<PAGE>

EXHIBIT 4.3

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                                     WARRANT

                               PURCHASE AGREEMENT

                                     between

                                    KFX INC.

                                       and

                                 William A. Boyd

                          dated as of February 15, 2002

================================================================================
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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

1.   DEFINITIONS...............................................................1
         1.1.  Certain Definitions.............................................1
         1.2.  Other Terms.....................................................1

2.   AUTHORIZATION AND SALE OF SECURITIES......................................2
         2.1.  Authorization...................................................2
         2.2.  Sale of the Warrant.............................................2

3.   CLOSING...................................................................2

4.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................2
         4.1.  Organization and Standing.......................................3
         4.2.  Corporate Power.................................................3
         4.3.  Authorization...................................................3

5.   INVESTMENT REPRESENTATIONS................................................3
         5.1.  Accredited Investor; Experience; Risk...........................3
         5.2.  Investment......................................................3
         5.3.  Restricted Securities; Rule 144.................................3
         5.4.  Authorization...................................................4
         5.5.  Further Limitations on Disposition..............................4
         5.6.  Company Information.............................................4

6.   CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR.............................4
         6.1.  Representations and Warranties Correct..........................4
         6.3.  Covenants.......................................................5

7.   CONDITIONS TO COMPANY'S OBLIGATIONS.......................................5
         7.1.  Representations Correct.........................................5

8.   MISCELLANEOUS.............................................................5
         8.1.  Governing Law...................................................5
         8.2.  Survival........................................................5
         8.3.  Successors and Assigns..........................................5
         8.4.  Entire Agreement; Amendment.....................................5
         8.5.  Notices, etc....................................................6
         8.6.  Delays or Omissions.............................................6
         8.7.  Counterparts....................................................6
         8.8.  Severability....................................................7

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          WARRANT PURCHASE AGREEMENT, dated as of February 15, 2002 (the
     "Agreement"), between KFx INC., a Delaware corporation (the "Company" or
     "KFx"), and William A. Boyd (the "Investor").

          In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:

1.   DEFINITIONS

          1.1. Certain Definitions. As used in this Agreement, the following
               -------------------
terms shall have the meanings set forth in this Section 1.1:

          1.1.1. "Closing" shall have the meaning specified in Section 3 of this
     Agreement.

          1.1.2. "Closing Date" shall have the meaning specified in Section 3 of
     this Agreement.

          1.1.3. "Commission" shall mean the Securities and Exchange Commission
     or any other federal agency at the time administering the Securities Act.

          1.1.4. "Common Stock" shall mean the common stock of the Company,
     $.001 par value per share.

          1.1.5. "Loan Note" shall mean the Loan Note by KFx to the Investor,
     dated as of February 15, 2002.

          1.1.6. "Pegasus" shall mean Pegasus Technologies, Inc., a South Dakota
     corporation, which is a majority owned subsidiary of KFx.

          1.1.7. "Securities" has the meaning specified in Section 4.3.

          1.1.8. "Securities Act" shall mean the Securities Act of 1933, as
     amended, and the rules and regulations of the Commission promulgated
     thereunder, all as the same shall be in effect at the time.

          1.1.9. "Warrant" shall mean the Common Stock Purchase Warrant of KFx
     Inc. dated February 15, 2002 issued to the Investor exercisable for Fifty
     Thousand (50,000) shares of Common Stock at an exercise price of $3.00 per
     share, subject to adjustment as set forth therein, a copy of which is
     attached hereto as Exhibit A.
                        ---------

          1.2. Other Terms. Other terms used in this Agreement are defined in
               -----------
the context in which they are used and shall have the meanings therein
indicated.

                                       1
<PAGE>

2.   AUTHORIZATION AND SALE OF SECURITIES

          2.1. Authorization. Prior to the Closing, the Company shall have
               -------------
authorized the sale and issuance of the Warrant and shall have reserved the
50,000 shares of Common Stock issuable upon exercise of the Warrant.

          2.2. Sale of the Warrant. On the basis of the representations,
               -------------------
warranties and agreements contained herein, and subject to the terms and
conditions hereof, at the Closing, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, the Warrant, in
consideration of the provision of an advance of $100,000 to KFx Inc., pursuant
to the Loan Note (the "Purchase Price").

          1.2. Legends. It is understood that each certificate representing the
               -------
Securities shall, unless registered under the Securities Act, bear a legend in
the following form or substantially similar form (in addition to any legend
required under applicable state securities laws):

          "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
          1933 (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
          AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
          CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
          DISPOSITION MAY BE EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION
          STATEMENT RELATED THERETO OR (B) AN EXEMPTION FROM THE REGISTRATION
          REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
          LAWS."

3.   CLOSING

          The closing of the purchase and sale of the Warrant being purchased by
the Investor hereunder (the "Closing") shall be held at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, at Four Times Square, New York, New York, at
12:00 noon on February 15, 2002 or at such other time and place as the Company
and the Investor mutually agree (the "Closing Date"). At the Closing, the
Company shall deliver to the Investor the Warrant being purchased by the
Investor against payment of the Purchase Price.

4.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company hereby represents and warrants to the Investor as follows:

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          4.1. Organization and Standing. The Company is a corporation duly
               -------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware.

          4.2. Corporate Power. The Company has all requisite legal and
               ---------------
corporate power and authority to execute and deliver this Agreement, to sell and
issue the Warrant and to carry out and perform its obligations under the terms
of this Agreement, and the Warrant.

          4.3. Authorization. All corporate action on the part of the Company,
               -------------
its directors and stockholders necessary for the sale and issuance of the
Warrant and the shares of Common Stock issuable upon exercise thereof (together,
the "Securities") and the execution, delivery and performance of the Company's
obligations under this Agreement and the Warrant and the reservation of the
shares of Common Stock issuable upon exercise of the Warrant have been duly
taken.

5.   INVESTMENT REPRESENTATIONS

          The Investor hereby represents and warrants to the Company, as of the
Closing Date, as follows:

          5.1. Accredited Investor; Experience; Risk. The Investor is an
               -------------------------------------
"accredited investor" as such term is defined in Regulation D promulgated under
the Securities Act and has not been organized for the specific purpose of
acquiring the Securities. The Investor and his representatives have been solely
responsible for the Investor's own "due diligence" investigations of the Company
and its management and business, for his own analysis of the merits and risks of
the investment, and for his own analysis of the fairness and desirability of the
terms of the investment. The Investor has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks associated with the purchase of the Securities and of protecting his
interests in connection therewith. The Investor is able to fend for himself in
the transactions contemplated by this Agreement and has the ability to bear the
economic risk of the investment, including complete loss of the investment.

          5.2. Investment. The Investor is acquiring the Securities for
               ----------
investment for his own account and not with a view to, or for resale in
connection with, any distribution thereof, and he has no present intention of
selling or distributing the Securities. The Investor understands that the
Securities have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein.

          5.3. Restricted Securities; Rule 144. The Investor understands that
               -------------------------------
the Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations the Securities may be resold without registration under
the Securities Act only in certain limited circumstances. The Investor
acknowledges that the Securities

                                       3
<PAGE>

must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available.

          5.4. Authorization. The Investor represents that he has the full
               -------------
right, power and authority to enter into and perform its obligations under this
Agreement and that this Agreement when executed and delivered by the Investor
will constitute a valid and binding obligation of the Investor, enforceable in
accordance with its terms, subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors, rules of law governing
specific performance, injunctive relief or other equitable remedies.

          5.5. Further Limitations on Disposition. Without in any way limiting
               ----------------------------------
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until either:

               (a) There is then in effect a registration statement under the
          Securities Act covering such proposed disposition and such disposition
          is made in accordance with such registration statement or the
          provisions of Section 5.3 hereof; or

               (b) The Investor shall have notified the Company of the proposed
          disposition and shall have furnished the Company with a detailed
          statement of the circumstances surrounding the proposed disposition.
          If, in the good faith determination of the counsel of the Company,
          there is a reasonable basis for the belief that such disposition would
          require registration under the Securities Act, the Company may require
          that Investor furnish the Company with an opinion of counsel,
          reasonably satisfactory to the Company, that such disposition will not
          require registration under the Securities Act.

          5.6. Company Information. The Investor has had an opportunity to
               -------------------
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. The Investor has also had the
opportunity to ask questions of, and receive answers from, the Company and its
management regarding the terms and conditions of this investment.

6.   CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR

          The obligations of the Investor to purchase the Warrant at the Closing
are subject to the fulfillment on or prior to the Closing Date of all of the
conditions set forth below in this Section 6.

          6.1. Representations and Warranties Correct. The representations and
               --------------------------------------
warranties made in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.

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<PAGE>

          1.3. Warrant. The Company shall execute and deliver the Warrant.
               -------

          1.4. Covenants. All covenants, agreements and conditions contained in
               ---------
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.

7.   CONDITIONS TO COMPANY'S OBLIGATIONS

          The Company's obligation to sell the Warrant to the Investor at the
Closing is subject to the fulfillment of the following conditions:

          7.1. Representations Correct. The representations made by such
               -----------------------
Investor in Section 5 hereof shall be true and correct in all material respects
when made, and shall be true and correct in all material respects on the Closing
Date with the same force and effect as if they had been made on the Closing
Date.

          7.2 Investor Advance. The Investor shall provide the Company with
              ----------------
written evidence, in a form reasonably satisfactory to the Company, that the
Investor has paid to KFx an advance of $100,000 pursuant to the Loan Note.

8.   MISCELLANEOUS

          8.1. Governing Law. This Agreement shall be governed in all respects
               -------------
by the laws of the State of New York, without regard to the conflict of laws
rules of such jurisdiction.

          8.2. Survival. The representations, warranties, covenants and
               --------
agreements made in Sections 4 and 5 hereof shall survive the Closing.

          8.3. Successors and Assigns. Except as otherwise provided herein, the
               ----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

          8.4. Entire Agreement; Amendment. This Agreement and the other
               ---------------------------
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and thereof
and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way, including, without limitation, any
summary of terms or similar agreement. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and the Investor.

          8.5. Notices, etc. Any notice required or permitted pursuant to this
               ------------
Agreement shall be in writing and shall be deemed sufficient (i) immediately
when delivered personally or by

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<PAGE>

facsimile, (ii) twenty (20) hours after being deposited with an overnight
courier service (e.g. Federal Express) for next day delivery, or (iii)
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed as follows:

          If to the Investor:

          William A. Boyd
          118 Riding Trail Lane
          Pittsburgh, PA 15215-1500
          Phone:  412-967-0619
          Fax:     412-967-0619

          If to the Company:

          KFx Inc.
          3300 East First Avenue, Suite 290
          Denver, CO 80206
          Attention: Chief Executive Officer
          Phone:  303-293-2992
          Facsimile:  303-293-8430

          8.6. Delays or Omissions. No delay or omission to exercise any right,
               -------------------
power or remedy accruing to the Investor or the Company, upon any breach or
default of the Company or the Investor, respectively, under this Agreement,
shall impair any such right, power or remedy of the Investor or the Company, as
the case may be, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of the Investor or the Company, of any breach or default under this
Agreement by the Company or the Investor, respectively, or any waiver on the
part of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to the Investor and to the Company, respectively, shall be cumulative
and not alternative.

          8.7. Counterparts. This Agreement may be executed in any number of
               ------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

          8.8. Severability. In the event that any provision of this Agreement
               ------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, however, that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.

                                       6
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Purchase Agreement, or have caused this Warrant Purchase Agreement to be fully
executed on their behalf as of the date first set forth above.

                                                 KFx INC.


                                                 By:
                                                     ---------------------------
                                                     R. G. Swenson
                                                     Vice President & Secretary


                                                 INVESTOR


                                                 By:
                                                     ---------------------------
                                                     William A. Boyd

                                       7
<PAGE>

                                    EXHIBIT A
                                    ---------

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (A) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR (B) AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.

                                                                   50,000 SHARES

                         COMMON STOCK PURCHASE WARRANT

                                  OF KFx INC.

                               February 15, 2002

       * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

     THIS IS TO CERTIFY that, for value received and subject to the provisions
hereinafter set forth, William A. Boyd (the "Warrant Holder"), is entitled to
purchase from KFx Inc., a Delaware corporation ("Company") fifty thousand
(50,000) shares (the "Warrant Shares") of the Company's common stock, $.001 par
value, (the "Common Stock" or "Shares"), for an aggregate purchase price equal
to $3.00 multiplied by fifty thousand (50,000) shares ("Aggregate Original
Warrant Price"), all on and subject to the terms, provisions and conditions
hereinafter set forth. This Warrant may be exercised as to all or part
(comprising a whole number) of the Shares represented hereby at any time or
times before February 15, 2005 ("Expiration Date"). This Warrant shall be void
and of no effect, and all rights, restrictions, and obligations hereunder shall
cease to the extent not exercised prior to the Expiration Date.

                                  ARTICLE I.

                              EXERCISE OF WARRANT

     Section 1.1 Duration. Subject to the provisions of Sections 1.2 and 1.4
hereof, this Warrant may be exercised at any time on or after 9:00 a.m., Denver,
Colorado time, on February 15, 2002 and at or before 5:00 p.m., Denver, Colorado
time, on February 15, 2005 (or, if such day is not a business day, at or before
5:00 p.m., Denver, Colorado time, on the next following business day). If this
Warrant is not exercised on or before the Expiration Date, it shall become void,
and all rights hereunder shall thereupon cease.

     Section 1.2 Exercise of Warrant. Subject to the conditions contained
herein, this Warrant may be exercised in whole or in part at any time or times
before the Expiration Date by the surrender of this Warrant or any duly
authorized replacements hereto (with a duly executed subscription agreement in
the form attached hereto) at the principal office of the Company in Denver,
Colorado, and upon payment to the Company of the Aggregate Original Warrant
Price (or, if exercised in part, upon payment to the Company of the applicable
proportionate part of the Aggregate Original Warrant Price) for each Share so
purchased in lawful money of the United States, or by check, or postal or
express money order payable in United States dollars to the order of the Company
or by funds wired to an account as specified by the Company, and upon compliance
with and subject to the conditions set forth herein.

     Upon receipt of this Warrant with the form of exercise duly executed and
accompanied by payment of the Aggregate Original Warrant Price for the shares of
Common Stock for which this Warrant is then being exercised, the Company will
cause to be issued certificates for the total number of whole Warrant Shares (as
provided in Article III hereof) for which this Warrant is being exercised in
such denominations as are required for delivery to the Warrant Holder, and the
Company shall thereupon deliver such certificates to the Warrant Holder or the
Warrant Holder's assignee.

                                       1

<PAGE>

     In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased under this Warrant,
the Company will execute a new Warrant substantially in the form of this Warrant
for the balance of the shares of Common Stock that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Warrant Holder.

     The Company shall pay any and all transfer taxes payable in connection with
the issue of this Warrant or the issue of any Warrant Shares upon exercise of
this Warrant. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issuance or delivery
of this Warrant or the Warrant Shares in a name other than that of the Warrant
Holder at the time of surrender and, until the payment of such tax the Company,
shall not be required to issue such Warrant Shares.

     Section 1.3 Warrant Holder Representation. Unless the issuance of the
Warrant Shares shall have been registered under the Securities Act of 1933, as
amended (the "1933 Act"), as a condition of its delivery of certificates for the
Warrant Shares or upon the split-up, combination, exchange, transfer or loan of
the Warrant, the Company may require the Warrant Holder (including the
transferee of the Warrant in whose name the Warrant Shares are to be registered)
to deliver to the Company, in writing, representations regarding the Warrant
Holder's sophistication, investment intent, acquisition for the Warrant Holder's
own account and such other matters as are reasonable and customary for
purchasers of securities in an unregistered private offering.

     Section 1.4 Vesting. This Warrant shall vest and be exercisable effective
February 15, 2002.

     Section 1.5 Exercise Price. The initial exercise price shall be $3.00 per
share (the "Exercise Price").

                                  ARTICLE II.

                                 ANTIDILUTION

     Section 2.1 Subdivisions or Combinations. In case the Company shall at any
time after the date of this Warrant (i) subdivide the outstanding Shares or (ii)
combine the outstanding Shares into a smaller number of Shares, the Exercise
Price and the number and kind of Shares receivable upon exercise, in effect at
the time of the effective date of such subdivision or combination, shall be
proportionately adjusted so that the holder of the Warrant exercised after such
time shall be entitled to receive the same percentage and kind of shares which,
if the Warrant had been exercised immediately prior to such date, the holder
would have owned upon such exercise and been entitled to receive by virtue of
such subdivision or combination. Such adjustment shall be made successively
whenever any event listed above shall occur and shall be retroactive to the
record date, if any, for such event. Any adjustment made pursuant to this
Section 2.1 shall become effective immediately upon the effective date of such
event retroactive to the record date, if any, for such event. All calculations
made under this Section 2.1 shall be made to the nearest cent or to the nearest
Share, as the case may be.

     Section 2.2 Reorganization, Reclassification, Consolidation, Merger or
Sales. In case of any capital reorganization of the Company, or of any
reclassification of Shares (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of
subdivision or combination), or in case of the consolidation of the Company with
or the merger of the Company into any other person (other than a consolidation
or merger in which the Company is the continuing corporation) or of the sale of
the properties and assets of the Company as, or substantially as, an entirety to
any other corporation, the Warrant shall after such reorganization,
reclassification, consolidation, merger or sale be exercisable, upon the terms
and conditions specified in this Warrant, for the number of shares of stock or
other securities, cash or other property to which a holder of the number of
Shares purchasable (at the time of such reorganization, reclassification,
consolidation, merger or sale) upon exercise of the Warrant would have been
entitled upon such reorganization, reclassification, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Section 2.2 with respect to the rights and interests thereafter of the holders
of the Warrant shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities, cash or other
property thereafter deliverable on the exercise of the Warrant. The subdivision
or combination of Shares at any time outstanding into a greater or

                                       2
<PAGE>

lesser number of Shares shall not be deemed to be a reclassification of the
Common Stock for the purposes of this Section 2.2. The Company shall not effect
any such consolidation, merger or sale unless prior to or simultaneously with
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the person purchasing such assets
or other appropriate corporation or entity shall assume, by written instrument
executed and delivered to the Company's and successor person's transfer agent,
if any, the obligation to deliver to the holders of the Warrant such shares of
stock, other securities, cash or other property as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations of the Company under this Warrant.

     Section 2.3 Notices to the Warrant Holder. Upon any adjustment of the
Exercise Price or of the number or kind of Shares for which the outstanding
Warrant may be exercised pursuant to Article II, the Company, within 20 calendar
days thereafter, shall cause to be given to all of the holders of the Warrant,
at such holders' addresses appearing on the register or other records maintained
for such purpose, an officer's certificate showing the adjusted Exercise Price
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Shares
purchasable upon exercise of the Warrant after such adjustment. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Article II.

     In case:

          (a) of any consolidation or merger to which the Company is a party and
     for which approval of any stockholders of the Company is required, or of
     the conveyance or transfer of the properties and assets of the Company as,
     or substantially as, an entirety, or of any capital reorganization or any
     reclassification of the Common Stock (other than a change in par value, or
     from par value to no par value, or from no par value to par value, or as a
     result of a subdivision or combination); or

          (b) of the voluntary or involuntary dissolution, liquidation or
     winding up of the Company;

then the Company shall cause to be mailed to the Warrant Holder at the Warrant
Holder's address appearing on the register or other records maintained by the
Company for such purpose, at least 20 calendar days (or 10 calendar days in any
case specified in clauses (a) or (b) above) prior to the applicable record or
effective date hereinafter specified a written notice stating the date on which
any such consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected and that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities, cash or other property, if any, deliverable upon such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 2.3 or any defect therein shall not affect the legality or
validity of any consolidation, merger, conveyance, transfer, reorganization,
dissolution, liquidation or winding up or the vote upon any action.

                                 ARTICLE III.

                               FRACTIONAL SHARES

     Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
exercise of this Warrant, and in any case where the Warrant Holder would, except
for the provisions of this Article III, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall upon the exercise of this Warrant and receipt of the Exercise
Price, issue the largest number of whole shares purchasable upon exercise of
this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrant Holder
would otherwise be entitled. The Warrant Holder, by the acceptance of this
Warrant, expressly waives the Warrant Holder's right to receive a certificate
for any fraction of a share upon exercise hereof.

                                       3
<PAGE>

                                  ARTICLE IV.

                            FULLY PAID STOCK; TAXES

         The Company covenants and agrees that the shares of stock represented
by each and every certificate representing Common Stock to be delivered on the
exercise of the purchase rights herein provided for shall, at the time of such
delivery, be validly issued and outstanding and be fully paid and nonassessable.
The Company further covenants and agrees that it will pay when due and payable
any and all federal, state and local taxes which may be payable in connection
with the issuance of this Warrant or any Common Stock or certificates therefor
or the exercise of the rights provided for pursuant to the provisions hereof,
including without limitation any such taxes relating to the exercise of any
purchase, conversion, or other rights contained herein, but specifically
excluding any federal, state or local income taxes owing by the holders of the
Warrant.

                                  ARTICLE V.

                           CLOSING OF TRANSFER BOOKS

     The right to exercise this Warrant shall not be suspended during any period
that the stock transfer books of the Company may be closed. The Company shall
not be required, however, to deliver certificates representing shares of its
Common Stock upon such exercise while such books are duly closed for any
purpose, but the Company may postpone the delivery of the certificates for such
Common Stock until the opening of such books, and they shall, in such case, be
delivered forthwith upon the opening thereof, or as soon as practicable
thereafter.

                                  ARTICLE VI.

                            REPLACEMENT OF WARRANT

     Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in the case of
such loss, theft or destruction, upon delivery to the Company of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor, in lieu of this Warrant.

                                 ARTICLE VII.

                             RESERVATION OF SHARES

     The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of shares of Common Stock as shall be
issuable upon the exercise of this Warrant. The Company covenants and agrees
that, upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid and non-assessable.

                                 ARTICLE VIII.

 RESTRICTIONS ON TRANSFERABILITY OF WARRANTS AND SHARES; COMPLIANCE WITH LAWS

     Section 8.1 In General. This Warrant and the Warrant Shares issued upon the
exercise hereof shall not be transferable except upon the conditions hereinafter
specified, which conditions are intended to insure compliance with the
provisions of the 1933 Act (or any similar federal statute at the time in
effect) and any applicable state securities laws in respect of the transfer of
this Warrant or any such Warrant Shares.

                                       4
<PAGE>

     Section 8.2 Restrictive Legends. Each Warrant shall bear on the face
thereof a legend substantially in the form of the notice endorsed on the first
page of this Warrant. Each certificate for shares of Common Stock initially
issued upon the exercise of any Warrant and each certificate for shares of
Common Stock issued to a subsequent transferee of such certificate shall, unless
otherwise permitted by the provisions of this Section 8.2, bear on the face
thereof a legend reading substantially as follows:

     THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
     (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND HAVE
     BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
     THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
     EFFECTED WITHOUT (A) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
     (B) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
     AND ANY APPLICABLE STATE SECURITIES LAWS.

     The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. In the
event that a registration statement covering the Warrant Shares shall become
effective under the 1933 Act and under any applicable state securities laws or
in the event that the Company shall receive an opinion of counsel satisfactory
to it that, in the opinion of such counsel, such legend is not, or is no longer,
necessary or required (including, without limitation, because of the
availability of the exemption afforded by Rule 144 of the General Rules and
Regulations of the Securities and Exchange Commission), the Company shall, or
shall instruct its transfer agents and registrars to, remove such legend from
the certificates evidencing the Warrant Shares or issue new certificates without
such legend in lieu thereof. All fees and expenses of counsel in connection with
the rendition of the opinion provided for in this Section 8.2 shall be paid by
the holder.

     Section 8.3 Notice of Proposed Transfer; Registration Not Required. The
holder of this Warrant or of any Warrant Shares, by acceptance thereof, agrees
to give prior written notice to the Company of such holder's intention to
transfer such Warrant or the Warrant Shares relating thereto (or any portion
thereof) describing briefly the manner and circumstances of the proposed
transfer. Promptly after receiving such written notice, the Company shall
present copies thereof to Company counsel and to counsel designated by such
holder, who may be an employee of such holder. If in the opinion of each such
counsel the proposed transfer may be effected without registration or
qualification of such Warrant or the Warrant Shares under any federal or state
law, the Company, as promptly as practicable, shall notify such holder of such
opinion and of the terms and conditions, if any, to be observed, whereupon such
holder shall be entitled to transfer such Warrant or Warrant Shares, all in
accordance with the terms of the notice delivered to such holder by the Company.
If either of such counsel is unable to render such an opinion (in which case
said counsel shall set forth in writing the basis for the legal conclusions in
this regard), the Company shall promptly notify such holder that the proposed
transfer described in the written notice given pursuant to this subsection may
not be effected without such registration or qualification or without compliance
with the conditions of an exemptive regulation of the Commission and any
applicable state securities regulatory authority. Such holder shall not be
entitled to effect such transfer until such registration, qualification,
exemption or other compliance has become effective. All fees and expenses of
counsel in connection with the rendition of the opinions provided for in this
subsection shall be paid by the holder requesting the transfer.

                                  ARTICLE IX.

                                 MISCELLANEOUS

     Section 9.1 Warrant Holder As Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrant Holder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary.

     Section 9.2 Warrant Holder Not Shareholder. This Warrant does not confer
upon the holder hereof any right to vote or to consent or to receive notice as a
shareholder of the Company, as such, in respect of any

                                       5
<PAGE>

matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof as hereinbefore provided.

     Section 9.3 Warrant Holder Representation. Notwithstanding anything to the
contrary herein, the Warrant Holder represents and warrants that:

          (a) it acknowledges that the Warrant and the Warrant Shares have not
     been registered under the 1933 Act or any state securities laws,

          (b) the Warrants and the Warrant Shares (unless such Warrants and/or
     Warrant Shares, as the case may be, are registered under the 1933 Act and
     applicable state securities laws) are being and will be issued pursuant to
     an exemption from registration for non-public offerings or offerings to one
     or more accredited investors,

          (c) that the Warrant Holder is acquiring the Warrant and will acquire
     the Warrant Shares (unless such Warrants and/or Warrant Shares are
     registered under the 1933 Act and applicable state securities laws) for the
     Warrant Holder's own account and not with a view toward their distribution,

          (d) the Warrant Holder is an "accredited investor" as such term is
     defined in Regulation D promulgated under the Securities Act and has not
     been organized for the specific purpose of acquiring the Warrant Shares or
     the Warrant,

          (e) the Warrant Holder and its representatives have been solely
     responsible for the Warrant Holder's own "due diligence" investigations of
     the Company and its management and business, for its own analysis of the
     merits and risks of the investment, and for its own analysis of the
     fairness and desirability of the terms of the investment,

          (f) the Warrant Holder has such knowledge and experience in financial
     and business matters that it is capable of evaluating the merits and risks
     associated with the Warrant and of protecting its interests in connection
     therewith,

          (g) the Warrant Holder is able to fend for itself in the transactions
     contemplated by this Warrant and has the ability to bear the economic risk
     of the investment, including complete loss of the investment,

          (h) the Warrant Holder is experienced in evaluating and investing in
     relatively early-stage, energy technology companies such as the Company,
     and

          (i) the Warrant Holder will not sell, offer for sale, pledge or
     otherwise hypothecate the Warrant or the Warrant Shares (unless such shares
     are registered under the 1933 Act and applicable state securities laws) in
     the absence of an opinion of counsel reasonably acceptable to the Company,
     that the sale, offer for sale, pledge or hypothecation of the Warrant and
     Warrant Shares is exempt from the registration and prospectus delivery
     requirements of the 1933 Act and applicable state securities laws.

     Section 9.4 Partial Exercise and Partial Assignment.

     (a) If this Warrant is exercised in part only, the holder shall upon
surrender hereof be entitled to receive a new Warrant, registered in the name of
the holder or its nominee. This Warrant may be assigned either in whole or in
part by surrender of this Warrant at the principal office of the Company in
Denver, Colorado (with the assignment or, as the case may be, partial assignment
form at the end hereof duly executed). If this Warrant is assigned, a new
Warrant shall be issued to the holder hereof, registered in the name of such
holder or its nominee. The assignee shall also be entitled to receive a new
Warrant, registered in the name of such assignee or its nominee.

     (b) Subject to the provisions of paragraph (a) of this Section 9.4 this
Warrant and the Warrant Shares may not be sold or otherwise disposed of except
as follows:

                                       6
<PAGE>

          (i) to a person who, in the opinion of counsel reasonably satisfactory
     to the Company, is a person to whom this Warrant or the Warrant Shares may
     legally be transferred without registration and without the delivery of a
     current prospectus under the 1933 Act with respect thereto and then only
     against receipt of an agreement of such person to comply with the
     provisions of this Warrant with respect to any resale or other disposition
     of such securities; or

          (ii) to any person upon delivery of a prospectus then meeting the
     requirements of the 1933 Act relating to such securities (as to which a
     registration statement under the 1933 Act shall then be in effect) and the
     offering thereof for such sale or disposition.

     Section 9.5 Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind, and inure to the benefit of,
the parties hereto and their respective heirs, executors, administrators,
distributees, successors and assigns.

     Section 9.6 Severability. Should any part of this Warrant for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Warrant had been executed with the invalid portion thereof eliminated, and it is
hereby declared the intention of the parties hereto that they would have
executed and accepted the remaining portion of this Warrant without including
therein any such part, parts or portion which may, for any reason, be hereafter
declared invalid.

     Section 9.7 Notices. Any notices required to be given pursuant to the terms
hereof shall be given (unless otherwise herein expressly provided) in writing
and either (i) personally delivered, (ii) sent by certified, return receipt
requested, (iii) sent by prepaid overnight courier, or (iv) transmitted by
telecopier or similar device, with confirmation of receipt. Notices shall be
addressed, if to holder of Warrants or Warrant Shares, to:

     William A. Boyd
     118 Riding Trail Road
     Pittsburgh, PA 15215-1500
     Phone & Fax:  412-967-0619

or to such other address of such holder appearing in the register maintained by
the Company, and if to the Company, to:

     KFx Inc.
     3300 East First Avenue, Suite 290
     Denver, CO  80206
     Attention:  Chief Executive Officer

     For purposes of this Warrant, any notice sent by mail shall be demand
given on the date deposited in the mail.

     Section 9.8 Headings. The Article headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.

     Section 9.9 Law Governing. This Warrant is delivered in the State of New
York and shall be construed and enforced in accordance with, and governed by,
the laws of the State of New York, without regard to the conflict of laws rules
of such jurisdiction.

     Section 9.10 Amendments and Modifications. This Warrant may be amended or
modified only with the prior written consent of the holder hereof.

                                       7
<PAGE>

         WITNESS the seal of the Company and the signatures of its duly
authorized officers.

                                     KFx INC.


                                     -------------------------------------------
                                     Name:    R. G. Swenson
                                     Title:   Vice President & Secretary

(SEAL)

                                       8
<PAGE>

                                   KFx Inc.
                               SUBSCRIPTION FORM
  (To be executed by the Registered Holder in order to Exercise the Warrant)

     The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares (the "Shares") of common stock, $.001 par value, (the "Common
Stock") of KFx Inc. (the "Company") covered by the Common Stock Purchase
Warrant, dated February 15, 2002 (the "Warrant") and herewith makes payment of
the purchase price of such Shares in accordance with the terms of the Warrant.
The undersigned requests a certificate for such Shares to be registered in the
name of _________________, whose address is _______________. If said number of
Shares is less than all of the Shares issuable under the Warrant, the
undersigned further requests that a new warrant representing the right to
acquire the remaining balance of the Shares to be registered in the name
_____________, whose address is _____________.

     The undersigned hereby represents and warrants that:

          (a) the Shares have not been registered under the Securities Act of
     1933, as amended (the "Act") or any state securities laws,

          (b) the Shares (unless such Shares are registered under the Act and
     applicable state securities laws) are being and will be issued pursuant to
     an exemption from registration for non-public offerings or offerings to one
     or more accredited investors,

          (c) it is acquiring the Shares (unless such Shares are registered
     under the Act and applicable state securities laws) for its own account and
     not with a view toward their sale or distribution,

          (d) the Warrant Holder is an "accredited investor" as such term is
     defined in Regulation D promulgated under the Securities Act and has not
     been organized for the specific purpose of acquiring the Warrant Shares or
     the Warrant,

          (e) the Warrant Holder and its representatives have been solely
     responsible for the Warrant Holder's own "due diligence" investigations of
     the Company and its management and business, for its own analysis of the
     merits and risks of the investment, and for its own analysis of the
     fairness and desirability of the terms of the investment,

          (f) the Warrant Holder has such knowledge and experience in financial
     and business matters that it is capable of evaluating the merits and risks
     associated with the Warrant and of protecting its interests in connection
     therewith,

          (g) the Warrant Holder is able to fend for itself in the transactions
     contemplated by this Warrant and has the ability to bear the economic risk
     of the investment, including complete loss of the investment,

          (h) the Warrant Holder is experienced in evaluating and investing in
     relatively early-stage, energy technology companies such as the Company,
     and

          (i) it will not sell, offer for sale, pledge or otherwise hypothecate
     the Shares (unless such Shares are registered under the Act and applicable
     state securities laws) in the absence of an opinion of counsel reasonably
     acceptable to the Company, that the sale, offer for sale, pledge or
     hypothecation of the Shares is exempt from the registration and prospectus
     delivery requirements of the Act and applicable state securities laws.

          (j) the Shares are being acquired in accordance with and subject to
     the terms, provisions and conditions of the Warrant, to all of which it
     hereby expressly assent.

                                       1
<PAGE>

                                            Very truly yours,

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

                           Print Name:
                                            ----------------------------

                           Address:
                                            ----------------------------

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

Receipt of the above is hereby acknowledged:

KFx Inc.

By:
     ------------------------------
     Name:
     Title:
     Date:

                                       2
<PAGE>

                                   ASSIGNMENT

     FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto _______________________________________ the within
Warrant and all rights evidenced thereby and does irrevocably constitute and
appoint, __________________ _____________________ as attorney-in-fact, to
transfer the said Warrant on the books of the within named Company.


----------------------------------
Name:
Title:
Date:



                               PARTIAL ASSIGNMENT

     FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________________ that portion
of the within Warrant and the rights evidenced thereby which will on the date
hereof entitle the holder to purchase ____________ shares of Common Stock of
___________________________, irrevocably constitute and appoint
_____________________________, attorney-in-fact, to transfer that part of the
said Warrant on the books of the within named Company.


----------------------------------
Name:
Title:
Date: