COVOL TECHNOLOGIES, INC.









                   DEBENTURE AGREEMENT AND SECURITY AGREEMENT











                                 January 9, 1998














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                                TABLE OF CONTENTS

Section                                                                    Page

1.  Loans; Terms and Conditions; Issuance of Debenture and Warrants..........1
    1.1      Loans...........................................................1
    1.2      Terms and Conditions............................................1
    1.3      Issuance of Debenture and Warrants..............................1

2.  Representations, Warranties and Covenants of the Company.................1
    2.1      Corporate Existence; Compliance with Law........................1
    2.2      Corporate Power; Authorization; Enforceable Obligations.........2
    2.3      Authorization and Valid Issuance of Debenture and Warrants......2
    2.4      Securities Laws.................................................3
    2.5      Disclosure......................................................3
    2.6      Authorized and Outstanding Shares of Capital Stock..............3
    2.7      Ownership of Property; Liens....................................3
    2.8      Patents, Trademarks, Copyrights and Licenses....................3
    2.9      No Material Adverse Effect......................................3
    2.10     Environmental Laws..............................................4
    2.11     Use of Proceeds.................................................4

3.  Representations, Warranties and Covenants of the Investor................4
    3.1      Purchase Entirely for Own Account...............................4
    3.2      Disclosure of Information.......................................4
    3.3      Investment Experience...........................................4
    3.4      Restricted Securities...........................................4
    3.5      Legends.........................................................5
    3.6      Accredited Investor.............................................5

4.  Valuation of Warrants....................................................5
    4.1      Value of Warrants...............................................5
    4.2      Financial and Tax Reporting.....................................5
    4.3      Issue Price.....................................................5
    4.4      Interpretation..................................................5

5.  Security Agreement.......................................................6
    5.1      Security Interest...............................................6
    5.2      Collateral......................................................6
    5.3      Perfection and Priority.........................................6
    5.4      Affirmative Covenants...........................................6
    5.5      Negative Covenants..............................................7
    5.6      Insurance; Payment of Premiums..................................7

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    5.7      Remedies Upon Default...........................................8

6.  Conditions Precedent.....................................................9
    6.1      Execution and Delivery of Agreement.............................9
    6.2      Documents and Other Agreements..................................9
    6.3      Absence of Material Adverse Change.............................10
    6.4      Conditions to the  Closing.....................................10

7.  Miscellaneous...........................................................10
    7.1      Survival of Warranties.........................................10
    7.2      Successors and Assigns.........................................10
    7.3      Governing Law..................................................11
    7.4      Counterparts...................................................11
    7.5      Titles and Subtitles...........................................11
    7.6      Notices........................................................11
    7.7      Expenses.......................................................11
    7.8      Amendments and Waivers.........................................11
    7.9      Severability...................................................11
    7.10     Indemnity......................................................11
    7.11     Waiver of Trial by Jury........................................12
    7.12     Entire Agreement...............................................12



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                   DEBENTURE AGREEMENT AND SECURITY AGREEMENT


         THIS DEBENTURE  AGREEMENT AND SECURITY  AGREEMENT is made as of the 9th
day of  January,  1998,  by and  among  COVOL  TECHNOLOGIES,  INC.,  a  Delaware
corporation  (the  "Company"),  and AJG  FINANCIAL  SERVICES,  INC.,  a Delaware
corporation ("Investor").

         THE PARTIES HEREBY AGREE AS FOLLOWS:

         1. Loans; Terms and Conditions; Issuance of Debenture and Warrants.

                  1.1 Loans.  During the period July 17, 1997,  to and including
         January 9, 1998,  Investor provided debt financing in the form of loans
         ("Loans") to the Company for use by the Company in the  construction of
         the Wash Plant at the  Company's  facility  at  Wellington,  Utah.  The
         aggregate principal amount of the Loans, together with accrued interest
         thereon, is $4,367,351.28.

                  1.2 Terms and  Conditions.  This Agreement  confirms the terms
         and conditions upon which Investor made the Loans to the Company.

                  1.3  Issuance of  Debenture  and  Warrants.  To  evidence  the
         aggregate outstanding principal amount of the Loans made by Investor to
         the Company,  together  with interest  thereon to the date hereof,  the
         Company  shall issue to Investor,  concurrently  with the execution and
         delivery of this Agreement (the "Closing"),  the Company's Debenture in
         the form set forth in Exhibit A hereto, and the Company's Warrants (one
         designated  Warrant A and the other  designated  Warrant B)  evidencing
         rights to purchase  initially up to an  aggregate of 432,544  shares of
         Common Stock of the Company.  The Debenture shall replace the Company's
         Promissory  Note,  dated  January  9,  1998,  payable  to the  order of
         Investor in the principal amount of $4,325,432.79,  and such Promissory
         Note shall be marked "replaced by Debenture dated January 9, 1998", and
         delivered to the Company.

         2.  Representations,  Warranties  and  Covenants  of the  Company.  The
Company hereby represents, warrants and covenants to Investor that:

                  2.1 Corporate Existence;  Compliance with Law. The Company (i)
         is a corporation duly organized,  validly existing and in good standing
         under the laws of the State of  Delaware;  (ii) is duly  qualified as a
         foreign  corporation  and in  good  standing  under  the  laws  of each
         jurisdiction where its ownership or lease of property or the conduct of
         its  business  requires  such  qualification;  (iii) has the  requisite
         corporate  power  and  authority  and the legal  right to own,  pledge,
         mortgage or otherwise encumber and operate its properties, to lease the
         property it operates  under lease,  and to conduct its business as now,
         heretofore  and  proposed  to  be  conducted;  (iv)  has  all  material
         licenses, permits, consents or approvals

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         from or by, and has or will have made all material  filings  with,  and
         has or will have  given  all  material  notices  to,  all  governmental
         authorities  having  jurisdiction,  to the  extent  required  for  such
         ownership,  operation  and  conduct;  (v)  is in  compliance  with  its
         certificate  of  incorporation  and by-laws;  and (vi) is in compliance
         with all applicable  provisions of law, including,  without limitation,
         the Employee Retirement Income Security Act of 1974, as amended,  those
         regarding the  collection,  payment and deposit of  employees'  income,
         unemployment   and  Social  Security  taxes,   and  those  relating  to
         environmental  matters where the failure to comply could  reasonably be
         expected  to have a  material  adverse  effect on the  business  of the
         Company.

                  2.2 Corporate Power;  Authorization;  Enforceable Obligations.
         The  execution,  delivery  and  performance  by  the  Company  of  this
         Agreement  and the  Debenture  (i) are within the  Company's  corporate
         power;  (ii) have  been  duly  authorized  by all  necessary  or proper
         corporate  action;  (iii) are not in  contravention of any provision of
         the Company's  certificate of incorporation  or by-laws;  (iv) will not
         violate any law or  regulation,  or any order or decree of any court or
         governmental  instrumentality;  (v) will not conflict with or result in
         the breach or termination of, constitute a default under, or accelerate
         any performance  required by, any indenture,  mortgage,  deed of trust,
         lease, agreement or other instrument to which the Company is a party or
         by which the  Company  or any of its  property  is bound  (except  such
         conflict,  breach,  termination,  default or  acceleration as could not
         reasonably  be  expected  to  have a  material  adverse  effect  on the
         business  of the  Company);  (vi) will not  result in the  creation  or
         imposition  of any lien upon any of the  property of the Company  other
         than  those in favor of the  Investor;  and  (vii) do not  require  the
         consent or approval of any governmental body, agency,  authority or any
         other Person.  At or prior to the Closing,  each of the documents to be
         delivered at such time shall have been duly  executed and delivered for
         the  benefit  of or on  behalf  of the  Company,  and each  shall  then
         constitute a legal,  valid and binding obligation of the Company to the
         extent it is a party thereto, enforceable against it in accordance with
         its terms,  subject to the effects of laws governing  creditors  rights
         generally and general principles of equity.

                  2.3   Authorization   and  Valid  Issuance  of  Debenture  and
         Warrants.  All  corporate  action  on the part of the  Company  and its
         officers,  directors and stockholders  necessary for the authorization,
         issuance and delivery of the Debenture  being issued  hereunder and the
         reservation  for  issuance  of  shares of Common  Stock  issuable  upon
         exercise of the Warrants  have been taken or will be taken prior to the
         Closing, and this Agreement,  the Debenture and the Warrants shall then
         constitute valid and legally binding  obligations of the Company,  each
         enforceable  in accordance  with its terms.  The  Debentures  which are
         being acquired by the Investor, when issued and delivered in accordance
         with the terms hereof for the consideration  expressed herein,  will be
         duly and validly issued. The Common Stock issuable upon exercise of the
         Warrants  has been duly and validly  reserved for  issuance  and,  upon
         issuance in accordance with the terms of the Warrants and the Company's
         Certificate of Incorporation,  shall be duly and validly issued,  fully
         paid and

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         nonassessable, and issued in compliance with all applicable federal and
         state securities laws, as currently in effect.

                  2.4   Securities   Laws.   In  reliance   on  the   investment
         representations  contained in Section 3.1 hereof, the offer,  issuance,
         sale and delivery of the Warrants,  as provided in this  Agreement,  is
         exempt from the  registration  requirements  of the  Securities  Act of
         1933, as amended,  and the rules and  regulations  thereunder,  and all
         applicable state securities laws.

                  2.5  Disclosure.  The Company's  Form 10-K for the fiscal year
         ended September 30, 1997, and all other written  information  furnished
         to Investor  did not, as of the date of such  information,  contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the statements therein not misleading.

                  2.6 Authorized and Outstanding  Shares of Capital Stock. After
         giving  effect to the  Closing,  the  authorized  capital  stock of the
         Company  consists  of  50,000,000  shares of Common  Stock,  $0.001 par
         value, of which11,326,404 Shares are issued and outstanding. Except for
         (i) the  Warrants  and (ii) rights to acquire  5,104,518  Shares (a) no
         subscription, warrant, option or other right to purchase or acquire any
         shares of any class of capital stock is authorized or outstanding,  and
         (b) there is no  commitment  of the  Company to issue any such  shares,
         warrants, options or other such rights or securities.

                  2.7  Ownership of Property;  Liens.  The Company owns good and
         merchantable  title to, or valid  leasehold  interests  in,  all of its
         properties  and  assets;  and  the  Company  has  received  all  deeds,
         assignments,  waivers,  consents,  non-disturbance  and  recognition or
         similar  agreements,  bills  of sale  and  other  documents,  and  duly
         effected  all  recordings,  filings  and  other  actions  necessary  to
         establish,  protect and perfect the Company's right, title and interest
         in  and to all  such  property  to the  extent  necessary  to use  such
         property in its ordinary business operations.

                  2.8 Patents, Trademarks,  Copyrights and Licenses. The Company
         owns all material licenses,  patents, patent applications,  copyrights,
         service marks,  trademarks,  trade mark  applications,  and trade names
         necessary to continue to conduct its business as  heretofore  conducted
         by it, now  conducted by it and proposed to be conducted by it, each of
         which is listed,  together with Patent and Trademark Office application
         or registration numbers, where applicable,  on Schedule 2.8 hereto. The
         Company  conducts  its  businesses  without  infringement  or  claim of
         infringement  of  any  license,   patent,   copyright,   service  mark,
         trademark,  trade name,  trade  secret or other  intellectual  property
         right of others.  To the best  knowledge  of the  Company,  there is no
         infringement  or claim  of  infringement  by  others  of any  material,
         license, patent, copyright,  service mark, trademark, trade name, trade
         secret or other intellectual property right of the Company.


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                  2.9  No  Material  Adverse  Effect.  Except  as  disclosed  on
         Schedule 2.9 hereto,  no event has occurred  since  September 30, 1997,
         and is continuing which has had or could reasonably be expected to have
         a  material  adverse  effect  on  the  business,   assets,  properties,
         operations, prospects or financial or other condition of the Company.

                  2.10  Environmental  Laws. All premises and facilities  owned,
         leased,  used or operated by the  Company or, to the  knowledge  of any
         executive officer of the Company after a reasonable investigation,  any
         predecessor in interest,  have been, and continue to be, owned, leased,
         used or  operated  in  compliance  in all  material  respects  with all
         applicable environmental laws.

                  2.11 Use of Proceeds. The proceeds of the loans by Investor to
         the  Company  were used for the  construction  of the Wash Plant at the
         Company's facility at Wellington, Utah.

         3. Representations,  Warranties and Covenants of the Investor. Investor
hereby represents and warrants that:

                  3.1  Purchase  Entirely  for  Own  Account.   Investor  hereby
         confirms that the Debenture and the Warrants to be received by Investor
         hereunder  and the Common Stock  issuable upon exercise of the Warrants
         (collectively,  the  "Securities")  will be acquired for Investor's own
         account and not with a view to the resale or  distribution  of any part
         thereof,  and that Investor has no agreement or arrangement with regard
         to or present  intention of selling,  granting any participation in, or
         otherwise distributing the same; provided, however, notwithstanding the
         foregoing,  Investor may effect  transactions  in reliance on Rule 144A
         promulgated under the Securities Act of 1933, as amended (the "Act").

                  3.2 Disclosure of  Information.  Investor has received all the
         information it considers  necessary or appropriate for deciding whether
         to purchase the Securities  being issued  hereunder.  Investor  further
         represents  that it has had an opportunity to ask questions and receive
         answers from the Company regarding the terms and conditions of the sale
         of the Securities.

                  3.3 Investment  Experience.  Investor  acknowledges that it is
         able to fend for itself,  can bear the economic risk of its  investment
         and has such knowledge and experience in financial or business  matters
         that it is capable of evaluating the merits and risks of the investment
         in the Securities being issued hereunder.

                  3.4  Restricted  Securities.  Investor  understands  that  the
         Debenture and the shares of Common Stock  issuable upon exercise of the
         Warrants  it  is  acquiring   pursuant  hereto  are   characterized  as
         "restricted  securities" under the federal  securities laws inasmuch as
         each is being acquired from the Company in a transaction  not involving
         a public  offering and that under such laws and applicable  regulations
         such securities may be resold without  registration  under the Act only
         in  certain  limited  circumstances.   In  this  connection,   Investor
         represents

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         that it is  familiar  with  Rule 144  under the Act,  as  presently  in
         effect, and understands the resale  limitations  imposed thereby and by
         the Act.

                  3.5  Legends.  It is  understood  that the  Debenture  and the
         Warrants  being issued  hereunder  and the Common Stock  issuable  upon
         exercise of the Warrants  will bear a legend  substantially  similar to
         the following:

                  "THIS  SECURITY HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES
                  ACT  OF  1933,  AS  AMENDED  (THE  "ACT"),  OR  REGISTERED  OR
                  OTHERWISE  QUALIFIED  FOR  SALE  UNDER  ANY  APPLICABLE  STATE
                  SECURITIES  LAWS AND MAY NOT BE TRANSFERRED OR SOLD OR OFFERED
                  FOR SALE OR OTHERWISE  TRANSFERRED,  PLEDGED,  HYPOTHECATED OR
                  DISPOSED  OF UNLESS IT HAS BEEN  REGISTERED  UNDER THE ACT AND
                  REGISTERED  OR OTHERWISE  QUALIFIED  FOR SALE UNDER SUCH STATE
                  SECURITIES LAWS OR AN EXCEPTION FROM  REGISTRATION  THEREUNDER
                  IS AVAILABLE."

                  3.6 Accredited  Investor.  Investor is an Accredited  Investor
         within the definition set forth in Rule 501(a) under the Act.

         4. Valuation of Warrants.

                  4.1 Value of  Warrants.  The fair market value of Warrant A as
         of the date hereof is $1,000.00  and the fair market value of Warrant B
         as of the date hereof is $100.00, and accordingly, of the $4,367,351.28
         stated principal  amount of the Debenture,  $1,100.00 is to be provided
         by Investor to the Company for the Warrants. Said fair market value was
         determined by the parties based on comparisons with comparable warrants
         of other issuers and Investor's customary investment considerations for
         equity and debt financing of such kind.

                  4.2  Financial  and Tax  Reporting.  The Company and  Investor
         shall prepare their respective  financial  accounting  statements,  and
         shall prepare and file their  respective  Federal (as well as state and
         local) income tax returns,  in a manner  consistent  with the foregoing
         allocation of the stated principal amount of the Debenture  between the
         Debenture and the Warrants, including but not limited to Investor's tax
         basis  in  the  Warrants  and  Debenture  in  accordance  with  Section
         1.1012(d) of the Treasury Regulations.

                  4.3 Issue  Price.  The "issue  price"  (within  the meaning of
         Section  1272(b) of the Internal  Revenue Code of 1986 (the "Code")) of
         the Debenture shall be equal to $4,366,251.28.

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                  4.4  Interpretation.  No provision in this Agreement  shall be
         interpreted,  alone or in conjunction with any other agreement  between
         or among  Investor and the Company,  or either of them (i) to alter the
         amount of the  exercise  price of the  Warrants  or to alter any rights
         granted to Investor in conjunction with the Warrants,  or (ii) to limit
         or impair in any way the rights of Investor  under the  Warrants,  this
         Agreement, the Debenture or any other agreement.

         5. Security Agreement. Payment of the Debenture shall be secured to the
extent described below:

                  5.1 Security Interest. The Company hereby grants to Investor a
         security interest in the property and its proceeds described in Section
         5.2 herein to secure the Company's obligations under the Debenture (the
         "Security Interest").

                  5.2 Collateral. The property in which the Security Interest is
         granted (the  "Collateral")  consists of a  continuing  interest in the
         following:  the Wash Plant at the  Company's  facility at Farnum  Road,
         Wellington,  Utah,  and all  machinery  and  equipment  which is a part
         thereof,  including the  machinery and equipment  described on Schedule
         5.2 hereto and all processing equipment, conveyors, data processing and
         computer  equipment  with  software and  peripheral  equipment,  tools,
         attachments, accessories, and other equipment of every kind and nature,
         whether now owned or hereafter  acquired,  together  with all additions
         and accessions thereto,  replacements therefor, all parts therefor, all
         substitutions for any of the foregoing, fuel therefor, and all manuals,
         drawings, instructions, warranties and rights with respect thereto, and
         all products and proceeds thereof and condemnation awards and insurance
         proceeds with respect thereto.

                  5.3  Perfection  and  Priority.  The Security  Interest  grant
         herein shall be a first priority lien on the Collateral,  subject to no
         other liens, claims or rights of others.

                  5.4  Affirmative  Covenants.  The  Company  covenants  that it
         shall:

                           (a) Keep and maintain all  Collateral  consisting  of
                  equipment  and  machinery  in  good  operating  condition  and
                  repair;  make all necessary  replacements  thereof so that the
                  value and operating  efficiency  thereof shall at all times be
                  maintained  and  preserved;  promptly  inform  Investor of any
                  additions to or deletions  from such  equipment and machinery;
                  and prevent any such  equipment and machinery  from becoming a
                  fixture  to  real  estate  or  accession  to  other   personal
                  property;

                           (b) Promptly  discharge  any liens,  encumbrances  or
                  other claims against the Collateral;

                           (c) Maintain such insurance as may be required by law
                  and such  other  insurance  to such  extent and  against  such
                  hazards and liabilities as is customarily

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                  maintained  by  companies  similarly  situated,   and  include
                  Investor as an additional  insured on all liability  policies;
                  and

                           (d)  Comply  strictly  and in all  respects  with all
                  applicable environmental laws.

                  5.5 Negative  Covenants.  The Company  covenants that it shall
         not, without  Investor's  prior written consent,  which Investor may or
         may not in its sole discretion give:

                           (a) Enter into any transaction  which  materially and
                  adversely  affects the Collateral or the Company's  ability to
                  repay the indebtedness under the Debenture;

                           (b) Remove the Collateral from the Company's facility
                  at  Wellington,  Utah,  or keep the  Collateral  at any  other
                  location unless (i) the Company gives Investor  written notice
                  thereof  and of the new  location of the  Collateral  at least
                  thirty (30) days prior thereto, and (ii) the other location is
                  within the continental United States of America; or

                           (c)   Create  or  permit  any  lien  on  any  of  the
                  Collateral, other than liens created hereunder.

                  5.6 Insurance;  Payment of Premiums. The Company shall, at its
         sole cost and expense, keep and maintain the Collateral insured for its
         full insurable value against loss or damage by fire, theft,  explosion,
         sprinklers and all other hazards and risks  ordinarily  insured against
         by other owners or users of such  properties in similar  businesses and
         notify Investor  promptly of any occurrence  causing a material loss or
         decline in value of the  Collateral  and the estimated  (or actual,  if
         available) amount of such loss or decline. All policies of insurance on
         the  Collateral  shall  be in form  and  with  insurers  recognized  as
         adequate by prudent  business persons and all such policies shall be in
         such  amounts as may be  satisfactory  to Investor.  The Company  shall
         deliver to Investor a certificate of insurance  and, upon request,  the
         original (or certified copy) of each policy of insurance,  and evidence
         of payment of all premiums  therefor.  Such policies of insurance shall
         contain an endorsement,  in form and substance  acceptable to Investor,
         showing loss payable to Investor,  as its  interests  may appear.  Such
         endorsement,  or an independent instrument furnished to Investor, shall
         provide that the insurance companies will give Investor at least thirty
         (30) days prior  written  notice  before any such policy or policies of
         insurance  shall be altered or  canceled  and that no act or default of
         the Company or any other  person  shall affect the right of Investor to
         recover  under such policy or policies of  insurance in case of loss or
         damage.  The Company hereby directs all insurers under such policies of
         insurance to pay all proceeds payable thereunder  directly to Investor,
         as its interests may appear. The Company irrevocably makes, constitutes
         and appoints Investor (and all officers, employees or agents designated
         by  Investor)  as  the   Company's   true  and  lawful   attorney  (and
         agent-in-fact) for the purpose of making, settling and adjusting claims
         under such policies of insurance, endorsing the name

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         of the  Company  on any  check,  draft,  instrument  or other  items of
         payment for the proceeds of such  policies of insurance  and for making
         all  determinations  and  decisions  with  respect to such  policies of
         insurance. In the event the Company, at any time hereafter,  shall fail
         to obtain or maintain any of the policies of insurance  required  above
         or to pay any  premium  in  whole  or in part  relating  thereto,  then
         Investor,  without  waiving or releasing any  obligations or default by
         the Company  hereunder,  may at any time thereafter (but shall be under
         no  obligation  to) obtain and maintain  such policies of insurance and
         pay such premium and take any other action with respect  thereto  which
         Investor deems advisable. All sums so disbursed by Investor,  including
         reasonable  attorneys'  fees,  court costs,  expenses and other charges
         relating thereto, shall be payable on demand by the Company to Investor
         and shall be additional  liabilities under the Debenture secured by the
         Collateral.

                  5.7  Remedies  Upon  Default.  In the  event  of any  Event of
         Default  under the  Debenture,  Investor  may do any one or more of the
         following:

                           (a)  Declare  any  indebtedness  under the  Debenture
                  immediately due and payable;

                           (b)  Enforce  the  security  interest  given  in this
                  Agreement under the provisions of the Uniform  Commercial Code
                  of the applicable state or any other equivalent law;

                           (c) Enter upon the premises of the  Company,  without
                  any obligation to pay rent to the Company,  through  self-help
                  and without judicial process,  without first obtaining a final
                  judgment or giving the Company  notice and  opportunity  for a
                  hearing on the  validity  of  Investor's  claim,  or any other
                  place or places where the  Collateral is located and kept, and
                  remove the Collateral therefrom to the premises of Investor or
                  any agent of  Investor,  for such time as Investor may desire,
                  in order to effectively  collect or liquidate the  Collateral,
                  or (ii)  require the Company to assemble  the  Collateral  and
                  make it available to Investor at a place to be  designated  by
                  Investor, in its sole discretion;

                           (d) Take  possession of the Collateral or any part of
                  it and of the records pertaining to the Collateral;

                           (e)  Sell  or   otherwise   dispose  of  all  or  any
                  Collateral  at public  or  private  sale or  sales,  with such
                  notice as may be required by law, in lots or in bulk, for cash
                  or on credit,  all as Investor,  in its sole  discretion,  may
                  deem advisable; (ii) adjourn such sales from time to time with
                  or without  notice;  (iii) conduct such sales on the Company's
                  premises or elsewhere and use the Company's  premises  without
                  charge for such sales for such time or times as  Investor  may
                  see  fit.  Investor  shall  have the  right to sell,  lease or
                  otherwise dispose of the Collateral,  or any part thereof, for
                  cash,  credit or any  combination  thereof,  and  Investor may
                  purchase all or any part of the

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                  Collateral  at public or, if  permitted  by law,  private sale
                  and, in lieu of actual  payment of such  purchase  price,  may
                  setoff the amount of such price against the indebtedness under
                  the  Debenture.  The  proceeds  realized  from the sale of any
                  Collateral  shall be applied  first to the  reasonable  costs,
                  expenses and attorneys' fees and expenses incurred by Investor
                  for collection and for  acquisition,  completion,  protection,
                  removal, storage, sale and delivery of the Collateral;  second
                  to  interest  due  upon  any of  the  indebtedness  under  the
                  Debenture;  and  third to the  principal  of the  indebtedness
                  under  the  Debenture.  If any  deficiency  shall  arise,  the
                  Company shall remain liable to Investor therefor; and

                           (f)  Exercise  any other  rights  and  remedies  of a
                  secured  party  under  the  Uniform  Commercial  Code  of  the
                  applicable  state or other applicable law, all of which rights
                  and remedies  shall be cumulative  and  non-exclusive,  to the
                  extent permitted by law.

         6. Conditions Precedent

         This  Agreement  shall become  effective upon the  satisfaction  of the
following conditions precedent:

                  6.1  Execution and Delivery of  Agreement.  This  Agreement or
         counterparts  thereof  shall have been duly  executed by, and delivered
         to, the Company and the Investor.

                  6.2 Documents and Other  Agreements.  The Investor  shall have
         received all of the following,  each in form and substance satisfactory
         to the Investor:

                           (a) The Debenture;

                           (b) The Warrants (the "Warrants");

                           (c) Registration Rights Agreement between the Company
                  and the Investor (the "Registration Rights Agreement");

                           (d) A  Certificate  of the  Secretary of the Company,
                  together with true and correct  copies of the  Certificate  of
                  Incorporation  and By-Laws of the Company,  and all amendments
                  thereto,  true and correct  copies of the  resolutions  of the
                  Board of Directors of the Company authorizing or ratifying the
                  execution,  delivery and  performance of this  Agreement,  the
                  Debenture, the Warrants and the Registration Rights Agreement,
                  and the  names  of the  officer  or  officers  of the  Company
                  authorized to sign this Agreement, the Debenture, the Warrants
                  and the Registration Rights Agreement,  together with a sample
                  of the true signature of each such officer;


                                        9
<PAGE>



                           (e) Certified copies of all documents  evidencing any
                  other necessary  corporate  action,  consents and governmental
                  approvals  (if  any)  with  respect  to  this  Agreement,  the
                  Debenture, the Warrants and the Registration Rights Agreement;

                           (f) The  favorable  opinion  of  Callister  Nebeker &
                  McCullough,  special counsel for the Company, addressed to the
                  Investor  with  respect to such  matters as may be  reasonably
                  requested by the Investor;

                           (g) The  favorable  opinion  of Harlan  M.  Hatfield,
                  general  counsel for the  Company,  addressed  to the Investor
                  with respect to such matters as may be reasonably requested by
                  the Investor;

                           (h) The Certificate of  Incorporation  of the Company
                  certified by the Secretary of State of Delaware;

                           (i) Good Standing  Certificates  for the Company from
                  the Secretaries of State of Delaware,  Alabama,  Pennsylvania,
                  Utah, Virginia and West Virginia;

                           (j) UCC lien  search  reports of filings  against the
                  Company  for  such   jurisdictions   as  the  Investor   deems
                  appropriate;

                           (k)  UCC  Financing   Statements  filed  against  the
                  Company in respect to such jurisdictions as the Investor deems
                  appropriate; and

                           (l) Landlord's Waiver and Consent by Earthco;

                           (m)   Certificate  of  insurance,   together  with  a
                  properly executed Lender's Loss Payable Clause.

                  6.3 Absence of Material  Adverse Change.  No material  adverse
         change  in  the  business,   operations  or  condition,   financial  or
         otherwise, of the Company shall have occurred or be continuing.

                  6.4 Conditions to the Closing.  It shall be a condition to the
         Closing  that the  conditions  contained  in Sections  5.1, 5.2 and 5.3
         shall have been fulfilled.

         7. Miscellaneous.

                  7.1 Survival of Warranties.  The  warranties,  representations
         and  covenants  of the Company and the  Investor  contained  in or made
         pursuant to this Agreement  shall survive the execution and delivery of
         this  Agreement  and the Closing and shall in no way be affected by any
         investigation  of the subject  matter  thereof  made by or on behalf of
         Investor or the Company.

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<PAGE>



                  7.2  Successors  and  Assigns.  Except as  otherwise  provided
         herein,  the terms and conditions of this Agreement  shall inure to the
         benefit of and be binding upon the respective successors and assigns of
         the parties (including transferees of the Debenture issued hereunder or
         any Common Stock issued upon exercise of the Warrants).

                  7.3  Governing  Law. This  Agreement  shall be governed by and
         construed  under the laws of the State of Utah without regard to choice
         of law principles.

                  7.4  Counterparts.  This  Agreement  may be executed in one or
         more counterparts,  each of which shall be deemed an original,  but all
         of which together shall constitute one and the same instrument.

                  7.5 Titles and  Subtitles.  The titles and  subtitles  used in
         this  Agreement  are  used  for  convenience  only  and  are  not to be
         considered in construing or interpreting this Agreement.

                  7.6 Notices. Unless otherwise provided, any notice required or
         permitted  under this Agreement  shall be given in writing and shall be
         deemed  effectively  given upon  personal  delivery  to the party to be
         notified or upon deposit with a reputable overnight courier or with the
         United States Post Office,  by registered  or certified  mail,  postage
         prepaid  and  addressed  to the  party to be  notified  at the  address
         indicated for such party on the signature page hereof, or at such other
         address as such party may  designate by ten (10) days  advance  written
         notice to the other parties.

                  7.7  Expenses.  Each  party  shall  bear its own  expenses  in
         connection with the transactions contemplated by this Agreement.

                  7.8 Amendments and Waivers.  Any term of this Agreement may be
         amended and the  observance of any term of this Agreement may be waived
         only with the  written  consent of the Company  and the  Investor.  Any
         amendment or waiver  effected in accordance  with this Section shall be
         binding  upon  each  holder  of any  securities  purchased  under  this
         Agreement  at the time  outstanding,  each  future  holder  of all such
         securities, and the Company.

                  7.9 Severability.  If one or more provisions of this Agreement
         are held to be unenforceable under applicable law, such provision shall
         be excluded from this Agreement and the balance of the Agreement  shall
         be  interpreted  as if such  provision  were so  exuded  and  shall  be
         enforceable in accordance with its terms.

                  7.10 Indemnity.  The Company hereby  indemnifies the Investor,
         and  its  directors,   officers,   employees,   affiliates  and  agents
         (collectively,  "Indemnified Persons") against, and agrees to hold each
         such  Indemnified  Person  harmless from,  any and all losses,  claims,
         damages and liabilities, including claims brought by any stockholder or
         former stockholder

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<PAGE>



         of the Company, and related expenses, including reasonable counsel fees
         and expenses,  incurred by such  Indemnified  Person arising out of any
         claim,  litigation,  investigation  or proceeding  (whether or not such
         Indemnified  Person is a party thereto)  relating to any  transactions,
         services or matters that are the subject of this  Agreement;  provided,
         however,  that  such  indemnity  shall  not  apply to any such  losses,
         claims,  damages,  or liabilities or related  expenses  determined by a
         court  of  competent   jurisdiction  to  have  arisen  from  the  gross
         negligence or willful misconduct of such Indemnified Person.

                  7.11 Waiver of Trial by Jury.  THE  COMPANY  AND THE  INVESTOR
         HEREBY  WAIVE  TRIAL  BY  JURY  IN  ANY  ACTION,  SUIT,  PROCEEDING  OR
         COUNTERCLAIM  OF ANY KIND  DIRECTLY  OR  INDIRECTLY  ARISING  OUT OF OR
         RELATED TO THIS AGREEMENT OR THE DEBENTURE OR ANY ACT OR OMISSION WHICH
         EITHER PARTY  ASSERTS  RESULTED IN ANY  LIABILITY  TO THE COMPANY,  THE
         INVESTOR  OR  THEIR  RESPECTIVE  OFFICERS,   DIRECTORS,   STOCKHOLDERS,
         PARTNERS, EMPLOYEES OR AGENTS, TO THE FULL EXTENT PERMITTED BY LAW.

                  7.12 Entire  Agreement.  This  Agreement,  the Debenture,  and
         other  documents  delivered  pursuant  hereto  constitute  the full and
         entire  understanding  and agreement between the parties with regard to
         the subjects hereof and thereof.

                  7.13  Permissible  Offset.  To the extent the Company fails to
         make  payment of principal  or interest  when due under the  Debenture,
         Holder  may  setoff  the  amount of such  deficiency  against  "Royalty
         Amounts" (net of any  commission  that the Company would be required to
         pay (e.g.,  Coalco)) due and owing to the Company from the Holder.  For
         purposes of this Section 7.13,  "Royalty  Amounts" shall mean royalties
         and license fees due to the Company  either from the Holder or from any
         of the  Holder's  assigns  or  transferees  that may owe a  royalty  or
         license fee to the Company.

THE  SECURITIES  ARE  SUITABLE  ONLY  FOR  SOPHISTICATED  INVESTORS  FOR WHOM AN
INVESTMENT IN THE SECURITIES DOES NOT CONSTITUTE A COMPLETE  INVESTMENT  PROGRAM
AND WHO FULLY UNDERSTAND AND ARE WILLING TO ASSUME THE RISK INVOLVED IN PURCHASE
OF THE  SECURITIES.  NO OFFER TO SELL  (OR  SOLICITATION  OF AN OFFER TO BUY) IS
BEING MADE IN ANY  JURISDICTION  IN WHICH SUCH  OFFER OR  SOLICITATION  WOULD BE
UNLAWFUL. THERE WILL BE NO PUBLIC OFFERING OF THE SECURITIES.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE  COMPANY  AND THE TERMS OF THE  OFFERING,  INCLUDING  THE  MERITS  AND RISKS
INVOLVED. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL OR
STATE SECURITIES  COMMISSION OR REGULATORY AUTHORITY NOR HAS ANY SUCH FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE

                                       12

<PAGE>



ACCURACY OR ADEQUACY OF ANY INFORMATION PROVIDED HEREWITH. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

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


Address:  3280 North Frontage Road                COVOL TECHNOLOGIES, INC.
          Lehi, Utah 84043

                                                  By: /Stanley M. Kimball/
                                                     -------------------------
                            Name: Stanley M. Kimball
                                                       Title: President



Address:  The Gallagher Centre                    AJG FINANCIAL SERVICES, INC.
          Two Pierce Place
          Itasca, Illinois 60143-3141

                                                  By: /David R. Long/
                                                     -------------------------
                               Name: David R. Long
                                                      Title: President


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