CONDITIONAL OPTION AGREEMENT

                           BIRMINGHAM SYN FUEL, L.L.C.


          THIS  CONDITIONAL  OPTION  AGREEMENT (this  "Agreement"),  dated as of
March 20, 1997, between Birmingham Syn Fuel I, Inc., an Oregon corporation,  and
Birmingham  Syn Fuel II, Inc.,  an Oregon  corporation  (collectively,  the "PFS
Parties   "),   and   PacifiCorp    Financial   Services,    Inc.,   an   Oregon
corporation("PFS")  on the one hand,  and Alabama  Synfuel #1,  Ltd., a Delaware
limited  partnership  ("Alabama  Synfuel"),  and  Covol  Technologies,  Inc.,  a
Delaware corporation ("Covol"), on the other hand.

          WHEREAS,  simultaneously  with the execution and delivery hereof,  (i)
Birmingham Syn Fuel,  L.L.C.,  an Oregon limited  liability company in which the
PFS Parties are the sole members,  as Buyer  ("Buyer"),  and Alabama Synfuel and
Covol,  jointly as Sellers,  have  entered  into that  certain  Alabama  Project
Purchase Agreement,  dated as of March 20, 1997(the "Purchase  Agreement"),  and
(ii) Covol,  as Borrower  and PFS, as Lender,  have  entered  into that  certain
Convertible  Loan and Security  Agreement  (the "Loan  Agreement").  Capitalized
terms used herein and not otherwise  defined shall have the meanings ascribed to
such terms in the Purchase Agreement.

          WHEREAS, pursuant to the Purchase Agreement, Covol and Alabama Synfuel
have agreed to complete the  construction of the Alabama Project and to transfer
the Alabama  Project to Buyer. To provide funds for the  construction  and other
items relating to the Alabama  Project,  PFS has agreed to loan up to $5,000,000
(the "Loan") to Covol pursuant to the Loan Agreement.

          WHEREAS, the parties are mutually unwilling to enter into the Purchase
Agreement,  the  Loan  Agreement  or  the  other  Transaction  Documents,  or to
consummate  or to  permit  the  consummation  of the  transactions  contemplated
thereby,  unless each of the parties hereto executes and delivers, and agrees to
be bound by the terms of this Agreement.

          WHEREAS,  each party hereto has  received  and will receive  material,
direct  or  indirect  benefits,  by  virtue  of  the  execution,   delivery  and
performance by the other parties of the Purchase  Agreement,  the Loan Agreement
and the other Transaction Documents,  it being acknowledged by each party hereto
that this  Agreement  is given in  consideration  of, among other  things,  such
benefits received and to be received by each party hereto and is not gratuitous.

<PAGE>
          NOW  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
promises and undertakings in this Agreement and the other Transaction Documents,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

     1. Grant of Put Option.  Covol  hereby  grants to the PFS Parties and PFS a
put option to require Covol to simultaneously  purchase all of the right,  title
and  interest of the PFS Parties in Buyer and all of the  interest of PFS in the
Loan and in the other Transaction  Documents  (excluding (i) any Shares (as such
term is defined in the Loan  Agreement)  received  pursuant  to the  exercise of
conversion  rights  under  the Loan  Agreement,  and (ii) all  rights  under the
Registration  Rights  Agreement (as such term is defined in the Loan Agreement);
such non-excluded  interests  collectively referred to as the "Interest") on the
following terms and conditions (it being acknowledged by the parties hereto that
all of the  Interests  must  be  purchased  and no  partial  purchase  shall  be
permitted):

          (a) The put option granted hereby (the "Option") may only be exercised
during the Option Period (as defined  below) after the occurrence of a Put Event
(as defined below).

          (b) For purposes hereof, the occurrence of any of the following shall
constitute a "Put Event":

               (i) if, by June 30, 1997,  the Alabama  Project is not  completed
               consistent  with  Buyer-approved  plans  and  specifications  and
               placed in service(for purposes of the 1986 Code and Section 29 of
               the 1986 Code);

               (ii) if, by June 30, 1997, a Letter Ruling  satisfactory to Buyer
               (as contemplated under Section 7.1(i) of the Purchase  Agreement)
               is not obtained by Buyer; or

               (iii) if, at any time,  there has occurred and is  continuing  an
               Event of Default under the Loan  Agreement  (unless such Event of
               Default has been waived by the PFS Parties; it being acknowledged
               by the parties  hereto that any such waiver  shall be in the sole
               discretion of the PFS Parties);

provided, however, that in no event shall a Put Event occur after the receipt by
Buyer of a Letter Ruling satisfactory to Buyer.

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<PAGE>
          (c) For purposes  hereof,  the period beginning the first Business Day
immediately succeeding the Put Event and ending 120 days thereafter shall be the
"Option Period".

          (d) The Option shall be  exercisable  by  irrevocable  written  notice
given to Covol by PFS on its behalf and on behalf of the PFS Parties at any time
during the Option Period.  The Option Price (defined below) shall be paid within
thirty (30) days after delivery of the notice of exercise.

          (e) The  "Option  Price" for the  Interest  of PFS and the PFS Parties
shall be an amount equal to the sum of the following:

               (i) all capital contributions of the PFS Parties to Buyer;

               (ii) all  obligations of Covol and Alabama Synfuel under the Loan
               Documents,   including,   without  limitation,   the  outstanding
               principal and interest on the Loan; and

               (iii)  all of the  out-of-pocket  expenses  of PFS  and  the  PFS
               Investors in connection with the Transaction  Documents,  whether
               or not such expenses were otherwise reimbursable.

The Option Price shall be payable to PFS and PFS Parties by Covol in immediately
available U.S. funds.

     2. Releases.  Upon the exercise of the Option,  PFS and the PFS Parties(and
any  Affiliate of any such  parties)  shall be  automatically  released from any
further obligations under the Transaction  Documents (except for the obligations
under this Agreement).  Upon payment in full of the Option Price pursuant to the
terms hereof,  Covol and Alabama  Synfuel(and any Affiliate of any such parties)
shall be automatically  released from any further  obligations to PFS and/or the
PFS  Parties(and  any  Affiliate  of any such  parties)  under  the  Transaction
Documents (except for the obligations under this Agreement).

     3. Delivery of Interests;  AS-IS. Upon payment in full of the Option Price,
(i) PFS shall  transfer  to Covol all of its  interest  in the Loan and  related
"Loan Documents" (as such term is defined in the Loan  Agreement),  and (ii) the
PFS  Parties  shall  transfer to Covol all of their  respective  interest in the
Buyer. PFS and the PFS Parties shall only be required to represent that they are
transferring their entire Interest,  that they have made no prior transfers with
respect to their Interest and that they have not encumbered  their Interest with


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<PAGE>

any liens. EXCEPT AS EXPRESSLY SET FORTH IN THE IMMEDIATELY  PRECEDING SENTENCE,
THE  TRANSFER OF THE  INTERESTS  SHALL BE MADE "AS IS," AND NONE OF PFS, THE PFS
PARTIES  NOR  ANY   AFFILIATE   THEREOF   SHALL  BE  DEEMED  TO  HAVE  MADE  ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, NOW OR HEREAFTER AS TO ANY OTHER
MATTER RELATING TO THE INTERESTS,  INCLUDING,  WITHOUT LIMITATION, (A) AS TO THE
VALUE  OF  THE  INTERESTS,   OR  THE  VALUE,   CONDITION,   DESIGN,   OPERATION,
MERCHANTABILITY,  QUALITY OF MATERIAL OR  WORKMANSHIP,  FITNESS FOR USE OR FOR A
PARTICULAR PURPOSE, MAINTENANCE, OR MARKETABILITY OF THE ALABAMA PROJECT, (B) AS
TO THE  CREDITWORTHINESS  OF ANY OBLIGOR  UNDER ANY  DOCUMENT,  OR (C) AS TO THE
ENFORCEABILITY OF ANY TRANSACTION DOCUMENT.

     4.  Further  Assurances.  Each party  agrees,  at the  request of the other
party,  at any time and from time to time after the  exercise of the Option,  to
execute and deliver all such further documents, and to take and forbear from all
such  action,  as may be  reasonably  necessary  or  appropriate  in order  more
effectively to perfect the transfers of rights  contemplated herein or otherwise
to confirm or carry out the provisions of this Agreement.

     5. Notices. All  notices  to  or  demands or requests of the parties hereto
shall be given pursuant to the terms of the Purchase Agreement.

     6. Interpretation.

          (a)  Ambiguities.  The  parties  acknowledge  that each  party and its
counsel has  materially  participated  in the drafting of this Agreement and the
other Transaction Documents;  consequently, the rule of contract interpretation,
that ambiguities,  if any, in a writing be construed against the drafter,  shall
not apply.

          (b) Headings.  The section headings in this Agreement are included for
convenience  only;  they do not give full  notice of the terms of any portion of
this  Agreement and are not relevant to the  interpretation  of any provision of
this Agreement.

          (c) Governing  Law. The parties  intend that this  Agreement  shall be
governed  by and  construed  in  accordance  with the laws of the  State of Utah
applicable  to  contracts  made and  wholly  performed  within  Utah by  persons
domiciled in Utah (without regard to choice of law rules).

          (d) Calculation of  Time Periods. In the  computation of any period of
time provided for in this Agreement, the  day of the act or event from which the


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<PAGE>

period of time runs shall be  excluded,  and the last day of the period shall be
included, unless it is a Saturday, Sunday, or bank holiday under federal or Utah
law,  in which case the period  shall be deemed to run until the end of the next
day that is not a Saturday, Sunday, or bank holiday under federal or Utah law.

          (e)  Severability.  Any  provision  of this  Agreement  that is deemed
invalid or  unenforceable  shall be ineffective to the extent of such invalidity
or  unenforceability,  without  rendering invalid or unenforceable the remaining
provisions  of this  Agreement.  Furthermore,  in lieu of each such  invalid  or
unenforceable  provision,  there shall be added  automatically as a part of this
Agreement  a  provision  as  similar in terms to such  invalid or  unenforceable
provision as may be possible and be valid and enforceable.

     7.  Integration;   Amendment.  This  Agreement,  together  with  the  other
Transaction Documents,  constitutes the entire agreement of the parties relating
to the  subject  matter  hereof.  There  are  no  promises,  terms,  conditions,
obligations,  or  warranties  other than those  contained  herein  and/or in the
Transaction   Documents.   The   Transaction   Documents   supersede  all  prior
communications,  representations,  or agreements,  verbal or written,  among the
parties relating to the subject matter hereof. This Agreement may not be amended
except in writing signed by the parties hereto.

     8.  Waiver.  No provision  of this  Agreement  shall be deemed to have been
waived unless such waiver is in writing signed by the waiving party.  No failure
by any party to insist  upon the strict  performance  of any  provision  of this
Agreement,  or to exercise any right or remedy consequent upon a breach thereof,
shall constitute a waiver of any such breach,  of such provision or of any other
provision. No waiver of any provision of this Agreement shall be deemed a waiver
of any other  provision  of this  Agreement or a waiver of such  provision  with
respect to any subsequent breach, unless expressly provided in writing.

     9. Expenses; Sales Taxes; Attorneys' Fees.

          (a) Expenses. Covol shall pay to PFS and the PFS Parties on demand all
reasonable out-of-pocket costs and expenses incurred by PFS and the PFS Parties,
or any of them  (including  the fees and charges of counsel) in connection  with
the preparation,  execution and delivery of any documentation required to effect
the provisions of this Agreement.

          (b) Sales Taxes. Covol shall be responsible for and shall indemnify,
reimburse,  and  hold PFS and PFS  Parties  harmless  against  all  sales,  use,


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<PAGE>

transfer or similar  taxes which may be imposed by any  Federal,  State or local
authority in connection  with the exercise of the Option and the transfer of the
Interests hereunder.

          (c)  Attorneys'  Fees. If any suit or action arising out of or related
to the  this  Agreement  is  brought  by any  party to any  such  document,  the
prevailing  party or parties  shall be  entitled  to recover  the costs and fees
(including without limitation  reasonable attorneys' fees, the fees and costs of
experts and  consultants,  copying,  courier and  telecommunication  costs,  and
deposition  costs and all other  costs of  discovery)  incurred by such party or
parties in such suit or action,  including without  limitation any post-trial or
appellate proceeding.

     10. Late Payments.  Any amount payable by any party hereunder not paid when
due  shall  bear  interest  at the  lesser  of the  maximum  rate  permitted  by
applicable  law or the "Default  Interest  Rate" (as such term is defined in the
Loan Agreement) payable on demand, from the date when due until paid in full.

     11. Binding Effect; Termination. This Agreement shall bind and inure to the
benefit  of, and be  enforceable  by, the  parties  hereto and their  respective
successors,  heirs,  and permitted  assigns.  In the event that no Put Event has
occurred and the Buyer has received a Letter Ruling  satisfactory to Buyer, then
this Agreement shall terminate and be of no further force and effect.

     12. Third-Party Beneficiary Rights. No person not a party to this Agreement
is an intended beneficiary of this Agreement, and  no person not a party to this
Agreement shall have any right to enforce any term of this Agreement.

     13. Counterparts.  This  Agreement   may  be  executed  in  any  number  of
counterparts, all of which taken together shall constitute one agreement binding
on all the parties, notwithstanding  that all parties are not signatories to the
same counterpart.

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<PAGE>

          IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be
executed as of the day and year first above written.


                                       COVOL TECHNOLOGIES, INC.



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


                                       ALABAMA SYNFUEL #1, LTD.



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


                                       PACIFICORP FINANCIAL SERVICES, INC.



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


                                       BIRMINGHAM SYN FUEL I, INC.



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


                                       BIRMINGHAM SYN FUEL II, INC.



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