SEVERANCE AGREEMENT, WAIVER AND RELEASE

This Severance Agreement, Waiver and Release (the “Agreement”) is entered into between Evergreen Energy Inc. (the “Company”), and Kevin R. Collins (the “Employee”).  The “Effective Date” of this Agreement is as defined below in Paragraph 7.

In consideration of the conditions, covenants and agreements set forth below, for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Company and the Employee (collectively called the “Parties”) agree as follows:

1.           The Employee was employed by the Company as President and CEO until his retirement from the Company on May 31, 2009.  The purpose of this Agreement is to settle all issues relating to his employment and retirement from the Company.

2.           The Company and the Employee, each without admitting any liability or wrongdoing, desire to resolve amicably, and in the spirit of compromise, all issues and differences between them in accordance with and in consideration of the terms of this Agreement.

3.           The Employee understands and acknowledges that whether or not he signs this agreement, he is entitled to and has received any earned but unpaid salary through May 31, 2009, commissions, vacation pay, paid time off, expenses, or other amounts to which the Employee already is entitled in accordance with the terms of the Company’s established policy.  If the Employee has any remaining expenses for which he has not yet been reimbursed, he agrees to submit his claim, if any, for such expenses by June 30, 2009, and the Company agrees to pay such expenses within one calendar week of the date the claim is received, subject to approval of the amount and appropriateness of such expenses in accordance with established company policy.

4.            Severance Payment .  Pursuant to approval from the Company’s Board of Directors, Company agrees to pay the Employee a “Severance Payment” as follows:

a.           Commencing on June 1, 2009, an amount equivalent to twelve (12) months of salary at his regular salary rate, less applicable withholding for federal and state taxes and other deductions required by law and less Eighty Five Thousand Dollars ($85,000) Employee is expected to receive for service during the year on the Company’s Board of Directors.  The total amount to be received during the twelve (12) month period is Two Hundred Fifteen Thousand Dollars ($215,000); provided however, should Employee leave the Board of Directors, Eighty Five Thousand Dollars ($85,000), less any Board fees received to date (not including fees for attendance at Board Committee meetings), will be added to the payments over the remaining period of the twelve (12) month payout.  The parties agree that when the last payment is made to Employee, he shall have received over the twelve (12) months a total of Three Hundred Thousand Dollars ($300,000).  The Company will pay this part of the Severance Payment (not including the Board fees which shall be paid at the same time as other Board members are paid) in the same manner as a regular employee through the regularly scheduled payroll process.

       c.           Except for the stock provided for in the Employment Agreement, which will be forfeited when the Employment Agreement terminates ( see section 16 below ), all other stock and/or options which have been granted to Employee and which have not yet vested will vest on June 1, 2009.

5.            Mutual Waiver and Release of Claims . In exchange for this Agreement and in consideration of the Severance Payment provided by Paragraph 4 above, which is in addition to anything of value to which the Employee already is entitled, the Employee hereby irrevocably and unconditionally releases and forever discharges the Company and its officers, members, agents, directors, shareholders, supervisors, employees, representatives, affiliates, and their successors and assigns, and all persons acting by, through, under, or in concert with any of them, from any and all charges, complaints, demands, damages, costs, expenses, causes of action, action, rights, benefits, complaints, claims and liabilities of any kind or nature whatsoever, known or unknown, suspected or unsuspected, certain or contingent, which the Employee at any time had or claimed to have regarding events that occurred up to and including the Effective Date of this Agreement, including but not limited to any and all such claims arising out of, related to, or in any manner incidental to the Employee’s employment with the Company or his separation from employment.

Similarly, in consideration of the rights and obligations created by this Agreement, the Company, and its officers, members, agents, directors, shareholders, supervisors, employees, representatives, affiliates, and their successors and assigns, and all persons acting by, through, under, or in concert with the Company, hereby irrevocably and unconditionally release and forever discharge the Employee and his heirs, successors, and assigns from any and all charges, complaints, demands, damages, costs, expenses, causes of action, action, rights, benefits, complaints, claims and liabilities of any kind or nature whatsoever, known or unknown, suspected or unsuspected, certain or contingent, which the Company at any time had or claimed to have regarding events that occurred up to and including the Effective Date of this Agreement.

6.            Specific Claims Released .  This release includes, but is not limited to, all claims arising under any federal, state or municipal law, including the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, Equal Pay Act, Fair Labor Standards Act, Family and Medical Leave Act, Age Discrimination in Employment Act, National Labor Relations Act, Occupational Safety and Health Act, Employee Retirement Income Security Act (except as specified below in this section), Colorado Wage Claim Act, the Colorado Anti-Discrimination Act, and other statutes and the common law of the state of Colorado, including claims for tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, and

defamation or injuries incurred on the job or upon separation from employment.  The Parties understand and agree that they are waiving and releasing any and all claims that they now have or might claim to have against each other based on events up to the Effective Date of this Agreement, regardless of their nature or origin, and the fact that such claim is not listed above does not mean it is not included in this release.

This release does not preclude an action by either party to enforce the specific terms of this Agreement. It does not preclude workers’ compensation claims, if any, that have already been filed or that pertain to on-the-job injuries that have already been reported.  This release does not preclude claims for benefits in which the Employee has become vested under the Employee Retirement Income Security Act.

7.            ADEA Release; Effective Date .  The Employee acknowledges, understands, and agrees as follows:

a.           He has carefully read and fully understands all of the provisions of this Agreement, including the release provisions.

b.           He knowingly and voluntarily agrees to all of the terms set forth in this Agreement, and he intends to be legally bound by them.

c.           Through this Agreement, he is releasing the Company from any and all claims, including claims under the Age Discrimination in Employment Act (ADEA)