that are subject to these restrictions are $10.7 million as of December 31, 2009. Buckeye may, however, repay intercompany loan balances. As of December 31, 2009, the amount of funds Buckeye was restricted from transferring was $10.7 million, net of an intercompany loan balance of $12.6 million.

F-27

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(7) Debt (Continued)

Derivatives

        We are required to adjust the conversion price upon the occurrence of a future issuance of stock or warrants at a price less than the 2009 Notes conversion price. This potential adjustment to the conversion price was concluded to be an embedded derivative that needed to be bifurcated for valuation purposes. We used a fair value modeling technique to value this derivative and recorded $1.7 million of short-term liability and a corresponding decrease in short-term debt in our consolidated balance sheets. Furthermore, we are required to fair value the derivative at each reporting period and, as a result, we recorded $1.0 million of other income during the year ended December 31, 2009 by decreasing the net derivative liability contained within other short-term liability to $705,000 in our consolidated balance sheet at December 31, 2009

Extension

        On December 21, 2009, we restructured and extended the terms of our 2009 Notes extending the maturity date to the earlier of the sale of Buckeye or June 30, 2010. As part of the restructuring, the stated principal amount has been increased by $2.25 million representing the 15% exit fee, pursuant to the original terms of the 2009 Notes, as of that date, bringing the aggregate principal amount of 2009 Notes to $17.25 million. Interest shall be due and payable at maturity of the 2009 Notes and the rate remains 10% per annum. The restructuring agreement also retains an exit fee in the amount of 15% of the par value of the 2009 Notes upon the payment of the 2009 Notes.

        Per the terms of the restructured agreement, we were required to raise additional common equity on or before January 30, 2010, utilizing a portion of the proceeds to pay a $1.8 million cash extension fee due to our lenders. Additionally, we were required to execute a binding agreement for the sale of Buckeye on or before March 31, 2010. The failure to complete either of these items would be deemed to be an "Event of Default" under the terms of the 2009 Notes. On January 26, 2010, we raised approximately $8.7 million of gross proceeds from our registered direct offering and paid the $1.8 million extension fee. We are required to pay not less than 30% of the proceeds of any subsequent common equity offering to reduce the outstanding balance of the 2009 Notes. Upon maturity, the repayment amount will be equal to 115% of the principal amount outstanding, which represents $2.6 million, plus accrued and unpaid interest. In addition the extension terms required us to raise additional common equity by January 15, 2010, or the repayment amount will be increased by $350,000. We incurred this additional $350,000 because our equity raise was consummated after January 15, 2010.

        In addition, we were required to continue to retain an investment banker to assist us in the sale of assets of Buckeye and provide semi-monthly updates to the lender regarding the status of the sale of Buckeye, retain a consultant of the lender's choosing and grant reasonable access to the site as well as the sales process. On March 12, 2010, we signed an agreement with Rosebud to sell certain assets of Buckeye. We anticipate the sale to be finalized April 2010.

        The 2009 Notes are secured by the assets of Buckeye pursuant to a security agreement dated as of March 20, 2009. The security agreement provides holder with a security interest in, but not limited to, all of Buckeye's property, equipment and fixtures, accounts, negotiable collateral, cash, and cash equivalents, subject to certain exceptions. The security interest created in the collateral will be first priority, subject to the permitted encumbrances provided in the Security Agreement, and such first

F-28

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(7) Debt (Continued)

priority security interest will be perfected to the extent such security interest can be perfected by the filing of a financing statement. The security agreement also provided that on or before April 3, 2009, Buckeye shall deliver to holder a first priority mortgage on each fee interest in real property now or hereafter owned by Buckeye. Further, in order to induce holder to extend credit to the Companies, Evergreen Operations, LLC ("Evergreen Ops") entered into a pledge agreement with Investor dated March 20, 2009. The pledge agreement provides that Evergreen Ops will pledge to holder all of its common stock in Buckeye, and in an event of default, as defined in the purchase agreement, holder's rights under the pledge agreement include, but are not limited to, the right to vote the pledged shares, or transfer such shares, in whole or in part, into its or its nominee's name. The pledge agreement will survive until our obligations are met and the purchase agreement is terminated.

Interest

        We paid $2.7 million, $7.6 million and $0 of interest for the years ended December 31, 2009, 2008 and 2007, respectively. We capitalized $1.0 million, $0.7 million, and $0 million of interest for the years ended December 31, 2009, 2008 and 2007, respectively.

(8) Convertible Preferred Stock

        On October 21, 2009, we completed the sale of an aggregate offering price of $6,973,380 of Series B Convertible preferred stock and detachable warrants. The preferred stock accrues dividends at the rate of 5.66% per annum, payable semi-annually on June 30 and December 31, commencing on December 31, 2009 and on each conversion date until October 21, 2014. Each share of preferred stock has a stated value of $1,000 per share. The preferred stock is convertible into the number of shares of common stock, $.001 par value determined by dividing the stated value of the preferred stock by the conversion price per share. The conversion price per share is $.6025, subject to adjustment under certain circumstances, including events of default under the preferred stock. Upon an event of default, the holders of the preferred stock may require us to redeem the preferred stock at an amount equal to, at a minimum, 130% of the stated value. The certificate of designation includes a provision under which we deposited with an escrow agent $1,973,380 of the gross proceeds of the offering. If the preferred stock was converted prior to October 21, 2014, the escrow amount will be used to pay to the holder, upon conversion, an amount equal to $282.99 per $1,000 of stated value converted, less the amount of dividends paid prior to the conversion date. All but two of the preferred shares were converted to common stock in the fourth quarter of 2009 and substantially all the escrow deposit was paid to the holders as a dividend. Upon the conversion of the preferred shares, we issued 11,571,403 of our common stock. The warrants are exercisable for an aggregate of 5,787,037 shares of common stock, at an exercise price of $.648 per share, subject to certain adjustments. The warrants are exercisable immediately and have a term of exercise equal to five years. The warrants also include a cashless exercise provision. The warrants are not redeemable by us.

        The detachable warrants issued in the convertible preferred stock agreement contain certain provisions, such as a contingent cash redemption feature or adjustments to the exercise price of the warrant upon the occurrence of a change of control. These features were concluded to result in the warrants being recorded as liabilities. We used a fair value modeling technique to value this put warrant liability and recorded $2.3 million of long-term liability in our consolidated balance sheet at the

F-29

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(8) Convertible Preferred Stock (Continued)

date of the transaction. Furthermore, we are required to fair value this put warrant liability at each reporting period and, as a result, we recorded $1.0 million of other income during the year ended December 31, 2009 by decreasing the fair value of this put warrant liability.

(9) Stockholders' Equity

        During 2002, we entered into a series of transactions with three investor groups whereby we issued a total of 6.8 million shares of our common stock and 14.4 million warrants. The investors have certain rights pursuant to an investor rights agreement, including the right for one group to select two persons to serve on our Board of Directors. As of December 31, 2009, these two positions were not filled. This provision remains in force until the investors hold less than 400,000 shares of our common stock. During 2005, we renegotiated the investor rights agreement executed in connection with the issuance of the shares in 2002 to provide us greater flexibility in constructing and operating plants. Subsequent to the renegotiation, we and the investors have the following rights:

•

One investor group continues to have the right to select two persons to serve on our Board of Directors;

•

All investors may develop or participate, with up to a 15% interest, in the greater of K-Fuel commercial projects with an annual output capacity of 50 million tons per year or six commercial plants. Such right will not be in effect until we have plants in operation or have binding contracts to construct plants for which the aggregate designed or projected annual output is at least 25 million tons per year;

•

We can participate in projects developed by the investors, other than in India, up to a 50% interest;

•

The investors retain the right to develop in India as long as certain conditions are met; and

•

The investors are obligated to pay certain royalty and license fees for these plants, if constructed.

        Except for the right to select persons to serve on our Board of Directors all other rights expire 20 years after the 25 million ton annual capacity threshold is reached or earlier, if the investors exercise their rights to 50 million tons of annual capacity.

Stockholder Rights Plan

        On December 4, 2008, we entered into a rights agreement. In connection with the adoption of the rights agreement, on December 2, 2008, the Board of Directors declared a dividend distribution of one right ("Right") for each outstanding share of our common stock on December 19, 2008. The Rights generally become exercisable only in the event that an acquiring party accumulates 15% or more of our outstanding common stock. Each Right, when exercisable, entitles the registered holder to purchase one-thousandth of one share of Series A Junior Participating Preferred Stock ("Series A Preferred Stock") at a price of $4.00 per one-thousandth share (the "Purchase Price"), subject to adjustment. If this were to occur, subject to certain exceptions, each Right (except for the Rights held by the acquiring party) would allow its holder to purchase common stock with a value equal to twice the exercise price of the Right. In the event that, after an acquiring party has accumulated 15% or more of

F-30

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(9) Stockholders' Equity (Continued)

our outstanding common stock, we are acquired in a merger or other business combination transaction or 50% or more of its assets or earning power are sold, each unexercised Right (except for the Rights held by the acquiring party) would thereafter allow its holder to purchase stock of the acquiring company (or our common stock if it is the surviving company to the transaction) with a value equal to twice the purchase price of the Right. If the Rights were fully exercised, the shares issued would cause substantial dilution to the acquiring party or the shareholders of the acquiring company. The Rights Agreement provides a period of time during which we may redeem the Rights, in whole, but not in part, at a price of $0.001 per Right, such that this period will end on the earlier of (i) the tenth business day following the date a person or group becomes the beneficial owner of 15% or more of the common stock or (ii) the final expiration date of the Rights, which is December 19, 2018.

(10) Stock Options, Stock Grants and Employee Benefit Plans

        We have five qualified stock plans, under which 12.5 million shares were reserved and 2.4 million shares are available for grant as of December 31, 2009. Pursuant to these plans we granted stock options, restricted stock and stock appreciation rights to directors, employees and outside consultants. All but one of the five qualified plans has been registered with the Securities and Exchange Commission. We have also issued stock related to various compensation and fee agreements with certain employees that were not issued from our five plans. These grants were made pursuant to certain stock exchange rules. The non-plan awards are generally registered with other registration statements that we periodically file. The five qualified stock plans and the non-plan awards are collectively referred to as "the plans."

        These plans are administered by the Compensation Committee of our Board of Directors, (Committee), which has the authority to determine the specific terms of awards under these plans, including exercise price and vesting term, subject to certain restrictions of the Internal Revenue Code regarding incentive stock options. The Committee can accelerate the vesting of an outstanding award at its sole discretion. Certain of the plans contain provisions requiring the acceleration of vesting of all outstanding awards in the event of a change in control, as defined in those plans. In addition, certain employee grants per the individual grant agreements contain provisions that accelerate the vesting of unvested outstanding awards upon a change in control. Stock options granted under the plans generally expire not more than ten years from the date of grant.

        Share-based compensation expense recognized during the current period is based on the value of the portion of share-based payment awards that are ultimately expected to vest, assuming estimated forfeitures at the time of grant. Historically, the majority of option grants outstanding were to executives, consultants and to our former founder. We have estimated the forfeiture rate on each of these grantee groups based upon historical data. In the fourth quarter of 2005, we started granting restricted shares to non-executive employees. We have based the forfeiture rate for this grantee group on the historical data of the executives, as we do not have sufficient historical data for non-executive employees. Lastly, during the fourth quarter of 2005, we granted restricted stock awards to certain of our executive officers, as further described below, which contain accelerated vesting provisions. Our estimate of forfeitures for these grants is that they all will vest and, as a result, we have not reduced our expense by estimated forfeitures. Total non-cash compensation expense was $5.7 million,

F-31

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

$6.3 million and $19.6 million for the years ended December 31, 2009, 2008 and 2007, respectively, which are primarily reflected in general and administrative expenses.

Stock options

        The following table summarizes the assumptions used to value stock options granted in 2009, 2008 and 2007:

		Year Ended December 31,
		2009			2008			2007
Weighted-average:
	Risk free interest rate		2.28	%		3.11	%		4.50	%
	Expected option life (years)		6.04			8.4			3.0
	Expected volatility		88	%		72	%		63	%
	Expected dividends		None			None			None

        We use the Black-Scholes option-pricing model to value our outstanding stock options. The Black-Scholes model requires the use of a number of assumptions, including the volatility of our stock price, a weighted average risk-free interest rate, and the weighted average expected life of the options. Generally, our option grants to non-employee board members vest immediately and expire on the third anniversary of the date of grant. As we do not pay dividends, the dividend rate variable in the Black-Scholes model is zero. The volatility assumption is based on the historical weekly price data of our stock over a period equivalent to the expected life of the options. We evaluated whether there were factors during the period which were unusual and which would distort the volatility figure used to estimate future volatility and concluded that there were no such factors. The risk-free interest rate assumption is based upon the note principal U.S. Treasury Strips rates determined at the date of grant. The expected life of the stock options represents the life of the option up to the expiration date. This is based upon an analysis of the historical exercise pattern of our employees and directors.

        On June 24, 2009, the Board of Directors appointed Thomas H. Stoner, Jr. as President and Chief Executive Officer. In connection with his employment, Mr. Stoner was granted options to purchase 500,000 shares of common stock at an exercise price of $0.96 per share. The options fully vested on June 24, 2009 and expire on June 24, 2014. All of the options are considered inducement options as defined by the NYSE Arca and are not issued pursuant to a plan.

        Stock options granted under the plans to employees generally vest from three to five years from the grant date until fully vested and generally expire ten years from grant date. Stock options granted to directors usually vest 100% on date of grant and expire three years from the date of grant. The majority of stock options granted during the three years ended December 31, 2009, 2008, and 2007, were at exercise prices that were equal to or greater than the fair market value of our common stock

F-32

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

on the date of grant. The following table summarizes our stock option activity, including both plan and non-plan options, for the three-year period ended December 31, 2009:

		Years Ended December 31,
		2009					2008					2007
		Total			Weighted- Average Exercise Price Per Share		Total			Weighted- Average Exercise Price Per Share		Total			Weighted- Average Exercise Price Per Share
		(shares in thousands)
Outstanding, beginning of period			2,892		$	7.51		2,726		$	9.26		4,044		$	10.86
	Granted		2,123			0.87		889			1.80		82			7.36
	Exercised		—			—		—			—		—			—
	Expired and forfeited		(1,917	)		7.13		(723	)		7.30		(1,400	)		13.64
Outstanding, end of period			3,098		$	3.20		2,892		$	7.51		2,726		$	9.26
Options exercisable and options expected to vest as of December 31, 2009			2,834		$	3.34
Options exercisable, end of period			2,390		$	3.37

        Plan and non-plan stock options outstanding and exercisable as of December 31, 2009 are summarized below:

	Stock Options Outstanding						Stock Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
	(in thousands)						(in thousands)
$0.01 - $3.00		2,541		4.4	$	1.15		1,893	$	1.09
$3.01 - $6.00		62		0.5		3.90		62		3.90
$6.01 - $9.00		145		1.2		7.93		145		7.93
$9.01 - $12.00		—		—		—		—		—
$12.01 - $15.00		50		2.0		12.88		50		12.88
$15.01 - $18.71		300		2.2		16.53		240		16.53
		3,098						2,390

F-33

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

        The following table summarizes the fair value of our stock option activity, including both plan and non-plan options, for non-vested option shares during the year ended December 31, 2009:

	Total			Weighted- Average Grant Date Fair Value
	(shares in thousands)
Non-vested, beginning of period		737		$	6.49
Granted		2,123			0.87
Vested		(1,758	)		2.13
Expired and forfeited		(395	)		2.70
Non-vested, end of period		707		$	2.61

        The total intrinsic value of options exercised is the difference between the exercise price of the option and the closing price of our common stock on the exercise date. No options were exercised during the years ended December 31, 2009, 2008 or 2007.

        The aggregate intrinsic value of stock options is the difference between our closing stock price on December 31, 2009 and the exercise price multiplied by the number of options. The majority of our outstanding options, exercisable options and exercisable and expected to vest options had exercise prices greater than the closing price of our common stock at December 31, 2009. As a result, the options had no aggregate intrinsic value at December 31, 2009.

	Years Ended December 31,
	2009		2008		2007
	(in thousands except per share amounts)
Weighted average per share grant date fair value	$	0.87	$	1.80	$	7.36
Total fair value	$	3,747	$	2,912	$	4,816
Total unrecognized compensation expense	$	435

        Total unrecognized compensation expense is expected to be recognized over a weighted average period of 1.1 years.

Restricted Stock

        Restricted stock grants to certain executive officers contain accelerated vesting criteria and are more fully described below. Restricted stock awards to employees under the plans contain either time, time and performance or market vesting criteria. These grants usually vest over a three to five year period with 20%-33% vesting each year, if the agreed upon performance criteria have been achieved, if applicable.

F-34

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

        The following table summarizes our restricted stock grant activity for the years ended December 31, 2009, 2008 and 2007:

	Years Ended December 31,
	2009			2008			2007
	(in thousands)
Outstanding, beginning of period		1,729			2,012			2,364
Granted		4,253			280			988
Vested		(660	)		(400	)		(744	)
Expired and forfeited		(530	)		(163	)		(596	)
Outstanding, end of the period		4,793			1,729			2,012
Outstanding and expected to vest as of December 31, 2009		4,751

	Years Ended December 31,
	2009	2008	2007
	(in thousands, except for per share amount)
Aggregate intrinsic value outstanding	$1,630	$484	$4,464
Aggregate intrinsic value expected to vest	$1,615	$404	$4,355
Weighted-average remaining vesting term	2.4 years	3.4 years	3.5 years
Weighted-average grant date fair value	$0.48	$1.38	$4.46

        The fair value of restricted stock is calculated by multiplying the number of restricted shares by the closing price of our common stock on December 31 of each year. The total fair value of restricted stock vested during the years ended December 31, 2009, 2008 and 2007 were $558,000, $687,000, and $3.5 million, respectively.

        As of December 31, 2009, total unrecognized compensation expense related to outstanding restricted stock grants is $4.1 million. This expense is expected to be recognized over a weighted-average period of 2.4 years.

        During the second quarter of 2009, we granted 3.0 million shares of restricted stock to our current Chief Executive Officer. The restricted stock vesting is subject to the attainment of certain market conditions and assuming continuous employment. All of these restricted shares are considered inducement options as defined by the NYSE Arca and are not issued pursuant to a plan, as follows:

•

1.0 million shares of common stock upon an increase in the closing price of our common stock to $1.50 or higher for all trading days within any sixty consecutive calendar day period;

•

500,000 shares of common stock upon an increase in the closing price of our common stock to $2.00 or higher for all trading days within any sixty consecutive calendar day period;

•

500,000 shares of common stock upon an increase in the closing price of our common stock to $2.50 or higher for all trading days within any sixty consecutive calendar day period;

F-35

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

•

500,000 shares of common stock upon an increase in the closing price of our common stock to $3.00 or higher for all trading days within any sixty consecutive calendar day period;

•

500,000 shares of common stock upon an increase in the closing price of our common stock to $4.00 or higher for all trading days within any sixty consecutive calendar day period.

        Furthermore during the fourth quarter of 2009, we granted our President and Chief Operating Officer 850,000 shares of restricted stock from one of our plans. The restricted stock vesting is subject to the attainment of certain market conditions and assuming continuous employment, as follows:

•

250,000 shares of restricted common stock when the closing price of our common stock is at or above $.70 per share for 60 consecutive calendar days;

•

150,000 shares of restricted common stock when the closing price of our common stock is at or above $1.05 per share for 60 consecutive calendar days;

•

150,000 shares of restricted common stock when the closing price of our common stock is at or above $1.50 per share for 60 consecutive calendar days;

•

150,000 shares of restricted common stock when the closing price of our common stock is at or above $1.75 per share for 60 consecutive calendar days; and

•

150,000 shares of restricted common stock when the closing price of our common stock is at or above $2.10 per share for 60 consecutive calendar days.

        Vesting of the awards pursuant to the benchmarks above may also occur in the event of a merger or acquisition in which the price per share for our common stock satisfies the above vesting thresholds. Any unvested portion of the restricted stock award will expire four years from grant date.

        During the fourth quarter of 2005, we granted 2.0 million shares of restricted stock to three of our then-executive officers.

        On July 22, 2009, one of the executive officers referred to above transitioned his officer positions and board seat (s) to our current chief executive officer. As a result, 600,000 of the former officer's shares will fully vest at his election upon satisfaction of any of the following conditions:

•

the end of the nine month transition period;

•

the sale of all of the assets or stock of Buckeye Industrial Mining Co.;

•

the company receiving financing in excess of $30 million.

        Pursuant to the agreement, we accelerated the vesting of the restricted stock grant and recorded $3.3 million of non-cash compensation for the year ended December 31, 2009.

        On May 31, 2009, another of the executive officers referred to above retired from his position. Since the restricted shares never vested and were forfeited upon his retirement, the cumulative non-cash compensation expense recorded since 2005 was reversed in the second quarter of 2009. This reversal of non-cash compensation totaled $2.9 million for the year ended December 31, 2009.

        On April 19, 2007, we ceased our relationship with the last of the executive officers referred to above. Pursuant to the terms of his employment agreement, he was entitled to acceleration of vesting

F-36

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(10) Stock Options, Stock Grants and Employee Benefit Plans (Continued)

with respect to 899,000 of the 1,000,000 shares of unvested common stock he was awarded in connection with his employment, and, as a result, we incurred a one-time $9.8 million non-cash charge for the year ended December 31, 2007. The 899,000 shares vested on July 18, 2007. The executive officer exercised a right pursuant to his employment agreement to have shares, which would have otherwise vested, withheld in satisfaction of his income tax liability from this vesting. As a result, we made a one-time cash payment of approximately $1.6 million to the appropriate taxing authorities related to his taxable income on this transaction. The withholding of these shares for taxes effectively represents a retirement of these shares and has been reflected as an adjustment to our additional paid-in capital during the year ended December 31, 2007.

Employee Stock Purchase Plan

        During the third quarter of 2005 the establishment of an Employee Stock Purchase Plan was approved. We have reserved 100,000 shares of our common stock that are eligible for issuance to employees. Until June 30, 2006, employees were able contribute to the plan, subject to certain maximum contributions, and be eligible for a discount on the lower of the November 1, 2005 or on June 30, 2006 closing price, the first purchase date pursuant to the plan. After June 30, 2006, our employees are eligible for monthly purchases at the month end market price less a 15% discount that we contribute for our employees.

(11) Warrants

        Associated with various financing and other transactions and professional service agreements, we have issued transferable warrants to purchase common stock, which generally immediately vest. The following table summarizes the outstanding warrant activity for years ended December 31, 2009, 2008, and 2007:

		Year Ended December 31,
		2009	2008		2007
		Number of Potentially Exercisable Shares	Number of Potentially Exercisable Shares		Number of Potentially Exercisable Shares
		(in thousands, except for price per share)
Outstanding, beginning of period		7,216	7,296		9,606
	Granted	9,638	—		—
	Exercised	—	(20	)	(1,757	)
	Expired and cancelled	—	(60	)	(553	)
Outstanding, end of period		16,854	7,216		7,296
Expiration		2010-2015	2010		2008-2010
Weighted average exercise price per share		$1.75	$2.75		$2.75

        The table above includes warrants further described in Note 8—Preferred Stock. In addition to the table above, we have entered into an Advisory Agreement with a third party dated March 23, 2009. Pursuant to the terms of the agreement, we have agreed to issue, as a success fee warrants to purchase up to 2,500,000 shares of common stock as follows: (i) 1,250,000 warrants will be issued upon the

F-37

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(11) Warrants (Continued)

execution of a definitive agreement to construct a plant utilizing our K-Fuel technology, and (ii) 1,250,000 warrants will be issued upon the commencement of the construction of the plant utilizing our K-Fuel technology. The exercise price of the warrants will be the volume weighted average of the daily per share closing price the common stock for the six month period ending on the date of the execution of a letter of intent, memorandum of understanding or a public statement which results in a definitive agreement to build a plant. The warrants will be immediately exercisable and will have a five-year term from the date of grant.

(12) Commitments and Contingencies

Payment Obligations

        The following table summarizes our future commitments as of December 31, 2009:

		Payments due by period
		2010		2011		2012		2013		2014		Thereafter		Total
		(in thousands)
Operating leases		$	1,942	$	1,353	$	1,334	$	1,187	$	1,199	$	22,738	$	29,753
Short-term debt and purchase commitments			21,100		—		—		—		—		—		21,100
Consulting and service commitments			500		500		500		500		500		10,000		12,500
Long-term debt			2,190		2,190		28,470		—		—		—		32,850
	Total commitments	$	25,732	$	4,043	$	30,304	$	1,687	$	1,699	$	32,738	$	96,203

        This table does not include accounts payable, accrued liabilities, or asset retirement obligations, which are reported in our December 31, 2009 Consolidated Balance Sheet. We generally have not included any obligation in which either party has the right to terminate except as discussed below. Additionally, we have not included K-Fuel royalty payments, as we cannot presently determine when such payments will be made as such payments are based upon our receipt of cash for licensing and royalties.

        We are obligated under non-cancelable operating leases with initial terms exceeding one year relating to office space. Rent expense for the years ended December 31, 2009, 2008 and 2007 was $1.2 million, $1.1 million, and $784,000, respectively. Additionally, included in operating leases is the rent obligation associated with our former headquarters totaling $105,000, which we have sub-leased but are not released from the obligation. Furthermore, included in operating leases is a 46-year port dock lease on the Ohio River, which we have the right to cancel upon six months written notice. If this lease were cancelled as of December 31, 2009, we would be obligated to pay $250,000 rather than the entire obligation of $23.0 million. This dock lease and the related obligation are included as assets to be sold pursuant to the anticipated sale of Buckeye.

        Consulting and service commitments include an exclusive patent sub-license agreement with the developer of a proprietary technology for the measurement of carbon emissions. The agreement provides us with an exclusive worldwide sub-license to a technology to standardize the measurement of carbon emissions in energy and agricultural related activities. The agreement was amended and restated to expand the energy and agricultural activities to all applications of the technology and eliminates other operating requirements. In order to maintain this licensing arrangement, we are required to make

F-38

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(12) Commitments and Contingencies (Continued)

minimum annual royalty payments of $500,000 to the developer of the proprietary technology, with each payment extending the arrangement for one year if the parties are in material compliance with the contract. Additionally, consulting and service commitments includes our amended and restated umbrella agreement with Bechtel. Through this new program management agreement, we committed to provide Bechtel with $1 billion in construction contracts through 2013. Failure to meet this commitment by 2014 could cost us up to the $10 million in termination fees, which is included in the above table.

        Long-term debt includes our principal amount due 2012 and the 8% interest payments.

        Short-term debt includes our principal amount, exit fees and accrued interest due upon the earlier of the sale of Buckeye or June 30, 2010. Interest is accrued at 10% of the principal amount.

        While our former investment banking firm may claim that we owe them up to $1.0 million upon the sale of Buckeye, and, while the previous potential buyer may claim that we owe them up to an additional $650,000 if we do not sell Buckeye to them, we do not believe that these fees are payable due to the lack of the counterparties meeting certain performance and contractual criteria in addition to certain verbal understandings reached related thereto. If claims are made for these contingent payments, we intend to vigorously dispute these claims. These potential obligations are not included in the table above.

Litigation

        We are not engaged in any material legal proceedings to which we or any of our subsidiaries are a party.

K-Fuel Royalties and Other Rights

        We owe royalty payments to parties related to certain rights that support our patents and our proprietary technology, primarily related to Mr. Edward Koppelman the inventor of the K-Fuel process. As described in further detail in Note 4—Other Assets.

        We have granted certain rights and limited licenses for the use of certain K-Fuel technology. The following is a summary of the significant parties and the rights:

•

Pursuant to an exchange transaction in 2003, we gave licenses for up to three plants to a third party, with certain limitations on the location of the plants, each plant having a maximum annual capacity of three million tons per year. The counterparty is obligated to pay certain royalty and license fees for these three plants, if constructed.

•

In December 2004, we entered into a licensing agreement with Cook Inlet Coal, an affiliate of Kanturk Partners LLC, under which we agreed to license to Cook Inlet Coal our proprietary coal processing technology for use at a coal processing plant to be operated by Cook Inlet Coal. Kanturk Partners owns approximately a 12% interest in Cook Inlet Coal. Mr. John Venners, brother of our founder, Mr. Theodore Venners, has an approximately 4.5% interest in Kanturk Partners. Effective May 1, 2007, the licensing agreement was assigned to a third party. Effective December 10, 2008, the third party reassigned the licensing agreement to Cook Inlet Coal.

F-39

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(12) Commitments and Contingencies (Continued)

•

As described in further detail in Note 10—Stockholders' Equity, certain investors have the right to, among other things, develop or participate in the greater of K-Fuel commercial projects with an annual output capacity of 50 million tons per year or six commercial projects, subject to certain qualifications.

(13) Segments

        Our segments include the GreenCert segment, Plant segment, Mining segment and Technology segment. The GreenCert segment reflects activities related to the measurement of green house gases and certification of environmental improvements as carbon credits. The Plant segment primarily represents revenue and costs related to our Fort Union plant in Gillette, Wyoming, at which we suspended operations in March 2008. The Mining segment primarily represents our mining operations of our subsidiary, Buckeye, and includes certain marketing personnel, the ash disposal facility and the preparation and blending facility. The Technology segment is comprised of all other operations that use, apply, own or otherwise advance our proprietary, patented K-Fuel process, including our headquarters and related operations, activities of Evergreen Energy Asia Pacific and KFx Technology, LLC, which holds the licenses to our technology. Corporate costs within our Technology segment are allocated to our other segments, generally on a percentage based on the number of employees, total segment operating expenses, or segment operating expenses plus segment capital expenditures. Our operations are principally conducted in the United States. Data through segment

F-40

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(13) Segments (Continued)

operating (loss)/ income is what is provided to our Chief Operating Decision Maker. We will continue to evaluate how we manage our business and, as necessary, adjust our segment reporting accordingly.

			For the Year Ended December 31, 2009
			GreenCert			Plant			Mining		Technology			Total
			(in thousands)
Operating revenues:
	Mining		$	—		$	—		$	50,248	$	—		$	50,248
	Consulting and other			423			—			—		—			423
		Total operating revenue		423			—			50,248		—			50,671
Operating expenses:
	Coal mining operating costs			—			—			43,458		—			43,458
	General and administrative			9,037			642			4,915		14,488			29,082
	Plant costs			—			1,554			—		—			1,554
		Total segment operating expense		9,037			2,196			48,373		14,488			74,094
Segment operating income (loss)			$	(8,614	)	$	(2,196	)		1,875	$	(14,488	)	$	(23,423	)
Total assets			$	7,489		$	2,042		$	34,783	$	30,190		$	74,504
Reconciliation to net loss:
Total Segment operating loss														$	(23,423	)
	Depreciation, depletion and amortization														(9,962	)
	Research and development														(49	)
	Asset impairments														(20,487	)
	Other income (expense)														(4,616	)
	Net loss attributable to noncontrolling interest														1,901
Net loss attributable to Evergreen Energy														$	(56,636	)

F-41

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(13) Segments (Continued)

			For the Year Ended December 31, 2008
			GreenCert			Plant			Mining		Technology			Total
			(in thousands)
Operating revenues:
	Mining		$	—		$	—		$	58,434	$	—		$	58,434
	K-Fuel refined coal and blended K-Fuel refined coal			—			463			—		—			463
	Consulting and other			4			—			—		—			4
		Total operating revenue		4			463			58,434		—			58,901
Operating expenses:
	Coal mining operating costs			—			—			47,799		—			47,799
	General and administrative			5,749			3,108			4,582		18,526			31,965
	Plant costs			—			17,417			—		213			17,630
		Total segment operating expense		5,749			20,525			52,381		18,739			97,394
Segment operating income (loss)			$	(5,745	)	$	(20,062	)	$	6,053	$	(18,739	)	$	(38,493	)
Total assets			$	5,586		$	2,398		$	55,673	$	37,784		$	101,441
Reconciliation to net loss:
Total Segment operating loss														$	(38,493	)
	Depreciation, depletion and amortization														(9,000	)
	Research and development														(79	)
	Asset impairments														(18,615	)
	Other income														957
Net loss														$	(65,230	)

F-42

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(13) Segments (Continued)

			For the Year Ended December 31, 2007
			GreenCert			Plant			Mining			Technology			Total
			(in thousands)
Operating revenues:
	Mining		$	—		$	36		$	47,326		$	—		$	47,362
	K-Fuel refined coal and blended K-Fuel refined coal			—			1,081			—		$	—			1,081
	Licensing and other			—			45			—			169			214
		Total operating revenue		—			1,162			47,326			169			48,657
Operating expenses:
	Coal mining operating costs			—			—			43,093			—			43,093
	General and administrative			2,290			6,166			4,380			30,195			43,031
	Plant costs			—			34,720			—			10			34,730
	Cost of licensing and other revenue			—			24			—			53			77
		Total segment operating expense		2,290			40,910			47,473			30,258			120,931
Segment operating loss			$	(2,290	)	$	(39,748	)	$	(147	)	$	(30,089	)	$	(72,274	)
Total assets			$	1,236		$	2,822		$	51,580		$	120,173		$	175,811
Reconciliation to net loss:
Total Segment operating loss															$	(72,274	)
	Depreciation, depletion and amortization															(8,383	)
	Research and development															(876	)
	Asset impairments															(122,688	)
	Other income (expense)															(455	)
Net loss															$	(204,676	)

F-43

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(14) Income Taxes

        Our operations are principally domestic, with income taxable at the federal statutory rate of 34% plus applicable state rates. Deferred tax assets (liabilities) were comprised of the following:

	2009			2008
	(in thousands)
Gross deferred tax assets:
Net operating loss carryforwards	$	122,478		$	114,632
Depreciation and amortization		36,203			37,246
Accrued liabilities		1,237			1,323
Stock options and warrants		7,307			6,362
Deferred revenue		2,946			2,511
Reserve on note receivable		428			469
Prepaid expenses		(484	)		(531	)
Other		150			—
Gross deferred tax assets		170,265			162,012
Deferred tax assets valuation allowance		(179,261	)		(162,012	)
Net deferred tax assets	$	—		$	—

        We have recorded a valuation allowance for the full amount of our net deferred asset because, based upon an assessment of both negative and positive evidence, it is more likely than not that we will not realize such benefits in future tax returns. As of December 31, 2009 our tax return net operating loss carryforwards are approximately $351.8 million expiring in various amounts including $3.4 million which will expire in 2010. Certain limitations apply to the annual amount of net operating losses that can be used to offset taxable income due to certain ownership changes, as defined in Section 382 of the Internal Revenue Code. Our tax return net operating loss carryforwards are significant. The tax years in which losses arose may be subject to audit by the Internal Revenue Service when such carryforwards are utilized to offset taxable income in future periods.

        Our total provision for income taxes in 2009, 2008 and 2007 were different from the amount expected by applying the statutory federal income tax rate to our net loss as reported in our Consolidated Statement of Operations. The approximate differences are as follows:

	2009			2008			2007
	(in thousands)
Expected tax benefit on loss before income taxes (34%)	$	(19,903	)	$	(22,178	)	$	(69,590	)
Expected state tax benefit, net		—			(2,153	)		(6,754	)
Stock options and warrant exercises		133			94			5,727
Non-deductible items and other		93			(253	)		3,484
State deferred tax adjustments		11,424			—			—
Increase in valuation allowance		8,253			24,490			67,133
	$	—		$	—		$	—

F-44

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(15) Related Party Transactions

Leasing

        On December 7, 2006, we entered into a memorandum of understanding and real estate lease with Hills Products Group, Inc, or Hills Products. Hills Products is owned by Mr. Stanford Adelstein who serves on our Board of Directors. We have leased certain real estate and facilities, including a train load-out facility, for the sole purpose of trans-loading our K-Fuel refined coal from over-the-road truck into railcars. Prior to the execution of this agreement our independent Board members approved this transaction. We believe the terms and contracted amounts would be similar if we had entered into this agreement with a third party. Per the agreement, we have committed to a monthly payment in the amount of $1,500, plus an additional fee based on tonnage of K-Fuel refined coal loaded after agreed upon monthly tonnages are exceeded. During the years ended December 31, 2008, and 2007, we paid Hills Products Group, Inc $12,000 and $24,000, respectively. As a result of the idling of our Fort Union plant, we terminated this agreement.

Consulting

        We had consulting agreements with Venners & Company, Ltd. for governmental affairs services, primarily for advice on proposed legislation and regulations and to advocate our interests before the U.S. Congress and regulatory agencies. Venners & Company, Ltd. is controlled by John P. Venners, the brother of Theodore Venners, our founder. We entered into agreements with Venners & Company for the providing of these services at a fixed monthly fee plus certain performance bonuses. In August 2007, we terminated one of the agreements and pursuant to the other agreement we were obligated to make payments of $7,500 per month through May 2008 for previous legislative consulting work. In May 2008, after the final payment, our obligation ceased. During the years ended December 31, 2008 and 2007, we paid Venners & Company $38,000, and $216,000, respectively, in cash for consulting fees. We did not incur any costs under this consulting agreement during the year ended December 31, 2009.

GreenCert

        In February 2007 we entered into an exclusive patent sub-license agreement with the developer of a proprietary technology for the measurement of carbon emissions and formed a subsidiary, C-Lock Technology, Inc. The agreement provides us with an exclusive worldwide sub-license to a technology to standardize the measurement of carbon emissions in energy and agricultural related activities. The agreement was amended and restated to expand the energy and agricultural activities to all applications of the technology and eliminates other operating requirements. In order to maintain this licensing arrangement, we are required to make minimum annual royalty payments of $500,000 to a company controlled by the developer of the proprietary technology, with each payment extending the arrangement for one year if the parties are in material compliance with the contract.

        We have developed a scientifically accurate, scalable environment intelligence solution that measures greenhouse gases and generates verifiable emissions credits. We utilized Enterprise Information Management, Inc. (or EIM) to help assist us in the development of our GreenCert software. One of our former non-executive employees serves on the board of directors of EIM. We believe the terms and contracted amounts would be similar if we had entered into this agreement with a third party. We had incurred costs of $2.3 million, $4.8 million, and $1.3 million during the years ended December 31, 2009, 2008 and 2007, respectively. On December 9, 2009, we entered into an

F-45

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(15) Related Party Transactions (Continued)

agreement with EIM to issue an aggregate of 1,543,210 shares of restricted common stock to settle $500,000 of incurred costs owed to EIM at that time.

        We granted shares from our majority owned subsidiary C-Lock Technology, Inc. to certain executive officers of Evergreen Energy, certain employees of C-Lock Technology, Inc. and others. In the aggregate, these share grants as of December 31, 2009 represent an 8% ownership interest in C-Lock Technology, Inc.

K-Fuel Licensing

        In December 2004, we entered into a licensing agreement with Cook Inlet Coal, an affiliate of Kanturk Partners LLC, under which we agreed to license to Cook Inlet Coal our proprietary coal processing technology for use at a coal processing plant to be operated by Cook Inlet Coal. Kanturk Partners owns approximately a 12% interest in Cook Inlet Coal. Mr. John Venners, brother of our founder, Mr. Theodore Venners, has an approximately 4.5% interest in Kanturk Partners. Effective May 1, 2007, the licensing agreement was assigned to a third party. Effective December 10, 2008, the third party reassigned the licensing agreement to Cook Inlet Coal.

Royalties

        In addition, we are obligated to make licensing and royalty payments to a party related to Theodore Venners, our founder. See further discussion in Note 5—Other Assets and Note 12—Commitments and Contingencies.

(16) Financial Statements of Guarantors

        The following information sets forth our consolidating statements of operations for the years ended December 31, 2009, 2008 and 2007; our consolidating balance sheets as of December 31, 2009 and 2008, and our consolidating statements of cash flows for the years ended December 31, 2009, 2008 and 2007. Pursuant to SEC regulations, we have presented in columnar format the financial information for Evergreen Energy Inc., the issuer of the 2007 Notes, Evergreen Operations, LLC, the guarantor, and all non-guarantor subsidiaries on a combined basis. The 2007 Notes are fully and unconditionally guaranteed, on a senior, unsecured basis by, Evergreen Operations, LLC. The 2009 Notes are not guaranteed by any subsidiaries and are reflected in the Evergreen Energy Inc. column. The 2009 Notes were co-issued by Evergreen Energy Inc., our wholly owned subsidiary Evergreen Operations, LLC and its wholly owned subsidiary, Buckeye Industrial Mining Co. The co-issuers are jointly and severally liable for the debt, and the debt is secured by all of Buckeye's assets and Evergreen Operations LLC's equity interest in Buckeye.

        The consolidating statements of operations, cash flows, and balance sheets include the effects of elimination of intercompany transactions and balances. Except for Evergreen Energy Asia Pacific, which is 96% owned by us, and C-Lock Technologies which is 92% owned by us, all of our other subsidiaries are 100% owned. The accounting principles used to determine the amounts reported in this note are consistent with those used in our consolidated financial statements. Transactions effecting our consolidated stockholders' equity include net loss, exercise of options and warrants, vesting of restricted stock, issuance of common stock, warrant issuances and debt issue costs. These transactions for all periods relate to our parent, Evergreen Energy Inc. with the exception of the sale of stock in Evergreen Asia Pacific for $3.6 million in the second quarter of 2007, which is included in the column labeled Other.

F-46

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2009

			Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
			(in thousands)
Assets
Current:
	Cash and cash equivalents		$	2,165		$	5		$	37		$	—		$	2,207
	Accounts receivable, net			6			4,604			584			—			5,194
	Inventory			—			1,747			—			—			1,747
	Receivable from Parent 2009 convertible notes			—			16,022			—			(16,022	)		—
	Debt issue cost, net of amortization			2,089			—			—			—			2,089
	Prepaid and other assets			1,343			301			3			—			1,647
		Total current assets		5,603			22,679			624			(16,022	)		12,884
Property, plant and equipment, net of accumulated depreciation				1,693			14,809			2,158			—			18,660
Construction in progress				9,980			2,360			4,955			—			17,295
Mineral rights and mine development, net of accumulated depletion				—			9,945			—			—			9,945
Restricted cash				11,339			—			—			—			11,339
Debt issuance costs, net of amortization				994			—			—			—			994
Investment in consolidated subsidiaries				(286,147	)		—			—			286,147			—
Due from subsidiaries				306,040			—			—			(306,040	)		—
Other assets				1,385			579			1,423			—			3,387
			$	50,887		$	50,372		$	9,160		$	(35,915	)	$	74,504
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	3,235		$	4,068		$	555		$	—		$	7,858
	Accrued liabilities			5,725			2,536			568			—			8,829
	Short-term debt			16,022			16,022			—			(16,022	)		16,022
	Other current liabilities			1,372			—			550			—			1,922
		Total current liabilities		26,354			22,626			1,673			(16,022	)		34,631
Long-term debt				27,898			—			—			—			27,898
Deferred revenue				—			—			8,265			—			8,265
Due to parent				—			259,450			46,590			(306,040	)		—
Asset retirement obligations				—			6,869			—			—			6,869
Other liabilities, less current portion				2,510			112			94			—			2,716
		Total liabilities		56,762			289,057			56,622			(322,062	)		80,379
Commitments and contingencies
Temporary Capital				2			—			—			—			2
		Total equity (deficit)		(5,877	)		(238,685	)		(47,462	)		286,147			(5,877	)
			$	50,887		$	50,372		$	9,160		$	(35,915	)	$	74,504

F-47

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2008

			Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
			(in thousands)
Assets
Current:
	Cash and cash equivalents		$	6,550		$	—		$	1,117		$	—		$	7,667
	Accounts receivable, net			—			6,640			—			—			6,640
	Marketable securities			—			—			—			—			—
	Inventory			—			958			—			—			958
	Prepaid and other assets			326			350			157			—			833
		Total current assets		6,876			7,948			1,274			—			16,098
Property, plant and equipment, net of accumulated depreciation				3,597			23,098			3,270			—			29,965
Construction in progress				10,700			4,603			2,399			—			17,702
Mineral rights and mine development, net of accumulated depletion				—			18,032			—			—			18,032
Restricted cash				13,444			—			—			—			13,444
Debt issuance costs, net of amortization				1,330			—			—			—			1,330
Investment in consolidated subsidiaries				(250,244	)		—			—			250,244			—
Due from subsidiaries				293,767			—			—			(293,767	)		—
Other assets				1,106			492			3,272			—			4,870
			$	80,576		$	54,173		$	10,215		$	(43,523	)	$	101,441
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	3,004		$	3,579		$	—		$	—		$	6,583
	Accrued liabilities			3,813			2,308			799			—			6,920
	Other current liabilities			182			—			150			—			332
		Total current liabilities		6,999			5,887			949			—			13,835
Long-term debt				28,573			—			—			—			28,573
Deferred revenue				—			—			6,732			—			6,732
Due to parent				—			254,964			38,803			(293,767	)		—
Asset retirement obligations				—			6,505			—			—			6,505
Other liabilities, less current portion				1,154			629			163			—			1,946
		Total liabilities		36,726			267,985			46,647			(293,767	)		57,591
Commitments and contingencies
		Total equity (deficit)		43,850			(213,812	)		(36,432	)		250,244			43,850
			$	80,576		$	54,173		$	10,215		$	(43,523	)	$	101,441

F-48

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
DECEMBER 31, 2009

			Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations		Evergreen Energy Consolidated
			(in thousands, except per share amounts)
Operating revenues:
	Mining		$	—		$	50,248		$	—		$	—	$	50,248
	Consulting and other			—			—			423			—		423
		Total operating revenue		—			50,248			423			—		50,671
Operating expenses:
	Coal mining operating costs			613			42,845			—			—		43,458
	General and administrative			13,516			5,557			10,009			—		29,082
	Plant costs			—			1,554			—			—		1,554
	Depreciation, depletion and amortization			1,226			7,544			1,192			—		9,962
	Research and development						—			49			—		49
	Asset impairments			2,217			18,270						—		20,487
		Total operating expenses		17,572			75,770			11,250			—		104,592
Operating loss				(17,572	)		(25,522	)		(10,827	)		—		(53,921	)
Other income (expense):
	Gain on equity exchange transactions			167			—			—			—		167
	Interest income			40			—			25			—		65
	Interest expense			(7,645	)		—			—			—		(7,645	)
	Other (expense) income, net			2,558			344			(105	)		—		2,797
		Total other (expense) income		(4,880	)		344			(80	)		—		(4,616	)
Equity in loss of subsidiaries				(36,085	)		—			—			36,085		—
Net loss				(58,537	)		(25,178	)		(10,907	)		36,085		(58,537	)
Less: net loss attributable to noncontrolling interest				—			—			—			1,901		1,901
Net loss attributable to Evergreen Energy			$	(58,537	)	$	(25,178	)	$	(10,907	)	$	37,986	$	(56,636	)

F-49

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
DECEMBER 31, 2008

			Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
			(in thousands, except per share amounts)
Operating revenues:
	Mining		$	—		$	58,434		$	—		$	—		$	58,434
	K-Fuel refined coal and blended K-Fuel refined coal			—			463			—			—			463
	Consulting and other			—			—			4			—			4
	Intercompany Consulting and other			—			171			—			(171	)		—
		Total operating revenue		—			59,068			4			(171	)		58,901
Operating expenses:
	Coal mining operating costs			617			47,182			—			—			47,799
	General and administrative			16,978			7,690			7,297			—			31,965
	Plant costs			—			17,417			213			—			17,630
	Depreciation, depletion and amortization			1,537			7,079			384			—			9,000
	Research and development						—			79			—			79
	Cost of licensing and other revenue			—			—			—			—			—
	Cost of intercompany consulting and other revenue			—			171			—			(171	)		—
	Asset impairments			18,615			—						—			18,615
		Total operating expenses		37,747			79,539			7,973			(171	)		125,088
Operating loss				(37,747	)		(20,471	)		(7,969	)		—			(66,187	)
Other income (expense):
	Gain on equity exchange transactions			6,138			—			—			—			6,138
	Interest income			1,128			—			123			—			1,251
	Interest expense			(6,132	)		—			—			—			(6,132	)
	Other (expense) income, net			(1,329	)		976			53			—			(300	)
		Total other (expense) income		(195	)		976			176			—			957
Equity in loss of subsidiaries				(27,288	)		—			—			27,288			—
Net loss			$	(65,230	)	$	(19,495	)	$	(7,793	)	$	27,288		$	(65,230	)

F-50

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
DECEMBER 31, 2007

			Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
			(in thousands, except per share amounts)
Operating revenues:
	Mining		$	—		$	47,362		$	—		$	—		$	47,362
	K-Fuel refined coal and blended K-Fuel refined coal			—			1,081			—			—			1,081
	Consulting and other			—			45			169			—			214
	Intercompany consulting and other			—			161			—			(161	)		—
		Total operating revenue		—			48,649			169			(161	)		48,657
Operating expenses:
	Coal mining operating costs			716			42,377			—			—			43,093
	General and administrative			28,293			10,546			4,192			—			43,031
	Plant costs			—			34,720			10			—			34,730
	Depreciation, depletion and amortization			1,139			7,199			45			—			8,383
	Research and development			—			—			876			—			876
	Cost of licensing and other revenue			—			24			53			—			77
	Cost of intercompany consulting and other			—			161			—			(161	)		—
	Asset impairments			11,508			111,180			—			—			122,688
		Total operating expenses		41,656			206,207			5,176			(161	)		252,878
Operating loss				(41,656	)		(157,558	)		(5,007	)		—			(204,221	)
Other income (expense):
	Interest income			4,230			—			118			—			4,348
	Interest expense			(3,429	)		(4	)		—			—			(3,433	)
	Other (expense) income, net			(1,729	)		335			24			—			(1,370	)
		Total (expense) other income		(928	)		331			142			—			(455	)
Equity in loss of subsidiaries				(162,092	)		—			—			162,092			—
Net loss			$	(204,676	)	$	(157,227	)	$	(4,865	)	$	162,092		$	(204,676	)

F-51

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF CASH FLOW
DECEMBER 31, 2009

		Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
		(in thousands)
Cash used in operating activities			(10,450	)		3,307			(5,765	)		—			(12,908	)
Investing activities:
	Purchases of construction in progress		(1,151	)		(6,770	)		(3,097	)		—			(11,018	)
	Purchases of property, plant and equipment		(3	)		(695	)		(75	)		—			(773	)
	Purchases of mineral rights and mine development		—			(557	)		—			—			(557	)
	Proceeds from the sale of assets		33			147			—			—			180
	Proceeds from maturities of marketable securities		—			—			2,000			—			2,000
	Restricted cash and marketable securities, net		905			—			—			—			905
	Other		(421	)		—			—			—			(421	)
Cash used in investing activities			(637	)		(7,875	)		(1,172	)		—			(9,684	)
Financing Activities:
	Payments to parent/subsidiaries		(64,925	)		(52,495	)		(2,000	)		119,420			—
	Advances /from parent/subsidiaries		54,495			57,068			7,857			(119,420	)		—
	Proceeds from issuance of convertible debt		15,000			—			—			—			15,000
	Proceeds from issuance of convertible preferred stock		6,515			—			—			—			6,515
	Proceeds from reverse repurchase transaction		1,800			—			—			—			1,800
	Payments on reverse repurchase transaction		(1,800	)		—			—			—			(1,800	)
	Payment of dividends from preferred stock conversion		(1,973	)		—			—			—			(1,973	)
	Payment of debt issuance costs		(2,387	)		—			—			—			(2,387	)
	Other		(23	)		—			—			—			(23	)
Cash provided by financing activities			6,702			4,573			5,857			—			17,132
Increase (decrease) in cash and cash equivalents			(4,385	)		5			(1,080	)					(5,460	)
Cash and cash equivalents, beginning of year			6,550			—			1,117			—			7,667
Cash and cash equivalents, end of year		$	2,165		$	5		$	37		$	—		$	2,207

F-52

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF CASH FLOW
DECEMBER 31, 2008

		Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
		(in thousands)
Cash used in operating activities			(19,108	)		(10,556	)		(6,599	)		—			(36,263	)
Investing activities:
	Purchases of construction in progress		(4,720	)		(6,534	)		(3,651	)		—			(14,905	)
	Purchases of property, plant and equipment		(161	)		(1,674	)		(47	)		—			(1,882	)
	Proceeds from the sale of assets		—			13			—			—			13
	Purchase of marketable securities		(5,000	)		—			—			—			(5,000	)
	Proceeds from maturities of marketable securities		27,500			—			—			—			27,500
	Restricted cash and marketable securities, net		14,974			—			—			—			14,974
	Other		(76	)		—			—			—			(76	)
Cash provided by (used in) investing activities			32,517			(8,195	)		(3,698	)		—			20,624
Financing Activities:
	Payments to parent/subsidiaries		(90,003	)		(61,794	)		(150	)		151,947			—
	Payments on debt for equity exchange transactions		(3,500	)		—			—			—			(3,500	)
	Advances /from parent/subsidiaries		61,602			80,545			9,800			(151,947	)		—
	Proceeds from exercise of options and warrants		55			—			—			—			55
	Payment debt issue cost		(200	)		—			—			—			(200	)
	Other		(7	)		—			—			—			(7	)
Cash (used in) provided by financing activities			(32,053	)		18,751			9,650			—			(3,652	)
Increase (decrease) in cash and cash equivalents			(18,644	)		—			(647	)					(19,291	)
Cash and cash equivalents, beginning of year			25,194			—			1,764			—			26,958
Cash and cash equivalents, end of year		$	6,550		$	—		$	1,117		$	—		$	7,667

F-53

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(16) Financial Statements of Guarantors (Continued)

EVERGREEN ENERGY INC.
CONSOLIDATING STATEMENTS OF CASH FLOW
DECEMBER 31, 2007

		Evergreen Energy Inc.			Evergreen Operations, LLC			Other			Eliminations			Evergreen Energy Consolidated
		(in thousands)
Cash used in operating activities			(8,227	)		(38,342	)		(5,012	)		—			(51,581	)
Investing activities:
	Purchases of construction in progress		(22,180	)		(26,560	)		(623	)		—			(49,363	)
	Purchases of property, plant and equipment		(2,725	)		(981	)		(390	)		—			(4,096	)
	Proceeds from the sale of assets		18			916			—			—			934
	Purchase of marketable securities		(72,613	)		—			(2,000	)		—			(74,613	)
	Proceeds from maturities of marketable securities		101,672			—			—			—			101,672
	Restricted cash and marketable securities		(24,508	)		(220	)		—			—			(24,728	)
	Other		(42	)		—			—			—			(42	)
Cash used in investing activities			(20,378	)		(26,845	)		(3,013	)		—			(50,236	)
Financing Activities:
	Payments to parent/subsidiaries		(124,075	)		(52,884	)		—			176,959			—
	Proceeds from issuance of convertible debt		95,000			—			—			—			95,000
	Advances /from parent/subsidiaries		52,884			118,138			5,937			(176,959	)		—
	Proceeds from exercise of options and warrants		4,853			—			—			—			4,853
	Proceeds from sale of stock in subsidiary, net of offering costs		—			—			3,715			—			3,715
	Payments of debt issuance costs		(5,785	)		—			—			—			(5,785	)
	Payment of payroll tax liability in exchange for common stock		(1,641	)		—			—			—			(1,641	)
	Other		(18	)		(67	)		—			—			(85	)
Cash provided by financing activities			21,218			65,187			9,652			—			96,057
Increase (decrease) in cash and cash equivalents			(7,387	)		—			1,627			—			(5,760	)
Cash and cash equivalents, beginning of year			32,581			—			137			—			32,718
Cash and cash equivalents, end of year		$	25,194		$	—		$	1,764		$	—		$	26,958

F-54

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(17) Selected Quarterly Financial Data (Unaudited)

        The following table presents selected unaudited quarterly financial data for the years ended December 31, 2009 and 2008:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	(in thousands, except per share amounts)
2009
Revenues	$	17,845		$	13,865		$	9,242		$	9,719		$	50,671
Operating loss		(6,996	)		(7,367	)		(12,617	)		(26,941	)		(53,921	)
Net loss		(6,854	)		(8,759	)		(14,850	)		(28,074	)		(58,537	)
Basic and diluted net loss per common share		(0.05	)		(0.06	)		(0.11	)		(0.24	)		(0.46	)
2008
Revenues	$	12,033		$	16,088		$	14,045		$	16,735		$	58,901
Operating loss		(20,656	)		(10,113	)		(10,622	)		(24,796	)		(66,187	)
Net loss		(22,389	)		(10,479	)		(6,604	)		(25,758	)		(65,230	)
Basic and diluted net loss per common share		(0.27	)		(0.13	)		(0.08	)		(0.24	)		(0.72	)

Fourth Quarter 2009 Discussion

        We incurred $20.5 million of impairment charges during the fourth quarter. In addition, we recorded a $2.1 million gain related to the fair value adjustment to our embedded derivatives and put warrant liability.

Fourth Quarter 2008 Discussion

        We incurred $18.6 million of impairment charges during the fourth quarter.

(18) Subsequent events

        On March 16, 2010, we and certain institutional investors entered into a securities purchase agreement, pursuant to which we agreed to sell an aggregate of 9,312.5 shares of our preferred stock and warrants to purchase 12,500,000 shares of its common stock to such investors for gross proceeds of approximately $9.3 million.

        Each share of preferred stock has a stated value of $1,000 per share. The preferred stock is convertible into the number of shares of common stock, $.001 par value determined by dividing the stated value of the preferred stock by the conversion price per share of is $.3725. The conversion price is subject to certain adjustments for stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The preferred stock accrues dividends at the rate of 9.261% per annum, payable semi-annually on June 30 and December 31, commencing on June 30, 2010 and on each conversion date until March 16, 2015. The Certificate of Designation includes a provision under which we have deposited with an escrow agent $4,312,500 of the gross proceeds of the offering. If the preferred stock is converted prior to March 16, 2015, the escrow amount will be used to pay to the holder, upon conversion, an amount equal to $463.09 per $1,000 of stated value converted, less the amount of dividends paid prior to the conversion date. Subject to certain ownership limitations, the warrants are immediately exercisable for a five year period thereafter after closing at an exercise price

F-55

EVERGREEN ENERGY INC.

Notes to Consolidated Financial Statements (Continued)

Years ended December 31, 2009, 2008 and 2007

(18) Subsequent events (Continued)

of $.31 per share. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

        The net proceeds from the above registered direct public offering, after deducting placement agent fees and the our estimated offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, are approximately $5.0 million.

        On March 12, 2010, we signed a definitive agreement with Rosebud Mining Company for the sale of certain net assets of both Buckeye and Evergreen for $27.9 million, in addition to the release of $5.0 million of cash reclamation bonds. Further, $2.8 million of the purchase price will be deposited into escrow for a period of twelve months to cover amounts payable to Rosebud pursuant to the indemnification provision of the sales agreement. The transaction is subject to customary closing conditions and the completion by Rosebud of due diligence. The closing is not subject to a financing condition, but is subject to the satisfaction of customary closing conditions, including, among other matters, (i) accuracy of the representations and warranties and compliance with the covenants set forth in the agreement, each in all material respects, (ii) receipt of legally required regulatory approvals, and (iii) consents of certain governmental authorities and certain of Buckeye's specified contractual counterparties. The sale is expected to close in April 2010, but in any event no later than June 30, 2010.

        On January 26, 2010, we consummated a registered direct public offering and raised gross proceeds of approximately $8.7 million. The securities were offered pursuant to a shelf registration statement on Form S-3 that was previously declared effective by the Securities and Exchange Commission (SEC) on January 19, 2010. In total, we sold an aggregate of 29,236,664 shares of our common stock and warrants to purchase 14,618,331 shares of its common stock. The common stock and warrants were sold in units, with each unit consisting of one share of common stock and a warrant to purchase 0.50 of a share of common stock. The purchase price per unit is $.30. Subject to certain ownership limitations, the warrants are exercisable commencing six months following the closing date of the offering and for a five year period thereafter at an exercise price of $0.3859. The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

        The net proceeds to us from this registered direct public offering, after deducting placement agent fees and our estimated offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, are approximately $8.0 million.

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EX-4.19

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Exhibit 4.19

SECOND AMENDMENT AND FORBEARANCE AGREEMENT

        This Second Amendment and Forbearance Agreement (this "Agreement") is made as of the 12th day of January, 2010 among Evergreen Energy Inc. ("Evergreen"), Evergreen Operations, LLC ("Evergreen Op") and Buckeye Industrial Mining Co. ("Buckeye," together with Evergreen and Evergreen Op, the "Companies" and each individually referred to as a "Company"), Centurion Credit Funding LLC ("Centurion") and Level 3 Capital Fund LP ("Level 3", and together with Centurion, the "Investors").

Background

        A.    The Companies and the Investors are parties to a certain Note Purchase Agreement dated as of March 20, 2009, as amended by the First Amendment to Note Purchase Agreement dated as of April 8, 2009 (as may be further modified and amended from time to time, the "Purchase Agreement"), pursuant to which the Companies issued to the Investors and the Investors purchased certain Senior Secured Convertible Promissory Notes in the aggregate principal amount of $15,000,000 (the "Existing Notes" and together with the Additional Notes (as defined below), collectively, the "Notes" and each a "Note"). The Purchase Agreement and all instruments, documents and agreements executed in connection therewith, or related thereto, including the Notes, are referred to herein collectively as the "Transaction Documents". All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Purchase Agreement.

        B.    The following Events of Default have occurred and are continuing: Companies have failed to make payment of the principal amount, interest and other monetary obligations under each of the Existing Notes on the Maturity Date (as defined in each of the Notes) (collectively, the "Existing Defaults"). As a result of the existence of the Existing Defaults, Lender has the right under the Existing Notes, Security Agreement and Pledge Agreement to exercise any and all of its rights and remedies with respect to the Existing Defaults, including, without limitation, the right to cease providing any other financial accommodations to Companies.

        C.    Notwithstanding the existence of the Existing Defaults, Companies have requested that Investors forbear for a limited period of time from exercising their rights and remedies as a result of and with respect to such Existing Defaults and Investors are willing to agree to the foregoing solely for the period and on and subject to the terms and conditions set forth in this Agreement.

        D.    Pursuant to the Existing Notes, Companies owe to Investors an Exit Fee equal to the aggregate amount of $2,250,000, which amount was due and payable in full on the Maturity Date and was not paid when due. In connection with Investors' agreement to forbear from exercising their rights and remedies as a result of such Existing Defaults, Companies have requested, and Investors have agreed, to extend the time of payment of the Exit Fee by issuing to Investors additional notes in the aggregate principal amount of $2,250,000 to evidence the fully earned Exit Fee owed to Investors.

        E.    Effective December 18, 2009, the Companies and Investors agreed to amend the terms and conditions of the Transaction Documents pursuant to the terms and conditions of a binding term sheet (the "Term Sheet") which contemplated the execution of this Agreement.

        F.     The Companies and Investors have agreed to amend the terms and conditions of the Transaction Documents pursuant to the terms and conditions of this Agreement.

        NOW, THEREFORE, with the foregoing Background incorporated by reference and made a part hereof and intending to be legally bound, the parties agree as follows:

        1.    Acknowledgment of Existing Defaults.    Companies acknowledge, confirm and agree that (a) the Existing Defaults have occurred and are continuing and (b) Investors have the presently exercisable right to exercise all rights and remedies against Companies and the Collateral (as defined in the Security Agreement) as are available to Investors under the Existing Notes and the other Transaction

Documents and under applicable law, all without notice to or consent by Companies, except as expressly provided for under the Existing Notes or other Transaction Documents or required by applicable law.

2.     Limited Forbearance Period; Forbearance Termination.

        (a)   At Companies' request and in reliance upon Companies' representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions of this Agreement, Investors agree to forbear during the Forbearance Period (as defined below) from exercising Investors' rights and remedies with respect to the Existing Defaults, whether arising under the Purchase Agreement, the Notes, the other Transaction Documents or applicable law. For the purposes of this Agreement, the "Forbearance Period" means the period commencing on and effective as of the Maturity Date and terminating on the earlier to occur of (i) June 30, 2010; (ii) the consummation of a sale of all or substantially all of the assets of Buckeye (the "Sale of Buckeye") pursuant to which all of the Obligations (as defined in the Security Agreement) are not paid in full at the closing thereof and (iii) the date on which any one or more of the following events has occurred (hereinafter referred to as a "Forbearance Event of Default"): (A) any Company's failure to perform or observe any of the terms and conditions of this Agreement; or (B) the existence or occurrence of any Event of Default that is not an Existing Default.

        (b)   From and after termination or expiration of the Forbearance Period (the "Forbearance Termination Date"), the agreement of Investors to forbear with respect to the Existing Defaults shall automatically and without further notice or action terminate and be of no further force and effect, and Investors shall have the immediate and unconditional right, in their sole discretion, to exercise any or all of its rights and remedies under the Purchase Agreement, the Notes, the other Transaction Documents and applicable law with respect to the Existing Defaults or any Forbearance Event of Default, including, without limitation, the election by Investors to enforce their security interests in and liens upon the Collateral or any portion thereof. Investors have not waived any of such rights or remedies, and nothing in this Agreement, nor any delay on the part of any Investor after the Forbearance Termination Date in exercising any such rights or remedies, should be construed as a waiver of any such rights or remedies.

        3.    Amendments and Modifications.

        (a)    Interest.    Notwithstanding the Existing Defaults, upon the effectiveness of this Agreement, the original principal amount of each of the Notes shall bear interest, in arrears, at a rate of ten percent (10%) per annum. Furthermore, upon the occurrence and during the continuance of a Forbearance Event of Default, the Companies will pay additional default rate interest to the Investors, payable on demand, at a rate equal to the lesser of two and one half percent (2.5%) per month (prorated for partial months) and the maximum applicable legal rate per annum, computed on the basis of a 360-day year of twelve (12) thirty-day months on the outstanding principal balance of the Notes. All accrued and unpaid interest shall be paid in cash at the time of any principal payment (including any partial payment of principal) made on or in respect of the Notes.

        (b)    Exit Fee.    When each of the Notes is repaid, in whole or in part, for any reason and at any time, Companies shall pay to the Investors, as consideration for the agreement of the Investors to forbear hereunder, a supplemental exit fee (the "Supplemental Exit Fee") in an amount equal to 15% of the amount of each such repayment or prepayment plus, if the First Equity Offering (as defined below) is not consummated on or prior to January 15, 2010, $350,000 in the aggregate. All fees payable pursuant to this paragraph shall be deemed fully earned upon the effectiveness of this Agreement. For the avoidance of doubt, this Supplemental Exit Fee shall be in addition to the Exit Fee.

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        (c)    First Equity Offering.    Evergreen shall use its best efforts to raise capital by the issuance and sale of its equity securities. The consummation of such equity raise shall be known as the "First Equity Offering". Evergreen shall consummate the First Equity Offering no later than January 28, 2010. Failure to consummate the First Equity Offering by January 28, 2010 shall be an immediate Event of Default under the Purchase Agreement and other Transaction Documents and shall constitute a Forbearance Event of Default hereunder.

        (d)    Subsequent Equity Offerings.    If Evergreen raises additional capital by the issuance of equity securities subsequent to the First Equity Offering (a "Subsequent Equity Offering"), Evergreen shall use 30% of the net proceeds from the Subsequent Equity Offering to prepay the principal amount of the Notes and any accrued but unpaid interest.

        (e)    Investment Banker.    The Companies have retained Raymond James as an investment banker (the "Investment Banker") to assist the Companies in their efforts to sell Buckeye. The Companies shall provide or cause the Investment Banker to provide semi-monthly updates to the Investors as to the status of the Companies efforts to sell Buckeye, including, subject to the terms of any confidentiality agreements executed with proposed purchasers, marketing efforts, names of potential buyers identified and their respective levels of interest, offers made to purchase all or a portion of Buckeye, and any other information reasonably requested by Investors. Termination of the Investment Banker for any reason or no reason whatsoever shall be an immediate Event of Default under the Purchase Agreement and other Transaction Documents and shall constitute a Forbearance Event of Default hereunder.

        (f)    Dividends.    None of the Companies shall (i) declare or pay any dividends or make any distributions (by reduction of capital or otherwise) to any holder(s) of its common stock (or security convertible into or exercisable for common stock) or set aside or otherwise deposit or invest any sums for such purpose, or (ii) redeem, retire, defease, purchase or otherwise acquire for value, directly or indirectly, any common stock or other equity security of the Companies or set aside or otherwise deposit or invest any sums for such purpose, in each case without the express written consent of the Investors. Notwithstanding the foregoing, Buckeye may declare and pay dividends or distributions of amounts solely for purposes of paying costs, expenses and obligations relating to the business of Buckeye consistent with past practices.

        (g)    Sale of Buckeye.    Notwithstanding anything to the contrary in the Purchase Agreement or the other Transaction Documents, failure: (i) by the Companies to enter into and execute a definitive binding agreement relating to the Sale of Buckeye at a purchase price sufficient to pay the Notes in full by no later than the close of business on March 31, 2010; or (ii) by the purchaser of Buckeye to satisfy any financing condition contained within a definitive binding agreement relating to the sale of Buckeye by the close of business on May 31, 2010, for any reason or no reason whatsoever shall be an immediate Event of Default under the Purchase Agreement and other Transaction Documents and shall constitute a Forbearance Event of Default hereunder.

        (h)    Consultant and Inspection.    Notwithstanding anything to the contrary in the Purchase Agreement or the other Transaction Documents, Investors may retain a single third party consultant or advisor in connection with the transactions contemplated by this Agreement, the Purchase Agreement and the other Transaction Documents satisfactory to Investors in their sole discretion and to assist the Investors in the review of the financial condition and operations of the Companies (the "Investors' Consultant"), and each Company shall permit such Investors' Consultant to visit any of such Company's properties and inspect any of its assets and/or books and records, to examine and make copies of its books and records and to discuss its affairs, finances, technology and accounts with, and to be advised as to the same by, its officers and employees at such reasonable times during normal hours as may be reasonably requested by Investor. The Companies, jointly and severally, agree to pay or reimburse Investors for all of the reasonable fees

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of Investors' Consultant and reasonable expenses relating to hotel, travel, meals and other out-of-pocket expenses incurred by the Investors' Consultant or its representatives in any such inspection or examination upon presentation of invoices or other documentation of such expenses.

        4.    Issuance of Additional Note.

        (a)   Upon satisfaction of the terms and conditions set forth herein and upon the terms and conditions contained herein and in the Purchase Agreement, the Companies shall issue to Investors additional senior secured promissory notes in the aggregate principal amount of $2,250,000 as evidence of the obligation of the payment of the Exit Fee as follows: Companies shall issue to Centurion additional senior secured promissory notes in the aggregate principal amount of $2,007,992 and issue to Level 3 an additional senior secured promissory note in the aggregate principal amount of $242,008, in each case substantially in the form of Exhibit A hereto (together, the "Additional Notes" and each an "Additional Note").

        (b)   The Additional Notes shall be deemed "Transaction Documents" under the Purchase Agreement.

        5.    Acknowledgment of Indebtedness and Obligations.    Companies hereby confirm and acknowledge that immediately prior to the execution of this Agreement, Companies were indebted to Investors in the aggregate principal amount of Fifteen Million Dollars ($15,000,000.00) plus the Exit Fee amount of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00), plus interest and all other fees, costs and expenses incurred to date in connection with and owing by Companies under the Purchase Agreement, Notes and the other Transaction Documents, in each case, without any deduction, defense, setoff, claim or counterclaim, of any nature.

        6.    Forbearance Fee.    Companies shall pay to Centurion a fee of $1,628,705 and to Level 3 a fee of $196,295 (collectively, the "Forbearance Fee"), which Forbearance Fee shall be fully earned upon the effectiveness of this Agreement, which fee shall be due and payable in cash in immediately available funds upon the earliest of (i) a closing on the First Equity Offering, (ii) the closing of the Sale of Buckeye, (iii) the occurrence of a Forbearance Event of Default or (iv) repayment of the Notes in full.

        7.    Representations and Warranties.    Each Company represents and warrants to Investors that:

        (a)   All warranties and representations made to the Investors under the Purchase Agreement and the Transaction Documents are true and correct as to the date hereof unless they specifically relate to an earlier date in which case they shall be true and correct as of such date, other than as set forth on the updated or additional disclosure schedules (the "Updated Disclosure Schedules") attached hereto (the numbers of which shall correspond to the numbers of the disclosure schedules to or applicable sections of the Purchase Agreement, including schedules that may have not been originally provided), provided the Investors waive compliance with Section 2.1(p) of the Purchase Agreement as of the date hereof and with respect to any information provided to the Investors' Consultant.

        (b)   The Companies have the requisite corporate power and authority to enter into and perform this Agreement. The execution, delivery and performance of this Agreement by each Company and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, no further consent or authorization of such Company, its Board of Directors, stockholders or any other third party is required. When executed and delivered by each of the Companies, this Agreement shall constitute a valid and binding obligation of such Company enforceable against such Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor's rights and remedies or by other equitable principles of general application.

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        (c)   Immediately prior to and after giving effect to this Agreement and to the transactions contemplated hereby, no default or Event of Default (other than the Existing Defaults) is outstanding.

        (d)   Buckeye has and, after giving effect to the transactions contemplated by this Agreement, the Purchase Agreement and the other Transaction Documents, will have, assets having a fair saleable value in excess of the amount required to pay its probable liability on its existing debts as they fall due for payment and that the sum of its debts is not and will not then be greater than all of its property at a fair valuation.

        8.    Closing Conditions.    Closing of this Agreement shall be subject to completion of the following conditions precedent (all documents to be in form and substance satisfactory to the Investors and Investors' counsel):

        (a)   Execution and delivery by the Companies and the Investors of this Agreement;

        (b)   Execution and delivery by the Companies of each of the Additional Notes;

        (c)   Payment by the Companies of any and all costs, fees and expenses of Investors (including without limitation, the Forbearance Fee and attorneys' fees) in connection with this Agreement and the transactions contemplated hereby; and

        (d)   Execution and/or delivery by the Companies of all agreements, instruments and documents requested by Investors to effectuate and implement the terms hereof and the Transaction Documents.

        9.    Expenses.    The Companies shall pay upon demand any and all costs, fees and expenses of Investors (including without limitation, the fees, costs and expenses of Investors' Consultant and attorneys' fees) in connection with the preparation, negotiation and completion of this Agreement and the transactions contemplated hereby and all fees, costs and expenses incurred by Investors in connection with the administration of and enforcement, protection and defense of the rights and claims of the Investors under this Agreement, the Purchase Agreement or any of the other Transaction Documents. The parties hereto acknowledge that in connection with the Term Sheet, the Companies have paid an expense retainer of $25,000 to be applied towards the fees, costs and expenses of Investors incurred in connection with the preparation, negotiation and completion of this Agreement and the transactions contemplated hereby. The parties hereto also acknowledge that prior to the payment of the retainer, there was a balance due of $15,099.15 relating to an invoice from counsel to the Investors dated December 2, 2009. In addition to the expense retainer and the balance due referenced above, the Investors estimate that an additional approximately $10,000 of costs, fees and expenses have been or will be incurred connection with the preparation, negotiation and completion of this Agreement and the transactions contemplated hereby. The Companies shall pay the balance due and the additional costs, fees and expenses referenced above upon execution of this Agreement. In addition to the foregoing, the Companies acknowledge that Investors anticipate further costs, fees and expenses in respect of title endorsements to be prepared in connection with the transactions contemplated hereby which shall be the responsibility of the Companies. Investors shall notify the Companies prior incurring any such expenses in excess of the foregoing amounts.

        10.    No Waivers, Reservation of Rights.    Investors have not waived, are not by this Agreement waiving, and has no intention of waiving, the Existing Defaults or any other Events of Default which may be continuing on the date hereof or any Events of Default which may occur after the date hereof (whether the same or similar to the Existing Defaults or otherwise), or any event which, with the passage of time or giving of notice, will become an Event of Default. Investors have not agreed to forbear with respect to any of their rights or remedies concerning any Events of Default (other than, during the Forbearance Period, the Existing Defaults to the extent expressly set forth herein), which may be continuing as of the date hereof or which may occur after the date hereof. Except as expressly

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set forth in Section 2(a), Investors reserve the right to exercise all of their rights and remedies, whether arising under the Purchase Agreement, the Notes, the other Transaction Documents or applicable law. Neither this Agreement nor any other agreement entered in connection herewith or pursuant to the terms hereof shall be deemed or construed to be a compromise, satisfaction, reinstatement, accord and satisfaction, novation or release of the Purchase Agreement or any of the other Transaction Documents, or any rights or obligations thereunder, or a waiver by either Investor of any of its rights thereunder or at law or in equity. This Agreement does not obligate Investors to agree to any other extension or modification of the Purchase Agreement nor does it constitute a course of conduct or dealing on behalf of Investors or a waiver of any other rights or remedies of Investors. No omission or delay by Lender in exercising any right or power under the Purchase Agreement, this Agreement, the Notes, the other Transaction Documents or any related instruments, agreements or documents will impair such right or power or be construed to be a waiver of any default or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and no waiver will be valid unless in writing and then only to the extent specified.

        11.    Ratification of Transaction Documents.    This Agreement is incorporated into and made a part of the Purchase Agreement and other Transaction Documents, the terms and provisions of which, unless expressly modified by this Agreement, are each ratified and confirmed and continue unchanged and in full force and effect. Nothing in this Agreement is intended in any way to limit or impair or release any liens, security interests or encumbrances that Investors have in the Companies' real or personal property, including, without limitation, the Collateral or the priority of such liens, security interests or encumbrances. Investors are and shall be entitled to the rights, remedies and benefits provided for in the Purchase Agreement and the other Transaction Documents and pursuant to applicable law, but subject to the terms and conditions of this Agreement. All references to the Purchase Agreement shall mean the Purchase Agreement as modified by this Agreement.

        12.    Collateral.    Each Company hereby confirms and agrees that all security interests and liens granted to Investors continue in full force and effect and shall continue to secure the Secured Obligations (as defined in the Security Agreement). Companies acknowledge and agree that nothing herein contained in any way impairs Investors' rights or priority in such security.

        13.    Release.    (a) Each Company hereby acknowledges and agrees that: (i) neither it nor any of its Affiliates has any claim or cause of action against Investors, or any of them (or any of their respective Affiliates, officers, directors, employees, attorneys, consultants or agents) and (ii) Investors have heretofore properly performed and satisfied in a timely manner all of their obligations to each Company under the Purchase Agreement and the other Transaction Documents. Notwithstanding the foregoing, in order to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of Investors' rights, interests, security and/or remedies under the Purchase Agreement and the other Transaction Documents, for and in consideration of the agreements contained in this Agreement and other good and valuable consideration, each Company (for itself and its Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (each a "Releasor" and collectively, the "Releasors") does hereby fully, finally, unconditionally and irrevocably release and forever discharge Investors, and each of them, and each of their Affiliates, officers, directors, employees, attorneys, consultants and agents (each a "Released Party" and collectively, the "Released Parties") from any and all debts, claims, obligations, damages, costs, attorneys' fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent of fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the date hereof arising out of, connected with or related in any way to this Agreement, the

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Purchase Agreement or any other Transaction Document, or any act, event or transaction related or attendant thereto, or Investors' agreements contained therein, or the possession, use, operation or control of any of the assets of agreements contained therein, or the possession, use, operation or control of any of the assets of any Company, or the making of any advance, or the management of such advance or the Collateral, provided the foregoing release in no manner releases the Investors from any breach of the any term of this Agreement or the Transaction Documents after the date hereof.

        (b)   Each Company understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted iii breach of the provisions of such release.

        (c)   Each Company agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final and unconditional nature of the release set forth above.

        (d)   Each Company, on behalf of itself and its heirs, successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, jointly and severally, covenants and agrees with each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any claim released, remised and discharged by such Company pursuant to this Section. If any Company violates the foregoing covenant, each Company agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys' fees and costs incurred by any Releasee as a result of such violation.

        14.    GOVERNING LAW:

        (a)   THE VALIDITY OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER TRANSACTION DOCUMENT IN RESPECT OF SUCH OTHER TRANSACTION DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

        (b)   THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. CENTURION, LEVEL 3 AND EACH COMPANY WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 14(b).

        (c)   TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, CENTURION, LEVEL 3 AND EACH COMPANY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. CENTURION, LEVEL 3 AND EACH COMPANY REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS

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FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

        15.    Waivers.    No Company will, directly or indirectly, do any act or fail to do any act, which would impair or affect Investors' security interest in any Collateral, nor will any Company, upon any default or Event of Default, contest Investors' right to obtain judgment against the Companies or to foreclose upon any Collateral pledged to Investors, nor will any Company move to vacate or enjoin such judgment or foreclosure. Each Company waives and renounces all rights which are waivable under Article 9 of the Code (as defined in the Security Agreement), whether such rights are waivable before or after default, including, without limitation, those rights with respect to compulsory disposition of collateral (U.C.C. §§9-610, 9-615 and 9-620), any right of redemption under U.C.C. §9-623, and any right to notice relating to disposition of collateral under U.C.C. §9-611.

        16.    Future Negotiations.    The parties hereto acknowledge and agree that (A) Investors have not agreed to and has no future obligation whatsoever to discuss, negotiate or agree to any restructuring of the Companies' obligations with respect to the Purchase Agreement, the Notes (including, without limitation, the Additional Notes), the other Transaction Documents, or any of them, or any modification, amendment, restructuring or reinstatement of such agreements or, except as expressly provided in this Agreement, to forbear from exercising its rights and remedies under such agreements or otherwise, and (B) if there are any future discussions among Investors and the Companies concerning any such restructuring, modification, amendment or reinstatement, then no restructuring, modification, amendment, reinstatement, compromise, settlement, agreement or understanding with respect to obligations under the Purchase Agreement, the Notes (including, without limitation, the Additional Notes), the other Transaction Documents, or any of them, or any aspect thereof, shall constitute a legally binding agreement or contract or have any force or effect whatsoever unless and until reduced to writing and signed by Investors and that none of the parties hereto shall assert or claim in any legal proceedings or otherwise that any such agreement exists except in accordance with the terms of this Section.

        17.    Confidentiality.    The Investors acknowledge and agree to keep as confidential and not share with any person, other than any of its officers, directors, employees, counsel, agents, investment bankers, or accountants, including, without limitation, Investors' Consultant, any and all confidential information received by the Investors or the Investors' Consultant pursuant to the terms of this Agreement or the Transaction Documents, including, but not limited to, all information provided by the Companies pursuant to Sections 3(e) and 3(h) hereof; provided, however, that such party may disclose or use any such information (i) as has become generally available to the public other than through a breach of this Agreement by such party or any of its affiliates and representatives, (ii) as becomes available to the Investors on a non-confidential basis from a source other than the Companies or the Companies' affiliates or representatives, provided that such source is not known or reasonably believed by such party to be bound by a confidentiality agreement or other obligations of secrecy, (iii) as may be required in any report, statement or testimony required to be submitted to any governmental entity having or claiming to have jurisdiction over it, or as may be otherwise required by applicable law, or as may be required in response to any summons or subpoena or in connection with any litigation, (iv) as may be required to obtain any governmental entity approval or consent required in order to consummate the transactions contemplated by this Agreement or the other Transaction Documents or (v) as may be necessary to establish or enforce the Investors' rights and/or to exercise the Investors' remedies under the Purchase Agreement, this Agreement and the other Transaction Documents, subject to the execution and delivery of a Non-Disclosure Agreement containing restrictions and limitations substantially similar to those contained in this Section 17. As condition to the receipt of any confidential information, the Companies may require the Investors' Consultant to execute a customary confidentiality and non-use agreement, prohibiting the dissemination or use of information provided,

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other than for the purposes specifically set forth in Section 3(h). In addition to any remedy at law or in equity, the Company shall be entitled to seek immediate injunctive relief for any breach or attempted breach of this Section 17. In addition to the foregoing confidentiality provisions, neither the Investors nor the Investors' Consultant shall provide any information regarding the Companies to any person who has considered or is considering the acquisition of any of the stock or assets of Buckeye.

        18.    Advice of Counsel.    Each Company (a) understands fully the terms of this Agreement and the consequences of the execution and delivery of this Agreement, (b) has been afforded an opportunity to discuss this Agreement with, and have this Agreement reviewed by, such attorneys and other persons as such Company may wish and specifically regarding the effect and implications of Sections 13 and 15 above, and (c) has entered into this Agreement and executed and delivered all documents in connection herewith of its own free will and accord and without threat, duress or other coercion of any kind by any Person and knowingly and voluntarily hereby waives the rights described therein or affected thereby. The parties hereto acknowledge and agree that neither this Agreement nor the other documents executed pursuant hereto shall be construed more favorably in favor of one than the other based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation and preparation of this Agreement and the other documents executed pursuant hereto or in connection herewith.

        19.    Signatories:    Each individual signatory hereto represents and warrants that he or she is duly authorized to execute this Agreement on behalf of his or her principal and that he or she executes the Agreement in such capacity and not as a party.

        20.    Duplicate Originals:    Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in counterparts, all of which counterparts taken together shall constitute one completed fully executed document. Signature by facsimile or PDF shall bind the parties hereto.

        21.    Severability:    The provisions of this Agreement are to be deemed severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect.

[Remainder of Page Intentionally Left Blank]

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        IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written.

Companies:	EVERGREEN ENERGY INC.
	By:	Name: Diana L. Kubik Title: Vice President and Chief Financial Officer
	EVERGREEN OPERATIONS, LLC
	By:	Name: Diana L. Kubik Title: Vice President and Chief Financial Officer
	BUCKEYE INDUSTRIAL MINING CO.
	By:	Name: Diana L. Kubik Title: Vice President and Chief Financial Officer
Investors:	CENTURION CREDIT FUNDING LLC
	By:	Name: Dan Small Title: Authorized Signatory
	LEVEL 3 CAPITAL FUND LP
	By:	Level 3 Capital Management LLC, its general partner
		By:	Name: Title:

[SIGNATURE PAGE TO SECOND AMENDMENT AND FORBEARANCE AGREEMENT]

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SECOND AMENDMENT AND FORBEARANCE AGREEMENT

EX-10.40

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Exhibit 10.40

EXECUTION COPY

ASSET PURCHASE AGREEMENT

AMONG

ROSEBUD MINING COMPANY,

("Buyer")

BUCKEYE INDUSTRIAL MINING CO.

                                                 ("Company")

AND

EVERGREEN ENERGY INC.

                                                 ("Parent")

March 12, 2010

TABLE OF CONTENTS

			Page
ARTICLE 1			1
DEFINITIONS			1
	1.1	Definitions.	1
	1.2	Accounting Terms	1
ARTICLE 2			1
PURCHASE AND SALE OF ASSETS			1
	2.1	Purchase and Sale	1
	2.2	Excluded Assets	2
	2.3	Assumed Liabilities	3
	2.4	Excluded Liabilities	3
	2.5	Non-Assignment of Assets	4
	2.6	Amounts Held in Trust	4
ARTICLE 3			4
PURCHASE PRICE			4
	3.1	Purchase Price	4
	3.2	Payment of the Purchase Price	4
	3.3	Determination and Payment of the Closing Indebtedness	4
	3.4	Escrow	4
	3.5	Allocation of Purchase Price	5
ARTICLE 4			5
REPRESENTATIONS AND WARRANTIES CONCERNING THE PARENT			5
	4.1	Authority; Capacity and Representation	5
	4.2	Execution and Delivery; Enforceability	5
	4.3	Noncontravention	5
ARTICLE 5			6
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY			6
	5.1	Organization and Good Standing; Authority; Enforceability	6
	5.2	Other Ventures	6
	5.3	Noncontravention	6
	5.4	Consents and Approvals	7
	5.5	Absence of Certain Changes or Events	7
	5.6	Taxes	8
	5.7	Employees	8
	5.8	Compliance with Laws	8

			Page
	5.9	Environmental Matters	8
	5.10	Real and Personal Properties	9
	5.11	Intellectual Properties	12
	5.12	Financial Statements	12
	5.13	Material Contracts	13
	5.14	Litigation	14
	5.15	Brokerage	14
	5.16	Material Suppliers and Customers	14
	5.17	Licenses and Permits	14
	5.18	Employee Benefit Plans and Other Compensation Arrangements	14
	5.19	Redbud West Point Ash Disposal Facility	15
	5.20	Acquired Assets	15
	5.21	No Additional Representations	15
ARTICLE 6			16
REPRESENTATIONS AND WARRANTIES OF BUYER			16
	6.1	Organization; Authorization	16
	6.2	Execution and Delivery; Enforceability	16
	6.3	Governmental Authorities; Consents	16
	6.4	Brokerage	16
	6.5	Financing	17
	6.6	Solvency	17
	6.7	Due Diligence Investigation	17
ARTICLE 7			17
CONDITIONS PRECEDENT			17
	7.1	Conditions to Buyer's Obligations	17
	7.2	Conditions to Sellers' Obligations	19
ARTICLE 8			19
THE CLOSING			19
ARTICLE 9			20
COVENANTS OF SELLERS			20
	9.1	Conduct of Business	20
	9.2	Access	20
	9.3	Change of Names	20

ii

			Page
	9.4	Exercise of Redbud Option to Acquire Permits	20
ARTICLE 10			21
COVENANTS OF BUYER			21
	10.1	Access	21
	10.2	Notices of Certain Events	21
	10.3	Employees	21
ARTICLE 11			21
ADDITIONAL COVENANTS OF BUYER AND SELLERS			21
	11.1	Termination	21
	11.2	Effect of Termination	22
	11.3	Updating of Disclosure Letter	22
	11.4	Pre-Closing Publicity	23
	11.5	Post-Closing Publicity	23
	11.6	Expenses	23
	11.7	No Assignments	23
	11.8	Confidentiality Agreement	23
	11.9	Satisfaction of Closing Conditions	23
	11.10	Tax Cooperation: Allocation of Taxes	23
	11.11	Replacement of Bonds and Letters of Credit	24
	11.12	Covenant Not to Compete	24
ARTICLE 12			25
INDEMNIFICATION			25
	12.1	Indemnification of Buyer	25
	12.2	Limitations on Indemnification	25
	12.3	Indemnification of Parent	26
	12.4	Procedures Relating to Indemnification	26
	12.5	Limitation of Remedies	28
	12.6	Subrogation	28
ARTICLE 13			28
CERTAIN DEFINITIONS			28
ARTICLE 14			34
CONSTRUCTION; MISCELLANEOUS PROVISIONS			34
	14.1	Notices	34

iii

		Page
14.2	Entire Agreement	35
14.3	Modification	35
14.4	Governing Law; Jurisdiction and Venue	35
14.5	Specific Performance	35
14.6	Binding Effect	36
14.7	Headings	36
14.8	Number and Gender; Inclusion	36
14.9	Counterparts	36
14.10	Third Parties	36
14.11	Disclosure Letter and Exhibits	36
14.12	Time Periods	36
14.13	Construction	36

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ASSET PURCHASE AGREEMENT

        THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of the 12th day of March, 2010, among Rosebud Mining Company, a Pennsylvania corporation ("Buyer"), Evergreen Energy Inc., a Delaware corporation ("Parent"), and Buckeye Industrial Mining Co., an Ohio corporation (the "Company," and together with Parent, collectively, "Sellers," and each individually, a "Seller").

RECITALS:

        A.    The Company is engaged in the business of (i) operating surface and underground coal mines in four (4) Ohio counties (Carroll, Columbiana, Jefferson and Stark); (ii) mining, processing and selling coal to electric utilities and industrial and institutional end-users; and (iii) ash removal and disposal and the operation of an ash monofill located in the State of Ohio (collectively, the "Business").

        B.    Parent owns certain assets used in the operations of the Business.

        C.    Buyer desires to purchase the assets used primarily in the operations of the Business, and Sellers desire to sell such assets of the Business to Buyer, all upon the terms and conditions hereinafter set forth.

        Now, therefore, in consideration of the mutual representations, warranties, covenants and agreements set forth in this Agreement, Buyer and Sellers hereby agree as follows:

ARTICLE 1

DEFINITIONS

        1.1    Definitions.    Certain terms used in this Agreement shall have the meanings set forth in Article 13, or elsewhere herein as indicated in Article 13.

        1.2    Accounting Terms.    Accounting terms used in this Agreement and not otherwise defined herein shall have the meanings attributed to them under GAAP except as may otherwise be specified herein.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

        2.1    Purchase and Sale.    Subject to the terms and conditions of this Agreement, at the Closing, Sellers shall sell, assign, transfer and deliver to Buyer, free and clear of all Liens, except for Permitted Liens, and Buyer shall purchase from Sellers, all of Sellers' right, title and interest in and to the following assets used primarily in the operation of the Business as of the Closing Date (collectively, the "Acquired Assets"), which Acquired Assets include:

        (a)   the owned real property identified in Section 2.1(a)(i) of the Disclosure Letter (the "Owned Real Property") and the leased real property identified in Section 2.1(a)(ii) of the Disclosure Letter (the "Leased Real Property," and together with the Owned Real Property, collectively the "Real Property");

        (b)   the machinery, equipment, furniture, fixtures, vehicles, tools, supplies, improvements and other tangible personal property, whether owned or leased by Sellers (the "Equipment"), identified in Section 2.1(b) of the Disclosure Letter;

        (c)   all of the Company's permits, approvals, orders, authorizations, consents, licenses, certificates, filings or registrations with or issued by any Governmental Authority, including all permits relating to the reclamation of coal mining properties, which have been issued or granted to or are owned, used or held by Sellers in the operation of the Business and all pending applications therefor (collectively, the "Permits"), which are listed in Section 2.1(c) of the Disclosure Letter;

        (d)   all Intellectual Property owned or licensed by Sellers primarily for use in the conduct of the Business and listed in Section 2.1(d) of the Disclosure Letter (collectively, the "Company Intellectual Property");

        (e)   all material Contracts (excluding however the Contract Mining Agreement between Company and Mountain Spring Coal Company dated October 1, 2006, the Employment Agreement dated September 29, 2006 with Jack Grinwis, the Employment agreement dated October 10, 2006 with John Grisham, and the Letter dated September 12, 2006 concerning employment with Kenneth Kelly), including Real Property leases, equipment and personal property leases, all capital leases and obligations, contracts relating to capital expenditures, contracts for the sale of coal and/or services (including unfilled customer and purchase orders) (collectively, the "Assumed Contracts"), which Contracts are listed in Section 2.1(e) of the Disclosure Letter;

        (f)    all coal and mineral rights in mineable coal reserves located on the Real Property (collectively, the "Reserves");

        (g)   all extracted, unsold coal inventory, wherever located (including inventory in transit and owned by the Company), existing as of the Closing Date;

        (h)   all rights of ingress and egress to all of the Reserves and the Real Property;

        (i)    all maps, reserve studies, engineering reports and other records relating to the Acquired Assets;

        (j)    all customer lists, sales brochures, correspondence and production records;

        (k)   all warranties and guaranties by, and rights, choses in action and claims, known or unknown, matured or unmatured, accrued or contingent against, third parties; and

        (l)    all right, title and interest in and to the membership interests held by the Company in Montgomery Coal Holdings, LLC, an Ohio limited liability company ("Montgomery").

        2.2    Excluded Assets.    Notwithstanding anything contained in Section 2.1 hereof to the contrary, Sellers are not selling, and Buyer is not purchasing (i) any assets of the Company set forth in Sections 2.2(a)-(l) below and (ii) any assets of Sellers not used primarily in the operation of the Business, all of which shall be retained by Sellers (collectively, the "Excluded Assets"). To the extent that any of the Excluded Assets are located at the Real Property, Sellers shall be provided a reasonable period after the Closing Date, but not to exceed sixty (60) days, to remove, at Sellers' expense, all such Excluded Assets. The Excluded Assets include:

        (a)   all cash, investments and other cash equivalents of the Company;

        (b)   all accounts receivable and notes receivable of the Company, and any security held by the Company for the payment thereof, as of the Closing Date;

        (c)   all performance bonds for reclamation or otherwise, surety bonds or escrow agreements and any payment or prepayments made with respect thereto, or certificates of deposit or other sums or amounts posted by Sellers to secure any of the foregoing for reclamation or otherwise;

        (d)   the Company's capital stock, corporate and minute books, Tax returns and other organizational documents, and the Company's financial books and records and employment records, other than those employment records pertaining to Hired Employees and allowed to be transferred to Buyer under applicable Laws;

        (e)   all qualifications to transact business as a foreign corporation, arrangements with registered agents with respect to foreign qualifications, and taxpayer and other identification numbers;

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        (f)    any Tax benefits and rights to refunds, including rights to any net operating losses;

        (g)   any Contracts (other than the Assumed Contracts) or rights relating to borrowed money;

        (h)   any prepaid items, deposits, advance payments, deferred charges and other similar assets (except prepaid royalties relating to the Reserves or the Real Property);

        (i)    all insurance policies and rights or Claims arising from such policies;

        (j)    all Intellectual Property, including licenses, patents, patent applications, copyrights, copyright applications, computer programs and formula, not used primarily in the operations of the Business;

        (k)   all Plans; and

        (l)    the Contract Mining Agreement between Company and Mountain Spring Coal Company, commencing October 1, 2006, with the stipulation that Company terminates the Mountain Spring contract at or prior to Closing without any penalty to Buyer, the Employment Agreement dated September 29, 2006 with Jack Grinwis, the Employment agreement dated October 10, 2006 with John Grisham, and the Letter dated September 12, 2006 concerning employment with Kenneth Kelly.

        2.3    Assumed Liabilities.    As further consideration for the purchase of the Acquired Assets and consummation of the other transactions contemplated hereby, on the Closing Date, Buyer shall assume and agree to perform and discharge in full, when due, all liabilities of the Company and the Business arising under or associated with (collectively, the "Assumed Liabilities"):

        (a)   Buyer's conduct of the Business after the Closing Date, including with respect to the use of the Acquired Assets and the hiring and employment of the Hired Employees;

        (b)   all Liabilities for and obligations of Sellers relating to the Acquired Assets arising, accruing and payable after the Closing Date, including all Liabilities and obligations arising in connection with the Assumed Contracts, other than Liabilities and obligations arising from breaches thereof prior to the Closing Date.

        (c)   all Liabilities related to the Permits for reclamation, whether prescribed by law, contract or otherwise, including, but not limited to, Permits listed in Section 2.1(c) of the Disclosure Letter; provided, however, that Sellers shall retain the Liability for any fines and penalties arising out of notices of violation, notices of non-compliance or orders, in each case issued prior to the Closing; and

        (d)   all obligations of whatever nature (other than bonds to be replaced in accordance with the terms of Section 11.11 below) relating to the Real Property and the personal property acquired by Buyer.

Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation. All such other liabilities and obligations shall be retained by and remain liabilities and obligations of Sellers.

        2.4    Excluded Liabilities.    Except for the assumption by Buyer of the Assumed Liabilities, Sellers will retain all liabilities relating to the Business (including, for clarity, all accounts payable of the Company and all Indebtedness of the Company, each as of the Closing Date) and, except for the Assumed Liabilities, Buyer shall not assume nor be liable or responsible for, whether as a successor or otherwise, any obligation or liability of Sellers or the Business of any kind or nature whatsoever, specifically including any obligations or liabilities associated with the material Contracts that Buyer is not taking assignment of and are specifically excluded in Section 2.1(e) above (such liabilities collectively referred to herein as the "Excluded Liabilities").

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        2.5    Non-Assignment of Assets.    This Agreement shall not constitute an agreement to assign or transfer any assets of Sellers, if an attempted transfer or assignment thereof, with the approval, authorization or consent of, or granting or issuance of any license or permit by, any third party thereto (with respect thereto), would constitute a breach thereof or in any way negatively affect the rights of Sellers or Buyer, as the assignee or transferee of such asset, as the case may be, thereunder. If the Closing occurs and such authorization, consent, approval, license or permit is required for the transfer or assignment of any asset of Sellers at or before the Closing, but not obtained, Sellers will cooperate with Buyer without further consideration (other than as provided in clause (b) of this Section 2.5) in any arrangement reasonably acceptable to Buyer and Sellers, designed to both (a) provide Sellers with the benefits of any such asset, and (b) cause Buyer to bear all costs and obligations of or under any such asset. Any transfer or assignment to Buyer of any asset that shall require the consent, approval, authorization of, or granting of any license or permit by any third party for such assignment or transfer as provided hereunder shall be made subject to such consent, approval, authorization, license or permit being obtained.

        2.6    Amounts Held in Trust.    Any amounts received by Buyer after the Closing with respect to any Excluded Asset shall be held by Buyer in trust for Sellers until promptly paid to Sellers. Likewise, any amounts received by Sellers after the Closing with respect to any Acquired Asset shall be held by Sellers in trust for Buyer until promptly paid to Buyer. Any such money received by Buyer or Sellers shall be paid over to the proper party within ten (10) business days after receipt.

ARTICLE 3

PURCHASE PRICE

        3.1    Purchase Price.    The aggregate purchase price for all of Acquired Assets (the "Purchase Price") shall be an amount equal to Twenty Seven Million Eight Hundred Fifty Two Thousand Dollars ($27,852,000).

        3.2    Payment of the Purchase Price.    Subject to the terms and conditions of this Agreement, at the Closing, Buyer shall: (a) pay and deliver the Purchase Price minus the Closing Indebtedness and minus the Escrowed Funds to Sellers by means of a wire transfer of immediately available cash funds to the account specified by Sellers prior to the Closing (the "Sellers' Account"); and (b) pay the Indebtedness of the Company identified in Section 3.2(c) of the Disclosure Letter (the "Closing Indebtedness") as provided for in Section 3.3 below.

        3.3    Determination and Payment of the Closing Indebtedness.    At the Closing, Buyer will wire, on Sellers' behalf, in immediately available funds, pursuant to appropriate Pay-Off Documents and instructions provided by Parent, the Closing Indebtedness. At least five (5) Business Days prior to the Closing Date, Sellers will deliver to Buyer executed payoff letters with respect to the Closing Indebtedness that set forth (i) the amount to be paid on the Closing, together with the recipient thereof and the related wire transfer instructions, and (ii) that the payment of such amount will result in a release of the Company from all obligations and of all Liens relating to such Closing Indebtedness (the "Pay-Off Documents").

        3.4    Escrow.    On the date hereof, Buyer, Sellers and KeyBank, N.A. (the "Escrow Agent") are entering into an escrow agreement, in the form of Exhibit A attached hereto (the "Escrow Agreement"), pursuant to which an amount equal to ten percent (10.0%) of the Purchase Price (the "Escrowed Funds") shall be deposited into escrow for the purposes of (i) establishing a good faith deposit by Buyer to evidence its intention to consummate the transactions contemplated hereby and which may be refunded to Buyer pursuant to Section 11.2 and (ii) from and after the Closing, securing Sellers' obligations, if any, under Article 12 hereof and shall be distributed to Sellers upon the expiration of the General Survival Period, subject to any pending claims for indemnification.

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        3.5    Allocation of Purchase Price.    The Purchase Price shall be allocated in accordance with a schedule to be mutually agreed upon by the parties following the Closing. After the Closing, Buyer and Sellers shall make consistent use of the agreed upon allocation for all purposes (including financial and regulatory reporting purposes and Tax purposes). Buyer and Sellers further agree to file, as applicable, their respective U.S. federal income Tax Returns and Form 8594 and, to the extent not in conflict with applicable Law, their other Tax Returns reflecting such allocation and any other reports required by Section 1060 of the Code, in accordance with such allocation. Each party agrees to prepare and timely file all applicable IRS forms, to cooperate with the other party in the preparation of such forms and to furnish the other party with a copy of such forms prepared in draft, within a reasonable period before the due date thereof. In addition, each party agrees to notify the other party in the event any taxing authority takes or purports to take a position inconsistent with the agreed-upon allocations.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES CONCERNING THE PARENT

        Except as set forth in the Disclosure Letter attached hereto and made a part hereof, Parent represents and warrants to Buyer as follows:

        4.1    Authority; Capacity and Representation.    Parent possesses all requisite legal right, power, authority and capacity (corporate or otherwise) to execute, deliver and perform this Agreement, and each other agreement, instrument and document to be executed and delivered by Parent in connection therewith (the "Parent Ancillary Agreements"), and consummate the transactions contemplated herein and therein. The execution, delivery and performance by Parent of this Agreement and such Parent Ancillary Agreements and the consummation by Parent of the transactions contemplated hereby and thereby have been duly and validly authorized (by all requisite corporate action) on the part of Parent. Parent is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

        4.2    Execution and Delivery; Enforceability.    This Agreement has been, and each Parent Ancillary Agreement will upon delivery be, duly executed and delivered by Parent and constitutes, or will upon such delivery constitute, the legal, valid and binding obligation of Parent, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights or by principles of equity (the "Enforceability Exceptions").

        4.3    Noncontravention.

        (a)   All consents, approvals, authorizations, permits, filings and notifications set forth in Section 4.3(a) of the Disclosure Letter have been waived, obtained or made, neither the execution and delivery of this Agreement or any Parent Ancillary Agreement nor the consummation by Parent of the transactions contemplated hereby or thereby, nor compliance by Parent with any of the provisions hereof or thereof, will: (i) conflict with or result in a breach of, any provisions of the Charter Documents of Parent, or (ii) violate any Law or Order applicable to Parent or by which any properties or assets owned or used by Parent are bound or affected; except, in the case of clause (ii) of this Section 4.3(a), as would not have a Material Adverse Effect or as would not materially impair the ability of Parent to consummate the transactions contemplated by this Agreement.

        (b)   Except as set forth in Section 4.3(b) of the Disclosure Letter, no consent, approval, or authorization of, or filing with or notification to, any Governmental Authority is required to be obtained or made by Parent in connection with: (i) the execution, delivery and performance by Parent of this Agreement or any Parent Ancillary Agreement; or (ii) the compliance by Parent with any of the provisions hereof or thereof or the consummation by Parent of the transactions

5

contemplated hereby or thereby; except where the failure to obtain such consent, approval, authorization, permit of, or to make such filing with or notification to, would not, when taken together with all other such failures by Parent, have a Material Adverse Effect.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY

        Except as set forth in the Disclosure Letter attached hereto and made a part hereof, the Company represents and warrants to Buyer as follows:

        5.1    Organization and Good Standing; Authority; Enforceability.

        (a)   The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. The Company has all requisite corporate power and authority to own and lease its assets and to operate the Business as the same are now being owned, leased and operated. The Company is duly qualified or licensed to do business as a foreign corporation in, and is in good standing in, each jurisdiction in which the nature of its business or its ownership of its properties requires it to be so qualified or licensed, except where the failure to be so qualified or licensed would not have a Material Adverse Effect. The Company has delivered or made available to Buyer a true, complete and correct copy of the Charter Documents, as currently in effect, for the Company.

        (b)   The Company possesses all requisite legal right, power, authority and capacity (corporate or otherwise) to execute, deliver and perform this Agreement, and each other agreement, instrument and document to be executed and delivered by the Company in connection therewith (the "Company Ancillary Agreements," and together with the Seller Ancillary Agreements, collectively the "Ancillary Agreements"), and consummate the transactions contemplated herein and therein. The execution, delivery and performance by the Company of this Agreement, the Company Ancillary Agreements and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all requisite corporate action on the part of the Company.

        (c)   This Agreement has been, and each Company Ancillary Agreement will upon the delivery thereof be, duly executed and delivered by the Company and constitutes, or will upon such delivery constitute, the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforcement may be limited by the Enforceability Exceptions.

        5.2    Other Ventures.    Except as set forth in Section 5.2 of the Disclosure Letter, the Company does not own, of record or beneficially, any equity ownership interest in any other Person, nor is it a partner or member of any partnership, limited liability company or joint venture.

        5.3    Noncontravention.

        (a)   Assuming all consents, approvals, authorizations, permits, filings and notifications set forth in Section 5.3(a) of the Disclosure Letter have been waived, obtained or made, neither the execution and delivery of this Agreement or any of the Company Ancillary Agreements, nor the consummation by the Company of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof, will: (i) conflict with or result in a breach of any provisions of its Charter Documents; (ii) constitute or result in the breach of any term, condition or provision of, or constitute a default under (with or without notice or lapse of time, or both), or give rise to any right of termination, consent, amendment, cancellation, modification or acceleration with respect to, or give rise to any obligation of the Company to make any payments under, or result in the creation or imposition of a Lien upon any property or assets of the Company pursuant to any Material Contract to which the Company is a party or by which

6

any of its properties or assets may be subject; or (iii) contravene, conflict with or result in a violation of, or constitute a failure to comply with any Law or Order applicable to the Company or by which any properties or assets are bound or affected; except, in the case of clauses (ii) and (iii) of this Section 5.3(a), as would not have a Material Adverse Effect or as would not materially impair the ability of the Company to consummate the transactions contemplated by this Agreement.

        (b)   No consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority is required to be obtained or made by the Company in connection with: (i) the execution and delivery of this Agreement or any Company Ancillary Agreement; or (ii) the compliance by the Company with any of the provisions hereof or thereof or the consummation of the transactions contemplated hereby or thereby; except where the failure to obtain such consent, approval, authorization, permit, or to make such filing with or notification to, would not, when taken together with all other such failures by the Company, have a Material Adverse Effect.

        5.4    Consents and Approvals.Section 5.4 of the Disclosure Letter sets forth a true and complete list of each material consent, waiver, authorization or approval of any Governmental Authority or any other Person that is required in connection with the execution, delivery and performance of this Agreement.

        5.5    Absence of Certain Changes or Events.    Except as set forth in Section 5.5 of the Disclosure Letter, since January 1, 2010:

        (a)   other than circumstances affecting the Company and its competitors generally, there has not occurred any event or circumstance that constitutes a Material Adverse Effect;

        (b)   other than as required by applicable Law or GAAP, there has not been any material change in the Tax reporting or accounting policies or practices of the Company;

        (c)   (A) other than in the ordinary course of business, the Company has not made, or granted: (1) any bonus or any wage, severance or termination pay, salary or compensation increase to any current director or officer; (2) any increase of any benefit provided under any employee benefit plan, employment agreement or arrangement, including any fringe benefit plan or arrangement; or (3) any equity or equity-based compensation award; and (B) other than in the ordinary course of business or to comply with, or respond to changes in, Law, the Company has not amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement;

        (d)   the Company has not merged or consolidated with any corporation or other entity or invested in, loaned, made an advance or capital contribution to or otherwise acquired any capital stock or business of any Person, or consummated any business combination transaction, in each case, whether a single transaction or series of related transaction;

        (e)   the Company has not amended its Charter Documents to take, agree to take or authorize any action to wind up its affairs or dissolve or change its corporate or other organizational form or amend any terms of its outstanding securities;

        (f)    the Company has not sold, assigned, transferred, subjected to any Lien, or otherwise disposed of any tangible or intangible assets having a book value, in any individual case, in excess of One Hundred Thousand Dollars ($100,000), except for sales of inventory in the ordinary course of business consistent with past practice and except for Permitted Liens;

        (g)   the Company has not purchased or leased, or has committed to purchase or lease, or authorized any capital expenditures or commitment for capital expenditures, of any asset for an amount in excess of One Hundred Thousand Dollars ($100,000) individually, except purchases of inventory and supplies in the ordinary course of business consistent with past practice; and

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        (h)   the Company has not entered into any agreement or otherwise committed to do any of the foregoing.

        5.6    Taxes.

        (a)   All Tax Returns for all open years required to be filed by or with respect to the Company have been properly filed (taking into account applicable extensions of time to file) and all such Tax Returns (including information provided therewith or with respect thereto) are accurate and complete in all material respects. All Taxes shown as due on such Tax Returns have been paid, other than Taxes which are not yet due or which, if due, are not delinquent or are being contested in good faith by appropriate proceedings or have not been finally determined, and for which, in each case, adequate reserves have been established in the books and records of the Company.

        (b)   There are no Tax claims, audits or proceedings by any Taxing Authority pending or, to the Company's Knowledge, threatened in writing in connection with any Taxes due from or with respect to the Company.

        (c)   There are not currently in force any waivers or agreements binding upon the Company for the extension of time for the assessment or payment of any Tax for any taxable period, and no request for any such waiver or extension is currently pending.

        (d)   The Company has properly withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any Person.

        (e)   The Company is not a party to or bound by any Tax allocation or Tax sharing agreement, or any similar agreement.

        (f)    This Section 5.6 represents the sole and exclusive representation and warranty of the Company regarding Tax matters.

        5.7    Employees.    There are no pending controversies, grievances or claims by any employee or former employee of the Company with respect to his or her employment, termination of employment or any employee benefits (other than routine claims for benefits), except such that would not have a Material Adverse Effect. Except as set forth in Section 5.7 of the Disclosure Letter, the Company is not a party to any collective bargaining agreement nor, to the Company's Knowledge, is there pending or underway any union organizational activities or proceedings with respect to employees of the Company. Section 5.7 of the Disclosure Letter sets forth a complete list, as of the date hereof, of all employees of the Company who, for the twelve (12) month period ended December 31, 2009, received aggregate employment compensation in the form of salary and bonus in excess of One Hundred Fifty Thousand Dollars ($150,000). There is no labor strike, slowdown or stoppage pending or, to the Company's Knowledge, threatened in writing against the Company.

        5.8    Compliance with Laws.    Except as set forth in Section 5.8 of the Disclosure Letter, the Company is and has been conducting the Business in compliance, in all material respects, with all applicable Laws relating to the Acquired Assets and the operation and conduct of the Business, and no assertion of a violation of any such Laws has been received or, to the Company's Knowledge, is threatened. Notwithstanding the foregoing or anything to the contrary in this Agreement, the representations or warranties in this Section 5.8 shall NOT apply to Environmental Laws and Buyer may look only to the representations or warranties in Section 5.9 as they may relate to the Company's compliance with Environmental Laws.

        5.9    Environmental Matters.    To the Knowledge of the Company and Parent, Section 5.9(a) of the Disclosure Letter contains a list of all environmental studies, analyses and reports prepared during the last five years and in the Company's possession or reasonably available to the Company relating to any Business Facility and the Business (collectively, the "Environmental Reports"), and Sellers have made

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available to Buyer copies of all such Environmental Reports, if any. Except (i) as set forth in the Environmental Reports and (ii) set forth in Section 5.9(b) of the Disclosure Letter:

        (a)   The Company is in compliance, in all material respects, with applicable Environmental Laws and Environmental Permits, and all past noncompliance (if any) by the Company with any Environmental Law or Environmental Permit has been resolved without any pending, ongoing or future obligation, cost or liability.

        (b)   Neither the Company nor any Business Facility is subject to any pending written information request or known, pending, or to the Knowledge of the Company or Parent, threatened claim, demand, action, notice of violation or liability, or proceeding relating to or arising under Environmental Law or Hazardous Materials.

        (c)   The Company currently holds all Environmental Permits (all of which are listed in Section 5.9(b), and has timely filed applications for renewal of all Environmental Permits such that the Environmental Permits will remain in effect during the pendency of the application. All Environmental Permits are in full force and effect and are final and non-appealable. No action, claim or proceeding seeking the revocation, modification or suspension of any Environmental Permit is pending, or to the Knowledge of the Company or Parent, threatened.

        (d)   The Company has not received written or, to the Knowledge of the Company and Parent, other notice that any occupant or tenant of any current Business Facility (A) is in violation of any Environmental Law; (B) is the subject of any known, pending, or threatened claim, demand, action, or proceeding arising under or relating to Environmental Law or Hazardous Material; or (C) does not have or has not renewed any Environmental Permit applicable to its assets or operations.

        (e)   There has been no Release or threatened Release of any Hazardous Materials on, at, to or from any Business Facility or any operations of the Company. There are no, nor have there ever been any, storage tanks (whether underground or above ground) or solid waste management units located on, under or adjoining any Business Facility other than as listed on Section 5.9(e) of the Disclosure Letter.

        (f)    None of the Hazardous Materials generated by the Company or for which the Company arranged for disposal have been treated, stored, disposed of or released at a location that is subject to an existing or potential claim or liability (including, without limitation, strict liability) under Environmental Laws;

        (g)   The Company has not received written, or, to the Knowledge of the Company or Parent, other notice that it has been identified as a potentially responsible party under CERCLA or other Environmental Law, nor has any Business Facility been listed or proposed for listing on the National Priorities List under CERCLA, or on any comparable list identifying properties in need of investigation or remediation under Environmental Laws, nor are the Business Facilities subject to any lien arising under Environmental Laws.

        (h)   The Company has no ongoing investigation, removal, remedial or cleanup obligations under Environmental Laws or Environmental Permits, relating to the ownership, use, maintenance, or operation by the Company of any Business Facility, nor has the Company voluntarily undertaken any of the foregoing.

        5.10    Real and Personal Properties.

        (a)   The Real Property listed in Sections 2.1(a)(i) and 2.1(a)(ii) of the Disclosure Letter constitutes all surface rights, coal and other mineral rights, and other real property rights and interests presently used in the ordinary course of business of the Company. Except as set forth in

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Section 5.10(a) of the Disclosure Letter, the Company owns or leases all real property interests reasonably necessary for the operation of the Business.

        (b)   Section 5.10(b) of the Disclosure Letter contains a complete and accurate list of all Real Property the Company leases or licenses to any other Person (collectively, the "Lessor Leases").

        (c)   The Company has good and marketable fee simple title to all of the Owned Real Properties reflected in Section 2.1(a)(i) of the Disclosure Letter as being owned by the Company, and a valid leasehold interest in all of the Real Properties reflected in Section 2.1(a)(i) of the Disclosure Letter as being leased to the Company, free and clear of all Liens except for Permitted Liens.

        (d)   Each of the Surface Leases, Lessor Leases, Mineral Leases, and Easements is (i) the legal, valid and binding obligation of the Company, (ii) in full force and effect in accordance with its terms, and (iii) enforceable against all Persons party thereto or bound thereby in accordance with its terms. Except as disclosed in Section 5.10(d) of the Disclosure Letter and except for Permitted Encumbrances, the Company and Parent have no Knowledge that any Easements, Surface Leases or Mineral Leases are subject to any ground lease, mortgage, deed of trust or other Liens that would entitle the holder thereof to interfere with or disturb the Company's use, enjoyment, exercise, or enforcement of the estate, rights, benefits, or privileges granted to the Company thereunder so long as the Company is not in default. There exists no default or event of default (or any event that with notice or lapse of time or both would become a default) on the part of the Company or, to the Company's or Parent's Knowledge, the other party under any Surface Lease, Lessor Lease, Mineral Lease, or Easement, that in any case could, when taken in the aggregate, be reasonably expected to cause a Material Adverse Effect on the Business. Neither the Company nor Parent has received any notice of any default under any Surface Lease, Lessor Lease, Mineral Lease, or Easement that has not been cured or any other termination notice with respect thereto, that in any case could, when taken in the aggregate, be reasonably expected to cause a Material Adverse Effect on the Business. Sellers have provided to Buyer a complete and correct copy of each Surface Lease, Lessor Lease, Mineral Lease, and Easement, including all amendments thereto and assignments thereof.

        (e)   Except for the Lessor Leases and those matters set forth in Section 5.10(e) of the Disclosure Letter (the "Pre-Approved Matters"), the Company has not leased, subleased, assigned, mortgaged, pledged, or otherwise transferred or encumbered any of the Real Property.

        (f)    Except as set forth in Section 5.10(f) of the Disclosure Letter, the Company is not party to any agreement or option to purchase any real property or interest therein and Sellers are not a party to any agreement or option to purchase any real property or interest therein which property or interest could be necessary or desirable for the Business.

        (g)   Except as set forth in Section 5.10(g) of the Disclosure Letter, no Affiliate of the Company is party to any Easement, Surface Lease, Mineral Lease, Lessor Lease, or other agreement affecting any of the Real Property; nor does any party to any Easement, Surface Lease, Mineral Lease, Lessor Lease, or other agreement affecting any of the Real Property have any economic interest in the Company other than through such agreement.

        (h)   Section 5.10(h) of the Disclosure Letter lists the balances of all security deposits (whether in cash, letter of credit, or other form) currently held by the lessor under any Surface Lease or Mineral Lease and such balances represent the full amount the Company is required to deposit under each Surface Lease or Mineral Lease. Section 5.10(h) of the Disclosure Letter lists the balances of all security deposits (whether in cash, letter of credit, or other form) currently held by the Company under the Lessor Leases. Such balances represent the full amount of all security deposits to which the Company is entitled under the Lessor Leases.

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        (i)    Except as set forth in Section 5.10(i) of the Disclosure Letter, the Company does not owe, nor will it owe in the future, any brokerage commissions, finder's fees, or similar compensation to any Person with respect to any Surface Lease, Mineral Lease, or Lessor Lease.

        (j)    To the extent in Sellers' possession, custody or control, Sellers have made available to Buyer a complete and correct copy of every (i) policy of title insurance, title report, title opinion, survey and environmental assessment of or related to the Real Property or any portion thereof; provided that Sellers do not represent or warrant to Buyer the completeness or accuracy of any such report; (ii) third party warranty related to the Real Property or any portion thereof that is still in force and effect; and (iii) certificate of occupancy, permit, license, franchise, approval and other authorization required for the Improvements and the Company's use of the Real Property to the extent required under applicable Legal Requirements. All data sheets, summaries, and other information compiled by the Company relating to the Real Property and provided to Buyer are, to the Knowledge of the Company and Parent, correct in all materials respects and do not omit any material information.

        (k)   All Improvements (i) have been installed, operated and maintained in accordance with accepted industry practice; (ii) to the Company's and the Parent's Knowledge are structurally sound, and free from defects (latent or patent) in design, workmanship or materials; and (iii) are adequate and suitable for the purposes for which they have been and are being employed. All Improvements used by the Company in the Business are either owned by the Company or leased under the Surface Leases or Mineral Leases. The Improvements are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing.

        (l)    All Real Property is either not subject to zoning restrictions or is zoned (and is not subject to "permitted nonconforming" use or structure classifications) to permit the uses the Company currently carries out, or intends to carry out, thereon or thereunder. The Company has complied, in all material respects, with all zoning ordinances and other Legal Requirements so that the Company's current use of, and exercise of its rights under, the Real Property as conducted by the Company may be lawfully continued.

        (m)  The Company has obtained and keeps in full effect all certificates of occupancy, permits, licenses, franchises, approvals and other authorizations required for the Improvements and the Company's use of, and exercise of its rights under, the Real Property consistent with applicable Legal Requirements, except for those instances where non-compliance could not have a Material Adverse Effect on the Business.

        (n)   The Real Property abut on and have adequate, direct vehicular access to a public road or have adequate access to a public road via a permanent, irrevocable, appurtenant easement benefiting such land and comprising a part of the Real Property except for those instances where noncompliance could not have a Material Adverse Effect on the Business. All Improvements are supplied with public or quasi-public utilities and other services appropriate and sufficient for the operation of the Business. No part of any Improvement encroaches on any real property not included in the Real Property, and, to the Knowledge of the Company and Parent, there are no buildings, structures, fixtures or other improvements primarily situated on adjoining property which encroach on any part of the Real Property.

        (o)   Except as disclosed in Section 5.10(o) of the Disclosure Letter, there are no outstanding options or rights of first refusal or limitations to purchase or lease any of the Company's right, title or interest in Real Property or any portion thereof or interest therein. Except as disclosed in Section 5.10(o) of the Disclosure Letter, the transactions contemplated herein do not require the consent of any other party to any Surface Lease, Mineral Lease, Lessor Lease, Easement, or other agreement affecting the Company's right, title or interest in Real Property.

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        (p)   Section 5.10(p) of the Disclosure Letter contains a list of all reclamation bonds and outstanding reclamation obligations for any properties affected by the Company's mining operations. The listed bonds represent all of the bonds the Company is required to post pursuant to applicable Legal Requirements and the Company's contractual obligations. Such bonds are sufficient in form and substance (and the current balance of each such bond is sufficient) to satisfy applicable Legal Requirements and the Company's contractual obligations. Such bonds have been delivered to the appropriate Persons pursuant to applicable Legal Requirements and the Company's contractual obligations. Section 5.10(p) of the Disclosure Letter contains a list of all properties affected by the Company's mining operations for which the Company has not identified all of the owners of the mineral rights and all of the owners of the surface rights. The Company has created suspense accounts adequate to compensate such owners for all such properties (which accounts are listed in Section 5.10(p) of the Disclosure Letter) and/or has otherwise complied with the Ohio Department of Natural Resources' rules and regulations concerning the reclamation and restoration of properties affected by the Company's mining operations.

        (q)   Except for those interests listed in Section 5.10(q) of the Disclosure Letter, the Company has fully and timely paid all royalties, bonuses, delay rentals, rents and other amounts due and payable under all Surface Leases and Mineral Leases and all royalties, bonuses, delay rentals, rents, production payments, profits and other sums due to the owners of any mineral and/or surface interests affected by the Company's mining operations who are not party to a Mineral Lease or Surface Lease.

        5.11    Intellectual Properties.

        (a)   Section 2.1(d) of the Disclosure Letter sets forth a listing of all: (i) registered Company Intellectual Property and all pending applications therefore; and (ii) material written licenses (excluding Off-the-Shelf Software and end user licenses for mass market Software) pursuant to which the Company is a party either as a licensee or licensor and any other material agreements under which the Company grants or receives any rights to Intellectual Property.

        (b)   The Company owns and possesses all right, title and interest in and to, or has a valid and enforceable right or license to use, the Company Intellectual Property as currently being used, except for such failure to so own or to have a valid right to use such Company Intellectual Property as would not have a Material Adverse Effect on the Business.

        (c)   Except for the Permitted Liens, the Company Intellectual Property is not subject to any Liens and is not subject to any restrictions or limitations regarding use or disclosure other than pursuant to the written license agreements disclosed in Section 2.1(d) of the Disclosure Letter.

        (d)   The Company Intellectual Property valid, subsisting, in full force and effect, and has not been cancelled, expired or abandoned.

        (e)   Except for such as would not have a Material Adverse Effect on the Business, the Company has not received in the past three (3) years any written notice regarding the infringement or misappropriation by the Company of any Intellectual Property of any third party.

        (f)    To the Company's Knowledge, no third party is infringing or has infringed, misappropriated or otherwise violated any of the Company Intellectual Property and no such claims have been brought or threatened in writing against any third party by the Company.

        5.12    Financial Statements.    Buyer has been provided copies of: (a) the audited consolidated financial statements of the Company as of and for the fiscal years ended December 31, 2007 and 2008 (collectively, the "Audited Financial Statements"); and (b) the unaudited consolidated financial statements of the Company as of and for the twelve (12) month period ended December 31, 2009 (the "Interim Financial Statements"). The Audited Financial Statements have been prepared in accordance

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with GAAP, consistently applied, and present fairly the consolidated financial position of the Company as of the dates indicated and the results of operations for the periods then ended. The Interim Financial Statements have been prepared in accordance with GAAP, consistently applied, and present fairly the consolidated financial position of the Company as of the date indicated and the results of operations for the period then ended, subject in each case to: (i) normal yearend adjustments; and (ii) the absence of disclosures normally made in footnotes.

        5.13    Material Contracts.Section 5.13 of the Disclosure Letter sets forth a listing as of the date hereof of all of the currently effective written agreements of the following types to which any of the Company is a party or by which any material assets of the Company are bound or subject:

        (a)   Contracts or group of related Contracts, other than purchase orders entered into in the ordinary course of business consistent with past practice, which involve commitments to make capital expenditures or which provide for the purchase of assets, goods or services by the Company from any one Person under which the undelivered balance of such goods or services has a purchase price in excess of One Hundred Thousand Dollars ($100,000) in any consecutive twelve (12) month period after the date hereof and which are not terminable by the Company upon ninety (90) days or less advance notice;

        (b)   Contracts or group of related Contracts, other than sales orders entered into in the ordinary course of business consistent with past practice, which provide for the sale of goods or services by the Company and under which the undelivered balance of such goods or services has a sale price in excess of One Hundred Thousand Dollars ($100,000) in any consecutive twelve (12) month period after the date hereof and which are not terminable by the Company upon ninety (90) days or less advance notice;

        (c)   joint venture agreements, partnership agreements, and limited liability company agreements and each similar type of Contract (however named) involving a sharing of profits, losses, costs or liabilities with any other Person;

        (d)   employment, confidentiality and non-competition agreements with any executive officer;

        (e)   Contracts not otherwise disclosed herein which presently limit in any material respect the freedom of the Company to engage in any business or compete with any Person;

        (f)    Contracts pursuant to which the Company is a lessor or a lessee of any personal or real property (including the Leases), or holds or operates any tangible personal property owned by another Person, except for any such leases under which the aggregate annual rent or lease payments do not exceed One Hundred Thousand Dollars ($100,000) and which are terminable by the Company upon ninety (90) days or less advance notice;

        (g)   Contracts for the sale, assignment, transfer or other disposition of assets involving a purchase price (in a single transaction or a series of related transactions) in excess of One Hundred Thousand Dollars ($100,000) and under which the Company has any continuing liability or obligation;

        (h)   Contracts not included in subsection (d) providing for severance, retention, change in control or other similar payments;

        (i)    Contracts with Parent or any officer or director of Parent, or any Affiliate of any of the foregoing, or in the case of any individual, any immediate family member of any of the foregoing;

        (j)    Contracts with dealers, distributors or sales representatives; and

        (k)   Contracts under which the Company has made advances or loans to any other Person.

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Correct and complete copies of each Contract required to be identified in Section 5.13 of the Disclosure Letter, including amendments thereto (collectively, the "Material Contracts"), have been made available to Buyer. Except as would not have a Material Adverse Effect on the Business, as of the date of this Agreement: (i) all of the Material Contracts are in full force and effect and, to the Company's Knowledge, are enforceable against the Company and the other parties thereto, in accordance with their respective terms, subject in each case to the Enforceability Exceptions, (ii) the Company has performed in all material respects all obligations required to be performed by it pursuant to such Material Contracts, and (iii) to the Company's Knowledge, there are no existing written threats of default, breaches or violations of any of such Material Contracts by any other party thereto.

        5.14    Litigation.    Except as set forth in Section 5.14 of the Disclosure Letter, as of the date of this Agreement, there are no actions, suits, arbitrations, proceedings, investigations or claims of any kind whatsoever, at Law or in equity, pending against or brought by the Company that: (a) if decided adversely to the Company, would have a Material Adverse Effect on the Business; or (b) could reasonably be expected to prevent or materially delay the consummation of the transactions contemplated hereby.

        5.15    Brokerage.    No Person is or will become entitled, by reason of any agreement or arrangement entered into or made by or on behalf of the Company, to receive any commission, brokerage, finder's fee or other similar compensation in connection with the consummation of the transactions contemplated by this Agreement, other than fees which shall be paid by Parent.

        5.16    Material Suppliers and Customers.    Except as set forth in Section 5.16 of the Disclosure Letter, no customer which accounted for more than ten percent (10%) of the aggregate sales of the Company, and no supplier which accounted for more than ten percent (10%) of the aggregate purchases of the Company, in the twelve (12) month period ended December 31, 2009, has delivered to the Company any written notice which cancelled, materially modified, or otherwise terminated its relationship with the Company or materially decreased its services, supplies or materials to the Company or its usage or purchase of the services or products of the Company.

        5.17    Licenses and Permits.Section 2.1(c) of the Disclosure Letter lists and correctly describes each Permit, whether for coal mining, reclamation or other operational purposes, together with the name of the Governmental Authority or entity issuing such Permit. Except as set forth in Section 5.17 of the Disclosure Letter, such Permits are valid and in full force and effect and will not be terminated or impaired or become terminable as a result of the transactions contemplated hereby and any necessary renewal applications have been timely filed. There are no Permits which have not been obtained by Sellers which are required for the operation of the Business as presently conducted and as proposed to be conducted as of the Closing Date.

        5.18    Employee Benefit Plans and Other Compensation Arrangements.    Set forth in Section 5.18(a) of the Disclosure Letter is a list of all material "employee benefit plans" (as defined in Section 3(b) of ERISA), with respect to which the Company currently is the sponsor or is obligated to make contributions under the plan terms (collectively, the "Plans").

        Except as set forth in Section 5.18(b) of the Disclosure Letter:

        (a)   none of the Plans is a "multiemployer plan" (as defined in Title I or Title IV of ERISA) or a plan subject to Title IV of ERISA;

        (b)   each of the Plans that is intended to be tax-qualified under Section 401(a) of the Code has received a favorable determination letter or opinion letter from the Internal Revenue Service regarding its qualification and is so qualified in all material respects, except that no representation is made with respect to any formal qualification requirement with respect to which the remedial amendment period under Section 401(b) of the Code has not yet expired;

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        (c)   in all material respects, all of the Plans have been operated in compliance with their respective terms and all Laws, and all contributions required under the terms of the Plans or applicable Law have been timely made;

        (d)   neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, disregarding any termination of employment which may occur on or after the Closing, will: (i) result in any material payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director, officer or any employee of the Company from the Company under any Plan or otherwise; (ii) materially increase any benefits otherwise payable under any Plan; (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent; or (iv) result in any payment under the Plans which will fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code; and

        (e)   none of the Plans provide medical benefits to any retired Person, or any current employee of the Company following such employee's retirement or other termination of employment, except as required by applicable Law (including Section 4980B of the Code).

        5.19    Redbud West Point Ash Disposal Facility.

        (a)   The Company operates the Redbud West Point Ash Disposal Facility, which is a ninety (90) acre disposal monofill which has been permitted under Environmental Law for the disposal of non-toxic fly ash, bottom ash, foundry sand and other exempted solid waste (the "Monofill"). The Company owns all of the real property on which the Monofill is located. The Monofill is capable of receiving dry and conditioned ash.

        (b)   The Monofill meets or exceeds all current applicable Environmental Laws, including Ohio Environmental Laws and Ohio EPA regulatory requirements.

        (c)   Redbud has all permits, certificates, licenses, patent licenses and similar requirements necessary or required under applicable Laws, including Environmental Laws, for the processing of biosolids (Municipal sewage sludge) at an on-site facility to produce a Class A Exceptional Quality Soil.

        5.20    Acquired Assets.    The Acquired Assets include all assets currently used primarily in the operation of the Business as currently conducted.

        5.21    No Additional Representations.    EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN ARTICLE 4 AND THIS ARTICLE 5 (AS MODIFIED BY THE DISCLOSURE LETTER), SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE COMPANY OR ANY OF THE ACQUIRED ASSETS, AND SELLERS SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE ACQUIRED ASSETS, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ACQUIRED ASSETS ARE BEING ACQUIRED "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR PRESENT CONDITION, AND BUYER SHALL RELY ON ITS OWN EXAMINATION AND INVESTIGATION THEREOF. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 4 AND ARTICLE 5 HEREOF (AS MODIFIED BY THE DISCLOSURE LETTER), SELLERS HEREBY DISCLAIM ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE, COMMUNICATED, OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE

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PROVIDED TO BUYER BY ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT, OR REPRESENTATIVE OF PARENT OR THE COMPANY OR ANY OF ITS AFFILIATES). NEITHER PARENT NOR THE COMPANY MAKES ANY REPRESENTATIONS OR WARRANTIES TO BUYER REGARDING ANY PROJECTION OR FORECAST REGARDING FUTURE RESULTS OR ACTIVITIES OR THE PROBABLE SUCCESS OR PROFITABILITY OF THE COMPANY.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BUYER

        Buyer represents and warrants to Sellers as follows:

        6.1    Organization; Authorization.    Buyer is a Pennsylvania corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Buyer has all requisite corporate power and authority to execute, deliver and perform this Agreement and each other agreement, instrument and document to be executed and delivered by Buyer pursuant hereto (the "Buyer Ancillary Agreements"). The execution, delivery and performance of this Agreement and such other Buyer Ancillary Agreements and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized (by corporate action or otherwise) on the part of Buyer.

        6.2    Execution and Delivery; Enforceability.    This Agreement has been, and each Buyer Ancillary Agreement will upon such delivery be, duly executed and delivered by Buyer and constitutes, or will upon such delivery constitute, the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, except as such enforcement may be limited by the Enforceability Exceptions.

        6.3    Governmental Authorities; Consents.

        (a)   Neither the execution and delivery of this Agreement or any Buyer Ancillary Agreement, nor the consummation by Buyer of the transactions contemplated hereby or thereby, nor compliance by Buyer with any of the provisions hereof or thereof, will: (i) conflict with or result in a breach of Buyer any provisions of the Charter Documents of Buyer; (ii) constitute or result in the breach of any term, condition or provision of, or constitute a default under (with or without notice or lapse of time, or both), or give rise to any right of termination, consent, amendment, cancellation, modification or acceleration with respect to, or give rise to any obligation of Buyer to make any payments under, or result in the creation or imposition of a Lien upon any property, assets of Buyer pursuant to any material Contract to which Buyer is a party or by which any of its respective properties or assets may be subject, other than any such consequences that could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement; or (iii) violate any Law or Order applicable to Buyer or by which any properties or assets owned or used by Buyer is bound or affected; except, in the case of clauses (ii) and (iii) of this Section 6.3(a), as would not materially impair the ability of Buyer to consummate the transactions contemplated by this Agreement.

        (b)   No consent, approval, authorization or permits of, or filing with or notification to, any Governmental Authority is required to be obtained or made by Buyer in connection with: (i) the execution, delivery and performance by Buyer of this Agreement or any Buyer Ancillary Agreement in connection herewith; or (ii) the compliance by Buyer with any of the provisions hereof or thereof or the consummation of the transactions contemplated hereby or thereby.

        6.4    Brokerage.    No Person is or will become entitled, by reason of any agreement or arrangement entered into or made by or on behalf of Buyer, to receive any commission, brokerage, finder's fee or

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other similar compensation in connection with the consummation of the transactions contemplated by this Agreement.

        6.5    Financing.    Buyer has and will continue to have readily available funds to consummate the transactions contemplated by this Agreement and each Buyer Ancillary Agreement.

        6.6    Solvency.

        (a)   Immediately after giving effect to the acquisition of the Acquired Assets and the consummation of the other transactions contemplated by this Agreement:

        (i)    the fair saleable value (determined on a going concern basis) of the assets of Buyer shall be greater than the total amount of its liabilities (including all liabilities, whether or not reflected in a balance sheet prepared in accordance with GAAP, and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed);

        (ii)   Buyer shall be able to pay its debts and obligations in the ordinary course of business as they become due; and

        (iii)  Buyer shall have adequate capital to carry on its business and all businesses in which it is about to engage.

        (b)   In completing the transactions contemplated by this Agreement, Buyer does not intend to hinder, delay or defraud any present or future creditors of Buyer or the Company.

        6.7    Due Diligence Investigation.    Buyer has had an opportunity to discuss the business, management, operations and finances of the Company with the Company's executive officers, directors, employees, agents, representatives and Affiliates, and has had an opportunity to inspect the facilities of the Company. Buyer has conducted its own independent investigation of the Company. In making its decision to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement, Buyer has relied solely upon the representations and warranties of Sellers set forth in this Agreement (and acknowledges that such representations and warranties are the only representations and warranties made by the Company or Parent, as the case may be), and has not relied upon any other information provided by, for or on behalf of Sellers, or their respective agents or representatives, to Buyer in connection with the transactions contemplated by this Agreement. Buyer has entered into the transactions contemplated by this Agreement with the understanding, acknowledgement and agreement that no representations or warranties, express or implied, are made with respect to any projection or forecast regarding future results or activities or the probable success or profitability of the Company. Buyer acknowledges that no current or former stockholder, director, officer, employee, affiliate or advisor of Sellers has made or is making any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement, express or implied, except as set forth in Articles 4 and 5.

ARTICLE 7

CONDITIONS PRECEDENT

        7.1    Conditions to Buyer's Obligations.    The obligation of Buyer to consummate the closing of the transaction contemplated in this Agreement is subject to the satisfaction or waiver, at or before the Closing, of the following conditions set forth in this Section 7.1:

        (a)   all filings, authorizations and approvals and consents set forth in Section 5.4 of the Disclosure Letter shall have been made with or obtained (i) from all applicable Governmental Authorities and (ii) from each third party (including, specifically, Givens Land Conservation Management, LLC) with respect to any Contract listed thereon that, were such filing,

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authorization, approval or consent not so made or obtained, would in the reasonable opinion of Buyer have a Material Adverse Effect;

        (b)   there shall be no suit, action, investigation or proceeding pending or threatened before any Governmental Authority by which it is sought to restrain, delay, prohibit, invalidate, set aside or impose any conditions upon the Closing, in whole or in part, and no injunction, judgment, order, decree or ruling with respect thereto shall be in effect;

        (c)   (i) the representations and warranties of Sellers contained in Articles 4 and 5, as applicable, shall be true and correct as of the Closing Date as if made as of the Closing Date (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), except for representations and warranties the circumstances giving rise to which do not and would not reasonably be expected to have a Material Adverse Effect on the Business; (ii) Sellers shall have performed or caused to have been performed in all material respects all of the covenants and agreements required by this Agreement to be performed by Sellers prior to the Closing; and (iii) Buyer shall have received one or more certificates stating that each of the conditions specified above in clauses (i) and (ii) is satisfied;

        (d)   Buyer shall have received the following:

        (i)    a bill of sale for the Acquired Assets and an assignment and assumption agreement for the Assumed Contracts, each in form and substance reasonably satisfactory to Buyer, covering items of tangible and intangible personal property included in the Acquired Assets and transferring Sellers' rights, duties and obligations in the Assumed Contracts to Buyer;

        (ii)   copies of the resolutions duly adopted by each Seller's board of directors and stockholders authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements to which such Seller is party, duly certified by the Secretary of each Seller, all of which resolutions shall be in full force and effect on the Closing Date;

        (iii)  a general warranty deed for the Owned Real Property;

        (iv)  an assignment of all of the Company's right, title and interest in any membership interests in Montgomery, and a resignation by the Company as any statutory agent, officer, or manager of Montgomery;

        (v)   amendments reasonably acceptable to Buyer to those agreements with Dean Kibler more fully described in Items 1 and 2 of subsection (j) of Section 5.13 of the Disclosure Letter, which amendments would eliminate any payment obligation to Mr. Kibler thereunder with respect to future mining or timber parcels;

        (vi)  the Pay-Off Documents in a commercially reasonable form with respect to the Closing Indebtedness which letters provide for the release of all Liens relating to the Closing Indebtedness following satisfaction of the terms contained in such payoff letters;

        (vii) a certificate, dated within ten (10) days of the Closing Date, issued by the Secretary of State of Ohio, with respect to the status of the Company as a corporation in good standing; and

        (viii)  such further documents and instruments of sale, transfer, conveyance, assignment or delivery covering the Acquired Assets or any part thereof as Buyer may reasonably require to assure the sale and assignment of the Acquired Assets as contemplated by this Agreement.

Any agreement or document to be delivered to Buyer pursuant to this Section 7.1, the form of which is not attached to this Agreement as an exhibit, shall be in form and substance reasonably satisfactory to Buyer.

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        7.2    Conditions to Sellers' Obligations.    The respective obligations of Sellers to consummate the closing of the transaction contemplated in this Agreement are subject to the satisfaction, at or before the Closing, of the following conditions set forth in this Section 7.2:

        (a)   all filings, authorizations and approvals and consents set forth in Section 5.4 of the Disclosure Letter shall have been made with or obtained from all applicable Governmental Authorities;

        (b)   there shall be no suit, action, investigation or proceeding pending or threatened before any Governmental Authority by which it is sought to restrain, delay, prohibit, invalidate, set aside or impose any conditions upon the Closing, in whole or in part, and no injunction, judgment, order, decree or ruling with respect thereto shall be in effect;

        (c)   (i) the representations and warranties of Buyer contained in Article 6 shall be true and correct as of the Closing Date as if made as of the Closing Date (other than those representations and warranties made as of a specific date, which shall be true and correct as of such date), except for representations and warranties the circumstances giving rise to which do not and would not reasonably be expected to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement; (ii) Buyer shall have performed or caused to have been performed in all material respects all of the covenants and agreements required by this Agreement to be performed by Buyer prior to the Closing; and (iii) Sellers shall have received a certificate stating that each of the conditions specified above in clauses (i) and (ii) is satisfied;

        (d)   Buyer shall have delivered to the Sellers' Account the Purchase Price in accordance with Section 3.2(a);

        (e)   Buyer shall have caused the satisfaction of the Closing Indebtedness in accordance with Section 3.2;

        (f)    Buyer shall replace all of the Company's deposits and bonds, including but not limited to the reclamation, utility, payment and performance bonds, and equipment bonds and deposits listed in Section 5.10(p) of the Disclosure Letter attached hereto, and cause the bonds and deposits of the Company to be released at the Closing; and

        (g)   Sellers shall have received the following:

        (i)    copies of the resolutions duly adopted by Buyer's board of directors authorizing the execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements, duly certified by the Secretary of Buyer, all of which resolutions shall be in full force and effect on the Closing Date; and

        (ii)   such further documents and instruments reasonably requested by Sellers to assure the assumption of the Assumed Liabilities and the Assumed Contracts as contemplated by this Agreement.

Any agreement or document to be delivered to Sellers pursuant to this Section 7.2, the form of which is not attached to this Agreement as an exhibit, shall be in form and substance reasonably satisfactory to Sellers.

ARTICLE 8

THE CLOSING

        The consummation of the transactions contemplated herein (the "Closing") will take place on the date that is no later than the third (3rd) Business Day following the satisfaction or waiver (to the extent permitted by applicable Law) of all of the conditions set forth in Article 7 hereof and shall take place at the Cadiz, Ohio offices of Buyer or at such other time and place as to which Buyer and Sellers

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may agree in writing. The date on which the Closing actually occurs is referred to herein as the "Closing Date." The transfers and deliveries described in Article 7 shall be mutually interdependent and shall be regarded as occurring simultaneously, and, any other provision of this Agreement notwithstanding, no such transfer or delivery shall become effective or shall be deemed to have occurred until all of the other transfers and deliveries provided for in Article 7 shall also have occurred or been waived in writing by the party entitled to waive the same. Such transfers and deliveries shall be deemed to have occurred and the Closing shall be effective as of 11:59 p.m. on the Closing Date

ARTICLE 9

COVENANTS OF SELLERS

        9.1    Conduct of Business.    During the period between the date of this Agreement until the earlier to occur of the termination of this Agreement in accordance with Section 11.1 or the Closing Date (the "Pre-Closing Period"), except as otherwise expressly provided for in this Agreement or the Disclosure Letter or except to the extent Buyer otherwise consents in writing, the Company shall: (a) be operated in the ordinary course of business, consistent with past practice, and (b) use commercially reasonable efforts to preserve intact its respective business organizations and relationships with Persons doing business with the Company, as applicable. Without limiting the generality of the foregoing, except as contemplated by this Agreement, during the Pre-Closing Period, without the prior written consent of Buyer, which consent will not be unreasonably withheld or delayed, the Company shall not to take, or agree (whether in writing or otherwise) to take, any action that would result in a violation of Section 5.5 hereof.

        9.2    Access.    During the Pre-Closing Period, Buyer and its representatives (including any financing sources and their respective representatives) shall have reasonable access during normal business hours to the personnel, facilities, counsel, accountants, consultants, representatives and books and records (consistent with applicable privacy Laws and subject to the Confidentiality Agreement) of the Company to conduct such necessary inspections as Buyer may reasonably request. Any inspection pursuant to this Section 9.2 will be conducted in such a manner as not to interfere with the conduct of the business of the Company and in no event will any provision hereof be interpreted to require the Company to permit any inspection, or to disclose any information, that the Company determine in good faith may violate any of its obligations with respect to confidentiality. Buyer and its representatives will not contact any of the employees, landlords, customers or suppliers of the Company without the prior written consent of Buyer, it being acknowledged that any and all such contacts will be arranged by Sellers and that Buyer and Sellers will mutually agree on the timing and manner of contact with all employees, landlords, customers, suppliers and other third parties.

        9.3    Change of Names.    Promptly following the Closing, but in any event within thirty (30) days after the Closing Date, Sellers shall provide evidence to Buyer of the change of the name of the Company to a name that does not bear the name "Buckeye" or "Buckeye Industrial Mining Co." or any variations or derivations thereof.

        9.4    Exercise of Redbud Option to Acquire Permits.    Promptly after the execution of this Agreement, the Company shall exercise its option to acquire those permits from The Redbud Company, Inc., an Ohio corporation ("Redbud"), described under the Service Agreement, dated August 28, 1995 (as amended, the "Service Agreement"), in accordance with the Company's purchase option under the Service Agreement.

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ARTICLE 10

COVENANTS OF BUYER

        10.1    Access.    Buyer shall, for a period of seven (7) years after the Closing Date, during normal business hours and upon reasonable advance notice, provide Sellers and their designees and representatives with such access to the books and records related to the Acquired Assets as may be reasonably requested by Sellers, who shall be entitled, at their expense, to make extracts and copies of such books and records. Buyer agrees that it shall not, during such seven (7) year period, destroy or cause or permit to be destroyed any material books or records relating to the Business without first obtaining the consent of Sellers (or providing to Sellers notice of such intent and a reasonable opportunity to copy such books or records, at Sellers' expense, at least thirty (30) days prior to such destruction).

        10.2    Notices of Certain Events.    Buyer agrees to notify Sellers in writing promptly upon the Buyer's or its authorized representatives' discovery of any information prior to the Closing Date relating to Sellers or the operations (including the financial condition, assets and properties) of the Business which constitutes (or would constitute) or indicates (or would indicate) a breach of any representation, warranty or covenant of Sellers contained herein.

        10.3    Employees.

        (a)    Hiring.    Buyer shall have the option to offer employment to any or all employees of the Company (collectively, the "Hired Employees"), and any such Hired Employees shall also be offered substantially similar benefits as currently available to Buyer's employees. The Company shall provide all reasonably necessary assistance to Buyer in hiring any such employees that Buyer determines it wishes to hire, as well as in any employment transition matters.

        (b)    Liabilities.    Buyer shall be solely responsible for any liabilities resulting from its practices and procedures in screening and hiring Hired Employees of the Business and for its employment decisions with respect to the hiring or refusal to hire any Employees of the Business.

        (c)    Records.    Prior to and following the Closing, Sellers shall provide Buyer with records and other relevant data within Sellers' control or access relating to the employment history of, and benefit matters relating to, the Hired Employees, as Buyer shall reasonably request, to the extent legally permitted.

        (d)    Hired Employees Not Third-Party Beneficiaries.    Nothing in this Section 10.03 or elsewhere in this Agreement is intended to confer upon any Hired Employee or his or her legal representatives or heirs any rights as a third-party beneficiary or otherwise or any other rights or remedies of any nature or kind whatsoever under or by reason of the transactions contemplated by this Agreement, including, without limitation, any rights of employment, continued employment or any rights under or with respect to any welfare benefit, pension or other fringe benefit plan, program or arrangement or any material benefit plan.

ARTICLE 11

ADDITIONAL COVENANTS OF BUYER AND SELLERS

        11.1    Termination.    This Agreement may be terminated:

        (a)   by mutual written consent of Buyer and Sellers at any time prior to the Closing;

        (b)   by (i) Buyer if it is not then in material breach of its obligations under this Agreement and if (x) any of the representations and warranties of Sellers in this Agreement are or become untrue or inaccurate such that the condition set forth in Section 7.1(c)(i) would not be satisfied or (y) there has been a breach on the part of Seller or the Company of any of their covenants or

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obligations in this Agreement such that the condition set forth in Section 7.1(c)(ii) would not be satisfied and, in either case, such breach or inaccuracy is not waived or cured within thirty (30) days after being notified of the same or is incapable of being cured; or (ii) Sellers if neither the Company nor Parent is then in material breach of their respective obligations under this Agreement and if (x) the representations and warranties of Buyer in this Agreement are or become untrue or inaccurate such that the condition set forth in Section 7.2(c)(i) would not be satisfied or (y) there has been a breach on the part of Buyer of any of its covenants or obligations in this Agreement such that the condition set forth in Section 7.2(c)(ii) would not be satisfied and, in either case, such breach or inaccuracy is not waived or cured within thirty (30) days after being notified of the same or is incapable of being cured; or

        (c)   by (i) Buyer if any of the conditions in Section 7.1 have not been satisfied as of June 30, 2010 or if satisfaction of such a condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition; or (ii) Sellers if any of the conditions in Section 7.2 has not been satisfied as of June 30, 2010 or if satisfaction of such a condition is or becomes impossible (other than through the failure of Sellers to comply with its obligations under this Agreement) and Sellers have not waived such condition.

        11.2    Effect of Termination.    If this Agreement is terminated pursuant to Section 11.1, then all provisions of this Agreement shall thereupon become void without any liability on the part of any party hereto to any other party hereto except that (x) this Sections 11.2, 11.6 and 11.8 and Article 14 shall survive any such termination and (y) nothing herein shall relieve any party from any liability for any willful or intentional breach hereof occurring prior to such termination. If this Agreement is terminated (i) by Sellers pursuant to Section 11.1(b)(ii), then Buyer and Sellers shall jointly instruct Escrow Agent to release the Escrowed Funds to Sellers, as liquidated damages and not as a penalty; and (ii) for any reason other than by Sellers pursuant to Section 11.1(b)(ii), then Buyer and Sellers shall jointly instruct Escrow Agent to release the Escrowed Funds to Buyer.

        In the case of clause (i) of the last sentence of the immediately preceding paragraph, Buyer and Sellers acknowledge that it would be extremely impracticable and difficult to ascertain the actual damages which would be suffered by Sellers if Buyer fails to consummate the purchase and sale contemplated herein as required under this Agreement. Buyer and Sellers have considered carefully the loss to Sellers altering their customary course of managing the Business, and Sellers taking the Company and the Business off the market, all as a consequence of the negotiation and execution of this Agreement; the personal expenses of Sellers incurred in connection with the preparation of this Agreement and Sellers' performance hereunder; and the other damages, general and special, which Buyer and Sellers realize and recognize Sellers will sustain, but which Sellers cannot at this time calculate with absolute certainty. Based on all those considerations, Buyer and Sellers have agreed that the damage to Sellers would reasonably be estimated to be an amount equal to the Escrowed Funds. Seller hereby agrees that its receipt of the Escrowed Funds pursuant to this Section 11.2 is the sole and exclusive right or remedy that Seller has, or may be entitled to exercise or pursue, against Buyer, whether at law, or in equity, with respect to such default.

        11.3    Updating of Disclosure Letter.    From time to time prior to the Closing, Sellers shall have the right to supplement or amend the Disclosure Letter with respect to any matter hereafter arising or discovered after the delivery of the Disclosure Letter pursuant to this Agreement. No such supplement or amendment shall have any effect on the satisfaction of the condition to closing set forth in Section 7.1(c); provided, however, if the Closing shall occur, then Buyer (and each other Buyer Indemnitee) shall be deemed to have waived any right or claim pursuant to the terms of this Agreement or otherwise, including pursuant to Article 12 hereof, with respect to any and all matters disclosed pursuant to any such supplement or amendment made by the Company at or prior to the Closing.

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        11.4    Pre-Closing Publicity.    During the Pre-Closing Period, any public disclosures or announcements relating to this Agreement or the transactions contemplated hereby will be made only as may be agreed upon in writing by Parent and Buyer, except as may be required by Law or by any Governmental Authority or the rules of any stock exchange or trading system.

        11.5    Post-Closing Publicity.    Following the Closing, no party shall make any public disclosure or comment regarding the specific terms of this Agreement or the transactions contemplated herein without the prior approval of Buyer or Parent, as the case may be, which approval shall not be unreasonably withheld, except as may be required by Law or by any Governmental Authority or the rules of any stock exchange or trading system or reasonably necessary to enforce any rights under this Agreement. Each party shall be entitled to disclose or comment to any Person that a transaction has been consummated. In addition, nothing herein shall preclude communications or disclosures necessary to implement the provisions of this Agreement, and Buyer and Parent and their respective Affiliates may make such disclosures as they may consider necessary in order to satisfy their legal or contractual obligations to their lenders, shareholders, investors or other interested parties, or for general marketing purposes, without the prior written consent of Parent or Buyer, as the case may be.

        11.6    Expenses.    Buyer shall pay all fees and expenses incident to the transactions contemplated by this Agreement which are incurred by Buyer or its representatives or are otherwise expressly allocated to Buyer hereunder, and Sellers shall pay all fees and expenses incident to the transactions contemplated by this Agreement which are incurred by Sellers or their respective representatives or are otherwise expressly allocated to Sellers hereunder.

        11.7    No Assignments.    No assignment or transfer (including by way of operation of law or a change in ownership of fifty percent or more of the voting power of Buyer) of all or any part of this Agreement or any right or obligation hereunder may be made by any party hereto without the prior written consent of all other parties hereto, and any attempted assignment or transfer without such consent shall be void and of no force or effect; provided, that (a) Buyer may assign any of its rights or delegate any of its duties under this Agreement to any controlled Affiliate of Buyer provided, further, that no such assignment shall relieve Buyer of its obligations hereunder; and (b) Buyer may assign its rights, but not its obligations, under this Agreement to any of its institutional financing sources.

        11.8    Confidentiality Agreement.    Notwithstanding the execution of this Agreement, the parties acknowledge that the confidentiality agreement executed by Buyer, dated December 15, 2009 (the "Confidentiality Agreement"), remains in full force and effect pursuant to the terms thereof, except to the extent reasonably necessary for Buyer to enforce any of its rights under this Agreement, but shall terminate at the Closing.

        11.9    Satisfaction of Closing Conditions.    During the Pre-Closing Period and subject to the terms and conditions of this Agreement, Sellers, on the one hand, and Buyer, on the other hand, will use their respective commercially reasonable best efforts to take or cause to be taken all actions and to do or cause to be done all things necessary under the terms of this Agreement or under applicable Laws to cause the satisfaction of the conditions set forth in Article 11 and to consummate the transactions contemplated by this Agreement, including using their respective commercially reasonable best efforts to obtain all authorizations, consents, Permits, waivers or other approvals of all Governmental Authorities that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement, and the parties shall cooperate with each other with respect to each of the foregoing.

        11.10    Tax Cooperation: Allocation of Taxes.

        (a)   Buyer and Parent agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Acquired Assets as is reasonably necessary for the filing of all Tax Returns, and making of any election related to Taxes,

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the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax Return. Parent and Buyer shall cooperate with each other in the conduct of any audit or other proceeding related to Taxes involving the Company and each shall execute and deliver such powers of attorney and other documents as are reasonably necessary to carry out the intent of this Section 11.10(a).

        (b)   Except as otherwise set forth in this Agreement, each party hereto shall bear and pay any transfer, documentary, sales, use or other taxes arising in connection with the transactions contemplated by this Agreement and any recording or filing fees with respect thereto (each, a "Transfer Tax").

        11.11    Replacement of Bonds and Letters of Credit.

        (a)   All bonds (including, but not limited, to reclamation, performance, utility, payment, and insurance bonds), deposits, or escrow funds securing the Company's operations and issued or deposited for the benefit of any and all third parties are listed in Section 5.10(p) of the Disclosure Letter (collectively, the "Bonds").

        (b)   Parent, for the benefit of the Company, secured the Bonds with the cash amounts listed in Section 11.11(b) of the Disclosure Letter (the "Cash Collateral"). The parties agree to use their commercially reasonable efforts to cause the secured holders of the Bonds (the "Surety Holders") to release Parent's guaranty of the Bonds and correspondingly release the Cash Collateral to Parent as expeditiously as possible following the Closing. Buyer agrees to remit to Parent, within five (5) Business Days of its receipt, any Cash Collateral received by Buyer from the Surety Holders of Cash Collateral held by them as of the date hereof. If at any time Parent or any of its Affiliates receives any of the Cash Collateral from the Surety Holders, Parent shall provide written notice of such receipt (including the amount of Cash Collateral received) to Buyer within five (5) Business Days following its receipt of the Cash Collateral; provided, however, that if Cash Collateral is received by Parent within ten (10) Business Days prior to the due date of a payment by Buyer under this Section 11.11(b), then Parent shall notify the Buyer in writing immediately following the receipt of Cash Collateral.

        11.12    Covenant Not to Compete.

        (a)   In consideration of Buyer's consummation of the transactions contemplated by this Agreement and for other good and valuable consideration, for a period of three (3) years from and after the Closing Date, Sellers and their Affiliates will not, directly or indirectly (whether as an owner, proprietor, partner, shareholder, officer, employee, independent contractor, director, joint venturer, consultant, lender or investor), solicit or engage in the Prohibited Business. The parties agree that this Section 11.12 shall not prohibit the ownership by a Seller or its Affiliate, solely as an investment, of securities of a person engaged in the Prohibited Business if (i) such Seller or its Affiliate is not an "affiliate" (as such term is defined in Rule 405 promulgated under the Securities Act) of the issuer of such securities, (ii) such securities are publicly traded on a national securities exchange and (iii) Sellers and their Affiliates do not, directly or indirectly, beneficially own in the aggregate more than two percent (2%) of the class of which such securities are a part. Further, the parties agree that this Section 11.12 shall not prohibit Parent from carrying on the businesses, other than the Business, currently conducted by Parent. Sellers acknowledge and agree that the limitations imposed by this Section 11.12 as to time, geographical area, and scope of activity being restrained are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Buyer.

        (b)   From and after the Closing Date, Sellers shall not, directly or indirectly (i) discourage any person from accepting employment with Buyer or any Affiliate of Buyer, including any Hired Employee, or (ii) hire or solicit the employment or services of, or cause or attempt to cause to

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leave the employment or service of Buyer or any Affiliate of Buyer, any person who or which is employed by, or otherwise engaged to perform services for, Buyer or any Affiliate of Buyer, including any Hired Employee (whether in the capacity of employee, consultant, independent contractor or otherwise), or who is offered a position by Buyer in connection with the transactions contemplated hereby.

        (c)   The parties hereby agree that if Sellers violate this Section 11.12, it would be difficult to determine the entire cost, damage or injury which Buyer and its Affiliates would sustain. Sellers acknowledge that if they violate or threaten to violate this Section 11.12, Buyer will have no adequate remedy at law. In that event, Buyer and/or its Affiliates shall have the right, in addition to any other rights that may be available to them, to obtain in any court of competent jurisdiction injunctive relief to restrain any violation by Sellers of this Section 11.12 or to compel specific performance by Sellers of one or more of their obligations under this Section 11.12 (any requirements for posting of bonds for injunction are hereby expressly waived). If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 11.12 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Section 11.12 shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

        (d)   Buyer and Sellers agree that no part of the Purchase Price shall be allocated to any obligations of Sellers under this Section 11.12.

ARTICLE 12

INDEMNIFICATION

        12.1    Indemnification of Buyer.    Subject to the limitations set forth in this Article 12, including those specifically set forth in Sections 12.2 and 12.5 hereof, following the Closing, Sellers, jointly and severally, shall indemnify, defend and hold harmless Buyer and its officers, directors, employees, stockholders, Affiliates, successors and assigns (collectively, the "Buyer Indemnitees"), from and against any Losses based upon, arising out of, caused by or in connection with: (a) any inaccuracy in, or breach of, any of the representations and warranties made by Sellers in Articles 4 or 5, as applicable; (b) any breach or nonperformance of any covenant or obligation made or incurred by (i) Sellers or, (ii) with respect to pre-Closing covenants, the Company herein; and (c) the imposition against any Buyer Indemnitee of any Liabilities other than the Assumed Liabilities. Sellers do not make and shall not be deemed to have made, nor is Buyer relying upon, any representation, warranty, covenant or obligation other than those representations, warranties, covenants and obligations that are expressly set forth in this Agreement.

        12.2    Limitations on Indemnification.    Notwithstanding any other provision of this Agreement, the indemnification obligations provided for in this Agreement shall be subject to the limitations and conditions set forth in this Section 12.2.

        (a)   Any claim by a Buyer Indemnitee for indemnification pursuant to Sections 12.1(a) or (b) shall be required to be made by delivering notice to Parent no later than the expiration of twelve (12) months after the Closing Date (the "General Survival Period"), except no claim may be brought for breach of any covenant in Sections 9.1, 9.2, 11.1, 11.2, 11.3, 11.4 and 11.9 that expires at the Closing. Notwithstanding the foregoing, any claim for indemnification (i) directly based upon, arising out of or caused by any inaccuracy in or breach of any representation or warranty in Sections 4.1 or 4.3 [Execution and Delivery; Enforceability] (collectively, the "Fundamental Reps"),

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or (B) brought for breach of any covenant (other than covenants set forth in Sections 9.1, 9.2, 11.1, 11.2, 11.3, 11.4 and 11.9) may, in each case, be made at any time.

        (b)   Except for claims for indemnification based upon, arising out of or caused by any breach of any of the Fundamental Reps or claims based on actual fraud, Buyer Indemnitees shall not be entitled to indemnification for any Losses until the aggregate amount of all of Buyer Indemnitees' claims for indemnification exceeds the Indemnification Threshold and thereafter Buyer Indemnitees shall be entitled to indemnification only for amounts in excess of the Indemnification Threshold.

        (c)   Except for claims for indemnification based upon, arising out of or caused by any breach of any of the Fundamental Reps or claims based on actual fraud, the maximum indemnification amount to which the Buyer Indemnitees may be entitled pursuant to this Agreement shall be limited to the Indemnification Cap.

        (d)   Solely with respect to indemnification claims based upon, arising out of or caused by any breach of the Fundamental Reps, the maximum indemnification amount to which Buyer Indemnitees may be entitled to recover from Sellers shall be an amount equal to the Purchase Price.

        (e)   Any claims for actual fraud shall not be subject to any limitation.

        (f)    The Buyer Indemnitees shall not be entitled to indemnification under this Agreement if, and to the extent that, such Buyer Indemnitees have otherwise been compensated for such matter pursuant to, or the Losses were taken into account under, any other provision of this Agreement, so as to avoid duplication or "double counting" of the same Losses.

        (g)   Any claim for Losses by the Buyer Indemnitees shall be reduced by the amount of such Losses that are attributable to any voluntary act, omission, transaction or arrangement of Buyer or the Company from and after the Closing.

        (h)   The Buyer Indemnitees shall take all reasonable steps to mitigate any Loss subject to Section 12.1 upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto.

        12.3    Indemnification of Parent.    From and after the Closing and subject to the limitations contained herein, Buyer shall indemnify, defend, hold harmless, pay and reimburse Parent and its officers, directors, employees, stockholders, Affiliates, successors and assigns (collectively, the "Seller Indemnitees"), from and against any Losses based upon, arising out of, resulting from, in connection with or otherwise caused by: (i) any inaccuracy in any of the representations and warranties made by Buyer herein; (ii) any breach or nonperformance of any of the covenants made by Buyer herein; or (iii) the imposition against any Seller Indemnitee of any of the Assumed Liabilities. Buyer does not make and shall not be deemed to have made, nor is Parent relying upon, any representation, warranty, covenant or obligation other than those representations, warranties, covenants and obligations that are expressly set forth in this Agreement.

        12.4    Procedures Relating to Indemnification.

        (a)    Third-Party Claims.

        (i)    In order for a party (the "indemnitee") to be entitled to any indemnification provided for under this Agreement with respect to, arising out of, or involving a claim or demand made by any Person against the indemnitee (a "Third-Party Claim"), such indemnitee must notify the party from whom indemnification hereunder is sought (the "indemnitor") in writing of the Third-Party Claim no later than thirty (30) days after such claim or demand is first asserted. Such notice shall state in reasonable detail the amount or estimated amount of

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such claim, and shall identify the specific basis (or bases) for such claim, including the representations, warranties, covenants or obligations in this Agreement alleged to have been breached. Failure to give such notification shall not affect the indemnification provided hereunder except and only to the extent the indemnitor shall have been actually prejudiced as a result of such failure. Thereafter, the indemnitee shall deliver to the indemnitor, without undue delay, copies of all notices and documents (including court papers received by the indemnitee) relating to the Third-Party Claim so long as any such disclosure could not reasonably be expected to have an adverse effect on the attorney-client or any other privilege that may be available to the indemnitee in connection therewith.

        (ii)   The indemnitor may elect to assume and control the defense of a Third-Party Claim with counsel selected by the indemnitor by providing written notice thereof to the indemnitee within sixty (60) days of the receipt of notice of such Third-Party claim from the indemnitee. If the indemnitor assumes such defense, the indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnitor, it being understood that the indemnitor shall control such defense; provided, that the indemnitor will not be liable for any legal expenses subsequently incurred by the indemnitee in connection with the defense of such Third-Party Claim. If the indemnitor does not assume the defense of any Third-Party Claim, the indemnitee may continue to defend such claim and the indemnitor may still participate in, but not control, the defense of such Third-Party Claim at the indemnitor's sole cost and expense. If the indemnitor so assumes the defense of any Third-Party Claim, all of the indemnified parties shall reasonably cooperate with the indemnitor in the defense or prosecution thereof. Such cooperation shall include, at the expense of the indemnitor, the retention and (upon the indemnitor's request) the provision to the indemnitor of records and information which are reasonably relevant to such Third-Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

        (iii)  The indemnitee (a) shall not admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the indemnitor's prior written consent (which consent shall not be unreasonably withheld or delayed); and (b) shall agree to any settlement, compromise or discharge of a Third-Party Claim which the indemnitor may recommend and which by its terms unconditionally releases the indemnitee from all liabilities and obligations in connection with such Third-Party Claim. The indemnitor shall not, without the written consent of the indemnitee, enter into any settlement, compromise or discharge or consent to the entry of any judgment which imposes any obligation or restriction upon the indemnitee or does not include as an unconditional term thereof the giving by each claimant or plaintiff to such indemnitee of a release from all liability with respect to such Third-Party Claim.

        (b)    Other Claims.    In the event any indemnitee should have a claim against any indemnitor under this Agreement that does not involve a Third-Party Claim, the indemnitee shall deliver notice of such claim to the indemnitor promptly following discovery of any indemnifiable Loss, but in any event, in the case of Buyer Indemnitees, not later than the last date set forth in Section 12.2, for making such claim. Failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnitor shall have been actually prejudiced as a result of such failure. Such notice shall state in reasonable detail the amount or an estimated amount of such claim, and shall specify the facts and circumstances which form the basis (or bases) for such claim, and shall further specify the representations, warranties or covenants alleged to have been breached. Upon receipt of any such notice, the indemnitor shall notify the indemnitee as to whether the indemnitor accepts liability for any Loss. If the indemnitor disputes

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its liability with respect to such claim, as provided above, the indemnitor and the indemnitee shall attempt to resolve such dispute in accordance with the terms and provisions of Section 14.4.

        12.5    Limitation of Remedies.    Each party acknowledges and agrees that, should the Closing occur, the sole and exclusive remedy with respect to any and all claims relating to this Agreement or the transactions contemplated hereby (other than claims of, or causes of action arising from, criminal activity, fraud or claims of, or causes of action for which the sole remedy sought is equitable relief) shall be pursuant to the indemnification provisions set forth in this Article 12. In furtherance of the foregoing, each of Buyer and Parent hereby waive on behalf of itself and all other Persons who might claim by, through or under it, from and after the Closing, any and all rights, claims and causes of action (other than claims of, or causes of action arising from, criminal activity, fraud or claims of, or causes of action for which the sole remedy sought is equitable relief) which any such other Person may have arising under or based upon any Law and that relates to the transaction contemplated herein or to any aspect of the business of the Company (except pursuant to the indemnification provisions set forth in this Article 12). Nothing in this Section 12.5 shall limit any Person's right to seek and obtain any equitable relief to which any Person may be entitled.

        12.6    Subrogation.    Upon making any indemnity payment pursuant to Sections 12.1 or 12.3, as applicable, the indemnitor shall be subrogated to all rights of the indemnitee or reimbursed party, as applicable, against any third party in respect of the Losses to which the payment related. The parties hereto will execute upon request all instruments reasonably necessary to evidence and perfect the above described subrogation rights.

ARTICLE 13

CERTAIN DEFINITIONS

        When used in this Agreement, the following terms in all of their tenses, cases and correlative forms shall have the meanings assigned to them in this Article 13, or elsewhere in this Agreement as indicated in this Article 13:

        "Affiliate" of a specified Person means any other Person which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person. For purposes of this definition, "control" of any Person means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting capital stock or membership interests, by Contract, or otherwise.

        "Agreement" means this Asset Purchase Agreement, as may be amended from time to time.

        "Ancillary Agreements" is defined in Section 5.1(b).

        "Assumed Contracts" is defined in Section 2.1(f).

"Assumed Liabilities" is defined in Section

        "Audited Financial Statements" is defined in Section 5.12(a).

        "Bonds" is defined in Section 11.11(a).

        "Business" is defined in the Recitals of this Agreement.

        "Business Day" means any other day than a Saturday, Sunday or day on which banking institutions in Cleveland, Ohio are authorized or obligated pursuant to Law to be closed.

        "Business Facility" means any Real Property on which the Company operates the Business.

        "Buyer" is defined in the preamble of this Agreement.

        "Buyer Indemnitees" is defined in Section 12.1.

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        "Cash Collateral" is defined in Section 11.11(b).

        "Charter Documents" means the articles of incorporation, certificate of incorporation, code of regulations and by-laws (or equivalent Charter Documents), as applicable, of any business entity.

        "CERCLA" shall have the meaning assigned to such term in the definition of "Environmental Laws"

        "Claims" means all claims, debts, losses, expenses, proceedings, covenants, liabilities, suits, judgments, damages, actions and causes of action, obligations, accounts, and liabilities of any kind or character whatsoever, known or unknown, suspected or unsuspected, in contract or in tort, direct or indirect, at law or in equity.

        "Closing" and "Closing Date" are defined in Article 7.

        "Closing Indebtedness" is defined in Section 3.2.

        "Code" means the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder.

        "Company" is defined in the preamble of this Agreement.

        "Company Ancillary Agreements" is defined in Section 5.1(b).

        "Company Intellectual Property" is defined in Section 2.1(d).

        "Confidentiality Agreement" is defined in Section 11.8.

        "Contract" means any contract, agreement, deed, mortgage, lease, license, instrument, note, commitment, undertaking, or arrangement, whether oral or written.

        "Disclosure Letter" is the confidential disclosure letter, dated as of the date hereof, delivered to Buyer in connection with the execution and delivery of this Agreement (as may be modified from time to time prior to the Closing in accordance with the terms hereof).

        "Disposal," "Storage," and "Treatment" shall have the meanings assigned them at 42 U.S.C. § 6903(3), (33) and (34), respectively.

        "Easement" means all easements, rights-of-way, licenses, and other rights of use in another Person's real property (other than leases) held by the Company or appurtenant to any property owned or leased by the Company.

        "Enforceability Exceptions" is defined in Section 4.2.

        "Environmental Laws" shall mean any and all applicable laws, statutes, ordinances, rules, regulations, or orders in effect as of the Closing Date or, if applicable, at any time prior to the Closing Date, of any Governmental Authority pertaining to pollution, preservation or protection of the environment, natural resources or human health and safety, including without limitation the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, as amended, any state or local Laws implementing the foregoing federal laws, and any state or federal laws pertaining to mining, mine safety, the handling of production wastes, the use, maintenance, and closure of mining sites, the protection of environmentally sensitive areas and threatened or endangered species, and all other environmental conservation or protection laws.

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        "Environmental Permits" means all permits, licenses, certificates, registrations, identification numbers, applications, consents, approvals, variances, notices of intent, exemptions and similar requirements necessary for the ownership, use and/or operation of the Business Facilities and the Company to comply with Environmental Laws.

        "Environmental Reports" is defined in Section 5.9.

        "Equipment" is defined in Section 2.1(b).

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

        "Escrow Agent," "Escrow Agreement" and "Escrowed Funds" are each defined in Section 3.4.

        "Excluded Assets" is defined in Section 2.2.

        "Excluded Liabilities" is defined in Section 2.4.

        "Fundamental Reps" is defined in Section 12.2(a).

        "GAAP" means generally accepted accounting principles, as in effect in the United States either from time to time as applied to periods prior to the Closing Date or as applied on the Closing Date, as applicable, and in either case, applied on a basis consistent with the past practices of the Company.

        "General Survival Period" is defined in Section 12.2(a).

        "Governmental Authority" means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of any such government or political subdivision, or any self-regulated organization or other non-governmental regulating authority (to the extent that the rules, regulations or orders of such authority have the force of law), or any arbitrator, tribunal or court of competent jurisdiction.

        "Hazardous Material" means any chemical, substance, waste, material, pollutant, or contaminant, the exposure to, presence of, use, Storage, Disposal, Treatment or transportation of which is regulated under or defined by Law.

        "Hired Employees" is defined in Section 10.3(a).

        "Improvements" shall mean any and all buildings, fixtures, utility lines and equipment, walls, fences, structures, betterments, and other improvements to, of, on, or under the Real Property (including, without limitation, all strip mines and all shafts, structural supports, and other betterments installed or constructed for mining operations) and any shafts, structural supports, roads and other betterments and improvements to, of, on or under any Real Property installed or constructed for or used in the Company's mining operations.

        "Indebtedness" means, as at any date of determination thereof (without duplication), all obligations (other than intercompany obligations) of the Company in respect of: (a) any borrowed money or funded indebtedness or issued in substitution for or exchange for borrowed money or funded indebtedness (including obligations with respect to principal, accrued interest, and any applicable prepayment charges or premiums); (b) any indebtedness evidenced by any note, bond, debenture or other debt security; (c) capital lease obligations; (d) any indebtedness guaranteed by the Company (excluding intercompany debt and letters of credit and guarantees by a company of performance obligations of another); and (e) any obligations with respect to any interest rate hedging or swap agreements. Notwithstanding the foregoing, the calculation of Indebtedness shall not include: (y) any of the principal amount as of the Closing Date of any undrawn letters of credit, or (z) obligations of the Company under or with respect to any outstanding checks.

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        "Indemnification Cap" means an amount equal to ten percent (10.0%) of the Purchase Price.

        "Indemnification Threshold" means an amount equal to one percent (1.0%) of the Purchase Price.

        "indemnitee" and "indemnitor" are defined in Section 12.4(a).

        "Intellectual Property" means any of the following in any jurisdiction throughout the world: (a) patents, patent applications, patent disclosures and inventions, including any provisionals, continuations, divisionals, continuations-in-part, renewals and reissues for any of the foregoing; (b) Internet domain names, trademarks, service marks, trade dress, trade names, logos, slogans and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith; (c) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof; (d) mask works and registrations and applications for registration thereof; (e) computer Software (excluding all Off-the-Shelf Software), data, data bases and documentation thereof; (f) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information) (collectively, "Trade Secrets"); and (g) copies and tangible embodiments thereof (in whatever form or medium).

        "Interim Financial Statements" is defined in Section 5.12(b).

        "Knowledge" with respect to any matter, means (a) with respect to Parent, matters within the actual knowledge of Thomas Stoner, William Laughlin and Diana Kubik, and (b) with respect to the Company, matters within the actual knowledge of John Grisham, Jack Grinwis, Rosemary Lacher, and Gary Alkire.

        "Law" means any federal, state, regional, local or foreign law, statute, ordinance, code, treaty, rule, regulation, order or requirement of any Governmental Authority in effect on the date of this Agreement.

        "Leased Real Property" is defined in Section 2.1(a).

        "Leases" means all Contracts pursuant to which the Company leases the Leased Real Property.

        "Legal Requirements" shall mean any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, statute, treaty or similar rule or requirement in effect as of the Closing Date or, if applicable, at any time prior to the Closing Date. With respect to Real Property, "Legal Requirements" also include (i) all restrictive covenants, easements, operating agreements, and other matters of record affecting use and/or development of the property, and (ii) all requirements of underwriting boards with respect to any insurance carried or required to be carried by the Company.

        "Lessor Leases" is defined in Section 5.10(b).

        "Liabilities" means all Indebtedness, obligations, claims and other liabilities of a Person, whether absolute, accrued, contingent, fixed or otherwise or whether due or to become due.

        "Lien" means any lien, charge, mortgage, pledge, easement, encumbrance, security interest, matrimonial or community interest, tenancy by the entirety claim, adverse claim, or any other title defect or restriction of any kind.

        "Loss" or "Losses" means any and all losses, liabilities, damages, costs, penalties, judgments, deficiencies, awards, fines, expenses, actions, notices of violation, and notices of liability and any claims in respect thereof (including, without limitation, amounts paid in settlement and reasonable costs of

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investigation, and legal fees and expenses) arising out of any incident, event, circumstance or proceeding asserted or initiated or otherwise occurring or existing in respect of any matter or any claim or proceeding to enforce any indemnification rights in respect thereof; provided, however, Losses relating to any claims for indemnification shall (a) specifically exclude punitive, exemplary, consequential or incidental damages, damages relating to lost profits, diminution of value, or based upon any multiplier of profits, earnings or cash flow, including earnings before interest, tax, depreciation or amortization or any other valuation metric; and (b) be net of the amount of any actual recoveries: (i) under any insurance policy covering such indemnifiable Losses of which the party seeking indemnification, or any of its Affiliates, is a beneficiary in connection with the circumstances that give rise to the claim for indemnification); and (ii) under "pass-through" warranty coverage from a manufacturer or other third party that are actually received by the party seeking indemnification, or any of its Affiliates, in connection with the circumstances that give rise to the claim for indemnification and, in either case, such indemnified party shall seek full recovery under all such insurance policies or "pass-through" warranty coverage for any Losses to the same extent as they would if such Losses were not subject to indemnification under this Agreement.

        "Material Adverse Effect" means a material adverse effect on the business, condition, financial or otherwise, assets, liabilities, or results of operations of the Company, taken as a whole; provided, however, that none of the following will be deemed, either alone or in combination, to constitute, and none of the following will be taken into account in determining whether there has been or will be, a "Material Adverse Effect": (a) changes in business or economic conditions affecting the economy or the Company' industries generally, (b) changes in stock markets or credit markets, (c) changes in Tax rates, Law or GAAP, or the enactment or implementation of any new Law or Tax; (d) any event as to which Buyer has provided written consent hereunder; (e) an event or circumstance disclosed in the Disclosure Letter, (f) natural disasters, acts of war, sabotage, terrorism, hostilities, military action or any escalation or worsening thereof, or (g) except for purposes of Sections 4.3 or 5.3, the execution, delivery or performance of this Agreement (including any announcement relating to this Agreement or the fact that Buyer is acquiring the Acquired Assets and any actions taken by any customer, supplier or employee of the Company in response to such announcement) or any actions taken by Parent or the Company hereunder or in contemplation hereof, or any actions that Parent or the Company or any representative thereof is required to take hereunder.

        "Material Contracts" is defined in Section 5.13(l).

        "Mineral Leases" means any lease of any mineral rights under which the Company is the tenant or lessee. Mineral Leases include those Surface Leases, if any, under which the Company is granted an interest in some or all of the mineral rights.

        "Monofill" is defined in Section 5.19(a).

        "Montgomery" is defined in Section 2.1(l).

        "Off-the-Shelf Software" means off-the-shelf personal computer software as such term is commonly understood, that is commercially available under non-discriminatory pricing terms on a retail basis for less than $300 per seat and used solely on the desktop personal computers of the Company.

        "Order" means any judgment, injunction, award, decision, decree, ruling, verdict, writ or order of any nature of any Governmental Authority.

        "Owned Real Property" is defined in Section 2.1(a).

        "Parent" is defined in the preamble to this Agreement.

        "Parent Ancillary Agreements" is defined in Section 4.1.

        "Pay-Off Documents" is defined in Section 3.3.

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        "Permits" is defined in Section 2.1(c).

        "Permitted Liens" means: (a) mechanics', carriers', workmen's, repairmen's or other like Liens arising or incurred in the ordinary course of business; (b) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business and under which the Company is not in default; (c) Liens arising by operation of Law, including Liens arising by virtue of rights of customers, suppliers and subcontractors in the ordinary course of business under general principles of commercial law; (d) Liens for current Taxes and utilities not yet due and payable or which are being contested in good faith and, in connection therewith, appropriate reserves have been set aside in accordance with GAAP; (e) imperfections of title or encumbrances, if any, that do not, individually or in the aggregate, materially impair the continued use and operation of any asset to which they relate in the conduct of the business of the Company as presently conducted; (f) leases, subleases and similar agreements set forth in Section 5.10(a) or in Section 5.13 of the Disclosure Letter; (g) easements, covenants, rights-of-way and other similar restrictions or conditions of record or which would be shown by a current accurate survey of any of the Real Property; and (h): (i) zoning, building and other similar restrictions imposed by applicable Laws; (ii) Liens that have been placed by any developer, landlord or other third party on property over which the Company have easement rights or, on any Real Property, under any lease or subordination or similar agreements relating thereto; and (iii) unrecorded easements, covenants, rights-of-way and other similar restrictions on the Real Property none of which, individually or in the aggregate, materially impairs the continued use and operation of such Real Property.

        "Person" means an individual, a corporation, a limited liability company, a partnership, a trust, an unincorporated association, a government or any agency, instrumentality or political subdivision of a government, or any other entity or organization.

        "Plans" is defined in Section 5.18.

        "Pre-Approved Matters" is defined in Section 5.10(e).

        "Pre-Closing Period" is defined in Section 9.1.

        "Prohibited Business" means offering to provide or providing any product or service competitive with the Company or the Business, in the geographic areas where the Company or Buyer engages in business as of the Closing Date.

        "Purchase Price" is defined in Section 3.1.

        "Real Property" is defined in Section 2.1(a).

        "Redbud" means Redbud Company, Inc., an Ohio corporation.

        "Release" shall mean the depositing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, migrating, dispersing, leaching, dumping or disposing.

        "Reserves" is defined in Section 2.1(g).

        "Securities Act" means the Securities Act of 1933, as amended.

        "Sellers" is defined in the preamble of this Agreement.

        "Seller Ancillary Agreements" is defined in Section 4.1.

        "Seller Indemnitees" is defined in Section 12.3.

        "Sellers' Account" is defined in Section 3.2.

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        "Software" means, as they exist anywhere in the world, computer software programs, including all source code, object code, specifications, databases, designs and documentation related to such programs.

        "Surface Lease" means any lease of Leased Real Property and/or Improvements under which the Company is lessee or tenant (including, without limitation, lease of any office, warehouse, or other space).

        "Surety Holders" is defined in Section 11.11(b).

        "Tax" or "Taxes" means: (a) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties, and similar governmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto) including, without limitation (i) taxes imposed on, or measured by income, gross receipts, franchise, or profits, and (ii) license, payroll, employment, withholding, excise, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, ad valorem capital gains, goods and services, branch, utility, production and compensation taxes; and (b) any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

        "Taxing Authority" means any domestic or foreign national, state, provincial, multi-state or municipal or other local executive, legislative or judicial government, court, tribunal, official, board, subdivision, agency, commission or authority thereof, or any other governmental body exercising any regulatory or taxing authority thereunder having jurisdiction over the assessment, determination, collection or other imposition of any Tax.

        "Tax Return" means any return, declaration, report, claim for refund, election, disclosure, estimate, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof required to be filed with any Taxing Authority with respect to Taxes.

        "Third-Party Claim" is defined in Section 12.4(a)(i).

        "Trade Secrets" is defined in the definition of "Intellectual Property."

        "Transfer Tax" is defined in Section 11.10(b).

ARTICLE 14

CONSTRUCTION; MISCELLANEOUS PROVISIONS

        14.1    Notices.    Any notice to be given or delivered pursuant to this Agreement shall be ineffective unless given or delivered in writing, and shall be given or delivered in writing as follows:

(a)

If to Buyer, to:
Rosebud Mining Company
301 Market Street
Kittanning, PA 16201
Attention: J. Clifford Forrest, III
Facsimile Number: (724) 543-6375

With a copy to:
Attorney Geoffrey Mosser
232 South Main Street
Cadiz, Ohio 43907
Attention: Geoffrey Mosser
Facsimile Number: (740) 942-2129

34

(b)

If to Sellers, to:

Evergreen Energy Inc.
1225 17th Street, Suite 1300
Denver, Colorado 80202-5506
Attention: William G. Laughlin
Facsimile Number: (303) 293-2992

With a copy to:

Calfee, Halter & Griswold LLP
1400 KeyBank Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attention: Robert A. Ross
Facsimile Number: (216) 241-0816

or in any case, to such other address for a party as to which notice shall have been given to Buyer and Sellers in accordance with this Section 14.1. Notices so addressed shall be deemed to have been duly given (i) on the third business day after the day of registration, if sent by registered or certified mail, postage prepaid, (ii) on the next Business Day following the documented acceptance thereof for next-day delivery by a national overnight air courier service, if so sent, or (iii) on the date sent by facsimile transmission, if electronically confirmed. Otherwise, notices shall be deemed to have been given when actually received at such address.

        14.2    Entire Agreement.    This Agreement, the Disclosure Letter and Exhibits hereto constitute the exclusive statement of the agreement among the Company, Buyer and Parent concerning the subject matter hereof, and supersedes all other prior agreements, oral or written, among or between any of the parties hereto concerning such subject matter. All negotiations among or between any of the parties hereto are superseded by this Agreement, and there are no representations, warranties, promises, understandings or agreements, oral or written, in relation to the subject matter hereof among or between any of the parties hereto other than those expressly set forth or expressly incorporated herein.

        14.3    Modification.    No amendment, modification, or waiver of this Agreement or any provision hereof, including the provisions of this sentence, shall be effective or enforceable as against a party hereto unless made in a written instrument that specifically references this Agreement and that is signed by the party waiving compliance.

        14.4    Governing Law; Jurisdiction and Venue.    This Agreement shall be governed by and construed in accordance with the Laws of the State of Ohio, without regard to the choice-of-laws or conflicts-of-law's provisions thereof. The parties agree that no action, suit or proceeding at law, in equity or otherwise which in any way arises out of or relates to this Agreement or the transactions contemplated hereby shall be brought solely in the state or federal courts in Cuyahoga County, Ohio and all objections to personal jurisdiction and venue in any action, suit or proceeding so commenced are hereby expressly waived by all parties hereto. The parties waive personal service of any and all process on each of them and consent that all such service of process shall be made in the manner, to the party and at the address set forth in Section 14.1 of this Agreement, and service so made shall be complete as stated in such section.

        14.5    Specific Performance.    Each party's obligation under this Agreement is unique. If any party should breach its covenants under this Agreement, the parties each acknowledge that it would be impracticable to measure the resulting damages; accordingly, the nonbreaching party or parties, in addition to any other available rights or remedies they may have under the terms of this Agreement, may sue in equity for specific performance, and each party expressly waives the defense that a remedy in damages will be adequate.

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        14.6    Binding Effect.    This Agreement shall be binding upon and shall inure to the benefit of Buyer and Sellers and the respective successors and permitted assigns.

        14.7    Headings.    The article and section headings used in this Agreement are intended solely for convenience of reference, do not themselves form a part of this Agreement, and may not be given effect in the interpretation or construction of this Agreement.

        14.8    Number and Gender; Inclusion.    Whenever the context requires in this Agreement, the masculine gender includes the feminine or neuter, the neuter gender includes the masculine or feminine, the singular number includes the plural, and the plural number includes the singular. In every place where it is used in this Agreement, the word "including" is intended and shall be construed to mean "including, without limitation."

        14.9    Counterparts.    This Agreement and each document delivered pursuant to this Agreement may be executed by the parties in separate counterparts and by facsimile or by electronic mail with scan or attachment signature, each of which when so executed and delivered shall be deemed an original, and all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof or thereof each signed by less than all, but together signed by all of the parties.

        14.10    Third Parties.    Except as may otherwise be expressly stated herein, no provision of this Agreement is intended or shall be construed to confer on any Person, other than the parties hereto, any rights hereunder. Buyer Indemnitees and Seller Indemnitees who are not otherwise parties to this Agreement shall be third party beneficiaries of this Agreement.

        14.11    Disclosure Letter and Exhibits.    The Disclosure Letter and Exhibits, if any, referenced in this Agreement constitute an integral part of this Agreement as if fully rewritten herein. Notwithstanding anything to the contrary contained in this Agreement or in any of the sections of the Disclosure Letter, any information disclosed in one section of the Disclosure Letter shall be deemed to be disclosed in such other sections of the Disclosure Letter and applicable to such other representations and warranties to the extent that the disclosure is reasonably apparent from its face to be applicable to such other section of the Disclosure Letter and such other representations and warranties. Disclosure of any fact or item in any section of the Disclosure Letter shall not be deemed to constitute an admission that such item or fact is material for the purposes of this Agreement. All references in this document to "this Agreement" and the terms "herein," "hereof," "hereunder" and the like shall be deemed to include all of such sections of the Disclosure Letter and Exhibits.

        14.12    Time Periods.    Any action required hereunder to be taken within a certain number of days shall, except as may otherwise be expressly provided herein, be taken within that number of calendar days; provided that if the last day for taking such action falls on a Saturday, a Sunday, or a legal holiday, the period during which such action may be taken shall automatically be extended to the next business day.

        14.13    Construction.    This Agreement and the other documents contemplated herein shall be deemed to have been drafted by the parties and neither this Agreement nor any other document contemplated herein shall be construed against any party as the principal draftsperson hereof or thereof.

[Signature Page Follows]

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        IN WITNESS WHEREOF, Buyer, the Company and Parent have caused this Asset Purchase Agreement to be executed and delivered by their duly authorized representatives, as of the date first written above.

BUYER:
ROSEBUD MINING COMPANY
Name:	J. Clifford Forrest, III
Its:	President
PARENT:
EVERGREEN ENERGY INC.
Name:
Its:
COMPANY:
BUCKEYE INDUSTRIAL MINING CO.
Name:
Its:

EXHIBIT A

Escrow Agreement

[See attached]

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ASSET PURCHASE AGREEMENT

EX-10.41

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Exhibit 10.41

EXECUTION COPY

ESCROW AGREEMENT

        THIS ESCROW AGREEMENT ("Escrow Agreement") is entered into as of the 12th day of March, 2010, among Rosebud Mining Company, a Pennsylvania corporation ("Buyer"), Buckeye Industrial Mining Co., an Ohio corporation (the "Company"), Evergreen Energy Inc., a Delaware corporation ("Parent" and together with Company, collectively, "Sellers"), and KeyBank, N.A., a national banking association (the "Escrow Agent"). Any capitalized term used but not defined herein shall have the meaning ascribed to it in the Purchase Agreement (as defined below).

RECITALS:

        1.     Pursuant to the terms of that certain Asset Purchase Agreement, dated as of the date hereof, among Buyer and Sellers (the "Purchase Agreement"), Buyer has agreed to deliver to the Escrow Agent on the date hereof an amount equal to Two Million Seven Hundred Eighty Five Thousand Two Hundred Dollars ($2,785,200) (together with any interest, earnings and income accrued thereon from time to time, collectively, the "Escrow Amount") pursuant to the terms of this Agreement.

        2.     The Escrow Amount shall be disbursed in accordance with the terms of this Escrow Agreement.

        NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Purchase Agreement, the Parties agree as follows:

        1.    Designation of the Escrow Agent.    Buyer and Sellers hereby designate and appoint the Escrow Agent to serve in accordance with the terms and conditions provided in this Escrow Agreement. The Escrow Agent hereby accepts such appointment and agrees to act as escrow agent in accordance with the terms, conditions and instructions contained in this Escrow Agreement.

        2.    Creation of Escrow.    Concurrently with the execution and delivery of this Escrow Agreement, Buyer shall deliver, by wire transfer of immediately available funds, to the Escrow Agent an amount equal to Two Million Seven Hundred Eighty Five Thousand Two Hundred Dollars ($2,785,200). The Escrow Agent shall acknowledge in writing to each of Buyer and Sellers its receipt of the Escrow Amount upon receipt. The Escrow Agent shall hold the Escrow Amount in a separate account established by the Escrow Agent (the "Escrow Fund").

        3.    Investment.    The Escrow Amount shall be invested at the direction of Parent in (a) obligations issued or guaranteed as to interest and principal by the government of the United States or any agency or instrumentality thereof including the Escrow Agent's Victory Institutional Money Market Fund; (b) certificates of deposit, demand deposits, or the deposits of banks or trust companies that are members of the Federal Deposit Insurance Corporation, including the Escrow Agent, that have combined capital and surplus of at least $100,000,000; or (c) any repurchase agreement of a bank or trust company, including the Escrow Agent, organized under the United States or any state thereof and fully collateralized by obligations described in (a) above. From the date hereof until otherwise directed in writing by Parent, the Escrow Agent is directed to deposit and invest the Escrow Amount in the Escrow Agent's Victory Institutional Money Market Fund. Any interest and earnings shall be disbursed in accordance with the terms of this Escrow Agreement. The Escrow Agent shall be entitled and is hereby directed to sell or redeem any such investments as necessary to make any payment or distribution in accordance with the terms hereof.

        4.    Disbursement of Escrow Amount.

        (a)   Unless sooner disbursed in accordance with the provisions of Section 4(b) below, on the date twelve (12) months after the Closing Date (the "Escrow Disbursement Date"), the Escrow Agent shall disburse the Escrow Amount to Sellers; provided, however, that if there is a Disputed Amount (as defined below), the amount of such payment shall be reduced by the amount of such

Disputed Amount, but shall not be a negative number. For purposes hereof, the term "Disputed Amount" shall mean the amount reasonably estimated in good faith by Buyer, and communicated (as provided in Section 11 of this Escrow Agreement and with explanation regarding how such estimated amount was calculated) to the Escrow Agent and Sellers prior to the Escrow Disbursement Date, that relates to unresolved claims for indemnification brought by Buyer pursuant to the terms of the Purchase Agreement.

        (b)   In any event and at any time, including, without limitation, upon the termination of the Purchase Agreement in accordance with Sections 11.1 and 11.2 thereof, the Escrow Amount, or any portion thereof, shall be disbursed by the Escrow Agent promptly upon (i) the receipt of a final, non-appealable order of a court of competent jurisdiction advising the Parties of the amount of the Escrow Fund to be disbursed and the recipients thereof; (ii) a final order issued in a binding arbitration; or (iii) joint written instructions from Buyer and Sellers advising the Escrow Agent of the portion of the Escrow Amount to be disbursed and the recipients thereof.

        5.    Termination.    This Escrow Agreement, and the Escrow Amount created hereby, shall terminate upon the date upon which the Escrow Amount (including any Disputed Amount) is fully and finally disbursed in accordance with Section 4 above.

        6.    Fees and Expenses.    In consideration for the services to be provided by Escrow Agent hereunder, all of the annual administrative escrow fee of Escrow Agent (as described on Exhibit A hereto) and such other fees, costs, charges and expenses of Escrow Agent, if any, including reasonable attorneys' fees, which are incurred in connection with the performance of Escrow Agent's duties and obligations hereunder shall be paid one-half by Buyer and one-half by Sellers. Escrow Agent shall submit written information (including copies of receipts) to Buyer and Sellers detailing the nature and amount of all expenses which it may incur prior to payment of same.

        7.    Conditions of the Escrow Agent's Obligations.

        (a)    Legal Counsel.    The Escrow Agent shall be entitled to employ such legal counsel and other experts as it may deem reasonably necessary to advise it in connection with its obligations hereunder, may rely on the advice of such counsel, and may pay them reasonable compensation therefor, provided, such counsel is not Calfee, Halter & Griswold LLP or Attorney Geoffrey Mosser.

        (b)    Resignation.    The Escrow Agent may resign by giving written notice thereof to Buyer and Sellers. Buyer and Sellers may remove the Escrow Agent at any time by furnishing to the Escrow Agent a joint written notice of its removal along with payment of all fees and expenses to which it is entitled through the date of termination. In the event of any such resignation or removal, the Escrow Agent shall refrain from taking any action with respect to the Escrow Amount and shall safely keep the Escrow Amount in accordance with the terms hereof until it receives joint written instructions from Buyer and Sellers or by written court order designating a successor escrow agent (which shall be a national bank authorized to exercise corporate trust powers, and having a combined capital and surplus of at least $5,000,000,000) and delivery of the Escrow Amount is made over to the successor escrow agent. Upon receipt of such joint instructions or court order the Escrow Agent shall promptly deliver the Escrow Amount then held by it to such successor escrow agent. Any successor escrow agent shall have all the rights, obligations, and immunities of the Escrow Agent set forth herein. If Buyer and Sellers have failed to appoint a successor escrow agent prior to the expiration of thirty (30) business days following receipt of the notice of resignation or removal, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon all of the Parties.

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        (c)    Liability Limitations.    Except as to its obligation to keep the Escrow Amount safely in its custody as the Escrow Agent hereunder, the Escrow Agent shall be indemnified, on a joint and several basis, by Buyer and Sellers and shall not be liable to any person claiming hereunder by reason of any error of judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law or for anything which it may do or refrain from doing in connection herewith unless caused by or arising out of its own bad faith, gross negligence or willful misconduct.

        (d)    Reliance.    The Escrow Agent shall be entitled to rely and shall be protected in acting in reliance upon any instructions or directions furnished to it in writing pursuant to any provisions of this Escrow Agreement by Sellers and Buyer and shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper or other document furnished to it and reasonably believed by it to be genuine and to have been signed and presented by the proper party or parties.

        (e)    Tax Matters.    The Escrow Agent does not have any interest in the Escrow Amount hereunder but is serving only as escrow holder and has only possession thereof. Sellers shall be responsible for reporting and the payment of taxes (including any late payment, penalty or interest) related to any interest earned on, or distribution of, the Escrow Amount. Any payments of income from the Escrow Amount shall be subject to withholding regulations then in force with respect to United States taxes. Sellers will provide the Escrow Agent with all appropriate information at Closing to enable the Escrow Agent to report any interest income accrued hereunder pursuant to Internal Revenue Code Section 1099. This Section 7(e) shall survive the termination of this Escrow Agreement or the resignation of the Escrow Agent.

        8.    Action by the Escrow Agent.    Nothing herein contained shall be deemed to impose upon Buyer or Sellers any obligation or liability on account of the failure of the Escrow Agent to fulfill its obligations under this Escrow Agreement, except pursuant to Section 7(c) hereof. The Escrow Agent will not be responsible for determining or calculating amounts to be disbursed from the Escrow Amount, except for the interest and earnings payments to be made as provided in Section 4.

        9.    Headings.    The headings in this Escrow Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation hereof.

        10.    Governing Law.    This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to contracts made and to be performed entirely within the State of Ohio, without regard to choice of law provisions.

        11.    Notices.    All notices, correspondence or other documents to be delivered in connection herewith shall be delivered as follows:

(a)

If to Buyer:

Rosebud Mining Company
301 Market Street
Kittanning, PA 16201
Attention: J. Clifford Forrest, III
Facsimile Number: (724) 543-6375

With a copy to:

Attorney Geoffrey Mosser
232 South Main Street
Cadiz, Ohio 43907
Attention: Geoffrey Mosser
Facsimile Number: (740) 942-2129

3

(b)

If to Sellers:

Buckeye Industrial Mining Co.
Evergreen Energy Inc.
1225 17th Street, Suite 1300
Denver, Colorado 80202-5506
Attention: William G. Laughlin
Facsimile Number: (303) 293-2992

With a copy to:

Calfee, Halter & Griswold, LLP
1400 KeyBank Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attention: Thomas A. Cicarella
Facsimile: (216) 241-0816

(c)

If to the Escrow Agent, to:

KeyBank, N.A.
127 Public Square
IAS—Escrow Department—14th Floor
Cleveland, Ohio 44114
Attention: Terrence J. Stone
Facsimile: (216) 689-3777

or to such other address as may have been designated in a prior notice. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if signed by the respective person giving such notice or other communication (in the case of any corporation the signature shall be by an authorized officer thereof) (i) when delivered personally, (ii) one (1) business day following deposit with a nationally recognized overnight delivery service, or (iii) two (2) business days after being deposited in the United States certified mail in a sealed envelope, postage prepaid, return receipt requested.

        12.    Execution in Counterparts.    This Agreement may be executed in multiple counterparts, each of which will be deemed an original, and all of which together will constitute one and the same document.

        13.    Entire Agreement; Modification.    This Escrow Agreement is the entire agreement among the Parties on the express subject matter hereof (the escrow of the Escrow Amount). This Escrow Agreement may be modified or amended only by mutual instructions to the Escrow Agent, signed by Buyer and Sellers, and by a subsequent writing signed by Buyer, Sellers and the Escrow Agent.

        14.    Binding Effect.    This Escrow Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of Buyer, Sellers and the Escrow Agent, and their respective heirs, personal representatives, successors and permitted assigns. No other person shall have any right hereunder.

        15.    Severability.    If any provision of this Escrow Agreement, or the application thereof to any person or circumstance, should, for any reason and to any extent, be invalid or unenforceable, the remainder of this Escrow Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law.

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        16.    No Assignments.    This Escrow Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, successors and assigns, but may not be assigned by any party without the prior written consent of the other parties hereto; provided, however, that Buyer may, without the permission or consent of the other parties, (i) collaterally assign its rights under this Escrow Agreement to its lenders and (ii) assign its rights to any of its affiliates or any successor of the business.

        17.    Waivers.    The failure of any Party at any time or times to require performance of any provision under this Escrow Agreement shall in no manner affect the right at a later time to enforce the same performance. A waiver by any Party of any such condition or breach of any term, covenant, representation, or warranty contained in this Escrow Agreement, in any one or more instances, shall neither be construed as a further or continuing waiver of any such condition or breach nor a waiver of any other condition or breach of any other term, covenant, representation, or warranty contained in this Escrow Agreement.

        18.    Attachment of Escrow Property; Compliance with Legal Orders.    In the event that any Escrow Amount shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Escrow Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree being subsequently reversed, modified, annulled, set aside or vacated.

[Signature page follows]

5

        IN WITNESS WHEREOF, this Escrow Agreement has been executed by Buyer, Sellers and the Escrow Agent on the date and year first written above.

BUYER:
ROSEBUD MINING CO.
BY	Print Name Title
PARENT:
EVERGREEN ENERGY INC.
BY	Print Name Title
COMPANY:
BUCKEYE INDUSTRIAL MINING CO.
BY	Print Name Title
ESCROW AGENT:
KEYBANK, N.A.
BY	Print Name Title

6

EXHIBIT A

Annual administrative escrow fee payable upon execution of the Escrow Agreement and annually thereafter on the anniversary date of the account opening $2,500.00

*

Fee is based on use of the Victory Institutional Money Market Fund with respect to investment of all Escrowed Funds. Alternative investments directed by the parties will incur an additional annual custody fee of five (.0005) basis points on the market value of the investments held in the escrow account.

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ESCROW AGREEMENT

EX-10.42

Exhibit 10.42

AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT

        This Amendment to the Asset Purchase Agreement (this "Amendment") is entered into among Rosebud Mining Company, a Pennsylvania corporation ("Buyer"), Evergreen Energy Inc., a Delaware corporation ("Parent"), and Buckeye Industrial Mining Co., an Ohio corporation (the "Company," and together with Parent, collectively, "Sellers," and each individually, a "Seller"), as of the 29th day of March, 2010.

A. INTRODUCTION

1.

Buyer, Parent and the Company have entered into an Asset Purchase Agreement, dated March 12, 2010 (the "Agreement"), pursuant to which Sellers are selling to Buyer the assets used primarily in the operations of the Business upon the terms and conditions set forth in the Agreement.

2.

Buyer, Parent and the Company desire to amend the Agreement as set forth herein in order to proceed to the Closing on an expedited basis.

3.

Capitalized terms not otherwise defined herein will be given the meanings set forth in the Agreement.

B. AMENDMENTS

1.

Article 8 of the Agreement will be amended in its entirety to read as follows:

"The consummation of the transactions contemplated herein (the "Closing") will take place on April 1, 2010, and shall take place at the offices of Calfee, Halter & Griswold in Cleveland, Ohio or at such other time and place as to which Buyer and Sellers may agree in writing. The date on which the Closing actually occurs is referred to herein as the "Closing Date." The transfers and deliveries described in Article 7 shall be mutually interdependent and shall be regarded as occurring simultaneously, and, any other provision of this Agreement notwithstanding, no such transfer or delivery shall become effective or shall be deemed to have occurred until all of the other transfers and deliveries provided for in Article 7 shall also have occurred or been waived in writing by the party entitled to waive the same. Such transfers and deliveries shall be deemed to have occurred and the Closing shall be effective as of 12:00:01 a.m. on the Closing Date."

2.

Notwithstanding anything to the contrary in the Agreement, Buyer waives any failure on behalf of Parent or the Company to deliver any of the authorizations, approvals or consents set forth in Section 5.4 of the Disclosure Letter from each third party with respect to any Contract listed thereon that, as of March 31, 2010, have not been secured by Parent or the Company and, accordingly and to that extent, waives the Closing condition set forth in Section 7.1(a)(ii).

3.

Section 7.1(d)(iii) of the Agreement will be amended in its entirety to read as follows:

"7.1(d)(iii)(A) On the Closing Date, each of Buyer and the Company and/ or Parent, as applicable, shall execute and deliver to the other party the following instruments with respect to the Real Property, other than the Owned Real Property:

        (x)   an Assignment and Assumption of Lease for each Surface Lease and Mineral Lease listed in Section 2.1(a)(ii) of the Disclosure Letter;

        (y)   an Assignment and Assumption of each Easement, License and other Agreement affecting the Real Property listed in Section 5.10(a) of the Disclosure Letter; and

        (z)   an Assignment and Assumption of Lease for each Lessor Lease listed in Section 5.10(b) of the Disclosure Letter;

        (B)  On the Closing Date, for each parcel of Owned Real Property for which the Company has obtained from Chicago Title Insurance Company a verifying tax map and conforming, record legal description matching such tax map and not marked insufficient for transfer under the applicable County's local conveyancing standards, the Company shall deliver to Buyer a general warranty deed for such parcel of Owned Real Property, free and clear of Liens other than Permitted Liens. For all other parcels of Owned Real Property, on the Closing Date, each of Buyer and Company shall execute and deliver to the other party an interim ground lease (the "Ground Lease") whereby the Company leases to Buyer, and Buyer leases from the Company, all other parcels of the Owned Real Property for a term of twenty nine (29) years after the Closing Date, for a cumulative annual base rent of $1 in aggregate, with Buyer paying all real estate taxes and assessments, charges and levies associated with the Owned Real Property that become payable after the Closing Date, with Buyer insuring all improvements thereon at full replacement value, and Buyer maintaining all such improvements in compliance with applicable law, and otherwise on an absolute, net-net-net basis."

4.

Section 7.1(d)(viii) of the Agreement is hereby deleted in its entirety.

5.

Section 7.2(f) of the Agreement will be amended in its entirety to read as follows: "Buyer shall have initiated all actions necessary to replace all of the Company's deposits and bonds, including but not limited to the reclamation, utility, payment and performance bonds, and equipment bonds and deposits listed in Section 5.10(p) of the Disclosure Letter attached hereto; and"

6.

Section 11.11 of the Agreement will be amended to add a new subsection (b) to read as follows: "To the extent not completed as of the Closing Date, within sixty (60) days after the Closing Date, Buyer shall have replaced all of the Company's deposits and bonds, including but not limited to the reclamation, utility, payment and performance bonds, and equipment bonds and deposits listed in Section 5.10(p) of the Disclosure Letter attached hereto and shall have caused the bonds and deposits of the Company to be released at such time." Accordingly, Section 11.11 of the Agreement will be further amended to change the current subsection (b) to subsection (c).

7.

A new Section 11.13 will be added to the Agreement to read as follows:

"11.13 Boundary Surveys: Deeds. After the Closing Date, at Sellers' expense, Sellers shall cause (i) new boundary surveys to be prepared by licensed surveyors selected by Sellers for the approximately 20 parcels of Owned Real Property located in Columbiana County and Jefferson County whose record legal descriptions do not comply with the local County conveyancing standards, and cause such boundary survey legal descriptions to be approved by the applicable County officials, and (ii) obtain tax maps and other title company verification of the record legal descriptions of all other parcels of Owned Real Property (to the extent not previously obtained by the Company pursuant to Section 7.1(d)(iii)(B) above. Promptly after Sellers complete their post closing obligations under this Section 11.13, Seller shall convey the Owned Real Property to Buyer by general warranty deeds, pay the Ohio conveyance fee tax for Buyer to file such deeds of record (calculated using the existing fair market values shown on the current tax duplicates for such Owned Real Property), whereupon the parties shall terminate the Ground Lease."

8.

A new Section 11.14 will be added to the Agreement to read as follows:

"11.14 Further Assurances. From time to time after the Closing, as and when requested by any party hereto without any fee other than payment of such party's out-of-pocket expenses, any other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as the requesting party may reasonably deem necessary or desirable to evidence and effectuate the transactions contemplated by this Agreement."

2

C. MISCELLANEOUS

1.

Terms of the Agreement. The terms of the Agreement, as expressly amended pursuant to this Amendment, will remain in full force and effect.

2.

Contract Interpretation and Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Ohio, without regard to the choice-of-laws or conflicts-of-law's provisions thereof.

3.

Headings. The article and section headings used in this Amendment are intended solely for convenience of reference, do not themselves form a part of this Amendment and may not be given effect in the interpretation or construction of this Amendment.

4.

Counterparts. This Amendment may be executed in two or more counterparts, all of which will be considered one and the same instrument and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

*****

3

        Intending to be legally bound, the undersigned have executed and delivered this Amendment as of the date first above written.

ROSEBUD MINING COMPANY

By:

Name:

Title:

EVERGREEN ENERGY INC.

By:

Name:

Title:

BUCKEYE INDUSTRIAL MINING CO.

By:

Name:

Title:

4

EX-12.1

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Exhibit 12.1

DEFICIENCY OF EARNINGS TO FIXED CHARGES

        Our earnings were sufficient to cover fixed charges for each of the periods presented. Accordingly, the following table sets forth the deficiency of earnings to fixed charges for each of the periods presented. Because of the deficiency, ratio information is not applicable.

	2009		2008		2007		2006		2005
	(in thousands)
Deficiency of Earnings to Fixed Charges	$	59,552	$	65,991	$	204,857	$	51,527	$	23,313

        For purposes of computing the deficiency of earnings available to cover fixed charges, fixed charges represent interest expense, the portion of operating lease rental expense that is considered by us to be representative of interest and amortization of discount related to indebtedness. Deficiency of earnings consists of loss before income taxes, plus fixed charges.

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Exhibit 12.1

DEFICIENCY OF EARNINGS TO FIXED CHARGES

EX-21.1

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Exhibit 21.1

SUBSIDIARIES OF EVERGREEN ENERGY INC.

KFx Technology, LLC*—a Delaware limited liability company

Evergreen Operations, LLC*—a Delaware limited liability company.

Landrica Development Company—a South Dakota company 100% owned by Evergreen Operations, LLC

Buckeye Industrial Mining Co.—an Ohio company 100% owned by Evergreen Operations, LLC

KFx Plant, LLC—a Wyoming limited liability company 100% owned by Evergreen Operations, LLC

KFx Operations, LLC—a Wyoming limited liability company 100% owned by Evergreen Operations, LLC

Evergreen Energy International, LLC*—a Delaware limited liability company.

Evergreen Energy Asia Pacific Corp—a Delaware company 96% owned by Evergreen Energy International, LLC

Evergreen Energy Asia Corporation—a Japanese company 100% owned by Evergreen Energy Inc.

C-Lock Technology, Inc.—a Delaware company 92% owned by Evergreen Energy Inc.

*

100% owned by Evergreen Energy

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Exhibit 21.1

SUBSIDIARIES OF EVERGREEN ENERGY INC.

EX-23.1

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the incorporation by reference in Registration Statements on Form S-8 (Nos. 333-09873, 333-82357, 333-106129, 333-129447 and 333-130336) and Registration Statements on Form S-3 (Nos. 333-163246, 333-162720, 333-04298, 333-87774, 333-106207 and 333-12181) of our reports dated March 31, 2010, relating to the financial statements of Evergreen Energy Inc. and subsidiaries (the "Company"),(which report expresses an unqualified opinion and includes an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern) and the effectiveness of Company's internal control over financial reporting(which report expresses an adverse opinion on the effectiveness of the Company's internal control over financial reporting because of a material weakness), appearing in the Annual Report on Form 10-K of Evergreen Energy Inc. for the year ended December 31, 2009.

/s/ Deloitte & Touche LLP
Denver, Colorado
March 31, 2010

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-31.1

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Thomas H. Stoner, Jr., certify that:

1.

I have reviewed this annual report on Form 10-K of Evergreen Energy Inc.:

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.

The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5.

The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

/s/ THOMAS H. STONER, JR. Thomas H. Stoner, Jr.
Title: Chief Executive Officer
Date: March 31, 2010

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Diana L. Kubik, certify that:

1.

I have reviewed this annual report on Form 10-K of Evergreen Energy Inc.:

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.

The company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

5.

The company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

/s/ DIANA L. KUBIK Diana L. Kubik
Title: Vice President and Chief Financial Officer
Date: March 31, 2010

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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Exhibit 32.1

EVERGREEN ENERGY INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas H. Stoner, Jr., state and attest that:

1.

I am the Chief Executive Officer of Evergreen Energy Inc. (the "Issuer"),

2.

Accompanying this certification is the Form 10-K for the year ended December 31, 2008, a periodic report (the "Periodic Report") filed by the Issuer with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), which contains financial statements.

3.

I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

•

the Periodic Report containing the financial statements fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

•

the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer for the periods presented therein.

/s/ THOMAS H. STONER, JR.
Thomas H. Stoner, Jr.
Title: President & Chief Executive Officer
Date: March 31, 2010

A signed original of this written statement required by Section 906 has been provided to Evergreen Energy Inc. and will be retained by Evergreen Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.1

EX-32.2

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EXHIBIT 32.2

EVERGREEN ENERGY INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

I, Diana L. Kubik, state and attest that:

1.

I am the Vice President and Chief Financial Officer of Evergreen Energy Inc. (the "Issuer"),

2.

Accompanying this certification is the Form 10-K for the year ended December 31, 2008, a periodic report (the "Periodic Report") filed by the Issuer with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), which contains financial statements.

3.

I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

•

the Periodic Report containing the financial statements fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

•

the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer for the periods presented therein.

/s/ DIANA L. KUBIK
Diana L. Kubik
Title: Vice President and Chief Financial Officer
Date: March 31, 2010

A signed original of this written statement required by Section 906 has been provided to Evergreen Energy Inc. and will be retained by Evergreen Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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EXHIBIT 32.2