SECURITY AGREEMENT

         SECURITY AGREEMENT (this "Agreement"), dated as of December 6, 1999, by
and between COVOL TECHNOLOGIES, INC.(the "Grantor"), a Delaware corporation with
an address at 3280 North Frontage Road, Lehi, Utah 84043; and DH FINANCIAL, L.C.
(the "Lender"),  a Utah limited  liability company with an address at 5478 Green
Street, Murray, Utah 84123.

         The Grantor and Lender are parties to a Securities  Purchase Agreement,
dated as of the date  hereof (as  amended and  modified  from time to time,  the
"Purchase Agreement"), pursuant to which the Grantor will issue and sell and the
Lender will purchase the convertible  secured  debentures (the  "Debentures") of
the  Grantor.  Capitalized  terms  used but not  defined  herein  shall have the
meanings given to such terms in the Purchase Agreement and the Debentures.

         The  Lender  has  agreed  to make  certain  loans to the  Grantor.  The
obligation of the Lender to lend under the Debentures is  conditioned  on, among
other things, the execution and delivery by the Grantor of this Agreement.

         Accordingly, the Grantor and the Lender, hereby agree as follows:

1.  DEFINITIONS.

         As used herein, the following terms shall have the following meanings:

         "Code" means the Uniform  Commercial  Code as in effect in the State of
Utah.

         "Collateral"  means (a) all of the Grantor's right,  title and interest
in and to (i) that certain  License and Binder Purchase  Agreement,  dated as of
June 26,  1998,  between the  Grantor  and Robena  L.L.C.  (the  "Licensee"),  a
Delaware  limited  liability  company,  a copy of which is  attached  hereto  as
Exhibit "A" and incorporated  herein by this reference,  and (ii) all subsequent
and future  license  agreements  or similar  agreements  between the Grantor and
Robena LLC, or the  Grantor and any other party which  relate to the  facilities
that are the  subject  of (i) above  (collectively,  as such  agreements  may be
amended,  restated or modified from time to time, the "License Agreement"),  and
(b) all proceeds of any and all of the foregoing  Collateral  and, to the extent
not otherwise included,  all payments under insurance (whether or not the Lender
is the loss payee thereof), or any indemnity,  warranty or guaranty,  payable by
reason of loss or damage to or otherwise  with  respect to any of the  foregoing
Collateral.

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<PAGE>

         "Obligations" means all indebtedness, obligations and other liabilities
of the Grantor to the Lender now or hereafter  arising  pursuant to the Purchase
Agreement,  including,  without  limitation,  the indebtedness  evidenced by the
Debentures.

         "Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other entity.

         The  foregoing  definitions  shall be  equally  applicable  to both the
singular  and  plural  forms  of the  defined  terms.  In  addition,  the  words
"including,"  "includes"  and  "include"  shall be deemed to be  followed by the
words "without limitation."

2.       GRANT OF SECURITY INTEREST.

         The Grantor  hereby pledges and grants a continuing  security  interest
in, and a right of setoff  against,  the  Collateral  to the  Lender,  to secure
payment, performance and observance by the Grantor of the Obligations.

3.       REPRESENTATIONS AND WARRANTIES.

         The Grantor makes the  representations and warranties set forth in this
Section 3 to the Lender.

         3.1  Necessary  Filings.  All  filings,  registrations  and  recordings
necessary or appropriate or otherwise  requested by Lender to create,  preserve,
protect and perfect the security  interest  granted by the Grantor to the Lender
hereby in respect of the  Collateral  will be delivered to Lender upon execution
of this Agreement or, if requested by Lender, will be delivered to Lender within
three (3) Business Days after the date of such request.

         3.2 Principal Location. The Grantor's mailing address, and the location
of its chief executive  office, is the address set forth in the preamble to this
Agreement (as the same may be modified pursuant to Section 4.4); the Grantor has
no other places of business.

         3.3 No Other  Names.  The Grantor  conducted  business as  Enviro-Fuels
Technology   during  1993  and  1994,  as   Environmental   Technologies   Group
International  during 1994 and 1995 and as Covol Technologies,  Inc. since 1995.
Except as discussed  herein,  the Grantor does not conduct and has not conducted
since 1993 any trade or business  under any name except the name in which it has
executed  this  Agreement.  The  Grantor  has not been a party to any  merger or
consolidation in the last five years.

         3.4 No Financing  Statements.  No financing statement describing all or
any portion of the Collateral  which has not lapsed or been  terminated has been
filed in any  jurisdiction  except  financing  statements  naming  the Lender as
secured party.

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<PAGE>

         3.5  Patents.  The  Grantor  owns and  possesses  all right,  title and
interest in and to, or has a valid and  enforceable  license to use, all patents
described in the License Agreement.

         3.6 License  Agreement.  Each License  Agreement  constitutes  a legal,
valid and binding  obligation  of the  Grantor,  enforceable  by and against the
Grantor  in  accordance  with its  terms,  except to the  extent  limited by (a)
applicable bankruptcy, insolvency,  reorganization,  moratorium and similar laws
of general application related to the enforcement of creditor's rights generally
and (b) general principles of equity. The Grantor is not in default,  nor to the
knowledge of the Grantor is there any basis for a valid claim of default, and to
the  Grantor's  knowledge no event has occurred  which,  with notice or lapse of
time,  would  constitute  a default,  under the  License  Agreement,  and to the
knowledge  of the  Grantor  no  licensee  is in default  under any such  License
Agreement.

         3.7 Collateral. The Grantor has good title to the Collateral,  free and
clear of all  claims,  liens and  encumbrances,  except  the  security  interest
created by this Agreement.  The Grantor has all requisite power and authority to
pledge  and grant the  security  interest  in the  Collateral  for the  purposes
contemplated  in this  Agreement and to create a first lien on the Collateral in
favor of the Lender and this Agreement  shall create a valid first lien upon and
perfected first priority security interest in the Collateral subject to no prior
security interest, lien, encumbrance or other restriction.  This Agreement, when
executed, has been duly and validly executed and is the legal, valid and binding
obligation of the Grantor and is  enforceable  against the Grantor by the Lender
in accordance with its terms.

         3.8  Claims.  The  Collateral  is not the  subject  of any  present  or
threatened suit, action,  arbitration,  administrative or other proceeding,  and
the  Grantor  knows of no  reasonable  grounds for the  institution  of any such
proceedings. No authorization, approval or other action by, and not notice to or
filing with, any  governmental  authority or regulatory  body is required either
(i) for the pledge by the Grantor of the  Collateral  pursuant to this Agreement
or for the  execution,  delivery or performance of this Agreement by the Grantor
or (ii) for the  exercise  by the  Lender of any  remedies  with  respect to the
Collateral.

4.       COVENANTS.

         Grantor  hereby  covenants  and  agrees  that  from  the  date  of this
Agreement, and thereafter until this Agreement is terminated:

         4.1  Inspection  and  Verification.  The Lender and such Persons as the
Lender may designate  shall have the right, at any reasonable time or times upon
three (3) days prior  notice and  during  Grantor's  usual  business  hours,  to
inspect the  Collateral,  all records  related thereto (and to make extracts and
copies from such records),  and the premises upon which any of the Collateral is
located,  to discuss  Grantor's  affairs  with the officers of Grantor and their
independent auditors to verify under reasonable procedures the validity, amount,
quality,  quantity, value and condition of, or any other matter relating to, the
Collateral.

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<PAGE>

         4.2 Records  and  Reports.  The  Grantor  will  maintain  complete  and
accurate  books and records with respect to the  Collateral,  and furnish to the
Lender such reports  relating to the Collateral as the Lender shall from time to
time reasonably request.

         4.3 Financing  Statements and Other  Actions.  The Grantor will execute
and deliver to the Lender all financing  statements and  amendments  thereto and
other  documents,  and  take  such  other  actions,  as are  from  time  to time
reasonably  requested  by the Lender in order to  perfect  and to  maintain  and
protect the validity,  enforceability and perfected status of the first priority
perfected  security  interest  in the  Collateral  or to  enable  the  Lender to
exercise  and  enforce its rights and  remedies  hereunder  with  respect to the
Collateral.

         4.4 Change in Location or Name.  The  Grantor  will not (a)  maintain a
place of business  at any  location  other than the  location  specified  in the
preamble  to this  Agreement,  (b)  change its name,  or (c) change its  mailing
address,  unless, in each case, the Grantor shall have given the Lender at least
thirty (30) days' prior  written  notice  thereof,  including the new address or
name, and delivered any financing statements or other documents requested by the
Lender.

         4.5 Other Financing Statements.  The Grantor will not sign or authorize
the signing on its behalf of any financing  statement  naming it as debtor which
covers all or any portion of the Collateral,  except financing statements naming
the Lender as secured party.

         4.6 Exclusivity. The Grantor will not sell, convey or otherwise dispose
of any  interest  in the  Collateral  or  create,  incur or  permit to exist any
pledge,   mortgage,  lien,  charge  or  encumbrance  or  any  security  interest
whatsoever in or with respect to any of the  Collateral  other than that created
hereby,  without the prior written consent of the Lender, which consent will not
be unreasonably withheld..

         4.7 Defense.  The Grantor will defend at its sole expense, the Lender's
right,  title and security interest in and to the Collateral  against the claims
of any person, firm, corporation or other entity.

         4.8.  Intellectual  Property  Covenants.  The Grantor shall:

                  (a) consistent with  commercially  reasonable  practices,  not
perform or omit to perform any act whereby any patent  rights  necessary for the
License Agreement may become dedicated, invalidated or unenforceable;

                  (b)  consistent  with   commercially   reasonable   practices,
prosecute  diligently any necessary patent,  trademark or copyright  application
which is pending  with  respect to the License  Agreement as of the date of this
Agreement or hereafter and  otherwise  maintain all rights in and to the patents
necessary under the License  Agreement,  including making all necessary  filings
and recordings and paying all required fees and taxes to record and maintain its
registration  and  ownership  of  each  such  patent  described  in the  License
Agreement;

Covol Security Agreement              - 4 -                     December 6, 1999
<PAGE>

                  (c) not impair any of the Lender's rights of action  described
herein.

         4.9 Grant of License to Use  Patents.  For the purpose of enabling  the
Lender to exercise its rights and remedies upon an Event of Default, the Grantor
hereby grants to the Lender an irrevocable,  nonexclusive  license  (exercisable
without payment of royalty or other compensation to the Grantor) to use, license
or sublicense  any of the patents and all of the patent rights  described in the
License  Agreement to the extent not inconsistent  with the terms of the License
Agreement,  wherever  the  same  may be  located.  Except  as set  forth  in the
preceding  sentence,  the  Lender  shall  have  no  obligations  or  liabilities
regarding  any or all of the  patents  by reason  of, or  arising  out of,  this
Agreement.

5.       REMEDIES UPON DEFAULT.

         5.1 Remedies upon Default. If any Event of Default shall occur, whether
or not all of the Obligations shall have become due and payable, the Lender may,
in addition  to its rights  under the  Purchase  Agreement  and the  Debentures,
exercise any or all of the rights and remedies  provided (i) in this  Agreement,
or  (ii) to a  secured  party  when a  debtor  is in  default  under a  security
agreement governed by the Code or any other applicable law.

         5.2 Specific  Performance.  The Grantor agrees that, in addition to all
other rights and remedies  granted to the Lender in this Agreement and under the
Debentures,  the Lender shall be entitled to specific performance and injunctive
and  other  equitable  relief,  and the  Grantor  further  agrees  to waive  any
requirement  for the  securing  or  posting  of any  bond or other  security  in
connection with the obtaining of any such specific performance and injunctive or
other equitable relief.

         5.3  Grantor's  Secured  Liabilities  Upon Event of  Default.  Upon the
request of the Lender after the  occurrence of an Event of Default,  the Grantor
will promptly:

                  (a) Assemble and make  available to the Lender the  Collateral
and all records relating thereto at the Company's principal place of business.

                  (b) Permit the Lender,  or the  Lender's  representatives  and
Lenders,  to enter any premises where all or any part of the Collateral,  or the
books and records relating thereto,  or both, are located, to take possession of
all  or any  part  of  the  Collateral  and to  remove  all or any  part  of the
Collateral.

         5.4 Remedies Cumulative.  All rights,  powers and remedies contained in
this Agreement or afforded by law shall be cumulative and all shall be available
to the Lender until the Obligations have been paid in full.

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<PAGE>

6.       WAIVERS, AMENDMENTS AND REMEDIES.

         No delay or  omission  of the Lender to  exercise  any right,  power or
remedy granted under this Agreement shall impair such right,  power or remedy or
be construed to be a waiver of any Event of Default or an acquiescence  therein,
and any single or partial exercise of any such right,  power or remedy shall not
preclude other or further  exercise  thereof or the exercise of any other right,
power or  remedy,  and no waiver,  amendment  or other  variation  of the terms,
conditions  or  provisions of this  Agreement  whatsoever  shall be valid unless
signed by each of the parties hereto,  and then only to the extent  specifically
set forth in such writing.

7.       COLLECTION OF RECEIVABLES; PROCEEDS.

         7.1 Collection of Receivables. Grantor hereby covenants and agrees that
the Lender  may at any time  after the  occurrence  of an Event of  Default,  by
giving the Grantor written notice,  elect to enforce  collection of any proceeds
of any and all of the  Collateral,  including any Earned Royalty and any payment
of profits from sales of  Proprietary  Binder  Material  (each as defined in the
License  Agreement)  and to require that such  proceeds be paid  directly to the
Lender. In such event, the Grantor covenants and agrees to, and shall permit the
Lender to,  promptly  notify the account  debtors or obligors  under the License
Agreement of the Lender's  interest  therein and direct such account  debtors or
obligors to make payment of all amounts then or thereafter due under the License
Agreement  directly  to the  Lender.  Upon  receipt of any such  notice from the
Lender,  the Grantor shall  thereafter  hold in trust for the Lender all amounts
and proceeds  received by it with respect to the License  Agreement or any other
Collateral,  shall  segregate  all such amounts and proceeds from other funds of
the Grantor,  and shall at all times  thereafter  promptly deliver to the Lender
all such amounts and proceeds in the same form as so received,  whether by cash,
check, draft or otherwise, with any necessary endorsements.

         7.2  Payment  of  Proceeds  from  Collateral.  Upon the  receipt by the
Licensee of notice from the Lender of the  occurrence  of an Event of Default by
the Company pursuant to the Purchase Agreement or the Debentures issued pursuant
thereto, the Grantor acknowledges and agrees that the Licensee shall (a) make no
further payments to the Company under (i) the License  Agreement,  including any
Earned  Royalty  (as  defined  in the  License  Agreement  ), or (ii) any  other
agreement between the Company and the Licensee with respect to the Facility, and
(b) make  all  payments  otherwise  due to the  Company  under  (i) the  License
Agreement , including any Earned Royalty,  or (ii) any other  agreement  between
the Company and the  Licensee  with  respect to the  Facility,  to the Lender as
specified by the Lender in the notice referred to above.

         The  Grantor  further  acknowledges  and agrees  that,  notwithstanding
anything to the contrary contained in Section 3.4 of the License Agreement,  (i)
payments with respect to the License  Agreement,  including Earned Royalty shall
be due as specified in Section 3.4 of the License  Agreement  and (ii)  payments
shall be made in  accordance  with this  Agreement and shall be deemed paid when
paid to the Lender.  The Grantor further  acknowledges  and agrees that payments
made by the  Licensee  to the  Lender  under this  Agreement  shall be deemed to
satisfy the

Covol Security Agreement              - 6 -                     December 6, 1999
<PAGE>

Licensee's  corresponding  payment obligations under the Licence Agreement.  The
Grantor  hereby agrees to continue to perform all of its  obligations  under the
License Agreement.

         7.3  Application  of Proceeds.  (a) Upon the  occurrence of an Event of
Default,  the Lender shall have the continuing  and exclusive  right to apply or
reverse and re-apply any and all payments to any portion of the Obligations.  To
the extent  that the  Grantor  makes a payment or  payments to the Lender or the
Lender  receives  any payment or proceeds of the  Collateral,  which  payment or
proceeds  or any part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent  or  preferential,  set aside or  required to be repaid to a trustee,
receiver or any other  party under any  bankruptcy  law,  state or federal  law,
common law or equitable cause,  then, to the extent of such payment or proceeds,
the  Obligations  or part thereof  intended to be satisfied  and this  Agreement
shall be revived and  continue in full force and effect,  as if such  payment or
proceeds had not been received by such party.

                  (b) Should the Lender receive proceeds of the Collateral,  the
Lender shall apply the proceeds of such amounts withdrawn as follows:

                  FIRST,  to the payment of all  reasonable  costs and  expenses
incurred by the Lender in connection  with such  collection or sale or otherwise
in connection with this Agreement or any of the  Obligations,  including but not
limited to all court costs and the  reasonable  fees and expenses of its Lenders
and legal counsel, the repayment of all advances made by the Lender hereunder on
behalf of the Grantor and any other  costs or  expenses  incurred in  connection
with the exercise of any right or remedy hereunder.

                  SECOND,  to the  payment  in full of all unpaid  interest  and
penalties on the Debentures.

                  THIRD, to the payment in full of the unpaid  principal  amount
of the Debentures, to be applied on a pro rata basis.

                  FOURTH,   to  the  payment  and   discharge  in  full  of  the
Obligations (other than those referred to above).

                  FIFTH,  to the Grantor,  its  successors  or assigns,  or as a
court of competent jurisdiction may otherwise direct.

8.       GENERAL PROVISIONS.

         8.1  Compromises and Collection of Collateral.  The Grantor  recognizes
that  setoffs,  counterclaims,  defenses  and other  claims may be  asserted  by
obligors  with  respect  to  certain  of  the  proceeds  of any  and  all of the
Collateral,  including any Earned  Royalty and any payment of profits from sales
of Proprietary  Binder Material,  that certain of such proceeds may be or become
uncollectible  in  whole or in part and that  the  expense  and  probability  of
success in

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<PAGE>

litigating  disputed  Collateral  proceeds may exceed the amount that reasonably
may be expected to be recovered  with respect to such  Collateral  proceeds.  In
view of the  foregoing,  the Grantor  agrees that the Lender may at any time and
from time to time compromise with the obligor on any Collateral proceeds, accept
in full payment of any Collateral proceeds such amount as the Lender in its sole
discretion shall  determine,  or abandon any Collateral  proceeds,  and any such
action by the Lender shall be commercially reasonable so long as the Lender acts
in good  faith  based on  information  known to it at the time it takes any such
action.

         8.2 Secured Party Performance of Grantor Secured  Liabilities.  Without
having any  obligation  to do so, the Lender may,  upon  notice to the  Grantor,
perform or pay any obligation  which the Grantor has agreed to perform or pay in
this Agreement but has not performed or paid and the Grantor shall reimburse the
Lender for any  amounts  paid or  incurred  pursuant to this  Section  8.2.  The
Grantor's  obligation to reimburse the Lender pursuant to the preceding sentence
shall be an Obligation  payable on demand and shall bear interest at the rate of
2.5% per month from the date of payment until payment in full.

         8.3  Authorization  for Secured Party To Take Certain Action.  Upon the
occurrence  of an Event of Default or with the  consent  of the  Grantor,  which
consent shall not be unreasonably  withheld,  the Grantor irrevocably authorizes
the  Lender  at any  time and from  time to time in the sole  discretion  of the
Lender, and irrevocably  appoints the Lender as its  attorney-in-fact  to act on
behalf of the  Grantor,  in the name of the Grantor or  otherwise,  from time to
time  in the  Lender's  discretion,  to  take  any  action  and to  execute  any
instrument  which the Lender may deem  necessary or advisable to accomplish  the
purposes  of this  Agreement,  including  without  limitation  (a) to execute on
behalf of the Grantor as debtor and to file  financing  statements  necessary or
desirable  in the  Lender's  sole  discretion  to perfect  and to  maintain  the
perfection and priority of the Lender's security interest in the Collateral; (b)
to endorse,  deposit and collect any cash and other proceeds of the  Collateral;
(c) to file a carbon,  photographic  or other  reproduction of this Agreement or
any financing  statement with respect to the Collateral as a financing statement
in such  offices  as the  Lender  in its  sole  discretion  deems  necessary  or
desirable to perfect and to maintain the perfection and priority of the Lender's
security  interest  in the  Collateral;  (d) to  enforce  payment  of the Earned
Royalty and the payments from sales of Proprietary  Binder  Material in the name
of the  Lender or the  Grantor;  (e) to cause  the  proceeds  of any  Collateral
received  by the  Lender  to be  applied  to the  Obligations;  (f) to sign  the
Grantor's  name on any  invoice or bill of lading  relating  to any  Collateral,
including any Earned Royalty and Proprietary Binder Material profits,  on drafts
against customers,  on schedules and assignments of such Collateral,  on notices
of assignment,  financing  statements and other public records, on verifications
of accounts and on notices to licensees;  (g) to send requests for  verification
of any  Collateral  or any  proceeds  therefrom,  including  Earned  Royalty and
Proprietary  Binder Material  profits to licensees or account debtors  (provided
that this clause (g) shall not limit the Lender's  rights under  Section  4.01);
(h) to do all  things  necessary  to carry out this  Agreement;  (i) to grant or
issue any exclusive or nonexclusive  license under the Collateral to any Person,
to the extent  consistent  with the terms of the License  Agreement,  and (j) to
assign,  pledge,  convey or otherwise  transfer title in or to or dispose of the
Collateral to anyone, including without limitation, to

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<PAGE>

make assignments,  recordings,  registrations  and applications  therefor in the
United States Patent and Trademark Office, the United States Copyright Office or
any  similar  office or agency of the United  States,  any State  thereof or any
other country or political  subdivision  thereof, and to execute and deliver any
and all  agreements,  documents,  instruments  of  assignment  or  other  papers
necessary  or  advisable  to effect  any of the  foregoing  or the  recordation,
registration,  filing or perfection  thereof.  The Grantor ratifies and approves
all acts of such attorney-in-fact. The Lender will not be liable for any acts or
omissions except those determined pursuant to a final, non-appealable order of a
court of competent  jurisdiction to have resulted solely from the Lender's gross
negligence or willful misconduct. The power conferred on the Lender hereunder is
solely to protect its interests in the  Collateral and shall not impose any duty
upon the Lender to  exercise  such  power.  This power,  being  coupled  with an
interest, is irrevocable.

         8.4 Grantor Remains Liable. Anything contained in this Agreement to the
contrary notwithstanding,  (a) the Grantor shall remain solely liable to perform
its  duties  and  obligations  under  the  License  Agreement  included  in  the
Collateral  to the  extent  set  forth  therein  to the same  extent  as if this
Agreement  had not been  executed,  (b) the exercise by the Lender of any of its
rights and  remedies  hereunder  shall not release  any Grantor  from any of its
duties or  obligations  under the License  Agreement  included in the Collateral
except to the extent the exercise of such rights renders the performance of such
duties or obligations by the Grantor  impracticable  under any such agreement or
contract,  and (c) the Lender shall not have any  obligation or liability  under
any License  Agreement  included in the Collateral by reason of this  Agreement,
and the  Lender  shall not be  obligated  in any  manner to  perform  any of the
obligations or duties of the Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.

9.       MISCELLANEOUS

         9.1 Security Interest Absolute. All rights of the Lender hereunder, the
security interest granted hereby,  and all obligations of the Grantor hereunder,
shall be absolute and unconditional  irrespective of (a) any lack of validity or
enforceability  of the  Debentures,  any  agreement  with  respect to any of the
Obligations  or  any  other  agreement  or  instrument  relating  to  any of the
foregoing,  (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the  Obligations,  or any other amendment or waiver
of or any consent to any departure from the Debentures or any other agreement or
instrument, (c) any exchange, release or non-perfection of any other Collateral,
or any release,  amendment or waiver of, or consent to or  departure  from,  any
guaranty for all or any of the Obligations,  or (d) any other circumstance which
might  otherwise  constitute  a defense  available  to, or a  discharge  of, the
Grantor in respect of the Obligations or in respect of this Agreement.

         9.2 Lender's Fees and Expenses; Indemnification. (a) The Grantor agrees
to pay  upon  demand  to the  Lender  the  amount  of all  reasonable  expenses,
including the fees and expenses of its counsel and of any experts of the Lender,
which the Lender may incur in connection with (i)

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<PAGE>

the  administration  of this Agreement,  (ii) the custody or preservation of, or
the sale of,  collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Lender  hereunder,
or (iv) the failure by the  Grantor to perform or observe any of the  provisions
hereof.

                  (b)  Without  limitation  of its  indemnification  obligations
under the  Purchase  Agreement  or any  Related  Documents  (as  defined  in the
Purchase  Agreement)  the Grantor  agrees to indemnify the Lender  against,  and
defend  and  hold  it  harmless  from,  any  and all  losses,  claims,  damages,
liabilities and related expenses,  including reasonable fees,  disbursements and
other charges of counsel,  incurred by or asserted against it arising out of, in
any  way  connected  with,  or  as a  result  of,  the  execution,  delivery  or
performance  of  this  Agreement  or any  claim,  litigation,  investigation  or
proceeding relating hereto or to the Collateral,  whether or not the Lender is a
party  thereto;  provided that such  indemnity  shall not, as to the Lender,  be
available  to the extent  that such  losses,  claims,  damages,  liabilities  or
related  expenses are determined by a court of competent  jurisdiction  by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of the Lender.

                  (c) Any such amounts  payable as provided  hereunder  shall be
additional Obligations secured by this Agreement. The provisions of this Section
9.2 shall  remain  operative  and in full  force and  effect  regardless  of the
termination of this Agreement, the consummation of the transactions contemplated
hereby,   the   repayment  of  any  of  the   Debentures,   the   invalidity  or
unenforceability   of  any  term  or  provision  of  this   Agreement,   or  any
investigation  made by or on behalf of the  Lender.  All  amounts due under this
Section 9.2 shall be payable on written demand  therefor and shall bear interest
at the rate of 2.5% per month  from the date  incurred  by Lender  until paid in
full

         9.3 No Amendment of License the  Agreements.  The Grantor hereby agrees
not to amend or waive  any  provision  of the  License  Agreements  without  the
written consent (which shall not be unreasonably withheld) of the Lender.

         9.4 Binding  Agreement;  Assignments.  This  Agreement,  and the terms,
covenants and conditions hereof,  shall be binding upon and inure to the benefit
of the parties hereto and their  respective  successors  and permitted  assigns,
except that the Grantor  shall not be permitted to assign this  Agreement or any
interest herein or in the Collateral or any part thereof,  or otherwise  pledge,
encumber or grant any option with respect to the Collateral or any part thereof,
or any cash or property held by the Lender as Collateral  under this  Agreement,
except as contemplated by this Agreement or the Debentures.

         9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE  INTERNAL  SUBSTANTIVE  LAWS OF THE  STATE OF UTAH  WITHOUT
GIVING  EFFECT TO THE LAWS OF CONFLICT OR CHOICE OF LAWS OF THE STATE OF UTAH OR
ANY OTHER JURISDICTION THAT

Covol Security Agreement             - 10 -                     December 6, 1999
<PAGE>

WOULD  RESULT IN THE  APPLICATION  OF ANY LAWS  OTHER THAN THOSE OF THE STATE OF
UTAH.

         9.6 Consent to  Jurisdiction  and Service of Process.  With  respect to
jurisdiction,  service of process,  jury trial and all other procedural  matters
the  Grantor  agrees  that the  provisions  of  Section  12.11  of the  Purchase
Agreement apply to this Agreement mutatis mutandis.

         9.7  Notices.  All  communications  and notices  hereunder  shall be in
writing and given as provided in the Debentures.

         9.8 Severability.  In case any one or more of the provisions  contained
in this Agreement should be invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as such
provision  is held to be invalid,  illegal or  unenforceable  and the  validity,
legality and enforceability of the remaining  provisions  contained herein shall
not in any way be affected or impaired. The parties shall endeavor in good-faith
negotiations to replace the invalid,  illegal and unenforceable  provisions with
valid  provisions,  the  economic  effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.

         9.9  Counterparts.  This  Agreement  may be  executed  in  two or  more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.

         9.10 Termination.  (a) This Agreement and the security interest granted
hereby shall  terminate only after all the  Obligations  have been  indefeasibly
paid  in full  and the  Lender  has no  further  commitment  to lend  under  the
Debentures,  at which time the Lender  shall  execute and deliver to the Grantor
all  Uniform  Commercial  Code  termination  statements  and  similar  documents
prepared by the Grantor which the Grantor shall  reasonably  request to evidence
such termination.

                  (b) Notwithstanding anything to the contrary contained in this
Agreement,  this Agreement shall remain in full force and effect and continue to
be  effective  should  any  petition  be filed by or  against  the  Grantor  for
liquidation or  reorganization,  should the Grantor become  insolvent or make an
assignment  for any  benefit of  creditors  or should a  receiver  or trustee be
appointed for all or any  significant  part of the Grantor's  assets,  and shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment and performance of the obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the obligations,  whether as a "voidable preference",
"fraudulent  conveyance" or otherwise,  all as though such payment,  or any part
thereof, is rescinded, reduced, restored or returned.

Covol Security Agreement             - 11 -                     December 6, 1999
<PAGE>

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

         Grantor:                           COVOL TECHNOLOGIES, INC.
Attest:
/s/ Harlan M. Hatfield                      By: /s/ Steven G. Stewart
-------------------------------------          ---------------------------------
Harlan M. Hatfield, General Counsel &           Steven G. Stewart, Chief
Corporate Secretary                             Financial Officer

                                            By: /s/ Stanley M. Kimball
                                                --------------------------------
                                                Stanley M. Kimball, Executive
                                                Vice President

         Lender:                            DH FINANCIAL, L.C.

                                            By: /s/ Brad Dennis
                                                --------------------------------
                                                Its  Manager

Covol Security Agreement             - 12 -                     December 6, 1999