REGISTRATION RIGHTS AGREEMENT


         This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 8, 2001 by and between KFx Inc., a Delaware
corporation (the "Company"), and William H. Walker ("Holder") to provide
Holder with certain registration rights relative to 166,667 shares of
Common Stock of KFx Inc. that Holder has the right to purchase pursuant to
a warrant provided by the Company to the Holder dated the date hereof (the
"Warrant").

         NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE I

                               REGISTRATION RIGHTS

         Section 1.01. DEFINITIONS. For purposes of this Agreement:

                  (a) Common Shares. The term "Common Shares" means shares
         of Common Stock, $.001 par value, of the Company.

                  (b) Holder. The term "Holder" means any person owning of
         record Registrable Securities that have not been sold to the
         public or sold pursuant to Rule 144 promulgated under the
         Securities Act, or any assignee of record of such Registrable
         Securities to whom rights under this Agreement have been duly
         assigned in accordance with this Agreement and the Warrant.

                  (c) Registrable Securities or Registrable Shares. The
         terms "Registrable Securities" or "Registrable Shares" means (i)
         all Common Shares of the Company that may hereafter be acquired by
         Holder pursuant to the exercise of the Warrant or any warrant that
         is issued by the Company to Holder as a replacement for all or any
         portion of the Warrant, (ii) all Common Shares of the Company that
         may hereafter be acquired by Holder pursuant to the Stock Purchase
         Agreement dated the date hereof to which the Company and Holder
         are parties, and (iii) any Common Shares of the Company issued as
         (or issuable upon the conversion or exercise of any warrant, right
         or other security which is issued as) a dividend or other
         distribution with respect to, or in exchange for or in replacement
         of, all such Common Shares described in clauses (i) and (ii) of
         this subsection (c); excluding in all cases, however, any
         --------- Registrable Securities sold by a person in a transaction
         in which rights under this Article I are not assigned in
         accordance with this Agreement or any Registrable Securities sold
         to the public or sold pursuant to Rule 144 promulgated under the
         Securities Act.

                  (d) Registration. The terms "register," "registration"
         and "registered" mean a registration effected by preparing and
         filing a registration statement in compliance with the Securities
         Act and the declaration or ordering of effectiveness of such
         registration statement.

                  (e) Registration Expenses. The term "Registration
         Expenses" means all expenses incurred by the Company in complying
         with Section 1.02 hereof, including, without limitation, all
         registration and filing fees, listing fees, printing expenses,
         fees and disbursements of counsel for the Company, blue sky fees
         and expenses, the expense of any special audits incident to or
         required by any such registration (but excluding the compensation
         of regular employees of the Company which shall be paid in any
         event by the Company) and the expenses of underwriters customarily
         paid by similarly situated companies in connection with
         underwritten offerings of equity securities to the public
         (including any qualified independent underwriter required in
         connection with such underwritten offering), excluding any such
         fees based on the proceeds of sales of Registrable Securities by
         selling Holders.

                  (f) Registration Statement. The term "Registration
         Statement" means any registration statement under the Securities
         Act for purposes of effecting a public offering of securities of
         the Company.

                  (g) SEC. The term "SEC" means the U.S. Securities and
         Exchange Commission.

                  (h) Securities Act. The term "Securities Act" means the
         Securities Act of 1933, as amended from time to time.

         Section 1.02. PIGGYBACK REGISTRATIONS.

                  (a) Right to Piggyback. The Company shall notify all
         Holders in writing at least thirty (30) days prior to filing any
         Registration Statement (including, but not limited to,
         Registration Statements relating to secondary offerings of
         securities of the Company, but excluding Registration Statements
         relating to any employee benefit plan or a corporate
         reorganization) and will afford each such Holder an opportunity to
         include in such Registration Statement all or any part of the
         Registrable Securities then held by such Holder. Each Holder
         desiring to include in any such Registration Statement all or any
         part of the Registrable Securities held by such Holder shall,
         within twenty (20) days after receipt of the above-described
         notice from the Company, so notify the Company in writing, and in
         such notice shall inform the Company of the number of Registrable
         Securities such Holder wishes to include in such Registration
         Statement. The Company thereupon will use its best efforts as a
         part of its filing of such Registration Statement to effect the
         registration under the Securities Act of all Registrable
         Securities which the Company has been so requested to register by
         the Holder, to the extent required to permit the disposition of
         the Registrable Securities so to be registered. If a Holder
         decides not to include all of its Registrable Securities in any
         Registration Statement thereafter filed by the Company, such
         Holder shall nevertheless continue to have the right to include
         any Registrable Securities in any subsequent Registration
         Statement or Registration Statements as may be filed by the
         Company with respect to offerings of its securities, all upon the
         terms and conditions set forth herein.

                  (b) Underwriting. If a Registration Statement under which
         the Company gives notice under this Section 1.02 is for an
         underwritten offering, then the Company shall so advise the
         Holders. In such event, the right of any such Holder's Registrable
         Securities to be included in a registration pursuant to this
         Section 1.02 shall be conditioned upon such Holder's participation
         in such underwriting and the inclusion of such Holder's
         Registrable Securities in the underwriting to the extent provided
         herein. All Holders proposing to distribute their Registrable
         Securities through such underwriting shall enter into an
         underwriting agreement in customary form with the managing
         underwriter or underwriter(s) selected for such underwriting.
         Notwithstanding any other provision of this Agreement, if the
         managing underwriter(s) determine(s) in good faith that marketing
         factors require a limitation of the number of shares to be
         underwritten, then the managing underwriter(s) may exclude shares
         (including Registrable Securities) from the registration and the
         underwriting, and the number of shares that may be included in the
         registration and the underwriting shall be allocated, first, to
         the Company, and second, the maximum number of Registrable
         Securities requested to be included therein by the Holders and the
         maximum number of any other securities of the same class as the
         Registrable Securities ("Other Securities") requested to be
         included therein by other shareholders of the Company having
         registration rights ("Other Holders"), pro rata among the
         respective Holders and Other Holders on the basis of the number of
         Registrable Securities and Other Securities requested to be
         included in such registration by each such Holder and Other
         Holder. If any Holder disapproves of the terms of any such
         underwriting, such Holder may elect to withdraw all or any part of
         such Holder's Registrable Securities therefrom by written notice
         to the Company and the underwriter, delivered at any time prior to
         the effective date of the Registration Statement. Any Registrable
         Securities excluded or withdrawn from such underwriting shall be
         excluded and withdrawn from the registration. For any Holder that
         is a partnership or corporation, the partners, retired partners
         and shareholders of such Holder, or the estates and family members
         of any such partners and retired partners and any trusts for the
         benefit of any of the foregoing persons shall be deemed to be a
         single "Holder," and any pro rata reduction with respect to such
         "Holder" shall be based upon the aggregate amount of shares
         carrying registration rights owned by all entities and individuals
         included in such "Holder," as defined in this sentence.

                  (c) Expenses. All Registration Expenses incurred in
         connection with a registration pursuant to this Section 1.02 shall
         be borne by the Company, except that notwithstanding anything to
         the contrary herein, if a Holder withdraws all or any part of such
         Holder's Registrable Securities from an underwriting at any time
         less than ten (10) business days prior to the effective date of
         the Registration Statement, such Holder shall pay its pro rata
         share (based on the number of Registrable Securities included in
         the Registration Statement on behalf of such Holder, or if no
         Registration Statement had been filed as of the date of such
         withdrawal, the number of Registrable Securities such Holder
         requested to be included in the Registration Statement) of all
         Registration Expenses, excluding all discounts, commissions or
         other amounts payable to underwriters or brokers in connection
         with the offering. Each Holder participating in a registration
         pursuant to this Section 1.02 shall bear such Holder's
         proportionate share (based on the total number of shares sold in
         such registration) of all discounts, commissions or other amounts
         payable to underwriters or brokers in connection with such
         offering.

         Section 1.03  OBLIGATIONS OF THE COMPANY.  Whenever  required to effect
         the  registration of any Registrable  Securities  under this Agreement,
         the Company shall:

                  (a) Prepare and file with the SEC a Registration
         Statement with respect to such Registrable Securities and use
         reasonable, diligent efforts to cause such Registration Statement
         to become effective.

                  (b) Prepare and file with the SEC such amendments and
         supplements to such Registration Statement and the prospectus used
         in connection with such Registration Statement as may be necessary
         to comply with the provisions of the Securities Act with respect
         to the disposition of all securities covered by such Registration
         Statement.

                  (c) Furnish to the Holders such number of copies of a
         prospectus, including a preliminary prospectus, in conformity with
         the requirements of the Securities Act and such other documents as
         they may reasonably request in order to facilitate the disposition
         of the Registrable Securities owned by them that are included in
         such registration.

                  (d) Use reasonable, diligent efforts to register and
         qualify the securities covered by such Registration Statement
         under such other securities or blue sky laws of such jurisdictions
         as shall be reasonably requested by the Holders, provided that the
         Company shall not be required solely as a result of such
         Registration or as a condition thereto to qualify to do business
         or to file a general consent to service of process in any such
         jurisdictions.

                  (e) In the event of any underwritten public offering,
         enter into and perform its obligations under an underwriting
         agreement, in usual and customary form, with the managing
         underwriter(s) of such offering.

                  (f) Notify each Holder of Registrable Securities covered
         by such Registration Statement at any time when a prospectus
         relating thereto is required to be delivered under the Securities
         Act of the happening of any event as a result of which the
         prospectus included in such Registration Statement, as then in
         effect, includes an untrue statement of a material fact or omits
         to state a material fact required to be stated therein or
         necessary to make the statements therein not misleading in the
         light of the circumstances then existing, and at the request of
         each Holder promptly prepare and furnish to such Holder a
         reasonable number of copies of a supplement to or amendment of
         such prospectus as may be necessary so that, as thereafter
         delivered to the purchasers of such Registrable Securities, such
         prospectus shall not include an untrue statement of a material
         fact or omit to state a material fact required to be stated
         therein or necessary to make the statements therein not misleading
         in the light of the circumstances then existing.

                  (g) Use its best efforts to list such Registrable
         Securities on each securities exchange on which any equity
         security of the Company is then listed.


         Section 1.04      OBLIGATIONS OF THE HOLDERS.

                  (a) It shall be a condition precedent to the obligations
         of the Company to take any action pursuant to Section 1.02 that
         the selling Holders furnish to the Company such information
         regarding themselves, the Registrable Securities held by them, and
         the intended method of disposition of such securities as is
         required to timely effect the registration of their Registrable
         Securities.

                  (b) Each Holder delivering a written request to
         participate in an underwritten registered offering in accordance
         with Section 1.02 shall, if requested by the Company, as soon as
         practicable after such delivery, execute and deliver to the
         Company a custody agreement and power of attorney in customary
         form satisfactory to the Company and any managing underwriter with
         respect to the Registrable Securities identified for sale by such
         Holder (a "Custody Agreement" and "Power of Attorney,"
         respectively). Each Custody Agreement and Power of Attorney shall
         provide, among other things, that such Holder will deliver to and
         deposit in custody with the custodian named therein (which shall
         be designated by the Company) a certificate or certificates
         representing such Registrable Securities (duly endorsed in blank
         by the registered owner or owners thereof or accompanied by duly
         executed stock powers in blank) and irrevocably appoint such
         custodian and attorney-in-fact with full power and authority to
         act under the Custody Agreement and Power of Attorney,
         respectively, on the Holder's behalf with respect to matters
         specified therein, including the execution and delivery of an
         underwriting agreement.

                  (c) Each Holder that has Registrable Securities included
         in any Registration Statement shall not (until further notice from
         the Company) effect sales thereof after receipt of notice from the
         Company to suspend sales to permit the Company to correct or
         update any Registration Statement, including any prospectus.

         Section 1.05. DELAY OF REGISTRATION. No Holder shall have any
right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Article I.

         Section 1.06 INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement pursuant to Section
1.02:

                  (a) By the Company. To the extent permitted by law, the
         Company will indemnify and hold harmless each Holder, the
         partners, officers, directors, legal counsel and accountants of
         each Holder, any underwriter (as defined in the Securities Act)
         for such Holder and each person, if any, who controls such Holder
         or underwriter within the meaning of the Securities Act or the
         Exchange Act against any losses, claims, expenses, damages, or
         liabilities (joint or several) to which they may become subject
         under the Securities Act, the Exchange Act or any other securities
         or other law of any jurisdiction, common law or otherwise, insofar
         as such losses, claims, expenses, damages, or liabilities (or
         actions proceedings or settlements in respect thereof) arise out
         of or are based upon any of the following statements, omissions or
         violations (collectively, "Violations" and, individually, a
         "Violation"):

                       (i) any untrue statement or alleged untrue statement
                  of a material fact contained in or incorporated by
                  reference in any Registration Statement, including any
                  preliminary prospectus or final prospectus contained
                  therein or any amendments or supplements thereto or any
                  document incorporated by reference therein;

                       (ii) the omission or alleged omission to state
                  therein a material fact required to be stated therein, or
                  necessary to make the statements therein not misleading,
                  or

                       (iii) any violation or alleged violation by the
                  Company of the Securities Act, the Exchange Act, or any
                  other securities or other law of any jurisdiction, common
                  law or otherwise, or any rule or regulation promulgated
                  under the Securities Act, the Exchange Act or any such
                  other laws, in connection with the offering covered by
                  such Registration Statement;

         and the Company will reimburse each such Holder, partner, officer
         or director, underwriter or controlling person for any legal or
         other expenses reasonably incurred by them, as incurred, in
         connection with investigating or defending any such loss, claim,
         damage, liability or action; provided, however, that the indemnity
         agreement contained in this subsection 1.06(a) shall not apply to
         amounts paid in settlement of any such loss, claim, damage,
         liability or action if such settlement is effected without the
         consent of the Company (which consent shall not be unreasonably
         withheld), nor shall the Company be liable in any such case for
         any such loss, claim, damage, liability or action to the extent
         that it arises out of or is based upon a Violation which occurs in
         reliance upon and in conformity with written information furnished
         expressly for use in connection with such registration by such
         Holder, partner, officer, director, underwriter or controlling
         person of such Holder.

                  (b) By Selling Holders. To the extent permitted by law,
         each selling Holder, severally and not jointly, will indemnify and
         hold harmless the Company, each of its directors, each of its
         officers who have signed the Registration Statement, each person,
         if any, who controls the Company within the meaning of the
         Securities Act, its legal counsel, its accountants, any
         underwriter and any other Holder selling securities under such
         Registration Statement or any of such other Holder's partners,
         directors or officers or any person who controls such Holder
         within the meaning of the Securities Act or the Exchange Act,
         against any losses, claims, damages or liabilities (joint or
         several) to which the Company or any such director, officer,
         controlling person, legal counsel, accountant, underwriter or
         other such Holder, partner or director, officer or controlling
         person of such other Holder may become subject under the
         Securities Act, the Exchange Act or any other securities or other
         law of any jurisdiction, common law or otherwise, insofar as such
         losses, claims, expenses, damages or liabilities (or actions in
         respect thereto) arise out of or are based upon any Violation, in
         each case to the extent (and only to the extent) that such
         Violation occurs in reliance upon and in conformity with written
         information furnished by such Holder expressly for use in
         connection with such registration; and each such Holder will
         reimburse any legal or other expenses reasonably incurred by the
         Company or any such director, officer, controlling person, legal
         counsel, accountant, underwriter or other Holder, partner,
         officer, director, legal counsel, accountant or controlling person
         of such other Holder in connection with investigating or defending
         any such loss, claim, damage, liability or action; provided,
         however, that the indemnity agreement contained in this subsection
         1.06(b) shall not apply to amounts paid in settlement of any such
         loss, claim, damage, liability or action if such settlement is
         effected without the consent of the Holder, which consent shall
         not be unreasonably withheld; and provided, further, that the
         total amounts payable by a Holder under this Section 1.07 in
         respect of any Violation shall not exceed the net proceeds
         received by such Holder in the registered offering out of which
         such Violation arises.

                  (c) Notice. Promptly after receipt by an indemnified
         party under this Section 1.07 of notice of the commencement of any
         action (including any governmental action), such indemnified party
         will, if a claim in respect thereof is to be made against any
         indemnifying party under this Section 1.06, deliver to the
         indemnifying party a written notice of the commencement thereof
         and the indemnifying party shall have the right to participate in,
         and, to the extent the indemnifying party so desires, jointly with
         any other indemnifying party similarly noticed, to assume the
         defense thereof with counsel mutually satisfactory to the parties;
         provided, however, that an indemnified party shall have the right
         to retain its own counsel, with the fees and expenses to be paid
         by the indemnifying party, if representation of such indemnified
         party by the counsel retained by the indemnifying party would be
         inappropriate due to actual or potential conflict of interests
         between such indemnified party and any other party represented by
         such counsel in such proceeding or if, and for such period, such
         indemnified party was required to retain counsel prior to the
         indemnifying party's retention of counsel. The failure to deliver
         written notice to the indemnifying party within a reasonable time
         of the commencement of any such action shall relieve such
         indemnifying party of its liability to the indemnified party under
         this Section 1.06 only if and to the extent it is prejudicial to
         its ability to defend such action, and the omission to so deliver
         written notice to the indemnifying party will not relieve it of
         any liability that it may have to any indemnified party otherwise
         than under this Section 1.06.

                  (d) Defect Eliminated in Final Prospectus. The foregoing
         indemnity agreements of the Company and Holders are subject to the
         limitation that, insofar as they relate to any Violation made in a
         preliminary prospectus but eliminated or remedied in the amended
         prospectus on file with the SEC at the time the Registration
         Statement in question becomes effective or the amended prospectus
         filed with the SEC pursuant to SEC Rule 424(b) (the "Final
         Prospectus"), such indemnity agreement shall not inure to the
         benefit of any person if a copy of the Final Prospectus was
         furnished to the indemnified party and was not furnished to the
         person asserting the loss, liability, claim or damage at or prior
         to the time such action is required by the Securities Act.

                  (e) Contribution. In order to provide for just and
         equitable contribution to joint liability under the Securities
         Act, in any case in which either (i) any Holder exercising rights
         under this Agreement, or any controlling person of any such
         Holder, makes a claim for indemnification pursuant to this Section
         1.06 but it is judicially determined (by the entry of a final
         judgment or decree by a court of competent jurisdiction and the
         expiration of time to appeal or the denial of the last right of
         appeal) that such indemnification may not be enforced or is
         otherwise unavailable in such case notwithstanding the fact that
         this Section 1.06 provides for indemnification in such case, or
         (ii) contribution under the Securities Act may be required on the
         part of any such selling Holder or any such controlling person in
         circumstances for which indemnification is provided under this
         Section 1.06; then, and in each such case, the Company and such
         Holder will contribute to the aggregate losses, claims, damages or
         liabilities to which they may be subject (after contribution from
         others) in such proportion so that such Holder is responsible for
         the portion represented by the percentage that the public offering
         price of its Registrable Securities offered by and sold under the
         Registration Statement bears to the public offering price of all
         securities offered by and sold under such Registration Statement,
         and the Company and other selling Holders are responsible for the
         remaining portion; provided, however, that, in any such case, (A)
         no such Holder will be required to contribute any amount in excess
         of the net proceeds received from the sale of all such Registrable
         Securities offered and sold by such Holder pursuant to such
         Registration Statement; and (B) no person or entity guilty of
         fraudulent misrepresentation (within the meaning of Section 11(f)
         of the Securities Act) will be entitled to contribution from any
         person or entity who was not guilty of such fraudulent
         misrepresentation.

                  (f) Survival; Release. The obligations of the Company and
         Holders under this Section 1.06 shall survive the completion of
         any offering of Registrable Securities in a Registration Statement
         and otherwise. No indemnifying party, in the defense of any such
         claim or litigation, shall, except with the consent of each
         indemnified party, consent to entry of any judgment or enter into
         any settlement which admits fault on behalf of the indemnified
         party or which does not include as an unconditional term thereof
         the giving by the claimant or plaintiff to such indemnified party
         of a release from all liability in respect to such claim or
         litigation.

         Section 1.07. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby
agrees that it shall not, to the extent requested by the Company or an
underwriter of securities of the Company, sell or otherwise transfer or
dispose of any Registrable Securities or other shares of stock of the
Company then owned by such Holder (other than to donees of the Holder who
agree to be similarly bound) for up to ninety (90) days following the
effective date of a Registration Statement of the Company for an
underwritten offering filed under the Securities Act; provided that all
officers and directors of the Company have entered into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the
shares subject to this Section and to impose stop transfer instructions
with respect to the Registrable Securities and such other shares of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

         Section 1.08. TERMINATION OF THE COMPANY'S OBLIGATIONS. The
Company shall have no obligations pursuant to Section 1.02 with respect to
any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 1.02 if, in the opinion of counsel to the
Company, all such Registrable Securities proposed to be sold by a Holder
and all other Common Shares then owned by such Holder may be sold in a
three-month period without registration under the Securities Act pursuant
to Rule 144 under the Securities Act. In such event, such Holder shall not
be subject to the provisions of Section 1.07.

                                ARTICLE II

                                 AMENDMENT

         Section 2.01. AMENDMENT. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and Holders holding Registrable
Securities representing more than fifty percent (50%) of all the
Registrable Securities (on an as-converted basis). Any amendment or waiver
effected in accordance with this Section 2.01 shall be binding upon each
Holder and the Company.

                                ARTICLE III

                             GENERAL PROVISIONS

         Section 3.01. NOTICES. Any and all notices required or permitted
to be given to a party pursuant to the provisions of this Agreement must be
in writing and will be effective and deemed to provide such party
sufficient notice under this Agreement on the earliest of the following:
(i) at the time of personal delivery, if delivery is in person; (ii) at the
time of transmission by facsimile, addressed to the other party at its
facsimile number, with confirmation of receipt made by both telephone and
printed confirmation sheet verifying successful transmission of the
facsimile; (iii) one (1) business day after deposit with an express
overnight courier for deliveries within a country, or three (3) business
days after such deposit for international deliveries or (iv) three (3)
business days after deposit in mail by certified mail (return receipt
requested) or equivalent for deliveries within a country.

         All notices for international delivery will be sent by facsimile
or by express courier. All notices not delivered personally or by facsimile
will be sent with postage and/or other charges prepaid and properly
addressed to the party to be notified at the following address or facsimile
number:

         Company:          KFx Inc.
                           3300 East First Avenue, Suite 290
                           Denver, Colorado 80206
                           Facsimile:  (303) 293-8430
                           Attention:  Chief Financial Officer

         Holder:           William H. Walker
                           1100 Poydras Street
                           Suite 3500
                           New Orleans, LA  70163


         Any party may by notice so given change its address for future
notices hereunder. Notice shall conclusively be deemed to have been given
in the manner set forth above.

         Section 3.02. ENTIRE AGREEMENT. This Agreement and the Warrant
constitute and contain the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties
or obligations between the parties respecting the subject matter hereof.

         Section 3.03. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware.

         Section 3.04. NO THIRD PARTY BENEFICIARIES. This Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended
to or shall confer upon any other person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.

         Section 3.05. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall inure to the benefit of, and shall be binding upon, the
successors and permitted assigns of the parties hereto.

         Section 3.06. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.

         Section 3.07. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same
agreement.

         Section 3.08. EXPENSES. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.

         Section 3.09. CONSTRUCTION. Words used herein, regardless of the
gender specifically used, shall be deemed and construed to include any
other gender, masculine, feminine or neuter, as the context requires.

                [Remainder of Page Intentionally Left Blank]



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


                                            THE COMPANY:

                                            KFX INC.


                                            By: /s/ Seth L. Patterson
                                               --------------------------
                                            Name:  Seth L. Patterson
                                            Title: Executive Vice President
                                                   and Chief Financial Officer


                                            HOLDER:


                                            WILLIAM H.  WALKER

                                            /s/ William H. Walker
                                            -----------------------------





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