PELLETCO Corporation
A Palmer Affiliate

13 Elm Street        605 Willowglen Rd.   920 E. Deerpath      60 E. 88th Street
Cohasset, MA         Santa Barbara, CA    Lake Forest, IL      New York, NY
02025-1828           93105                60045                10128
Tel: 781/383-3200    Tel: 805/587-2315    Tel: 347/234-0832    Tel: 212/876-6060
Fax: 781/383-3205    Fax: 805/587-2795    Fax: 347/234-3397    Fax: 212/289-3490

November 20, 1997


Covol Technologies, Inc.                           By Facsimile to: 801-768-4483
3820 North Frontage Road
Lehi, Utah  84043

Attn:    Brent M. Cook, Chief Executive Officer

Gentlemen:

Pelletco  Corporation  ("Pelletco") entered into a License Agreement dated as of
August  5,  1997  (the  "License  Agreement")  with  Covol  Technologies,   Inc.
("Covol").  Under the  definition  of  "Project"  in  Section  1 of the  License
Agreement,  a  facility  located  at one of the first  five (5) sites  listed on
Exhibit A thereto is included in such  definition of "Projects" for the purposes
of the License  Agreement and the License Agreement applies to such site only if
two conditions are satisfied.  Those two conditions are as follows: (i) Pelletco
has given Covol written  notice of its  intention to have the License  Agreement
apply to such facility, and (ii) such notice, if given, is given within 120 days
of the execution and delivery of the License Agreement. This 120-day period will
expire on or about December 3, 1997.

Pelletco  respectfully  requests  Covol to extend this  period in the  foregoing
provision by an additional  60 days so that  Pelletco  would be entitled to give
such notice for the purposes of this  provision at any time prior to February 5,
1998. The granting of such extension by this letter will constitute an amendment
of the  License  Agreement  but only to the  extent  of such  extension.  Please
indicate  your consent and  agreement to such  extension by signing in the space
provided below.

                                               Very truly yours,

                                               PELLETCO CORPORATION

                                               By: /s/ Donald R. Logan
                                                  ------------------------------
                         Donald R. Logan, Vice President

AGREED AND ACCEPTED
ON NOVEMBER 24, 1997

COVOL TECHNOLOGIES, INC.

By: /s/ Alan D. Ayers
   --------------------
Name/Title:
   Alan D. Ayers
   Chief Operating Officer

<PAGE>

                                LICENSE AGREEMENT

         THIS LICENSE AND BINDER PURCHASE AGREEMENT (the  "Agreement'),  is made
and entered  into as of August 5, 1997 by and between  Pelletco  Corporation,  a
Massachusetts  corporation (the  "Licensee"),  and Covol  Technologies,  Inc., a
Delaware corporation (the "Licensor").

         WHEREAS  Licensor has  represented  that it has developed a proprietary
process to produce  synthetic coal fuel extrusions,  pellets and briquettes from
waste coal dust,  coal fines and other coal  derivatives,  and that Licensor has
sufficient  rights to such  proprietary  process  pursuant to which  Licensor is
entitled to license the coal extruding and Briquetting technology to Licensee;

         WHEREAS  Licensee  intends to develop a facility  to produce  synthetic
coal  fuel  extrusions,  pellets  and/or  briquettes  or  substantially  similar
products from waste coal dust,  coal fines and other coal  derivatives at one or
more of the  locations  set forth on Exhibit A  attached  hereto and made a part
hereof (individually, a "Project" and collectively, the "Projects"); and

         WHEREAS  Licensee  wishes to  obtain  and  Licensor  wishes to grant to
Licensee a license for the Coal  Briquetting  Technology  (as defined  below) in
connection  with each  Project  on the terms  and  conditions  set forth in this
Agreement, and Licensee wishes to obtain and Licensor wishes to sell to Licensee
the Proprietary Binder Material (as defined below)  manufactured by Licensor for
use in the operation of each Project.

         NOW, THEREFORE,  in consideration of the foregoing premises, the mutual
covenants  and  agreements  hereinafter  set forth,  and other good and valuable
consideration,  the receipt  and  sufficiency  of which is hereby  acknowledged,
Licensor and Licensee each agree as follows:

Section 1. Definitions.

         "Coal Briquetting Technology" means all intellectual property,  patents
(including  but not  limited  to United  States  Patent  Numbers  5,487,764  and
5,453,103) and  applications  therefor,  printed and unprinted  technical  data,
know-how,  trade secrets,  copyrights and other  intellectual  property  rights,
inventions, discoveries, techniques, works, processes, methods, plans, software,
designs, drawings, schematics, specifications,  communications protocols, source
and object code and modifications, test procedures, program cards, tapes, disks,
algorithms  and all other  scientific or technical  information in whatever form
relating to, embodied in or used in the proprietary process to produce synthetic
coal fuel  extrusions,  pellets and briquettes  from waste coal dust, coal fines
and other similar coal derivatives,  including all such information in existence
as of the date of this Agreement as well as related  information later developed
by  Licensor;  provided,  however,  that  the  defined  term  "Coal  Briquetting
Technology"  shall not include the proprietary  process developed by Licensor to
produce  synthetic coke extrusions and briquettes from coke breeze,  iron revert
materials,  or any  technology  for other than the  processing and production of
synthetic  coal  fuel  extrusions,  pellets  and  briquettes.  Nothing  in  this
Agreement  is  intended  to  grant to  Licensee  the  right  to  apply  the Coal
Briquetting Technology to

<PAGE>

produce  anything  other  than  synthetic  coal  fuel  extrusions,  pellets  and
briquettes  intended to qualify for tax credits under Section 29(c)(1)(C) of the
1986  Internal   Revenue  Code.  This  definition  is  intended  to  cover  only
information and documents which are proprietary and confidential to Licensor and
otherwise covered by Section 7.3(i) hereof.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Developed  Technology"  means any  inventions,  "Improvement,"  or new
technology  that  Licensor  may  conceive,  make or  invent in  connection  with
Licensor's  disclosure  to  Licensee  of the  Coal  Briquetting  Technology,  or
Licensee's  efforts to market products  manufactured  using the Coal Briquetting
Technology  under  this  Agreement  or which  are  conceived  by  Licensor  as a
consequence of opportunity or knowledge  afforded to Licensee by this Agreement.
"Developed  Technology"  also  means  any  inventions,  "Improvement,  " or  new
technology directly related to the Coal Briquetting Technology that Licensor may
conceive,  make or invent relating to the Coal Briquetting Technology during the
Term of this  Agreement.  "Improvement"  means an  alteration  or addition to an
invention  or  discovery  which (i)  directly  relates  to the Coal  Briquetting
Technology,  (ii) is conceived, made or invented by Licensor and (iii) enhances,
to some  extent,  performance  or  economics  without  changing or  destroying a
product's,  device's,  or method's  basic identity and essential  character.  An
Improvement  may  comprise  alterations  or  additions  to  either  patented  or
unpatented inventions,  discoveries,  technology, or devices, and may or may not
be patentable.

         "Earned License Fee" has the meaning set forth in Section 3.3.

         "Elective Date" means the date of this Agreement set forth above.

         "Initial License Fee" has the meaning set forth in Section 3.2.

         "License Fee" means the Initial License Fee and the Earned License Fee.

         "Licensee" has the meaning set forth in the preamble.

         "License has the meaning set forth in the preamble.

         "Net Cash Flow" means, with respect to any calendar  quarter,  all cash
receipts of Licensee  (excluding  any capital  contributions  made by the equity
owners of Licensee  and any loan  proceeds  from any  source)  less (a) all cash
disbursements  of Licensee  during such quarter and all such cash  disbursements
during any prior quarter which have not previously been offset by cash receipts,
and (b) such amounts as are set aside to maintain reasonable working capital and
contingency reserves, from time to time, in an amount to be mutually agreed upon
but in no event less than the projected  reasonable operating costs and expenses
for the immediately succeeding calendar quarter for all Projects developed. Cash
disbursements  may include payments at market rates to Licensor or affiliates of
Licensee or Licensor for the  furnishing of goods and services or the lending of
funds to Licensee, including without limitation, the Proprietary Binder Material
at the price agreed upon pursuant to Section 4.2

                                        2
<PAGE>

below,  the operation and  maintenance  of each Project,  and the management and
administration  of Licensee with respect to each Project.  The  calculation  and
distribution  of "Net Cash Flow"  shall not take into  account and shall be made
after the payment of the Initial License Fee, and (y) the  reimbursement  of all
capital contributions made, from time to time, by the current four equity owners
of Licensee. The calculation of "Net Cash Flow" shall include as a "cash receipt
of Licensee" the pre-tax  equivalent of any credits under Section 29 of the Code
which the four  current  equity  owners of  Licensee  shall claim  directly  and
currently for Federal income tax purposes as a result of the production from the
Projects,  provided,  however,  that such credits  shall not be included for the
purpose of such  calculation  to the extent they arise from an equity  ownership
which,  in the  aggregate,  is not in excess of five  percent  (5%) of the total
equity ownership of Licensee or its assignee(s), as the case may be. However, if
Licensee is not taxed as a  partnership  for Federal  income tax  purposes,  any
credits under  Section 29 of the Code which  Licensee  shall claim  directly and
currently for Federal income tax purposes shall be included in "cash receipts of
Licensee" but only on a basis to be mutually agreed upon as reflecting in a fair
and reasonable manner the purposes of this Agreement.

         "Project' has the meaning set forth in the preamble,  provided however,
a  facility  located  at one of the sites  listed on  Exhibit A hereto  shall be
included  within the definition of ~Projects" for the purposes of this Agreement
and this  Agreement  shall  apply to such  Project,  in each  case only when (i)
Licensee  has  given  Licensor  written  notice  of its  intention  to have this
Agreement  apply to such  facility,  and (ii) in the case of the first  five (5)
sites  listed on Exhibit A hereto,  such notice,  if given,  is given within 120
days of the execution and delivery of this Agreement.

         "Proprietary  Binder  Materials means and refers to the binder compound
developed  by  Licensor  and  necessary  for the  production,  by  Licensee,  of
synthetic coal extrusions,  pellets and briquettes and which extrusions, pellets
and briquettes  satisfy the chemical change and other  conditions of IRS Private
Letter Rulings No.  9701041 and No.  9549025 in order to constitute  requalified
feels" pursuant to the terms of Section 29(c)(1)(C) of the 1986 Internal Revenue
Code and with  respect to which  Section 29 is  applicable  pursuant  to Section
29(f) and 29(g) of the 1986 Code. The parties  acknowledge  that the Proprietary
Binder  Material is not a staple  article of commerce  suitable for  substantial
non-infringing  uses, but rather is an integral and inseparable part of the Coal
Briquetting Technology.

         Section 2. License Grant.

         2.1 General.  Subject to the terms and  conditions  of this  Agreement,
Licensor  hereby  grants to  Licensee,  for the full and entire term  hereof,  a
non-exclusive  license to use the Coal  Briquetting  Technology  for  commercial
exploitation  (and  not  for  research  development  purposes),   including  the
non-exclusive  right to make,  have made or use at each  Project  and to sell or
otherwise   transfer  products  which  have  been  manufactured  with  the  Coal
Briquetting Technology.  Licensee hereby accepts the license on the terms hereof
and agrees to make and have made products using the Coal Briquetting  Technology
only at each Project under this License  Agreement.  Licensee  shall not make or
have made products using the Coal Briquetting Technology or

                                        3
<PAGE>

similar  technology  except at each  Project,  but  Licensee  may use,  sell and
otherwise transfer  products,  which have been manufactured at each Project with
the Coal Briquetting Technology, at or to any location.  Licensee shall not have
the right to sublicense the Coal Briquetting  Technology,  except as provided in
Section 17 hereof.

         2.2 Developed  Technology.  Licensee shall have the right and is hereby
granted a non-exclusive  license to use all Developed Technology relating to the
Coal Briquetting  Technology  without payment of any additional  compensation to
Licensor, throughout the Term of this Agreement, subject to the restrictions and
limitations in this Section 2. All Developed  Technology shall become Licensor's
absolute property. Licensee shall at any time during the Term of this Agreement,
at  Licensor's  reasonable  request,  execute any patent  papers  covering  such
Developed  Technology as well as any other  documents that Licensor may consider
necessary or helpful in the prosecution of applications  for a patent thereon or
in connection  with any litigation or  controversy  related  thereto;  provided,
however,  that all expenses  incident to the filing of such applications and the
production  thereof  and the  conduct  of such  litigation  shall  be  borne  by
Licensor.

         2.3 Exclusive Technology.  As long as the Coal Briquetting  Technology,
the  equipment  necessary  for  its  implementation  and  continued  use at each
Project,  and the Proprietary Binder Material are readily available to Licensee,
Licensee  agrees to use the Coal  Briquetting  Technology  for the production at
each Project of solid  synthetic  fuel intended to qualify for tax credits under
Section  29(c)(1)(C)  of the Code.  However,  subject  always  to the  foregoing
sentence, Licensee shall be permitted at any Project to use any other technology
or  equipment  for such  production  in  addition to (or as a  substitute  for a
portion of) the Coal Briquetting Technology,  and in the case of such additional
or partial  substitute use at a Project where Licensee continues to use the Coal
Briquetting  Technology  and the  Proprietary  Binder  Material,  Licensee shall
continue  to pay to  Licensor  the  License  Fee set forth in Section 3 below in
respect of such Project.  Licensee agrees to use the Coal Briquetting Technology
only under authority of this License Agreement with Licensor.  Licensee will not
engage in any action  which could  reasonably  be construed  as  competitive  to
Licensor's  interest in this Agreement.  Licensor agrees that neither it nor any
of its  affiliates  shall  (i)  use  for  development  purposes  independent  of
Licensee,  or  disclose to any third  party,  including  any  existing or future
licensee,  developer,  or joint  venturer,  the name or  location  of any of the
Projects identified on Exhibit A hereto or any other information  concerning the
Projects  learned by Licensor  from  Licensee  without  the  written  consent of
Licensee, or (ii) subsequent to the date hereof,  knowingly license lo any party
the Coal Briquetting  Technology or the Proprietary Binder Material with respect
to any of the Projects listed, from time to time, on Exhibit A hereto.

2.4  Non-licensed  Technology.  Licensor  retains  the  absolute  right to fully
exploit its proprietary  technology and processes,  including but not limited to
the application of such technology  embodied in the Coal Briquetting  Technology
together with any  Improvements  thereto,  to produce,  market and use synthetic
coke extrusions and briquettes from coke breeze, iron revert materials,  and any
other materials to which Licensor's technology can be applied.

                                        4
<PAGE>

2.5  Confidentiality.  Each of the parties  hereby  agree to  maintain  the Coal
Briquetting  Technology  confidential  and not to disclose the Coal  Briquetting
Technology,  or any aspect thereof,  or the Improvements,  or any aspect thereof
(collectively,  the "Confidential Information").  Notwithstanding the foregoing,
information which (i) is or becomes generally available to the public other than
as a result of an  unauthorized  disclosure  by the parties or their  respective
agents, employees, directors or representatives, (ii) was available to the party
receiving  disclosure  on  a  non-confidential  basis  prior  to  its  receiving
disclosure hereunder, or (iii) lawfully becomes available to the party receiving
disclosure on a non-confidential  basis from a third party source (provided that
such  source is not  known by the  party  receiving  disclosure  or its  agents,
employees,  directors or  representatives to be prohibited from transmitting the
information),  shall not be subject  to the terms of this  Section  2.5.  At the
termination  of this  Agreement,  all  copies  of any  Confidential  Information
(including without limitation any reports or memoranda) shall be returned by the
party receiving  disclosure.  Nothing in this Agreement shall prohibit  Licensee
from  disclosing  the  Confidential  Information  to others as may be reasonably
necessary  for  Licensee  to exploit  Licensee's  rights  under this  Agreement;
provided  that the  recipient of any such  Confidential  Information  executes a
Confidentiality  Agreement  restricting  further  disclosure of the Confidential
Information.

         2.6 Know-How and  Assistance.  To enable Licensee to benefit fully from
the  license of the Coal  Briquetting  Technology,  Licensor  shall  provide (i)
reasonable access to technical information,  relevant  documentation,  drawings,
engineering  specifications and other know-how in Licensor's possession relating
to the Coal Briquetting  Technology and the Proprietary  Binder Material,  ~'ii)
reasonable  access to  Licensor's  employees or agents who are familiar with the
Coal  Briquetting  Technology  or the  Proprietary  Binder  Material,  and (iii)
technical  advice  necessary to exploit the Coal  Briquetting  Technology or the
Proprietary  Binder  Material,  in each  case,  as is  reasonably  requested  by
Licensee  and  relevant to the  purposes of this  Agreement,  including  without
limitation,  advice and  assistance in connection  with any  applications  for a
Private  Letter  Ruling with  respect to Section 29 of the Code.  No such access
shall be required to be provided by Licensor to Licensee if such access would be
harmful to Licensor's business, except as may be otherwise required for Licensor
to meet its other obligations under this Agreement.

         Section 3. License Fee.

         3.1 License Fee.  Licensee shall pay the Initial License Fee and Earned
License Fee as a license fee to Licensor in consideration of Licensor granting a
license of the Coal Briquetting Technology hereunder.

         3.2  Initial  License  Fee.   Licensee  shall  pay  *  to  Licensor  in
immediately  available  funds (the  "Initial  License  Fee") within  twenty (20)
business  days  after the later of (a) the  commencement  of  construction  of a
Project, and (b) the obtaining of third-party  construction financing in respect
of such Project. An Initial License Fee is payable in respect of each Project.

                                        5

* Confidential  material omitted and filed separately with the Commission.

<PAGE>

         3.3 Earned License Fee. Licensee shall pay to Licensor quarterly earned
license  fee  payments  ("Earned  License  Fee")  in  an  amount  equal  to * of
Licensee's "Net Cash Flow" for the immediately preceding quarter. No License Fee
shall be payable in respect of a calendar  quarter  during  which  Licensor  was
unwilling to supply Licensee with Proprietary Binder Material in accordance with
this Agreement or was otherwise in breach of this Agreement.

         3.4 Payment  Terms.  Earned  License Fee  payments  shall be due within
twenty (20) business days after the end of each calendar quarter. Payments shall
be made by Licensee to Licensor  and shall be deemed to be: paid upon receipt by
Licensor.  Payments after the due dates above shall accrue  interest at the rate
of one percent per month.

Section 4. Sales of Binder.

         4.1 Sale and Purchase.  Licensor  shall sell to Licensee,  and Licensee
shall  purchase from Licensor,  Licensee's  requirements  of Proprietary  Binder
Material required to operate each Project developed by Licensee.  Licensor shall
deliver the  Proprietary  Binder  Material at such times and in such  amounts as
requested by Licensee.  Payments for Proprietary  Binder  Material  delivered by
Licensor  during any calendar  month shall be due and payable to Licensor on the
tenth  business day of the  immediately  succeeding  month.  Payments  after the
applicable due dates shall accrue interest at the rate of one percent per month.

         4.2  Price.  The price  which  Licensee  shall pay for the  Proprietary
Binder  Material  delivered  by Licensor  during any  calendar  year shall be an
amount equal to (i) Covol's reasonable direct and actual costs (direct material,
labor, and transportation costs) and a percentage of the total overhead costs of
Covol reasonably  reflecting the ratio of the  administrative  costs incurred in
connection with the  manufacture and sale of the Proprietary  Binder Material to
Licensee to Covol's  aggregate  administrative  costs, plus (ii) * of the amount
determined  pursuant to clause (i).  For the  purposes of this  Section  4.2, if
Covol  incurs any capital  expenditures  to  construct a facility at or near any
Project for the purpose of producing and storing its Proprietary Binder Material
to be used specifically at such Project, then such capital expenditures shall be
included in the term "Covol's  reasonable direct and actual costs" in the amount
of 2.5% of such  expenditures  for each of the first 40 months of the  Project's
operations.

         4.3  Representations  and Warranties.  Licensor  represents,  warrants,
covenants and agrees as follows:

              (a)  Licensor   shall  convey  to  Licensee   good  title  to  all
         Proprietary   Binder  Material  purchased  by  Licensee  from  Licensor
         hereunder, free and clear of any and all liens, claims and encumbrances
         of any type whatsoever.

              (b) No  Proprietary  Binder  Material  shall contain any hazardous
         material to an extent or in a manner which would cause its production,

                                        6

* Confidential material omitted and filed separately with the Commission.

<PAGE>

         delivery or storage by Licensor or its intended use by Licensee for the
         purposes of this  Agreement to be in violation of  applicable  laws and
         governmental regulations.

              (c) At Licensee's  option,  Licensor shall replace,  or refund the
         purchase of, all non-conforming Proprietary Binder Material.

              (d)  All  Proprietary   Binder  Material   delivered  to  Licensee
         hereunder shall satisfy the binder  requirements  and effects set forth
         in the  various  IRS Private  Letter  Rulings  and  Revenue  Procedures
         issued,  from time to time,  with  respect  to  Licensor's  Proprietary
         Binder Material in respect of Section 29 of the Code.

         4.4 Order  Procedure.  Licensee  shad deliver all  purchase  orders for
Proprietary  Binder  Materials at least thirty (30) days in advance of the first
day of the  month in which  delivery  of such  Proprietary  Binder  Material  is
required under such purchase  order,  and all such purchase  orders  received by
Licensor  during the term of this Agreement shad be deemed to have been accepted
by Licensor. (For example,  Licensee shall deliver a purchase order for December
delivery  by no later  than  November  1st).  Each such  purchase  order shad be
delivered  either (i) in writing,  or (ii) orally by telephone by an  authorized
agent of  Licensee  (subject to the  condition  that it is followed by a written
purchase order within 24 hours).  Such purchase  orders shad be sent to Licensor
at such address as Licensor shall direct.

         4.5 Delivery and Acceptance.  All Proprietary Binder Material purchased
hereunder  shall be  delivered  F.O.B.  the Project.  Licensor  shad arrange for
transportation  of the Proprietary  Binder  Material to the designated  Project.
Licensee  shall  bear the  expense  of  unloading  the  trucks.  The  weight  of
Proprietary Binder Material in each delivery shall be determined by a comparison
of the weight, on Licensee's  scales, of the delivery truck immediately prior to
unloading and its weight, on Licensee's scales, immediately following unloading,
as reflected in  customary  weighing  certificates.  At  Licensor's  request and
expense from: time to time,  Licensor shall have the right to inspect Licensee's
scales for  accuracy.  Licensee  shall have a reasonable  opportunity  to sample
Proprietary  Binder  Material  delivered  to it  hereunder  to confirm that such
Proprietary  Binder Material conforms to the teems and requirements  hereof, and
Licensee shall not be deemed or required to accept any such  Proprietary  Binder
Material prior to the completion of such sampling.

         4.6 Binder  Technology  License.  If Licensor's  ability to deliver the
Proprietary  Binder Material to Licensee (in the amounts required by Licensee or
otherwise in accordance with the terms of this  Agreement),  will be interrupted
or terminated for any reason, Licensor shall give not less than ninety (90) days
prior notice to Licensee.  Subject to giving  notice of its inability to deliver
the Proprietary  Binder Material to Licensee (or, in the absence of such notice,
the actual  failure to deliver  the  Proprietary  Binder  Material  for at least
twenty days after Licensee gives written  notice of  non-delivery  to Licensor),
Licensor  hereby grants to Licensee a nonexclusive  license for the term of this
Agreement (or such shorter period as provided in the proviso  hereto) to use the
technology used to manufacture the

                                        7
<PAGE>

Proprietary  Binder Material to manufacture  the Proprietary  Binder Material in
sufficient  quantities  to operate  each Project up to full  capacity,  and such
technology  shall be deemed "Coal  Briquetting  Technology"  for the purposes of
this Agreement;  provided,  however,  that the license granted to Licensee under
this Section 4.6 shall cease (subject to reinstatement  upon the reoccurrence of
the events  contemplated  above) and sales of Proprietary  Binder Material under
the terms of this  Agreement  shall be  reinstated,  in each case, on a date not
less than ninety (90) days after  Licensor  gives notice to  Licensee,  together
with  evidence  reasonably  satisfactory  to Licensee  that  Licensor is able to
deliver the Proprietary  Binder  Material in accordance with this Agreement.  No
additional  fee or royalty shall be payable to Licensor in  connection  with the
license  granted  pursuant to this Section 4.6 and Licensee shall be responsible
for its own direct out-of-pocket operating costs incurred in connection with the
production of Proprietary  Binder  Material  pursuant to this Section.  Licensor
represents and warrants that,  simultaneously with the execution and delivery of
this  Agreement,  Licensor has delivered to a safety  deposit box designated and
owned by Licensee a written copy of the formula used by Licensor to  manufacture
the Proprietary Binder Material in sufficient quantities to operate each Project
to full  capacity,  and an officer of Licensor shall deliver to Licensee a sworn
affidavit  stating  that such  delivery  by  Licensor  has been  made.  Licensor
covenants to notify Licensee of any  improvements,  variations or  modifications
made on or to the formula used by Licensor to manufacture the Proprietary Binder
Material promptly after such improvements,  variations or modifications are made
by  Licensor  and to  provide a copy of any such  improved,  varied or  modified
formula for placement in the safety deposit box. Licensee  covenants to hold the
formula  delivered  to it by  Licensor  pursuant  to the  immediately  preceding
sentence as  confidential  and not to utilize the formula  except in  accordance
with the license granted to Licensee  pursuant to this Section 4.6. In addition,
in the event  Licensee  uses the license  granted  pursuant to this Section 4.6,
Licensor hereby  covenants to lease to Licensee for no additional fee or royalty
any binder manufacturing facility of Licensor adjacent to such Project.

         4.7 Certification.  At Licensee's request and at Licensee's  reasonable
expense,  Licensor  shall conduct  periodic field audits of each Project and its
operations,  and (a) shall  certify  in  writing,  from  time to time,  that the
Proprietary Binder Material delivered to Licensee hereunder satisfies the binder
requirements and effects set forth in the various IRS Private Letter Rulings and
Revenue  Procedures  issued,  from  time to time,  with  respect  to  Licensor's
Proprietary  Binder Material in respect of Section 29 of the Code, and (b) shall
cause  periodic  testing of the  production  from each  Project  by a  reputable
independent  third  party to  determine  the  occurrence  of a  chemical  change
satisfying  the  chemical  change and other  conditions  of IRS  Private  Letter
Rulings No. 9549025 and No. 9701041 dated September 8, 1995 and October 4, 1996,
respectively,  in order to constitute "qualified fuels" pursuant to the terms of
Section  29(c)(1)(C) of the Code. Such binder  certification shall be based upon
independent, random sample testing conducted at the time of binder production.

         Section 5.  Records:  Inspection:  Confidentiality..  Each party hereto
shall keep accurate  records  containing  all data  reasonably  required for the
computation and verification of the amounts to be paid by the respective parties
under  this  Agreement,  and shall  permit  each other  party or an  independent
accounting  firm  designated  by such other party to inspect  and/or  audit

                                       8
<PAGE>

such records during normal  business hours upon reasonable  advance notice.  All
costs and expenses  incurred by a party in connection with such inspection shall
be borne by it. Each party agrees to hold  confidential  from all third  parties
all information  contained in records examined by or on behalf of it pursuant to
this Section 5.

         Section 6.  Infringement.  If during the term of this Agreement a third
party has infringed any  intellectual  property rights  associated with the Coal
Briquetting  Technology  or  otherwise   misappropriated  any  Coal  Briquetting
Technology,  Licensor  may, at Licensor's  expense,  institute and conduct legal
actions  against  such third  party or enter into such  agreements  or accord in
settlement as are deemed  appropriate by Licensor,  in which case Licensor shall
be entitled to any sums recovered from third parties.  If Licensor does not take
any action,  Licensee  shall have the right to take action as a plaintiff in the
prosecution  of  any  infringement  or  misappropriation  action  affecting  any
Project,  and Licensee  shall be entitled to any sums  recovered  from the third
party.  If Licensee and  Licensor  have jointly  conducted  an  infringement  or
misappropriation  action,  after  each party has been  reimbursed  for costs and
expenses  incurred by it in prosecuting the action,  any sums recovered from the
third  party  shall  be  distributed  to  Licensee  and  Licensor  based  on the
proportionate amount of damages suffered by Licensee and Licensor as a result of
the actions by the third party from whom damages were recovered.  Licensee shall
always  have the right to be  represented  at its  expense by counsel of its own
selection in any action.  In no event shall Licensor enter into any agreement or
settlement inconsistent with the terms of this Agreement.

Section 7. Representations and Warranties.

         7.1  Authority.  Each of Licensee and Licensor  represents and warrants
that (i) the  execution,  delivery and  performance  of this  Agreements and the
consummation of the transactions  contemplated  hereby have been duly authorized
on its behalf by all requisite action,  corporate or otherwise,  (ii) it has the
full right,  power and  authority to enter into this  Agreement and to carry out
the terms of this  Agreement,  (iii) it has duly  executed  and  delivered  this
Agreement,  and (iv) this  Agreement  is a valid and  binding  obligation  of it
enforceable in accordance with its terms.

         7.2 No Consent.  Each of Licensee and Licensor  represents and warrants
that no approval,  consent,  authorization order,  designation or declaration of
any court or regulatory  authority or  governmental  body or any  third-party is
required to be obtained by it, nor is any filing or registration  required to be
made therewith by it for the consummation by it of the transactions contemplated
under this Agreement.

         7.3 Intellectual Property Matters. Licensor warrants and covenants that
it (i)  owns,  free  and  clear  of all  liens  and  encumbrances,  intellectual
property,  patents  (including  but not limited to United States Patent  Numbers
5,487,764  and  5,453,103)  and  applications  therefor,  printed and  unprinted
technical  data,  know-how,  trade secrets,  copyrights  and other  intellectual
property  rights and all other  scientific or technical  information in whatever
form  relating  to,  embodied in or used in the  proprietary  process to produce
synthetic coal fuel  extrusions,  pellets and  briquettes  from waste coal dust,
coal fines and other  similar  coal  derivatives,  and, the right to freely use,
sell and exploit  Proprietary  Binder Material used in  manufacturing  synthetic
coal fuel  extrusions,  pellets and briquettes  from waste coal dust, coal fines
and other

                                       9
<PAGE>

similar coal derivatives,  (ii) has the right and power to grant to Licensee the
licenses granted herein, (iii) has not made and will not make any agreement with
another in conflict with the rights  granted  herein,  and (iv) has no knowledge
that the sale or use of the rights,  Proprietary Binder Material and/or licenses
granted  herein  as   contemplated   by  this   Agreement   would  infringe  any
third-party's  intellectual  property  rights.  Licensor  agrees  that  it  is a
"licenser" Section 365(n) of the United States Bankruptcy Code.

         7.4 Indemnification. Licensor shall indemnify, defend and hold harmless
Licensee  and  its  partners,  directors,  officers,  agents,   representatives,
subsidiaries  and  affiliates  from and against  any and all claims,  demands or
suits (by any party,  including any governmental entity),  losses,  liabilities,
damages,  obligations,  payments,  costs and expenses  (including  the costs and
expenses of  defending  any and all  actions,  suits,  proceedings,  demands and
assessments  which shall  include  reasonable  attorneys'  fees and court costs)
resulting from,  relating to, arising out of, or incurred in connection with any
breach by Licensor of any of the  representations,  warranties  and/or covenants
contained in this Agreement.

         Section  8.  Term.  The Term of this  Agreement  is (a) for the  period
commencing  on the  effective  date of this  Agreement and ending on 31 December
2015 or (b) for the full life of the last U.S.  Patents to expire which disclose
and claim  Covol's  proprietary  Coal  Briquetting  Technology,  defined  above,
whichever  date is earlier.  Any extension of this Agreement must be in writing,
signed by both parties.

         Section  9.  Termination.  This  Agreement  shall  terminate  upon  the
termination  date set forth in Section 8,  unless the  Agreement  is  terminated
sooner pursuant to this Section 9.

         9.1  Termination  for Cause.  Either party may terminate this Agreement
for cause  (i.e.,  in the event either  party  commits a material  breach of any
provision  of this  Agreement)  at any time by giving  the other  party at least
sixty (60) days prior written notice of such termination  unless such default or
breach is cured  within said sixty (60) days.  If either party  terminates  this
Agreement  pursuant to this Section 9, Licensee shall promptly  return and cause
all  agents  of  Licensee  to  promptly  return  to  Licensor  all  Confidential
Information and all Coal Briquetting  Technology then in Licensee's  possession,
and Licensee shall not thereafter use for its own commercial benefit or disclose
to any third person any Confidential  Information or Coal Briquetting Technology
during the period ending three (3) years from the date of such termination.

         9.2 Automatic Termination. This Agreement shall automatically terminate
if:

         (a)  Licensee  becomes  insolvent or is unable to pay its debts as they
fall due, seeks protection  voluntarily or involuntarily  under any law relating
to   bankruptcy,   receivership,   insolvency,   administration,    liquidation,
dissolution or similar law of any jurisdiction (other than for the purposes of a
reorganization  with a view to continuing  the business as a going concern under
relevant bankruptcy or insolvency proceedings) or enters into a

                                       10
<PAGE>

general  assignment or arrangement  or a composition  with or for the benefit of
its creditors; or

         (b) Licensee takes any step  (including the filing or presentation of a
petition, the convening of a meeting or the filing of an application or consent)
in  any  jurisdiction   for,  or  with  a  view  to,  the:   appointment  of  an
administrator,  liquidator,  receiver,  trustee,  custodian or similar  official
(other than for the purposes of a  reorganization  with a view to continuing the
business as a going concern under relevant bankruptcy or insolvency proceedings)
for  Licensee  and/or  the  whole  or any  part  of the  business,  undertaking,
property, assets, receiver or uncalled capital of Licensee or any such person is
appointed; or

         (c)  Licensee  ceases to carter on its  business  relating  to the Coal
Briquetting Technology.

         9.3 Effect of  Termination.  Upon  termination of this  Agreement,  all
rights granted and obligations to the parties shall immediately  cease;  however
termination shall not relieve either party of its obligations accrued during the
Term of this Agreement  (including any  pre-termination  obligation Licensee may
have to pay Licensor)  which has not been  fulfilled,  and all  representations,
warranties, and confidentiality agreements made herein shall survive termination
of this Agreement.

         Section 10. Set-Off. If at any time any compensation under Section 5 of
Restated  Exclusive  Financial  Advisor  Agreement  made as of December 13, 1996
between  Licensor and Coalco  Corporation  ("Coalco"),  an affiliate of Licensee
(the "Restated Agreement") or under any provision of First Amendment to Restated
Exclusive  Financial  Advisor  Agreement  made as of even date herewith  between
Licensor  and Coalco  (the  "Amendment")  is due and  payable by Licensor or any
affiliate  thereof  to  Coalco  or any  affiliate  thereof,  Licensee  shall  be
entitled,  upon giving Licensor seven (7) business days' notice thereof,  to set
off such amount (the "Set Off  Amount")  against any and all  payments due under
this  Agreement.  If Licensee  exercises such right of set off, then the Set Off
Amount shall be applied, until exhausted, first against any and all payments due
to Licensor by Coalco under the  Amendment,  and then once no such  payments are
then due, against any and all payments due to Licensor under this Agreement.  If
at any time any amounts under the  Amendment or any provision of this  Agreement
are due and  payable  by Coalco  or  Licensee  to  Licensor,  Licensor  shall be
entitled,  upon giving  Coalco and  Licensee  seven (7)  business  days'  notice
thereof) to set off such amount against any and all compensation payments due to
Coalco under any provision of the Restated Agreement or the Amendment.

         Section 11. Waiver. The failure of any party to enforce at any time any
provision of this Agreement shall not be construed as a waiver of such provision
or the right  thereafter to enforce each and every  provision.  No waiver by any
party, either express or implied, of any breach of any of the provisions of this
Agreement  shall be  construed  as a waiver of any other  breach of such term or
condition.

         Section 12.  Severability.  If any provision of this Agreement shall be
held by a court of competent  jurisdiction to be invalid or unenforceable in any
respect for any reason, the validity

                                       11
<PAGE>

and  enforceability  of any  such  provision  in any  other  respect  and of the
remaining provisions of this Agreement shall not be in any way impaired.

         Section  13.  Notices.  All  notices  required  or  authorized  by this
Agreement  shall  be  given  to the  parties  hereto  at the  addresses,  and in
accordance  with  the  procedures,  set  forth  in  Section  11 of the  Restated
Financial  Advisor  Agreement made as of December 13, 1996 between  Licensor and
Coalco  Corporation  an affiliate of Licensee as if Licensee,  instead of Coalco
Corporation was referenced in such provision.

         Section 14. Remedies Cumulative. Remedies provided under this Agreement
shall be  cumulative  and in  addition to other  remedies  provided by law or in
equity.

         Section 15. Entire  Agreement.  This Agreement  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.   This  Agreement   supersedes  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.

         Section  16.  Governing  Law.  This  Agreement  shall  be  governed  in
accordance with the laws of the State of Utah, exclusive of its conflict of laws
rules.

         Section 17. Assignment. This Agreement may not be assigned, in whole or
in part,  by any party  without the written  consent of the other  party,  which
consent may be withheld by any party for any reason or for no reason in its sole
discretion  except that (i) each party shall have the right to assign its rights
and obligations under this Agreement to any entity which is controlled by, or is
in common  control  with,  such party or in which such party  owns,  directly or
indirectly,  at  least  fifty  percent  (50%) of each  class of its  outstanding
securities,  provided that no such assignment  shall release the assigning party
from its obligations hereunder, and (ii) Licensee shall have the right to assign
its rights and  obligations to Licensor in connection  with any sale by Licensee
to Licensor of substantially  all of the assets of any Project.  Notwithstanding
the foregoing exceptions set forth in clause (i) and (ii) above,  Licensee shall
not be  entitled  to assign any of its rights or  obligations  hereunder  to any
entity in which Cotton Energy,  L.L.C. or an affiliate thereof has any ownership
interest.

         Executed by the duly  authorized  representative  of the parties on the
date and year firs above written.

         COVOL TECHNOLOGIES, INC.                   PELLETCO CORPORATION

         By: /s/ Brent M. Cook                      By: /s/ Gordon L. Deane
            -------------------                        ---------------------
         Name: Brent M. Cook                        Name: Gordon L. Deane
         Title: President                           Title: President


                                       12
<PAGE>

                                      EXHIBIT A

         PROJECTS                                     PROJECTED CAPACITY

1.       Homer City (OPT Energy),                     360,000 tons per year
         Line 1 - Homer City, PA

2.       Homer City (GPU Energy),                     360,000 tons per year
         Line 2 - Homer City, PA

3.       Keystone Coal Mining                         360,000 tons per year
         (Rochester & Pittsburgh Coal Company)
         - Elderton, PA

4.       Eighty-Four Mining (Rochester &              360,000 tons per year
         Pittsburgh Coal Company)
         - Eighty-Four, PA

5.       Buckeye Industrial Mining -                  360,000 tons per year
         Kensington Prep Plant -
         Columbia County, Lisbon, OH

6.       Site Location to be designated               360,000 tons per year
         by Licensee at a later date

                                       13