PROJECT DEVELOPMENT AGREEMENT

         THIS  AGREEMENT  is made and  entered  into this 30th day of  December,
1996, by and between Covol  Technologies,  Inc., a Delaware  corporation,  whose
address is 3180 No.  Frontage  Road,  Lehi,  Utah  84043,  ("Covol"),  and CoBon
Energy,  L.L.C., a Utah limited  liability  company,  whose address is 1145 East
South Union Avenue,  Midvale, Utah 84047,  hereinafter referred to as ("CoBon").
Covol and CoBon are sometimes referred to herein as the "Parties."

         WITNESSETH:

         Whereas,   Covol  and  CoBon  are  parties  to  that  certain  "License
Agreement" dated September 10, 1996, in which Covol agreed to grant to CoBon the
rights to develop up to 1.5 million  tons of annual  production  capacity  using
Covol's  patented  Coal  Technology,  a copy of which is attached as Exhibit "A"
hereto and incorporated by reference, and

         Whereas,  pursuant to the License  Agreement,  CoBon has identified and
developed  a business  relationship  and  specified  projects  with and has been
negotiating  with  Pace  Carbon  Fuels,   L.L.C.,  its  affiliates  and  assigns
(collectively  "Pace")  regarding the final  aspects of a sub-license  agreement
respecting Pace's development and operation of coal  manufacturing,  briquetting
or extruding  facilities and related product marketing  operations that will use
Covol's  patented Coal  Technology  and CoBon believes it is prepared to and can
finalize a  sub-license  agreement  with regard  thereto (the "Pace  Agreement,"
attached as Exhibit "B"), and

         Whereas it is the intent of the Parties, in consideration  hereof, that
CoBon will discontinue further  negotiations  regarding the Pace Agreement draft
and  CoBon and Pace will  cancel  the Pace  Agreement  and  supersede  it with a
separate agreement between Covol and Pace, incorporating the terms hereof, and

         Whereas,  the Parties wish to "carve out" the Pace  Agreement  from the
License Agreement,  whereby CoBon will relinquish the exclusive rights it had to
develop the Pace projects,  provided,  however,  that CoBon shall be entitled to
receive  the full value of the Pace  Agreement  with  respect  to the  Qualified
Tonnage hereinafter  defined,  including without limitation,  the fulfillment of
all Sub-License,  Royalty and Tax Credit payment terms to have been performed by
Pace, as provided herein.

         Now, therefore, in consideration of the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the sufficiency
and  receipt of which are  hereby  acknowledge,  the  Parties,  intending  to be
legally bound, hereby amend the License Agreement as follows:

                                     Page 1

* Confidential  material has been omitted from this exhibit and filed separately
with the Securities and Exchange Commission (the "Commission").

<PAGE>

         TERMS:

         1. The amount of  production  capacity  developed by Pace using Covol's
patented  Coal  Technology  with  respect  to which  CoBon will be  entitled  to
compensation  (the  "Qualifying  Tonnage")  shall be equal to the  lesser of (a)
500,000 tons, or (b) 1.5 million tons less the annual aggregate capacity ("Total
Permitted  Production") of all other projects  developed by CoBon excluding Pace
("Other Projects").

         For  example,  if CoBon  develops an annual  aggregate  capacity of 1.1
million tons of qualifying fuel with Other  Projects,  CoBon will be entitled to
compensation for the first 400,000 tons of qualifying fuel produced each year by
Pace.  If CoBon  develops an annual  aggregate  capacity of 1.5 million  tons of
qualifying fuel with Other  Projects,  CoBon will be entitled to no compensation
for any qualifying  fuel produced each year by Pace. If CoBon develops an annual
aggregate  capacity of less than 1.0 million tons of qualifying  fuel with Other
Projects,  CoBon will be entitled to compensation  for the first 500,000 tons of
qualifying fuel produced each year by Pace.

         2. With respect to the Qualifying Tonnage, Covol understands that CoBon
will be paid directly by Pace according to the terms of the Pace Agreement,  the
material fee and payment terms of which are set forth in Exhibit "C" hereto,  or
pursuant  to an  escrow  arrangement  to be  arranged  between  Pace  and  CoBon
hereafter.

         For example,  if the Pace  Agreement  calls for Pace to pay directly to
CoBon  Royalty Fee  payments of * per ton and Tax Credit Fee payments * per * of
all Section 29 tax credits  accruing to Pace per ton of qualifying fuel produced
by Pace, CoBon shall receive * per ton and * per * of all Section 29 tax credits
generated  per ton of  qualifying  fuel  produced  each year by Pace,  up to the
amount  of the  Qualifying  Tonnage,  for the  duration  of the  Pace  Agreement
including  the Tax Credit  term stated in the Pace  Agreement.  In no event will
CoBon  receive  compensation  relating  to the Pace  projects  for more than the
Qualifying Tonnage, nor will CoBon receive more compensation per ton than called
for in the Pace Agreement.

         3. The production capacity developed by Pace will not apply against the
1.5 million tons of annual  aggregate  capacity to which CoBon is entitled under
Paragraph  3.1 of the  License  Agreement.  However,  to the  extent  Qualifying
Tonnage is claimed by CoBon,  the  Qualifying  Tonnage  will be  included in the
calculation  of the  License  Royalty  Fee under  Paragraph  4.2 of the  License
Agreement.  The Pace  project will no longer be  considered a CoBon  project for
this or any other  agreement.  Nothing in this  Agreement  will be  construed to
expand or diminish  the annual  aggregate  capacity of 1.5 million tons to which
CoBon is entitled under the License Agreement.

         4. For purposes of calculating the Qualifying Tonnage in Paragraph 1 of
this  Agreement,  CoBon shall  project,  within  ninety (90) days  following the
"Placed in Service"  date for each facility  from CoBon's  Other  Projects,  the
annual  production  capacity  of such  facility.  The  quantity  projected  will
conclusively and permanently establish the annual production limit of such plant
and will  become  part of the  Total  Permitted  Production  which  will then be
subtracted from the 1.5 million tons of

                                     Page 2

* Confidential  material has been omitted from this Exhibit and filed separately
with the Securities and Exchange Commission (the "Commission").

<PAGE>

aggregated capacity to calculate the Qualifying Tonnage in Paragraph 1.

         5. The Parties  understand  that it is in their best interest to market
all Section 29 related  projects in an orderly and  controlled  manner.  To that
end, the Parties agree that CoBon will coordinate with Covol with respect to the
submission of any Section 29 private  letter  ruling  requests.  Nothing  herein
shall be construed,  however, to limit CoBon or its sublicensees from processing
any Section 29 private letter ruling applications.

         6. Covol  acknowledges and agrees that  nonperformance or breach by any
of CoBon's sub-licensees or assignees of any applicable provision of the License
Agreement,  which is not cured within  thirty (30) days  following  receipt of a
Notice of Default and results in the sub-licensee's loss of its right to use the
Coal  Technology,  shall not be grounds to  terminate  or  restrict  the License
Agreement  as it pertains to any other  sub-licensee  of CoBon.  Nothing  herein
shall be construed as modifying paragraph 6.3 of the License Agreement.

         7. To effectuate the Parties' intent  regarding the payment to CoBon of
the  compensation  referenced  in the  Pace  Agreement  (including  Exhibit  "C"
excerpts) and based on the Qualifying Tonnage, the Parties agree as follows:

         (a)  Sub-License  fees  shall  be paid to CoBon at the time and as such
payments are due under the Pace  Agreement.  CoBon will  acknowledge  receipt of
such payments,  in writing,  to Covol.  CoBon will make any applicable  payments
therefrom to Covol as required by Article 4 of the License Agreement.

         (b)  Royalty and Tax Credit Fees shall be paid to CoBon at the time and
as such payments are due under the Pace Agreement.  To the extent that the Other
Projects'  production  schedules  do not permit  calculation  of the  Qualifying
Tonnage at the time the Pace  Agreement  payments  are due,  the Royalty and Tax
Credit  Fees  shall be paid into an  escrow  account  in the name of CoBon.  The
escrow funds shall be disbursed to CoBon, or alternatively to Covol, upon and in
accordance  with CoBon's  furnishing  the escrow agent,  to be designated by the
Parties,  with CoBon's  projection  under  Paragraph 4 of the annual  production
capacity of the Other Projects.

         8. All other  provisions of the License  Agreement  will remain in full
force and effect as if repeated herein.

         9.  Notwithstanding  CoBon's desire and the Parties'  expectation  that
Pace will make payments directly to CoBon of the compensation  referenced herein
based upon the Qualifying  Tonnage,  Covol  promises,  immediately  upon receipt
thereof,  to make all such payments to CoBon, in accord with the Pace Agreement,
in the event Pace pays such  compensation  to Covol. To the extent CoBon obtains
Pace's acknowledgement and agreement to make the foregoing compensation payments
directly to CoBon, the foregoing guarantee shall be of no effect.

         10. In consideration hereof, CoBon relinquishes the exclusive rights it
had to select and develop the Pace projects,  and relinquishes any present, past
or  future  rights it may have for any  compensation  with  respect  to the Pace
projects, except as expressly provided in this Agreement,

                                     Page 3
<PAGE>

including its attachments.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer and the Agreement shall be effective as of
the date first above written.

COBON ENERGY, L.L.C.                                 COVOL TECHNOLOGIES, INC.


By: /s/ Steven Nash                                  By: /s/ Brent M. Cook
  ---------------------                                -----------------------
Its: President                                       Its: President
Date: 12/30/96                                       Date: 30 December, 1996


                                 Acknowledgement

         Pace Carbon Fuels,  L.L.C.  ("Pace") hereby acknowledges that the draft
Pace  Agreement   attached  as  Exhibit  "C"  and  incorporated   herein  (i.e.,
Sub-License  Agreement),  including its payment terms (as excerpted in pertinent
part in Exhibit "C"), is true,  correct and  accurately  reflects the status and
nature of the  discussions  and agreements to date between Pace and CoBon.  Pace
further  acknowledges its understanding of the foregoing terms regarding CoBon's
exclusive  right to Sublicense the Coal  Technology  regarding the Pace projects
and CoBon's  willingness to assign and relinquish such right in consideration of
the terms of this Project Development Agreement and License Addendum,  including
Pace's  obligation to pay compensation  provided for in the Pace Agreement based
upon the Qualifying Tonnage directly to CoBon.

         Dated this ____ day of December, 1996.

                                           Pace Carbon Fuels, L.L.C.


                                           By:_________________________________

                                           Its:_________________________________

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