<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ]
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 Rule 14a-11(c) or Rule 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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:____________________________________________________
4) Date Filed:______________________________________________________
<PAGE> 2
[KFx LETTERHEAD]
May 17, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of KFx Inc., which will be held at 10:00 a.m. local time on Thursday, June 22,
2000 at our executive offices, 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, 1999 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 of our officers 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,
Theodore Venners
Chairman of the Board of Directors
President and Chief Executive Officer
<PAGE> 3
[KFx LETTERHEAD]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
May 17, 2000
To the Stockholders of KFx Inc:
The 2000 Annual Meeting of the Stockholders of KFx Inc. will be held on
Thursday, June 22, 2000 at 10:00 a.m. local time at our executive offices, 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 PricewaterhouseCoopers LLP as our independent accountants for
the year ending December 31, 2000.
3. Such other business as may properly be brought before the meeting and any
postponements, continuations or adjournments thereof.
Only stockholders of record at the close of business on May 12, 2000 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 OUR BOARD OF DIRECTORS. OUR 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 our Board of Directors.
Rudolph G. Swenson
Secretary
<PAGE> 4
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of KFx Inc. for
use at the 2000 Annual Meeting of the Stockholders to be held on Thursday, June
22, 2000 at 10:00 a.m. local time at our executive offices, 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 our stockholders on or about May 17, 2000.
VOTING PROCEDURES
The presence in person or by proxy of a majority of our outstanding shares
of common stock, $.001 par value, entitled to vote at the meeting is necessary
to provide a quorum for the transaction of business at the meeting. Your shares
can only be voted if you are present in person or are represented by returning a
properly signed proxy. Your 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 nominees for director, FOR the
ratification of the selection of PricewaterhouseCoopers LLP as our independent
accountants for the year ending December 31, 2000, and as the individuals named
as proxy holders on the proxy deem advisable on all matters as may properly come
before the meeting. You may revoke your proxy at any time prior to the exercise
thereof by submitting another proxy bearing a later date, by giving written
notice of revocation to us at our address indicated above or by voting in person
at the meeting. Any notice of revocation sent to us must include your 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
PricewaterhouseCoopers LLP as our independent accountants for the year ending
December 31, 2000 and all other matters that may be submitted to our
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 the 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., our transfer agent. Votes cast by proxy or in person at
the meeting will be counted by the persons appointed by us to act as election
inspectors for the meeting.
Our outstanding shares entitled to vote as of May 12, 2000 (the record
date) consisted of 24,934,289 shares of common stock. Only stockholders of
record at the close of business on May 12, 2000 are entitled to vote at the
meeting. Each share is entitled to one vote.
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for a board of directors
consisting 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 our By-laws, our 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 our annual meeting of stockholders in 2001 and 2002, respectively. The
current term of the Class II directors expires at the meeting.
Our Board has nominated Vincent N. Cook, David H. Russell and Stanley G.
Tate for election as Class II directors to serve a three-year term expiring at
the 2003 annual meeting of stockholders and until their successors are elected
and qualified.
Shares represented by properly executed proxies will be voted to elect the
director nominees, unless authority to so vote is withheld. The nominees are
currently members of the Board and have indicated a willingness to serve as
directors if re-elected. Our Board has no reason to believe that any director
nominee will be unable to serve as a director or become unavailable for any
reason. If, at the time of the meeting, any director nominee becomes unavailable
for any reason, the persons entitled to vote the proxy will vote, as such
persons determine in their discretion, for such substituted nominee, if any,
nominated by our Board.
OUR BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" PROPOSAL NO. 1
DIRECTORS
The following table sets forth certain information with respect to our
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.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director
Name and Age Five Years; Other Directorships Since
------------ --------------------------------------------------- --------
<S> <C> <C>
Vincent N. Cook (65) A founding stockholder. Mr. Cook has been President and 1996
Chief Executive Officer of Visions Incorporated
International Partners and Associates since 1989. Mr. Cook
has served as a consultant to and the Vice Chairman of the
Board of Directors of Science Applications International
Corporation since 1992.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
David H. Russell (53) Mr. Russell served as Vice Chairman of Werner Offshore, 1999
Inc., a marine technology company, and as a consultant to
Thompson Financial Services from January 1995 to January
1998. Mr. Russell was the President, Chief Executive
Officer and a founding stockholder of Dalcomp, Inc., a
provider of computer software and telecommunications
services, from 1980 until January 1995, when Dalcomp was
acquired by Thompson Financial Services. Mr. Russell is
also a director of DermaRx Corp. and MacroChem Corp. and
of the charitable organizations Hamilton Foundation and
Trickle-Up Program.
Stanley G. Tate (72) A founding stockholder. Mr. Tate has been the principal 1997
stockholder and President of Tate Enterprises, a holding
company whose entities are involved in real estate
development, construction, investments and consulting and
receivership activities, since 1987.
</TABLE>
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
Principal Occupation or Employment During the Past Director
Name and Age Five Years; Other Directorships Since
------------ -------------------------------------------------- --------
<S> <C> <C>
Stanford M. Adelstein (68) Chairman of the Board and President of Northwestern 1998
Engineering Company, a holding company whose subsidiaries
are engaged in real estate management, highway and street
construction, quarrying and manufacturing ready-mix
concrete, since 1966.
Jack C. Pester (65) Mr. Pester began serving as our consultant in April 1999. 1994
Mr. Pester retired in April 1999 from his position as
Senior Vice President in charge of international refining
and marketing for The Coastal Corporation, a diversified
energy company, which position he held 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 AmerUs
Life Insurance Company (formerly American Mutual Life
Insurance Company) of Des Moines, Iowa.
Mark S. Sexton (44) Chairman of the Board, Chief Executive Officer and 1999
President of Evergreen Resources, Inc., an independent
energy company, since 1996. From 1989 to 1996 Mr. Sexton
was Vice President of Operations for Evergreen Resources,
Inc. and President of Evergreen Operating Company, its
wholly owned subsidiary. Mr. Sexton is a registered
professional engineer in Colorado.
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
Theodore Venners (52) Chairman of our Board since July 1993, and President and 1992
Chief Executive Officer since October 1995. Mr. Venners
also served as our President since our inception to
September 1993. He has also served as Chairman of the
Board of our subsidiary, Pegasus Technologies, Inc. since
March 1998. 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 us in December 1992. Mr. Venners
is a director of Northwestern Engineering Company.
</TABLE>
Mr. Russell is nominated as a director pursuant to a Stock Purchase
Agreement between us and Mr. Russell. Pursuant to a series of agreements we
have with a subsidiary of Black Hills Corporation ("BKH"), BKH has the right to
designate a nominee for election to our Board of Directors. BKH has declined to
exercise this right.
BOARD MEETINGS
During 1999 our Board met five times. The Board also took action four times
by unanimous written consent. During 1999, all directors attended at least 75%
of the aggregate of (i) the total number of meetings of the Board during 1999
and (ii) the total number of meetings held by all committees of the Board on
which he served in 1999.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. The Board has an Audit Committee and during 1999 its
members were Stanford M. Adelstein (Chairman), Vincent N. Cook, David H. Russell
(beginning in September 1999) and Stanley G. Tate. 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 our internal accounting
controls. The Audit Committee met one time in 1999.
COMPENSATION COMMITTEE. The Board has a Compensation Committee and during
1999 its members were Stanford M. Adelstein, Vincent N. Cook (beginning in
September 1999), Brian D. Holt (until September 1999), Jack C. Pester (until
September 1999), Mark S. Sexton (Chairman) (beginning in September 1999) and
Stanley G. Tate (until September 1999). 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 did not meet in 1999 but took action one time by
unanimous written consent.
EXECUTIVE COMMITTEE. The Board formed an Executive Committee in April 1999
and during 1999 its members were Vincent N. Cook (beginning in September 1999),
Jack C. Pester (Chairman), Mark S. Sexton (beginning in December 1999), Stanley
G. Tate and Theodore Venners. The Executive Committee has and may exercise all
of the authority of our entire Board of Directors in our business and affairs,
except where action of our entire Board is required by statute. The Executive
Committee met fifteen times in 1999.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. Directors who are not our employees have historically
received 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. In 1999, directors were paid a
retainer of $2,000 and fees for meetings attended through June 30, 1999. The
Board of Directors discontinued payment of cash fees to the Board beginning July
1, 1999. In lieu of cash compensation for the second half of 1999, Board members
received stock appreciation rights, or SARs, granted pursuant to our 1999 Stock
Incentive Plan (the "1999 Plan"). See "1999 Stock Incentive Plan" below. Mr.
Venners is an employee and does not
<PAGE> 8
receive any compensation from us for his service as a director or as a member of
the Executive Committee. Directors are also reimbursed for out-of-pocket travel
and other expenses incurred in attending meetings.
1996 STOCK OPTION AND INCENTIVE PLAN. From 1996 through 1998, directors who
are not our employees received an annual grant of options to purchase 10,000
shares of common stock under our 1996 Stock Option and Incentive Plan (the "1996
Plan"). Under the terms of the 1996 Plan, the grant of nonqualified 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. Shares of common stock acquired upon exercise of the stock options are
subject to repurchase by us at the exercise price if a non-employee director
ceases to serve as a director for any reason other than death before the first
anniversary of the date of grant. The exercise price may not be less than the
average daily market price for the five consecutive trading days immediately
preceding the grant date. No options were granted to non-employee directors
under the 1996 Plan in 1999.
1998 DIRECTORS NONQUALIFIED STOCK OPTION PLAN. In August 1998, we adopted
the 1998 Directors Nonqualified Stock Option Plan (the "1998 Plan") and reserved
200,000 shares of common stock for issuance upon exercise of options granted
under the 1998 Plan. Under the 1998 Plan, nonqualified stock options may be
granted to directors in such number, at such price not less than the greater of
(i) $3.75 per share or (ii) the fair market value of the common stock on the
date of grant, and with such other terms as the plan administrator may
determine. Shares of common stock acquired upon exercise of the stock options
are subject to repurchase by the Company at the exercise price if a director
ceases to serve as a director for any reason other than death before the first
anniversary of the date of grant. In addition, options granted under the 1998
Plan will not be exercisable by a director if the plan administrator determines
that the director has committed certain specified acts of misconduct or made
unauthorized disclosures of trade secret or confidential information of the
Company. No options were granted to directors under the 1998 Plan in 1999.
1999 STOCK INCENTIVE PLAN. In April 1999, we adopted the 1999 Plan and
reserved 2,000,000 shares of common stock for issuance upon the exercise of
options, SARs, dividend equivalent rights, restricted stock and other awards
granted under the 1999 Plan. Awards granted under the 1999 Plan to directors may
be nonqualified stock options, SARs, dividend equivalent rights, restricted
stock or other awards. The 1999 Plan authorizes the plan administrator to
determine the terms and conditions of any award, except that the exercise price
of nonqualified stock options cannot be less than 85% of the fair market value
of the common stock on the date the option is granted. The awards may be granted
subject to vesting schedules and restrictions on transfer and repurchase or
forfeiture rights in favor of us as specified in agreements issued under the
1999 Plan. The plan administrator may accelerate the vesting and release from
any restrictions on transfer and repurchase or forfeiture rights of any
outstanding award, or prevent such acceleration or release, with respect to any
merger, consolidation, change of control or similar corporate transaction
involving us.
As compensation for their service in the second half of 1999, Board members
were granted SARs at an exercise price of $1.00 per share, which was the closing
price of our common stock on the American Stock Exchange on the next trading day
following the meeting at which such rights were granted, as follows: Messrs.
Adelstein (25,000), Cook (25,000), Pester (25,000), Russell (12,500), Sexton
(12,500) and Tate (25,000). In addition, as compensation for their service in
1999, members of our Executive Committee were granted SARs at an exercise price
of $1.00 per share as follows: Messrs. Cook (100,000), Pester (100,000), Sexton
(75,000) and Tate (75,000). For each year beginning January 1, 2000,
non-employee directors will receive grants of 50,000 SARs at the closing price
of our common stock on the first trading day of each calendar year. All SARs
granted or to be granted to Board members are fully vested upon the date of
grant and expire 10 years after the date of grant. The SARs are not exercisable
until the satisfaction of the following two conditions: (a) cancellation or
exercise of the warrants to purchase our common stock held by Thermo Ecotek
Corporation ("TCK") and (b) the conversion, redemption or maturity of our
outstanding 6% Convertible Debentures. After the SARs become exercisable, we
have the option to convert them to nonqualified stock options or restricted
stock grants.
<PAGE> 9
EXECUTIVE OFFICERS
Set forth below is certain information regarding our executive officers,
including age, principal occupation during the last five years and the date each
first became an executive officer.
<TABLE>
<CAPTION>
Name (Age) Present Executive Office Executive Officer
---------- ------------------------ Since
-----------------
<S> <C> <C>
Theodore Venners (52) Chairman of our Board, President and Chief Executive 1992
Officer. More detailed information regarding Mr. Venners'
business experience is set forth under "Directors."
Seth L. Patterson (47) Executive Vice President and Chief Financial Officer since 1998
September 1998. Mr. Patterson served as our consultant
from June to August 1998, as Vice President and Chief
Financial Officer of and in related capacities for United
Water Services, Inc., a provider of operations and
maintenance services to water and waste water facilities,
from July 1996 to December 1997, Vice President and Chief
Financial Officer of Phelps-Tointon, Inc., a closely-held
company involved in various construction related
businesses, from November 1995 to April 1996 and as Vice
President, Finance/Administration of Power Resources,
Inc., a uranium producer, from July 1992 to March 1995.
Mr. Patterson is the Vice President of the Colorado
Chapter of the Financial Executives Institute and is a
past Board Chair of the Food Bank of the Rockies.
Rudolph G. Swenson (62) Secretary and Treasurer since 1992 and Vice President of 1992
Contracts and Patents since June 1996. From January 1994
to June 1996, Mr. Swenson served us as Chief Financial
Officer. Mr. Swenson serves as a member of the Board of
Directors of the Black Hills Regional Eye Institute.
</TABLE>
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the last
three fiscal years concerning compensation paid by us to our Chief Executive
Officer and each executive officer who earned a total annual salary and bonus
that exceeded $100,000 for 1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------- ----------------------
Securities
Name and Underlying
Principal Positions Year Salary Bonus Options/SARs (#)
------------------- ---- ------- ----- ----------------------
<S> <C> <C> <C> <C>
Theodore Venners 1999 $120,000 $ -- 150,000
Chairman of the Board 1998 120,000 65,000 150,000
President and CEO 1997 142,500 -- 200,000
Seth L. Patterson 1999 $110,000 $ -- 50,000
Executive Vice 1998(1) 61,667 10,000 250,000
President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Includes $25,000 of fees earned by Mr. Patterson from June to August 1998,
when he was a consultant to us. The bonus to Mr. Patterson was paid in 1999.
The foregoing compensation table does not include certain fringe benefits
made available on a nondiscriminatory basis to all our employees such as group
health insurance, paid parking, certain educational and training programs,
vacation and sick leave. In addition, we make available certain non-monetary
benefits to our executive officers with a view to acquiring and retaining
qualified personnel and facilitating job performance. We consider 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 $50,000 and
less than 10% of the annual salary of each such executive officer, is not
included in such table.
COMPENSATION PURSUANT TO PLANS
1992 PLAN
In 1993, our stockholders approved and adopted the Amended and Restated
Stock Option Plan (the "1992 Plan"). We have reserved 1,000,000 shares of common
stock for issuance under the 1992 Plan. As of April 30, 2000, stock options for
822,000 shares had been granted, leaving stock options for 178,000 shares
available for grant under the 1992 Plan.
1996 PLAN
In 1996, our stockholders approved and adopted the 1996 Plan. We have
reserved 1,500,000 shares of common stock for issuance under the 1996 Plan. As
of April 30, 2000, stock options and SARs for 1,479,334 shares had been granted,
leaving awards for 20,666 shares available for grant under the 1996 Plan.
RESTRICTED STOCK PLAN - DIRECTORS AND SELECTED OFFICERS
In December 1993, our stockholders approved and adopted the Restricted
Stock Plan for Directors and Selected Officers (the "Directors Plan"). We have
reserved 500,000 shares for issuance under the
<PAGE> 11
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, we changed the compensation policy of our directors beginning in 1996
(see "Compensation of Directors" discussed previously) and do not currently
foresee any additional issuance of shares under the Directors Plan.
1999 PLAN
In April 1999, we adopted the 1999 Plan and reserved 2,000,000 shares for
issuance under the 1999 Plan. Under the 1999 Plan, as of April 30, 2000, stock
options and SARs for 1,080,000 shares had been granted, leaving awards for
920,000 shares available for grant under the 1999 Plan.
STOCK OPTIONS AND SARS GRANTED DURING 1999
The following table sets forth information concerning individual grants of
SARs by us for the year ended December 31, 1999 to the Named Executive Officers.
No stock options were granted to any of the Named Executive Officers in 1999.
SAR GRANTS IN 1999
<TABLE>
<CAPTION>
Percent of
Number of Total
Securities Options/SARs Value at Assumed
Underlying Granted to Exercise Annual Rates of
SARs Employees Price Per Expiration Stock Appreciation
Name Granted(1) in 1999 Share Date(2) for SAR Term(3)
---- ---------- ------------ --------- ---------- ------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Theodore 150,000 58.8% $ 1.50 (2) $31,848 $66,533
Venners
Seth L 50,000 19.6% $ 1.50 (2) $10,616 $22,178
Patterson
</TABLE>
- ---------------
(1) SARs granted under the 1999 Plan. The SARs are not exercisable until the
following two conditions are satisfied: (a) cancellation or exercise of the
TCK Warrants and (b) the conversion, redemption or maturity of our 6%
Convertible Debentures. We have the option to convert the SARs to
nonqualified stock options or restricted stock when they are exercised.
(2) The SARs expire upon the later of (a) December 31, 2000 and (b) the date
that is 30 days after they become exercisable.
(3) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective SARs if exercised at the end of the term. This
table assumes that the SARs expire on August 30, 2002, which is the date 30
days after our 6% Convertible Debentures become due, the latest date upon
which the SARs may be exercised. These gains are based on assumed rates of
stock appreciation of 5% and 10%, compounded annually from the date the
respective SARs were granted to their expiration date. The gains are net of
the exercise price, but do not include deductions for taxes or other
expenses associated with the exercise. Actual gains, if any, on SAR
exercises will depend on the future performance of our common stock, the
grantee's continued employment through the date of exercise and the date on
which the SARs are exercised.
<PAGE> 12
1999 YEAR-END OPTION AND SAR VALUES
The following table reports certain information regarding outstanding stock
options and SARs held at December 31, 1999 by the Named Executive Officers. No
stock options or stock appreciation rights were exercised during 1999.
1999 YEAR-END OPTION AND SAR VALUES
<TABLE>
<CAPTION>
Value of
Number Unexercised
of Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares 12/31/99 12/31/99
Acquired on Value (Exercisable/ (Exercisable/
Name Exercise Realized Unexercisable) Unexercisable)(1)
- ----------------- ----------- -------- ---------------- -----------------
<S> <C> <C> <C> <C>
Theodore Venners - - 470,000/630,000 $ 0/$28,125
Seth L. Patterson - - 50,000/250,000 $ 0/$ 9,375
- ---------------
</TABLE>
(1) Based on the closing price of $1.6875 of the common stock on the American
Stock Exchange on December 31, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Theodore Venners, our Chairman of the Board, Chief Executive Officer
and President, serves as a director of Northwestern Engineering Company, the
Chairman of the Board and the President of which, Mr. Stanford Adelstein, serves
as our director.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for our executive officers are made by the
Compensation Committee of the Board. 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 or
SARs.
The committee believes that the compensation of executive officers should
reflect the scope of their responsibilities, our success 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 our performance and the contributions of each executive.
External competitiveness is an important element of the committee's
compensation policy. The competitiveness of compensation for our executives is
assessed by comparing it to market data.
The process of determining each of the elements of compensation for our
executive officers is outlined below.
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size, market capitalizations
and complexity. 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. It is the committee's intention that over time the
base salaries for the CEO and the other executive officers will approach the
mid-point of competitive data.
<PAGE> 13
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 bonuses is 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. We did
not pay any bonuses to executive officers for 1999.
STOCK INCENTIVE PROGRAM
Our primary goal is to excel in the creation of long-term value for our
stockholders. The principal incentive tool used to achieve this goal is the
periodic award to key employees of options and SARs to purchase our common
stock.
The committee and management believe that awards of stock options and SARs
to purchase our shares accomplish many objectives. The grant of options and SARs
to key employees encourages equity ownership in us, and closely aligns
management's interest to the interests of all the stockholders. The emphasis on
stock options and SARs 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 us
prematurely, stock options and SARs are an incentive for key employees to remain
with us 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 and SARs as described above, in determining
awards.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The committee has also considered the application of Section 162(m) of the
Internal Revenue Code to our 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 our individual
executives do not approach the $1 million threshold, and we believe that our
stock incentive plans qualify as "performance based." Therefore, we do not
believe any further action is necessary in order to comply with Section 162(m).
From time to time, the committee will re-examine our compensation practices and
the effect of Section 162(m).
1999 CEO COMPENSATION
Cash compensation for Mr. Theodore Venners is reviewed by both the
committee and the full Board. The committee and the Board evaluate Mr. Venners'
performance and compensation using a process similar to that used for our other
executive officers.
<PAGE> 14
Awards to Mr. Venners of stock options or SARs to purchase our shares of
common stock are reviewed and determined periodically by the committee using
criteria similar to that used for our other executive officers. Mr. Venners was
awarded SARs to purchase 150,000 shares at an exercise price of $1.50 per share
of our common stock in 1999.
Mr. Mark S. Sexton, Chairman
Mr. Stanford M. Adelstein
Mr. Vincent N. Cook
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that we include in this
Proxy Statement 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, 1994 in our common stock, the Russell
2000(R) Index and the Energy - Other industry group ("EO") 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 - OTHER INDUSTRY GROUP
FROM DECEMBER 31, 1994 TO DECEMBER 31, 1999
[COMPARATIVE PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
KFx 95 113 67 31 35
RUSSELL 2000(R) 128 150 183 178 216
EO 110 188 265 251 357
</TABLE>
<PAGE> 15
In addition to us, the EO is comprised of the following companies: AES
Corporation; Arch Coal Inc; Calpine Corporation; Environmental Power
Corporation; Fuelcell Energy Inc.; High Plains Corporation; Huaneng Power
International Inc; Midamerican Energy Holdings; Penn Virginia Corporation;
Pittston Minerals Group Inc; Rentech Inc; Thermo Ecotek Corporation; Thermo
Power Corporation; Trigen Energy Corporation; U.S. Energy Systems Inc; and York
Research Corporation. All companies in the EO industry group are listed on U.S.
stock exchanges or the Nasdaq system.
We are excluded from the EO industry group for purposes of the comparative
performance graph.
From July 21, 1994 to January 29, 1996, our common stock was traded on the
Nasdaq SmallCap Market under the trading symbol "KFXI." Beginning January 30,
1996, our common stock was traded on the American Stock Exchange under the
trading symbol "KFX."
<PAGE> 16
STOCK OWNERSHIP
The following table sets forth certain information, as of April 30, 2000,
with respect to the holdings of (1) each person who is the beneficial owner of
more than five percent of our common stock, (2) each of our directors, (3) the
CEO and each Named Executive Officer, and (4) by all of our directors and
executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially
Name and Address Owned Percentage of Class
---------------- ------------------- -------------------
<S> <C> <C>
Stanford M. Adelstein 200,000(1) *
1309 W. Main Street
P.O. Box 8006
Rapid City, South Dakota 57709
Vincent N. Cook 412,500(2) 1.6%
P.O. Box 4390
Avon, Colorado 81620
Cristobal Energy Co., Inc. 3,172,640 12.7%
1270 Stone Canyon Road
Los Angeles, California 90077
Seth L. Patterson 65,000(3) *
1999 Broadway, Suite 3200
Denver, Colorado 80202
Jack C. Pester 101,126(4) *
3751 Arnold
Houston, Texas 77005
David H. Russell 1,236,500 4.8%
15 Charolais Circle
P.O. Box 1863
Edwards, Colorado 81632
Mark S. Sexton 0 *
1401 17th Street, Suite 1200
Denver, Colorado 80202
Stanley G. Tate 518,050(5) 2.0%
1175 N.E. 125th Street, Suite 102
North Miami Beach, Florida 33161
Thermo Electron Corporation/ 3,851,100(6) 15.4%
Thermo Ecotek Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Theodore Venners 4,129,067(7) 16.0%
1999 Broadway, Suite 3200
Denver, Colorado 80202
All directors and executive officers 6,922,343(8) 26.8%
as a group (10 persons)
</TABLE>
- ---------------
* Less than 1 percent.
(1) Represents shares owned by Northwestern Engineering Company, of which Mr.
Adelstein is Chairman of the Board and controls 95% of the outstanding
voting shares of capital stock.
(2) Includes 300,000 shares owned by an investment partnership controlled by
Mr. Cook and 20,000 shares which Mr. Cook has the right to acquire within
60 days of April 30, 2000 pursuant to the exercise of
<PAGE> 17
options. Mr. Cook disclaims beneficial ownership of the 300,000 shares
owned by the investment partnership.
(3) Includes 7,500 shares owned by the mother of Mr. Patterson, of which he
disclaims beneficial ownership, and 50,000 shares which Mr. Patterson has
the right to acquire within 60 days of April 30, 2000, pursuant to the
exercise of options.
(4) Includes 80,000 shares which Mr. Pester has the right to acquire within 60
days of April 30, 2000 pursuant to the exercise of options.
(5) Includes 20,000 shares which Mr. Tate has the right to acquire within 60
days of April 30, 2000 pursuant to the exercise of options and 14,500
shares owned by the Stanley Tate Revocable Trust for which Mr. Tate serves
as trustee.
(6) Includes 3,808,500 shares owned by TCK, a majority owned subsidiary of
Thermo Electron Corporation.
(7) Includes 470,000 shares which Mr. Venners has the right to acquire within
60 days of April 30, 2000 pursuant to the exercise of options.
(8) Includes an aggregate of 870,000 shares which directors and executive
officers as a group have the right to acquire within 60 days of April 30,
2000 pursuant to the exercise of options. Includes 300,000 shares of which
Mr. Cook disclaims beneficial ownership and 7,500 shares owned by the
mother of Mr. Patterson, of which he disclaims beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than 10% of a registered class of our equity
securities, or 10% stockholders to file with the Securities and Exchange
Commission and the American Stock Exchange reports of ownership and changes in
ownership of our equity securities and to furnish us with copies of all Section
16(a) forms they file.
Based solely upon a review of the copies of such Section 16(a) reports
furnished to us and written representations that no other reports were required,
we believe that during 1999 all Section 16(a) filing requirements applicable to
our directors, executive officers and 10% stockholders were complied with,
except Messrs. Russell and Sexton filed their Form 3s late and Mr. Venners filed
two Form 4s late reporting twelve transactions.
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS
THERMO ECOTEK CORPORATION
On August 18, 1995, we entered into several agreements with TCK, a
stockholder of ours which owns approximately 17.2% of our common stock, whereby,
over a six-year period, TCK has the right, at its option, to acquire up to a 51%
ownership interest in our stock through stock purchases and the exercise of
warrants.
o We entered into a Stock Purchase Agreement dated August 18, 1995 with TCK
which generally provides for the issuance and sale of up to 4,250,000
shares of our common stock as follows: 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.
o On August 18, 1995, we 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% of our 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 exercise date. Warrant B may be exercised in whole or in part
commencing on January 1, 2000 and ending July 1, 2001, if Warrant A has
previously been exercised in full.
o A Stockholders' Voting and Co-Sale Agreement (the "Voting Agreement") was
also entered into on August 18, 1995 by and among us, TCK and Mr. Theodore
Venners, our Chairman, President and Chief Executive Officer. Pursuant to
the terms of the Voting Agreement, we agreed to increase our number of
directors by one director 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. Mr. Holt resigned from our
Board in September 1999, and TCK has not designated, and has notified us
that it does not intend to designate, a replacement director. 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. 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.
o A Registration Rights Agreement, dated August 18, 1995, was entered into
between us and TCK whereby we 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.
On May 1, 2000, certain transactions were closed with various parties
whereby a subsidiary of Black Hills Corporation purchased 2,000,000 shares of
our common stock from TCK . TCK has sold a portion of the remaining 2.25 million
of our common shares it owned to private investors and at May 12, 2000, still
held 1,195,100 of such shares for sale. As of May 9, 2000, the Stock Purchase
Agreement, the warrants, the Voting Agreement and the Registration Rights
Agreement all have been cancelled.
ESTATE OF EDWARD KOPPELMAN
We are a party to a Royalty Agreement with Edward Koppelman, whereby Mr.
Koppelman is entitled to receive a royalty equal to 25% of our worldwide royalty
and license fee revenue, computed after the payment of a royalty to the State of
Wyoming. The royalty to Mr. Koppelman will cease when the cumulative payments to
him reach the sum of approximately $75.2 million. Mr. Koppelman passed away in
October 1997 and all his rights and obligations as discussed above are held by
his estate. In his will, Mr.
<PAGE> 19
Koppelman bequeathed 50% of the royalty stream to Theodore Venners, our Chairman
of the Board, Chief Executive Officer and President.
OTHER
As of May 1, 2000, pursuant to a series of agreements we have with a
subsidiary of Black Hills Corporation (BKH) and others, BKH owns 2 million
shares of our common stock, has a warrant to purchase 1.3 million additional
shares at $3.65 per share (subject to certain adjustments) and has the right to
designate one nominee for election to our Board of Directors. As of May 12,
2000, BKH has declined to exercise their right to designate a Board nominee.
We have a 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 1999,
Venners & Company, Ltd. was paid $144,000 for consulting fees, $35,000 as a
bonus for 1998 services and $78,355 for reimbursed expenses relating to our
business. We also provide office space for Mr. John Venners in Arlington,
Virginia. Rent we paid for such office space in 1999 totalled $28,084. 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 it. Also, we are obligated to include Venners & Company, Ltd.
in any cash-based employee benefit programs of ours. During 1999, we paid
medical insurance premiums of $5,268 for an employee of Venners & Company, Ltd.
Mr. Pester, a director of ours, provided consulting services to us during
1999 and was paid $40,000 for such services and $59,863 for reimbursement of
expenses relating to our business.
In September 1998 we granted 100,000 options to Mr. Vincent Cook, a
director of ours, in connection with consulting services he provided to us. The
options have an exercise price of $3.75, were vested on the date of grant and
expire five years after the date of the grant. The Board of Directors cancelled
these options in December 1999 with the consent of Mr. Cook and granted him
100,000 SARs as a replacement for these options. See "Compensation of
Directors."
We have a stock purchase agreement with Mr. Theodore Venners, our Chairman
of the Board, Chief Executive Officer and President, which gives us the option
to purchase up to $5 million of our common stock held by Mr. Venners at fair
market value upon Mr. Venners' death. We own a $5 million key man life insurance
policy on the life of Mr. Venners.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board, upon the recommendation of the Audit Committee, has selected
PricewaterhouseCoopers LLP to serve as our independent accountants for the
fiscal year ending December 31, 2000. PricewaterhouseCoopers has served as our
independent accountants since the fiscal year ended December 31, 1992.
Representatives of PricewaterhouseCoopers 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 stockholders.
Although it is not required to do so, the Board is submitting its selection
of our independent accountants for ratification by our 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.
OUR BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" PROPOSAL NO. 2
<PAGE> 20
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of our Board, but may
also be made without additional remuneration by our officers or employees 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
stockholders by the Board subsequent to the furnishing of this Proxy Statement,
has been or will be borne by us. We 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 stockholders at the meeting, supplementary
solicitations may be made by mail, telephone or interview by our officers or
selected securities dealers. We anticipate that the cost of such supplementary
solicitations, if any, will not be material. In addition, we have retained our
transfer agent, InterWest Transfer Company, Inc., to solicit proxies from
stockholders by mail, in person and by telephone. We 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
Our Annual Report on Form 10-K/A, as amended, for the fiscal year ended
December 31, 1999, together with a letter from Mr. Theodore Venners, our
Chairman of the Board of Directors and Chief Executive Officer, has been mailed
to stockholders along with this Proxy Statement. WE WILL, UPON WRITTEN REQUEST
AND WITHOUT CHARGE, PROVIDE TO ANY PERSON SOLICITED HEREUNDER ADDITIONAL COPIES
OF OUR ANNUAL REPORT ON FORM 10-K/A, AS AMENDED, FOR THE YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. Requests should be
addressed to the Investor Relations Department, 1999 Broadway, Suite 3200,
Denver, Colorado 80202. Also, such report may be obtained from our Internet
homepage at http://www.kfx.com.
OTHER MATTERS
We are 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
judgment.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder who intends to submit a proposal at the 2001 Annual Meeting
of Stockholders 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 us for consideration no later than December
18, 2000. Proxies for the 2001 Annual Meeting of Stockholders will confer
discretionary authority to vote with respect to all stockholder proposals of
which we do not receive notice before April 2, 2001. Such proposals should be
sent to Rudolph G. Swenson, our Secretary, at 1999 Broadway, Suite 3200, Denver,
Colorado 80202.
<PAGE> 21
NOTICE TO BANKS, BROKER-DEALERS
AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise us 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, WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. WE REQUEST THAT YOU 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 US
AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE MEETING
CAN BE HELD. STOCKHOLDERS 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
May 17, 2000
<PAGE> 22
[FRONT OF PROXY VOTING CARD]
PROXY
KFX INC.
1999 BROADWAY, SUITE 3200, DENVER, COLORADO 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of KFx Inc. (the "Company") hereby appoints Seth
L. Patterson and Rudolph G. Swenson 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 22, 2000 at 10:00 a.m. local time at the executive offices of
the Company, 1999 Broadway, Suite 3200, Denver, Colorado 80202, and any
postponements, continuations 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 the nominees listed below.
[ ] WITHHOLD AUTHORITY to vote for the nominees for director listed below.
[ ] FOR the 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
David H. Russell
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, CONTINUATIONS OR ADJOURNMENTS THEREOF.
[BACK OF PROXY VOTING 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 PricewaterhouseCoopers
LLP as the Company's independent accountants for the year ending December 31,
2000. This proxy also delegates discretionary authority to vote with respect to
any other business which may properly come before the meeting or any
postponements, continuations or adjournments thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FURNISHED IN CONNECTION HEREWITH, AND HEREBY
RATIFIES ALL THAT THE SAID ATTORNEYS AND PROXIES MAY DO BY VIRTUE HEREOF.
DATED: ______________, 2000
(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 on this card. 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.
