CoBon Energy, L.L.C.
1145 E. South Union Ave.
Midvale, UT 84047

December 31, 1996

                                                Via Telecopy      (801) 768-4483
                                                                  (801) 766-1979

Covol Technologies, Inc.
Attn: Brent M. Cook
3280 No. Frontage Rd.
Lehi, Utah  84043

         Re: Modification to Project Development Agreement and License Agreement

Dear Brent:

         This  letter  confirms  our  discussions  and further  agreements  this
morning  regarding  Covol's  licensure  of Coal  Technology  to Pace  Carbon  as
described in our December 30, 1996 Project Development  Agreement  ("Agreement")
and shall constitute a further amendment to the parties' License Agreement. Pace
has proposed a licensing arrangement to Covol that involves CoBon's right to the
development of the Pace projects,  a copy of which is attached hereto as Exhibit
"A".

         CoBon has agreed and will agree to accept in lieu of the payment of the
Sub-License, Royalty and Tax Credit fees described in the Agreement as follows:

         License Royalty Fees (see Section 4.2 of License  Agreement) to be paid
to Covol by CoBon for  purposes of the Pace  projects  only shall be modified as
follows:  Covol agrees to grant the License for the first 500,000 tons of annual
production  capacity  for  CoBon  developed  facility(ies)  free of any  License
Royalty Fee  payment.  CoBon  shall  nevertheless  pay Covol a one time  License
Royalty Fee of * in U.S. dollars per ton for all annual  production  capacity in
the range of 500,001 to 1,500,000  tons. In other words,  CoBon shall retain the
entire * per ton  license  fee  proposed  and to be paid by Pace to Covol to the
extent the Pace  projects  are  determined  by CoBon to fall  within the initial
500,000 ton  development  block and shall  retain * of the * per ton license fee
proposed  and to be paid by Pace to Covol to the  extent the Pace  projects  are
determined  by CoBon to fall within the  500,001 to  1,500,000  ton  development
block.

         In  addition,  with regard to the Pace  projects,  CoBon shall accept a
royalty fee of * multiplied  by the total MMBtu  content of the  extrusions  and
briquettes  produced and sold by that project that  qualifies for Section 29 tax
credits  under the  agreement  between  Covol and Pace which is  expected  to be
executed later today.

* Confidential  material has been omitted from this Exhibit and filed separately
with the Commission.

<PAGE>

         For purposes hereof,  CoBon shall treat the Pace developed capacity (i)
as within the first  block of the License  Agreement  if CoBon  develops  and/or
licenses  no other  facilities;  (ii) as within the second  block of the License
Agreement if CoBon develops and/or licenses facilities in a capacity range up to
500,000  tons;  and (iii) as within the third block of the License  Agreement if
CoBon develops and/or licenses facilities in a capacity range up to 1,000,000.
The other terms of the Agreement shall still apply.

         All payments of the aforesaid  consideration  shall come from the first
500,000 of  production  capacity  available  from the Pace projects and shall be
paid  directly  to CoBon by Pace and shall not be subject to any claims or liens
of Covol or its existing or future creditors. Covol shall execute such documents
and make such legal  arrangements as may be necessary to effectuate the parties'
intent to insure CoBon's right to payment shall not be subject to such claims or
liens and that the same shall be free and clear thereof. Payments to CoBon shall
be  timely  made as  required  under the  Covol/Pace  agreement  to be  executed
hereafter and as referenced in Exhibit "A".

         CoBon shall waive any right it may have to the  aforesaid  Sub-License,
Royalty  and Tax  Credit  Fees  under the  Agreement  in lieu of  receiving  the
consideration referenced herein.

         Please acknowledge your receipt and agreement to the foregoing terms in
the space provided below and return a signed copy to me immediately.

                                             Cordially,

                                             /s/ Steven Nash
                                             -------------------
                                             Steven Nash



Acknowledgement and Consent

/s/ Brent Cook
-----------------------------
Brent M. Cook, President
CoVol Technologies, Inc.

Dated