UTAH #2

                            ASSET PURCHASE AGREEMENT

                                 by and between

                              DTE KENTUCKY, L.L.C.

                                       and

                            COVOL TECHNOLOGIES, INC.

                             CARBON SYNFUEL, L.L.C.

                            SYNFUEL INVESTMENTS, INC.

                                December 23, 1999

** This Exhibit contains  confidential  material which has been omitted pursuant
to a Confidential  Treatment  Request.  The omitted  information  has been filed
separately with the Securities and Exchange Commission.

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                               TABLE OF CONTENTS

                                                                            Page

ARTICLE I DEFINITIONS.........................................................1
         1.1. Affiliate.......................................................1
         1.2. Agreement.......................................................1
         1.3. As-Built Drawing................................................1
         1.4. Assets..........................................................1
         1.5. Assignment Agreement............................................1
         1.6. Bill of Sale....................................................2
         1.7. Books and Records...............................................2
         1.8. Buyer's Closing Certificate.....................................2
         1.9. Closing.........................................................2
         1.10. Closing Date...................................................2
         1.11. Code...........................................................2
         1.12. Confidentiality Agreement......................................2
         1.13. Contracts......................................................2
         1.14. Covol Process..................................................2
         1.15. Effective Time.................................................2
         1.16. Excluded Assets................................................2
         1.17. Facility.......................................................2
         1.18. Facility Site..................................................2
         1.19. Fixed Assets...................................................3
         1.20. GAAP...........................................................3
         1.21. Improvements...................................................3
         1.22. IRS............................................................3
         1.23. Knowledge of Buyer.............................................3
         1.24. Knowledge of Seller............................................3
         1.25. Law............................................................3
         1.26. Lease..........................................................3
         1.27. License and Binder Purchase Agreement..........................3
         1.28. Lien...........................................................3
         1.29. Loss...........................................................4
         1.30. Material Adverse Effect........................................4
         1.31. Opinion of Sellers' Counsel....................................4
         1.32. Permitted Liens................................................4
         1.33. Plans and Specifications.......................................4
         1.34. Product........................................................4
         1.35. Purchase Consideration.........................................4
         1.36. Required Consents..............................................4
         1.37. Section 29 Product.............................................4
         1.38. Sellers' Closing Certificate...................................4
         1.39. Sublease and License...........................................4
         1.40. Transaction Documents..........................................4

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ARTICLE II PURCHASE AND SALE..................................................5
         2.1. Purchase and Sale...............................................5
         2.2. Payment of the Purchase Consideration...........................5
         2.3. Deliveries at Closing...........................................5
         2.4. Allocation of Purchase Price....................................5
         2.5. No Assumption of Liabilities....................................6
         2.6. Sales Tax Exemption.............................................6

ARTICLE III REPRESENTATION AND WARRANTIES OF SELLERS..........................6
         3.1. Corporate Standing..............................................6
         3.2. Authorizations; Binding Agreements..............................6
         3.3. No Actions Affecting Enforcement of the Agreement and
                the other Transaction Documents...............................7
         3.4. Taxes...........................................................7
         3.5. Brokers or Finders Fees.........................................7
         3.6. No Imposition of Liens..........................................8
         3.7. Title to Assets.................................................8
         3.8. Condition of Assets.............................................8
         3.9. Pending Litigation..............................................8
         3.10. Compliance With Laws...........................................8
         3.11. Status of Contracts............................................8
         3.12. Consents.......................................................9
         3.13. Books and Records..............................................9
         3.14. Environmental Conditions.......................................9
         3.15. Liabilities...................................................10
         3.16. Agreements with Related Persons...............................10
         3.17. Adequacy of the Purchased Assets..............................10
         3.18. Production Capacity...........................................11
         3.19. Section 29 Issues.............................................11

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER...........................11
         4.1. Organization and Standing......................................11
         4.2. Authorizations; Binding Agreements.............................11
         4.3. Brokers or Finders Fees........................................12
         4.4. No Action Affecting Enforcement of the Agreement and the
                other Transaction Documents..................................12

ARTICLE V CERTAIN UNDERSTANDINGS AND AGREEMENTS..............................12
         5.1. Best Efforts...................................................12
         5.2. Public Announcements...........................................12
         5.3. Confidentiality................................................12
         5.4. Taxes..........................................................13
         5.5. Private Letter Ruling Repurchase Option........................13
         5.6. Solvency Representations and Covenants.........................13
         5.7. Sublease and License...........................................14

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ARTICLE VI CONDITIONS PRECEDENT TO THE PAYMENT OBLIGATIONS OF BUYER..........14
         6.1. Compliance with Agreement......................................14
         6.2. Proceedings and Instruments Satisfactory.......................14
         6.3. No Litigation..................................................14
         6.4. Representations and Warranties.................................14
         6.5. Consents.......................................................15
         6.6. Tax Opinion....................................................15

ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS...............15
         7.1. Compliance with Agreement......................................15
         7.2. Proceedings and Instruments Satisfactory.......................15
         7.3. No Litigation..................................................15
         7.4. Representations and Warranties.................................15
         7.5. Required Consents..............................................16

ARTICLE VIII INDEMNITIES AND ADDITIONAL COVENANTS............................16
         8.1. Sellers' Indemnity.............................................16
         8.2. Buyer's Indemnity..............................................17
         8.3. Bulk Sales Compliance..........................................18
         8.4. Additional Instruments.........................................18
         8.5. Access to Books, Records and Employees.........................19

ARTICLE IX TERMINATION.......................................................19
         9.1. Termination....................................................19
         9.2. Rights on Termination; Waiver..................................19

ARTICLE X MISCELLANEOUS......................................................20
         10.1. Entire Agreement; Amendment...................................20
         10.2. Expenses......................................................20
         10.3. Governing Law; Consent to Jurisdiction........................20
         10.4. Assignment....................................................21
         10.5. Notices.......................................................21
         10.6. Counterparts; Headings........................................22
         10.7. Interpretation................................................22
         10.8. Severability..................................................22
         10.9. No Reliance...................................................22
         10.10. Parties in Interest..........................................22
         10.11. Specific Performance.........................................23

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                             EXHIBITS AND SCHEDULES

SCHEDULE 1.13     Contracts
SCHEDULE 1.16     Excluded Assets
SCHEDULE 1.19     Fixed Assets
SCHEDULE 1.23     Knowledge of Buyer
SCHEDULE 1.24     Knowledge of Sellers

SCHEDULE 1.31     Opinion of Sellers' Counsel
SCHEDULE 1.32     Permitted Liens
SCHEDULE 1.36     Required Consents
SCHEDULE 3.3      Pending Actions
SCHEDULE 3.5      Brokers or Finders Fees of Sellers
SCHEDULE 3.7      Title
SCHEDULE 3.8      Condition of Assets
SCHEDULE 3.9      Pending Litigation
SCHEDULE 3.11     Status of Contracts
SCHEDULE 3.16     Agreements with Related Persons


EXHIBIT A          Assignment Agreement
EXHIBIT B          Bill of Sale
EXHIBIT C          Buyer's Closing Certificate
EXHIBIT D          Sellers' Closing Certificate

EXHIBIT E          License and Binder Purchase Agreement
EXHIBIT F          Allocation of Purchase Price

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                            ASSET PURCHASE AGREEMENT

         ASSET PURCHASE AGREEMENT,  made as of December 23, 1999, by and between
DTE KENTUCKY,  L.L.C., a Delaware limited liability company ("Buyer"), and COVOL
TECHNOLOGIES,  INC., a Delaware  corporation;  CARBON  SYNFUEL,  L.L.C.,  a Utah
limited liability  company;  and SYNFUEL  INVESTMENTS,  INC., a Utah corporation
("Sellers").

                                    RECITALS

         WHEREAS,  Carbon  Synfuel,  L.L.C.  owns  the  Assets  comprised  of  a
processing  Facility to produce  solid  synthetic  fuel  pellets from coal fines
located near Price,  Utah and Carbon Synfuel,  L.L.C. is controlled by the other
Sellers; and

         WHEREAS,  Sellers  desire to sell the Assets and the Contracts to Buyer
and Buyer  desires to  purchase  the Assets from  Sellers,  all on the terms and
subject to the conditions set forth herein.

         NOW,  THEREFORE,  in  consideration  of the  Recitals and of the mutual
covenants,  conditions  and  agreements  set forth herein and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, it is hereby agreed that:

                                    ARTICLE I
                                   DEFINITIONS

         When  used in this  Agreement,  the  following  terms  shall  have  the
meanings specified:

                  1.1.  Affiliate shall mean, as to any person, any other person
or entity  that,  directly or  indirectly  through  one or more  intermediaries,
controls, is controlled by or is under common control with such person.

                  1.2.  Agreement shall mean this Purchase  Agreement,  together
with the Exhibits and Schedules attached hereto, as the same may be amended from
time to time in accordance with the terms hereof.

                  1.3. As-Built Drawing shall mean as-built drawings  reflecting
necessary revisions on the original tracings of the Plans and Specifications and
related  drawings  relating to the  Facility  necessary  to indicate  such field
changes as may have been found necessary to suit conditions at the Facility Site
and any other revisions made in the course of construction of the Facility.

                  1.4. Assets shall mean,  collectively,  the Improvements,  the
Books and Records,  and the Fixed Assets,  together with all goodwill associated
with the Facility.

                  1.5. Assignment  Agreement shall mean the Assignment Agreement
between  Sellers and Buyer  relating to the  Contracts  in the form of Exhibit A
attached hereto.

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                  1.6.  Bill of Sale shall mean the Bill of Sale from Sellers to
Buyer relating to the Assets, in the form of Exhibit B attached hereto.

                  1.7.  Books  and  Records  shall  mean  original  or true  and
complete  copies of all of the books,  records,  files,  data and information of
Sellers  relating to the design,  construction and operation of the Facility and
operation of the business  prior to the  Effective  Time,  which are relevant to
Buyer's use of the Assets,  performance under the Contracts and operation of the
Facility and the Business after the Effective Time, including without limitation
Plans and  Specifications,  all  original  tracings of the related  drawings and
designs and the As-Built Drawings.

                  1.8. Buyer's Closing Certificate shall mean the certificate of
Buyer substantially in the form of Exhibit C attached hereto.

                  1.9.  Closing shall mean the meeting of the parties to be held
at 9:00 a.m.,  local  time,  on the  Closing  Date,  at the  offices of Hunton &
Williams,  Riverfront  Plaza,  East  Tower,  951  East  Byrd  Street,  Richmond,
Virginia,  or such other time and place as the  parties  may  mutually  agree in
writing.

                  1.10. Closing Date shall mean December 29, 1999, or such other
date as the parties may mutually agree in writing.

                  1.11.  Code shall mean the Internal  Revenue Code of 1986,  as
amended, and the regulations thereunder.

                  1.12.   Confidentiality   Agreement   shall  mean  the  Letter
Agreement,  dated  April 27,  1999,  between  Sellers  and DTE  Energy  Services
Company.

                  1.13.   Contracts  shall  mean  all  construction   agreements
relating to the Facility and the  Improvements,  or components  thereof,  all as
listed on  Schedule1.13  attached  hereto or as  otherwise  agreed upon by Buyer
prior to the Closing Date.

                  1.14. Covol Process shall mean Sellers' proprietary  synthetic
coal fuel production  process for  manufacturing  solid synthetic fuel from coal
fines  which is defined  in and is the  subject of the  Technology  License  and
Binder Supply Agreement.

                  1.15.  Effective Time shall mean 12:01 a.m.,  Eastern Time, on
the Closing Date.

                  1.16.  Excluded Assets shall mean the items listed on Schedule
1.16 attached

hereto

                  1.17.  Facility  shall mean the solid  synthetic  fuel  pellet
manufacturing Facility and related support Facility owned by Sellers and located
at the Facility Site.

                  1.18.  Facility  Site shall mean that  certain  parcel of land
located near Price,  Utah where the Facility is located as of the Effective Date
and which is the leased premises under the Lease.

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                  1.19. Fixed Assets shall mean all tangible  personal  property
located at the Facility Site which  constitute  part of, or are otherwise  owned
and used by Sellers in the operation of, the Facility as of the Effective  Time,
including, but not limited to, all fixed assets, chattels, machinery, equipment,
computer  hardware,  fixtures,  furniture,   furnishings,   handling  equipment,
implements,  spare parts, tools and accessories of all kinds which are listed on
Schedule  1.19  attached  hereto;  provided,  however,  that Fixed  Assets shall
exclude (i) leased items of property and (ii) the Excluded Assets.

                  1.20. GAAP shall mean generally accepted accounting principles
of the United  States as applied  by Sellers in a manner  consistent  with prior
periods.

                  1.21.  Improvements  shall mean the structures,  buildings and
improvements  now standing on the  Facility  Site and  constituting  part of the
Facility,  and replacements thereof,  including,  without limitation,  all plant
equipment,  apparatus,  and machinery of every kind and nature forming a part of
such Facility, buildings, and improvements.

                  1.22. IRS shall mean the Internal Revenue Service.

                  1.23.  Knowledge  of Buyer  shall mean the  actual  knowledge,
after due inquiry, of any person listed on Schedule 1.23 attached hereto.

                  1.24.  Knowledge  of Seller  shall mean the actual  knowledge,
after due inquiry, of any person listed on Schedule 1.24 attached hereto.

                  1.25. Law shall mean any federal, state, local or other law or
governmental  requirement  of any kind,  and the rules,  regulations  and orders
promulgated thereunder.

                  1.26.  Lease shall mean that  certain  Lease  Agreement by and
between U.P.C.,  Inc. and Covol  Technologies,  Inc. dated December 23, 1996, as
amended by that certain Amendment to Lease Agreement dated as of April 2, 1997.

                  1.27.  License and Binder  Purchase  Agreement shall mean that
certain  License and Binder  Purchase  Agreement to be entered into by Buyer and
Sellers, relating to the licensing by the Buyer of Covol's proprietary synthetic
coal fuel extrusion,  pellet and briquette  production process for the Facility,
and substantially in the form of Exhibit E attached hereto.

                  1.28.  Lien shall mean any  interest in  property  securing an
obligation,  whether such interest is based on common law,  statute or contract,
and including any restriction on the use, voting, transfer, receipt of income or
other  exercise of any  attributes of ownership,  any security  interest or lien
arising  from  a  mortgage,  claims,  encumbrance,   pledge,  charge,  easement,
servitude,  security  agreement,  conditional  sale or trust receipt or a lease,
consignment  or bailment  for  security  purposes.  The term  "Lien"  shall also
include reservations,  exceptions, covenants, conditions,  restrictions, leases,
subleases,   licenses,   occupancy  agreements,   pledges,  equities,   charges,
assessments,  covenants, reservations, defects in title, encroachments and other
burdens,  and other title exceptions and encumbrances  affecting property of any
nature, whether accrued or unaccrued, or absolute or contingent.

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                  1.29.  Loss  shall  have the  meaning  given  to such  term in
Section 8.1(a).

                  1.30.  Material  Adverse Effect shall mean a material  adverse
effect  on the  Assets  and  Contracts,  taken as a whole,  the  business  to be
conducted  by Buyer  with the Assets or the  maintenance  and  operation  of the
Facility.

                  1.31.  Opinion of Sellers'  Counsel  shall mean the opinion of
Pillsbury, Madison & Sutro, LLP, counsel of Sellers and Harlan Hatfield, general
counsel of Covol Technologies, Inc., substantially in the form of Schedule 1.31.

                  1.32.  Permitted  Liens shall mean Liens (but only for amounts
not yet due and payable) securing taxes,  assessments or governmental charges or
levies,  Liens of an immaterial nature which could not reasonably be expected to
have an adverse effect on the  maintenance  and operation of the Facility or the
good and marketable title of the Assets or the  enforceability of the Contracts,
and Liens disclosed on Schedule 1.32 attached hereto.

                  1.33.  Plans and  Specifications  shall have the meaning given
such terms in the Contracts.

                  1.34.  Product  shall  mean the solid  synthetic  fuel  pellet
product produced at the Facility using and pursuant to the Covol Process.

                  1.35.  Purchase  Consideration shall have the meaning given to
such term in Section 2.2 hereof.

                  1.36.  Required Consents shall mean those consents,  approvals
and waivers  required  from  parties to the  Contracts or under the Lease or any
subleases  or from  governmental  authorities  or other third  parties  that are
necessary or required in order to transfer the Assets and Contracts to Buyer and
otherwise give effect to the transactions  contemplated  herein (other than such
consents, the failure of which to obtain, taken as a whole, could not reasonably
be  expected  to have a  Material  Adverse  Effect)  and that  are  specifically
identified on Schedule 1.36 attached hereto.

                  1.37.   Section  29  Product   shall  mean  Product  which  is
reasonably  expected to constitute  "qualified  fuels"  pursuant to the terms of
Section  29(c)(1)(C)  of the Code  and  with  respect  to  which  Section  29 is
applicable pursuant to the terms of Sections 29(f) and 29(g) of the Code.

                  1.38.  Sellers' Closing Certificate shall mean the certificate
of Sellers substantially in the form of Exhibit D attached hereto.

                  1.39.  Sublease and License  shall have the meaning given such
term in Section 5.7.

                  1.40.  Transaction  Documents shall mean this  Agreement,  the
Bill of Sale,  the  Assignment  Agreement,  the  Sublease  and License and those
agreements  and  instruments to be executed and delivered as provided in Section
2.3.

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                                   ARTICLE II
                                PURCHASE AND SALE

         2.1.     Purchase and Sale.

                  (a) Buyer and Sellers  hereby agree that at the  Closing,  and
upon all of the terms and subject to all of the  conditions  of this  Agreement,
Sellers  shall  sell,  convey,  transfer  and assign to Buyer,  and Buyer  shall
purchase  and accept  from  Sellers,  all of the  Assets,  free and clear of all
Liens.

                  (b) Buyer and Sellers  hereby agree that at the  Closing,  and
upon all of the terms and subject to all of the  conditions  of this  Agreement,
Sellers shall assign to Buyer the Contracts and all rights arising thereunder.

         2.2. Payment of the Purchase Consideration.

         In consideration of Sellers' sale, conveyance,  transfer,  delivery and
assignment of the Assets and  Contracts,  Buyer shall on the Closing Date make a
cash  payment to Sellers  in the  amount of **  Dollars  ($**),  payable by wire
transfer in readily  available  funds to First  Security  Bank;  Salt Lake City,
Utah; 18A 124 000012;  for the account of Covol  Technology;  Acct.  #0600019939
(the "Purchase Consideration").

         2.3. Deliveries at Closing.

                  (a) By Sellers to Buyer. At the Closing, Sellers shall deliver
the following items to Buyer, each properly executed and dated as of the Closing
Date by Sellers and in form and substance  reasonably  acceptable to Buyer:  the
Assignment Agreement,  the Bill of Sale, the Improvements Deed, the Sublease and
License, the License and Binder Purchase Supply Agreement, all Required Consents
applicable  to  Sellers,  the  Opinion of  Sellers'  Counsel,  Sellers'  Closing
Certificate, a subordination and nondisturbance agreement,  satisfactory in form
and substance to Buyer,  from all mortgagees and other parties with interests in
the  Facility  Site,  the Lease or the  Improvements  and a  certificate  of the
corporate secretary of Sellers as to such matters as may reasonably be requested
by Buyer.

                  (b) By Buyer to Sellers.  At the Closing,  Buyer shall deliver
the Purchase  Consideration  and the following  items to Sellers,  each properly
executed  and dated as of the  Closing  Date by Buyer and in form and  substance
reasonably  acceptable to Sellers:  the Assignment  Agreement,  the Sublease and
License,  the License  and Binder  Purchase  Agreement,  all  Required  Consents
applicable  to Buyer,  Buyer's  Closing  Certificate  and a  certificate  of the
corporate secretary (or equivalent  official) of Buyer as to such matters as may
reasonably be requested by Sellers.

         2.4. Allocation of Purchase Price.

         On the Closing Date,  or at a later time agreed to by the parties,  not
to exceed 30 days  following  the  Closing  Date,  the  purchase  price shall be
allocated  among the Assets and Contracts in accordance  with Exhibit F attached
hereto.  Such  allocation  shall be intended to comply with

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<PAGE>

the  requirements  of  Section  1060 of the Code,  and no party  shall  take any
position inconsistent with such allocation for income tax purposes,  except that
Buyer's  cost for the  Assets  and  Contracts  may  differ  from the  amount  so
allocated to the extent  necessary to reflect  Buyer's  capitalized  acquisition
costs other than the amount realized by Sellers.

         2.5. No Assumption of Liabilities.

         Buyer does not and will not assume any  liability or  obligation of any
kind  of  Sellers,  or any  obligation  relating  to the  use of the  Assets  or
performance by Sellers under the Contracts prior to the Effective Time,  whether
absolute or contingent,  accrued or unaccrued,  asserted or unasserted, known or
unknown, or otherwise.

         2.6. Sales Tax Exemption.

         To the extent applicable, at the Closing, Buyer will deliver to Sellers
appropriate  and  customary  sales tax  exemption  certificates  relating to the
transfer of the Assets and the assignment of the Contracts contemplated hereby.

                                   ARTICLE III
                    REPRESENTATION AND WARRANTIES OF SELLERS

         Sellers jointly and severally represent and warrant to Buyer that:

         3.1. Corporate Standing.

         Sellers are corporations or a limited  liability company duly organized
and validly  existing  and in good  standing  under the laws of their  states of
organization  as indicated  in the  introductory  paragraph  of this  agreement.
Sellers  have the power to own  their  property,  and to  execute,  deliver  and
perform this Agreement and each of the Transaction  Documents  applicable to it,
and to  carry  on  their  business  as now  being  conducted.  Sellers  are duly
qualified to do business in and are in good standing as foreign  corporations or
limited  liability  companies,  authorized to do business  under the laws of the
States of Utah.

         3.2. Authorizations; Binding Agreements.

         The execution, delivery and performance of this Agreement and the other
Transaction Documents by Sellers and each conveyance, assignment, agreement, and
other document  herein  contemplated  to be executed by Sellers,  have been duly
authorized by all necessary  corporate and limited  liability company action, as
the case may be. This  Agreement  and the other  Transaction  Documents  and the
conveyances, assignments, agreements, and other documents herein contemplated to
be executed,  delivered and performed by Sellers are, or will be upon execution,
legal,  valid and binding  obligations  of  Sellers,  duly  enforceable  against
Sellers in  accordance  with their terms  (subject,  however,  to the effects of
bankruptcy, insolvency,  reorganization,  moratorium, and similar laws from time
to time in effect relating to the rights and remedies of creditors as well as to
general  principles  of  equity).  This  Agreement  and  the  other  Transaction
Documents and the  conveyances,  assignments,  agreements,  and other  documents
herein  contemplated  to be executed,  delivered and performed by Sellers (i) do
not and will not result in

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<PAGE>

any  violation  of,  conflict with or default under the terms of any of Sellers'
organizational documents (nor, to the Knowledge of Sellers, does there exist any
condition  which upon the  passage of time or the giving of notice  would  cause
such  violation,  conflict or  default),  and (ii)  subject only to the Required
Consents,  do not and will not  result in any  violation  of,  conflict  with or
default  under  any  Contract  or any other  material  permit,  lease,  venture,
indenture, mortgage, agreement, contract, judgment, order or other obligation or
restriction  to which Sellers,  the Assets,  the Contracts or the conduct of the
maintenance  and operation of the Facility may be bound or  encumbered  (nor, to
the Knowledge of Sellers,  does there exist any condition which upon the passage
of time or the  giving  of  notice  would  cause  such  violation,  conflict  or
default).

         3.3. No Actions  Affecting  Enforcement  of the Agreement and the other
Transaction Documents.

         Except as set forth in Schedule 3.3,  there are no actions,  suits,  or
proceedings  pending,  or, to the  Knowledge  of  Sellers,  threatened,  against
Sellers in any court, or  administrative  governmental body or agency which will
affect in any  adverse  manner the  ability of Sellers to  execute,  deliver and
perform this Agreement and the other Transaction Documents.  Subject only to the
Required  Consents  and such  consents  which the  failure  to obtain  could not
reasonably be expected to have a Material  Adverse Effect,  Sellers has obtained
all  permits,  licenses,  franchises,  authorizations,   variances,  exemptions,
concessions,  leases, instruments, orders, consents or approvals of governmental
entities  and third  parties  necessary to  construct,  maintain and operate the
Facility  and to  execute,  deliver  and perform  this  Agreement  and the other
Transaction Documents.

         3.4. Taxes.

         All tax returns and reports  relating to the Assets,  the Contracts and
the conduct of the  construction,  maintenance  and  operation  of the  Facility
required by law (including all federal, state, and local property tax, severance
and  franchise  tax laws) to be filed by Sellers  prior to the Closing have been
timely filed or will be caused to be timely filed,  including  those tax returns
relating  to  periods  prior to  Closing  that are not yet due,  except for such
returns and reports  which the failure to file could not  reasonably be expected
to  have  a  material  adverse  effect  on  the  Assets,  the  Contracts  or the
maintenance  and  operation  of the  Facility.  All  taxes,  assessments,  fees,
interest,  penalties and other governmental  charges relating to the Assets, the
Contracts or the conduct of the  construction,  maintenance and operation of the
Facility  prior to Closing  have been paid when due and  payable or payment  has
been provided for, except for such taxes, assessments, fees, interest, penalties
and other governmental  charges which the failure to pay could not reasonably be
expected to have a material  adverse effect on the Assets,  the Contracts or the
construction, maintenance and operation of the Facility.

         3.5. Brokers or Finders Fees.

         Except  as set  forth in  Schedule  3.5,  there  are no  obligation  or
liability,  contingent  or  otherwise,  for brokers or finders  fees  created by
Sellers with respect to the matters provided for in this Agreement and the other
Transaction  Documents.  No  obligation or liability for brokers or

                                       7
<PAGE>

finders fees created by Sellers with respect to the matters provided for in this
Agreement and the other  Transaction  Documents shall be imposed upon Buyer, the
Assets or the Contracts.

         3.6. No Imposition of Liens.

         The execution, delivery and performance of this Agreement and the other
Transaction Documents by Sellers shall not result in the imposition of any Lien,
other than Permitted  Liens,  upon any of the Assets,  the Contracts or by which
the maintenance and operation of the Facility may be bound or encumbered.

         3.7. Title to Assets.

         Except as set forth on  Schedule  3.7,  as of the date  hereof,  Carbon
Synfuel, L.L.C. owns, and as of the Effective Time, it will own, good, valid and
marketable  title to all of the  Assets,  free and  clear of any and all  Liens,
except for Permitted Liens. As of the Effective Time and upon Buyer's payment of
the Purchase  Consideration pursuant hereto, good, valid and marketable title to
the Assets and holds a fully  enforceable  leasehold  interest  in the  Facility
Site,  free and clear of all Liens,  except for Permitted  Liens,  shall pass to
Buyer.

         3.8. Condition of Assets.

         Except as set forth on Schedule 3.8, as of the Closing Date,  the Fixed
Assets,  taken as a whole,  will be in good  operating  condition and repair and
substantially fit for the production of Section 29 Product at a rate of 360,0000
tons per year, and the Facility has been  constructed  in conformance  with that
degree of skill and judgment  normally  exercised by recognized  engineering and
construction  firms of similar size and  experience  to that of the  contractors
under the  Contracts,  and the Assets  comprising  the  Facility  conform to the
standards of material and  workmanship  prevailing in applicable  industries and
are free from material  defects in design,  material and  workmanship and are of
good quality.

         3.9. Pending Litigation.

         Except as  disclosed  on Schedule  3.9,  there are no  actions,  suits,
arbitrations or proceedings  currently  pending or, to the Knowledge of Sellers,
threatened  against the Assets or the  Contracts.  There are no  outstanding  or
unsatisfied judgments, orders or decrees to which Sellers are bound.

         3.10. Compliance With Laws.

         To the Knowledge of Sellers, Sellers are in compliance with all orders,
writs, injunctions,  decrees, judgments,  rulings, laws, rules or regulations of
any  governmental  entity to which  Sellers,  the  Assets or the  Contracts  are
subject,  the violation of which could reasonably be expected to have a Material
Adverse Effect.

         3.11. Status of Contracts.

                                       8
<PAGE>

         Schedule 1.12 is a true,  correct and complete list of all the material
contracts  entered into by Sellers relating  primarily to the Assets.  Except as
described in the Schedule  3.11,  the Contracts are valid and in good  standing,
and there is no violation of, conflict with or default under the Contracts,  the
consequence  of which could  reasonably  be expected to have a Material  Adverse
Effect. Sellers have not received any notice from any party to any Contract that
such party intends to terminate, cancel or refuse to renew the same or that such
party  intends to offset any amount due  thereunder or assert any defense to the
enforceability thereof.

         3.12. Consents.

         Schedule  1.36 is a true,  correct and  complete  list of all  Required
Consents.

         3.13. Books and Records.

         As of the Closing  Date,  the Books and Records  shall be complete  and
correct in all material respects.

         3.14. Environmental Conditions.

                  (a) Definitions. When used in this Section:

                           (i)  "Environmental  Laws" shall mean all  applicable
laws (including common law), rules, orders, regulations,  statutes,  ordinances,
codes,  decrees  and  requirements  of any  Governmental  Authority  regulating,
relating to or imposing liability  standards of conduct concerning any Hazardous
Materials or environmental protection.

                           (ii) "Governmental Authority" shall mean any federal,
state, local,  municipal or other governmental  department,  commission,  board,
bureau,   agency  or  instrumentality,   or  any  court,  in  each  case  having
jurisdiction over the applicable matter.

                           (iii)  "Hazardous  Materials"  shall  mean any  solid
waste,  petroleum or petroleum  product,  hazardous  material,  hazardous waste,
infectious  medical waste, or hazardous or toxic substance  defined or regulated
as such in any Environmental Law.

                  (b) Environmental  Representations  and Warranties.  Except as
set forth on Schedule 3.14 attached hereto:

                           (i)  Sellers   have  not  operated  the  Facility  or
conducted  business or other  activities at or from the Facility,  in connection
with the construction of the Facility or otherwise, in a manner that constituted
or constitutes a violation of any applicable Environmental Law;

                           (ii) There has been no  off-site  shipment or release
of any  Hazardous  Materials  by the Sellers on,  under,  at, from or in any way
affecting the Facility or any part thereof,  which off-site  shipment or release
gives rise to liabilities or obligations  under applicable  Environmental  Laws;
and

                                       9
<PAGE>

                           (iii) Sellers have not received any notices or claims
that  they are a  responsible  party in  connection  with  any  claim or  notice
asserted pursuant to 42 U.S.C. Section 9601 et seq., or any state superfund law,
in connection with the Facility.

                           (iv)  Seller  has  received  all  permits  as  may be
required under applicable  Environmental  Laws to operate the Facility as of the
Effective  Time,  and Seller is in compliance in all material  respects with the
terms and conditions of each such permits. Such permits shall be transferable to
Buyer and will be effective  immediately (or, subject to Section 5.1, as soon as
practicable) after the Closing.

         3.15. Liabilities.

         Except for liabilities underlying any Permitted Liens, the Sellers have
no  liabilities  which could  reasonably be expected to have a Material  Adverse
Effect  following  the  Closing,  nor has any  condition  existed  or any  event
occurred which could reasonably be expected to give rise to any such liability.

         3.16. Agreements with Related Persons.

         There are no contracts,  licenses,  agreements or arrangements with any
Affiliate of Sellers in connection with the construction, maintenance, ownership
and operation of the Facility, other than as disclosed on Schedule 3.16.

         3.17. Adequacy of the Purchased Assets.

         Except as  described  in  Schedule  3.8 the Assets  and the  Contracts,
together with (i) the technology and know-how being licensed to Buyer by Sellers
under the License and Binder Purchase Agreement,  (ii) the chemical binder to be
supplied to Buyer by Sellers  under the License and Binder  Purchase  Agreement,
and (iii) rights and assets  required for the  relocation of the Facility to the
site selected by Buyer  (including  but not limited to  relocation  construction
contracts,  feedstock raw materials,  applicable real property rights,  permits,
etc.) which Buyer may arrange for but which are not the subject of this Purchase
Agreement,  constitute  all of  the  assets  and  technology  rights  reasonably
expected to be necessary  for the  production  by Buyer of Section 29 Product at
the rate of 360,000 tons per year.

                                       10
<PAGE>

         3.18. Production Capacity.

         The  Facility  has a rated  capacity to produce  Product at the rate of
360,000 tons per year.

         3.19. Section 29 Issues.

         The  Facility was placed "in service" for purposes of the Code prior to
July 1, 1998  pursuant to a binding  contract  entered  into prior to January 1,
1997 and effective at all times thereafter through completion of construction.

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer hereby represents and warrants to Sellers that:

         4.1. Organization and Standing.

         Buyer is a limited liability company duly organized,  validly existing,
and in good  standing  under the laws of the State of Delaware and has the power
to own its own property, and to execute,  deliver and perform this Agreement and
each of the  Transaction  Documents,  and to carry on its  business as now being
conducted.

         4.2. Authorizations; Binding Agreements.

         The  execution,  delivery,  and  performance  of this Agreement and the
other  Transaction  Documents  by  Buyer  and of  each  conveyance,  assignment,
agreement,  and other document herein  contemplated to be executed by Buyer have
been fully authorized by all necessary limited  liability  company action.  This
Agreement and the other Transaction Documents and the conveyances,  assignments,
agreements,  and other documents herein  contemplated to be executed,  delivered
and performed by Buyer are, or will be upon execution,  legal, valid and binding
obligations of Buyer,  duly  enforceable  against Buyer in accordance with their
terms   (subject,   however,   to  the   effects  of   bankruptcy,   insolvency,
reorganization,  moratorium,  and  similar  laws  from  time to  time in  effect
relating  to the  rights  and  remedies  of  creditors  as  well  as to  general
principles of equity).  This Agreement and the other  Transaction  Documents and
the   conveyances,   assignments,   agreements,   and  other  documents   herein
contemplated  to be executed,  delivered  and  performed by Buyer (i) do not and
will not result in any violation of, conflict with or default under the terms of
Buyer's  organizational  documents,  and  (ii)  subject  only  to  the  Required
Consents,  do not and will not  result in any  violation  of,  conflict  with or
default  under  any  material  permit,  lease,  venture,  indenture,   mortgage,
agreement, contract, judgment, order or other obligation or restriction to which
Buyer is bound (nor, to the  Knowledge of Buyer,  does there exist any condition
which  upon the  passage  of time or the  giving  of  notice  would  cause  such
violation, conflict or default).

                                       11
<PAGE>

         4.3. Brokers or Finders Fees.

         No  obligation or  liability,  contingent or otherwise,  for brokers or
finders fees  created by Buyer with respect to the matters  provided for in this
Agreement shall be imposed upon Sellers.

         4.4. No Action  Affecting  Enforcement  of the  Agreement and the other
Transaction Documents.

         There  are no  actions,  suits,  or  proceedings  pending,  or,  to the
Knowledge of Buyer,  threatened,  against Buyer in any court, or  administrative
governmental  body or agency which will affect in any adverse manner the ability
of  Buyer  to  execute,  deliver  and  perform  this  Agreement  and  the  other
Transaction Documents.

                                    ARTICLE V
                      CERTAIN UNDERSTANDINGS AND AGREEMENTS

         5.1. Best Efforts.

         Subject  to the  terms  and  conditions  herein  provided,  each of the
parties  hereto agrees to use its  commercially  reasonable  efforts to take, or
cause to be  taken,  all  action,  and to do,  or cause to be done,  all  things
necessary, proper and advisable under applicable Law, and to obtain the Required
Consents,   necessary  to  consummate  and  make   effective  the   transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further  action is  necessary  or  desirable  to carry out the  purposes of this
Agreement,  the proper  officers and  directors of each party to this  Agreement
shall  take all such  necessary  action.  Buyer and  Sellers  will  execute  any
additional  instruments  necessary to consummate the  transactions  contemplated
hereby. To the extent that any permits referenced in Section 3.14(b)(iv) are not
transferred  at the  Closing  Date,  Sellers  will use  commercially  reasonable
efforts to cause such transfer to Buyer as soon as practicable after the Closing
Date.

         5.2. Public Announcements.

         Buyer and Sellers will consult with each other before issuing any press
release or otherwise  making any public statement with respect to this Agreement
and the  transactions  contemplated  herein,  and shall not issue any such press
release or make any such public  statement  prior to such  consultation or as to
which the other party reasonably objects, except as may be required by Law or by
obligations  pursuant  to any listing  agreement  with any  national  securities
exchange or inter-dealer quotation system.

         5.3. Confidentiality.

         Notwithstanding  the execution of this Agreement,  the  confidentiality
provisions  of the  Confidentiality  Agreement  shall  remain in full  force and
effect and shall survive the Closing.

                                       12
<PAGE>

         5.4. Taxes.

         Following  Closing,  Sellers  shall  timely  file all tax  returns  and
reports  relating  to  the  Assets,   the  Contracts  and  the  conduct  of  the
construction,  maintenance  and operation of the Facility prior to Closing which
have not  been  filed or were  not yet due to be  filed  prior to  Closing,  and
Sellers shall timely pay all taxes, assessments,  fees, interest,  penalties and
governmental charges relating to the Assets, the Contracts or the conduct of the
construction,  maintenance  and operation of the Facility prior to Closing which
have not been paid or were not yet due and payable prior to Closing.

         5.5. Private Letter Ruling Repurchase Option.

         Following Closing, Buyer plans to seek a Private Letter Ruling from the
IRS as to matters  relating to the Facility and Section 29 of the Code.  Sellers
shall  cooperate  with and assist Buyer,  as reasonably  requested by Buyer,  in
connection with seeking such Private Letter Ruling. In the event that Buyer does
seek such a Private  Letter Ruling and the IRS refuses or fails to issue it in a
form that is  satisfactory in the sole and absolute  discretion of Buyer,  Buyer
shall be entitled to elect (by giving  written notice to Sellers to such effect)
to terminate the obligation to make further royalty  payments under Section 3 of
the License and Binder Purchase Agreement and, in such event, Sellers shall have
the option to purchase,  within one year following  such notice,  the Assets and
Contracts (and assume obligations under the Contracts) from Buyer at the greater
of (i) the amount of Purchase  Consideration  theretofore paid by Buyer plus the
amount of any capital expenditures made by Buyer in connection with the Facility
and Assets  plus any  obligations  of Buyer in respect of the  Facility  and the
Assets  and  Contracts,  or (ii)  the  fair  market  value  of such  Assets  and
Contracts.

         5.6. Solvency Representations and Covenants.

         Each Seller  hereby  represents  and  warrants (as to itself only) that
prior to consummating the transactions  contemplated  herein,  (i) the aggregate
fair market value of such Seller's  assets exceeds the aggregate  amount of such
Seller's  liabilities,   including  contingent  liabilities  discounted  by  the
probability of their  occurrence,  (ii) such Seller is able to pay and is paying
its  debts  generally  as and when they  become  due in the  ordinary  course of
business,  (iii) such  Seller is  adequately  capitalized  for its  current  and
contemplated  business   undertakings,   and  (iv)  the  Purchase  Consideration
constitutes reasonably equivalent value and fair consideration for the Assets.

         Each  Seller   hereby   covenants   (as  to  itself  only)  that  after
consummating  the transaction  contemplated by the Purchase  Agreement,  (i) the
aggregate  fair market value of such  Seller's  assets will exceed the aggregate
amount of such Seller's liabilities, including contingent liabilities discounted
by the probability of their occurrence, (ii) such Seller will be able to pay and
will pay its debts  generally as and when they become due in the ordinary course
of  business,  and (iii) such  Seller will not be left with  unreasonably  small
capital for its then-current and contemplated business undertakings.

                                       13
<PAGE>

         5.7. Sublease and License.

         At, and as a condition to, the Closing, Buyer, Sellers and the landlord
under the Lease shall enter into a sublease,  license and consent agreement (the
"Sublease and License"), in form and substance to be agreed upon by the parties,
which  shall  provide  (i) for  Sellers to  sublease  the  portion of the leased
premises  under the Lease and grant those  rights  under the Lease to the extent
necessary to allow Buyer, without restriction,  to enter such premises, maintain
and operate the Facility and to remove the  Facility,  after which such sublease
shall  terminate,  (ii) for the granting of a license by the landlord  under the
Lease providing for the rights referenced in clause (i) above, and (iii) for the
consent  of the  landlord  under  the Lease to all of the  foregoing  and to the
ultimate  removal of the  Facility  from such  leased  premises  with no further
obligation on the part of Buyer. In addition,  Sellers shall assign to Buyer, to
the extent  assignable,  or  otherwise  shall assist  Buyer in  connection  with
obtaining, agreements providing for necessary utilities at such site and Sellers
shall  provide  necessary  security  services  relating to the  Facility and the
Facility Site during the period  following  the  Effective  Time and until Buyer
removes the Facility from the Facility Site.

                                   ARTICLE VI
            CONDITIONS PRECEDENT TO THE PAYMENT OBLIGATIONS OF BUYER

         Each and every  obligation of Buyer to be performed on the Closing Date
shall  be  subject  to  the  satisfaction,  prior  to or at the  Closing  of the
following express conditions precedent:

         6.1. Compliance with Agreement.

         Sellers shall have performed and complied in all material respects with
all of its  obligations  under  this  Agreement  which  are to be  performed  or
complied with by it prior to or on the Closing Date.

         6.2. Proceedings and Instruments Satisfactory.

         All  proceedings,  corporate  or  other,  to be  taken  by  Sellers  in
connection  with  the  transactions  contemplated  by  this  Agreement,  and all
documents  incident  thereto,  shall  be  reasonably  satisfactory  in form  and
substance to Buyer.

         6.3. No Litigation.

         No investigation, suit, action or other proceedings (including, without
limitation,  any petition  relating to any of the Sellers  under the  Bankruptcy
Code or similar  federal or state law) shall be threatened or pending before any
court or governmental agency that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby or in connection with obligations to creditors.

         6.4. Representations and Warranties.

         The  representations  and warranties  made by Sellers in this Agreement
shall be true and correct in all respects (as to representations  and warranties
qualified or limited by the term

                                       14
<PAGE>

"Material Adverse Effect," the word "material," or phrases of like import),  and
in all material respects (as to representations  and warranties not so qualified
or limited) as of the Closing Date with the same force and effect as though said
representations and warranties had been made on the Closing Date.

         6.5. Consents.

         All Required  Consents  applicable to Sellers shall have been obtained,
including  without  limitation  consents  relating  and required of the landlord
under the Lease pursuant to the Sublease and License.

         6.6. Tax Opinion.

         Buyer shall have  received an opinion of Hunton & Williams,  counsel to
Buyer,  in form and  substance  satisfactory  to Buyer,  with respect to matters
related to Section 29 of the Code.

                                   ARTICLE VII
               CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS

         Each and every  obligation  of Sellers to be  performed  on the Closing
Date  shall be  subject to the  satisfaction  prior to or at the  Closing of the
following express conditions precedent:

         7.1. Compliance with Agreement.

         Buyer shall have  performed and complied in all material  respects with
all of its  obligations  under  this  Agreement  which  are to be  performed  or
complied with by it prior to or on the Closing Date.

         7.2. Proceedings and Instruments Satisfactory.

         All proceedings, corporate or other, to be taken by Buyer in connection
with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Sellers.

         7.3. No Litigation.

         No investigation,  suit, action or other proceeding shall be threatened
or  pending  before  any court or  governmental  agency  that  seeks  restraint,
prohibition,  damages or other relief in connection  with this  Agreement or the
consummation of the transactions contemplated hereby.

         7.4. Representations and Warranties.

         The  representations  and  warranties  made by Buyer in this  Agreement
shall be true and correct in all respects (as to representations  and warranties
qualified or limited by the term "Material Adverse Effect," the word "material,"
or phrases of like import),  and in all material respects (as to representations
and warranties not so qualified or limited) as of the Closing Date

                                       15
<PAGE>

with the same force and effect as though such representations and warranties had
been made on the Closing Date.

         7.5. Required Consents.

         All Required Consents applicable to Buyer shall have been obtained.

                                  ARTICLE VIII
                      INDEMNITIES AND ADDITIONAL COVENANTS

         8.1. Sellers' Indemnity.

         (a) Sellers  hereby  jointly  and  severally  indemnify  and hold Buyer
harmless  from and  against,  and  agree to  defend  promptly  Buyer  from,  and
reimburse Buyer for, any and all losses, damages, costs, expenses,  liabilities,
obligations and claims of any kind, including, without limitation, environmental
liabilities  (whether involving personal injury or property damage),  reasonable
attorneys'  fees and other legal  costs and  expenses  (hereinafter  referred to
collectively as "Losses"), that Buyer and any Affiliate of Buyer may at any time
suffer or incur, or become subject to, as a result of or in connection with: (i)
any breach or inaccuracy of any of the  representations  and warranties  made by
Sellers in this  Agreement  or any other  agreement or  instrument  delivered by
Sellers  pursuant  hereto;  (ii) any  failure of Sellers to carry out,  perform,
satisfy  and  discharge  any  of  its   covenants,   agreements,   undertakings,
liabilities or  obligations  under this Agreement or under any of the agreements
and instruments delivered by Sellers pursuant to this Agreement; (iii) claims by
third parties (including governmental authorities) against Buyer relating to the
construction,  operation  and  ownership  by  Sellers  of  the  Assets  and  the
performance  by Sellers under the Contracts in each case under this clause (iii)
for the period prior to the Effective  Time;  (iv) any violations of, or failure
to operate in accordance  with,  necessary  permits prior to the Effective Time;
(v) except as otherwise  provided in the Sublease and License,  all  obligations
and  liabilities  under  the  Lease;  and  (vi)  any  and  all  liabilities  and
obligations of Sellers;

         (b) In the event a claim  against  Buyer  arises that Buyer  reasonably
believes  is  covered by the  indemnity  provisions  of  Section  8.1(a) of this
Agreement,  notice shall be given promptly by Buyer to Sellers containing detail
reasonably sufficient for Sellers to identify the nature and basis of the claim.
Provided  that  Sellers  admit in writing to Buyer that such claim is covered by
the indemnity provisions of Section 8.1(a) hereof,  Sellers shall have the right
to contest and defend by all  appropriate  legal  proceedings  such claim and to
control all  settlements  (unless  Buyer agrees to assume the cost of settlement
and to forgo such  indemnity)  and to select lead  counsel to defend any and all
such  claims at the sole cost and expense of Sellers;  provided,  however,  that
Sellers may not effect any settlement that could result in any cost,  expense or
liability  to Buyer  unless  Buyer  consents in writing to such  settlement  and
Sellers  agree  to  indemnify  Buyer  therefor.  Buyer  may  select  counsel  to
participate  with Sellers'  counsel in any such defense,  in which event Buyer's
counsel shall be at its own sole cost and expense.  In connection  with any such
claim,  action or  proceeding,  the parties shall  cooperate with each other and
provide  each  other  with  access  to  relevant  books  and  records  in  their
possession.

                                       16
<PAGE>

         (c) Sellers shall not be required to indemnify and hold harmless  Buyer
pursuant  to Section  8.1(a)(i)  hereof in respect  of the  representations  and
warranties  made by  Sellers  herein  unless  such right to  indemnification  is
asserted by Buyer  (whether or not such Losses have actually  been  incurred) by
notice to Sellers within 12 months after the Closing Date, with the exception of
(i) the representations and warranties set forth in Sections 3.4 and 3.19, which
must be asserted by Buyer within the  applicable  statute of  limitations or any
extensions thereof required by any applicable authority relating to the taxes or
assessments giving rise to the Loss, plus 60 days, (ii) the  representations and
warranties set forth in Section 3.10, which must be asserted by Buyer within the
applicable  statute of limitations  for the violation of the underlying law that
forms the basis of such  claim,  plus 60 days,  (iii)  the  representations  and
warranties  set forth in Sections 3.1, 3.2, and 3.8, which shall be without time
limitation,  and (iv) the  representations  and  warranties set forth in Section
3.14 hereof, which must be asserted within 24 months after the Closing Date.

         (d)  Notwithstanding  the  foregoing,  Sellers shall not be required to
indemnify Buyer under Section  8.1(a)(i) in respect of the  representations  and
warranties   made  by  Sellers  unless  the  amount  of  all  Losses  for  which
indemnification  is sought by Buyer  under  Section  8.1(a)(i)  exceeds,  in the
aggregate,  $250,000,  in which event,  Sellers' indemnity  obligation hereunder
would apply to all such Losses.  Sellers' aggregate  indemnification  obligation
pursuant  to  Section   8.1(a)(i)   shall  in  no  event   exceed  the  Purchase
Consideration described in Section 2.2 and paid to Sellers.

         (e) The  indemnification  provided in this Section 8.1,  including  the
limitations with respect  thereto,  shall be the exclusive remedy for Buyer with
respect to Losses as a result of or in connection with the matters  described in
Section 8.1(a)(i), notwithstanding any provisions in this Agreement or any other
such agreement or instrument to the contrary.

         8.2. Buyer's Indemnity.

         (a) Buyer  hereby  indemnifies  and  holds  Sellers  harmless  from and
against,  and agrees to defend promptly Sellers from and reimburse  Sellers for,
any and all  Losses  that  Sellers  may at any time  suffer or incur,  or become
subject to, as a result of or in connection  with:  (i) any breach or inaccuracy
of any of the  representations and warranties made by Buyer in this Agreement or
any other agreement or instrument  delivered by Buyer pursuant hereto;  (ii) any
failure  by  Buyer to carry  out,  perform,  satisfy  and  discharge  any of its
covenants,  agreements,  undertakings,  liabilities  or  obligations  under this
Agreement  or under any of the  agreements  and  instruments  delivered by Buyer
pursuant  to this  Agreement;  and  (iii)  claims  by third  parties  (including
governmental   authorities)  against  Sellers  relating  to  the  operation  and
ownership by Buyer of the Assets for the period following the Effective Time.

         (b) In the event a claim against  Sellers arises that is covered by the
indemnity  provisions  of Section 8.2 of this  Agreement,  notice shall be given
promptly by Sellers to Buyer containing detail  reasonably  sufficient for Buyer
to identify  the nature and basis of the claim.  Provided  that Buyer  admits in
writing to Sellers  that such claim is covered by the  indemnity  provisions  of
Section  8.2  hereof,  Buyer  shall have the right to contest  and defend by all
appropriate legal proceedings such claim and to control all settlements  (unless
Sellers agrees to

                                       17
<PAGE>

assume the cost of settlement  and to forgo such  indemnity)  and to select lead
counsel to defend any and all such claims at the sole cost and expense of Buyer;
provided, however, that Buyer may not effect any settlement that could result in
any cost,  expense or liability to Sellers unless Sellers consents in writing to
such  settlement  and Buyer agrees to indemnify  Sellers  therefor.  Sellers may
select counsel to participate with Buyer's counsel in any such defense, in which
event  Sellers'  counsel  shall be at the sole cost and expense of  Sellers.  In
connection  with any  such  claim,  action  or  proceeding,  the  parties  shall
cooperate  with each other and provide each other with access to relevant  books
and records in their possession.

         (c) Buyer shall not be required to indemnify and hold harmless  Sellers
pursuant  to Section  8.2(a)(i)  hereof in respect  of the  representations  and
warranties made by Buyer herein unless such right to indemnification is asserted
by Sellers (whether or not such Losses have actually been incurred) by notice to
the Buyer within 12 months  after the Closing  Date,  with the  exception of the
representations  and warranties set forth in Sections 4.1 and 4.2 hereof,  which
shall be without time limitation.

         (d)  Notwithstanding  the  foregoing,  Buyer  shall not be  required to
indemnify Sellers under Section 8.2(a)(i) in respect of the  representations and
warranties   made  by  Buyer   unless   the  amount  of  all  Losses  for  which
indemnification  is sought by Sellers under Section  8.2(a)(i)  exceeds,  in the
aggregate,  $250,000,  in which event,  Buyer's indemnity  obligation  hereunder
would apply to all such Losses.

         (e) The  indemnification  provided in this Section 8.2,  including  the
limitations with respect thereto, shall be the exclusive remedy for Sellers with
respect to Losses as a result of or in connection with the matters  described in
Section 8.2(a)(i), notwithstanding any provisions in this Agreement or any other
such agreement or instrument to the contrary.

         8.3. Bulk Sales Compliance.

         To the extent  applicable,  Buyer hereby  waives  compliance by Sellers
with the provisions of the bulk sales law of any U.S.  jurisdiction,  and in any
event,  Sellers covenants and agrees to pay and discharge when due all claims of
any  governmental  entities and creditors of Sellers and its  subsidiaries  that
could be asserted against Buyer by reason of such non-compliance. Sellers agrees
to  indemnify  and hold  Buyer  harmless  from and  against  and shall on demand
reimburse  Buyer for any and all Losses  suffered by Buyer by reason of Sellers'
failure to pay and discharge any such claims.

         8.4. Additional Instruments.

         At any time and from time to time after the Closing,  at either party's
request and without further consideration, Sellers or Buyer, as the case may be,
shall execute and deliver such other instruments of sale, transfer,  conveyance,
assignment and  confirmation  and take such other action as Sellers or Buyer may
reasonably  deem necessary or desirable in order to more  effectively  transfer,
convey,  and assign to Buyer,  and confirm  Buyer's title to and interest in and
responsibility  and liability for, the Assets and Contracts and the consummation
of the transactions  contemplated herein. Without limiting the generality of the
foregoing,  Sellers  will

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<PAGE>

cooperate with and assist Buyer in renewing, or transferring,  into Buyer's name
those Permits for which Buyer requests such  assistance  and  cooperation at the
appropriate time for such renewal or transfer as determined by Buyer.

         8.5. Access to Books, Records and Employees.

         From and after the  Closing  Date,  Buyer  will  authorize  and  permit
Sellers and its respective representatives to have access during normal business
hours, upon reasonable notice and for reasonable  purposes and in such manner as
will not unreasonably  interfere with the conduct of Buyer's business,  to Books
and Records  within the control of Buyer that relate to the  Facility.  From and
after  the  Closing  Date,  Sellers  will  authorize  and  permit  Buyer and its
representatives  to have access during normal  business  hours,  upon reasonable
notice and for reasonable  purposes and in such manner as will not  unreasonably
interfere  with the  conduct of  Sellers'  business,  to all books and  records,
files,  documents and other correspondence  related to the Facility prior to the
Effective  Time,  which are not included among the Books and Records.  Buyer and
Sellers  agree to  maintain  all  books,  records,  files,  documents  and other
correspondence related to the Facility prior to the Effective Time in accordance
with their  respective  normal  document  retention  practices after the Closing
Date.

                                   ARTICLE IX
                                   TERMINATION

         9.1.     Termination.

         This  Agreement may be  terminated  and the  transactions  contemplated
hereby may be abandoned as follows: (a) at any time prior to the Closing Date by
mutual written agreement of Sellers and Buyer; or (b) by either Sellers or Buyer
if the  Effective  Time shall not have  occurred on or before  January 15, 2000,
provided,  however,  that the right to terminate this Agreement pursuant to this
clause (b) shall not be  available  to any party  whose  failure to fulfill  any
obligation  under  this  Agreement  has been the cause of, or  resulted  in, the
failure of the Effective Time to occur prior to such date.

         9.2. Rights on Termination; Waiver.

         (a) If this  Agreement  is  terminated  pursuant  to Section  9.1,  all
further  obligations  of the parties under or pursuant to this  Agreement  shall
terminated.

         (b) If any of the  conditions set forth in Article VI of this Agreement
have not been satisfied,  Buyer may nevertheless  elect to waive such conditions
and proceed with the consummation of the transactions  contemplated  hereby.  If
any of the  conditions  set forth in Article VII of this Agreement have not been
satisfied,  Sellers may nevertheless  elect to waive such conditions and proceed
with the consummation of the transactions  contemplated  hereby. The election by
Buyer or Sellers to terminate this  Agreement  pursuant to Section 9.1 (b) shall
not in any way affect the rights of such party  against  the other party for any
breach or default under this Agreement.

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<PAGE>

                                    ARTICLE X
                                  MISCELLANEOUS

         10.1.    Entire Agreement; Amendment.

         This Agreement and the documents referred to herein and to be delivered
pursuant hereto constitute the entire agreement  between the parties  pertaining
to the  subject  matter  hereof,  and  supersede  all prior and  contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral  or  written,  and  there  are  no  warranties,  representations  or  other
agreements  between the parties in connection  with the subject  matter  hereof,
except as specifically  set forth herein or therein.  No amendment,  supplement,
modification,  waiver or termination  of this Agreement  shall be binding unless
executed  in writing by the party to be bound  thereby.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute  a  continuing  waiver  unless  otherwise  expressly  provided.   The
representations  and  warranties  of each  party  hereto  shall be  deemed to be
material and to have been relied upon by the other party.  The  representations,
warranties, covenants and agreements of Sellers and Buyer contained herein shall
survive the execution and delivery of this  Agreement  and  consummation  of the
transactions  contemplated hereby and, as to the representations and warranties,
shall be effective  until the relevant time  limitation for making any indemnity
claim with respect to such  representations  and  warranties  under Sections and
shall  have  been  reached  and  no  longer.  All  agreements,   understandings,
representations,  warranties and covenants made by Sellers herein shall be joint
and several obligations of Sellers.

         10.2. Expenses.

         Except as otherwise  specifically  provided herein, each of the parties
hereto shall pay the fees and expenses of their respective counsel,  accountants
and other  experts  and the  other  expenses  incident  to the  negotiation  and
preparation of this Agreement and consummation of the transactions  contemplated
hereby.

         10.3. Governing Law; Consent to Jurisdiction.

         This Agreement shall be construed and interpreted according to the laws
of the State of New York,  without regard to the conflicts of law rules thereof;
provided,  however,  that Section 5-1401 of the New York General Obligations Law
shall apply to this Agreement.  Each of the parties hereto, in respect of itself
and its properties,  agrees to be subject to (and hereby irrevocably submits to)
the  nonexclusive  jurisdiction  of the  United  States  federal  court  for the
Southern  District of New York or New York state court sitting in the Borough of
Manhattan, New York, in respect of any suit, action or proceeding arising out of
or relating to this  Agreement  or the  transactions  contemplated  herein,  and
irrevocably  agrees  that all  claims in  respect  of any such  suit,  action or
proceeding  may be heard and  determined in any such court.  Each of the parties
hereto irrevocably  waives, to the fullest extent it may effectively do so under
applicable  Law,  any  objection  to the  laying of the venue of any such  suit,
action or proceeding brought in any such court and any claim that any such suit,
action  or  proceeding  brought  in  any  such  court  has  been  brought  in an
inconvenient  forum.  Either party hereto may make service on the other

                                       20
<PAGE>

party by sending or  delivering  a copy of the process to the party to be served
at the address and in the manner  provided  for the giving of notices in Section
hereof.  Nothing in this Section , however,  shall affect the right of any party
to bring any action or proceeding  arising out of or relating to this  Agreement
in any other court or to serve legal  process in any other  manner  permitted by
law or in equity.

         10.4. Assignment.

         This Agreement and each party's  respective rights hereunder may not be
assigned, by operation of law or otherwise, without the prior written consent of
the other party  provided,  however,  that Buyer may assign this Agreement to an
Affiliate of Buyer without the consent of Sellers.

         10.5. Notices.

         All  communications,  notices and disclosures  required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier  of the  date  (a)  when  delivered  personally  or by  messenger  or by
overnight delivery service to an officer of the other party, (b) five days after
being mailed by registered or certified  United  States mail,  postage  prepaid,
return  receipt  requested,  or (c) when received via  telecopy,  telex or other
electronic  transmission,  in all cases  addressed  to the person for whom it is
intended  at his  address  set forth  below or to such other  address as a party
shall have  designated  by notice in  writing  to the other  party in the manner
provided by this Section:

If to Buyer:      DTE Kentucky, L.L.C.
                  425 South Main Street
                  Suite 201
                  Ann Arbor, Michigan 48104
                  Fax: (734) 668-9739
                  Attn:  Manager of Assets

With a copy to:   DTE Energy Services             Hunton & Williams
                  425 South Main Street           Riverfront Plaza, East Tower
                  Suite 201                       951 East Byrd Street
                  Ann Arbor, Michigan 48104       Richmond, Virginia 23219
                  Fax: (734) 668-1028             Fax:  (804) 788-8218
                  Attn: General Counsel           Attn:  Kenneth J. Alcott, Esq.

If to Sellers:    Covol Technologies, Inc.
                  3280 North Frontage Road
                  Lehi, Utah 84043
                  Fax:  (801) 768-4483
                  Attn:  Brent M. Cook

                                     and

With a copy to:   Covol Technologies, Inc.        Pillsbury Madison & Sutro LLP
                  3280 North Frontage Road        235 Montgomery Street
                  Lehi, Utah 84043                San Francisco, CA 94104
                  Fax:  (801) 768-4483            Fax:  (415) 983-1200
                  Attn:  General Counsel          Attn:  Linda C. Williams, Esq.

                                       21
<PAGE>

         10.6. Counterparts; Headings.

         This Agreement may be executed in several  counterparts,  each of which
shall be deemed an original, but such counterparts shall together constitute but
one and the same  Agreement.  The Table of  Contents  and  Article  and  Section
headings in this  Agreement are inserted for  convenience  of reference only and
shall not constitute a part hereof.

         10.7. Interpretation.

         Unless the context requires otherwise, all words used in this Agreement
in the singular number shall extend to and include the plural,  all words in the
plural  number  shall  extend to and include the  singular  and all words in any
gender shall extend to and include all genders.  All  references  to  contracts,
agreements,  leases or other  understandings or arrangements shall refer to oral
as well as written matters.  The specificity of any  representation  or warranty
contained  herein  shall  not be deemed  to limit  the  generality  of any other
representation or warranty contained herein.

         10.8. Severability.

         If any provision,  clause or part of this Agreement, or the application
thereof under  certain  circumstances,  is held  invalid,  the remainder of this
Agreement,  or the  application  of such  provision,  clause or part under other
circumstances, shall not be affected thereby.

         10.9. No Reliance.

         No  third  party  is  entitled  to rely on any of the  representations,
warranties and agreements contained in this Agreement.  Buyer and Sellers assume
no liability to any third party because of any reliance on the  representations,
warranties  and  agreements  of Buyer or Sellers  contained  in this  Agreement.
Nothing contained in this Agreement shall be construed as creating a partnership
or joint venture or any agency  relationship  between the parties hereto, or any
other relationship other than buyer and Sellers as provided herein.

         10.10. Parties in Interest.

         This Agreement shall be binding upon and inure solely to the benefit of
each party  hereto,  and  nothing in this  Agreement,  express  or  implied,  is
intended  to or shall  confer  upon any other  person any  rights,  benefits  or
remedies of any nature whatsoever under or by reason of this Agreement.

         10.11. Specific Performance.

         The parties  hereto  agree that  irreparable  damage would occur in the
event any of the  provisions of this  Agreement were not performed in accordance
with the  terms  hereof  and that

                                       22
<PAGE>

the parties shall be entitled to specific  performance  of the terms hereof,  in
addition to any other remedy at law or equity.

                [Remainder of this page intentionally left blank]


                                       23
<PAGE>

         IN  WITNESS  WHEREOF,  each  party  hereto  has  caused  this  Purchase
Agreement to be executed in its name by a duly authorized  officer as of the day
and year first above written.

                                  DTE KENTUCKY, L.L.C.


                                  By: /Kent L. McCargar/
                                     ---------------------------------------
                                  Its:  Vice President and Chief Financial
                                        Officer

                                  COVOL TECHNOLOGIES, INC.

                                  By:  /Kirk A. Benson/
                                     ---------------------------------------
                                  Its: Chairman and Chief Executive Officer

                                  SYNFUEL INVESTMENTS, INC.

                                  By:  /Brent M. Cook/
                                     ---------------------------------------
                                  Its:     President

                                  CARBON SYNFUELS, L.L.C.

                                  By:      Covol Technologies, Inc.

                                  By:   /Brent M. Cook/
                                     ---------------------------------------
                                  Its:     President

                                       24