Exhibit 10.69

EMPLOYMENT AGREEMENT

THIS AGREEMENT is dated December 21, 2005, between Theodore Venners
("Executive") and KFx Inc., a Delaware corporation (the "Company").  In
consideration of the mutual covenants and agreements set forth below, Executive
and the Company agree as follows:

            1.         Employment.  (a)  The Company hereby agrees to employ
Executive commencing effective on December 1, 2005 (the "Effective Date") as its
Chairman and Chief Technology Officer during the Term (defined below), with the
authority, responsibilities and duties customarily exercised by a person holding
that position.  Executive shall report to the Chief Executive Officer of the
Company (the "CEO") and shall perform his duties subject to the overall policies
and directions of the CEO.  The "Term" shall begin on the Effective Date and end
on the fifth anniversary of the Effective Date, subject to earlier termination
as provided herein; provided, however, that the Term will be automatically
extended by twelve months on the fifth anniversary of the Effective Date and on
each of the two anniversaries thereafter, unless one party to this Agreement
provides written notice of non-renewal to the other party at least 90 days prior
to the date of such automatic extension. 

                        (b)        Executive has been and will remain a member
of the Board.  Hereafter and during the Term, while Executive is employed by the
Company, the Board shall use its best efforts to cause Executive to continue to
serve on the Board as a director, shall include Executive in the Board's slate
of nominees for election as a director at annual meetings of the Company's
shareholders, and shall recommend to the shareholders at each such meeting that
Executive be elected or reelected as a director of the Company, to the extent
consistent with the fiduciary obligations of the Board to the shareholders.

            2.         Performance of Duties.  During the Term, Executive shall
devote substantially his full business time, energies and talents serving as the
Company’s Chairman and Chief Technology Officer and as a director.  Executive
may, however, (i) serve as a director, trustee or otherwise participate in
not-for-profit educational, welfare, social, religious and civic organizations;
(ii) serve as a director of no more than two (2) for-profit businesses (not
including advisory boards, participation on which shall not be specifically
limited), and (iii) have passive investment interests in one or more entities
(although his passive investment interest in any entity which is in direct
competition with the Company (meaning that such company is in the business of
coal fuel production) may not exceed five percent (5%) of that entity’s total
outstanding equity); provided that such activities described in clauses (i),
(ii) and (iii) do not materially interfere with the performance of Executive's
duties under this Agreement.

            3.         Initial Restricted Stock Award.  On the date of signing
this Agreement, Executive shall be granted 600,000 shares of the Company's
common stock ("Common Stock"), which shares shall initially be subject to
forfeiture and shall vest and become non-forfeitable in accordance with the
provisions of this Section 3 (the “Restricted Stock Award”).  The Restricted
Stock Award shall be made pursuant to the Company’s 2004 Equity Incentive Plan,
which was previously approved by the Company’s stockholders at its annual
meeting held on June 21, 2005.

            (a)        Time Based Vesting Schedule.  Unless sooner vested
pursuant to the provisions of Sections 3(b), 3(c), or 3(d), below, the
Restricted Stock Award shall vest in full on the seventh anniversary of the
Effective Date, provided that Executive is continually employed on a full-time

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basis as contemplated in Section 2 above by the Company from the Effective Date
through such date.

            (b)        Performance Based Accelerated Vesting.  (i) The
Restricted Stock Award shall vest as indicated below upon attainment of any of
the following events during the Term until the Restricted Stock Award is vested
in full:

                                    (A)       Share Price.  The Restricted Stock
Award shall vest in full as of the date the non volume-weighted average daily
closing price of the Company’s Common Stock on the principal securities exchange
or market on which the Company’s Common Stock is then traded equals or exceeds
Forty-Five and 05/100 Dollars ($45.05) for the trading days within any period of
90 consecutive calendar days during the Term (the “Share Price Target”).  In the
event of a stock split, reverse stock split, subdivision, recapitalization,
reclassification, merger, consolidation (whether or not the Company is the
surviving corporation), combination or exchange of shares, separation, or
reorganization, or in the event of an extraordinary dividend, “spin-off”,
liquidation, other substantial distribution of assets of the Company or other
change in capital of the Company, or the issuance by the Company of shares
without receipt of full consideration therefor, or rights or securities
exercisable, convertible or exchangeable for shares, or any similar change
affecting the Company’s capital structure, (a “Change in the Company’s
Capitalization”), during the Term, the Shares Price Target shall be equitably
adjusted to effectuate the intent of the parties with regard to the accelerated
vesting of the Restricted Stock Award under this Section based upon the initial
Share Price Target.

                                    (B)       Gross Revenue.  Vesting shall
occur if the Company has annualized Gross Revenue for any fiscal year during the
Term exceeding $1,000,000,000 (the “Gross Revenue Target”).  Gross Revenue shall
mean all operating revenue of the Company together with royalty and licensing
revenue from whatever source derived, as well as the portion of the revenue
derived from the operation of “K-Fuel” plants attributable to any other person
that jointly owns or operates, or has jointly owned or operated, one or more
such plants directly or indirectly with the Company (a “Company Partner”) and is
not intended to include any extraordinary or non-recurring items such as the
proceeds from the sale of a subsidiary, the proceeds from the sales of capital
assets belonging to the Company, or the proceeds from the sale by a Company
Partner of its interest in a “K-Fuel” plant to a third-party.  The Gross Revenue
Target is attained based on annual or quarterly determinations, as described
below.  The Company’s fiscal year is the calendar year.

                                    (1)        The Restricted Stock Award shall
vest in full if the Company’s Gross Revenue for any fiscal year exceeds the
Gross Revenue Target.  Vesting shall occur as of the date the Board, in good
faith, reasonably determines that the Gross Revenue Target for the fiscal year
is achieved, which date shall occur as soon as reasonably practicable after the
end of the fiscal year, or, if earlier, upon the first to occur after the end of
the fiscal year of (a) the date Executive terminates employment or (b) the date
immediately prior to a Change of Control.  If Executive terminates employment
prior to the end of a fiscal year, the Company shall determine its Gross Revenue
for such fiscal year through the end of the calendar quarter immediately
preceding the date of termination.  If the Company’s Gross Revenue through the
end of the calendar quarter immediately preceding the date of termination would,
if annualized, (as determined by the Board in good faith) exceed the Gross
Revenue Target, the Restricted Stock Award shall vest in full immediately prior
to the date of termination.

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                                    (2)        One-quarter of the Restricted
Stock Award shall vest for each calendar quarter during the Term in which the
Company’s Gross Revenue would, if annualized, (as determined by the Board in
good faith) exceed the Gross Revenue Target.  Vesting shall occur as of the date
the Board reasonably determines in good faith that the Gross Revenue Target for
the calendar quarter is achieved, which date shall occur as soon as reasonably
practicable after the end of the calendar quarter, or, if earlier, upon the
first to occur after the end of the calendar quarter of (a) the date Executive
terminates employment or (b) the date immediately prior to a Change of Control.

                                    (C)       Net Cash Flow.  Vesting shall
occur if the Company has annualized Net Cash Flow for any fiscal year during the
Term exceeding Two Hundred Fifty Million Dollars ($250,000,000) (the “Net Cash
Flow Target”).  Net Cash Flow shall mean the Company’s gross operating revenue
from whatever source derived (excluding sales of assets, plants or portions of
plants or subsidiaries except as specifically provided below), minus the cost of
goods sold and all selling, general, and administrative expenses of the Company
other than expenses for income taxes, depreciation, amortization, debt
repayment, and non-cash items.  For purposes of determining Net Cash Flow,
Company tax credits monetized or used by the Company, as well as all profits on
sales of assets, plants or portions of plants and subsidiaries, shall be
included in the determination of gross operating revenue on a straight-line
amortized basis over the five year period beginning on the date the Company
receives the proceeds from, or receives the benefit of, the tax credit or sale. 
The Company shall be deemed to receive the benefit of any tax credits used by
the Company as of the date the Company files its audited financial statements
reflecting the tax benefit of such credits.  The Net Cash Flow Target is
attained based on annual or quarterly determinations, as described below. 

                                    (1)        The Restricted Stock Award shall
vest in full if the Company’s Net Cash Flow for any fiscal year exceeds the Net
Cash Flow Target.  Vesting shall occur as of the date the Board, in good faith,
reasonably determines that the Net Cash Flow Target for the fiscal year is
achieved, which date shall occur as soon as reasonably practicable after the end
of the fiscal year, or, if earlier, upon the first to occur after the end of the
fiscal year of (a) the date Executive terminates employment or (b) the date
immediately prior to a Change of Control.  If Executive terminates employment
prior to the end of a fiscal year, the Company shall determine its Net Cash Flow
for such fiscal year through the end of the calendar quarter immediately
preceding the date of termination.  If the Company’s Net Cash Flow through the
end of the calendar quarter immediately preceding the date of termination would,
if annualized, (as determined by the Board in good faith) exceed the Net Cash
Flow Target, the Restricted Stock Award shall vest in full immediately prior to
the date of termination. 

                                    (2)        One quarter of the Restricted
Stock Award shall vest for each calendar quarter during the Term in which the
Company’s Net Cash Flow would, if annualized, (as determined by the Board in
good faith) exceed the Net Cash Flow Target.  Vesting shall occur as of the date
the Board reasonably determines in good faith that the Net Cash Flow Target for
the calendar quarter is achieved, which date shall occur as soon as reasonably
practicable after the end of the calendar quarter, or, if earlier, upon the
first to occur after the end of the calendar quarter of (a) the date Executive
terminates employment or (b) the date immediately prior to a Change of Control. 

                        (ii)        One-half of the Restricted Stock Award shall
vest as of the date the non volume-weighted average daily closing price of the
Company’s Common Stock on the principal

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securities exchange or market on which the Company’s Common Stock is then traded
exceeds Thirty and 05/100 Dollars ($30.05) for the trading days within any
period of 90 consecutive calendar days during the Term (the “Reduced Share Price
Target”), provided that the Reduced Share Price Target is attained while
Executive is employed by the Company on a full-time basis as contemplated by
Section 2 above.  In the event of a Change in the Company’s Capitalization, (as
described in Section 3(b)(i)(A)) during the Term, the Reduced Shares Price
Target shall be equitably adjusted to effectuate the intent of the parties with
regard to the accelerated vesting of the Restricted Stock Award under this
Section based upon the initial Reduced Share Price Target.

                        (iii)       In the event Executive disagrees with the
Board’s determination as to whether a performance goal set forth in this Section
3 has been attained, Executive shall have the right to demand an independent
recalculation of the performance measure by a nationally recognized accounting
firm mutually agreed upon by the parties that does not then perform audit
services for the Company.  Executive must initiate such demand by written notice
to the Company within 30 days of the Board’s determination.  The parties shall
select an accounting firm within 30 days of Executive’s written demand, and the
Company shall promptly provide the accounting firm with all materials and data
reasonably requested to perform the recalculation.  The accounting firm shall
deliver its findings to the parties within 30 days of the date it receives the
materials necessary to perform the recalculation, or as soon thereafter as is
reasonably practicable.  The findings of the accounting firm shall be final and
binding on the parties, and, to the extent such findings would support
accelerated vesting based on the attainment of a performance measure, Executive
shall be entitled to such accelerate vesting irrespective of whether Executive
is then employed by the Company or the reason for Executive’s termination.  All
expenses of the accounting firm shall be borne by the Company.

            (c)        Acceleration Upon a Change of Control.  (i)  Immediately
prior to a Change of Control (as defined in Section 3(c)(iii), below) that
occurs on or after the second anniversary of the Effective Date and while
Executive is employed by the Company on a full-time basis as contemplated by
Section 2 above, the Restricted Stock Award shall vest in full.

                        (ii)  Immediately prior to a Change of Control that
occurs prior to the second anniversary of the Effective Date and while Executive
is employed by the Company on a full-time basis as contemplated by Section 2
above, the then-unvested portion of the Restricted Stock Award (if any) shall
vest on a pro-rata basis in accordance with a fraction, the numerator of which
is the number of days between the date of the Change of Control and the
Effective Date, and the denominator of which is 730.  Notwithstanding the
foregoing, no acceleration shall occur under this Section 3(c)(ii) unless the
Market Capitalization of the Company at the time of the Change of Control equals
or exceeds One Billion, Five Hundred Million Dollars ($1,500,000,000) (the
“Market Cap Target”).  “Market Capitalization” means the combined value of all
outstanding shares of all classes of stock issued by the Company, and shall
include the value of any outstanding stock options or warrants to purchase
Company stock issued by the Company, but shall not include unvested shares of
restricted stock.  For purposes of clarity, shares of stock vesting immediately
prior to or upon the Change of Control shall be considered vested for this
purpose.  The value of stock options and warrants shall be the excess, if any,
on the date of the Change of Control, of the fair market value of the Company
stock subject to the option or warrant and the strike price of the option or
warrant.  The fair market value of a class of Company stock that is then
publicly traded shall be the average of the high and low bid prices of the stock
on the trading date immediately prior to the Change of Control, as reported on
the

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principal securities exchange or market on which the stock is then traded.  The
fair market value of a class of Company stock not then publicly traded shall be
finally determined by the Board in good faith.

                        (iii)  A Change of Control shall mean the first to occur
of:

                    

                        (A)       any "person" (as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
other than (1) the Company or any subsidiary of the Company, (2) any employee
benefit plan of the Company or any subsidiary of the Company, or (3) any person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan which acquires beneficial ownership of voting
securities of the Company, is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 40% or more of the
combined voting power of the Company's then outstanding securities.

                    

                    

                        (B)       the individual directors of the Board on the
Effective Date (“Incumbent Directors”) cease for any reason to constitute at
least a majority of the Board.  For purposes of this paragraph,any new director
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the Incumbent
Directors shall be considered an Incumbent Director.  However, no director whose
initial election to the Board occurs as a result of an actual or threatened
election contest with respect to the election or removal of director or other
actual or threatened solicitation of proxies or consents by or on behalf or a
person other than the board shall be considered a Incumbent Director;

                    

                    

                        (C)       consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) the individuals and entities who were
the beneficial owners of outstanding voting securities of the Company
immediately prior to such Business Combination beneficially own, by reason of
such ownership of the Company's voting securities immediately before the
Business Combination, directly or indirectly, more than 40% of the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the company resulting from such
Business Combination (including, without limitation, a company which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership of the outstanding voting
securities of the Company immediately prior to such Business Combination; (ii)
no person (excluding any company resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such company
resulting from such Business Combination) beneficially owns, directly or
indirectly, 40% or more of, respectively, the then combined voting power of the
then outstanding voting securities of the company resulting from such Business
Combination, except to the extent that such ownership existed prior to the
Business Combination; and (iii) at least a majority of the members of the board
of directors of the company resulting from such

                    

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Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

                    

                    

                        (D)       approval by the stockholders of the Company of
a complete liquidation or dissolution of the Company.

                        (d)        Death, Disability, Termination of
Employment.  (i)  In the event Executiveterminates employment by reason of death
or Disability (as defined in subparagraph 6(c) below), the then unvested portion
of the Restricted Stock Award shall immediately vest on a pro-rata basis
determined by multiplying the number of then-unvested shares of the Restricted
Stock Award by a fraction, the numerator of which is the number of days that
have elapsed from the Effective Date through the date of termination, and the
denominator of which is 3650, and only the portion of the Restricted Stock Award
that thereafter remains unvested shall be forfeited. 

                                    (ii)        In the event Executive
terminates employment prior to the second anniversary of the Effective Date by
reason of a termination by the Company without Cause or a Constructive
Discharge, the then unvested portion of the Restricted Stock Award shall
immediately vest on a pro-rata basis determined by multiplying the number of
then-unvested shares of the Restricted Stock Award by a fraction, the numerator
of which is the number of days that have elapsed from the Effective Date through
the date of termination, and the denominator of which is 730, and only the
portion of the Restricted Stock Award that thereafter remains unvested shall be
forfeited.

                                    (iii)       In the event Executive
terminates employment on or after the second anniversary of the Effective Date
by reason of a termination by the Company without Cause or a Constructive
Discharge, the Restricted Stock Award shall be vested in full.    

                                    (iv)       Notwithstanding subparagraphs
(ii) and (iii) above, in the event Executive terminates employment by reason of
a termination by the Company without Cause or a Constructive Discharge, and the
termination is in anticipation of or occurs within one year of (A) the
attainment of any performance goal set forth in Section 3(b), or (B) a Change in
Control, the Executive shall be treated as if he was employed through the date
the performance goal was achieved or through the date of the Change of Control,
and shall receive accelerated vesting of the Restricted Stock Award in
accordance with the applicable subparagraph(s) of Section 3(b) or 3(c) of this
Agreement.

                                    (v)        In the event of a termination of
Executive's employment for Cause (as defined in subparagraph 6(e) below) or upon
Executive's resignation from the employ of the Company (other than pursuant to a
Constructive Discharge or by reason of a Disability) or upon the expiration of
this Agreement in accordance with its terms, Executive shall retain any portion
of the Restricted Stock Award that is then vested, but the then-unvested portion
of the Restricted Stock Award shall be forfeited in its entirety.

                        (e)        Dividends; Shareholder Rights.  Shares
subject to the Restricted Stock Award shall constitute issued and outstanding
shares of Common Stock for all corporate purposes.  Executive will have the
right to vote the shares subject to the Restricted Stock Award, to receive and
retain ordinary dividends and distributions paid or distributed on the
Restricted Stock Award, and to exercise all other rights, powers, and privileges
of a stockholder of shares of

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Common Stock with respect to the Restricted Stock Award; except, that the
Company or its designee will retain in escrow on behalf of Executive all
extraordinary distributions or dividends made or declared with respect to the
Restricted Stock Award ("Retained Distributions"), and such Retained
Distributions will be subject to the same restrictions, terms and vesting, and
other conditions as are applicable to the Restricted Stock Award generally. 
Retained Distributions shall not bear interest.  Retained Distributions, upon
vesting, shall be paid to the Executive in either cash or Common Stock, or a
combination thereof, in the sole discretion of the Board.

                        (f)         Adjustment to Restricted Stock Award.  The
number and kind of shares subject to the Restricted Stock Award shall be
adjusted upon a Change in the Company’s Capitalization,(as described in Section
3(b)(i)(A)) in order to preserve the intended economic benefit of the Restricted
Stock Award to Executive.

                        (g)        Tax Withholding.  Any tax withholding, or any
part thereof, required from the receipt or vesting of any shares of the
Restricted Stock Award may be satisfied by (a) electing to have the Company
withhold from the Restricted Stock Award, shares of Common Stock having an
aggregate fair market value equal to the minimum amount required to be withheld
or such lesser amount as may be elected by Executive; provided however, that no
such withholding shall be permitted if it would result in an accounting charge
to the Company, or (b) to transfer to the Company a number of shares of Common
Stock that were acquired by Executive more than six months prior to the transfer
to the Company (or such longer period a as is necessary to avoid an accounting
charge to the Company) and that have an aggregate fair market value equal to the
amount required to be withheld or such lesser amount as may be elected by
Executive.  The fair market value of Common Stock to be withheld shall be based
on the closing price of the Common Stock on the principal securities exchange or
market on which the Company’s Common Stock is then traded, on the date that the
amount of tax to be withheld is to be determined (the “Tax Date”).  Any such
elections by Executive to have shares of Common Stock withheld or transferred
for this purpose will be subject to the following restrictions:

                                    (i)         All elections must be made prior
to the Tax Date.

                                    (ii)        All elections shall be
irrevocable.

Should the Executive not elect to satisfy withholding tax obligations by
withholding shares as contemplated in this Section 3(g), or should the amount
the Executive elects to withhold be insufficient to meet the withholding and
payroll tax obligations (other than the Company’s share of payroll taxes)
imposed upon the Company, Executive shall be obligated to pay to the Company, in
cash, all amounts required to be paid by the Company (not subject to an election
to withhold shares) in order to meet its withholding and payroll tax obligations
(other than the Company’s share of payroll taxes).

                        (h)        Registration of Shares.  The Company shall
take all steps necessary to register the shares subject to the Restricted Stock
Award under an appropriate registration statement filed with the Securities and
Exchange Commission and shall list those shares on AMEX.

            4.         Compensation.  During the Term, while Executive is
employed by the Company on a full-time basis as contemplated by Section 2 above,
the Company shall compensate him for his services as follows:

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                        (a)        Base Salary.  Executive shall receive a Base
Salary equal to the salary he is receiving on the Effective Date.  This amount
shall be reviewed annually by the Compensation Committee of the Board
(“Compensation Committee”) pursuant to its normal performance review policies
for senior executives, with the first such review occurring in 2006. 

                        (b)        Annual Bonus.  For each calendar year,
Executive shall be eligible to receive an annual cash bonus payment determined
by the Compensation Committee in its discretion.  Such bonus shall be payable on
or before March 15th of the calendar year following the calendar year to which
the Annual Bonus relates.

                        (c)        Employee Benefits, Fringe Benefits and
Perquisites.  Executive shall be provided with health and other employee
benefits, fringe benefits and perquisites on the same basis as such benefits and
perquisites are provided by the Company from time to time to the Company's other
senior executives.  To the extent that it may legally do so without violating
the terms of any applicable plan or policy, or without creating adverse tax
consequences for the Company or other participants in such plans, the Company
agrees to waive any waiting periods for Executive and Executive's spouse with
respect to group coverage under its health and welfare benefit plans.

                        (d)        Expense Reimbursement.  The Company will
promptly reimburse Executive for all reasonable expenses incurred by him (i) in
connection with the negotiation and preparation of this Agreement such that he
shall have no after-tax cost for the negotiation and preparation of this
Agreement, and (ii) in the performance of his duties in accordance with the
Company's policies applicable to senior executives.  All reimbursements shall be
made in a manner that complies with Section 409A of the Code.

                        (e)        Vacation.  Executive shall be entitled to
vacation at a rate of 30 days per calendar year during the Term in accordance
with the plans, policies and programs as in effect generally with respect to
other senior executives of the Company, including limitations, if any, on the
carry-over of accrued but unused vacation.

            5.         Indemnification.  (a) The Company agrees that if, during
or after his employment, Executive is made a party, or is threatened to be made
a party, to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by reason of the fact that he
is or was a director, officer or employee of the Company or is or was serving at
the request of the Company as a director, officer, member, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is Executive's alleged action in an official capacity
while serving as a director, officer, member, employee or agent, Executive shall
be indemnified and held harmless by the Company to the fullest extent legally
permitted or authorized by the Company's certificate of incorporation or bylaws
or resolutions of the Company's Board of Directors or, if more expansive, by the
laws of the State of Delaware, against all cost, expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes or other liabilities or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if he
has ceased to be a director, member, employee or agent of the Company or other
entity, with respect to acts or omissions which occurred prior to his cessation
of employment with the Company, and shall inure to the

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benefit of Executive's heirs, executors and administrators.  The Company shall
advance to Executive all reasonable costs and expenses incurred by him in
connection with a Proceeding within 20 calendar days after receipt by the
Company of a written request for such advance.  Such request shall include an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses.

                        (b)        Neither the failure of the Company (including
its Board of Directors, independent legal counsel or stockholders) to have made
a determination prior to the commencement of any proceeding concerning payment
of amounts claimed by Executive under subparagraph 5(a) above, that
indemnification of Executive is proper because he has met the applicable
standard of conduct, nor a determination by the Company (including its Board of
Directors, independent legal counsel or stockholders) that Executive has not met
such applicable standard of conduct, shall create a presumption that Executive
has not met the applicable standard of conduct.

                        (c)        During his employment with the Company and
thereafter so long as Executive may have liability arising out of his service as
an officer or director of the Company, the Company agrees to continue and
maintain a director's and officer's liability insurance policy covering
Executive in an amount that is reasonable and customary based on the size of the
Company and its business activities, and the authorities, power,
responsibilities, and duties of Executive.

            6.         Termination of Employment. 

                        (a)        General.  Upon termination of Executive's
employment for any reason, Executive or, in the event of his death, Executive's
estate, shall be entitled to Executive's accrued but unpaid Base Salary through
the date of termination, which shall be paid in accordance with the Company’s
customary payroll practices for senior executives.  Any Annual Bonus awarded to
Executive for a prior award period, but not yet paid to Executive, shall be paid
to Executive promptly following termination of employment, and in all events
prior to March 15th of the year following the year to which the Annual Bonus
relates.  Any employee benefits to which Executive is entitled by reason of his
employment shall be paid to Executive or his estate at such time as is provided
by the terms of the applicable Company plan or policy, or the foregoing terms of
this Agreement, as the case may be.  Executive shall be entitled to the vested
portion of his Restricted Stock Award as of the date of termination, including
such portion thereof that becomes vested as a result of Executive’s termination,
all as determined under Section 3, Initial Restricted Stock Award, of this
Agreement.  Executive's right to additional payments and benefits under this
Agreement upon his termination shall be determined in accordance with the
following provisions of this Section 6, Termination of Employment, which set
forth the exclusive circumstances upon which this Agreement may be terminated
during the Term.

                        (b)        Death.  This Agreement shall terminate
automatically upon the death of Executive.  No additional payments or benefits
will be made to Executive following his death, other than those described in
Section 6(a), Termination of Employment, General, above. 

                        (c)        Disability.  Executive or the Company may
terminate Executive's employment because of Executive's Disability during the
Term.  "Disability" means (i) that Executive has been substantially unable, for
a period of 180 consecutive days, to perform

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Executive's duties under this Agreement as a result of physical or mental
illness or injury, and (ii) a physician selected by the Company or its insurers,
and reasonably acceptable to Executive or Executive's legal representative, has
determined that Executive is disabled.  A termination of Executive's employment
by the Company for Disability shall be communicated to Executive by written
notice, and shall be effective on the 30th day after receipt of such notice by
Executive (the "Disability Effective Time"), unless Executive returns to
full-time performance of Executive's duties before the Disability Effective
Time.  A termination of Executive’s employment by Executive for Disability shall
be effective immediately upon delivery of written notice of termination to the
Company.  No additional payments or benefits will be made to Executive following
termination of his employment by reason of Disability, other than those
described in Section 6(a), Termination of Employment, General, above. 

                        (d)        Voluntary Resignation.  Executive may resign
from his employment with the Company, other than pursuant to a Constructive
Discharge, after first giving the Company 90 days written notice of his intent
to resign.  No additional payments or benefits will be made to Executive
following his voluntary resignation, other than those described in Section 6(a),
Termination of Employment, General, above.

                        (e)        Termination for Cause.  The Company may
terminate Executive’s employment with the Company for “Cause,” which shall mean
a reasonable determination by directors comprising two-thirds of the
non-executive Board members, after giving Executive notice and an opportunity to
be heard, that Executive:

                    

                        (A)       has been convicted of a felony that is
materially injurious to the Company’s business or reputation; or

                    

                    

                        (B)       has willfully and continuously failed to
perform substantially his duties as contemplated by Section 2 above (other than
such failure resulting from incapacity due to physical or mental illness), after
a written demand for corrected performance is delivered to Executive by the
Board which specifically identifies the manners in which the Board believes
Executive has not substantially performed his duties, and after Executive has
failed to cure such items identified in the Board’s letter within 90 days.

No additional payments or benefits will be made to Executive following a
termination for Cause, other than those described in Section 6(a), Termination
of Employment, General, above.

                        (f)         Termination Without Cause.  The Company may
terminate Executive’s employment at any time without Cause, after first giving
Executive 90 days written notice. 

                                    (i)         If the Company terminates
Executive without Cause, then Executive, upon his election, shall receive
medical, dental, and vision coverage identical to the coverage in effect
immediately prior to the Executive’s termination, for the period provided for
by, and consistent with, COBRA following the date of termination.  The cost of
COBRA coverage shall be borne exclusively by the Company. However, the Executive
shall receive no additional payments or benefits other than those described in
Section 6(a), Termination of Employment, General, above.

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                                    (ii)        If the Company terminates
Executive without Cause on or after a Change of Control, or within the one year
period prior to the Change of Control if the termination is in anticipation of
the Change of Control, then, in addition to the payments or benefits described
in Sections 6(a), Termination of Employment, General, and 6(f)(i), above,
Executiveshall be entitled to a lump sum cash payment equal to three times the
Executive’s Base Amount (but not including the amounts, if any, attributable to
the vesting of Restricted Shares and/or Retained Distributions) as otherwise
defined in Section 280G(b)(3) of the Code (the “Change of Control Severance”). 
The Change of Control Severance payment shall be made six months and one (1) day
after the date of termination, or as soon thereafter as reasonably practicable.

                        (g)        Resignation for Constructive Discharge. 
Executive's voluntary resignation for Constructive Discharge shall be treated
for all purposes of this Agreement as a termination by the Company without
Cause, entitling Executive to the benefits described in subparagraph (f)(i)
above, if such Constructive Discharge occurs prior to a Change of Control, and
to the benefits described in (f)(i) and (ii) above, if such Constructive
Discharge occurs on or after a Change of Control, or within 1 year prior to the
Change of Control if the termination is in anticipation of the Change of
Control.  For purposes of this Agreement, "Constructive Discharge" shall mean
Executive’s voluntary resignation following the occurrence of any of the
following:

                                    (i)         a reduction by the Company in
Executive's Base Salary to an amount that is less than that required under
Section 4 above or the Company's failure to provide the other elements of
compensation or their equivalent as set forth in Section 4;

                                    (ii)        the removal of Executive from
the position of Chief Executive Officer, the failure of Executive to remain on
the Company's Board of Directors in his then current capacity on the Board to
the extent that the decision to remove Executive from the Board is in the
control of the Board, or the removal of Executive from any other position then
held with the Company without Executive’s written consent;

                                    (iii)       any action by the Company which
results in significant diminution in Executive's authority, power,
responsibilities or duties from those contemplated by Sections 1 and 2 above or
as may thereafter be in effect if in excess of that contemplated by Sections 1
and 2 above, or the assignment to Executive without his written consent of any
duties inconsistent with Executive's position and status as contemplated by
Sections 1 and 2 above or his position and status as may thereafter be in effect
if in excess of that contemplated by Sections 1 and 2 above, which action or
assignment continues after written notice thereof and a reasonable opportunity
to cure of not less than fifteen (15) days has been given by Executive to the
Company;

                                    (iv)       the failure of the Company to
obtain an agreement from any successor, assignee, or transferee to expressly
assume the liabilities, obligations and duties of the Company hereunder in
accordance with the requirements of Section 11 below, unless such liabilities,
obligations and duties of the Company are automatically assumed by any such
successor, assignee or transferee by operation of law;

                                    (v)        any other breach by the Company
of any of its material obligations to Executive under this Agreement, which
breach continues after written notice thereof

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and a reasonable opportunity to cure of not less than ninety (90) days has been
given by Executive to the Company, or

                                    (vi)       a Change of Control.

            7.         Special Tax Provision.  (a)  Anything in this Agreement
or in any other agreement between the Company and Executive or in any equity
incentive or other benefit plan to the contrary notwithstanding and except as
set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an additional payment
(a "Gross‑Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (including the tax provided for
under Section 409A of the Code and including any interest and penalties imposed
with respect to income taxes of any nature) and Excise Tax imposed upon the
Gross‑Up Payment, Executive retains an amount of the Gross‑Up Payment equal to
the Excise Tax imposed upon the Payments.

                        (b)        Subject to the provisions of Section 7(c),
all determinations required to be made under this Section 7, including whether
and when a Gross‑Up Payment is required and the amount of such Gross‑Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm or benefits
consulting firm mutually agreed upon by the Company and Executive (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and Executive within fifteen business days of the receipt of notice
from Executive that there has been a Payment, or such earlier time as is
requested by the Company.  In the event that the Accounting Firm is serving as
accountant or auditor for the Company or the individual, entity or group
effecting the Change of Control, the Company and Executive shall jointly appoint
another nationally recognized accounting or benefits consulting firm to make the
determinations required hereunder (which firm shall then be referred to as the
Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall
be borne solely by the Company.  Any Gross‑Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to Executive within fifteen
business days of the receipt of the Accounting Firms' determination.  Any
determination by the Accounting Firm shall be binding upon the Company and
Executive.  As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that a Gross‑Up Payment which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder.  In the event that the Company
exhausts its remedies pursuant to Section 7(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.

                        (c)        Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross‑Up

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Payment.  Such notification shall be given as soon as practicable but no later
than ten business days after Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid.  Executive shall not pay such claim prior to the
expiration of the thirty‑day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:

                                    (i)         give the Company any information
reasonably requested by the Company relating to such claim,

                                    (ii)        take such action in connection
with contesting such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,

                                    (iii)       cooperate with the Company in
good faith in order effectively to contest such claim, and

                                    (iv)       permit the Company to participate
in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after‑tax basis, for any Excise Tax, payroll tax, or income tax (including the
tax provided for under Section 409A of the Code and including any interest and
penalties imposed with respect to taxes of any nature) imposed as a result of
such representation and payment of costs and expenses.  Without limitation on
the foregoing provisions of this Section 7(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or to contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest‑free basis and shall
indemnify and hold Executive harmless, on an after‑tax basis, from any Excise
Tax, payroll tax, or income tax (including the tax provided for under Section
409A of the Code and including any interest and penalties with respect to taxes
of any nature) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.  Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross‑Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority at Executive’s sole cost
including the cost of Executive’s counsel or other tax representative.

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                        (d)        If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 7(c), Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 7(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).  If, after
the receipt by Executive of an amount advanced by the Company pursuant to
Section 7(c), a determination is made that Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify Executive
in writing of its intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross‑Up Payment required to
be paid.

            8.         No Mitigation; No Offset.  In the event of any
termination of employment, Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts due Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.

            9.         Confidential Information Non-competition..  (a)  The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive’s employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement).  Except in good faith performance of
his duties for the Company, during employment and after termination of the
Executive’s employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.  In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

                        (b)        Executive agrees that during the period that
he is an employee of the Company or any of its affiliated companies pursuant to
this Agreement and for one year thereafter, he will not without the consent of
the Company (i) Participate In (as defined below) any business or organization
in the coal fuels business (a “Competitor”) in a capacity that directly assists
such Competitor in competing with the Company, any of its subsidiaries, or any
company in which the Company owns at least 10% of the equity interests (an
“Affiliate”), in a material respect in the coal fuels business in North America,
(ii) own a controlling interest in a business or organization that competes in a
material respect in the coal fuels business in North America, or (iii) solicit
or interfere with, or endeavor to entice away from the Company or any of its
subsidiaries or Affiliates any of their respective suppliers, customers or
employees.  The employment by Executive or a business that Executive
Participates In of a person employed or formerly employed by the Company shall
not be prohibited by the foregoing provision if such person sought out
employment on his own initiative without initial encouragement by Executive. 
For purposes of this Section 9(b), the term “Participate In” shall mean:
“directly or indirectly, for his own benefit or for, with or through any other
person, firm or corporation, own, manage, operate, lend money to or participate
in the ownership, management, operation or control of, or be connected as a
director, officer, employee, partner, consultant, agent, independent contractor
or otherwise with, or acquiesce in the use of his name in.”  Notwithstanding the
foregoing,

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Executive shall not be deemed to Participate In a business merely because he
owns not more than 5% of the outstanding common stock of a corporation, if, at
the time of its acquisition by Executive, such stock is listed on a national
securities exchange, is reported on Nasdaq or is regularly traded in the
over-the-counter market by a member of a national securities exchange.

                        (c)        Executive agrees that the provisions of this
Section 9 are necessary and reasonable to protect the Company in the conduct of
its business.  If any restriction contained in this Section 9 shall be deemed to
be invalid, illegal or unenforceable by reason of the extent, duration or
geographical scope hereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope or other provisions hereof, and in its reduced form such restriction shall
then be enforceable in the manner contemplated hereby.

            10.       Remedies.  Executive agrees that the restrictions set
forth in Section 9 hereof are reasonable and necessary to protect the legal
interests of the Company.  Executive further agrees that the Company shall be
entitled, in addition to damages, to injunctive relief in the event of any
actual or threatened breach of such restrictions.

            11.       Assignability, Binding Nature.  This Agreement is personal
to Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution.  This Agreement shall inure to the benefit of and be enforceable
by Executive’s legal representative’s.  No rights or obligations of the Company
under this Agreement may be assigned or transferred except pursuant to a merger
or consolidation in which the Company is not the continuing entity, or the sale
or liquidation of all or substantially all of the assets of the Company,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law.  The Company further
agrees that, in the event of a merger or consolidation in which the Company is
not the continuing entity or a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action it legally can in order to
cause the successor, assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. 

            12.       Amendment.  This Agreement may be amended only by mutual
agreement of the parties in writing.  So long as Executive lives, no person,
other than the parties hereto, shall have any rights under or interest in this
Agreement or the subject matter hereto except that in the event of Executive's
Disability so as to render him incapable of such action, his legal
representative may be substituted for purposes of such amendment.

            13.       Applicable Law.  The provisions of this Agreement shall be
construed in accordance with the internal laws of the State of Colorado, without
regard to the conflict of law provisions of any state.

            14.       Severability.  The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of
any other provision of this Agreement, and this Agreement will be construed as
if such invalid or unenforceable provision were omitted (but only to the extent
such provision cannot be appropriately reformed or modified).

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            15.       Waiver of Breach.  No waiver by any party hereto of a
breach of any provision of this Agreement by any other party, or of compliance
with any condition or provision of this Agreement to be performed by such other
party, will operate or be construed as a waiver of any subsequent breach by such
other party of any similar or dissimilar provisions and conditions at the same
or any prior or subsequent time.  The failure of any party hereto to take any
action by reason of such breach will not deprive such party of the right to take
action at any time while such breach continues.

            16.       Notices.  Notices and all other communications provided
for in this Agreement shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, postage prepaid,
or sent by facsimile, or prepaid overnight courier to the parties at the
facsimile phone numbers or addresses set forth below (or such other addresses or
facsimile numbers as shall be specified by the parties by like notice):

            to the Company:

                        KFx Inc.
                        55 Madison Street, Suite 500
                        Denver, Colorado  80206-5810
                        Attn:  Chief Executive Officer

                        With copy to:

                        General Counsel
                        55 Madison Street, Suite 500
                        Denver, Colorado  80206-5810
                        Facsimile:  (303) 293-8430

            or to Executive:

                        Theodore Venners
                        55 Madison Street, Suite 500
                        Denver, Colorado 80206-5810
                        Facsimile:  (303) 293-8430
                        Email:  tvenners@kfx.com

Each party, by written notice furnished to the other party, may modify the
applicable delivery address, except that notice of change of address shall be
effective only upon receipt.  Such notices, demands, claims and other
communications shall be deemed given in the case of delivery by overnight
service with guaranteed next day delivery, the next day or the day designated
for delivery; or in the case of certified or registered U.S. mail, five days
after deposit in the U.S. mail; or, in the case of facsimile, the date upon
which the transmitting party received confirmation of receipt by facsimile,
telephone, or otherwise; provided, however, that in no event shall any such
communications be deemed to be given later than the date they are actually
received.

                        17.       Mediation/Arbitration of Disputes and
Reimbursement of Legal Costs.  Any controversy or claim arising out of or
relating to this Agreement (including, without limitation, the breach thereof)
shall be settled by:

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(a) Mediation.  Before resolution of the matter by arbitration, the matter will
be mediated with any such mediation being held in Denver, Colorado before one
mediator experienced in executive compensation. The mediation shall be
administered by JAMS pursuant to the rules and procedures of JAMS.

                    

                    

(b) Arbitration.  If mediation is unsuccessful, the matter shall be settled by
final, binding and non-appealable arbitration in Denver, Colorado by a single
arbitrator in accordance with the rules of JAMS then in effect for employment
related disputes.  The arbitrator shall, to the extent possible, be experienced
in the resolution of disputes under employment agreements for executives of
major corporations and shall be selected by mutual agreement of the parties. 
Any award entered by the arbitrator shall be final, binding and nonappealable
and judgment may be entered thereon by either party in accordance with
applicable law in any court of competent jurisdiction.  This arbitration
provision shall be specifically enforceable.

                    

                    

(c) If Executive prevails on any material issue which is the subject of such
mediation, arbitration or lawsuit, the Company shall be responsible for all of
the fees of JAMS and the mediator and/or arbitrator and any expenses relating to
the conduct of the mediation and/or arbitration (including the Company's and
Executive's reasonable attorneys' fees and expenses).  Otherwise, each party
shall be responsible for its own expenses relating to the conduct of the
mediation and/or arbitration (including reasonable attorneys' fees and expenses)
and shall share the fees of JAMS equally.

            18.       Survivorship.  Upon the expiration or other termination of
this Agreement, the respective rights and obligations of the parties hereto
shall survive such expiration or other termination to the extent necessary to
carry out the intentions of the parties under this Agreement, particularly, but
without limitation, the restrictions contained in Section 8.

            19.       Entire Agreement.  Except as otherwise noted herein, this
Agreement and any related agreement (such as a restricted stock or registration
rights agreement with regard to the Restricted Stock Award) constitute the
entire agreement between the parties concerning the subject matter hereof and
supersede all prior and contemporaneous agreements, if any, between the parties
relating to the subject matter hereof.

            20.       Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

Remainder of Page left Intentionally Blank

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            IN WITNESS WHEREOF, Executive has hereunto set his hand, and the
Company has caused this Agreement to be executed in its name and on its behalf,
and its corporate seal to be hereunto affixed, all on the day and year first
above written.

EXECUTIVE:

THEODORE VENNERS

/s/ THEODORE VENNERS                           

COMPANY:

KFx INC.

By:/s/ MARK S. SEXTON                             

Mark S. Sexton

Chief Executive Officer

ATTEST:

/s/ WILLIAM G. LAUGHLIN                        

William G. Laughlin

Secretary

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