<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
KFX INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
KFX INC.
1999 BROADWAY, SUITE 3200
DENVER, COLORADO 80202
April 30, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of KFx Inc., which will be held at 10:00 a.m. local time on
Thursday, June 19, 1997 at the executive offices of KFx Inc., 1999 Broadway,
Suite 3200, Denver, Colorado 80202.
The Notice of Annual Meeting and the Proxy Statement that follow
describe the business to be conducted at the meeting. We will also report on
matters of current interest to our stockholders.
The Annual Report for the year ended December 31, 1996 is enclosed,
and I hope you will read it carefully. Feel free to forward to us any questions
you may have if you are unable to be present at the Meeting. Our World Wide Web
homepage on the Internet is a convenient way to communicate with us. Our
homepage is located at http://www.kfx.com.
Also enclosed is a Proxy authorizing two officers of KFx Inc. to vote
your shares for you if you do not attend the Meeting. Whether or not you are
able to attend the Meeting, I urge you to complete your Proxy and return it to
our transfer agent, InterWest Transfer Company, in the enclosed addressed,
postage-paid envelope, as a quorum of the Stockholders must be present at the
Meeting, either in person or by Proxy, for the conduct of business.
Sincerely,
/s/ Theodore Venners
Theodore Venners
Chairman of the Board of Directors
President and Chief Executive Officer
<PAGE>
KFX INC.
1999 BROADWAY, SUITE 3200
DENVER, COLORADO 80202 USA
NOTICE OF ANNUAL MEETING
April 30, 1997
To the Stockholders of KFx Inc:
The 1997 Annual Meeting of the Stockholders (the "Meeting") of KFx
Inc. (the "Company") will be held on Thursday, June 19, 1997 at 10:00 a.m. local
time at the executive offices of the Company, 1999 Broadway, Suite 3200, Denver,
Colorado 80202. The purpose of the Meeting is to consider and take action upon
the following matters:
1. Election of three Directors.
2. Approval of Price Waterhouse LLP as the Company's independent
accountants for the year ending December 31, 1997.
3. Such other business as may properly be brought before the Meeting
and any postponements, continuation or adjournments thereof.
Only stockholders of record at the close of business on April 30, 1997
are entitled to notice of and to vote at the Meeting or at any postponements,
continuations or adjournments thereof.
The By-laws require that the holders of a majority of the stock issued
and outstanding and entitled to vote be present or represented at the Meeting in
order to constitute a quorum for the transaction of business. It is important
that your stock be represented at the Meeting regardless of the number of shares
you hold. Whether or not you are able to be present in person, please sign and
return promptly the enclosed Proxy in the accompanying envelope, which requires
no postage if mailed in the United States.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
This Notice, the Proxy and Proxy Statement enclosed herewith are
sent to you by order of the Board of Directors.
Rudolph G. Swenson
Secretary
<PAGE>
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors (the
"Board") of KFx Inc. (the "Company") for use at the 1997 Annual Meeting of the
Stockholders (the "Meeting") to be held on Thursday, June 19, 1997 at 10:00 a.m.
local time at the executive offices of the Company, 1999 Broadway, Suite 3200,
Denver, Colorado 80202, and all postponements, continuations or adjournments
thereof. This Proxy Statement and the enclosed Proxy were first furnished to
Stockholders of the Company on or about April 30, 1997.
VOTING PROCEDURES
The presence in person or by proxy of a majority of the outstanding
shares of common stock of the Company, $.001 par value ("Common Stock"),
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you
plan to attend the Meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted FOR the management nominees for Directors,
FOR the ratification of the selection of Price Waterhouse LLP as the Company's
independent accountants for the year ending December 31, 1997, and as the
individuals named as proxy holders on the proxy deem advisable on all matters as
may properly come before the Meeting. Any proxy may be revoked at any time
prior to the exercise thereof by submitting another proxy bearing a later date
or by giving written notice of revocation to the Company at the Company's
address indicated above or by voting in person at the Meeting. Any notice of
revocation sent to the Company must include the Stockholder's name and must be
received prior to the Meeting to be effective.
The election of each director nominee requires the affirmative vote of
a plurality of the shares cast in the election of directors. An affirmative
vote of a majority of the votes cast at the Meeting is required for approval of
Price Waterhouse LLP as the Company's independent accountants for the year
ending December 31, 1997 and all other matters that may be submitted to the
Company's Stockholders for consideration.
Those shares present, in person or by proxy, including shares as to
which authority to vote on any proposal is withheld, shares abstaining as to any
proposal, and broker non-votes (where a broker submits a proxy but does not have
authority to vote a customer's shares on one or more matters) on any proposal,
will be considered present at the Meeting for purposes of establishing a quorum.
Each will be tabulated separately.
Under the rules of the American Stock Exchange, brokers who hold
shares in street name for customers have the authority to vote on certain items
when they have not received instructions from beneficial owners. Brokers that
do not receive instructions are entitled to vote on all proposals contained in
this Proxy.
Abstentions are counted in tabulations of the votes cast on proposals
presented to the stockholders, while broker non-votes are not counted for
purposes of determining whether a proposal has been approved. Votes cast by
proxy will be tabulated by an automated system administered by InterWest
Transfer Company, Inc., the Company's transfer agent. Votes cast by proxy or in
person at the Meeting will be counted by the persons appointed by the Company to
act as election inspectors for the Meeting.
1
<PAGE>
The outstanding shares of the Company entitled to vote as of April 30,
1997, consisted of 23,926,040 shares of Common Stock. Only Stockholders of
record at the close of business on April 30, 1997, are entitled to vote at the
Meeting. Each share is entitled to one vote.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
---------------------
The Company's Certificate of Incorporation provides for a board of
directors made up of three classes. The members of each class serve three-year
staggered terms with one class to be elected at each annual meeting. As
provided in the Company's By-laws, the Board has currently set the total number
of directors at seven, with two directors in Class I, three directors in Class
II and two directors in Class III. The current terms of the Class III and Class
I directors expire at the Company's annual meeting of shareholders in 1998 and
1999, respectively. The current term of the Class II directors expires at the
Meeting.
The Board has nominated Vincent N. Cook, Peter G. Martin and Stanley
G. Tate for election as Class II directors to serve a three-year term expiring
at the 2000 annual meeting of stockholders and until their successors are
elected and qualified.
It is intended that shares represented by properly executed Proxies
will be voted to elect the director nominees, unless authority to so vote is
withheld. Each nominee, except Mr. Tate, is currently a member of the Board and
each of the nominees has indicated a willingness to serve as a director if re-
elected (or elected in the case of Mr. Tate). The Board has no reason to
believe that any of the director nominees will be unable to serve as a director
or become unavailable for any reason. If, at the time of the Meeting, each of
the director nominees shall become unavailable for any reason, the persons
entitled to vote the Proxy will vote, as such persons shall determine in his or
her discretion, for such substituted nominee or nominees, if any, nominated by
the Board.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 1
2
<PAGE>
DIRECTORS
The following table sets forth certain information with respect to the
director nominees and the directors who will continue in office after the
Meeting including the name and age of each director and nominee, his principal
occupation and business experience during the past five years, and the
commencement of his term as a director of the Company.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
Principal Occupation or Employment Director
During the Past
Name and Age Five Years; Other Directorships Since
- --------------------------- ----------------------------------------- --------
<S> <C> <C>
Vincent N. Cook (62) A founding stockholder of the Company. 1996
Mr. Cook has been President and Chief
Executive Officer of Visions Inc. since
1989. Mr. Cook is a director of
Science Applications International
Corporation.
Peter G. Martin (48) An independent investment banker and 1995
venture capitalist since 1990. Mr.
Martin is a director of MacroChem, Inc.
and DermaRx Corporation.
Stanley G. Tate (69) A founding stockholder of the Company. -
Mr. Tate has been the principal
shareholder of Tate Enterprises since
1986. Mr. Tate is a director of
Envirocivil Engineering Corp.
</TABLE>
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
Principal Occupation or Employment Director
During the Past
Name and Age Five Years; Other Directorships Since
- --------------------------- ----------------------------------------- --------
<S> <C> <C>
Brian D. Holt (48) President and Chief Executive Officer of 1995
Thermo Ecotek Corporation ("TCK"), since
February 1994. From January 1989 to
February 1994, Mr. Holt was President
and Chief Executive Officer of Pacific
Generation Company. Mr. Holt also
serves as a director of TCK. See
"Certain Relationships and Related
Transactions."
Jack C. Pester (62) Senior Vice President in charge of 1994
Retail Marketing for The Coastal
Corporation since 1987. Mr. Pester is a
past president of the Independent
Refiners Association of America and the
Petroleum Marketers Association of
America. Mr. Pester is a director of
the Board of Governors of Drake
University and the American Mutual Life
Insurance Company of Des Moines.
Theodore Venners (49) Chairman of the Board since July 1993, 1992
and President and Chief Executive
Officer of the Company since October
1995. Mr Venners also served as
President of the Company since its
inception to September 1993. He is a
founding partner of K-Fuel Limited
Partnership and its predecessor, K-Fuel
Partnership, and served as managing
partner of those entities from 1984
until their merger with the Company in
December 1992.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Starkey A. Wilson (67) A founding stockholder of the Company. Mr. Wilson has been an 1992
independent geologist, specializing in oil and gas operations, coal
operations and precious metals since 1966. Mr. Wilson is a
member of the American Association of Petroleum Geologists,
the Dallas Geological Society, the Rocky Mountain Geological
Society, the Alaska Geological Society, and the Rocky Mountain
Coal Association.
</TABLE>
BOARD MEETINGS
During 1996 the Board met ten times. The Board also took action four times
by unanimous written consent. During 1996, no director attended fewer than 75
percent of the aggregate of (i) the total number of meetings of the Board during
1996; and (ii) the total number of meetings held by all committees of the Board
on which he served in 1996.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Board has an audit committee and during 1996 its
members were Peter G. Martin, Jack C. Pester and Starkey A. Wilson. The Audit
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans and
results of the audit engagement, considers the range of audit and non-audit fees
and reviews with the independent accountants the adequacy of the Company's
internal accounting controls. The Audit Committee met three times in 1996.
COMPENSATION COMMITTEE. The Board has a Compensation Committee and during
1996 its members were Brian D. Holt, Vincent N. Cook and Jack C. Pester. The
Compensation Committee, among other things, advises the Board on all matters
pertaining to compensation programs and policies, establishes guidelines for
employee incentive and benefit programs, makes specific recommendations to the
Board relating to salaries of officers and all incentive awards, and administers
the Company's stock option plans. The Compensation Committee met three times
in 1996.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. Effective in 1996, directors who are not employees of
the Company receive an annual retainer of $4,000 and a fee of $500 for attending
each regular meeting of the Board and $300 for participating in each meeting of
the Board held by means of telephone conference call and for participating in
certain meetings of committees of the Board. Mr. Venners is an employee of the
Company and does not receive any cash compensation from the Company for his
service as a director. Directors are also reimbursed for out-of-pocket travel
and other expenses incurred in attending such meetings.
STOCK OPTION PLAN. Effective in 1996, directors who are not employees of
the Company receive an annual grant of options to purchase 10,000 shares of
Common Stock under the Company's 1996 Stock Option and Incentive Plan (the "1996
Plan"). Under the terms of the 1996 Plan, the grant of stock options to non-
employee directors is automatic on the third business day after the annual
meeting of stockholders and are immediately vested on the date of grant. The
exercise price is the average daily market price for the five (5) consecutive
trading days immediately preceding the grant date. In 1996, options for 50,000
shares were granted to non-employee directors, comprised of 10,000 each to
Mssrs. Holt, Martin, Pester and Wilson and 10,000 to James A. Bitonti, who
subsequently resigned from the Board.
4
<PAGE>
EXECUTIVE OFFICERS
------------------
Set forth below is certain information regarding the executive
officers of the Company, including age, principal occupation during the last
five years and the date each first became an executive officer of the Company.
<TABLE>
<CAPTION>
Executive Officer
of the Company
Name / (Age) Present Executive Office Since
- --------------------------- -------------------------------- -----------------
<S> <C> <C>
Theodore Venners (49) Chairman of the Board, 1992
President and Chief Executive
Officer. More detailed
information regarding Mr.
Venners' business experience is
set forth under "Directors."
Kurt B. Eckrich (57) Chief Financial Officer since 1995
October 1995 and a director
since October 1995. Mr.
Eckrich's term as a director
expires at the Meeting and he
is not standing for
re-election. Mr. Eckrich has
been President of Eckrich
Capital, Inc. since 1988.
Robert H. Gentile (53) Vice President of Development 1994
since January 1994. From April
1992 to January 1994, he served
as Managing Director of
Atlantic Partners, Ltd., an
affiliate of the Company. Mr.
Gentile was a consultant with
Gentile & Co. from September
1991 to April 1992. From
September 1989 to September
1991, Mr. Gentile served as
Assistant Secretary for Fossil
Energy, U.S. Department of
Energy.
Joyce M. Goldman (56) Vice President of 1994
Administration since January
1994. Ms. Goldman has served
as the primary administrative
officer of the Company and
various predecessor entities of
the Company since April 1984.
Jeffrey A. Hansen (35) Controller of the Company since 1994
February 1994 and served as a
part-time consultant to the
Company from July 1993 to
February 1994. From 1989 until
joining the Company, Mr. Hansen
was employed as a financial
manager or was a consultant to
various companies in the
extractive and agribusiness
industries. Mr. Hansen is a
member of the American
Institute of Certified Public
Accountants.
Robert W. Pollard (46) Vice President of Marketing and 1996
Sales since June 1996. From
1990 until joining the Company,
Mr. Pollard served in various
executive marketing positions
with Jim Walter Resources,
Inc., an Alabama coal mining
and marketing company. Mr.
Pollard is a licensed attorney
in the State of Alabama and is
a member of the Alabama and
American bar associations.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Rudolph G. Swenson (59) Secretary and Treasurer since 1992 and Vice 1992
President of Contracts and Patents since
June 1996. From January 1994 to June 1996,
Mr. Swenson served the Company as Chief
Financial Officer. Mr. Swenson serves on
the Board of Directors of the Black Hills
Regional Eye Institute.
R. David Usilton (55) Chief Operating Officer since June 1996. 1996
From December 1994 to December 1995, Mr.
Usilton was President of Axial Basin Ranch
Company and H-G Coal Company, subsidiaries
of the W.R. Grace Company. From 1991 to
1994, Mr. Usilton was President of Colowyo
Coal Company.
</TABLE>
EXECUTIVE COMPENSATION
----------------------
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the
last three fiscal years concerning compensation paid by the Company to the Chief
Executive Officer ("CEO") and any other executive officer whose total annual
salary and bonus exceeded $100,000 for 1996 ("Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------- -------------------------------
Bonus and Securities
Name and Other Annual Restricted Stock Underlying
Principal Positions Year Salary Compensation Awards Options /(5)/
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Theodore Venners /(1)/ 1996 $164,583 $18,750/(4)/ - 600,000
Chairman of the Board 1995 185,000 - - 50,000
President and CEO 1994 185,000 - - -
Kurt B. Eckrich /(2)/ 1996 145,833 15,625 /(4)/ - 150,000
Chief Financial Officer 1995 43,750 - - 500,000
1994 - - - -
Robert H. Gentile/ (3)/ 1996 171,500 - - -
VP - Development 1995 150,000 - - 25,000
1994 140,000 - - 55,000
</TABLE>
- ---------------
/(1)/ President and Chief Executive Officer since October 1995.
/(2)/ Chief Financial Officer since October 1995.
/(3)/ Mr. Gentile's salary includes the payment of salary deferred from prior
years. Such payments in 1996, 1995 and 1994 were $51,500, $30,000 and $20,000,
respectively.
/(4)/ Bonus compensation in 1996 was for 1996 services but was not paid until
January 1997.
/(5)/ It has not been the Company's policy in the past to grant stock
appreciation rights ("SARs"), and no such rights are outstanding.
6
<PAGE>
The forgoing compensation table does not include certain fringe
benefits made available on a nondiscriminatory basis to all Company employees
such as group health insurance, paid parking, certain educational and training
programs, vacation and sick leave. In addition, the Company makes available
certain non-monetary benefits to its executive officers with a view to acquiring
and retaining qualified personnel and facilitating job performance. The Company
considers such benefits to be ordinary and incidental business costs and
expenses. The aggregate value of such benefits in the case of each executive
officer listed in the above table, which cannot be precisely ascertained but
which is less than ten percent of the annual salary of each such executive
officer, is not included in such table.
COMPENSATION PURSUANT TO PLANS
1992 PLAN
In 1993, the Company's stockholders approved and adopted the Amended
and Restated Stock Option Plan (the "1992 Plan"). The Company has reserved
1,000,000 shares of Common Stock for issuance under the 1992 Plan. As of April
30, 1997, stock options for 952,000 shares had been granted, leaving stock
options for 48,000 shares available for grant under the 1992 Plan.
1996 PLAN
In 1996, the Company's stockholders approved and adopted the 1996
Plan. The Company has reserved 1,500,000 shares of Common Stock for issuance
under the 1996 Plan. As of April 30, 1997, stock options for 525,500 shares
had been granted, leaving stock options for 974,500 shares available for grant
under the 1996 Plan.
RESTRICTED STOCK PLAN - DIRECTORS AND SELECTED OFFICERS
In December 1993, the Company's stockholders approved and adopted the
Restricted Stock Plan for Directors and Selected Officers ("the Directors
Plan"). A total of 500,000 shares have been reserved for issuance pursuant to
the Directors Plan. The Directors Plan provided that commencing as of the
effective date of the Directors Plan, any and all fees payable to directors for
their service on the Board, and the salary payable to selected officers after
the date that they became participants in the Directors Plan, were paid entirely
and solely in shares of restricted stock. Although the Directors Plan is still
in existence, the Company changed the compensation policy of directors beginning
in 1996 (see "Compensation of Directors" discussed previously) and does not
currently foresee any additional issuances of shares under the Directors Plan.
7
<PAGE>
STOCK OPTIONS GRANTED DURING 1996
The following table sets forth information concerning individual
grants of stock options by the Company under the 1992 Plan and the 1996 Plan for
the year ended December 31, 1996 to the CEO and the Named Executive Officers.
It has not been the Company's policy in the past to grant stock appreciation
rights, and no such rights were granted during 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Percent of
Number of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Exercise Annual Rates of
Options Employees Price Per Expiration Stock Appreciation
Name Granted in 1996 Share Date for Option Term /(4)/
- ----------------------------------------------------------------------------------------------------
5 Percent 10 Percent
----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Theodore Venners 350,000 /(1)/ 35.9 % $ 5.09 3/28/06 $ 1,120,000 $ 2,838,500
250,000 /(2)/ 25.6 % 7.42 6/20/03 755,000 1,760,000
Kurt B. Eckrich 150,000 /(3)/ 15.4 % 5.00 1/1/06 471,000 1,195,500
Robert H. Gentile - - - - - -
- ---------------
</TABLE>
/(1)/ Options granted under the 1992 Plan.
/(2)/ Options granted under the 1996 Plan, which vest 20 percent per year
beginning on the first anniversary date of the grant.
/(3)/ Options granted outside of the 1992 Plan and the 1996 Plan and became
fully vested on January 1, 1997.
/(4)/ The amounts shown on this table represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5 percent
and 10 percent, compounded annually from the date the respective options were
granted to their expiration date. The gains are net of the option exercise
price, but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock, the optionee's continued employment
through the end of the option period, and the date on which the options are
exercised.
8
<PAGE>
STOCK OPTIONS EXERCISED DURING 1996 AND YEAR-END VALUES
The following table reports certain information regarding stock option
exercises during the year ended December 31, 1996 and outstanding stock options
held at December 31, 1996 by the CEO and the Named Executive Officers. No stock
appreciation rights were exercised or were outstanding during 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Unexercised
No. of Unexercised In-the-Money
Shares Options at 12/31/96 Options
Acquired on Value (Exercisable / (Exercisable /
Name Exercise Realized Unexercisable) Unexercisable)/(1)/
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Theodore Venners - - 400,000 / 250,000 $143,500 / 0
Kurt B. Eckrich - - 500,000 / 150,000 $1,275,000 / $75,000
Robert H. Gentile - - 80,000 / 0 $20,500 / 0
- ---------------
</TABLE>
/(1)/ Based on the closing price of $5.50 of the Common Stock on the American
Stock Exchange on December 31, 1996.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Company's executive officers are
made by the Compensation Committee of the Board (the "Committee"). The executive
compensation program presently consists of annual base salary, short-term
incentives in the form of annual cash bonuses, and long-term incentives in the
form of stock options.
The Committee believes that the compensation of executive officers
should reflect the scope of their responsibilities, the success of the Company,
and the contributions of each executive to that success. In addition, the
Committee believes that base salaries should approximate the mid-point of
competitive salaries derived from market surveys and that short-term and long-
term incentive compensation should reflect the performance of the Company and
the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Company's compensation for its
executives is assessed by comparing it to market data provided by a compensation
consultant and comparing the Company's compensation levels to those published
the Mountain States Employers Council, of which the Company is a member.
The process of determining each of the elements of compensation for
the Company's executive officers is outlined below.
9
<PAGE>
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size, market capitalizations
and complexity to the Company. Executive salaries are adjusted gradually over
time and only as necessary to meet this objective. Increases in base salary may
be moderated by other considerations, such as geographical or regional market
data, industry trends and internal fairness within the Company. It is the
Committee's intention that over time the base salaries for the CEO and the other
Named Executive Officers will approach the mid-point of competitive data.
CASH BONUS
The Committee establishes a median potential bonus for each executive
officer by using the market data on total cash compensation from the same
executive compensation surveys as used to determine salaries. The Committee's
determination with respect to 1996 bonuses was based on a subjective evaluation
of the contributions of each executive that are not captured by operating
measures but are considered important in the creation of long-term stockholder
value.
STOCK OPTION PROGRAM
The primary goal of the Company is to excel in the creation of long-
term value for the Company's stockholders. The principal incentive tool used to
achieve this goal is the periodic award to key employees of options to purchase
Common Stock of the Company.
The Committee and management believe that awards of stock options to
purchase the shares of the Company accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Company, and closely
aligns management's interest to the interests of all the stockholders. The
emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Company prematurely, stock options are an incentive for key employees to
remain with the Company long-term.
Awards are not made annually in conjunction with the annual review of
cash compensation, but are made periodically. The Committee considers total
compensation of executives, actual and anticipated contributions of each
executive (which includes a subjective assessment by the Committee of the value
of the executive's future potential within the organization), as well as the
value of previously awarded options as described above, in determining option
awards.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Committee has also considered the application of Section 162(m) of
the Internal Revenue Code to the Company's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance based." The annual cash compensation
paid to individual executives of the Company do not approach the $1 million
threshold, and it is believed that the stock incentive plans of the Company
qualify as "performance based." Therefore, the Committee does not believe any
further action is necessary in order to comply with Section 162(m). From time
to time, the Committee will re-examine the Company's compensation practices and
the effect of Section 162(m).
10
<PAGE>
1996 CEO COMPENSATION
Cash compensation for Mr. Theodore Venners is reviewed by both the
Committee and the full Board. The Committee and the Board evaluates Mr.
Venners' performance and compensation using a process similar to that used for
the other executive officers of the Company.
Awards to Mr. Venners of options to purchase shares of the Common Stock are
reviewed and determined periodically by the Committee using criteria similar to
that used for the other executive officers of the Company. Mr. Venners was
awarded options to purchase 600,000 shares of the Common Stock in 1996.
Mr. Brian D. Holt (Chairman)
Mr. Vincent N. Cook
Mr. Jack C. Pester
11
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line-graph presentation comparing cumulative,
five-year shareholder returns (assuming reinvestment of dividends) for the
Common Stock with a broad-based market index and either a nationally recognized
industry standard or an index of peer companies selected by the Company. The
Common Stock has been publicly traded only since July 21, 1994 and, as a result,
the following graph assumes $100 invested on July 21, 1994 in the Common Stock,
the Russell 2000(R) Index and the Energy - Alternative Sources Index ("EAS") as
published by The Investors Business Daily. The stock price performance shown on
----------------------------
the graph below is not necessarily indicative of future price performance.
COMPARISON OF TOTAL RETURN AMONG KFX INC.,
THE RUSSELL 2000(R) INDEX AND THE
INVESTORS BUSINESS DAILY ENERGY - ALTERNATIVE SOURCES INDEX
FROM JULY 21, 1994 TO DECEMBER 31, 1996
(GRAPHIC OMITTED - COMPARATIVE PERFORMANCE CHART)
<TABLE>
<CAPTION>
7/21/94 12/30/94 12/29/95 12/31/96
-------------------------------------
<S> <C> <C> <C> <C>
KFX 100 91 86 102
RUSSELL 2000(R) 100 103 133 155
EAS 100 91 115 191
</TABLE>
In addition to the Company, the EAS index is comprised of the
following companies: AES Corporation; Alpha Solarco Inc; Besicorp Group Inc;
Calenergy Inc; Energy Research Corporation; Environmental Power Corporation;
Nevada Energy Inc; Photocomm Inc; SGI International Inc; Thermo Ecotek
Corporation; Wheelabrator Technologies Inc; and York Research Corporation. The
Company is excluded from the EAS for purposes of the comparative performance
graph.
From July 21, 1994 to January 29, 1996, the Company's Common Stock was
traded on the NASDAQ SmallCap Market under the trading symbol "KFXI." Beginning
January 30, 1996, the Company's common stock was traded on the American Stock
Exchange under the trading symbol "KFX."
12
<PAGE>
STOCK OWNERSHIP
---------------
The following table sets forth certain information, as of April 30,
1997, with respect to the holdings of (1) each person who is the beneficial
owner of more than five percent of the Common Stock of the Company, (2) each
director of the Company, (3) the CEO and each Named Executive Officer, and (4)
by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially
Name and Address Owned Percentage of Class
---------------- ----- -------------------
<S> <C> <C>
Vince N. Cook 390,050 /(1)/ 1.6 %
P.O. Box 4390
Avon, Colorado 81620
Cristobal Energy Co., Inc. 3,462,820 /(2)/ 14.5 %
1270 Stone Canyon Road
Los Angeles, California 90077
Kurt B. Eckrich 651,000 /(3)/ 2.7 %
1999 Broadway, Suite 3200
Denver, Colorado 80202
Robert H. Gentile 80,000 /(4)/ /*/
901 North Stuart Street, Suite 750
Arlington, Virginia 22203
Brian D. Holt 12,113 /(5)/ /*/
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
Peter G. Martin 12,113 /(6)/ /*/
48 Ogden Place
Dobbs Ferry, New York 10522
Jack C. Pester 77,126 /(7)/ /*/
9 Greenway Plaza
Houston, Texas 77046
Thermo Ecotek Corporation 4,262,300 /(8)/ 17.8 %
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
Theodore Venners 5,109,867 /(9)/ 21.0 %
1999 Broadway, Suite 3200
Denver, Colorado 80202
Starkey A. Wilson 1,279,100 /(10)/ 5.3 %
2121 San Jacinto Street, Suite 1860
Dallas, Texas 75225
All directors and executive officers 8,152,469 /(11)/ 31.9 %
as a group (13 persons)
</TABLE>
13
<PAGE>
_______________
/*/ Less than 1 percent.
/(1)/ Includes 377,550 shares owned by an investment partnership controlled by
Mr. Cook.
/(2)/ Includes 64,870 shares owned individually by Manual R. Caldera, an
officer, director and controlling shareholder of Cristobal Energy Co., Inc.
/(3)/ Includes 650,000 shares which Mr. Eckrich has the right to acquire within
60 days of the Record Date pursuant to the exercise of options.
/(4)/ Includes 80,000 shares which Mr. Gentile has the right to acquire within
60 days of the Record Date pursuant to the exercise of options.
/(5)/ Includes 10,000 shares which Mr. Holt has the right to acquire within 60
days of the Record Date pursuant to the exercise of options.
/(6)/ Includes 10,000 shares which Mr. Martin has the right to acquire within
60 days of the Record Date pursuant to the exercise of options.
/(7)/ Includes 60,000 shares which Mr. Pester has the right to acquire within
60 days of the Record Date pursuant to the exercise of options.
/(8)/ Includes 11,300 shares owned by Thermo Electron Corporation, a majority
shareholder of TCK.
/(9)/ Includes 450,000 shares which Mr. Venners has the right to acquire
within 60 days of the Record Date pursuant to the exercise of options, and
700,000 shares owned by Energy Brothers, Inc., of which Mr. Venners is the
majority shareholder.
/(10)/ Includes 160,000 shares which Mr. Wilson has the right to acquire within
60 days of the Record Date pursuant to the exercise of options.
/(11)/ Includes an aggregate of 1,661,000 shares which directors and executive
officers as a group have the right to acquire within 60 days of the Record Date
pursuant to the exercise of options.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 (a) of the Exchange Act requires the Company's directors
and executive officers and persons who own more than ten percent (10 %) of a
registered class of Company's equity securities ("10 % Shareholders") to file
with the Securities and Exchange Commission and the American Stock Exchange
reports of ownership and changes in ownership of equity securities of the
Company and to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon a review of the copies of such 16(a) reports
furnished to the Company and written representations that no other reports were
required, the Company believes that, during 1996, all Section 16(a) filing
requirements applicable to the Company's directors, executive officers and 10 %
Shareholders were complied with, except Mr. Cook did not file a Form 3 and
Mssrs. Holt, Martin, Pester, Wilson and Venners did not report one transaction
each during 1996. A Form 5 will be filed for each director to report these
transactions.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
THERMO ECOTEK CORPORATION
On August 18, 1995, the Company entered into several agreements
(described below) with TCK whereby, over a six-year period, TCK has the right,
at its option, to acquire up to 51 percent ownership in the Company through
stock purchases and the exercise of warrants.
1. The Company and TCK entered into a Stock Purchase Agreement dated
August 18, 1995 which generally provides for the issuance and sale of
up to 4,250,000 shares of the Common Stock as follows: (a) the first,
second and third purchases under the Stock Purchase Agreement occurred
on August 29, 1995; December 28, 1995; and January 28, 1997,
respectively, wherein TCK purchased 1,500,000 shares on the first and
second such date at a price of $2.00 per share, and 1,250,000 shares
on the third such date at a price of $2.00 per share.
2. On August 18, 1995, the Company issued two warrants to TCK ("Warrant
A" and Warrant B"). Warrant A grants to TCK the right to purchase
7,750,000 shares at an exercise price of $3.65 per share, subject to
adjustment. Warrant A is exercisable in whole or in part, commencing
on January 1, 2000 and ending July 1, 2001. Warrant B grants to TCK
the right to purchase that number of shares sufficient to give TCK
ownership of 51 percent of the Company's outstanding shares on the
date of exercise, at a price per share equal to the average of the
daily closing price of the shares for the 40 trading days immediately
preceding the date of computation. Warrant B may be exercised in whole
or in part commencing on January 1, 2000 and ending July 1, 2001,
provided that Warrant A has previously been exercised in full.
3. A Stockholders' Voting and Co-Sale Agreement (the "Voting Agreement")
was also entered into on August 18, 1995 by and among the Company, TCK
and Mr. Theodore Venners, Chairman, President and Chief Executive
Officer of the Company. Pursuant to the terms of the Voting Agreement,
the Company agreed to increase its number of directors from five to
six and the parties agreed to use their best efforts to elect one
member designated by TCK to the Board. Accordingly, Mr. Brian Holt was
elected to the Board in October 1995. After such time as TCK has
exercised Warrant A, in full, the parties agree to use their best
efforts to elect to the Board the number of directors designated by
TCK sufficient to equal at least one third of all Board members; and
following TCK's exercise of Warrant B, in full, the parties agree to
support the election of directors designated by TCK to the Board
sufficient to provide TCK with a majority of all Board members.
4. A Registration Rights Agreement, dated August 18, 1995, was entered
into between the Company and TCK whereby the Company agreed to provide
for the registration under the Securities Act of 1933, as amended, of
the shares purchased under the Stock Purchase Agreement and upon
exercise of Warrant A or Warrant B.
15
<PAGE>
OTHER
The Company has a consulting agreement (the "Consulting Agreement")
with Venners & Company, Ltd. for investor and public relations and governmental
affairs services. Venners & Company, Ltd. is controlled by John P. Venners, the
brother of Theodore Venners. During 1996 and 1995, Venners & Company, Ltd. was
paid $238,645 and $219,479, respectively, for consulting fees and reimbursed
expenses relating to the business of the Company. The Company also provides
office space for Mr. John Venners in Arlington, Virginia. The Consulting
Agreement provides for a two-year term which began January 1, 1994 and is
automatically renewable for successive one-year periods, unless either party
terminates the Consulting Agreement. Also, the Company is obligated to include
Venners & Company, Ltd. in any cash-based employee benefit programs of the
Company. During 1996 and 1995, the Company paid medical insurance premiums of
approximately $1,600 and $1,400, respectively, for an employee of Venners &
Company, Ltd.
In addition, in January 1997 the Company issued to Mr. John Venners a
common stock purchase warrant for 33,334 shares of the Common Stock at $4.00 per
share. The warrant expires on November 5, 1999. The warrant was issued to Mr.
John Venners in relation to certain governmental affairs services performed in
1995 and 1996.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
----------------------------------------------------
The Board, upon the recommendation of the Audit Committee, has
selected Price Waterhouse LLP ("Price Waterhouse") to serve as independent
accountants of the Company and its subsidiaries for the fiscal year ending
December 31, 1997. Price Waterhouse has served as the Company's independent
accountants since the fiscal year ended December 31, 1992. Representatives of
Price Waterhouse will be present at the Meeting and will have the opportunity
to make a statement if they desire and will be available to respond to
appropriate questions from shareholders.
Although it is not required to do so, the Board is submitting its
selection of the Company's independent accountants for ratification by the
stockholders at the Meeting in order to ascertain the views of stockholders
regarding such selection. Whether the proposal is approved or defeated, the
Board may reconsider its selection.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2
SOLICITATION OF PROXIES
-----------------------
This solicitation is being made by mail on behalf of the Board, but
may also be made without additional remuneration by officers or employees of the
Company by telephone, telegraph, facsimile transmission, electronic means or
personal interview. The expense of the preparation, printing and mailing of
this Proxy Statement and the enclosed form of Proxy and Notice of Annual
Meeting, and any additional material relating to the Meeting which may be
furnished to shareholders by the Board subsequent to the furnishing of this
Proxy Statement, has been or will be borne by the Company. The Company will
reimburse banks and brokers who hold shares in their name or custody, or in the
name of nominees for others, for their out-of-pocket expenses incurred in
forwarding copies of the proxy materials to those persons for whom they hold
such shares. To obtain the necessary representation of shareholders at the
Meeting, supplementary solicitations may be made by mail, telephone or interview
by officers of the Company or selected securities dealers. It is anticipated
that the cost of such supplementary solicitations, if any, will not be material.
In addition, the Company has retained its transfer agent, InterWest Transfer
Company, Inc. ("InterWest"), to solicit proxies from shareholders by mail, in
person and by telephone. The Company will pay InterWest a fee of $500 for its
services, plus reimbursement of reasonable out-of-pocket expenses incurred in
connection with the proxy solicitation.
ANNUAL REPORT
-------------
The Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1996 has been mailed to shareholders along with this Proxy
Statement. THE COMPANY WILL, UPON WRITTEN REQUEST AND WITHOUT CHARGE, PROVIDE
TO ANY PERSON SOLICITED HEREUNDER ADDITIONAL COPIES OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. Requests should be addressed to Investor
Relations Department, 1999 Broadway, Suite 3200, Denver, Colorado 80202. Also,
such report may be obtained from the Company's Internet homepage at
http://www.kfx.com.
16
<PAGE>
OTHER MATTERS
-------------
The Company is not aware of any business to be presented for
consideration at the Meeting, other than that specified in the Notice of Annual
Meeting. If any other matters are properly presented at the Meeting, it is the
intention of the persons named in the enclosed Proxy to vote in accordance with
their best judgement.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
---------------------------------------------
Any shareholder who intends to submit a proposal at the 1998 Annual
Meeting of Shareholders and who wishes to have the proposal considered for
inclusion in the proxy statement and form of proxy for that meeting must, in
addition to complying with the applicable laws and regulations governing
submission of such proposals, deliver the proposal to the Company for
consideration no later than December 1, 1997. Such proposals should be sent to
Rudolph G. Swenson, the Secretary of the Company, at 1999 Broadway, Suite 3200,
Denver, Colorado 80202.
NOTICE TO BANKS, BROKER-DEALERS
AND VOTING TRUSTEES AND THEIR NOMINEES
--------------------------------------
Please advise the Company whether other persons are the beneficial
owners of the shares for which proxies are being solicited from you, and, if so,
the number of copies of this Proxy Statement and other soliciting materials you
wish to receive in order to supply copies to the beneficial owners of the
shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS,
WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, ARE REQUESTED
TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING YOUR PROXY PROMPTLY YOU
CAN HELP THE COMPANY AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM
SO THAT THE MEETING CAN BE HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE
A PRIOR PROXY AND VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY
STATEMENT.
By Order of the Board of Directors
Rudolph G. Swenson
Secretary
Denver, Colorado
April 30, 1997
17
<PAGE>
PROXY VOTING CARD
[FRONT OF PROXY VOTING CARD]
PROXY
KFX INC.
1999 BROADWAY, SUITE 3200 DENVER, CO 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of KFx Inc. (the "Company") hereby appoints Rudolph
G. Swenson and Jeffrey A. Hansen as the attorney and proxy of the undersigned,
with the powers the undersigned would possess if personally present, and with
full power of substitution, to vote all shares of Common Stock of the Company at
the annual meeting of stockholders of the Company to be held on Thursday, June
19, 1997 at 10:00 a.m. local at the executive offices of the Company, 1999
Broadway, Suite 3200, Denver, CO 80202, and any postponements, continuation or
adjournments thereof, upon all subjects that may properly come before the
meeting, including the matters described in the proxy statement furnished
herewith, subject to any directions indicated below.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
[ ] FOR all three nominees listed below.
[ ] WITHHOLD AUTHORITY to vote for all three nominees for director listed below.
[ ] FOR all three nominees for director listed below, except WITHHOLD AUTHORITY
to vote for the nominee(s) whose name(s) is (are) lined through.
Nominees: Vincent N. Cook, Peter G. Martin and Stanley G. Tate
PROPOSAL NO. 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. 3 - TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT
BEFORE THE MEETING AND ANY POSTPONEMENTS, CONTINUATION OR ADJOURNMENTS THEREOF.
[BACK OF PROXY CARD]
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder(s). If no direction is made, this Proxy
will be voted "FOR" the nominees of the Board of Directors in the election of
directors, and "FOR" the ratification of the selection of Price Waterhouse LLP
as the Company independent accountants for the year ending December 31, 1997.
This proxy also delegates discretionary authority to vote with respect to any
other business which may properly come before the meeting or any postponements,
continuation or adjournments thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH, AND HEREBY
RATIFIES ALL THAT THE SAID ATTORNEYS AND PROXIES MAY DO BY VIRTUE HEREOF.
Dated:__________________________, 1997
(Label) ______________________________________
(Stockholder's Signature)
______________________________________
(Stockholder's Signature)
Note: Please mark, date and sign this proxy card
and return it in the enclosed envelope. Please sign
as your name appears below. If shares are
registered in more than one name, all owners should
sign. If signing in a fiduciary or representative
capacity, please give full title and attach
evidence of authority. Corporations please sign
with corporate name by a duly authorized officer
and affix corporate seal.
