EXHIBIT 10.76

SHARE PURCHASE AGREEMENT

                                                                                                                                        

 

 

among

 

 

 

KFX INC.

 

 

(“Buyer”)

 

 

NEW MEADVILLE FORGING, INC.

 

 

(“Seller”)

 

 

and

 

 

KELLER GROUP, INC.

 

 

(“Keller”)

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TABLE OF CONTENTS

Page

                       

            

                                                                                                              

          

ARTICLE 1     Definitions

5

                       

1.1

Definitions

5

1.2

Accounting Terms

5

 

ARTICLE 2     Purchase and Sale

5

2.1

Purchase and Sale

5

2.2

Purchase Price

5

2.3

Closing Payment

6

2.4

Escrowed Funds

6

2.5

Deliveries at Closing

6

2.6

Allocation of Purchase Price

6

 

ARTICLE 3     Seller’s Representations and Warranties Concerning the Transaction

6

3.1

Authority and Capacity

6

3.2

Ownership of Shares

7

3.3

Execution and Delivery; Enforceability

7

3.4

Noncontravention

7

 

ARTICLE 4     Seller’s Representations and Warranties Concerning Company

7

4.1

Organization and Good Standing

7

4.2

Capitalization

8

4.3

Other Ventures

8

4.4

Noncontravention

8

4.5

Financial Statements

8

4.6

Absence of Certain Changes or Events

9

4.7

Taxes

10

4.8

Employees

11

4.9

Employee Benefit Plans and Other Compensation Arrangements

12

4.10

Environmental Matters

13

4.11

Permits; Compliance with Laws

14

4.12

Real Properties

14

4.13

Personal Property

18

4.14

Accounts Receivable

19

4.15

Intellectual Property

19

4.16

Contracts

20

4.17

Litigation

20

4.18

Brokerage

21

4.19

Material Suppliers and Customers

21

4.20

Insurance

21

4.21

No Other Representations and Warranties

21

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ARTICLE 5     Representations and Warranties of Buyer

22

5.1

Organization; Authorization

22

5.2

Execution and Delivery; Enforceability

22

5.3

Governmental Authorities; Consents

22

5.4

Brokerage

22

5.5

Investment Intent; Restricted Shares

22

5.6

Buyer Capitalization; Stock Consideration Shares

23

5.7

SEC Documents; KFx Financial Statements

23

 

ARTICLE 6     Closing Deliveries

23

6.1

Conditions to Buyer’s Obligations

23

6.2

Conditions to Seller’s Obligations

24

 

ARTICLE 7     The Closing

25

 

ARTICLE 8     Additional Covenants and Agreements

26

8.1

Pre-Closing Covenants and Agreements

26

8.1.1   

Conduct of Business                                                             

26

8.1.2.

Access

26

8.1.3.

Satisfaction of Closing Conditions

27

8.1.4.

Termination

27

8.1.5.

Subsequent Actions

27

8.2

Miscellaneous Covenants

28

8.2.1.

Publicity

28

8.2.2.

Expenses

28

8.2.3.

No Assignments

28

8.2.4.

Confidentiality Agreement

28

8.2.5.

Access by Seller

28

8.2.6.

Continuation of Indemnification

28

8.3

Acknowledgements

29

8.4

Tax Matters

29

8.5

Reclamation Bonds and Letters of Credit

30

 

ARTICLE 9     Indemnification

31

9.1

Indemnification of Buyer

31

9.2

Limitations on Indemnification of Buyer

31

9.3

Indemnification of Seller

32

9.4

Limitations on Indemnification of Seller

32

9.5

Procedures Relating to Indemnification

33

9.5.1.

Third-Party Claims

33

9.5.2.

Other Claims

34

9.6

Limitation of Remedies

34

 

ARTICLE 10     Certain Definitions

35

 

ARTICLE 11     Construction; Miscellaneous Provisions

40

11.1

Notices

40

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11.2

Entire Agreement

41

11.3

Modification

41

11.4

Mediation, Jurisdiction and Venue

41

11.4.1.  

Mandatory Mediation                                                      

41

11.4.2.

Jurisdiction and Venue

42

11.5

Binding Effect

42

11.6

Headings

42

11.7

Number and Gender; Inclusion

42

11.8

Counterparts

42

11.9

Third Parties

42

11.10

Schedules and Exhibits

42

11.11

Time Periods

43

11.12

Governing Law

43

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Schedules

                      

2.6

Allocation of Purchase Price

4.1

Corporate Jurisdictions

4.2

Ownership of Shares

4.4

Non-Contravention

4.5

Financial Statements

4.6

Absence of Changes or Events

4.7

Taxes

4.8

Employee Claims

4.8(c)

Employee Compensation

4.8(h)

Employment Contracts and Policies

4.9

Benefit Plans; Plan Matters

4.10(a)

Environmental Claims

4.10(b)

Hazardous Materials Actions

4.10(c)

Environmental Compliance

4.10(d)

Release of Hazardous Materials

4.10(e)

Storage of Hazardous Materials

4.10(g)

Material Adverse Impacts

4.11

Permits; Compliance with Laws

4.12(a)

Owned Real Properties

4.12(b)

Leased Real Properties

4.13

Personal Property Liens

4.15

Company Intellectual Property

4.16

Material Contracts

4.17

Litigation

4.18

Brokerage Fees

4.19

Materials Suppliers and Customers

4.20

Insurance

6.1(a)

Necessary Consents

6.1(e)

Resignations

8.1.1

Capital Expenditures

8.5

Reclamation Bonds and Letters of Credit

 

Exhibits

 

Exhibit A

Escrow Agreement

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SHARE PURCHASE AGREEMENT

            THIS SHARE PURCHASE AGREEMENT (“Agreement”) is entered into as of
March 6, 2006, among KFx Inc., a Delaware corporation (“Buyer”), New Meadville
Forging, Inc., a Delaware corporation (“Seller”), and Keller Group, Inc., an
Illinois corporation (“Keller”).

RECITALS:

            1.         Seller owns all of the issued and outstanding shares (as
more particularly defined in Section 4.2, the “Shares”) of Buckeye Industrial
Mining Co., an Ohio corporation (“Company”).

            2.         Buyer wishes to buy, and Seller wishes to sell, the
Shares on the terms and conditions set forth herein.

            3.         Company is a Qualified Subchapter S Subsidiary and, as
such, the sale of Shares contemplated by this Agreement will be treated, for tax
purposes, as a sale of all of the assets of Company by Seller.

            4.         Keller is the ultimate parent of Seller and will benefit
directly and beneficially from the transactions contemplated hereby.

            Now, therefore, in consideration of the mutual representations,
warranties, covenants and agreements set forth in this Agreement, Buyer and
Seller hereby agree as follows:

ARTICLE 1

 

Definitions

            1.1       Definitions.  Certain terms used in this Agreement shall
have the meanings set forth in ARTICLE 10, or elsewhere herein as indicated in
ARTICLE 10.

            1.2       Accounting Terms.  Accounting terms used in this Agreement
and not otherwise defined herein shall have the meanings attributed to them
except as may otherwise be specified herein.

ARTICLE 2

 

Purchase and Sale

            2.1       Purchase and Sale.  Subject to the terms and conditions of
this Agreement, the Seller shall sell, assign, transfer and deliver to Buyer at
the Closing, free and clear of all Liens, and Buyer shall purchase from Seller,
all of Seller’s right, title and interest in and to all of the Shares.

            2.2       Purchase Price.  The aggregate purchase price for all of
the Shares (the “Purchase Price”) shall be an amount equal to Thirty Seven
Million, Five Hundred Thousand Dollars ($37,500,000).

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            2.3       Closing Payment.  Subject to the terms and conditions of
this Agreement, Buyer shall pay and deliver at the Closing the Purchase Price to
Seller as follows: (a) issue to Seller 118,821.29 shares of Common Stock, $.001
par value per share, of Buyer (the “Buyer Common Shares”) having a value equal
to Two Million Five Hundred Thousand Dollars ($2,500,000) based on the average
closing price of Buyer Common Shares during the five (5) trading day period
ending on the business day immediately preceding the date hereof (the “Stock
Consideration Shares”) and (b) pay and deliver an amount) equal to Thirty One
Million Two Hundred Fifty Thousand Dollars ($31,250,000) (the “Cash Portion”, to
Seller by means of a wire transfer of immediately available cash funds to an
account as directed by Seller prior to the Closing (the “Seller’s Account”).

            2.4       Escrowed Funds.  Notwithstanding any other term or
condition contained elsewhere in this Agreement and its attached schedules,
including, without limitation, Section 0 hereof, at Closing, funds in the amount
of Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (an amount
equal to Ten Percent (10%) of the Purchase Price) shall be placed into escrow in
accordance with the terms and conditions of the escrow agreement attached hereto
as Exhibit A (the “Escrow Agreement”), to be held by the escrow agent specified
in the Escrow Agreement until the release of all or a portion of the funds is
mandated by the terms thereof.  The escrowed funds shall be released from escrow
and paid over to Seller in accordance with the time frames and/or conditions set
forth in the Escrow Agreement.

            2.5       Deliveries at Closing.  At the Closing, (a) Seller will
deliver to Buyer the various certificates, instruments, and documents referred
to in 6.1 below, (b) Buyer will deliver to Seller the various certificates,
instruments, and documents referred to in 6.2 below, (c) Seller will deliver to
Buyer stock certificates representing all of its Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (d) Buyer will deliver to
Seller and the Escrow Agent the consideration specified in Section 2.3 and 2.4
above.

            2.6       Allocation of Purchase Price.  The fair market value of
the assets of Company and the allocation of the Purchase Price among them for
purposes of Section 1060 of the Internal Revenue Code shall be as set forth on
Schedule 2.6 which Parties shall, prior to Closing, attach hereto.  Buyer and
Seller agree to be bound by such fair market value determination and allocation
and to complete and attach IRS Form 8594 to their respective Tax Returns
accordingly.

ARTICLE 3

 

Seller’s Representations and Warranties Concerning the Transaction

            Seller represents and warrants to Buyer that the following
statements contained in this ARTICLE 3 are true and correct at and as of the
date of this Agreement and will also be correct and complete as of the Closing
Date.

            3.1       Authority and Capacity.  Seller possesses all requisite
legal right, power, authority and capacity to execute, deliver and perform this
Agreement and each other agreement, instrument and document to be executed and
delivered by or on behalf of Seller and consummate the transactions contemplated
herein and therein.  Seller is duly organized, validly existing and in good
standing under the laws of the State of Delaware.

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            3.2       Ownership of Shares.  Seller is the beneficial and record
owner and has good and marketable title to all of the Shares free and clear of
all Liens.

            3.3       Execution and Delivery; Enforceability.  This Agreement
has been, and each other document, instrument or agreement to be executed and
delivered by Seller in connection herewith will upon such delivery be, duly
executed and delivered by Seller and constitutes, or will upon such delivery
constitute, the legal, valid and binding obligation of Seller, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights or by principles
of equity (collectively, the “Enforceability Exceptions”).

            2.4       Noncontravention. 

                        (a)        Seller is not required to submit any notice,
report or other filing with any Governmental Authority in connection with
Seller’s execution, delivery or performance of this Agreement or any other
document, instrument or agreement to be executed and delivered by Seller in
connection herewith.  The execution, delivery and performance of this Agreement
will not result in a breach or violation of, or constitute a default (or an
event that, with notice or lapse of time, or both, would constitute a default)
under, or give rise to a right of any party to accelerate, amend, modify or
terminate, or require payments under, or require the authorization, consent or
approval from any third party pursuant to any agreement to which Seller is a
party.  No consent, approval or authorization of any Governmental Authority or
any other Person is required to be obtained by Seller in connection with
Seller’s execution, delivery and performance of this Agreement or any other
document, instrument or agreement to be executed and delivered by Seller in
connection herewith.

                        (b)        The execution and delivery by Seller of this
Agreement and any other document, instrument or agreement to be executed and
delivered by Seller in connection herewith and the consummation by Seller of the
transactions contemplated hereby and thereby will not (1) conflict with or
violate the organizational documents of Seller, or (2) conflict with or violate
any Laws applicable to Seller.

ARTICLE 4

 

Seller’s Representations and Warranties Concerning Company

            Seller represents and warrants to Buyer that the following
statements contained in this ARTICLE 4 are true and correct at and as of the
date of this Agreement.

            4.1       Organization and Good Standing.  Company is a corporation
organized, validly existing and in good standing under the laws of the State of
Ohio.  Company has all requisite corporate power and authority to own and lease
its assets and to operate its business as the same are now being owned, leased
and operated.  Company is duly qualified or licensed to do business as a foreign
corporation in, and is in good standing in, each jurisdiction in which the
nature of its business or its ownership of its properties requires it to be so
qualified or licensed, except where the failure to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect.  Schedule
4.1 sets forth a true and complete list of all jurisdictions in which Company is
qualified or licensed to do business as a foreign corporation.  The execution,
delivery and performance of this Agreement and each other agreement, instrument
and document to be executed and delivered by or on behalf of Company and the

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consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Company.  Company
has delivered or made available to Buyer a true, complete and correct copy of
its Articles of Incorporation and Code of Regulations, each as currently in
effect.  Each of the Articles of Incorporation and Code of Regulations of
Company is in full force and effect, and Company is not in violation of any
provision thereof.

            4.2       Capitalization.  Company has the authority to issue a
total of Eight Hundred Fifty (850) common shares, without par value, of which a
total of One Hundred (100) common shares are issued and outstanding (each, a
“Share” and collectively, the “Shares”) and are owned of record by Seller.  All
of the Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws and any preemptive rights or rights of first refusal of
any Person.  There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Company to issue, sell, or otherwise
cause to become outstanding any of its capital stock.  Except as set forth on
Schedule 4.2, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Company.  There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any shares of capital stock of Company, there does not
exist nor is there outstanding any right or security granted or issued to any
Person to cause Company to issue or sell any shares of capital stock of Company
to any Person (including any warrant, stock option, convertible debt obligation,
subscription for shares or securities convertible into shares of Company, or any
other similar right, security, instrument or agreement), and there is no
obligation, contingent or otherwise, of Company to (i) repurchase, redeem or
otherwise acquire any share of the capital stock or other equity interests of
Company, or (ii) provide funds to, or make any investment in (in the form of a
loan, capital contribution or otherwise), or provide any guarantee with respect
to the obligations of, any other Person.

            4.3       Other Ventures.  Company does not own of record or
beneficially any equity ownership interest in any other Person, nor is it a
partner or member of any partnership, limited liability company or joint
venture.

            4.4       Noncontravention.  Except as set forth in Schedule 4.4,
the execution, delivery and performance of this Agreement by Seller will not
violate any applicable Law or any provision of the Articles of Incorporation or
Code of Regulations of Company and will not result in a breach or violation of,
or constitute a default under, or give rise to a right of any party to
accelerate, modify or terminate, or require the authorization, consent or
approval from any third party under, any Material Contract.

            4.5       Financial Statements.  Schedule 4.5 sets forth true and
complete copies of (i) the stand-alone unaudited financial statements of the
Company as of and for the fiscal years ended December 31, 2005, 2004 and 2003
(collectively, the “Year-End Financial Statements”), (ii) the unaudited balance
sheet of the Company as of January 31, 2006 (the “Acquisition Balance Sheet”)
and statements of income of the Company as of and for the one-month period
ending January 31, 2006 (the financial statements in this clause (ii),
collectively, the “Interim Financial Statements”).  The Year-End Financial
Statements and the Interim Financial Statements present fairly, in all material
respects, the financial position of the Company as of the dates indicated and
the results of operations for the periods

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then ended, subject in each case to (a) normal year-end adjustments, and (b) the
absence of disclosures normally made in footnotes.

            4.6       Absence of Certain Changes or Events.  Company has been
operated only in the Ordinary Course of Business, and except as set forth in
Schedule 4.6, since January 1, 2005:

                        (a)        Other than circumstances affecting Company
and its competitors generally, there has not occurred any event or circumstance
that constitutes a Material Adverse Effect.

                        (b)        There has not been any material change in the
tax reporting or accounting policies or practices of Company including practices
with respect to the payment of accounts payable or the collection of accounts
receivable and Company has not settled or compromised any material tax liability
or made any material tax election.

                        (c)        The Company has not incurred any Indebtedness
or assumed, guaranteed, or endorsed the indebtedness of any other Person, or
canceled any debt owed to it or released any claim possessed by it, other than
in the Ordinary Course of Business, except for any Indebtedness or claims that
are reflected in the Year-End Financial Statements or the Interim Financial
Statements, as the case may be.

                        (d)        The Company has not suffered any theft,
damage, destruction or loss of or to any tangible asset or assets having a value
in excess of Ten Thousand Dollars ($10,000) individually or Twenty-Five Thousand
Dollars ($25,000) in the aggregate.

                        (e)        The Company has not made, granted, or
committed to make or grant any bonus or any wage, salary or compensation
increase to any director, officer, employee or consultant, other than salary
increases and bonuses in the Ordinary Course of Business, or any increase of any
benefit provided under any employee benefit plan or arrangement, and Company has
not amended or terminated any existing employee benefit plan or arrangement or
adopted any new employee benefit plan or arrangement.

                        (f)         Company has not declared or paid any
dividend or made any other distribution of any kind to its equity holders on or
in respect of, nor has Company repurchased, redeemed, retired or otherwise
acquired any shares or any options, warrants or other rights to purchase shares
or adjusted or reclassified its capital stock.

                        (g)        The Company has not sold, assigned,
transferred or subjected to any Lien, or has committed to sell, assign, transfer
or subject to any Lien, any tangible or intangible assets having a current book
value in excess of Twenty-Five Thousand Dollars ($25,000), except for sales of
inventory in the Ordinary Course of Business and except for Permitted
Encumbrances.

                        (h)        The Company has not purchased or leased, or
has committed to purchase or lease, any asset for an amount in excess of Fifty
Thousand Dollars ($50,000), except purchases of inventory and supplies in the
Ordinary Course of Business, consistent with past practice.

                        (i)         The Company has not made or authorized any
capital expenditures or commitment for capital expenditures in an amount more
than Fifty Thousand Dollars ($50,000) individually.

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                        (j)         The Company has not entered into any
agreement, contract, or license (or series of related agreements, contracts,
leases, and licenses) involving more than Twenty-Five Thousand Dollars
($25,000).

                        (k)        Neither Company nor Seller has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than Twenty-Five Thousand Dollars ($25,000) to which Company is a party or
by which Company is bound.

                        (l)         The Company has not made any capital
investment in, any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than Ten Thousand Dollars ($10,000).

                        (m)       There has been no change made or authorized in
the articles of incorporation or code of regulations of Company.

                        (n)        The Company has not issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock.

                        (o)        Company has not made or pledged to make any
charitable or other capital contribution.

                        (p)        The Company has not made any loans or
advances of money.

                        (q)        The Company has not disclosed any
Confidential Information other than to Buyer and its representatives or to third
parties pursuant to confidentiality agreements executed in favor of the Company.

                        (r)        The Company has not committed any crimes or
violated any criminal statutes or laws that are reasonably likely to result in
fines having a Material Adverse Effect.

            4.7       Taxes.  At all times since Company’s organization, Company
has satisfied the requirements under Section 1361(b)(3)(B) of the Code and has
had in effect a valid election to be treated as a Qualified Subchapter S
Subsidiary under the Code and under analogous relevant state and local income
tax statues where available.  All Taxes owed by Company have been paid other
than Taxes that are not yet due or which, if due, are not delinquent or are
being contested in good faith by appropriate proceedings or have not been
finally determined, and for which, in each case, adequate reserves have been
established on the Acquisition Balance Sheet or in the books and records of
Company.  All Tax Returns required to be filed by Company have been duly and
timely filed and are true, correct and complete in all material respects. 
Seller, at its sole expense, shall be responsible for timely meeting and
completing all of Company’s tax return filing and payment obligations and
requirements relating to Company’s operations up to the Closing Date.  Except as
set forth on Schedule 4.7, there are no Tax claims, audits or proceedings
pending or, To Seller’s Knowledge, threatened against Company.  There are not
currently in force any waivers or agreements binding upon Company for the
extension of time for the assessment or payment of any Tax.  Except as set forth
on Schedule 4.7, Company is not a party to or bound by any Tax allocation or Tax
sharing agreement with

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any other Person and has no contractual obligation to indemnify any other Person
with respect to Taxes.

                        (a)        Company has withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.

                        (b)        Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.

                        (c)        Company has not filed a consent under Code
§341(f) concerning collapsible corporations.  Except as set forth on Schedule
4.7, Company is not a party to any agreement, contract, arrangement or plan that
has resulted or could result, separately or in the aggregate, in the payment of
(i) any “excess parachute payment” within the meaning of Code §280G (or any
corresponding provision of state, local or foreign Tax law) and (ii) any amount
that will not be fully deductible as a result of Code §162(m) (or any
corresponding provision of state, local or foreign Tax law).  Company has not
been a United States real property holding corporation within the meaning of
Code §897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii).  Company has disclosed on their federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code §6662.  Company is not a party
to or bound by any Tax allocation or sharing agreement.  Company has not been a
member of an Affiliated Group filing a consolidated federal income Tax Return or
(B) has any Liability for the Taxes of any Person other than Company under Reg.
§1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.

                        (d)        Company has not distributed stock of another
Person, or has had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by Code §355
or Code §361.

            4.8       Employees.  Except as set forth in Schedule 4.8, there are
no pending or, to Seller’s Knowledge, since the date of the Acquisition Balance
Sheet, threatened controversies, grievances or claims by any employee or former
employee of Company with respect to his or her employment or any benefits
incident thereto.

                        (a)        Company is not a party to any collective
bargaining agreement or employee grievance procedure or dispute resolution
mechanism nor, to Seller’s Knowledge, is there pending or underway any union
organizational activities or proceedings with respect to employees of Company.

                        (b)        No labor organization or group of employees
has filed any representation petition or made any written or oral demand for
recognition.

                        (c)        Schedule 4.8(c) sets forth a complete list of
all employees of Company who, for the 2005 calendar year, received total
employment compensation of Fifty Thousand Dollars ($50,000) or more in respect
of the twelve (12) month period then ended.

                        (d)        There is no labor strike, slowdown or
stoppage pending or, to Seller’s Knowledge, threatened against Company.

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                        (e)        To Seller’s Knowledge, no executive or
manager of Company: (1) has any present intention to terminate his or her
employment, or (2) is a party to any confidentiality, non-competition,
proprietary rights or other such agreement between such employee and any Person
besides Company that would be materially adverse to the performance of such
employee’s employment duties, or the ability of Company or Buyer to conduct the
business of Company as it is presently conducted.

                        (f)         There is no workers compensation liability,
experience or matter that could have a Material Adverse Effect.

                        (g)        There is no employment-related charge,
complaint, grievance, investigation, inquiry or obligation of any kind, pending
or threatened in any forum, relating to an alleged violation or breach by
Company (or its officers or directors) of any law, regulation or contract.

                        (h)        Except as set forth in Schedule 4.8(h): (1)
there are no employment contracts or severance agreements with any employees of
Company, and (2) there are no written personnel policies, rules or procedures
applicable to employees of Company.

            4.9       Employee Benefit Plans and Other Compensation
Arrangements.  Set forth on Schedule 4.9 is a list of all material employee
benefit plans (as defined in Section 3(b) of ERISA), with respect to which
Company, currently is the sponsor or obligated to make contributions under the
plan terms (the “Plans”).  Except as set forth on Schedule 4.9:

                        (a)        None of the Plans is a “multiemployer plan”
(as defined in Title I or Title IV of ERISA) or a plan subject to Title IV of
ERISA.

                        (b)        Each of the Plans that is intended to be
tax-qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service as to its qualification
and is so qualified in all material respects, except that no representation is
made with respect to any formal qualification requirement with respect to which
the remedial amendment period under Section 401(b) of the Code has not yet
expired.

                        (c)        All of the Plans have been operated in
substantial compliance with their respective terms and all Laws, and all
contributions required under the terms of the Plans or applicable Law have been
timely made.

                        (d)        There are no pending or, to Seller’s
Knowledge, threatened claims by or on behalf of any of the Plans, by any
employee or beneficiary covered under any Plan or otherwise involving any Plan
(other than routine claims for benefits).

                        (e)        No amounts payable under the Plans will fail
to be deductible for federal income tax purposes by virtue of Section 280G of
the Code.

                        (f)         None of the Plans provide medical benefits
to any retired Person, or any current employee of Company following such
employee’s retirement or other termination of employment, except as required by
applicable Law (including Section 4980B of the Code).

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                        (g)        The Company does not maintain any Plan under
which it would be obligated to pay benefits solely because of the consummation
of the transactions contemplated by this Agreement, disregarding any termination
of employment that may occur on or after the Closing.

            4.10     Environmental Matters.  With respect to environmental
matters pertaining to Company and to all businesses and assets of Company
(including, without limitation, Company’s Real Properties, as more particularly
described on Schedules 4.10(c) through 4.10(e) and 4.10(g), Company and Seller
make the following representations and warranties to Buyer as of the date of
this Agreement:

                        (a)        Except as set forth in Schedule 4.10(a),
there are no Environmental Claims pending or, to Seller’s Knowledge, threatened
against Company.  In addition, except as set forth in Schedule 4.10(a), there
are no Environmental Claims pending or to the Seller’s Knowledge threatened
against any person or entity whose liability for any Environmental Claim,
Company has or may have retained or assumed either contractually or by operation
of law.  For the purposes of this Section 4.10(a), the term “Environmental
Claim” shall mean any claim, action, cause of action, investigation or notice,
written or verbal, by any person or entity alleging potential liability,
including, without limitation, potential liability for investigation costs,
reclamation costs, remedial action or corrective action costs, governmental
response costs, natural resource damages, property damages, personal injuries,
fines or penalties, arising out of, based on or resulting from (1) the presence,
release or threatened release of any Hazardous Material at any location, whether
or not owned or operated by Company, or (2) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.

                        (b)        Except as set forth in Schedule 4.10(b),
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the presence, release or
threatened release of any Hazardous Materials which are reasonably likely to
form the basis of any Environmental Claim against Company or against any person
or entity whose liability for any Environmental Claim, Company has or may have
retained or assumed either contractually or by operation of law.

                        (c)        Except as set forth in Schedule 4.10(c),
Company is and has been for the past five (5) years in compliance in all
material respects with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession by Company of all permits and
other governmental authorizations required under applicable Environmental Laws,
and material compliance with the terms and conditions thereof).  Except as set
forth in Schedule 4.10(c), Company has not received in the past five (5) years
any written communication, whether from a Governmental Authority, citizens
group, employee or otherwise, alleging that Company is not in compliance except
where no Material Adverse Effect would result, and there are no past or present
actions, activities, circumstances, conditions, events or incidents that may
prevent or materially interfere with such compliance with any Environmental Law
in the future by the Company operating its business as it is currently
conducted.

                        (d)        Except as set forth in Schedule 4.10(d), no
action to respond to the presence, release or threatened release of any
Hazardous Material is being conducted or planned at any of Company’s Real
Properties or, to Seller’s Knowledge, at any properties formerly owned, leased
or operated by Company.

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                        (e)        Without in any way limiting the generality of
the foregoing, and except as set forth in Schedule 4.10(e), (1) there are no
onsite and offsite locations where Company has stored, treated, disposed of or
arranged for the disposal of Hazardous Materials; (2) there are no underground
storage tanks located on property owned by Seller or Company (the capacity and
contents are shown for each such tank listed on Schedule 4.10(e); (3) there is
no asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by Company; and (4)  there are no
polychlorinated biphanyls (PCBs) that have been or are being used, stored or
treated at any property owned or operated by Company

                        (f)         Company has delivered or otherwise made
available for inspection to Buyer true, complete and correct originals or copies
and results of any reports, studies, analyses, tests, data, information or
monitoring possessed or initiated by Company pertaining to Hazardous Materials
in, on, beneath or adjacent to any property currently or formerly owned,
operated or leased by Company, or regarding Company’s compliance with applicable
Environmental Laws.

                        (g)        To Seller’s Knowledge, Schedule 4.10(g)
discloses and references, by category and in summary form, but not necessarily
in complete detail, any and all environmental problems, issues, incidents,
actions, consent agreements, reopeners, claims and lawsuits not otherwise
disclosed in this Section 4.10(g) that following the Closing would be likely to
have a Material Adverse Impact upon Company or the businesses and assets of
Company.  For the purposes of this Section 4.10, the term “Material Adverse
Impact” shall mean any impact or effect that results in (1) the incurrence or
imposition of new or additional civil or criminal liabilities; costs, fines or
penalties in excess of twenty five thousand dollars ($25,000) or additional
regulatory requirements, under any applicable Environmental Law.

            4.11     Permits; Compliance with Laws.  Except as set forth on
Schedule 4.11 and except with respect to ERISA, Environmental Laws and Laws
relating to Tax (all of which are separately and independently covered above),
Company is in compliance in all material respects with all other applicable Laws
(“General Laws”), and possesses all material licenses, permits, approvals,
permanent certificates of occupancy, authorizations and certificates from any
Governmental Authority that are required under applicable General Law with
respect to the operation of its business as currently conducted (collectively,
“Permits”).  Except as set forth on Schedule 4.11, since December 31, 2005,
Company has not received any written notice from any Person alleging any
material noncompliance with any applicable General Law or Permit.  None of the
Permits will lapse, terminate or expire or require any action otherwise not
required thereby as a result of the performance of this Agreement by Seller, or
the consummation of the transactions contemplated hereby.

Real Properties.

                        (a)        Schedule 4.12(a) sets forth the street
address or parcel identification number of each parcel of real estate owned by
Company (the “Real Properties”).  With respect to the Real Properties:

       

            (1)        There are no pending or, to the Knowledge of Seller,
threatened condemnation proceedings, suits, liens, lis pendens or administrative
or judicial actions relating to any of the Real Properties.

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            (2)        All buildings, improvements and fixtures located on the
Real Properties are in good repair and are safe for occupancy and use, in
working order (reasonable wear and tear excepted) and adequate for the use of
such Real Properties in the manner in which presently used.

       

       

            (3)        There are no outstanding options or rights of first
refusal or limitations to purchase the owned parcels of Real Property, or, to
the Knowledge of Seller, the leased parcels of Real Property or any portion
thereof or interest therein.

       

       

            (4)        There are no outstanding leases of, or other rights to
possession in third parties with respect to, the owned Real Properties, or any
portion thereof or interest therein.

       

       

            (5)        The Seller has not subleased, assigned or otherwise
transferred or encumbered its interests, or any portion thereof, pursuant to
leases of the leased Real Properties.

       

       

            (6)        To the Knowledge of Seller, the Real Properties, and the
use, operation, maintenance and management thereof, are not in violation of any
restrictive covenant, agreement or permit applicable thereto, or of any building
code, ordinance, statute, regulation or requirement of any Governmental
Authority having jurisdiction thereof; and Company has received no notices
regarding any such violation.

       

       

            (7)        The Company has not been notified in writing of possible
future improvements by any public authority, any part of the cost of which would
or might be assessed against the Real Properties, or of any contemplated future
assessments of any kind.

                        (b)        Schedule 4.12(b) sets forth a true and
complete list of all Leases for each Leased Real Property (including the date
and name of the parties to each such Lease document).  Company has delivered or
otherwise made available to Buyer a true and complete copy of each such Lease
document, and in the case of any oral Lease, a written summary of the material
terms of such Lease. Except as set forth in Schedule 4.12(b), with respect to
each of the Leases:

       

            (1)        Such Lease is legal, valid, binding, enforceable and in
full force and effect.

       

       

            (2)        The transactions contemplated by this Agreement do not
require the consent of any other party to such Lease (except for those Leases
for which Lease Consents (as hereinafter defined) are obtained), will not result
in a breach of or default under such Lease, and will not otherwise cause such
Lease to cease to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Closing.

       

       

            (3)        The Company’s possession and quiet enjoyment of the
Leased Real Property under such Lease has not been disturbed and there are no
disputes with respect to such Lease.

       

       

            (4)        Neither Company, nor to Seller’s Knowledge any other
party to the Lease is in breach of or default under such Lease, and no event has
occurred or circumstance exists that, with the delivery of notice, the passage
of time or both, would constitute such a

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breach or default, or permit the termination, modification or acceleration of
rent under such Lease.

       

       

            (5)        No security deposit or portion thereof deposited with
respect to such Lease has been applied in respect of a breach of or default
under such Lease that has not been redeposited in full.

       

       

            (6)        The Company does not owe, nor to Seller’s Knowledge will
it owe in the future, any brokerage commissions or finder’s fees with respect to
such Lease.

       

       

            (7)        The other party to such Lease is not an Affiliate of, and
otherwise does not have any economic interest in Company.

       

       

            (8)        The Company has not subleased, licensed or otherwise
granted any Person the right to use or occupy the Leased Real Property (other
than the landlord thereof) or any portion thereof.

       

       

            (9)        The Company has not collaterally assigned or granted any
other Lien in such Lease or any interest therein.

       

       

            (10)      There are no Liens on the estate or interest created by
such Lease.

                        (c)        Except as set forth in Schedule 4.12(a),
Company has good and marketable fee simple title to all of the Real Properties
reflected on Schedule 4.12(a) as being owned by Company free and clear of all
Liens and has valid leasehold interests in all of the Leased Real Properties
reflected on Schedule 4.12(b) as being leased by Company free and clear of all
Liens except, in each case, for (1) Permitted Encumbrances; (2) easements,
covenants, rights-of-way, restrictions, conditions, encumbrances and other
matters of record; (3) any conditions that may be shown by a current, accurate
ALTA/ACSM survey or physical inspection of any such property; (4)(i) zoning,
building and other similar laws, ordinances or restrictions, or (ii) unrecorded
easements, covenants, rights-of-way or other similar restrictions.

                        (d)        The Owned Real Property identified in
Schedule 4.12(a) and the Leased Real Property identified in Schedule 4.12(b)
(collectively, the “Real Property”), comprise all of the real property used or
intended to be used in, or otherwise related to Company’s business as it is
currently conducted; and Company is not a party to any agreement or option to
purchase any real property or interest therein.

                        (e)        All buildings, structures, fixtures, building
systems and equipment, and all components thereof, including the roof,
foundation, load-bearing walls and other structural elements thereof, heating,
ventilation, air conditioning, mechanical, electrical, plumbing and other
building systems, environmental control, remediation and abatement systems,
sewer, storm and waste water systems, irrigation and other water distribution
systems, parking facilities, fire protection, security and surveillance systems,
and telecommunications, computer, wiring and cable installations, included in
the Real Property (the “Improvements”) are in good condition and repair
(reasonable wear and tear excepted) and sufficient for the operation of
Company’s business as it is currently conducted.  To Seller’s Knowledge, there
are no structural deficiencies or latent defects affecting any of the
Improvements and there are no facts or conditions affecting any of the
Improvements that would,

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individually or in the aggregate, interfere in any material respect with the use
or occupancy of the Improvements or any portion thereof in the operation of
Company’s business as currently conducted thereon.

                        (f)         There is no condemnation, expropriation or
other proceeding in eminent domain, pending or to the Seller’s Knowledge
threatened, affecting any parcel of Real Property or any portion thereof or
interest therein.  There is no injunction, decree, order, writ or judgment
outstanding, or any claim, litigation, administrative action or similar
proceeding, pending or to Seller’s Knowledge threatened, relating to the
ownership, lease, use or occupancy of the Real Property or any portion thereof,
or the operation of Company’s business as currently conducted thereon.

                        (g)        The Real Property is in material compliance
with all applicable building, zoning, subdivision, health and safety and other
land use laws, including the Americans with Disabilities Act of 1990, as
amended, and all insurance requirements affecting the Real Property, in effect
as of the Closing Date (collectively, the “Real Property Laws”), and the current
use and occupancy of the Real Property and operation of Company’s business
thereon do not violate any Real Property Laws.  Company has not received any
notice of violation of any Real Property Law and to Seller’s Knowledge there is
no basis for the issuance of any such notice or the taking of any action for
such violation.

                        (h)        Each parcel of Real Property has direct
vehicular and pedestrian access to a public street adjoining the Real Property,
or has vehicular and pedestrian access to a public street via an insurable,
permanent, irrevocable and appurtenant easement benefitting such parcel of Real
Property, and such access is not dependent on any land or other real property
interest that is not included in the Real Property. None of the Improvements or
any portion thereof is dependent for its access, use or operation on any land,
building, improvement or other real property interest that is not included in
the Real Property.

                        (i)         All water, oil, gas, electrical, steam,
compressed air, telecommunications, sewer, storm and waste water systems and
other utility services or systems for the Real Property have been installed and
are operational and sufficient for the operation of Company’s business as
currently conducted thereon.  Each such utility service enters the Real Property
from an adjoining public street or valid private easement in favor of the
supplier of such utility service or appurtenant to such Real Property, and is
not dependent for its access, use or operation on any land, building,
improvement or other real property interest that is not included in the Real
Property.

                        (j)         All certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively, the “Real
Property Permits”) of all Governmental Authorities, boards of fire underwriters,
associations or any other entity having jurisdiction over the Real Property that
are required or appropriate to use or occupy the Real Property or operate
Company’s business as currently conducted thereon, have been issued and are in
full force and effect.  Seller has delivered or made available to Buyer a true
and complete copy of all Real Property Permits.  Company has not received any
notice from any Governmental Authority or other entity having jurisdiction over
the Real Property threatening a suspension, revocation, modification or
cancellation of any Real Property Permit and to Seller’s Knowledge there is no
basis for the issuance of any such notice or the taking of any such action. 

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                        (k)        The classification of each parcel of Real
Property under applicable land use and zoning laws, ordinances and regulations
permits the use and occupancy of such parcel and the operation of Company’s
business as currently conducted thereon, and permits the Improvements located
thereon as currently constructed, used and occupied.  There are sufficient
parking spaces, loading docks and other facilities at such parcel to comply with
such land use and zoning laws, ordinances and regulations.  Company’s use or
occupancy of the Real Property or any portion thereof or the operation of
Company’s business as currently conducted thereon is not dependent on a
“permitted non-conforming use” or “permitted non-conforming structure” or
similar variance, exemption or approval from any governmental authority.

                        (l)         The current use and occupancy of the Real
Property and the operation of Company’s business as currently conducted thereon
do not violate any easement, covenant, condition, restriction or similar
provision in any instrument of record or, to Seller’s Knowledge, other
unrecorded agreement affecting such Real Property (the “Encumbrance
Documents”).  Neither Seller, nor Company have received any notice of violation
of any Encumbrance Documents, and, to Seller’s Knowledge, there is no basis for
the issuance of any such notice or the taking of any action for such violation.

                        (m)       None of the Improvements encroaches on any
land that is not included in the Real Property or on any easement affecting such
Real Property, or violates any building lines or set-back lines, and there are
no encroachments onto the Real Property, or any portion thereof, that would
materially interfere with the use or occupancy of such Real Property or the
continued operation of Company’s business as currently conducted thereon.

                        (n)        Each parcel of Real Property is a separate
lot for real estate tax and assessment purposes, and no other real property is
included in such tax parcel.  There are no Taxes, assessments, fees, charges or
similar costs or expenses imposed by any Governmental Authority, association or
other entity having jurisdiction over the Real Property (collectively, the “Real
Estate Impositions”) with respect to any Real Property or portion thereof that
are delinquent.  The Title Commitments set forth all Real Estate Impositions
that are due and payable with respect to such parcel.  There is no pending or,
to Seller’s Knowledge, threatened increase or special assessment or reassessment
of any Real Estate Impositions for such parcel.

                        (o)        To Seller’s Knowledge, none of the Real
Property or any portion thereof is located in a flood hazard area (as defined by
the Federal Emergency Management Agency).

            4.13     Personal Property.  Company owns each of the items of
tangible personal property reflected on the Acquisition Balance Sheet or
acquired thereafter (except for assets reflected thereon or acquired thereafter
that have been disposed of in the Ordinary Course of Business, since the date of
the Acquisition Balance Sheet), free and clear of all Liens, except for Liens
identified or described on Schedule 4.13, and except for Permitted
Encumbrances.  The condition of the tangible personal property is sufficient, in
all material respects, for the operation of the business as currently conducted
by Company.  The items of tangible personal property reflected on the
Acquisition Balance Sheet or acquired thereafter constitute all of the assets,
tangible and intangible, of any nature whatsoever, used in or necessary to
operate Company’s business in the manner presently operated by Company.

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            4.14     Accounts Receivable.  The accounts receivable reflected on
the Acquisition Balance Sheet and accounts receivable arising after the date of
the Acquisition Balance Sheet and reflected on the books and records of Company
represent valid obligations arising from sales actually made.  Company has not
received written notice of any contest, claim or right of setoff with respect to
its accounts receivable, other than returns and discounts in the Ordinary Course
of Business.

            4.15     Intellectual Property.  Schedule 4.15 sets forth a complete
and correct list of all material registered Company Intellectual Property. 
Schedule 4.15 sets forth all written material licenses for which Company is a
party either as a licensee or licensor and any other material agreements under
which Company grants or receives any rights to Intellectual Property, in each
case specifically excluding licenses and agreements relating to shrink wrap
software.  Except as set forth in Schedule 4.15:

                        (a)        The Company owns and possesses all, right,
title and interest in and to, or has a valid and enforceable right or license to
use Company Intellectual Property as currently being used.

                        (b)        Except for the Permitted Encumbrances,
Company Intellectual Property is not subject to any Liens and is not subject to
any restrictions or limitations regarding use or disclosure other than pursuant
to written license agreements applicable thereto.

                        (c)        To Seller’s Knowledge: (1) Company has not
infringed, misappropriated or otherwise conflicted with, any Intellectual
Property of any third party; (2) the conduct of the businesses as currently
conducted by Company does not infringe upon any Intellectual Property owned or
controlled by any third party; and (3) Company has not received any written
notice regarding any of the foregoing (including, without limitation, any
demands or offers to license any Intellectual Property from any third party).

                        (d)        To Seller’s Knowledge: (1) no third party has
infringed, misappropriated or otherwise conflicted with any of Company
Intellectual Property; (2) no such claims have been brought or threatened
against any third party by Company; and (3) to Seller’s Knowledge, no facts
exist that indicate a likelihood of any of the foregoing.

                        (e)        (1) all licenses listed on Schedule 4.15 are
in full force and effect and, to Seller’s Knowledge, are enforceable in
accordance with their respective terms, subject to the Enforceability
Exceptions; (2) Company has performed all obligations required to be performed
by it pursuant to the licenses and agreements listed on Schedule 4.15; and (3)
there is no existing or, to Seller’s Knowledge, threatened default under or
violation of any of the licenses or agreements listed on Schedule 4.15 by any
other party thereto.

                        (f)         Company owns and possesses or has the right
to use pursuant to a valid and enforceable written license, sublicense,
agreement, or permission all Intellectual Property necessary for the operation
of the business of Company as presently conducted.  Each item of Intellectual
Property owned or used by Company immediately prior to the Closing will be owned
or available for use by Company on identical terms and conditions immediately
subsequent to the Closing.  Company has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.

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                        (g)        To Seller’s Knowledge, the owners of any of
the Intellectual Property licensed to Company have taken all necessary and
desirable actions to maintain and protect the Intellectual Property covered by
such license.

            4.16     Contracts.  Schedule 4.16 lists all of the following
written agreements to which Company is a party and which are currently in
effect:

                        (a)        Contracts, other than purchase orders entered
into in the Ordinary Course of Business, that involve commitments to make
capital expenditures or that provide for the purchase of goods or services by
Company from any one Person under which the undelivered balance of such goods or
services has a purchase price in excess of Twenty-Five Thousand Dollars
($25,000).

                        (b)        Contracts, other than sales orders entered
into in the Ordinary Course of Business, that provide for the sale of goods or
services by Company and under which the undelivered balance of such goods or
services has a sale price in excess of Twenty-Five Thousand Dollars ($25,000).

                        (c)        Contracts relating to the borrowing of money
by Company, to the granting by Company of a Lien on any of its assets, or any
guaranty by Company of any obligation in respect of borrowed money or otherwise.

                        (d)        Contracts with dealers, distributors or sales
representatives.

                        (e)        Employment, confidentiality and
non-competition agreements with any employee, officer, consultant or management
advisor.

                        (f)         Contracts not otherwise disclosed herein
that limit the freedom of Company to engage in any business or compete with any
Person.

                        (g)        Contracts pursuant to which Company is a
lessor or a lessee of any personal or real property, or holds or operates any
tangible personal property owned by another Person, except for any such leases
under which the aggregate annual rent or lease payments do not exceed Ten
Thousand Dollars ($10,000).

                        (h)        Contracts or commitments for the purchase or
sale of capital assets in excess of Twenty-Five Thousand Dollars ($25,000).

Company has made available to Buyer correct and complete copies of each contract
required to be identified on Schedule 4.16, including amendments thereto
(collectively, the “Material Contracts”).  All of the Material Contracts are in
full force and effect and, to Seller’s Knowledge, are enforceable in accordance
with their respective terms, subject to the Enforceability Exceptions.  Except
as set forth on Schedule 4.16, Company has performed in all material respects
all obligations required to be performed by it pursuant to such contracts, and
there is no existing or, to Seller’s Knowledge, threatened default under or
violation of any of such contracts by any other party thereto.

            4.17     Litigation.  Schedule 4.17 sets forth each instance in
which Company:  (a) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (b) is a party or, to Seller’s Knowledge, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation

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of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator.  None
of the actions, suits, proceedings, hearings, claims and investigations set
forth Schedule 4.17 would be likely to result in any Material Adverse Effect. 
To Seller’s Knowledge, there is no basis for such action, suit, proceeding,
hearing, or investigation.  Except as indicated on Schedule 4.17, there are no
actions, suits, arbitrations, proceedings, investigations or claims of any kind
whatsoever, at law or in equity, pending or, to Seller’s Knowledge, since
January 1, 2000, threatened in writing, against Company that involve more than
Ten Thousand Dollars ($10,000) in claims or damages individually.

            4.18     Brokerage.  Except for fees or expenses identified on
Schedule 4.18, no Person is or will become entitled, by reason of any agreement
or arrangement entered into or made by or on behalf of Company to receive any
commission, brokerage, finder’s fee or other similar compensation in connection
with the consummation of the transactions contemplated by this Agreement.

            4.19     Material Suppliers and Customers.  Except as set forth on
Schedule 4.19, no customer that accounted for more than ten percent (10%) of
sales, and no supplier that accounted for more than ten percent (10%) of
purchases in the fiscal year ended December 31, 2005, has delivered to Company
any written notice that cancelled, materially modified, or otherwise terminated
its relationship with the Company or materially decreased its services, supplies
or materials to Company or its usage or purchase of the services or products of
Company, nor has any such customer or supplier indicated its intention in
writing to Company to do any of the foregoing.

            4.20     Insurance.  Schedule 4.20 contains an accurate and complete
list of all insurance policies owned, held by or applicable to Company (or its
assets or business).  With respect to each such insurance policy Company
represents that: (1) the policy is legal, valid, binding, enforceable, and in
full force and effect; (2) Company is not in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred that, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (3) no party to the policy has repudiated any provision thereof. 
Schedule 4.20 describes any self-insurance arrangements affecting Company.

            4.21     No Other Representations and Warranties.  Seller has not
made, and Seller shall not be deemed to have made, any representation or
warranty other than as expressly made by Seller in this ARTICLE 4.  Without
limiting the generality of the foregoing, and notwithstanding any
representations and warranties made by Seller in this ARTICLE 4, Seller makes no
representation or warranty with respect to (a) any projections, estimates or
budgets delivered or made available to Buyer or its representatives at any time
with respect to estimated tonnage for coal reserves, future revenues, expenses
or expenditures or future results of operations, or (b) except as expressly
covered by a representation and warranty contained in this ARTICLE 4, any other
information or documents (financial or otherwise) made available to Buyer or its
representatives before or after the date of this Agreement.

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ARTICLE 5

 

Representations and Warranties of Buyer

            Buyer represents and warrants to Seller that the following
statements contained in this ARTICLE 5 are true and correct at and as of the
date of this Agreement.

            5.1       Organization; Authorization.  Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.  Buyer has all requisite power and authority to execute, deliver and
perform this Agreement and each other agreement, instrument and document to be
executed and delivered by or on behalf of Buyer in connection herewith.

            5.2       Execution and Delivery; Enforceability.   Prior to
Closing, this Agreement  and each other document, instrument or agreement to be
executed and delivered by Buyer in connection herewith will be duly executed and
delivered by Buyer and constitutes, or will by Closing constitute, the legal,
valid and binding obligation of Buyer, enforceable in accordance with its terms,
subject to the Enforceability Exceptions.

            5.3       Governmental Authorities; Consents.  Buyer is not required
to submit any notice, report or other filing with any Governmental Authority in
connection with Buyer’s execution, delivery or performance of this Agreement or
any other document, instrument or agreement to be executed and delivered by
Buyer in connection herewith, and such execution, delivery and performance will
not violate any Law by which Buyer is bound.  No consent, approval or
authorization of any Governmental Authority or any other Person is required to
be obtained by Buyer in connection with Buyer’s execution, delivery and
performance of this Agreement or any other document, instrument or agreement to
be executed and delivered by Buyer in connection herewith or the consummation of
the transactions contemplated hereby or thereby.

            5.4       Brokerage.  No Person is or will become entitled, by
reason of any agreement or arrangement entered into or made by or on behalf of
Buyer, to receive any commission, brokerage, finder’s fee or other similar
compensation in connection with the consummation of the transactions
contemplated by this Agreement.

            5.5       Investment Intent; Restricted Shares.  Buyer is acquiring
the Shares solely for Buyer’s own account, for investment purposes only, and not
with a view to, or with any present intention of, reselling or otherwise
distributing the Shares or dividing its participation herein with others.  Buyer
has sufficient experience in business, financial and investment matters to be
able to evaluate the purchase of the Shares and to make an informed investment
decision with respect to such purchase.  Buyer is an “accredited investor”
within the meaning of Rule 501 promulgated under the Securities Act.  Buyer has
had such opportunity as it has deemed adequate to obtain from management of
Company such information about the business of Company as is necessary to permit
Buyer to evaluate the merits and risks of investment in Company.  Buyer
understands and acknowledges that (a) none of the Shares have been registered or
qualified under the 1933 Act, or under any securities Laws of any state of the
United States or other jurisdiction, in reliance upon specific exemptions
thereunder for transactions not involving any public offering; (b) all of the
Shares constitute “restricted securities” as defined in Rule 144 under the 1933
Act; (c) none of the Shares are traded or tradable on any securities exchange or
over-the-counter; and (d) none of the Shares may be sold, transferred or
otherwise disposed of

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unless a registration statement under the 1933 Act with respect to such Shares
and qualification in accordance with any applicable state securities Laws
becomes effective or unless such registration and qualification is inapplicable,
or an exemption therefrom is available.  Buyer will refrain from transferring or
otherwise disposing of any of the Shares acquired hereunder or any interest
therein in any manner that may cause Seller to be in violation of the 1933 Act
or any applicable state securities Laws. 

            5.6       Buyer Capitalization; Stock Consideration Shares.  Buyer
has the authority to issue (a) a total of Twenty Million (20,000,000) preferred
shares, $.001 par value per share, of which none are issued and outstanding, and
(b) a total of One Hundred Twenty Million (120,000,000) Buyer Common Shares, of
which Seventy Eight Million Five Hundred Sixty Thousand Four Hundred Fifty Three
(78,560,453)] Buyer Common Shares are issued and outstanding.  All of Buyer
Common Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws and any preemptive rights or rights of first refusal of
any Person.  Buyer has reserved a total of 118,822 Buyer Common Shares for
issuance hereunder.  The Stock Consideration Shares, when issued and delivered
hereunder will be duly and validly issued, fully paid, and nonassessable, with
no personal liability attaching to ownership thereof, free of Liens and not
subject to preemptive or similar rights of the shareholders of Buyer and will be
free of restrictions on transfer other than under applicable state and federal
securities laws.

            5.7       SEC Documents; KFx Financial Statements. 

                        (a)        KFx has filed with the Securities and
Exchange Commission (“SEC”) all documents required to be filed under the
Securities Act and the Exchange Act since July 1, 2005 (the “KFx SEC
Documents”).  As of their respective dates, the KFx SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and none of the KFx SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

                        (b)        As of their respective dates, the
consolidated financial statements of KFx included in the KFx SEC Documents were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and present fairly the consolidated financial
position of KFx and its consolidated subsidiaries as at the dates thereof and
the consolidated results of their operations and statements of cash-flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).

ARTICLE 6

 

Closing Deliveries

            6.1       Conditions to Buyer’s Obligations.  The obligation of
Buyer to consummate the Closing of the transaction contemplated in this
Agreement is subject to the satisfaction, at or before the Closing, of the
following conditions set forth in this Section 6.1:

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                        (a)        All filings, authorizations and approvals and
consents set forth on Schedule 6.1(a) shall have been made with or obtained from
all applicable Governmental Authorities or other Persons, as the case may be.

                        (b)        There shall be no suit, action, investigation
or proceeding pending or threatened before any Governmental Authority by which
it is sought to restrain, delay, prohibit, invalidate, set aside or impose any
conditions upon the Closing, in whole or in part, and no injunction, judgment,
order, decree or ruling with respect thereto shall be in effect.

                        (c)        Seller shall have executed and delivered to
Buyer a certificate stating that (i) the representations and warranties of
Seller contained in Article 3 and Article 4 that are not qualified by
materiality or Material Adverse Effect are true and correct in all material
respects at and as of the Closing as though then made, and those that are
qualified by materiality or Material Adverse Effect are true and correct at and
as of the Closing as though then made; and (ii) Seller has performed or caused
to have been performed in all material respects all of the covenants and
agreements required by this Agreement to be performed by Seller or Company prior
to the Closing.

                        (d)        Buyer shall have received from Seller all
certificates for the Shares, duly endorsed for transfer or accompanied by a duly
executed stock power or other appropriate instrument of assignment and transfer.

                        (e)        Buyer shall have received the written
resignation, effective as of the Closing, of each director and officer of
Company listed on Schedule 6.1(e).

                        (f)         Buyer shall have completed its due diligence
review of Seller, the results of which shall be reasonably satisfactory to
Buyer.

                        (g)        Buyer and Seller shall have entered into a
registration rights agreement in a form reasonably acceptable to Buyer and
Seller (the “Registration Rights Agreement”).

                        (h)        Buyer shall have received a certificate of
good standing as of the most recent practicable date from the Secretary of State
with respect to Company.

                        (i)         Buyer shall have received each other
document required to be delivered to Buyer pursuant to this Agreement.

                        (j)         Buyer shall have received Board approval on
or before March 17, 2006 to execute this Agreement and to consummate the
Closing.

Any agreement or document to be delivered to Buyer pursuant to this Section 6.1,
the form of which is not attached to this Agreement as an exhibit, shall be in
form and substance reasonably satisfactory to Buyer.

            6.2       Conditions to Seller’s Obligations.  The obligation of
Seller to consummate the closing of the transaction contemplated in this
Agreement are subject to the satisfaction, at or before the Closing, of the
following conditions set forth in this Section 6.2:

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                        (a)        All filings, authorizations and approvals and
consents set forth on Schedule 6.1(a) shall have been made with or obtained from
all applicable Governmental Authorities or other Persons, as the case may be.

                        (b)        There shall be no suit, action, investigation
or proceeding pending or threatened before any Governmental Authority by which
it is sought to restrain, delay, prohibit, invalidate, set aside or impose any
conditions upon the Closing, in whole or in part, and no injunction, judgment,
order, decree or ruling with respect thereto shall be in effect.

                        (c)        Buyer shall have executed and delivered to
Seller a certificate stating that (1) the representations and warranties of
Buyer contained in ARTICLE 6 that are not qualified by materiality are true and
correct in all material respects at and as of the Closing as though then made
and those that are qualified by materiality are true and correct at and as of
the Closing as though then made, and (2) Buyer has performed or caused to have
been performed in all material respects all of the covenants and agreements
required by this Agreement to be performed by Buyer prior to the Closing.

                        (d)        Buyer shall have (1) issued to Seller the
Stock Consideration Shares and delivered to Seller the Cash Portion pursuant to
Section 2.3, and (2) reimbursed Seller for any capital expenditures and
operating expenses provided by Seller to Company for the projects more fully
described in Section 8.1.1; and (2) Buyer shall have delivered the Escrow Amount
to the Escrow Agent pursuant to terms and conditions of the Escrow Agreement.

                        (e)        Buyer and Seller shall have entered into the
Registration Rights Agreement.

                        (f)         Seller shall have received each other
document required to be delivered to Seller pursuant to this Agreement.

Any agreement or document to be delivered to Seller pursuant to this Section 0,
the form of which is not attached to this Agreement as an exhibit, shall be in
form and substance reasonably satisfactory to Seller.

ARTICLE 7

 

The Closing

            The consummation of the transactions contemplated herein (the
“Closing”) will be effective as of the date specified in writing by the Parties
(the “Closing Date”) and take place on the date that is the later of April 3,
2006 or the fifth (5th) business day following the satisfaction or waiver (to
the extent permitted by applicable Law) of all of the conditions set forth in
ARTICLE 6 hereof and shall take place at the offices of Fognani & Faught, PLLC
in Denver, Colorado, or at such other time and place as to which Buyer and
Seller may agree in writing.  The date on which the Closing actually occurs is
referred to herein as the Closing Date.  The transfers and deliveries described
in ARTICLE 6 shall be mutually interdependent and shall be regarded as occurring
simultaneously, and, any other provision of this Agreement notwithstanding, no
such transfer or delivery shall become effective or shall be deemed to have
occurred until all of the other transfers and deliveries provided for in Article
6 shall also have occurred or been waived in writing by the party entitled to
waive the same.  Such transfers and deliveries shall be deemed to have occurred
and the Closing shall be effective as of 12:01 a.m. on the Closing Date.

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ARTICLE 8

 

Additional Covenants and Agreements

            8.1       Pre-Closing Covenants and Agreements.

                        8.1.1.   Conduct of Business.

                        (a)        From the date of this Agreement until the
Closing, except as otherwise expressly provided for in this Agreement or upon
prior written notice to Buyer, Seller shall cause Company to be operated in the
Ordinary Course of Business and shall cause Company to use commercially
reasonable efforts to preserve intact its business organizations and
relationships with Persons doing business with Company.  Notwithstanding the
foregoing, Company (1) shall fully release, repay and cause to be cancelled, and
shall provide written documentation of said release and cancellation, all
Indebtedness, and (2) may dividend to Seller the cash or cash equivalents
remaining after the repayment or cancellation of Indebtedness contemplated by
clause (1), if any.

                        (b)        Buyer covenants and agrees that Buyer shall
reimburse Seller for all amounts provided by Seller to Company through the
Closing for capital expenditures and operating expenses in connection with the
projects of Company set forth on Schedule 8.1.1 (the “CapEx Expenses”), which
Schedule shall be updated and revised by Seller from time to time up to, and
including, the Closing Date.  Two (2) days prior to the Closing, Seller shall
provide Buyer with a good faith estimate of the CapEx Expenses (the “Estimated
CapEx Expenses”), which Estimated CapEx Expenses will be reimbursed by Buyer to
Seller at the Closing by wire transfer of immediately available funds.

                        (c)        Not later than thirty (30) days after the
Closing Date, Buyer and Seller shall jointly determine, and Buyer shall cause
Company to assist in such determination, the actual amount of the CapEx Expenses
(the “Actual CapEx Expenses”).  In the event Buyer and Seller are unable to
agree upon the calculation of the Actual CapEx Expenses, they shall submit such
dispute to an accounting firm of national reputation reasonably acceptable to
both Buyer and Seller (the “Independent Accountants”), whose determination shall
be final, binding and conclusive as to both Buyer and Seller.  The determination
of the amount of the Actual CapEx Expenses shall be final upon the earlier to
occur of (i) the agreement of Buyer and Seller or (ii) the determination of the
Independent Accountants.  If the Estimated CapEx Expenses exceed the Actual
CapEx expenses, Seller shall refund to Buyer the amount of such difference.  If
the Actual CapEx Expenses exceed the Estimated CapEx Expenses, Buyer shall pay
to Seller the amount of such difference.  If the Actual CapEx Expenses equal the
Estimated CapEx Expenses, no further payments shall be made hereunder.  Any
payment to be made pursuant to this Section 8.1.1(c) shall be made no later than
two (2) business days after the date on which the final determination of the
Actual CapEx Expenses is made and shall be made by means of a wire transfer of
immediately available funds to an account or accounts designated by Buyer or
Seller, as appropriate.

                        8.1.2.   Access.  From the date of this Agreement until
the Closing, Seller shall cause Company to provide to Buyer and its
representatives reasonable access to the personnel, facilities and records of
Company and to permit Buyer and its representatives to conduct such necessary
inspections as Buyer may reasonably request.  All such information received by
Seller pursuant to this Section

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8.1.2 shall be subject to the terms and provisions of the Confidentiality
Agreement more fully described in Section 8.2.4.

                        8.1.3.   Satisfaction of Closing Conditions.  Subject to
the terms and conditions of this Agreement, Seller, on the one hand, and Buyer,
on the other hand, will use commercially reasonable efforts to take or cause to
be taken all actions and to do or cause to be done all things necessary under
the terms of this Agreement or under applicable Laws to consummate the
transactions contemplated by this Agreement.  The parties shall cooperate with
each other so as to obtain as soon as practicable after the date hereof all
necessary regulatory or other consents, clearances, authorizations and approvals
required under Article 6.  Buyer shall use commercially reasonable efforts to
complete its due diligence review of Seller contemplated by Section 6.1(f) as
expeditiously as practicable.

                        8.1.4.   Termination.  This Agreement may be terminated:

                        (a)        By mutual written consent of Buyer and Seller
at any time prior to the Closing.

                        (b)        By Buyer or Seller if a material breach of
any provision of this Agreement has been committed by the other party and such
breach has not been waived or cured within thirty (30) days after being notified
of same.

                        (c)        By (1) Buyer if any of the conditions in
Section 6.1 has not been satisfied as of April, 30, 2006, or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer has not
waived such condition; or (2) Seller if any of the conditions in Section 6.2 has
not been satisfied as of April 30, 2006, or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Seller to comply
with their obligations under this Agreement) and Seller has not waived such
condition.

                        (d)        By Buyer or Seller if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before April 30, 2006.

If this Agreement is terminated pursuant to Section 8.1.4(a), then all
provisions of this Agreement except Section 8.2.4 shall thereupon become void
without any liability on the part of any party hereto to any other party
hereto.  If this Agreement is terminated other than pursuant to Section
8.1.4(a), such termination will not affect any right or remedy that accrued
hereunder or under applicable Laws prior to or on account of such termination,
and the provisions of this Agreement shall survive such termination to the
extent required so that each party may enforce all rights and remedies available
to such party hereunder or under applicable Laws in respect of such termination
and so that any party responsible for any breach or nonperformance of its
obligations hereunder prior to termination shall remain liable for the
consequences thereof.

                        8.1.5.   Subsequent Actions.  At least two (2) business
days before the Closing Date, Seller shall deliver to Buyer updated Disclosure
Schedules, if necessary, which updated Disclosure Schedules shall be deemed
accepted by Buyer unless such update reveals a matter describing or giving rise
to a Material Adverse Effect.

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            8.2       Miscellaneous Covenants.

                        8.2.1.   Publicity.  From the date of this Agreement
until the Closing Date, any disclosures or announcements relating to this
Agreement or the transactions contemplated hereby will be made only as may be
agreed upon in writing by Seller and Buyer, or as may be required by Law or by
any Governmental Authority. 

                        8.2.2.   Expenses.  Buyer shall pay all fees and
expenses incident to the transactions contemplated by this Agreement that are
incurred by Buyer or its representatives or are otherwise expressly allocated to
Buyer hereunder, and Seller or Company (with Company only being obligated for
payment of any expenses of Seller if such payment is made prior to the Closing
Date) shall pay all fees and expenses incident to the transactions contemplated
by this Agreement that are incurred by Seller or its representatives or incurred
by Company or its representatives on behalf of Seller. 

                        8.2.3.   No Assignments.  No assignment of any part of
this Agreement or any right or obligation hereunder may be made by any party
hereto without the prior written consent of all other parties hereto, and any
attempted assignment without such consent shall be void and of no force or
effect; provided, however, that (a) Buyer may assign any of its rights or
delegate any of its obligations or duties under this Agreement to any controlled
Affiliate of Buyer provided, further, that no such assignment shall relieve
Buyer of its obligations hereunder; and (b) Buyer may assign its rights, but not
its obligations, under this Agreement to any of its financing sources.

                        8.2.4.   Confidentiality Agreement.  Notwithstanding the
execution of this Agreement, the parties acknowledge that the confidentiality
agreement executed by Buyer and Company, dated November 10, 2005, remains in
full force and effect pursuant to the terms thereof.

                        8.2.5.   Access by Seller.  Buyer shall, and shall cause
Company to, for a period of five (5) years after the Closing Date, during normal
business hours, provide Seller and its designees and representatives with such
access to the books and records of Company with respect to the six (6) year
period prior to the Closing Date as may be reasonably requested by Seller, who
shall be entitled, at its expense, to make extracts and copies of such books and
records.  Buyer agrees that it shall not, during such five (5)-year period after
the Closing Date, destroy or cause or permit to be destroyed any material books
or records with respect to the six (6) year period prior to the Closing Date
without first obtaining the consent of Seller (or providing to Seller notice of
such intent and a reasonable opportunity to copy such books or records at least
thirty (30) days prior to such destruction).

                        8.2.6.   Continuation of Indemnification.  Buyer shall
cause Company to continue to indemnify and hold harmless each of the present and
former directors, officers, employees and agents of Company, in their capacities
as such, from and against all damages, costs and expenses actually incurred or
suffered in connection with any threatened or pending action, suit or proceeding
at law or in equity by any Person or any arbitration or administrative or other
proceeding relating to the business of Company or the status of such individual
as a director, officer, employee or agent at any time prior to the Closing Date,
to the fullest extent permitted by applicable Law.  Buyer shall retain or
include in the Articles of Incorporation and Code of Regulations of Company any
indemnification provision or provisions, including provisions respecting the
advancement of expenses, in effect on the Closing Date for the benefit of the
current or former officers, directors, employees and agents, and shall not
thereafter amend the same (except to the extent that such amendment preserves or
broadens the indemnification or other rights theretofore available to such
officers, directors, employees and agents.  If Company merges into, consolidates
with or transfers all or substantially all of its assets to another

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Person, then and in each such case, Buyer shall make and shall cause Company to
make proper provision so that the surviving or resulting corporation or the
transferee in such transaction shall assume the obligations of Buyer or Company
under this Section 8.2.6.

            8.3       Acknowledgements.  Buyer does not make, and has not made
any representations or warranties relating to Buyer or otherwise other than
those expressly set forth herein and Seller does not make, and has not made, any
representations or warranties relating to Seller, Company or the business of
Company or otherwise, in connection with the transactions contemplated hereby
other than those expressly set forth herein.  It is understood that any cost
estimate, projection or other prediction, any data, any financial information or
any memoranda or offering materials or presentations, including, without
limitation, any memoranda and materials provided by any representative of Seller
are not and shall not be deemed to be or to include representations or
warranties of Seller.  No Person has been authorized by Seller to make any
representation or warranty relating to Seller, Company or the business of
Company or otherwise in connection with the transaction contemplated hereby and,
if made, such representation or warranty may not be relied upon as having been
authorized by Seller and shall not be deemed to have been made by Seller.  It is
understood that Calfee, Halter & Griswold LLP (“CHG”) is representing only
Seller and not Buyer or Company in connection with this Agreement and the
transactions contemplated herein; accordingly, CHG shall be allowed to continue
to represent Seller in all matters and disputes, including in any matter or
dispute adverse to Buyer or Company.  

            8.4       Tax Matters.  Following the Closing, Seller and Buyer
shall, and Buyer shall cause Company to, cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any audit,
litigation or other proceeding with respect to Taxes or the preparation of any
Tax Return.  Such cooperation shall include the retention and (upon the other
party’s request) the provision of records and information that are reasonably
relevant to any such Tax matter or required by the Code or other applicable Law
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. 
Seller and Buyer agree (a) to retain all books and records with respect to Tax
matters pertinent to Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (b) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Seller or Buyer, as the case may
be, shall allow such other party to take possession of such books and records. 
Buyer and Seller further agree, upon request, to use commercially reasonable
efforts to obtain any certificate or other document from any Governmental
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).  Buyer and Seller further
agree, upon request, to provide the other party with all information that either
party may be required to report pursuant to the Code and all regulations
promulgated thereunder.  In addition, notwithstanding any confidentiality
provision herein or in any agreement to the contrary, any party may disclose the
tax treatment and tax structure of the transactions contemplated herein and such
other information required by Section 6011 of the Code; provided, however, any
such disclosure be limited to the extent possible so that attorney-client
privileges not be breached and the non-disclosing party be given advance notice
of any such disclosure.  All Tax sharing agreements or similar agreements with
respect to or involving Company shall be deemed terminated as of the Closing
Date and, after the Closing Date, Seller and Company shall not be bound thereby
or have any liability thereunder.

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            8.5       Reclamation Bonds and Letters of Credit.  Buyer
acknowledges that Keller is the obligor with respect to those reclamation bonds
and letters of credit set forth on Schedule 8.5 relating to the Real Properties
described therein and for the benefit of those Governmental Authorities noted
thereon (the “Reclamation Bonds and LC’s” and each is sometimes referred to
individually as a “Reclamation Bond or LC”).  For a period (the “Obligation
Period”) commencing on the Closing Date and ending on the earliest to occur of
(a) the date upon which Company or Buyer enters into a loan facility or series
of related loan facilities in the aggregate loan amount of Fifty Million Dollars
($50,000,000); (b) the date upon which Company or Buyer consummates subsequent
to Closing a round of public financing of the sort utilized to consummate the
transactions contemplated hereby in an amount not less than One Hundred Million
Dollars ($100,000,000); (c) the date on which Buyer or Company sells Company or
Company’s assets, whether by means of (i) a sale of stock, a merger or a
consolidation of Company with any other Person, such that at least 50% of the
total voting power represented by the voting securities of Company are
transferred to such other Person, or (ii) an agreement for the sale or
disposition by Company of all or substantially all of Company’s assets or a plan
of complete liquidation of Company; (d) the date on which Buyer fails to replace
Keller as obligor with respect to any Reclamation Bond or LC in accordance with
the terms and provisions of this Section 8.5; or (e) the date three (3) years
after the Closing Date, Keller agrees to remain liable for the reimbursement
obligations with respect to each Reclamation Bond or LC for the time period set
forth on Schedule 8.5 with respect to such Reclamation Bond or LC; provided,
that, in the event Buyer, Company or a permittee under a permit on which Keller
is an obligor (a “Permittee”), receives from any Governmental Authority, any
order or notice of forfeiture or proposed forfeiture or any notice stating an
intention to draw upon any Reclamation Bond or LC, Buyer shall cause Company to
immediately notify Keller of such notice or order.  Keller, in its sole
discretion, may direct that Company or such Permittee to file an appeal of any
such notice or order and Buyer and Company shall cause such an appeal to be
filed.  Additionally, Keller, in its sole discretion, may elect to access the
applicable Real Property, and Buyer shall cause Company to allow such access,
for the purposes of conducting and controlling the applicable reclamation
project.  Keller covenants that all such Keller-directed reclamation projects
shall be conducted in a good and workmanlike manner and in accordance with all
applicable requirements established by permit or Law.  Notwithstanding the
foregoing, in the event Company sells a parcel of Real Property to which any
Reclamation Bond or LC relates, Buyer shall cause the Reclamation Bond or LC
that relates to said Real Property to be replaced by a reclamation bond or LC on
which Keller is not an obligor.  Keller shall have no further obligations with
respect to such Reclamation Bond or LC.  From and after the Closing Date, Buyer
(i) shall cause Keller to be removed as an obligor under each Reclamation Bond
or LC on or before such time set forth on Schedule 8.5 with respect to such
Reclamation Bond or LC and (ii) shall cause Company to continue to reimburse
Keller for any and all amounts paid or costs incurred by Keller in connection
with Keller’s costs and expenses associated with keeping the Reclamation Bonds
and LC’s in force.  At all times during the Obligation Period, and as a
condition to Keller’s obligations under this Section 8.5, Company shall operate,
and Buyer shall cause Company to operate, its business in compliance with
applicable Laws and sound business practice and, to the extent permitted
thereby, in a manner consistent with the practices of Company prior to the
Closing Date.  In the event that the foregoing covenant is breached by Company,
Buyer and Company shall be jointly and individually responsible for
reimbursement to Keller for any and all amounts paid or costs incurred by Keller
in connection with any notice or order of forfeiture, related administrative or
judicial proceedings, including attorney fees, and any reclamation project costs
or expenses that arise as a direct result of or in connection with any such
breach or failure on the part of Company.  Notwithstanding any other provision
of this

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Agreement, including, without limitation, Section 9.6 hereof, Keller will be
entitled to specific performance with respect to its rights under this Section
8.5.

            8.6       Real Property Transfers.  Seller covenants and agrees that
it will cause Company to execute and file, as promptly as possible after the
date hereof but in any event prior to the Closing, such deeds, affidavits,
assignments or other documents as are reasonably necessary to title in the name
of Company those Owned Real Properties set forth on Schedule 4.12(a) shown as
currently titled in the name of an entity other than Company.  Seller further
covenants and agrees that at any time and from time to time after the Closing,
it will execute and deliver to Buyer such further deeds, affidavits,
conveyances, assignments or other written assurances as Buyer may reasonably
request to establish and protect Company’s title in and to such Owned Real
Properties.

ARTICLE 9

 

Indemnification

            9.1       Indemnification of Buyer.  From and after the Closing and
subject to Sections 9.2, 9.5 and 9.6, Seller and Keller, jointly and severally,
shall indemnify Buyer and its permitted successors and assigns (collectively,
the “Buyer Indemnitees”), against and hold Buyer Indemnitees harmless from: any
Losses based upon, arising out of or caused by (a) inaccuracy in, or breach of,
any of the representations and warranties made by Seller in Articles 3 or 4 or
(b) any breach or nonperformance of any covenant or obligation made or incurred
by Seller herein.  Seller does not make and shall not be deemed to have made,
nor is Buyer relying upon, any representation, warranty or covenant other than
those representations, warranties and covenants that are expressly set forth in
this Agreement.

            9.2       Limitations on Indemnification of Buyer. 

                        (a)        Notwithstanding any other provision of this
Agreement, the indemnification of Buyer Indemnitees provided for in this
Agreement shall be subject to the limitations and conditions set forth in this
Section 9.2.

       

            (1)        Except as set forth below, any claim by a Buyer
Indemnitee for indemnification pursuant to Section 9.1(a) shall be required to
be made by delivering notice to Seller no later than the expiration of twelve
(12) months after the Closing Date.  Notwithstanding the foregoing, (A) any
claim for indemnification based upon, resulting from or arising out of fraud or
any inaccuracy in or breach of any representation or warranty in Section 3.1
[Authority and Capacity], Section 3.2 [Ownership of Shares], Section 3.3
[Execution and Delivery; Enforceability], Section 4.2 [Capitalization] or
Section 4.17 [Brokerage] may be made at any time and (B) any claim for
indemnification based upon, resulting from or arising out of any inaccuracy in
or breach of any representation or warranty in Section 4.7 [Taxes] may be made
at any time prior to the expiration of the applicable statute of limitations.

       

       

            (2)        Except for claims for indemnification in respect of fraud
or breaches of representations and warranties contained in 3.1 [Authority and
Capacity], Section 3.2 [Ownership of Shares], Section 3.3 [Execution and
Delivery; Enforceability], Section 4.2 [Capitalization], Section 4.7 [Taxes]or
Section 4.17 [Brokerage], Buyer Indemnitees shall not be entitled to
indemnification for any claim pursuant to Section 9.1(a) until the aggregate
amount of all such claims exceed the Indemnification Threshold and thereafter
Buyer

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Indemnitees shall be entitled to indemnification only for amounts in excess of
the Indemnification Threshold.

       

       

            (3)        Except for claims for indemnification in respect of fraud
or breaches of representations and warranties contained in 3.1 [Authority and
Capacity], Section 3.2 [Ownership of Shares], Section 3.3 [Execution and
Delivery; Enforceability], Section 4.2 [Capitalization], Section 4.7 [Taxes] or
Section 4.17 [Brokerage], the maximum indemnification amount to which Buyer
Indemnitees may be entitled under Section 9.1(a) of this Agreement shall be the
Indemnification Cap.

                        (b)        Notwithstanding any other provision of this
Agreement, the Buyer Indemnitees shall not be entitled to indemnification
hereunder if, and to the extent that, any one or more of the following
circumstances apply:

       

            (1)        In connection with any claim for indemnification
hereunder with respect to which any of the Buyer Indemnitees has an enforceable
right of indemnification, warranty or right of set-off against any third party
(contractual or otherwise).

       

       

            (2)        Any insurance proceeds received by any of Buyer
Indemnities in connection with the facts or circumstances giving rise to such
indemnification (and Buyer Indemnitees shall seek full recovery under all
insurance policies covering any Losses to the same extent as they would if such
Losses were not subject to indemnification under this Agreement).

                        (c)        In the event that a Buyer Indemnitee makes a
claim for indemnification that is determined by a court of competent
jurisdiction to be without reasonable basis in law or fact, Buyer Indemnitees
shall bear all reasonable costs and expenses (including court costs and
reasonable attorneys’ and accounting fees) incurred by Seller in investigating
and defending against such claim.

            9.3       Indemnification of Seller.  From and after the Closing
Date and subject to Sections 9.4, 9.5 and 9.6, Buyer shall indemnify Seller and
its permitted successors and assigns (collectively, the “Seller Indemnitees”),
against and hold Seller Indemnitees harmless from any Losses based upon, arising
out of or caused by: (a) any inaccuracy in or breach of any of the
representations and warranties made by Buyer in Article 5; (b) any breach or
nonperformance of any covenant or obligation made or incurred by Buyer herein;
and (c) except as provided in Section 8.5, the operation of Company from and
after the Closing Date.  Buyer does not make and shall not be deemed to have
made, nor is any Seller Indemnitee relying upon, any representation, warranty or
covenant other than those representations, warranties and covenants that are
expressly set forth in this Agreement.

            9.4       Limitations on Indemnification of Seller.  Notwithstanding
any other provisions of this Agreement, the indemnification of Seller
Indemnitees provided for in this Agreement shall be subject to the limitations
and conditions set forth in this Section 9.4.

                        (a)        Except as set forth below, any claim by a
Seller Indemnitee for indemnification pursuant to Section 9.3(a) of this
Agreement shall be required to be made by delivering notice to Buyer no later
than the expiration of twelve (12) months after the Closing Date. 
Notwithstanding the foregoing, any claim for indemnification resulting from or
arising out of fraud or any inaccuracy in or breach of any representation or
warranty made by Buyer in Sections 5.2 [Execution and Delivery;

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Enforceability], 5.4 [Brokerage], 5.5 [Investment Intent; Restricted Shares] or
5.6 [Buyer Capitalization; Stock Consideration Shares] may be made at any time.

                        (b)        Except for claims for indemnification in
respect of fraud or breaches of representations and warranties contained in
Sections 5.2 [Execution and Delivery; Enforceability], 5.4 [Brokerage], 5.5
[Investment Intent; Restricted Shares] or 5.6 [Buyer Capitalization; Stock
Consideration Shares], Seller Indemnitees shall not be entitled to
indemnification for any claim pursuant to Section 9.3(a) until the aggregate
amount of all such claims exceed the Indemnification Threshold and thereafter
Seller Indemnitees shall be entitled to indemnification only for amounts in
excess of the Indemnification Threshold.

                        (c)        Except for claims for indemnification in
respect of fraud or breaches of representations and warranties contained in
Sections 5.2 [Execution and Delivery; Enforceability], 5.4 [Brokerage], 5.5
[Investment Intent; Restricted Shares] or 5.6 [Buyer Capitalization; Stock
Consideration Shares], the maximum indemnification amount to which Seller
Indemnitees may be entitled under Section 9.3(a) of this Agreement shall be an
amount equal to the Indemnification Cap.

                        (d)        In the event that Seller Indemnitees make a
claim for indemnification that is determined by a court of competent
jurisdiction to be without reasonable basis in law or fact, Seller Indemnitees
shall bear all reasonable costs and expenses (including court costs and
reasonable attorneys’ and accounting fees), incurred by Buyer in investigating
and defending against such claim.

            9.5       Procedures Relating to Indemnification.

                        9.5.1.   Third-Party Claims.  In order for a party (the
“indemnitee”) to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of, or involving a claim or demand made by
any Person against the indemnitee (a “Third-Party Claim”), such indemnitee must
notify the party from whom indemnification hereunder is sought (the
“indemnitor”) in writing of the Third-Party Claim no later than sixty (60) days
after such claim or demand is first asserted, but in any event not later than
the last date set forth in Section 9.2 or 9.4, as the case may be, for making
such claim.  Such notice shall state in reasonable detail the amount or
estimated amount of such claim, and shall identify the specific basis (or bases)
for such claim, including the representations, warranties or covenants in this
Agreement alleged to have been breached.  Failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
indemnitor shall have been actually prejudiced as a result of such failure. 
Thereafter, the indemnitee shall deliver to the indemnitor, without undue delay,
copies of all notices and documents (including court papers received by the
indemnitee) relating to the Third-Party Claim so long as any such disclosure
could not reasonably be expected to have an adverse effect on the
attorney-client or any other privilege that may be available to the indemnitee
in connection therewith.

                        If a Third-Party Claim is made against an indemnitee,
the indemnitor shall be entitled to participate, at its expense, in the defense
thereof.  Notwithstanding the foregoing, if the indemnitor irrevocably admits to
the indemnitee in writing its obligation to indemnify the indemnitee for all
liabilities and obligations relating to such Third-Party Claim, the indemnitor
may elect to assume and control the defense thereof with counsel selected by the
indemnitor.  If the indemnitor assumes such defense, the indemnitee shall have
the right to participate in the defense thereof and to employ counsel,

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at its own expense, separate from the counsel employed by the indemnitor, it
being understood that the indemnitor shall control such defense.

                        If the indemnitor so assumes the defense of any
Third-Party Claim, all of the indemnified parties shall cooperate with the
indemnitor in the defense or prosecution thereof.  Such cooperation shall
include, at the expense of the indemnitor, the retention and (upon the
indemnitor’s request) the provision to the indemnitor of records and information
that are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.  If the indemnitor has assumed
the defense of a Third-Party Claim, (i) the indemnitee shall not admit any
liability with respect to, or settle, compromise or discharge, such Third-Party
Claim without the indemnitor’s prior written consent (which consent shall not be
unreasonably withheld or delayed); (ii) the indemnitee shall agree to any
settlement, compromise or discharge of a Third-Party Claim that the indemnitor
may recommend and that by its terms releases the indemnitee from any liability
in connection with such Third-Party Claim; and (iii) the indemnitor shall not,
without the written consent of the indemnitee, enter into any settlement,
compromise or discharge or consent to the entry of any judgment that imposes any
obligation or restriction upon the indemnitee.

                        9.5.2    Other Claims.  In the event any indemnitee
should have a claim against any indemnitor under this Article 9 that does not
involve a Third-Party Claim, the indemnitee shall deliver notice of such claim
to the indemnitor promptly following discovery of any indemnifiable Loss, but in
any event not later than the last date set forth in Section 9.2 or 9.4, as the
case may be, for making such claim.  Such notice shall state in reasonable
detail the amount or an estimated amount of such claim, and shall specify the
facts and circumstances that form the basis (or bases) for such claim, and shall
further specify the representations, warranties or covenants alleged to have
been breached.  Failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnitor shall
have been actually prejudiced as a result of such failure.  Upon receipt of any
such notice, the indemnitor shall notify the indemnitee as to whether the
indemnitor accepts liability for any such liability, loss, damage or expense. 
If the indemnitor disputes its liability with respect to such claim, as provided
above, the indemnitor and the indemnitee shall attempt to resolve such dispute
in accordance with the terms and provisions of Section 11.4.

            9.6       Limitation of Remedies.  Each party acknowledges and
agrees that, should the Closing occur, the sole and exclusive remedy with
respect to any and all claims relating to this Agreement or the transactions
contemplated hereby (other than claims relating to Section 8.2.4 or claims of,
or causes of action arising from, fraud) shall be pursuant to the
indemnification provisions set forth in this Article 9.  In furtherance of the
foregoing, Buyer and Seller hereby waives on behalf of itself and all other
Persons who might claim by, through or under it, from and after the Closing, any
and all rights, claims and causes of action (other than claims relating to
Section 8.2.4 or claims of, or causes of action arising from, fraud) that it or
any such other Person may have under this Agreement against Seller or Buyer, as
the case may be, arising under or based upon any Law (except pursuant to the
indemnification provisions set forth in this Article 9).

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ARTICLE 10

 

Certain Definitions

            When used in this Agreement, the following terms in all of their
tenses, cases and correlative forms shall have the meanings assigned to them in
this Article 10, or elsewhere in this Agreement as indicated in this Article 10:

            “1933 Act” means the Securities Act of 1933, as amended, and the
regulations thereunder.

            “Actual CapEx Expenses” is defined in Section 8.1.1(b).

            “Acquisition Balance Sheet” is defined in Section 4.5.

            An “Affiliate” of a specified Person means any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such specified Person.  For
purposes of this definition, “control” of any Person means possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting capital
stock, by contract, or otherwise.

            “Agreement” means this Share Purchase Agreement, as may be amended
from time to time.

            “Applicable Law” means any and all applicable federal, state or
local statutes, regulations, rules ordinances, order and/or decrees in effect as
of the Closing Date.

            “Buyer” is defined in the preamble of this Agreement.

            “Buyer Common Shares” is defined in Section 2.3.

            “Buyer Indemnitees” is defined in Section 9.1.

            “CapEx Expenses” is defined in Section 8.1.1(b).

            “Cash Portion” is defined in Section 2.3.

            “Closing” and “Closing Date” is defined in Article 7.

            “Code” means the United States Internal Revenue Code of 1986, as
amended, and the regulations thereunder.

            “Company” is defined in the Recitals to this Agreement.

            “Company Intellectual Property” means the Intellectual Property
owned or held for use by Company.

            “Confidential Information” means any information concerning the
businesses and affairs of Seller that is not already generally available to the
public.

            “CPR” is defined in Section 11.4.1.

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            “Disclosure Schedule” means the disclosure schedules annexed hereto
and made a part hereof.

            “Disposal,” “Storage,” and “Treatment” shall have the meanings
assigned them at 42 U.S.C. § 6903(3), (33) and (34), respectively.

            “Enforceability Exceptions” is defined in Section 3.3.

            “Environmental Laws” means any Law in effect as of the Closing Date
pertaining to the environment or the health or safety of the public and the
Release or threatened Release of Hazardous Materials or otherwise regulating the
manufacture, processing, distribution, use, Treatment, Storage, transport or
handling of Hazardous Materials, including, without limitation:  the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601, et seq.; the Solid Waste Disposal Act, 42 U.S.C. § 6901,et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001, et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. § 5101, et seq.; the Clean
Air Act, 42 U.S.C. § 7401, et seq.; the Clean Water Act, 33 U.S.C. § 1251, et
seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq.; and the Oil
Pollution Act of 1990, 33 U.S.C. § 2701, et seq.; each as amended; and all
regulations promulgated pursuant to the foregoing.

            “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.

            “Escrow Agent” has the meaning set forth in the Escrow Agreement.

            “Escrow Agreement” means the escrow agreement entered into
concurrently herewith and attached hereto as Exhibit A

            “Escrow Amount” means $3,750,000.

            “Estimated CapEx Expenses” is defined in Section 8.1.1(b).

            “General Laws” is defined in Section 4.12.

            “Governmental Authority” means any foreign, federal, state, regional
or local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.

            “Hazardous Material” means any waste, chemical or other substance
that is listed, defined, designated, identified or classified as hazardous,
radioactive, reactive, toxic, ignitable or corrosive, or a pollutant or a
contaminant, under or pursuant to any Environmental Law, and specifically
including petroleum and all derivatives thereof, asbestos or asbestos-containing
materials and polychlorinated biphenyls.

            “Improvements” has the meaning set forth in Section 4.12 (e).

            “Indebtedness” means (without duplication) an amount, determined as
of the Closing, equal to: (a) all obligations of Company for borrowed money or
funded indebtedness or issued in substitution for or exchange for borrowed money
or funded indebtedness (including obligations in respect of principal, accrued
interest, and any applicable prepayment charges or premiums); (b) any
indebtedness

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evidenced by any note, bond, debenture, credit and facility agreement or other
debt security; (c) any capital lease obligations; (d) any indebtedness
guaranteed by Company; and (e) any obligations with respect to the termination
of any interest rate hedging or swap agreements. 

            “Indemnification Cap” is an amount equal to Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000).

            “Indemnification Threshold” is an amount equal to Three Hundred
Seventy-Five Thousand Dollars ($375,000).

            “indemnitee” and “indemnitor” are defined in Section 9.5.1.

            “Intellectual Property” means any of the following in any
jurisdiction throughout the world: (i) patents, patent applications, patent
disclosures and inventions, including any continuations, divisionals,
continuations-in-part, renewals and reissues for any of the foregoing; (ii)
internet domain names, trademarks, service marks, trade dress, trade names,
logos and corporate names and registrations and applications for registration
thereof together with all of the goodwill associated therewith; (iii) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof; (iv) mask works and registrations and
applications for registration thereof; (v) material computer software,
(specifically excluding all shrink wrap software), data, data bases and
documentation thereof; (vi) trade secrets and other confidential information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial and marketing plans and customer and supplier
lists and information); and (vii) copies and tangible embodiments thereof (in
whatever form or medium).

            “Independent Accountants” is defined in Section 8.1.1(b).

            “Interim Financial Statements” is defined in Section 4.5.

            “Keller” is defined in the preamble of this Agreement.

            “KFx SEC Documents” is defined in Section 5.7.

            “Law” means any common law decision and any federal, state,
regional, local or foreign law, statute, ordinance, code, rule, regulation or
order.

            “Lease” is defined in Section 4.12.1.

            “Lease Consents” means all leases, subleases, licenses, concessions
and other agreements (written or oral), including all amendments, extensions,
renewals, guaranties, and other agreements with respect thereto, pursuant to
which Company or any of its predecessors holds any Leased Real Property,
including the right to all security deposits and other amounts and instruments
deposited by or on behalf of Company or any of its predecessors.

            “Liability” means any liability or obligation of whatever kind or
nature (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or

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unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

            “Lien” means any lien, charge, mortgage, pledge, easement,
encumbrance, security interest, matrimonial or community interest, tenancy by
the entirety claim, adverse claim, or any other title defect or restriction of
any kind.

            “Loss” or “Losses” means any and all losses, liabilities, damages,
costs, penalties, actions, notices of violation, and notices of liability and
any claims in respect thereof (including, without limitation, amounts paid in
settlement and reasonable costs of investigation and legal expenses); provided,
however, all Losses relating to any claims for indemnification shall be limited
to actual damages and shall specifically exclude punitive, exemplary,
consequential or any similar type damages.

            “Material Adverse Effect” means a material adverse effect on the
business, condition, financial or otherwise, assets, liabilities, or results of
operations of Company taken as a whole; provided, however, “Material Adverse
Effect” shall not include changes in business or economic conditions affecting
the economy or Company’s industry generally; changes in stock markets, credit
markets, Tax rates or implementation of new Taxes, interest rates, exchange
rates or other matters affecting the economy or Company’s industry, generally;
the enactment or implementation of any new Law; any act or omission of Seller
with respect to which Buyer has received the written notice described in
Section 8.1.5 and nevertheless elected to close; any event as to which Buyer has
provided written consent hereunder; or the execution, delivery or performance of
this Agreement (including any announcement relating to this Agreement or the
fact that Buyer is acquiring Company).

            “Material Contracts” is defined in Section 4.15.

            “Obligation Period” is defined in Section 8.5.

            “Ordinary Course of Business” an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if that
action: (a) is consistent in nature, scope and magnitude with the past practices
of such Person and is taken in the ordinary course of the normal, day-to-day
operations of such Person; and (b) does not require authorization by the board
of directors of such Person.

            “Owned Real Property” means all land, together with all buildings,
structures, improvements, and fixtures located thereon, including all
electrical, mechanical, plumbing and other building systems, fire protection,
security and surveillance systems, telecommunications, computer, wiring, and
cable installations, utility installations, water distribution systems, and
landscaping, together with all easements and other rights and interests
appurtenant thereto (including air, oil, gas, mineral, and water rights), owned
by Company.

            “Party” has the meaning set forth in the preface above.

            “PBGC” means the Pension Benefit Guaranty Corporation.

            “Permits” is defined in Section 4.11.

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            “Permitted Encumbrances” means with respect to each parcel of Real
Property: (a) real estate taxes, assessments and other governmental levies,
fees, or charges imposed with respect to such Real Property that are (i) not due
and payable as of the Closing Date or (ii) being contested in good faith and for
which appropriate reserves have been established on the Acquisition Balance
Sheet; (b) mechanics’ liens and similar liens for labor, materials, or supplies
provided with respect to such Real Property incurred in the Ordinary Course of
Business for amounts that are (i) not due and payable as of the Closing Date or
(ii) being contested in good faith and for which appropriate reserves have been
established on the Acquisition Balance Sheet; (c) zoning, building codes and
other land use laws regulating the use or occupancy of such Real Property or the
activities conducted thereon which are imposed by any governmental authority
having jurisdiction over such Real Property and are not violated by the current
use or occupancy of such Real Property or the operation of Company’s business as
currently conducted thereon; and (d) easements, covenants, conditions,
restrictions, and other similar matters of record affecting title to such Real
Property that do not or would not impair the use or occupancy of such Real
Property in the operation of Company’s business as currently conducted thereon.

            “Person” means an individual, a corporation, a limited liability
company, a partnership, a trust, an unincorporated association, a government or
any agency, instrumentality or political subdivision of a government, or any
other entity or organization.

            “Plans” is defined in Section 4.9.

            “Purchase Price” is defined in Section 2.2.

            “Real Properties” is defined in Section 4.12.1.

            “Real Property Laws” has the meaning set forth in Section 4.12(g).

            “Reclamation Bond or LC” and “Reclamation Bonds and LC’s” are
defined in Section 8.5.

            “Registration Rights Agreement” is defined in Section 6.1(g).

            “Release” means any actual or threatened, permitted, un-permitted
release, discharge, spill, leaching, emission, dumping or escape into the
Environment.

            “Securities Act” means the Securities Act of 1933, as amended.

            “Seller” is defined in the preamble of this Agreement.

            “Seller Indemnitees” is defined in Section 9.3.

            “Seller’s Account” is defined in Section 2.3.

            “Shares” is defined in Section 4.2.

            “Stock Consideration Shares” is defined in Section 2.3.

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            “Tax” or “Taxes” means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits,  customs duties, capital stock,
franchise, profits, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not
and including any obligations to indemnify or otherwise assume or succeed to the
Tax liability of any other Person.

            “Tax Return” means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

            “Third-Party Claim” is defined in Section 9.5.1.

            “To Seller’s Knowledge” or “Seller’s Knowledge”means within the
actual knowledge of each of John R. Keller, John Grisham and David Spada after
reasonable inquiry of the management level employees of Seller and the Company
responsible for the relevant matter.

            “Year-End Financial Statements” is defined in Section 4.5.

ARTICLE 11

 

Construction; Miscellaneous Provisions

            11.1     Notices.  Any notice to be given or delivered pursuant to
this Agreement shall be ineffective unless given or delivered in writing, and
shall be given or delivered in writing as follows:

(a)

If to Buyer, to:

       

       

       

                              

       

       

       

KFx Inc.

       

       

       

55 Madison Street, Suite 500

       

       

       

Denver, Colorado 80206

       

       

       

Attention: William Laughlin, Esq.

       

       

       

Telecopy Number:  (303) 293-8430

       

       

       

       

       

       

With a copy to:

       

       

       

Fognani & Faught, PLLC

       

       

       

1700 Lincoln Street, Suite 2222

       

       

       

Denver, Colorado 80203

       

       

       

Attention:  John D. Fognani, Esq.

       

       

       

Telecopy Number:  (303) 382-6210

       

       

       

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(b)

If to Seller or Keller:

       

       

       

                              

New Meadville Forging, Inc.

       

       

       

c/o Keller Group, Inc.

       

       

       

One Northfield Plaza, Suite 510

       

       

       

Northfield, Illinois  60093

       

       

       

Attention:  Jack Keller

       

       

       

Telecopy Number:  (847) 446-9384

       

       

       

With a copy to:

       

       

       

Calfee, Halter & Griswold LLP

       

       

       

1400 McDonald Investment Center

       

       

       

800 Superior Avenue

       

       

       

Cleveland, Ohio 44114-2688

       

       

       

Attention:  Robert A. Ross, Esq.

       

       

       

Telecopy Number:  (216) 241-0816

or in any case, to such other address for a party as to which notice shall have
been given to Buyer and Seller in accordance with this Section.  Notices so
addressed shall be deemed to have been duly given (i) on the third business day
after the day of registration, if sent by registered or certified mail, postage
prepaid, (ii) on the next business day following the documented acceptance
thereof for next-day delivery by a national overnight air courier service, if so
sent, or (iii) on the date sent by facsimile transmission, if electronically
confirmed.  Otherwise, notices shall be deemed to have been given when actually
received at such address.

            11.2     Entire Agreement.  This Agreement and the schedules and
exhibits hereto constitute the exclusive statement of the agreement between
Buyer and Seller concerning the subject matter hereof, and supersedes all other
prior agreements, oral or written, among or between any of the parties hereto
concerning such subject matter.  All negotiations among or between any of the
parties hereto are superseded by this Agreement, and there are no
representations, warranties, promises, understandings or agreements, oral or
written, in relation to the subject matter hereof among or between any of the
parties hereto other than those expressly set forth or expressly incorporated
herein.

            11.3     Modification.  No amendment, modification, or waiver of
this Agreement or any provision hereof, including the provisions of this
sentence, shall be effective or enforceable as against a party hereto unless
made in a written instrument that specifically references this Agreement and
that is signed by the party waiving compliance.

            11.4     Mediation, Jurisdiction and Venue.

                        11.4.1. Mandatory Mediation.  Unless and except to the
extent otherwise expressly agreed in writing by Seller and Buyer, in the event
of any dispute arising out of or related to this Agreement or any of the
transactions contemplated hereby, the parties shall be required to enter into
mediation of such dispute or disagreement prior to the initiation of any action
or proceeding against the other.  Upon notice by either party to the other of
the initiating party’s desire to mediate, the parties shall endeavor to settle
the dispute by mediation under the then current Center for Public Resources
(“CPR”) Model procedure for mediation of business disputes.   The location for
the mediation shall be

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in Cuyahoga County, Ohio, and the neutral third party will be selected from the
CPR Panel of Neutrals applicable to such geographical area.  If the parties
encounter difficulty in agreeing on a Neutral, they will seek the assistance of
CPR in the selection process.  A mediation proceeding shall thereafter be
scheduled at a time mutually convenient to the parties involved.  The mediation
shall be held within ninety (90) days following the notification by a party of a
desire for mediation.  If the parties cannot agree on a date for mediation, then
the CPR shall select a date it believes is reasonable for the parties, given all
of the alleged conflicts in dates.  The parties shall equally share the cost of
the mediator.

                        11.4.2. Jurisdiction and Venue.  The parties agree that
no action, suit or proceeding at law, in equity or otherwise that in any way
arises out of or relates to this Agreement or the transactions contemplated
hereby shall be brought prior to the parties’ compliance with Section 11.4.1,
and after such compliance each party hereto agrees that any claim relating to
this Agreement shall be brought solely in any state or federal court of
competent jurisdiction located in Cuyahoga County, Ohio, and all objections to
personal jurisdiction and venue in any action, suit or proceeding so commenced
are hereby expressly waived by all parties hereto.  The parties waive personal
service of any and all process on each of them and consent that all such service
of process shall be made in the manner, to the party and at the address set
forth in Section 11.1 of this Agreement, and service so made shall be complete
as stated in such section.

            11.5     Binding Effect.  This Agreement shall be binding upon and
shall inure to the benefit of Buyer, Seller, and the respective successors and
permitted assigns of Buyer and of Seller.

            11.6     Headings.  The article and section headings used in this
Agreement are intended solely for convenience of reference, do not themselves
form a part of this Agreement, and may not be given effect in the interpretation
or construction of this Agreement.

            11.7     Number and Gender; Inclusion.  Whenever the context
requires in this Agreement, the masculine gender includes the feminine or
neuter, the neuter gender includes the masculine or feminine, the singular
number includes the plural, and the plural number includes the singular.  In
every place where it is used in this Agreement, the word “including” is intended
and shall be construed to mean “including, without limitation.”

            11.8     Counterparts.  This Agreement may be executed and delivered
in multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.  A facsimile,
electronic “.pdf” exchange or other copy of a signature shall be deemed an
original for purposes of this Agreement.

            11.9     Third Parties.  Except as may otherwise be expressly stated
herein, no provision of this Agreement is intended or shall be construed to
confer on any Person, other than the parties hereto, any rights hereunder.

            11.10   Schedules and Exhibits.  The schedules and exhibits, if any,
referenced in this Agreement constitute an integral part of this Agreement as if
fully rewritten herein.  Notwithstanding anything to the contrary contained in
this Agreement or in any of the Schedules, any information disclosed in one
Schedule shall be deemed to be disclosed in such other Schedules and applicable
to such other representations and warranties.  Disclosure of any fact or item in
any Schedule shall not be deemed to constitute an admission that such item or
fact is material for the purposes of this Agreement.

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All references in this document to “this Agreement” and the terms “herein,”
“hereof,” “hereunder” and the like shall be deemed to include all of such
schedules and exhibits.

            11.11   Time Periods.  Any action required hereunder to be taken
within a certain number of days shall, except as may otherwise be expressly
provided herein, be taken within that number of calendar days; provided,
however, that if the last day for taking such action falls on a Saturday, a
Sunday, or a legal holiday, the period during which such action may be taken
shall automatically be extended to the next business day.

            11.12   Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
the choice-of-laws or conflicts-of-laws provisions thereof.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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            IN WITNESS WHEREOF, Buyer, Seller and Keller have executed and
delivered this Share Purchase Agreement, or have caused this Share Purchase
Agreement to be executed and delivered by their duly authorized representatives,
as of the date first written above.

BUYER:

 

KFX INC.

 

 

By:       /s/ Willliam G. Laughlin            

Name:  William G. Laughlin

Title:    Senior Vice President

 

 

SELLER:

 

NEW MEADVILLE FORGING, INC.

 

 

By:       /s/ John R. Keller                                 

Name:  John R. Keller

Title:    President

 

 

KELLER:

 

KELLER GROUP, INC.

 

 

By:       /s/ John R. Keller                                 

Name:  John R. Keller

Title:    President

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EXHIBIT A

 

ESCROW AGREEMENT

            This ESCROW AGREEMENT (the “Agreement”) is made as of April 3, 2006,
among KFx Inc., a Delaware corporation (“Buyer”), New Meadville Forging, Inc., a
Delaware corporation (“Seller” and together with Buyer, sometimes referred to
collectively as the “Parties”), and JPMorgan Chase Bank, N.A. (the “Escrow
Agent”).

RECITALS

            A.        Buyer and Seller, along with Keller Group, Inc., an
Illinois corporation and parent entity of Seller, are party to that certain
Share Purchase Agreement (the “Purchase Agreement”), dated March 6, 2006, as
amended on April 3, 2006, pursuant to which Buyer is purchasing from Seller all
of the issued and outstanding shares of Buckeye Industrial Mining Co., an Ohio
corporation and wholly-owned subsidiary of Seller.  Escrow Agent is not a party
to, has not received and will not be responsible for the Purchase Agreement.

            B.         Pursuant to the Purchase Agreement, a portion of the
Purchase Price will be delivered to the Escrow Agent to be held and ultimately
distributed in accordance with the terms and conditions provided for herein.

            C.        Buyer and Seller desire the Escrow Agent to receive, hold,
manage and dispose of the Escrow Fund in accordance with the terms, conditions
and provisions of this Agreement and the Escrow Agent is willing to do so.

            NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:

            1.         Certain Defined Terms.  Capitalized terms used but not
otherwise defined herein will have the respective meanings given such terms in
the Purchase Agreement. 

            2.         Appointment of Escrow Agent.  Buyer and Seller hereby
designate and appoint the Escrow Agent to serve in accordance with the terms and
conditions of this Agreement, and the Escrow Agent hereby agrees to act as such,
upon the terms and conditions provided in this Agreement.

            3.         Escrow Fund.

                        (a)        Deposit of Escrow Fund.  On the Closing Date,
Buyer will deliver to the Escrow Agent, in accordance with the terms of Section
2.4 of the Purchase Agreement, the Escrow Amount of $3,750,000 in immediately
available funds.  The Escrow Agent will hold such funds in an account
established by the Escrow Agent (the “Escrow Account” or the “Escrow Fund”). 
The Escrow Agent will not make any payment or distribution of the Escrow Fund
except as and in the manner expressly provided by this Agreement.

                        (b)        Rights to Escrow Fund.  Except as expressly
provided herein, none of the parties hereto will have any right, title or
interest in or possession of any of the Escrow Fund.  Neither Buyer nor Seller
will have the ability to pledge, convey, hypothecate or grant a security
interest in any portion of the Escrow Fund unless and until such assets have
been disbursed in accordance with this Agreement.

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                        (c)        Payments from Escrow Fund.  Any payment to be
made by the Escrow Agent pursuant to this Agreement will be made by wire
transfer to the appropriate recipient (upon receipt of written wire transfer
instructions of the recipient) from the Escrow Fund. Initial wire instructions
for each of Buyer and Seller are set forth on Exhibit A attached hereto.

                        (d)        Investment of Escrow Fund.  During the term
of this Agreement, the Escrow Fund and Escrow Income may be invested by the
Escrow Agent in (a) a JPMorgan Chase Bank, N.A. money market account, (b) a
trust account with JPMorgan Chase Bank; N.A. or (c) a money market mutual fund
(separately specified in writing), including without limitation a JPMorgan fund
or any other mutual fund for which the Escrow Agent or any affiliate of the
Escrow Agent serves as investment manager, administrator, shareholder servicing
agent and/or custodian or subcustodian, notwithstanding that (i) the Escrow
Agent or an affiliate of the Escrow Agent receives fees from such funds for
services rendered, (ii) the Escrow Agent charges and collects fees for services
rendered pursuant to this Agreement, which fees are separate from the fees
received from such funds, and (iii) services performed for such funds and
pursuant to this Agreement may at times duplicate those provided to such funds
by the Escrow Agent or its affiliates; or such other investments as shall be
directed in writing by Buyer and Seller and as shall be acceptable to the Escrow
Agent.  Such written instructions, if any, referred to in the foregoing sentence
shall specify the type and identity of the investments to be purchased and/or
sold and will be executed through JPMorgan Asset Management (JPMAM), in the
investment management division of JPMorgan Chase.  Unless otherwise instructed
in writing by the Parties, Escrow Agent shall invest the Escrow Fund in
selection (b) above.

            Subject to principles of best execution, transactions shall be
effected on behalf of the Escrow Fund through broker-dealers selected by JPMAM. 
In this regard, JPMAM seeks to attain the best overall result for the Escrow
Fund, taking into consideration quality of service and reliability.  An agency
fee will be assessed in connection with each transaction. The Escrow Agent shall
have the right to liquidate any investments held in order to provide funds
necessary to make required payments under this Agreement.  The Escrow Agent
shall have no liability for any loss sustained as a result of any investment in
an investment made pursuant to the terms of this contract or as a result of any
liquidation of any investment prior to its maturity or for the failure of the
parties to give the Escrow Agent instructions to invest or reinvest the Escrow
Fund. Receipt, investment and reinvestment of the Escrow Fund shall be confirmed
by Escrow Agent as soon as practicable by account statement, and any
discrepancies in any such account statement shall be noted by Parties to Escrow
Agent within 30 calendar days after receipt thereof.  Failure to inform Escrow
Agent in writing of any discrepancies in any such account statement within said
30-day period shall conclusively be deemed confirmation of such account
statement in its entirety.

                        (e)        All income, increments and gains of all kinds
(“Escrow Income”) earned on the Escrow Fund will be distributed to Seller as
part of the distribution on the Twelve Month Anniversary Date (as defined
below).

                        (f)         Tax Liability.  The Parties each represent
that its correct Taxpayer Identification Number ("TIN") assigned by the Internal
Revenue Service ("IRS") or any other taxing authority is set forth on the
signature pagehereof.  Buyer and Seller agree that, for tax reporting purposes,
all interest or other income, if any, attributable to the Escrow Fund or any

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other amount held in escrow by the Escrow Agent pursuant to this Agreement shall
be allocable to Seller.  In addition, Escrow Agent shall withhold any taxes it
deems appropriate and shall remit such taxes to the appropriate authorities. Any
tax returns or reports required to be prepared and filed on behalf of or by the
Escrow Fund will be prepared and filed by Buyer or Seller, as applicable, and
the Escrow Agent shall have no responsibility for the preparation and/or filing
or any tax return with respect to any income earned by the Escrow Fund.  In
addition, any tax or other payments required to be made pursuant to such tax
return or filing will be paid by Buyer or Seller, as appropriate. Escrow Agent
shall have no responsibility for such payment unless directed to do so by the
appropriate authorized party.

                        (g)        Direction Letters.  In any event and at any
time, the Escrow Agent will promptly upon receipt of one or more Direction
Letters disburse the Escrow Fund in accordance with the terms and conditions of
the Direction Letters.  As used in this Agreement, a “Direction Letter” means a
joint letter of direction executed by Buyer and Seller and delivered to the
Escrow Agent. 

                        (h)        Other.  In addition to the foregoing
procedures, the Escrow Agent may make payments from the Escrow Fund at any time
five (5) calendar days after receipt by the Escrow Agent of an order, judgment
or decree that represents a final adjudication of the rights of the parties by a
court of competent jurisdiction, and for which the time of appeal from such
order, judgment or decree has expired without an appeal having been noticed,
filed or perfected (a “Final Order”). In the event that any escrow property
shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order affecting the
property deposited under this Agreement, the Escrow Agent is hereby expressly
authorized, in its sole discretion, to obey and comply with all writs, orders or
decrees so entered or issued, which it is advised by legal counsel of its own
choosing is binding upon it, whether with or without jurisdiction, and in the
event that the Escrow Agent obeys or complies with any such writ, order or
decree it shall not be liable to any of the parties hereto or to any other
person, firm or corporation, by reason of such compliance notwithstanding such
writ, order or decree be subsequently reversed, modified, annulled, set aside or
vacated.

            4.         Delivery of Indemnification Documents.

                        (a)        Notice of Third Party Claims.  With respect
to any third party claim subject to indemnification under Section 9.1 of the
Purchase Agreement (a “Third Party Claim”), Buyer will give written notice to
the Escrow Agent at the same time that the Buyer Indemnitees give written notice
of the Third Party Claim to Seller under the Purchase Agreement.  If Seller
elects to participate in or control the defense and settlement of such Third
Party Claim by giving written notice to the Buyer Indemnitees as provided in
Section 9.5 of the Purchase Agreement, then Seller also will give written notice
at the same time to the Escrow Agent.

                        (b)        Notice, Payment or Settlement of
Indemnification Claims.  In accordance with Section 9.5 of the Purchase
Agreement, Buyer has the right to deliver or cause to be delivered in accordance
with Section 8 hereof a written notice (a “Claim Notice”) of an indemnification
claim (an “Indemnification Claim”) to Seller with a copy to the Escrow Agent
prior to 5:00 p.m. Central Time on or before April 3, 2007.  The Claim Notice
may include, if

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appropriate, the notice to be given by Buyer pursuant to Section 4(a) above with
respect to any Third Party Claim.  Upon receipt of such Claim Notice, Seller has
the right to deliver prior to 5:00 p.m. Central Time on the thirtieth (30th) day
after Escrow Agent’s receipt of the Claim Notice, notify Buyer and the Escrow
Agent in writing as to whether Seller either (i) acknowledges and accepts the
obligation of the Indemnification Claim and agrees to accept liability for
damages resulting from such Indemnification Claim, or (ii) disputes such
Indemnification Claim.  Failure of Seller to so notify Buyer and the Escrow
Agent within thirty (30) days will be deemed to constitute an acknowledgment and
acceptance of the obligation of the Indemnification Claim and an agreement to
accept liability for damages resulting from and identified in such
Indemnification Claim.

                        (c)        Payment of Indemnification Claims.  At any
time after any damages become a liquidated amount, Buyer may submit to the
Escrow Agent and Seller a notice as more fully provided below (a “Payment
Notice”) setting forth the amount of the damages and request the payment thereof
from the Escrow Account.

                                    (i)         The Payment Notice will state
(i) that an Indemnification Claim to which the Payment Notice relates has been
submitted to Seller in accordance with Section 4(b) hereof and (ii) whether
Seller has acknowledged and accepted the obligation of the Indemnification Claim
and agreed to accept liability for damages resulting from such Indemnification
Claim or previously has given notice to Buyer that Seller disputes the
particular Indemnification Claim.

                                    (ii)        If the Payment Notice states
that Seller has acknowledged and accepted the obligation of the Indemnification
Claim and has agreed to accept liability for damages resulting from such
Indemnification Claim, then the Escrow Agent will distribute to Buyer the amount
set forth in the Payment Notice from the Escrow Account.

                                    (iii)       If the Payment Notice states
that Seller previously has given notice to Buyer and Escrow Agent that Seller
disputes the particular Indemnification Claim, then the Escrow Agent will
distribute to Buyer from the Escrow Account the amount specified in the Payment
Notice only if (i) Seller has withdrawn in writing to Buyer and Escrow Agent its
objection to the Indemnification Claim or has waived in writing to Buyer and
Escrow Agent any objection to the payment or reimbursement of the amount set
forth in such Payment Notice or (ii) a Final Order has been entered with respect
to the Indemnification Claim or the portion thereof to be paid or reimbursed
pursuant to such Payment Notice (with a copy of such Final Order attached to the
applicable Payment Notice).

                                    (iv)       Notwithstanding any of the
foregoing provisions of this Section 4(c), if Seller objects to the payment or
reimbursement of all or some portion (which will be so specified) of the amount
set forth in any Payment Notice in a written notice that is delivered to the
Escrow Agent and Buyer within ten (10) days of the date of the Payment Notice
and that states the grounds or basis upon which Seller objects to the payment or
reimbursement of the amount (or some portion of the amount) set forth in the
particular Payment Notice, then no payment from the Escrow Account will be
distributed to Buyer for the amount set forth in the Payment Notice until the
Escrow Agent will have received either (i) a Direction Letter or (ii) a copy of
a Final Order entered with respect thereof.  If Seller objects to only a portion
of such

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amount, then the Escrow Agent will distribute to Buyer from the Escrow Account
only an amount equal to that portion as to which Seller has no objection. 
Nothing herein will prevent Buyer from reducing the amount of, deleting certain
items and/or amounts from, or withdrawing a Payment Notice, without prejudice to
resubmit­ting the same in a subsequent Payment Notice.  Buyer will notify the
Escrow Agent and Seller in writing of any such reduction, deletion or
withdrawal.

                        (d)        Distribution Notice.  If a Claim Notice has
been resolved and Buyer has not timely submitted a Payment Notice, Seller may
submit a distribution notice (a “Distribution Notice”) to the Escrow Agent
stating that such Claim Notice has been resolved, with a copy of such
Distribution Notice delivered to Buyer and the Escrow Agent will, on or at any
time after the tenth (10th) day following receipt of such Distribution Notice,
distribute to Buyer from the Escrow Account the amount set forth in the
Distribution Notice.

            5.         Distributions from the Escrow Account.  Distributions to
Seller will be made from the Escrow Account as follows:

                        (a)        First Distribution from Escrow Account.  As
promptly as is practicable after the twelve (12) month anniversary date of this
Agreement (the “Twelve Month Anniversary Date”), the Escrow Agent will
distribute to Seller the then remaining amount in the Escrow Account minus (i)
those amounts reasonably necessary to reserve for the payment of all Payment
Notices (including the disputed portions thereof) relating to Indemnification
Claims that have been timely received by the Escrow Agent in accordance with
this Agreement and not paid in full or otherwise discharged, plus (ii) all
pending Indemnification Claims that have been timely received by the Escrow
Agent in accordance with this Agreement and not paid in full or otherwise
discharged (collectively the “Outstanding Claims”); provided, however, that if
the Outstanding Claims exceed the amount remaining in the Escrow Account on the
Twelve Month Anniversary Date, then no distribution of or from the Escrow
Account (other than the distribution of Escrow Income as provided for in Section
3(d) above) pursuant to this Section 5(a) will be made.

                        (b)        Subsequent Distributions from the Escrow
Account.  Subsequent to the Twelve Month Anniversary Date, as each Payment
Notice or Indemnification Claim is finally determined, resolved, paid or
disposed of, if the amount reserved for that particular Payment Notice or
Indemnification Claim will exceed the actual amount distributed to Buyer
relating to that particular Payment Notice or Indemnification Claim, then Buyer
and Seller will deliver a Direction Letter to the Escrow Agent specifying such
excess amount.  As promptly as is practicable after its receipt of such
Direction Letter, the Escrow Agent will distribute to Seller such excess amount
then held by the Escrow Agent in the Escrow Account.

            6.         Termination of Escrow.  Upon final payment of all amounts
remaining in the Escrow Fund pursuant to Section 5, this Agreement will
terminate, and the Escrow Agent will be released from any further duty or
obligation hereunder.

            7.         Escrow Agent.

                        (a)        Protection of Escrow Agent.  The parties
agree that:

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                                    (i)         Buyer and Seller may examine the
Escrow Fund at any time during regular business hours and upon reasonable prior
notice at the office of the Escrow Agent and the Escrow Agent will periodically
provide a written accounting of the Escrow Fund to Buyer and Seller in
accordance with the Escrow Agent’s standard practices, but in no event less
often than monthly;

                                    (ii)        the Escrow Agent’s duties and
responsibilities will be limited to those expressly set forth in this Agreement;

                                    (iii)       subject to Section 8(d) hereof,
no assignment of the interest of any of the parties or their successors will be
binding upon the Escrow Agent unless and until written evidence of such
assignment in form satisfactory to the Escrow Agent will be filed with and
accepted in writing by the Escrow Agent;

                                    (iv)       the Escrow Agent will exercise
the same degree of care toward the Escrow Fund as it exercises toward similar
property held in escrow for the account of others, and will not be held to any
higher standard of care under this Agreement;

                                    (v)        the Escrow Agent will not be
called upon to advise any party as to selling or retaining, or taking or
refraining from taking any action with respect to, any securities or other
property deposited hereunder;

                                    (vi)       the Escrow Agent will be entitled
to rely upon any order, judgment, certification, instruction, notice or other
writing delivered to it in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity or service thereof; the Escrow
Agent may act in reliance upon any instrument comporting with the provisions of
this Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; the Escrow Agent may act pursuant to the advice of counsel
chosen by it with respect to any matter relating to this Agreement and will not
be liable for any action taken or omitted in accordance with such advice so long
as such action or omission does not constitute gross negligence or willful
misconduct.  The Escrow Agent undertakes to perform only such duties as are
expressly set forth herein and no duties shall be implied. The Escrow Agent
shall be under no duty to inquire into or investigate the validity, accuracy or
content of any such document, notice, instruction or request.  The Escrow Agent
shall have no duty to solicit any payments which may be due it or the Escrow
Fund.  The Escrow Agent shall not be liable for any action taken or omitted by
it in good faith except to the extent that a final adjudication of acourt of
competent jurisdiction determines that the Escrow Agent's gross negligence or
willful misconduct was the primary cause of any loss to either of the Parties. 
The Escrow Agent may interplead all of the assets held hereunder into a court of
competent jurisdiction or may seek a declaratory judgment with respect to
certain circumstances, and thereafter be fully relieved from any and all
liability or obligation with respect to such interpleaded assets or any action
or nonaction based on such declaratory judgment.  The parties hereto other than
the Escrow Agent agree to pursue any redress or recourse in connection with any
dispute without making the Escrow Agent a party to the same.  Anything in this
Escrow Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for

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special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.  No party to this Agreement is liable to any other party for losses due
to, or if it is unable to perform its obligations under the terms of this Escrow
Agreement because of, acts of God, fire, war, terrorism, floods, strikes,
electrical outages, equipment or transmission failure, or other causes
reasonably beyond its control.

                                    (vii)      the Escrow Agent will be under no
duty to monitor or enforce compliance by Buyer or Seller with any term or
provision of the Purchase Agreement;

                                    (viii)      if the Escrow Agent will be
uncertain as to its duties or rights hereunder or will receive instructions from
any of the undersigned with respect to the Escrow Fund which, in the opinion of
the Escrow Agent, are in conflict with any of the provisions of this Agreement,
the Escrow Agent will be entitled to refrain from taking any action until it
will be directed otherwise by a Direction Letter or Final Order;

                                    (ix)       if the Escrow Agent is made a
party to any litigation in connection with this Agreement, it will have the
right to retain counsel, and will be reimbursed for all reasonable costs and
expenses, including its reasonable attorneys’ fees and expenses, incurred in
connection therewith; such costs and expenses will be paid one-half by Buyer and
one-half by Seller (provided that the Escrow Agent will not be entitled to any
reimbursement for its fees and expenses incurred as a result of its gross
negligence or willful misconduct); and

                        (b)        The Parties shall jointly and severally
indemnify, defend and save harmless the Escrow Agent and its directors,
officers, agents and employees (the "indemnitees") from and against any and all
loss, liability or expense (including the fees and expenses of in house or
outside counsel and experts and their staffs and all expense of document
location, duplication and shipment) arising out of or in connection with (i) the
Escrow Agent's execution and performance of this Agreement, except in the case
of any indemnitee to the extent that such loss, liability or expense is finally
adjudicated to have been primarily caused by the gross negligence or willful
misconduct of such indemnitee, or (ii) its following any instructions or other
directions from Buyer or Seller, except to the extent that its following any
such instruction or direction is expressly forbidden by the terms hereof.  The
Parties hereto acknowledge that the foregoing indemnities shall survive the
resignation or removal of the Escrow Agent or the termination of this
Agreement.  The Parties hereby grant the Escrow Agent a lien on, right of
set-off against and security interest in the Escrow Fund for the payment of any
claim for indemnification, compensation, expenses and amounts due hereunder.

                        (c)        Fees and Expenses.  The Buyer agrees to (i)
pay the Escrow Agent upon execution of this Agreement and from time to time
thereafter reasonable compensation for the services to be rendered hereunder,
which unless otherwise agreed in writing shall be as described in Exhibit B
attached hereto, and (ii) pay or reimburse the Escrow Agent upon request for all
expenses, disbursements and advances, including reasonable attorney's fees and
expenses, incurred or made by it in connection with the preparation, execution,
performance, delivery, modification and termination of this Agreement.

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                        (d)        New Escrow Agent.  The Escrow Agent will have
the right to resign at any time upon five (5) Business Days’ written notice of
such resignation to Buyer and Seller and Buyer and Seller will have the right to
terminate the services of the Escrow Agent at any time upon giving written
notice signed by Buyer and Seller of such termination to the Escrow Agent, and
in each case specifying the effective date of such resignation or termination. 
If the Escrow Agent will be removed as escrow agent or will resign or otherwise
cease to act as escrow agent, Buyer and Seller will mutually agree upon a
successor which successor will be deemed to be the Escrow Agent for all purposes
of this Agreement.  If a successor Escrow Agent has not been appointed and
accepted such appointment by the end of the thirty (30) day period following
such removal, resignation or cessation, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor escrow agent and
deposit the Escrow Fund with such court (and upon so depositing such property,
it will be relieved of all liability under the terms hereof as to the property
so deposited), and the costs, expenses and reasonable attorneys’ fees which the
Escrow Agent incurs in connection with such a proceeding will be borne
severally, and not jointly, one-half by Buyer and one-half by Seller.  After the
effective date of such removal, resignation or cessation, the Escrow Agent will
be under no further obligation to perform any of the duties of Escrow Agent
under this Agreement other than to deliver the Escrow Fund, and any notices or
other written communications or documents received by Escrow Agent in its
capacity as such, to the successor escrow agent.  The removal, resignation or
other ceasing to act as escrow agent by the Escrow Agent or any successor
thereto will have no effect on this Agreement or any of the rights of the
parties hereunder, all of which will remain in full force and effect. 

            8.         Miscellaneous.

                        (a)        Notices.  All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement will be in writing and will be deemed to have been given when
personally delivered (including by Federal Express or other reputable courier
service) or sent by facsimile transmission with a confirmation receipt . 
Notices, demands and communications to the parties hereto will, unless another
address is specified in writing, be sent to the respective address indicated in
the Purchase Agreement or, with respect to the Escrow Agent, as set forth below

If to Buyer:

                                                                                

KFx Inc.

55 Madison Steret, Suite 500

Denver, Colorado  80206

Attention:  William Laughlin, Esq.

Fax No.:  (303) 293-8430

 

If to Seller:

 

New Meadville Forging, Inc.

c/o Keller Ground, Inc.

One Northfield Plaza, Suite 510

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Northfield, Illinois  60093

Attention:   Jack Keller

Fax No.:  (847) 446-9384

                                                                                

If to the Escrow Agent:

 

JPMorgan Chase Bank, N.A.

Escrow  Services

600 Travis Street, 53rd Floor

Houston, Texas  77002

Attention:  Luis Bustamante

Fax No.: (713) 216-6927

            In the event that the Escrow Agent, in its sole discretion, shall
determine that an emergency exists, the Escrow Agent may use such other means of
communication as the Escrow Agent deems appropriate.  "Business Day" shall mean
any day other than a Saturday, Sunday or any other day on which the Escrow Agent
located at the notice address set forth above is authorized or required by law
or executive order to remain closed.

                        (b)        Governing Law.  This Agreement will be
governed by and construed in accordance with the laws of the State of Colorado,
without regard to the choice-of-laws or conflicts-of-laws provisions thereof. 
Each party hereto irrevocably waives any objection on the grounds of venue,
forum non-conveniens or any similar grounds and irrevocably consents to service
of process by mail or in any other manner permitted by applicable law and
consents to the jurisdiction of the courts located in the State of Texas.  The
parties further hereby waive any right to a trial by jury with respect to any
lawsuit or judicial proceeding arising or relating to this Agreement.

                        (c)        Counterparts.  This Agreement may be executed
in separate counterparts and by facsimile, each of which will be an original and
all of which taken together will constitute one and the same agreement.

                        (d)        Successors and Assigns.  Neither Seller nor
Buyer will assign or agree to assign or grant to any other party any rights
under this Agreement, including without limitation any rights in or to the
Escrow Fund, without the prior written consent of the other.  This Agreement
will be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and permitted assigns.

                        (e)        Amendment Waiver.  This Agreement may only be
amended, modified, altered or revoked by a written instrument, signed by Buyer,
Seller and the Escrow Agent.  Buyer and Seller agree to give the Escrow Agent
advance notice of any amendment or modification to this Agreement and to provide
the Escrow Agent promptly with copies of any such amendment or modification.

                        (f)         Captions.  The paragraph captions used
herein are for reference purposes only, and will not in any way affect the
meaning or interpretation of this Agreement.

A-9

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                        (g)        Entire Agreement.  This Agreement and the
Purchase Agreement (including the documents and instruments referred to herein
and therein) constitute the entire agreement for and Buyer and Seller and this
Agreement constitutes the entire agreement for Escrow Agent and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.

                        (h)        Account Opening Information.

            IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

            For accounts opened in the US:  to help the government fight the
funding of terrorism and money laundering activities, Federal law requires all
financial institutions to obtain, verify, and record information that identifies
each person who opens an account.  When an account is opened, the Escrow Agent
will ask for information that will allow us to identify relevant parties.

                        (i)         Security Procedures.  In the event funds
transfer instructions are given (other than in writing at the time of execution
of this Agreement, as indicated in this Section 8 above), whether in writing, by
telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
("Exhibit C") hereto, and the Escrow Agent may rely upon the confirmation of
anyone purporting to be the person or persons so designated.  Each funds
transfer instruction shall be executed by an authorized signatory, a list of
such authorized signatories is set forth on Exhibit C.  The undersigned is
authorized to certify that the signatories on Schedule 1 are authorized
signatories.  The persons and telephone numbers for call-backs may be changed
only in a writing actually received and acknowledged by the Escrow Agent. If the
Escrow Agent is unable to contact any of the authorized representatives
identified in Exhibit C, the Escrow Agent is hereby authorized to seek
confirmation of such instructions by telephone call-back to any one or more of
your executive officers, ("Executive Officers"), which shall include the titles
of______________________, as the Escrow Agent may select. Such "Executive
Officer" shall deliver to the Escrow Agent a fully executed Incumbency
Certificate, and the Escrow Agent may rely upon the confirmation of anyone
purporting to be any such officer. The Escrow Agent and the beneficiary's bank
in any funds transfer may rely solely upon any account numbers or similar
identifying numbers provided by Buyer or Seller to identify (i) the beneficiary,
(ii) the beneficiary's bank, or (iii) an intermediary bank.  The Escrow Agent
may apply any of the escrowed funds for any payment order it executes using any
such identifying number, even when its use may result in a person other than the
beneficiary being paid, or the transfer of funds to a bank other than the
beneficiary's bank or an intermediary bank designated. The parties to this
Agreement acknowledge that these security procedures are commercially
reasonable.

Remainder of Page Left Intentionally Blank

A-10

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            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.

 

Tax Certification: Taxpayer ID#:  _______________________

Customer is a (check one):

 

___ Corporation

   

___ Municipality

   

___ Partnership

   

___ Non-profit or Charitable Org

___ Individual

___ REMIC

___ Trust

___ Other _________________

 

Under the penalties of perjury, the undersigned certifies that:

 

                                                                                                                                                                                                                                               

(1)

the entity is organized under the laws of the United States

 

(2)     

the number shown above is its correct Taxpayer Identification Number (or it is
waiting for a number to be issued to it); and

 

(3)     

it is not subject to backup withholding because: (a) it is exempt from backup
withholding or (b) it has not been notified by the Internal Revenue Service
(IRS)
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified it that it is no longer
subject to backup
withholding.

 

(If the entity is subject to backup withholding, cross out the words after the
(3) above.)

 

Investors who do not supply a tax identification number will be subject to
backup withholding in accordance with IRS regulations.

 

Note: The IRS does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.

 

SELLER:

                                                                                            

     

NEW MEADVILLE FORGING, INC.

 

 

By:                                                                  

       Name:

       Title:

A-11

--------------------------------------------------------------------------------

 

Tax Certification: Taxpayer ID#:  _______________________

Customer is a (check one):

 

___ Corporation

   

___ Municipality

   

___ Partnership

   

___ Non-profit or Charitable Org

___ Individual

___ REMIC

___ Trust

___ Other _________________

 

Under the penalties of perjury, the undersigned certifies that:

 

                                                                                                                                                                                                                                               

(1)

the entity is organized under the laws of the United States

 

(2)     

the number shown above is its correct Taxpayer Identification Number (or it is
waiting for a number to be issued to it); and

 

(3)     

it is not subject to backup withholding because: (a) it is exempt from backup
withholding or (b) it has not been notified by the Internal Revenue Service
(IRS)
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified it that it is no longer
subject to backup
withholding.

 

(If the entity is subject to backup withholding, cross out the words after the
(3) above.)

 

Investors who do not supply a tax identification number will be subject to
backup withholding in accordance with IRS regulations.

 

Note: The IRS does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.

 

BUYER:

                                                                                            

     

KFx INC.

 

 

By:       /s/ Kevin R. Colllins                             

       Name:  Kevin R. Collins

       Title:    Executive Vice President-Finance & Strategy

 

 

 

ESCROW AGENT:

 

JPMORGAN CHASE BANK, N.A.

 

 

 

By:
                                                                             

Name:                                                                         

Title:
                                                                           

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EXHIBIT A

 

Wire Instructions

For Seller:

For Buyer:

A-13

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EXHIBIT B

 

Compensation of Escrow Agent

A-14

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EXHIBIT C

 

Telephone Number(s) and signatures for

 

Person(s) Designated to give and confirm Funds Transfer Instructions

If to Buyer:

 

Name

Telephone Number

Signature

 

     

     

1.

______________________

_______________________

___________________

 

2.

______________________

_______________________

___________________

 

3.

______________________

_______________________

___________________

 

If to Seller:

 

Name

Telephone Number

Signature

 

1.

______________________

_______________________

___________________

 

2.

______________________

_______________________

___________________

 

3.

______________________

_______________________

___________________

Telephone call backs shall be made to both Buyer and Seller if joint
instructions are required pursuant to the Agreement. All funds transfer
instructions must include the signature of the person(s) authorizing said funds
transfer.

A-15