Document:

UTAH #2

                            ASSET PURCHASE AGREEMENT

                                 by and between

                                       **

                                       and

                            COVOL TECHNOLOGIES, INC.

                             CARBON SYNFUEL, L.L.C.

                            SYNFUEL INVESTMENTS, INC.

                                December 23, 1999

** This Exhibit contains  confidential  material which has been omitted pursuant
to a Confidential  Treatment  Request.  The omitted  information  has been filed
separately with the Securities and Exchange Commission.

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                               TABLE OF CONTENTS

                                                                            Page

ARTICLE I DEFINITIONS.........................................................1
         1.1. Affiliate.......................................................1
         1.2. Agreement.......................................................1
         1.3. As-Built Drawing................................................1
         1.4. Assets..........................................................1
         1.5. Assignment Agreement............................................1
         1.6. Bill of Sale....................................................2
         1.7. Books and Records...............................................2
         1.8. Buyer's Closing Certificate.....................................2
         1.9. Closing.........................................................2
         1.10. Closing Date...................................................2
         1.11. Code...........................................................2
         1.12. Confidentiality Agreement......................................2
         1.13. Contracts......................................................2
         1.14. Covol Process..................................................2
         1.15. Effective Time.................................................2
         1.16. Excluded Assets................................................2
         1.17. Facility.......................................................2
         1.18. Facility Site..................................................2
         1.19. Fixed Assets...................................................3
         1.20. GAAP...........................................................3
         1.21. Improvements...................................................3
         1.22. IRS............................................................3
         1.23. Knowledge of Buyer.............................................3
         1.24. Knowledge of Seller............................................3
         1.25. Law............................................................3
         1.26. Lease..........................................................3
         1.27. License and Binder Purchase Agreement..........................3
         1.28. Lien...........................................................3
         1.29. Loss...........................................................4
         1.30. Material Adverse Effect........................................4
         1.31. Opinion of Sellers' Counsel....................................4
         1.32. Permitted Liens................................................4
         1.33. Plans and Specifications.......................................4
         1.34. Product........................................................4
         1.35. Purchase Consideration.........................................4
         1.36. Required Consents..............................................4
         1.37. Section 29 Product.............................................4
         1.38. Sellers' Closing Certificate...................................4
         1.39. Sublease and License...........................................4
         1.40. Transaction Documents..........................................4

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ARTICLE II PURCHASE AND SALE..................................................5
         2.1. Purchase and Sale...............................................5
         2.2. Payment of the Purchase Consideration...........................5
         2.3. Deliveries at Closing...........................................5
         2.4. Allocation of Purchase Price....................................5
         2.5. No Assumption of Liabilities....................................6
         2.6. Sales Tax Exemption.............................................6

ARTICLE III REPRESENTATION AND WARRANTIES OF SELLERS..........................6
         3.1. Corporate Standing..............................................6
         3.2. Authorizations; Binding Agreements..............................6
         3.3. No Actions Affecting Enforcement of the Agreement and
                the other Transaction Documents...............................7
         3.4. Taxes...........................................................7
         3.5. Brokers or Finders Fees.........................................7
         3.6. No Imposition of Liens..........................................8
         3.7. Title to Assets.................................................8
         3.8. Condition of Assets.............................................8
         3.9. Pending Litigation..............................................8
         3.10. Compliance With Laws...........................................8
         3.11. Status of Contracts............................................8
         3.12. Consents.......................................................9
         3.13. Books and Records..............................................9
         3.14. Environmental Conditions.......................................9
         3.15. Liabilities...................................................10
         3.16. Agreements with Related Persons...............................10
         3.17. Adequacy of the Purchased Assets..............................10
         3.18. Production Capacity...........................................11
         3.19. Section 29 Issues.............................................11

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER...........................11
         4.1. Organization and Standing......................................11
         4.2. Authorizations; Binding Agreements.............................11
         4.3. Brokers or Finders Fees........................................12
         4.4. No Action Affecting Enforcement of the Agreement and the
                other Transaction Documents..................................12

ARTICLE V CERTAIN UNDERSTANDINGS AND AGREEMENTS..............................12
         5.1. Best Efforts...................................................12
         5.2. Public Announcements...........................................12
         5.3. Confidentiality................................................12
         5.4. Taxes..........................................................13
         5.5. Private Letter Ruling Repurchase Option........................13
         5.6. Solvency Representations and Covenants.........................13
         5.7. Sublease and License...........................................14

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ARTICLE VI CONDITIONS PRECEDENT TO THE PAYMENT OBLIGATIONS OF BUYER..........14
         6.1. Compliance with Agreement......................................14
         6.2. Proceedings and Instruments Satisfactory.......................14
         6.3. No Litigation..................................................14
         6.4. Representations and Warranties.................................14
         6.5. Consents.......................................................15
         6.6. Tax Opinion....................................................15

ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS...............15
         7.1. Compliance with Agreement......................................15
         7.2. Proceedings and Instruments Satisfactory.......................15
         7.3. No Litigation..................................................15
         7.4. Representations and Warranties.................................15
         7.5. Required Consents..............................................16

ARTICLE VIII INDEMNITIES AND ADDITIONAL COVENANTS............................16
         8.1. Sellers' Indemnity.............................................16
         8.2. Buyer's Indemnity..............................................17
         8.3. Bulk Sales Compliance..........................................18
         8.4. Additional Instruments.........................................18
         8.5. Access to Books, Records and Employees.........................19

ARTICLE IX TERMINATION.......................................................19
         9.1. Termination....................................................19
         9.2. Rights on Termination; Waiver..................................19

ARTICLE X MISCELLANEOUS......................................................20
         10.1. Entire Agreement; Amendment...................................20
         10.2. Expenses......................................................20
         10.3. Governing Law; Consent to Jurisdiction........................20
         10.4. Assignment....................................................21
         10.5. Notices.......................................................21
         10.6. Counterparts; Headings........................................22
         10.7. Interpretation................................................22
         10.8. Severability..................................................22
         10.9. No Reliance...................................................22
         10.10. Parties in Interest..........................................22
         10.11. Specific Performance.........................................23

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                             EXHIBITS AND SCHEDULES

SCHEDULE 1.13     Contracts
SCHEDULE 1.16     Excluded Assets
SCHEDULE 1.19     Fixed Assets
SCHEDULE 1.23     Knowledge of Buyer
SCHEDULE 1.24     Knowledge of Sellers

SCHEDULE 1.31     Opinion of Sellers' Counsel
SCHEDULE 1.32     Permitted Liens
SCHEDULE 1.36     Required Consents
SCHEDULE 3.3      Pending Actions
SCHEDULE 3.5      Brokers or Finders Fees of Sellers
SCHEDULE 3.7      Title
SCHEDULE 3.8      Condition of Assets
SCHEDULE 3.9      Pending Litigation
SCHEDULE 3.11     Status of Contracts
SCHEDULE 3.16     Agreements with Related Persons

EXHIBIT A          Assignment Agreement
EXHIBIT B          Bill of Sale
EXHIBIT C          Buyer's Closing Certificate
EXHIBIT D          Sellers' Closing Certificate

EXHIBIT E          License and Binder Purchase Agreement
EXHIBIT F          Allocation of Purchase Price

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                            ASSET PURCHASE AGREEMENT

         ASSET PURCHASE AGREEMENT,  made as of December 23, 1999, by and between
**., a Delaware limited liability  company  ("Buyer"),  and COVOL  TECHNOLOGIES,
INC., a Delaware corporation;  CARBON SYNFUEL,  L.L.C., a Utah limited liability
company; and SYNFUEL INVESTMENTS, INC., a Utah corporation ("Sellers").

                                    RECITALS

         WHEREAS,  Carbon  Synfuel,  L.L.C.  owns  the  Assets  comprised  of  a
processing  Facility to produce  solid  synthetic  fuel  pellets from coal fines
located near Price,  Utah and Carbon Synfuel,  L.L.C. is controlled by the other
Sellers; and

         WHEREAS,  Sellers  desire to sell the Assets and the Contracts to Buyer
and Buyer  desires to  purchase  the Assets from  Sellers,  all on the terms and
subject to the conditions set forth herein.

         NOW,  THEREFORE,  in  consideration  of the  Recitals and of the mutual
covenants,  conditions  and  agreements  set forth herein and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, it is hereby agreed that:

                                    ARTICLE I
                                   DEFINITIONS

         When  used in this  Agreement,  the  following  terms  shall  have  the
meanings specified:

                  1.1.  Affiliate shall mean, as to any person, any other person
or entity  that,  directly or  indirectly  through  one or more  intermediaries,
controls, is controlled by or is under common control with such person.

                  1.2.  Agreement shall mean this Purchase  Agreement,  together
with the Exhibits and Schedules attached hereto, as the same may be amended from
time to time in accordance with the terms hereof.

                  1.3. As-Built Drawing shall mean as-built drawings  reflecting
necessary revisions on the original tracings of the Plans and Specifications and
related  drawings  relating to the  Facility  necessary  to indicate  such field
changes as may have been found necessary to suit conditions at the Facility Site
and any other revisions made in the course of construction of the Facility.

                  1.4. Assets shall mean,  collectively,  the Improvements,  the
Books and Records,  and the Fixed Assets,  together with all goodwill associated
with the Facility.

                  1.5. Assignment  Agreement shall mean the Assignment Agreement
between  Sellers and Buyer  relating to the  Contracts  in the form of Exhibit A
attached hereto.

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                  1.6.  Bill of Sale shall mean the Bill of Sale from Sellers to
Buyer relating to the Assets, in the form of Exhibit B attached hereto.

                  1.7.  Books  and  Records  shall  mean  original  or true  and
complete  copies of all of the books,  records,  files,  data and information of
Sellers  relating to the design,  construction and operation of the Facility and
operation of the business  prior to the  Effective  Time,  which are relevant to
Buyer's use of the Assets,  performance under the Contracts and operation of the
Facility and the Business after the Effective Time, including without limitation
Plans and  Specifications,  all  original  tracings of the related  drawings and
designs and the As-Built Drawings.

                  1.8. Buyer's Closing Certificate shall mean the certificate of
Buyer substantially in the form of Exhibit C attached hereto.

                  1.9.  Closing shall mean the meeting of the parties to be held
at 9:00 a.m.,  local  time,  on the  Closing  Date,  at the  offices of Hunton &
Williams,  Riverfront  Plaza,  East  Tower,  951  East  Byrd  Street,  Richmond,
Virginia,  or such other time and place as the  parties  may  mutually  agree in
writing.

                  1.10. Closing Date shall mean December 29, 1999, or such other
date as the parties may mutually agree in writing.

                  1.11.  Code shall mean the Internal  Revenue Code of 1986,  as
amended, and the regulations thereunder.

                  1.12.   Confidentiality   Agreement   shall  mean  the  Letter
Agreement, dated April 27, 1999, between Sellers and **.

                  1.13.   Contracts  shall  mean  all  construction   agreements
relating to the Facility and the  Improvements,  or components  thereof,  all as
listed on  Schedule1.13  attached  hereto or as  otherwise  agreed upon by Buyer
prior to the Closing Date.

                  1.14. Covol Process shall mean Sellers' proprietary  synthetic
coal fuel production  process for  manufacturing  solid synthetic fuel from coal
fines  which is defined  in and is the  subject of the  Technology  License  and
Binder Supply Agreement.

                  1.15.  Effective Time shall mean 12:01 a.m.,  Eastern Time, on
the Closing Date.

                  1.16.  Excluded Assets shall mean the items listed on Schedule
1.16 attached

hereto

                  1.17.  Facility  shall mean the solid  synthetic  fuel  pellet
manufacturing Facility and related support Facility owned by Sellers and located
at the Facility Site.

                  1.18.  Facility  Site shall mean that  certain  parcel of land
located near Price,  Utah where the Facility is located as of the Effective Date
and which is the leased premises under the Lease.

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                  1.19. Fixed Assets shall mean all tangible  personal  property
located at the Facility Site which  constitute  part of, or are otherwise  owned
and used by Sellers in the operation of, the Facility as of the Effective  Time,
including, but not limited to, all fixed assets, chattels, machinery, equipment,
computer  hardware,  fixtures,  furniture,   furnishings,   handling  equipment,
implements,  spare parts, tools and accessories of all kinds which are listed on
Schedule  1.19  attached  hereto;  provided,  however,  that Fixed  Assets shall
exclude (i) leased items of property and (ii) the Excluded Assets.

                  1.20. GAAP shall mean generally accepted accounting principles
of the United  States as applied  by Sellers in a manner  consistent  with prior
periods.

                  1.21.  Improvements  shall mean the structures,  buildings and
improvements  now standing on the  Facility  Site and  constituting  part of the
Facility,  and replacements thereof,  including,  without limitation,  all plant
equipment,  apparatus,  and machinery of every kind and nature forming a part of
such Facility, buildings, and improvements.

                  1.22. IRS shall mean the Internal Revenue Service.

                  1.23.  Knowledge  of Buyer  shall mean the  actual  knowledge,
after due inquiry, of any person listed on Schedule 1.23 attached hereto.

                  1.24.  Knowledge  of Seller  shall mean the actual  knowledge,
after due inquiry, of any person listed on Schedule 1.24 attached hereto.

                  1.25. Law shall mean any federal, state, local or other law or
governmental  requirement  of any kind,  and the rules,  regulations  and orders
promulgated thereunder.

                  1.26.  Lease shall mean that  certain  Lease  Agreement by and
between U.P.C.,  Inc. and Covol  Technologies,  Inc. dated December 23, 1996, as
amended by that certain Amendment to Lease Agreement dated as of April 2, 1997.

                  1.27.  License and Binder  Purchase  Agreement shall mean that
certain  License and Binder  Purchase  Agreement to be entered into by Buyer and
Sellers, relating to the licensing by the Buyer of Covol's proprietary synthetic
coal fuel extrusion,  pellet and briquette  production process for the Facility,
and substantially in the form of Exhibit E attached hereto.

                  1.28.  Lien shall mean any  interest in  property  securing an
obligation,  whether such interest is based on common law,  statute or contract,
and including any restriction on the use, voting, transfer, receipt of income or
other  exercise of any  attributes of ownership,  any security  interest or lien
arising  from  a  mortgage,  claims,  encumbrance,   pledge,  charge,  easement,
servitude,  security  agreement,  conditional  sale or trust receipt or a lease,
consignment  or bailment  for  security  purposes.  The term  "Lien"  shall also
include reservations,  exceptions, covenants, conditions,  restrictions, leases,
subleases,   licenses,   occupancy  agreements,   pledges,  equities,   charges,
assessments,  covenants, reservations, defects in title, encroachments and other
burdens,  and other title exceptions and encumbrances  affecting property of any
nature, whether accrued or unaccrued, or absolute or contingent.

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                  1.29.  Loss  shall  have the  meaning  given  to such  term in
Section 8.1(a).

                  1.30.  Material  Adverse Effect shall mean a material  adverse
effect  on the  Assets  and  Contracts,  taken as a whole,  the  business  to be
conducted  by Buyer  with the Assets or the  maintenance  and  operation  of the
Facility.

                  1.31.  Opinion of Sellers'  Counsel  shall mean the opinion of
Pillsbury, Madison & Sutro, LLP, counsel of Sellers and Harlan Hatfield, general
counsel of Covol Technologies, Inc., substantially in the form of Schedule 1.31.

                  1.32.  Permitted  Liens shall mean Liens (but only for amounts
not yet due and payable) securing taxes,  assessments or governmental charges or
levies,  Liens of an immaterial nature which could not reasonably be expected to
have an adverse effect on the  maintenance  and operation of the Facility or the
good and marketable title of the Assets or the  enforceability of the Contracts,
and Liens disclosed on Schedule 1.32 attached hereto.

                  1.33.  Plans and  Specifications  shall have the meaning given
such terms in the Contracts.

                  1.34.  Product  shall  mean the solid  synthetic  fuel  pellet
product produced at the Facility using and pursuant to the Covol Process.

                  1.35.  Purchase  Consideration shall have the meaning given to
such term in Section 2.2 hereof.

                  1.36.  Required Consents shall mean those consents,  approvals
and waivers  required  from  parties to the  Contracts or under the Lease or any
subleases  or from  governmental  authorities  or other third  parties  that are
necessary or required in order to transfer the Assets and Contracts to Buyer and
otherwise give effect to the transactions  contemplated  herein (other than such
consents, the failure of which to obtain, taken as a whole, could not reasonably
be  expected  to have a  Material  Adverse  Effect)  and that  are  specifically
identified on Schedule 1.36 attached hereto.

                  1.37.   Section  29  Product   shall  mean  Product  which  is
reasonably  expected to constitute  "qualified  fuels"  pursuant to the terms of
Section  29(c)(1)(C)  of the Code  and  with  respect  to  which  Section  29 is
applicable pursuant to the terms of Sections 29(f) and 29(g) of the Code.

                  1.38.  Sellers' Closing Certificate shall mean the certificate
of Sellers substantially in the form of Exhibit D attached hereto.

                  1.39.  Sublease and License  shall have the meaning given such
term in Section 5.7.

                  1.40.  Transaction  Documents shall mean this  Agreement,  the
Bill of Sale,  the  Assignment  Agreement,  the  Sublease  and License and those
agreements  and  instruments to be executed and delivered as provided in Section
2.3.

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                                   ARTICLE II
                                PURCHASE AND SALE

         2.1.     Purchase and Sale.

                  (a) Buyer and Sellers  hereby agree that at the  Closing,  and
upon all of the terms and subject to all of the  conditions  of this  Agreement,
Sellers  shall  sell,  convey,  transfer  and assign to Buyer,  and Buyer  shall
purchase  and accept  from  Sellers,  all of the  Assets,  free and clear of all
Liens.

                  (b) Buyer and Sellers  hereby agree that at the  Closing,  and
upon all of the terms and subject to all of the  conditions  of this  Agreement,
Sellers shall assign to Buyer the Contracts and all rights arising thereunder.

         2.2. Payment of the Purchase Consideration.

         In consideration of Sellers' sale, conveyance,  transfer,  delivery and
assignment of the Assets and  Contracts,  Buyer shall on the Closing Date make a
cash  payment to Sellers  in the  amount of **  Dollars  ($**),  payable by wire
transfer in readily  available  funds to First  Security  Bank;  Salt Lake City,
Utah; 18A 124 000012;  for the account of Covol  Technology;  Acct.  #0600019939
(the "Purchase Consideration").

         2.3. Deliveries at Closing.

                  (a) By Sellers to Buyer. At the Closing, Sellers shall deliver
the following items to Buyer, each properly executed and dated as of the Closing
Date by Sellers and in form and substance  reasonably  acceptable to Buyer:  the
Assignment Agreement,  the Bill of Sale, the Improvements Deed, the Sublease and
License, the License and Binder Purchase Supply Agreement, all Required Consents
applicable  to  Sellers,  the  Opinion of  Sellers'  Counsel,  Sellers'  Closing
Certificate, a subordination and nondisturbance agreement,  satisfactory in form
and substance to Buyer,  from all mortgagees and other parties with interests in
the  Facility  Site,  the Lease or the  Improvements  and a  certificate  of the
corporate secretary of Sellers as to such matters as may reasonably be requested
by Buyer.

                  (b) By Buyer to Sellers.  At the Closing,  Buyer shall deliver
the Purchase  Consideration  and the following  items to Sellers,  each properly
executed  and dated as of the  Closing  Date by Buyer and in form and  substance
reasonably  acceptable to Sellers:  the Assignment  Agreement,  the Sublease and
License,  the License  and Binder  Purchase  Agreement,  all  Required  Consents
applicable  to Buyer,  Buyer's  Closing  Certificate  and a  certificate  of the
corporate secretary (or equivalent  official) of Buyer as to such matters as may
reasonably be requested by Sellers.

         2.4. Allocation of Purchase Price.

         On the Closing Date,  or at a later time agreed to by the parties,  not
to exceed 30 days  following  the  Closing  Date,  the  purchase  price shall be
allocated  among the Assets and Contracts in accordance  with Exhibit F attached
hereto.  Such  allocation  shall be intended to comply with

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the  requirements  of  Section  1060 of the Code,  and no party  shall  take any
position inconsistent with such allocation for income tax purposes,  except that
Buyer's  cost for the  Assets  and  Contracts  may  differ  from the  amount  so
allocated to the extent  necessary to reflect  Buyer's  capitalized  acquisition
costs other than the amount realized by Sellers.

         2.5. No Assumption of Liabilities.

         Buyer does not and will not assume any  liability or  obligation of any
kind  of  Sellers,  or any  obligation  relating  to the  use of the  Assets  or
performance by Sellers under the Contracts prior to the Effective Time,  whether
absolute or contingent,  accrued or unaccrued,  asserted or unasserted, known or
unknown, or otherwise.

         2.6. Sales Tax Exemption.

         To the extent applicable, at the Closing, Buyer will deliver to Sellers
appropriate  and  customary  sales tax  exemption  certificates  relating to the
transfer of the Assets and the assignment of the Contracts contemplated hereby.

                                   ARTICLE III
                    REPRESENTATION AND WARRANTIES OF SELLERS

         Sellers jointly and severally represent and warrant to Buyer that:

         3.1. Corporate Standing.

         Sellers are corporations or a limited  liability company duly organized
and validly  existing  and in good  standing  under the laws of their  states of
organization  as indicated  in the  introductory  paragraph  of this  agreement.
Sellers  have the power to own  their  property,  and to  execute,  deliver  and
perform this Agreement and each of the Transaction  Documents  applicable to it,
and to  carry  on  their  business  as now  being  conducted.  Sellers  are duly
qualified to do business in and are in good standing as foreign  corporations or
limited  liability  companies,  authorized to do business  under the laws of the
States of Utah.

         3.2. Authorizations; Binding Agreements.

         The execution, delivery and performance of this Agreement and the other
Transaction Documents by Sellers and each conveyance, assignment, agreement, and
other document  herein  contemplated  to be executed by Sellers,  have been duly
authorized by all necessary  corporate and limited  liability company action, as
the case may be. This  Agreement  and the other  Transaction  Documents  and the
conveyances, assignments, agreements, and other documents herein contemplated to
be executed,  delivered and performed by Sellers are, or will be upon execution,
legal,  valid and binding  obligations  of  Sellers,  duly  enforceable  against
Sellers in  accordance  with their terms  (subject,  however,  to the effects of
bankruptcy, insolvency,  reorganization,  moratorium, and similar laws from time
to time in effect relating to the rights and remedies of creditors as well as to
general  principles  of  equity).  This  Agreement  and  the  other  Transaction
Documents and the  conveyances,  assignments,  agreements,  and other  documents
herein  contemplated  to be executed,  delivered and performed by Sellers (i) do
not and will not result in

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any  violation  of,  conflict with or default under the terms of any of Sellers'
organizational documents (nor, to the Knowledge of Sellers, does there exist any
condition  which upon the  passage of time or the giving of notice  would  cause
such  violation,  conflict or  default),  and (ii)  subject only to the Required
Consents,  do not and will not  result in any  violation  of,  conflict  with or
default  under  any  Contract  or any other  material  permit,  lease,  venture,
indenture, mortgage, agreement, contract, judgment, order or other obligation or
restriction  to which Sellers,  the Assets,  the Contracts or the conduct of the
maintenance  and operation of the Facility may be bound or  encumbered  (nor, to
the Knowledge of Sellers,  does there exist any condition which upon the passage
of time or the  giving  of  notice  would  cause  such  violation,  conflict  or
default).

         3.3. No Actions  Affecting  Enforcement  of the Agreement and the other
Transaction Documents.

         Except as set forth in Schedule 3.3,  there are no actions,  suits,  or
proceedings  pending,  or, to the  Knowledge  of  Sellers,  threatened,  against
Sellers in any court, or  administrative  governmental body or agency which will
affect in any  adverse  manner the  ability of Sellers to  execute,  deliver and
perform this Agreement and the other Transaction Documents.  Subject only to the
Required  Consents  and such  consents  which the  failure  to obtain  could not
reasonably be expected to have a Material  Adverse Effect,  Sellers has obtained
all  permits,  licenses,  franchises,  authorizations,   variances,  exemptions,
concessions,  leases, instruments, orders, consents or approvals of governmental
entities  and third  parties  necessary to  construct,  maintain and operate the
Facility  and to  execute,  deliver  and perform  this  Agreement  and the other
Transaction Documents.

         3.4. Taxes.

         All tax returns and reports  relating to the Assets,  the Contracts and
the conduct of the  construction,  maintenance  and  operation  of the  Facility
required by law (including all federal, state, and local property tax, severance
and  franchise  tax laws) to be filed by Sellers  prior to the Closing have been
timely filed or will be caused to be timely filed,  including  those tax returns
relating  to  periods  prior to  Closing  that are not yet due,  except for such
returns and reports  which the failure to file could not  reasonably be expected
to  have  a  material  adverse  effect  on  the  Assets,  the  Contracts  or the
maintenance  and  operation  of the  Facility.  All  taxes,  assessments,  fees,
interest,  penalties and other governmental  charges relating to the Assets, the
Contracts or the conduct of the  construction,  maintenance and operation of the
Facility  prior to Closing  have been paid when due and  payable or payment  has
been provided for, except for such taxes, assessments, fees, interest, penalties
and other governmental  charges which the failure to pay could not reasonably be
expected to have a material  adverse effect on the Assets,  the Contracts or the
construction, maintenance and operation of the Facility.

         3.5. Brokers or Finders Fees.

         Except  as set  forth in  Schedule  3.5,  there  are no  obligation  or
liability,  contingent  or  otherwise,  for brokers or finders  fees  created by
Sellers with respect to the matters provided for in this Agreement and the other
Transaction  Documents.  No  obligation or liability for brokers or

                                       7
<PAGE>

finders fees created by Sellers with respect to the matters provided for in this
Agreement and the other  Transaction  Documents shall be imposed upon Buyer, the
Assets or the Contracts.

         3.6. No Imposition of Liens.

         The execution, delivery and performance of this Agreement and the other
Transaction Documents by Sellers shall not result in the imposition of any Lien,
other than Permitted  Liens,  upon any of the Assets,  the Contracts or by which
the maintenance and operation of the Facility may be bound or encumbered.

         3.7. Title to Assets.

         Except as set forth on  Schedule  3.7,  as of the date  hereof,  Carbon
Synfuel, L.L.C. owns, and as of the Effective Time, it will own, good, valid and
marketable  title to all of the  Assets,  free and  clear of any and all  Liens,
except for Permitted Liens. As of the Effective Time and upon Buyer's payment of
the Purchase  Consideration pursuant hereto, good, valid and marketable title to
the Assets and holds a fully  enforceable  leasehold  interest  in the  Facility
Site,  free and clear of all Liens,  except for Permitted  Liens,  shall pass to
Buyer.

         3.8. Condition of Assets.

         Except as set forth on Schedule 3.8, as of the Closing Date,  the Fixed
Assets,  taken as a whole,  will be in good  operating  condition and repair and
substantially fit for the production of Section 29 Product at a rate of 360,0000
tons per year, and the Facility has been  constructed  in conformance  with that
degree of skill and judgment  normally  exercised by recognized  engineering and
construction  firms of similar size and  experience  to that of the  contractors
under the  Contracts,  and the Assets  comprising  the  Facility  conform to the
standards of material and  workmanship  prevailing in applicable  industries and
are free from material  defects in design,  material and  workmanship and are of
good quality.

         3.9. Pending Litigation.

         Except as  disclosed  on Schedule  3.9,  there are no  actions,  suits,
arbitrations or proceedings  currently  pending or, to the Knowledge of Sellers,
threatened  against the Assets or the  Contracts.  There are no  outstanding  or
unsatisfied judgments, orders or decrees to which Sellers are bound.

         3.10. Compliance With Laws.

         To the Knowledge of Sellers, Sellers are in compliance with all orders,
writs, injunctions,  decrees, judgments,  rulings, laws, rules or regulations of
any  governmental  entity to which  Sellers,  the  Assets or the  Contracts  are
subject,  the violation of which could reasonably be expected to have a Material
Adverse Effect.

         3.11. Status of Contracts.

                                       8
<PAGE>

         Schedule 1.12 is a true,  correct and complete list of all the material
contracts  entered into by Sellers relating  primarily to the Assets.  Except as
described in the Schedule  3.11,  the Contracts are valid and in good  standing,
and there is no violation of, conflict with or default under the Contracts,  the
consequence  of which could  reasonably  be expected to have a Material  Adverse
Effect. Sellers have not received any notice from any party to any Contract that
such party intends to terminate, cancel or refuse to renew the same or that such
party  intends to offset any amount due  thereunder or assert any defense to the
enforceability thereof.

         3.12. Consents.

         Schedule  1.36 is a true,  correct and  complete  list of all  Required
Consents.

         3.13. Books and Records.

         As of the Closing  Date,  the Books and Records  shall be complete  and
correct in all material respects.

         3.14. Environmental Conditions.

                  (a) Definitions. When used in this Section:

                           (i)  "Environmental  Laws" shall mean all  applicable
laws (including common law), rules, orders, regulations,  statutes,  ordinances,
codes,  decrees  and  requirements  of any  Governmental  Authority  regulating,
relating to or imposing liability  standards of conduct concerning any Hazardous
Materials or environmental protection.

                           (ii) "Governmental Authority" shall mean any federal,
state, local,  municipal or other governmental  department,  commission,  board,
bureau,   agency  or  instrumentality,   or  any  court,  in  each  case  having
jurisdiction over the applicable matter.

                           (iii)  "Hazardous  Materials"  shall  mean any  solid
waste,  petroleum or petroleum  product,  hazardous  material,  hazardous waste,
infectious  medical waste, or hazardous or toxic substance  defined or regulated
as such in any Environmental Law.

                  (b) Environmental  Representations  and Warranties.  Except as
set forth on Schedule 3.14 attached hereto:

                           (i)  Sellers   have  not  operated  the  Facility  or
conducted  business or other  activities at or from the Facility,  in connection
with the construction of the Facility or otherwise, in a manner that constituted
or constitutes a violation of any applicable Environmental Law;

                           (ii) There has been no  off-site  shipment or release
of any  Hazardous  Materials  by the Sellers on,  under,  at, from or in any way
affecting the Facility or any part thereof,  which off-site  shipment or release
gives rise to liabilities or obligations  under applicable  Environmental  Laws;
and

                                       9
<PAGE>

                           (iii) Sellers have not received any notices or claims
that  they are a  responsible  party in  connection  with  any  claim or  notice
asserted pursuant to 42 U.S.C. Section 9601 et seq., or any state superfund law,
in connection with the Facility.

                           (iv)  Seller  has  received  all  permits  as  may be
required under applicable  Environmental  Laws to operate the Facility as of the
Effective  Time,  and Seller is in compliance in all material  respects with the
terms and conditions of each such permits. Such permits shall be transferable to
Buyer and will be effective  immediately (or, subject to Section 5.1, as soon as
practicable) after the Closing.

         3.15. Liabilities.

         Except for liabilities underlying any Permitted Liens, the Sellers have
no  liabilities  which could  reasonably be expected to have a Material  Adverse
Effect  following  the  Closing,  nor has any  condition  existed  or any  event
occurred which could reasonably be expected to give rise to any such liability.

         3.16. Agreements with Related Persons.

         There are no contracts,  licenses,  agreements or arrangements with any
Affiliate of Sellers in connection with the construction, maintenance, ownership
and operation of the Facility, other than as disclosed on Schedule 3.16.

         3.17. Adequacy of the Purchased Assets.

         Except as  described  in  Schedule  3.8 the Assets  and the  Contracts,
together with (i) the technology and know-how being licensed to Buyer by Sellers
under the License and Binder Purchase Agreement,  (ii) the chemical binder to be
supplied to Buyer by Sellers  under the License and Binder  Purchase  Agreement,
and (iii) rights and assets  required for the  relocation of the Facility to the
site selected by Buyer  (including  but not limited to  relocation  construction
contracts,  feedstock raw materials,  applicable real property rights,  permits,
etc.) which Buyer may arrange for but which are not the subject of this Purchase
Agreement,  constitute  all of  the  assets  and  technology  rights  reasonably
expected to be necessary  for the  production  by Buyer of Section 29 Product at
the rate of 360,000 tons per year.

                                       10
<PAGE>

         3.18. Production Capacity.

         The  Facility  has a rated  capacity to produce  Product at the rate of
360,000 tons per year.

         3.19. Section 29 Issues.

         The  Facility was placed "in service" for purposes of the Code prior to
July 1, 1998  pursuant to a binding  contract  entered  into prior to January 1,
1997 and effective at all times thereafter through completion of construction.

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer hereby represents and warrants to Sellers that:

         4.1. Organization and Standing.

         Buyer is a limited liability company duly organized,  validly existing,
and in good  standing  under the laws of the State of Delaware and has the power
to own its own property, and to execute,  deliver and perform this Agreement and
each of the  Transaction  Documents,  and to carry on its  business as now being
conducted.

         4.2. Authorizations; Binding Agreements.

         The  execution,  delivery,  and  performance  of this Agreement and the
other  Transaction  Documents  by  Buyer  and of  each  conveyance,  assignment,
agreement,  and other document herein  contemplated to be executed by Buyer have
been fully authorized by all necessary limited  liability  company action.  This
Agreement and the other Transaction Documents and the conveyances,  assignments,
agreements,  and other documents herein  contemplated to be executed,  delivered
and performed by Buyer are, or will be upon execution,  legal, valid and binding
obligations of Buyer,  duly  enforceable  against Buyer in accordance with their
terms   (subject,   however,   to  the   effects  of   bankruptcy,   insolvency,
reorganization,  moratorium,  and  similar  laws  from  time to  time in  effect
relating  to the  rights  and  remedies  of  creditors  as  well  as to  general
principles of equity).  This Agreement and the other  Transaction  Documents and
the   conveyances,   assignments,   agreements,   and  other  documents   herein
contemplated  to be executed,  delivered  and  performed by Buyer (i) do not and
will not result in any violation of, conflict with or default under the terms of
Buyer's  organizational  documents,  and  (ii)  subject  only  to  the  Required
Consents,  do not and will not  result in any  violation  of,  conflict  with or
default  under  any  material  permit,  lease,  venture,  indenture,   mortgage,
agreement, contract, judgment, order or other obligation or restriction to which
Buyer is bound (nor, to the  Knowledge of Buyer,  does there exist any condition
which  upon the  passage  of time or the  giving  of  notice  would  cause  such
violation, conflict or default).

                                       11
<PAGE>

         4.3. Brokers or Finders Fees.

         No  obligation or  liability,  contingent or otherwise,  for brokers or
finders fees  created by Buyer with respect to the matters  provided for in this
Agreement shall be imposed upon Sellers.

         4.4. No Action  Affecting  Enforcement  of the  Agreement and the other
Transaction Documents.

         There  are no  actions,  suits,  or  proceedings  pending,  or,  to the
Knowledge of Buyer,  threatened,  against Buyer in any court, or  administrative
governmental  body or agency which will affect in any adverse manner the ability
of  Buyer  to  execute,  deliver  and  perform  this  Agreement  and  the  other
Transaction Documents.

                                    ARTICLE V
                      CERTAIN UNDERSTANDINGS AND AGREEMENTS

         5.1. Best Efforts.

         Subject  to the  terms  and  conditions  herein  provided,  each of the
parties  hereto agrees to use its  commercially  reasonable  efforts to take, or
cause to be  taken,  all  action,  and to do,  or cause to be done,  all  things
necessary, proper and advisable under applicable Law, and to obtain the Required
Consents,   necessary  to  consummate  and  make   effective  the   transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further  action is  necessary  or  desirable  to carry out the  purposes of this
Agreement,  the proper  officers and  directors of each party to this  Agreement
shall  take all such  necessary  action.  Buyer and  Sellers  will  execute  any
additional  instruments  necessary to consummate the  transactions  contemplated
hereby. To the extent that any permits referenced in Section 3.14(b)(iv) are not
transferred  at the  Closing  Date,  Sellers  will use  commercially  reasonable
efforts to cause such transfer to Buyer as soon as practicable after the Closing
Date.

         5.2. Public Announcements.

         Buyer and Sellers will consult with each other before issuing any press
release or otherwise  making any public statement with respect to this Agreement
and the  transactions  contemplated  herein,  and shall not issue any such press
release or make any such public  statement  prior to such  consultation or as to
which the other party reasonably objects, except as may be required by Law or by
obligations  pursuant  to any listing  agreement  with any  national  securities
exchange or inter-dealer quotation system.

         5.3. Confidentiality.

         Notwithstanding  the execution of this Agreement,  the  confidentiality
provisions  of the  Confidentiality  Agreement  shall  remain in full  force and
effect and shall survive the Closing.

                                       12
<PAGE>

         5.4. Taxes.

         Following  Closing,  Sellers  shall  timely  file all tax  returns  and
reports  relating  to  the  Assets,   the  Contracts  and  the  conduct  of  the
construction,  maintenance  and operation of the Facility prior to Closing which
have not  been  filed or were  not yet due to be  filed  prior to  Closing,  and
Sellers shall timely pay all taxes, assessments,  fees, interest,  penalties and
governmental charges relating to the Assets, the Contracts or the conduct of the
construction,  maintenance  and operation of the Facility prior to Closing which
have not been paid or were not yet due and payable prior to Closing.

         5.5. Private Letter Ruling Repurchase Option.

         Following Closing, Buyer plans to seek a Private Letter Ruling from the
IRS as to matters  relating to the Facility and Section 29 of the Code.  Sellers
shall  cooperate  with and assist Buyer,  as reasonably  requested by Buyer,  in
connection with seeking such Private Letter Ruling. In the event that Buyer does
seek such a Private  Letter Ruling and the IRS refuses or fails to issue it in a
form that is  satisfactory in the sole and absolute  discretion of Buyer,  Buyer
shall be entitled to elect (by giving  written notice to Sellers to such effect)
to terminate the obligation to make further royalty  payments under Section 3 of
the License and Binder Purchase Agreement and, in such event, Sellers shall have
the option to purchase,  within one year following  such notice,  the Assets and
Contracts (and assume obligations under the Contracts) from Buyer at the greater
of (i) the amount of Purchase  Consideration  theretofore paid by Buyer plus the
amount of any capital expenditures made by Buyer in connection with the Facility
and Assets  plus any  obligations  of Buyer in respect of the  Facility  and the
Assets  and  Contracts,  or (ii)  the  fair  market  value  of such  Assets  and
Contracts.

         5.6. Solvency Representations and Covenants.

         Each Seller  hereby  represents  and  warrants (as to itself only) that
prior to consummating the transactions  contemplated  herein,  (i) the aggregate
fair market value of such Seller's  assets exceeds the aggregate  amount of such
Seller's  liabilities,   including  contingent  liabilities  discounted  by  the
probability of their  occurrence,  (ii) such Seller is able to pay and is paying
its  debts  generally  as and when they  become  due in the  ordinary  course of
business,  (iii) such  Seller is  adequately  capitalized  for its  current  and
contemplated  business   undertakings,   and  (iv)  the  Purchase  Consideration
constitutes reasonably equivalent value and fair consideration for the Assets.

         Each  Seller   hereby   covenants   (as  to  itself  only)  that  after
consummating  the transaction  contemplated by the Purchase  Agreement,  (i) the
aggregate  fair market value of such  Seller's  assets will exceed the aggregate
amount of such Seller's liabilities, including contingent liabilities discounted
by the probability of their occurrence, (ii) such Seller will be able to pay and
will pay its debts  generally as and when they become due in the ordinary course
of  business,  and (iii) such  Seller will not be left with  unreasonably  small
capital for its then-current and contemplated business undertakings.

                                       13
<PAGE>

         5.7. Sublease and License.

         At, and as a condition to, the Closing, Buyer, Sellers and the landlord
under the Lease shall enter into a sublease,  license and consent agreement (the
"Sublease and License"), in form and substance to be agreed upon by the parties,
which  shall  provide  (i) for  Sellers to  sublease  the  portion of the leased
premises  under the Lease and grant those  rights  under the Lease to the extent
necessary to allow Buyer, without restriction,  to enter such premises, maintain
and operate the Facility and to remove the  Facility,  after which such sublease
shall  terminate,  (ii) for the granting of a license by the landlord  under the
Lease providing for the rights referenced in clause (i) above, and (iii) for the
consent  of the  landlord  under  the Lease to all of the  foregoing  and to the
ultimate  removal of the  Facility  from such  leased  premises  with no further
obligation on the part of Buyer. In addition,  Sellers shall assign to Buyer, to
the extent  assignable,  or  otherwise  shall assist  Buyer in  connection  with
obtaining, agreements providing for necessary utilities at such site and Sellers
shall  provide  necessary  security  services  relating to the  Facility and the
Facility Site during the period  following  the  Effective  Time and until Buyer
removes the Facility from the Facility Site.

                                   ARTICLE VI
            CONDITIONS PRECEDENT TO THE PAYMENT OBLIGATIONS OF BUYER

         Each and every  obligation of Buyer to be performed on the Closing Date
shall  be  subject  to  the  satisfaction,  prior  to or at the  Closing  of the
following express conditions precedent:

         6.1. Compliance with Agreement.

         Sellers shall have performed and complied in all material respects with
all of its  obligations  under  this  Agreement  which  are to be  performed  or
complied with by it prior to or on the Closing Date.

         6.2. Proceedings and Instruments Satisfactory.

         All  proceedings,  corporate  or  other,  to be  taken  by  Sellers  in
connection  with  the  transactions  contemplated  by  this  Agreement,  and all
documents  incident  thereto,  shall  be  reasonably  satisfactory  in form  and
substance to Buyer.

         6.3. No Litigation.

         No investigation, suit, action or other proceedings (including, without
limitation,  any petition  relating to any of the Sellers  under the  Bankruptcy
Code or similar  federal or state law) shall be threatened or pending before any
court or governmental agency that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby or in connection with obligations to creditors.

         6.4. Representations and Warranties.

         The  representations  and warranties  made by Sellers in this Agreement
shall be true and correct in all respects (as to representations  and warranties
qualified or limited by the term

                                       14
<PAGE>

"Material Adverse Effect," the word "material," or phrases of like import),  and
in all material respects (as to representations  and warranties not so qualified
or limited) as of the Closing Date with the same force and effect as though said
representations and warranties had been made on the Closing Date.

         6.5. Consents.

         All Required  Consents  applicable to Sellers shall have been obtained,
including  without  limitation  consents  relating  and required of the landlord
under the Lease pursuant to the Sublease and License.

         6.6. Tax Opinion.

         Buyer shall have  received an opinion of Hunton & Williams,  counsel to
Buyer,  in form and  substance  satisfactory  to Buyer,  with respect to matters
related to Section 29 of the Code.

                                   ARTICLE VII
               CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS

         Each and every  obligation  of Sellers to be  performed  on the Closing
Date  shall be  subject to the  satisfaction  prior to or at the  Closing of the
following express conditions precedent:

         7.1. Compliance with Agreement.

         Buyer shall have  performed and complied in all material  respects with
all of its  obligations  under  this  Agreement  which  are to be  performed  or
complied with by it prior to or on the Closing Date.

         7.2. Proceedings and Instruments Satisfactory.

         All proceedings, corporate or other, to be taken by Buyer in connection
with the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Sellers.

         7.3. No Litigation.

         No investigation,  suit, action or other proceeding shall be threatened
or  pending  before  any court or  governmental  agency  that  seeks  restraint,
prohibition,  damages or other relief in connection  with this  Agreement or the
consummation of the transactions contemplated hereby.

         7.4. Representations and Warranties.

         The  representations  and  warranties  made by Buyer in this  Agreement
shall be true and correct in all respects (as to representations  and warranties
qualified or limited by the term "Material Adverse Effect," the word "material,"
or phrases of like import),  and in all material respects (as to representations
and warranties not so qualified or limited) as of the Closing Date

                                       15
<PAGE>

with the same force and effect as though such representations and warranties had
been made on the Closing Date.

         7.5. Required Consents.

         All Required Consents applicable to Buyer shall have been obtained.

                                  ARTICLE VIII
                      INDEMNITIES AND ADDITIONAL COVENANTS

         8.1. Sellers' Indemnity.

         (a) Sellers  hereby  jointly  and  severally  indemnify  and hold Buyer
harmless  from and  against,  and  agree to  defend  promptly  Buyer  from,  and
reimburse Buyer for, any and all losses, damages, costs, expenses,  liabilities,
obligations and claims of any kind, including, without limitation, environmental
liabilities  (whether involving personal injury or property damage),  reasonable
attorneys'  fees and other legal  costs and  expenses  (hereinafter  referred to
collectively as "Losses"), that Buyer and any Affiliate of Buyer may at any time
suffer or incur, or become subject to, as a result of or in connection with: (i)
any breach or inaccuracy of any of the  representations  and warranties  made by
Sellers in this  Agreement  or any other  agreement or  instrument  delivered by
Sellers  pursuant  hereto;  (ii) any  failure of Sellers to carry out,  perform,
satisfy  and  discharge  any  of  its   covenants,   agreements,   undertakings,
liabilities or  obligations  under this Agreement or under any of the agreements
and instruments delivered by Sellers pursuant to this Agreement; (iii) claims by
third parties (including governmental authorities) against Buyer relating to the
construction,  operation  and  ownership  by  Sellers  of  the  Assets  and  the
performance  by Sellers under the Contracts in each case under this clause (iii)
for the period prior to the Effective  Time;  (iv) any violations of, or failure
to operate in accordance  with,  necessary  permits prior to the Effective Time;
(v) except as otherwise  provided in the Sublease and License,  all  obligations
and  liabilities  under  the  Lease;  and  (vi)  any  and  all  liabilities  and
obligations of Sellers;

         (b) In the event a claim  against  Buyer  arises that Buyer  reasonably
believes  is  covered by the  indemnity  provisions  of  Section  8.1(a) of this
Agreement,  notice shall be given promptly by Buyer to Sellers containing detail
reasonably sufficient for Sellers to identify the nature and basis of the claim.
Provided  that  Sellers  admit in writing to Buyer that such claim is covered by
the indemnity provisions of Section 8.1(a) hereof,  Sellers shall have the right
to contest and defend by all  appropriate  legal  proceedings  such claim and to
control all  settlements  (unless  Buyer agrees to assume the cost of settlement
and to forgo such  indemnity)  and to select lead  counsel to defend any and all
such  claims at the sole cost and expense of Sellers;  provided,  however,  that
Sellers may not effect any settlement that could result in any cost,  expense or
liability  to Buyer  unless  Buyer  consents in writing to such  settlement  and
Sellers  agree  to  indemnify  Buyer  therefor.  Buyer  may  select  counsel  to
participate  with Sellers'  counsel in any such defense,  in which event Buyer's
counsel shall be at its own sole cost and expense.  In connection  with any such
claim,  action or  proceeding,  the parties shall  cooperate with each other and
provide  each  other  with  access  to  relevant  books  and  records  in  their
possession.

                                       16
<PAGE>

         (c) Sellers shall not be required to indemnify and hold harmless  Buyer
pursuant  to Section  8.1(a)(i)  hereof in respect  of the  representations  and
warranties  made by  Sellers  herein  unless  such right to  indemnification  is
asserted by Buyer  (whether or not such Losses have actually  been  incurred) by
notice to Sellers within 12 months after the Closing Date, with the exception of
(i) the representations and warranties set forth in Sections 3.4 and 3.19, which
must be asserted by Buyer within the  applicable  statute of  limitations or any
extensions thereof required by any applicable authority relating to the taxes or
assessments giving rise to the Loss, plus 60 days, (ii) the  representations and
warranties set forth in Section 3.10, which must be asserted by Buyer within the
applicable  statute of limitations  for the violation of the underlying law that
forms the basis of such  claim,  plus 60 days,  (iii)  the  representations  and
warranties  set forth in Sections 3.1, 3.2, and 3.8, which shall be without time
limitation,  and (iv) the  representations  and  warranties set forth in Section
3.14 hereof, which must be asserted within 24 months after the Closing Date.

         (d)  Notwithstanding  the  foregoing,  Sellers shall not be required to
indemnify Buyer under Section  8.1(a)(i) in respect of the  representations  and
warranties   made  by  Sellers  unless  the  amount  of  all  Losses  for  which
indemnification  is sought by Buyer  under  Section  8.1(a)(i)  exceeds,  in the
aggregate,  $250,000,  in which event,  Sellers' indemnity  obligation hereunder
would apply to all such Losses.  Sellers' aggregate  indemnification  obligation
pursuant  to  Section   8.1(a)(i)   shall  in  no  event   exceed  the  Purchase
Consideration described in Section 2.2 and paid to Sellers.

         (e) The  indemnification  provided in this Section 8.1,  including  the
limitations with respect  thereto,  shall be the exclusive remedy for Buyer with
respect to Losses as a result of or in connection with the matters  described in
Section 8.1(a)(i), notwithstanding any provisions in this Agreement or any other
such agreement or instrument to the contrary.

         8.2. Buyer's Indemnity.

         (a) Buyer  hereby  indemnifies  and  holds  Sellers  harmless  from and
against,  and agrees to defend promptly Sellers from and reimburse  Sellers for,
any and all  Losses  that  Sellers  may at any time  suffer or incur,  or become
subject to, as a result of or in connection  with:  (i) any breach or inaccuracy
of any of the  representations and warranties made by Buyer in this Agreement or
any other agreement or instrument  delivered by Buyer pursuant hereto;  (ii) any
failure  by  Buyer to carry  out,  perform,  satisfy  and  discharge  any of its
covenants,  agreements,  undertakings,  liabilities  or  obligations  under this
Agreement  or under any of the  agreements  and  instruments  delivered by Buyer
pursuant  to this  Agreement;  and  (iii)  claims  by third  parties  (including
governmental   authorities)  against  Sellers  relating  to  the  operation  and
ownership by Buyer of the Assets for the period following the Effective Time.

         (b) In the event a claim against  Sellers arises that is covered by the
indemnity  provisions  of Section 8.2 of this  Agreement,  notice shall be given
promptly by Sellers to Buyer containing detail  reasonably  sufficient for Buyer
to identify  the nature and basis of the claim.  Provided  that Buyer  admits in
writing to Sellers  that such claim is covered by the  indemnity  provisions  of
Section  8.2  hereof,  Buyer  shall have the right to contest  and defend by all
appropriate legal proceedings such claim and to control all settlements  (unless
Sellers agrees to

                                       17
<PAGE>

assume the cost of settlement  and to forgo such  indemnity)  and to select lead
counsel to defend any and all such claims at the sole cost and expense of Buyer;
provided, however, that Buyer may not effect any settlement that could result in
any cost,  expense or liability to Sellers unless Sellers consents in writing to
such  settlement  and Buyer agrees to indemnify  Sellers  therefor.  Sellers may
select counsel to participate with Buyer's counsel in any such defense, in which
event  Sellers'  counsel  shall be at the sole cost and expense of  Sellers.  In
connection  with any  such  claim,  action  or  proceeding,  the  parties  shall
cooperate  with each other and provide each other with access to relevant  books
and records in their possession.

         (c) Buyer shall not be required to indemnify and hold harmless  Sellers
pursuant  to Section  8.2(a)(i)  hereof in respect  of the  representations  and
warranties made by Buyer herein unless such right to indemnification is asserted
by Sellers (whether or not such Losses have actually been incurred) by notice to
the Buyer within 12 months  after the Closing  Date,  with the  exception of the
representations  and warranties set forth in Sections 4.1 and 4.2 hereof,  which
shall be without time limitation.

         (d)  Notwithstanding  the  foregoing,  Buyer  shall not be  required to
indemnify Sellers under Section 8.2(a)(i) in respect of the  representations and
warranties   made  by  Buyer   unless   the  amount  of  all  Losses  for  which
indemnification  is sought by Sellers under Section  8.2(a)(i)  exceeds,  in the
aggregate,  $250,000,  in which event,  Buyer's indemnity  obligation  hereunder
would apply to all such Losses.

         (e) The  indemnification  provided in this Section 8.2,  including  the
limitations with respect thereto, shall be the exclusive remedy for Sellers with
respect to Losses as a result of or in connection with the matters  described in
Section 8.2(a)(i), notwithstanding any provisions in this Agreement or any other
such agreement or instrument to the contrary.

         8.3. Bulk Sales Compliance.

         To the extent  applicable,  Buyer hereby  waives  compliance by Sellers
with the provisions of the bulk sales law of any U.S.  jurisdiction,  and in any
event,  Sellers covenants and agrees to pay and discharge when due all claims of
any  governmental  entities and creditors of Sellers and its  subsidiaries  that
could be asserted against Buyer by reason of such non-compliance. Sellers agrees
to  indemnify  and hold  Buyer  harmless  from and  against  and shall on demand
reimburse  Buyer for any and all Losses  suffered by Buyer by reason of Sellers'
failure to pay and discharge any such claims.

         8.4. Additional Instruments.

         At any time and from time to time after the Closing,  at either party's
request and without further consideration, Sellers or Buyer, as the case may be,
shall execute and deliver such other instruments of sale, transfer,  conveyance,
assignment and  confirmation  and take such other action as Sellers or Buyer may
reasonably  deem necessary or desirable in order to more  effectively  transfer,
convey,  and assign to Buyer,  and confirm  Buyer's title to and interest in and
responsibility  and liability for, the Assets and Contracts and the consummation
of the transactions  contemplated herein. Without limiting the generality of the
foregoing,  Sellers  will

                                       18
<PAGE>

cooperate with and assist Buyer in renewing, or transferring,  into Buyer's name
those Permits for which Buyer requests such  assistance  and  cooperation at the
appropriate time for such renewal or transfer as determined by Buyer.

         8.5. Access to Books, Records and Employees.

         From and after the  Closing  Date,  Buyer  will  authorize  and  permit
Sellers and its respective representatives to have access during normal business
hours, upon reasonable notice and for reasonable  purposes and in such manner as
will not unreasonably  interfere with the conduct of Buyer's business,  to Books
and Records  within the control of Buyer that relate to the  Facility.  From and
after  the  Closing  Date,  Sellers  will  authorize  and  permit  Buyer and its
representatives  to have access during normal  business  hours,  upon reasonable
notice and for reasonable  purposes and in such manner as will not  unreasonably
interfere  with the  conduct of  Sellers'  business,  to all books and  records,
files,  documents and other correspondence  related to the Facility prior to the
Effective  Time,  which are not included among the Books and Records.  Buyer and
Sellers  agree to  maintain  all  books,  records,  files,  documents  and other
correspondence related to the Facility prior to the Effective Time in accordance
with their  respective  normal  document  retention  practices after the Closing
Date.

                                   ARTICLE IX
                                   TERMINATION

         9.1.     Termination.

         This  Agreement may be  terminated  and the  transactions  contemplated
hereby may be abandoned as follows: (a) at any time prior to the Closing Date by
mutual written agreement of Sellers and Buyer; or (b) by either Sellers or Buyer
if the  Effective  Time shall not have  occurred on or before  January 15, 2000,
provided,  however,  that the right to terminate this Agreement pursuant to this
clause (b) shall not be  available  to any party  whose  failure to fulfill  any
obligation  under  this  Agreement  has been the cause of, or  resulted  in, the
failure of the Effective Time to occur prior to such date.

         9.2. Rights on Termination; Waiver.

         (a) If this  Agreement  is  terminated  pursuant  to Section  9.1,  all
further  obligations  of the parties under or pursuant to this  Agreement  shall
terminated.

         (b) If any of the  conditions set forth in Article VI of this Agreement
have not been satisfied,  Buyer may nevertheless  elect to waive such conditions
and proceed with the consummation of the transactions  contemplated  hereby.  If
any of the  conditions  set forth in Article VII of this Agreement have not been
satisfied,  Sellers may nevertheless  elect to waive such conditions and proceed
with the consummation of the transactions  contemplated  hereby. The election by
Buyer or Sellers to terminate this  Agreement  pursuant to Section 9.1 (b) shall
not in any way affect the rights of such party  against  the other party for any
breach or default under this Agreement.

                                       19
<PAGE>

                                    ARTICLE X
                                  MISCELLANEOUS

         10.1.    Entire Agreement; Amendment.

         This Agreement and the documents referred to herein and to be delivered
pursuant hereto constitute the entire agreement  between the parties  pertaining
to the  subject  matter  hereof,  and  supersede  all prior and  contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral  or  written,  and  there  are  no  warranties,  representations  or  other
agreements  between the parties in connection  with the subject  matter  hereof,
except as specifically  set forth herein or therein.  No amendment,  supplement,
modification,  waiver or termination  of this Agreement  shall be binding unless
executed  in writing by the party to be bound  thereby.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute  a  continuing  waiver  unless  otherwise  expressly  provided.   The
representations  and  warranties  of each  party  hereto  shall be  deemed to be
material and to have been relied upon by the other party.  The  representations,
warranties, covenants and agreements of Sellers and Buyer contained herein shall
survive the execution and delivery of this  Agreement  and  consummation  of the
transactions  contemplated hereby and, as to the representations and warranties,
shall be effective  until the relevant time  limitation for making any indemnity
claim with respect to such  representations  and  warranties  under Sections and
shall  have  been  reached  and  no  longer.  All  agreements,   understandings,
representations,  warranties and covenants made by Sellers herein shall be joint
and several obligations of Sellers.

         10.2. Expenses.

         Except as otherwise  specifically  provided herein, each of the parties
hereto shall pay the fees and expenses of their respective counsel,  accountants
and other  experts  and the  other  expenses  incident  to the  negotiation  and
preparation of this Agreement and consummation of the transactions  contemplated
hereby.

         10.3. Governing Law; Consent to Jurisdiction.

         This Agreement shall be construed and interpreted according to the laws
of the State of New York,  without regard to the conflicts of law rules thereof;
provided,  however,  that Section 5-1401 of the New York General Obligations Law
shall apply to this Agreement.  Each of the parties hereto, in respect of itself
and its properties,  agrees to be subject to (and hereby irrevocably submits to)
the  nonexclusive  jurisdiction  of the  United  States  federal  court  for the
Southern  District of New York or New York state court sitting in the Borough of
Manhattan, New York, in respect of any suit, action or proceeding arising out of
or relating to this  Agreement  or the  transactions  contemplated  herein,  and
irrevocably  agrees  that all  claims in  respect  of any such  suit,  action or
proceeding  may be heard and  determined in any such court.  Each of the parties
hereto irrevocably  waives, to the fullest extent it may effectively do so under
applicable  Law,  any  objection  to the  laying of the venue of any such  suit,
action or proceeding brought in any such court and any claim that any such suit,
action  or  proceeding  brought  in  any  such  court  has  been  brought  in an
inconvenient  forum.  Either party hereto may make service on the other

                                       20
<PAGE>

party by sending or  delivering  a copy of the process to the party to be served
at the address and in the manner  provided  for the giving of notices in Section
hereof.  Nothing in this Section , however,  shall affect the right of any party
to bring any action or proceeding  arising out of or relating to this  Agreement
in any other court or to serve legal  process in any other  manner  permitted by
law or in equity.

         10.4. Assignment.

         This Agreement and each party's  respective rights hereunder may not be
assigned, by operation of law or otherwise, without the prior written consent of
the other party  provided,  however,  that Buyer may assign this Agreement to an
Affiliate of Buyer without the consent of Sellers.

         10.5. Notices.

         All  communications,  notices and disclosures  required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier  of the  date  (a)  when  delivered  personally  or by  messenger  or by
overnight delivery service to an officer of the other party, (b) five days after
being mailed by registered or certified  United  States mail,  postage  prepaid,
return  receipt  requested,  or (c) when received via  telecopy,  telex or other
electronic  transmission,  in all cases  addressed  to the person for whom it is
intended  at his  address  set forth  below or to such other  address as a party
shall have  designated  by notice in  writing  to the other  party in the manner
provided by this Section:

If to Buyer:      **
                  Fax:  **

                  Attn:  Manager of Assets

With a copy to:   **                              Hunton & Williams
                  Fax:  **                        Riverfront Plaza, East Tower
                  Attn:  General Counsel          951 East Byrd Street
                                                  Richmond, Virginia 23219
                                                  Fax:  (804) 788-8218
                                                  Attn:  Kenneth J. Alcott, Esq.

If to Sellers:    Covol Technologies, Inc.
                  3280 North Frontage Road
                  Lehi, Utah 84043
                  Fax:  (801) 768-4483
                  Attn:  Brent M. Cook

                                     and

With a copy to:   Covol Technologies, Inc.        Pillsbury Madison & Sutro LLP
                  3280 North Frontage Road        235 Montgomery Street
                  Lehi, Utah 84043                San Francisco, CA 94104
                  Fax:  (801) 768-4483            Fax:  (415) 983-1200
                  Attn:  General Counsel          Attn:  Linda C. Williams, Esq.

                                       21
<PAGE>

         10.6. Counterparts; Headings.

         This Agreement may be executed in several  counterparts,  each of which
shall be deemed an original, but such counterparts shall together constitute but
one and the same  Agreement.  The Table of  Contents  and  Article  and  Section
headings in this  Agreement are inserted for  convenience  of reference only and
shall not constitute a part hereof.

         10.7. Interpretation.

         Unless the context requires otherwise, all words used in this Agreement
in the singular number shall extend to and include the plural,  all words in the
plural  number  shall  extend to and include the  singular  and all words in any
gender shall extend to and include all genders.  All  references  to  contracts,
agreements,  leases or other  understandings or arrangements shall refer to oral
as well as written matters.  The specificity of any  representation  or warranty
contained  herein  shall  not be deemed  to limit  the  generality  of any other
representation or warranty contained herein.

         10.8. Severability.

         If any provision,  clause or part of this Agreement, or the application
thereof under  certain  circumstances,  is held  invalid,  the remainder of this
Agreement,  or the  application  of such  provision,  clause or part under other
circumstances, shall not be affected thereby.

         10.9. No Reliance.

         No  third  party  is  entitled  to rely on any of the  representations,
warranties and agreements contained in this Agreement.  Buyer and Sellers assume
no liability to any third party because of any reliance on the  representations,
warranties  and  agreements  of Buyer or Sellers  contained  in this  Agreement.
Nothing contained in this Agreement shall be construed as creating a partnership
or joint venture or any agency  relationship  between the parties hereto, or any
other relationship other than buyer and Sellers as provided herein.

         10.10. Parties in Interest.

         This Agreement shall be binding upon and inure solely to the benefit of
each party  hereto,  and  nothing in this  Agreement,  express  or  implied,  is
intended  to or shall  confer  upon any other  person any  rights,  benefits  or
remedies of any nature whatsoever under or by reason of this Agreement.

         10.11. Specific Performance.

         The parties  hereto  agree that  irreparable  damage would occur in the
event any of the  provisions of this  Agreement were not performed in accordance
with the  terms  hereof  and that

                                       22
<PAGE>

the parties shall be entitled to specific  performance  of the terms hereof,  in
addition to any other remedy at law or equity.

                [Remainder of this page intentionally left blank]

                                       23
<PAGE>

         IN  WITNESS  WHEREOF,  each  party  hereto  has  caused  this  Purchase
Agreement to be executed in its name by a duly authorized  officer as of the day
and year first above written.

                                       **

                                  By: /**/
                                     ---------------------------------------
                                  Its:  Vice President and Chief Financial
                                        Officer

                                  COVOL TECHNOLOGIES, INC.

                                  By:      /Kirk A. Benson/
                                     ---------------------------------------
                                  Its: Chairman and Chief Executive Officer

                                  SYNFUEL INVESTMENTS, INC.

                                  By:      /Brent M. Cook/
                                     ---------------------------------------
                                  Its:     President

                                  CARBON SYNFUELS, L.L.C.

                                  By:      Covol Technologies, Inc.

                                  By:      /Brent M. Cook/
                                     ---------------------------------------
                                  Its:     President

                                       24ASSET PURCHASE AGREEMENT

                                 by and between

                                       **

                                       **

                                       and

                            COVOL TECHNOLOGIES, INC.

                           POCAHONTAS SYNFUEL, L.L.C.

                            SYNFUEL INVESTMENTS, INC.

                                January 13, 2000

         ** This Exhibit contains  confidential  material which has been omitted
pursuant to a Confidential  Treatment Request.  The omitted information has been
filed separately with the Securities and Exchange Commission.

                                       i
<PAGE>

                               TABLE OF CONTENTS

                                                                         Page

RECITALS ..................................................................1

ARTICLE I DEFINITIONS......................................................2
         1.1      Affiliate................................................2
         1.2      Agreement................................................2
         1.3      As-Built Drawings........................................2
         1.4      Bill of Sale.............................................3
         1.5      Books and Records........................................3
         1.6      Buyer's Closing Certificate..............................3
         1.7      Buyer's Financing Statement(s)...........................3
         1.8      Buyer Indemnified Persons................................3
         1.9      Buyer's Officer Certificate..............................3
         1.10     Closing..................................................3
         1.11     Closing Date.............................................3
         1.12     Code.....................................................4
         1.13     Commercial Operation Date................................4
         1.14     Confidentiality Agreement................................4
         1.15     Construction Agreement...................................4
         1.16     Contracts................................................4
         1.17     Cooperation Agreement....................................4
         1.18     Copyrights...............................................4
         1.19     Covol Process............................................4
         1.20     Effective Time...........................................4
         1.21     Environmental Claim......................................5
         1.22     Environmental Condition..................................5
         1.23     Environmental Laws.......................................5
         1.24     Excluded Assets..........................................5
         1.25     Excluded Liabilities.....................................5
         1.26     Facility.................................................6
         1.27     Facility Site............................................6
         1.28     Fixed Assets.............................................6
         1.29      [Intentionally Omitted].................................6
         1.30     Hazardous Substances.....................................6
         1.31     Initial Consideration....................................6
         1.32     Intellectual Property....................................6
         1.33     IRS......................................................6
         1.34     Knowledge of Buyer.......................................7
         1.35     Knowledge of Sellers.....................................7

                                       ii
<PAGE>

         1.36     Law......................................................7
         1.37     Lender...................................................7
         1.38     Lender Release...........................................7
         1.39     License and Binder Purchase Agreement....................7
         1.40     Licenses.................................................7
         1.41     Lien.....................................................7
         1.42     Losses...................................................8
         1.43     Material Adverse Effect..................................8
         1.44     New Facility Site........................................8
         1.45     Opinions of Sellers' Counsel.............................8
         1.46     Party....................................................8
         1.47     Patents..................................................8
         1.48     Payoff Amount............................................8
         1.49     Permitted Liens..........................................9
         1.50     Person...................................................9
         1.51     Pocahontas' Account......................................9
         1.52     Product..................................................9
         1.53     Purchase Consideration...................................9
         1.54     Real Property Owners.....................................9
         1.55     Release..................................................9
         1.56     Relocation Period........................................9
         1.57     Remaining Initial Consideration.........................10
         1.58     Required Consents.......................................10
         1.59     Section 29 Product......................................10
         1.60     Sellers' Affidavits.....................................10
         1.61     Sellers' Closing Certificates...........................10
         1.62     Sellers' Indemnified Persons............................10
         1.63     Sellers' Intellectual Property..........................11
         1.64     Sellers' Officer Certificates...........................11
         1.65     Solvent.................................................11
         1.66     Subsequent Consideration................................11
         1.67     Trademarks..............................................11
         1.68     Trade Secrets...........................................11
         1.69     Transaction Documents...................................12
         1.70     Transfer Taxes..........................................12
         1.71     UCC.....................................................12
         1.72     UCC Termination Statement(s)............................12
         1.73     Use and Non-Disturbance Agreement.......................12

ARTICLE II PURCHASE AND SALE..............................................12
         2.1      Purchase and Sale; Assignment...........................12
         2.2      Payment of the Purchase Consideration...................13

                                      iii
<PAGE>

         2.3      Deliveries at Closing...................................13
         2.4      Allocation of Purchase Price............................15
         2.5      No Assumption of Liabilities............................15
         2.6      Prorations..............................................16
         2.7      Sales Tax Exemption.....................................16

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS ....................16
         3.1      Corporate Standing......................................16
         3.2      Authorizations; Binding Agreements......................17
         3.3      No Consents.............................................18
         3.4      Taxes...................................................18
         3.5      Brokers or Finders Fees.................................18
         3.6      No Imposition of Liens..................................19
         3.7      Title to Assets; Good Title Conveyed....................19
         3.8      Condition of Assets.....................................19
         3.9      Litigation..............................................20
         3.10     Compliance with Laws....................................20
         3.11     Status of Contracts.....................................20
         3.12     Consents................................................21
         3.13     Books and Records.......................................21
         3.14     Environmental Matters...................................21
         3.15     Liabilities.............................................22
         3.16     Agreements with Related Persons.........................22
         3.17     Adequacy of the Purchased Assets........................22
         3.18     Section 29 Issues.......................................23
         3.19     Intellectual Property...................................24
         3.20     Product Liability.......................................24
         3.21     Ownership...............................................24
         3.22     Full Disclosure.........................................25
         3.23     Solvency................................................25

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................25
         4.1      Organization and Standing...............................25
         4.2      Authorizations; Binding Agreements......................26
         4.3      Brokers or Finders Fees.................................27
         4.4      No Actions Affecting Enforcement of the
                  Agreement and the other Transaction Documents...........27
         4.5      Consents................................................27

ARTICLE V CERTAIN UNDERSTANDINGS AND AGREEMENTS...........................28
         5.1      Subsequent Actions......................................28
         5.2      Public Announcements....................................29

                                       iv
<PAGE>

         5.3      Confidentiality.........................................29
         5.4      Taxes...................................................29
         5.5      Use of and Access to Facility...........................30
         5.6      Damage to Facility......................................31

ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS
                  OF BUYER................................................31
         6.1      No Termination; Compliance with Agreement...............32
         6.2      Actions.................................................32
         6.3      Instruments Satisfactory................................32
         6.4      No Litigation...........................................32
         6.5      Representations and Warranties..........................32
         6.6      Material Adverse Change.................................33
         6.7      Board Approval..........................................33
         6.8      Financing Statements....................................33
         6.9      Consents................................................34

ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS
                  OF SELLERS..............................................34
         7.1      No Termination; Compliance with Agreement...............34
         7.2      Actions.................................................34
         7.3      Instruments Satisfactory................................35
         7.4      No Litigation...........................................35
         7.5      Representations and Warranties..........................35
         7.6      Consents................................................35

ARTICLE VIII INDEMNITIES AND ADDITIONAL COVENANTS.........................36
         8.1      Sellers' Indemnity......................................36
         8.2      Buyer's Indemnity.......................................38
         8.3      Bulk Sales Compliance. .................................40
         8.4      Additional Instruments..................................40
         8.5      Access to Books, Records and Employees..................40

ARTICLE IX TERMINATION....................................................41
         9.1      Termination.............................................41
         9.2      Rights on Termination; Waiver...........................42

ARTICLE X MISCELLANEOUS...................................................42
         10.1     Entire Agreement; Amendment.............................42
         10.2     Expenses................................................43
         10.3     Governing Law; Consent to Jurisdiction;
                  Waiver of Jury Trial....................................43

                                       v
<PAGE>

         10.4     Assignment..............................................44
         10.5     Notices.................................................45
         10.6     Counterparts; Headings..................................46
         10.7     Interpretation..........................................46
         10.8     Severability............................................47
         10.9     No Reliance.............................................48
         10.10    Parties in Interest.....................................48
         10.11    Specific Performance.  .................................48
         10.12    Time of Essence.........................................48
         10.13    Representations, Warranties and Covenants...............48
         10.14    Election of Remedies....................................49
         10.15    ** Undertaking..........................................49

                                       vi
<PAGE>

                             EXHIBITS AND SCHEDULES

SCHEDULE 1.16     Contracts
SCHEDULE 1.27     Facility Site
SCHEDULE 1.28     Fixed Assets
SCHEDULE 1.49     Permitted Liens
SCHEDULE 3.5      Brokers or Finders Fees of Sellers
SCHEDULE 3.7      Exceptions to Title
SCHEDULE 3.8      Condition of Assets
SCHEDULE 3.9      Sellers' Litigation
SCHEDULE 3.11     Default under the Contracts
SCHEDULE 3.12     Sellers' Required Consents
SCHEDULE 3.14     Environmental Matters
SCHEDULE 3.16     Agreements With Related Persons
SCHEDULE 4.3      Brokers or Finders Fees of Buyer
SCHEDULE 4.4      Buyer's Litigation
SCHEDULE 4.5      Buyer's Required Consents

EXHIBIT A         [Intentionally Omitted]
EXHIBIT B         Bill of Sale
EXHIBIT C         [Intentionally Omitted]
EXHIBIT D         Officer's Certificate of Buyer
EXHIBIT E         Lender Release
EXHIBIT F         License and Binder Purchase Agreement
EXHIBIT G-1       Opinion of Pillsbury Madison & Sutro, LLP, Counsel to Sellers
EXHIBIT G-2       Opinion of Harlan Hatfield, General Counsel of Sellers
EXHIBIT G-3       Opinion of Jackson & Kelly, Counsel to Sellers
EXHIBIT H         [Intentionally Omitted]
EXHIBIT I-1       Officer's Certificate of Covol
EXHIBIT I-2       Officer's Certificate of Synfuel
EXHIBIT I-3       Officer's Certificate of Pocahontas
EXHIBIT J         Use and Non-Disturbance Agreement

                                      vii
<PAGE>

                            ASSET PURCHASE AGREEMENT

         ASSET PURCHASE  AGREEMENT,  made as of January 13, 2000, by and between
**, a Kentucky corporation  ("Buyer");  and, for the sole and limited purpose of
Section  10.15,  **, a Kentucky  corporation  ("**"),  and  POCAHONTAS  SYNFUEL,
L.L.C., a Utah limited liability  company  ("Pocahontas");  COVOL  TECHNOLOGIES,
INC., a Delaware corporation  ("Covol");  and SYNFUEL INVESTMENTS,  INC., a Utah
corporation ("Synfuel" and together with Pocahontas and Covol, "Sellers").

                                    RECITALS

         WHEREAS,   Covol  constructed  a  solid  synthetic  fuel  manufacturing
facility located near North Fork, McDowell County, West Virginia;

         WHEREAS,  pursuant to a Bill of Sale dated  September  29, 1999,  Covol
sold a one  percent  (1%)  undivided  interest  in  such  solid  synthetic  fuel
manufacturing  facility to Synfuel in exchange for three hundred (300) shares of
capital stock of Synfuel,  which  constitutes  one hundred percent (100%) of the
outstanding capital stock of Synfuel;

         WHEREAS,  pursuant to a Bill of Sale dated September 29, 1999,  Synfuel
sold its one percent  (1%)  interest  and Covol sold its  remaining  ninety-nine
percent (99%) interest in such solid  synthetic fuel  manufacturing  facility to
Pocahontas in exchange for a one percent (1%) member  interest and a ninety-nine
percent (99%) member interest, respectively, in Pocahontas;

         WHEREAS,  Pocahontas  continues to own the fixed  assets that  comprise
such solid synthetic fuel manufacturing facility;

         WHEREAS, Sellers own certain books, records and information relating to
the engineering,  design, construction,  operation and maintenance of such solid
synthetic fuel manufacturing  facility and the substantiation of the eligibility
of solid  synthetic  fuel produced at such solid  synthetic  fuel  manufacturing
facility to qualify for credit under Section 29(a) of the Code;

                                       1
<PAGE>

         WHEREAS,  Pocahontas  and, to the extent each of Covol and Synfuel have
retained  any right,  title or interest  in any of such fixed  assets and books,
records and  information,  Covol and Synfuel desire to sell,  convey,  transfer,
deliver  and assign such fixed  assets and books,  records  and  information  to
Buyer,  and Buyer  desires to purchase  and accept such fixed  assets and books,
records and information  from each of Sellers,  as applicable,  all on the terms
and subject to the conditions set forth herein; and

         WHEREAS,  Covol and  Synfuel,  as the sole owners of  Pocahontas,  will
derive substantial benefit from the sale of such fixed assets and books, records
and  information  to  Buyer  and the  other  transactions  contemplated  by this
Agreement.

         NOW,  THEREFORE,  in  consideration  of the  Recitals and of the mutual
covenants,  conditions  and  agreements  set forth herein and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, it is hereby agreed by the Parties that:

                                    ARTICLE I
                                   DEFINITIONS

         Unless the context otherwise requires, when used in this Agreement, the
following capitalized terms shall have the meanings specified:

                  1.1 Affiliate  shall mean, as to any Person,  any other Person
that, directly or indirectly through one or more  intermediaries,  controls,  is
controlled by or is under common control with such Person.

                  1.2  Agreement  shall  mean  this  Asset  Purchase  Agreement,
together with the Exhibits and  Schedules  attached  hereto,  as the same may be
amended from time to time in accordance with the terms hereof.

                  1.3 As-Built  Drawings shall mean the "as-built"  construction
drawings  provided  to Covol by, or on behalf  of,  TIC The  Industrial  Company
pursuant to the  Construction  Agreement,  and all other design and construction
drawings  owned or in the  possession  of Sellers  which relate to the completed
Facility.

                                       2
<PAGE>

                  1.4 Bill of Sale  shall  mean  the Bill of Sale to be  entered
into by each of Sellers in favor of Buyer relating to the Facility,  in the form
of Exhibit B attached hereto.

                  1.5 Books and Records shall mean original or true and complete
copies of all books, records, files, data, drawings (including,  but not limited
to, the As-Built  Drawings),  operation  and parts  manuals and  information  of
Sellers  relating  to  the  engineering,  design,  construction,  operation  and
maintenance of the Facility and the substantiation of the eligibility of Product
produced at the Facility to qualify for credit under Section 29(a) of the Code.

                  1.6 Buyer's Closing  Certificate shall mean the certificate of
an officer of Buyer,  certifying as to the  satisfaction  of the  conditions set
forth in Article VII.

                  1.7  Buyer's  Financing  Statement(s)  shall mean all  filings
(including,  but not limited to, UCC financing  statements),  registrations  and
recordings which Buyer may, in its sole discretion, require to be filed by or on
behalf  of Buyer  with  respect  to its  right,  title  and/or  interest  in the
Facility.

                  1.8 Buyer Indemnified Persons shall have the meaning set forth
in Section 8.1(a).

                  1.9 Buyer's  Officer  Certificate  shall mean a certificate of
the corporate secretary (or equivalent officer) of Buyer, in the form of Exhibit
D attached hereto,  certifying as to the matters set forth in Exhibit D attached
hereto.

                  1.10 Closing  shall mean the meeting of the Parties to be held
at 11:00 a.m., local time, on the Closing Date, at the offices of Skadden, Arps,
Slate,  Meagher & Flom, 1440 New York Avenue,  N.W.,  Washington,  D.C., or such
other time and place as the Parties may mutually agree in writing.

                  1.11  Closing  Date shall mean  January 14, 2000 or, if later,
five (5) business days  following the date on which all  conditions set forth in
Articles VI and VII have been satisfied or waived by the applicable  Parties, as
the case  may be,  or such  other  date as the  Parties  may  mutually  agree in
writing.

                                       3
<PAGE>

                  1.12 Code shall mean the  Internal  Revenue  Code of 1986,  as
amended, and the regulations thereunder.

                  1.13 Commercial Operation Date shall mean the first date after
the Closing  Date on which the  Facility  has  produced at least  14,000 tons of
commercially  saleable  Section  29  Product  at the New  Facility  Site  over a
consecutive 14-day period beginning after the Closing Date.

                  1.14   Confidentiality   Agreement   shall   mean  the  Letter
Agreement, dated March 24, 1999, between Covol and **.

                  1.15  Construction   Agreement  shall  mean  the  Construction
Agreement, dated December 26, 1996, Contract No. TIC002WV, between Covol and TIC
The Industrial Company, as amended.

                  1.16 Contracts  shall mean all of the agreements  entered into
by or on behalf of Sellers  relating to the engineering,  design,  construction,
operation  and/or  maintenance  of the Facility,  all as listed on Schedule 1.16
attached hereto.

                  1.17 Cooperation Agreement shall mean that certain Cooperation
Agreement  to be entered into between  Covol and the Real  Property  Owners with
respect to the  payment of certain  monies,  the  release of certain  liens with
respect to the Facility Site and the execution and delivery by the Real Property
Owners of the Use and Non-Disturbance Agreement.

                  1.18  Copyrights  shall mean U.S. and foreign  registered  and
unregistered  copyrights  (including,  but not  limited  to,  those in  computer
software  and  databases),   rights  of  publicity  and  all  registrations  and
applications to register the same.

                  1.19 Covol  Process shall mean Covol's  proprietary  synthetic
coal fuel  production  process for  manufacturing  solid synthetic fuel which is
defined as "Coal  Briquetting  Technology"  in and is the subject of the License
and Binder Purchase Agreement.

                  1.20  Effective  Time shall mean 12:01 a.m.,  Eastern Time, on
the Closing Date.

                                       4
<PAGE>

                  1.21 Environmental Claim shall mean any claim,  action,  cause
of action,  investigation  or notice  (written  or oral) by any Person  alleging
actual  or  potential  liability  for  investigatory,  cleanup  or  governmental
response costs, or natural resources or property damages,  or personal injuries,
attorney's fees or penalties  relating to (i) the presence,  or Release into the
environment,  of any  Hazardous  Substance at the Facility  Site,  now or in the
past,  or (ii)  circumstances  forming  the basis of any  violation,  or alleged
violation, of any Environmental Law.

                  1.22  Environmental  Condition  shall  mean  the  presence  or
Release to the environment of Hazardous Substances,  including,  but not limited
to, any migration of Hazardous  Substances  through air, soil or groundwater at,
to or from the  Facility  Site  regardless  of when  such  presence  or  Release
occurred or is discovered.

                  1.23  Environmental  Laws  shall  mean  all  laws,   statutes,
regulations,  ordinances,  administrative or judicial orders or decrees,  or the
common  law,  in each  case,  as  amended  from  time to time,  relating  to (a)
pollution or protection of the  environment,  natural  resources or human health
and safety,  including  Laws  relating to  Releases  or  threatened  Releases of
Hazardous  Substances  or otherwise  relating to the  manufacture,  formulation,
generation,   processing,   distribution,   use,  treatment,  storage,  Release,
transport,  investigation,   remediation,  abatement,  cleanup  or  handling  of
Hazardous Substances, (b) record keeping, notification, disclosure and reporting
requirements  respecting Hazardous Substances,  and (c) the management or use of
natural resources.

                  1.24 Excluded Assets shall mean all real and personal property
of any nature and kind located at the  Facility  Site and not listed on Schedule
1.27 attached hereto,  including,  but not limited to, any foundations (concrete
or  otherwise),  underground  pilings,  footings and piers,  concrete  flooring,
containment  structures,  buried pipes or other structures,  feedstock,  work in
progress, finished goods, chemical binder and any other inventory and accounts.

                  1.25 Excluded  Liabilities shall have the meaning set forth in
Section 2.5.

                  1.26 Facility shall mean, collectively,  the Books and Records
and the Fixed Assets.

                                       5
<PAGE>

                  1.27  Facility  Site  shall mean that  certain  parcel of land
located in  McDowell  County  near North Fork,  West  Virginia,  where the Fixed
Assets are located,  as more  specifically  described in Schedule  1.27 attached
hereto.

                  1.28 Fixed Assets shall mean all  tangible  personal  property
which constitute part of the solid synthetic fuel manufacturing facility located
at the Facility Site as of the Effective  Time,  including,  but not limited to,
all fixed assets, chattels,  machinery,  equipment, computer hardware, fixtures,
furniture,   furnishings,  handling  equipment,  implements,  parts,  tools  and
accessories  of all kinds which are listed on  Schedule  1.28  attached  hereto;
provided, however, that "Fixed Assets" shall not include the Excluded Assets.

                  1.29      [Intentionally Omitted]

                  1.30 Hazardous  Substances shall mean (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials,  radon gas, asbestos
in any form that is or could become friable,  urea  formaldehyde foam insulation
and  transformers  or other  equipment that contain  dielectric  fluid which may
contain polychlorinated  biphenyls,  (b) any chemicals,  materials or substances
defined as or included in the definition of "hazardous  substances,"  "hazardous
wastes," "hazardous materials," "hazardous constituents,"  "restricted hazardous
materials,"    "extremely    hazardous    substances,"    "toxic    substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory  effect  under  any  applicable  Environmental  Law and (c) any other
chemical,  material or substance,  exposure to which is  prohibited,  limited or
regulated by any applicable Environmental Law.

                  1.31 Initial Consideration shall have the meaning set forth in
Section 2.2.

                  1.32 Intellectual Property shall mean all Trademarks, Patents,
Copyrights, Trade Secrets and Licenses.

                  1.33     IRS shall mean the Internal Revenue Service.

                  1.34 Knowledge of Buyer shall mean the actual knowledge, after
due inquiry, of Buyer.

                                       6
<PAGE>

                  1.35  Knowledge  of Sellers  shall mean the actual  knowledge,
after due inquiry, of Sellers.

                  1.36 Law shall mean any federal,  state, local or other law or
governmental  requirement  of any kind,  and the rules,  regulations  and orders
promulgated thereunder.

                  1.37  Lender  shall  mean  AJG  Financial  Services,  Inc.,  a
Delaware corporation.

                  1.38 Lender Release shall mean the  Acknowledgment and Release
in favor of Covol and  Pocahontas  to be entered into by Lender,  in the form of
Exhibit E attached hereto.

                  1.39  License and Binder  Purchase  Agreement  shall mean that
certain License and Binder  Purchase  Agreement to be entered into between Buyer
and Covol, in the form of Exhibit F attached hereto.

                  1.40 Licenses shall mean all licenses and agreements  pursuant
to which  Sellers  have  acquired  rights in or to any  Trademarks,  Patents  or
Copyrights  used by or for the  benefit of the  operation  of the  Facility,  or
licenses and  agreements  pursuant to which Sellers have licensed or transferred
the right to use any such Trademarks,  Patents or Copyrights which constitutes a
part of the Facility.

                  1.41 Lien shall mean any  interest  in  property of any nature
(including,  but not limited to, real and  personal  property  and  tangible and
intangible  property) securing an obligation,  whether such interest is based on
common law,  statute or contract,  and  including  any  restriction  on the use,
voting,  transfer,  receipt of income or other  exercise  of any  attributes  of
ownership,  any  security  interest or lien  arising  from a  mortgage,  claims,
encumbrance,   pledge,   charge,   easement,   servitude,   security  agreement,
conditional  sale or trust  receipt  or a lease,  consignment  or  bailment  for
security purposes. The term "Lien" shall also include reservations,  exceptions,
covenants,  conditions,  restrictions,  leases,  subleases,  licenses,  options,
rights of first  refusal,  occupancy  agreements,  pledges,  equities,  charges,
assessments,  covenants, reservations, defects in title, encroachments and other
burdens,  and other title exceptions and encumbrances  affecting property of any
nature, whether accrued or unaccrued, or absolute or contingent.

                                       7
<PAGE>

                  1.42  Losses  shall  have the  meaning  set  forth in  Section
8.1(a).

                  1.43  Material  Adverse  Effect shall mean a material  adverse
effect on (a) the operation and maintenance of the Facility at the Facility Site
or the New Facility Site, (b) Buyer's good, valid and marketable title to all or
any portion of the Facility, free and clear of all Liens, and (c) the ability of
Buyer to produce  commercially  saleable Section 29 Product from the Facility at
the New Facility Site.

                  1.44 New Facility Site shall mean that certain  parcel of land
located in ** County, Kentucky, where the Facility is to be relocated.

                  1.45 Opinions of Sellers'  Counsel shall mean the opinions of:
(a) Pillsbury Madison & Sutro,  LLP, counsel to Sellers,  in the form of Exhibit
G-1; (b) Harlan Hatfield, General Counsel of Sellers, in the form of Exhibit G-2
and (c) Jackson & Kelly, counsel to Sellers, in the form of Exhibit G-3 .

                  1.46 Party shall mean each of, and Parties  shall mean all of,
Buyer, ** (for the sole and limited purpose of Section 10.15), Pocahontas, Covol
and Synfuel.

                  1.47 Patents  shall mean issued U.S.  and foreign  patents and
pending  patent  applications,  patent  disclosures  and any and all  divisions,
continuations,  continuations-in-part,  reissues,  re-examinations and extension
thereof, any counterparts claiming priority therefrom,  utility models,  patents
of  importation/confirmation,  certificates  of  invention  and  like  statutory
rights.

                  1.48  Payoff  Amount  shall mean an amount  equal to the total
outstanding principal, accrued but unpaid interest and other costs and expenses,
if any,  owed by Covol  and/or  Pocahontas  to Lender as of the Closing  Date in
complete  satisfaction of the then outstanding debt with Lender pursuant to that
certain Loan and Security Agreement,  dated February 26, 1998, between Covol and
Lender and the Secured Draw Down  Promissory  Note,  dated February 26, 1998, by
Covol in favor of Lender,  which amount Covol shall certify in Sellers'  Closing
Certificates.

                  1.49  Permitted  Liens  shall  mean (a)  Liens  (but  only for
amounts not yet due and payable)  securing  taxes,  assessments or  governmental
charges or levies,  and (b) Liens which are (i) not in excess of $5,000.00 or of
an immaterial nature

                                       8
<PAGE>

which do not have a Material  Adverse Effect and (ii) disclosed on Schedule 1.49
attached hereto.

                  1.50  Person  shall  mean  a  natural   person,   partnership,
corporation,  limited liability  company,  business trust,  joint stock company,
trust,  unincorporated  association,  joint  venture,  administrative  agency or
commission  or other  governmental  or other  regulatory  authority or agency or
other entity or organization.

                  1.51   Pocahontas'   Account   shall  mean  such   account  in
Pocahontas' name as shall be set forth in Sellers' Closing Certificates.

                  1.52 Product shall mean the solid  synthetic fuel produced and
sold at the Facility using and pursuant to the Covol Process.

                  1.53  Purchase  Consideration  shall have the meaning given to
such term in Section 2.2.

                  1.54  Real   Property   Owners   shall  mean   Black   Diamond
Enterprises,  Inc.,  a  Virginia  corporation,  Bygoma  Energy,  L.L.C.,  a West
Virginia limited liability company,  Norman Mullins,  an individual past the age
of majority in, and resident of,  Virginia,  and Ralph Woods, an individual past
the age of majority in, and resident of Virginia.

                  1.55 Release shall mean any release,  spill, leak,  discharge,
disposal of, pumping, pouring, emitting, emptying, injecting,  leaching, dumping
or allowing to escape into or through the environment.

                  1.56  Relocation  Period shall mean the Use Period (as defined
in the Use and  Non-Disturbance  Agreement)  and any Extended Use  Period(s) (as
defined in the Use and Non-Disturbance Agreement).

                  1.57  Remaining  Initial  Consideration  shall  mean an amount
equal to the  greater of (i) the amount of the  difference  between  the Initial
Consideration and the Payoff Amount and (ii) zero (0).

                  1.58 Required  Consents shall mean (a) in the case of Sellers,
all  consents,  approvals  and  waivers  of any  Persons  that are  required  in
connection with the sale, conveyance,  transfer,  delivery and assignment of the
Facility by Sellers to

                                       9
<PAGE>

Buyer and the  execution  and  delivery  by  Sellers of this  Agreement  and the
Transaction  Documents and the  performance of their  obligations  hereunder and
thereunder and (b) in the case of Buyer, all consents,  approvals and waivers of
any Persons that are required in connection  with the purchase and acceptance of
the Facility by Buyer and the execution and delivery by Buyer of this  Agreement
and the Transaction  Documents and the performance of its obligations  hereunder
and thereunder,  in each case, including,  but not limited to, (i) any consents,
approvals  and waivers from  parties to loan  agreements,  contracts,  leases or
other agreements and from governmental  authorities,  whether federal,  state or
local  and  (ii)  any  consents,   approvals  or  resolutions  of  directors  or
shareholders of any Party or any other Person.

                  1.59 Section 29 Product shall mean Product which constitutes a
"qualified  fuel"  pursuant to the terms of Section  29(c)(1)(C) of the Code and
with respect to which Section 29 of the Code is applicable pursuant to the terms
of Sections 29(f) and 29(g) of the Code.

                  1.60  Sellers'   Affidavits  shall  mean  such  affidavits  of
directors,  officers  and/or  employees  of Sellers as Buyer may  request (i) to
substantiate Sellers' representations and warranties in Section 3.18 and (ii) as
to such other matters as Buyer may reasonably request.

                  1.61 Sellers' Closing  Certificates shall mean the certificate
of an  officer  of  each  Seller,  certifying  as to  the  satisfaction  of  the
conditions  set forth in Article VI and to such other  matters as are  expressly
provided for herein or which Buyer may request.

                  1.62 Sellers'  Indemnified  Persons shall have the meaning set
forth in Section 8.2(a).

                  1.63   Sellers'   Intellectual   Property   shall   mean   all
Intellectual Property that is used in connection with the Facility.

                  1.64 Sellers' Officer  Certificates shall mean certificates of
the corporate  secretary (or equivalent  officer) of each Seller, in the form of
Exhibits  I-1, I-2 and I-3  attached  hereto,  certifying  as to the matters set
forth in Exhibits  I-1,  I-2 and I-3 attached  hereto and such other  matters as
Buyer may reasonably request.

                                       10
<PAGE>

                  1.65 Solvent  shall mean as to each Seller,  (a) the assets of
such Seller,  both at a fair valuation and at present fair salable value, exceed
its debts,  (b) the present fair salable value of such Seller's  assets  exceeds
the amount that will be required to pay its  profable  liability on its existing
debts as they become absolute and matured,  (c) such Seller is generally  paying
its debts as they become due, (d) such Seller will have sufficient  capital with
which to conduct  its  business  as  presently  conducted  and as proposed to be
conducted  and (e) such Seller has not  incurred  debts,  and does not intend to
incur debts,  beyond its ability to pay such debts as they mature.  For purposes
of this definition,  (i) "debt" means any liability on a claim, and (ii) "claim"
means (x) a right to payment,  whether or not such right is reduced to judgment,
liquidated,  unliquidated,  fixed,  contingent,  matured,  unmatured,  disputed,
undisputed,  secured,  or unsecured  or (y) a right to an  equitable  remedy for
breach of  performance  if such breach  gives rise to a payment,  whether or not
such right to an  equitable  remedy is reduced to judgment,  fixed,  contingent,
matured, unmatured,  disputed,  undisputed, secured or unsecured; provided, that
with respect to any contingent debts, such debts shall be computed at the amount
which,  in  light of all the  facts  and  circumstances  existing  at the  time,
represents  the amount which can  reasonably  be expected to become an actual or
matured debt.

                  1.66 Subsequent Consideration shall have the meaning set forth
in Section 2.2.

                  1.67  Trademarks  shall mean U.S. and foreign  registered  and
unregistered  trademarks,  trade  dress,  service  marks,  logos,  trade  names,
corporate names and all registrations and applications to register the same.

                  1.68 Trade Secrets shall mean all  categories of trade secrets
as defined in the Uniform Trade Secrets Act, including business information.

                  1.69 Transaction Documents shall mean this Agreement, the Bill
of Sale, the Use and Non-Disturbance  Agreement,  the Cooperation Agreement, the
Lender  Release,  the UCC  Termination  Statement(s)  and those  agreements  and
instruments to be executed and delivered as provided in Section 2.3.

                  1.70 Transfer Taxes shall mean any property  transfer or gains
tax, sales tax,  conveyance fee, use tax, stamp tax, stock transfer tax or other
similar tax, including any related penalties, interest and additions to tax.

                                       11
<PAGE>

                  1.71 UCC shall mean the Uniform  Commercial  Code of the State
of New York.

                  1.72 UCC  Termination  Statement(s)  shall mean those  filings
(including,  but not limited to, UCC termination statements),  registrations and
recordings  which Buyer may, in its sole  discretion,  require to terminate  any
filings (including, but not limited to, UCC financing statements), registrations
or recordings with respect to the Facility,  including,  but not limited to, UCC
termination  statements terminating all of Lender's UCC financing statements and
other filings with respect to the Facility.

                  1.73 Use and Non-Disturbance  Agreement shall mean the Use and
Non-Disturbance  Agreement to be entered into between Buyer and each of the Real
Property Owners, in the form of Exhibit J attached hereto.

                                   ARTICLE II
                                PURCHASE AND SALE

                  2.1      Purchase and Sale; Assignment.

                  Buyer and Sellers  hereby agree that at the Closing,  and upon
all of the terms and subject to all of the conditions of this Agreement:

                           (a) Pocahontas shall sell, convey, transfer,  deliver
and assign to Buyer,  and Buyer shall purchase and accept from  Pocahontas,  the
Fixed Assets and the Books and Records, free and clear of all Liens; and

                           (b) Covol and Synfuel  shall,  to the extent to which
they have any right, title or interest in, to and under the Fixed Assets and the
Books and  Records,  convey,  transfer,  deliver and assign to Buyer,  and Buyer
shall purchase and accept from Covol and Synfuel, the Fixed Assets and the Books
and Records, free and clear of all Liens.

                  2.2      Payment of the Purchase Consideration.

                  In  consideration  of  Sellers'  sale,  conveyance,  transfer,
delivery  and  assignment  of the  Facility  to  Buyer  on the  Closing  Date in
accordance with this Agreement, Buyer shall:

                                       12
<PAGE>

                           (a) on the  Closing  Date,  make  a cash  payment  to
Pocahontas  in the amount of ** ($**) (the "Initial  Consideration")  payable by
wire transfer in readily  available  funds as follows:  (i) the Payoff Amount to
Harris  Trust &  Savings  Bank,  ABA # 071 000  288,  Account  #  160-4586,  AJG
Financial  Services,  Inc.,  for the  account of Lender  and (ii) the  Remaining
Initial Consideration to Pocahontas' Account; and

                           (b) on the  Commercial  Operation  Date,  make a cash
payment  to  Pocahontas  in the  amount of **  Dollars  ($**)  (the  "Subsequent
Consideration"  and  together  with the payments  described  in clauses  (a)(i),
(a)(ii) of this  Section  2.2,  the  "Purchase  Consideration")  payable by wire
transfer in readily available funds to Pocahontas' Account;  provided,  however,
that Buyer shall have no obligation to make payment to Sellers of the Subsequent
Consideration in the event that the Commercial Operation Date is not achieved.

                  2.3      Deliveries at Closing.

                           (a) By  Sellers  to Buyer.  At the  Closing,  Sellers
shall deliver, or cause to be delivered, to Buyer the following documents,  each
fully  executed  (other  than by Buyer) and dated as of the  Closing  Date,  and
otherwise in form and substance satisfactory to Buyer:

                                    (i) the Bill of Sale;

                                    (ii)  the   License   and  Binder   Purchase
Agreement;

                                    (iii) the Use and Non-Disturbance  Agreement
and the Cooperation Agreement;

                                    (iv) the  agreements  listed on Schedule 3.5
attached hereto;

                                    (v) the Lender Release;

                                    (vi) the UCC Termination Statement(s);

                                    (vii) the Buyer Financing Statement(s);

                                       13
<PAGE>

                                    (viii)  the   Sellers'   Required   Consents
specified on Schedule 3.12 attached hereto;

                                    (ix) the Opinions of Sellers' Counsels;

                                    (x) the Sellers' Affidavits;

                                    (xi) the Sellers' Closing Certificates;

                                    (xii) the  Sellers'  Officers  Certificates;
and

                                    (xii)  all  such  other  agreements,  deeds,
endorsements,  assignments  and  other  instruments  as Buyer  may,  in its sole
discretion,  request to vest in Buyer good,  valid and  marketable  title to the
Facility,  free and  clear of all  Liens,  and to  consummate  the  transactions
contemplated herein.

                           (b) By Buyer to Sellers. At the Closing,  Buyer shall
deliver,  or cause to be  delivered,  to Sellers the following  documents,  each
executed by Buyer and dated as of the  Closing  Date by Buyer and  otherwise  in
form and substance satisfactory to Sellers:

                                    (i)  the   License   and   Binder   Purchase
Agreement;

                                    (ii) the Use and Non-Disturbance Agreement;

                                    (iii)   the   Buyer's   Required    Consents
specified on Schedule 4.5 attached hereto;

                                    (iv) the  agreements  listed on Schedule 4.3
attached hereto;

                                    (v) the Buyer's Closing Certificate; and

                                    (vi) the Buyer's Officers Certificates.

                                       14
<PAGE>

         2.4 Allocation of Purchase Price.

         On the Closing Date,  or at a later time agreed to by the Parties,  not
to  exceed  thirty  (30)  days   following   the  Closing  Date,   the  Purchase
Consideration  shall be allocated among the Fixed Assets, in accordance with the
allocation  to be  agreed  to by the  Parties  and set  forth in  writing.  Such
allocation  shall be intended to comply with the requirements of Section 1060 of
the Code, and no Party shall take any position inconsistent with such allocation
for income tax  purposes,  except  that  Buyer's  cost for the Fixed  Assets may
differ from the amount so allocated to the extent  necessary to reflect  Buyer's
capitalized acquisition costs other than the Purchase Consideration.

         2.5 No Assumption of Liabilities.

         Notwithstanding  anything to the  contrary in this  Agreement or any of
the Transaction  Documents,  Buyer does not and will not assume any liability or
obligation  of  Sellers  of  whatever  nature  or  kind,   whether  absolute  or
contingent,  accrued or unaccrued,  asserted or unasserted, known or unknown, or
otherwise,  including,  but not limited to, (i) any  liability or  obligation of
Sellers  arising out of, in respect of, or relating to the  ownership  or use of
the Facility or  performance  by Sellers  under any of the Contracts or (ii) any
liabilities  or  obligations  of  Sellers  arising  out  of  the   Environmental
Conditions  at,  on,  under  or  related  to the  Facility  Site or  arising  in
connection with or under  Environmental  Law in connection with the operation of
the Facility (collectively, the "Excluded Liabilities").

         2.6 Prorations.

         As of the Closing Date, any utility charges,  personal  property taxes,
assessments  or other  governmental  charges or levies  relating to the Facility
shall be prorated as of the Effective  Time. Such prorations may be estimated as
necessary  and final  settlement  shall be made  within  ninety (90) days of the
Closing Date.

         2.7 Sales Tax Exemption.

         All Transfer Taxes  incurred in connection  with this Agreement and the
Transaction Documents and the transactions contemplated hereby and thereby

                                       15
<PAGE>

shall be borne by Sellers. Sellers, at their expense, shall prepare and file, to
the extent  required by  applicable  Law,  all  necessary  tax returns and other
documentation with respect to all such Transfer Taxes. To the extent applicable,
at the Closing,  Buyer shall deliver to Sellers  appropriate sales tax exemption
certificates relating to the transfer of the Facility.

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLERS

         Each Seller represents and warrants to Buyer that all of the statements
by such Seller and each of the other  Sellers  contained in this Article III are
true  and  complete  as of the  date  of  this  Agreement  (or,  if made as of a
specified  date,  as of such  date),  and  will be true and  complete  as of the
Closing Date as though made on the Closing Date:

         3.1 Corporate Standing.

                  (a) Each Seller is a corporation or limited  liability company
duly  organized and validly  existing and in good standing under the laws of its
state of organization or incorporation.

                  (b)  Each  Seller  has the  power to own its  property  and to
execute,  deliver  and  perform  this  Agreement  and  each  of the  Transaction
Documents  to which it is a party,  and to carry on its  business  as now  being
conducted.

                  (c) Each Seller is duly  qualified to do business in and is in
good standing as a foreign corporation or limited liability company,  authorized
to do business under the laws of the States of Utah and West Virginia.

         3.2 Authorizations; Binding Agreements.

                  (a) Each  Seller has full  corporate  power and  authority  to
execute and deliver this Agreement and the other Transaction  Documents to which
it is a party and to consumate the transactions contemplated herein and therein.

                  (b) The execution,  delivery and performance by each Seller of
this  Agreement and the other  Transaction  Documents to which it is a party and
each conveyance, assignment, agreement and other document herein and therein

                                       16
<PAGE>

contemplated  to be executed by each  Seller,  has been duly  authorized  by all
necessary corporate and company action.

                  (c) No vote of, or  consent  by,  the  holders of any class or
series  of  stock  or  indebtedness   having  general  voting  rights  and  debt
convertible  into  securities  having  such  rights  issued  by each  Seller  is
necessary to authorize the execution and delivery by it of this Agreement or the
other Transaction  Documents to which it is a party or the consummation by it of
the transactions contemplated hereby and thereby.

                  (d) This Agreement and the other Transaction Documents and the
conveyances, assignments, agreements, and other documents herein contemplated to
be  executed,  delivered  and  performed  by  each  Seller  is,  or will be upon
execution,  legal,  valid and  binding  obligations  of each such  Seller,  duly
enforceable against such Seller in accordance with its terms (subject,  however,
to the effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws  from  time to time in  effect  relating  to the  rights  and  remedies  of
creditors as well as to general principles of equity).

                  (e) This Agreement and the other Transaction Documents and the
conveyances,  assignments,  agreements  and other  documents  herein and therein
contemplated to be executed, delivered and performed by each Seller (i) does not
and will not result in any  violation  of,  conflict  with or default  under the
terms of any of such Seller's organizational documents (nor, to the Knowledge of
Sellers,  does there exist any  condition  which upon the passage of time or the
giving of notice  would cause such  violation,  conflict or  default),  and (ii)
subject only to Sellers' Required Consents,  does not and will not result in any
violation  of,  conflict  with or default  under any  Contract,  any  collective
bargaining  agreement,  any  permit,  or  any  other  material  lease,  venture,
indenture, mortgage, agreement, contract, judgment, order or other obligation or
restriction  to which such  Seller or the  Facility  may be bound or  encumbered
(nor, to the Knowledge of Sellers, does there exist any condition which upon the
passage of time or the giving of notice would cause such violation,  conflict or
default).

         3.3 No Consents.

         Subject only to Sellers'  Required  Consents,  each Seller has obtained
all  permits,  licenses,  franchises,  authorizations,   variances,  exemptions,
concessions,

                                       17
<PAGE>

leases, instruments,  orders, consents or approvals of governmental entities and
third parties  necessary to construct,  maintain and operate the Facility at the
Facility Site and to execute,  deliver and perform this  Agreement and the other
Transaction Documents to which it is a party.

         3.4 Taxes.

         All tax returns and reports relating to the Facility and the conduct of
the  construction,  maintenance  and  operation of the Facility  required by law
(including all federal,  state and local  property tax,  severance and franchise
tax laws) to be filed by Sellers  prior to the Closing have been timely filed or
will be caused to be timely  filed,  including  those tax  returns  relating  to
periods  prior to Closing  that are not yet due. All taxes,  assessments,  fees,
interest,  penalties and other governmental  charges relating to the Facility or
the conduct of the construction, maintenance and operation of the Facility prior
to Closing have been paid when due and payable or payment has been provided for.

         3.5 Brokers or Finders Fees.

         Except as set  forth in  Schedule  3.5  attached  hereto,  there are no
obligation or liability,  contingent or otherwise, for broker's or finder's fees
created by Sellers  with respect to the matters  provided for in this  Agreement
and the other Transaction Documents.  No obligation or liability for broker's or
finder's  fees created by Sellers  with  respect to the matters  provided for in
this Agreement and the other  Transaction  Documents shall be imposed upon Buyer
or the Facility.

         3.6 No Imposition of Liens.

         The execution, delivery and performance of this Agreement and the other
Transaction  Documents by each Seller shall not result in the  imposition of any
Lien, other than Permitted Liens, upon the Facility.

         3.7 Title to Assets; Good Title Conveyed.

         Except as set forth on Schedule 3.7 attached hereto,  Sellers own good,
valid and marketable title to all of the Facility, free and clear of any and all
Liens, except for Permitted Liens. The Bill of Sale and the deeds, endorsements,
assignments  and other  instruments  to be executed and  delivered by Sellers to
Buyer

                                       18
<PAGE>

at the Closing will be valid and binding obligations of Sellers,  enforceable in
accordance with their respective terms, and will effectively vest in Buyer good,
valid and marketable title to all of the Facility, free and clear of any and all
Liens, except for Permitted Liens.

         3.8 Condition of Assets.

         Except as set forth on Schedule 3.8 attached hereto, the Facility is in
good operating  condition and repair and is adequate and  substantially  fit for
the production and sale of Section 29 Product at a rate of at least 360,000 tons
per year, and the Facility has been  constructed in conformance with that degree
of  skill  and  judgment  normally  exercised  by  recognized   engineering  and
construction  firms of similar size and  experience  to that of the  contractors
under the  Contracts,  and the assets  comprising  the  Facility  conform to the
standards of material and workmanship prevailing in applicable  industries,  are
free from  material  defects in design,  material and  workmanship,  are of good
quality  and are not in need of  maintenance  or repairs,  except for  ordinary,
routine maintenance and repairs which are not material in nature or cost.

         3.9 Litigation.

         Except as  disclosed  on Schedule  3.9  attached  hereto,  there are no
actions, suits, inquiries,  proceedings or investigations by or before any court
or  governmental  or other  regulatory  or  administrative  agency or commission
pending or, to the Knowledge of Sellers, threatened against or involving Sellers
or the Facility, or which questions or challenges the validity of this Agreement
or any of the  Transaction  Documents  or any  action  taken  or to be  taken by
Sellers  pursuant  to this  Agreement  or any of the  Transaction  Documents  in
connection  with the  transactions  contemplated  herein or therein,  and to the
Knowledge  of  Sellers,  there is no valid  basis  for any  such  action,  suit,
inquiry,  proceeding or  investigation.  There are no outstanding or unsatisfied
judgments, orders or decrees against Sellers or the Facility.

                                       19
<PAGE>

         3.10 Compliance with Laws.

         Each  Seller  has  complied  in a  timely  manner  and in all  material
respects with all orders, writs, injunctions, decrees, judgments, rulings, laws,
rules and regulations and ordinances of all federal, state and local governments
and agencies thereof that affect the business,  properties or assets (including,
but not limited to, the Facility) of such Seller, and no notice,  charge, claim,
action or assertion has been received by any Seller or has been filed, commenced
or, to the Knowledge of Sellers,  threatened  against any Seller or the Facility
alleging any violation of any of the foregoing.

         3.11 Status of Contracts.

         Schedule 1.16 attached  hereto is a true,  correct and complete list of
all  agreements  entered  into  by or on  behalf  of  Sellers  relating  to  the
engineering, design, construction,  operation and/or maintenance of the Facility
which  commit  one or more  Sellers  to spend  more than  $15,000.00.  Except as
described in Schedule  3.11  attached  hereto,  each of the  Contracts is valid,
binding and  enforceable  against Sellers in accordance with its terms (subject,
however, to the effects of bankruptcy,  insolvency,  reorganization,  moratorium
and similar laws from time to time in effect relating to the rights and remedies
of  creditors  as well as to  general  principles  of  equity),  and there is no
violation of,  conflict with or default under the Contracts,  the consequence of
which could  reasonably be expected to have a Material  Adverse Effect.  Sellers
have not  received  any notice  from any party to any  Contract  that such party
intends  to  terminate,  cancel or  refuse to renew the same or that such  party
intends  to offset  any  amount  due  thereunder  or assert  any  defense to the
enforceability thereof.

         3.12 Consents.

         Schedule 3.12 attached  hereto is a true,  correct and complete list of
all of Sellers' Required Consents.

         3.13 Books and Records.

         The Books and  Records  shall be complete  and correct in all  material
respects.

                                       20
<PAGE>

         3.14 Environmental Matters.

         Except as set forth on Schedule 3.14 attached hereto:

                  (a)  Sellers  have not  operated  the  Facility  or  conducted
business or other  activities  at or from the Facility,  in connection  with the
construction  of the  Facility or  otherwise,  in a manner that  constituted  or
constitutes a violation of any applicable Environmental Law.

                  (b)  Sellers  have  heretofore  delivered  to  Buyer  true and
complete  copies of all  environmental  studies  made in the last five (5) years
relating to the Facility and the Facility Site.

                  (c)  There is no civil,  criminal  or  administrative  action,
suit, demand, claim, hearing,  notice of violation,  investigation,  proceeding,
notice or demand letter, or request for information,  existing or pending, or to
the Knowledge of Sellers,  threatened,  relating to the Facility or the Facility
Site,  relating in any way to the  Environmental  Laws or Hazardous  Substances,
including,  but not limited to,  claims,  notices or  requests  for  information
arising under the federal Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601, et seq. or analogous state or local laws.

                  (d)  Sellers  have not,  and no other  Person  has,  Released,
discharged,  or otherwise  disposed of any Hazardous  Substances  on, beneath or
adja cent to the  Facility  or the  Facility  Site,  except for (i)  Releases of
Hazardous Substances subject to and in compliance with a permit or authorization
pursuant  to  applicable  Environmental  Law or  (ii)  Releases,  discharges  or
disposals that are not reasonably likely to result in a claim against Sellers or
Buyer.

                  (e)  Sellers  have not  received  any notice or order from any
governmental  agency or private  or public  entity  advising  them that they are
responsi ble for or potentially  responsible for  investigation,  remediation or
cleanup of any Hazardous Substances at any location,  including, but not limited
to, the Facility or Facility  Site,  and have not entered into any agreements or
consent decrees or order, or been the subject of unilateral  orders,  concerning
such investigation,  remediation or cleanup,  nor are Sellers aware of any facts
which might reasonably give rise to such notice, order, decree or agreement.

                                       21
<PAGE>

                  (f) All tanks on or under the Facility Site have been emptied,
all lines on or under the Facility Site have been purged and all containments on
or under the Facility Site have been emptied.

         3.15 Liabilities.

         Except for liabilities  underlying any Permitted Liens, Sellers have no
liabilities which could reasonably be expected to have a Material Adverse Effect
following the Closing, nor has any condition existed or any event occurred which
could reasonably be expected to give rise to any such liability.

         3.16 Agreements with Related Persons.

         There are no contracts,  licenses,  agreements or arrangements with any
Affiliate of Sellers in connection with the construction, maintenance, ownership
and operation of the Facility, other than as disclosed on Schedule 3.16 attached
hereto.

         3.17 Adequacy of the Purchased Assets.

         Except as  described in Schedule 3.8  attached  hereto,  the  Facility,
together with (i) the  technology  and know-how being licensed to Buyer by Covol
pursuant to the License and Binder Purchase Agreement,  (ii) the chemical binder
to be  supplied  to  Buyer  by Covol  under  the  License  and  Binder  Purchase
Agreement,  and (iii)  relocation-specific  rights and assets (including but not
limited to relocation  construction  contracts,  feedstock raw  materials,  real
property  rights,  permits,  etc.) which Buyer may arrange for but which are not
the  subject of this  Agreement,  constitute  all of the  assets and  technology
rights  reasonably  expected  to be  necessary  for the  production  by Buyer of
Section 29 Product at the New Facility Site at the rate of at least 360,000 tons
per year.

         3.18 Section 29 Issues.

                  (a)  The  Facility  satisfies  the  requirements  of  Sections
29(f)(1)(B)  and (g)(1)(A) of the Code of having been placed "in service"  prior
to July 1,  1998  pursuant  to a binding  written  contract  in effect  prior to
January 1, 1997 and  effective at all times  thereafter  through  completion  of
construction.

                                       22
<PAGE>

                  (b) The  Construction  Agreement was, and the parties  thereto
treated  the  Construction   Agreement  as,  a  valid  and  binding   agreement,
enforceable  in  accordance  with its terms at all times from  December 26, 1996
until July 1, 1998, and neither party to the Construction  Agreement provided or
received any notice of default, breach, termination or intent to terminate prior
to July 1, 1998.

                  (c) The sale of the Product produced at the Facility using the
Covol Process constitutes a "qualified fuel" for purposes of Section 29(c)(1)(C)
of the Code and is eligible for the credit under Section 29(a) of the Code.

                  (d) The sale and relocation of the Facility will not cause the
Facility to fail to satisfy the placed in-service  requirements of Section 29(f)
and (g) of the Code or otherwise  cause the sale of the Product  produced at the
Facility using the Covol Process not to be eligible for the credit under Section
29(a) of the Code.

                  (e) There have not been any grants,  tax-exempt  financing  or
subsidized energy financing  provided in connection with the Facility within the
meaning of Section 29(b)(3) of the Code.

                  (f) No rulings have been  requested  from the IRS with respect
to the  Facility  or the  Construction  Agreement  prior  to the  date  of  this
Agreement.

         3.19 Intellectual Property.

                  Sellers  own, or are  licensed or  otherwise  possess  legally
enforceable rights to use Sellers' Intellectual  Property,  and the consummation
of the transactions  contemplated  herein and in the Transaction  Documents will
not alter or impair  such  ability  in any  respect.  There are no  oppositions,
cancellations,   invalidity   proceedings,   interferences   or   re-examination
proceedings  presently pending with respect to Sellers'  Intellectual  Property.
The conduct of the business of the Facility and Sellers'  Intellectual  Property
does not  infringe any  Intellectual  Property  rights or any other  proprietary
right of any Person,  and Sellers have not received any written  notice from any
other Person  pertaining  to or  challenging  the right of Sellers to use any of
Sellers' Intellectual  Property.  Sellers have not made any claim of a violation
or  infringement  by others  of its  rights to or in  connection  with  Sellers'
Intellectual Property which is still pending.

                                       23
<PAGE>

                  3.20 Product Liability.  There are not presently pending,  or,
to the Knowledge of Sellers, threatened, and, to the Knowledge of Sellers, there
is no basis for, any civil, criminal or administrative  actions, suits, demands,
claims, hearings,  notices of violation,  investigations,  proceedings or demand
letters relating to any alleged hazard or alleged defect in design, manufacture,
materials or  workmanship,  including  any failure to warn or alleged  breach of
express or implied warranty or representation,  relating to any Product produced
at the Facility.

         3.21 Ownership.

                  (a) Synfuel is a wholly owned subsidiary of Covol,  with Covol
owning all the outstanding capital stock of Synfuel, free and clear of all Liens
and all material claims or charges of any kind, and all such outstanding capital
stock of Synfuel is validly issued, fully paid and nonassessable,  and there are
no  outstanding  options,  rights  or  agreements  of any kind  relating  to the
issuance,  sale or transfer of any capital  stock or other equity  securities of
Synfuel.

                  (b)  Pocahontas  is an indirect  wholly  owned  subsidiary  of
Covol,  with Covol owning  directly a ninety-nine  percent (99%) member interest
and  indirectly,  through its  ownership  of Synfuel,  a one percent (1%) member
interest  in  Pocahontas,  in each  case,  free and  clear of all  Liens and all
material  claims  or  charges  of any kind,  and all such  member  interests  of
Pocahontas are validly issued,  fully paid and  nonassessable,  and there are no
outstanding options,  rights or agreements of any kind relating to the issuance,
sale  or  transfer  of  any  member  interest  or  other  equity  securities  of
Pocahontas.

         3.22 Full Disclosure.  Sellers have not failed to disclose to Buyer any
facts  material to the business,  results of  operations,  assets,  liabilities,
financial condition or prospects of the Facility.  No representation or warranty
by any Seller contained in this Agreement or any of the Transaction Documents to
which  such  Seller  is a party  and no  statement  contained  in any  document,
certificate or other writing furnished or to be furnished by any Seller to Buyer
or any of its representatives pursuant to the provisions hereof or thereof or in
connection with the  transactions  contemplated  herein or therein,  contains or
will  contain any untrue  statement  of  material  fact or omits or will omit to
state any material fact necessary,  in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.

                                       24
<PAGE>

         3.23  Solvency.  Each of the Sellers is and, after giving effect to the
transactions  contemplated in this Agreement and the Transaction Documents, will
be Solvent.

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer  represents  and warrants to Sellers  that all of the  statements
contained  in this  Article  IV are  true  and  complete  as of the date of this
Agreement  (or, if made as of a specified  date,  as of such date),  and will be
true and complete as of the Closing Date as though made on the Closing Date:

         4.1 Organization and Standing.

         Buyer is a corporation duly organized,  validly  existing,  and in good
standing under the laws of the Commonwealth of Kentucky and has the power to own
its own property, and to execute, deliver and perform this Agreement and each of
the Transaction  Documents to which it is a party,  and to carry on its business
as now being conducted.

         4.2 Authorizations; Binding Agreements.

                  (a) Buyer has full  corporate  power and  authority to execute
and deliver this Agreement and the other Transaction Documents to which Buyer is
a party and to consummate the transactions contemplated herein and therein.

                  (b) The execution,  delivery and  performance by Buyer of this
Agreement and the other Transaction Documents to which it is a party and of each
conveyance,   assignment,  agreement  and  other  document  herein  and  therein
contemplated  to be executed by it have been fully  authorized  by all necessary
corporate action (other than approval by Buyer's board of directors).

                  (c) No vote of, or  consent  by,  the  holders of any class or
series  of  stock  or  indebtedness   having  general  voting  rights  and  debt
convertible  into securities  having such rights issued by Buyer is necessary to
authorize  the  execution  and delivery by Buyer of this  Agreement or the other
Transaction  Documents to which it is a party or the  consummation  by it of the
transactions contemplated hereby and thereby.

                                       25
<PAGE>

                  (d) This  Agreement  and the other  Transaction  Documents  to
which Buyer is a party and the  conveyances,  assignments,  agreements and other
documents  herein  and  therein  contemplated  to  be  executed,  delivered  and
performed  by Buyer are,  or will be upon  execution,  legal,  valid and binding
obligations of Buyer,  duly  enforceable  against Buyer in accordance with their
terms   (subject,   however,   to  the   effects  of   bankruptcy,   insolvency,
reorganization, moratorium and similar laws from time to time in effect relating
to the rights and  remedies of  creditors  as well as to general  principles  of
equity).

                  (e) This  Agreement  and the other  Transaction  Documents  to
which Buyer is a party and the  conveyances,  assignments,  agreements and other
documents  herein  and  therein  contemplated  to  be  executed,  delivered  and
performed by Buyer (i) do not and will not result in any violation of,  conflict
with or default under the terms of Buyer's  organizational  documents,  and (ii)
subject  only to Buyer's  Required  Consents,  do not and will not result in any
violation  of,  conflict  with or  default  under any  material  permit,  lease,
venture,  indenture,  mortgage,  agreement,  contract,  judgment, order or other
obligation  or  restriction  to which Buyer is bound (nor,  to the  Knowledge of
Buyer,  does there  exist any  condition  which upon the  passage of time or the
giving of notice would cause such violation, conflict or default).

         4.3 Brokers or Finders Fees.

         Except as set  forth on  Schedule  4.3  attached  hereto,  there are no
obligations or  liabilities,  contingent or otherwise,  for broker's or finder's
fees created by Buyer with respect to the matters provided for in this Agreement
and the other Transaction Documents.

         4.4 No Actions  Affecting  Enforcement  of the  Agreement and the other
Transaction Documents.

         Except as  disclosed  on Schedule  4.4  attached  hereto,  there are no
actions, suits, inquiries,  proceedings or investigations by or before any court
or  governmental  or other  regulatory  or  administrative  agency or commission
pending or, to the Knowledge of Buyer, threatened against or involving Buyer, or
which  questions  or  challenges  the  validity of this  Agreement or any of the
Transaction  Documents  to which  Buyer is a party or any action  taken or to be
taken by Buyer

                                       26
<PAGE>

pursuant to this Agreement or any of the Transaction  Documents to which it is a
party in connection with the transactions contemplated herein or therein, and to
the  Knowledge  of Buyer  there is no valid  basis  for any such  action,  suit,
inquiry, proceeding or investigation.

         4.5 Consents.

         Schedule 4.5 attached  hereto is a true,  correct and complete  list of
all of Buyer's Required Consents.

                                    ARTICLE V
                      CERTAIN UNDERSTANDINGS AND AGREEMENTS

         5.1 Subsequent Actions.

                  (a) Subject to the terms and conditions herein provided,  each
of the Parties agrees to use commercially  reasonable  efforts to take, or cause
to be taken, all action,  and to do, or cause to be done, all things  necessary,
proper and advisable under applicable Law, and to obtain the Required  Consents,
necessary to consummate and make effective the transactions contemplated by this
Agreement,  including,  but not limited  to,  Buyer  agrees to use  commercially
reasonable  efforts (i) to relocate the Facility to the New Facility Site,  (ii)
to produce and sell  Section 29 Product  from the  Facility at the New  Facility
Site,  (iii) to achieve the Commercial  Operation Date by no later than December
31, 2000 and (iv) to provide Sellers with monthly  production records indicating
the quantity of Product produced at the Facility at the New Facility Site.

                  (b) If at any  time  after  the  Effective  Time,  Buyer  will
consider or be advised that any deeds, bills of sale, instruments of conveyance,
financing statements, powers of attorney,  assignments,  assurances or any other
actions  or things  are  necessary  or  desirable  to vest,  perfect  or confirm
ownership (of record or otherwise) in the Facility, its right, title or interest
in,  to or under  any or all of the  Facility  or  otherwise  to carry  out this
Agreement,  Sellers  shall  execute  and  deliver  all  deeds,  bills  of  sale,
instruments of conveyance, financing statements, powers of attorney, assignments
and  assurances  and take or do,  or cause to be taken or done,  all such  other
actions and things as may be requested by Buyer in order to

                                       27
<PAGE>

vest,  perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Facility or otherwise to carry out this
Agreement.

                  (c) In case at any time after the  Effective  Time any further
action is  necessary,  proper or  desirable  to carry out the  purposes  of this
Agreement, as soon as reasonably practicable, each Party shall take or cause its
proper  officers or directors to take, all such  necessary,  proper or desirable
action. Buyer and Sellers will execute any additional  instruments  necessary to
consummate the transactions contemplated hereby.

         5.2 Public Announcements.

         Buyer and Sellers will consult with each other before issuing any press
release or otherwise  making any public statement with respect to this Agreement
and the  transactions  contemplated  herein,  and  shall  not issue or cause the
publication  of any such press  release or make,  or cause to be made,  any such
public  statement  prior to such  consultation  or as to which the  other  Party
reasonably objects,  except as may be required by Law or by obligations pursuant
to any listing agreement with any national  securities  exchange or inter-dealer
quotation system.

         5.3 Confidentiality.

         Notwithstanding  the execution of this Agreement,  the  confidentiality
provisions  of the  Confidentiality  Agreement  shall  remain in full  force and
effect and shall survive the Closing;  provided,  however,  that notwithstanding
anything  to the  contrary  contained  in the  Confidentiality  Agreement,  this
Agreement  or  any  of  the  Transaction   Documents,   the  provisions  of  the
Confidentiality  Agreement  shall not apply to (a) any documents or  information
that Buyer shall  disclose to Affiliates or to other Persons as may be necessary
for Buyer (i) to consummate the transactions  contemplated in this Agreement and
the Transaction Documents, (ii) to operate and maintain the Facility or (iii) to
produce and sell Product at the New Facility Site and (b) any documents prepared
in connection with a proceeding  before or filed with, or other  disclosure made
to, a court,  arbitration  tribunal  or  mediation  service  in order to enforce
Buyer's  rights  arising in connection  with the  termination  of this Agreement
pursuant to Article IX.

                                       28
<PAGE>

         5.4 Taxes.

                  (a)  Following  Closing,  Sellers  shall  timely  file all tax
returns  and  reports   relating  to  the   Facility  and  the  conduct  of  the
construction,  maintenance  and operation of the Facility prior to Closing which
have not  been  filed or were  not yet due to be  filed  prior to  Closing,  and
Sellers shall timely pay all taxes, assessments,  fees, interest,  penalties and
governmental   charges   relating  to  the   Facility  or  the  conduct  of  the
construction,  maintenance  and operation of the Facility prior to Closing which
have not been paid or were not yet due and payable prior to Closing.

                  (b)  Following  Closing,  Buyer  may seek one or more  Private
Letter  Rulings from the IRS as to matters  relating to the Facility and Section
29 of the Code.  Sellers shall  cooperate  with and assist Buyer,  as reasonably
requested by Buyer, in connection with seeking such Private Letter Rulings.

         5.5 Use of and Access to Facility.

         Beginning on the date of this  Agreement  and ending on the last day of
the Relocation Period:

                  (a) Sellers  shall (i)  afford,  or cause to be  afforded,  to
Buyer and its authorized  representatives  reasonable access to the Facility and
to all  books  and  records  relating  to the  Facility  (whether  on or off the
Facility Site), (ii) permit Buyer to make such inspections and to make copies of
such books and records as it may  reasonably  require,  and (iii)  furnish Buyer
with such  financial and operating  data and other  information  concerning  the
Facility  as Buyer  may from  time to time  reasonably  request.  Buyer  and its
authorized  representatives  shall conduct all such inspections in a manner that
will minimize  disruptions  to the business and operations of Sellers and/or the
Facility.

                  (b)   Sellers   agree   that   Buyer   and   its    authorized
representatives  (including its designated  engineers or consultants) may at any
time enter into and upon all or any portion of the Facility or the Facility Site
in order to investigate  and assess,  as Buyer deems necessary or appropriate in
its sole and absolute discretion, the environmental condition of such properties
or the business conducted thereat.  Such investigation may include, but need not
be limited to, the  performance  of soil and surface or ground  water  sampling,
monitoring,  borings or testing  and any other  tests,  investigations,  audits,
assessments, studies, inspections or

                                       29
<PAGE>

other procedures relating to environmental  conditions or Hazardous  Substances.
Sellers  shall  cooperate  with  Buyer  and its  authorized  representatives  in
conducting such investigation, shall provide, or cause to be provided, Buyer and
its  authorized  representatives  full access to the  Facility  and the Facility
Site, together with full permission to conduct such investigation.

                  (c) Sellers  shall grant and  provide,  or cause to be granted
and provided,  to Buyer (at no additional cost to Buyer) such access (including,
but not limited to,  rights of ingress and egress) to the Facility Site as Buyer
may reasonably  request in order to permit Buyer to remove the Facility from the
Facility  Site for a period of up to (12) months  beginning  on the Closing Date
(for purposes of this Section, the "Use Period"); provided, however, that during
the Use Period the  maintenance of the roads that are to be used by Buyer on the
Plant Property (as defined in the Use and Non-Disturbance Agreement) shall be at
Buyer's  expense;  provided  further  that  Buyer  shall have no  obligation  to
maintain such roads for use by any other Person. During the Use Period,  Sellers
shall permit Buyer (at no additional cost to Buyer) to store all or such portion
of the Facility at the Facility Site as Buyer may require.

                  (d) Sellers shall provide, or cause to be provided,  to Buyer,
all utilities  (including,  without  limitation,  gas,  electric,  water,  waste
disposal and telephone) required in connection with the maintenance, removal and
relocation of the Facility by Buyer, provided that Buyer shall reimburse Sellers
for any actual costs or expenses so incurred on behalf of Buyer. Buyer agrees to
provide, or cause to be provided, at its own cost, security at the Facility Site
for so long as the Facility is located at the Facility Site.

         5.6 Damage to Facility.

         In the event  that  after the date of this  Agreement  but  before  the
Closing Date, the Facility shall have been materially and adversely  affected by
reason  of any loss,  taking,  condemnation,  destruction  or  physical  damage,
whether or not insured  against,  Sellers  agree that they shall use  reasonable
best  efforts,  at their own expense,  to repair the Facility such that it is in
materially  the  same   condition  as  it  was  prior  to  such  loss,   taking,
condemnation, destruction or physical damage.

                                       30
<PAGE>

                                   ARTICLE VI
                CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER

         Each and every  obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent,  in each case, in form and substance  satisfactory
to Buyer:

         6.1 No Termination; Compliance with Agreement.

         This Agreement  shall not have been  terminated in accordance  with its
terms,  and Sellers shall have  performed and complied in all material  respects
with all of their  obligations under this Agreement which are to be performed or
complied with by them prior to or on the Closing Date.

         6.2 Actions.

         Each  Seller  shall have taken all  actions,  corporate  or  otherwise,
necessary in connection  with the  execution and delivery of this  Agreement and
the  Transaction  Documents  to which it is a party and the  performance  of its
obligations hereunder and thereunder.

         6.3 Instruments Satisfactory.

         Each of Sellers shall deliver,  or cause to be delivered,  to Buyer the
documents specified in Section 2.3(a), each fully executed (other than by Buyer)
and  dated  as of  the  Closing  Date,  and  otherwise  in  form  and  substance
satisfactory to Buyer.

         6.4 No Litigation.

         No investigation, suit, action or other proceedings shall be threatened
or pending  before any court or  governmental  authority  that seeks  restraint,
prohibition,  damages  or other  relief in  connection  with the  execution  and
delivery of this Agreement or the Transaction  Documents or the  consummation of
the transactions contemplated hereby and thereby.

                                       31
<PAGE>

         6.5 Representations and Warranties.

                  (a) The representations and warranties made by Sellers in this
Agreement  and the  Transaction  Documents  shall  be true  and  correct  in all
respects (subject to any express  qualifications or limitations stated herein or
therein, other than the qualifications and limitations set forth in the provisio
to Sellers'  representations and warranties in the last sentence of Section 3.1)
as of  the  Closing  Date  with  the  same  force  and  effect  as  though  such
representations and warranties had been made on the Closing Date.

                  (b) Between the date of this  Agreement  and the Closing Date,
the Facility  shall not have suffered any material  adverse change in its assets
or operations by reason of any loss, taking, condemnation, destruction, physical
damage or otherwise, whether or not insured against.

         6.6 Material Adverse Change.

                  (a) The  Fixed  Assets  shall  not have  been  materially  and
adversely affected by reason of any loss, taking,  condemnation,  destruction or
physical damage, whether or not insured against.

                  (b) There shall not have occurred any Material Adverse Effect.

                  (c) Neither any  investigation  of the  Facility or Sellers by
Buyer,  nor any document  delivered to Buyer as  contemplated by this Agreement,
shall have revealed any facts or circumstances  which, in the sole and exclusive
judgment of Buyer, reflect in a material adverse way on the financial condition,
assets,  liabilities  (absolute,  accrued,  contingent or otherwise),  business,
operations or prospects of Sellers or the Facility.

         6.7 Board Approval.

         Buyer shall have obtained approval of its Board of Directors to execute
and deliver this  Agreement  and the  Transaction  Documents  and to perform its
obligations hereunder and thereunder.

         6.8 Financing Statements.

                                       32
<PAGE>

         Sellers  shall have  executed,  or cause to be  executed on its behalf,
Buyer's  Financing  Statements,  and such financing  statements  shall have been
filed in the appropriate jurisdiction.

         6.9 Consents.

         All consents and  approvals of any Person  (including,  but not limited
to, Sellers' Required Consents) necessary to the consummation of the Closing and
the  execution  and delivery by Sellers of this  Agreement  and the  Transaction
Documents and the  performance  of their  respective  obligations  hereunder and
thereunder,  including,  but not limited  to, (i) any  consents,  approvals  and
waivers from parties to loan agreements,  contracts,  leases or other agreements
and from governmental authorities,  whether federal, state or local and (ii) any
consents,  approvals or resolutions of directors or shareholders of any Party or
any other Person,  shall have been obtained,  and a copy of each such consent or
approval shall have been provided to Buyer at or prior to Closing.

                                   ARTICLE VII
               CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS

         Each and every  obligation  of Sellers to be  performed  on the Closing
Date  shall be  subject to the  satisfaction  prior to or at the  Closing of the
following  express  conditions  precedent,  in each case,  in form and substance
satisfactory to Sellers:

         7.1 No Termination; Compliance with Agreement.

         This Agreement  shall not have been  terminated in accordance  with its
terms, and Buyer shall have performed and complied in all material respects with
all of its  obligations  under  this  Agreement  which  are to be  performed  or
complied with by it prior to or on the Closing Date.

         7.2 Actions.

         Buyer shall have taken all actions,  corporate or otherwise,  necessary
in  connection  with  the  execution  and  delivery  of this  Agreement  and the
Transaction

                                       33
<PAGE>

Documents  to  which  it is a  party  and  the  performance  of its  obligations
hereunder and thereunder.

         7.3 Instruments Satisfactory.

         Buyer shall deliver, or cause to be delivered, to Sellers the documents
specified in Section 2.3(b),  each executed by Buyer and dated as of the Closing
Date, and otherwise in form and substance satisfactory to Buyer.

         7.4 No Litigation.

         No investigation,  suit, action or other proceeding shall be threatened
or pending  before any court or  governmental  authority  that seeks  restraint,
prohibition,  damages or other relief in connection  with this  Agreement or the
Transaction  Documents  or the  consummation  of the  transactions  contemplated
hereby and thereby.

         7.5 Representations and Warranties.

         The  representations and warranties made by Buyer in this Agreement and
the Transaction  Documents shall be true and correct in all respects (subject to
any express  qualifications  or limitations  stated herein or therein) as of the
Closing Date with the same force and effect as though such  representations  and
warranties had been made on the Closing Date.

         7.6 Consents.

         All consents and  approvals of any Person  (including,  but not limited
to, Buyer's Required Consents)  necessary to the consummation of the Closing and
the  execution  and  delivery  by Buyer of this  Agreement  and the  Transaction
Documents  to  which  it is a party  and the  performance  of  their  respective
obligations  hereunder and  thereunder,  including,  but not limited to, (i) any
consents,  approvals  and waivers  from parties to loan  agreements,  contracts,
leases or other agreements and from governmental  authorities,  whether federal,
state or local and (ii) any consents,  approvals or  resolutions of directors or
shareholders of any Party or any other Person,  shall have been obtained,  and a
copy of each such consent or approval  shall have been provided to Sellers at or
prior to Closing.

                                       34
<PAGE>

                                  ARTICLE VIII
                      INDEMNITIES AND ADDITIONAL COVENANTS

         8.1 Sellers' Indemnity.

                  (a)  Sellers  shall  indemnify  and  hold  harmless  from  and
against,  and agree to defend  promptly  Buyer,  any  Affiliate of Buyer and the
officers, directors, employees, agents, representatives and advisors of Buyer or
any Affiliate of Buyer  (collectively,  "Buyer  Indemnified  Persons") from, and
reimburse Buyer  Indemnified  Persons for, any and all losses,  damages,  costs,
expenses,  liabilities,  judgments,  settlements,  obligations and claims of any
kind, including, but not limited to, environmental penalties,  costs (including,
but not limited to, costs of  remediation)  and liabilities  (whether  involving
personal injury or property damage),  reasonable attorneys' fees and other legal
costs and expenses (hereinafter referred to collectively as "Losses"),  that any
Buyer Indemnified  Person may at any time suffer or incur, or become subject to,
as a result of or in connection with: (i) any breach or inaccuracy of any of the
representations   and  warranties  made  by  Sellers  in  this  Agreement,   the
Transaction  Documents or any other agreement or instrument delivered by Sellers
pursuant  hereto or thereto;  (ii) any  failure of Sellers  (before or after the
Closing Date) to carry out, perform, satisfy and discharge any of its covenants,
agreements,  undertakings,  liabilities or obligations under this Agreement, the
Transaction  Documents or under any of the agreements and instruments  delivered
by  Sellers  pursuant  to  hereto or  thereto;  (iii)  claims  by third  parties
(including governmental authorities) against Buyer relating to the construction,
operation,  maintenance  and  ownership  by  Sellers  of the  Facility  and  the
performance by Sellers under the Contracts, in each case under this clause (iii)
for the period prior to the Effective Time;  (iv) any of the matters  referenced
in Schedules 3.5 and 3.11 attached hereto;  (v) any violations of, or failure to
operate  the  Facility  in  accordance  with,  necessary  permits  prior  to the
Effective  Time;  (vi)  failure by Sellers to satisfy  and  perform any of their
obligations herein or under the Transaction  Documents after the Closing and any
cost incurred to satisfy and perform any such  obligation or resulting  from any
additional  or modified  terms under any  Contracts  (or  substitute  contracts)
required  for or  resulting  from  the  satisfaction  and  performance  of  such
obligations;  and (vii) any of the events, circumstances or conditions described
in Section 3.14, any

                                       35
<PAGE>

pollution  or threat to human health or the  environment  that (A) is related in
any way to Sellers' (or any other owner's  (including,  but not limited to, each
of the Real Property Owners) or operator's) management,  use, control, ownership
or operation of the  Facility or Facility  Site prior to the Closing,  including
all on-site and off-site  activities  involving  Hazardous  Substances,  and (B)
occurred,  existed,  arises out of conditions or circumstances  that occurred or
existed,  or was caused,  in whole or in part, on or before the Closing Date; or
any  Environmental  Claim against the Facility or any Person whose liability for
such  Environmental  Claim was assumed or retained  either  contractually  or by
operation of law; and (viii) any and all Excluded Liabilities.

                  (b) In the event a claim  against a Buyer  Indemnified  Person
arises that Buyer reasonably believes is covered by the indemnity  provisions of
Section  8.1(a),  notice shall be given promptly by Buyer to Sellers  containing
details  reasonably  sufficient  for Sellers to identify the nature and basis of
the claim.  Provided  that Sellers  admit in writing to Buyer that such claim is
covered by the indemnity  provisions of Section  8.1(a),  Sellers shall have the
right to contest and defend by all appropriate  legal proceedings such claim and
to control all settlements (unless Buyer agrees to assume the cost of settlement
and to forgo such  indemnity)  and to select lead  counsel to defend any and all
such claims at the sole cost and expense of Sellers; provided, however, that (i)
Sellers may not effect any settlement that could result in any cost,  expense or
liability  to Buyer  unless  Buyer  consents in writing to such  settlement  and
Sellers  agree to  indemnify  Buyer  therefor  and (ii) in the event  that Buyer
reaches  a  settlement  with  respect  to  such  a  claim,   Sellers  shall  not
unreasonably withhold their consent to such settlement. Buyer may select counsel
to participate with Sellers' counsel in any such defense, in which event Buyer's
counsel shall be at its own sole cost and expense.  In connection  with any such
claim,  action or  proceeding,  the Parties shall  cooperate with each other and
provide  each  other  with  access  to  relevant  books  and  records  in  their
possession.

                  (c)  Sellers  shall  not be  required  to  indemnify  and hold
harmless Buyer  Indemnified  Persons pursuant to Section 8.1(a)(i) in respect of
the  representations  and warranties made by Sellers herein unless such right to
indemnification  is asserted by Buyer  (whether or not such Losses have actually
been  incurred) by notice to Sellers within twelve (12) months after the Closing
Date, with the exception of (i) the  representations and warranties set forth in
Sections  3.4 and 3.19,  which must be asserted by Buyer  within the  applicable
statute of  limitations  or any  extensions  thereof  required by any applicable
authority  relating to the taxes or  assessments  giving rise to the Loss,  plus
sixty (60) days, (ii) the representations and

                                       36
<PAGE>

warranties set forth in Section 3.12, which must be asserted by Buyer within the
applicable  statute of limitations  for the violation of the underlying law that
forms the basis of such claim,  plus sixty (60) days, (iii) the  representations
and  warranties  set forth in Sections 3.1, 3.2, and 3.7, which shall be without
time  limitation,  and (iv) the  representations  and  warranties  set  forth in
Section 3.14,  which must be asserted within  twenty-four  (24) months after the
Closing Date.

                  (d)  Notwithstanding  the  foregoing,  Sellers  shall  not  be
required to indemnify  Buyer  Indemnified  Persons  under  Section  8.1(a)(i) in
respect of the representations and warranties made by Sellers (other than in the
case of fraud or  misrepresentation)  unless  the amount of all Losses for which
indemnification  is sought by Buyer  under  Section  8.1(a)(i)  exceeds,  in the
aggregate,  $75,000.00,  in which event, Sellers' indemnity obligation hereunder
would apply to all such Losses.  Sellers' aggregate  indemnification  obligation
pursuant  to  Section   8.1(a)(i)   shall  in  no  event   exceed  the  Purchase
Consideration paid to Sellers.

                  (e) Subject to Section 10.11, the indemnification  provided in
this Section 8.1,  including the limitations with respect thereto,  shall be the
exclusive  remedy  for  Buyer  with  respect  to  Losses  as a  result  of or in
connection with the matters described in Section 8.1(a)(i),  notwithstanding any
provisions  in this  Agreement or any other such  agreement or instrument to the
contrary.

         8.2 Buyer's Indemnity.

                  (a)  Buyer  hereby  indemnifies  and holds  harmless  from and
against, and agrees to defend promptly Sellers, any Affiliate of Sellers and the
officers, directors,  employees, agents, representatives and advisors of Sellers
or any Affiliate of Sellers (collectively,  "Sellers' Indemnified Persons") from
and reimburse Sellers' Indemnified Persons for, any and all Losses that Sellers'
Indemnified  Persons may at any time suffer or incur, or become subject to, as a
result of or in  connection  with:  (i) any breach or  inaccuracy  of any of the
representations  and  warranties  made by Buyer in this  Agreement  or any other
agreement or instrument  delivered by Buyer pursuant hereto; (ii) any failure by
Buyer to  carry  out,  perform,  satisfy  and  discharge  any of its  covenants,
agreements,  undertakings,  liabilities or  obligations  under this Agreement or
under any of the agreements and instruments  delivered by Buyer pursuant to this
Agreement;   and  (iii)  claims  by  third   parties   (including   governmental
authorities) against Sellers relating to the operation and ownership by Buyer of
the Facility for the period following the Effective Time.

                                       37
<PAGE>

                  (b) In the event a claim against a Sellers' Indemnified Person
arises that is covered by the  indemnity  provisions of Section  8.2(a),  notice
shall  be given  promptly  by  Sellers  to Buyer  containing  detail  reasonably
sufficient  for Buyer to  identify  the nature and basis of the claim.  Provided
that  Buyer  admits in  writing  to  Sellers  that such  claim is covered by the
indemnity  provisions of Section  8.2(a),  Buyer shall have the right to contest
and defend by all appropriate  legal  proceedings  such claim and to control all
settlements (unless Sellers agrees to assume the cost of settlement and to forgo
such  indemnity) and to select lead counsel to defend any and all such claims at
the sole cost and expense of Buyer;  provided,  however,  that (i) Buyer may not
effect any  settlement  that could  result in any cost,  expense or liability to
Sellers unless Sellers  consents in writing to such  settlement and Buyer agrees
to  indemnify  Sellers  therefor  and (ii) in the  event  that  Sellers  reach a
settlement with respect to such a claim,  Buyer shall not unreasonably  withhold
their consent to such settlement. Sellers may select counsel to participate with
Buyer's counsel in any such defense, in which event Sellers' counsel shall be at
the sole cost and expense of Sellers.  In connection with any such claim, action
or  proceeding,  the Parties  shall  cooperate  with each other and provide each
other with access to relevant books and records in their possession.

                  (c) Buyer shall not be required to indemnify and hold harmless
Sellers'  Indemnified  Persons  pursuant to Section  8.2(a)(i) in respect of the
representations  and  warranties  made by  Buyer  herein  unless  such  right to
indemnification is asserted by Sellers (whether or not such Losses have actually
been  incurred)  by notice to the Buyer  within  twelve  (12)  months  after the
Closing Date, with the exception of the representations and warranties set forth
in Sections 4.1 and 4.2, which shall be without time limitation.

                  (d) Notwithstanding the foregoing, Buyer shall not be required
to indemnify Sellers'  Indemnified Persons under Section 8.2(a)(i) in respect of
the  representations  and  warranties  made by Buyer  (other than in the case of
fraud  or  misrepresentation)   unless  the  amount  of  all  Losses  for  which
indemnification  is sought by Sellers under Section  8.2(a)(i)  exceeds,  in the
aggregate,  $75,000.00,  in which event,  Buyer's indemnity obligation hereunder
would apply to all such Losses.  Buyer's  aggregate  indemnification  obligation
pursuant  to  Section   8.2(a)(i)   shall  in  no  event   exceed  the  Purchase
Consideration paid to Sellers.

                  (e) Subject to Section 10.11, the indemnification  provided in
this Section 8.2, including the limitations with respect thereto, shall be the

                                       38
<PAGE>

exclusive  remedy  for  Sellers  with  respect  to  Losses  as a result of or in
connection with the matters described in Section 8.2(a)(i),  notwithstanding any
provisions  in this  Agreement or any other such  agreement or instrument to the
contrary.

         8.3 Bulk Sales Compliance.

         To the extent  applicable,  Sellers shall comply with the provisions of
the bulk sales law of any U.S. jurisdiction, and Sellers covenants and agrees to
pay and discharge when due all claims of any governmental entities and creditors
of Sellers and its  subsidiaries  that could be asserted against Buyer by reason
of such non-compliance. Sellers agrees to indemnify and hold Buyer harmless from
and against and shall on demand  reimburse Buyer for any and all Losses suffered
by Buyer by reason of Sellers' failure to pay and discharge any such claims.

         8.4 Additional Instruments.

         At any time and from time to time after the Closing,  at either Party's
request and without further consideration, Sellers or Buyer, as the case may be,
shall execute and deliver such other instruments of sale, transfer,  conveyance,
assignment  and  confirmation  and take such other  action  (including,  but not
limited to, the  filings of liens and  execution  of  financing  statements)  as
Sellers or Buyer may  reasonably  deem  necessary  or desirable in order to more
effectively transfer,  convey, and assign to Buyer, and confirm Buyer's title to
and  interest in and  responsibility  and  liability  for,  the Facility and the
consummation  of the  transactions  contemplated  herein.  Without  limiting the
generality of the  foregoing,  Sellers will  cooperate  with and assist Buyer in
renewing,  or  transferring,  into  Buyer's  name those  permits for which Buyer
requests  such  assistance  and  cooperation  at the  appropriate  time for such
renewal or transfer as determined by Buyer.

         8.5 Access to Books, Records and Employees.

         From and after the  Closing  Date,  Buyer  will  authorize  and  permit
Sellers and its respective representatives to have access during normal business
hours, upon reasonable notice and for reasonable  purposes and in such manner as
will not unreasonably  interfere with the conduct of Buyer's business,  to Books
and Records and within the  control of Buyer that relate to the  Facility.  From
and after the Closing  Date,  Sellers  will  authorize  and permit Buyer and its
representatives  to have access during normal  business  hours,  upon reasonable
notice and for reasonable

                                       39
<PAGE>

purposes and in such manner as will not unreasonably  interfere with the conduct
of Sellers'  business,  to all books and  records,  files,  documents  and other
correspondence  related to the Facility prior to the Effective  Time,  which are
not included  among the Books and Records.  Buyer and Sellers  agree to maintain
all books,  records,  files,  documents and other correspondence  related to the
Facility  prior to the Effective  Time for a period of seven (7) years after the
Closing Date.

                                   ARTICLE IX
                                   TERMINATION

         9.1 Termination.

         This  Agreement may be  terminated  and the  transactions  contemplated
hereby may be abandoned at any time prior to the Closing Date as follows:

                  (a) by mutual written agreement of all of the Parties;

                  (b)  by  either  Buyer  or  Sellers  if  any  court,  arbitral
tribunal,  administrative  agency or commission or other  governmental  or other
regulatory  authority or agency  shall issue an order,  decree or ruling or take
any other action,  which permanently  restrains,  enjoins or otherwise prohibits
the acquisition by Buyer of the Facility and such order, decree, ruling or other
action shall have become final and non-appealable;

                  (c) by either  Buyer or Sellers if the other Party or Parties,
as the case may be, shall have  breached in any  material  respect any of its or
their,  as the  case may be,  representations,  warranties,  covenants  or other
agreements  contained  in this  Agreement or any of the  Transaction  Documents,
which breach  cannot be or has not been cured within  thirty (30) days after the
giving of written notice thereof by such non-breaching Party; or

                  (d) by either  Sellers or Buyer if the Closing  Date shall not
have occurred on or before January 31, 2000; provided,  however,  that the right
to terminate this  Agreement  pursuant to this clause (d) shall not be available
to any Party whose failure to fulfill any  obligation  under this  Agreement has
been the cause of, or  resulted  in, the  failure of the  Closing  Date to occur
prior to such date.

         9.2 Rights on Termination; Waiver.

                                       40
<PAGE>

                  (a) If this  Agreement is terminated  pursuant to Section 9.1,
all further obligations of the Parties under or pursuant to this Agreement shall
terminate and there shall be no liability or  obligation  thereafter on the part
of either Party to the other Party or Parties,  as the case may be,  except with
respect to any fraud or breach of this Agreement prior to such termination.

                  (b) If any of the  conditions  set forth in Article VI of this
Agreement have not been satisfied,  Buyer may  nevertheless  elect to waive such
conditions and proceed with the  consummation of the  transactions  contemplated
hereby. If any of the conditions set forth in Article VII of this Agreement have
not been satisfied,  Sellers may nevertheless elect to waive such conditions and
proceed with the consummation of the transactions contemplated hereby.

                                    ARTICLE X
                                  MISCELLANEOUS

         10.1 Entire Agreement; Amendment.

                  (a) This Agreement and the documents referred to herein and to
be delivered pursuant hereto constitute the entire agreement between the Parties
pertaining  to  the  subject  matter   hereof,   and  supersede  all  prior  and
contemporaneous agreements, understandings,  negotiations and discussions of the
Parties,  whether oral or written, and there are no warranties,  representations
or other  agreements  between the Parties in connection  with the subject matter
hereof, except as specifically set forth herein or therein.

                  (b)  No  amendment,   supplement,   modification,   waiver  or
termination of this Agreement shall be binding unless executed in writing by all
of the Parties.  No waiver of any of the provisions of this  Agreement  shall be
deemed or shall  constitute a waiver of any other  provision of this  Agreement,
whether or not similar,  nor shall such waiver  constitute  a continuing  waiver
unless otherwise expressly provided.

         10.2 Expenses.

         Except as otherwise  specifically  provided herein, each of the Parties
shall pay the fees and expenses of their  respective  counsel,  accountants  and
other

                                       41
<PAGE>

experts  and all other  costs  and  expenses  incident  to the  negotiation  and
preparation of this Agreement and consummation of the transactions  contemplated
hereby.

         10.3 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

                  (a) THIS  AGREEMENT  AND THE  RIGHTS  AND  OBLIGATIONS  OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE  STATE OF NEW YORK  (WITHOUT  GIVING  EFFECT  TO THE  PRINCIPLES  THEREOF
RELATING  TO  CONFLICTS  OF LAW EXCEPT  SECTION  5-1401 OF THE NEW YORK  GENERAL
OBLIGATIONS LAW OR ANY SUCCESSOR PROVISION THERETO).

                  (b) Each Seller, in respect of itself and its properties,  (i)
agrees to be subject to (and hereby  irrevocably  submits to) the  non-exclusive
jurisdiction of any Federal court located in the Commonwealth of Kentucky or any
Kentucky  state court in the event of any dispute  arising out of or relating to
this  Agreement or the  transactions  contemplated  hereby,  (ii) agrees that it
shall not attempt to deny or defeat such jurisdiction by motion or other request
for leave from any such court and irrevocably  waives,  to the fullest extent it
may  effectively do so under  applicable Law, any objection to the laying of the
venue of any such  action in any such court and any claim  that any such  action
brought  in any such  court has been  brought in an  inconvenient  forum,  (iii)
agrees  that it shall not bring any action  arising  out of or  relating to this
Agreement  or any  transactions  contemplated  hereby in any court  other than a
Federal  or state  court  sitting  in the  Commonwealth  of  Kentucky,  and (iv)
irrevocably  agrees  that  all  disputes  arising  out of or  relating  to  this
Agreement and the transactions  contemplated  hereby that are brought by Sellers
may be determined in any Federal or state court sitting in the  Commonwealth  of
Kentucky.

                  (c) Buyer, in respect of itself and its properties, (i) agrees
to  be  subject  to  (and  hereby  irrevocably  submits  to)  the  non-exclusive
jurisdiction of any Federal court located in the State of Utah or any Utah state
court in the event of any dispute  arising out of or relating to this  Agreement
or the transactions  contemplated  hereby, (ii) agrees that it shall not attempt
to deny or defeat such  jurisdiction  by motion or other  request for leave from
any such court and irrevocably  waives, to the fullest extent it may effectively
do so under applicable Law, any objection to the laying of the venue of any such
action in any such court and any

                                       42
<PAGE>

claim that any such  action  brought  in any such  court has been  brought in an
inconvenient  forum, (iii) agrees that it shall not bring any action arising out
of or relating to this Agreement or any transactions  contemplated hereby in any
court other than a Federal or state court sitting in the State of Utah, and (iv)
irrevocably  agrees  that  all  disputes  arising  out of or  relating  to  this
Agreement and the transactions contemplated hereby and that are brought by Buyer
may be determined in any Federal or state court sitting in the State of Utah.

                  (d)  Either  Party  may make  service  on the  other  Party by
sending  or  delivering  a copy of the  process to the Party to be served at the
address and in the manner  provided  for the giving of notices in Section  10.5,
provided that nothing in this Section 10.3,  shall affect the right of any Party
to serve legal process in any other manner permitted by law or in equity.

                  (e) EACH OF THE PARTIES  IRREVOCABLY WAIVES ALL RIGHT OF TRIAL
BY JURY  IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING  OUT  OF,  OR IN
CONNECTION  WITH,  THIS  AGREEMENT  OR THE  TRANSACTION  DOCUMENTS OR ANY MATTER
ARISING HEREUNDER OR THEREUNDER.

         10.4 Assignment.

         This  Agreement  and each  Party's  respective  rights,  interests  and
obligations  hereunder  may not be assigned,  by operation of law or  otherwise,
without the prior written consent of the other Party or Parties, as the case may
be; provided, however, that Buyer may assign, in its sole discretion, any or all
of its rights, interests and/or obligations under this Agreement to an Affiliate
without such consent.

         10.5 Notices.

         All  communications,  notices and disclosures  required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier  of the  date  (a)  when  delivered  personally  or by  messenger  or by
overnight delivery service to an officer of the other Party or (b) when received
via telecopy, telex or other electronic transmission,  in all cases addressed to
the Person for whom it is  intended  at his  address  set forth below or to such
other address as a Party shall have designated by notice in writing to the other
Party in the manner provided by this Section:

                                       43
<PAGE>

  If to Buyer:       **
                     Fax:  **
                     Attn:  President

  With a copy to:    **
                     Fax **

                     Attn:  General Counsel

  If to **:          **
                     Fax: **
                     Attn:  President

  If to Sellers:     Covol Technologies, Inc.
                     3280 North Frontage Road
                     Lehi, Utah  84043-9534
                     Fax:  (801) 768-4483
                     Attn:  Brent M. Cook

  With a copy to:    Covol Technologies, Inc.     Pillsbury Madison & Sutro LLP
                     3280 North Frontage Road     235 Montgomery Street
                     Lehi, Utah 84043-9534        San Francisco, CA  94104
                     Fax:  (801) 768-4483         Fax:  (415) 983-1200
                     Attn:  General Counsel       Attn:  Linda C. Williams, Esq.

         10.6 Counterparts; Headings.

         This Agreement may be executed in several  counterparts,  each of which
shall be deemed an original, but such counterparts shall together constitute but
one and the same  Agreement.  The Table of  Contents  and  Article  and  Section
headings in this  Agreement are inserted for  convenience  of reference only and
shall not constitute a part hereof.

         10.7 Interpretation.

         Unless the context requires otherwise:

                  (a) When a reference  is made in this  Agreement to an article
or section, such reference shall be to an article or section of this Agreement.

                                       44
<PAGE>

                  (b) Whenever the words  "include",  "includes" or  "including"
are used in this  Agreement  they  shall be deemed to be  followed  by the words
"without limitation."

                  (c) The words  "hereof",  "herein" and "herewith" and words of
similar import shall,  unless  otherwise  stated,  be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement,  and
article,  section,  paragraphs,  exhibit  and  schedule  references  are  to the
articles, sections, paragraphs, exhibits and schedules of this Agreement.

                  (d) The meaning  assigned to each term defined herein shall be
equally  applicable to both the singular and the plural forms of such term,  and
words  denoting any gender shall include all genders.  Where a word or phrase is
defined herein,  each of its other  grammatical forms shall have a corresponding
meaning.

                  (e) A reference  to any Party to this  Agreement  or any other
agreement  or document  shall  include  such Party's  successors  and  permitted
assigns.

                  (f) A reference to any  legislation or to any provision of any
legislation  shall include any amendment to, and any modification or reenactment
thereof, any legislative  provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.

                  (g) All references to contracts,  agreements,  leases or other
understandings or arrangements shall refer to oral as well as written matters.

                  (h)  The  specificity  of  any   representation   or  warranty
contained  herein  shall  not be deemed  to limit  the  generality  of any other
representation or warranty contained herein.

                  (i) The Parties have  participated  jointly in the negotiation
and drafting of this Agreement.  In the event an ambiguity or question of intent
or  interpretation  arises,  this  Agreement  shall be  construed  as if drafted
jointly  by the  Parties,  and no  presumption  or burden of proof  shall  arise
favoring or disfavoring  any Party by virtue of the authorship of any provisions
of this Agreement.

                                       45
<PAGE>

         10.8 Severability.

         Any  term or  provision  of this  Agreement  that is held by a court of
competent  jurisdiction or other authority to be invalid,  void or unenforceable
in  any  situation  in  any  jurisdiction  shall  not  affect  the  validity  or
enforceability  of the remaining terms and provisions  hereof or the validity or
enforceability  of the offending term or provision in any other  situation or in
any  other  jurisdiction.  If  the  final  judgment  of  a  court  of  competent
jurisdiction  or other authority  declares that any term or provision  hereof is
invalid,  void or  unenforceable,  the parties  agree that the court making such
determination  shall  have the  power to reduce  the  scope,  duration,  area or
applicability of the term or provision,  to delete specific words or phrases, or
to replace any invalid,  void or unenforceable  term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.

         10.9 No Reliance.

         No  third  party  is  entitled  to rely on any of the  representations,
warranties and agreements contained in this Agreement.  Buyer and Sellers assume
no liability to any third party because of any reliance on the  representations,
warranties  and  agreements  of Buyer or Sellers  contained  in this  Agreement.
Nothing contained in this Agreement shall be construed as creating a partnership
or joint venture or any agency  relationship  between the Parties,  or any other
relationship other than Buyer and Sellers as provided herein.

         10.10 Parties in Interest.

         This Agreement shall be binding upon and inure solely to the benefit of
each Party, and nothing in this Agreement, express or implied, is intended to or
shall  confer  upon any other  Person any  rights,  benefits  or remedies of any
nature whatsoever under or by reason of this Agreement.

         10.11 Specific Performance.

         The Parties agree that irreparable damage would occur in the event that
any of the provisions of this  Agreement  were not performed in accordance  with
the terms hereof or were otherwise  breached.  It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement

                                       46
<PAGE>

and to enforce  specifically  the terms and  provisions  of this  Agreement,  in
addition to any other remedy at law or equity.

         10.12 Time of Essence.

         Each of the Parties  hereby  agrees that,  with regard to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.

         10.13 Representations, Warranties and Covenants.

         The  representations and warranties of each Party shall be deemed to be
material and to have been relied upon by the other Party.  The  representations,
warranties, covenants and agreements of Sellers and Buyer contained herein shall
survive the execution and delivery of this Agreement and the consummation of the
transactions  contemplated hereby and, as to the representations and warranties,
shall be effective  until the relevant time  limitation for making any indemnity
claim with respect to such representations and warranties under Sections 8.1 and
8.2. shall have been reached.

         10.14 Election of Remedies.

         Neither the exercise of nor the failure to exercise a right of set-off,
or to give notice of a claim under this  Agreement,  will constitute an election
of  remedies  or limit  Buyer in any  manner  in the  enforcement  of any  other
remedies that may be available to any of them, whether at law or in equity.

         10.15 ** Undertaking.

         In the event that Buyer shall fail to pay Pocahontas all or any portion
of the Subsequent  Consideration in accordance with the terms of this Agreement,
** agrees that it shall,  subject to the terms and conditions of this Agreement,
pay to Pocahontas the unpaid amount of the Subsequent Consideration which is due
and payable under this Agreement;  provided,  however, that in no event shall **
be obligated to pay pursuant to this Section  10.15 in excess of an amount equal
to the Subsequent Consideration, less the amount of any payment or payments made
by, or on behalf of Buyer, to Pocahontas pursuant to Section 2.2(b).

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       47
<PAGE>

         IN WITNESS WHEREOF, each Party has caused this Purchase Agreement to be
executed in its name by a duly  authorized  officer as of the day and year first
above written.

                                    **

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

                                    COVOL TECHNOLOGIES, INC.

                                    By:        /Kirk A. Benson/
                                       -----------------------------------------
                                    Name:  Kirk A. Benson
                                    Title: Chairman and Chief Executive Officer

                                    SYNFUEL INVESTMENTS, INC.

                                    By:   /Brent M. Cook/
                                       -----------------------------------------
                                    Name: Brent M. Cook
                                    Title: President

                                    POCAHONTAS SYNFUEL, L.L.C.

                                    By:   Covol Technologies, Inc., Manager

                                    By:   /Brent M. Cook/
                                       -----------------------------------------
                                    Name: Brent M. Cook
                                    Title: President

                                       48
<PAGE>

                                    For the sole and limited purpose of Section
                                    10.15 of this Asset Purchase Agreement

                                    **

                                    By:   /**/
                                       -----------------------------------------
                                    Name:   **
                                    Title:  **

                                       49

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