Document:

SETTLEMENT AGREEMENT AND RELEASE

         THIS SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is entered into
this 26th day of June, 2000, by and among COVOL TECHNOLOGIES, INC., a Delaware
corporation ("Covol"), UTAH SYNFUEL #1 LTD., a Delaware limited partnership
("Utah Synfuel"), COALTECH NO. 1 L.P., a Delaware limited partnership
("Coaltech"), AJG FINANCIAL SERVICES, INC., a Delaware corporation ("AJG") and
SQUARE D COMPANY, a Delaware corporation ("Square D").

                                    PREAMBLES

         WHEREAS, Covol, Utah Synfuel, AJG, Square D and Coaltech (collectively,
the "Parties") have entered into various interrelated agreements respecting
Coaltech's synthetic fuel operations in Price, Utah (the "Utah Project"),
including the following agreements (collectively, the "Transaction Documents"):

                  a. Utah Project Purchase Agreement, dated March 7, 1997, by
         and among Covol, Utah Synfuel and Coaltech (the "Purchase Agreement");

                  b. Operation and Maintenance Agreement, dated March 7, 1997,
         by and between Coaltech and Covol (the "Operation and Maintenance
         Agreement");

                  c. License and Binder Purchase Agreement, dated March 7, 1997,
         by and among Coaltech, Covol and Utah Synfuel;

                  d. Sublease Agreement, dated March 7, 1997, by and between
         Coaltech and Covol (the "Sublease");

                  e. Supply and Purchase Agreement for the Supply of Coal Fines
         and the Purchase of Coal Product, dated March 7, 1997, by and among
         Covol, Utah Synfuel, and Coaltech (the "Supply and Purchase
         Agreement");

                  f. Abandonment Option Agreement, dated March 7, 1997, by and
         among AJG and Square D, as Option Holders, and Covol; and

                  g. Repurchase Option Agreement, dated March 7, 1997, by and
         among Coaltech, Covol and Utah Synfuel.

         ** 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.

<PAGE>

         WHEREAS, Covol, AJG and Square D also have entered into that certain
Agreement of Limited Partnership of Coaltech No. 1, L.P., dated March 7, 1997,
by and among Covol as General Partner and AJG and Square D as limited partners
(the "Partnership Agreement");

         WHEREAS, various issues have arisen between the Parties pertaining to
the Utah Project and the Parties' respective rights and obligations under the
Transaction Documents and the Partnership Agreement, including, but not limited
to, the limited partners' forced retirement of Covol as General Partner of
Coaltech on October 29, 1999 and the ownership and operation of the synthetic
fuel facility currently located in Price, Utah and any location to which the
facility may be moved or relocated in the future (the "Facility");

         WHEREAS, Covol, Utah Synfuel, AJG and Coaltech have entered into that
certain Assignment and Amendment Agreement, dated January 26, 2000, a copy of
which is attached hereto as Exhibit A;

         WHEREAS, simultaneous with the signing of this Agreement, Coaltech,
Covol and Utah Synfuel are entering into that certain License and Binder Supply
Agreement dated the date hereof, a copy of which is attached hereto as Exhibit B
(the "Binder Agreement"); and

         WHEREAS, the Parties wish to resolve remaining issues and agree to
settle such issues on the conditions set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties do hereby agree as
follows:

         1. Termination. The Parties agree that each of the Transaction
Documents is terminated and is of no further force or effect, subject to and in
accordance with the terms and conditions set forth herein.

         2. Accounting and Settlement Payments.

                  a. Accounting. The Parties agree that an accounting has been
         rendered of all financial obligations and sums owed under the
         Partnership Agreement and the Transaction Documents by
         PriceWaterhouseCoopers for the period commencing March 7,1997 and
         ending September 30, 1999 (Exhibit C) and by Covol for the period
         commencing October 1, 1999 and ending April 29, 2000 (Exhibit D).
         Exhibit C and Exhibit D will be collectively referred to hereafter as
         the "Accounting." The cost of the accounting by PriceWaterhouseCoopers
         shall be split equally between Covol and Coaltech.

                  b. Settlement Payments. Pursuant to the Accounting, Coaltech
         shall pay Covol $** upon the execution of this Agreement.

                                       2
<PAGE>

                  c. Site Termination Costs. Coaltech shall pay Covol $** to be
         applied to the costs of Covol in terminating (i) the obligation to make
         monthly payments to the landlord of the Premises under the lease dated
         December 23, 1996 (the "Lease"); and (ii) the Gas Gathering, Purchase
         and Sale Agreement dated June 4, 1997 with the Drunkards Wash Owners.
         Covol shall pay the costs of any Premises restoration and environmental
         remediation.

         3. Representations and Warranties. Covol and Utah Synfuel jointly and
severally represent and warrant to Coaltech, AJG and Square D that as of the
date of this Agreement, the following are true:

                  a. Title. At the closing on March 7, 1997, Covol and Utah
         Synfuel conveyed to Coaltech, marketable title to and possession of the
         Purchased Assets (as defined in the Purchase Agreement) free and clear
         of all Liens (as defined in the Purchase Agreement), other than
         Permitted Liens (as defined in the Purchase Agreement). During the
         period commencing March 7, 1997 ending October 29, 1999, Covol, as
         General Partner of Coaltech, except as set forth on Schedule 1 attached
         hereto, has not (i) sold, leased, assigned, hypothecated or agreed to
         sell, lease, assign, hypothecate or otherwise transferred or disposed
         of, or agreed to transfer or dispose of any of the Purchased Assets; or
         (ii) permitted or allowed any of the Purchased Assets to be subject to
         any liens other than pursuant to the Security Agreement (as defined in
         the Purchase Agreement). During the period commencing October 29, 1999
         through the date hereof, to the knowledge of Covol and/or Utah Synfuel,
         Covol, except as set forth on Schedule 1 hereto, has not (i) sold,
         leased, assigned, hypothecated or agreed to sell, lease, assign,
         hypothecate or otherwise transferred or disposed of, or agreed to
         transfer or dispose of any of the Purchased Assets; or (ii) permitted
         or allowed any of the Purchased Assets to be subject to any liens other
         than pursuant to the Security Agreement (as defined in the Purchase
         Agreement).

                  b. Condition of Purchased Assets. As of October 29, 1999, the
         Purchased Assets were in good operating condition and repair, subject
         only to normal wear and tear. As of the date hereof, to the knowledge
         of Covol and/or Utah Synfuel, the Purchased Assets are in good
         operating condition and repair, subject to only normal wear and tear.

                  c. Proprietary Property. In the event Coaltech and/or any of
         its agents or affiliates uses the Purchased Assets to produce synthetic
         fuel any time after the date hereof, without use of the Synthetic Fuel
         Technology (as defined in the Binder Agreement) or other proprietary
         information from Covol and Utah Synfuel pursuant to the Binder
         Agreement, the sole obligations of Coaltech, AJG and Square D to Covol
         and Utah Synfuel shall be the payment obligations under Section 4(d)
         hereof and under the Binder Agreement.

         4. Covenants.

                                       3
<PAGE>

                  a. Access to the Premises. Covol agrees that Coaltech, AJG and
         Square D (and any of their agents) shall continue to have access to the
         Premises (as defined in the Sublease) for a period commencing the date
         hereof ending July 31, 2000 for the purposes of removing and
         relocating, at Coaltech's expense, all of the Purchased Assets. Covol
         and Utah Synfuel shall cooperate with AJG, Coaltech and Square D during
         such period in arranging security, maintenance and other services for
         the Facility.

                  b. Payments to Geocapital. Coaltech agrees that it will
         continue to pay all fees due to Geocapital pursuant to Section 5.3(c)
         of the Purchase Agreement and that certain Letter Agreement between
         Coaltech and Geocapital, Inc., dated March 7, 1997, for coal produced
         using the Purchased Assets (as defined in the Purchase Agreement) until
         December 31, 2007.

                  c. Payments to Coalco Corporation. Covol and Utah Synfuel
         agree that it will continue to make all payments due to CoalCo.
         Corporation as a result of the transactions contemplated by the
         Transaction Documents pursuant to Section 5.3(c) of the Purchase
         Agreement.

                  d. Payments to Covol by AJG and Square D. AJG and Square D
         severally agree to pay Covol ** percent (**%) of the "Net Benefit"
         derived by AJG and Square D or any of their affiliates arising from or
         related to the Purchased Assets for the period commencing the date
         hereof and ending December 31, 2007. For the purpose of this Section
         4(d), the term "Net Benefit" shall include, but not limited to (i) sale
         proceeds, lease payments, partnership distributions or other benefits
         that may be derived upon the sale, lease, assignment, or other transfer
         involving the Purchased Assets, if any, (ii) in any calendar quarter,
         the positive difference available to AJG and Square D, if any, between
         (1) the sum of the value of the tax credits and gross sales revenues
         generated by the sale of synthetic fuel, less (2) the costs of
         producing and selling synthetic fuel; and (iii) any other economic
         benefit received by AJG or Square D arising from or related to the
         Purchased Assets; provided that no economic benefit of AJG or Square D
         shall be included more than once for purposes of calculating the "Net
         Benefit."

         5. Indemnification.

                                       4
<PAGE>

                  a. Indemnification of Coaltech, AJG and Square D. Covol and
         Utah Synfuel jointly and severally agree to indemnify, defend, and hold
         Coaltech, AJG and Square D and their officers, directors, shareholders,
         partners, employees, representatives and agents and their respective
         successors and assigns (the "Coaltech Group"), harmless from and
         against any and all costs, expenses, losses, direct or indirect
         damages, fines, penalties or liabilities (including, without
         limitation, interest which may be imposed by a court in connection
         therewith), court costs, litigation expenses, reasonable attorneys' and
         paralegals' fees and accounting fees (collectively, the "Damages")
         suffered, sustained or incurred by any member of the Coaltech Group
         with respect to, arising from or in connection with, or alleged to
         result from, arise out of or in connection with:

                           i. a breach by Covol or Utah Synfuel of, or the
                  inaccuracy of, any representation or warranty made by Covol or
                  Utah Synfuel and contained in this Agreement or the Binder
                  Agreement;

                           ii. a breach or nonperformance by Covol or Utah
                  Synfuel of any covenant, restriction or agreement made by
                  Covol or Utah Synfuel and contained in this Agreement or the
                  Binder Agreement; or

                           iii. any claims, suits, action or cause of action or
                  proceeding brought by any person other than a member of the
                  Coaltech Group that arises out of or is based upon (A) a
                  breach by Covol and/or Utah Synfuel of the Partnership
                  Agreement or any of the Transaction Documents or (B) Covol's
                  operation of the Utah Project.

                  b. Indemnification of Covol and Utah Synfuel. Coaltech, AJG
         and Square D, severally (solely as to its own breaches) agree to
         indemnify, defend, and hold Covol and Utah Synfuel and their officers,
         directors, shareholders, employees, partners, representatives and
         agents and their respective successors and assigns (the ACovol Group@)
         harmless from and against any and all Damages suffered, sustained or
         incurred by any member of the Covol Group with respect to, arising from
         or in connection with or alleged to result from, arise out of or in
         connection with:

                           i. a breach by Coaltech, AJG or Square D of, or the
                  inaccuracy of, any representation or warranty made by Coaltech
                  and contained in this Agreement or the Binder Agreement;

                           ii. a breach or nonperformance by Coaltech, AJG or
                  Square D of any covenant, restriction or agreement made by
                  Coaltech, AJG or Square D and contained in this Agreement or
                  the Binder Agreement; or

                           iii. any claim, suit, action or cause of action or
                  proceeding brought by any person other than a member of the
                  Covol Group that arises out of or is based upon (A) the breach
                  by AJG and/or Square D of the Partnership Agreement or any of
                  the Transaction Documents or (B) the continuation of the
                  Coaltech business from and after October 29, 1999 (unless such
                  claim, suit, action or cause of action or proceeding resulted
                  from an act or omission by Covol and/or Utah Synfuel).

         6. Release.

                                       5
<PAGE>

                  a. Release by Covol and Utah Synfuel. Except for (i) the
         obligations of Coaltech, AJG and Square D under this Agreement, Binder
         Agreement and the Assignment and Amendment Agreement and (ii) the
         Excluded Claims (as defined below), Covol and Utah Synfuel, on behalf
         of the Covol Group, hereby release, covenant not to sue, and forever
         discharge the Coaltech Group and each member thereof, from and against
         any and all claims, demands, liabilities, causes of action and damages
         of any and every kind, nature, character, known and unknown, which any
         member of the Covol Group has, had or may have against the Coaltech
         Group or any member thereof relating to the Transaction Documents
         and/or the Partnership Agreement.

                  b. Release by Coaltech, AJG and Square D. Except for (i) the
         obligations of Covol and Utah Synfuel under this Agreement, the Binder
         Agreement and the Assignment and Amendment Agreement and (ii) the
         Excluded Claims (as defined below), Coaltech, AJG and Square D, on
         behalf of the Coaltech Group, hereby release, covenant not to sue, and
         forever discharge the Covol Group and any member thereof, from and
         against any and all claims, demands, liabilities, causes of action and
         damages of any and every kind, nature, character, known and unknown,
         which any member of the Coaltech Group has, had or may have against
         them arising from, relating to the Transaction Documents and/or the
         Partnership Agreement.

         The Parties acknowledge that certain members of the Covol Group are
parties to written agreements with certain members of the Coaltech Group besides
the Partnership Agreement and the Transaction Documents, including, without
limitation, the Debenture (as that term is defined in the Assignment and
Amendment Agreement), that certain written contract styled Agreement Concerning
Additional Facilities effective December 27, 1996 between Covol and AJG and that
certain letter agreement dated October 27, 1997 between Covol and AJG. For
purposes of this Agreement, "Excluded Claims" shall mean any and all rights and
obligations of any of the Parties pursuant to any other agreements between any
member of the Coaltech Group and its affiliates and any member of the Covol
Group and its affiliates besides the Partnership Agreement and the Transaction
Documents, which rights and obligations shall continue in full force and effect
notwithstanding the mutual releases given pursuant to this Section 6 of this
Agreement.

         7. No Admission. The Parties agree that the Agreement does not
represent any admission of guilt or liability by any of the Parties.

         8. Represented by Counsel. In entering the Agreement, the Parties
represent that they have relied upon the advice of their respective attorneys,
who are the attorneys of their own choice, and the terms of this Agreement have
been interpreted, completely read and explained to them by their attorneys, and
that those terms are fully understood and voluntarily accepted.

         9. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Parties hereto and their successors and assigns.

                                       6
<PAGE>

         10. Waiver. No waiver of any provision hereof shall operate as a waiver
of such provision or any other provision on a future occasion. This Agreement
may not be modified except pursuant to the written agreement of the party
against whom enforcement is sought.

         11. Headings. The headings used herein are for convenience only and
shall not be used to aid in the interpretation of any provision of the
Agreement.

         12. Integration Clause. This Agreement, the Binder Agreement and the
Assignment and Amendment Agreement contain the entire agreement between the
Parties concerning the subject matter of this Agreement and supersedes all prior
negotiations, proposed agreements or understandings, except as set forth herein.

         13. Contract Execution. This Agreement may be executed in duplicate
counterparts, each of which shall be considered and have the full force and
effect as an original.

         14. Rules of Construction. No rule of construction requiring
interpretation against the draftsman hereof shall apply in the interpretation of
this Agreement.

         15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to its conflicts of laws principles.

                                       7
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed and delivered this
Settlement Agreement and Release on the day and year first written above.

COVOL TECHNOLOGIES, INC.,                UTAH SYNFUEL #1 LTD.,
a Delaware corporation                   a Delaware limited partnership

By: /s/ Harlan M. Hatfield               By: /s/ Harlan M. Hatfield, V.P.
   -----------------------------             ----------------------------------
   Its: V.P.                                 Its: Covol Technologies, Inc., G.P.

COALTECH NO. 1 L.P.,                     AJG FINANCIAL SERVICES, INC.,
a Delaware limited partnership           a Delaware corporation

By: /s/ David S. O'Neill                 By: /s/ John C. Rosengren
   -----------------------------             ---------------------------
   Its: Manager of the General Partner       Its: V-P

SQUARE D COMPANY,
a Delaware corporation

By: /s/ Dick O'Shanna
    Its: V.P., Treasurer

                                       8
<PAGE>

                                   Schedule 1

None.

                                       9EXHIBIT B

                       LICENSE AND BINDER SUPPLY AGREEMENT

         THIS LICENSE AND BINDER SUPPLY AGREEMENT ("Agreement"), is made and
entered into as of June 26, 2000 by and among COALTECH NO. 1 L.P., a Delaware
limited partnership ("Coaltech"), UTAH SYNFUEL #1 LTD. ("Utah Synfuel") - and
COVOL TECHNOLOGIES, INC., a Delaware corporation ("Covol").

         WHEREAS, Coaltech and Covol entered into various interelated agreements
relating to Covol's synthetic fuel operations in Utah (the "Utah Project");

         WHEREAS, various disputes and claims have arisen between the parties
pertaining to the Utah Project and the synthetic fuel manufacturing facility
currently located in Price, Utah and any location to which the facility may be
moved or relocated in the future (the "Facility"); and

         WHEREAS, simultaneously with the execution of this Agreement, the
parties are entering into that certain Settlement Agreement and Release dated as
of the date hereof by and among Covol, Utah Synfuel, Coaltech, AJG Financial
Services, Inc. and Square D Company (the "Settlement Agreement").

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

                                   ARTICLE I.
                          SUPPLY AND PURCHASE OF BINDER

         Section I.1 Definition of Binder. As used herein, the term "Binder"
means and refers to the binder compound necessary for the production, by
Coaltech, of synthetic coal fuel that is reasonably expected to constitute
"qualified fuels" pursuant to the terms of Section 29(c)1(C) of the 1986
Internal Revenue Code, as amended (the "1986 Code") and with respect to which
Section 29 is applicable pursuant to Sections 29(f) and 29(g) of the 1986 Code.

<PAGE>

         Section I.2 Sale and Purchase. Covol agrees to supply to Coaltech, at
Coaltech's sole discretion, such quantity of Binder as Coaltech may request
pursuant to Section 1.5 hereof. On or before the fifteenth (15th) day of each
calendar month immediately following the delivery of Binder to Coaltech
hereunder, Covol shall deliver an invoice to Coaltech for the Binder delivered
to Coaltech during the immediately preceding calendar month. Payments for Binder
delivered by Covol to Coaltech during any calendar month shall be due and
payable to Covol on the tenth (10th) business day after the date upon which
Coaltech receives an invoice for such delivered Binder. Notwithstanding anything
in this Agreement to the contrary, Covol acknowledges and agrees that Coaltech
has no obligation to purchase any minimum quantity of Binder from Covol and
that, in addition, Coaltech has the unrestricted right to purchase and use
binders obtained from any third party in lieu of the Binder supplied by Covol.

         Section I.3 Price. The price which Coaltech shall pay for the Binder
delivered to Coaltech by Covol during any calendar month shall be an amount
equal to Covol's direct and actual costs of such Binder (including, but not
limited to, material, labor, and transportation costs, with overhead or
administrative costs or charges not to exceed $** per ton) plus ** ($**) per ton
of synthetic fuel produced. To the extent that the Facility produces synthetic
fuel without use of the Binder, Coaltech shall nevertheless pay to Covol **
($**) per ton of synthetic fuel produced by the Facility. Coaltech shall have
the right, directly or through its authorized representatives, at any time
during normal business hours, to inspect the books and records of Covol to
verify the direct and actual costs of the Binder, and to make copies or extracts
of such books and records relating to such costs.

         Section I.4 Covenants of Covol and Utah Synfuel. Covol and Utah Synfuel
jointly and severally covenant and agree to and with Coaltech as follows:

                  I.4.1 Covol shall convey to Coaltech good title to all Binder
         supplied to Coaltech by Covol hereunder, free and clear of any and all
         liens, claims, security interests, equities and encumbrances of any
         type whatsoever.

                  I.4.2 All Binder supplied by Covol to Coaltech hereunder shall
         be of such quality and nature as to be suitable for processing so as to
         produce synthetic coal fuel which constitutes "qualified fuel" for
         purposes of Section 29 of the 1986 Code.

                  I.4.3 The Binder shall not contain any hazardous material and
         all Binder shall meet all applicable laws and governmental rules,
         rulings, ordinances, requirements and regulations.

                                       2
<PAGE>

                  I.4.4 Covol, at its cost and expense, shall carry from a
         reputable insurer at all times during the term of this Agreement
         general third party liability insurance, including product liability
         coverage with a ten million dollar ($10,000,000) coverage limit which
         may be comprised of primary and umbrella policies. Any policy providing
         such insurance shall name Coaltech as an additional insured thereunder
         and shall provide that Coaltech shall be given written notice of the
         cancellation of such policy, or the reduction of any amounts or
         coverages thereunder, not less than ten (10) business days prior to the
         effective date thereof. Upon the request of Coaltech, Covol shall
         provide Coaltech with a certificate of insurance confirming the
         foregoing.

         Section I.5 Order Procedure and Delivery. Coaltech shall deliver all
orders for the Binder to Covol at least thirty (30) days in advance of the first
day of the month in which delivery of such Binder is required under such order,
and all such orders received by Covol from Coaltech during the term of this
Agreement shall be deemed to have been accepted by Covol. (For example, Coaltech
shall deliver an order for December delivery by no later than the immediately
preceding November 1st). Each such order shall be delivered either (i) in
writing, or (ii) orally by telephone by an authorized agent of Coaltech (subject
to the condition that it is followed by a written purchase order within 24
hours). Such orders shall be sent to Covol at such address as Covol shall direct
or, in the absence of such direction, at 3280 North Frontage Road, Lehi, Utah
84043; facsimile (801) 768-4483. Covol acknowledges that time is of the essence,
and Covol agrees to deliver the Binder so ordered no later than the delivery
date specified in such order.

                                   ARTICLE II.
                                GRANT OF LICENSE

         Section II.1 Definition of Synthetic Fuel Technology. As used herein,
the term "Synthetic Fuel Technology" means all intellectual property, patents
(including, but not limited to, United States Patent Numbers 5,487,764,
5,453,103, and 5,599,361) and applications therefor, printed and unprinted
technical data, know-how, trade secrets, copyrights and other intellectual
property rights, inventions, discoveries, techniques, works, processes, methods,
plans, software, designs, drawings, schematics, specifications, communications
protocols, source and object code and modifications, test procedures, program
cards, tapes, discs, algorithms, and all other scientific or technical
information in whatever form relating to, embodied in or used in the proprietary
process to produce synthetic coal fuel from waste coal dust, coal fines and
other similar coal derivatives, including all such information in existence as
of the date of this Agreement as well as related information later developed by
Covol or Utah Synfuel; provided, however, that the defined term "Synthetic Fuel
Technology" shall not include the proprietary process developed by Covol to
produce synthetic coke extrusions and briquettes from coke breeze, iron revert
materials, or any technology for other than the processing and production of
synthetic coal fuel.

         Section II.2 License. Subject to the terms and conditions of this
Agreement, Covol and Utah Synfuel hereby grant to Coaltech, for the full and
entire term hereof, a license to use the Synthetic Fuel Technology for
commercial use in connection with Coaltech's production of synthetic fuel, which
license shall be paid for pursuant to section 4(d) of the Settlement Agreement.
This license does not extend to the State of Alabama.

                                       3
<PAGE>

         Section II.3 Know-How and Assistance. To enable Coaltech to benefit
fully from the license of the Synthetic Fuel Technology, Covol and Utah Synfuel,
promptly upon the request of Coaltech, shall provide at Covol and/or Utah
Synfuel's expense (i) access to all technical information, relevant
documentation, drawings, engineering specifications and other know-how in either
Utah Synfuel's or Covol's possession and (ii) reasonable access to Utah
Synfuel's and Covol's employees or agents who are familiar with the Synthetic
Fuel Technology, and any Improvements (as defined below) to the Synthetic Fuel
Technology. Covol and Utah Synfuel shall further provide to Coaltech, promptly
upon the request of Coaltech, all technical advice necessary to exploit the
Synthetic Fuel Technology as is reasonably requested by Coaltech and relevant to
the provisions of this Agreement and Coaltech shall reimburse Covol and Utah
Synfuel for its reasonable out of pocket expenses associated therewith
(exclusive of compensation, employment taxes, benefits costs and overhead or
administrative costs) within 30 days of invoice supported by appropriate
documentation.

         Section II.4 Improvements. Each of Covol and Utah Synfuel shall notify
Coaltech of any improvements, variations or modifications ("Improvements") made
by it (or any of its affiliates or independent contractors or other parties
retained for such purpose) on or to the Synthetic Fuel Technology promptly after
such Improvements are made (including a detailed description of such
improvements, variations or modifications and the technical assistance required
to implement same in connection with Coaltech's operations). The term
"Improvements" shall include changes in the Synthetic Fuel Technology that
reduce production costs, improved performance, broaden applicability or increase
marketability, but shall not include changes that do not relate to the
production process using the Synthetic Fuel Technology (i..e., changes relating
solely to administrative and marketing practices and procedures). Improvements
made by or on behalf of Covol or Utah Synfuel (or any of their respective
affiliates) shall be owned by Covol and shall be considered a part of the
Synthetic Fuel Technology licensed hereunder and each of Covol and Utah Synfuel
hereby grants to Coaltech (without royalty or payment) a non-exclusive license
to utilize the Improvements made by any of the parties on the same terms and
conditions as the Synthetic Fuel Technology is licensed to Coaltech hereunder.

                                       4
<PAGE>

         Section II.5 Confidentiality. Each of the parties hereby agree to
maintain the Synthetic Fuel Technology confidential and not to disclose the
Synthetic Fuel Technology, or any aspect thereof, or the Improvements, or any
aspect thereof (collectively, "Confidential Information"), except as provided in
this Agreement. Notwithstanding the foregoing, information which (i) is or
becomes generally available to the public other than as a result of an
unauthorized disclosure by the parties or their respective agents, employees,
directors or representatives, (ii)was available to the party receiving
disclosure on the non-confidential basis prior to its receiving disclosure
hereunder, or (iii) lawfully becomes available to the party receiving disclosure
on a non-confidential basis from the third party source (provided that such
source is not known by the party receiving disclosure or its agents, employees,
directors or representatives to be prohibited from transmitting the
information), shall not be subject to the terms of this Section 2.5. At the
termination of this Agreement, the party receiving disclosure shall return all
copies of any Confidential Information shall be returned by the party receiving
disclosure. Nothing in this Agreement shall prohibit Coaltech from disclosing
the Confidential Information to others as may be reasonably necessary for
Coaltech to produce synthetic fuel using the Binder or to relocate any of the
equipment Covol and Utah Synfuel sold to Coaltech in connection with the
Facility.

                                  ARTICLE III.
                   REPRESENTATIONS, WARRANTIES AND INDEMNITIES

         Section III.1 Authority. Covol, Utah Synfuel and Coaltech represent and
warrant to one another that (i) the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized on its behalf by all requisite action, corporate or otherwise,
(ii) it has the full right, power and authority to enter into this Agreement and
to carry out the terms of this Agreement, (iii) it has duly executed and
delivered this Agreement, and (iv) this Agreement is a valid and binding
obligation of it enforceable in accordance with its terms.

         Section III.2 No Consent. Covol, Utah Synfuel and Coaltech represent
and warrant to one another that no approval, consent, authorization, order,
designation or declaration of any court or regulatory authority or governmental
body or any third-party is required to be obtained by it, nor is any filing or
registration required to be made therewith by it for the consummation by it of
any of the transactions contemplated under this Agreement.

         Section III.3  Intellectual Property Matters.

                  III.3.1 Representations of Covol. Covol represents and
         warrants that it (i) owns, free and clear of all liens and
         encumbrances, all intellectual property, patents (including but not
         limited to United States Patent Numbers 5,487,764, 5,453,103, and
         5,599,361) and applications therefor, printed and unprinted technical
         data, know-how, trade secrets, copyrights and other intellectual
         property rights and all other scientific or technical information in
         whatever form relating to, embodied in or used in the proprietary
         process to produce synthetic coal fuel from waste coal dust, coal fines
         and other similar coal derivatives, and, the right to freely use, sell
         and exploit the Binder used in manufacturing synthetic coal fuel from
         waste coal dust, coal fines and other similar coal derivatives, (ii)
         has the right and power to grant to Coaltech the licenses granted
         herein, (iii) has not made and will not make any agreement with another
         in conflict with the rights granted herein, and (iv) has no knowledge
         that the sale or use of the rights, Binder and/or licenses granted
         herein as contemplated by this Agreement would infringe any
         third-party's intellectual property rights. Covol agrees to take all
         steps necessary to maintain all of the patents hereunder at Covol's
         sole expense.

                                       5
<PAGE>

                  III.3.2 Representations of Utah Synfuel. Utah Synfuel
         represents and warrants that it (i) has sufficient rights, free and
         clear of all liens and encumbrances, to all intellectual property,
         patents (including but not limited to United States Patent Numbers
         5,487,764, 5,453,103, and 5,599,361) and applications therefor, printed
         and unprinted technical data, know-how, trade secrets, copyrights and
         other intellectual property rights and all other scientific or
         technical information in whatever form relating to, embodied in or used
         in the proprietary process to produce synthetic coal fuel from waste
         coal dust, coal fines and other similar coal derivatives, and,
         sufficient rights to use and exploit Binder used in manufacturing
         synthetic coal fuel from waste coal dust, coal fines and other similar
         coal derivatives, (ii) has the right and power to grant to Coaltech the
         licenses granted herein, (iii) has not made and will not make any
         agreement with another in conflict with the rights granted herein, and
         (iv) has no knowledge that the sale or use of the rights, Binder and/or
         licenses granted herein as contemplated by this Agreement would
         infringe any third-party's intellectual property rights.

                  Section III.3.3 Guaranty of License. Each of Covol and Utah
         Synfuel hereby represent and warrant that they have sufficient rights
         in the Synthetic Fuel Technology and the Binder to make the license
         granted by this Agreement. Covol and Utah Synfuel agree that both Covol
         and Utah Synfuel and each of them is a "licensor" under Section 365(n)
         of the United States Bankruptcy Code.

                  Section III.3.4 Covol Indemnification. Covol and Utah Synfuel,
         jointly and severally, shall indemnify, defend and hold harmless
         Coaltech and its affiliates and their partners, directors, officers,
         agents, representatives, successors and assigns from and against any
         and all claims, demands or suits (by any party, including any
         governmental entity), losses, liabilities, damages, obligations,
         payments, costs and expenses (including the costs and expenses of
         defending any and all actions, suits, proceedings, demands and
         assessments which shall include reasonable attorneys' fees and court
         costs) resulting from, relating to, arising out of, or incurred in
         connection with any breach by Covol or Utah Synfuel of any of the
         representations, warranties and/or covenants or agreements of Covol
         and/or Utah Synfuel contained in this Agreement, including, without
         limitation, any and all charges of patent infringement or violation of
         other property rights.

                  Section III.3.5 Coaltech Indemnification. Coaltech shall
         indemnify, defend and hold harmless Covol and Utah Synfuel and their
         affiliates, partners, directors, officers, agents, representatives,
         successors and assigns from and against any and all claims, demands or
         suits (by any party, including any governmental entity), losses,
         liabilities, damages, obligations, payments, costs and expenses
         (including the costs and expenses of defending any and all actions,
         suits, proceedings, demands and assessments which shall include
         reasonable attorneys' fees and court costs) resulting from, relating
         to, arising out of, or incurred in connection with any breach by
         Coaltech of any of the representations, warranties and/or covenants or
         agreements of Coaltech contained in this Agreement.

                                       6
<PAGE>

                                   ARTICLE IV.
                            MISCELLANEOUS PROVISIONS

         Section IV.1 Term. This Agreement shall be for the period from the date
hereof to the later of December 31, 2007 or the end of the term of Section 29 of
the 1986 Code, as the same may be amended.

         Section IV.2 Waiver. The failure of any party to enforce at any time
any provision of this Agreement shall not be construed as a waiver of such
provision or the right thereafter to enforce each and every provision. No waiver
by any party, either express or implied, of any breach of any of the provisions
of this Agreement shall be construed as a waiver of any other breach of such
term or condition.

         Section IV.3 Severability. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be invalid or unenforceable in any
respect for any reason, the validity and enforceability of any such provision in
any other respect and of the remaining provisions of this Agreement shall not be
in any way impaired.

         Section IV.4 Notices. Any notice, statement or bill provided under this
Agreement, or any notice or communication required, contemplated or permitted by
this Agreement by either party, shall be in writing and shall be duly delivered
by personal delivery, telegram, telecopy (provided receipt thereof is confirmed
in writing on the date of receipt by the recipient thereof), private courier
service, postage prepaid, return receipt request, certified or registered mail
or first class mail, to the party to whom intended at the following address:

         If to Covol:                      3280 North Frontage Road
                                           Lehi, Utah 84043
                                           Attn: President
                                           Facsimile: (801) 768-4483

         If to Utah Synfuel #1 Ltd.:       C/O of Covol Technologies, Inc.
                                           3280 North Frontage Road
                                           Lehi, Utah 84043
                                           Attn: President

                                       7
<PAGE>

         If to Coaltech:                   C/O David O'Neill
                                           5487 North Milwaukee Avenue
                                           Chicago, Illinois 60630

         with a copy of  such notice       AJG Financial Services, Inc.
         to be provided to:                The Gallagher Center
                                           Two Pierce Place
                                           Itasca, Illinois 60143
                                           Attn: John C. Rosengren, Esq.
                                           Facsimile: (630) 285-3457

         Section IV.5 Remedies Cumulative. Remedies provided under this
Agreement shall be cumulative and in addition to other remedies provided by law
or in equity.

         Section IV.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof, and, together
with the Settlement Agreement, hereby supercedes and cancels that certain
License and Binder Purchase Agreement dated as of March 7, 1997. There are no
promises, terms, conditions, obligations, or warranties other than those
contained herein and in the Settlement Agreement. This Agreement may not be
amended except in writing signed by the parties hereto.

         Section IV.7 Governing Law. All questions concerning the execution,
construction, performance, breach or enforcement of this Agreement shall be
construed under the substantive laws of the State of Delaware and not just the
Delaware laws regarding conflicts of laws.

         Section IV.8 Coaltech Assignment; Sublicense. Covol agrees to use
reasonable efforts to cooperate with Coaltech in marketing, selling, or
otherwise transferring the Facility. Coaltech may grant a sublicense to any
person with respect to this Agreement (a "Facility Sub License") or assign its
rights and obligations under this Agreement to an person (a "Facility
Assignment"), except that any such sublicense or assignment must be limited
solely to the ownership and/or operation of the Facility. No such attempted
sublicense or assignment by Coaltech shall be valid unless the putative
transferee shall have agreed unqualifiedly to assume the obligations of Coaltech
under this Agreement and Covol shall have consented to such sublicense or
assignment in writing, which consent shall not be unreasonably withheld. In the
event of a Facility Assignment, if the transferee fails to make (i) any payment
for the purchase of Binder required by Section 1.3 of this Agreement within 15
days of the due date therefor, or (ii) any license payment required by Section
2.2 of this Agreement and Section 4(d) of the Settlement Agreement within 15
days of the due date therefor, then AJG Financial Services, Inc., a Delaware
corporation, and Square D Company, a Delaware corporation, jointly and severally
agree to promptly pay Covol such unpaid amounts upon written demand therefor.

                                       8
<PAGE>

         Section IV.9 Covol Assignment. Covol may not assign this Agreement
without the written consent of the other party, which consent shall not be
unreasonably withheld, except that Covol shall have the right to assign its
rights and obligations under this Agreement to any entity of which Covol or its
partners and affiliates together own, directly or indirectly, at least eighty
percent (80%) of each class of the entity's outstanding securities.

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

                                        COALTECH NO. 1 L.P.

                                        By:      /s/ David S. O'Neill
                                        Name: David S. O'Neill
                                        Title:   Manager of the General Partner

                                        UTAH SYNFUEL #1 LTD.

                                        By:      /s/ Harlan M. Hatfield
                                        Name: Harlan M. Hatfield
                                        Title:   V.P. Covol Technologies, Inc.

                                        COVOL TECHNOLOGIES, INC.

                                        By:      /s/ Harlan M. Hatfield
                                        Name: Harlan M. Hatfield
                                        Title:   V.P.

                                        AJG FINANCIAL SERVICES,  INC.*

                                        By:      /s/ John C. Rosengren
                                        Name: John C. Rosengren
                                        Title:   Vice President

                                        SQUARE D COMPANY*

                                        By:      /s/ Dick O'Shanna
                                        Name: Dick O'Shanna
                                        Title:   V.P., Treasurer

                                        ________________________________
                                       *Solely as to Section 4.8 above.

                                       9

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